-----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, I9AxcJdyK79rt8j9enocym+wPYY+gFEwMr2X/5qQdK7USjKriZzuVpDigssOmsSJ u9pxsUoGfO9oXobzpPaz5w== 0000950123-96-001416.txt : 19970821 0000950123-96-001416.hdr.sgml : 19970821 ACCESSION NUMBER: 0000950123-96-001416 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ITT CORP /NV/ CENTRAL INDEX KEY: 0001001149 STANDARD INDUSTRIAL CLASSIFICATION: 3663 IRS NUMBER: 880340591 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13960 FILM NUMBER: 96540826 BUSINESS ADDRESS: STREET 1: 1330 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2122581000 MAIL ADDRESS: STREET 1: 1330 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: ITT DESTINATIONS INC DATE OF NAME CHANGE: 19950920 10-K405 1 ITT CORPORATION 1 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-K ANNUAL REPORT (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the Transition period from ---------------------- to ------------------- COMMISSION FILE NO. 1-13960 ------------------ ITT CORPORATION INCORPORATED IN THE STATE OF NEVADA 88-0340591 (I.R.S. EMPLOYER IDENTIFICATION NO.) 1330 AVENUE OF THE AMERICAS, NEW YORK, NY 10019-5490 (PRINCIPAL EXECUTIVE OFFICES) TELEPHONE NUMBER: (212) 258-1000 ------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT, ALL OF WHICH ARE REGISTERED ON THE NEW YORK STOCK EXCHANGE, INC.: COMMON STOCK, NO PAR VALUE SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS 6 1/4% NOTES DUE NOVEMBER 15, 2000 6 3/4% NOTES DUE NOVEMBER 15, 2005 7 3/8% DEBENTURES DUE NOVEMBER 15, 2015 7 3/4% DEBENTURES DUE NOVEMBER 15, 2025 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant on January 31, 1996, was approximately $6.5 billion. As of February 29, 1996, there were outstanding 117,299,221 shares of Common Stock, no par value, of the registrant. DOCUMENTS INCORPORATED BY REFERENCE The registrant's definitive proxy statement filed or to be filed with the Securities and Exchange Commission pursuant to Regulation 14A involving the election of directors at the annual meeting of the shareholders of the registrant scheduled to be held on May 14, 1996, is incorporated by reference in Part III of this Form 10-K. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
ITEM PAGE PART 1 Business of ITT...................................................... 1 I 2 Properties........................................................... 22 3 Legal Proceedings.................................................... 22 4 Submission of Matters to a Vote of Security Holders.................. 23 * Executive Officers of ITT............................................ 23 PART 5 Market for ITT's Common Stock and Related Stockholder Matters........ 24 II 6 Selected Financial Data.............................................. 24 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 25 8 Financial Statements and Supplementary Data.......................... 32 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................... 32 PART 10 Directors and Executive Officers of ITT.............................. 32 III 11 Executive Compensation............................................... 32 12 Security Ownership of Certain Beneficial Owners and Management....... 32 13 Certain Relationships and Related Transactions....................... 32 PART 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 32 IV Signatures.................................................................. II-1 Exhibit Index............................................................... II-2
- - ------------ * Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K. PART I ITEM 1. BUSINESS OF ITT ITT Corporation is a Nevada corporation, with World Headquarters at 1330 Avenue of the Americas, New York, NY 10019-5490. ITT Corporation was incorporated in 1995. Unless the context otherwise indicates, references herein to ITT Corporation ("ITT") include its subsidiaries. On December 19, 1995 (the "Distribution Date"), ITT Corporation, a Delaware corporation (which has been renamed ITT Industries, Inc. and reincorporated in the State of Indiana, "Old ITT"), distributed to its shareholders of record at the close of business on such date all of the outstanding shares of common stock of ITT, then a wholly owned subsidiary of Old ITT (the "Distribution"). In such Distribution, holders of common stock of Old ITT received one share of ITT's common stock for every one share of Old ITT common stock held. In connection with such Distribution, ITT, which was then named "ITT Destinations, Inc.", changed its name to "ITT Corporation". References herein to ITT prior to December 20, 1995 are references to Old ITT, the former parent corporation of ITT. ITT is engaged, through subsidiaries, in the hospitality, gaming and entertainment business and the information services business. ITT conducts its hospitality and entertainment business through ITT Sheraton Corporation ("ITT Sheraton"), Ciga S.p.A. ("Ciga"), Caesars World, Inc. ("Caesars") and Madison Square Garden, L.P. ("MSG") and conducts its information services business through ITT World Directories, Inc. ("ITT World Directories") and ITT Educational Services, Inc. ("ITT Educational"). In addition, ITT owns approximately 6% of the outstanding capital shares of Alcatel Alsthom, a French company which owns, among other things, Alcatel, N.V., one of the largest telecommunications equipment manufacturers in the world. Through the ITT Sheraton trade names and service marks, ITT is represented in most major markets of the world. In 1995, over 45 million customers stayed at ITT Sheraton properties in approximately 60 countries. ITT Sheraton is a worldwide hospitality network of 412 owned, leased, managed and franchised properties, including hotels, casinos and inns. Gaming operations are marketed under either the Caesars World or ITT Sheraton trade names and service marks and are represented in Las Vegas, 1 3 Atlantic City, Halifax (Nova Scotia), Sydney (Nova Scotia), Lake Tahoe, Tunica County (Mississippi), Lima (Peru), Cairo (Egypt), Windsor (Ontario) and Townsville (Australia). The acquisition in 1994 of 70.3% of Ciga and the acquisition of other key hotel properties(particularly, The Phoenician in Scottsdale, Arizona, the Crescent in Phoenix, Arizona, and The Park Grande Hotel in Sydney, Australia) enhanced ITT's geographic balance of hotels along with its image and profile. In January 1995, ITT completed the acquisition of Caesars, one of the world's most recognized gaming companies. The acquisition of Caesars greatly enhanced ITT's profile in the rapidly growing gaming business. Caesars' flagship property is the renowned Caesars Palace in Las Vegas; Caesars also owns and operates Caesars Atlantic City in Atlantic City, New Jersey, and Caesars Tahoe in Stateline, Nevada. Caesars also owns one-third of a management company that operates Casino Windsor, which was opened in May 1994 in Windsor, Ontario, and Caesars owns and operates four non-gaming resorts in Pennsylvania's Pocono Mountains. In March 1995, ITT acquired, through its investment in MSG in partnership with subsidiaries of Cablevision Systems Corporation, the New York Knickerbockers basketball and New York Rangers hockey franchises and the Madison Square Garden arena. The MSG investment also included a special events theater and the MSG cable television entertainment network. In August 1995, ITT, in partnership with Dow Jones & Co. ("Dow Jones"), agreed to purchase television station WNYC-TV from New York City. The purchase, subject to approval by the Federal Communications Commission and other customary conditions, is expected to close in the first half of 1996. The purchase price of $207 million will be split evenly by the two companies, and the partnership will be managed on a 50/50 basis. ITT World Directories, an 80%-owned subsidiary, engages in the publication of telephone directories, including classified directory services for telephone subscribers, in Europe, Asia, Africa, Puerto Rico and the United States Virgin Islands. ITT Educational, which is owned 83.3% by ITT and 16.7% by the public, operates technical colleges offering post-secondary career education. ITT owns approximately 9.4 million shares, or approximately 6% of the outstanding capital shares, of Alcatel Alsthom, a French company which owns, among other things, Alcatel N.V., one of the largest telecommunications equipment manufacturers in the world. The fair market value of such shares was $826 million at December 31, 1995. 2 4 BUSINESS SEGMENTS*
REVENUES INCOME ------------------------------- ------------------------- 1995 1994 1993 1995 1994 1993 ------- ------- ------- ----- ----- ----- Hotels................................................... $ 4,120 $ 3,700 $ 3,160 $ 190 $ 152 $ 87 Gaming................................................... 1,370 227 24 209 9 (9) Information Services..................................... 856 833 800 178 155 162 Dispositions and Other................................... -- -- 185 -- 1 8 ------- ------- ------- ----- ----- ----- Total Segments........................................... 6,346 4,760 4,169 577 317 248 Other.................................................... -- -- -- (6) (25) (106) ------- ------- ------- ----- ----- ----- 6,346 4,760 4,169 571 292 142 Interest expense, net.................................... (291) (131) (33) Miscellaneous income (expense), net...................... 2 (17) 10 Income tax expense....................................... (114) (58) (63) Minority equity.......................................... (21) (12) (17) ------- ------- ------- ----- ----- ----- $ 6,346 $ 4,760 $ 4,169 $ 147 $ 74 $ 39 ====== ====== ====== ===== ===== =====
- - --------------- * Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations and the Business Segment Information, included in the Notes to Financial Statements, which include descriptions of Business Segments. HOTEL OPERATIONS ITT's revenues from hotel operations are derived worldwide from ITT Sheraton's owned, leased and managed hotels and franchise fees. Revenues in the hotel business are essentially a function of number of rooms, average daily rate charged for rooms and number of rooms occupied. Six of the hotels in the ITT Sheraton network have casino operations managed by Sheraton. The gaming operations in the ITT Sheraton network and the gaming operations of Caesars are discussed below under "Gaming Operations". The following table illustrates in percentage terms the sources of revenues of ITT's hotel operations. The percentages for the 1994 period assume that the acquisition of the 70.3% interest in Ciga and certain other hotel properties had been completed on January 1, 1994. Hotel/casinos owned by ITT Sheraton and Caesars are not included in the table.
PRO FORMA YEAR ENDED YEAR ENDED DEC. 31, 1995 DEC. 31, 1994 ------------- ------------- Owned or Leased Hotels............................................................. 32% 30% Managed and Joint Venture Hotels(1)................................................ 65 67 Franchised Hotels(2)............................................................... 1 1 Other(3)........................................................................... 2 2 --- --- 100% 100% === ===
- - --------------- (1) Includes 100% of the revenues of managed and joint venture hotels. (2) Includes franchise fees to ITT Sheraton, not revenues of franchise hotels. (3) Other revenues primarily include reservations fees and Sheraton Club International fees. 3 5 Owned and Leased Hotels The following table illustrates for ITT Sheraton's owned and leased properties, the number of properties, available room nights, average daily occupancy rate and average daily room rate, in each case for the years ended December 31, 1995 and December 31, 1994. For the year ended December 31, 1994, the table assumes that the acquisition of the 70.3% interest in Ciga and certain other hotel properties had been completed on January 1, 1994. Hotel/casinos owned by ITT Sheraton and Caesars are not included in the table.
PRO FORMA YEAR ENDED YEAR ENDED DEC. 31, 1995 DEC. 31, 1994 ------------- ------------- Number of properties at period end................................................. 68 66 Available room nights(1)........................................................... 7,929,283 7,467,848 Average daily occupancy rate(2).................................................... 71.2% 70.1% Average daily rate(3).............................................................. $135.65 $125.72
- - --------------- (1) Based on properties held at period end. (2) Occupied rooms in the period divided by rooms available for sale in the same period. (3) Room revenues for the period divided by rooms occupied for the same period. The owned and leased properties in the ITT Sheraton network are, in many cases, subject to mortgage and lease indebtedness. As of December 31, 1995, the aggregate mortgage and lease indebtedness in respect of such hotels was $334 million. In connection with the leased properties in the ITT Sheraton network, an ITT Sheraton subsidiary generally leases the land upon which the hotel has been built and the hotel building. Upon expiration of the lease, the buildings and other leasehold improvements owned by such subsidiary revert to the landlord. Usually, such ITT Sheraton subsidiary is responsible for repairs, maintenance, operating expenses and lease rentals and retains managerial discretion over operations. Generally, ITT Sheraton pays a percentage rental based on total revenues (as defined) or gross operating profit (as defined) in respect of the relevant facility but sometimes with a minimum fixed annual rent or a preferential rent. During the year ended December 31, 1995 and the year ended December 31, 1994, ITT Sheraton paid aggregate rentals, including rentals attributable to the leased properties referenced above, of $22 million and $17 million, respectively. Managed and Joint Venture Hotels ITT Sheraton, through subsidiaries, manages, usually under long-term agreements, a number of hotels throughout the world. The following table illustrates the number of properties, available room nights, average daily occupancy rate and average daily room rate, in each case for the years December 31, 1995 and December 31, 1994 for the hotels managed for third parties and joint venture hotels in the ITT Sheraton network. For the year ended December 31, 1994, the table assumes that the acquisition of the 70.3% interest in Ciga and certain other hotel properties had been completed on January 1, 1994.
PRO FORMA YEAR ENDED YEAR ENDED DEC. 31, 1995 DEC. 31, 1994 ------------- ------------- Number of properties at period end(1).............................................. 130 143 Available room nights(2)........................................................... 18,138,378 18,919,583 Average daily occupancy rate(3).................................................... 70.6% 70.4% Average daily rate(4).............................................................. $121.28 $111.12
- - --------------- (1) The decrease resulted primarily from a reclassification of certain hotels from the managed category to the franchised category. (2) Based on properties held at period end. (3) Occupied rooms in the period divided by rooms available for sale in the same period. (4) Room revenues for the period divided by rooms occupied for the same period. 4 6 Under its standard management agreement, ITT Sheraton operates lodging facilities under long-term arrangements with property owners. ITT Sheraton's responsibilities include hiring, training and supervising the managers and employees required to operate the facilities. For an additional fee ITT Sheraton provides reservation services as well as national advertising, marketing and promotional services. ITT Sheraton prepares and implements annual budgets for lodging facilities under its management and is responsible for allocating property-owner funds for periodic maintenance and repair of buildings and furnishings. ITT Sheraton's management fee is generally based on a percentage of the hotel's total revenues (as defined), plus, in certain instances, an incentive fee based on the operating performance. International Operations The hotel operations of ITT Sheraton are conducted worldwide. As a general matter, ITT Sheraton's presence outside of North America consists of contracts to manage hotels and, to a far more limited extent, equity positions in hotels. With the acquisition of 70.3% of Ciga, a deluxe hotel group in Europe with 33 hotels, and Sheraton on the Park in Sydney, Australia, ITT Sheraton has expanded its role as an owner of hotels outside of North America. As of December 31, 1995, ITT Sheraton had an equity interest of 50% or more in 28 properties in Europe, one property in the Asia/Pacific region, six properties in Latin America and one property in the Africa/Middle East region. The source of revenues in geographic terms of ITT's operations (excluding revenues from gaming operations and reservations-based revenues) is set forth in the following table for the years ended December 31, 1995 and December 31, 1994. The data for the year ended December 31, 1994 assumes that the acquisition of the 70.3% interest in Ciga and certain other hotel properties had been completed on January 1, 1994. The pro forma financial information includes ITT management's estimates of results which, among other things, assume revenue and expense levels based on historical trends and ITT management's views of current economic conditions. Such information may not be indicative of the results that would have occurred if the acquisitions had been completed on January 1, 1994. Hotel/ casinos owned by ITT Sheraton and Caesars are not included in the table.
PRO FORMA YEAR ENDED YEAR ENDED DEC. 31, 1995 DEC. 31, 1994 ------------- ------------- REVENUES North America(1)................................................................. 44% 45% Europe........................................................................... 21 18 Africa/Middle East............................................................... 9 10 Latin America.................................................................... 5 6 Asia/Pacific..................................................................... 19 19 Headquarters and Other........................................................... 2 2 --- --- Total...................................................................... 100% 100% ============= ============= EBITDA(2) North America(1)................................................................. 50% 60% Europe........................................................................... 24 6 Africa/Middle East............................................................... 3 3 Latin America.................................................................... 15 21 Asia/Pacific..................................................................... 12 15 Headquarters and Other........................................................... (4) (5) --- --- Total...................................................................... 100% 100% ============= =============
- - --------------- (1) Includes franchise fees. (2) EBITDA is presented here as an alternative measure of the ability of ITT to generate cash flow and should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) or to cash flow from operating activities (as determined on the Consolidated Cash Flow Statements in ITT's Consolidated Financial Statements contained herein). EBITDA was computed above as earnings before interest, taxes, depreciation and amortization. 5 7 Franchise Business The franchise business of ITT Sheraton largely relates to properties based in North America. Only 20 of the franchise hotels and inns are located outside of North America. The following table illustrates for ITT Sheraton's franchise business (which includes properties operated under the "Four Points Hotels" trade name), the number of properties, available room nights, average daily occupancy rate and average daily room rate, in each case for the years ended December 31, 1995 and December 31, 1994.
PRO FORMA YEAR ENDED YEAR ENDED DEC. 31, 1995 DEC. 31, 1994 ------------- ------------- Number of properties at period end......................................... 214 214 Available room nights(1)................................................... 19,199,826 20,530,000 Average daily occupancy rate(2)............................................ 67.2% 67.4% Average daily rate(3)...................................................... $76.51 $72.89
- - --------------- (1) Based on properties held at period end. (2) Occupied rooms in the period divided by rooms available for sale in the same period. (3) Room revenues for the period divided by rooms occupied for the same period. Sheraton franchise hotels are licensed to operate under the "Sheraton" trade name and the stylized "S" and Wreath service mark. The franchise hotels currently operated under the "Sheraton" trade name are generally smaller than the hotels owned, leased or managed by ITT Sheraton. In each instance, ITT Sheraton approves the plans for, and the location of, franchise hotels and reviews their design. In 1995, ITT Sheraton began offering owners the opportunity to convert Sheraton franchise inns to the new "Four Points Hotels" trade name. ITT Sheraton plans for nearly all of its franchise inns to convert to the "Four Points Hotels" trade name. It is expected that the "Four Points Hotel" will be operated and marketed by their respective owners with a view toward providing hospitality services to the business-oriented traveler. Nearly all new franchise hotels are also expected to be operated under the "Four Points Hotels" trade name. At December 31, 1995, there were 214 franchise hotels operated by other business entities under the "Sheraton" or "Four Points Hotels" trade name. In general, each franchisee pays ITT Sheraton an initial minimum fee, plus an additional fee for every room over 100. There is a continuing monthly license fee based on a percentage of the facility's room revenues. Although ITT Sheraton does not directly participate in the day-to-day management or operation of franchise hotels, it periodically inspects those facilities to ensure that ITT Sheraton's standards are maintained. GAMING OPERATIONS ITT's gaming operations consist primarily of Caesars Palace in Las Vegas, Caesars Atlantic City in Atlantic City and Caesars Tahoe in Stateline, Nevada (each acquired in January 1995), ITT Sheraton's Desert Inn Resort & Casino in Las Vegas, the Sheraton Casino in Tunica County, Mississippi and various hotel/casino operations of ITT Sheraton and Caesars outside of the United States. Caesars World In January 1995, a subsidiary of Old ITT acquired through a cash tender offer approximately 92.9% of the outstanding shares of Caesars. Upon the merger of such subsidiary into Caesars, effective March 2, 1995, Caesars became a direct, wholly owned subsidiary of Old ITT. The cost of the transaction to Old ITT was approximately $1.7 billion. In connection with the Distribution, Caesars became an indirect wholly owned subsidiary of ITT. Caesars' wholly owned subsidiaries operate three destination gaming resorts: Caesars Palace in Las Vegas, Nevada; Caesars Tahoe in Stateline, Nevada; and Caesars Atlantic City in Atlantic City, New Jersey. A Caesars subsidiary carries on operations of small casinos on two cruise ships in conjunction with the operator of the ships. Caesars also owns one-third of a management company which operates Casino Windsor, a casino opened on May 17, 1994 in Windsor, Canada, which is owned by the Government of the Province of Ontario. Caesars' subsidiaries also own and operate four non-gaming resorts in the Pocono Mountains of Pennsylvania. 6 8 Nevada Properties. Caesars Palace, which opened in 1966 and was purchased by Caesars in 1969, is a casino/hotel complex located on approximately 80 acres on the "Strip" in Las Vegas, Nevada. At December 31, 1995, Caesars Palace had 1,486 hotel rooms and suites, 10 restaurants, a 1,126-seat showroom, a convention complex with approximately 100,000 square feet of meeting and banquet space, numerous bars and lounges, a shopping arcade, two swimming pools, tennis facilities, a 4,500-seat sports pavilion, a 15,000-seat outdoor stadium, health spas, and an "Omnimax" theater. Its casino is approximately 118,000 square feet, and it offers wagering limits among the highest in Nevada. For the year ended December 31, 1995, the average occupancy rate at Caesars Palace of 88.3% included occupancy of approximately 41.7% of the available rooms and suites by guests receiving complimentary rooms. The average occupancy rate at Caesars Palace was 90.8% and 92.0% for the years ended December 31, 1994 and 1993, respectively, including occupancy of 42.7% and 37.1%, respectively, of the available rooms and suites by guests receiving complimentary rooms. Recent major capital projects at Caesars Palace include room and public area refurbishments and completion of luxury suites. Scheduled or ongoing capital projects include Caesars Magical Empire, a new state-of-the-art magical and dining entertainment facility scheduled to open in the second quarter of 1996, a second parking garage and guest room and public area refurbishments. Caesars Tahoe casino/hotel opened in 1979 and is located in Stateline, Nevada, adjacent to Lake Tahoe. In 1979, Caesars entered into a long-term lease of the 24-acre property on which the casino/hotel stands. At December 31, 1995, Caesars Tahoe had 440 hotel rooms and suites, four restaurants, a 1,500-seat showroom, 25,000 square feet of convention space, a Roman-themed nightclub, a 40,000-square foot casino including a race and sports book, bars, shops, four outdoor tennis courts and an indoor health spa containing a swimming pool and a racquetball court. For the year ended December 31, 1995, the average occupancy rate at Caesars Tahoe of 86.0% included occupancy of approximately 28.9% of the available rooms and suites by guests receiving complimentary rooms. The average occupancy rate at Caesars Tahoe was 88.8% and 90.4% for the years ended December 31, 1994 and 1993, respectively, including occupancy of 32.0% and 33.6%, respectively, of the available rooms and suites by guests receiving complimentary rooms. Recent major capital projects at Caesars Tahoe include a themed restaurant, room renovations and remodeling/refurbishing of the casino floor. Scheduled capital projects include room renovations and replacement of slot equipment. Caesars Atlantic City. Caesars Atlantic City is a 638-room casino/hotel on the Boardwalk in Atlantic City, New Jersey. At December 31, 1995, it had a 74,000-square foot casino, including table games, slots, keno, poker and race simulcasting, 12 restaurants and bars, 10,000 square feet of meeting and banquet space, an 1,100-seat showroom, a shopping arcade, a Roman-themed transportation center which accommodates 2,500 cars and 11 buses, a health club and 2 tennis courts. The property on which Caesars Atlantic City stands consists of approximately 8.1 acres, including contiguous parcels totaling approximately 5.4 acres bounded on three sides by Missouri, Arkansas and Pacific Avenues, with an entire block of Boardwalk frontage. For the year ended December 31, 1995, the average occupancy rate at Caesars Atlantic City of 93.7% included occupancy of approximately 84.4% of the available rooms and suites by guests receiving complimentary rooms. The average occupancy rate at Caesars Atlantic City was 92.7% and 90.8% for the years ended December 31, 1994 and 1993, respectively, including occupancy of 77.0% and 62.6%, respectively, of the available rooms and suites by guests receiving complimentary rooms. Recent major capital projects at Caesars Atlantic City include completion of a casino expansion (including additional slot machines, table games, poker games, and a keno and simulcasting area), remodeling and refurbishing of guest rooms and the baccarat casino area and purchase of slot equipment. Scheduled capital projects include a casino renovation to add slot machines, computer equipment, themed restaurants, replacement of slot machines and renovation of guest rooms and suites. 7 9 Sheraton Desert Inn Resort & Casino The Sheraton Desert Inn Resort & Casino, which was purchased, through a wholly owned subsidiary, by ITT Sheraton in November 1993, is a casino/hotel complex located on approximately 200 acres on the "Strip" in Las Vegas, Nevada. At December 31, 1995, the Sheraton Desert Inn had 821 hotel rooms and suites, five restaurants, a 636-seat showroom, a convention complex with approximately 24,500 square feet of meeting and banquet space, numerous bars and lounges, a shopping arcade, three swimming pools, tennis facilities, an 18 hole golf course and other facilities. Its casino is approximately 20,000 square feet. For the year ended December 31, 1995, the average occupancy rate at Sheraton Desert Inn of 74.7% included occupancy of approximately 18.8% of the available rooms and suites by guests receiving complimentary rooms. The average hotel occupancy rate at Sheraton Desert Inn was 78.4% and 82.6% in 1994 and 1993, respectively, including occupancy of 18.3% and 18.9%, respectively, of the available rooms and suites by guests receiving complimentary rooms. Tunica Casino The Sheraton Casino opened in Tunica County, Mississippi in August 1994. The Sheraton Casino has three restaurants, three bars and lounges and other facilities. Its casino has approximately 31,000 square feet. Casino games include mini-baccarat, black jack, craps, roulette, slot machines, Caribbean stud poker, big "6" and "let it ride." Other ITT Sheraton also operates a casino gaming operation in Lima, Peru in the Sheraton Lima Hotel & Casino, which has 438 rooms and suites. In June 1995, ITT Sheraton added to its foreign gaming operation with the opening of a casino in Halifax, Nova Scotia in the Sheraton Halifax Hotel, now renamed the Sheraton Halifax Hotel & Casino. In August 1995, ITT Sheraton expanded its Nova Scotia gaming operations with the opening of a stand-alone casino in Sydney, Cape Breton, Nova Scotia, named Sheraton Casino Sydney. ITT Sheraton also operates casinos in Australia and Egypt. During late 1995, for operational purposes, all of ITT Sheraton's gaming operations were consolidated under Caesars. Both ITT Sheraton and Caesars are actively exploring various gaming opportunities in the United States and internationally. MADISON SQUARE GARDEN In March 1995, ITT, in partnership with an indirect subsidiary of Cablevision Systems Corporation, acquired MSG for approximately $1 billion. MSG's activities include owning and operating (i) the Madison Square Garden Arena, which seats approximately 20,000 people, (ii) a special events theater which seats approximately 5,600 people, (iii) the New York Knicks of the National Basketball Association (the "NBA") and (iv) the New York Rangers of the National Hockey League (the "NHL"). MSG also supplies and distributes television programming for cable systems principally in New York, New Jersey and Connecticut through the MSG Network. MSG Network programming includes its own sporting events and rights to the New York Yankees baseball games through the year 2000. In addition, MSG produces, promotes and/or presents live entertainment. In addition to its principal assets, MSG currently owns the business which produces the Miss Universe, Miss USA and Miss Teen USA pageants. On March 12, 1996 MSG sold SRO Motorsports, a division of MSG which produced auto thrill show events. In connection with the sale of SRO Motorsports, MSG received approximately $20.1 million in cash. Ownership Structure On March 10, 1995, Madison Square Garden, L.P. ("Holdings"), a partnership among subsidiaries of Rainbow Programming Holdings, Inc. ("Rainbow Programming"), a wholly owned subsidiary of 8 10 Cablevision Systems Corporation, and wholly owned subsidiaries of ITT acquired the business and assets of Madison Square Garden Corporation. Holdings funded the purchase price of the acquisition through (i) borrowings of $289.1 million under a bank credit agreement, (ii) an equity contribution from Rainbow Programming of $110 million and (iii) an equity contribution from ITT of $610 million. Pursuant to agreements among ITT, Rainbow Programming and Cablevision Systems Corporation, Rainbow Programming has the right to acquire interests in Holdings from ITT sufficient to equalize the interests of ITT and Rainbow Programming in Holdings by making certain scheduled payments totalling $250 million (plus interest on any unpaid portion thereof) on specified dates up to and including March 17, 1997. Rainbow Programming may acquire all or part of such interests in Holdings through (i) the payment of cash to ITT, (ii) the delivery to ITT, at the option of Rainbow Programming, of common or preferred stock of the Cablevision Systems Corporation (together with the commitment of a nationally recognized underwriter to promptly purchase such common or preferred stock for cash), or a combination of cash and such common or preferred stock (with such a commitment) or (iii) subject to certain conditions and in lieu of payment of a limited amount of the required cash or common or preferred stock for the purchase of a portion of such interests, the delivery to ITT, at the option of ITT, of certain designated programming interests of Rainbow Programming. If any scheduled payment is not made on the applicable due date, then Rainbow Programming will forfeit (a) its right to equalize the interests in Holdings and (b) certain minority rights. If certain conditions are met and Rainbow Programming has forfeited its right to equalize the interests in Holdings, then Rainbow Programming will also have the right to require ITT to purchase all of Rainbow Programming's interest in Holdings for an amount equal to (i) the price paid by Rainbow Programming for such interest plus (ii) all interest paid by Rainbow Programming on the unpaid portion of the $250 million of scheduled payments (as described above). Initially, Holdings will be managed on a 50/50 basis by Rainbow Programming and ITT. If Rainbow Programming does not equalize its ownership interest in Holdings as discussed above, its management role will effectively be eliminated. MSG Network The MSG Network is an advertiser-supported cable television entertainment program service. The MSG Network's programming is distributed primarily via satellite for distribution by cable television operators and other video distributors principally in New York, New Jersey and Connecticut. The MSG Network currently has over 5,000,000 homes that are subscribers in the New York, New Jersey and Connecticut. The MSG Network derives revenue from two principal sources: sale of advertising time on the network and receipt of per-subscriber license fees paid by cable operators and other distributors pursuant to negotiated carriage arrangements. The sale of advertising time is affected by viewer demographics, viewer ratings and market conditions. The MSG Network programming generally consists of sporting events and related programs, primarily focusing on New York Yankees baseball games, New York Knicks basketball games, New York Rangers hockey games and various other events held at the Madison Square Garden Arena. The MSG Network has acquired programming rights from the New York Yankees to broadcast its baseball games through the year 2000, for an aggregate fee of $493.5 million. In addition to rights fees paid to the New York Yankees, the MSG Network pays a fee to (i) the NBA for distribution of New York Knicks games to, as a general matter, households located outside of a 75 mile radius of New York City and (ii) the NHL for distribution of New York Rangers games to, as a general matter, households located outside of a 50 mile radius of New York City. New York Knicks MSG owns the New York Knicks, a member of the NBA. The New York Knicks play their home games in the Madison Square Garden Arena, which is owned and operated by MSG. The NBA, through its constitution, has established rules governing club operations, including drafting of players and trading player contracts. The New York Knicks are subject to payment of ongoing 9 11 assessments and dues to the NBA and to compliance with the constitution and by-laws of the NBA, as the same may be modified from time to time by the membership, as well as with rules promulgated by the Commissioner of the NBA. These rules include standards of conduct for players and front office personnel; methods of operation; procedures for drafting new players and for purchasing, selling and trading player contracts; rules for implementing disciplinary action relative to players, coaches and front office personnel; and certain financial requirements. In addition to ticket revenues from home games (basketball clubs in the NBA do not share in gate receipts from games away from home), a portion of the New York Knicks' revenues is derived from a pro-rata share of the network broadcast rights fees received by the NBA, pursuant to a broadcast rights fee agreement through the 1997-1998 seasons awarded to NBC Sports, a division of the National Broadcasting Company, and from a pro-rata share of the broadcast rights fees received by the NBA, pursuant to the broadcast rights fee agreement through the 1997-1998 season awarded to TBS Superstation and Turner Network Television, Inc., affiliates of Turner Broadcasting System, Inc. The New York Knicks also receive revenue from local cable rights fees for games broadcast by the MSG Network and from local radio rights fees for games broadcast by WFAN-AM. Other sources of revenues for the New York Knicks' operations include promotional and novelty revenues, including royalties from NBA Properties, Inc., and a pro rata share of expansion fees paid by new NBA franchises. New York Rangers MSG owns the New York Rangers, a member of the NHL. In addition to owning the New York Rangers, MSG licenses the Rangers name in connection with the operation of a minor league hockey team in Binghamton, New York. The New York Rangers play their home games in the Madison Square Garden Arena. The NHL, through its constitution, has established rules governing club operations, including drafting of players and trading player contracts. The New York Rangers are subject to payment of ongoing assessments and dues to the NHL and to compliance with the constitution and by-laws of the NHL, as the same may be modified from time to time by the membership, as well as with rules promulgated by the Commissioner of the NHL. These rules include standards of conduct for players and front office personnel; methods of operation; procedures for drafting new players and for purchasing, selling and trading player contracts; rules for implementing disciplinary action relative to players, coaches and front office personnel; and certain financial requirements. In addition to ticket revenues from home games, a portion of the New York Rangers' revenues is derived from a pro-rata share of the revenues generated through contracts negotiated by the NHL with television networks. The principal broadcast agreements for the NHL are with the Entertainment and Sports Programming Network ("ESPN"), the Fox Television Network and, in Canada, Molson Companies, Ltd. Each of these agreements covers the 1994-1995 through 1998-1999 seasons. The New York Rangers also receive revenue from local cable rights fees for games broadcast by the MSG Network and from local radio rights fees for games broadcast by WFAN-AM. Other sources of revenues for the New York Rangers' operations include promotional and novelty revenues, including royalties from NHL Enterprises, Inc., and a pro rata share of expansion fees paid by new NHL franchises. Madison Square Garden Arena The principal tenants of the Madison Square Garden Arena are the New York Knicks and the New York Rangers. In addition to the New York Knicks basketball games and New York Rangers hockey games, MSG derives revenues from various other activities and events held at the Madison Square Garden Arena and the special events theater at Madison Square Garden. These events include various other sporting events, concerts, family shows, the circus, trade shows, conventions and other special events. MSG generates revenue through luxury suite licensing, concessions (fast food, restaurants and catering), ticket sales and merchandise sales. 10 12 WBIS+-TV In August 1995, ITT, in a 50/50 partnership with Dow Jones, agreed to purchase television station WNYC-TV from New York City. The purchase, subject to approval by the Federal Communications Commission and other customary conditions, is expected to close in the first half of 1996. The purchase price of $207 million will be split evenly by the two companies and the partnership will be managed on a 50/50 basis. ITT and Dow Jones plan to rename the station WBIS+, and to replace the station's mix of public-service and ethnic programming with a broad range of business news during the day and professional sports and other events at night. INFORMATION SERVICES ITT World Directories ITT, through an 80%-owned subsidiary, ITT World Directories, is engaged in the publication of telephone directories, including classified directory services for telephone subscribers in several countries outside the United States, as well as in Puerto Rico and the United States Virgin Islands. BellSouth Corporation owns the remaining 20% of ITT World Directories through a subsidiary. ITT World Directories publishes telephone directories -- alphabetical and classified -- and also publishes specialized directories. ITT World Directories' principal source of revenues in connection with its operations is advertising revenue generated by advertisements published in its directories. Its principal publications are in Belgium, The Netherlands, Portugal, The Republic of Ireland, Puerto Rico and the United States Virgin Islands. ITT publishes directories in these jurisdictions either pursuant to a contract with the existing national telecommunications provider or as a proprietary directory in such jurisdiction after expiration of such a contract. ITT World Directories is continuing a program of product diversification and, where possible, geographic expansion, as exemplified by its recent return to South Africa and its acquisition of a 60% controlling interest in the directory sales agent for Telekom in South Africa, Maister Directories 1981 (Pty) Limited, in late 1995. Historically, the business of ITT World Directories had consisted of contracts for the publication of telephone directories with monopoly providers of telecommunications services. In many jurisdictions, the monopoly provider of telecommunications services was obligated to publish white pages telephone directories and the obligation or right (depending on the jurisdiction) to publish yellow pages directories (and thus claim significant advertising revenues) went along with the requirement to publish white pages. As a means of satisfying its publication obligations, various monopoly providers contracted with ITT World Directories to publish telephone directories. Some of the current business of ITT World Directories remains consistent with this historical source of business. However, one of the most important factors currently affecting the business of ITT World Directories is the changing competitive environment in the member states of the European Union in which it publishes telephone directories. Specifically, in Belgium and The Netherlands, the historical contractual relationship between ITT World Directories and the national telecommunications entity, namely Belgacom and PTT Telecom, respectively, were not renewed or extended when the last contract term expired. As contracts are scheduled for renewal in other jurisdictions within the European Union, the contracts there may also not be renewed or extended, thereby possibly adversely affecting ITT World Directories. A second important factor affecting the business of ITT World Directories is the challenge presented by new interactive and other technologies (including as the traditional yellow pages market moves to a paperless product). The operating performance of ITT World Directories is not expected to be materially adversely affected by the emergence of new technologies in the immediate future. However, if ITT World Directories is not successful in implementing a strategy to apply new technologies to its business, its long-term operating results may be adversely affected. These new technologies are likely to include information delivery methods such as CD ROMs and computer diskettes and operator-assisted yellow pages. ITT World Directories has activities in this arena. Specifically, in South Africa and Portugal, ITT World Directories has had operator-assisted yellow pages in operation, in South Africa for nine years and in Portugal for three years; in Belgium and The Netherlands, and it is publishing its classified directories on CD ROM and it is publishing a fax directory in Portugal on CD ROM. 11 13 ITT Educational Prior to its initial public offering, which was consummated on December 27, 1994, ITT Educational was a wholly owned subsidiary of Old ITT. ITT beneficially owns 83.3% of the outstanding shares of common stock of ITT Educational. The shares of common stock of ITT Educational are traded on the New York Stock Exchange under the symbol "ESI". The term "ITT Technical Institutes" (in singular or plural form) refers to educational institutions owned and operated by ITT Educational. Based on student enrollment, ITT Educational is a leading proprietary provider of technical post-secondary degree programs in the United States. ITT Educational offers degree programs and non-degree diploma programs to over 20,000 students through a system of 58 ITT Technical Institutes located in 26 states. These programs are designed, after consultation with employers, to provide students with the knowledge and skills necessary for entry-level employment in technical positions in a variety of industries. ITT entered the education services business in 1966 through the acquisition of a predecessor of ITT Educational which owned three technical institutes. In 1981, ITT Educational began a strategy of significant expansion, acquiring three and establishing 45 new technical institutes since that date. Of the 58 institutes currently operating, 20 were established since January 1, 1991. As a result of adding new institutes and increasing enrollment at existing institutes, the number of students attending Technical Institutes rose from 16,192 students at December 31, 1990, to 20,618 students at December 31, 1995. ITT Educational has recently accelerated its expansion program, opening five new technical institutes in 1993, six institutes in 1994 and four institutes in 1995. Classes at two of the institutes opened in 1995 did not begin until March 1996. ALCATEL ALSTHOM In July 1992, Old ITT sold its 30% equity interest in Alcatel N.V., a Netherlands company which is one of the largest telecommunications equipment manufacturers in the world, to Alcatel Alsthom, a major French company which owned the other 70% of Alcatel N.V. At the closing of the sale, Old ITT received, among other things, 9.1 million capital shares of Alcatel Alsthom, recorded at $806 million. During the 1995 third quarter, Old ITT received approximately an additional 300,000 capital shares in the form of a stock dividend. The total 9.4 million capital shares at December 31, 1995 represented approximately 6% of the outstanding capital shares of Alcatel Alsthom. The shares of Alcatel Alsthom were transferred to ITT in December 1995. ITT expects to retain its equity interest in Alcatel Alsthom until at least July 1997, unless Alcatel Alsthom and ITT agree otherwise. Mr. Rand V. Araskog, Chairman and Chief Executive of ITT, is a member of the board of directors of Alcatel Alsthom. EMPLOYEES As of December 31, 1995, ITT and its subsidiaries employed approximately 38,000 people. OPERATIONS OUTSIDE THE UNITED STATES In 1995, approximately 46.5% of the ITT's consolidated sales and revenues were made outside the United States. Of these, Western Europe comprised 46.9%, the Asia Pacific region 26.8%, Africa and Middle East region 14.3%, and the balance made elsewhere. COMPETITION Substantially all of ITT's operations are in highly competitive businesses, although the nature of the competition varies among the business segments. INTELLECTUAL PROPERTY ITT owns and controls a number of trademarks, trade names, service marks, copyrights, patents, trade secrets, confidential information, and other intellectual property rights which are used in the operation of ITT businesses. These intellectual property rights include such well recognizable trademarks and trade names as ITT, Sheraton, Caesars Palace, Madison Square Garden, the Knicks and the 12 14 Rangers. However, while these trademarks, trade names, and other intellectual property rights in the aggregate, are of material importance to its business, it is believed that ITT's business, as a whole, is not materially dependent upon any one intellectual property or related group of such properties. ITT is licensed to use certain trademarks, software, patents, technology and other intellectual property rights owned and controlled by others, and similarly, other companies are licensed to use certain trademarks, software, patents, technology and other intellectual property rights owned and controlled by ITT. SERVICE CONTRACTS ITT has contracts with certain of its operating subsidiaries under which ITT furnishes them with insurance, administrative, legal, intellectual property, tax, personnel, financial, accounting, purchasing and operating advice and assistance, as well as other services. In certain instances, specialized employees are engaged for the account of the companies served. In return for such services, these subsidiaries pay ITT a percentage of their gross operating revenues. In addition, reimbursement is sometimes made for the actual salaries and expenses of specialized employees furnished. RELATIONSHIP BETWEEN ITT, ITT INDUSTRIES, INC. AND ITT HARTFORD GROUP, INC. In connection with the Distribution, ITT, ITT Industries and ITT Hartford Group, Inc. ("ITT Hartford") entered into certain agreements, described below, governing their relationship following the Distribution and providing for the allocation of tax and certain other liabilities and obligations arising from periods prior to the Distribution Date. Distribution Agreement. ITT, ITT Industries and ITT Hartford entered into a Distribution Agreement which provided for, among other things, certain corporate transactions required to effect the Distribution and other arrangements between ITT, ITT Industries and ITT Hartford subsequent to the Distribution Date. The Distribution Agreement provides for, among other things, the assumption of liabilities and cross-indemnities designed to allocate generally, effective as of the Distribution Date, financial responsibility for the liabilities of Old ITT arising out of or in connection with (i) the automotive, defense and electronics, and fluid technology businesses to ITT Industries and its subsidiaries, (ii) the hospitality, entertainment and information services businesses to ITT and its subsidiaries and (iii) the insurance businesses to ITT Hartford and its subsidiaries. The Distribution Agreement also provides for the allocation generally of the financial responsibility for the liabilities arising out of or in connection with former and present businesses not described in the immediately preceding sentence to or among ITT, ITT Industries and ITT Hartford. Pursuant to the Distribution Agreement each of ITT, ITT Industries and ITT Hartford agreed not to take any action that would jeopardize the intended tax consequences of the Distribution. Specifically, each of ITT, ITT Industries and ITT Hartford agreed to maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Internal Revenue Code, until the first anniversary of the Distribution Date. Under the Distribution Agreement, each of ITT, ITT Industries and ITT Hartford have also agreed to provide to the other parties, subject to certain conditions, on an "as-needed" basis such services on such terms as may be agreed upon between the applicable parties. Intellectual Property Agreements. ITT, ITT Industries and ITT Hartford have entered into certain Intellectual Property License Agreements (collectively, "IP Agreements") which provide for licensing to or among the companies of, rights under patents, copyrights, software, technology, trade secrets and certain other intellectual property (collectively, "Intellectual Property") owned by ITT, ITT Industries or ITT Hartford and their respective subsidiaries and associated companies as of the Distribution Date. The purpose of these IP Agreements was to provide ITT, ITT Industries and ITT Hartford and their respective subsidiaries and associated companies with those continuing rights and licenses under such Intellectual Property necessary for the continued conduct of their respective businesses. Included within the IP Agreements is: (i) a grant of rights and licenses to ITT Industries and ITT Hartford, with rights to license their respective subsidiaries and associated companies, to continue to use the "ITT" name, mark and logo in the operation of their respective businesses, subject to the maintenance of certain quality standards for their products and services and other conditions in accordance with the terms of the IP Agreements, and (ii) a transfer from ITT Industries to ITT of all the right, title and interest in the "ITT" 13 15 name, mark, and logo and the applications, registrations, goodwill, and contractual rights and obligations associated therewith. Tax Allocation Agreement. ITT, ITT Industries and ITT Hartford have also entered into a Tax Allocation Agreement which generally provides that ITT and ITT Hartford will pay their respective shares of ITT Industries' consolidated tax liability for the tax years that ITT and ITT Hartford, as applicable, were included in ITT Industries' consolidated Federal income tax return. The Tax Allocation Agreement also provides for sharing, where appropriate, of state, local and foreign taxes attributable to periods prior to the Distribution Date, as well as certain other matters. Employee Benefits Agreement. ITT, ITT Industries and ITT Hartford have also entered into an Employee Benefits Services and Liability Agreement providing for the allocation of retirement, medical, disability and other employee welfare benefit plans among ITT, ITT Industries and ITT Hartford. The Agreement provides for the treatment of certain retirement plans for salaried employees, investment and savings programs, excess benefit plans, retiree medical and life insurance benefits and stock awards. In addition, the Agreement provided that, as of the Distribution Date, each of ITT, ITT Industries and ITT Hartford generally assume all liability for their respective active employees under their respective employee welfare benefit plans and that each of ITT, ITT Industries, and ITT Hartford shall be allocated a proportionate share of any assets of ITT Industries held with respect thereto. GOVERNMENTAL REGULATION AND RELATED MATTERS General. In the event that ITT, in partnership with Dow Jones, consummates the acquisition of WNYC-TV, ownership of ITT common stock by "aliens" (to the United States) will be subject to limitation under the United States Communications Act of 1934 due to the license of the United States Federal Communications Commission held by the partnership. Sheraton hotels in the United States are liquor retailers where permitted, licensed in each state where they do such business, and in certain states are subject to statutes which prohibit ITT Sheraton or its owner from being both a wholesaler and retailer of alcoholic beverages. ITT Educational's technical colleges offering postsecondary career education are extensively regulated by federal and state agencies. Restrictions on Alien Ownership. If, as anticipated, ITT, in partnership with Dow Jones, consummates the purchase of WNYC-TV from New York City, then the Communications Act of 1934, as amended (the "Communications Act"), will restrict the ownership of the common stock of ITT by "aliens." The Communications Act generally defines "aliens" to include persons who are not citizens of the United States, entities organized under laws other than those of the United States, foreign governments, entities controlled directly or indirectly by foreign nationals, and the representatives of foreign persons or foreign-controlled entities. Because ITT will have shared control of a broadcast licensee, the limitations in Section 310(b)(4) of the Communications Act will govern the permissible degree of alien ownership and control of the outstanding stock of ITT. Under Section 310(b)(4), no more than 25 percent of the ownership nor more than 25 percent of the voting rights in ITT may be held directly or indirectly by aliens. In assessing compliance with the 25 percent ceiling, the FCC will consider direct and indirect alien interests using a multiplier, so that, for example, minority alien interests in U.S.-controlled corporations will count proportionally against the 25 percent ceiling. Alien voting interests are not treated proportionally, however, in any corporation that is alien controlled. The alien interest in any partnership with an alien partner also is not treated proportionally unless the alien partner is a limited partner that is insulated from material involvement in the business of the partnership within the meaning of the FCC's rules and policies. The ITT By-Laws will provide that under no circumstances shall the amount of ITT stock owned of record or voted by aliens within the meaning of the FCC's rules and policies exceed 25 percent of the total outstanding stock of ITT. If and so long as the stock records of ITT shall at any time disclose 25 percent alien ownership (i) no transfers of shares of domestic record to aliens may be made and (ii) if it shall be found that stock of domestic record is in fact held by or for the account of an alien within the meaning of the FCC's rules and policies, the holder of such stock shall not be entitled to vote, to receive 14 16 dividends, or to have any other rights except the right to transfer the stock to a citizen of the United States. At the close of business on January 31, 1996, ITT believes that approximately 6 percent of the outstanding common stock of ITT was owned of record by aliens. Casino Gaming -- General. The Sheraton Desert Inn casino/hotel complex is owned and operated by Sheraton Desert Inn Corporation ("SDI"), which is a wholly-owned subsidiary of Sheraton Gaming Corporation ("SGC"), which is a wholly-owned subsidiary of ITT Sheraton (Sheraton, SGC and SDI are hereinafter collectively referred to as the "Sheraton Desert Inn Companies"). In August 1994, ITT expanded its domestic casino gaming operations with the opening of the Sheraton Casino in Tunica County, Mississippi; that casino is owned and operated by Sheraton Tunica Corporation ("STC"), which is a wholly-owned subsidiary of SDI. Caesars' casino gaming operations in Las Vegas, Nevada and Stateline, Nevada are conducted by Desert Palace, Inc. ("DPI"), which is a wholly-owned subsidiary of Caesars Palace Corporation ("CPC"), which is a wholly-owned subsidiary of Caesars (Caesars, CPC and DPI are hereinafter collectively referred to as the "Caesars Nevada Companies"). Caesars is a wholly-owned subsidiary of ITT Sheraton. Caesars' casino gaming operations in Atlantic City, New Jersey are conducted by Boardwalk Regency Corporation ("BRC"), which is a wholly-owned subsidiary of Caesars New Jersey, Inc. ("CNJ"), which is a wholly-owned subsidiary of Caesars (as required by the context, Caesars, CNJ and BRC are hereinafter collectively referred to as the "Caesars New Jersey Companies"). In addition, DPI owns all of the issued and outstanding capital stock of Tele/Info, Inc. ("Tele/Info"), which is a Nevada licensed disseminator of horse race simulcasts for the purpose of receiving and disseminating live telecasts of horse racing information. Casino Gaming Regulation -- General. The ownership and/or operation of casino gaming facilities in the United States are subject to extensive federal, state and local regulations. On the federal level, in addition to all other relevant federal regulation, ITT's casino gaming operations are specifically subject to the compliance with the Gambling Devices Act of 1962, as amended, and the Bank Secrecy Act, as amended; these govern the ownership, possession, manufacture, distribution and transportation in interstate commerce of gaming devices and the recording and reporting of currency transactions, respectively. Due to its casino gaming operations in Nevada, ITT's Nevada casino gaming operations -- at the Sheraton Desert Inn in Las Vegas, Caesars Palace in Las Vegas, and Caesars Tahoe in Stateline -- are subject to the Nevada Gaming Control Act (the "Nevada Act") and the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission") and the Nevada State Gaming Control Board (the "Nevada Control Board"), as well as various local, county and state regulatory agencies (hereinafter collectively referred to as the "Nevada Gaming Authorities"). Due to its casino gaming operations in New Jersey, ITT's New Jersey casino gaming operations -- at Caesars Atlantic City -- are subject to the New Jersey Casino Control Act (the "New Jersey Act") and the licensing and regulatory control of the New Jersey Casino Control Commission (the "New Jersey Commission") and the New Jersey Department of Law & Public Safety, Division of Gaming Enforcement (the "New Jersey DGE"), as well as various local, county and state regulatory agencies (hereinafter collectively referred to as the "New Jersey Gaming Authorities"). Due to its casino gaming operations in Mississippi, ITT's Mississippi casino gaming operations -- at the Sheraton Casino in Tunica County, Mississippi -- are subject to the Mississippi Gaming Control Act (the "Mississippi Act") and the licensing and regulatory control of the Mississippi Gaming Commission (the "Mississippi Commission"), as well as various local, county and state regulatory agencies (hereinafter collectively referred to as the "Mississippi Gaming Authorities"). Due to its casino gaming operations in Ontario, Canada, ITT's Ontario casino gaming operations -- through its one-third interest in the licensed operator of Casino Windsor, Ontario -- are subject to the Ontario Gaming Control Act (the "Ontario Act") and the licensing and regulatory control of the Ontario Gaming Control Commission (the "Ontario Commission"), as well as various local, provincial and federal regulatory agencies (hereinafter collectively referred to as the "Ontario Gaming Authorities"). Due to its casino gaming operations in Nova Scotia, Canada, ITT's Nova Scotia casino gaming operations -- at the Sheraton Halifax Hotel & Casino and the Sheraton Casino/Sydney -- are subject to the Nova Scotia Gaming Control Act (the "Nova Scotia Act") and the licensing and regulatory control of the Nova Scotia Gaming Control Commission (the "Nova Scotia Commission"), as well as various local, provincial and federal regulatory agencies (hereinafter collectively referred to as the "Nova Scotia Gaming Authorities"). 15 17 The casino gaming laws, regulations and supervisory procedures of Nevada, New Jersey, Mississippi, Ontario and Nova Scotia are extensive and reflect certain public policy considerations as to (i) the integrity of casino gaming operations and its participants, (ii) the need for strict governmental and regulatory control of casino gaming operations, (iii) the creation of economic development, taxes and employment, and (iv) foster and enhance the public confidence and trust in casino gaming regulation and control. Changes to such laws, regulations and supervisory procedures could have an adverse effect on ITT's casino gaming operations. Nevada Gaming Regulation. Nevada's casino gaming laws, regulations and supervisory procedures are extensive and reflect certain broad declarations of public policy. In general, Nevada's gaming laws, regulations and supervisory procedures seek to (i) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity, (ii) establish and maintain responsible accounting practices and procedures, (iii) maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record-keeping, and making periodic reports to the applicable casino gaming authority, (iv) prevent cheating and fraudulent practices, and (v) provide a source of state and local revenues through taxation and licensing fees. SDI, as the operator of the Sheraton Desert Inn, and DPI, as the operator of Caesars Palace and Caesars Tahoe, are required to be licensed by the Nevada Gaming Authorities. The casino gaming licenses are not transferable and must be renewed periodically by the payment of casino gaming license fees and taxes. The Nevada Commission requires that (i) SGC and ITT Sheraton be registered as intermediary companies of SDI and (ii) CPC be registered as an intermediary company of DPI; the Nevada Commission also requires that ITT and Caesars be registered as publicly traded corporations. No person may become a stockholder of, or receive any percentage of profits from, SDI or DPI without first obtaining certain required licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with ITT, the Sheraton Desert Inn Companies or the Caesars Nevada Companies in order to determine whether such individual is suitable or should be licensed as a business associate of either SDI or DPI. Officers, directors and key employees of each of SDI and DPI must be individually licensed by, and changes in corporate positions must be reported to, the Nevada Gaming Authorities; the Nevada Gaming Authorities may disapprove a change in corporate position. Certain officers, directors and key employees of ITT, ITT Sheraton and SGC who are actively and directly involved in the gaming activities of SDI may be required to be licensed or found suitable by the Nevada Gaming Authorities; similarly, certain officers, directors and key employees of ITT, Caesars and CPC who are actively and directly involved in the gaming activities of DPI may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or finding of suitability must pay all of the costs of the investigation. If the Nevada Gaming Authorities find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with ITT, the Sheraton Desert Inn Companies or the Caesars Nevada Companies, the companies involved would be required to sever all relationships with such person. In addition, the Nevada Gaming Authorities may require a registered company or licensee to terminate the employment of any person who refuses to file appropriate disclosures. ITT, the Sheraton Desert Inn Companies and the Caesars Nevada Companies are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all loans, leases, sales of securities and similar financing transactions by either SDI or DPI must be reported to or approved by the Nevada Commission. Nevada law prohibits a corporation registered by the Nevada Commission from making a public offering of its securities without the prior approval of the Nevada Commission if any part of the proceeds of the offering of the securities themselves are to be used either to (i) finance the construction, acquisition or operation of gaming facilities in Nevada, or (ii) retire or extend obligations incurred for one or more such purposes. If it is determined that Nevada gaming laws were violated by SDI or DPI, the gaming license each respectively holds could be limited, conditioned, suspended or revoked. In addition, at the discretion of 16 18 the Nevada Commission, ITT, the Sheraton Desert Inn Companies and the persons involved could be subject to substantial fines for each separate violation of the Nevada gaming laws by the Sheraton Desert Inn; similarly, and also at the discretion of the Nevada Commission, ITT, the Caesars Nevada Companies and the persons involved could be subject to substantial fines for each separate violation of the Nevada gaming laws by either Caesars Palace or Caesars Tahoe. Further, a supervisor could be appointed by the Nevada Commission to operate either SDI's or DPI's respective gaming property and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of SDI's or DPI's respective gaming property) could be forfeited to the State of Nevada. Any suspension or revocation of either SDI's or DPI's license would have a materially adverse effect on SDI or DPI, respectively. The Nevada Gaming Authorities may investigate and require a finding of suitability of any holder of any class of ITT's voting securities at any time. Nevada law requires any person who acquires more than 5% of any class of ITT's voting securities to report the acquisition to the Nevada Commission and such person may be investigated and found suitable. Any person who becomes a beneficial owner of more than 10% of any class of ITT's voting securities must apply for a finding of suitability by the Nevada Commission within 30 days after the Nevada Control Board Chairman mails a written notice requiring such filing, and must pay the costs and fees incurred by the Nevada Control Board in connection with the investigation. Under certain circumstances, an "institutional investor," as such term is defined in the Nevada Act and regulations, which acquires more than 10% but not more than 15% of ITT's voting securities, may apply to the Nevada Commission for a waiver of such finding of suitability requirements if such institutional investor holds the voting securities for investment purposes only; an institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the Board of Directors of ITT, any change in ITT's corporate charter, bylaws, management, policies or operations or any of its casino gaming operations, or any other action which the Nevada Commission finds to be inconsistent with holding ITT's voting securities for investment purposes only. Notwithstanding the foregoing, activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include (i) voting on all matters voted on by stockholders, (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations, and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial holders. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or by the Chairman of the Nevada Control Board may be found unsuitable. Any holder of any equity or debt security found unsuitable and who holds, directly or indirectly, any beneficial ownership of ITT's debt or equity voting securities beyond such period or periods of time as may be prescribed by the Nevada Commission may be guilty of a gross misdemeanor. ITT could be subject to disciplinary action if, without the prior approval of the Nevada Commission and after ITT receives notice that a person is unsuitable to be an equity or debt security holder or to have any other relationship with ITT, the Sheraton Desert Inn Companies or the Caesars Nevada Companies, ITT, the Sheraton Desert Inn Companies, the Caesars Nevada Companies or any one of them either (i) pays to the unsuitable person any dividend, interest or any distribution whatsoever, (ii) recognizes any voting right by such unsuitable person in connection with such securities, (iii) pays the unsuitable person remuneration in any form, (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction, or (v) fails to pursue all lawful efforts to require such unsuitable person to relinquish his securities including, if necessary, the immediate purchase of such securities for cash at fair market value. Regulations of the Nevada Commission provide that control of a registered publicly traded corporation cannot be changed through merger, consolidation, acquisition of assets, management or consulting agreements, or any form of takeover without the prior approval of the Nevada Commission. Persons seeking approval to control a registered publicly traded corporation must satisfy the Nevada Commission as to a variety of stringent standards prior to assuming control of such corporation. The 17 19 failure of a person to obtain such approval prior to assuming control over the registered publicly traded corporation may constitute grounds for finding such person unsuitable. Regulations of the Nevada Commission also prohibit certain repurchases of securities by registered publicly traded corporations without the prior approval of the Nevada Commission. Transactions covered by these regulations are generally aimed at discouraging repurchases of securities at a premium over market price from certain holders of more than 3% of the outstanding securities of the registered publicly traded corporation. The regulations of the Nevada Commission also require prior approval for a "plan of recapitalization," as such term is defined in the Nevada regulations; generally, a plan of recapitalization is a plan proposed by the management of a registered publicly traded corporation that contains recommended action in response to a proposed corporate acquisition opposed by management of the corporation which acquisition itself would require the prior approval of the Nevada Commission. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively "Licensees"), and who proposes to become involved in a gaming operation outside the State of Nevada is required to deposit with the Nevada Control Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Control Board of the Licensees' participation in such foreign gaming; the revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Once such revolving fund is established, the Licensees may engage in gaming activities outside the State of Nevada without seeking the approval of the Nevada Commission provided (i) such activities are lawful in the jurisdiction where they are to be conducted and (ii) the Licensees comply with certain reporting requirements imposed by the Nevada Act. Licensees are subject to disciplinary action by the Nevada Commission if they or any one of them (i) knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, (ii) fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, (iii) engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or (iv) employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability. New Jersey Casino Gaming Regulation. Casino gaming in New Jersey is subject to strict compliance with the New Jersey Act, the strict supervision of the New Jersey Commission and compliance with the regulations adopted by the New Jersey Commission. The New Jersey gaming laws and regulations primarily concern (a) the financial stability and character of casino operators, their employees, their security holders and others financially interested in casino operations, and (b) the operating methods -- including the rules of the games and credit issuance procedures -- and the financial and accounting procedures used in connection with casino operations. The New Jersey gaming laws and regulations include detailed provisions concerning, among other things, (i) the type, manner and number of applications and licenses required to conduct casino gaming and ancillary activities, (ii) the licensing, regulation and curricula of gaming schools, (iii) the establishment of minimum standards of accounting and internal control, including the issuance and enforceability of casino credit, (iv) the manufacture, sale, distribution and possession of gaming equipment, (v) the rules of the games, (vi) the exclusion of undesirable persons, (vii) the use, regulation and reporting of junket activities, (viii) the possession, sale and distribution of alcoholic beverages, (ix) the regulation and licensing of suppliers to licensed casino operators, (x) the conduct of entertainment within licensed casino facilities, (xi) equal employment opportunity for employees of licensed casino operators, contractors for casino facilities and the like, (xii) the payment of gross revenue taxes and similar fees and expenses, (xiii) the conduct of casino simulcasting, and (xiv) the imposition and discharge of casino reinvestment development obligations. A number of these regulations require practices which are different from those in many casinos elsewhere and some of them result in casino operating costs greater than those in comparable facilities elsewhere. As a prerequisite to being licensed, a New Jersey casino/hotel facility must meet certain facilities requirements concerning, among other things, the size and number of guest rooms. In order to operate Caesars Atlantic City, BRC must be licensed by the New Jersey Commission, which has broad discretion with regard to the issuance, renewal, revocation or suspension of licenses. A New Jersey casino license is not transferable and must be renewed at designated periods of up to four years; renewal is not automatic and involves an extensive review by the New Jersey DGE, a report by the New Jersey DGE to the New Jersey Commission, an independent intensive review by the New Jersey 18 20 Commission, and the affirmative vote of at least four of the five sitting Commissioners of the New Jersey Commission sitting in a scheduled open public meeting. BRC's plenary casino license to operate Caesars Atlantic City was renewed on October 5, 1994 and expires on November 30, 1996; as a result of recent legislative changes extending the terms of casino licenses, BRC will become eligible for a four year license upon consideration of its renewal application in November 30, 1996. Except for certain banking and lending institutions exempted under the New Jersey Act, all financial backers, investors, mortgagees, debt holders, landlords under leases relating to New Jersey casino/hotel facilities, all lenders to BRC, all officers and directors of BRC and all employees who work at Caesars Atlantic City have to be qualified, licensed, approved or registered by or with the New Jersey Commission. In addition, all contracts and leases entered into by BRC are subject to approval by the New Jersey Commission. As a prerequisite to BRC holding a license, ITT, Caesars and CNJ have to be approved by the New Jersey Commission due to their corporate relationship to BRC. Thus, any debt or equity security holder of ITT, Caesars or CNJ will have to be found qualified; the qualification requirement of any debt or equity security holder of ITT may be waived based on an express finding by the New Jersey Commission, with the consent of the Director of the New Jersey DGE, that the security holder either (a)(i) is not significantly involved in the activities of BRC, (ii) does not have the ability to control ITT, Caesars, CNJ or BRC, and (iii) does not have the ability to elect one or more members of the respective boards of directors of ITT, Caesars, CNJ or BRC, or (b) is an "institutional investor," as such term is defined in the New Jersey Act and regulations; for purposes of the former, the New Jersey Act presumes that any non-"institutional investor" security holder who owns or beneficially holds 5% or more of the equity securities of ITT has the ability to control ITT, Caesars, CNJ or BRC, unless such presumption is rebutted by clear and convincing evidence. The New Jersey Act and regulations define an "institutional investor" as (i) any retirement fund administered by a public agency for the exclusive benefit of federal, state or local public employees, (ii) an investment company registered under the Investment Company Act of 1940, (iii) a collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency, (iv) a closed end investment trust, (v) a chartered or licensed life insurance company or property and casualty insurance company, (vi) banking or other licensed or chartered lending institutions, (vii) an investment advisor registered under the Investment Advisors Act of 1940, or (viii) such other persons as the New Jersey Commission may determine for reasons consistent with the policies of the New Jersey Act. In the absence of a prima facie showing by the Director of the DGE that there is any cause to believe that such institutional investor may be found unqualified, upon application and for good cause shown, an institutional investor holding either (a) less than 10% of the equity securities of ITT or (b) ITT debt securities constituting less than 20% of the outstanding debt of ITT and less than 50% of the issue involved may be granted a waiver of qualification as to such holdings if (i) such securities are those of a publicly traded corporation, (ii) the institutional investor's holdings of such securities were purchased for investment purposes only, and (iii) upon request by the New Jersey Commission, the institutional investor files with the New Jersey Commission a certified statement to the effect that the institutional investor has no intention of influencing or affecting the affairs of ITT, Caesars, CNJ or BRC; notwithstanding the foregoing, the institutional investor is permitted to vote on matters put to the vote of the outstanding security holders of ITT. If an institutional investor who has been granted a waiver subsequently determines to influence or affect the affairs of ITT, the institutional investor must provide to the New Jersey Commission not less than 30 days prior notice of such intent and the institutional investor must file with the New Jersey Commission an application for qualification before taking any action that may influence or affect the affairs of ITT; notwithstanding the foregoing, the institutional investor is permitted to vote on matters put to the vote of the outstanding security holders of ITT. If an institutional investor changes its investment intent, or if the New Jersey Commission finds reasonable cause to believe that the institutional investor may be found unqualified, no action other than divestiture shall be taken by such institutional investor with respect to its security holdings until there has been compliance with the interim casino authorization provisions of the New Jersey Act, including the execution of a trust agreement. ITT, Caesars, CNJ and BRC are required to immediately notify the New Jersey Commission and the New Jersey DGE of any information about, or action of, an institutional investor holding its equity or debt securities where such 19 21 information or action may impact on the eligibility of such institutional investor for a waiver. If the New Jersey Commission finds an institutional investor unqualified or if the New Jersey Commission finds that, by reason of the extent or nature of its holdings, an institutional investor is in the position to exercise a substantial impact on the controlling interests of BRC so that qualification of the institutional investor is necessary to protect the public interest, the New Jersey Act vests in the New Jersey Commission the power to take all necessary action to protect the public interest, including the power to require that the institutional investor submit to qualification and become qualified under the New Jersey Act. An equity or debt security holder -- including institutional investors -- of ITT, Caesars, CNJ or BRC who is required to be found qualified by the New Jersey Commission must submit an application for qualification within 30 days after being ordered to do so or divest all security holdings within 120 days after the New Jersey Commission determines such qualification is required. The application for qualification must include a trust agreement by which the security holder places its interest in ITT in trust with a trustee qualified by the New Jersey Commission. If the security holder is ultimately found qualified, the trust agreement is terminated. If the security holder is not found qualified or withdraws its application for qualification prior to a determination on qualification being made, the trustee will be empowered with all rights of ownership pertaining to such security holder's ITT securities, including all voting rights and the power to sell the securities; in any event, the unqualified security holder will not be entitled to receive in exchange for its ITT securities an amount in excess of the lower of (i) the actual cost the security holder incurred in acquiring the securities or (ii) the value of such securities calculated as if the investment had been made on the date the trust became operative. By the same token, if the security holder is not found qualified, it is unlawful for the security holder to (i) receive any dividends or interest on such securities, (ii) exercise, directly or through any trustee or nominee, any right conferred by such securities, or (iii) receive any remuneration in any form from ITT, Caesars, CNJ or BRC for services rendered or otherwise. Each officer, director, lender and certain other persons of ITT, Caesars and CNJ must be found qualified unless the New Jersey Commission, with the consent of the Director of the New Jersey DGE, finds that such officer, director, lender or other person of ITT, Caesars or CNJ is not significantly involved in the affairs of BRC and is thus waived from qualification. New Jersey law requires that an officer or director of ITT, Caesars or CNJ must apply for temporary qualification at least 30 days before assuming any duties; such temporary qualification, if granted by the New Jersey Commission, will be valid for a period not to exceed the earlier of (i) nine consecutive calendar months or (ii) the effective date of BRC's next casino license renewal. The New Jersey Act requires that each of ITT, Caesars, CNJ and BRC maintain financial stability and capability. For purposes of these requirements, the New Jersey Commission has adopted regulations defining "financial stability" as the same applies to the licensed casino operation and has set forth certain standards for determining compliance with the financial stability regulations. Under the regulations of the New Jersey Commission, "financial stability" has been defined as (i) the ability to assure the financial integrity of casino operations by the maintenance of a casino bankroll or equivalent provisions adequate to pay winning wagers to casino patrons when due, (ii) the ability to meet ongoing operating expenses which are essential to the maintenance of continuous and stable casino operations, (iii) the ability to pay, as and when due, all local, state and federal taxes and any and all fees imposed by the New Jersey Act, (iv) the ability to make necessary capital and maintenance expenditures in a timely manner which are adequate to insure maintenance of a superior first class facility of exceptional quality as required by the New Jersey Act, and (v) the ability to pay, exchange, refinance or extend debts, including long-term and short-term principal and interest and capital lease obligations, which will mature or otherwise come due and payable during either the license term or within 12 months after the end of the license term or to otherwise manage such debts and any default with respect to the debts. The New Jersey Commission regulations provide that the financial stability standards concerning casino bankroll, operating expenses and capital and maintenance expenditures are met if the following is shown by clear and convincing evidence: (i) casino bankroll -- the maintenance, on a daily basis, of a casino bankroll at least equal to the average daily casino bankroll, calculated on a monthly basis, for the corresponding month in the previous year, (ii) operating expenses -- the demonstration of the ability to achieve positive gross operating profit measured on an annual basis, and (iii) capital and maintenance expenditures -- the demonstration that its capital and maintenance expenditures over the five year 20 22 period, which includes the previous 36 calendar months and the upcoming license period, average at least 5% of net revenue per annum. ITT believes that, at current operating levels, BRC will have no difficulty in complying with these requirements. The New Jersey Commission has the authority to restrict or prohibit the transfer of cash or the assumption of liabilities by BRC if such action will adversely impact the financial stability of BRC and the prior approval of the New Jersey Commission is required to incur indebtedness and guarantees of affiliated indebtedness by BRC involving amounts greater than $25 million. If it is determined that New Jersey gaming laws were violated by BRC, BRC could be subject to fines or its casino license could be limited, conditioned, suspended or revoked. In addition, if a security holder of ITT, Caesars, CNJ or BRC is found disqualified but does not dispose of the securities, the New Jersey Commission is authorized to take any necessary action to protect the public interest, including the suspension or revocation of the casino license; however, the New Jersey Commission shall not take any action against ITT, Caesars, CNJ or BRC with respect to the continued ownership of the security interest by the disqualified holder if the New Jersey Commission finds that (i) ITT has provided in its corporate charter that any ITT securities are held subject to the condition that, if a holder thereof is found to be disqualified by the New Jersey Commission pursuant to the provisions of the New Jersey Act, such holder shall dispose of his interest in ITT, (ii) ITT has made a good faith effort, including the prosecution of all legal remedies, to comply with any order of the New Jersey Commission requiring the divestiture of the security interest held by the disqualified holder, and (iii) such disqualified holder does not have the ability to control ITT, Caesars, CNJ or BRC or to elect one or more members of the boards of directors of ITT, Caesars, CNJ or BRC. If BRC's license is revoked, not renewed or suspended for a period in excess of 120 days, the New Jersey Commission is empowered to appoint a conservator to operate, and to dispose of, BRC's casino/hotel facilities. If a conservator operates the casino/hotel facilities, payments to shareholders would be limited to a "fair return" on their investment, with any excess going to the State of New Jersey. If a conservator is appointed, the conservator's charges and expenses become a lien against the property which is paramount to all prior and subsequent liens. Mississippi Casino Gaming Regulation. Gaming in Mississippi can be legally conducted only on vessels of a certain minimum size either in navigable waters of counties bordering the Mississippi River or in the waters of the State of Mississippi which lie adjacent to the coastline of the three counties bordering the Gulf of Mexico. STC possesses a license for the ownership and operation of the Sheraton Casino in Tunica County, Mississippi issued by the Mississippi Commission pursuant to the Mississippi Act. The Mississippi Act does not restrict the amount or percentage of space on a vessel that may be utilized for casino gaming; the Mississippi Act also does not limit the number of licenses that the Mississippi Commission can grant for a particular area. ITT and STC are required to submit detailed financial, operating and other reports to the Mississippi Commission. Substantially all loans, leases, sales of securities and similar financing transactions entered into by ITT or by STC must be reported to or approved by the Mississippi Commission. ITT and STC are also required to periodically submit detailed financial and operating reports to the Mississippi Commission and furnish any other information which the Mississippi Commission may require. Each of the directors, officers and certain key employees of ITT and STC who are actively and directly engaged in the administration or supervision of casino gaming in Mississippi, or who have any other significant involvement with the activities of STC, must be found suitable therefor and may be required to be licensed by the Mississippi Commission. A finding of suitability is comparable to licensing, and both require the submission of detailed personal financial information followed by a thorough investigation. An application for licensing may be denied for any cause deemed reasonable by the Mississippi Commission. Changes in licensed positions must be reported to the Mississippi Commission. In addition to its authority to deny an application for a license, the Mississippi Commission has the authority to disapprove a change in corporate position. If the Mississippi Commission finds a director, officer or key employee of ITT or STC unsuitable for licensing or unsuitable to continue having a relationship with ITT or STC, ITT or STC, as the case may be, is required to suspend, dismiss and sever all relationships with such person. ITT and STC have similar obligations with regard to any person who fails or refuses to file appropriate applications. Each gaming employee must obtain a work permit; the Mississippi Commission may refuse to issue a work permit to a gaming employee (i) if the employee has 21 23 committed larceny, embezzlement or any other crime of moral turpitude or knowingly violated the Mississippi Act or the regulations of the Mississippi Commission, or (ii) for any other reasonable cause. Mississippi gaming licenses are not transferable and must be renewed periodically. The Mississippi Commission is empowered to deny, limit, condition, revoke and/or suspend any license, finding of suitability or registration, and to fine any person as it deems reasonable and in the public interest, subject to the due process considerations of notice and an opportunity for a hearing. The Mississippi Commission may fine any licensee or other person who is subject to the Mississippi Act up to $100,000 for each violation of the Mississippi Act which is the subject of an initial complaint and up to $250,000 for each violation of the Mississippi Act which is the subject of any subsequent complaint. The Mississippi Act provides for judicial review of certain decisions of the Mississippi Commission; however, the filing for such judicial review does not automatically stay the action taken by the Mississippi Commission pending the court's review. License fees and taxes, computed in various ways depending on the type of casino gaming involved, are payable to the State of Mississippi and to the counties and cities in which the gaming operations are located. Depending on the particular fee or tax imposed, these fees and taxes are based on a percentage of the gross gaming revenues received by the casino operation, the number of slot machines operated by such casino, or the number of table games operated by such casino. Moreover, several local governments have been authorized to impose either additional gross fees on adjusted gross gaming revenues or, alternatively, per person boarding fees and annual license fees based on the number of gaming devices aboard the vessel. License fees paid to the State of Mississippi are allowed as a credit against Mississippi state income taxes. In all other material respects, casino gaming regulation in Mississippi is similar to the regulation of casino gaming in Nevada and New Jersey. Windsor, Ontario Casino Gaming Regulation. Casino Windsor Ltd., Caesars' unconsolidated one-third owned Canadian corporation which operates the casino in Windsor, Ontario, Canada, is required to comply with licensing requirements similar to Nevada and New Jersey and is also subject to operational regulation by the Province of Ontario. Nova Scotia Casino Gaming Regulation. ITT Sheraton's subsidiary, which both (i) owns and operates the casino in the City of Halifax, Nova Scotia, and (ii) operates the casino in the City of Sydney, Nova Scotia, is required to comply with licensing requirements similar to the Province of Ontario and is also subject to operational regulation by the Province of Nova Scotia. Casino Gaming -- Related Provisions of the Certificate of Incorporation. ITT's Restated Articles of Incorporation provide that (i) all securities of ITT are subject to redemption by ITT to the extent necessary to prevent the loss, or to secure the reinstatement, of any casino gaming license held by ITT or any of its subsidiaries in any jurisdiction within or without the United States of America, (ii) all securities of ITT are held subject to the condition that if a holder thereof is found by a gaming authority in any such jurisdiction to be disqualified or unsuitable pursuant to any gaming law, such holder will be required to dispose of all ITT securities held by such holder, and (iii) it will be unlawful for any such disqualified person to (a) receive payments of interest or dividends on any ITT securities, (b) exercise, directly or indirectly, any rights conferred by any ITT securities or (c) receive any remuneration in any form, for services rendered or otherwise, from the subsidiary that holds the gaming license in such jurisdiction. ITEM 2. PROPERTIES Reference is made to "Business of ITT." ITEM 3. LEGAL PROCEEDINGS There are various lawsuits pending against ITT and its subsidiaries some of which involve claims for substantial amounts. However, the ultimate liability with respect to these lawsuits is not considered material in relation to the consolidated financial condition of ITT and its subsidiaries. 22 24 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders of ITT during the fourth quarter of the fiscal year covered by this report. EXECUTIVE OFFICERS OF ITT The following information is provided as to the executive officers of ITT.
DATE OF AGE AT YEAR OF ELECTION FEBRUARY 1, INITIAL ELECTION TO PRESENT NAME 1996 POSITION AS AN OFFICER POSITION - - --------------------------------------------- --------------------------------------- ---------------- ---------- Rand V. Araskog................... 64 Chairman and Chief Executive and 1995 12/19/95 Director Robert A. Bowman.................. 40 President and Chief Operating Officer 1995 12/19/95 and Director Peter G. Boynton.................. 53 Senior Vice President; President and 1995 12/19/95 Chief Executive Officer of Caesars World, Inc. Juan C. Cappello.................. 57 Senior Vice President, Director of 1995 12/19/95 Corporate Relations Gerald C. Crotty.................. 44 Senior Vice President 1995 12/19/95 Jon F. Danski..................... 43 Senior Vice President and Controller 1995 12/19/95 Nicholas J. Glakas................ 51 Senior Vice President 1995 12/19/95 Ralph W. Pausig................... 61 Senior Vice President 1995 12/19/95 Ann N. Reese...................... 42 Executive Vice President and Chief 1995 12/19/95 Financial Officer Elizabeth A. Tuttle............... 39 Senior Vice President and Treasurer 1995 12/19/95 Richard S. Ward................... 55 Executive Vice President, General 1995 12/19/95 Counsel and Corporate Secretary Daniel P. Weadock................. 57 Senior Vice President; President and 1995 12/19/95 Chief Executive Officer of ITT Sheraton Corporation
Each of the above-named officers was elected to his or her present position to serve at the pleasure of the Board of Directors. For the five years immediately preceding the Distribution, all of the above-named officers held executive positions with Old ITT bearing at least substantially the same responsibilities as those borne in their present offices, except that (i) Mr. Araskog, prior to his election as Chairman and Chief Executive, was Chairman, President and Chief Executive of Old ITT; (ii) Mr. Bowman, prior to his election as President and Chief Operating Officer, was Executive Vice President and Chief Financial Officer of Old ITT since September 1992, Executive Vice President and Chief Financial Officer of ITT Sheraton Corporation from April 1991 to September 1992, Senior Vice President and Chief Financial Officer of ITT Sheraton Corporation from January to April 1991 and prior to that Treasurer of the State of Michigan; (iii) Mr. Boynton, prior to his election as Senior Vice President of ITT and President and Chief Executive Officer of Caesars World, Inc., was Senior Vice President of Old ITT since July 1995, President and Chief Operating Officer of Caesars World, Inc. since February 1995 and President and Chief Operating Officer of Caesars Atlantic City Hotel/Casino from 1982 to February 1995; (iv) Mr. Crotty, prior to his election as Senior Vice President, was Senior Vice President of Old ITT since October 1994, Chairman, President and Chief Operating Officer of ITT Information Services, Inc. from October 1993 to present, President and Chief Operating Officer of ITT Consumer Financial Corporation from February 1992 until September 1993, Vice President of Old ITT from August 1991 until September 1994 and Secretary to the Governor of the State of New York ending in July 1991; (v) Mr. Danski, prior to his election as Senior Vice President and Controller, was Senior Vice President and Controller of Old ITT since October 1993 and prior to that Vice President and General Auditor of RJR Nabisco; (vi) Mr. Glakas, prior to his election as Senior Vice President, was Vice President, Associate General Counsel & Director of Government Affairs of Old ITT from September 1992 to October 1995 and Director of Government Affairs of Old ITT prior thereto; (vii) Ms. Reese, prior to her election as Executive Vice President and Chief Financial Officer, was Senior Vice President and Treasurer of Old ITT since September 1992 and Vice President and Assistant Treasurer of Old ITT prior thereto; (viii) Ms. Tuttle, prior to her election as Senior Vice President and Treasurer, was Vice President and Assistant Treasurer of Old ITT since February 1995, Assistant Treasurer & Director of Capital Markets of Old ITT from October 1993 to February 1995, Assistant Treasurer & Manager of Financial Planning and Operations of Old ITT from July 1992 to October 1993 and Manager of Financial Planning and Operations of Old ITT prior thereto; (ix) Mr. Ward, prior to his election as Executive Vice President, General Counsel and Corporate Secretary, was Executive Vice President and General Counsel of Old ITT since May 1994, Senior Vice President and General Counsel of Old ITT from September 1992 to May 1994 and Vice President and Associate General Counsel of Old ITT prior thereto; and (x) Mr. Weadock, prior to his election as Senior Vice President and President and Chief Executive Officer of ITT Sheraton Corporation, was Senior Vice President of Old ITT since July 1995, President and Chief Operating Officer of ITT Sheraton Corporation since November 1993 and Chairman, President and Chief Executive Officer of ITT Communications and Information Services, Inc. prior thereto. 23 25 PART II ITEM 5. MARKET FOR ITT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS ITT COMMON STOCK -- MARKET PRICES AND DIVIDENDS
1995 ----------------- HIGH LOW ------ ------ Period commencing December 20, 1995 and ending December 31, 1995.................................................. $53.13 $48.25
On December 19, 1995, Old ITT distributed to its shareholders of record at the close of business on such date all of the outstanding shares of common stock of ITT, then a wholly owned subsidiary of Old ITT. In the Distribution, holders of common stock of Old ITT received one share of ITT's common stock for every one share of Old ITT common stock held. On December 20, 1995, the common stock of ITT commenced "regular way" trading on the New York Stock Exchange under the symbol "ITT". During the period from January 1, 1996 through February 29, 1996, the high and the low reported market prices of ITT common stock were $60.75 and $47.38, respectively. ITT has not declared any dividends to date and ITT presently has no plans to declare and pay any dividends. There were approximately 54,000 holders of record of ITT Common Stock on February 29, 1996. ITT Common Stock is listed on the New York Stock Exchange. ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ ($ IN MILLIONS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Revenues................................................................... $6,346 $4,760 $4,169 $4,253 $3,855 Income before Accounting Changes........................................... $ 147 $ 74 $ 39 $ 2 $ 43 Earnings per share (Pro Forma for 1994 and prior years) before Accounting Changes.................................................................. $ 1.24 $ .63 $ .33 $ .02 $ .37 BALANCE SHEET DATA: Total Assets............................................................... $8,692 $5,012 $3,791 $3,375 $2,462 Long-Term Debt, including Capital Leases................................... $3,575 $ 600 $ 169 $ 186 $ 160 OPERATING DATA: Operating Income........................................................... $ 571 $ 292 $ 142 $ 34 $ 126 EBITDA(1).................................................................. $ 797 $ 396 $ 222 $ 81 $ 163 Cash from Operating Activities............................................. $ 504 $ 230 $ 186 $ 143 $ 133 Number of Employees (in thousands)......................................... 38 25 18 18 20
- - --------------- (1) EBITDA is presented here as an alternative measure of the ability of ITT to generate cash flow and should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) or to cash flows from operating activities (as determined on the Consolidated Cash Flow Statement in ITT Corporation's Financial Statements contained herein). EBITDA was computed above as earnings before interest, taxes, depreciation and amortization. 24 26 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED) On December 19, 1995, Old ITT distributed to its shareholders of record at the close of business on such date all of the outstanding shares of common stock of ITT, then a wholly owned subsidiary of Old ITT (the "Distribution"). In the Distribution, holders of common stock of Old ITT received one share of ITT common stock for every one share of Old ITT common stock held, creating a separate publicly traded entity. This discussion and analysis of financial condition and results of operations is prepared as if ITT were a separate entity for all periods discussed. BACKGROUND AND BUSINESS CONDITIONS ITT combines the world's largest hotel and gaming company with a premier sports and entertainment company and information services businesses to create a dynamic and rapidly growing enterprise. Management believes ITT's strategic complement of assets, unmatched international presence and leading brand names uniquely position it to be a highly competitive participant in each of its operating segments. Moreover, ITT has the financial flexibility, as evidenced by 1995 comparable pro forma earnings before interest, taxes, depreciation, amortization and one time unusual items ("comparable pro forma EBITDA") of $892, to pursue opportunities worldwide. The 1995 comparable pro forma EBITDA results (which assume all acquisitions during 1994 and 1995 had been consummated on January 1, 1994) represent a 48% increase over the 1994 pro forma EBITDA of $604. The comparable pro forma results presented herein may not be indicative of the results of operations that would actually have been reported had the transactions underlying the pro forma amounts actually been consummated on such a date or of the results of operations that may be reported by ITT in the future. ITT completed the acquisition of one of the world's most recognized gaming companies, Caesars in January 1995. In March 1995, ITT, in partnership with subsidiaries of Cablevision Systems Corporation, acquired the well-known New York Knickerbockers and New York Rangers sports franchises, the MSG television network, and the Madison Square Garden Arena, through its investment in MSG. In addition, the acquisition in 1994 of 70.3% of Ciga, as well as other key hotel property acquisitions in both 1995 and 1994 have enhanced ITT's geographic balance along with its image and profile. Furthermore, in August 1995, ITT, in partnership with Dow Jones, agreed to purchase television station WNYC-TV from New York City. The purchase, subject to approval by the Federal Communications Commission and other customary conditions, is expected to close in the first half of 1996. Together, ITT and Dow Jones hope to transform the station into a preeminent business and sports television station based in New York City. The purchase price of $207 will be split evenly by the two companies and the partnership will be managed on a 50/50 basis. ITT also operates a telephone directory publishing business for telephone subscribers outside the United States, as well as in Puerto Rico and the U.S. Virgin Islands, and a United States-based provider of post-secondary career education and owns approximately 6% of Alcatel Alsthom, a French telecommunications equipment company. Through the ITT Sheraton brand name, ITT is represented in most major markets of the world. In 1995, over 45 million customers stayed at ITT Sheraton properties in approximately 60 countries. ITT Sheraton had a worldwide hospitality network of 412 owned, leased, managed and franchised properties including hotels, casinos and inns at December 31, 1995. Gaming operations are marketed under either the Caesars or ITT Sheraton brand names and are represented in Las Vegas, Atlantic City, Halifax (Nova Scotia), Sydney (Nova Scotia), Lake Tahoe, Tunica County (Mississippi), Lima (Peru), Cairo (Egypt), Windsor (Ontario) and Townsville (Australia). The Information Services segment consists of an 80% interest in ITT World Directories, a directory publishing business, and an 83.3% interest in ITT Educational, a provider of post-secondary degree technical education. 25 27 ITT's revenues, operating income and earnings before interest, taxes, depreciation and amortization ("EBITDA") have historically been lowest in the first quarter and highest in the fourth quarter, the result of seasonality in the Hotels segment and the timing of the directory publishing schedule at ITT World Directories. In the Gaming segment, results have not been particularly seasonal as a result of its mix of gaming jurisdictions; however, such results may be volatile as a result of the nature of high limit baccarat wagering. High limit baccarat wagering has been confined primarily to the Las Vegas properties and comprised approximately 23%, 23% and 24% of total Gaming revenues in 1995, 1994 and 1993, respectively. These seasonality factors are not expected to differ significantly in 1996, although there can be no assurance that the historical seasonality trends will continue. The following table reflects the historical seasonality of ITT:
PERCENT OF TOTAL YEAR ----------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- ----- Revenues 1995................................ 20% 27% 26% 27% 100% 1994................................ 18% 26% 23% 33% 100% 1993................................ 19% 28% 24% 29% 100% EBITDA 1995................................ 15% 28% 28% 29% 100% 1994................................ 13% 30% 24% 33% 100% 1993................................ 12% 31% 24% 33% 100% ====== ====== ====== ====== =====
Operating performance in the Hotels segment has historically been somewhat cyclical and has fluctuated to some degree based upon general economic conditions as well as specific factors affecting relevant local markets. In the Gaming segment, operating performance is impacted by, among other things, competition in the markets in which ITT operates. Increased competition in this segment is likely, as other states and countries authorize casino gaming. In the Information Services segment, ITT World Directories has historically been the sole provider of yellow page directories in specific markets and has performed its services on behalf of the local telephone companies. However, due in large measure to a changing competitive environment in the member states of the European Union, certain historical contractual relationships existing between ITT World Directories and the national telecommunications entity (specifically in Belgium and The Netherlands) were not renewed or extended upon expiration of the last contract term. ITT World Directories is currently competing with the national telecommunications entities in these countries. Such competition could adversely impact the operating results of ITT World Directories, although there has been no adverse impact to date and 1995 operating results improved; however, it is not certain that such trends will continue. Additionally, as contracts are scheduled for renewal in other jurisdictions within the European Union, such contracts may also not be renewed or extended, thereby possibly adversely affecting ITT World Directories. The higher-education industry is dependent upon the health of the national economy, with student enrollment generally softening in periods of strong job creation. ITT Educational continues to grow through new school openings and added curricula. Management believes it is well positioned to benefit from the expected rise in high school graduates entering the work force over the next ten years (as currently forecast by the U.S. Department of Labor). The following table reflects pro forma results of operations which assume that the acquisitions of Caesars, the 70.3% interest in Ciga, certain other hotel properties and MSG, in partnership with another entity, were completed on January 1, 1994. This pro forma information relates to a large degree to periods prior to ITT's ownership and does not take into account synergies that may be derived or ongoing 26 28 cost reduction efforts. Such information may not be indicative of the results that would have occurred if the acquisitions were completed on January 1, 1994:
REVENUES EBITDA OPERATING INCOME ----------------------------------- ----------------------------------- ----------------------------------- PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA YEAR ENDED YEAR ENDED % YEAR ENDED YEAR ENDED % YEAR ENDED YEAR ENDED % 12/31/95 12/31/94 CHANGE 12/31/95 12/31/94 CHANGE 12/31/95 12/31/94 CHANGE ---------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------- Hotels........... $4,120 $3,896 6% $383 $263 46% $259 $150 73% Gaming........... 1,452 1,232 18 316 212 49 218 129 69 Information Services........ 856 833 3 237 181 31 207 155 34 Corporate Overhead, MSG, and Minority.... -- -- -- (44) (52) -- (71) (77) -- -- -- -- ------ ------ ------ ------ ------ ------ $6,428 $5,961 8% $892 $604 48% $613 $357 72% ====== ====== == ====== ====== == ====== ====== ==
A substantial portion of the remaining discussion and analysis of results of operations relates to the historical periods of ITT which, for the most part, do not include the results of the acquisitions completed in late 1994 and the 1995 first quarter. YEAR ENDED DECEMBER 31, 1995 COMPARED WITH DECEMBER 31, 1994 Revenues of $6,346 in 1995 increased 33% compared with $4,760 in 1994, reflecting the eleven-month contribution of the Caesars acquisition as well as the full year contribution of Ciga and other significant hotel acquisitions completed during the second half of 1994. Caesars revenues totaled $979 from the date of acquisition while Ciga and other hotel acquisitions contributed $542 in 1995 compared with $271 in 1994 from the dates of acquisition of these properties. Excluding the effect of acquisitions, hotel revenues increased 4% primarily due to higher average room rates, particularly in owned and leased properties in North America. Revenues at ITT World Directories were basically unchanged during 1995 at $654 compared to $646 in 1994 reflecting increased competition with certain telephone companies. Revenues at ITT Educational increased 8% to $202 from $187 in 1994 reflecting additional school openings, increased census and a continuing expansion of curricula and degree offerings. Excluding the Caesars and hotel acquisitions discussed above, revenues increased 7%. Salaries, benefits and other operating costs increased 24% in 1995 to $4,747 from $3,837 representing the costs of the acquired properties and smaller increases in the cost of services. Overall, salaries, benefits and other operating costs represented 75% of revenues in 1995, down from 81% in the comparable 1994 period, as higher average rates and occupancy outpaced the increase in costs. In addition, improved performance in the Information Services segment, representing lower telephone company fees in Belgium; continuing benefits of cost control programs; and favorable foreign exchange experience, contributed to the positive results. Selling, general and administrative expenses increased 48% to $871 in 1995 compared with $587 in 1994, due primarily to the costs associated with Caesars, Ciga and the other hotel acquisitions. ITT has embarked on several company-wide cost rationalization programs aimed at reducing administrative costs. In June 1995, ITT announced the closing of the Caesars headquarters in Los Angeles; in September 1995, ITT provided for severance and other costs associated with restructuring the headquarters of the hotels and information services business segments totaling $80 pretax, and in December 1995, ITT recorded charges associated with the consolidation of certain administrative and other functions in its gaming segment of $6 pretax. In addition, ITT is undertaking an aggressive information systems rationalization program. This program is designed to reduce operating costs and increase efficiency as well as improve management's ability to access operational and financial data. Selling, general and administrative expenses include $96 and $88 in 1995 and 1994, respectively, representing reimbursement of overhead expenses related to world headquarters management and supervision of the entities comprising Old ITT prior to the Distribution. These expenses represent fees for advice and assistance provided by ITT in connection with legal, accounting, tax, treasury and insurance services. In the opinion of management, the methods for allocating these costs are reasonable. However, the net cost of these services to ITT are not necessarily indicative of the costs that would have been 27 29 incurred if ITT had been operated as an unaffiliated entity. It is not practical to estimate such costs on a stand-alone basis. Operating income rose 96% in 1995 reflecting the impact of the acquisitions discussed above, as well as the impact of one-time charges related to the planned disposals of certain non-core assets and restructuring charges referred to above. Excluding the acquisitions and restructuring charges, operating income increased 43% primarily due to higher average room rates, particularly in owned properties in North America, and the aforementioned improvement in the Information Services segment. Depreciation and amortization increased 92% compared with 1994 due primarily to the acquisitions discussed above. Interest expense (before interest income of $54 in 1995 and $16 in 1994) increased to $345 from $147 in 1994. In connection with the Distribution, Old ITT allocated certain indebtedness between ITT and ITT Industries, Inc. As a result of such allocation, the interest expense incurred in prior periods may not be indicative of the interest expense which would have been incurred if ITT was an independent entity during such periods. Income tax expense rose during 1995 in direct proportion to the higher pretax earnings as ITT maintained an effective rate of 40% in both years. Minority equity in 1995 reflects the minority ownership in ITT World Directories, ITT Educational and Ciga and increased due to higher earnings. Net income of $147 in 1995 improved 99% compared with $74 in 1994, the results of the factors discussed above. Cash from operating activities, as defined by SFAS No. 95, increased to $504 in 1995 from $230 in 1994 reflecting the improved operating results and the accretive impact of the acquisitions discussed above. The SFAS definition of cash from operating activities differs from EBITDA largely due to the inclusion of interest, income taxes and changes in working capital. BUSINESS SEGMENTS Revenues, EBITDA and operating income (excluding the effect of corporate overhead and minority income) for each of ITT's three major business segments were as follows:
YEAR ENDED 1995 YEAR ENDED 1994 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $4,120 $314 $ 190 .............Hotels............. $3,700 $239 $ 152
Hotels 1995 results reflect the full-year benefit of the Ciga and other significant hotel acquisitions made during 1994 and the $51 restructuring charge. At December 31, 1995, Hotel properties include 198 properties (48%) which are owned, leased or managed under long-term agreements and 214 properties (52%) which are franchised. During 1995, significant benefits were realized at the owned and leased properties in EBITDA and operating income due to improved operations and cost control programs. Improvements in these properties have a greater impact on the Hotels segment results than do improvements in managed properties, where the majority of the improvements are realized by those property owners. In addition, during 1995 the average daily room rate at ITT's owned, leased and managed properties increased 10% to $126 and revenue per available room rose 10% to $89. These increases reflect management's focus on attaining the optimal combination of rate and occupancy while enhancing the level of service and value to ITT's customers. ITT has continued to focus on expanding and enhancing its image among world travelers, through ongoing renovations of key properties, upgrading standards, defranchising nonconforming properties and strategic acquisitions. Management continues to aggressively pursue revenue growth as well as cost saving opportunities in each of its market segments through a variety of strategies including: maximizing the integration of the Ciga hotels; cross promoting ITT's gaming and entertainment assets; and continued domestic and international expansion.
YEAR ENDED 1995 YEAR ENDED 1994 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $1,370 $301 $ 209 .............Gaming............. $227 $ 19 $ 9
28 30 The January 1995 acquisition of one of the most internationally recognized brand names in gaming, Caesars, positions ITT to be a competitive force in this rapidly expanding industry. The Gaming segment has key properties in both major U.S. jurisdictions, Las Vegas, Nevada and Atlantic City, New Jersey as well as other properties both domestically and internationally. The 1995 results also reflect a full year of operating results from the Sheraton Casino in Tunica County, Mississippi which opened in August 1994. In the future, the Gaming segment is expected to contribute an increasing portion of ITT's results.
YEAR ENDED 1995 YEAR ENDED 1994 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $856 $208 $ 178 .......Information Services....... $833 $181 $ 155
Revenues at ITT World Directories were basically unchanged compared with 1994. Excluding the restructuring charge of $29, margins improved reflecting lower telephone company fees in Belgium as ITT World Directories has begun to compete with the local telephone company. As more fully discussed in the Notes to Financial Statements, ITT Promedia, a subsidiary of ITT World Directories, is involved in a dispute with the Belgium Telephone Company ("Belgacom") challenging Belgacom's current published fee schedule as being unfair, unreasonable and discriminatory. ITT Educational achieved record results in its first year as a publicly traded company reflecting the benefit of four additional school openings, ongoing cost control measures and a continuing expansion of curricula and degree offerings. ITT Educational maintained its enrollment base (20,618 students at December 31, 1995 compared with 20,668 at December 31, 1994) despite a strong job market in 1995. YEAR ENDED DECEMBER 31, 1994 COMPARED WITH DECEMBER 31, 1993 Revenues of $4,760 in 1994 increased 14% over 1993 results, reflecting the contribution of 70.3% of Ciga, which was purchased in stages during the second half of the year, The Phoenician, the Crescent and The Park Grande Hotel, all acquired in 1994, along with improved results at Hotels in the North American and Asia-Pacific regions. The improvement was partially offset by the loss of revenues from the ITT World Directories United Kingdom unit disposed of in 1993. Revenues of Ciga and the other acquisitions totaled $271 in 1994. Excluding these acquisitions, revenues increased 3%. Average occupancy of owned, leased and managed hotels (excluding the newly acquired Ciga hotels) improved 3.8% to 72.9% in 1994. Salaries, benefits and other operating costs increased 11% in 1994 over 1993 levels, representing the costs of the acquired properties as well as smaller increases in the cost of services. Overall, salaries, benefits and other operating costs represented 81% of revenues in 1994, down from 83% in 1993 as high average rates and occupancy outpaced the increase in direct costs. Selling, general and administrative expenses include $118 in 1994 and $122 in 1993, representing overhead expenses related to the management and supervision of the entities comprising ITT before the Distribution. Of these amounts, $88 and $73 were charged in the respective years to affiliated companies and represented fees for advice and assistance provided by ITT in connection with cash management, legal, accounting, tax and insurance services. The fees for these services were based upon a general relations agreement with each affiliate. Excluding these overhead expenses and related service fee income, selling, general and administrative expenses increased approximately 12% due primarily to the overhead of the acquired companies and hotels. Operating income rose 106% in 1994, reflecting the aforementioned North American occupancy and rate improvement at Hotels, a full year of Gaming operations and benefits from cost reduction actions initiated in 1993 in all major business segments. Operating income in 1993 included restructuring provisions totaling $49 aimed at increasing the efficiency and productivity of overhead functions at the segment and regional headquarters locations. These provisions yielded the desired improvements as evidenced, in part, by the increased operating cash flow in 1994. In addition, the 1993 results included a $29 provision for the accelerated write-off of capitalized development expenses stemming from a reevaluation of future plans and projects. Depreciation and amortization rose 21% due primarily to the fixed asset additions made through acquisition and the goodwill amortization associated with the Ciga and The Phoenician acquisitions. 29 31 Interest expense (before interest income of $16 in 1994 and $14 in 1993) increased to $147 compared with $47 in 1993, the result of additional debt required to fund the Desert Inn purchase in 1993 and the 1994 acquisitions discussed above. Average interest-bearing debt of $1.4 billion in 1994 compares with $0.4 billion in 1993. Interest-bearing debt represents external borrowings (averaging $0.4 billion in 1994 and $0.2 billion in 1993) and interest-bearing advances from ITT Industries, Inc. ($1.0 billion in 1994 and $0.2 billion in 1993). Miscellaneous income (expense), net reflects non-operating items of a non-recurring nature including gains and losses on the sale of investments. In 1994, miscellaneous expense of $17 primarily relates to the write-off of expenses incurred in connection with a terminated gaming project, partly offset by the gain on the public offering of 16.7% of ITT Educational. In 1993, miscellaneous income of $10 related primarily to the gain on the sale of an ITT World Directories unit. Income taxes of $58 in 1994 were provided on pretax income of $144 representing a 40% effective tax rate. Tax on repatriation of foreign earnings in addition to U.S. state and local income taxes raises ITT's effective tax rate above the U.S. statutory rate. The decrease from the 1993 53% effective tax rate results primarily from the absence of the 1993 tax cost associated with repatriating cash to the United States from ITT World Directories units in Portugal, Belgium and The Netherlands. Minority income in 1994 represents the effect of minority ownership in ITT World Directories and Ciga. In 1993, minority income related solely to ITT World Directories. Net income of $74 in 1994 improved 90% compared with $39 in 1993, the result of the factors discussed above. EBITDA increased a substantial 78% in 1994 to $396 from the $222 generated in 1993. Improved occupancy and rates in the Hotels segment (primarily in the North American region) and lower overhead costs coupled with the absence of 1993 restructuring provisions, which totaled $49, are the primary contributors to the improvement. Acquisitions made throughout 1994 impacted revenues to a much larger degree than EBITDA. EBITDA represented 8.3% of revenues in 1994 compared with 5.3% in 1993. Cash from operating activities, as defined by SFAS No. 95, increased to $230 in 1994 from $186 in 1993 for the reasons described above. The SFAS definition of cash from operating activities differs from EBITDA largely due to the inclusion of interest, income taxes and changes in working capital. BUSINESS SEGMENTS Revenues, EBITDA and operating income (excluding the effect of corporate overhead, minority income and dispositions) for each of ITT's three major business segments were as follows:
YEAR ENDED 1994 YEAR ENDED 1993 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $3,700 $239 $ 152 .............Hotels............. $3,160 $167 $87
Properties in the Hotels segment are marketed under the ITT Sheraton brand name and include 209 properties (49%) which are owned, leased or managed under long-term agreements and 214 properties (51%) which are franchised at December 31, 1994. At year end 1993, 176 properties (43%) were owned, leased or managed and 230 properties (57%) were franchised. The shift in mix toward owned hotels, including the purchase of a controlling interest in Ciga in 1994, is indicative of ITT's focus on improving the standards of properties carrying the ITT Sheraton trade names and service marks. Hotels revenues increased in 1994 due to improved results in the North American and Asia-Pacific regions and the contribution of new acquisitions, namely Ciga, The Phoenician and The Park Grande. EBITDA improved a substantial 43% from 1993, partly as a result of acquisitions. Operating income in 1994 reflected, among other things, the improvements in the North American region and benefits from cost reductions. In 1993, operating income reflected the accelerated write-off of capitalized development expenses totaling $23, partly offset by an $11 gain on the sale of an investment in Bally's Las Vegas operations. Room rates of owned and leased properties (excluding the newly acquired Ciga hotels) averaged $110 in 1994, compared with $105 in 1993, while occupancy rates rose to 72.9% from 70.2% in the prior year. 30 32 Hotels segment revenues are geographically diverse with 45% and 48% generated in North America in 1994 and 1993, respectively. New York, Boston and Miami are among the larger markets served.
YEAR ENDED 1994 YEAR ENDED 1993 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $227 $ 19 $ 9 .............Gaming............. $ 24 $(3) $ (9)
The Sheraton Desert Inn is included in the Gaming segment for the full year in 1994 compared with two months in 1993. ITT Sheraton opened the Sheraton Casino in Tunica County, Mississippi in August 1994. Gaming contributed $19 to ITT's EBITDA in 1994, up $22 from $(3) in 1993, when ITT began its gaming efforts in the United States.
YEAR ENDED 1994 YEAR ENDED 1993 - - --------------------------------- --------------------------------- OPERATING OPERATING REVENUES EBITDA INCOME REVENUES EBITDA INCOME - - -------- ------ --------- -------- ------ --------- $833 $181 $ 155 .......Information Services....... $800 $178 $ 162
Operating income fell at the Information Services segment in 1994 on modestly higher revenues, reflecting additional expenses of publishing in competitive markets and ITT World Directories' share of the costs of establishing a directory joint venture. Both revenues and income improved at ITT Educational. LIQUIDITY AND CAPITAL RESOURCES The preceding discussion of the results of operations describes ITT over a period of significant transformation and growth. ITT has historically incurred debt at the parent level to a greater extent than at the operating level, particularly when funding major capital programs or acquisitions. On November 16, 1995, in preparation for the post-Distribution recapitalization, ITT issued $1.75 billion of notes and debentures ranging in maturity from 5 to 30 years and yielding a weighted average interest rate of 6.97%. The proceeds from this offering were used for the repayment of commercial paper. Effective with the Distribution, ITT entered into two revolving credit agreements with syndicate banks totaling $3 billion (five-year facility of $2 billion; 364-day facility of $1 billion). In addition, ITT maintains lesser credit lines at certain operating units. These commitments are used to assure working capital needs and to support commercial paper. As of December 31, 1995, $1,329 of commercial paper has been classified as long-term since ITT intends to renew or refinance these obligations through 1996 and future periods. The future liquidity of ITT will, to a large degree, depend upon the integration and performance of its recent acquisitions as well as the previously existing businesses of ITT. Additionally, income taxes have been assessed to ITT in accordance with a tax allocation agreement with Old ITT that generally requires the computation of income taxes as if ITT had been a stand-alone entity. In all years presented, credits for income taxes paid in foreign jurisdictions were fully utilizable in the United States in the Old ITT consolidated tax return, which may not be achieved in the future. To the extent foreign tax credits cannot be used to reduce the U.S. tax obligation, a higher effective income tax rate will be incurred. ITT generated EBITDA of $797 in 1995 compared with $396 in 1994, which was prior to the acquisitions of Caesars, MSG, Ciga and other significant hotels. Comparable pro forma EBITDA was $892 in 1995 compared with $604 in 1994, a 48% increase. These cash flows are expected to be sufficient to service indebtedness, satisfy tax obligations and cover maintenance capital expenditures and other liquidity needs. Additional liquidity needs would be funded through traditional debt or equity financings, asset sales or any combination thereof. Funds used in capital expenditures and acquisitions totaled $2.8 billion and $1.5 billion in 1995 and 1994, respectively, representing combined expenditures of $4.3 billion since January 1, 1994. Of this amount, the acquisition of Caesars ($1.7 billion), MSG ($0.6 billion), Ciga ($0.5 billion) and other significant hotel acquisitions ($0.7 billion) comprised 81%. A portion of these expenditures were financed through the sale by Old ITT of its ITT Financial assets. The balance was used for smaller acquisitions and to maintain ITT's facilities. The Corporation expects to pay $103.5 in connection with its proposed acquisition of WNYC-TV in partnership with Dow Jones. This transaction is expected to close in the first half of 1996. EFFECT OF INFLATION The rate of inflation as measured by changes in the average consumer price index has not had a material effect on the revenues or operating results of ITT during the three most recent fiscal years. 31 33 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements and Schedule contained elsewhere herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF ITT The information called for by Item 10 with respect to directors is incorporated herein by reference to the definitive proxy statement involving the election of directors filed or to be filed by ITT with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-K. The information called for by Item 10 with respect to executive officers is set forth above in Part I under the caption "Executive Officers of ITT." ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by Item 12 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information called for by Item 13 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as a part of this report: 1. See Index to Financial Statements and Schedule appearing on page F-1 for a list of the financial statements and schedule filed as a part of this report. 2. See Exhibit Index appearing on pages II-2 and II-3 for a list of the exhibits filed or incorporated herein as a part of this report. (b) On November 27, 1995, ITT filed a Current Report on Form 8-K which attached as exhibits the definitive form of ITT's 6 1/4% Notes Due November 15, 2000, 6 3/4% Notes Due November 15, 2005, 7 3/8% Debentures Due November 15, 2015 and 7 3/4% Debentures Due November 15, 2025 and an opinion of counsel as to the legality of such securities. On December 22, 1995, ITT filed a Current Report on Form 8-K to report that on December 19, 1995 the outstanding common stock of ITT was distributed to the shareholders of Old ITT of record on the close of business on such date and that, as part of such distribution, "ITT Destinations, Inc." changed its name to "ITT Corporation". 32 34 INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE ---- Report of Management................................................................. F-2 Report of Independent Public Accountants............................................. F-3 Consolidated Income for the three years ended December 31, 1995...................... F-4 Consolidated Balance Sheet as of December 31, 1995 and 1994.......................... F-5 Consolidated Cash Flow for the three years ended December 31, 1995................... F-6 Consolidated Stockholders Equity for the three years ended December 31, 1995......... F-7 Notes to Financial Statements........................................................ F-8 Quarterly Results for 1995 and 1994 (unaudited)...................................... F-19 Business Segment Information......................................................... F-19 Geographical Information -- Total Segments........................................... F-19 Valuation and Qualifying Accounts.................................................... S-1
F-1 35 REPORT OF MANAGEMENT The management of ITT Corporation is responsible for the preparation and integrity of the information in the financial statements and other sections of the Annual Report. The financial statements are prepared in accordance with generally accepted accounting principles and, where necessary, include amounts that are based on management's informed judgments and estimates. Other information in the Annual Report is consistent with the financial statements. ITT's financial statements are audited by Arthur Andersen LLP, independent public accountants, elected by the shareholders. Management has made ITT's financial records and related data available to Arthur Andersen LLP, and believes that the representations made to the independent public accountants are valid and complete. ITT's system of internal controls is a major element in management's responsibility to provide a fair presentation of the financial statements. The system includes both accounting controls and the internal auditing program, which are designed to provide reasonable assurance that ITT's assets are safeguarded, that transactions are properly recorded and executed in accordance with management's authorization, and that fraudulent financial reporting is prevented or detected. ITT's internal controls provide for the careful selection and training of personnel and for appropriate divisions of responsibility. The controls are documented in written codes of conduct, policies and procedures that are communicated to ITT's employees. Management continually monitors the system of internal controls for compliance. ITT's internal auditors independently assess the effectiveness of internal controls and make recommendations for improvement on a regular basis. The independent public accountants also evaluate internal controls and perform tests of procedures and accounting records to enable them to express their opinion on ITT's financial statements. They also make recommendations for improving internal controls, policies and practices. Management takes appropriate action in response to each recommendation from the internal auditors and the independent public accountants. The Audit Committee of the Board of Directors, composed of nonemployee directors, meets periodically with management and with the independent public accountants and internal auditors to evaluate the effectiveness of the work performed by them in discharging their respective responsibilities and to assure their independence and free access to the Committee. F-2 36 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE SHAREHOLDERS OF ITT CORPORATION: We have audited the accompanying consolidated balance sheet of ITT Corporation (a Nevada corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, cash flow and stockholders equity for each of the three years in the period ended December 31, 1995, as described in the accompanying Index to Financial Statements and Schedule. These financial statements and the schedule referred to below are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ITT Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the Index to Financial Statements and Schedule is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP New York, New York January 24, 1996 F-3 37 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME IN MILLIONS EXCEPT PER SHARE
YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ Revenues....................................................... $6,346 $4,760 $4,169 Costs and Expenses: Salaries, benefits and other operating....................... 4,747 3,837 3,451 Selling, general and administrative, net of service fee income of $96, $88 and $73................................ 775 499 467 Depreciation and amortization................................ 253 132 109 ------ ------ ------ 5,775 4,468 4,027 ------ ------ ------ 571 292 142 Interest expense (net of interest income of $54, $16 and $14)......................................................... (291) (131) (33) Miscellaneous income (expense), net............................ 2 (17) 10 ------ ------ ------ 282 144 119 Income tax expense............................................. (114) (58) (63) Minority equity................................................ (21) (12) (17) ------ ------ ------ Net income..................................................... $ 147 $ 74 $ 39 ====== ====== ====== Earnings per share (Pro Forma for 1994 and 1993 -- See Notes to Financial Statements)........................... $ 1.24 $ 0.63 $ 0.33 ====== ====== ====== Weighted average common equivalent shares (Pro Forma for 1994 and 1993 -- See Notes to Financial Statements).................................................. 118 117 117 ====== ====== ======
The accompanying notes to financial statements are an integral part of the above statement. F-4 38 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET IN MILLIONS EXCEPT FOR SHARES
DECEMBER 31, ----------------- 1995 1994 ------ ------ ASSETS Current assets: Cash and cash equivalents........................................... $ 177 $ 191 Receivables, net.................................................... 784 498 Inventories......................................................... 86 59 Prepaid expenses and other.......................................... 96 217 ------ ------ Total current assets........................................... 1,143 965 Plant, property and equipment, net....................................... 3,979 2,882 Investments.............................................................. 1,757 655 Goodwill, net............................................................ 1,332 232 Long-term receivables, net............................................... 150 133 Other assets............................................................. 331 145 ------ ------ $8,692 $5,012 ====== ====== LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable.................................................... $ 309 $ 72 Accrued expenses.................................................... 695 426 Notes payable and current maturities of long-term debt.............. 265 31 Other current liabilities........................................... 161 95 ------ ------ Total current liabilities...................................... 1,430 624 Long-term debt........................................................... 3,575 600 Deferred income taxes.................................................... 141 39 Other liabilities........................................................ 350 192 Minority interest........................................................ 260 204 ------ ------ 5,756 1,659 ------ ------ Stockholders Equity: Common stock: authorized 200,000,000 shares, no par or stated value, outstanding 117,196,370 shares..................................... 2,944 -- Accumulated deficit................................................. (8) -- Investments and advances from ITT Industries, Inc.(1)............... -- 3,353 ------ ------ Total stockholders equity...................................... 2,936 3,353 ------ ------ $8,692 $5,012 ====== ======
- - --------------- (1) Investments and Advances From ITT Industries, Inc. represents the means by which ITT was funded by Old ITT prior to the Distribution and consisted of both equity and interest bearing advances. The accompanying notes to financial statements are an integral part of the above statement. F-5 39 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED CASH FLOW IN MILLIONS
YEARS ENDED DECEMBER 31, ----------------------------- 1995 1994 1993 ------- ------- ----- OPERATING ACTIVITIES Net Income.................................................... $ 147 $ 74 $ 39 Adjustments to net income: Depreciation and amortization............................... 253 132 109 Provision for doubtful receivables.......................... 132 69 26 Equity income, net of dividends received.................... 21 16 15 Loss (gain) on divestments -- pretax........................ 2 -- (19) Changes in working capital: Accounts receivable......................................... (219) (92) 2 Inventories................................................. (4) (5) (7) Accounts payable............................................ 59 (6) 9 Accrued expenses............................................ 77 29 117 Accrued and deferred taxes.................................... 44 11 (52) Other, net.................................................... (8) 2 (53) ------- ------- ----- Cash from operating activities........................... 504 230 186 ------- ------- ----- INVESTING ACTIVITIES Additions to plant, property and equipment.................... (571) (453) (91) Proceeds from divestments..................................... 10 18 41 Acquisitions, net of acquired cash of $164 in 1995............ (2,188) (1,038) (180) Other, net.................................................... 110 6 (99) ------- ------- ----- Cash used for investing activities....................... (2,639) (1,467) (329) ------- ------- ----- FINANCING ACTIVITIES Short-term debt, net.......................................... 94 13 (19) Long-term debt issued......................................... 3,132 260 -- Long-term debt repaid......................................... (121) (124) (18) Change in investments and advances from ITT Industries, Inc......................................................... (929) 457 428 Other, net.................................................... (55) (11) (45) ------- ------- ----- Cash from financing activities........................... 2,121 595 346 ------- ------- ----- EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS............. -- (1) (5) ------- ------- ----- (Decrease) increase in cash and cash equivalents.............. (14) (643) 198 Cash and Cash Equivalents -- Beginning of Year................ 191 834 636 ------- ------- ----- CASH AND CASH EQUIVALENTS -- END OF YEAR...................... $ 177 $ 191 $ 834 ======= ======= ===== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest...................................................... $ 314 $ 119 $ 27 ======= ======= ===== Income taxes.................................................. $ 55 $ 117 $ 19 ======= ======= =====
The accompanying notes to financial statements are an integral part of the above statement. F-6 40 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED STOCKHOLDERS EQUITY IN MILLIONS EXCEPT FOR SHARES
INVESTMENTS COMMON STOCK AND ADVANCES FROM ---------------------- ACCUMULATED ITT INDUSTRIES, INC.(1) SHARES AMOUNT DEFICIT ----------------------- ----------- ------ ----------- Balance -- January 1, 1993.......... $ 2,313 -- $ -- $-- Net Income.......................... 39 -- -- -- Transfers from ITT Industries, Inc............................... 431 -- -- -- Translation of financial statements........................ (18) -- -- -- ------ ----------- ------ --- Balance -- December 31, 1993........ 2,765 -- -- -- Net Income.......................... 74 -- -- -- Transfers from ITT Industries, Inc............................... 549 -- -- -- Translation of financial statements........................ (35) -- -- -- ------ ----------- ------ --- Balance -- December 31, 1994........ 3,353 -- -- -- Net Income.......................... 155 -- -- -- Transfers to ITT Industries, Inc., net............................... (539) -- -- -- Translation of financial statements........................ (25) -- -- -- Issuance of common stock in connection with the Distribution...................... (2,944) 117,196,370 2,944 -- ------ ----------- ------ --- Balance -- December 19, 1995........ -- 117,196,370 2,944 -- Net Loss............................ -- -- -- (8) ------ ----------- ------ --- Balance -- December 31, 1995........ $ -- 117,196,370 $2,944 $(8) ====== =========== ====== ===
- - --------------- (1) Investments and Advances From ITT Industries, Inc. represents the means by which ITT was funded by Old ITT prior to the Distribution and consisted of both equity and interest bearing advances. As of December 19, 1995, ITT was recapitalized through issuances of its own debt and equity securities. The accompanying notes to financial statements are an integral part of the above statement. F-7 41 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED BASIS OF PRESENTATION ITT Corporation ("ITT") is the world's largest hotel and gaming company. ITT's principal lines of business are hotels, gaming and information services. The hotels segment is comprised of a worldwide hospitality network of over 400 full-service hotels serving three markets: luxury, upscale and mid-price. ITT's hotel operations are represented on every continent and in nearly every major world market. ITT's gaming operations are located in several key domestic jurisdictions. ITT also operates various hotel/casino ventures outside the United States. ITT's information services segment publishes telephone directories in many countries outside the United States and provides post-secondary career education in the United States. On December 19, 1995 (the "Distribution Date"), the former ITT Corporation ("Old ITT", which has been renamed ITT Industries, Inc.), distributed to its shareholders of record at the close of business on such date all of the outstanding shares of common stock of ITT, then a wholly owned subsidiary of Old ITT (the "Distribution"). In such distribution, holders of common stock of Old ITT received one share of ITT common stock for every one share of Old ITT common stock held. In connection with such distribution, ITT, which was then named "ITT Destinations, Inc.", changed its name to ITT Corporation. These financial statements present the financial position, results of operations and cash flows of ITT as if it were a separate entity for all periods presented. Old ITT's historical basis in the assets and liabilities of ITT has been carried over and all majority-owned subsidiaries have been consolidated. All material intercompany transactions and balances between ITT and its subsidiaries have been eliminated. ITT included many of the corporate functions of Old ITT and provided to Old ITT centralized systems for legal, accounting, tax, treasury and insurance services. ITT charged fees for these services to Old ITT and its affiliates (see "Transactions with Companies Affiliated with ITT Industries"). The net cost to ITT of providing these services, after allocation to Old ITT and its affiliates, is $34, $39 and $56 for 1995, 1994 and 1993, respectively. In the opinion of management, ITT's methods for allocating costs are believed to be reasonable. However, the net cost of these services to ITT are not necessarily indicative of the costs that would have been incurred if ITT had been operated as an unaffiliated entity. It is not practicable to estimate such costs on a stand-alone basis. For purposes of governing certain of the ongoing relationships between ITT and Old ITT after the Distribution and to provide for an orderly transition, ITT and Old ITT have entered into various agreements including a Distribution Agreement, Employee Benefits Services and Liability Agreement, Tax Allocation Agreement and Intellectual Property Transfer and License Agreements. ITT may be liable to or due reimbursement from Old ITT relating to the resolution of certain pre-Distribution matters under these agreements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTING POLICIES Revenue Recognition: Generally, revenues are recognized when the services have been rendered. The following is a description of the composition of revenues for each of ITT Corporation's business segments: Hotels Operations: At December 31, 1995 ITT operated 130 hotels under long-term management agreements. These agreements effectively convey to ITT the right to use the hotel properties in exchange for payments to the property owners which are based primarily on the hotels' profitability. Accordingly, ITT includes the operating results of hotel properties under long-term management agreements in its F-8 42 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED consolidated financial statements. Revenues related to these hotel properties were $2.7 billion, $2.6 billion and $2.4 billion for 1995, 1994 and 1993, respectively, and amounts provided for payments to the property owners for the use of the hotel properties were $.5 billion, $.5 billion and $.4 billion for 1995, 1994 and 1993, respectively. Gaming Operations: Casino revenues represent the net win from gaming wins and losses. Revenues exclude the retail value of rooms, food, beverage, entertainment and other promotional allowances provided on a complimentary basis to customers. The estimated retail value of these promotional allowances was $144, $17 and $-- for the years ended December 31, 1995, 1994 and 1993, respectively. The estimated cost of such promotional allowances was $99, $11 and $- for the years ended December 31, 1995, 1994 and 1993, respectively, and has been included in Costs and Expenses in the accompanying statement of Consolidated Income. Revenues and costs and expenses of the Gaming operations are comprised of the following for the years ended December 31, 1995, 1994 and 1993:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 1995 1994 1993 ---------------------- ---------------------- ---------------------- COSTS AND COSTS AND COSTS AND REVENUES EXPENSES REVENUES EXPENSES REVENUES EXPENSES -------- --------- -------- --------- -------- --------- Gaming......................................... $1,068 $ 535 $165 $ 75 $ 15 $ 12 Rooms.......................................... 101 31 28 12 4 2 Food and beverage.............................. 108 93 22 23 3 3 Other operations............................... 93 105 12 13 2 6 Selling, general and administrative............ -- 191 -- 37 -- 3 Depreciation and amortization.................. -- 92 -- 10 -- 6 Provision for doubtful accounts................ -- 114 -- 48 -- 1 ------ ------ ---- ---- --- --- Total.................................. $1,370 $ 1,161 $227 $ 218 $ 24 $ 33 ====== ====== ==== ==== === ===
Information Services Operations: Revenues for the Directories unit of Information Services are comprised of the total value of advertising contracts sold by ITT. Costs and expenses include remuneration and franchise fees paid to telephone authorities in places where ITT operates as a publisher of directories or operates as an agent. Tuition revenue at ITT Educational Services is recorded on a straight-line basis over the length of the applicable course. If a student discontinues training, the revenue related to the remainder of that quarter is recorded with the amount of refund resulting from the application of federal, state, or accreditation requirements recorded as an expense. Cash and Cash Equivalents: ITT considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories: Inventories, comprised principally of hotel and gaming supplies, are generally valued at the lower of cost (first-in, first-out) or market and potential losses from obsolete and slow-moving inventories are provided for in the current period. Plant, Property and Equipment: Plant, property and equipment, including capitalized interest applicable to major project expenditures, are recorded at cost. ITT normally claims the maximum depreciation deduction allowable for tax purposes. In general, for financial reporting purposes, depreciation is provided on a straight-line basis over the useful economic lives of the assets involved as follows: Buildings and improvements -- primarily 15 to 40 years, Machinery and equipment -- 2 to 10 years, and Other -- 5 to 40 years. Gains or losses on sale or retirement of assets are included in income. Derivative Financial Instruments: ITT uses derivative financial instruments from time to time, including foreign currency forward contracts and/or swaps, as a means of hedging exposure to foreign F-9 43 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED currency risks. ITT is an end-user and does not utilize these instruments for speculative purposes. ITT has strict policies regarding financial stability and credit standing of its major counterparties. Forward exchange contracts and foreign currency swaps are accounted for in accordance with SFAS No. 52. Changes in the spot rate of instruments designated as hedges of the net investment in a foreign subsidiary are reflected in Stockholders Equity. Foreign Currency: Balance sheet accounts are translated at the exchange rates in effect at each year end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The national currencies of foreign operations are generally the functional currencies. Gains and (losses) from foreign currency transactions are reported currently in costs and expenses and were insignificant for all periods presented. Income Tax: Prior to the Distribution, ITT and its subsidiaries were included in the consolidated U.S. Federal tax return of Old ITT and remitted to (received from) Old ITT an income tax provision (benefit) computed in accordance with a tax sharing arrangement. This arrangement generally required that ITT determine its tax provision (benefit) as if it were filing a separate U.S. Federal income tax return. However, the agreement allowed ITT to record benefits of certain tax attributes, primarily foreign tax credits, utilizable on the Old ITT consolidated tax return, which may not have been available on a separate company basis. Subsidiary Stock Issuance: ITT recognizes gains (losses) on sales of subsidiary stock. For the year ended December 31, 1994, Miscellaneous income (expense), net includes a gain of $10, pretax, from the sale for 16.7% of the common stock of ITT Educational Services, Inc. Goodwill: The excess of cost over the fair value of net assets acquired is amortized on a straight-line basis over 40 years. Accumulated amortization was $38, $6 and $3 at December 31, 1995, 1994 and 1993, respectively. ITT continually reviews goodwill to assess recoverability from future operations using undiscounted cash flows. Impairments would be recognized in operating results if a permanent diminution in value is deemed to have occurred. Earnings Per Share: Earnings per share through the Distribution Date were computed based upon the number of ITT common shares that were outstanding on the Distribution Date. Earnings per share from the Distribution Date through December 31, 1995 were determined based upon the weighted average of common and common equivalent shares outstanding during the period. For purposes of this calculation, common equivalent shares were assumed to have been outstanding from the beginning of 1995. Reclassifications: Certain amounts in the prior years' financial statements have been reclassified to conform to the current year presentation. TRANSACTIONS WITH COMPANIES AFFILIATED WITH ITT INDUSTRIES, INC. ITT included many of the corporate functions of Old ITT and provided Old ITT and other affiliates certain centralized systems (see "Basis of Presentation"). ITT received fees for such services which ranged between 0.5% and 1% of net sales of the affiliate. Service fee income is recorded in costs and expenses as earned. Interest expense was charged to ITT on the portion of its Investments and Advances from ITT Industries, Inc. which was deemed debt. Interest expense was charged at 8% and totaled $232, $86 and $13 for the years 1995, 1994 and 1993, respectively. ITT was one of the several affiliates participating in the ITT Salaried Retirement Plan as well as health care and life insurance programs for salaried employees and retirees sponsored by Old ITT through the time of the Distribution (see "Employee Benefit Plans"). F-10 44 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED ACQUISITIONS On January 30, 1995, ITT completed a cash tender offer for the outstanding shares of Caesars World, Inc. ("Caesars") for approximately $1.76 billion (including expenses directly attributable to the acquisition of approximately $10). The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to assets based on their estimated fair values. The purchase price, including assumed liabilities of $450, exceeded the fair value of assets acquired by approximately $1.1 billion. Caesars results of operations are included in Consolidated Income from the date of acquisition. On March 10, 1995, ITT, in a joint venture with Rainbow Programming Holdings, Inc., a subsidiary of Cablevision Systems Corporation, completed the acquisition of the businesses comprising Madison Square Garden ("MSG") for approximately $1 billion. The acquisition was funded by equity contributions from the venture partners of approximately $720 and the remainder was financed through bank debt. ITT's initial investment ($610) is reported using the equity method as ITT's venture partner is expected to increase its equity investment to 50%. ITT's share of the results of MSG are included in Consolidated Income from the date of acquisition. During 1994, ITT completed several acquisitions in its Hotel operations. The acquisitions were accounted for using the purchase method. The purchase price of each acquisition was allocated to assets based on their estimated fair values. The aggregate purchase price, including assumed liabilities of $400, exceeded the fair value of assets acquired by approximately $200. The results of operations of these acquisitions are included in Consolidated Income from the dates of their respective acquisitions. The following unaudited pro forma summary presents information as if the acquisitions had occurred at the beginning of the respective periods:
YEAR ENDED DECEMBER 31, --------------------- 1995 1994 ------ ------ Net revenues................................................................ $6,428 $5,961 Net income.................................................................. $ 132 $ 8 ====== ====== Earnings per share.......................................................... $ 1.11 $ 0.07 ====== ======
The pro forma information is not necessarily indicative of the results that would have occurred had the acquisitions taken place at the beginning of the respective periods. RECEIVABLES Current receivables of $784 and $498 at December 31, 1995 and 1994, including current maturities of notes receivable, are reported net of allowances for doubtful accounts of $106 and $55. Long-term receivables of $150 and $133 at December 31, 1995 and 1994, are net of allowances for doubtful accounts of $98 and $78, exclude current maturities of $21 and $126 and approximate fair value. F-11 45 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED PLANT, PROPERTY AND EQUIPMENT Plant, property and equipment consisted of the following:
DECEMBER 31, --------------------- 1995 1994 ------ ------ Land and improvements....................................................................... $1,178 $ 598 Buildings and improvements.................................................................. 2,311 2,095 Machinery, furniture, fixtures and equipment................................................ 789 505 Construction work in process................................................................ 250 1 Other....................................................................................... 97 164 ------ ------ 4,625 3,363 Less: Accumulated depreciation and amortization............................................. (646) (481) ------ ------ $3,979 $2,882 ====== ======
INVESTMENTS Investments consisted of the following:
DECEMBER 31, --------------------- 1995 1994 ------ ------ Equity in Madison Square Garden............................................................. $ 607 $ -- Equity in and advances to other 20-50% owned companies...................................... 261 164 Alcatel Alsthom at cost..................................................................... 834 426 Other investments at cost................................................................... 55 65 ------ ------ $1,757 $ 655 ====== ======
Equity in earnings (losses) of unconsolidated subsidiaries accounted for on the equity basis was $1, $ -- and $(5) in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the market value of the Alcatel Alsthom stock, which is restricted through 1997, was approximately $826 and $410, respectively, based on the quoted market prices. Dividend income from Alcatel Alsthom was $29 in 1995. RESTRUCTURING ITT recorded an $80 pretax charge in the 1995 third quarter to restructure and rationalize headquarter operations and provide for the planned disposal of non-core assets. These charges related to operations in the Hotels ($51 pretax) and Information Services ($29 pretax) business segments. Of the total pretax charges, approximately $28 represents severance and other related employee termination costs associated with the elimination of nearly 275 positions worldwide. The employee groups affected included field sales personnel as well as headquarters and divisional managerial and administrative staff from a number of disciplines, primarily finance/accounting, human resources, information technology, operations, purchasing and corporate development. Of the 275 positions eliminated, approximately 130 employees have been terminated at a cost of approximately $11 as of December 31, 1995. It is expected that the majority of the severance costs will be paid by the end of 1996. The balance of the restructuring charges ($52 pretax) relate primarily to asset write-offs, lease commitments and termination penalties and reserve actions in connection with the planned disposal of non-core assets and reduced facilities utilization. At December 31, 1995, approximately $32 of costs for the aforementioned items have been charged against this reserve. The balance of the reserve is expected to be utilized by the end of 1997. F-12 46 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED INCOME TAX Income tax data is as follows:
1995 1994 1993 ---- ---- ---- Pretax income (loss) U.S.......................................................................... $ 64 $(23) $(34) Foreign...................................................................... 218 167 153 ---- ---- ---- $282 $144 $119 ==== ==== ==== Provision (benefit) for income tax* Current U.S. Federal................................................................. $(27) $ 36 $(80) State and local.............................................................. 13 6 6 Foreign...................................................................... 99 73 85 ---- ---- ---- 85 115 11 ---- ---- ---- Deferred U.S. Federal................................................................. 33 (54) 73 Foreign and other............................................................ (4) (3) (21) ---- ---- ---- 29 (57) 52 ---- ---- ---- $114 $ 58 $ 63 ==== ==== ====
- - --------------- * The provision (benefit) for income taxes has been computed in accordance with a tax sharing agreement between ITT and ITT Industries, Inc. that generally requires that such provision (benefit) be computed as if the enterprise were a stand-alone entity. The primary exception to the stand-alone computation relates to the utilization of foreign tax credits. The agreement allows for the realization of such credits since they have been utilized by ITT Industries, Inc. in the consolidated tax return. No provision was made for U.S. taxes payable on undistributed foreign earnings amounting to approximately $211 since these amounts are permanently reinvested. Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. The December 31, 1995 and 1994 Consolidated Balance Sheets include net U.S. Federal deferred tax liabilities of $113 and $10, and net foreign and other deferred tax liabilities of $28 and $29, respectively. Deferred tax assets (liabilities) include the following:
1995 1994 ----------------------- ----------------------- U.S. FOREIGN U.S. FOREIGN FEDERAL & OTHER FEDERAL & OTHER ------- --------- ------- --------- Employee benefits................................................. $ 33 $ -- $ 49 $ -- Reserve for bad debts............................................. 45 -- 11 -- Plant, property and equipment..................................... (183) (14) (66) (11) Other............................................................. (8) (14) (4) (18) ----- ---- ---- $(113) $ (28) $ (10) $ (29) ===== ==== ====
F-13 47 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED A reconciliation of the tax provision at the U.S. statutory rate to the provision for income tax as reported is as follows:
1995 1994 1993 ---- ---- ---- Tax provision at U.S. statutory rate............................................... $ 99 $50 $42 Tax on repatriation of foreign earnings............................................ (16) 3 22 Non-deductible goodwill............................................................ 9 -- -- Foreign tax rate differential...................................................... 12 (1 ) (1 ) U.S. state and local income taxes.................................................. 9 4 4 Other.............................................................................. 1 2 (4 ) ---- --- --- Provision for income tax........................................................... $114 $58 $63 ==== === ===
DEBT Debt consisted of the following:
DECEMBER 31, ------------------- 1995 1994 ------ ---- Bank loans and other short-term............................................. $ 252 $ 28 Long-term................................................................... 3,588 603 ------ ---- $3,840 $631 ====== ====
The weighted average interest rate for bank loans and other short-term borrowings was 10.11% at December 31, 1995 and 8.26% at December 31, 1994 and their fair values approximated carrying value. The estimated fair value of long-term debt at December 31, 1995 and 1994 is $3,637 and $605, based on discounted cash flows using ITT's incremental borrowing rates for similar arrangements. ITT maintains lines of credit under which bank loans and other short-term debt are drawn. In November 1995, ITT entered into two major revolving credit facilities, effective December 19, 1995, with syndicate banks totaling $3.0 billion (five-year facility of $2.0 billion; 364-day facility of $1.0 billion). In addition, smaller credit lines are maintained by ITT's foreign subsidiaries. As of December 31, 1995, ITT had unused credit lines of approximately $3.0 billion, 45% of which supports outstanding commercial paper. As of December 31, 1995, $1,329 of commercial paper has been classified as long-term since ITT intends to renew or refinance these obligations through 1996 and future periods. Long-term debt consisted of the following at December 31:
Description 1995 1994 ---------------------------------------------------------------------------- ------ ---- Commercial paper (5.94% weighted average rate).............................. $1,329 $ -- 6.25% notes due 2000........................................................ 698 -- 6.75% notes due 2005........................................................ 449 -- 7.375% debentures due 2015.................................................. 448 -- 7.75% debentures due 2025................................................... 148 -- 8.875% senior subordinated notes due 2002................................... 150 -- 5.9%-10.1% domestic mortgage loans due 1998-2001............................ 151 149 6.2%-14.4% foreign loans due 1996-2009...................................... 204 448 Other....................................................................... 11 6 ------ ---- Total....................................................................... 3,588 603 Less current maturities..................................................... 13 3 ------ ---- $3,575.. $600 ====== ====
The aggregate maturities of long-term debt, excluding debt discount of $7, are $13 in 1996, $89 in 1997, $40 in 1998, $10 in 1999, $2,054 in 2000, and $1,389 thereafter. Assets pledged to secure indebtedness (including mortgage loans) amounted to $330 as of December 31, 1995. F-14 48 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED EMPLOYEE BENEFIT PLANS Pension Plans -- ITT and its subsidiaries sponsor numerous pension plans. The plans are funded with trustees, except in some countries outside the U.S. where funding is not required. The plans' assets are comprised of a broad range of domestic and foreign equity securities, fixed income investments and real estate. Prior to the Distribution, certain employees of ITT participated in the ITT Salaried Retirement Plan sponsored by Old ITT. Subsequent to the Distribution, those employees became participants of ITT plans. Total pension expenses were:
1995 1994 1993 ---- ---- ---- Defined Benefit Plans Service cost............................................................. $ 19 $ 14 $ 11 Interest cost............................................................ 19 16 15 Return on assets......................................................... (35) (1) (27) Net amortization and deferral............................................ 17 (14) 13 ---- ---- ---- Net periodic pension cost................................................ 20 15 12 Other Pension Cost Allocated cost of ITT Salaried Retirement Plan............................................. 3 4 3 Defined contribution (savings) plans..................................... 5 5 5 Other.................................................................... 6 3 3 ---- ---- ---- Total Pension Expense............................................ $ 34 $ 27 $ 23 ==== ==== ====
U.S. pension expenses included in the net periodic pension costs in the table above were $10, $10 and $8 for 1995, 1994 and 1993, respectively. The following table sets forth the funded status of ITT's pension plans, amounts recognized in ITT's Consolidated Balance Sheet at December 31, 1995 and 1994, and the principal weighted average assumptions inherent in their determination:
DECEMBER 31, --------------------------------------------- 1995 1994 -------------------- -------------------- DOMESTIC FOREIGN DOMESTIC FOREIGN -------- ------- -------- ------- Actuarial present value of benefit obligations -- Vested benefit obligation......................................... $ 169 $ 83 $ 101 $ 43 Accumulated benefit obligation.................................... $ 189 $ 88 $ 112 $ 48 ==== ==== ==== ==== Projected benefit obligation........................................ $ 257 $ 109 $ 141 $ 65 Plan assets at fair value........................................... 168 82 133 64 ---- ---- ---- ---- Projected benefit obligation (in excess of) plan assets............. (89) (27) (8) (1) Unrecognized net (gain)/loss........................................ 59 (2) 8 (1) Unrecognized net obligation/(asset)................................. (2) 4 (3) 4 ---- ---- ---- ---- Pension asset (liability) recognized in the consolidated balance sheet............................................................. $ (32) $ (25) $ (3) $ 2 ==== ==== ==== ==== Discount rate....................................................... 7.50% 7.08% 8.50% 7.38% Rate of return on invested assets................................... 9.75% 7.51% 9.75% 7.69% Salary increase assumption.......................................... 6.00% 5.42% 6.10% 5.38% ==== ==== ==== ====
For substantially all domestic and foreign plans, the total of assets and recorded liabilities exceed accumulated benefits. Investment and Savings Plan -- Employees of ITT have participated in ITT Industries' Investment and Savings Plans. ITT contributions to the plan are determined annually and are based, in part, on contributions of participating employees. The cost of this plan charged to ITT was $5 in 1995, 1994 and 1993. As part of the Distribution, ITT has established a similar plan. Subsequent to December 31, 1995, F-15 49 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED ITT employees' balances in the ITT Industries, Inc. plan were transferred to the newly established ITT plan. Postretirement Health and Life -- ITT and its subsidiaries provide health care and life insurance benefits for certain eligible retired employees. ITT has prefunded a portion of the health care and life insurance obligations through trust funds where such prefunding can be accomplished on a tax effective basis. Postretirement health care and life insurance benefits expense was comprised of the following:
1995 1994 1993 ---- ---- ---- Service cost............................................................................... $ 1 $ 1 $ 1 Interest cost.............................................................................. 2 1 1 Return on assets........................................................................... (2 ) -- -- Net amortization and deferral.............................................................. -- (1 ) (1 ) --- --- --- Net periodic expense............................................................... $ 1 $ 1 $ 1 === === ===
The following table sets forth the funded status of the postretirement benefit plans other than pensions, amounts recognized in ITT's Consolidated Balance Sheet at December 31, 1995 and 1994 and the principal weighted average assumptions inherent in their determination:
1995 1994 ----- ----- Accumulated postretirement benefit obligation.................................................. $ 26 $ 18 Plan assets at fair value...................................................................... 10 7 ----- ----- Accumulated postretirement benefit obligation (in excess of) plan assets....................... (16) (11) Unrecognized net (gain)........................................................................ (2) (4) Unrecognized past service liability............................................................ (4) (5) ----- ----- Liability recognized in the consolidated balance sheet......................................... $ (22) $ (20) ===== ===== Discount rate.................................................................................. 7.50% 8.50% Rate of return on invested assets.............................................................. 9.75% 9.75% Ultimate health care trend rate................................................................ 6.00% 6.00% ===== =====
The assumed rate of future increases in the per capita cost of health care (the health care trend rate) was 10% for 1995, decreasing ratably to 6% in the year 2001. Increasing the table of health care trend rates by 1% per year would have the effect of increasing the accumulated postretirement benefit obligation by $1 and the annual expense by $--. To the extent that the actual experience differs from the inherent assumptions, the effect will be amortized over the average future service of the covered active employees. LEASES AND RENTALS As of December 31, 1995, minimum rental commitments under operating leases were $62, $56, $52, $46 and $42 for 1996, 1997, 1998, 1999 and 2000, respectively. For the remaining years, such commitments amounted to $312, aggregating total minimum lease payments of $570. Rental expenses for operating leases were $77, $76 and $83 for 1995, 1994 and 1993, respectively. CAPITAL STOCK ITT is authorized to issue 50 million shares of preferred stock, none of which was outstanding at December 31, 1995. In connection with the Distribution, ITT issued one Series A Participating Cumulative Preferred Stock Purchase Right (the "Right") for each share of ITT common stock outstanding. Additionally, Rights will be issued in respect of common stock subsequently issued until the Rights Distribution Date, as defined, and, in certain circumstances, with respect to common stock issued after the Rights Distribution Date. In the event a person or group has acquired, or has obtained the right to acquire, beneficial ownership of F-16 50 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED more than 15% of the outstanding shares of common stock or certain specified tender offers occur for more than 15% of the common stock, or in the event ITT is acquired in a merger or other business combination or certain other specified events occur, the Right entitles each holder, subject to certain exceptions, to purchase the number of 1/1,000ths of a share of Series A Participating Cumulative Preferred Stock of ITT equivalent to the number of shares of ITT common stock or common stock of the surviving corporation or other specified entity, as applicable, which have a market value of twice the specified Purchase Price at the relevant date. The Rights, which do not have voting rights, expire on the tenth anniversary of the related rights agreement and are redeemable by ITT at any time at a price of $.01 per Right. STOCK INCENTIVE PLAN Concurrent with the Distribution, the Company adopted the 1995 ITT Corporation Incentive Stock Plan (the "Plan") for key employees. Awards may be made under the Plan through the year 2005. The Plan provides for the granting of nonqualified or incentive stock options, stock appreciation rights payable in stock or cash, performance shares, restricted stock or any combination of the foregoing. In connection with the Distribution, ITT granted substitute stock options to acquire 6,276,596 of the Company's common shares. These substitute options replaced 2,627,591 options which were outstanding prior to the Distribution. At December 31, 1995, all of these options were outstanding and 3,414,809 were exercisable. These substitute options were granted at exercise prices ranging from $18.00 to $45.53 per share and maintain the same economic value, vesting, expiration dates and other restrictions, terms and conditions which existed under Old ITT Incentive Plans prior to the Distribution. In addition to the stock options noted above, ITT granted 127,401 substitute shares of restricted stock. These substitute shares replaced 53,334 restricted shares which were outstanding prior to the Distribution. These shares vest at various dates through January 1, 2001. None of these shares were vested at December 31, 1995. Under the Plan the total number of shares available with respect to which awards may be made shall not exceed 1.5% of the issued and outstanding shares (including treasury shares) on the last day of each year, plus unused portions of such limit carried over from prior years. No more than 5,000,000 shares may be available for incentive stock options and no more than 20% of the total may be available for awards of restricted stock or performance shares under the Plan. During 1996, approximately 1,758,000 shares are available for grant in accordance with the Plan's allotment formula. The Plan limits the award of stock options to any one person to no more than 10% of the annual limit of available shares that year. DERIVATIVE FINANCIAL INSTRUMENTS ITT has entered into two foreign currency swaps with a major financial institution to hedge exchange rate exposure on ITT's net investment in a foreign country. The contractual amounts of these foreign currency swaps at December 31, 1995 and 1994 totaled $250 and mature in 1997. The entire amount hedges dollars against French francs. The unrealized loss at December 31, 1995 was $36 and the estimated fair value was a loss of $31. At December 31, 1994, there was no significant gain or loss on these contracts and the estimated fair value approximated the recorded amounts. The estimated fair value is the present value of the change in cash flows that would result from the agreements being replaced at the year-end market rate for the remaining term of the agreements. COMMITMENTS AND CONTINGENCIES In 1994, at the expiration of its contract with the Belgium Telephone Company ("Belgacom"), ITT Promedia decided to continue publishing its directories in competition with a newly created Belgacom Directory Services. A Belgian Royal Decree was issued in July 1994, which required Belgacom to provide subscriber data information at fair, reasonable and nondiscriminatory tariffs. ITT Promedia has challenged F-17 51 ITT CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED Belgacom's current fee schedule as being unfair, unreasonable and discriminatory in both the European Commission and in the Commercial Court of Brussels. ITT Promedia has accrued a fee to Belgacom which it believes is adequate considering the issues involved. Hearings in the European Commission and the Court are scheduled for April 1996 with decisions expected by the end of 1996. ITT and its subsidiaries are involved in various other legal matters, some of which include claims for substantial sums. Reserves have been established when the outcome is probable and can be reasonably estimated. While the ultimate result of claims and litigation cannot be determined, ITT does not expect that the resolution of all legal matters will have a material adverse effect on its consolidated results of operations, financial position or cash flow. ITT has guaranteed certain loans and commitments of various ventures to which it is a party. These commitments, which in the aggregate were approximately $290 at December 31, 1995, are not expected to have a material adverse effect on ITT's consolidated financial position or results of operations. F-18 52 ITT CORORATION AND SUBSIDIARIES QUARTERLY RESULTS FOR 1995 AND 1994 IN MILLIONS EXCEPT PER SHARE UNAUDITED
THREE MONTHS ENDED -------------------------------------------- MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR ------- ------- -------- ------- ------ 1995 Revenues.......................................................... $ 1,285 $ 1,697 $1,647 $ 1,717 $6,346 Costs and Expenses................................................ $ 1,219 $ 1,498 $1,510 $ 1,548 $5,775 Net Income........................................................ $ 7 $ 46 $ 50 $ 44 $ 147 Earnings Per Share (Pro Forma through September 30)............... $ .06 $ .39 $ .42 $ .37 $ 1.24 1994 Revenues.......................................................... $ 876 $ 1,240 $1,108 $ 1,536 $4,760 Costs and Expenses................................................ $ 848 $ 1,140 $1,046 $ 1,434 $4,468 Net Income........................................................ $ 8 $ 29 $ 22 $ 15 $ 74 Pro Forma Earnings Per Share...................................... $ .07 $ .24 $ .19 $ .13 $ .63
BUSINESS SEGMENT INFORMATION IN MILLIONS
IDENTIFIABLE ASSETS GROSS PLANT ADDITIONS DEPRECIATION ---------------------------- ---------------------- ---------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------ ------ ------ ---- ---- ---- ---- ---- ---- Hotels............................. $3,685 $3,484 $1,754 $380 $328 $62 $102 $70 $56 Gaming............................. 2,730 345 217 173 108 9 59 6 1 Information Services............... 448 378 371 15 14 15 16 15 14 Dispositions and Other............. -- (17) 7 -- -- -- -- -- -- ------ ------ ------ ---- ---- --- ---- --- --- Total Segments..................... 6,863 4,190 2,349 568 450 86 177 91 71 Other.............................. 1,829 822 1,442 3 4 4 8 8 8 ------ ------ ------ ---- ---- --- ---- --- --- $8,692 $5,012 $3,791 $571 $454 $90 $185 $99 $79 ====== ====== ====== ==== ==== === ==== === ===
HOTELS: Operates a worldwide network of hotels and resorts under the Sheraton name, including the hotels and resorts in the ITT Sheraton Luxury Collection. GAMING: Includes the casino operations of ITT Sheraton Gaming Corporation and effective January 31, 1995, includes the newly acquired operations of Caesars. Caesars owns and operates three hotel/casinos in Las Vegas and Stateline, Nevada, and in Atlantic City, New Jersey. In conjunction with two other partners, Caesars manages a casino owned by the Ontario government in Windsor, Canada. INFORMATION SERVICES: Engages in the publication of telephone directories, including classified directory services for telephone subscribers in numerous countries outside the United States, as well as in Puerto Rico and the U.S. Virgin Islands, and in providing post-secondary career education in the U.S. "Dispositions and Other" includes the operating results of units sold and includes World Directories' U.K. and Turkey operations. "Other" includes non-operating income, corporate expenses and minority equity. Intercompany revenues, which are priced on an arm's-length basis, are not material. GEOGRAPHICAL INFORMATION -- TOTAL SEGMENTS IN MILLIONS
REVENUES OPERATING INCOME IDENTIFIABLE ASSETS ---------------------------- ---------------------- ---------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------ ------ ------ ---- ---- ---- ------ ------ ------ U.S........................... $3,393 $2,139 $1,723 $245 $ 75 $ 21 $4,345 $2,249 $1,694 Western Europe................ 1,385 1,203 1,154 194 135 157 1,811 1,311 353 Canada and Other.............. 1,568 1,418 1,292 138 107 70 707 630 302 ------ ------ ------ ---- ---- ---- ------ ------ ------ Total Segments................ $6,346 $4,760 $4,169 $577 $317 $248 $6,863 $4,190 $2,349 ====== ====== ====== ==== ==== ==== ====== ====== ======
F-19 53 SCHEDULE II ITT CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS IN MILLIONS
ADDITIONS (DEDUCTIONS) --------------------------------------------- CHARGED TO WRITE-OFFS/ BALANCE COSTS AND TRANSLATION PAYMENTS/ BALANCE DESCRIPTION JANUARY 1 EXPENSES ADJUSTMENT OTHER DECEMBER 31 - - -------------------------------------- ------------- ------------- ------------- ------------- ----------------- YEAR ENDED DECEMBER 31, 1995 Trade Receivables -- Allowance for doubtful accounts................... $ 55 $ 132 $ 1 $ (82) $ 106 Notes Receivable -- Allowance for doubtful accounts................... 78 -- -- 20 98 Accumulated depreciation of plant, property and equipment.............. 481 185 9 (29)(1) 646 YEAR ENDED DECEMBER 31, 1994 Trade Receivables -- Allowance for doubtful accounts................... $ 38 $ 63 $ 3 $ (49) $ 55 Notes Receivable -- Allowance for doubtful accounts................... 76 6 -- (4) 78 Accumulated depreciation of plant, property and equipment.............. 353 99 -- 29(2) 481 YEAR ENDED DECEMBER 31, 1993 Trade Receivables -- Allowance for doubtful accounts................... $ 52 $ 21 $ (3) $ (32) $ 38 Notes Receivable -- Allowance for doubtful accounts................... 72 5 -- (1) 76 Accumulated depreciation of plant, property and equipment.............. 323 79 (10) (39)(1) 353
- - --------------- (1) Principally retirements as well as companies sold during the year. (2) Primarily reflects the consolidation of properties previously accounted for on the equity method. S-1 54 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, AND BY THE UNDERSIGNED IN THE CAPACITY INDICATED. ITT CORPORATION By JON F. DANSKI JON F. DANSKI SENIOR VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) March 29, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - - ------------------------- --------------- RAND V. ARASKOG Chairman and Chief Executive and March 29, 1996 RAND V. ARASKOG Director (PRINCIPAL EXECUTIVE OFFICER) ANN N. Executive Vice President and Chief March 29, 1996 REESE Financial Officer ANN N. REESE (PRINCIPAL FINANCIAL OFFICER)
SIGNATURE TITLE DATE SIGNATURE TITLE DATE - - ---------------------- -------------------- --------------- ---------------------- --------- --------------- BETTE B. ANDERSON Director March 29, 1996 EDWARD C. MEYER Director March 29, 1996 BETTE B. ANDERSON EDWARD C. MEYER NOLAN D. ARCHIBALD Director March 29, 1996 BENJAMIN F. PAYTON Director March 29, 1996 NOLAN D. ARCHIBALD BENJAMIN F. PAYTON ROBERT A. BOWMAN Director, President March 29, 1996 VIN WEBER Director March 29, 1996 ROBERT A. BOWMAN and Chief Operating VIN WEBER Officer ROBERT A. BURNETT Director March 29, 1996 MARGITA E. WHITE Director March 29, 1996 ROBERT A. BURNETT MARGITA E. WHITE PAUL G. KIRK, Director March 29, 1996 KENDRICK R. WILSON Director March 29, 1996 JR. III PAUL G. KIRK, JR. KENDRICK R. WILSON III
II-1 55 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION LOCATION 3.1 Restated Articles of Incorporation....... Incorporated by reference to Exhibit 3.1 to the Registrant's Amendment No. 1 to Form 10/A dated November 13, 1995 (File No. 1-13960). 3.2 Certificate of Amendment of Articles of Incorporation.......................... Incorporated by reference to Exhibit No. 1 to the Registrant's Current Report on Form 8-K dated December 22, 1995 (File No. 1-13960). 3.3 By-Laws.................................. Incorporated by reference to Exhibit 3.2 to the Registrant's Amendment No. 1 for Form 10/A dated November 13, 1995 (File No. 1-13960). 4.1 Specimen common share certificate........ Incorporated by reference to Exhibit 4.1 to the Registrant's Amendment No. 1 to Form 10/A dated November 13, 1995 (File No. 1-13960). 4.2 Rights Agreement dated as of November 1, 1995 between the Registrant and The Bank of New York, as Rights Agent...... Incorporated by reference to Exhibit 4.4 to the Registrant's Amendment No. 1 for Form 10/A dated November 13, 1995 (File No. 1-13960). 4.3 Form of Certificate of Voting Powers, Preferences and Relative Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of Series A Participating Cumulative Preferred Stock............. Incorporated by reference to Exhibit 4.4 (attached as Exhibit A thereto) to the Registrant's Amendment No. 1 for Form 10/A dated November 13, 1995 (File No. 1-13960). 4.4 Form of Right Certificate................ Incorporated by reference to Exhibit 4.4 (attached as Exhibit B thereto) to the Registrant's Amendment No. 1 to Form 10/A dated November 13, 1995 (File No. 1-13960). 4.5 Other instruments defining rights of security holders, including indentures............................. The Registrant hereby agrees to file with the Commission a copy of any instrument defining the rights of long-term debt holders of the Registrant and its consolidated subsidiaries upon request of the Commission. 9. Voting Trust Agreement................... None. 10.1 Distribution Agreement among ITT Industries, Inc., the Registrant and ITT Hartford Group, Inc. .............. Filed herewith. 10.2 Intellectual Property License Agreement between and among ITT Industries, Inc., the Registrant and ITT Hartford Group, Inc. .................................. Filed herewith. 10.3 Trademark Assignment Agreement between ITT Industries, Inc. and the Registrant ............................ Filed herewith. 10.4 License Assignment Agreement between ITT Industries, Inc. and the Registrant ... Filed herewith.
II-2 56
EXHIBIT NUMBER DESCRIPTION LOCATION 10.5 License Assignment Agreement among the Registrant, ITT Hartford Group, Inc. and Nutmeg Insurance Company........... Filed herewith. 10.6 License Assignment Agreement among the Registrant, Nutmeg Insurance Company and Hartford Fire Insurance Company.... Filed herewith. 10.7 Tax Allocation Agreement among ITT Industries, Inc., the Registrant and ITT Hartford Group, Inc. .............. Filed herewith. 10.8 Employee Benefit Services and Liability Agreement among ITT Industries, Inc., the Registrant and ITT Hartford Group, Inc. .................................. Filed herewith. 10.9 Form of ITT Corporation 1996 Restricted Stock Plan for Non-Employee Directors.............................. Incorporated by reference to Exhibit 10.9 to the Registrant's Amendment No. 1 to Form 10/A dated November 13, 1995 (File No. 1-13960). 10.10 Form of indemnification agreement with members of the Board of Directors...... Incorporated by reference to Exhibit 10.10 to the Registrant's Form 10 dated September 18, 1995 (File No. 1-13960). 10.11 Form of 1995 Corporation Incentive Stock Plan................................... Incorporated by reference to Exhibit 10.11 to the Registrant's Form 10 dated September 18, 1995 (File No. 1-13960). 10.12 Form of ITT Corporation Senior Executive Severance Pay Plan..................... Incorporated by reference to Exhibit 10.12 to the Registrant's Form 10 dated September 18, 1995 (File No. 1-13960). 10.13 Form of R.V. Araskog employment agreement.............................. Incorporated by reference to Exhibit 10.13 to the Registrant's Form 10 dated September 18, 1995 (File No. 1-13960). 10.14 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 among the Registrant, the lenders parties thereto and Chemical Bank, as administrative agent.................................. Filed herewith. 10.15 Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 among the Registrant, the lenders parties thereto and Chemical Bank, as issuing bank and administrative agent................... Filed herewith. 12 Statement re computation of ratios....... Filed herewith. 13 Annual report to security holders, Form 10-Q or quarterly report to security holders................................ Not required to be filed. 16 Letter re change in certifying accountant............................. None. 18 Letter re change in accounting principles............................. None. 21 Subsidiaries of the Registrant........... Filed herewith. 22 Published report regarding matters submitted to vote of security holders................................ Not required to be filed. 23 Consents of experts and counsel Consent of Arthur Andersen LLP........... Filed herewith. 24 Power of attorney........................ None. 27 Financial data schedule.................. Filed herewith. 99 Additional exhibits...................... None.
II-3 EX-10.1 2 DISTRIBUTION AGREEMENT 1 CONFORMED COPY DISTRIBUTION AGREEMENT dated as of November 1, 1995, among ITT CORPORATION, a Delaware corporation ("ITT"), ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations"), and ITT HARTFORD GROUP, INC., a Delaware corporation ("ITT Hartford"). WHEREAS, the Board of Directors of ITT has determined that it is appropriate and desirable to distribute to the holders of shares of Common Stock, par value $1.00 per share, of ITT (the "ITT Common Stock") all the outstanding shares of common stock of ITT Destinations (the "ITT Destinations Common Shares") and all the outstanding shares of common stock of ITT Hartford (the "ITT Hartford Common Shares"); WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined that it is necessary and desirable to allocate and assign responsibility for those liabilities in respect of the activities of the businesses of such entities on the Distribution Date (as defined herein) and those liabilities in respect of other businesses and activities of ITT and its former subsidiaries and other matters; and WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined that it is necessary and desirable to set forth the principal corporate transactions required to effect such distribution and to set forth other agreements that will govern certain other matters following the distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I. DEFINITIONS SECTION 1.01. General. As used in this Agreement, the following terms shall have the following meanings 2 2 (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Action" shall mean any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency, body or commission or any arbitration tribunal. "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "Agent" shall have the meaning as defined in Section 2.01(b). "Ancillary Agreements" shall mean all of the written agreements, instruments, understandings, assignments or other arrangements (other than this Agreement) entered into in connection with the transactions contemplated hereby, including, without limitation, the Conveyancing and Assumption Instruments, the Employee Benefits Services and Liability Agreement, the Tax Allocation Agreement and the Intellectual Property Agreements. "Claims Administration" shall mean the processing of claims made under the Company Policies, including, without limitation, the reporting of losses or claims to insurance carriers (including, without limitation, as a result of reports provided to ITT Industries by ITT Destinations or ITT Hartford), management and defense of claims, the settlement of claims (except to the extent settlement authority remains with another party as contemplated by the second proviso to Section 7.03(a)) and providing for appropriate releases upon settlement of claims. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. "Commission" shall have the meaning as defined in Section 4.02(b). "Company Policies" shall mean all Policies, current or past, which are or at any time were maintained by or on behalf of or for the benefit or protection of ITT or any 3 3 of its predecessors which relate to any Shared Liability, the ITT Industries Business, the ITT Destinations Business or the ITT Hartford Business, or current or past directors, officers, employees or agents of any of the foregoing Businesses, including, without limitation, the Policies identified on Schedule 7.01(a) hereto. "Conveyancing and Assumption Instruments" shall mean, collectively, the various agreements, instruments and other documents to be entered into to effect the transfer of assets and the assumption of Liabilities in the manner contemplated by this Agreement. "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT on the basis of one ITT Destinations Common Share for each outstanding share of ITT Common Stock and (ii) the ITT Hartford Common Shares owned by ITT on the basis of one ITT Hartford Common Share for each outstanding share of ITT Common Stock. "Distribution Date" shall mean such date as may hereafter be determined by ITT's Board of Directors as the date as of which the Distribution shall be effected. "Distribution Record Date" shall mean such date as may hereafter be determined by ITT's Board of Directors as the record date for the Distribution. "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. "Employee Benefits Services and Liability Agreement" shall mean the Employee Benefits Services and Liability Agreement dated as of November 1, 1995, among ITT, ITT Destinations and ITT Hartford. "Indemnifiable Losses" shall mean any and all losses, liabilities, claims, damages, demands, costs or expenses (including, without limitation, reasonable attorneys' fees and any and all out-of-pocket expenses) whatsoever reasonably incurred in investigating, preparing for or defending against any Actions or potential Actions. "Indemnifying Party" shall have the meaning as defined in Section 3.04. 4 4 "Indemnitee" shall have the meaning as defined in Section 3.04. "Insurance Administration" shall mean, with respect to each Company Policy, the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Company Policies, and the distribution of Insurance Proceeds as contemplated by this Agreement. "Insurance Proceeds" shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured. "Insured Claims" shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Company Policies, whether or not subject to deductibles, co-insurance, uncollectability or retrospectively-rated premium adjustments, but only to the extent that such Liabilities are within applicable Company Policy limits, including aggregates. "Intellectual Property Agreements" shall mean the various intellectual property and licensing agreements entered into in connection with the Distribution. "ITT" shall mean ITT Corporation, a Delaware corporation and its predecessor Maryland corporation. "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation. "ITT Destinations Assets" shall mean, collectively, all the rights and assets of ITT and its Subsidiaries relating to the ITT Destinations Business, including, without limitation, (i) the assets included on the consolidated balance sheet of ITT Destinations as of September 30, 1995, and any assets acquired by ITT or any of its Subsidiaries relating to the ITT Destinations Business from October 1, 1995, to the Distribution Date, (ii) all the outstanding capital stock or other interests of ITT 5 5 Destinations in Subsidiaries of ITT Destinations and (iii) rights to the Company Policies to the extent set forth in Article VII hereof. "ITT Destinations Business" shall mean the businesses of (i) those business entities listed on Schedule 1.01(b) hereto, (ii) any other division, Subsidiary or investment of ITT managed or operated as of the date of this Agreement or any prior time by any such business entity unless such other division, Subsidiary or investment is listed on Schedule 1.01(a), Schedule 1.01(c) or Schedule 1.01(d) hereto and (iii) business entities acquired or established by or for ITT Destinations or any of its Subsidiaries after the date of this Agreement. "ITT Destinations Indemnitees" shall mean ITT Destinations, each Affiliate of ITT Destinations, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. "ITT Destinations Liabilities" shall mean, collectively, (i) all the Liabilities of ITT Destinations and its Subsidiaries under this Agreement and any of the Ancillary Agreements and (ii) all the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, at or following the Effective Time) arising out of or in connection with or otherwise relating to the management or conduct before or after the Effective Time of the ITT Destinations Business (the Liabilities listed in clauses (i) and (ii) above being collectively referred to as the "True ITT Destinations Liabilities") and (iii) 33-1/3% of the amount of all Shared Liabilities. "ITT Hartford" shall mean ITT Hartford Group, Inc., a Delaware corporation. "ITT Hartford Assets" shall mean, collectively, all the rights and assets of ITT and its Subsidiaries relating to the ITT Hartford Business, including, without limitation, (i) the assets included on the consolidated balance sheet of ITT Hartford as of September 30, 1995, and any assets acquired by ITT or any of its Subsidiaries relating to the ITT Hartford Business from October 1, 1995, to the Distribution Date, (ii) all the outstanding capital stock or other interests of ITT Hartford in Subsidiaries of ITT Hartford and (iii) rights to the Company Policies to the extent set forth in Article VII hereof. 6 6 "ITT Hartford Business" shall mean the businesses of (i) those business entities listed on Schedule 1.01(c) hereto, (ii) any other division, Subsidiary or investment of ITT managed or operated as of the date of this Agreement or any prior time by any such business entity unless such other division, Subsidiary or investment is listed on Schedule 1.01(a), Schedule 1.01(b) or Schedule 1.01(d) hereto and (iii) business entities acquired or established by or for ITT Hartford or any of its Subsidiaries after the date of this Agreement. "ITT Hartford Indemnitees" shall mean ITT Hartford, each Affiliate of ITT Hartford, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. "ITT Hartford Liabilities" shall mean, collectively, (i) all the Liabilities of ITT Hartford and its Subsidiaries under this Agreement and any of the Ancillary Agreements and (ii) all the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, at or following the Effective Time) arising out of or in connection with or otherwise relating to the management or conduct before or after the Effective Time of the ITT Hartford Business (the Liabilities listed in clauses (i) and (ii) above being collectively referred to as the "True ITT Hartford Liabilities") and (iii) 33-1/3% of the amount of all Shared Liabilities. "ITT Industries" shall mean (i) ITT Industries, Inc., an Indiana corporation and the legal successor to ITT, or (ii) ITT, after giving effect to the transactions contemplated by Section 2.01 hereof or as if such transactions had occurred, in each case as the context requires. "ITT Industries Assets" shall mean, collectively, all the rights and assets of ITT and its Subsidiaries relating to the ITT Industries Business, including, without limitation, (i) the assets included on the consolidated balance sheet of ITT Industries as of September 30, 1995, and any assets acquired by ITT or any of its Subsidiaries relating to the ITT Industries Business from October 1, 1995, to the Distribution Date, (ii) all the outstanding capital stock or other interests of ITT Industries in Subsidiaries of ITT Industries and (iii) rights to the Company Policies to the extent set forth in Article VII hereof. 7 7 "ITT Industries Business" shall mean the businesses of (i) those business entities listed on Schedule 1.01(a) hereto, (ii) any other division, Subsidiary or investment of ITT managed or operated as of the date of this Agreement or any prior time by any such business entity unless such other division, Subsidiary or investment is listed on Schedule 1.01(b), Schedule 1.01(c) or Schedule 1.01(d) hereto and (iii) business entities acquired or established by or for ITT Industries or any of its Subsidiaries after the date of this Agreement. "ITT Industries Indemnitees" shall mean ITT Industries, each Affiliate of ITT Industries, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. "ITT Industries Liabilities" shall mean collectively, (i) all the Liabilities of ITT Industries and its Subsidiaries under this Agreement and any of the Ancillary Agreements and (ii) all the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, at or following the Effective Time) arising out of or in connection with or otherwise relating to the management or conduct before or after the Effective Time of the ITT Industries Business (the Liabilities listed in clauses (i) and (ii) above being collectively referred to as the "True ITT Industries Liabilities") and (iii) 33-1/3% of the amount of all Shared Liabilities. "Liabilities" shall mean any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any court, any governmental or other regulatory or administrative agency or commission or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking. "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Policies" shall mean insurance policies and insurance contracts of any kind (other than life and 8 8 benefits policies or contracts), including, without limitation, primary, excess and umbrella policies, commercial general liability policies, fiduciary liability, automobile, aircraft, property and casualty, workers' compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. "Provider" shall have the meaning as defined in Section 5.01. "Proxy Statement" shall mean the Proxy Statement sent to the holders of shares of ITT Common Stock in connection with the Distribution, including any amendment or supplement thereto. "Recipient" shall have the meaning as defined in Section 5.01. "Shared Liability" means any Liability of the parties hereto or their respective Subsidiaries (whether arising prior to, at or following the Effective Time) which (i) arises out of or is in connection with or otherwise relates to the management or conduct prior to the Effective Time of the businesses of ITT and its Subsidiaries and (ii) is not a True ITT Industries Liability, True ITT Destinations Liability or True ITT Hartford Liability, including, without limitation, Shared Liabilities listed on Schedule 1.01(d) hereto. "Subsidiary" shall mean any corporation, partnership or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). For purposes of this Agreement, Madison Square Garden, L.P., and ITT-Dow Jones Television and their respective Subsidiaries are Subsidiaries of ITT Destinations. "Tax" shall mean all Federal, state, local and foreign taxes and assessments, including all interest, 9 9 penalties and additions imposed with respect to such amounts. "Tax Allocation Agreement" shall mean the Tax Allocation Agreement dated as of November 1, 1995, among ITT, ITT Destinations and ITT Hartford. "Third Party Claim" shall have the meaning as defined in Section 3.05. "True ITT Destinations Liabilities" shall have the meaning as defined under "ITT Destinations Liabilities." "True ITT Hartford Liabilities" shall have the meaning as defined under "ITT Hartford Liabilities." "True ITT Industries Liabilities" shall have the meaning as defined under "ITT Industries Liabilities." SECTION 1.02. References; Interpretation. References to an "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules attached to this Agreement, and references to a "Section" are, unless otherwise specified, to one of the Sections of this Agreement. ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS SECTION 2.01. The Distribution and Other Transactions. (a) Certain Transactions. On or prior to the Distribution Date: (i) ITT will contribute to ITT Destinations the business entities that are to comprise the ITT Destinations Business (to the extent they are not owned by ITT Destinations or any of its Subsidiaries). (ii) ITT will contribute to ITT Hartford the business entities that are to comprise the ITT Hartford Business (to the extent they are not owned by ITT Hartford or any of its Subsidiaries). (iii) ITT Industries shall, on behalf of itself and its Subsidiaries, transfer to ITT Destinations effective as of the Effective Time all of ITT Industries' and its 10 10 Subsidiaries' right, title and interest in the ITT Destinations Assets. ITT Industries shall, on behalf of itself and its Subsidiaries, transfer to ITT Hartford effective as of the Effective Time all of ITT Industries' and its Subsidiaries' right, title and interest in the ITT Hartford Assets. (iv) ITT Destinations shall, on behalf of itself and its Subsidiaries, transfer to ITT Industries effective as of the Effective Time all of ITT Destinations' and its Subsidiaries' right, title and interest in the ITT Industries Assets. ITT Destinations shall, on behalf of itself and its Subsidiaries, transfer to ITT Hartford effective as of the Effective Time all of ITT Destinations' and its Subsidiaries' right, title and interest in the ITT Hartford Assets. (v) ITT Hartford shall, on behalf of itself and its Subsidiaries, transfer to ITT Destinations effective as of the Effective Time all of ITT Hartford's and its Subsidiaries' right, title and interest in the ITT Destinations Assets. ITT Hartford shall, on behalf of itself and its Subsidiaries, transfer to ITT Industries effective as of the Effective Time all of ITT Hartford's and its Subsidiaries' right, title and interest in the ITT Industries Assets. (b) Stock Dividends to ITT. On or prior to the Distribution Date: (i) ITT Destinations shall issue to ITT as a stock dividend a number of ITT Destinations Common Shares as required to effect the Distribution, as certified by the ITT Corporate Stock Services Department (the "Agent"). In connection therewith ITT shall deliver to ITT Destinations for cancellation the share certificate (or certificates) currently held by it representing ITT Destinations Common Shares and shall receive a new certificate (or certificates) representing the total number of ITT Destinations Common Shares to be owned by ITT after giving effect to such stock dividend. (ii) ITT Hartford shall issue to ITT as a stock dividend a number of ITT Hartford Common Shares as required to effect the Distribution, as certified by the Agent. In connection therewith ITT shall deliver to ITT Hartford for cancellation the share certificate currently held by it representing ITT Hartford Common Shares and shall receive a new certificate (or certificates) representing the total 11 11 number of ITT Hartford Common Shares to be owned by ITT after giving effect to such stock dividend. (c) Charters; By-laws. On or prior to the Distribution Date: (i) All necessary actions shall have been taken to provide for the adoption of the form of Articles of Incorporation and By-laws filed by ITT Destinations with the Commission. (ii) All necessary actions shall have been taken to provide for the adoption of the form of Articles of Incorporation and By-laws filed by ITT Hartford with the Commission. (iii) ITT Destinations shall have filed with the Secretary of State of Nevada an amendment to its Articles of Incorporation to change its name to "ITT Corporation". (d) Directors. On or prior to the Distribution Date, ITT, as the sole shareholder of ITT Destinations and ITT Hartford, shall have taken all necessary action to elect, or cause to be elected, to the Board of Directors of ITT Destinations and the Board of Directors of ITT Hartford the individuals identified in the Proxy Statement as directors of New ITT (as defined in the Proxy Statement) and ITT Hartford, respectively. (e) Certain Licenses and Permits. (i) On or prior to the Distribution Date or as soon as reasonably practicable thereafter, all transferrable licenses, permits and authorizations issued by governmental or regulatory entities which relate to the ITT Destinations Business or the ITT Hartford Business but which are held in the name of ITT or any of its Subsidiaries (other than ITT Destinations or ITT Hartford or any of their respective Subsidiaries), or any of their respective employees, officers, directors, stockholders, agents, or otherwise, on behalf of ITT Destinations (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as applicable, shall be duly and validly transferred by ITT to ITT Destinations (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as applicable. (ii) On or prior to the Distribution Date or as soon as reasonably practicable thereafter, all transferrable licenses, permits and authorizations issued by governmental or regulatory entities which relate to the ITT Industries 12 12 Business or the ITT Hartford Business but which are held in the name of ITT Destinations or any of its Subsidiaries, or any of their respective employees, officers, directors, stockholders, agents, or otherwise, on behalf of ITT Industries (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as applicable, shall be duly and validly transferred by ITT Destinations to ITT Industries (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as applicable. (iii) On or prior to the Distribution Date or as soon as reasonably practicable thereafter, all transferrable licenses, permits and authorizations issued by governmental or regulatory entities which relate to the ITT Destinations Business or the ITT Industries Business but which are held in the name of ITT Hartford or any of its Subsidiaries, or any of their respective employees, officers, directors, stockholders, agents, or otherwise, on behalf of ITT Destinations (or its Subsidiaries) or ITT Industries (or its Subsidiaries), as applicable, shall be duly and validly transferred by ITT Hartford to ITT Destinations (or its Subsidiaries) or ITT Industries (or its Subsidiaries), as applicable. (f) Transfer of Agreements. (i) ITT hereby agrees that on or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.01(f), it will, and it will cause its Subsidiaries (other than ITT Destinations or ITT Hartford or any of their respective Subsidiaries) to, assign, transfer and convey to ITT Destinations or ITT Hartford, as applicable, all of ITT's or such Subsidiary's respective right, title and interest in and to any and all agreements that relate exclusively to the ITT Destinations Business or ITT Hartford Business, as applicable. ITT Destinations hereby agrees that on or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.01(f), it will, and it will cause its Subsidiaries to, assign, transfer and convey to ITT Industries or ITT Hartford, as applicable, all of ITT Destinations' or such Subsidiary's respective right, title and interest in and to any and all agreements that relate exclusively to the ITT Industries Business or ITT Hartford Business, as applicable. ITT Hartford hereby agrees that on or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.01(f), it will, and it will cause its Subsidiaries 13 13 to, assign, transfer and convey to ITT Industries or ITT Destinations, as applicable, all of ITT Hartford's or such Subsidiary's respective right, title and interest in and to any and all agreements that relate exclusively to the ITT Industries Business or ITT Destinations Business, as applicable. (ii) Subject to the provisions of this Section 2.01(f), any agreement to which any of the parties hereto or any of their Subsidiaries is a party that inures to the benefit of more than one of the ITT Industries Business, ITT Destinations Business and ITT Hartford Business shall be assigned in part, on or prior to the Distribution Date or as soon as reasonably practicable thereafter, so that each party shall be entitled to the rights and benefits inuring to its business under such agreement. (iii) The assignee of any agreement assigned, in whole or in part, hereunder (an "Assignee") shall assume and agree to pay, perform, and fully discharge all obligations of the assignor under such agreement or, in the case of a partial assignment under paragraph (f)(ii), such Assignee's related portion of such obligations as determined in accordance with the terms of the relevant agreement, where determinable on the face thereof, and otherwise as determined in accordance with the practice of the parties prior to the Distribution. (iv) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any agreement, in whole or in part, or any rights thereunder if the agreement to assign or attempt to assign, without the consent of a third party, would constitute a breach thereof or in any way adversely affect the rights of the Assignee thereof. Until such consent is obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of any party hereto so that the Assignee would not, in fact, receive all such rights, the parties will cooperate with each other in any arrangement designed to provide for the Assignee the benefits of, and to permit the Assignee to assume liabilities under, any such agreement. (g) Consents. The parties hereto shall use their commercially reasonable efforts to obtain required consents to assignment of agreements hereunder. 14 14 (h) Delivery of Shares to Agent. ITT shall deliver to the Agent the share certificates representing the ITT Destinations Common Shares and the ITT Hartford Common Shares issued to ITT by ITT Destinations and ITT Hartford, respectively, pursuant to Section 2.01(b) and shall instruct the Agent to distribute, on or as soon as practicable following the Distribution Date, such Common Shares to holders of record of shares of ITT Common Stock on the Distribution Record Date as further contemplated by, and subject to the conditions contained in, the Proxy Statement and this Agreement. ITT Destinations and ITT Hartford shall provide all share certificates that the Agent shall require in order to effect the Distribution. (i) Other Transactions. On or prior to the Distribution Date, each of ITT, ITT Destinations and ITT Hartford shall have consummated those other transactions in connection with the Distribution that are contemplated by the Proxy Statement and the ruling request submission by ITT to the Internal Revenue Service dated June 22, 1995 (as subsequently supplemented), and not specifically referred to in subparagraphs (a)-(h) above. SECTION 2.02. Certain Financial and Other Arrangements. (a) Intercompany Accounts. (i) Without limiting the terms of Section 2.03, all intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between ITT Destinations or any of its Subsidiaries, on the one hand, and ITT Industries or any of its Subsidiaries, on the other hand, shall, as of the Effective Time, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Effective Time by duly authorized representatives of ITT Industries and ITT Destinations. (ii) Without limiting the terms of Section 2.03, all intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), 15 15 including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between ITT Hartford or any of its Subsidiaries, on the one hand, and ITT Industries or any of its Subsidiaries, on the other hand, shall, as of the Effective Time, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Effective Time by duly authorized representatives of ITT Industries and ITT Hartford. (iii) Without limiting the terms of Section 2.03, all intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between ITT Destinations or any of its Subsidiaries, on the one hand, and ITT Hartford or any of its Subsidiaries, on the other hand, shall, as of the Effective Time, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Effective Time by duly authorized representatives of ITT Destinations and ITT Hartford. (b) Operations in Ordinary Course. Each of ITT Industries, ITT Destinations and ITT Hartford covenants and agrees that, except as otherwise provided in any Ancillary Agreement, during the period from the date of this Agreement through the Distribution Date, it will, and will cause any entity that is a Subsidiary of such party at any time during such period to, conduct its business in a manner substantially consistent with current and past operating practices and in the ordinary course, including, without limitation, with respect to the payment and administration of accounts payable and the administration of accounts receivable, the purchase of capital assets and equipment and the management of inventories. SECTION 2.03. Capital Structure. ITT, ITT Destinations and ITT Hartford each agrees to use its commercially reasonable efforts to achieve a capitalization at December 31, 1995 which is substantially the same as its respective forecasted capitalization under the heading "ITT Industries Forecasted Capitalization", "New ITT Forecasted 16 16 Capitalization" or "ITT Hartford Forecasted Capitalization" in ITT's Current Report on Form 8-K filed with the Commission on November 7, 1995. SECTION 2.04. Assumption and Satisfaction of Liabilities; Management Responsibility for Shared Liabilities; Rights and Assets Relating to Shared Liabilities. (a) Except as otherwise specifically set forth in any Ancillary Agreement, from and after the Effective Time, (i) ITT Industries shall, and shall cause its Subsidiaries to, assume, pay, perform and discharge all ITT Industries Liabilities, (ii) ITT Destinations shall, and shall cause its Subsidiaries to, assume, pay, perform and discharge all ITT Destinations Liabilities, and (iii) ITT Hartford shall, and shall cause its Subsidiaries to, assume, pay, perform and discharge all ITT Hartford Liabilities. (b) The parties acknowledge that various claims and administrative matters may arise from time to time in respect of Shared Liabilities and that it would be in the best interests of the parties hereto to designate responsibility for managing and administering Shared Liabilities, including, without limitation, as contemplated by Section 3.05(b) hereto. The parties accordingly agree that such responsibilities shall be allocated as provided in Schedule 1.01(d) hereto; such responsibilities for Shared Liabilities not covered by Schedule 1.01(d) shall be as mutually agreed upon among the parties. All costs and expenses (including, without limitation, reasonable attorneys' fees and all out-of-pocket expenses whatsoever reasonably incurred) incurred by or on behalf of the party with such management and administrative responsibility shall be shared among the parties equally. (c) The parties hereto shall be entitled to share in any rights and assets (including, without limitation, recoveries, claims and proceeds of asset sales) that relate to Shared Liabilities (including, without limitation, Insurance Proceeds received under Company Policies) equally. SECTION 2.05. Resignations. (a) ITT Industries shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT Destinations or as officers or directors of any Subsidiary of ITT Destinations in which they serve. ITT Destinations shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT 17 17 Industries or as officers or directors of any Subsidiary of ITT Industries in which they serve. (b) ITT Industries shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT Hartford or as officers or directors of any Subsidiary of ITT Hartford in which they serve. ITT Hartford shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT Industries or as officers or directors of any Subsidiary of ITT Industries in which they serve. (c) ITT Hartford shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT Destinations or as officers or directors of any Subsidiary of ITT Destinations in which they serve. ITT Destinations shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers of ITT Hartford or as officers or directors of any Subsidiary of ITT Hartford in which they serve. SECTION 2.06. Further Assurances. In case at any time after the Effective Time any further action is reasonably necessary or desirable to carry out the purposes of this Agreement and the Ancillary Agreements, the proper officers of each party to this Agreement shall take all such necessary action. Without limiting the foregoing, ITT, ITT Destinations and ITT Hartford shall use their commercially reasonable efforts to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications that may be required for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including, without limitation, all applicable governmental and regulatory filings. SECTION 2.07. No Representations or Warranties. Each of the parties hereto understands and agrees that, except as otherwise expressly provided, no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, including, without limitation, as to title, value or legal sufficiency. It is also agreed and understood that all assets either transferred to or retained by the parties, as the case may be, shall be "as is, where is" and that (subject to Section 2.06) the party to which such assets are to be transferred hereunder shall 18 18 bear the economic and legal risk that any conveyances of such assets shall prove to be insufficient or that such party's or any of the Subsidiaries' title to any such assets shall be other than good and marketable and free from encumbrances. Similarly, each party hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable agreements or the requirements of any or all applicable laws or judgments, it being agreed and understood that the party to which any assets are transferred shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of laws or judgments are not complied with. SECTION 2.08. Guarantees. (a) Except as otherwise specified in any Ancillary Agreement, ITT Industries, ITT Destinations and ITT Hartford shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, ITT Industries and any of its Subsidiaries removed as guarantor of or obligor for any ITT Destinations Liability or ITT Hartford Liability, including, without limitation, in respect of those guarantees set forth on Schedule 2.08(a). (b) Except as otherwise specified in any Ancillary Agreement, ITT Industries, ITT Destinations and ITT Hartford shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, ITT Destinations and any of its Subsidiaries removed as guarantor of or obligor for any ITT Industries Liability or ITT Hartford Liability, including, without limitation, in respect of those guarantees set forth on Schedule 2.08(b). (c) Except as otherwise specified in any Ancillary Agreement, ITT Industries, ITT Destinations and ITT Hartford shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, ITT Hartford and any of its Subsidiaries removed as guarantor of or obligor for any ITT Industries Liability or ITT Destinations Liability, including, without limitation, in respect of those guarantees set forth on Schedule 2.08(c). 19 19 SECTION 2.09. Witness Services. At all times from and after the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall use their commercially reasonable efforts to make available to each other party hereto, upon reasonable written request, its and its Subsidiaries' officers, directors, employees and agents as witnesses to the extent that (i) such persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party may from time to time be involved and (ii) there is no conflict in the Action between the requesting party and ITT Industries, ITT Destinations or ITT Hartford, as applicable. A party providing witness services to the other party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses and direct and indirect costs of employees who are witnesses, as may be reasonably incurred in providing such witness services. SECTION 2.10. Certain Post-Distribution Transactions. (a)(i) ITT Industries shall comply with and otherwise not take action inconsistent with each representation and statement made, or to be made, to the Internal Revenue Service in connection with the request by ITT for a revenue ruling in respect of the Distribution or to ITT's outside tax counsel in connection with such firm's rendering an opinion to ITT, ITT Destinations and ITT Hartford as to certain tax aspects of the Distribution and (ii) until one year after the Distribution Date, ITT Industries will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. (b)(i) ITT Destinations shall comply with and otherwise not take action inconsistent with each representation and statement made, or to be made, to the Internal Revenue Service in connection with the request by ITT for a revenue ruling in respect of the Distribution or to ITT's outside tax counsel in connection with such firm's rendering an opinion to ITT, ITT Destinations and ITT Hartford as to certain tax aspects of the Distribution and (ii) until one year after the Distribution Date, ITT Destinations will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. 20 20 (c)(i) ITT Hartford shall comply with and otherwise not take action inconsistent with each representation and statement made, or to be made, to the Internal Revenue Service in connection with the request by ITT for a revenue ruling in respect of the Distribution or to ITT's outside tax counsel in connection with such firm's rendering an opinion to ITT, ITT Destinations and ITT Hartford as to certain tax aspects of the Distribution and (ii) until one year after the Distribution Date, ITT Hartford will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. SECTION 2.11. Directors and Officers Liability Insurance. ITT Industries agrees that, from and after the Effective Time to the seventh anniversary of the Distribution Date, it will maintain in full force and effect the Company Policy numbered 16 on Schedule 7.01(a) hereto (or, through the purchase of extended discovery, the full benefits and coverage of such Company Policy) and shall not amend the terms of such Policy in a manner adverse to any persons covered by such insurance. The provisions of this Section 2.11 are intended for the benefit of, and shall be enforceable by, each of the persons covered by the Company Policy numbered 16 on Schedule 7.01(a) hereto. SECTION 2.12. Insurance. Except as contemplated by Article VII and Section 2.11 hereof, any and all coverage of ITT Destinations, ITT Hartford and their respective Subsidiaries under Company Policies has terminated or will terminate no later than the Effective Time (and will not be replaced by ITT). SECTION 2.13. Transfers Not Effected Prior to the Distribution; Transfers Deemed Effective as of the Distribution Date. To the extent that any transfers contemplated by this Article II shall not have been consummated on or prior to the Distribution Date, the parties shall cooperate to effect such transfers as promptly following the Distribution Date as shall be practicable. Nothing herein shall be deemed to require the transfer of any assets or the assumption of any Liabilities which by their terms or operation of law cannot be transferred; provided, however, that the parties hereto and their respective Subsidiaries shall cooperate to seek to obtain any necessary consents or approvals for the transfer of all assets and Liabilities contemplated to be transferred pursuant to this Article II. In the event that any such transfer of assets or Liabilities has not been consummated, from and after the Distribution 21 21 Date the party retaining such asset or Liability shall hold such asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) or retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, as the case may be, and take such other action as may be reasonably requested by the party to whom such asset is to be transferred, or by whom such Liability is to be assumed, as the case may be, in order to place such party, insofar as is reasonably possible, in the same position as would have existed had such asset or Liability been transferred as contemplated hereby. As and when any such asset or Liability becomes transferable, such transfer shall be effected forthwith. The parties agree that, as of the Distribution Date, each party hereto shall be deemed to have acquired complete and sole beneficial ownership over all of the assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such party is entitled to acquire or required to assume pursuant to the terms of this Agreement. SECTION 2.14. Ancillary Agreements. Prior to the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall enter into, and/or (where applicable) shall cause their respective Subsidiaries to enter into, the Ancillary Agreements and any other agreements in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby. ARTICLE III. INDEMNIFICATION SECTION 3.01. Indemnification by ITT Industries. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, ITT Industries shall indemnify, defend and hold harmless the ITT Destinations Indemnitees and the ITT Hartford Indemnitees from and against any and all Indemnifiable Losses of the ITT Destinations Indemnitees and the ITT Hartford Indemnitees, respectively, arising out of, by reason of or otherwise in connection with (i) the ITT Industries Liabilities or (ii) the breach by ITT Industries of any provision of this Agreement or any Ancillary Agreement. 22 22 SECTION 3.02. Indemnification by ITT Destinations. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, ITT Destinations shall indemnify, defend and hold harmless the ITT Industries Indemnitees and the ITT Hartford Indemnitees from and against any and all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Hartford Indemnitees, respectively, arising out of, by reason of or otherwise in connection with (i) the ITT Destinations Liabilities or (ii) the breach by ITT Destinations of any provision of this Agreement or any Ancillary Agreement. SECTION 3.03. Indemnification by ITT Hartford. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, ITT Hartford shall indemnify, defend and hold harmless the ITT Industries Indemnitees and the ITT Destinations Indemnitees from and against any and all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Destinations Indemnitees, respectively, arising out of, by reason of or otherwise in connection with (i) the ITT Hartford Liabilities or (ii) the breach by ITT Hartford of any provision of this Agreement or any Ancillary Agreement. SECTION 3.04. Limitations on Indemnification Obligations. The amount that any party (an "Indemnifying Party") is or may be required to pay to any other person (an "Indemnitee") pursuant to Section 3.01, Section 3.02 or Section 3.03, as applicable, shall be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnitee in respect of the related Indemnifiable Loss. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Loss. SECTION 3.05. Procedures for Indemnification. (a) Third Party Claims (other than in respect of Shared Liabilities). If a claim or demand is made against an Indemnitee by any person who is not a party to this Agree- 23 23 ment (a "Third Party Claim") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within 15 business days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel selected by the Indemnifying Party; provided that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, then in no event will the 24 24 Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge if the Indemnitee agrees that the Indemnifying Party's indemnification obligation with respect to such Third Party Claim shall not exceed the amount that would be required to be paid by or on behalf of the Indemnifying Party in connection with such settlement, compromise or discharge. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. This Section 3.05(a) shall govern all claims under this Article III for indemnification against Third Party Claims except Third Party Claims in respect of Shared Liabilities, as to which Section 3.05(b) shall govern. 25 25 (b) Third Party Claims in Respect of Shared Liabilities. If a Third Party Claim in respect of a Shared Liability is made against an Indemnitee, such Indemnitee shall notify the Indemnifying Parties in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent an Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Parties shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Parties, promptly (and in any event within 15 business days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. Each Indemnifying Party shall be entitled to participate in the defense of such Third Party Claim subject to the following provisions of this paragraph. Without limiting the terms of Section 3.01, Section 3.02 or Section 3.03 hereof, the Indemnitee and Indemnifying Parties shall use commercially reasonable efforts to agree as soon as reasonably practicable upon a party (the "Managing Party") which shall have management and administrative responsibility in respect of the Third Party Claim against the Indemnitee unless a party is designated on Schedule 1.01(d) to have management responsibility for the related Shared Liability (in which case the party so designated shall be the "Managing Party"). Such management and administrative responsibility shall entail the defense of such Third Party Claim, negotiation with claimants and potential claimants (subject to the limitations in the following paragraph) and other reasonably related activities. If the Indemnifying Parties acknowledge in writing their respective obligations to indemnify the Indemnitee for the Third Party Claim to the extent contemplated by this Agreement, and an Indemnifying Party is selected as the Managing Party, such Indemnifying Party may assume the defense thereof with counsel selected by such Indemnifying Party; provided that such counsel is not reasonably objected to by the Indemnitee or any other Indemnifying Party. If there is a Managing Party and such party conducts the defense of the Third Party Claim, the legal or other expenses in respect of such Third Party Claim incurred by or 26 26 on behalf of any person other than such Managing Party shall not be Indemnifiable Losses for purposes of this Agreement; provided, however, the Indemnifying Parties shall be liable for fees and expenses of counsel employed by the Indemnitee for any period during which an Indemnifying Party, in its capacity as Managing Party, has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of such Third Party Claim as provided above), but only to the extent contemplated by the final paragraph of this Section 3.05(b). If there is a Managing Party and such party conducts the defense of the Third Party Claim, the Managing Party shall control the defense of such Third Party Claim, although the Indemnitee (if not the Managing Party) shall have the right to participate in such defense and to employ counsel, at its own expense, separate from the counsel employed by the Managing Party. All of the Indemnitees and each Indemnifying Party shall cooperate with any Managing Party and each other in the defense or prosecution of such Third Party Claim. If each of the Indemnifying Parties acknowledges in writing liability for such Third Party Claim to the extent contemplated by this Agreement, then in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any such Third Party Claim without each of the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Parties if the Indemnitee releases each of the Indemnifying Parties from their respective indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Parties. If the Indemnifying Parties acknowledge in writing liability for such Third Party Claim, an Indemnitee will agree to any settlement, compromise or discharge of such Third Party Claim that the Managing Party may recommend and that by its terms obligates the Indemnifying Parties to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim (or portion thereof, as applicable) and that would not otherwise adversely affect the Indemnitee; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge if the Indemnitee agrees that each of the Indemnifying Party's indemnification obligations with respect to such Third Party Claim shall not 27 27 exceed the amount that would be required to be paid by or on behalf of such Indemnifying Party in connection with such settlement, compromise or discharge. Notwithstanding the foregoing, an Indemnifying Party shall not be entitled to assume the defense of such Third Party Claim (and shall be liable for the fees and expenses of counsel incurred by an Indemnitee in defending such Third Party Claim to the extent contemplated by this Agreement) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, an Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages as contemplated above. Legal and other expenses incurred in connection with each such Third Party Claim which are Indemnifiable Losses shall be shared by the parties in the same proportions in which the related Shared Liability is shared. SECTION 3.06. Indemnification Payments. Indemnification required by this Article III shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or loss, liability, claim, damage or expense is incurred. SECTION 3.07. Other Adjustments. (i) The amount of any Indemnifiable Loss shall be (x) increased to take into account any net Tax cost actually incurred by the Indemnitee arising from any payments received from the Indemnifying Party (grossed up for such increase) and (y) reduced to take account of any net Tax benefit actually realized by the Indemnitee arising from the incurrence or payment of any such Indemnifiable Loss. In computing the amount of such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any payment with respect to an Indemnifiable Loss or the incurrence or payment of any Indemnifiable Loss. 28 28 (ii) In addition to any adjustments required pursuant to Section 3.04 hereof or clause (i) of this Section 3.07, if the amount of any Indemnifiable Loss shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Loss. SECTION 3.08. Survival of Indemnities. The obligations of ITT Industries, ITT Destinations and ITT Hartford under this Article III shall survive the sale or other transfer by any of them of any assets or businesses or the assignment by any of them of any Liabilities, with respect to any Indemnifiable Loss of any Indemnitee related to such assets, businesses or Liabilities. ARTICLE IV. ACCESS TO INFORMATION SECTION 4.01. Provision of Corporate Records. (a) Unless otherwise specified in the procedures set forth in Schedule 4.03(b) hereto, after the Distribution Date, upon the prior written request by ITT Destinations or ITT Hartford for specific and identified agreements, documents, books, records or files including, without limitation, computer files, microfiche, tape recordings and photographs (collectively, "Records"), relating to or affecting ITT Destinations or ITT Hartford, as applicable, ITT Industries shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of ITT Industries or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (b) Unless otherwise specified in the procedures set forth in Schedule 4.03(b) hereto, after the Distribution Date, upon the prior written request by ITT Industries or ITT Hartford for specific and identified Records relating to or affecting ITT Industries or ITT Hartford, as applicable, ITT Destinations shall arrange, as soon as reasonably prac- 29 29 ticable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of ITT Destinations or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (c) Unless otherwise specified in the procedures set forth in Schedule 4.03(b) hereto, after the Distribution Date, upon the prior written request by ITT Industries or ITT Destinations for specific and identified Records relating to or affecting ITT Industries or ITT Destinations, as applicable, ITT Hartford shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of ITT Hartford or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. SECTION 4.02. Access to Information. (a) Unless otherwise specified in the procedures set forth in Schedule 4.03(b) hereto, from and after the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, books and records of such party and its Subsidiaries insofar as such access is reasonably required by the other party. (b) For a period of five years following the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall provide to the other, promptly following such time at which such documents shall be filed with the Securities and Exchange Commission (the "Commission"), all documents that shall be filed by it and by any of its respective Subsidiaries with the Commission pursuant to the periodic and interim reporting requirements of the Securities Exchange Act of 1934, and the rules and regulations of the Commission promulgated thereunder. SECTION 4.03. Reimbursement; Other Matters. (a) Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing Records or access to 30 30 information to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Records or access to information. (b) The parties hereto shall comply with those document retention policies as shall be set forth in Schedule 4.03(b) hereto or established and agreed to in writing by their respective authorized officers on or prior to the Distribution Date in respect of Records and related matters. SECTION 4.04. Confidentiality. Each of (i) ITT Industries and its Subsidiaries, (ii) ITT Destinations and its Subsidiaries and (iii) ITT Hartford and its Subsidiaries shall not use or permit the use of (without the prior written consent of the other) and shall hold, and shall cause its consultants and advisors to hold, in strict confidence, all information concerning the other parties in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain through no fault of such party or (B) such information has been later lawfully acquired from other sources by such party or (C) this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information) to the extent such information (x) relates to the period up to the Effective Time, (y) relates to any Ancillary Agreement or (z) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other person, except such party's auditors and attorneys, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure. To the extent that a party hereto is compelled by judicial or administrative process to disclose such information under circumstances in which any evidentiary privilege would be available, such party agrees to assert such privilege in good faith prior to making such disclosure. Each of the parties hereto agrees to consult with each relevant other party in connection with any such judicial or administrative process, including, without limitation, in determining whether any privilege is 31 31 available, and further agrees to allow each such relevant party and its counsel to participate in any hearing or other proceeding (including, without limitation, any appeal of an initial order to disclose) in respect of such disclosure and assertion of privilege. ARTICLE V. ADMINISTRATIVE SERVICES SECTION 5.01. Performance of Services. Beginning on the Distribution Date, each party will provide, or cause one or more of its Subsidiaries to provide, to the other party and its Subsidiaries such services on such terms as may be agreed upon between (i) ITT Industries (or any of its Subsidiaries) and ITT Destinations (or any of its Subsidiaries), (ii) ITT Industries (or any of its Subsidiaries) and ITT Hartford (or any of its Subsidiaries) or (iii) ITT Destinations (or any of its Subsidiaries) and ITT Hartford (or any of its Subsidiaries) from time to time in writing. The party that is to provide the services (the "Provider") will use (and will cause its Subsidiaries to use) its commercially reasonable efforts to provide such services to the other party (the "Recipient") and its Subsidiaries in a satisfactory and timely manner and as further specified in writing by the parties. SECTION 5.02. Independence. All employees and representatives of the Provider providing the scheduled services to the Recipient will be deemed for purposes of all compensation and employee benefits matters to be employees or representatives of the Provider and not employees or representatives of the Recipient. In performing such services, such employees and representatives will be under the direction, control and supervision of the Provider (and not the Recipient) and the Provider will have the sole right to exercise all authority with respect to the employment (including, without limitation, termination of employment), assignment and compensation of such employees and representatives. SECTION 5.03. Non-exclusivity. Nothing in this Agreement precludes any party from obtaining, in whole or in part, services of any nature that may be obtainable from the other parties from its own employees or from providers other than the other parties. 32 32 ARTICLE VI. DISPUTE RESOLUTION In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including, without limitation, any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the general counsels of the relevant parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute. If after such reasonable period such general counsels are unable to settle such Agreement Dispute (and in any event after 60 days have elapsed from the time the relevant parties began such negotiations), such Agreement Dispute shall be determined, at the request of any relevant party, by arbitration conducted in New York City, before and in accordance with the then-existing Rules for Commercial Arbitration of the American Arbitration Association (the "Rules"), and any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. Section 10(a) as in effect on the date hereof), and judgment may be entered by any state or Federal court having jurisdiction thereof in accordance with Section 8.19 hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of the then-existing Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Civil Rules for the United States District Court for the Southern District of New York shall apply to any arbitration hereunder. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article VI shall be determined by the arbitrator. The arbitrator shall be a retired or former judge of any United States District Court or Court of Appeals or such other qualified person as the relevant parties may agree to designate, provided such individual has had substantial professional experience with regard to settling sophisticated commercial disputes. The parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The designation of a situs or a governing law for this Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it would be applicable. In his award the arbitrator shall allocate, in 33 33 his discretion, among the parties to the arbitration all costs of the arbitration, including, without limitation, the fees and expenses of the arbitrator and reasonable attorneys' fees, costs and expert witness expenses of the parties. The undersigned agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrator shall not be entitled to award punitive damages. ARTICLE VII. INSURANCE SECTION 7.01. Policies and Rights Included Within Assets. (a) The ITT Destinations Assets shall include any and all rights of an insured party under each of the Company Policies set forth on Schedule 7.01(a) hereto and all predecessor Policies thereto, subject to the terms of such Company Policies and any limitations or obligations of ITT Destinations contemplated by this Article VII or Schedule 7.01(a), specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Distribution Date by any party in or in connection with the conduct of the ITT Destinations Business or, to the extent any claim is made against ITT Destinations or any of its Subsidiaries, the conduct of the ITT Industries Business or the ITT Hartford Business, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under one or more of such Company Policies; provided, however, that nothing in this clause shall be deemed to constitute (or to reflect) an assignment of such Company Policies, or any of them, to ITT Destinations. (b) The ITT Hartford Assets shall include any and all rights of an insured party under the Company Policies numbered 16 and 17 on Schedule 7.01(a) hereto and all predecessor Policies thereto, subject to the terms of such Company Policies and any limitations or obligations of ITT Hartford contemplated by this Article VII or 34 34 Schedule 7.01(a), specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Distribution Date by any party in or in connection with the conduct of the ITT Hartford Business or, to the extent any claim is made against ITT Hartford or any of its Subsidiaries, the conduct of the ITT Industries Business or the ITT Destinations Business, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under either such Company Policy; provided, however, that nothing in this clause shall be deemed to constitute (or to reflect) an assignment of either of such Company Policies to ITT Hartford. (c) The ITT Industries Assets shall include any and all rights of a named additional insured party under Policies where ITT is a named additional insured party, subject to the terms of such Policies and any limitations or obligations of ITT contemplated by this Article VII, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Distribution Date by any party in or in connection with the conduct of the ITT Industries Business or, to the extent any claim is made against ITT Industries or any of its Subsidiaries, the conduct of the ITT Destinations Business or the ITT Hartford Business, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under either such Policy; provided, however, that nothing in this clause shall be deemed to constitute (or to reflect) an assignment of such Policies to ITT Industries. SECTION 7.02. Post-Distribution Date Claims. (a) If, subsequent to the Distribution Date, any person shall assert a claim against ITT Destinations or any of its Subsidiaries (including, without limitation, where ITT Destinations or its Subsidiaries are joint defendants with other persons) with respect to any claim, suit, action, proceeding, injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Distribution Date in or in connection with the conduct of the ITT Destinations Business or, to the extent any claim is made 35 35 against ITT Destinations or any of its Subsidiaries (including, without limitation, where ITT Destinations or its Subsidiaries are joint defendants with other persons), the conduct of the ITT Industries Business or the ITT Hartford Business, and which claim, suit, action, proceeding, injury, loss, liability, damage or expense may arise out of an insured or insurable occurrence under one or more of the Company Policies, ITT Industries shall, at the time such claim is asserted, to the extent any such Policy may require that Insurance Proceeds thereunder be collected directly by the party against whom the Insured Claim is asserted, be deemed to designate, without need of further documentation, ITT Destinations as the agent and attorney-in-fact to assert and to collect any related Insurance Proceeds under such Company Policy, and shall further be deemed to assign, without need of further documentation, to ITT Destinations any and all rights of an insured party under such Company Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer and the right to any applicable Insurance Proceeds thereunder; provided, however, that nothing in this Section 7.02(a) shall be deemed to constitute (or to reflect) an assignment of the Company Policies, or any of them, to ITT Destinations; provided further, however, that, with respect to those Company Policies set forth on Schedule 7.01(a) hereto for which ITT Destinations has payment obligations as reflected on such Schedule, ITT Destinations and its Subsidiaries shall only have the rights set forth under this Section 7.02(a) with respect to such Company Policies if such payment obligations have been satisfied by ITT Destinations at the relevant time as contemplated by Schedule 7.01(a). (b) If, subsequent to the Distribution Date, any person shall assert a claim against ITT Hartford or any of its Subsidiaries (including, without limitation, where ITT Hartford or its Subsidiaries are joint defendants with other persons) with respect to any claim, suit, action, proceeding, injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Distribution Date in or in connection with the conduct of the ITT Hartford Business or, to the extent any claim is made against ITT Hartford or any of its Subsidiaries (including, without limitation, where ITT Hartford or its Subsidiaries are joint defendants with other persons), the conduct of the ITT Industries Business or the ITT Destinations Business, and which claim, suit, action, pro- 36 36 ceeding, injury, loss, liability, damage or expense may arise out of an insured or insurable occurrence under the Company Policy numbered 16 or 17 on Schedule 7.01(a) hereto, ITT Industries shall, at the time such claim is asserted, to the extent such Policy may require that Insurance Proceeds thereunder be collected directly by the party against whom the Insured Claim is asserted, be deemed to designate, without need of further documentation, ITT Hartford as the agent and attorney-in-fact to assert and to collect any related Insurance Proceeds under such Company Policy, and shall further be deemed to assign, without need of further documentation, to ITT Hartford any and all rights of an insured party under such Company Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer and the right to any applicable Insurance Proceeds thereunder; provided, however, that nothing in this Section 7.02(b) shall be deemed to constitute (or to reflect) an assignment of either of such Company Policies to ITT Hartford; provided further, however, that, with respect to the Company Policy numbered 17 on Schedule 7.01(a) hereto, ITT Hartford and its Subsidiaries shall only have the rights set forth under this Section 7.02(b) with respect to such Company Policy if the payment obligations of ITT Hartford set forth in Schedule 7.01(a) with respect to such Policy have been satisfied by ITT Hartford at the relevant time as contemplated by Schedule 7.01(a). SECTION 7.03. Administration; Other Matters. (a) Administration. Except as otherwise provided in Section 7.02 hereof, from and after the Distribution Date ITT Industries shall be responsible for (i) Insurance Administration of the Company Policies and (ii) Claims Administration under such Company Policies with respect to ITT Industries Liabilities, ITT Destinations Liabilities and ITT Hartford Liabilities; provided that the retention of such responsibilities by ITT Industries is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under such Policies as contemplated by the terms of this Agreement; and provided further that ITT Industries' retention of the administrative responsibilities for the Company Policies shall not relieve the party submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner (it being understood that, as specified in the definitions of "Claims Administration" and "Insurance Administration", ITT Destinations and ITT Hartford shall report Insured 37 37 Claims to the relevant carrier through ITT Industries) or of such party's authority to settle (within the periods specified in Schedule 7.01(a) in the cases of the Company Policies numbered 1, 3 and 4 on said Schedule) any such Insured Claim. ITT Industries may discharge its administrative responsibilities under this Section 7.03 by contracting for the provision of services by independent parties. Except as contemplated by Schedule 7.01(a) hereto or this Agreement, each of the parties hereto shall administer and pay any costs relating to defending its respective Insured Claims under Company Policies to the extent such defense costs are not covered under such Policies and shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Company Policies. The disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of ITT Industries relating to Claims Administration and Insurance Administration contemplated by this Section 7.03(a) shall be the responsibility of ITT Industries, provided that, if such disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of ITT Industries shall be materially in excess of the comparable historical disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of ITT, the relevant parties hereto agree to negotiate in good faith an equitable allocation of responsibility for such disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of ITT Industries. (b) Access to Specified Policies. Where ITT Destinations Liabilities or ITT Hartford Liabilities, as applicable, are specifically covered under the Company Policies set forth on Schedule 7.01(a) hereto numbered 16 or 17 for periods prior to the Distribution Date, or under either such Company Policy covering claims made after the Distribution Date with respect to an occurrence prior to the Distribution Date, then from and after the Distribution Date ITT Destinations and ITT Hartford may claim coverage for Insured Claims under such Company Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Company Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 7.02 or Section 7.03(d) hereof). (c) Liability Limitation. Except as specifically contemplated by lettered items under Schedule 7.01(a), ITT 38 38 Industries, ITT Destinations and ITT Hartford shall not be liable to one another for claims not reimbursed by insurers for any reason not within the control of ITT Industries, ITT Destinations or ITT Hartford, as the case may be, including, without limitation, coinsurance provisions, deductibles, quota share deductibles, exhaustion of aggregates, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Company Policy limitations or restrictions, any coverage disputes, any failure to timely claim by ITT Industries, ITT Destinations or ITT Hartford or any defect in such claim or its processing. (d) Allocation of Insurance Proceeds. Except as otherwise provided in Section 7.02, Insurance Proceeds received with respect to claims, costs and expenses under the Company Policies shall be paid to ITT Industries in trust, which shall thereafter administer the Company Policies by paying the Insurance Proceeds, as appropriate, to ITT Industries with respect to ITT Industries Liabilities, to ITT Destinations with respect to ITT Destinations Liabilities, to ITT Hartford with respect to the ITT Hartford Liabilities and as provided in Section 2.04(c) with respect to Shared Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Policies will be made by ITT Industries to the appropriate party upon receipt from the insurance carrier. In the event that the aggregate limits on any Company Policies are exceeded by the aggregate of outstanding Insured Claims by two or more of the relevant parties hereto, such parties shall agree on an equitable allocation of Insurance Proceeds based upon their respective bona fide claims. The parties agree to use commercially reasonable efforts to maximize available coverage under those Company Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a Company Policy have been exceeded or would be exceeded as a result of such Insured Claim. SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of more than one of the parties hereto exist relating to the same occurrence, the relevant parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Section 7.04 shall be 39 39 construed to limit or otherwise alter in any way the obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. SECTION 7.05. Cooperation. The parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement (including, without limitation, in connection with Policies where ITT is a named additional insured party). ARTICLE VIII. MISCELLANEOUS SECTION 8.01. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. SECTION 8.02. Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 8.03. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 8.04. Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 8.05. Expenses. Except as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred on or prior to the Distribution 40 40 Date (whether or not paid on or prior to the Distribution Date) in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Proxy Statement and the Distribution and the consummation of the transactions contemplated thereby shall be charged to and paid by ITT, provided that ITT shall not be responsible for those costs or expenses incurred by ITT Hartford or ITT Destinations (including, without limitation, any attorney or financial advisor fees owing to attorneys or financial advisors retained by ITT Destinations or ITT Hartford). Except as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses incurred after the Distribution Date. SECTION 8.06. Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To ITT Corporation (ITT Industries, Inc. after the Distribution): 4 West Red Oak Lane White Plains, NY 10604 Attn: Senior Vice President and General Counsel To ITT Destinations, Inc. (ITT Corporation after the Distribution): 1330 Avenue of the Americas New York, NY 10019 Attn: Executive Vice President and General Counsel To ITT Hartford Group, Inc.: Hartford Plaza Hartford, CT 06115 Attn: Senior Vice President and General Counsel 41 41 SECTION 8.07. Waivers. The failure of either party to require strict performance by the other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 8.08. Amendments. Subject to the terms of Section 8.11 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by the parties. SECTION 8.09. Assignment. This Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all the assets of a party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other parties to this Agreement. Otherwise this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the others, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. SECTION 8.10. Successors and Assigns. The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and permitted assigns. SECTION 8.11. Termination. This Agreement (including, without limitation, Section 2.11 and Article III hereof) may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of ITT without the approval of ITT Destinations or ITT Hartford or the shareholders of ITT. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Section 2.11 and Article III shall not be terminated or amended after the Distribution in respect of the third party beneficiaries thereto without the consent of such persons. SECTION 8.12. Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations 42 42 set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the Distribution Date. SECTION 8.13. Third Party Beneficiaries. Except as provided in Section 2.11 relating to directors and officers liability insurance and in Article III relating to Indemnitees, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 8.14. Attorney Fees. Except as contemplated by the third to the last sentence of Article VI hereof, a party in breach of this Agreement shall, on demand, indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including, without limitation, legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled hereunder or otherwise. SECTION 8.15. Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 8.16. Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 8.17. Specific Performance. Each of the parties hereto acknowledges that there is no adequate remedy at law for failure by such parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the parties hereto under this Agreement. SECTION 8.18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE 43 43 LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED IN THAT STATE. SECTION 8.19. Consent to Jurisdiction. Without limiting the provisions of Article VI hereof, each of the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 8.19. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 8.20. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 44 44 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ITT CORPORATION, by /s/ D. Travis Engen ----------------------------------- Name: D. Travis Engen Title: Executive Vice President ITT DESTINATIONS, INC., by /s/ R. S. Ward ----------------------------------- Name: R. S. Ward Title: Executive Vice President, General Counsel ITT HARTFORD GROUP, INC., by /s/ Donald R. Frahm ----------------------------------- Name: Donald R. Frahm Title: Executive Vice President EX-10.2 3 INTELLECTUAL PROPERTY LICENSE AGREEMENT 1 INTELLECTUAL PROPERTY LICENSE AGREEMENT INTELLECTUAL PROPERTY LICENSE AGREEMENT ("IP Agreement") dated as of November 1, 1995 between and among ITT CORPORATION, a Delaware corporation ("ITT Corporation"), ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations"), and ITT HARTFORD GROUP, INC., a Delaware corporation ("ITT Hartford") (collectively the "Parties"). RECITALS WHEREAS, in order to carry out the Distribution (as hereinafter defined) whereby the holders of the shares of common stock of ITT Corporation will receive all of the outstanding shares of common stock of ITT Destinations (as hereinafter defined) and all the outstanding shares of common stock of ITT Hartford (as hereinafter defined), it is necessary to license certain intellectual property assets and rights between and among the Parties to provide for the continued conduct of the Parties' respective businesses; WHEREAS, a series of General Relations Agreements are in effect between and among ITT Corporation and its Subsidiaries, including ITT Destinations, ITT Hartford and their Subsidiaries, granting certain rights and licenses under intellectual property in connection with the conduct of their respective businesses; and WHEREAS, the Parties desire that certain rights and licenses under such intellectual property enjoyed by the Parties and their Subsidiaries prior to the Distribution Date should continue after the Distribution Date as specified herein. NOW, THEREFORE, in consideration of the mutual agreements, undertakings and covenants herein, the Parties hereby agree as follows: 1 2 (1) ARTICLE I. DEFINITIONS Section 1.01 General. As used in this IP Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Intellectual Property" shall mean and include inventions, invention disclosures, patents, patent applications, computer programs (including source code, object code and data), copyrights, copyright registrations, copyright registration applications, mask works, designs, technical information, proprietary information, trade secrets, manufacturing processes, formulas, algorithms, data, and all other kinds of intellectual property protected or protectable under state, federal or foreign law owned by a Party or its Subsidiaries as of the Distribution Date, except Trademarks (as hereinafter defined). "Distribution Agreement" shall mean the Distribution Agreement to be entered into by ITT Corporation, ITT Destinations, and ITT Hartford relating to the distribution of the shares of ITT Destinations and ITT Hartford to the holders of ITT Corporation Common Stock. "Distribution Date" shall mean such date as may hereafter be determined by ITT Corporation's Board of Directors as the date on which the Distribution shall be effected. "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Corporation Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT Corporation on the basis of one ITT Destinations Common Share for each outstanding share of ITT Corporation Common Stock, and (ii) the ITT Hartford Common Shares owned by ITT Corporation on the basis of one ITT Hartford Common Share for each outstanding share of ITT Corporation Common Stock. 2 3 (1) "Distribution Record Date" shall mean such date as may hereafter be determined by ITT Corporation 's Board of Directors as the record date for the Distribution. "GRA" shall mean the General Relations Agreements in effect as of the Distribution Date between and among ITT Corporation and its Subsidiaries, including ITT Destinations, ITT Hartford and their Subsidiaries, pursuant to ITT Corporation Administrative Practice 60.3. "ITT Corporation" shall mean ITT Corporation, a Delaware corporation and its predecessor Maryland corporation up to the Effective Time (to be merged thereafter into ITT Indiana, Inc., an Indiana corporation which will be renamed ITT Industries, Inc.). "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation, to be renamed "ITT Corporation" immediately prior to the Effective Time. "ITT Destinations Business" shall mean the principal businesses and operations conducted by ITT Destinations and its Subsidiaries on the Distribution Date, such businesses being hospitality, entertainment, information and educational services as specifically described in Exhibit A1 annexed hereto and, in addition, shall also mean the Closely Related Businesses described in Exhibit A1, provided that ITT Destinations Business does not include the ITT Industries Business or the ITT Hartford Business. "ITT Hartford" means ITT Hartford Group, Inc., a Delaware corporation. "ITT Hartford Business" shall mean the principal businesses and operations conducted by ITT Hartford and its Subsidiaries on the Distribution Date, such businesses being the insurance services in the fields of property, casualty, life and reinsurance as specifically described in Exhibit A2 annexed hereto and, in addition, shall also mean the Closely Related Businesses described in Exhibit A2, provided that ITT Hartford 3 4 (1) Business does not include the ITT Industries Business or the ITT Destinations Business. "ITT Industries" shall mean (i) ITT Industries, Inc., an Indiana corporation and the legal successor after the Distribution to ITT Corporation, or (ii) ITT Corporation, after giving legal effect to the transactions contemplated by Section 2.01 of the Distribution Agreement or as if such transactions had occurred, in each case as the context requires. "ITT Industries Business" shall mean the principal businesses and operations conducted by ITT Industries and its Subsidiaries on the Distribution Date, such businesses being the design, manufacture, sale, and servicing of automotive products, defense products, electronic component products, fluid handling products, and management services for military and space satellite launch facilities as specifically described in Exhibit A3 annexed hereto and, in addition, shall also mean the Closely Related Businesses described in Exhibit A3, provided that ITT Industries Business does not include ITT Destinations Business or ITT Hartford Businesses. "Proxy Statement" shall mean the Proxy Statement sent to the holders of shares of ITT Corporation Common Stock in connection with the Distribution, including any amendment or supplement thereto. "Subsidiary", with respect to any Party, shall mean any corporation, partnership, joint venture or other entity of which such Party, directly or indirectly, owns an interest sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency). Irrespective of this definition and for purposes of this IP Agreement, Madison Square Garden, L.P., and ITT-Dow Jones Television and their respective Subsidiaries are Subsidiaries of ITT Destinations. 4 5 (1) "Trademarks" shall mean and include trademarks, trade names, company names, service marks, trade dress, the registrations thereof, the applications therefor and the goodwill associated therewith. ARTICLE II. OWNERSHIP OF INTELLECTUAL PROPERTY ASSETS Section 2.01 The Parties agree that ITT Hartford and the ITT Hartford Subsidiaries own all right, title, and interest, including the right to sue and collect past and future damages, in any Intellectual Property which: (i) originated with ITT Hartford or the ITT Hartford Subsidiaries in the conduct of ITT Hartford Business; (ii) was obtained by, or exclusively or primarily for, ITT Hartford or the ITT Hartford Subsidiaries for the conduct of ITT Hartford Business; (iii) was developed exclusively or primarily for ITT Hartford or the ITT Hartford Subsidiaries for the conduct of ITT Hartford Business; (iv) arose from funding by, or exclusively or primarily for the benefit of, ITT Hartford or the ITT Hartford Subsidiaries in the conduct of ITT Hartford Business; or, (v) as of the Distribution Date is used or held for use exclusively by ITT Hartford or the ITT Hartford Subsidiaries solely for the conduct of ITT Hartford Business. If a conflict exists 5 6 (1) between any of the subsections (i) through (iv) of this Section on the one hand and subsection (v) of this Section on the other hand, then subsection (v) shall prevail. Section 2.02 The Parties agree that ITT Destinations and the ITT Destinations Subsidiaries own all right, title, and interest, including the right to sue and collect past and future damages, in any Intellectual Property which: (i) originated with ITT Destinations or the ITT Destinations Subsidiaries in the conduct of ITT Destinations Business; (ii) was obtained by, or exclusively or primarily for, ITT Destinations or the ITT Destinations Subsidiaries for the conduct of ITT Destinations Business; (iii) was developed exclusively or primarily for ITT Destinations or the ITT Destinations Subsidiaries for the conduct of ITT Destinations Business; (iv) arose from funding by, or exclusively or primarily for the benefit of, ITT Destinations or the ITT Destinations Subsidiaries in the conduct of ITT Destinations Business; or, (v) as of the Distribution Date is used or held for use exclusively by ITT Destinations or the ITT Destinations Subsidiaries solely for the conduct of ITT Destinations Business. If a conflict exists between any of the subsections (i) through (iv) of this Section on the one hand and subsection (v) of this Section on the other hand, then subsection (v) shall prevail. Section 2.03 The Parties agree that ITT Industries and the ITT Industries Subsidiaries own all right, title, and interest, including the right to sue and collect past and future damages, in any Intellectual Property which: (i) originated with ITT Industries or the ITT Industries Subsidiaries in the conduct of ITT Industries Business; (ii) was obtained by, or exclusively or primarily for, ITT Industries or the ITT Industries Subsidiaries for the conduct of ITT Industries Business; (iii) was developed exclusively or primarily for ITT Industries or the ITT Industries Subsidiaries for the conduct of ITT Industries Business; (iv) arose from funding by, or exclusively or primarily for the benefit of, ITT Industries or the ITT Industries Subsidiaries in the conduct of ITT Industries Business; or, (v) as of the Distribution Date is used or held for use exclusively by ITT Industries or the ITT Industries Subsidiaries solely for the conduct of ITT Industries Business. If a conflict exists between any of the subsections (i) through (iv) of this Section on the one hand and subsection (v) of this Section on the other hand, then subsection (v) shall prevail. Section 2.04 Except as otherwise specifically provided for in this IP Agreement or the Distribution Agreement, the Parties agree that no Party shall be obligated to provide any technical assistance, or to transfer any technical information or documentation associated therewith. Section 2.05 The confirmation of ownership of the Intellectual Property rights provided for under Sections 2.01-2.03 are subject to all pre-existing third party rights, obligations and restrictions as of the Distribution Date. ARTICLE III. INTELLECTUAL PROPERTY LICENSES Section 3.01 ITT Industries, on behalf of itself and the ITT Industries Subsidiaries, hereby grants as of the Distribution Date to ITT Hartford, ITT Destinations and their respective Subsidiaries a non-assignable, worldwide, 6 7 (1) perpetual, paid up, royalty free, non-exclusive license, without right to grant sublicenses except to future Subsidiaries and except as provided in Section 3.06, under Intellectual Property owned by ITT Industries or the ITT Industries Subsidiaries as of the Distribution Date to manufacture, have manufactured, use, offer to sell, and sell any and all methods, processes, compositions, and products and offer and provide any services in connection with all fields of activity other than the fields of activity of the ITT Industries Business. Section 3.02 ITT Destinations, on behalf of itself and the ITT Destinations Subsidiaries, hereby grants as of the Distribution Date to ITT Industries, ITT Hartford and their Subsidiaries a non-assignable, worldwide, perpetual, paid up, royalty free, non-exclusive license, without right to grant sublicenses except to future Subsidiaries and except as provided in Section 3.06, under Intellectual Property owned by ITT Destinations or the ITT Destinations Subsidiaries as of the Distribution Date to manufacture, have manufactured, use, offer to sell, and sell any and all methods, processes, compositions, and products and offer and provide any services in connection with all fields of activity other than the fields of activity of the ITT Destinations Business. Section 3.03 ITT Hartford, on behalf of itself and the ITT Hartford Subsidiaries, hereby grants as of the Distribution Date to ITT Industries, ITT Destinations and their Subsidiaries a non-assignable, worldwide, perpetual, paid up, royalty free, non- exclusive license, without right to grant sublicenses except to future Subsidiaries and except as provided in Section 3.06, under Intellectual Property owned by ITT Hartford or the ITT Hartford Subsidiaries as of the Distribution Date to manufacture, have manufactured, use, offer to sell, and sell any and all methods, processes, compositions, and products and offer and provide any services in connection with all fields of activity other than the fields of activity of the ITT Hartford Business. Section 3.04 The rights granted by the Parties under Sections 3.01-3.03 are subject to all pre-existing third party rights, obligations and restrictions as of the Distribution Date. 7 8 (1) Section 3.05 Any GRA between a Party and its Subsidiaries on the one hand and any other Party and/or its Subsidiaries on the other hand will be terminated as of the Effective Time. To the extent that residual rights under Section 10.4 of the GRAs are in conflict with the rights and licenses granted under this Article III, then this IP Agreement controls. Section 3.06 Each Party may sublicense the rights granted to such Party under Sections 3.01 - 3.03 hereof to third parties, provided, however, the scope of such sublicenses shall be in writing and shall be expressly limited to the scope of the license granted to such Party. Section 3.07 Each of the Parties hereto understands and agrees that, except as otherwise expressly provided, no party hereto is, in this IP Agreement or in any other agreement or document contemplated by this IP Agreement or otherwise, making any representation or warranty whatsoever, including, without limitation, as to title, value or legal sufficiency. It is also agreed and understood that any and all assets either transferred or licensed to or retained or licensed by the Parties, as the case may be, shall be "as is, where is". ARTICLE IV. UNDERTAKINGS Section 4.01 To the extent that the grants of Intellectual Property rights and licenses under Articles II and III herein would violate or be prohibited by any agreement with a third party, and such Intellectual Property is actually used by the grantee Party, then the granting Party undertakes to use reasonable efforts to obtain the necessary consent(s) from such third party so as to be permitted to make such grants. However, each Party hereto understands and agrees that no Party hereto is, in this IP Agreement or in any other agreement or document contemplated by this IP Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications, possibly contemplated by this IP Agreement will satisfy the provisions of any and all applicable agreements or the requirements of any or all applicable laws or judgments. 8 9 (1) Section 4.02 To the extent a Party or its Subsidiaries shall require technical assistance in connection with technology, technical information or software transferred or licensed from another Party, then that technical assistance shall be provided pursuant to a separate agreement entered into by the Parties pursuant to terms agreed to by the Parties. ARTICLE V. DISPUTE RESOLUTION In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this IP Agreement or otherwise arising out of, or in any way related to this IP Agreement, including, without limitation, any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the general counsels of the relevant parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute. If after such reasonable period such general counsels are unable to settle such Agreement Dispute (and in any event after 60 days have elapsed from the time the relevant parties began such negotiations), such Agreement Dispute shall be determined, at the request of any relevant party, by arbitration conducted in New York City, before and in accordance with the then-existing Rules for Commercial Arbitration of the American Arbitration Association (the "Rules"), and any judgment or award rendered by the arbitrator shall be final, binding and unappealable (except upon grounds specified in 9 U.S.C., Section 10(a) as in effect on the date hereof), and judgment may be entered by any state or Federal court having jurisdiction thereof in accordance with Section 6.16 hereof. Unless the arbitrator otherwise determines, the pre- trial discovery of the then-existing Federal Rules of Civil Procedure and the then-existing Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Civil Rules for the United States District Court for the Southern District of New York shall apply to any arbitration hereunder. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this IP Agreement is bound to 9 10 (1) arbitrate, or as to the interpretation of enforceability of this Article shall be determined by the arbitrator. The arbitrator shall be a retired or former judge of any United States District Court or Court of Appeals or such other qualified person as the relevant parties may agree to designate, provided such individual has had substantial professional experience with regard to settling sophisticated commercial disputes. The parties intent that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The designation of a situs or a governing law for this IP Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it would be applicable. In his award the arbitrator shall allocate, in his discretion, among the parties to the arbitration all costs of the arbitration, including, without limitation, the fees and expenses of the arbitrator and reasonable attorneys' fees, costs and expert witness expenses of the parties. The undersigned agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrator shall not be entitled to award punitive damages. ARTICLE VI. MISCELLANEOUS Section 6.01 Complete Agreement; Construction. This IP Agreement, including the Exhibits, together with the Distribution Agreement and the other Ancillary Agreements (as defined in the Distribution Agreement), shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Notwithstanding any other provisions in this IP Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this IP Agreement as it relates to Intellectual Property rights and obligations and the provisions of the Distribution Agreement or any other Ancillary Agreement, this IP Agreement shall control. 10 11 (1) Section 6.02 Counterparts. This IP Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. Section 6.03 Survival of Agreements. Except as otherwise contemplated by this IP Agreement, all covenants and agreements of the Parties contained in this IP Agreement shall survive the Distribution Date. Section 6.04 Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the Parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To ITT Destinations, Inc. (ITT Corporation after the Distribution): ITT Corporation 1330 Avenue of the Americas New York, NY 10019 Attn: General Counsel To ITT Corporation (ITT Industries, Inc. after the Distribution): ITT Industries, Inc. 4 West Red Oak Lane White Plains, NY 10604 Attn: General Counsel 11 12 (1) To ITT Hartford Group, Inc.: ITT Hartford Group, Inc. Hartford Plaza Hartford, CT 06115 Attn: General Counsel Section 6.05 Waivers. The failure of any Party to require strict performance by any other Party of any provision in this IP Agreement will not waive or diminish the first Party's right to demand strict performance thereafter of that or any other provision hereof. Section 6.06 Amendments. This IP Agreement may not be modified or amended except by an agreement in writing signed by the Parties. Section 6.07 Assignment. This IP Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all the assets of a Party hereto or in part in connection with a Party's sale or other divestiture of a Subsidiary whose field of activity is within the scope of rights granted to such Party by this IP Agreement. Otherwise this IP Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent of the others, and any attempt to assign any rights or obligations arising under this IP Agreement without such consent shall be void. Section 6.08 Successors and Assigns. The provisions of this IP Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. Section 6.09 Termination. This IP Agreement may be terminated at any time prior to the Distribution by and in the sole discretion of ITT Corporation without the approval of ITT Destinations or ITT Hartford or the shareholders of ITT Corporation. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. 12 13 (1) After the Distribution Date, this IP Agreement may not be terminated except by an agreement in writing signed by the Parties. Section 6.10 Subsidiaries. Each of the Parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party on and after the Distribution Date. Section 6.11 Third Party Beneficiaries. This IP Agreement is solely for the benefit of the Parties hereto and their respective Subsidiaries and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this IP Agreement. Section 6.12 Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Section 6.13 Specific Performance. Each of the Parties hereto acknowledges that there is no adequate remedy at law for failure by such Parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the Parties hereto under this IP Agreement. Section 6.14 Governing Law. This IP Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 6.15 Consent to Jurisdiction. Without limiting the provisions of Article V hereof, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York 13 14 (1) County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this IP Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the Parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 6.15. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this IP Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) or the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Section 6.16 Severability. In the event any one or more of the provisions contained in this IP Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 14 15 (1) IN WITNESS WHEREOF, the Parties have caused this IP Agreement to be duly executed as of the day and year first above written. ITT CORPORATION By: /s/ Vincent A. Maffeo ----------------------------------- Name: Vincent A. Maffeo Title: Attorney-in-fact ITT DESTINATIONS, INC. By: /s/ Richard S. Ward ----------------------------------- Name: Richard S. Ward Title: Executive Vice President and General Counsel ITT HARTFORD GROUP, INC. By /s/ Michael S.Wilder ----------------------------------- Name: Michael S. Wilder Title: Senior Vice President and General Counsel 15 16 EXHIBIT A1 ITT DESTINATIONS BUSINESS I. Hospitality, Entertainment and Gaming A. Scope of Business: Hospitality, entertainment and gaming services, facilities, and content of all types including, sports teams and franchises, television, theatrical studios, networks, broadcasting, arenas, theaters and other performance facilities, television programs, resort and destination facilities, hotels, gaming operations, lodging, transportation, and related marketing, distribution, promotion, advertising and licensing. B. Major Businesses and Service Groupings 1. ITT Sheraton and Ciga S.p.A. Hotels a. Hotel operations (1) reservation services (2) national marketing (3) promotional services b. Hotel management c. Hotel ownership 2. Caesars World, Inc. a. resorts/hotels b. casinos/gaming operations 17 c. merchandising of Caesars branded products (fragrances, clothing, accessories, gift items w/Caesars' name) 3. Madison Square Garden a. New York Knicks (1) ticket revenues (2) merchandising b. New York Rangers (1) ticket revenues (2) merchandising c. Madison Square Garden Arena (1) sports events (2) concerts (3) family shows (4) trade shows - conventions d. The Paramount Theater e. WNYC-TV (Nationally broadcast business and sports TV station in a joint venture with Dow Jones) f. Supply and distribution of television programming for cable g. Rights to New York Yankees' games h. MSG Network-Advertiser supported cable television entertainment program service 18 II. Information Services A. Scope of Business Information services, facilities, and content, in connection with information training and educational services, electronic and print publication of informational and educational materials, collection, creation, production, compilation, storage and translation of informational and educational materials. B. Major Businesses and Services Groupings 1. ITT World Directories, Inc. a. publishing traditional telephone directories internationally b. contracts for the publication of telephone directories with monopoly providers of telecommunications services 2. ITT Educational Services, Inc. a. ITT Technical Institutes III. Closely Related Businesses: A. Acquisition, management, ownership and operation of: 1. Entertainment services, facilities and content of all types, including, without limitation: sports teams and franchises, television, theatrical studios, networks, broadcasting, theme parks, arenas, theaters and other performance facilities, musical recordings, merchandizing, movies, television programs, magazines, 19 electronic entertainment, interactive media and related marketing, distribution, promotion, advertising and licensing; 2. Hospitality, tourism, recreation and gaming services, including, without limitation, resort and destination facilities, services, hotels, gaming operations, lodging and transportation; and 3. Information services facility and content, including, without limitation (a) training and educational services, electronic and print publication of informational and educational materials; (b) collection, creation, production, compilation, storage and transmission, including interactive services, of informational and educational materials; (c) commercial communication equipment, services and facilities including, without limitation, telecommunications, satellites, cable and all other storage, access and transmission means. 20 EXHIBIT A2 ITT HARTFORD BUSINESS A. ITT Hartford is engaged in: 1. All lines of property and casualty insurance 2. All lines of life company business, including without limitation all lines of life, disability, health, stop-loss and special risk (accidental death and dismemberment, blanket lines, and Medicare Supplements) insurance and annuities (the "Life Company Business") 3. Ceded and assumed reinsurance in all lines of property and casualty insurance and life Company Business 4. The following services related to property and casualty insurance and Life Company Business and reinsurance: a. Underwriting b. Loss control c. Premium collection, audit and financing d. Actuarial e. Administrative (including without limitation, benefit plan administration and consulting) f. Claim administration (including without limitation, processing) g. Reinsurance consulting h. Catastrophe evaluation i. Reinsurance and insurance market research and assistance j. Runoff of liabilities for discontinued insurance operations 21 k. Servicing or administration of voluntary and residual market plans, pools and other residual market mechanisms l. Establishing and maintaining risk retention and purchasing group m. Insurance-related information management 5. Surety and fidelity/burglary bonds including, but not limited to, contract, miscellaneous and financial guarantee bonds and credit insurance. 6. The providing of investment advisory services to mutual funds and/or the operation of mutual funds and/or any other pooled investment vehicles and/or the distribution of interests in such funds or other vehicles B. Closely Related Businesses: 1. Any insurance-related business permitted to be conducted by a company under applicable regulatory authority and any other business which may only be conducted by companies regulated by the applicable insurance regulatory authorities 2. Investment banking activities, including but not limited to the underwriting of securities and stock brokerage activities 22 EXHIBIT A3 ITT INDUSTRIES BUSINESS I. Automotive Group A. Scope of Business: Supplier of systems and components to automotive vehicle manufacturers worldwide and related automotive aftermarket products B. Major Automotive Product/Service Groupings: 1. Brake and Chassis Systems (a) antilock brake systems and components (b) traction control system and components (c) chassis systems and components (d) foundation brake system and components (e) fluid handling systems and components (f) shock absorbers (g) brake activation systems and components (h) friction products 2. Body and Electrical Systems (a) electric motors and motor controllers (b) wiper system and components (c) activator systems and components (d) switches and lamps (e) body hardware (f) seat sub-systems (g) precision die cast products (h) structural stampings (i) door systems and components (j) air management systems and components (k) modular chassis systems 23 3. Front and Rear Corner Modules (a) brake sub-systems and components (b) suspension sub-systems and components (c) bearings (d) complete axle assemblies and sub-assemblies (e) vehicle stability management systems and components (f) steering systems and components II. Defense & Electronics Group A. Scope of Business: Develop, manufacture and support high technology electronic systems and components specifically designed for military and defense application on a worldwide basis. B. Major Products/Service Groupings for Military and Defense Application: 1. communications systems, equipment, and components: (a) military communications equipment; (b) tactical radios and components; (c) air traffic control radio equipment; (d) networking equipment; (e) air traffic control radio equipment; (f) switches; (g) military Private Mobile Radio equipment; (h) communications software; (i) wireless LANS; (j) tactical data systems and components; (k) communications security devices and software; (l) computer security products; (m) INFOSEC products; 24 (n) biometric authentication products; (o) speech and speaker recognition, identification and verification systems and components; (p) communication intelligence workstation components and subsystems; (q) language and dialect identification products; (r) Communications-Navigation-Identification systems and components; (s) secure voice/data communications systems and components; (t) command and control systems and components; (u) communications and signal intelligence systems and components; (v) satellite payload systems and components; (w) military Personal Communications Services radios 2. electronic warfare systems including: (a) Advanced Threat Radar Jammar and components; (b) Airborne Self-Protection Jammer and components; (c) electronic countermeasures and counter-countermeasures systems and components; (d) decoy systems and components; (e) electro-optical and infrared systems and components; 3. night vision devices incorporating image intensifiers including: (a) infantrymen's night vision devices and components; (b) aviator's night vision devices and components; (c) image intensifier tubes; (d) night vision weapon sights and components; (e) special purpose photosensitive devices; 25 (f) vehicle mounted night vision devices and components; 4. radar systems including: (a) shipboard radars and components; (b) air-traffic radars and components; (c) coastal defense radars and components; (d) transmit/receive modules; (e) bistatic radar systems and components; 5. space payload products including: (a) navigation payloads; (b) meteorological instruments; (c) suites of meteorological and navigation instruments; (d) RF/microware/millimeter wave sensor systems and components; (e) control segment integration software; 6. navigation systems including: (a) global positioning satellite systems and components; (b) TACAN systems and components; (c) tactical navigation systems and components; 7. semiconductor IC devices: (a) Gallium Arsenide integrated circuits; (b) MMIC products; (c) RF products; (d) Silicon based integrated circuit semiconductor devices; 26 8. connectors and cable assemblies C. Defense and Electronics Products for Commercial Application 1. night vision devices incorporating image intensifiers: (a) personal image identifier night vision devices and components; (b) commercial image intensifier tubes; (c) vehicle-mounted image identifier night vision devices and components; (d) Retinitis Pigmentosa image intensifier night vision devices and components; 2. Manufacture of Gallium Arsenide semiconductor IC devices and circuits 3. biometric authentication products 4. speech and speaker recognition, identification and verification systems and devices 5. language and dialect identification products 6. Security Access Control Systems for accessing computer systems having application in computer and financial networks 7. global positioning satellite products 8. connectors and cable assemblies 9. integrated circuit cards and components 10. switches 27 D. Services: 1. Gallium Arsenide discrete and integrated circuit design and foundry services. 2. System integration, engineering, maintenance and repair of radar systems, military and government communications and information systems, and electronic warfare systems. 3. Current principal business lines* of ITT Defense, Inc. and ITT Federal Services Corporation, including, but not limited to, management and operation of: a. military base operations support, equipment and maintenance and training services; b. U.S. Government Job Corps Program Centers, including administration, placement, recruiting and training; c. space and missile support operations and facilities; d. system integration engineering and management of satellite payloads; e. commercial satellite launch facilities; f. government and semi-government sponsored training services; and g. other current businesses of ITT Federal Services Corporation. *Any overlap or commonality with the businesses in ITT Destinations Business will coexist. 28 III. Fluid Technology Group A. Business: Engaged in the design, development, production, marketing and sale of products, systems and services used to move, handle, transfer, control and contain fluids. The principal markets are water and wastewater treatment, industrial and process, and construction. The other markets consist of chemical processing, pharmaceutical and biotech sectors, selected segments of oil and gas and mining markets, HVAC, commercial and leisure marine aerospace and power industry markets. B. Major Product/Service Products: 1. Pump products including drivers, controllers, accessories and components thereof for use in the markets specified in IIIA above. 2. Mixer products including drivers, controllers, accessories and components thereof for use in the markets specified in IIIA above. 3. Valve products including drivers, actuators and components thereof for use in the markets specified in IIIA above. 4. Instrument and control products including drivers, actuators, sensors, microprocessors, accessories and components thereof for use in the markets specified in IIIA above. 5. Regulators, transducers, seals including drivers, actuators, sensors, microprocessors, accessories and components thereof for use in the markets specified in IIIA above. 29 6. Boiler and condensate equipment and products including drivers, controllers, accessories and components thereof for use in the markets specified in IIIA above. 7. Switches including actuators, sensors, controllers, and components thereof for use in the markets specified in IIIA above. 8. Heat transfer products and components thereof for use in the markets specified in IIIA above. 9. Lighting and sanitary products and components thereof for use in markets specified in IIIA above. 10. Software programs for the selection and design of above specified products. IV. Closely Related Businesses: A. Transportation Products: The design, manufacture, sale, marketing and servicing of OEM and aftermarket automotive, truck, train and other such transportation products. B. Fluid Products: The design, manufacture, sale, marketing and servicing of fluid handling products related to the types of products/service products set out in III B above. C. Military and Defense Products/Services: The design, manufacture, sale, marketing and servicing of products, systems and operations specially designed for the military and defense application. D. Components: The design, manufacture, sale, marketing and servicing of components consisting of connectors, cable assemblies, integrated circuit cards and components thereof, and switches. EX-10.3 4 TRADEMARK ASSIGNMENT AGREEMENT 1 TRADEMARK ASSIGNMENT AGREEMENT TRADEMARK ASSIGNMENT AGREEMENT ("Assignment") effective as of November 2, 1995 between ITT CORPORATION, a Delaware corporation ("ITT Corporation") and ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations") (collectively the "Parties"). RECITALS WHEREAS, the Board of Directors of ITT Corporation has decided to carry out the Distribution (as hereinafter defined) whereby the holders of shares of Common Stock of ITT Corporation will receive all the outstanding shares of Common Stock of ITT Destinations and all the outstanding shares of Common Stock of ITT Hartford Group, Inc. (as hereinafter defined); WHEREAS, the shareholders of ITT Corporation have approved the aforesaid Distribution and certain other related transactions considered necessary by ITT Corporation to carry out the Distribution; WHEREAS, as part of carrying out the Distribution, ITT Corporation has entered into Trade Name and Trademark License Agreements each effective as of November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement") granting them and certain of their Sublicensees the continued right and license to use the ITT Name and the ITT Marks (each as hereinafter defined); WHEREAS, ITT Corporation owns and is assigning to ITT Destinations effective simultaneously with this Assignment, the Enterprises License Agreement and the Hartford License Agreement; WHEREAS, ITT Corporation is the owner of the worldwide right, title and interest in and to the ITT Name and the ITT Marks and the goodwill associated therewith; and WHEREAS, it is the present intention of ITT Destinations not to use the ITT Name and the ITT Marks in a manner which would materially be detrimental to the goodwill of such ITT Name and ITT Marks. NOW, THEREFORE, in connection with and to carry out the Distribution and in consideration of the premises and mutual agreements and covenants herein, the Parties agree as follows: 1 2 (4) 1. DEFINITIONS. As used in this Assignment, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): (a) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Corporation Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT Corporation on the basis of one ITT Destinations Common Share for each outstanding share of ITT Corporation Common Stock and (ii) the ITT Hartford Group, Inc. Common Shares owned by ITT Corporation on the basis of one ITT Hartford Group, Inc. Common Share for each outstanding share of ITT Corporation Common Stock. (b) "Distribution Agreement" shall mean the Distribution Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford Group, Inc. relating to the distribution of the shares of ITT Destinations and ITT Hartford Group, Inc. to the holders of ITT Corporation Common Stock. (c) "Distribution Date" shall mean such date as may hereafter be determined by ITT Corporation's Board of Directors as the date on which the Distribution shall be effected. (d) "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. (e) "ITT Corporation" shall mean (i) ITT Corporation, a Delaware corporation and its predecessor Maryland corporation up to the Effective Time to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, and renamed "ITT Industries, Inc." in connection with the Distribution. (f) "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation, to be renamed "ITT Corporation" immediately prior to the Effective Time. (g) "ITT Industries" shall mean ITT Industries, Inc., an Indiana corporation and the legal successor after the Distribution to ITT Corporation. (h) "ITT Hartford Group, Inc." shall mean ITT Hartford Group, Inc., a Delaware corporation. (i) "ITT Manufacturing Enterprises, Inc." shall mean ITT Manufacturing Enterprises, Inc., a Delaware corporation. (j) "ITT Logo" shall mean the worldwide rights including License Rights in and to the stylized trademark and service mark shown in Exhibit A annexed hereto together with all registrations thereof and all applications therefor, now or hereinafter 2 3 (4) obtained or filed, including those registrations and applications set forth in Exhibit A, and the goodwill associated therewith. (k) "ITT Marks" shall mean the worldwide rights including License Rights in and to (i) the ITT Logo, and (ii) all other trademarks and service marks consisting of the letters "ITT", together with all registrations thereof and all applications therefor now or hereinafter filed or obtained, and the goodwill associated therewith, including those registrations and applications set forth in Exhibit A hereto. (l) "ITT Name" shall mean the worldwide rights including License Rights in and to that portion of any company or trade name consisting of the letters "ITT", and the goodwill associated therewith. (m) "License Rights" shall mean any and all rights in and to licenses and other grants received from or licensed to third parties under any contracts, memoranda or other understandings relating to the ITT Logo, the ITT Marks and/or the ITT Name. 2. REPRESENTATIONS. ITT Corporation represents and warrants that it is the owner of the ITT Name and the ITT Marks. 3. ASSIGNMENT. ITT Corporation hereby transfers and assigns to ITT Destinations, without charge to ITT Destinations, effective as of November 2, 1995, all of its worldwide right, title and interest in and to the ITT Name and the ITT Marks, including the right to sue and recover for past infringements thereof. 4. ACCEPTANCE. ITT Destinations hereby accepts the aforesaid transfer and assignment of the ITT Name and the ITT Marks, including the right to sue and recover for past infringements thereof. 5. DOCUMENTS. To the extent the assignments pursuant to paragraph 3 herein may be incomplete or ineffective for any reason including errors or omissions in Exhibits A hereto, then ITT Corporation or, after the Distribution Date its successor ITT Industries, shall execute and deliver to ITT Destinations, upon ITT Destinations' request, any and all documents and take other reasonable actions which may be necessary to make such assignment complete and effective. IN WITNESS WHEREOF, the Parties have caused this Assignment to be duly executed by their respective authorized officers as of the day and year first written above. 3 4 (4) ITT CORPORATION By: /s/ Richard S. Ward ---------------------------- Name: Richard S. Ward Title: Executive Vice President and General Counsel ITT DESTINATIONS, INC. By: /s/ Peter A. Abruzzese ---------------------------- Name: Peter A. Abruzzese Title: Vice President and Associate General Counsel 4 5 (4) STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On this 27th day of November, 1995, before me appeared Richard S. Ward, to me personally known and known to me the person who executed the foregoing Assignment; and who being by me duly sworn, did depose and say that he is Executive Vice President of ITT CORPORATION, that he is authorized to sign this Assignment on behalf of said corporation, and that said assignment was signed on behalf of the corporation by authority of its Board of Directors, and unto me acknowledged said Assignment to be the free act and deed of said corporation. [Notary Seal of Sonja Esposito] /s/ Sonja Esposito ----------------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On this 27th day of November,1995, before me appeared Peter A. Abruzzese to me personally known and known to me the person who executed the foregoing Assignment; and who being by me duly sworn, did depose and say that he is Vice President of ITT DESTINATIONS, INC., that he is authorized to sign this Assignment on behalf of said corporation, and that said Assignment was signed on behalf of the corporation by authority of its Board of Directors, and unto me acknowledged said Assignment to be the free act and deed of said corporation. [Notary Seal of Sonja Esposito] /s/ Sonja Esposito ----------------------- Notary Public 5 EX-10.4 5 LICENSE ASSIGNMENT AGREEMENT 1 LICENSE ASSIGNMENT AGREEMENT LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of November 2, 1995 between ITT CORPORATION, a Delaware corporation ("ITT Corporation") and ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations") (the "Parties"). RECITALS WHEREAS, the Board of Directors of ITT Corporation (as hereinafter defined) has decided to carry out the Distribution (as hereinafter defined) whereby the holders of shares of Common Stock of ITT Corporation will receive all the outstanding shares of Common Stock of ITT Destinations and all the outstanding shares of Common Stock of ITT Hartford Group, Inc. (as hereinafter defined); WHEREAS, the shareholders of ITT Corporation have approved the aforesaid Distribution and certain other related transactions considered necessary by ITT Corporation to carry out the Distribution; WHEREAS, as part of carrying out the Distribution, ITT Corporation has entered into Trade Name and Trademark License Agreements each effective November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement") granting them and certain of their Sublicensees the continued right and license to use the ITT Name and the ITT Marks (each as hereinafter defined); and WHEREAS, ITT Corporation owns and is assigning to ITT Destinations effective simultaneous with this License Assignment, all worldwide right, title, and interest in and to the ITT Name and the ITT Marks. NOW, THEREFORE, in connection with and to carry out the Distribution and in consideration of the premises and mutual agreements and covenants herein, the Parties hereby agree as follows: 1. DEFINITIONS. As used in this License Assignment, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): (a) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Corporation Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT Corporation on the basis of one ITT Destinations Common Share for each outstanding share of ITT 1 2 (5) Corporation Common Stock and (ii) the ITT Hartford Common Shares owned by ITT Corporation on the basis of one ITT Hartford Common Share for each outstanding share of ITT Corporation Common Stock. (b) "Distribution Agreement" shall mean the Distribution Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford relating to the distribution of the shares of ITT Destinations and ITT Hartford to the holders of ITT Corporation Common Stock. (c) "Distribution Date" shall mean such date as may hereafter be determined by ITT Corporation's Board of Directors as the date on which the Distribution shall be effected. (d) "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. (e) "ITT Corporation" shall mean ITT Corporation, a Delaware corporation and its predecessor Maryland corporation, up to the Effective Time to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which will be renamed "ITT Industries, Inc." in connection with the Distribution. (f) "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation, to be renamed "ITT Corporation" immediately prior to the Effective Time. (g) "ITT Hartford" or "ITT Hartford Group, Inc." shall mean ITT Hartford Group, Inc., a Delaware corporation. (h) "ITT Manufacturing Enterprises, Inc." or "ITT Enterprises" shall mean ITT Manufacturing Enterprises, Inc., a Delaware corporation and a wholly owned subsidiary of ITT Corporation. (i) "ITT Logo" shall mean the worldwide rights to the stylized trademark and service mark shown in Exhibit B annexed to the Enterprises License Agreement and the Hartford License Agreement together with all registrations thereof and all applications thereof now or hereinafter obtained or filed, and the goodwill associated therewith. (j) "ITT Marks" shall mean the worldwide rights to (i) the ITT Logo, and (ii) all other trademarks and service marks consisting of the letters "ITT", together with all registrations thereof and all applications therefor now or hereinafter filed or obtained, and the goodwill associated therewith. 2 3 (5) (k) "ITT Name" shall mean the worldwide rights to that portion of any company or trade name consisting of the letters "ITT", and the goodwill associated therewith. 2. ASSIGNMENT. ITT Corporation hereby transfers and assigns to ITT Destinations, without charge to ITT Destinations, effective as of November 2, 1995, the Enterprises License Agreement and the Hartford License Agreement and all rights and obligations thereunder. 3. ACCEPTANCE. ITT Destinations hereby accepts the transfer and assignment of the Enterprises License Agreement and the Hartford License Agreement and all rights and obligations thereunder. 4. GUARANTEE. ITT Corporation acknowledges the obligations imposed upon its subsidiary ITT Manufacturing Enterprises, Inc. and upon any ITT Enterprises Sublicensees (as the term is defined in the Enterprises License Agreement) to comply with the terms and conditions of the Enterprises License Agreement and hereby guarantees to ITT Destinations the performance of ITT Enterprises and the ITT Enterprises Licensees of those terms and conditions. IN WITNESS WHEREOF, the Parties have caused this License Assignment to be duly executed by their respective authorized officers as of the day and year first written above. ITT CORPORATION By: /s/ Richard S. Ward ---------------------------- Name: Richard S. Ward Title: Executive Vice President and General Counsel ITT DESTINATIONS, INC. By: /s/ Peter A. Abruzzese ---------------------------- Name: Peter A. Abruzzese Title: Vice President and Associate General Counsel 3 EX-10.5 6 LICENSE ASSIGNMENT AGREEMENT 1 LICENSE ASSIGNMENT AGREEMENT LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of December 19, 1995 among ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations"), ITT HARTFORD GROUP, INC., a Delaware corporation ("ITT Hartford"), and NUTMEG INSURANCE COMPANY, a Connecticut corporation ("Nutmeg") (the "Parties"). RECITALS WHEREAS, the Board of Directors of ITT Corporation (as hereinafter defined) has decided to carry out the Distribution (as hereinafter defined) whereby the holders of shares of Common Stock of ITT Corporation will receive all the outstanding shares of Common Stock of ITT Destinations and all the outstanding shares of Common Stock of ITT Hartford Group, Inc.; WHEREAS, the shareholders of ITT Corporation have approved the aforesaid Distribution and certain other related transactions considered necessary by ITT Corporation to carry out the Distribution; WHEREAS, as part of carrying out the Distribution, ITT Corporation has entered into Trade Name and Trademark License Agreements each effective November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License Agreement") and with ITT Hartford ("Hartford License Agreement") concerning their and their Sublicensees' continued right and license to use the ITT Name and the ITT Marks (each as hereinafter defined); and WHEREAS, ITT Destinations owns all worldwide right, title, and interest in and to the ITT Name and the ITT Marks. NOW, THEREFORE, in connection with and to carry out the Distribution and in consideration of the premises and mutual agreements and covenants herein, the Parties hereby agree as follows: 1. DEFINITIONS. As used in this License Assignment, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): (a) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Corporation Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT Corporation on the basis of one ITT Destinations Common Share for each outstanding share of ITT 1 2 (7) Corporation Common Stock and (ii) the ITT Hartford Common Shares owned by ITT Corporation on the basis of one ITT Hartford Common Share for each outstanding share of ITT Corporation Common Stock. (b) "Distribution Agreement" shall mean the Distribution Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford relating to the distribution of the shares of ITT Destinations and ITT Hartford to the holders of ITT Corporation Common Stock. (c) "Distribution Date" shall mean such date as may hereafter be determined by ITT Corporation's Board of Directors as the date on which the Distribution shall be effected. (d) "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. (e) "ITT Corporation" shall mean ITT Corporation, a Delaware corporation and its predecessor Maryland corporation, up to the Effective Time to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which will be renamed "ITT Industries, Inc." in connection with the Distribution. (f) "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation, to be renamed "ITT Corporation" immediately prior to the Effective Time. (g) "ITT Hartford" shall mean ITT Hartford Group, Inc., a Delaware corporation. (h) "Nutmeg" shall mean Nutmeg Insurance Company, a Connecticut corporation and a wholly owned subsidiary of ITT Hartford Group, Inc. (i) "ITT Manufacturing Enterprises, Inc." shall mean ITT Manufacturing Enterprises, Inc., a Delaware corporation and a wholly-owned subsidiary of ITT Corporation. (j) "ITT Logo" shall mean the worldwide rights to the stylized trademark and service mark shown in Exhibit B annexed to the Hartford License Agreement together with all registrations thereof and all applications thereof now or hereinafter obtained or filed, and the goodwill associated therewith. (k) "ITT Marks" shall mean the worldwide rights to (i) the ITT Logo, and (ii) all other trademarks and service marks consisting of the letters "ITT", together with all registrations thereof and all applications therefor now or hereinafter filed or obtained, and the goodwill associated therewith. 2 3 (7) (l) "ITT Name" shall mean that portion of any company or trade name consisting of the letters "ITT", and the goodwill associated therewith. 2. ASSIGNMENT. ITT Hartford hereby transfers and assigns to Nutmeg, without charge to Nutmeg, effective as of 11:57 p.m., New York time of the Distribution Date, the Hartford License Agreement and all rights and obligations thereunder. 3. ACCEPTANCE. Nutmeg hereby accepts the transfer and assignment of the Hartford License Agreement and all rights and obligations thereunder. 4. GUARANTEE. ITT Hartford acknowledges the obligations imposed upon its subsidiary Nutmeg and upon any Nutmeg Sublicensees (as that term is defined in the Hartford License Agreement) to comply with the terms and conditions of the Hartford License Agreement and hereby guarantees to ITT Destinations the performance of Nutmeg and the Nutmeg Sublicensees of those terms and conditions. 5. CONSENT. ITT Destinations hereby consents to the assignment of the Hartford License Agreement from ITT Hartford to Nutmeg as set forth herein and further grants to Nutmeg the right to grant sublicenses in accordance with the provisions of Sections 2.01 and 2.02 of the Hartford License Agreement to ITT Hartford and ITT Hartford Subsidiaries. IN WITNESS WHEREOF, the Parties have caused this License Assignment to be duly executed by their respective authorized officers as of the day and year first written above. 3 4 (7) ITT DESTINATIONS, INC. By: /s/ Peter A. Abruzzese -------------------------- Name: Peter A. Abruzzese Title: Vice President and Associate General Counsel ITT HARTFORD GROUP, INC. By: /s/ Michael S. Wilder -------------------------- Name: Michael S. Wilder Title: Senior Vice President and General Counsel NUTMEG INSURANCE COMPANY By: /s/ William B. Malchodi -------------------------- Name: William B. Malchodi Title: Vice President 4 EX-10.6 7 LICENSE ASSIGNMENT AGREEMENT 1 LICENSE ASSIGNMENT AGREEMENT LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of December 19, 1995 among ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations"), NUTMEG INSURANCE COMPANY, a Connecticut corporation ("Nutmeg"), and HARTFORD FIRE INSURANCE COMPANY, a Connecticut corporation ("Hartford Fire"). RECITALS WHEREAS, the Board of Directors of ITT Corporation (as hereinafter defined) has decided to carry out the Distribution (as hereinafter defined) whereby the holders of shares of Common Stock of ITT Corporation will receive all the outstanding shares of Common Stock of ITT Destinations and all the outstanding shares of Common Stock of ITT Hartford Group, Inc. (as hereinafter defined); WHEREAS, the shareholders of ITT Corporation have approved the aforesaid Distribution and certain other related transactions considered necessary by ITT Corporation to carry out the Distribution; WHEREAS, as part of carrying out the Distribution, ITT Corporation has entered into Trade Name and Trademark License Agreements each effective November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement") concerning their and certain of their Sublicensees' continued right and license to use the ITT Name and the ITT Marks (each as hereinafter defined); WHEREAS, ITT Hartford Group, Inc. has entered into a License Assignment Agreement effective as of 11:57 p.m., New York time, of the Distribution Date with Nutmeg Insurance Company (as hereinafter defined) assigning to it all its rights and obligations in the Hartford License Agreement; and WHEREAS, ITT Destinations owns all worldwide right, title, and interest in and to the ITT Name and the ITT Marks. NOW, THEREFORE, in connection with and to carry out the Distribution and in consideration of the premises and mutual agreements herein, the Parties hereto hereby agree as follows: 1. DEFINITIONS. As used in this License Assignment, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 1 2 (8) (a) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of ITT Corporation Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT Corporation on the basis of one ITT Destinations Common Share for each outstanding share of ITT Corporation Common Stock and (ii) the ITT Hartford Common Shares owned by ITT Corporation on the basis of one ITT Hartford Common Share for each outstanding share of ITT Corporation Common Stock. (b) "Distribution Agreement" shall mean the Distribution Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford relating to the distribution of the shares of ITT Destinations and ITT Hartford to the holders of ITT Corporation Common Stock. (c) "Distribution Date" shall mean such date as may hereafter be determined by ITT Corporation's Board of Directors as the date on which the Distribution shall be effected. (d) "Effective Time" shall mean 11:59 p.m., New York time, on the Distribution Date. (e) "ITT Corporation" shall mean ITT Corporation, a Delaware corporation and its predecessor Maryland corporation, up to the Effective Time to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which will be renamed "ITT Industries, Inc." in connection with the Distribution. (f) "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada corporation, to be renamed "ITT Corporation" immediately prior to the Effective Time. (g) "ITT Hartford Group, Inc." or "ITT Hartford" shall mean ITT Hartford Group, Inc., a Delaware corporation. (h) "Nutmeg" or "Nutmeg Insurance Company" shall mean Nutmeg Insurance Company, a Connecticut corporation and a wholly owned subsidiary of ITT Hartford Group, Inc. (i) "Hartford Fire" shall mean Hartford Fire Insurance Company, a Connecticut corporation and a wholly owned subsidiary of ITT Hartford Group, Inc. (j) "ITT Manufacturing Enterprises, Inc." shall mean ITT Manufacturing Enterprises, Inc., a Delaware corporation and a wholly-owned subsidiary of ITT Corporation. 2 3 (8) (k) "ITT Logo" shall mean the worldwide rights to the stylized trademark and service mark shown in Exhibit B annexed to the Hartford License Agreement together with all registrations thereof and all applications therefor now or hereinafter obtained or filed, and the goodwill associated therewith. (l) "ITT Marks" shall mean the worldwide rights to (i) the ITT Logo, and (ii) all other trademarks and service marks consisting of the letters "ITT", together with all registrations thereof and all applications therefor now or hereinafter filed or obtained, and the goodwill associated therewith. (m) "ITT Name" shall mean that portion of any company or trade name consisting of the letters "ITT" and the goodwill associated therewith. 2. ASSIGNMENT. Nutmeg hereby transfers and assigns to Hartford Fire, without charge to Hartford Fire, effective as of 11:58 p.m., New York time of the Distribution Date, the Hartford License Agreement and all rights and obligations thereunder. 3. ACCEPTANCE. Hartford Fire hereby accepts the transfer and assignment of the Hartford License Agreement and all rights and obligations thereunder. 4. GUARANTEE. ITT Hartford acknowledges the obligations imposed upon its subsidiary Hartford Fire and upon any Hartford Fire Sublicensees (as that term is defined in the Hartford License Agreement) to comply with the terms and conditions of the Hartford License Agreement and hereby guarantees to ITT Destinations the performance of Hartford Fire and Hartford Fire Sublicensees of those terms and conditions. 5. CONSENT. ITT Destinations hereby consents to the assignment of the Hartford License Agreement from Nutmeg to Hartford Fire as set forth herein and further grants to Hartford Fire the right to grant sublicenses in accordance with the provisions of Sections 2.01 and 2.02 of the Hartford License Agreement to ITT Hartford and the ITT Hartford Subsidiaries. IN WITNESS WHEREOF, the Parties have caused this License Assignment to be duly executed by their respective authorized officers as of the day and year first written above. 3 4 (8) ITT DESTINATIONS, INC. By: /s/ Peter A. Abruzzese --------------------------------- Name: Peter A. Abruzzese Title: Vice President and Associate General Counsel HARTFORD FIRE INSURANCE COMPANY By: /s/ Michael S. Wilder --------------------------------- Name: Michael S. Wilder Title: Senior Vice President and General Counsel NUTMEG INSURANCE COMPANY By: /s/ William B. Malchodi --------------------------------- Name: William B. Malchodi Title: Vice President 4 EX-10.7 8 TAX ALLOCATION AGREEMENT 1 TAX ALLOCATION AGREEMENT TAX ALLOCATION AGREEMENT, dated as of November 1, 1995, among ITT Corporation, a Delaware corporation (which will be reincorporated in Indiana and renamed ITT Industries, Inc.; "ITT INDUSTRIES"), ITT Destinations, Inc., a Nevada corporation (which will be renamed ITT Corporation; "ITT DESTINATIONS"), and ITT Hartford Group, Inc., a Delaware corporation ("ITT HARTFORD"). ITT Industries, ITT Destinations and ITT Hartford are hereinafter jointly referred to as the "COMPANIES". WHEREAS, as of the date hereof, ITT Industries is the common parent of an affiliated group of domestic corporations, including ITT Destinations and ITT Hartford, which has elected to file consolidated Federal income tax returns; WHEREAS, ITT Industries proposes to distribute all of the stock it owns in ITT Destinations and ITT Hartford to its shareholders (the "DISTRIBUTION") and, as a result of the Distribution, ITT Destinations and ITT Hartford will not be included in the consolidated Federal income tax return of ITT Industries for the portion of the year following the Distribution or in future years; WHEREAS, the Companies have entered into an agreement (the "DISTRIBUTION AGREEMENT") to, among other things, allocate and assign responsibility for certain liabilities of the present ITT Corporation and its former subsidiaries; and WHEREAS, the Companies desire to allocate the tax burdens and benefits of transactions which occurred on or prior to the Distribution Date and to provide for certain other tax matters, including the assignment of responsibility for the preparation and filing of tax returns and the prosecution and defense of any tax controversies; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Companies (each on its own behalf and on behalf of each of its subsidiaries as of the Distribution Date) hereby agree as follows: 1 2 1. Definitions. As used in this Agreement, the following terms shall have the following meaning: "ADJUSTED ALLOCABLE FEDERAL INCOME TAX LIABILITY" shall mean the Allocable Federal Income Tax Liability, adjusted as provided in paragraphs 8(c), 8(d), 16 and 20 hereof. "AGREEMENT" shall mean this Tax Allocation Agreement. "ALLOCABLE FEDERAL INCOME TAX LIABILITY" shall mean the Separate Consolidated Federal Income Tax Liability, but including the AMT and adjusted as provided in paragraphs 8(a), 8(e) and 15(b) hereof. "AMT" shall mean the alternative minimum tax imposed by Section 55 of the Code. "CONSOLIDATED RETURN" shall mean the consolidated federal income tax return of ITT Industries for the period commencing on January 1, 1995; or, if the Distribution occurs after December 31, 1995, the consolidated federal income tax return of ITT Industries for the period commencing on January 1, 1996; and including the ITT Destinations Group and the ITT Hartford Group through the Distribution Date. "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute. "DISTRIBUTION" shall have the meaning assigned to such term in the recitals to this Agreement. "DISTRIBUTION AGREEMENT" shall have the meaning assigned to such term in the recitals to this Agreement. 2 3 "DISTRIBUTION DATE" shall mean the date on which ITT Industries distributes to its shareholders all of the stock it owns in ITT Destinations and ITT Hartford. "FEDERAL TAX ADMINISTRATOR" shall mean James P. Whitson, the Director of Taxes of ITT Destinations, or such other person as ITT Destinations shall appoint with the consent of each of ITT Industries and ITT Hartford, which consent shall not be unreasonably withheld or delayed. "FINAL DETERMINATION" shall mean the final resolution of liability for any tax for any taxable period, including any related interest or penalties, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order of a court of competent jurisdiction; (ii) a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreement under the laws of other jurisdictions, which resolves the entire tax liability for any tax period; (iii) any allowance of a refund or credit in respect of an overpayment of tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the tax imposing jurisdiction; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations. "FTC" shall mean the foreign tax credit pursuant to Section 27 of the Code. "GROUP" shall mean the ITT Industries Group, the ITT Destinations Group and/or the ITT Hartford Group, as the context may require. "IRS" shall mean the United States Internal Revenue Service. "ITT DESTINATIONS" shall have the meaning assigned to such term in the preamble to this Agreement. "ITT DESTINATIONS GROUP" shall mean ITT Destinations and each ITT Destinations Subsidiary. 3 4 "ITT DESTINATIONS SUBSIDIARY" shall mean all of the direct or indirect subsidiaries of ITT Destinations as of the Distribution Date which have joined or are eligible to join the Consolidated Return or any Prior Period Consolidated Return. "ITT FINANCIAL OPERATIONS" shall have the meaning assigned to such term in paragraph 8(e). "ITT HARTFORD" shall have the meaning assigned to such term in the preamble to this Agreement. "ITT HARTFORD GROUP" shall mean ITT Hartford and each ITT Hartford Subsidiary. "ITT HARTFORD SUBSIDIARY" shall mean all of the direct or indirect subsidiaries of ITT Hartford as of the Distribution Date which have joined or are eligible to join the Consolidated Return or any Prior Period Consolidated Return. "ITT INDUSTRIES" shall have the meaning assigned to such term in the preamble to this Agreement. "ITT INDUSTRIES GROUP" shall mean ITT Industries and each ITT Industries Subsidiary. "ITT INDUSTRIES SUBSIDIARY" shall mean all of the direct or indirect subsidiaries of ITT Industries as of the Distribution Date which have joined or are eligible to join the Consolidated Return or any Prior Period Consolidated Return, other than subsidiaries which are members of the ITT Destinations Group or the ITT Hartford Group. 4 5 "NET REVERSAL BENEFIT" shall have the meaning assigned to such term in paragraph 8(a). "PRIME RATE" shall mean the "prime rate" charged by Citibank, N.A., New York, New York, as such rate shall be changed from time to time, compounded daily on the basis of a year of 365/366 days and actual days elapsed. "PRIOR PERIOD CONSOLIDATED RETURN" shall mean any consolidated tax return of the present ITT Corporation filed, or to be filed, for years prior to the Consolidated Return year. "SEPARATE CONSOLIDATED FEDERAL INCOME TAX LIABILITY" shall mean, with respect to any year or portion thereof, the tax liability which a Group would have incurred if such Group, on a stand alone basis, had been an affiliated group eligible to file a consolidated return for any portion of such taxable year during which it is included in the Consolidated Return or any Prior Period Consolidated Return and had filed a return for such period, computed without regard to AMT. "STATE TAX ADMINISTRATOR" shall mean Richard W. Powers, the Director of Taxes of ITT Industries, or such other person as ITT Industries shall appoint with the consent of each of ITT Destinations and ITT Hartford, which consent shall not be unreasonably withheld or delayed. "TAX CREDITS" shall include all credits against tax pursuant to Subtitle A, Chapter 1, Part IV of the Code.. "TAX ITEM" shall have the meaning specified in paragraph 8(a). 2. Consolidated Return to be Filed. Each of the Companies will join, and will cause each of their subsidiaries to join, in the Consolidated Return to the extent each is eligible to join in such return under the provisions of the Code and the regulations thereunder. 5 6 3. Documentation. The Companies hereby agree to execute and deliver all documentation reasonably required (including powers of attorney, if requested) to enable the Federal Tax Administrator to file, and to take all actions necessary or incidental to the filing of, the Consolidated Return (including, without limitation, the execution of Treasury Form 1122), or, with the consent of each of the Companies, which consent shall not be unreasonably withheld or delayed, any amendment of the Consolidated Return or any Prior Period Consolidated Return. No consent of any Company shall be required for the filing of an amended return pursuant to Section 905(c) of the Code. 4. Tax Return Preparation and Audits. (a) The Federal Tax Administrator will cause the Consolidated Return to be timely prepared and filed. The Federal Tax Administrator shall be responsible for the preparation and filing of any consents and requests for extension of time within which to file the Consolidated Return or any related information or similar returns. The Federal Tax Administrator shall make the Consolidated Return available to the Directors of Taxes of ITT Industries and ITT Hartford for their review prior to filing and shall furnish them a copy of the return promptly after it is filed. (b) ITT Industries and ITT Hartford agree that each will cause their respective Director of Taxes to furnish to the Federal Tax Administrator on a timely basis such information, schedules, analyses and any other items as may be necessary to prepare the Consolidated Return. Such information, schedules, analyses and other items will be prepared in a manner consistent with existing practice and in accordance with a work plan and schedule to be agreed upon among the Directors of Taxes of each of the Companies, acting reasonably, no later than the Distribution Date. (c) In preparing the Consolidated Return, the Federal Tax Administrator shall retain Arthur Andersen LLP to review the Consolidated Return (with a scope to be agreed upon among the Directors of Taxes of each of the Companies and the cost of such review to be shared equally among the Companies) and may retain other advisors and charge the cost of their services to the appropriate Group or Groups; provided that, without the consent of the affected Group, the cost to any Group of such services in any calendar year shall not exceed $25,000. (d) The Federal Tax Administrator shall have overall responsibility for obtaining and coordinating all responses in connection with any audit of the Consolidated Return and all Prior Period Consolidated Returns. Such responses shall be prepared by the affected Group in a manner consistent with prior practice. IRS adjustments affecting the taxable income, loss or deductions of, or tax credits generated by, any Group may be agreed upon or settled only upon approval of that Group, which approval shall not be unreasonably withheld or delayed. In connection with the defense of any audit of the Consolidated Return or any Prior Period Consolidated Return, the 6 7 Federal Tax Administrator may retain advisors and charge the cost of their services to the appropriate Group or Groups; provided that, without the consent of the affected Group, the cost to any Group of such services in any calendar year shall not exceed $50,000. 5. Consolidated Return Computations of Tax and Payments. (a) On or before December 14, 1995, the ITT Destinations Group and the ITT Hartford Group each agree to make payments to ITT Industries equal to the excess of their estimated Consolidated Return year Separate Consolidated Federal Income Tax Liability over their prior payments with respect to estimated taxes for the Consolidated Return year, and ITT Industries agrees to make payments to the ITT Destinations Group and the ITT Hartford Group equal to the excess of their prior payments with respect to estimated taxes for the Consolidated Return year over their Consolidated Return year Separate Consolidated Federal Income Tax Liability. For purposes of this paragraph 5(a), the computation of Separate Consolidated Federal Income Tax Liability shall take into account the benefit of any net capital loss, net operating loss, credit or deduction of the ITT Destinations Group or the ITT Hartford Group if the Federal Tax Administrator reasonably determines that such item will produce a benefit in the Consolidated Return. (b) On or before March 14, 1996, an interim tax settlement payment shall be made to or by ITT Industries by or to the ITT Destinations Group and the ITT Hartford Group, as the case may be, equal to the difference between the Separate Consolidated Federal Income Tax Liability, modified as described in paragraph 5(a), and the net amounts previously paid with respect to estimated taxes for the Consolidated Return year. (c) Based on computations to be prepared by the affected Group and approved by the Federal Tax Administrator, an adjusting payment equal to the difference between the Allocable Federal Income Tax Liability and the net amounts previously paid with respect to estimated taxes for the Consolidated Return year shall be made to or by ITT Industries by or to the ITT Destinations Group and the ITT Hartford Group, as the case may be, on or before October 15, 1996 based on the Consolidated Return as filed, together with interest thereon at the Prime Rate from December 14, 1995 or March 14, 1996, as the case may be. Each of the ITT Destinations Group and the ITT Hartford Group shall increase their liability for such adjusting payment by the amount of any AMT credit carryforward allocated to them under the consolidated return regulations which exceeds the AMT calculated on a separate consolidated basis. 6. Recomputations of Tax and Payments. (a) The Adjusted Allocable Federal Income Tax Liability of the ITT Destinations Group and the ITT Hartford Group for the Consolidated Return or any Prior Period Consolidated Return shall be adjusted in computations to be prepared by the affected Group and approved by the Federal Tax Administrator with respect to changes in the 7 8 taxable income, loss, deduction or tax credits of the ITT Destinations Group or the ITT Hartford Group: (i) in each instance when payments are to be made to, or refunds are received from, the IRS; (ii) when no payment is to be made or refund is to be received due to offsetting adjustments, upon filing of an amended return, completion of an IRS audit and completion of an IRS appellate review; and (iii) to reflect the results of any Final Determination. ITT Destinations and ITT Hartford each agree to pay to ITT Industries additional amounts (plus penalties and additions to tax, if any) equal to any increases in the Adjusted Allocable Federal Income Tax Liability of the ITT Destinations Group or the ITT Hartford Group resulting from any such changes, and ITT Industries agrees to pay ITT Destinations and ITT Hartford amounts equal to any decreases in the Adjusted Allocable Federal Income Tax Liability of the ITT Destinations Group or the ITT Hartford Group resulting from any such changes, in each case together with any interest relating thereto. For purposes of this agreement, unless specifically provided otherwise, interest shall be computed at the Federal statutory rate used, pursuant to Section 6621(a) of the Code, by the IRS in computing the interest payable to or by it on the net balance due to or from the IRS. Any interest under Section 6621(c) of the Code shall be charged to the Group whose separate deficiencies gave rise to such interest. If the separate deficiencies of more than one Group gave rise to such interest, then such interest shall be allocated between or among such Groups. Penalties levied in respect of the Consolidated Return or any Prior Period Consolidated Return shall be charged to the Group whose separate computations gave rise to the penalty. If the separate computations of more than one Group gave rise to the penalty, then such penalty shall be allocated between or among such Groups. If a penalty does not arise from the separate computations of the Groups, it shall be allocated in proportion to the tax in the separate tax computations of the Groups. (b) Amounts payable to or by ITT Industries by or to ITT Destinations or ITT Hartford under paragraph 6(a) shall be paid upon written request therefor approved by the Federal Tax Administrator, together with interest thereon from the original due date or such other date as may be appropriate under the circumstances. Any amounts due to or from ITT Industries from or to ITT Destinations or ITT Hartford as a result of a payment to the IRS or the receipt of a refund shall be paid within five working days after such payment or receipt, together with appropriate interest 8 9 thereon. If no payment is to be made or refund is to be received due to offsetting items among the various Groups, then tax and interest (computed at the IRS overpayment rates) shall be paid within 30 calendar days after the completion of each of the IRS audit and appellate review of the tax period in question and a Final Determination. After expiration of the five day period (or, if applicable, 30 day period) any amounts unpaid shall bear interest computed from the date of payment or receipt (or, if applicable, completion or Final Determination) at the Prime Rate. (c) No payment relating to a change in Adjusted Allocable Federal Income Tax Liability shall be made by or to any Group with respect to the IRS audit of the Consolidated Return or a Prior Period Consolidated Return until the audit has been completed with respect to all Groups, unless such advance payment has been approved by ITT Industries and such Group. 7. Special Rules. (a) If the Consolidated Return or any Prior Period Consolidated Return tax liability (including any interest relating thereto) exceeds or is less than the total of the three Groups' Allocable Federal Income Tax Liability or Adjusted Allocable Federal Income Tax Liability, as appropriate (including any interest relating thereto), the cost or benefit of any net difference shall be allocated equally to ITT Industries and ITT Destinations, provided, that AMT in an amount equal to any AMT credit carryforward from the Consolidated Return allocated to a Group shall be borne by such Group. (b) The liability for any environmental tax shall be apportioned among the ITT Industries Group, the ITT Destinations Group and the ITT Hartford Group in proportion to their separate Group liability therefor, computed without the benefit of the amount referred to in Section 59A(a)(2) of the Code. (c) Each of the Companies agrees that, unless it obtains consent of each of the other Companies, all members of its Group will waive the carryback of any net operating loss from a tax period beginning on or after January 1, 1996 to the Consolidated Return or Prior Period Consolidated Return. 8. Treatment of Various Items. (a) In computing Allocable Federal Income Tax Liability for the purposes of this Agreement, each Group shall take into account an amount equal to any benefit resulting from any net operating loss, net capital loss, deduction or credit or any adjustment arising from an IRS audit, amended return or otherwise (each, a "TAX ITEM") attributable to it, or any carryback of a Tax Item attributable to it, which produces a benefit in the Consolidated Return or any Prior Period Consolidated Return. In determining whether a Tax Item or carryback of a Tax 9 10 Item produces such a benefit, no Group shall take into account any Tax Item which is a carryforward into a taxable year which begins after the Distribution Date. If the Tax Item or carryback of a Tax Item results in a carryforward into a taxable year of another Group which begins after the Distribution Date and such carryforward produces a realized benefit (including a realized benefit as the result of a tax basis increase), or other use, in such year or any subsequent year after considering all other items of taxable income or credits otherwise available to such other Group (a "NET REVERSAL BENEFIT"), then an amount equal to such Net Reversal Benefit, when realized, shall be paid by such other Group directly to the Group generating, or otherwise bearing the cost of, such Tax Item or carryback of a Tax Item. For purposes of this Agreement, a Net Reversal Benefit shall be deemed to be realized when included in a filed tax return or otherwise allowed and shall be recomputed if adjusted upon audit by the IRS, by amended return or otherwise. Payments with respect to the realization or adjustment of a Net Reversal Benefit, together with interest thereon (computed at the IRS overpayment rate) from the original due date of the return in which the Tax Item arose or such other date as may be appropriate in the case of an adjustment, shall be made within 30 days. The benefit of any carryback of a Tax Item to the Consolidated Return or any Prior Period Consolidated Return shall be taken into account only as and to the extent that such carryback reduces the Consolidated Return or Prior Period Consolidated Return tax or produces a Net Reversal Benefit. If no AMT is payable in the Consolidated Return or any Prior Period Consolidated Return, no Group shall include AMT in its Allocable Federal Income Tax Liability for such year. To the extent that AMT results from a carryback from a year beginning after the end of the Consolidated Return year, then such AMT shall be allocated to the Group giving rise to the carryback and such Group shall be entitled to recover any Net Reversal Benefit resulting from any AMT credit carryforwards associated with such AMT. (b) In the event that two or more carrybacks of Tax Items are available for use in the Consolidated Return or in any Prior Period Consolidated Return, their order of use will be determined by the Code and the regulations thereunder. Where two or more carrybacks of Tax Items have equal priority and can not be used in full, each such carryback shall be used by the affected Groups in proportion to the total of such carrybacks. (c) Amounts equal to research credits allowed upon any audit of the Consolidated Return or any Prior Period Consolidated Return which are attributable to the activities of the ITT Destinations Group or the ITT Hartford Group prior to the Distribution Date shall be allocated to such Group. However, if no credit is allowed, no allocation will be made. If a portion of the total credit claimed on the Consolidated Return or any Prior Period Consolidated Return is not allowed, only a portion of the credit as finally allowed (computed in proportion to qualified expenditures as finally allowed) will be allocated to the ITT Destinations Group or the ITT Hartford Group. (d) Adjustments to the Federal tax liability (including interest and penalties) of or with respect to any business listed on Schedule 1.01(d) of the Distribution Agreement for any taxable 10 11 year before or including the Distribution Date, shall be apportioned among the Groups in the same manner as the other liabilities with respect to such business are apportioned in the Distribution Agreement; provided, that any adjustment with respect to any issue in the Consolidated Return which has not been cleared with the Federal Tax Administrator, or for which a "more likely than not" opinion from tax advisors reasonably acceptable to the Federal Tax Administrator has not been received by him prior to the filing of the Consolidated Return, shall be charged to the Group in whose separate tax computations the adjustment arose, with the balance being apportioned. Any benefit (including any Net Reversal Benefit) arising as a result of an adjustment pursuant to this paragraph 8(d) or paragraph 8(e) below shall be similarly allocated and apportioned. In computing the effect of adjustments with respect to companies listed on Schedule 1.01(d) of the Distribution Agreement, all such adjustments shall be combined and treated as if they were deemed to be a separate fourth Group. Notwithstanding the foregoing, changes in direct FTC's generated by a company listed on Schedule 1.01(d) of the Distribution Agreement and changes in indirect FTC's generated by any foreign company together with any related gross-up pursuant to Section 78 of the Code shall be allocated to the Group owning such company on the Distribution Date (or, if such company has been disposed of prior to the Distribution Date, the Group owning such company prior to its disposition) and no FTC benefits or FTC carryforwards shall be computed for such deemed fourth Group. (e) If United States Federal income taxes with respect to the operations or sale of the businesses of or assets of ITT Financial Corporation, and the legal entities which were direct or indirect subsidiaries of ITT Financial Corporation prior to its liquidation (such operations or sale, collectively "ITT FINANCIAL Operations"), differ from the amounts reflected in any Prior Period Consolidated Return or in the Consolidated Return, when filed, then such difference in tax liability shall be apportioned equally among the three Groups. To the extent that the statutory tax rate on capital gains with respect to ITT Financial Operations is less than 35%, the difference, when realized, shall be apportioned equally among the three Groups. In addition, state, local and foreign taxes with respect to ITT Financial Operations which differ from the amounts in the returns as originally filed (including the returns to be filed with respect to 1995), shall be similarly apportioned. Treatment of items in the Consolidated Return and in state, local and foreign tax returns for the 1995 year are subject to the proviso in paragraph 8(d) above. (f) If actions taken on or before the Distribution Date cause any of the Companies to be liable under the tax indemnities contained in the covenants, loan agreements or offering memoranda of any debt instruments of a company included in the Consolidated Return and listed on Schedule 1.01(d) of the Distribution Agreement, with respect to obligations which remain outstanding at the Distribution Date, then the cost of such tax indemnity shall be shared equally among the Groups. 11 12 (g) The intention of paragraphs 8(d), 8(e) and 8(f) above and of paragraphs 9(b) and 15 below is that the items which are to be shared equally pursuant to the Distribution Agreement or this Agreement shall be shared equally on an after-tax basis. 9. Taxes Other Than Federal Taxes. (a) The Companies and their subsidiaries shall file income and franchise tax returns in those jurisdictions in which they are required to do so. Consistent with prior practice, the Companies and their subsidiaries shall file combined tax returns in certain jurisdictions. If any state or local income or franchise tax audit adjustment attributable to any of the Companies, or any subsidiary of any of the Companies, increases or decreases such combined tax liability for a taxable period beginning before the Distribution Date, then an amount in respect of that adjustment shall be paid as provided in paragraph 9(c) hereof. The State Tax Administrator shall have the power and responsibility to act in a manner substantially identical to the Federal Tax Administrator in connection with all combined state and local tax returns and settlements with respect thereto; provided that, without the consent of any affected Group, the cost to any Group of outside services in any calendar year shall not exceed $5,000. In connection with any Connecticut Combined Group Return, the Director of Taxes of ITT Hartford shall act for the State Tax Administrator with respect to the ITT Hartford Group. (b) Tax liabilities incurred and refunds received by any of the Companies or by a subsidiary of any of the Companies (other than those relating to Federal, state and local income or franchise taxes computed on a combined or consolidated basis) and all taxes not measured by income, including, but not limited to, premium, ad valorem, capital stock, sales, use, real and personal property, special assessment, franchise, automobile registration, employment, earnings, duty and import taxes (plus interest) shall be for the account of ITT Industries, ITT Destinations or ITT Hartford, as the case may be. All foreign taxes shall be allocated to the Group which has legal ownership of the taxpayer as of the Distribution Date, except that foreign taxes incurred with respect to transactions undertaken in order to arrange the ownership of foreign companies or assets to conform with management responsibility for such companies or assets shall be apportioned equally among the Groups and that foreign taxes with respect to operations of divisions of or subsidiaries of a foreign company which are managed by a Group other than the Group having legal ownership shall be allocated to such other Group. If, as a result of changes in foreign taxes which are allocated or apportioned to one or more Groups under this paragraph 9(b) or under paragraph 8(e) or of adjustments to FTC's under paragraph 8(d), another Group realizes a benefit in its separate tax computations relating to the Consolidated Return or any Prior Period Consolidated Return, after considering all other credits otherwise available to such other Group except credit carrybacks from a taxable year beginning after the Distribution, or a Net Reversal Benefit, then such other Group shall pay the amount of such benefit or Net Reversal Benefit to the Group or Groups to which the foreign taxes were allocated or apportioned. 12 13 (c) Consistent with prior practice, the Companies will reimburse each other for any payment by one of them to a state or local tax authority which is determined to be for the account of another Company, provided however that such matter is timely referred to the State Tax Administrator. The rules contained in paragraph 6(b) will apply to amounts any party must pay. 10. Tax Deficiencies and Claims. (a) The Federal Tax Administrator shall defend or prosecute proposed or actual income tax deficiencies or refund claims with respect to the Consolidated Return or any Prior Period Consolidated Return where that deficiency or claim relates to the businesses of all of the Groups or with respect to any businesses listed on Schedule 1.01(d) of the Distribution Agreement. In connection with such defense or prosecution, the Federal Tax Administrator may retain such accountants and counsel as required and charge their costs ratably to each Group with the prior approval of each Group, which approval shall not be unreasonably withheld or delayed. Similarly, any compromise or settlement of such a claim or deficiency may be made by the Federal Tax Administrator only after receipt of the approval of each Group, which shall not be unreasonably withheld or delayed. The Federal Tax Administrator will keep all Groups timely advised of all matters relating to such defense or prosecution. (b) Any proposed or actual income tax deficiencies or refund claims with respect to the Consolidated Return or any Prior Period Consolidated Return which arise from the business activities of only one Group may be defended or prosecuted by that interested Group at its own cost and expense and with counsel and accountants of its own selection. Either of the remaining Groups may participate in any such prosecution or defense at its own cost and expense (in either event such cost or expense is not to include the amount of any payment of any tax claim, interest or penalties, or of any compromise settlement or other disposition thereof). The interested Group may control the proceedings, but it may not compromise or settle any deficiency of tax or refund claim for the Consolidated Return year or any Prior Period Consolidated Return year without the prior written consent of the other Groups, which shall not be unreasonably withheld. Notwithstanding the foregoing, no Group shall have a right to an extension of the statute of limitations beyond the time reasonably necessary to complete review at the Appeals Division of the IRS or to any waiver of any other procedural safeguard without the prior written consent of the other Groups. The limitation expressed in the preceding sentence applies, but is not limited to, the filing of a petition with the United States Tax Court. If any Group defends or prosecutes an action, it shall keep each other Group informed of matters relating to such defense or prosecution. (c) Where proposed or actual income tax deficiencies or refund claims of the type described in paragraph 10(b) above arise from the business activities of two Groups, those Groups may jointly participate in the prosecution or defense of such claims or deficiencies on the basis of and subject to the limitations of paragraph 10(b) above. 13 14 11. Dispute Resolution. In the event of a disagreement between the Federal Tax Administrator (or, if with respect to state or local taxes, the State Tax Administrator) and another party hereto, all computations or recomputations of Federal or state and local income and franchise tax liability, and all computations or recomputations of any amount or any payment (including, but not limited to, computations of the amount of the tax liability, any loss or credit or deduction, Federal statutory tax rate change for a year, utilization of carryback items, interest, penalties, and adjustments) and all determinations of the amount of payments or repayments, or determinations of any other nature necessary to carry out the terms of this Agreement will be reviewed by Arthur Andersen LLP or another mutually satisfactory third party, with the costs of such review to be shared equally by the disputing parties. If any disagreement remains after any such review, including any disagreement as to the construction, applicability or binding nature of this Agreement, that disagreement will be resolved as provided by Article VI of the Distribution Agreement. In such case, the arbitrator shall be a retired or former judge of the United States Tax Court or such other qualified person as the relevant parties may agree to designate, provided that such individual has had substantial experience with regard to settling complex tax disputes. 12. Tax Benefit Transfer Leases. (a) In computing any ITT Destinations and ITT Hartford payment to ITT Industries under this Agreement, ITT Destinations and ITT Hartford, and their respective subsidiaries and Groups, will determine their tax liability as if their tax benefit transfer leases were not in effect. (b) ITT Destinations and ITT Hartford will indemnify ITT Industries if ITT Industries is required to make any termination payments or other payments, including interest and penalties, resulting from their failure to perform under a tax benefit transfer lease. (c) ITT Industries agrees to continue to provide assistance to ITT Destinations and ITT Hartford in connection with their tax benefit transfer leases. 13. Survival of Terms. The provisions of this Agreement shall survive the Distribution and remain in full force until all periods of limitations, including any extensions or waiver periods, as well as the ten-year statute of limitations with respect to foreign tax credit redeterminations, for the Consolidated Return period and Prior Period Consolidated Return periods have expired and no further carrybacks to such periods are possible. At that time all remaining payments required under this Agreement shall become immediately due and payable. 14 15 14. Parties to Cooperate. Each of the Companies and their subsidiaries shall cooperate fully and to the extent reasonably requested by the other party in connection with the preparation and filing of any return or the conduct of any audit, dispute, proceeding, suit or action concerning any issues or any other matter contemplated hereunder. Such cooperation shall include, without limitation, (i) the retention and provision on demand of books, records, documentation or other information relating to any tax matter until the later of (x) the expiration of the applicable statute of limitation (giving effect to any extension, waiver, or mitigation thereof) and (y) in the event any claim has been made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim; (ii) the provision of additional information with respect to and explanation of tax practices (elections, accounting methods, conventions and principles of taxation) and material provided under clause (i) of this paragraph 14; (iii) the execution of any document that may be necessary or reasonably helpful in connection with the filing of any tax return by any member of one of the Groups, or in connection with any audit, proceeding, suit or action addressed in the preceding sentence; and (iv) the use by each of the Companies of its reasonable efforts to obtain any documentation from a governmental authority or a third party that may be necessary or helpful in connection with the foregoing. Each of the companies shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation and shall retain as permanent records all documentation necessary to enable it to determine any obligation under this Agreement. The records described above will be made available to representatives of any of the Companies within a reasonable time upon request and may be photocopied on an as needed basis. 15. Distribution Taxes. (a) If the Distribution is ultimately held to be a taxable transaction and there has been no material breach of the covenants contained in Section 2.10 of the Distribution Agreement, then any tax liability incurred by ITT Industries (as well as any payments which ITT Industries makes with respect to the cost of additional taxes paid by its shareholders receiving ITT Destinations and ITT Hartford stock in the Distribution, whether or not ITT Industries is legally obligated to make such payments) shall be divided equally among the Companies. If any of the Companies (or any subsidiary thereof) takes or omits any action after the Distribution which materially contributes to a Final Determination that the Distribution is a taxable event, then such Company will indemnify ITT Industries for the resulting tax liability which would not otherwise have been incurred (including interest and penalties) and any resulting payments (computed after any available tax benefit) which ITT Industries makes to its shareholders with respect to the cost of additional taxes, whether or not ITT Industries is legally obligated to make such payments. No settlement with respect to the matters referred to in this paragraph 15(a) shall be entered into without the agreement of each Group having liability with respect thereto under the terms of this Agreement. (b) Taxes which are triggered in the Consolidated Return and which relate to the intercompany sale or distribution of stock of a subsidiary or of other property by one Group to 15 16 another Group (but not those which relate to the intercompany sale or distribution of assets within a Group) shall be shared equally by the three Groups. 16. Gain Recognition Agreements. Adjustments to the tax liability (including interest and penalties) of ITT Industries which result because of actions taken by either ITT Destinations or ITT Hartford after the Distribution Date which trigger any gain recognition agreements entered into in a Prior Period Consolidated Return year by ITT Industries pursuant to Section 367 of the Code shall be charged to the ITT Destinations Group or to the ITT Hartford Group, as the case may be. ITT Industries shall make available to ITT Destinations and ITT Hartford copies of such gain recognition agreements immediately after the Distribution. 17. No Self-Approval. Any computation or issue of the ITT Destinations Group which is to be approved by or cleared with the Federal Tax Administrator shall also be approved by or cleared with the Director of Taxes of ITT Industries and any computation or issue of the ITT Industries Group which is to be approved by or cleared with the State Tax Administrator shall also be approved by or cleared with the Director of Taxes of ITT Destinations. 18. Notices. Any notices, payments or other communications required by this Agreement shall be made as provided in the Distribution Agreement with a copy to the attention of the Director of Taxes of the appropriate Company. 19. Indemnification. ITT Industries shall indemnify ITT Destinations and ITT Hartford for any Federal or state income or franchise taxes for any taxable period (or portion of a taxable period) ending before or including the Distribution Date for which the ITT Destinations Group or the ITT Hartford Group or any ITT Destinations Subsidiary or ITT Hartford Subsidiary may be liable solely as a result of the operation of Treasury Regulation Sections 1.1502-6 and 1.1502-77 or any state counterpart statute or regulation. 20. Certain Pending Claims. The tax and after-tax interest effects of the tax refund litigation covering the period 1970 through 1980 (with possible rollover effects on subsequent years) shall be allocated 50% to the ITT Industries Group and 50% to the ITT Destinations Group. The tax and after-tax interest effects of the tax refund claim with respect to the 1987 reserve strengthening issue shall be allocated solely to the ITT Hartford Group. 16 17 21. Choice of Law; Successors and Assigns. This Agreement shall be governed and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be performed in that state. This Agreement shall be binding on the successors and assignees of the Companies. 22. Entire Agreement. This Agreement contains the entire agreement among the Companies with respect to the subject matter hereof and supersedes all prior written tax sharing or tax allocation agreements, memoranda, negotiations and oral understandings, if any, and may not be amended, supplemented or discharged except by performance or by an instrument in writing signed by all of the Companies. However, this Agreement does not supersede the certain Agreement and Plan of Merger identified in the first footnote on page 3 of Schedule 1.01(c) of the Distribution Agreement, provided, however, that the liabilities of ITT Corporation with respect to tax matters under such Agreement and Plan of Merger shall be apportioned as provided in the Distribution Agreement for liabilities of ITT Financial Corporation and its subsidiaries. 23. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Companies have duly executed this Agreement as of the date first above written. ITT CORPORATION By: /s/ Richard W. Powers ----------------------------------------- Name: Richard W. Powers Title: Vice President ITT DESTINATIONS, INC. By: /s/ Richard S. Ward ----------------------------------------- Name: Richard S. Ward Title: Executive Vice President 17 18 ITT HARTFORD GROUP, INC. By: /s/ Michael S. Wilder ----------------------------------------- Name: Michael S. Wilder Title: Senior Vice President 18 EX-10.8 9 EMPLOYEE BENEFIT SERVICES AND LIABILITY 1 CONFORMED COPY EMPLOYEE BENEFIT SERVICES AND LIABILITY AGREEMENT dated as of November 1, 1995, among ITT CORPORATION, a Delaware corporation (which, together with its subsidiaries, is herein referred to as "ITT"), ITT DESTINATIONS, INC., a Nevada corporation, (which, together with its subsidiaries, is herein referred to as "ITT Destinations"), and ITT HARTFORD GROUP, INC., a Delaware corporation (which, together with its subsidiaries, is herein referred to as "ITT Hartford"). WHEREAS, the Board of Directors of ITT has determined that it is appropriate and desirable to distribute to the holders of shares of common stock, par value $1.00 per share, of ITT (the "ITT Common Stock") all the outstanding shares of common stock of ITT Destinations (the "ITT Destinations Common Stock") and all the outstanding shares of common stock of ITT Hartford (the "ITT Hartford Common Stock"); and WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined that it is necessary and desirable to allocate and assign responsibility for certain employee benefit liabilities in respect of the activities of the businesses of such entities on the Distribution Date (as defined herein) and those liabilities in respect of other businesses and activities of ITT and its former subsidiaries and certain other matters. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, ITT, ITT Destinations and ITT Hartford agree as follows: 1. RETIREMENT PLANS. (a) Continuation of Retirement Plans. (i) Following the Distribution, (x) ITT Industries shall continue to sponsor the ITT Salaried Retirement Plan, which shall be renamed as the "ITT Industries Salaried Retirement Plan", (y) ITT Hartford shall continue to sponsor the ITT Hartford Retirement Plan and (z) ITT Destinations shall adopt the Sheraton Salaried Retirement Plan as the ITT Destinations Salaried Retirement Plan. (ii) Amendment of Retirement Plans. Effective as of the Distribution Date, (x) ITT Industries shall cause the 2 2 ITT Salaried Retirement Plan to be amended as provided pursuant to Section 1 of this Agreement; (y) ITT Destinations shall cause the ITT Destinations Salaried Retirement Plan to be amended as provided pursuant to Section 1 of this Agreement; and (z) ITT Hartford shall cause the ITT Hartford Retirement Plan to be amended as provided pursuant to Section 1 of this Agreement. (b) Recognition of Service Rendered Prior to the Distribution Date. This paragraph (b) is intended to set forth the steps to be taken to provide for recognition of service rendered prior to the Distribution Date by ITT Employees who, immediately prior to the Distribution Date, (x) have an accrued benefit under more than one of the ITT Salaried Retirement Plan, the Sheraton Salaried Retirement Plan and the ITT Hartford Retirement Plan or (y) have an accrued benefit under any such plan and, on the Distribution Date, will be a participant in any other such plan. (i) This clause (i) applies solely to ITT Employees who, immediately prior to the Distribution Date, have an accrued benefit under the ITT Salaried Retirement Plan and who, on such date, are employed by either ITT Destinations or ITT Hartford. Each of the ITT Destinations Salaried Retirement Plan and the ITT Hartford Retirement Plan shall be amended to recognize all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Eligibility Service (as defined in the ITT Salaried Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the ITT Salaried Retirement Plan for purposes of determining eligibility and vesting, including, without limitation, eligibility service for purposes of determining eligibility for plan membership, preretirement survivor benefits, early retirement benefits and normal retirement benefits. Each of the ITT Destinations Salaried Retirement Plan and the ITT Hartford Retirement Plan shall further be amended to (A) recognize as service for benefit accrual purposes all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Benefit Service (as defined in the ITT Salaried Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the ITT Salaried Retirement Plan and (B) provide for an offset of any benefit payable with respect to service recognized under the ITT Salaried Retirement Plan or any other defined benefit 3 3 retirement plan maintained by ITT or its Affiliates covering the same period of service. (ii) This clause (ii) applies solely to ITT Employees who, immediately prior to the Distribution Date, have an accrued benefit under the Sheraton Salaried Retirement Plan and who, on such date, are employed by either ITT Industries or ITT Hartford. Each of the ITT Salaried Retirement Plan and the ITT Hartford Retirement Plan shall be amended to recognize all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Eligibility Service (as defined in the Sheraton Salaried Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the Sheraton Salaried Retirement Plan for purposes of determining eligibility and vesting, including, without limitation, eligibility service for purposes of determining eligibility for plan membership, preretirement survivor benefits, early retirement benefits and normal retirement benefits. Each of the ITT Salaried Retirement Plan and the ITT Hartford Retirement Plan shall further be amended to (A) recognize as service for benefit accrual purposes all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Benefit Service (as defined in the Sheraton Salaried Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the Sheraton Salaried Retirement Plan and (B) provide for an offset of any benefit payable with respect to service recognized under the Sheraton Salaried Retirement Plan or any other defined benefit retirement plan maintained by ITT or its Affiliates covering the same period of service. (iii) This clause (iii) applies solely to ITT Employees who, immediately prior to the Distribution Date, have an accrued benefit under the ITT Hartford Retirement Plan and who, on such date, are employed by either ITT Industries or ITT Destinations. Each of the ITT Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan shall be amended to recognize all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Eligibility Service (as defined in the ITT Hartford Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the ITT Hartford Retirement Plan for purposes of determining eligibility and 4 4 vesting, including, without limitation, eligibility service for purposes of determining eligibility for plan membership, preretirement survivor benefits, early retirement benefits and normal retirement benefits. Each of the ITT Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan shall further be amended to (A) recognize as service for benefit accrual purposes all service rendered by such ITT Employees prior to the Distribution Date which is recognized as Benefit Service (as defined in the ITT Hartford Retirement Plan, as in effect immediately prior to the Distribution Date) under the terms of the ITT Hartford Retirement Plan and (B) provide for an offset of any benefit payable with respect to service recognized under the ITT Hartford Retirement Plan or any other defined benefit retirement plan maintained by ITT or its Affiliates covering the same period of service. (iv) For purposes of determining the offset to be provided pursuant to subclause (B) of each of clauses (i), (ii) and (iii) of this paragraph (b), the benefits payable under each plan shall be determined as a straight life annuity payable at normal or postponed retirement age, and the offset shall be applied to reduce the benefit payable under the appropriate plan. The offset shall be taken as of the date benefits commence under the plan against which the offset is applied, and the offset shall be computed as if the benefit being offset commenced as of the same date. (c) Recognition of Service Rendered On and After the Distribution Date. This paragraph (c) is intended to set forth the steps to be taken to provide for recognition of service rendered on and after the Distribution Date by ITT Employees who, immediately prior to the Distribution Date (x) have an accrued benefit under more than one of the ITT Salaried Retirement Plan, the Sheraton Salaried Retirement Plan and the ITT Hartford Retirement Plan or (y) have an accrued benefit under any such plan and, on the Distribution Date, will be a participant in any other such plan. (i) This clause (i) applies solely to ITT Employees who, on the Distribution Date, are employed by ITT Industries and have an accrued benefit under either the Sheraton Salaried Retirement Plan or the ITT Hartford Retirement Plan. Subject to Section 1(e) hereof and to the extent permitted by applicable law, each of the ITT Destinations Salaried Retirement Plan and the ITT Hartford Retirement 5 5 Plan shall be amended to recognize service rendered on and after the Distribution Date with ITT Industries for each such ITT Employee for purposes of eligibility and vesting, including, without limitation, eligibility service for purposes of preretirement death benefits, early retirement benefits and normal retirement benefits. For purposes of the ITT Destinations Salaried Retirement Plan and the ITT Hartford Retirement Plan, the final average pay of such ITT Employees shall be determined immediately prior to the Distribution Date. (ii) This clause (ii) applies solely to ITT Employees who, on the Distribution Date, are employed by ITT Destinations and have an accrued benefit under either the ITT Salaried Retirement Plan or the ITT Hartford Retirement Plan. Subject to Section 1(e) hereof and to the extent permitted by applicable law, each of the ITT Salaried Retirement Plan and the ITT Hartford Retirement Plan shall be amended to recognize service rendered on and after the Distribution Date with ITT Destinations for each such ITT Employee for purposes of eligibility and vesting, including, without limitation, eligibility service for purposes of preretirement death benefits, early retirement benefits and normal retirement benefits. For purposes of the ITT Salaried Retirement Plan and the ITT Hartford Retirement Plan, the final average pay of such ITT Employees shall be determined immediately prior to the Distribution Date. (iii) This clause (iii) applies solely to ITT Employees who, on the Distribution Date, are employed by ITT Hartford and have an accrued benefit under either the ITT Salaried Retirement Plan or the Sheraton Salaried Retirement Plan. Subject to Section 1(e) hereof and to the extent permitted by applicable law, each of the ITT Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan shall be amended to recognize service rendered on and after the Distribution Date with ITT Hartford for each such ITT Employee for purposes of eligibility and vesting, including, without limitation, eligibility service for purposes of preretirement death benefits, early retirement benefits and normal retirement benefits. For purposes of the ITT Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan, the final average pay of such ITT 6 6 Employees shall be determined immediately prior to the Distribution Date. (d) Effect of Employment On and After the Distribution Date with ITT Industries, ITT Destinations or ITT Hartford. (i) Any ITT Employee who, on the Distribution Date, is employed by ITT Industries and for whom service rendered on and after the Distribution Date is recognized pursuant to Section 1(c) under the ITT Destinations Salaried Retirement Plan or the ITT Hartford Retirement Plan while such person is employed with ITT Industries (including periods after re-employment following a termination of employment occurring after the Distribution Date), (I) shall not be deemed either to have terminated employment or to be in retirement status under the ITT Destinations Salaried Retirement Plan or the ITT Hartford Retirement Plan and (II) except to the extent required by law, shall not be eligible to receive payment of his or her vested benefit or retirement allowance under the ITT Destinations Salaried Retirement Plan or the ITT Hartford Retirement Plan. (ii) Any ITT Employee who, on the Distribution Date, is employed by ITT Destinations and for whom service rendered on and after the Distribution Date is recognized pursuant to Section 1(c) under the ITT Salaried Retirement Plan or the ITT Hartford Retirement Plan while such person is employed with ITT Destinations (including periods after re-employment following a termination of employment occurring after the Distribution Date) (I) shall not be deemed either to have terminated employment or to be in retirement status under the ITT Salaried Retirement Plan or the ITT Hartford Retirement Plan and (II) except to the extent required by law, shall not be eligible to receive payment of his or her vested benefit or retirement allowance under the ITT Salaried Retirement Plan or the ITT Hartford Retirement Plan. (iii) Any ITT Employee who, on the Distribution Date, is employed by ITT Hartford and for whom service rendered on and after the Distribution Date is recognized pursuant to Section 1(c) under the ITT Salaried Retirement Plan or the ITT Destinations Salaried Retirement Plan while such person is employed with ITT Hartford (including periods after re-employment following a termination of employment occurring after the Distribution Date) (I) shall not be deemed either to have terminated employment or to be in retirement status under the ITT Salaried Retirement Plan or 7 7 the ITT Destinations Salaried Retirement Plan and (II) except to the extent required by law, shall not be eligible to receive payment of his or her vested benefit or retirement allowance under the ITT Salaried Retirement Plan or the ITT Destinations Salaried Retirement Plan. (e) Limited Obligation To Recognize Service Rendered On and After the Distribution Date. (i) With respect to any ITT Employee, service rendered on and after the Distribution Date that is required to be recognized by ITT Industries under the ITT Salaried Retirement Plan pursuant to Section 1(c) hereof shall be the same years and portions thereof of service recognized for similar purposes under the ITT Hartford Retirement Plan, as in effect immediately prior to the Distribution Date, with respect to ITT Hartford Employees, and under the ITT Destinations Salaried Retirement Plan, as in effect immediately prior to the Distribution Date, with respect to ITT Destinations Salaried Employees. In no event shall the ITT Salaried Retirement Plan be required to recognize any enhanced service benefits that might be provided on and after the Distribution Date under the ITT Destinations Salaried Retirement Plan or the ITT Hartford Retirement Plan. (ii) With respect to any ITT Employee, service rendered on and after the Distribution Date that is required to be recognized by ITT Destinations under the ITT Destinations Salaried Retirement Plan pursuant to Section 1(c) hereof shall be the same years and portions thereof of service recognized for similar purposes under the ITT Salaried Retirement Plan, as in effect immediately prior to the Distribution Date, with respect to ITT Industries Salaried Employees, and under the ITT Hartford Retirement Plan, as in effect immediately prior to the Distribution Date, with respect to ITT Hartford Employees. In no event shall the ITT Destinations Salaried Retirement Plan be required to recognize any enhanced service benefits that might be provided on and after the Distribution Date under the ITT Salaried Retirement Plan or the ITT Hartford Retirement Plan. (iii) With respect to any ITT Employee, service rendered on and after the Distribution Date that is required to be recognized by ITT Hartford under the ITT Hartford Retirement Plan pursuant to Section 1(c) hereof shall be the same years and portions thereof of service recognized for similar purposes under the ITT Salaried Retirement Plan, as in effect immediately prior to the Distribution Date, with 8 8 respect to ITT Industries Salaried Employees, and under the ITT Destinations Salaried Retirement Plan, as in effect immediately prior to the Distribution Date, with respect to ITT Destinations Salaried Employees. In no event shall the ITT Hartford Retirement Plan be required to recognize any enhanced service benefits that might be provided on and after the Distribution Date under the ITT Salaried Retirement Plan or the ITT Destinations Salaried Retirement Plan. (f) Plan Asset Transfers. It is intended that, at any time or from time to time following the Distribution, ITT Industries, ITT Destinations and ITT Hartford may cause to occur transfers of assets from the ITT Salaried Retirement Plan, the ITT Destinations Salaried Retirement Plan and/or the ITT Hartford Retirement Plan, to any other such plan, subject to agreement by the sponsor of the transferor plan and the sponsor of the transferee plan, with respect to benefits that have accrued as of the Distribution Date and that are attributable to a person no longer employed by the sponsor of the transferor plan or its affiliates. 2. INVESTMENT AND SAVINGS PROGRAMS. (a) Effective as of the Distribution Date, ITT Destinations shall adopt the ITT Destinations Savings Plan, which shall have terms similar in all material respects to the ITT Savings Plan. ITT Industries shall cause the transfer, as soon as practicable on or after the Distribution Date, of the accounts of all ITT Destinations Salaried Employees from the ITT Savings Plan to the ITT Destinations Savings Plan. Such assets will be transferred in kind to the maximum extent practicable. (b) Effective as of the Distribution Date, ITT Hartford shall adopt the ITT Hartford Savings Plan, which shall have terms similar in all material respects to the ITT Savings Plan. ITT Industries shall cause the transfer, as soon as practicable on or after the Distribution Date, of the accounts of all ITT Hartford Employees from the ITT Savings Plan to the ITT Hartford Savings Plan. Such assets will be transferred in kind to the maximum extent practicable. (c) With respect to any former ITT employee who is entitled to a benefit as of the Distribution Date under the ITT Destinations Salaried Retirement Plan or any other 9 9 defined benefit retirement plan to be maintained by ITT Destinations following the Distribution or who was a participant in any such plan on such employee's last day of service with ITT, ITT Industries shall cause the account of such former employee under the ITT Savings Plan to be transferred in the manner described in Section 2(a) hereof. (d) With respect to any former ITT employee entitled to a benefit as of the Distribution Date under the ITT Hartford Retirement Plan or any other defined benefit retirement plan to be maintained by ITT Hartford following the Distribution or who was a participant in any such plan on such employee's last day of service with ITT, ITT Industries shall cause the account of such former employee under the ITT Savings Plan to be transferred in the manner described in Section 2(b) hereof. (e) The account of any other current or former ITT employee shall remain in the ITT Savings Plan, which shall continue to be sponsored by ITT Industries and shall be renamed as the "ITT Industries Investment and Savings Plan." 3. EXCESS NON-QUALIFIED SUPPLEMENTAL BENEFIT PLANS. (a) Excess Pension Plans. (i) Effective as of the Distribution Date, ITT Industries shall continue to sponsor the ITT Excess Pension Plan and ITT Excess Pension Plan Trust. Effective as of the Distribution Date, ITT Destinations shall adopt the Sheraton Excess Pension Plan as the ITT Destinations Excess Pension Plan and shall adopt the ITT Destinations Excess Pension Plan Trust under which excess pension benefits for certain officers will be funded. Effective as of the Distribution Date, ITT Hartford shall continue to sponsor the ITT Hartford Excess Pension Plan and the ITT Hartford Excess Pension Plan Trust. (ii) ITT Industries does hereby assume all liability for benefits (whether funded or unfunded) that have accrued prior to the Distribution Date under the Sheraton Excess Pension Plan and the ITT Hartford Excess Pension Plan with respect to ITT Industries Salaried Employees, except that, to the extent such benefits are funded under the ITT Hartford Excess Pension Plan Trust, ITT Industries' assumption of liability for benefits to any ITT Industries Salaried Employee shall be effective only if and to the extent that such employee waives his or her right to receive such benefits under the ITT Hartford Excess Pension Plan and ITT Hartford Excess Pension Plan Trust. ITT 10 10 Industries and ITT Hartford shall each use its commercially reasonable efforts to obtain such waivers from ITT Industries Salaried Employees, and ITT Hartford shall notify ITT Industries upon receipt of any such waiver. (iii) ITT Destinations does hereby assume all liability for benefits (whether funded or unfunded) that have accrued prior to the Distribution Date under the ITT Excess Pension Plan and the ITT Hartford Excess Pension Plan with respect to ITT Destinations Salaried Employees, except that, to the extent such benefits are funded under the ITT Excess Pension Plan Trust or the ITT Hartford Excess Plan Trust, ITT Destinations' assumption of liability for benefits to any ITT Destinations Salaried Employee shall be effective only if and to the extent that such employee waives his or her right to receive such benefits under the ITT Excess Pension Plan and ITT Excess Pension Plan Trust or the ITT Hartford Excess Pension Plan and ITT Hartford Excess Pension Plan Trust, as the case may be. ITT Industries, ITT Destinations and ITT Hartford shall each use its commercially reasonable efforts to obtain such waivers from ITT Destinations Salaried Employees, and ITT Industries and ITT Hartford shall notify ITT Destinations upon receipt of any such waiver. (iv) ITT Hartford does hereby assume all liability for benefits (whether funded or unfunded) that have accrued prior to the Distribution Date under the ITT Excess Pension Plan and the Sheraton Excess Pension Plan with respect to ITT Hartford Employees, except that, to the extent such benefits are funded under the ITT Excess Pension Plan Trust, ITT Hartford's assumption of liability for benefits to any ITT Hartford Employee shall be effective only if and to the extent that such employee waives his or her right to receive such benefits under the ITT Excess Pension Plan and ITT Excess Pension Plan Trust. ITT Industries and ITT Hartford shall each use its commercially reasonable efforts to obtain such waivers from ITT Hartford Employees, and ITT Industries shall notify ITT Hartford upon receipt of any such waiver. (b) Excess Savings Plans. Effective as of the Distribution Date, ITT Industries shall remain liable for benefits accrued under the ITT Excess Savings Plan prior to the Distribution Date with respect to ITT Industries Salaried Employees. Effective as of the Distribution Date, ITT Destinations shall adopt the ITT Destinations Excess Savings Plan, which shall be identical in all material respects to the ITT Excess Savings Plan as in effect 11 11 immediately prior to the Distribution Date. Effective as of the Distribution Date, ITT Hartford shall continue to sponsor the ITT Hartford Excess Savings Plan. ITT Destinations does hereby assume liability for benefits accrued prior to the Distribution Date under the ITT Excess Savings Plan with respect to ITT Destinations Salaried Employees, and ITT Hartford does hereby assume liability for benefits accrued prior to the Distribution Date under the ITT Excess Savings Plan with respect to ITT Hartford Employees. (c) Guarantee. (i) ITT Destinations and ITT Hartford jointly and severally guarantee and agree, in the event ITT Industries fails to satisfy its obligations in respect of benefits that have accrued prior to the Distribution Date under the ITT Excess Pension Plan (including, without limitation, to the extent that ITT Industries has assumed any such liability pursuant to an employee's waiver of benefits under the ITT Hartford Excess Pension Plan Trust, as contemplated by Section 3(a) above) or benefits that have accrued prior to the Distribution Date under the ITT Excess Savings Plan, to make payment when due in respect of all such obligations of ITT Industries in respect of the ITT Excess Pension Plan or the ITT Excess Savings Plan, as applicable. To the extent ITT Destinations or ITT Hartford makes payment in respect of this guarantee, it will have a right of contribution from the nonpaying guarantor of 50% of the payment made. (ii) ITT Industries and ITT Hartford jointly and severally guarantee and agree, in the event ITT Destinations fails to satisfy its obligations in respect of benefits under the ITT Destinations Excess Pension Plan that have accrued prior to the Distribution Date (including, without limitation, to the extent that ITT Destinations has assumed any such liability pursuant to an employee's waiver of benefits under the ITT Excess Pension Plan Trust or the ITT Hartford Excess Pension Plan Trust, as contemplated by Section 3(a) above) or benefits that have accrued prior to the Distribution Date under the ITT Destinations Excess Savings Plan with respect to ITT Destinations Salaried Employees (including, without limitation, by reason of the assumption by ITT Destinations of liability for such benefits under Section 3(b) above), to make payment when due in respect of all such obligations of ITT Destinations in respect of the ITT Destinations Excess Pension Plan or the ITT Destinations Excess Savings Plan, as applicable. To the extent ITT Industries or ITT Hartford makes payment in 12 12 respect of this guarantee, it will have a right of contribution from the nonpaying guarantor of 50% of the payment made. (iii) ITT Destinations and ITT Industries jointly and severally guarantee and agree, in the event ITT Hartford fails to satisfy its obligations in respect of benefits under the ITT Hartford Excess Plan that have accrued prior to the Distribution Date (including, without limitation, to the extent that ITT Hartford has assumed any such liability pursuant to an employee's waiver of benefits under the ITT Excess Pension Plan Trust, as contemplated by Section 3(a) above) or benefits that have accrued prior to the Distribution Date under the ITT Hartford Excess Savings Plan with respect to ITT Hartford Employees (including, without limitation, by reason of the assumption by ITT Hartford of liability for such benefits under Section 3(b) above), to make payment when due in respect of all such obligations of ITT Hartford in respect of the ITT Hartford Excess Pension Plan or the ITT Hartford Excess Savings Plan, as applicable. To the extent ITT Destinations or ITT Industries makes payment in respect of this guarantee, it will have a right of contribution from the nonpaying guarantor of 50% of the payment made. (iv) This Section 3(c) is not intended to modify the allocation and assumption of liabilities in respect of the excess pension plans and excess savings plans contemplated by Section 3(a) and Section 3(b) hereof. (v) It is the intention of the parties to this Agreement that the provisions of this Section 3(c) shall be enforceable by any ITT Employee or ITT retiree or their respective surviving beneficiaries. 4. ITT EMPLOYEE WELFARE BENEFIT PLANS. (a) Establishment of Plans. (i) Subject to Section 10(c), effective as of the Distribution Date, ITT Industries shall continue to sponsor the employee welfare benefit plans of ITT for ITT Industries Salaried Employees. Such employee welfare benefit plans shall include coverage for life insurance, disability, health, accident and post-retirement health and life insurance. (ii) Subject to Section 10(c), effective as of the Distribution Date, ITT Destinations shall adopt the broad-based employee welfare benefit plans of ITT Sheraton as the ITT Destinations salaried employee welfare benefit program. 13 13 Such employee welfare benefit plans shall include coverage for life insurance, health, accident and post-retirement health and life insurance. ITT Destinations shall also adopt a long-term disability insurance plan and an excess long-term disability plan, as provided in Section 4(d) hereof. Subject to Section 10(c), ITT Destinations shall further cause CWI, ITT Educational Services and ITT Intermedia, and use its commercially reasonable efforts to cause MSG, to continue their respective separate employee welfare benefit plans covering their respective employees. (iii) Subject to Section 10(c), effective as of the Distribution Date, ITT Hartford shall continue its broad-based employee welfare benefit plans. Such employee welfare benefit plans shall include coverage for life insurance, disability, health, accident and post-retirement health and life insurance. (b) Post-Retirement Benefits. (i) ITT Sheraton and ITT Hartford each maintains separate employee welfare benefit programs that include retiree medical and health benefits for certain of their respective salaried employees. ITT Destinations acknowledges that, following the Distribution, it will retain all liability with respect to such plans maintained by ITT Sheraton. ITT Hartford acknowledges that, following the Distribution, it will retain all liability with respect to such plans maintained by ITT Hartford. ITT Industries shall retain all liability with respect to, and all Code Section 501(c)(9) assets attributable to, retiree life insurance and medical benefits under the ITT employee welfare benefit plans, except that (i) ITT Industries shall transfer to ITT Destinations the liability of ITT with respect to, and any assets attributable to, certain ITT Destinations Salaried Employees whose employment is transferred to ITT Destinations in connection with the Distribution, and ITT Destinations does hereby assume such liability and (ii) ITT Industries shall transfer to ITT Hartford the liability with respect to, and assets attributable to, certain ITT Employees whose employment is transferred to ITT Hartford in connection with the Distribution, and ITT Hartford does hereby assume such liability. (ii) If there is a Change in Control of ITT Industries, ITT Destinations or ITT Hartford during the ten-year period following the Distribution, then the company in 14 14 which such Change in Control occurred shall not, during the balance of such ten-year period, reduce or eliminate health benefits in effect immediately prior to such Change in Control provided to former employees who retired from ITT or any of its Affiliates on or prior to the Distribution Date (or as set forth in the next succeeding sentence), or increase associated retiree contributions, unless the other companies consent in writing to such a reduction, elimination or cost increase; provided, however, that the company in which the Change in Control occurred may, in its sole discretion, modify such benefits in accordance with the changes contemplated in the assumptions in effect immediately prior to the Change in Control that are used to establish such company's Accumulated Postretirement Benefit Obligation (as defined in Statement of Financial Accounting Standard No. 106). Persons who are receiving severance payments in connection with the Distribution and who are or become eligible to retire on or before the end of such severance period shall be afforded the treatment of this Section 4(b)(ii). (iii) Indemnity. In the event that any of ITT Industries, ITT Destinations or ITT Hartford is asked to consent to a reduction, elimination or cost increase with respect to retiree health benefits after a Change in Control as described in clause (ii) above, each such company shall determine whether to provide such consent in its sole and absolute discretion. Each of ITT Industries, ITT Destinations and ITT Hartford does hereby agree to indemnify any other company asked by it to provide such consent against any and all liability that might arise with respect to the granting or withholding of such consent. (c) Severance. As of the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall provide severance plans for all ITT Employees which are substantially equivalent to those ITT severance plans covering such employees immediately prior to the Distribution Date. Such severance plans shall be maintained without modification for a minimum of one year. (d) Long-Term Disability Insurance. (i) As of the Distribution Date, ITT Destinations shall adopt a long-term disability plan, identical in all material respects to the ITT Long-Term Disability Plan, as in effect on the Distribution Date, covering eligible ITT Destinations Salaried Employees. ITT Destinations shall be allocated a proportionate share of any assets attributable thereto, 15 15 including any assets (and any related liability) for incurred but unreported claims. ITT Hartford shall be allocated a proportionate share of any assets attributable thereto, including any assets (and any related liability) for incurred but unreported claims. The reasonable determination of Metropolitan Life Insurance Company with respect to the allocation of such assets among ITT Industries, ITT Destinations and ITT Hartford shall be binding on the parties hereto. (ii) Effective as of the Distribution Date, ITT Destinations shall adopt an excess long-term disability plan, identical in all material respects to the ITT Excess Long-Term Disability Plan, as in effect on the Distribution Date, covering those eligible ITT Destinations employees. ITT Destinations does hereby assume all liabilities to ITT Destinations Salaried Employees under the ITT Excess Long-Term Disability Plan. 5. BONUS PLAN; LONG-TERM PERFORMANCE PLAN. ITT currently maintains certain bonus plans and the ITT Long-Term Performance Plan, pursuant to which certain ITT Employees employed by ITT World Headquarters might become entitled to payments after the Distribution Date with respect to their performance with ITT prior to the Distribution Date. With respect to such ITT Employees who continue in employment on the Distribution Date, ITT Industries shall remain liable for such payments, including any such payments to be made following the Distribution Date, except that any such payments deferred by any such ITT Employee pursuant to the ITT Deferred Compensation Plan shall be the liability of the company employing such ITT Employee on the Distribution Date. With respect to such ITT Employees who do not continue in employment immediately following the Distribution Date, ITT Industries shall remain liable for (i) the payments described in the first sentence of this Section 5 and for any payments under applicable severance arrangements, including any such payments to be made following the Distribution Date, and (ii) any of the payments referred to in (i) above deferred by any such ITT Employee pursuant to the ITT Deferred Compensation Plan. ITT Industries, ITT Destinations and ITT Hartford shall cause any such payments under the bonus plans to be recognized as compensation for purposes of their respective retirement plans without regard to the source of such payments, provided that all other terms and conditions of such retirement plans shall apply to the determination of whether such payments are recognized as compensation. 16 16 6. COLI. (i) Effective as of the Distribution Date, a portion of the COLI policy underwritten by Penn Insurance and Annuity Company covering ITT Destinations Salaried Employees shall be allocated to ITT Destinations. (ii) Effective as of the Distribution Date, the COLI policy underwritten by Hartford Life Insurance Company covering certain ITT Employees and directors of ITT, ITT Destinations and ITT Hartford who are eligible for participation in the ITT Deferred Compensation Plan shall be allocated among the three companies based on the employment of each such ITT Employee or service of such director immediately following the Distribution Date. 7. STOCK OPTIONS AND OTHER AWARDS. (a) Effective as of the Distribution Date, outstanding stock options, stock appreciation rights and restricted stock awards ("ITT stock awards") under the ITT 1977 Stock Option Incentive Plan, the ITT 1986 Incentive Stock Plan, and the ITT 1994 Incentive Stock Plan, as each such plan may have been amended from time to time (the "ITT Stock Plans"), shall be treated as follows: (i) ITT Industries Salaried Employees. ITT stock awards held by ITT Industries Salaried Employees shall be adjusted to reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans. (ii) ITT Destinations Salaried Employees. ITT Destinations Salaried Employees holding ITT stock awards shall receive substitute stock awards in respect of ITT Destinations Common Stock pursuant to the terms of the ITT Destinations Stock Plan, to be adopted by ITT Destinations as of the Distribution Date, provided that such ITT Destinations Salaried Employees surrender their ITT stock awards for cancellation. Any such ITT stock awards not so surrendered and cancelled shall be adjusted to reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans and as described in Section 7(a)(i). (iii) ITT Hartford Employees. ITT Hartford Employees holding ITT stock awards shall receive substitute stock awards in respect of ITT Hartford Common Stock pursuant to the terms of the ITT Hartford Stock Plan, to be adopted by ITT Hartford as of the Distribution Date, provided that such ITT Hartford Employees surrender their ITT stock awards for 17 17 cancellation. Any such ITT stock awards not so surrendered and cancelled shall be adjusted to reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans and as described in Section 7(a)(i). (iv) Other Persons. Prior to the Distribution Date, the Compensation and Personnel Committee of the Board of Directors of ITT shall be asked to waive any remaining restrictions on the exercisability and vesting of ITT stock awards held by other individuals, including retirees and former employees of ITT. The Compensation and Personnel Committee shall be asked to cause such waiver to occur beginning on October 1, 1995 (or such earlier date as it may determine). Any ITT stock awards held by such individuals that have not been exercised as of the Distribution Date shall be adjusted to reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans and as described in Section 7(a)(i). (b) Manner of Substitution. With respect to each cancelled ITT stock award, the number and exercise price of substitute stock awards granted under the ITT Destinations Stock Plan or the ITT Hartford Stock Plan with respect thereto, and the other terms and conditions of the substitute stock awards, shall be equitably determined to preserve the economic value of the cancelled ITT stock award. 8. FOREIGN BENEFIT PLANS. Certain current and former employees of ITT Industries, ITT Destinations and ITT Hartford participate in (i) ITT Group pension plans and savings plans made available for ITT Group employees in Canada, the United Kingdom, Belgium and Ireland or (ii) expatriate pension plans. The plan actuary for each such plan shall be responsible for determining the appropriate amount of assets to be allocated to comparable plans to be established and adopted by the companies as required, in each case in accordance with applicable local law. 9. DIRECTOR PLANS. (a) Effective as of the Distribution Date, ITT Industries shall continue the ITT Deferred Compensation Plan, the ITT Directors Retirement Plan (which was suspended as of October 1, 1995), the group life insurance program of ITT and the ITT Group Accident Program. With respect to any non-employee director of ITT Industries immediately following the Distribution who is not 18 18 also a director of ITT Destinations at such time and who has an accrued benefit under the suspended ITT Directors Retirement Plan, ITT Industries shall provide such accrued benefit in accordance with the terms of such plan, but only to the extent such accrued benefit is not duplicated under a plan maintained by ITT Destinations or ITT Hartford. (b) Effective as of the Distribution Date, ITT Destinations shall adopt plans and programs for non-employee directors that are identical in all material respects to the ITT Deferred Compensation Plan, the ITT Directors Retirement Plan (which was suspended as of October 1, 1995), the group life insurance program of ITT and the ITT Group Accident Program. With respect to any non-employee director of ITT Destinations immediately following the Distribution who has an accrued benefit under the suspended ITT Directors Retirement Plan, ITT Destinations shall provide such accrued benefit in accordance with the terms of such plan, but only to the extent such accrued benefit is not duplicated under a plan maintained by ITT Industries or ITT Hartford. (c) Effective as of the Distribution Date, ITT Hartford intends to adopt plans and programs for non-employee directors that are identical in all material respects to the group life insurance program of ITT and the ITT Group Accident Program. With respect to any non-employee director of ITT Hartford who has an accrued benefit under the suspended retirement plan covering ITT Hartford non-employee directors, ITT Hartford shall provide such accrued benefit in accordance with the terms of such plan, but only to the extent such accrued benefit is not duplicated under a plan maintained by ITT Industries or ITT Destinations. 10. BENEFIT PROGRAM PARTICIPATION. (a) Except as specifically provided herein, all ITT Destinations and ITT Hartford employees (including ITT Destinations Salaried Employees and ITT Hartford Employees) will cease participation in all ITT benefit plans and programs immediately prior to the Distribution Date. As soon as reasonably practicable, ITT Industries will provide an accounting of the 1995 claims experience for ITT Destinations employees and ITT Hartford Employees who participate in the ITT welfare benefit plans and programs and reasonably determine any reconciliation payment necessary. 19 19 (b) ITT Destinations shall cause to be recognized each ITT Destinations Salaried Employee's service with ITT for purposes of determining (i) eligibility for vacation benefits, short-term disability and severance benefits and (ii) eligibility for vesting under all other employee benefit plans and policies of ITT Destinations applicable to such ITT Destinations Salaried Employees, to the extent such service was recognized by ITT for such purposes. ITT Hartford shall cause to be recognized each ITT Hartford Employee's service with ITT for purposes of determining (i) eligibility for vacation benefits, short-term disability and severance benefits and (ii) eligibility for vesting under all other employee benefit plans and policies of ITT Hartford applicable to such ITT Hartford Employees, to the extent such service was recognized by ITT for such purposes. (c) Nothing in this Agreement shall be construed or interpreted to restrict ITT Industries', ITT Destinations' or ITT Hartford's right or authority to amend or terminate any of its employee benefit plans, policies or programs effective as of a date following the Distribution Date, except as explicitly stated in Section 4(b) hereof. 11. ALLOCATION OF BALANCE SHEET ACCOUNTS. Effective as of the Distribution Date, certain balance sheet accounts attributable to employee benefit plans for which responsibility is being transferred from ITT to ITT Destinations and/or ITT Hartford shall be allocated to the balance sheets of ITT Destinations or ITT Hartford, as appropriate, on the following basis: (a) All accruals on the balance sheets of ITT Destinations (including accruals on the balance sheet of ITT Sheraton) and ITT Hartford which relate to benefit plans sponsored by the respective companies shall be unaffected by the provisions of this Section 11. (b)(i) With respect to the unfunded pension plan liabilities assumed by ITT Destinations (excluding all liabilities assumed pursuant to a waiver described in Section 3 of this Agreement), the then current balance sheet accrual shall be transferred. (ii) With respect to the unfunded pension plan liabilities assumed by ITT Destinations pursuant to a waiver described in Section 3 of this Agreement, the then current balance sheet accrual for the ITT Excess Pension Plan shall be allocated between ITT Industries and ITT Destinations in 20 20 proportion to the Accumulated Benefit Obligation (as that term is defined in Statement of Financial Accounting Standard No. 87) assumed by such companies. (c) With regard to the ITT Directors Retirement Plan, there shall be allocated to the responsible party, determined in accordance with Section 9 of this Agreement, the present value of the accrued pension benefit as of the Distribution Date for those eligible directors for whom the liability is being assumed by either ITT Destinations or ITT Hartford using the discount rate last adopted by ITT for purposes of Statement of Financial Accounting Standard No. 87. (d) With respect to the liabilities being assumed by ITT Destinations and ITT Hartford in connection with the provisions of Section 4(b) of this Agreement, ITT shall allocate to the respective parties the "Accumulated Postretirement Benefit Obligation" (as that term is defined in Statement of Financial Accounting Standard No. 106), using the assumptions in effect as of the Distribution Date, for ITT Employees who, immediately after the Distribution, are employed by ITT Destinations or ITT Hartford. (e) In connection with the book reserves maintained by ITT with respect to the liabilities for Other Postemployment Benefits, as that term is described in Statement of Financial Accounting Standard No. 112, ITT shall allocate to ITT Destinations and ITT Hartford, respectively, the amounts previously provided by operations which, after the Distribution Date, shall be part of ITT Destinations and ITT Hartford, adjusted to reflect the gain recognized by ITT in connection with the 1993 changes to Medicare. (f) With regard to the liabilities recorded by ITT with respect to the ITT Excess Savings Plan that will, in accordance with Section 3(b), be assumed by ITT Destinations and ITT Hartford, respectively, ITT shall allocate to the respective new employing entity an amount equal to the sum of the plan balances for such affected employees. (g) With respect to the liabilities accrued by ITT in connection with the ITT Excess Long-Term Disability Plan, ITT shall allocate to ITT Destinations a share of such book reserves based on the proportion of the exposure 21 21 assumed by ITT Destinations to the total exposure under the plan as determined by Metropolitan Life Insurance Company. (h) In connection with the assumption by ITT Destinations of a portion of the responsibility for the ITT Third Country National Pension Plan, with an appropriate transfer of assets, as provided in Section 8 of this Agreement, ITT shall allocate to ITT Destinations a portion of the prepaid pension expense in the same proportion that the assets transferred relate to the total assets of the plan. (i) For each category of balance sheet account enumerated in this Section 11, there has been recorded a corresponding deferred tax debit or credit, as the case may be, which shall also be allocated to the respective companies based on the amount allocated for the stated reason above. (j) To the extent that a balance sheet account requiring allocation among the companies exists that is not specifically included in this Section 11, ITT shall make the allocation on a reasonable basis, subject to the agreement of the party in whose favor the allocation is being made. 12. ACCESS TO INFORMATION AND DATA EXCHANGE. (a) Provision of Corporate Records. (i) Unless otherwise specified in the procedures set forth in Schedule 12(c)(ii) hereto, after the Distribution Date, upon the prior written request by ITT Destinations or ITT Hartford for specific and identified agreements, documents, books, records or files including, without limitation, computer files, microfiche, tape recordings and photographs (collectively, "Records"), relating to or affecting ITT Destinations or ITT Hartford, as applicable, ITT Industries shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of ITT Industries or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (ii) Unless otherwise specified in the procedures set forth in Schedule 12(c)(ii) hereto, after the Distribution Date, upon the prior written request by ITT Industries or ITT Hartford for specific and identified Records relating to or affecting ITT Industries or ITT 22 22 Hartford, as applicable, ITT Destinations shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a need for such originals) in the possession of ITT Destinations or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (iii) Unless otherwise specified in the procedures set forth in Schedule 12(c)(ii) hereto, after the Distribution Date, upon the prior written request by ITT Industries or ITT Destinations for specific and identified Records relating to or affecting ITT Industries or ITT Destinations, as applicable, ITT Hartford shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a need for such originals) in the possession of ITT Hartford or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (b) Access to Information. (i) Unless otherwise specified in the procedures set forth in Schedule 12(c)(ii) hereto, from and after the Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, books and Records of such party and its Subsidiaries insofar as such access is reasonably required by the other party. (ii) Without limiting the generality of the foregoing clause (i), except as otherwise provided by law, each party hereto shall furnish, or shall cause to be furnished to the other parties, a list of all benefit plan participants and employee data or information in its possession which is necessary for such other parties to maintain and implement any benefit plan or arrangement covered by this Agreement, or to comply with the provisions of this Agreement, and which is not otherwise readily available to such other party. (c) Reimbursement; Other Matters. (i) Except to the extent otherwise contemplated by the Distribution 23 23 Agreement or any Ancillary Agreement or Schedule 12(c)(ii) hereto, a party providing Records or access to information to the other party under this Section 12 shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Records or access to information. (ii) The parties hereto shall comply with those document retention policies, cost sharing arrangements, expense reimbursement procedures and request procedures as shall be set forth in Schedule 12(c)(ii) hereto or established and agreed to in writing by their respective authorized officers on or prior to the Distribution Date in respect of Records and related matters. (d) Confidentiality. Each of (i) ITT Industries and its Subsidiaries, (ii) ITT Destinations and its Subsidiaries and (iii) ITT Hartford and its Subsidiaries shall not use or permit the use of (without the prior written consent of the other) and shall hold, and shall cause its consultants and advisors to hold, in strict confidence, all information concerning the other parties in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain through no fault of such party or (B) such information has been later lawfully acquired from other sources by such party or (C) the Distribution Agreement, this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information) to the extent such information (x) relates to the period up to the Effective Time, (y) relates to the Distribution Agreement or any Ancillary Agreement or (z) is obtained in the course of performing services for the other party pursuant to the Distribution Agreement or any Ancillary Agreement, and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other person, except such party's auditors and attorneys, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure. To the extent that a party hereto is compelled by judicial or administrative process to disclose such information under circumstances in which any evidentiary privilege would be available, such party agrees 24 24 to assert such privilege in good faith prior to making such disclosure. Each of the parties hereto agrees to consult with each relevant other party in connection with any such judicial or administrative process, including, without limitation, in determining whether any privilege is available, and further agrees to allow each such relevant party and its counsel to participate in any hearing or other proceeding (including, without limitation, any appeal of an initial order to disclose) in respect of such disclosure and assertion of privilege. Notwithstanding anything to the contrary contained herein, each party shall be entitled to use information disclosed pursuant to this Agreement to the extent reasonably necessary for the administration of its employee benefit plans in accordance with applicable law. 13. NOTICES; COOPERATION. Notwithstanding anything in this Agreement to the contrary, all actions contemplated herein with respect to benefit plans which are to be consummated pursuant to this Agreement shall be subject to such notices to, and/or approvals by, the Internal Revenue Service (or other governmental agency or entity) as are required or deemed appropriate by such benefit plan's sponsor. Each of ITT Industries, ITT Destinations and ITT Hartford agrees to use its commercially reasonable efforts to cause all such notices and/or approvals to be filed or obtained, as the case may be. Each party hereto shall reasonably cooperate with the other parties with respect to any government filings, employee notices or any other actions reasonably necessary to maintain and implement the employee benefit arrangements covered by this Agreement. 14. FURTHER ASSURANCES. From time to time, as and when reasonably requested by any other party hereto, each party hereto shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such other party may reasonably deem necessary or desirable to effect the purposes of this Agreement and the transactions contemplated hereunder. 15. INDEMNIFICATION. (a) Indemnification by ITT Industries. Except as otherwise specifically set forth in this Agreement or the Distribution Agreement, ITT Industries shall indemnify, defend and hold harmless the ITT Destinations Indemnitees and the ITT Hartford Indemnitees from and against any and all Indemnifiable Losses of the ITT Destinations Indemnitees and the ITT Hartford Indemnitees, 25 25 respectively, arising out of, by reason of or otherwise in connection with (i) any employee benefit plan, policy, program or arrangement established or adopted by ITT Industries effective on or after the Distribution Date, (ii) any liability assumed or retained by ITT Industries pursuant to the terms and conditions set forth in this Agreement or (iii) the breach by ITT Industries of any provision of this Agreement. (b) Indemnification by ITT Destinations. Except as otherwise specifically set forth in this Agreement or the Distribution Agreement, ITT Destinations shall indemnify, defend and hold harmless the ITT Industries Indemnitees and the ITT Hartford Indemnitees from and against any and all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Hartford Indemnitees, respectively, arising out of, by reason of or otherwise in connection with (i) any employee benefit plan, policy, program or arrangement established or adopted by ITT Destinations effective on or after the Distribution Date, (ii) any liability assumed or retained by ITT Destinations pursuant to the terms and conditions set forth in this Agreement or (iii) the breach by ITT Destinations of any provision of this Agreement. (c) Indemnification by ITT Hartford. Except as otherwise specifically set forth in this Agreement or the Distribution Agreement, ITT Hartford shall indemnify, defend and hold harmless the ITT Industries Indemnitees and the ITT Destinations Indemnitees from and against any and all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Destinations Indemnitees, respectively, arising out of, by reason of or otherwise in connection with (i) any employee benefit plan, policy, program or arrangement established or adopted by ITT Hartford effective on or after the Distribution Date, (ii) any liability assumed or retained by ITT Hartford pursuant to the terms and conditions set forth in this Agreement and (iii) the breach by ITT Hartford of any provision of this Agreement. (d) Limitations on Indemnification Obligations. (i) The amount that any party (an "Indemnifying Party") is or may be required to pay to any other person (an "Indemnitee") pursuant to paragraphs (a), (b) or (c) of this Section 15, as applicable, shall be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnitee in respect of the related Indemnifiable Loss. If an Indemnitee shall have received the payment required by this Agreement 26 26 from an Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Loss. (ii) An Indemnifying Party shall not be required to indemnify or pay an Indemnitee pursuant to paragraphs (a), (b) or (c) of this Section 15, as applicable, for any Indemnifiable Losses relating to or associated with any employee benefit plan, policy, program or arrangement of the Indemnifying Party arising out of, by reason of or otherwise in connection with any act or failure to act on the part of such Indemnitee (including for this purpose any subsidiaries, businesses or operations which become associated with the Indemnitee by virtue of or in connection with the Distribution) with respect to or in connection with such employee benefit plan, policy, program or arrangement, including, without limitation, any such act or failure to act in connection with the administration by the Indemnitee of such employee benefit plan, policy, program or arrangement. (e) Procedures for Indemnification (Third Party Claims). If a claim or demand is made against an Indemnitee by any person who is not a party to this Agreement (a "Third Party Claim") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within 15 business days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. 27 27 If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel selected by the Indemnifying Party; provided that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, then in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise significantly adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee; provided, however, that the 28 28 Indemnitee may refuse to agree to any such settlement, compromise or discharge if the Indemnitee agrees that the Indemnifying Party's indemnification obligation with respect to such Third Party Claim shall not exceed the amount that would be required to be paid by or on behalf of the Indemnifying Party in connection with such settlement, compromise or discharge. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. Indemnification required by this Section 15 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or loss, liability, claim, damage or expense is incurred. All claims under Section 15 that are Third Party Claims shall be governed by this Section 15(e). (f) Other Adjustments. (i) The amount of any Indemnifiable Loss shall be (x) increased to take into account any net Tax cost actually incurred by the Indemnitee arising from any payments received from the Indemnifying Party (grossed up for such increase) and (y) reduced to take account of any net Tax benefit actually realized by the Indemnitee arising from the incurrence or payment of any such Indemnifiable Loss. In computing the amount of any such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any payment with respect to an Indemnifiable Loss or the incurrence or payment of any Indemnifiable Loss. (ii) In addition to any adjustments required pursuant to Section 15(d) hereof or clause (i) of this 29 29 Section 15(f), if the amount of any Indemnifiable Loss shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Loss. (g) Survival of Indemnities. The obligations of ITT Industries, ITT Destinations and ITT Hartford under this Section 15 shall survive the sale or other transfer by any of them of any assets or businesses or the assignment by any of them of any Liabilities, with respect to any Indemnifiable Loss of the other related to such assets, businesses or Liabilities. 16. DISPUTE RESOLUTION. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including, without limitation, any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the general counsels of the relevant parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute. If after such reasonable period such general counsels are unable to settle such Agreement Dispute (and in any event after 60 days have elapsed from the time the relevant parties began such negotiations), such Agreement Dispute shall be determined, at the request of any relevant party, by arbitration conducted in New York City, before and in accordance with the then-existing Rules for Commercial Arbitration of the American Arbitration Association (the "Rules"), and any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. Section 10(a) as in effect on the date hereof), and judgment may be entered by any state or Federal court having jurisdiction thereof in accordance with Section 17(q) hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of the then-existing Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Civil Rules for the United States District Court for the Southern District of New York shall apply to any arbitration hereunder. Any controversy 30 30 concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Section 15 shall be determined by the arbitrator. The arbitrator shall be a retired or former judge of any United States District Court or Court of Appeals or such other qualified person as the relevant parties may agree to designate, provided such individual has had substantial professional experience with regard to settling sophisticated commercial disputes. The parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The designation of a situs or a governing law for this Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it would be applicable. In his award the arbitrator shall allocate, in his discretion, among the parties to the arbitration all costs of the arbitration, including, without limitation, the fees and expenses of the arbitrator and reasonable attorneys' fees, costs and expert witness expenses of the parties. The undersigned agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrator shall not be entitled to award punitive damages. 17. MISCELLANEOUS. (a) Complete Agreement; Construction. This Agreement, including the Schedule, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. The Schedule shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. (b) Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters explicitly and expressly covered by the Distribution Agreement or the Ancillary Agreements. (c) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be 31 31 considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. (d) Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. (e) Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To ITT Corporation (ITT Industries, Inc. after the Distribution): 4 West Red Oak Lane White Plains, NY 10604 Attn: General Counsel To ITT Destinations, Inc. (ITT Corporation after the Distribution): 1330 Avenue of the Americas New York, NY 10019 Attn: Executive Vice President and General Counsel To ITT Hartford Group, Inc.: Hartford Plaza Hartford, CT 06115 Attn: General Counsel (f) Waivers. The failure of either party to require strict performance by the other party of any 32 32 provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision thereof. (g) Amendments. Subject to the terms of Section 17(j), this Agreement may not be modified or amended except by an agreement in writing signed by the parties. (h) Assignment. This Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all the assets of a party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other parties to this Agreement. Otherwise this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the others, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. (i) Successors and Assigns. The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and permitted assigns. (j) Termination. This Agreement (including, without limitation, Section 3(c) and Section 15 hereof) may be terminated, amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of ITT without the approval of ITT Destinations or ITT Hartford or the shareholders of ITT. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Section 3(c) and Section 15 shall not be terminated or amended after the Distribution in respect of the third party beneficiaries thereto without the consent of such persons. (k) Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the Distribution Date. 33 33 (l) Third Party Beneficiaries. Except as provided in Section 3(c) hereof relating to excess pension plan guarantees and excess savings plan guarantees and in Section 15 hereof relating to Indemnitees, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. (m) Attorney Fees. Except as contemplated by the third to the last sentence of Section 16 hereof, a party in breach of this Agreement shall, on demand, indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including, without limitation, legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such party may be entitled hereunder or otherwise. (n) Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. (o) Specific Performance. Each of the parties hereto acknowledges that there is no adequate remedy at law for failure by such parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the parties hereto under this Agreement. (p) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED IN THAT STATE. (q) Consent to Jurisdiction. Without limiting the provisions of Section 16 hereof, each of the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern 34 34 District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 17(q). Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated herein in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient form. (r) Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 35 35 (s) Effectiveness. This Agreement shall be effective as of the Distribution Date, subject to the consummation of the Distribution. (t) Definitions. Capitalized terms used herein shall have the respective meanings specified in the Appendix attached hereto unless otherwise herein defined or the context hereof shall otherwise require. IN WITNESS WHEREOF, the parties have duly executed and entered into this Agreement, as of the date first above written. ITT Corporation, By: /s/ Robert W. Brokaw ---------------------------------- Name: Robert W. Brokaw Title: VP, Director-Employee Benefits & HQ Personnel ITT Destinations, Inc., By: /s/ Richard S. Ward ---------------------------------- Name: Richard S. Ward Title: Executive Vice President ITT Hartford Group, Inc., By: /s/ Donald R. Frahm ---------------------------------- Name: Donald R. Frahm Title: Executive Vice President 36 Appendix As used in the Agreement, the following terms have the following meanings: "Action" means any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency, body or commission or any arbitration tribunal. "Affiliate" means, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "Agreement Disputes" has the meaning set forth in Section 16 of this Agreement. "Ancillary Agreements" means all of the written agreements, instruments, understandings, assignments or other written arrangements (other than this Agreement and the Distribution Agreement) entered into in connection with the transactions contemplated hereby, including, without limitation, the Conveyancing and Assumption Instruments, the Tax Allocation Agreement and the Intellectual Property Agreements. "CWI" means Caesars World, Inc. "Change in Control" means the occurrence of any of the following events with respect to the relevant corporation: (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") or any successor provision disclosing that any person (within the meaning of Section 13(d) of the Exchange Act), other than the relevant corporation or a subsidiary thereof, or any employee benefit plan maintained by the relevant corporation or a subsidiary thereof, is the beneficial owner directly or indirectly of 20% or more of the outstanding common stock of the relevant corporation; (ii) any person (within the meaning of Section 13(d) of the Exchange Act), other than the relevant corporation or a subsidiary thereof, or any employee benefit plan maintained by the relevant corporation or a subsidiary thereof, shall purchase shares pursuant to a tender offer or exchange offer 37 2 to acquire any of the common stock of such relevant corporation (or securities convertible into such common stock) for cash, securities or any other consideration, provided that after the consummation of the offer, the person in question is the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly of 15% or more of the outstanding common stock of the relevant corporation (calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the case of rights to acquire common stock); (iii) the shareholders of the relevant corporation shall approve (A) any consolidation or merger of the relevant corporation in which such corporation is not the continuing or surviving corporation or pursuant to which shares of the common stock of the relevant corporation would be converted into cash, securities or other property, other than a merger of the relevant corporation in which holders of the common stock thereof immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the relevant corporation; or (iv) there shall have been a change in majority of the members of the board of directors of the relevant corporation within a 12-month period unless the election or nomination for election by the shareholders of the relevant corporation of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who were directors at the beginning of such 12-month period. "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. "Conveyancing and Assumption Instruments" means, collectively, the various agreements, instruments and other documents to be entered into to effect the transfer of assets and the assumption of Liabilities in the manner contemplated by the Distribution Agreement, this Agreement and the Ancillary Agreements. "Distribution" means the distribution on the Distribution Date to holders of record of shares of ITT Common Stock as of the Distribution Record Date of (i) the ITT Destinations Common Stock owned by ITT on the basis of one share of ITT Destinations Common Stock for each 38 3 outstanding share of ITT Common Stock and (ii) the ITT Hartford Common Stock owned by ITT on the basis of one share of ITT Hartford Common Stock for each outstanding share of ITT Common Stock. "Distribution Agreement" means the Distribution Agreement dated as of November 1, 1995, among ITT, ITT Destinations and ITT Hartford. "Distribution Date" means such date as may hereafter be determined by ITT's Board of Directors as the date as of which the Distribution shall be effected. "Distribution Record Date" means such date as may hereafter be determined by ITT's Board of Directors as the record date for the Distribution. "Effective Time" means 11:59 p.m., New York time, on the Distribution Date. "Indemnifiable Losses" means any and all losses, liabilities, claims, damages, demands, costs or expenses (including, without limitation, reasonable attorneys' fees and any and all out-of-pocket expenses) whatsoever reasonably incurred in investigating, preparing for or defending against any Actions or potential Actions. "Indemnifying Party" has the meaning set forth in Section 15(d). "Indemnitee" has the meaning set forth in Section 15(d). "Insurance Proceeds" means those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in either case net of any applicable premium adjustment, retroactively-rated premium, deductible, retention, cost of reserve paid or held by or for the benefit of such insured. "Intellectual Property Agreements" means the various intellectual property and licensing agreements entered into in connection with the Distribution. "ITT" means ITT Corporation, a Delaware corporation and its predecessor Maryland corporation, together with its Subsidiaries, to be renamed "ITT 39 4 Industries, Inc." and reincorporated under Indiana law in connection with the Distribution. "ITT Bonus Plan" means the ITT Annual Incentive Bonus Plan maintained by ITT. "ITT Common Stock" has the meaning set forth in the preamble to this Agreement. "ITT Deferred Compensation Plan" means (i) the 1995 ITT Deferred Compensation Plan or (ii) the 1995 ITT Industries Deferred Compensation Plan, after giving effect to the Distribution, in each case as the context requires. "ITT Destinations" means ITT Destinations, Inc., a Nevada corporation, together with its Subsidiaries, to be renamed "ITT Corporation" in connection with the Distribution, and referred to in the Proxy Statement as "New ITT". "ITT Destinations Common Stock" has the meaning set forth in the preamble to this Agreement. "ITT Destinations Excess Pension Plan" means the excess pension plan to be adopted by ITT Destinations effective as of the Distribution Date, to be known after the Distribution as the "ITT Excess Pension Plan" and referred to in the Proxy Statement as the "New ITT Excess Plan". "ITT Destinations Excess Pension Plan Trust" means the excess pension plan trust to be adopted by ITT Destinations effective as of the Distribution Date. "ITT Destinations Excess Savings Plan" means the excess investment and savings plan to be adopted by ITT Destinations effective as of the Distribution Date, to be known after the Distribution as the "ITT Excess Savings Plan" and referred to in the Proxy Statement as the "New ITT Excess Savings Plan". "ITT Destinations Indemnitees" means ITT Destinations, each Affiliate of ITT Destinations, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. "ITT Destinations Salaried Employees" means persons who, immediately after the Distribution, are 40 5 employed on a salaried basis by ITT Destinations, including such persons absent from work at ITT Destinations by reason of layoff, leave of absence or disability. "ITT Destinations Salaried Retirement Plan" means the Sheraton Salaried Retirement Plan, as adopted by ITT Destinations effective as of the Distribution Date, to be known as the "ITT Salaried Retirement Plan" and referred to in the Proxy Statement as the "New ITT Salaried Retirement Plan". "ITT Destinations Savings Plan" means the defined contribution investment and savings plan to be adopted by ITT Destinations effective as of the Distribution Date, to be known after the Distribution as the "ITT Investment and Savings Plan" and referred to in the Proxy Statement as the "New ITT Savings Plan". "ITT Destinations Stock Plan" means the ITT 1995 Incentive Stock Plan to be adopted by ITT Destinations effective as of the Distribution. "ITT Directors Retirement Plan" means (i) the Retirement Plan for Non-Management Directors of ITT Corporation or (ii) the ITT Industries Directors Retirement Plan, after giving effect to the Distribution, in each case as the context requires. "ITT Employees" means (i) persons employed in the United States on a salaried basis by the ITT Group immediately prior to the Distribution, except those persons who are employed by CWI and MSG as of such time; (ii) persons employed in the United States by ITT Hartford immediately prior to the Distribution; (iii) persons employed on an hourly basis by the ITT Group immediately prior to the Distribution who have accrued benefits under the ITT Salaried Retirement Plan, the Sheraton Salaried Retirement Plan or the ITT Hartford Retirement Plan and (iv) persons included in clauses (i), (ii) and (iii) above who are absent from work immediately prior to the Distribution by reason of layoff, leave of absence or disability. "ITT Excess Long-Term Disability Plan" means (i) the ITT Excess Long-Term Disability Plan or (ii) the excess long-term disability plan maintained by ITT Industries, after giving effect to the Distribution, in each case as the context requires. 41 6 "ITT Excess Pension Plan" means (i) the ITT Excess Plan or (ii) the excess pension plan maintained by ITT Industries, after giving effect to the Distribution, in each case as the context requires. "ITT Excess Pension Plan Trust" means (i) the excess pension plan trust maintained by ITT or (ii) the excess pension plan trust maintained by ITT Industries, after giving effect to the Distribution, in each case as the context requires. "ITT Excess Savings Plan" means (i) the ITT Excess Savings Plan or (ii) the excess savings plan maintained by ITT Industries, after giving effect to the Distribution, in each case as the context requires. "ITT Group" means ITT and its affiliates prior to the Distribution. "ITT Group Accident Program" means (i) the ITT Group Accident Program for Officers and Directors or (ii) the ITT Industries Group Accident Program for Officers and Directors, after giving effect to the Distribution, in each case as the context requires. "ITT Hartford" has the meaning set forth in the preamble to this Agreement. "ITT Hartford Common Stock" has the meaning set forth in the preamble to this Agreement. "ITT Hartford Employees" means persons who, immediately after the Distribution, are employed by ITT Hartford or absent from work by reason of layoff, leave of absence or disability. "ITT Hartford Excess Pension Plan" means the excess pension plan maintained by ITT Hartford. "ITT Hartford Excess Pension Plan Trust" means the excess pension plan trust maintained by ITT Hartford. "ITT Hartford Excess Savings Plan" has the meaning set forth in Section 3(b) of this Agreement. "ITT Hartford Indemnitees" means ITT Hartford, each Affiliate of ITT Hartford, each of their respective directors, officers, employees and agents and each of the 42 7 heirs, executors, successors and assigns of any of the foregoing. "ITT Hartford Retirement Plan" means the Hartford Fire Insurance Company Retirement Plan. "ITT Hartford Savings Plan" means the defined contribution investment and savings plan to be adopted by ITT Hartford effective as of the Distribution Date. "ITT Hartford Stock Plan" means the ITT Hartford 1995 Incentive Stock Plan to be adopted by ITT Hartford effective as of the Distribution. "ITT Industries" means (i) ITT Industries, Inc., an Indiana corporation and the legal successor to ITT, together with its Subsidiaries, or (ii) ITT, together with its Subsidiaries, after giving effect to the Distribution or as if such transaction had occurred, in each case as the context requires. "ITT Industries Indemnitees" means ITT Industries, each Affiliate of ITT Industries, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. "ITT Industries Salaried Employees" means persons who, immediately after the Distribution, are employed on a salaried basis by ITT Industries, including such persons absent from work at ITT Industries by reason of layoff, leave of absence or disability. "ITT Long-Term Disability Plan" means (i) the ITT Long-Term Disability Plan or (ii) the long-term disability plan maintained by ITT Industries, after giving effect to the Distribution, in each case as the context requires. "ITT Long-Term Performance Plan" means the ITT Long-Term Performance Plan maintained by ITT. "ITT Salaried Retirement Plan" means (i) the Retirement Plan for Salaried Employees of ITT Corporation or (ii) the ITT Industries Salaried Retirement Plan, after giving effect to the Distribution, in each case as the context requires. 43 8 "ITT Savings Plan" means (i) the ITT Investment and Savings Plan for Salaried Employees or (ii) the ITT Industries Investment and Savings Plan, after giving effect to the Distribution, in each case as the context requires. "ITT Sheraton" means ITT Sheraton Corporation. "ITT Stock Awards" has the meaning set forth in Section 7 of this Agreement. "ITT Stock Plans" has the meaning set forth in Section 7 of this Agreement. "Liabilities" means any and all debts, liabilities and obligations, absolute and contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any court, any governmental or other regulatory or administrative agency or commission or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking. "MSG" means Madison Square Garden, L.P. "person" means any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Proxy Statement" means the proxy statement sent to the holders of shares of ITT Common Stock in connection with the Distribution, including any amendment or supplement thereto. "Records" has the meaning set forth in Section 12 of this Agreement. "Rules" has the meaning set forth in Section 16 of this Agreement. "Sheraton Excess Pension Plan" means the excess pension plan maintained by ITT Sheraton prior to the Distribution. 44 9 "Sheraton Salaried Retirement Plan" means the Sheraton Corporation Retirement Plan for Salaried Employees. "Subsidiary" means any corporation, partnership or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). For purposes of this Agreement, MSG and ITT-Dow Jones Television and their respective Subsidiaries are Subsidiaries of ITT Destinations. "Tax" means all Federal, state, local and foreign taxes and assessments, including all interest, penalties and additions imposed with respect to such amounts. "Tax Allocation Agreement" means the Tax Allocation Agreement dated as of November 1, 1995, among ITT, ITT Destinations and ITT Hartford. "Third Party Claim" has the meaning set forth in Section 15(e) of this Agreement. EX-10.14 10 364-DAY COMPETITIVE ADVANCE AND REVOLVING CREDIT 1 ================================================================================ 364-DAY COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT Dated as of November 10, 1995 among ITT CORPORATION THE LENDERS NAMED HEREIN and CHEMICAL BANK, as Administrative Agent ================================================================================ 2 TABLE OF CONTENTS I. DEFINITIONS 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 11 II. THE CREDITS 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.03. Competitive Bid Procedure . . . . . . . . . . . . . . . . . . . . 13 2.04. Standby Borrowing Procedure . . . . . . . . . . . . . . . . . . . 15 2.05. Conversion and Continuation of Standby Loans . . . . . . . . . . . 15 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.07. Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . 17 2.08. Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . 17 2.09. Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.10. Alternate Rate of Interest . . . . . . . . . . . . . . . . . . . . 18 2.11. Termination and Reduction of Commitments . . . . . . . . . . . . . 18 2.12. Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.13. Reserve Requirements; Change in Circumstances . . . . . . . . . . . 19 2.14. Change in Legality . . . . . . . . . . . . . . . . . . . . . . . . 20 2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.16. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . 21 2.17. Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . 21 2.18. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.19. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.20. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances . . . . . . . . . . . . . . . . . 24 III. REPRESENTATIONS AND WARRANTIES 3.01. Organization; Powers . . . . . . . . . . . . . . . . . . . . . . . 25 3.02. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.03. Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.04. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 26 3.05. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 26 3.06. Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . 26 3.07. Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . 26 3.08. Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.10. Full Disclosure; No Material Misstatements . . . . . . . . . . . . 27 3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.12. Employee Pension Benefit Plans . . . . . . . . . . . . . . . . . . 27
3 Contents, p. 2 3.13. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 IV. CONDITIONS OF LENDING 4.01. All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.02. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.03. First Borrowing by Each Borrowing Subsidiary . . . . . . . . . . . 29 V. COVENANTS 5.01. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.02. Business and Properties . . . . . . . . . . . . . . . . . . . . . 29 5.03. Financial Statements, Reports, Etc. . . . . . . . . . . . . . . . . 29 5.04. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.05. Obligations and Taxes . . . . . . . . . . . . . . . . . . . . . . 30 5.06. Litigation and Other Notices . . . . . . . . . . . . . . . . . . . 30 5.07. Maintaining Records; Access to Properties and Inspections . . . . . . . . . . . . . . . . . . . . . . . . 31 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.09. Consolidations, Mergers, and Sales of Assets . . . . . . . . . . . 31 5.10. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . 31 5.11. Limitations on Sale and Leaseback Transactions . . . . . . . . . . 33 5.12. Consolidated Total Debt to Consolidated EBITDA . . . . . . . . . . 34 VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 VII. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 VIII. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 37 IX. MISCELLANEOUS 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.02. Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . 39 9.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9.04. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 40 9.05. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . 42 9.06. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 42 9.07. Waivers; Amendment . . . . . . . . . . . . . . . . . . . . . . . . 42 9.08. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.12. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.13. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . 44 9.14. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 44 9.15. Addition of Borrowing Subsidiaries . . . . . . . . . . . . . . . . 45 9.16. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4 Contents, p. 3 EXHIBITS AND SCHEDULES Exhibit A-1 Form of Competitive Bid Request Exhibit A-2 Form of Notice of Competitive Bid Request Exhibit A-3 Form of Competitive Bid Exhibit A-4 Form of Competitive Bid Accept/Reject Exhibit A-5 Form of Standby Borrowing Request Exhibit B Administrative Questionnaire Exhibit C Form of Assignment and Acceptance Exhibit D Form of Opinion of Counsel for ITT Corporation Exhibit E Form of Borrowing Subsidiary Agreement Exhibit F Form of Letter Agreement Schedule 2.01 Commitments Schedule 3.13 Assumptions Schedule 5.10 Existing Liens 5 364-DAY COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT (as it may be amended, supplemented or otherwise modified, the "Agreement") dated as of November 10, 1995, among ITT CORPORATION, a Nevada corporation (the "Company"), each Borrowing Subsidiary party hereto, the lenders listed in Schedule 2.01 (together with their permitted assigns, the "Lenders") and CHEMICAL BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Lenders have been requested to extend credit to the Borrowers (such term and each other capitalized term used but not defined herein having the meaning assigned to it in Article I) to enable them to borrow on a standby revolving credit basis on and after the date hereof and at any time and from time to time prior to the Maturity Date a principal amount not in excess of $1,000,000,000 at any time outstanding. The Lenders have also been requested to provide a procedure pursuant to which the Borrowers may invite the Lenders to bid on an uncommitted basis on short-term borrowings by the Borrowers. The proceeds of such borrowings are to be used for working capital and other general corporate purposes. The Lenders are willing to extend credit on the terms and subject to the conditions herein set forth. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Administrative Fees" shall have the meaning assigned to such term in Section 2.06(b). "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit B hereto. "Affiliate" shall mean, when used with respect to a specified person, another person that directly or indirectly controls or is controlled by or is under common control with the person specified. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, 6 "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as released on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so released for any day which is a Business Day, the arithmetic average (rounded upwards to the next 1/100th of 1%), as determined by the Administrative Agent, of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" shall mean on any date, with respect to Eurodollar Loans or with respect to the Facility Fee, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread" or "Facility Fee Percentage", as the case may be, based upon the Ratings in effect on such date:
Category 1 Eurodollar Spread Facility Fee Percentage - - ---------- ----------------- ----------------------- AA- or higher by D&P; .130% .045% AA- or higher by Fitch; Aa3 or higher by Moody's; AA- or higher by S&P Category 2 - - ---------- A+ or A by D&P; .150% .050% A+ or A by Fitch; A1 or A2 by Moody's; A+ or A by S&P Category 3 - - ---------- A- by D&P; .195% .055% A- by Fitch; A3 by Moody's; A- by S&P Category 4 - - ---------- BBB+ by D&P; .225% .075% BBB+ by Fitch; Baa1 by Moody's; BBB+ by S&P
7 3
Category 5 Eurodollar Spread Facility Fee Percentage - - ---------- ----------------- ----------------------- BBB by D&P; .250% .100% BBB by Fitch; Baa2 by Moody's; BBB by S&P Category 6 - - ---------- BBB- or lower by D&P; .275% .125% BBB- or lower by Fitch; Baa3 or lower by Moody's; BBB- or lower by S&P
For purposes of the foregoing, (i) if the Ratings shall fall within different Categories, then (A) if all the Ratings fall within two adjacent Categories, the Applicable Percentage will be determined by reference to the superior (or numerically lower) of such Categories unless one or more of the Ratings shall fall within Category 6, in which case the Applicable Percentage shall be determined by reference to Category 6, and (B) if the Ratings fall within more than two Categories or within two Categories that are not adjacent, then one Rating from each of the highest Category and the lowest Category in which Ratings shall fall shall be excluded and the Applicable Percentage shall be determined by reference to the superior (or numerically lower) of the remaining Ratings unless one or both of such Ratings shall fall within Category 6, in which case the Applicable Percentage shall be determined by reference to Category 6, (ii) if only two Ratings exist, the Applicable Percentage shall be based upon the lower (numerically higher) of the available Ratings, (iii) if only one Rating exists, the Applicable Percentage will be based upon the lower (numerically higher) of Category 5 and the Category corresponding to the available Rating, (iv) if no Ratings exist, the Applicable Percentage shall be based upon Category 6, and (v) if any Rating shall be changed (other than as a result of a change in the rating system of the applicable Rating Agency), such change shall be effective as of the date on which it is first announced by the Rating Agency making such change. Each such change in the Applicable Percentage shall apply to all outstanding Eurodollar Loans and to Facility Fees accruing during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of any Rating Agency shall change, the parties hereto shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee in the form of Exhibit C. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Board of Directors" shall mean the Board of Directors of a Borrower or any duly authorized committee thereof. "Borrower" shall mean any of the Company and the Borrowing Subsidiaries. "Borrowing" shall mean a group of Loans of a single Type made by the Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have been accepted pursuant to Section 2.03) on a single date and as to which a single Interest Period is in effect. 8 4 "Borrowing Subsidiary" shall mean any Restricted Subsidiary which shall have executed and delivered to the Administrative Agent for distribution to each Lender a Borrowing Subsidiary Agreement. "Borrowing Subsidiary Agreement" shall mean an agreement, in the form of Exhibit E hereto, duly executed by the Company and a Subsidiary. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capitalized Lease-Back Obligation" shall mean with respect to a Principal Property, at any date as of which the same is to be determined, the total net rental obligations of the Company or a Restricted Subsidiary under a lease of such Principal Property, entered into as part of an arrangement to which the provisions of Section 5.11 are applicable (or would have been applicable had such Restricted Subsidiary been a Restricted Subsidiary at the time it entered into such lease), discounted to the date of computation at the rate of interest per annum implicit in the lease (determined in accordance with GAAP). The amount of the net rental obligation for any calendar year under any lease shall be the sum of the rental and other payments required to be paid in such calendar year by the lessee thereunder, not including, however, any amounts required to be paid by such lessee (whether or not therein designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. A "Change in Control" shall be deemed to have occurred if (a) any person or group of persons shall have acquired beneficial ownership of more than 30% of the outstanding Voting Shares of the Company (within the meaning of Section 13(d) or 14(d) of the Exchange Act and the applicable rules and regulations thereunder), or (b) during any period of 12 consecutive months, commencing after the Effective Date, individuals who on the first day of such period were directors of the Company (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Company. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Commitment" shall mean, with respect to each Lender, the commitment of such Lender hereunder as set forth as of the Effective Date in Schedule 2.01 hereto as such Lender's Commitment may be permanently terminated or reduced from time to time pursuant to Section 2.11. The Commitment of each Lender shall automatically and permanently terminate on the Maturity Date if not terminated earlier pursuant to the terms hereof. "Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.03. "Competitive Bid Accept/Reject Letter" shall mean a notification made by a Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4. "Competitive Bid Rate" shall mean, as to any Competitive Bid, (i) in the case of a Eurodollar Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid. 9 5 "Competitive Bid Request" shall mean a request made pursuant to Section 2.03(a) in the form of Exhibit A-1. "Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted under the bidding procedure described in Section 2.03. "Competitive Loan" shall mean a Loan made pursuant to the bidding procedure described in Section 2.03. Each Competitive Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan. "Consolidated EBITDA" shall mean, for any period, the sum of (a) Consolidated Net Income, (b) provisions for taxes based on income, (c) Consolidated Interest Expense, (d) total depreciation expense and (e) total amortization expense, all of the foregoing as determined on a consolidated basis for the Company and the Subsidiaries in accordance with GAAP. "Consolidated Interest Expense" shall mean, for any period, the gross interest expense of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" shall mean, for any period, net income or loss of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Net Tangible Assets" shall mean the total of all assets appearing on a consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in accordance with GAAP (and as of a date not more than 90 days prior to the date as of which Consolidated Net Tangible Assets are to be determined), less the sum of the following items as shown on said consolidated balance sheet: (i) the book amount of all segregated intangible assets, including such items as good will, trademarks, trademark rights, trade names, trade name rights, copyrights, patents, patent rights and licenses and unamortized debt discount and expense less unamortized debt premium; (ii) all depreciation, valuation and other reserves; (iii) current liabilities; (iv) any minority interest in the shares of stock (other than Preferred Stock) and surplus of Restricted Subsidiaries of the Company; (v) the investment of the Company and its Restricted Subsidiaries in any Unrestricted Subsidiary of the Company; (vi) the total indebtedness of the Company and its Restricted Subsidiaries incurred in any manner to finance or recover the cost to the Company or any Restricted Subsidiary of any physical property, real or personal, which prior to or simultaneously with the creation of such indebtedness shall have been leased by the Company or a Restricted Subsidiary to the United States of America or a department or agency thereof at an aggregate rental, payable during that portion of the initial term of such lease (without giving effect to any options of renewal or extension) which shall be unexpired at the date of the creation of such indebtedness, sufficient 10 6 (taken together with any amounts required to be paid by the lessee to the lessor upon any termination of such lease) to pay in full at the stated maturity date or dates thereof the principal of and the interest on such indebtedness; (vii) deferred income and deferred liabilities; and (viii) other items deductible under GAAP. "Consolidated Total Debt" shall mean, as at any date of determination, all Indebtedness of the Company and the Subsidiaries determined on a consolidated basis in accordance with GAAP. "D&P" shall mean Duff & Phelps Credit Rating Co. or any of its successors. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Distribution" shall mean the consummation of the transactions described in the Proxy Statement. "Dollars" or "$" shall mean lawful money of the United States of America. "Effective Date" shall mean the first date on or after November 2, 1995, on which the conditions set forth in Section 4.02 are satisfied. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Company or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Company or any ERISA Affiliate of any notice that Withdrawal Liability is being imposed or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; and (h) the occurrence of a "prohibited transaction" with respect to which the Company or any of its Subsidiaries is a "disqualified person" (within the meaning of Section 4975) of the Code, or with respect to which the Company or any such Subsidiary could otherwise be liable. 11 7 "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Competitive Loan" shall mean any Competitive Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Eurodollar Loan" shall mean any Eurodollar Competitive Loan or Eurodollar Standby Loan. "Eurodollar Standby Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Event of Default" shall have the meaning assigned to such term in Article VI. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Existing Credit Facilities" shall mean the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of February 24, 1995 and the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of February 24, 1995, among Old ITT, certain lenders and Chemical Bank, as administrative agent. "Facility B Credit Agreement" shall mean the $2,000,000,000 Five-Year Competitive Advance and Revolving Credit Facility Agreement dated the date hereof among the parties hereto, as such agreement may be amended, supplemented or modified from time to time. "Facility Fee" shall have the meaning assigned to such term in Section 2.06(a). "Fair Value", when used with respect to property, shall mean the fair value as determined in good faith by the board of directors of the Company. "Fees" shall mean the Facility Fee and the Administrative Fees. "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, treasurer, associate or assistant treasurer or director of treasury services of such corporation. "Fitch" shall mean Fitch Investors Service, Inc. or any of its successors. "Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans. "Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (the "Fixed Rate") (expressed in the form of a decimal to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid. "GAAP" shall mean generally accepted accounting principles, applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body . 12 8 "Guaranteed Obligations" shall mean the principal of and interest on the Loans made to, and the other obligations, monetary or otherwise, of, the Borrowing Subsidiaries hereunder. "Indebtedness" of any person shall mean all indebtedness representing money borrowed or the deferred purchase price of property (other than trade accounts payable) or any capitalized lease obligation, which in any case is created, assumed, incurred or guaranteed in any manner by such corporation or for which such corporation is responsible or liable (whether by agreement to purchase indebtedness of, or to supply funds to or invest in, others or otherwise). "Interest Payment Date" shall mean, with respect to any Loan, the last day of each Interest Period applicable thereto and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration or a Fixed Rate Loan with an Interest Period of more than 90 days' duration, each day that would have been an Interest Payment Date for such Loan had successive Interest Periods of three months' duration or 90 days' duration, as the case may be, been applicable to such Loan and, in addition, the date of any prepayment of each Loan or conversion of such Loan to a Loan of a different Type. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the earliest of (i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the Maturity Date, and (iii) the date such Borrowing is converted to a Borrowing of a different Type in accordance with Section 2.05 or repaid or prepaid in accordance with Section 2.07 or Section 2.12 and (c) as to any Fixed Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date specified in the Competitive Bids in which the offers to make the Fixed Rate Loans comprising such Borrowing were extended, which shall not be earlier than seven days after the date of such Borrowing or later than 360 days after the date of such Borrowing; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of Eurodollar Loans only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the rate at which dollar deposits approximately equal in principal amount to (i) in the case of a Standby Borrowing, the Administrative Agent's portion of such Eurodollar Borrowing and (ii) in the case of a Competitive Borrowing, a principal amount that would have been the Administrative Agent's portion of such Competitive Borrowing had such Competitive Borrowing been a Standby Borrowing, and for a maturity comparable to such Interest Period as are offered to the principal London offices of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" shall mean, with respect to any property or asset, any mortgage, deed of trust, lien, pledge, security interest, charge or other encumbrance on, of or in such property or asset. 13 9 "Loan" shall mean a Competitive Loan or a Standby Loan, whether made as a Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as permitted hereby. "Loan Documents" shall mean this Agreement, the Borrowing Subsidiary Agreements and promissory notes, if any, issued pursuant to Section 9.04(i). "Margin" shall mean, as to any Eurodollar Competitive Loan, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBO Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan. "Margin Regulations" shall mean Regulations G, T, U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Margin Stock" shall have the meaning given such term under Regulation U of the Board. "Material Adverse Effect" shall mean a materially adverse effect on the business, assets, operations or condition, financial or otherwise, of the Company and its subsidiaries taken as a whole. "Maturity Date" shall mean the date 364 days after the date hereof. "Moody's" shall mean Moody's Investors Service, Inc. or any of its successors. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Notice of Competitive Bid Request" shall mean a notification made pursuant to Section 2.03(a) in the form of Exhibit A-2. "Old ITT" shall mean ITT Corporation, a Delaware Corporation. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "person" shall mean any natural person, corporation, limited liability company, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which any Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Principal Property" shall mean any single facility or other property owned by the Company or any Restricted Subsidiary having a gross book value in excess of 2% of Consolidated Net 14 10 Tangible Assets, except any such property or portion thereof which the board of directors of the Company by resolution declares is not of material importance to the total business conducted by the Company and its Restricted Subsidiaries as an entirety. "Proxy Statement" shall mean the Proxy Statement of Old ITT dated August 30, 1995, and filed with the SEC under the Exchange Act. "Rating Agencies" shall mean D&P, Fitch, Moody's and S&P. "Ratings" shall mean the ratings from time to time established by the Rating Agencies for senior, unsecured, non- credit-enhanced long-term debt of the Company. "Register" shall have the meaning given such term in Section 9.04(d). "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Reportable Event" shall mean any reportable event as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414). "Required Lenders" shall mean, at any time, Lenders having Commitments representing at least 66-2/3% of the Total Commitment or, for purposes of acceleration pursuant to clause (ii) of Article VI, Lenders holding Loans representing at least 66- 2/3% of the aggregate principal amount of the Loans outstanding. "Responsible Officer" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "Restricted Subsidiary" shall mean any Subsidiary other than an Unrestricted Subsidiary. "S&P" shall mean Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or any of its successors. "SEC" shall mean the Securities and Exchange Commission. "Standby Borrowing" shall mean a Borrowing consisting of simultaneous Standby Loans from each of the Lenders. "Standby Borrowing Request" shall mean a request made pursuant to Section 2.04 in the form of Exhibit A-5. "Standby Loans" shall mean the revolving loans made pursuant to Section 2.04. Each Standby Loan shall be a Eurodollar Standby Loan or an ABR Loan. "Statutory Reserves" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) 15 11 expressed as a decimal established by the Board and any other banking authority to which the Administrative Agent is subject for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" shall mean, with respect to any person (the "parent"), any corporation, association or other business entity of which securities or other ownership interests representing more than 50% of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean a subsidiary of the Company. "Total Commitment" shall mean, at any time, the aggregate amount of Commitments of all the Lenders, as in effect at such time. "Transactions" shall have the meaning assigned to such term in Section 3.02. "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall include the LIBO Rate, the Alternate Base Rate and the Fixed Rate. "Unrestricted Subsidiary" shall mean (a) any Subsidiary which has been designated an Unrestricted Subsidiary by resolution of the board of directors of the Company (which resolution has been communicated in a notice delivered by the Company to the Administrative Agent for distribution to the Lenders) as an Unrestricted Subsidiary, other than any such Subsidiary as to which such a designation has been rescinded by resolution of said board of directors and not thereafter, or after some subsequent such rescission, restored by resolution of said board, or (b) any Subsidiary 50% or less of the Voting Shares of which is owned directly by the Company and/or one or more Restricted Subsidiaries. A Subsidiary may not be designated as (or otherwise permitted to become) an Unrestricted Subsidiary unless, immediately after such Subsidiary becomes an Unrestricted Subsidiary, such Subsidiary would not own any capital stock of, or hold any indebtedness of, any Restricted Subsidiary. A designation as an Unrestricted Subsidiary may not be rescinded (or an Unrestricted Subsidiary otherwise permitted to become a Restricted Subsidiary) unless such Subsidiary (i) is not a party to any lease which it would have been prohibited by this Agreement from entering into had it been a Restricted Subsidiary at the time it entered into such lease, unless (x) such Subsidiary had not been a Restricted Subsidiary prior to its entering into such lease, or (y) the property subject to such lease shall be owned by the Company and/or one or more Subsidiaries, or (z) such Subsidiary would not be prohibited by this Agreement from entering into such lease immediately after it becomes a Restricted Subsidiary, and (ii) does not have outstanding upon any of its property any mortgage, pledge or other lien which it would be prohibited by this Agreement from creating, suffering to be created, or assuming, immediately after it becomes a Restricted Subsidiary. "Voting Shares" shall mean, as to a particular corporation or other person, outstanding shares of stock or other equity interests of any class of such person entitled to vote in the election of directors, or otherwise to participate in the direction of the management and policies, of such person, excluding shares or interests entitled so to vote or participate only upon the happening of some contingency. SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, 16 12 any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Article V, such terms shall be construed in accordance with GAAP as in effect on the date hereof applied on a basis consistent with the application used in preparing the Company's audited financial statements referred to in Section 3.05. ARTICLE II THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Standby Loans to the Borrowers, at any time and from time to time on and after the date hereof and until the earlier of the Maturity Date and the termination of the Commitment of such Lender, in an aggregate principal amount at any time outstanding not to exceed such Lender's Commitment minus the amount by which the Competitive Loans outstanding at such time shall be deemed to have used such Commitment pursuant to Section 2.16, subject, however, to the conditions that (i) at no time shall (A) the sum of (x) the outstanding aggregate principal amount of all Standby Loans made by all Lenders plus (y) the outstanding aggregate principal amount of all Competitive Loans made by all Lenders exceed (B) the Total Commitment and (ii) at all times, the outstanding aggregate principal amount of all Standby Loans made by each Lender shall equal the product of (A) the percentage which its Commitment represents of the Total Commitment times (B) the outstanding aggregate principal amount of all Standby Loans. Within the foregoing limits, the Borrowers may borrow, pay or prepay and reborrow Standby Loans hereunder, on and after the Effective Date and prior to the Maturity Date, subject to the terms, conditions and limitations set forth herein. SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments; provided, however, that the failure of any Lender to make any Standby Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.03. The Standby Loans or Competitive Loans comprising any Borrowing shall be (i) in the case of Competitive Loans, in an aggregate principal amount which is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) in the case of Standby Loans, in an aggregate principal amount which is an integral multiple of $5,000,000 and not less than $20,000,000 (or an aggregate principal amount equal to the remaining balance of the available Commitments). (b) Each Competitive Borrowing shall be comprised entirely of Eurodollar Competitive Loans or Fixed Rate Loans, and each Standby Borrowing shall be comprised entirely of Eurodollar Standby Loans or ABR Loans, as the Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch, agency or Affiliate of such Lender to make such Loan; provided that any 17 13 exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time. For purposes of the foregoing, Loans having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Loans. (c) Subject to Section 2.05, each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to the Administrative Agent in New York, New York, not later than 12:00 noon, New York City time, and the Administrative Agent shall by 3:00 p.m., New York City time, credit the amounts so received to the account or accounts specified from time to time in one or more notices delivered by the Company to the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids therefor are accepted pursuant to Section 2.03 in the amounts so accepted. Standby Loans shall be made by the Lenders pro rata in accordance with Section 2.16. Unless the Administrative Agent shall have received notice from a Lender prior to the date (or, in the case of ABR Borrowings, on the date) of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with this paragraph (c) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Effective Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. SECTION 2.03. Competitive Bid Procedure. (a) In order to request Competitive Bids, a Borrower (the "Applicable Borrower") shall hand deliver or telecopy to the Administrative Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be received by the Administrative Agent (i) in the case of a Eurodollar Competitive Loan, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to, a Competitive Bid Request. A Competitive Bid Request that does not conform substantially to the format of Exhibit A-1 may be rejected in the Administrative Agent's sole discretion, and the Administrative Agent shall promptly notify the Borrower of such rejection by telecopy. Each Competitive Bid Request shall refer to this Agreement and specify (w) whether the Borrowing then being requested is to be a Eurodollar Borrowing or a Fixed Rate Borrowing, (x) the date of such Borrowing (which shall be a Business Day) and the aggregate principal amount thereof, which shall be in a minimum principal amount of $10,000,000 and in an integral multiple of $5,000,000, and (y) the Interest Period with respect thereto (which may not end after the Maturity Date). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid, the Administrative Agent shall telecopy to the Lenders a Notice of Competitive Bid Request inviting the Lenders to bid, on the terms and conditions of this Agreement, to make Competitive Loans. (b) Each Lender invited to bid may, in its sole discretion, make one or more Competitive Bids to the Applicable Borrower responsive to such Borrower's Competitive Bid Request. 18 14 Each Competitive Bid by a Lender must be received by the Administrative Agent by telecopy, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar Competitive Loan, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing. A Lender may submit multiple bids to the Administrative Agent. Competitive Bids that do not conform substantially to the format of Exhibit A-3 may be rejected by the Administrative Agent, and the Administrative Agent shall notify the Lender making such nonconforming bid of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested) of the Competitive Loan or Loans that the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is prepared to make the Competitive Loan or Loans and (z) the Interest Period and the last day thereof. If any Lender invited to bid shall elect not to make a Competitive Bid, such Lender shall so notify the Administrative Agent by telecopy (I) in the case of Eurodollar Competitive Loans, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing, and (II) in the case of Fixed Rate Loans, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing; provided, however, that failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Loan as part of such Competitive Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be irrevocable. (c) The Administrative Agent shall as promptly as practicable notify the Borrower, by telecopy, of all the Competitive Bids made, the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. The Administrative Agent shall send a copy of all Competitive Bids to the Borrower for its records as soon as practicable after completion of the bidding process set forth in this Section 2.03. (d) The Borrower may in its sole and absolute discretion, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid referred to in paragraph (c) above. The Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject any of or all the bids referred to in paragraph (c) above not more than one hour after it shall have been notified of such bids by the Administrative Agent pursuant to such paragraph (c); provided, however, that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in paragraph (c) above, (ii) the Borrower shall not accept a bid made at a particular Competitive Bid Rate if it has decided to reject a bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) if the Borrower shall accept a bid or bids made at a particular Competitive Bid Rate but the amount of such bid or bids shall cause the total amount of bids to be accepted to exceed the amount specified in the Competitive Bid Request, then the Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such bid at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv) the 19 15 amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of the Borrower. A notice given pursuant to this paragraph (d) shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate) by telecopy, and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. (f) No Competitive Borrowing shall be requested or made hereunder if after giving effect thereto any of the conditions set forth in paragraphs (i) or (ii) of Section 2.01 would not be met. (g) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such bid directly to the Applicable Borrower one quarter of an hour earlier than the latest time at which the other Lenders are required to submit their bids to the Administrative Agent pursuant to paragraph (b) above. (h) All notices required by this Section 2.03 shall be given in accordance with Section 9.01. SECTION 2.04. Standby Borrowing Procedure. In order to request a Standby Borrowing, a Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5 (a) in the case of a Eurodollar Standby Loan, not later than 10:30 a.m., New York City time, three Business Days before such Borrowing, and (b) in the case of an ABR Borrowing, not later than 10:30 a.m., New York City time, on the day of such Borrowing. No Fixed Rate Loan shall be requested or made pursuant to a Standby Borrowing Request. Such notice shall be irrevocable and shall in each case specify (i) whether the Borrowing then being requested is to be a Eurodollar Standby Loan or an ABR Borrowing; (ii) the date of such Standby Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if such Borrowing is to be a Eurodollar Standby Loan, the Interest Period with respect thereto, which shall not end after the Maturity Date. If no election as to the Type of Standby Borrowing is specified in any such notice, then the requested Standby Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Standby Loan is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration, in the case of a Eurodollar Borrowing. Notwithstanding any other provision of this Agreement to the contrary, no Standby Borrowing shall be requested if the Interest Period with respect thereto would end after the Maturity Date. The Administrative Agent shall promptly advise each of the Lenders of any notice given pursuant to this Section 2.04 and of each Lender's portion of the requested Borrowing. SECTION 2.05. Conversion and Continuation of Standby Loans. Each Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (i) not later than 10:30 a.m., New York City time, on the day of the conversion, to convert all or any part of any Eurodollar Standby Loan into an ABR Borrowing, and (ii) not later than 10:30 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Standby Loan or to continue any Eurodollar Standby Loan as a Eurodollar Standby Loan for an additional Interest Period, subject in each case to the following: (a) if less than all the outstanding principal amount of any Standby Borrowing shall be converted or continued, the aggregate principal amount of the Standby Borrowing converted or continued shall be an integral multiple of $5,000,000 and not less than $20,000,000; 20 16 (b) accrued interest on a Standby Borrowing (or portion thereof) being converted shall be paid by the Borrower at the time of conversion; (c) if any Eurodollar Standby Loan is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (d) any portion of a Standby Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Standby Loan; (e) any portion of a Eurodollar Standby Loan which cannot be continued as a Eurodollar Standby Loan by reason of clause (d) above shall be automatically converted at the end of the Interest Period in effect for such Eurodollar Standby Borrowing into an ABR Borrowing; (f) no Interest Period may be selected for any Eurodollar Standby Loan that would end later than the Maturity Date; and (g) at any time when there shall have occurred and be continuing any Default or Event of Default, no Borrowing may be converted into or continued as a Eurodollar Standby Loan. Each notice pursuant to this Section 2.05 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Standby Borrowing to be converted or continued, (ii) whether such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Loan or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Loan, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Standby Loan, the Borrower shall be deemed to have selected an Interest Period of one month's duration. If no notice shall have been given in accordance with this Section 2.05 to convert or continue any Standby Borrowing, such Standby Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into a new Interest Period as an ABR Borrowing. SECTION 2.06. Fees. (a) The Company agrees to pay to each Lender, through the Administrative Agent, on each March 31, June 30, September 30 and December 31 (with the first payment being due on December 31, 1995) and on each date on which the Commitment of such Lender shall be terminated as provided herein, a facility fee (a "Facility Fee"), at a rate per annum equal to the Applicable Percentage from time to time in effect on the amount of the Commitment of such Lender, whether used or unused, during the preceding quarter (or other period commencing on the Effective Date, or ending with the Maturity Date or any date on which the Commitment of such Lender shall be terminated). All Facility Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be. The Facility Fee due to each Lender shall commence to accrue on the Effective Date, and shall cease to accrue on the earlier of the Maturity Date and the termination of the Commitment of such Lender as provided herein. (b) The Company agrees to pay the Administrative Agent, for its own account, the administrative and other fees separately agreed to by the Company and the Administrative Agent (the "Administrative Fees"). 21 17 (c) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders except that the Administrative Fee shall be paid pursuant to paragraph (b) above. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby agrees that the outstanding principal balance of each Standby Loan shall be payable on the Maturity Date and that the outstanding principal balance of each Competitive Loan shall be payable on the last day of the Interest Period applicable thereto. Each Loan shall bear interest on the outstanding principal balance thereof as set forth in Section 2.08. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type of each Loan made and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from each Borrower and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section 2.07 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrowers to repay the Loans in accordance with their terms. SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to (i) in the case of each Eurodollar Standby Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03. (b) Subject to the provisions of Section 2.09, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, for periods during which the Alternate Base Rate is determined by reference to the Prime Rate and 360 days for other periods) at a rate per annum equal to the Alternate Base Rate. (c) Subject to the provisions of Section 2.09, each Fixed Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03. (d) Interest on each Loan shall be payable on each Interest Payment Date applicable to such Loan except as otherwise provided in this Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest Period or day within an Interest Period, as the case may be, shall be 22 18 determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.09. Default Interest. If a Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, whether by scheduled maturity, notice of prepayment, acceleration or otherwise, such Borrower shall on demand from time to time from the Administrative Agent pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed as provided in Section 2.08(b)) equal to the Alternate Base Rate plus 2%. SECTION 2.10. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing, the Administrative Agent shall have determined (i) that dollar deposits in the principal amounts of the Eurodollar Loans comprising such Borrowing are not generally available in the London interbank market or (ii) that reasonable means do not exist for ascertaining the LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination under clauses (i) or (ii) above, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (x) any request by a Borrower for a Eurodollar Competitive Loan pursuant to Section 2.03 shall be of no force and effect and shall be denied by the Administrative Agent and (y) any request by a Borrower for a Eurodollar Standby Loan pursuant to Section 2.04 shall be deemed to be a request for an ABR Borrowing. In the event the Required Lenders notify the Administrative Agent that the rates at which dollar deposits are being offered will not adequately and fairly reflect the cost to such Lenders of making or maintaining Eurodollar Loans during such Interest Period, the Administrative Agent shall notify the applicable Borrower of such notice and until the Required Lenders shall have advised the Administrative Agent that the circumstances giving rise to such notice no longer exist, any request by such Borrower for a Eurodollar Standby Loan shall be deemed a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be made in good faith and shall be conclusive absent manifest error. SECTION 2.11. Termination and Reduction of Commitments. (a) The Commitments shall be automatically terminated on the Maturity Date. (b) Upon at least three Business Days' prior irrevocable telecopy notice to the Administrative Agent, the Company may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Total Commitment; provided, however, that (i) each partial reduction of the Total Commitment shall be in an integral multiple of $10,000,000 and in a minimum principal amount of $50,000,000 and (ii) no such termination or reduction shall be made which would reduce the Total Commitment to an amount less than the aggregate outstanding principal amount of the Competitive Loans. (c) Each reduction in the Total Commitment hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. The Borrowers shall pay to the Administrative Agent for the account of the Lenders, on the date of each termination of the Total Commitment, the Facility Fees on the amount of the Commitments so terminated accrued through the date of such termination or reduction. SECTION 2.12. Prepayment. (a) Each Borrower shall have the right at any time and from time to time to prepay any Standby Borrowing, in whole or in part, upon giving telecopy 23 19 notice (or telephone notice promptly confirmed by telecopy) to the Administrative Agent: (i) before 10:00 a.m., New York City time, three Business Days prior to prepayment, in the case of Eurodollar Loans, and (ii) before 10:00 a.m., New York City time, one Business Day prior to prepayment, in the case of ABR Loans; provided, however, that each partial prepayment shall be in an amount which is an integral multiple of $10,000,000 and not less than $50,000,000. No prepayment may be made in respect of any Competitive Borrowing. (b) On the date of any termination or reduction of the Commitments pursuant to Section 2.11, the Borrowers shall pay or prepay so much of the Standby Borrowings as shall be necessary in order that the sum of the aggregate Competitive Loan Exposures and Standby Loan Exposures will not exceed the Total Commitment, after giving effect to such termination or reduction. (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the applicable Borrower to prepay such Borrowing (or portion thereof) by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall result in the imposition, modification or applicability of any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender, or shall result in the imposition on any Lender or the London interbank market of any other condition affecting this Agreement, such Lender's Commitment or any Eurodollar Loan or Fixed Rate Loan made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then such additional amount or amounts as will compensate such Lender for such additional costs or reduction will be paid by the Borrowers to such Lender upon demand. Notwithstanding the foregoing, no Lender shall be entitled to request compensation under this paragraph with respect to any Competitive Loan if the change giving rise to such request was applicable to such Lender at the time of submission of the Competitive Bid pursuant to which such Competitive Loan was made. (b) If any Lender shall have determined that the adoption of any law, rule, regulation or guideline arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards", or the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, such Lender's Commitment or the Loans made by such Lender pursuant hereto to a level below that which such Lender or such Lender's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies and the policies of 24 20 such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time such additional amount or amounts as will compensate such Lender for such reduction will be paid by the Borrowers to such Lender. It is acknowledged that this Agreement is being entered into by the Lenders on the understanding that the Lenders will not be required to maintain capital against their Commitments under currently applicable laws, regulations and regulatory guidelines. In the event the Lenders shall be advised by any Governmental Authority or shall otherwise determine on the basis of pronouncements of any Governmental Authority that such understanding is incorrect, it is agreed that the Lenders will be entitled to make claims under this paragraph (b) based upon market requirements prevailing on the date hereof for commitments under comparable credit facilities against which capital is required to be maintained. (c) A certificate of any Lender setting forth such amount or amounts as shall be necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Company and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to such period or any other period; provided, however, that no Lender shall be entitled to compensation under this Section 2.13 for any costs incurred or reductions suffered with respect to any date unless it shall have notified the Company that it will demand compensation for such costs or reductions under paragraph (c) above not more than 90 days after the later of (i) such date and (ii) the date on which it shall have become aware of such costs or reductions. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Company and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon such Lender shall not submit a Competitive Bid in response to a request for a Eurodollar Competitive Loan and any request for a Eurodollar Standby Loan shall, as to such Lender only, be deemed a request for an ABR Loan, unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans, made by it be converted to ABR Loans, in which event all such Eurodollar Loans, shall be automatically converted to ABR Loans, as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans, that would have been made by such Lender or the converted Eurodollar Loans, of such Lender shall instead be applied to repay the ABR Loans, made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. 25 21 (b) For purposes of this Section 2.14, a notice by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt. SECTION 2.15. Indemnity. The Borrowers shall indemnify each Lender against any out-of-pocket loss or expense which such Lender may sustain or incur as a consequence of (a) any failure to borrow or to refinance, convert or continue any Loan hereunder after irrevocable notice of such borrowing, refinancing, conversion or continuation has been given pursuant to Section 2.03, 2.04 or 2.05, (b) any payment, prepayment or conversion, or assignment required under Section 2.20, of a Eurodollar Loan required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period, if any, applicable thereto, (c) any default in payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (d) the occurrence of any Event of Default, including, in each such case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or reasonable expense shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or not borrowed (assumed to be the LIBO Rate applicable thereto) for the period from the date of such payment, prepayment, refinancing or failure to borrow or refinance to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or refinance the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid or not borrowed or refinanced for such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section shall be delivered to such Borrower and shall be conclusive absent manifest error. SECTION 2.16. Pro Rata Treatment. Except as required under Sections 2.14 and 2.20, each payment or prepayment of principal of any Standby Borrowing, each payment of interest on the Standby Loans, each payment of the Facility Fees, each reduction of the Commitments and each refinancing or conversion of any Borrowing with a Standby Borrowing of any Type, shall be allocated pro rata among the Lenders in accordance with their respective Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Standby Loans). Each payment of principal of any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing. Each payment of interest on any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective amounts of accrued and unpaid interest on their outstanding Competitive Loans comprising such Borrowing. For purposes of determining the available Commitments of the Lenders at any time, each outstanding Competitive Borrowing shall be deemed to have utilized the Commitments of the Lenders (including those Lenders which shall not have made Loans as part of such Competitive Borrowing) pro rata in accordance with such respective Commitments. Each Lender agrees that in computing such Lender's portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other 26 22 similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Standby Loan or Loans as a result of which the unpaid principal portion of its Standby Loans shall be proportionately less than the unpaid principal portion of the Standby Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Standby Loans of such other Lender, so that the aggregate unpaid principal amount of the Standby Loans and participations in the Standby Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Standby Loans then outstanding as the principal amount of its Standby Loans prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Standby Loans outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Any Lender holding a participation in a Standby Loan deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing to such Lender by reason thereof as fully as if such Lender had made a Standby Loan in the amount of such participation. SECTION 2.18. Payments. (a) The Borrowers shall make each payment (including principal of or interest on any Borrowing and any Fees or other amounts) hereunder from an account in the United States not later than 12:00 noon, local time at the place of payment, on the date when due in funds to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, in immediately available funds. Each such payment shall be made in dollars. (b) Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.19. Taxes. (a) Any and all payments to the Lenders hereunder shall be made, in accordance with Section 2.18, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) income taxes imposed on the income of the Administrative Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the income, assets or net worth of the Administrative Agent or any Lender (or Transferee), in each case by the jurisdiction under the laws of which the Administrative Agent or such Lender (or Transferee) is organized or doing business (other than as a result of entering into this Agreement, performing any obligations hereunder, receiving any payments hereunder or enforcing any rights hereunder), or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, "Taxes"). If any Borrower shall be required to deduct any Taxes from or in respect of any sum payable hereunder to any Lender (or any Transferee) or the Administrative Agent, (i) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) such Lender (or Transferee) other Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. 27 23 (b) In addition, the Borrowers shall pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document ("Other Taxes"). (c) The Borrowers shall indemnify each Lender (or Transferee) and the Administrative Agent for the full amount of Taxes and Other Taxes paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by a Lender (or Transferee) or the Administrative Agent on its behalf, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date any Lender (or Transferee) or the Administrative Agent, as the case may be, makes written demand therefor, which written demand shall be made within 60 days of the date such Lender (or Transferee) or the Administrative Agent receives written demand for payment of such Taxes or Other Taxes from the relevant Governmental Authority. (d) If a Lender (or Transferee) or the Administrative Agent shall become aware that it is entitled to claim a refund from a Governmental Authority in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrowers, or with respect to which the Borrowers have paid additional amounts, pursuant to this Section 2.19, it shall promptly notify the Borrowers of the availability of such refund claim and shall, within 30 days after receipt of a request by the Borrowers, make a claim to such Governmental Authority for such refund at the Borrowers' expense. If a Lender (or Transferee) or the Administrative Agent receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section 2.19, it shall within 30 days from the date of such receipt pay over such refund to the Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 2.19 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Lender (or Transferee) or the Administrative Agent and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Borrowers, upon the request of such Lender (or Transferee) or the Administrative Agent, agree to repay the amount paid over to the Borrowers (plus penalties, interest or other charges) to such Lender (or Transferee) or the Administrative Agent in the event such Lender (or Transferee) or the Administrative Agent is required to repay such refund to such Governmental Authority. (e) As soon as practicable after the date of any payment of Taxes or Other Taxes by the Borrowers to the relevant Governmental Authority, the Borrowers will deliver to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof. (f) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.19 shall survive the payment in full of the principal of and interest on all Loans made hereunder. (g) Each Lender (or Transferee) that is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver to the Company and the Administrative Agent two copies of either United States Internal 28 24 Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10 percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Company under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a participation holder, on or before the date such participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 2.19(g), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.19(g) that such Non-U.S. Lender is not legally able to deliver. (h) The Company shall not be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan; provided, however, that this clause (i) shall not apply to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of the Company; and provided further, however, that this clause (i) shall not apply to the extent the indemnity payment or additional amounts any Transferee, or Lender (or Transferee) through a New Lending Office, would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or additional amounts that the person making the assignment, participation or transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of paragraph (g) above. (i) Any Lender (or Transferee)claiming any indemnity payment or additional amounts payable pursuant to this Section 2.19 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document reasonably requested in writing by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such indemnity payment or additional amounts that may thereafter accrue and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (j) Nothing contained in this Section 2.19 shall require any Lender (or Transferee) or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). SECTION 2.20. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any additional amounts payable pursuant to 29 25 Section 2.13 or Section 2.19 or exercising its rights under Section 2.14 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (b) In the event that any Lender shall have delivered a notice or certificate pursuant to Section 2.13 or 2.14, or the Company shall be required to make additional payments to any Lender under Section 2.19, the Company shall have the right, at its own expense, upon notice to such Lender and the Administrative Agent, to require such Lender to transfer and assign without recourse, representation or warranty (in accordance with and subject to the restrictions contained in Section 9.04) all interests, rights and obligations contained hereunder to another financial institution approved by the Administrative Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; provided that (i) no such assignment shall conflict with any law, rule or regulation or order of any Governmental Authority and (ii) the assignee or the Company, as the case may be, shall pay to the affected Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants to each of the Lenders that: SECTION 3.01. Organization; Powers. Each Borrower and each of the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect, and (d) in the case of each Borrower, has the corporate power and authority to execute, deliver and perform its obligations under the Loan Documents and to borrow hereunder and thereunder. SECTION 3.02. Authorization. The execution, delivery and performance by the Borrowers of this Agreement, the promissory notes, if any, issued pursuant to Section 9.04(i) (and by the Borrowing Subsidiaries of each Borrowing Subsidiary Agreement), the Borrowings hereunder and the completion of the Distribution (collectively, the "Transactions") (a) have been duly authorized by all requisite corporate action and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation (including the Margin Regulations) or of the certificate of incorporation or other constitutive documents or by-laws of the Borrowers, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which any Borrower is a party or by which it or any of its property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any lien upon any property or assets of any Borrower. 30 26 SECTION 3.03. Enforceability. This Agreement and each Loan Document to which a Borrower is a party constitutes a legal, valid and binding obligation of each Borrower enforceable in accordance with its terms. SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or other action by any Governmental Authority, other than those which have been taken, given or made, as the case may be, is or will be required with respect to any Borrower in connection with the Transactions. SECTION 3.05. Financial Statements. (a) The Company has heretofore furnished to the Administrative Agent and the Lenders copies of its combined balance sheet and statements of income and cash flow as of and for the year ended December 31, 1994, and the six months ended June 30, 1995, as included in the Proxy Statement. Such financial statements present fairly, in all material respects, the consolidated combined financial condition and the results of operations of the Company and the Subsidiaries as of such dates and for such periods in accordance with GAAP. (b) The Company has heretofore furnished to the Administrative Agent and the Lenders copies of its pro forma combined balance sheet and statements of income as of June 30, 1995, and for the year and the six months ended December 31, 1994, and June 30, 1995, respectively, giving effect to the Distribution and certain related transactions. Such financial statements present fairly, in all material respects, the consolidated combined financial condition and the results of operations of the Company and the Subsidiaries on a pro forma basis as of such dates and for such periods in accordance with GAAP. (c) As of the Effective Date, there has been no material adverse change in the consolidated financial condition of the Company and the Subsidiaries taken as a whole from the financial condition reported in the financial statements referenced in paragraph (a) of this Section 3.05. SECTION 3.06. Litigation; Compliance with Laws. (a) As of the Effective Date, there are no actions, proceedings or investigations filed or (to the knowledge of the Borrowers) threatened affecting any Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which question the validity or legality of this Agreement, the Transactions or any action taken or to be taken pursuant to this Agreement and no order or judgment has been issued or entered restraining or enjoining any Borrower or any Subsidiary from the execution, delivery or performance of this Agreement nor is there any other action, proceeding or investigation filed or (to the knowledge of any Borrower or any Subsidiary) threatened against any Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which would be reasonably likely to result in a Material Adverse Effect or materially restrict the ability of any Borrower to comply with its obligations under the Loan Documents. (b) Neither any Borrower nor any Subsidiary is in violation of any law, rule or regulation (including any law, rule or regulation relating to the protection of the environment or to employee health or safety), or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be reasonably likely to result in a Material Adverse Effect. SECTION 3.07. Federal Reserve Regulations. (a) Neither any Borrower nor any Subsidiary that will receive proceeds of the Loans hereunder is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. 31 27 (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry Margin Stock or to refund indebtedness originally incurred for such purpose, or for any other purpose which entails a violation of, or which is inconsistent with, the provisions of the Margin Regulations. SECTION 3.08. Investment Company Act; Public Utility Holding Company Act. No Borrower is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 (the "1940 Act") or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Use of Proceeds. All proceeds of the Loans shall be used for the purposes referred to in the recitals to this Agreement. SECTION 3.10. Full Disclosure; No Material Misstatements. None of the representations or warranties made by any Borrower in connection with this Agreement as of the date such representations and warranties are made or deemed made, and no report, financial statement or other information furnished by or on behalf of any Borrower to the Administrative Agent or any Lender pursuant to or in connection with this Agreement or the credit facilities established hereby contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or will be made, not misleading. SECTION 3.11. Taxes. Each Borrower and each of the material Subsidiaries have filed or caused to be filed all Federal, state and local tax returns which are required to be filed by them, and have paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by any of them, other than any taxes or assessments the validity of which is being contested in good faith by appropriate proceedings, and with respect to which appropriate accounting reserves have to the extent required by GAAP been set aside. SECTION 3.12. Employee Pension Benefit Plans. The present aggregate value of accumulated benefit obligations of all unfunded and underfunded pension plans of the Company and its Subsidiaries (based on those assumptions used for disclosure in corporate financial statements in accordance with GAAP) did not, as of December 31, 1994, exceed by more than $8,923,000 the value of the assets of all such plans. Of such $8,923,000, $2,019,000 is attributable to employee pension plans in countries where the funding of such obligations is not required or customary and $3,076,000 relates to domestic pension plans where funding is not permitted under current tax regulations. In these cases the Company has recorded book reserves to meet the obligations. SECTION 3.13. Distribution. At or prior to the Effective Date, the Distribution will have been duly completed in accordance with applicable law and as described in the Proxy Statement, and the assets, liabilities and capitalization of the Company will have been consistent at the time of and after giving effect to the Distribution in all material respects with the forecasted capitalization table of the Company set forth in the Proxy Statement and the pro forma financial statements referred to in Section 3.05(b), except that in the event the Distribution shall occur prior to December 31, 1995, the transactions set forth in Schedule 3.13 which are reflected as having occurred in such capitalization table and such pro forma financial statements might not yet have occurred. 32 28 ARTICLE IV CONDITIONS OF LENDING The obligations of the Lenders to make Loans hereunder are subject to the satisfaction of the following conditions: SECTION 4.01. All Borrowings. On the date of each Borrowing: (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or Section 2.04, as applicable. (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Borrowing no Event of Default or Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by each Borrower on the date of such Borrowing as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. Effective Date. On the Effective Date: (a) The Administrative Agent shall have received a favorable written opinion of Walter Diehl, Esq., dated the Effective Date and addressed to the Lenders and satisfactory to the Lenders, Administrative Agent and Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D hereto. (b) The Administrative Agent shall have received (i) a copy of the certificate of incorporation, including all amendments thereto, of the Company, certified as of a recent date by the Secretary of State of its state of incorporation, and a certificate as to the good standing of the Company as of a recent date from such Secretary of State; (ii) a certificate of the Secretary or an Assistant Secretary of the Company dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Company as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate of incorporation referred to in clause (i) above has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to such clause (i) and (D) as to the incumbency and specimen signature of each officer executing this Agreement or any other document delivered in connection herewith on behalf of the Company; and (iii) a certificate of another officer of the Company as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above. (c) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer of the Company, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. 33 29 (d) The principal of and accrued and unpaid interest on any loans outstanding under the Existing Credit Facilities shall have been paid in full, all other amounts due in respect of the Existing Credit Facilities shall have been paid in full and the commitments to lend under the Existing Credit Facilities shall have been permanently terminated. (e) The Administrative Agent shall have received any Fees or other amounts due and payable on or prior to the Effective Date. SECTION 4.03. First Borrowing by Each Borrowing Subsidiary. On or prior to the first date on which Loans are made to any Borrowing Subsidiary: (a) The Lenders shall have received the favorable written opinion of counsel satisfactory to the Administrative Agent, addressed to the Lenders and satisfactory to the Lenders, the Administrative Agent and Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D hereto. (b) Each Lender shall have received a copy of the Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary. ARTICLE V COVENANTS A. Affirmative Covenants. Each Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Fees or any other amounts payable hereunder shall be unpaid, unless the Required Lenders shall otherwise consent in writing, it will, and will cause each of the Subsidiaries to: SECTION 5.01. Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as expressly permitted under Section 5.09; provided, however, that nothing in this Section shall prevent the abandonment or termination of the existence, rights or franchises of any Subsidiary or any rights or franchises of any Borrower if such abandonment or termination is in the best interests of the Borrowers and is not disadvantageous in any material respect to the Lenders. SECTION 5.02. Business and Properties. Comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority (including any of the foregoing relating to the protection of the environment or to employee health and safety), whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. 34 30 SECTION 5.03. Financial Statements, Reports, Etc. In the case of the Company, furnish to the Administrative Agent for distribution to each Lender: (a) within 120 days after the end of each fiscal year, its consolidated balance sheet and the related consolidated statements of income and cash flows showing its consolidated financial condition as of the close of such fiscal year and the consolidated results of its operations during such year, all audited by Arthur Andersen LLP or other independent certified public accountants of recognized national standing selected by the Company and accompanied by an opinion of such accountants to the effect that such consolidated financial statements fairly present its financial condition and results of operations on a consolidated basis in accordance with GAAP (it being agreed that the requirements of this paragraph may be satisfied by the delivery pursuant to paragraph (d) below of an annual report on Form 10-K containing the foregoing); (b) within 90 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related consolidated statements of income and cash flow, showing its consolidated financial condition as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as fairly presenting its financial condition and results of operations on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments (it being agreed that the requirements of this paragraph may be satisfied by the delivery pursuant to paragraph (d) below of a quarterly report on Form 10-Q containing the foregoing); (c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer certifying that, to the best of such Financial Officer's knowledge, no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (d) promptly after the same become publicly available, copies of all reports on forms 10-K, 10-Q and 8-K filed by it with the SEC, or any Governmental Authority succeeding to any of or all the functions of the SEC, or, in the case of the Company, copies of all reports distributed to its shareholders, as the case may be; (e) promptly, from time to time, such other information as any Lender shall reasonably request through the Administrative Agent; and (f) concurrently with any delivery of financial statements under paragraph (a) or (b) above, calculations of the financial test referred to in Section 5.12. SECTION 5.04. Insurance. Keep its insurable properties adequately insured at all times by financially sound and reputable insurers, and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses (it being understood that the Borrowers and their Subsidiaries may self-insure to the extent customary with companies similarly situated and in the same or similar businesses). SECTION 5.05. Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments and governmental charges imposed upon it or upon its income or profits or in respect of its property, as well as all other material liabilities, in each case before the same shall 35 31 become delinquent or in default and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto shall, to the extent required by GAAP, have been set aside. SECTION 5.06. Litigation and Other Notices. Give the Administrative Agent prompt written notice of the following (which the Administrative Agent shall promptly provide to the Lenders): (a) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding which could reasonably be expected to result in a Material Adverse Effect; (b) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and (c) any change in any of the Ratings. SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Maintain financial records in accordance with GAAP and, upon reasonable notice, at all reasonable times, permit any authorized representative designated by the Administrative Agent to visit and inspect the properties of the Company and of any material Subsidiary and to discuss the affairs, finances and condition of the Company and any material Subsidiary with a Financial Officer of the Company and such other officers as the Company shall deem appropriate. SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the purposes set forth in the recitals to this Agreement. B. Negative Covenants. Each Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Fees or any other amounts payable hereunder shall be unpaid, unless the Required Lenders shall otherwise consent in writing, it will not, and will not cause or permit any of the Subsidiaries to: SECTION 5.09. Consolidations, Mergers, and Sales of Assets. Consolidate or merge with or into any other person or sell, lease or transfer all or substantially all of its property and assets, or agree to do any of the foregoing, unless (a) no Default or Event of Default has occurred and is continuing or would have occurred immediately after giving effect thereto, and (b) in the case of a consolidation or merger or transfer of assets involving the Company and in which the Company is not the surviving corporation or sells, leases or transfers all or substantially all of its property and assets, the surviving corporation or person purchasing, leasing or receiving such property and assets is organized in the United States of America or a state thereof and agrees to be bound by the terms and provisions applicable to the Company hereunder. SECTION 5.10. Limitations on Liens. In the case of the Company, create, suffer to be created, or assume (directly or indirectly) any mortgage, pledge or other lien upon any Principal Property, or permit any Restricted Subsidiary to create, suffer to be created, or assume (directly or indirectly) any mortgage, pledge or other lien upon any Principal Property; provided, however, that this covenant shall not apply to any of the following: (a) any mortgage, pledge or other lien on any Principal Property hereafter acquired, constructed or improved by the Company or any Restricted Subsidiary which is created or 36 32 assumed to secure or provide for the payment of any part of the purchase price of such property or the cost of such construction or improvement, or any mortgage, pledge or other lien on any Principal Property existing at the time of acquisition thereof, provided, however, that the mortgage, pledge or other lien shall not extend to any Principal Property theretofore owned by the Company or any Restricted Subsidiary; (b) any mortgage, pledge or other lien on any Principal Property existing on the date of this Agreement as described in Schedule 5.10; (c) any mortgage, pledge or other lien existing upon any property of a company which is merged with or into or is consolidated into, or substantially all the assets or shares of capital stock of which are acquired by, the Company or a Restricted Subsidiary, at the time of such merger, consolidation or acquisition, provided that such mortgage, pledge or other lien does not extend to any other Principal Property, other than improvements to the property subject to such mortgage, pledge or other lien; (d) any pledge or deposit to secure payment of workers' compensation or insurance premiums, or in connection with tenders, bids, contracts (other than contracts for the payment of money) or leases; (e) any pledge of, or other lien upon, any assets as security for the payment of any tax, assessment or other similar charge by any Governmental Authority or public body, or as security required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or right; (f) any pledge or lien necessary to secure a stay of any legal or equitable process in a proceeding to enforce a liability or obligation contested in good faith by the Company or a Restricted Subsidiary or required in connection with the institution by the Company or a Restricted Subsidiary of any legal or equitable proceeding to enforce a right or to obtain a remedy claimed in good faith by the Company or a Restricted Subsidiary, or required in connection with any order or decree in any such proceeding or in connection with any contest of any tax or other governmental charge; or the making of any deposit with or the giving of any form of security to any governmental agency or any body created or approved by law or governmental regulation in order to entitle the Company or a Restricted Subsidiary to maintain self-insurance or to participate in any fund in connection with workers' compensation, unemployment insurance, old age pensions or other social security or to share in any provisions or other benefits provided for companies participating in any such arrangement or for liability on insurance of credits or other risks; (g) any mechanics', carriers', workmen's, repairmen's, or other like liens, if arising in the ordinary course of business, in respect of obligations which are not overdue or liability for which is being contested in good faith by appropriate proceedings; (h) any lien or encumbrance on property in favor of the United States of America, or of any agency, department or other instrumentality thereof, to secure partial, progress or advance payments pursuant to the provisions of any contract; (i) any mortgage, pledge or other lien securing any indebtedness incurred in any manner to finance or recover the cost to the Company or any Restricted Subsidiary of any physical property, real or personal, which prior to or simultaneously with the creation of such indebtedness shall have been leased by the Company or a Restricted Subsidiary to the United 37 33 States of America or a department or agency thereof at an aggregate rental, payable during that portion of the initial term of such lease (without giving effect to any options of renewal or extension) which shall be unexpired at the date of the creation of such indebtedness, sufficient (taken together with any amounts required to be paid by the lessee to the lessor upon any termination of such lease) to pay in full at the stated maturity date or dates thereof the principal of and the interest on such indebtedness; (j) any mortgage, pledge or other lien securing indebtedness of a Restricted Subsidiary to the Company or a Restricted Subsidiary, provided that in the case of any sale or other disposition of such indebtedness by the Company or such Restricted Subsidiary, such sale or other disposition shall be deemed to constitute the creation of another mortgage, pledge or other lien not permitted by this clause (j); (k) any mortgage, pledge or other lien affecting property of the Company or any Restricted Subsidiary securing indebtedness of the United States of America or a State thereof (or any instrumentality or agency of either thereof) issued in connection with a pollution control or abatement program required in the opinion of the Company to meet environmental criteria of the Company or any Restricted Subsidiary and the proceeds of which indebtedness have financed the cost of acquisition of such program; (l) the renewal, extension, replacement or refunding of any mortgage, pledge, lien, deposit, charge or other encumbrance permitted by the foregoing provisions of this covenant upon the same property theretofore subject thereto, or the renewal, extension, replacement or refunding of the amount secured thereby, provided that in each case such amount outstanding at that time shall not be increased; or (m) any other mortgage, pledge or other lien, provided that immediately after the creation or assumption of such mortgage, pledge or other lien, the total of (x) the aggregate principal amount of indebtedness of the Company and all Restricted Subsidiaries secured by all mortgages, pledges and other liens created or assumed under the provisions of this clause (m), plus (y) the aggregate amount of Capitalized Lease-Back Obligations of the Company and Restricted Subsidiaries under the entire unexpired terms of all leases entered into in connection with sale and lease-back transactions which would have been precluded by the provisions of Section 5.11 but for the satisfaction of the condition set forth in clause (b) thereof, shall not exceed an amount equal to 10% of Consolidated Net Tangible Assets. The lease of any property by the Company or a Restricted Subsidiary and rental obligations with respect thereto (whether or not arising out of a sale and lease-back of properties and whether or not in accordance with GAAP such property is carried as an asset and such rental obligations are carried as indebtedness on the Company's or a Restricted Subsidiary's balance sheet) shall not in any event be deemed to be the creation of a mortgage, pledge or other lien. SECTION 5.11. Limitations on Sale and Leaseback Transactions. In the case of the Company or any Restricted Subsidiary, enter into any arrangement with any person providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property (except for temporary leases for a term of not more than three years and except for leases between the Company and a Restricted Subsidiary or between Restricted Subsidiaries), which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such person more than 120 days after the acquisition thereof or the completion of construction and commencement of full operation thereof, unless either (a) the Company shall apply an amount equal to the greater of the Fair Value of such property or the net proceeds of such sale, within 120 days of the effective date of any such 38 34 arrangement, to the retirement (other than any mandatory retirement or by way of payment at maturity) of Indebtedness or to the acquisition, construction, development or improvement of properties, facilities or equipment used for operating purposes which are, or upon such acquisition, construction, development or improvement will be, a Principal Property or a part thereof; or (b) at the time of entering into such arrangement, such Principal Property could have been subjected to a mortgage, pledge or other lien securing indebtedness of the Company or a Restricted Subsidiary in a principal amount equal to the Capitalized Lease-Back Obligations with respect to such Principal Property under paragraph (m) of Section 5.10. SECTION 5.12. Consolidated Total Debt to Consolidated EBITDA. Permit the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA at the end of and for any period of four consecutive fiscal quarters to exceed 5.0 to 1.0. ARTICLE VI EVENTS OF DEFAULT In case of the happening of any of the following events (each an "Event of Default"): (a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Borrowings hereunder shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of ten days; (d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Section 5.01, 5.09, 5.10, 5.11 or 5.12 and, in the case of any default under Section 5.10, such default shall continue for 30 days; (e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in clauses (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Company; (f) the Company or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in a principal amount in excess of $20,000,000, beyond the period of grace, if any, provided in the agreement or instrument under which such Indebtedness was created, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness, or any other event shall occur or condition shall exist, beyond the period of grace, if any, provided in such agreement or instrument, if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such 39 35 Indebtedness or a trustee on its or their behalf (with or without the giving of notice) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company, or of a substantial part of the property or assets of the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of the property or assets of the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 or (iii) the winding up or liquidation of the Company; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of the property or assets of the Company, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more final judgments shall be entered by any court against the Company or any of the Subsidiaries for the payment of money in an aggregate amount in excess of $100,000,000, and such judgment or judgments shall not have been paid, covered by insurance, discharged or stayed for a period of 60 days, or a warrant of attachment or execution or similar process shall have been issued or levied against property of the Company or any of the Subsidiaries to enforce any such judgment or judgments; (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect; or (k) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and, in the case of any event with respect to the 40 36 Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding. ARTICLE VII GUARANTEE The Company unconditionally and irrevocably guarantees the due and punctual payment and performance, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, of the Guaranteed Obligations. The Company further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations. The Company waives presentment to, demand of payment from and protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against the Borrowing Subsidiaries under the provisions of this Agreement or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any guarantee or any other agreement; or (c) the failure of any Lender to exercise any right or remedy against any other guarantor of the Guaranteed Obligations. The Company further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any security, if any, held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on its books, in favor of the Borrowing Subsidiaries or any other person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Company hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement, any guarantee or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity. To the extent permitted by applicable law, the Company waives any defense based on or arising out of any defense available to the Borrowing Subsidiaries, including any defense based on or arising out of any disability of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the 41 37 Borrowing Subsidiaries, other than final payment in full of the Guaranteed Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, or exercise any other right or remedy available to them against the Borrowing Subsidiaries, or any security without affecting or impairing in any way the liability of the Company hereunder except to the extent the Guaranteed Obligations have been fully and finally paid. The Company waives any defense arising out of any such election even though such election operates to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Company against the Borrowing Subsidiaries or any security. The Company further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrowing Subsidiary or otherwise. In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent or any Lender, forthwith pay or cause to be paid to the Administrative Agent or such Lender in cash the amount of such unpaid Guaranteed Obligation. The Company hereby irrevocably waives and releases any and all rights of subrogation, indemnification, reimbursement and similar rights which it may have against or in respect of the Borrowing Subsidiaries at any time relating to the Guaranteed Obligations, including all rights that would result in its being deemed a "creditor" of the Borrowing Subsidiaries under the United States Code as now in effect or hereafter amended, or any comparable provision of any successor statute. ARTICLE VIII THE ADMINISTRATIVE AGENT In order to expedite the transactions contemplated by this Agreement, Chemical Bank is hereby appointed to act as Administrative Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of Default of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrowers pursuant to this Agreement as received by the Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or 42 38 representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants or agreements contained in this Agreement. The Administrative Agent shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agent may deem and treat the Lender which makes any Loan as the holder of the indebtedness resulting therefrom for all purposes hereof until it shall have received notice from such Lender, given as provided herein, of the transfer thereof. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrowers on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrowers of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent acceptable to the Company. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. With respect to the Loans made by it hereunder, the Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent. Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitment hereunder or, if the Commitments shall have been terminated, the amount of its outstanding Loans) of any expenses incurred for the benefit of the 43 39 Lenders by the Administrative Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by it under this Agreement to the extent the same shall not have been reimbursed by the Borrowers; provided that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. Each Lender agrees that any allocation made in good faith by the Administrative Agent of expenses or other amounts referred to in this paragraph between this Agreement and the Facility B Credit Agreement shall be conclusive and binding for all purposes. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, as follows: (a) if to any Borrower, to ITT Corporation, 1330 Avenue of the Americas, New York, New York 10019-5490, Attention of Ms. Elizabeth A. Tuttle (Telecopy No. 212-489-3995); (b) if to the Administrative Agent, to Chemical Bank Agency Services Corp., 140 East 45th Street, 29th Floor, New York, New York 10017, Attention of Mr. Chris Moriarty, (Telecopy No. 212-622-0002), with a copy to Chemical Bank at 270 Park Avenue, New York, New York 10017, Re: ITT Corporation; and (c) if to a Lender, to it at its address (or telecopy number) set forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy to such party as provided in this Section or in accordance with the latest unrevoked direction from such party given in accordance with this Section. 44 40 SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement is outstanding and unpaid or the Commitments have not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement, or any investigation made by or on behalf of the Administrative Agent or any Lender. SECTION 9.03. Binding Effect. This Agreement shall become effective on the Effective Date and when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have received copies hereof (telecopied or otherwise) which, when taken together, bear the signature of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers shall not have the right to assign any rights hereunder or any interest herein without the prior consent of all the Lenders. SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, the Company must give its prior written consent to such assignment (which consent, if required, shall not be unreasonably withheld in the event an Event of Default has occurred and is continuing), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and a processing and recordation fee of $3,000 (provided that, in the case of simultaneous assignment of interests under this Agreement and the Facility B Credit Agreement, the aggregate fee shall be $3,000), (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire, and (iv) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 and the amount of the Commitment of such Lender remaining after such assignment shall not be less than $5,000,000 or shall be zero. Upon acceptance and recording pursuant to paragraph (e) of this Section, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account hereunder and not yet paid)). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such 45 41 time, and in such case shall retain its rights hereunder in respect of any Loans so retained until such Loans have been repaid in full in accordance with this Agreement. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.03 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and the principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Borrowers, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by each party hereto, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and the written consent of the Company to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. (f) Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if it were the selling Lender (and limited to the amount that could have been claimed 46 42 by the selling Lender had it continued to hold the interest of such participating bank or other entity), except that all claims made pursuant to such Sections shall be made through such selling Lender, and (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such selling Lender in connection with such Lender's rights and obligations under this Agreement. (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender; provided that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement for the benefit of the Company whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any such information. (h) The Borrowers shall not assign or delegate any rights and duties hereunder without the prior written consent of all Lenders. (i) Any Lender may at any time pledge all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided that no such pledge shall release any Lender from its obligations hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, each Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to such Borrower by the assigning Lender hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with entering into this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof, or incurred by the Administrative Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement or in connection with the Loans made hereunder, including the fees and disbursements of counsel for the Administrative Agent or, in the case of enforcement, the Lenders. (b) The Borrowers agree to indemnify the Administrative Agent, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against any Indemnitee arising out of (i) the consummation of the transactions contemplated by this Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section shall be payable on written demand therefor. 47 43 SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.07. Waivers; Amendment. (a) No failure or delay of the Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Borrower or any Subsidiary in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest or fees on any Loan, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, without the prior written consent of each Lender affected thereby, (ii) increase the Commitment or decrease the Facility Fee of any Lender or other amounts due to any Lender without the prior written consent of such Lender, (iii) limit or release the guarantee set forth in Article VII, or (iv) amend or modify the provisions of Section 2.16 or Section 9.04(h), the provisions of this Section or the definition of the "Required Lenders", without the prior written consent of each Lender; provided further, however, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section and any consent by any Lender pursuant to this Section shall bind any assignee of its rights and interests hereunder. SECTION 9.08. Entire Agreement. This Agreement, the agreements referred in Section 2.06(b) and the letter agreement attached as Exhibit F constitute the entire contract among the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 9.09. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. 48 44 SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.12. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or obligations of the Company and any Borrowing Subsidiary now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company and the Administrative Agent after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (A) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. SUBJECT TO THE FOREGOING AND TO PARAGRAPH (B) BELOW, NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY HERETO MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY OTHER PARTY HERETO IN THE COURTS OF ANY JURISDICTION. (B) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR THEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 49 45 SECTION 9.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION. SECTION 9.15. Addition of Borrowing Subsidiaries. Each Borrowing Subsidiary which shall deliver to the Administrative Agent a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company shall, upon such delivery and without further act, become a party hereto and a Borrower hereunder with the same effect as if it had been an original party to this Agreement. SECTION 9.16. Execution. Upon execution by the Lenders, this Agreement will be executed with Old ITT as "the Company" all as contemplated by the letter agreement attached as Exhibit F, and upon execution of this Agreement by the Company, the Company shall succeed to the rights and obligations of Old ITT as contemplated in this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ITT CORPORATION, as Borrower, by /s/ Elizabeth A. Tuttle ---------------------------------------------- Name: Elizabeth A. Tuttle Title: Vice President and Assistant Treasurer CHEMICAL BANK, individually and as Administrative Agent, by /s Robert K. Gaynor ---------------------------------------------- Name: Robert K. Gaynor Title: Vice President 50 46 ABN AMRO BANK N.V., NEW YORK BRANCH, by /s/ Frances O'R. Logan ---------------------------------------------- Name: Frances O'R. Logan Title: Vice President by /s/ William J. Van Nostrand ---------------------------------------------- Name: William J. Van Nostrand Title: Vice President ARAB BANK PLC, by /s/ Nofal S. Barbar ---------------------------------------------- Name: Nofal S. Barbar Title: Executive Vice President and Branch Manager BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH, by /s/ Charles Dougherty ---------------------------------------------- Name: Charles Dougherty Title: Vice President by /s/ J. M. Welch ---------------------------------------------- Name: J. M. Wlech Title: Assistant Vice President BANCA DI ROMA, NEW YORK BRANCH, by /s/ Ralph L. Riehle ---------------------------------------------- Name: Ralph L. Riehle Title: First Vice President by /s/ Luca Balestra ---------------------------------------------- Name: Luca Balestra Title: Assistant Vice President 51 47 BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH, by /s/ Giuliano Violetta -------------------------------------- Name: Giuliano Violetta Title: First Vice President by /s/ Giulio Giovine -------------------------------------- Name: Giulio Giovine Title: Vice President 52 48 BANCA POPOLARE DI MILANO, by /s/ Anthony Franco ---------------------------------------------- Name: Anthony Franco Title: Executive Vice President/General Manager by /s/ Nicholas Cinosi ---------------------------------------------- Name: Nicholas Cinosi Title: Vice President BANK OF AMERICA ILLINOIS, by /s/ Donald J. Chin ---------------------------------------------- Name: Donald J. Chin Title: Authorized Officer BANK OF HAWAII, by /s/ John R. Landgraf ---------------------------------------------- Name: John R. Landgraf Title: Officer THE BANK OF NEW YORK, by /s/ Mary Anne Zagroba ---------------------------------------------- Name: Mary Anne Zagroba Title: Vice President 53 49 THE BANK OF NOVA SCOTIA, by /s/ J. Alan Edwards ---------------------------------------------- Name: J. Alan Edwards Title: Authorized Signatory THE BANK OF TOKYO TRUST COMPANY, by /s/ Paul P. Malecki ---------------------------------------------- Name: Paul P. Malecki Title: Vice President BANKERS TRUST COMPANY, by /s/ Katherine A. Judge ---------------------------------------------- Name: Katherine A. Judge Title: Vice President BARCLAYS BANK PLC, by /s/ John C. Livingston ---------------------------------------------- Name: John C. Livingston Title: Associate Director BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, by /s/ Wilfried Freudenberger ---------------------------------------------- Name: Wilfried Fruedenberger Title: Executive Vice President and General Manager by /s/ Peter Obermann ---------------------------------------------- Name: Peter Obermann Title: Senior Vice President Manager Lending Division CIBC, INC., by /s/ J. Domkowski ---------------------------------------------- Name: J. Domkowski Title: Vice President 54 50 THE CHASE MANHATTAN BANK, N.A., by /s/ David B. Townsend ---------------------------------------------- Name: David B. Townsend Title: Managing Director CITIBANK, N.A., by /s/ Elizabeth A. Palermo ---------------------------------------------- Name: Elizabeth A. Palermo Title: Attorney-in-fact COMERICA BANK, by /s/ Tamara J. Gurne ---------------------------------------------- Name: Tamara J. Gurne Title: Account Officer COMMERZBANK AKTIENGESELLSCHAFT, GRAND CAYMAN BRANCH, by /s/ Thomas Ausfahl ---------------------------------------------- Name: Thomas Ausfahl Title: Assistant Vice President by /s/ Robert Donohue ---------------------------------------------- Name: Robert Donohue Title: Vice President COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, by /s/ Eric Longuet ---------------------------------------------- Name: Eric Longuet Title: Vice President by /s/ Albert M. Calo ---------------------------------------------- Name: Albert M. Calo Title: Vice President 55 51 CREDIT LYONNAIS, NEW YORK BRANCH, by /s/ Robert Ivosevich ---------------------------------------------- Name: Robert Ivosevich Title: Senior Vice President CREDIT SUISSE, by /s/ Robert B. Potter ---------------------------------------------- Name: Robert B. Potter Title: Member of Senior Management by /s/ Chris T. Horgan ---------------------------------------------- Name: Chris T. Horgan Title: Associate CREDITO ITALIANO, S.P.A., by /s/ Harmon P. Butler ---------------------------------------------- Name: Harmon P. Butler Title: First Vice President and Deputy Manager by /s/ Saiyed A. Abbas ---------------------------------------------- Name: Saiyed A. Abbas Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH, by /s/ Timothy White ---------------------------------------------- Name: Timothy White Title: Vice President DEN DANSKE BANK, AKTIESELSKAB CAYMAN ISLANDS BRANCH, by /s/ Bent V. Christensen ---------------------------------------------- Name: Bent V. Christensen Title: Vice President by /s/ Mogens Sendergaard ---------------------------------------------- Name: Mogens Sendergaard Title: Vice President 56 52 DEUTSCHE BANK AG, NEW YORK BRANCH, AND/OR CAYMAN ISLANDS BRANCH, by /s/ Hans-Josef Thiele ---------------------------------------------- Name: Hans-Josef Thiele Title: Vice President by /s/ Stephan A. Wiedemann ---------------------------------------------- Name: Stephan A. Wiedemann Title: Vice President DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, by /s/ Mark K. Connelly ---------------------------------------------- Name: Mark K. Connelly Title: Vice President by /s/ Karen A. Brinkman ---------------------------------------------- Name: Karen A. Brinkman Title: Vice President DRESDNER BANK AG, NEW YORK BRANCH, AND GRAND CAYMAN BRANCH, by /s/ J. Michael Leffler ---------------------------------------------- Name: J. Michael Leffler Title: Senior Vice President by /s/ Ernest C. Fung ---------------------------------------------- Name: Ernest C. Fung Title: Vice President FIRST INTERSTATE BANK OF CALIFORNIA, by /s/ William J. Baird ---------------------------------------------- Name: William J. Baird Title: Senior Vice President by /s/ Judy A. Maahs ---------------------------------------------- Name: Judy A. Maahs Title: Assistant Vice President 57 53 THE FIRST NATIONAL BANK OF BOSTON, by /s/ Paul P. Sassieni ---------------------------------------------- Name: Paul P. Sassieni Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO, by /s/ Rebecca McCloskey ---------------------------------------------- Name: Rebecca McCloskey Title: Vice President FIRST UNION NATIONAL BANK OF NORTH CAROLINA, by /s/ Mark M. Harden ---------------------------------------------- Name: Mark M. Harden Title: Vice President THE FUJI BANK, LIMITED, NEW YORK BRANCH, by /s/ Gina M. Kearns ---------------------------------------------- Name: Gina M. Kearns Title: Vice President and Manager THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /s/ John V. Veltri ---------------------------------------------- Name: John V. Veltri Title: Senior Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA, by /s/ Wendell Jones ---------------------------------------------- Name: Wendell Jones Title: Vice President by /s/ Ettore Viazzo ---------------------------------------------- Name: Ettore Viazzo Title: Vice President 58 54 KREDIETBANK N.V., by /s/ Armen Karozichian ---------------------------------------------- Name: Armen Karozichian Title: Vice President by /s/ Robert Snauffer ---------------------------------------------- Name: Robert Snauffer Title: Vice President LLOYDS BANK PLC, by /s/ Paul D. Briamonte ---------------------------------------------- Name: Paul D. Briamonte Title: Vice President by /s/ Stephen J. Attree ---------------------------------------------- Name: Stephen J. Attree Title: Assistant Vice President LTCB TRUST COMPANY, by /s/ Rene O. LeBlanc ---------------------------------------------- Name: Rene O. LeBlanc Title: Senior Vice President THE MITSUBISHI BANK, LIMITED, by /s/ Paula Mueller ---------------------------------------------- Name: Paula Mueller Title: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION, by /s/ Patricia Loret de Mola ---------------------------------------------- Name: Patricia Loret de Mola Title: Senior Vice President 59 55 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, by /s/ George J. Stapleton ---------------------------------------------- Name: George J. Stapleton Title: Vice President NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH, by /s/ Anne Marie Torre ---------------------------------------------- Name: Anne Marie Torre Title: Vice President NATIONSBANK, N.A., by /s/ James T. Gilland ---------------------------------------------- Name: James T. Gilland Title: Senior Vice President THE NIPPON CREDIT BANK LTD., by /s/ Barry S. Fein ---------------------------------------------- Name: Barry S. Fein Title: Assistant Vice President THE NORTHERN TRUST COMPANY, by /s/ Daryl M. Robicsek ---------------------------------------------- Name: Daryl M. Robicsek Title: Vice President PNC BANK, NATIONAL ASSOCIATION, by /s/ Tom Partridge ---------------------------------------------- Name: Tom Partridge Title: Commercial Banking Officer ROYAL BANK OF CANADA, by /s/ Rainer R. Kraft ---------------------------------------------- Name: Rainer R. Kraft Title: Manager 60 56 THE SAKURA BANK, LIMITED, NEW YORK BRANCH, by /s/ Masahiro Nakajo ---------------------------------------------- Name: Masahiro Nakajo Title: Senior Vice President and Manager THE SANWA BANK LIMITED, NEW YORK BRANCH, by /s/ Stephen C. Small ---------------------------------------------- Name: Stephen C. Small Title: Vice President and Area Manager SOCIETE GENERALE, by /s/ Sedare Coradin ---------------------------------------------- Name: Sedare Coradin Title: Vice President THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH, by /s/ Yoshinori Kawamura ---------------------------------------------- Name: Yoshinori Kawamura Title: Joint General Manager SUNTRUST BANK, ATLANTA, by /s/ May M. Smith ---------------------------------------------- Name: May M. Smith Title: Banking Officer by /s/Craig W. Farnsworth ---------------------------------------------- Name: Craig W. Farnsworth Title: Vice President 61 57 SWISS BANK CORPORATION, NEW YORK BRANCH, by /s/ Susan N. Isquith ---------------------------------------------- Name: Susan N. Isquith Title: Director by /s/ Edward J. McDonnell III ---------------------------------------------- Name: Edward J. McDonnell III Title: Associate Director THE TOKAI BANK, LIMITED, by /s/ Stuart Schulman ---------------------------------------------- Name: Stuart Schulman Title: Senior Vice President TORONTO DOMINION (NEW YORK), by /s/ Randall Bingham ---------------------------------------------- Name: Randall Bingham Title: Managing Director UNION BANK OF SWITZERLAND, NEW YORK BRANCH, by /s/ Robert W. Casey, Jr. ---------------------------------------------- Name: Robert W. Casey, Jr. Title: Vice President by /s/ Daniel R. Strickford ---------------------------------------------- Name: Daniel R. Strickford Title: Assistant Treasurer 62 58 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES, by /s/ A. Kumbier ---------------------------------------------- Name: A. Kumbier Title: Managing Director by /s/ M.P.M. Ransley ---------------------------------------------- Name: M.P.M. Ransley Title: Associate THE YASUDA TRUST AND BANKING COMPANY, LIMITED, NEW YORK BRANCH, by /s/ Rohn M. Laudenschlager ---------------------------------------------- Name: Rohn M. Laudenschlager Title: Senior Vice President 63 EXHIBIT A-1 FORM OF COMPETITIVE BID REQUEST Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, NY 10017 Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may hereafter be amended, modified, extended or restated from time to time, the "364-Day Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 364-Day Agreement. The Borrower hereby gives you notice pursuant to Section 2.03(a) of the 364-Day Agreement that it requests a Competitive Borrowing under the 364-Day Agreement, and in that connection sets forth below the terms on which such Competitive Borrowing is requested to be made: (A) Date of Competitive Borrowing (which is a Business Day) __________________ (B) Principal amount of Competitive Borrowing 1/ __________________ (C) Interest rate basis 2/ __________________ (D) Interest Period and the last day thereof 3/ __________________ Upon acceptance of any or all of the Loans offered by the Lenders in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Section 4.01(b) and (c) of the 364-Day Agreement have been satisfied. Very truly yours, [NAME OF BORROWER], by __________________________ Name: Title: [Financial Officer] ____________________ 1/ Not less than $10,000,000 (and in integral multiples of $5,000,000) or greater than the Total Commitment then available. 2/ Eurodollar Competitive Loan or Fixed Rate Loan. 3/ Which shall be subject to the definition of Interest Period and end not later than the Maturity Date. 64 EXHIBIT A-2 FORM OF NOTICE OF COMPETITIVE BID REQUEST [Name of Lender] [Address] [Date] Attention: [ ] Dear Ladies and Gentlemen: Reference is made to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may hereafter be amended, modified, extended or restated from time to time, the "364-Day Agreement"), among ITT Corporation [,__________] (the "Borrower"), the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 364-Day Agreement. The Borrower made a Competitive Bid Request on __________, 19[ ], pursuant to Section 2.03(a) of the 364- Day Agreement, and in that connection you are invited to submit a Competitive Bid by [Date]/[Time]. 1/ Your Competitive Bid must comply with Section 2.03(b) of the 364-Day Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Borrowing _________________ (B) Principal amount of Competitive Borrowing _________________ (C) Interest rate basis _________________ (D) Interest Period and the last day thereof _________________ Very truly yours, CHEMICAL BANK, as Administrative Agent, by __________________________ Name: Title: ____________________ 1/ The Competitive Bid must be received by the Administrative Agent (i) in the case of Eurodollar Competitive Loans, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Borrowing, and (ii) in the case of Fixed Rate Loans, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Borrowing. 65 EXHIBIT A-3 FORM OF COMPETITIVE BID Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, N.Y. 10017 [Date] Attention: [ ] Dear Ladies and Gentlemen: The undersigned, [Name of Lender], refers to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "364-Day Agreement"), among ITT Corporation [,__________] (the "Borrower"), the Borrowing Subsidiaries parties thereto, the Lenders named therein and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 364-Day Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section 2.03(b) of the 364-Day Agreement, in response to the Competitive Bid Request made by the Borrower on ___________, 19[ ], and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount 1/ _________________ (B) Competitive Bid Rate 2/ _________________ (C) Interest Period and last day thereof _________________ The undersigned hereby confirms that it is prepared, subject to the conditions set forth in the 364-Day Agreement, to extend credit to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.03(d) of the 364-Day Agreement. Very truly yours, [NAME OF LENDER], by _______________________________________ Name: Title: ____________________ 1/ Not less than $5,000,000 or greater than the requested Competitive Borrowing and in integral multiples of $1,000,000. Multiple bids will be accepted by the Administrative Agent. 2/ i.e., LIBO Rate + or - __%, in the case of Eurodollar Competitive Loans or ___%, in the case of Fixed Rate Loans. 66 EXHIBIT A-4 FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER [Date] Chemical Bank, as Administrative Agent for the Lenders referred to below 270 Park Avenue New York, N.Y. 10017 Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "364-Day Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent for the Lenders. In accordance with Section 2.03(c) of the 364-Day Agreement, we have received a summary of bids in connection with our Competitive Bid Request dated _____________, and in accordance with Section 2.03(d) of the 364-Day Agreement, we hereby accept the following bids for maturity on [date]:
Principal Amount Fixed Rate/Margin Lender - - ---------------- ----------------- ------ $ [%]/[+/-. %] $
We hereby reject the following bids:
Principal Amount Fixed Rate/Margin Lender - - ---------------- ----------------- ------ $ [%]/[+/-. %] $
The $__________ should be deposited in Chemical Bank account number [ ] on [date]. Very truly yours, [NAME OF BORROWER], by _______________________________________ Name: Title: 67 EXHIBIT A-5 FORM OF STANDBY BORROWING REQUEST Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, N.Y. 10017 [Date] Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "364-Day Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 364-Day Agreement. The Borrower hereby gives you notice pursuant to Section 2.04 of the 364-Day Agreement that it requests a Standby Borrowing under the 364-Day Agreement, and in that connection sets forth below the terms on which such Standby Borrowing is requested to be made: (A) Date of Standby Borrowing (which is a Business Day) __________________ (B) Principal amount of Standby Borrowing 1/ __________________ (C) Interest rate basis 2/ __________________ (D) Interest Period and the last day thereof 3/ __________________ Upon acceptance of any or all of the Loans made by the Lenders in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Section 4.01(b) and (c) of the 364-Day Agreement have been satisfied. Very truly yours, [NAME OF BORROWER], by __________________________ Name: Title: [Financial Officer] ____________________ 1/ Not less than $20,000,000 (and in integral multiples of $5,000,000) or greater than the Total Commitment then available. 2/ Eurodollar Standby Loan or Fixed Rate Loan. 3/ Which shall be subject to the definition of Interest Period and end not later than the Maturity Date. 68 EXHIBIT B [CHEMICAL LOGO] CHEMICAL BANK 140 East 45th Street New York, NY 10017-3162 212/622-0001 Fax 212/622-0002 Telex 353006 ABSC NYK ITT CORPORATION ADMINISTRATIVE QUESTIONNAIRE Please accurately complete the following information and return via FAX to the attention of Janet Belden at Chemical Bank as soon as possible: FAX NUMBER: 212-622-0122 LEGAL NAME TO APPEAR IN DOCUMENTATION: _______________________________________________________________________________ GENERAL INFORMATION - DOMESTIC LENDING OFFICE: Institution Name: ____________________________________________________________ Street Address: __________________________________________________________ City, State, Zip Code: _______________________________________________________ GENERAL INFORMATION - EURODOLLAR LENDING OFFICE: Institution Name: __________________________________________________________ Street Address: _________________________________________________________ City, State, Zip Code: _______________________________________________________ CONTACTS/NOTIFICATION METHODS: CREDIT CONTACTS: Primary contact: ______________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ______________________________________________________________ FAX Number: ______________________________________________________________ Backup Contact: ______________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ______________________________________________________________ FAX Number: ______________________________________________________________ 69 EXHIBIT B TAX WITHHOLDING: Non Resident Alien __________ Y* _________N * Form 4224 Enclosed Tax ID Number _______________________________ CONTACTS/NOTIFICATION METHODS: ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC. Contact: _____________________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: ________________________________________________________ Phone Number: _________________________________________________________________ FAX Number: ___________________________________________________________________ BID LOAN NOTIFICATION: Contact: _____________________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: ________________________________________________________ Phone Number: _________________________________________________________________ FAX Number: ___________________________________________________________________ PAYMENT INSTRUCTIONS: Name of Bank where funds are to be transferred: _______________________________________________________________________________ Routing Transit/ABA number of Bank where funds are to be transferred: _______________________________________________________________________________ Name of Account, if applicable: _______________________________________________________________________________ Account Number: ______________________________________________________________ Additional Information: _______________________________________________________ MAILINGS: Please specified who should receive financial information: Name: _________________________________________________________________________ Street Address: _______________________________________________________________ City, State, Zip Code: ________________________________________________________ It is very important that all of the above information is accurately filled in and returned promptly. If there is someone other than yourself who should receive this questionnaire, please notify us of their name and FAX number and we will FAX them a copy of the questionnaire. If you have any questions, please call me on 212-622-0011. 70 EXHIBIT C [FORM OF] ASSIGNMENT AND ACCEPTANCE Dated: _________, 19__ Reference is made to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (the "364-Day Agreement"), among ITT Corporation (the "Company"), the Borrowing Subsidiaries parties thereto, the Lenders parties thereto (the "Lenders") and Chemical Bank, as Administrative Agent for the Lenders. Terms defined in the 364-Day Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the 364-Day Agreement, including, without limitation, the interests set forth below in the Commitment of the Assignor on the Effective Date and the Competitive Loans and Standby Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04 of the 364-Day Agreement, a copy of which has been received by each such party. From and after the Effective Date, (i) the Assignee shall be a party to and be bound by the provisions of the 364-Day Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the 364-Day Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.19(g) of the 364-Day Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the 364-Day Agreement, an Administrative Questionnaire in the form of Exhibit B to the 364-Day Agreement and (iii) a processing and recordation fee of $3,000. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: 71 Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment):
Percentage Assigned of Facility/Commitment (set forth, to at least 8 decimals, as a Principal Amount Assigned (and percentage of the Facility and identifying information as to the aggregate Commitments of Facility individual Competitive Loans) all Lenders thereunder) -------- ----------------------------- ----------------------- Commitment Assigned: $____________ ___________ % Standby Loans: $____________ ___________ % Competitive Loans: $____________ ___________ %
The terms set forth and on the reverse side Accepted: hereof are hereby agreed to: ITT CORPORATION, ________________________________, as by: ___________________________ Assignor, Name: Title: by: ____________________________ Name: Title: ________________________________, as Assignee, by: ____________________________ Name: Title: 72 EXHIBIT D [FORM OF] OPINION OF COUNSEL FOR ITT CORPORATION 1/ 1. ITT Corporation (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (iii) is qualified to do business in every jurisdiction within the United States where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect on ITT Corporation, and (iv) has all requisite corporate power and authority to execute, deliver and perform its obligations under the Agreement and to borrow funds thereunder. 2. The execution, delivery and performance by ITT Corporation of the Agreement and the borrowings of ITT Corporation thereunder (collectively, the "Transactions") (i) have been duly authorized by all requisite corporate action and (ii) will not (a) violate (1) any provision of law, statute, rule or regulation (including without limitation, the Margin Regulations), or of the certificate of incorporation or other constitutive documents or by-laws of ITT Corporation, (2) any order of any governmental authority or (3) any provision of any indenture, agreement or other instrument to which ITT Corporation is a party or by which it or its property is or may be bound, (b) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (c) result in the creation or imposition of any lien upon any property or assets of ITT Corporation. 3. The Agreement has been duly executed and delivered by ITT Corporation and constitutes a legal, valid and binding obligation of ITT Corporation enforceable against ITT Corporation in accordance with its terms, subject as to the enforceability of rights and remedies to any applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect. 4. No action, consent or approval of, registration or filing with, or any other action by, any government authority is or will be required in connection with the Transactions, except such as have been made or obtained and are in full force and effect. 5. Neither ITT Corporation nor any of its subsidiaries is (a) except as set forth in the next sentence, an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 (the "1940 Act") or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. ____________________ 1/ Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the 364-Day Competitive Advance and Revolving Credit Facility Agreement (the Agreement ) dated as of November 10, 1995, among ITT Corporation, the lenders listed in Schedule 2.01 thereto, and Chemical Bank, as Administrative Agent. 73 EXHIBIT E to the Credit Agreement BORROWING SUBSIDIARY AGREEMENT dated as of [ ], among ITT CORPORATION, a Nevada corporation (the "Company"), [Name of Subsidiary], a [ ] corporation ("the Subsidiary"), and CHEMICAL BANK, as administrative agent (the "Administrative Agent") for the lenders (the "Lenders") party to the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995, as amended (the "Agreement"), among the Company, the Administrative Agent and the Lenders. Under the Agreement, the Lenders have agreed, upon the terms and subject to the conditions therein set forth, to make competitive advance and revolving credit loans and to issue Letters of Credit to the Company and to Subsidiaries (as defined in the Agreement) of the Company which execute and deliver to the Administrative Agent Borrowing Subsidiary Agreements in the form of this Borrowing Subsidiary Agreement. The Company represents that the Subsidiary is a subsidiary (as so defined) of the Company and that the guarantee of the Company contained in Article VII of the Agreement applies to the obligations of the Subsidiary. In consideration of being permitted to borrow or have Letters of Credit issued under the Agreement upon the terms and subject to the conditions set forth therein, the Subsidiary agrees that from and after the date of this Borrowing Subsidiary Agreement it will be, and will be liable for the observance and performance of all the obligations of, a Borrowing Subsidiary under the Agreement, as the same may be amended from time to time, to the same extent as if it had been one of the original parties to the Agreement and that it will furnish to the Administration Agent and the Lenders copies of its financial statements on an annual basis. IN WITNESS WHEREOF, the Company and the Subsidiary have caused this Borrowing Subsidiary Agreement to be duly executed by their authorized officers as of the date first appearing above. ITT CORPORATION, by ______________________ Name: Title: [NAME OF SUBSIDIARY], by ______________________ Name: Title: Accepted as of the date first appearing above: CHEMICAL BANK, as Administrative Agent, by ______________________ Name: Title: 74 Exhibit F ITT Corporation 1330 Avenue of the Americas New York, NY 10019 November ___, 1995 Chemical Bank, as Administrative Agent for the Lenders 270 Park Avenue New York, NY 10019 Attention: Elisabeth Hughes Dear Sirs: Reference is made to the 364-Day Competitive Advance and Revolving Credit Facility Agreement and the Five-Year Competitive Advance and Revolving Credit Facility Agreement (collectively, the "Credit Agreements"), each among ITT Corporation, a Nevada corporation ("New ITT"), the lenders listed in Schedules 2.01 thereto (the "Lenders") and Chemical Bank, as administrative agent for the Lenders (the "Administrative Agent"). 1. As contemplated by Section 9.16 of the 364-Day Credit Agreement, and Section 9.17 of the Five-Year Credit Agreement, ITT Corporation, a Delaware corporation ("Old ITT"), and the Administrative Agent, acting on behalf of the Lenders, hereby agree that the Credit Agreements shall be executed on the date hereof and that, except as otherwise provided herein, Old ITT will have all rights and obligations of the "Company" referred to therein. 2. Old ITT agrees that upon the completion of the Distribution, it shall cause New ITT to execute, and New ITT shall succeed to the rights and obligations of Old ITT under, the Credit Agreements. 3. Old ITT further agrees that prior to each of (a) the successions referred to in paragraph 2 above, (b) the termination and cancellation of the Existing Credit Facilities (as defined in the Credit Agreements), (c) the completion of the Distribution and (d) the satisfaction of the other conditions set forth in the Credit Agreements, Old ITT shall not make any Borrowing or request the issuance of any Letter of Credit under the Credit Agreements. This letter agreement shall be deemed to be a part of each of the Credit Agreements and shall have the same effect as if set forth in full therein. The failure of the 75 Borrower to comply with the terms of this letter agreement shall constitute an Event of Default under the Credit Agreements. Very truly yours, ITT CORPORATION by __________________________ Name: Title: Accepted and agreed to as of the date first written above: CHEMICAL BANK, as Administrative Agent by ______________________ Name: Title: 76 SCHEDULE 2.01
Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Chemical Bank Ms. Nancy Mistretta $ 51,666,666.86 270 Park Avenue (212) 270-6041 New York, NY 10017 ABN AMRO Bank, N.V. Ms. Margaret Hannahoe $ 13,333,333.33 500 Park Avenue (212) 832-7129 New York, NY 10022 Arab Bank Plc Mr. Peter Boyadjian $ 8,333,333.33 520 Madison Avenue (212) 593-4632 New York, NY 10022 Banca Commerciale Italiana Ms. Elizabeth Cronin $ 13,333,333.33 New York Branch (212) 809-2124 1 William Street New York, NY 10004 Banca di Roma S.p.A. Mr. Ralph Riehle $ 8,333,333.33 34 East 51st Street, 7th Floor (212) 407-1118 New York, NY 10005 Banca Nazionale del Lavoro Mr. Giulio Giovine $ 13,333,333.33 New York Branch (212) 765-2978 25 W. 51st Street Rockefeller Plaza New York, NY 10019 Banca Popolare di Milano Mr. Nicholas Cinosi $ 8,333,333.33 375 Park Avenue (212) 586-3537 New York, NY 10152 Bank of America Illinois Ms. Bonnie Ptaszkowski $ 23,333,333.33 USCG - Account Administration (312) 974-9626 200 W. Jackson Street, 9th Floor Chicago, IL 60679 with copy to: Bank of America Mr. Donald Chin 335 Madison Avenue (212) 503-7771 New York, NY 10017 Bank of Hawaii Mr. Scott G. Balke $ 8,333,333.33 111 South King Street (808) 537-8301 P.O. Box 2900 Honolulu, HI 96813 The Bank of New York Ms. Mary Anne Zagroba $ 18,333,333.33 One Wall Street (212) 635-1480 New York, NY 10286
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- The Bank of Nova Scotia Mr. Philip Adsetts $ 23,333,333.33 One Liberty Plaza (212) 225-5090/91 New York, NY 10006 The Bank of Tokyo Trust Company Mr. Paul P. Malecki $ 23,333,333.33 1251 Avenue of the Americas (212) 782-6440 12th Floor New York, NY 10116-3138 Bankers Trust Company Ms. Katherine Judge $ 23,333,333.33 130 Liberty Street (212) 250-4969 New York, NY 10006 Barclays Bank PLC Ms. Afsaneh Naimollah $ 23,333,333.33 222 Broadway, 11th Floor (212) 412-7580 New York, NY 10038 Bayerische Landesbank Girozentrale Ms. Joanne Cicino $ 13,333,333.33 111 East 50th Street (212) 310-9868 New York, NY 10022 CIBC, Inc. Ms. Judith Domkowski $ 18,333,333.33 425 Lexington Avenue (212) 856-3991 New York, NY 10017 The Chase Manhattan Bank, N.A. Mr. Edward F. McNulty $ 23,333,333.33 One Chase Manhattan Plaza (212) 552-7879 New York, NY 10081 Citibank, N.A. Ms. Elizabeth Palermo $ 23,333,333.33 399 Park Avenue (212) 826-2375 New York, NY 10043 Comerica Bank Ms. Tammy Gurne $ 13,333,333.33 500 Woodward Avenue (313) 222-7806 Detroit, MI 48226-3280 Commerzbank AG Mr. Thomas Ausfahl $ 13,333,333.33 2 World Financial Center (212) 266-7235 New York, NY 10281 Compagnie Financiere de CIC et de Ms. Martha Skidmore $ 8,333,333.33 l'Union Europeenne (212) 715-4535 520 Madison Avenue 37th Floor New York, NY 10022
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Credit Lyonnais Mr. Michael Moretti $ 23,333,333.33 1301 Avenue of the Americas (212) 459-3179 18th Floor New York, NY 10019 Credit Suisse Ms. Carole Lustig $ 23,333,333.33 Tower 49 (212) 238-5439 12 East 49th Street New York, NY 10017 Credito Italiano Mr. Harmon Butler $ 8,333,333.33 375 Park Avenue (212) 546-9675 New York, NY 10152 The Dai-Ichi Kangyo Bank, Ltd. Mr. Timothy White $ 18,333,333.33 One World Trade Center (212) 524-0579 Suite 4911 New York, NY 10048 Den Danske Bank Mr. Mogens Sondergaard $ 8,333,333.33 280 Park Avenue (212) 370-9239 New York, NY 10017 Deutsche Bank AG Mr. Rolf-Peter Mikolayczyk $ 23,333,333.33 New York Branch (212) 474-8212 31 West 52nd Street New York, NY 10019 DG Bank Deutsche Mr. Mark Connelly $ 13,333,333.33 Genossenschaftsbank (212) 745-1556 609 Fifth Avenue 8th Floor New York, NY 10017 Dresdner Bank AG Mr. Michael Leffler $ 23,333,333.33 New York Branch (212) 574-0130 75 Wall Street New York, NY 10005-2889 First Interstate Bank of California Mr. Roy Roberts $ 13,333,333.33 885 Third Avenue (212) 593-5241 New York, NY 10022 The First National Bank of Boston Ms. Cindy Chen $ 13,333,333.33 100 Federal Street (617) 434-0601 01-06-12 Boston, MA 02106
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- The First National Bank of Chicago Mr. Stephen Liggins $ 23,333,333.33 153 West 51st Street (212) 373-1388 New York, NY 10019 First Union National Bank of North Mr. Dave Johnson $ 8,333,333.33 Carolina (704) 374-2802 One First Union Center Charlotte, NC 28288 The Fuji Bank, Limited Mr. Roy Tanfield $ 23,333,333.33 Two World Trade Center 79th Floor (212) 912-0516 New York, NY 10048 The Industrial Bank of Japan, Ltd., Mr. John Veltri $ 18,333,333.33 New York Branch (212) 856-9450 245 Park Avenue 23rd Floor New York, NY 10167-0037 Istituto Bancario San Paolo Bank di Mr. Wendell Jones $ 8,333,333.33 Torino S.p.A. (212) 599-5303 245 Park Avenue New York, NY 10167 Kredietbank N.V. Ms. Jennifer Pariente $ 8,333,333.33 125 West 55th Street (212) 956-5580 New York, NY 10019 Lloyds Bank Plc Mr. Theodore Walser $ 18,333,333.33 199 Water Street (212) 607-4999 9th Floor New York, NY 10038 LTCB Trust Company Mr. Yoshi Nakagawa $ 8,333,333.33 165 Broadway (212) 608-2371 New York, NY 10006 The Mitsubishi Bank Mr. J. Bruce Meredith $ 18,333,333.33 New York Branch (212) 667-3562 225 Liberty Street New York, NY 10281-1059 The Mitsubishi Trust and Banking Mr. Randolph Medrano $ 13,333,333.33 Corporation (212) 593-4691 520 Madison Avenue New York, NY 10022
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Morgan Guaranty Trust Company of Mr. Stephen J. Kenneally $ 23,333,333.33 New York (212) 648-5018 60 Wall Street New York, NY 10260-0060 National Westminster Bank Plc Mr. Jordan Fragiacorno $ 18,333,333.33 175 Water Street (212) 602-4256 New York, NY 10038-4924 Nationsbank, N.A. Mr. James Gilland $ 23,333,333.33 767 Fifth Avenue (212) 593-1083 23rd Floor New York, NY 10153 Nippon Credit Bank Mr. Jeff Pasquale $ 8,333,333.33 245 Park Avenue (212) 490-3895 New York, NY 10167 The Northern Trust Company Mr. Daryl M. Robicsek $ 8,333,333.33 50 South LaSalle Street (312) 444-3508 Chicago, IL 60675 PNC Bank, National Association Mr. Tom Partridge $ 8,333,333.33 5th and Wood Streets (212) 557-5461 Pittsburgh, PA 15265 Royal Bank of Canada Mr. John Crawford $ 23,333,333.33 One Financial Square (212) 428-6459 New York, NY 10005-3531 The Sakura Bank, Limited, Mr. Pierre Vautravers $ 13,333,333.33 New York Branch (212) 888-7651 277 Park Avenue New York, NY 10172 The Sanwa Bank, Ltd. Mr. Stephen C. Small $ 23,333,333.33 New York Branch (212) 754-1304 55 East 52nd Street New York, NY 10055 Societe Generale Ms. Sedare Coradin $ 23,333,333.33 1221 Avenue of the Americas (212) 278-7430 New York, NY 10020 The Sumitomo Bank, Limited Mr. Edward McColly $ 23,333,333.33 New York Branch (212) 224-5188 277 Park Avenue New York, NY 10172
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- SunTrust Bank, Atlanta Ms. May Smith $ 13,333,333.33 711 Fifth Avenue (212) 371-9386 5th Floor New York, NY 10022 Swiss Bank Corporation Ms. Susan Isquith $ 18,333,333.33 New York Branch (212) 574-3228 222 Broadway New York, NY 10038 The Tokai Bank, Limited Mr. Stuart Schulman $ 13,333,333.33 55 East 52nd Street (212) 754-2170 12th Floor New York, NY 10022 The Toronto-Dominion Bank Mr. Reginald Waylen $ 18,333,333.33 31 West 52nd Street (212) 262-1926 New York, NY 10019 Union Bank of Switzerland Mr. Daniel H. Perron $ 23,333,333.33 299 Park Avenue (212) 821-3383 New York, NY 10171 Westdeutsche Landesbank Mr. Ralph White $ 13,333,333.33 Girozentrale (212) 852-8307 1211 Avenue of the Americas New York, NY 10036 The Yasuda Trust and Banking Co., Mr. Rohn Laudenschlager $ 13,333,333.33 Ltd. (212) 373-5796 New York Branch 666 Fifth Avenue Suite 801 New York, NY 10103 _________________ TOTAL COMMITMENT $1,000,000,000.00
82 SCHEDULE 3.13 ITT CORPORATION SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS 1. The use of $275 million in cash balances at various subsidiaries of ITT Destinations, Inc. to repay existing short-term borrowings. 2. Net capital expenditures totaling $106 million in the last three months of 1995 ($57 million was incurred in the comparable 1994 period). 3. Receipt of a $100 million contribution from ITT Industries, Inc. 4. The results of operation between the date of the Distribution and the date projected in the forecasted capitalization table. 5. Such additional modifications as outlined in the Form 8-K filed on November 7, 1995 by Old ITT with the Securities and Exchange Commission. 83 Schedule 5.10 ITT Corporation Liens on Principal Properties Sheraton Boston Liens in favor of Citibank. N.A. to secure approximately $192.6 million of outstanding indebtedness. Sheraton Buenos Aires Liens in favor of Overseas Private Investment Corp. to secure approximately $34 million of indebtedness. Park Grande Sydney Liens in favor of Commonwealth Bank of Australia to secure approximately $200 million of indebtedness. EX-10.15 11 FIVE-YEAR COMPETITIVE ADVANCE AND REVOLVING 1 33 Borrowing Amounts and Local Currency Lender Maximum Borrowing Amounts pursuant to this Section 2.22(c) shall be effective until the amount thereof shall be recalculated by the Administrative Agent on the next succeeding Reset Date or Borrowing Date, and shall not be deemed to reduce the stated amount of any commitment of any Local Currency Lender in respect of any Local Currency Addendum. (d) If, on any Reset Date or Borrowing Date (after giving effect to (i) any Loans to be made or repaid on such date, (ii) any amendment, supplement or other modification to any Local Currency Addendum effective on such date of which the Administrative Agent has received notice and (iii) any reduction in the Local Currency Facility Maximum Borrowing Amounts pursuant to Section 2.22(c) effective on such date), the sum of (A) the aggregate outstanding Dollar Standby Extensions of Credit of all the Lenders, (B) the aggregate L/C Exposures and (C) the aggregate Competitive Loan Exposures exceed the Dollar Facility Overage (the amount of such excess being called the "Dollar Facility Excess"), then the Local Currency Facility Maximum Borrowing Amount under each Local Currency Addendum shall be reduced on such date by an amount equal to the product of such Dollar Facility Excess times a fraction the numerator of which shall equal the Local Currency Facility Maximum Borrowing Amount under such Local Currency Addendum and the denominator of which shall equal the aggregate of the Local Currency Facility Maximum Borrowing Amounts with respect to all Local Currency Addenda. Each such reduction in the Local Currency Facility Maximum Borrowing Amount under a Local Currency Addendum shall in turn reduce the respective Local Currency Lender Maximum Borrowing Amounts of each Local Currency Lender party to such Local Currency Addendum, pro rata on the basis of the respective Local Currency Lender Maximum Borrowing Amounts of such Local Currency Lenders immediately prior to such reduction. Reductions in Local Currency Facility Maximum Borrowing Amounts and Local Currency Lender Maximum Borrowing Amounts pursuant to this Section 2.22(d) shall be effective until the amount thereof shall be recalculated by the Administrative Agent on the next succeeding Reset Date or Borrowing Date, and shall not be deemed to reduce the stated amount of any commitment of any Local Currency Lender in respect of any Local Currency Addendum. (e) If, on any Reset Date, the Dollar Equivalent of the Local Currency Loans outstanding under a Local Currency Addendum exceeds 105% of the Local Currency Facility Maximum Borrowing Amount with respect thereto (after giving effect to any reductions therein effected pursuant to Section 2.22(c) or (d) on such date), then the relevant Borrower shall, within three Business Days after notice thereof from the Administrative Agent, (i) increase the Local Currency Facility Maximum Borrowing Amount with respect to such Local Currency Facility in accordance with Section 2.21(e) and/or (ii) prepay Local Currency Loans, in either case in an aggregate amount such that, after giving effect thereto, (x) the Dollar Equivalent of all such Local Currency Loans shall be equal to or less than such Local Currency Facility Maximum Borrowing Amount and (y) the Dollar Equivalent of the Local Currency Loans of each relevant Local Currency Lender shall be equal to or less than such Local Currency Lender's Local Currency Lender Maximum Borrowing Amount with respect to such Local Currency Addendum. (f) If, on any Reset Date, the Standby Credit Exposure of any Lender exceeds 105% of such Lender's Commitment, then, within three Business Days after notice thereof from the Administrative Agent, the Company shall prepay and/or cause the relevant Borrowing Subsidiaries to prepay the Loans in accordance with this Agreement, in an aggregate amount such that, after giving effect thereto, the Standby Credit Exposure of such Lender shall be equal to or less than such Lender's Commitment. 2 34 (g) The Administrative Agent shall promptly notify the relevant Lenders of the amount of any reductions in Local Currency Facility Maximum Borrowing Amounts or Local Currency Lender Maximum Borrowing Amounts required pursuant to this Section 2.22. SECTION 2.23. Letters of Credit. (a) General. The Borrowers may request the issuance of Letters of Credit, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, appropriately completed, for the accounts of the Borrowers, at any time and from time to time while the Commitments remain in effect. All Letters of Credit shall be denominated in Dollars. This Section shall not be construed to impose an obligation upon any Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the applicable Borrower shall hand deliver or telecopy to the applicable Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph 2.23(c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. Following receipt of such notice and prior to the issuance of the requested Letter of Credit or the applicable amendment, renewal or extension, the Administrative Agent shall notify the Borrowers, each Lender and the applicable Issuing Bank of the amount of the Aggregate Credit Exposure after giving effect to (i) the issuance, amendment, renewal or extension of such Letter of Credit, (ii) the issuance or expiration of any other Letter of Credit that is to be issued or will expire prior to the requested date of issuance of such Letter of Credit and (iii) the borrowing or repayment of any Loans that (based upon notices delivered to the Administrative Agent by the Borrowers) are to be borrowed or repaid prior to the requested date of issuance of such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit, the Borrowers shall be deemed to represent and warrant that, (i) after giving effect to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed $350,000,000 and (B) the Aggregate Credit Exposure shall not exceed the Total Commitment and (ii) in the case of a Letter of Credit that will expire later than the first anniversary of such issuance, amendment, renewal or extension, the applicable Borrower, the applicable Issuing Bank and the Required Lenders shall have reached agreement on the fees to be applicable thereto as contemplated by the last sentence of Section 2.06(c). (c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of the date five years after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Maturity Date, unless such Letter of Credit expires by its terms on an earlier date; provided that a Letter of Credit shall not be issued (nor shall a Letter of Credit be amended, renewed or extended) that would result in the Aggregate Credit Exposure exceeding the Total Commitment. Compliance with the foregoing proviso shall be determined based upon the assumption that (i) each Letter of Credit remains outstanding and undrawn in accordance with its terms until its expiration date (taking into account any rights of renewal or extension that do not require written notice by or consent of the applicable Issuing Bank, in its sole discretion, in order to effect such renewal or extension) and (ii) the Commitments will not be reduced voluntarily pursuant to Section 2.11(b). (d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the applicable Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender, and each such Lender hereby acquires from the applicable Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Share from time to time of the 3 35 aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such Lender's Applicable Share from time to time of each L/C Disbursement made by such Issuing Bank and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any other Loan Document) forthwith on the date due as provided in Section 2.02(e). Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If an Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the applicable Borrower shall pay to the Administrative Agent such L/C Disbursement not later than two hours after the Borrower shall have received notice from such Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m., New York City time, on the immediately following Business Day. (f) Obligations Absolute. The Borrowers' obligations to reimburse L/C Disbursements as provided in paragraph 2.23(e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; (iii) the existence of any claim, setoff, defense or other right that the Borrowers, any other party guaranteeing, or otherwise obligated with, the Borrowers, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, any Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of any Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrowers' obligations hereunder. 4 36 Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrowers hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or wilful misconduct of any Issuing Bank. However, the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by the Borrowers that are caused by such Issuing Bank's gross negligence or wilful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof; it is understood that each Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (i) an Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute wilful misconduct or gross negligence of an Issuing Bank. (g) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the applicable Borrower of such demand for payment and whether such Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Lender notice thereof. (h) Interim Interest. If an Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of such Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment or the date on which interest shall commence to accrue thereon as provided in paragraph 2.02(e) above, at the rate per annum that would apply to such amount if such amount were an ABR Loan. (i) Resignation or Removal of an Issuing Bank. An Issuing Bank may resign at any time by giving 180 days' prior written notice to the Administrative Agent, the Lenders and the Borrowers, and may be removed at any time by the Borrowers by notice to the Issuing Bank, the Administrative Agent and the Lenders. Subject to the next succeeding paragraph, upon the acceptance of any appointment as an Issuing Bank hereunder by a successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such removal or resignation shall become effective, the Borrowers shall pay all accrued and unpaid fees pursuant to Section 2.06(c)(ii). The acceptance of any appointment as an Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrowers and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Issuing Bank under this Agreement and the other Loan Documents and (ii) 5 37 references herein and in the other Loan Documents to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of an Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. (j) Additional Issuing Banks. The Borrowers may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of the Agreement. Any Lender designated as an issuing bank pursuant to this paragraph 2.23(j) shall, upon entering into an Issuing Bank Agreement with the Company, be deemed to be an "Issuing Bank" (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Banks and such Lender. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants to each of the Lenders that: SECTION 3.01. Organization; Powers. Each Borrower and each of the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect, and (d) in the case of each Borrower, has the corporate power and authority to execute, deliver and perform its obligations under the Loan Documents and to borrow hereunder and thereunder. SECTION 3.02. Authorization. The execution, delivery and performance by the Borrowers of this Agreement, the Issuing Bank Agreements, the promissory notes, if any, issued pursuant to Section 9.04(i) and each Local Currency Addendum (and by the Borrowing Subsidiaries of each Borrowing Subsidiary Agreement), the Borrowings hereunder and the completion of the Distribution (collectively, the "Transactions") (a) have been duly authorized by all requisite corporate action and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation (including the Margin Regulations) or of the certificate of incorporation or other constitutive documents or by-laws of the Borrowers, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which any Borrower is a party or by which it or any of its property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any lien upon any property or assets of any Borrower. SECTION 3.03. Enforceability. This Agreement and each Loan Document to which a Borrower is a party constitutes a legal, valid and binding obligation of each Borrower enforceable in accordance with its terms. 6 38 SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or other action by any Governmental Authority, other than those which have been taken, given or made, as the case may be, is or will be required with respect to any Borrower in connection with the Transactions. SECTION 3.05. Financial Statements. (a) The Company has heretofore furnished to the Administrative Agent and the Lenders copies of its combined balance sheet and statement of income and cash flow as of and for the year ended December 31, 1994, and the six months ended June 30, 1995, as included in the Proxy Statement. Such financial statements present fairly, in all material respects, the consolidated combined financial condition and the results of operations of the Company and the Subsidiaries as of such dates and for such periods in accordance with GAAP. (b) The Company has heretofore furnished to the Administrative Agent and the Lenders copies of its pro forma combined balance sheet and statements of income as of June 30, 1995, and for the year and the six months ended December 31, 1994, and June 30, 1995, respectively, giving effect to the Distribution and certain related transactions. Such financial statements present fairly, in all material respects, the consolidated combined financial condition and the results of operations of the Company and the Subsidiaries on a pro forma basis as of such dates and for such periods in accordance with GAAP. (c) As of the Effective Date, there has been no material adverse change in the consolidated financial condition of the Company and the Subsidiaries taken as a whole from the financial condition reported in the financial statements referenced in paragraph (a) of this Section 3.05. SECTION 3.06. Litigation; Compliance with Laws. (a) As of the Effective Date, there are no actions, proceedings or investigations filed or (to the knowledge of the Borrowers) threatened affecting any Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which question the validity or legality of this Agreement, the Transactions or any action taken or to be taken pursuant to this Agreement and no order or judgment has been issued or entered restraining or enjoining any Borrower or any Subsidiary from the execution, delivery or performance of this Agreement nor is there any other action, proceeding or investigation filed or (to the knowledge of any Borrower or any Subsidiary) threatened against any Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which would be reasonably likely to result in a Material Adverse Effect or materially restrict the ability of any Borrower to comply with its obligations under the Loan Documents. (b) Neither any Borrower nor any Subsidiary is in violation of any law, rule or regulation (including any law, rule or regulation relating to the protection of the environment or to employee health or safety), or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be reasonably likely to result in a Material Adverse Effect. (c) No exchange control law or regulation materially restricts any Borrower from complying with its obligations in respect of any Loan or Letter of Credit or otherwise under this Agreement or any Local Currency Addendum. SECTION 3.07. Federal Reserve Regulations. (a) Neither any Borrower nor any Subsidiary that will receive proceeds of the Loans hereunder is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. 7 39 (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry Margin Stock or to refund indebtedness originally incurred for such purpose, or for any other purpose which entails a violation of, or which is inconsistent with, the provisions of the Margin Regulations. SECTION 3.08. Investment Company Act; Public Utility Holding Company Act. No Borrower is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 (the "1940 Act") or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Use of Proceeds. All proceeds of the Loans and Letters of Credit shall be used for the purposes referred to in the recitals to this Agreement. SECTION 3.10. Full Disclosure; No Material Misstatements. None of the representations or warranties made by any Borrower in connection with this Agreement as of the date such representations and warranties are made or deemed made, and no report, financial statement or other information furnished by or on behalf of any Borrower to the Administrative Agent or any Lender pursuant to or in connection with this Agreement or the credit facilities established hereby, contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or will be made, not misleading. SECTION 3.11. Taxes. Each Borrower and each of the material Subsidiaries have filed or caused to be filed all Federal, state and local tax returns which are required to be filed by them, and have paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by any of them, other than any taxes or assessments the validity of which is being contested in good faith by appropriate proceedings, and with respect to which appropriate accounting reserves have to the extent required by GAAP been set aside. SECTION 3.12. Employee Pension Benefit Plans. The present aggregate value of accumulated benefit obligations of all unfunded and underfunded pension plans of the Company and its Subsidiaries (based on those assumptions used for disclosure in corporate financial statements in accordance with GAAP) did not, as of December 31, 1994, exceed by more than $8,923,000 the value of the assets of all such plans. Of such $8,923,000, $2,019,000 is attributable to employee pension plans in countries where the funding of such obligations is not required or customary and $3,076,000 relates to domestic pension plans where funding is not permitted under current tax regulations. In these cases the Company has recorded book reserves to meet the obligations. SECTION 3.13. Distribution. At or prior to the Effective Date, the Distribution will have been duly completed in accordance with applicable law and as described in the Proxy Statement, and the assets, liabilities and capitalization of the Company will have been consistent at the time of and after giving effect to the Distribution in all material respects with the forecasted capitalization table of the Company set forth in the Proxy Statement and the pro forma financial statements referred to in Section 3.05(b), except that in the event the Distribution shall occur prior to December 31, 1995, the transactions set forth in Schedule 3.13 which are reflected as having occurred in such capitalization table and such pro forma financial statements might not yet have occurred. 8 40 ARTICLE IV CONDITIONS OF LENDING The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: SECTION 4.01. All Extensions of Credit. On the date of each Borrowing and on the date of each issuance of a Letter of Credit: (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or Section 2.04, as applicable, or, in the case of the issuance of a Letter of Credit, the applicable Issuing Bank shall have been selected to issue such Letter of Credit as contemplated by Section 2.23. (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing or issuance of a Letter of Credit with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Borrowing or issuance of a Letter of Credit no Event of Default or Default shall have occurred and be continuing. Each Borrowing and issuance of a Letter of Credit shall be deemed to constitute a representation and warranty by each Borrower on the date of such Borrowing or issuance of a Letter of Credit as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. Effective Date. On the Effective Date: (a) The Administrative Agent shall have received a favorable written opinion of Walter Diehl, Esq., dated the Effective Date and addressed to the Lenders and satisfactory to the Lenders, the Administrative Agent and Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D hereto. (b) The Administrative Agent shall have received (i) a copy of the certificate of incorporation, including all amendments thereto, of the Company, certified as of a recent date by the Secretary of State of its state of incorporation, and a certificate as to the good standing of the Company as of a recent date from such Secretary of State; (ii) a certificate of the Secretary or an Assistant Secretary of the Company dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Company as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate of incorporation referred to in clause (i) above has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to such clause (i) and (D) as to the incumbency and specimen signature of each officer executing this Agreement or any other document delivered in connection herewith on behalf of the Company; and (iii) a certificate of another officer of the Company as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above. 9 41 (c) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer of the Company, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. (d) The principal of and accrued and unpaid interest on any loans outstanding under the Existing Credit Facilities shall have been paid in full, all other amounts due in respect of the Existing Credit Facilities shall have been paid in full and the commitments to lend under the Existing Credit Facilities shall have been permanently terminated. (e) The Administrative Agent shall have received any Fees or other amounts due and payable on or prior to the Effective Date. SECTION 4.03. First Borrowing by Each Borrowing Subsidiary. On or prior to the first date on which Loans are made to or Letters of Credit are issued for the benefit of any Borrowing Subsidiary: (a) The Lenders and any Issuing Banks shall have received the favorable written opinion of counsel satisfactory to the Administrative Agent, addressed to the Lenders and satisfactory to the Lenders, the Administrative Agent and Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D hereto. (b) Each Lender and any Issuing Banks shall have received a copy of the Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary. ARTICLE V COVENANTS A. Affirmative Covenants. Each Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Fees or any other amounts payable hereunder shall be unpaid or any Letters of Credit have not been canceled or have not expired or any amounts drawn thereunder have not been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, it will, and will cause each of the Subsidiaries to: SECTION 5.01. Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as expressly permitted under Section 5.09; provided, however, that nothing in this Section shall prevent the abandonment or termination of the existence, rights or franchises of any Subsidiary or any rights or franchises of any Borrower if such abandonment or termination is in the best interests of the Borrowers and is not disadvantageous in any material respect to the Lenders. SECTION 5.02. Business and Properties. Comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority (including any of the foregoing relating to the protection of the environment or to employee health and safety), whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. 10 42 SECTION 5.03. Financial Statements, Reports, Etc. In the case of the Company, furnish to the Administrative Agent for distribution to each Lender: (a) within 120 days after the end of each fiscal year, its consolidated balance sheet and the related consolidated statements of income and cash flows showing its consolidated financial condition as of the close of such fiscal year and the consolidated results of its operations during such year, all audited by Arthur Andersen LLP or other independent certified public accountants of recognized national standing selected by the Company and accompanied by an opinion of such accountants to the effect that such consolidated financial statements fairly present its financial condition and results of operations on a consolidated basis in accordance with GAAP (it being agreed that the requirements of this paragraph may be satisfied by the delivery pursuant to paragraph (d) below of an annual report on Form 10-K containing the foregoing); (b) within 90 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related consolidated statements of income and cash flow showing its consolidated financial condition as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as fairly presenting its financial condition and results of operations on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments (it being agreed that the requirements of this paragraph may be satisfied by the delivery pursuant to paragraph (d) below of a quarterly report on Form 10-Q containing the foregoing); (c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer certifying that, to the best of such Financial Officer's knowledge, no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (d) promptly after the same become publicly available, copies of all reports on forms 10-K, 10-Q and 8-K filed by it with the SEC, or any Governmental Authority succeeding to any of or all the functions of the SEC, or, in the case of the Company, copies of all reports distributed to its shareholders, as the case may be; (e) promptly, from time to time, such other information as any Lender shall reasonably request through the Administrative Agent; and (f) concurrently with any delivery of financial statements under paragraph (a) or (b) above, calculations of the financial test referred to in Section 5.12. SECTION 5.04. Insurance. Keep its insurable properties adequately insured at all times by financially sound and reputable insurers, and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses (it being understood that the Borrowers and their Subsidiaries may self-insure to the extent customary with companies similarly situated and in the same or similar businesses). SECTION 5.05. Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments and governmental charges imposed upon it or upon its income or profits or in respect of its property, as well as all other material liabilities, in each case before the same shall 11 43 become delinquent or in default and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto shall, to the extent required by GAAP, have been set aside. SECTION 5.06. Litigation and Other Notices. Give the Administrative Agent prompt written notice of the following (which the Administrative Agent shall promptly provide to the Lenders): (a) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding which could reasonably be expected to result in a Material Adverse Effect; (b) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and (c) any change in any of the Ratings. SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Maintain financial records in accordance with GAAP and, upon reasonable notice, at all reasonable times, permit any authorized representative designated by the Administrative Agent to visit and inspect the properties of the Company and of any material Subsidiary and to discuss the affairs, finances and condition of the Company and any material Subsidiary with a Financial Officer of the Company and such other officers as the Company shall deem appropriate. SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the purposes set forth in the recitals to this Agreement. B. Negative Covenants. Each Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Fees or any other amounts payable hereunder shall be unpaid or any Letters of Credit have not been canceled or have not expired or any amounts drawn thereunder have not been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, it will not, and will not cause or permit any of the Subsidiaries to: SECTION 5.09. Consolidations, Mergers, and Sales of Assets. Consolidate or merge with or into any other person or sell, lease or transfer all or substantially all of its property and assets, or agree to do any of the foregoing, unless (a) no Default or Event of Default has occurred and is continuing or would have occurred immediately after giving effect thereto, and (b) in the case of a consolidation or merger or transfer of assets involving the Company and in which the Company is not the surviving corporation or sells, leases or transfers all or substantially all of its property and assets, the surviving corporation or person purchasing, leasing or receiving such property and assets is organized in the United States of America or a state thereof and agrees to be bound by the terms and provisions applicable to the Company hereunder. SECTION 5.10. Limitations on Liens. In the case of the Company, create, suffer to be created, or assume (directly or indirectly) any mortgage, pledge or other lien upon any Principal Property, or permit any Restricted Subsidiary to create, suffer to be created, or assume (directly or indirectly) any mortgage, pledge or other lien upon any Principal Property; provided, however, that this covenant shall not apply to any of the following: 12 44 (a) any mortgage, pledge or other lien on any Principal Property hereafter acquired, constructed or improved by the Company or any Restricted Subsidiary which is created or assumed to secure or provide for the payment of any part of the purchase price of such property or the cost of such construction or improvement, or any mortgage, pledge or other lien on any Principal Property existing at the time of acquisition thereof, provided, however, that the mortgage, pledge or other lien shall not extend to any Principal Property theretofore owned by the Company or any Restricted Subsidiary; (b) any mortgage, pledge or other lien on any Principal Property existing on the date of this Agreement as described in Schedule 5.10; (c) any mortgage, pledge or other lien existing upon any property of a company which is merged with or into or is consolidated into, or substantially all the assets or shares of capital stock of which are acquired by, the Company or a Restricted Subsidiary, at the time of such merger, consolidation or acquisition, provided that such mortgage, pledge or other lien does not extend to any other Principal Property, other than improvements to the property subject to such mortgage, pledge or other lien; (d) any pledge or deposit to secure payment of workers' compensation or insurance premiums, or in connection with tenders, bids, contracts (other than contracts for the payment of money) or leases; (e) any pledge of, or other lien upon, any assets as security for the payment of any tax, assessment or other similar charge by any Governmental Authority or public body, or as security required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or right; (f) any pledge or lien necessary to secure a stay of any legal or equitable process in a proceeding to enforce a liability or obligation contested in good faith by the Company or a Restricted Subsidiary or required in connection with the institution by the Company or a Restricted Subsidiary of any legal or equitable proceeding to enforce a right or to obtain a remedy claimed in good faith by the Company or a Restricted Subsidiary, or required in connection with any order or decree in any such proceeding or in connection with any contest of any tax or other governmental charge; or the making of any deposit with or the giving of any form of security to any governmental agency or any body created or approved by law or governmental regulation in order to entitle the Company or a Restricted Subsidiary to maintain self-insurance or to participate in any fund in connection with workers' compensation, unemployment insurance, old age pensions or other social security or to share in any provisions or other benefits provided for companies participating in any such arrangement or for liability on insurance of credits or other risks; (g) any mechanics', carriers', workmen's, repairmen's, or other like liens, if arising in the ordinary course of business, in respect of obligations which are not overdue or liability for which is being contested in good faith by appropriate proceedings; (h) any lien or encumbrance on property in favor of the United States of America, or of any agency, department or other instrumentality thereof, to secure partial, progress or advance payments pursuant to the provisions of any contract; (i) any mortgage, pledge or other lien securing any indebtedness incurred in any manner to finance or recover the cost to the Company or any Restricted Subsidiary of any 13 45 physical property, real or personal, which prior to or simultaneously with the creation of such indebtedness shall have been leased by the Company or a Restricted Subsidiary to the United States of America or a department or agency thereof at an aggregate rental, payable during that portion of the initial term of such lease (without giving effect to any options of renewal or extension) which shall be unexpired at the date of the creation of such indebtedness, sufficient (taken together with any amounts required to be paid by the lessee to the lessor upon any termination of such lease) to pay in full at the stated maturity date or dates thereof the principal of and the interest on such indebtedness; (j) any mortgage, pledge or other lien securing indebtedness of a Restricted Subsidiary to the Company or a Restricted Subsidiary, provided that in the case of any sale or other disposition of such indebtedness by the Company or such Restricted Subsidiary, such sale or other disposition shall be deemed to constitute the creation of another mortgage, pledge or other lien not permitted by this clause (j); (k) any mortgage, pledge or other lien affecting property of the Company or any Restricted Subsidiary securing indebtedness of the United States of America or a State thereof (or any instrumentality or agency of either thereof) issued in connection with a pollution control or abatement program required in the opinion of the Company to meet environmental criteria of the Company or any Restricted Subsidiary and the proceeds of which indebtedness have financed the cost of acquisition of such program; (l) the renewal, extension, replacement or refunding of any mortgage, pledge, lien, deposit, charge or other encumbrance permitted by the foregoing provisions of this covenant upon the same property theretofore subject thereto, or the renewal, extension, replacement or refunding of the amount secured thereby, provided that in each case such amount outstanding at that time shall not be increased; or (m) any other mortgage, pledge or other lien, provided that immediately after the creation or assumption of such mortgage, pledge or other lien, the total of (x) the aggregate principal amount of indebtedness of the Company and all Restricted Subsidiaries secured by all mortgages, pledges and other liens created or assumed under the provisions of this clause (m), plus (y) the aggregate amount of Capitalized Lease-Back Obligations of the Company and Restricted Subsidiaries under the entire unexpired terms of all leases entered into in connection with sale and lease-back transactions which would have been precluded by the provisions of Section 5.11 but for the satisfaction of the condition set forth in clause (b) thereof, shall not exceed an amount equal to 10% of Consolidated Net Tangible Assets. The lease of any property by the Company or a Restricted Subsidiary and rental obligations with respect thereto (whether or not arising out of a sale and lease-back of properties and whether or not in accordance with GAAP such property is carried as an asset and such rental obligations are carried as indebtedness on the Company's or a Restricted Subsidiary's balance sheet) shall not in any event be deemed to be the creation of a mortgage, pledge or other lien. SECTION 5.11. Limitations on Sale and Leaseback Transactions. In the case of the Company or any Restricted Subsidiary, enter into any arrangement with any person providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property (except for temporary leases for a term of not more than three years and except for leases between the Company and a Restricted Subsidiary or between Restricted Subsidiaries), which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such person more than 120 days after the acquisition thereof or the completion of construction and commencement of full operation thereof, 14 46 unless either (a) the Company shall apply an amount equal to the greater of the Fair Value of such property or the net proceeds of such sale, within 120 days of the effective date of any such arrangement, to the retirement (other than any mandatory retirement or by way of payment at maturity) of Indebtedness or to the acquisition, construction, development or improvement of properties, facilities or equipment used for operating purposes which are, or upon such acquisition, construction, development or improvement will be, a Principal Property or a part thereof; or (b) at the time of entering into such arrangement, such Principal Property could have been subjected to a mortgage, pledge or other lien securing indebtedness of the Company or a Restricted Subsidiary in a principal amount equal to the Capitalized Lease-Back Obligations with respect to such Principal Property under paragraph (m) of Section 5.10. SECTION 5.12. Consolidated Total Debt to Consolidated EBITDA. Permit the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA at the end of and for any period of four consecutive fiscal quarters to exceed 5.0 to 1.0. ARTICLE VI EVENTS OF DEFAULT In case of the happening of any of the following events (each an "Event of Default"): (a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or any Local Currency Addenda or the Borrowings or issuances of Letters of Credit hereunder shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or L/C Disbursement or any Fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of ten days; (d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Section 5.01, 5.09, 5.10, 5.11 or 5.12 or in any Local Currency Addendum and, in the case of any default under Section 5.10, such default shall continue for 30 days; (e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein or in any other Loan Document (other than those specified in clauses (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Company; (f) the Company or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in a principal amount in excess of $20,000,000, beyond the period of grace, if any, provided in the agreement or instrument 15 47 under which such Indebtedness was created or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness, or any other event shall occur or condition shall exist, beyond the period of grace, if any, provided in such agreement or instrument, if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company, or of a substantial part of the property or assets of the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of the property or assets of the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 or (iii) the winding up or liquidation of the Company; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of the property or assets of the Company, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more final judgments shall be entered by any court against the Company or any of the Subsidiaries for the payment of money in an aggregate amount in excess of $100,000,000, and such judgment or judgments shall not have been paid, covered by insurance, discharged or stayed for a period of 60 days, or a warrant of attachment or execution or similar process shall have been issued or levied against property of the Company or any of the Subsidiaries to enforce any such judgment or judgments; (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect; or (k) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company or any Subsidiary with assets having a gross book value in excess of $25,000,000 described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans 16 48 then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding, (iii) require the Borrowers to deposit with the Administrative Agent cash collateral in an amount equal to the aggregate L/C Exposures to secure the Borrowers' reimbursement obligations under Section 2.23; and, in the case of any event with respect to the Company or any Subsidiary having a gross book value in excess of $25,000,000 described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding, and the Borrowers shall deposit with the Administrative Agent cash collateral in an amount equal to the aggregate L/C Exposure to secure the Borrowers' reimbursement obligations under Section 2.23. ARTICLE VII GUARANTEE The Company unconditionally and irrevocably guarantees the due and punctual payment and performance, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, of the Guaranteed Obligations. The Company further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations. The Company waives presentment to, demand of payment from and protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against the Borrowing Subsidiaries under the provisions of this Agreement or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any guarantee or any other agreement; or (c) the failure of any Lender to exercise any right or remedy against any other guarantor of the Guaranteed Obligations. The Company further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any security, if any, held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on its books, in favor of the Borrowing Subsidiaries or any other person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Company hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement, any guarantee or any other agreement, by any waiver or modification of any provision 17 49 thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity. To the extent permitted by applicable law, the Company waives any defense based on or arising out of any defense available to the Borrowing Subsidiaries, including any defense based on or arising out of any disability of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrowing Subsidiaries, other than final payment in full of the Guaranteed Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, or exercise any other right or remedy available to them against the Borrowing Subsidiaries, or any security without affecting or impairing in any way the liability of the Company hereunder except to the extent the Guaranteed Obligations have been fully and finally paid. The Company waives any defense arising out of any such election even though such election operates to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Company against the Borrowing Subsidiaries or any security. The Company further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrowing Subsidiary or otherwise. In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent or any Lender, forthwith pay or cause to be paid to the Administrative Agent or such Lender in cash the amount of such unpaid Guaranteed Obligation. The Company hereby irrevocably waives and releases any and all rights of subrogation, indemnification, reimbursement and similar rights which it may have against or in respect of the Borrowing Subsidiaries at any time relating to the Guaranteed Obligations, including all rights that would result in its being deemed a "creditor" of the Borrowing Subsidiaries under the United States Code as now in effect or hereafter amended, or any comparable provision of any successor statute. ARTICLE VIII THE ADMINISTRATIVE AGENT In order to expedite the transactions contemplated by this Agreement, Chemical Bank is hereby appointed to act as Administrative Agent on behalf of the Lenders and the Issuing Banks. Each of the Lenders and the Issuing Banks hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or Issuing Bank and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Issuing Banks, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and the Issuing Banks all payments of principal of and 18 50 interest on the Loans and all other amounts due to the Lenders and the Issuing Banks hereunder, and promptly to distribute to each Lender or Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of Default of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrowers pursuant to this Agreement as received by the Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants or agreements contained in this Agreement. The Administrative Agent shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agent may deem and treat the Lender which makes any Loan as the holder of the indebtedness resulting therefrom for all purposes hereof until it shall have received notice from such Lender, given as provided herein, of the transfer thereof. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrowers on account of the failure of or delay in performance or breach by any Lender or Issuing Bank of any of its obligations hereunder or to any Lender or Issuing Bank on account of the failure of or delay in performance or breach by any other Lender or Issuing Bank or the Borrowers of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent acceptable to the Company. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 19 51 With respect to the Loans made by it hereunder, the Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent. Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitment hereunder or, if the Commitments shall have been terminated, the amount of its outstanding Loans and L/C Exposure) of any expenses incurred for the benefit of the Lenders by the Administrative Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by it under this Agreement to the extent the same shall not have been reimbursed by the Borrowers; provided that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or wilful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. Each Lender agrees that any allocation made in good faith by the Administrative Agent of expenses or other amounts referred to in this paragraph between this Agreement and the Facility A Credit Agreement shall be conclusive and binding for all purposes. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, as follows: (a) if to any Borrower, to ITT Corporation, 1330 Avenue of the Americas, New York, New York 10019-5490, Attention of Ms. Elizabeth A. Tuttle (Telecopy No. 212-489-3995); (b) if to the Administrative Agent, to Chemical Bank Agency Services Corp., 140 East 45th Street, 29th Floor, New York, New York 10017, Attention of Mr. Chris Moriarty, (Telecopy No. 212-622-0002), with a copy to Chemical Bank at 270 Park Avenue, New York, New York 10017, Re: ITT Corporation; and 20 52 (c) if to a Lender, to it at its address (or telecopy number) set forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy to such party as provided in this Section or in accordance with the latest unrevoked direction from such party given in accordance with this Section. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and the Issuing Banks and shall survive the making by the Lenders of the Loans and issuance of Letters of Credit regardless of any investigation made by the Lenders or the Issuing Banks or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement is outstanding and unpaid, any Letter of Credit is outstanding or the Commitments have not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of any Letter of Credit, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement, or any investigation made by or on behalf of the Administrative Agent or any Lender. SECTION 9.03. Binding Effect. This Agreement shall become effective on the Effective Date and when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have received copies hereof (telecopied or otherwise) which, when taken together, bear the signature of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers shall not have the right to assign any rights hereunder or any interest herein without the prior consent of all the Lenders. SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, the Company must give its prior written consent to such assignment (which consent, if required, shall not be unreasonably withheld in the event an Event of Default has occurred and is continuing), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and a processing and recordation fee of $3,000 (provided that, in the case of simultaneous assignment of interests under this Agreement and the Facility A Credit Agreement, the aggregate fee shall be $3,000), (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire, and (iv) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 and the amount of the Commitment of such Lender remaining after such assignment shall not be less than $5,000,000 or shall be zero. Upon acceptance and recording pursuant to paragraph (e) of this Section, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the 21 53 execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account hereunder and not yet paid)). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any Loans so retained until such Loans have been repaid in full in accordance with this Agreement. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.03 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and the principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Borrowers, the Administrative Agent, the Issuing Banks and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by each party hereto, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and the written consent of the Company to such assignment, the 22 54 Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. (f) Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if it were the selling Lender (and limited to the amount that could have been claimed by the selling Lender had it continued to hold the interest of such participating bank or other entity), except that all claims made pursuant to such Sections shall be made through such selling Lender, and (iv) the Borrowers, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such selling Lender in connection with such Lender's rights and obligations under this Agreement. (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender; provided that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement for the benefit of the Company whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any such information. (h) The Borrowers shall not assign or delegate any rights and duties hereunder without the prior written consent of all Lenders. (i) Any Lender may at any time pledge all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided that no such pledge shall release any Lender from its obligations hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, each Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to such Borrower by the assigning Lender hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with entering into this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof, or incurred by the Administrative Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement or in connection with the Loans made or Letters of Credit issued hereunder or under any Local Currency Addendum, including the fees and disbursements of counsel for the Administrative Agent or, in the case of enforcement, the Lenders. (b) The Borrowers agree to indemnify the Administrative Agent, the Issuing Banks, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against any Indemnitee arising out of (i) the consummation of the transactions contemplated by this Agreement, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related 23 55 expenses are determined by a final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Administrative Agent, the Issuing Banks or any Lender. All amounts due under this Section shall be payable on written demand therefor. SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.07. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Issuing Banks or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Borrower or any Subsidiary in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest or fees on any Loan or for reimbursement of any L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) increase the Commitment or decrease the Facility Fee, L/C Participation Fee of any Lender or other amounts due to any Lender without the prior written consent of such Lender, (iii) limit or release the guarantee set forth in Article VII, or (iv) amend or modify the provisions of Section 2.16 or Section 9.04(h), the provisions of this Section or the definition of the "Required Lenders", without the prior written consent of each Lender; provided further, however, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Banks hereunder without the prior written consent of the Administrative Agent or the Issuing Banks. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section and any consent by any Lender pursuant to this Section shall bind any assignee of its rights and interests hereunder. SECTION 9.08. Entire Agreement. This Agreement, the agreements referenced in Section 2.06(b) and the letter agreement attached as Exhibit H constitute the entire contract among the 24 56 parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 9.09. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.12. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or obligations of the Company and any Borrowing Subsidiary now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company and the Administrative Agent after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (A) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY LOCAL CURRENCY ADDENDA OR ANY LETTER OF CREDIT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. SUBJECT TO THE FOREGOING AND TO PARAGRAPH (B) BELOW, NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY HERETO MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY LOCAL CURRENCY ADDENDUM 25 57 OR ANY LETTER OF CREDIT AGAINST ANY OTHER PARTY HERETO IN THE COURTS OF ANY JURISDICTION. (B) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR THEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY LOCAL CURRENCY ADDENDUM OR ANY LETTER OF CREDIT IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 9.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION. SECTION 9.15. Addition of Borrowing Subsidiaries. Each Borrowing Subsidiary which shall deliver to the Administrative Agent a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company shall, upon such delivery and without further act, become a party hereto and a Borrower hereunder with the same effect as if it had been an original party to this Agreement. SECTION 9.16. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of the Borrowers in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the 26 58 Agreement Currency, the Borrowers agree, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 9.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. SECTION 9.17. Execution. Upon execution by the Lenders, this Agreement will be executed with Old ITT as "the Company" all as contemplated by the letter agreement attached as Exhibit H, and upon execution of this Agreement by the Company, the Company shall succeed to the rights and obligations of Old ITT as contemplated in such agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ITT CORPORATION, as Borrower, by /s/ Elizabeth A. Tuttle -------------------------------------- Name: Elizabeth A. Tuttle Title: Vice President and Assistant Treasurer CHEMICAL BANK, individually and as Administrative Agent, by /s/ Robert K. Gaynor -------------------------------------- Name: Robert K. Gaynor Title: Vice President ABN AMRO BANK N.V., NEW YORK BRANCH, by /s/ Frances O'R. Logan -------------------------------------- Name: Frances O'R. Logan Title: Vice President by /s/ William J. Van Nostrand -------------------------------------- Name: William J. Van Nostrand Title: Vice President ARAB BANK PLC, by /s/ Nofal S. Barbar -------------------------------------- Name: Nofal S. Barbar Title: Executive Vice President and Branch Manager 27 59 BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH, by /s/ C. Dougherty -------------------------------------- Name: C. Dougherty Title: Vice President by /s/ J. M. Welch -------------------------------------- Name: J. M. Welch Title: Assistant Vice President BANCA DI ROMA, NEW YORK BRANCH, by /s/ Ralph L. Riehle -------------------------------------- Name: Ralph L. Riehle Title: First Vice President by /s/ Luca Balestra -------------------------------------- Name: Luca Balestra Title: Assistant Vice President BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH, by /s/ Giuliano Violetta -------------------------------------- Name: Giuliano Violetta Title: First Vice President by /s/ Giulio Giovine -------------------------------------- Name: Giulio Giovine Title: Vice President BANCA POPOLARE DI MILANO, by /s/ Anthony Franco -------------------------------------- Name: Anthony Franco Title: Executive Vice President/General Manager by /s/ Nicholas Cinosi -------------------------------------- Name: Nicholas Cinosi Title: Vice President 28 60 BANK OF AMERICA ILLINOIS, by /s/ Donald J. Chin -------------------------------------- Name: Donald J. Chin Title: Authorized Officer BANK OF HAWAII, by /s/ John R. Landgraf -------------------------------------- Name: John R. Landgraf Title: Officer THE BANK OF NEW YORK, by /s/ Mary Anne Zagroba -------------------------------------- Name: Mary Anne Zagroba Title: Vice President THE BANK OF NOVA SCOTIA, by /s/ J. Alan Edwards -------------------------------------- Name: J. Alan Edwards Title: Authorized Signatory THE BANK OF TOKYO TRUST COMPANY, by /s/ Paul P. Malecki -------------------------------------- Name: Paul P. Malecki Title: Vice President BANKERS TRUST COMPANY, by /s/ Katherine A. Judge -------------------------------------- Name: Katherine A. Judge Title: Vice President BARCLAYS BANK PLC, by /s/ John C. Livingston -------------------------------------- Name: John C. Livingston Title: Associate Director 29 61 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, by /s/ Wilfried Freudenberger -------------------------------------- Name: Wilfried Freudenberger Title: Executive Vice President and General Manager by /s/ Peter Obermann -------------------------------------- Name: Peter Obermann Title: Senior Vice President Manager Lending Division CIBC, INC., by /s/ J. Domkowski -------------------------------------- Name: J. Domkowski Title: Vice President THE CHASE MANHATTAN BANK, N.A., by /s/ David B. Townsend -------------------------------------- Name: David B. Townsend Title: Managing Director CITIBANK, N.A., by /s/ Elizabeth A. Palermo -------------------------------------- Name: Elizabeth A. Palermo Title: Attorney-in-fact COMERICA BANK, by /s/ Tamara J. Gurne -------------------------------------- Name: Tamara J. Gurne Title: Account Officer 30 62 COMMERZBANK AKTIENGESELLSCHAFT, GRAND CAYMAN BRANCH, by /s/ Thomas Ausfahl -------------------------------------- Name: Thomas Ausfahl Title: Assistant Vice President by /s/ Robert Donohue -------------------------------------- Name: Robert Donohue Title: Vice President COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, by /s/ Eric Longuet -------------------------------------- Name: Eric Longuet Title: Vice President by /s/ Albert M. Calo -------------------------------------- Name: Albert M. Calo Title: Vice President CREDIT LYONNAIS, NEW YORK BRANCH, by /s/ Robert Ivosevich -------------------------------------- Name: Robert Ivosevich Title: Senior Vice President CREDIT SUISSE, by /s/ Robert B. Potter -------------------------------------- Name: Robert B. Potter Title: Member of Senior Management by /s/ Chris T. Horgan -------------------------------------- Name: Chris T. Horgan Title: Associate 31 63 CREDITO ITALIANO, S.P.A., by /s/ Harmon P. Butler -------------------------------------- Name: Harmon P. Butler Title: First Vice President and Deputy Manager by /s/ Saiyed A. Abbas -------------------------------------- Name: Saiyed A. Abbas Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH, by /s/ Timothy White -------------------------------------- Name: Timothy White Title: Vice President DEN DANSKE BANK, AKTIESELSKAB CAYMAN ISLANDS BRANCH, by /s/ Bent V. Christensen -------------------------------------- Name: Bent V. Christensen Title: Vice President by /s/ Mogens Sendergaard -------------------------------------- Name: Mogens Sendergaard Title: Vice President DEUTSCHE BANK AG, NEW YORK BRANCH, AND/OR CAYMAN ISLANDS BRANCH, by /s/ Hans-Josef Thiele -------------------------------------- Name: Hans-Josef Thiele Title: Vice President by /s/ Stephan A. Wiedemann -------------------------------------- Name: Stephan A. Wiedemann Title: Vice President 32 64 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, by /s/ Mark K. Connelly -------------------------------------- Name: Mark K. Connelly Title: Vice President by /s/ Karen A. Brinkman -------------------------------------- Name: Karen A. Brinkman Title: Vice President DRESDNER BANK AG, NEW YORK BRANCH, AND GRAND CAYMAN BRANCH, by /s/ J. Michael Leffler -------------------------------------- Name: J. Michael Leffler Title: Senior Vice President by /s/ Ernest C. Fung -------------------------------------- Name: Ernest C. Fung Title: Vice President FIRST INTERSTATE BANK OF CALIFORNIA, by /s/ William J. Baird -------------------------------------- Name: William J. Baird Title: Senior Vice President by /s/ Judy A. Maahs -------------------------------------- Name: Judy A. Maahs Title: Assistant Vice President THE FIRST NATIONAL BANK OF BOSTON, by /s/ Paul P. Sassieni -------------------------------------- Name: Paul P. Sasieni Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO, by /s/ Rebecca McCloskey -------------------------------------- Name: Rebecca McCloskey Title: Vice President 33 65 FIRST UNION NATIONAL BANK OF NORTH CAROLINA, by /s/ Mark M. Harden -------------------------------------- Name: Mark M. Harden Title: Vice President THE FUJI BANK, LIMITED, NEW YORK BRANCH, by /s/ Gina M. Kearns -------------------------------------- Name: Gina M. Kearns Title: Vice President and Manager THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /s/ John V. Veltri -------------------------------------- Name: John V. Veltri Title: Senior Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA, by /s/ Wendell Jones -------------------------------------- Name: Wendell Jones Title: Vice President by /s/ Ettore Viazzo -------------------------------------- Name: Ettore Viazzo Title: Vice President KREDIETBANK N.V., by /s/ Armen Karozichian -------------------------------------- Name: Armen Karozichian Title: Vice President by /s/ Robert Snauffer -------------------------------------- Name: Robert Snauffer Title: Vice President 34 66 LLOYDS BANK PLC, by /s/ Paul D. Briamonte -------------------------------------- Name: Paul D. Briamonte Title: Vice President by /s/ Stephen J. Attree -------------------------------------- Name: Stephen J. Attree Title: Assistant Vice President LTCB TRUST COMPANY, by /s/ Rene O. LeBlanc -------------------------------------- Name: Rene O. LeBlanc Title: Senior Vice President THE MITSUBISHI BANK, LIMITED, by /s/ Paula Mueller -------------------------------------- Name: Paula Mueller Title: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION, by /s/ Patricia Loret de Mola -------------------------------------- Name: Patricia Loret de Mola Title: Senior Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, by /s/ George J. Stapleton -------------------------------------- Name: George J. Stapleton Title: Vice President NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH, by /s/ Anne Marie Torre -------------------------------------- Name: Anne Marie Torre Title: Vice President 35 67 NATIONSBANK, N.A., by /s/ James T. Gilland -------------------------------------- Name: James T. Gilland Title: Senior Vice President THE NIPPON CREDIT BANK LTD., by /s/ Barry S. Fein -------------------------------------- Name: Barry S. Fein Title: Assistant Vice President THE NORTHERN TRUST COMPANY, by /s/ Daryl M. Robicsek -------------------------------------- Name: Daryl M. Robicsek Title: Vice President PNC BANK, NATIONAL ASSOCIATION, by /s/ Tom Partridge -------------------------------------- Name: Tom Partridge Title: Commercial Banking Officer ROYAL BANK OF CANADA, by /s/ Rainer R. Kraft -------------------------------------- Name: Rainer R. Kraft Title: Manager THE SAKURA BANK, LIMITED, NEW YORK BRANCH, by /s/ Masahiro Nakajo -------------------------------------- Name: Masahiro Nakajo Title: Senior Vice President and Manager THE SANWA BANK LIMITED, NEW YORK BRANCH, by /s/ Stephen C. Small -------------------------------------- Name: Stephen C. Small Title: Vice President and Area Manager 36 68 SOCIETE GENERALE, by /s/ Sedare Coradin -------------------------------------- Name: Sedare Coradin Title: Vice President THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH, by /s/ Yoshinori Kawamura -------------------------------------- Name: Yoshinori Kawamura Title: Joint General Manager SUNTRUST BANK, ATLANTA, by /s/ May M. Smith -------------------------------------- Name: May M. Smith Title: Banking Officer by /s/ Craig W. Farnsworth -------------------------------------- Name: Craig W. Farnsworth Title: Vice President SWISS BANK CORPORATION, NEW YORK BRANCH, by /s/ Susan N. Isquith -------------------------------------- Name: Susan N. Isquith Title: Director by /s/ Edward J. McDonnell III -------------------------------------- Name: Edward J. McDonnell III Title: Associate Director THE TOKAI BANK, LIMITED, by /s/ Stuart Schulman -------------------------------------- Name: Stuart Schulman Title: Senior Vice President 37 69 TORONTO DOMINION (NEW YORK), by /s/ Randall Bingham -------------------------------------- Name: Randall Bingham Title: Managing Director UNION BANK OF SWITZERLAND, NEW YORK BRANCH, by /s/ Robert W. Casey, Jr. -------------------------------------- Name: Robert W. Casey, Jr. Title: Vice President by /s/ Daniel R. Strickford -------------------------------------- Name: Daniel R. Strickford Title: Assistant Treasurer WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES, by /s/ A. Kumbier -------------------------------------- Name: A. Kumbier Title: Managing Director by /s/ M.P.M. Ransley -------------------------------------- Name: M.P.M. Ransley Title: Associate THE YASUDA TRUST AND BANKING COMPANY, LIMITED, NEW YORK BRANCH, by /s/ Rohn M. Laudenschlager -------------------------------------- Name: Rohn M. Laudenschlager Title: Senior Vice President 38 EXHIBIT A-1 FORM OF COMPETITIVE BID REQUEST Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, NY 10017 Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "5-Year Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 5-Year Agreement. The Borrower hereby gives you notice pursuant to Section 2.03(a) of the 5-Year Agreement that it requests a Competitive Borrowing under the 5-Year Agreement, and in that connection sets forth below the terms on which such Competitive Borrowing is requested to be made: (A) Date of Competitive Borrowing (which is a Business Day) __________________ (B) Principal amount of Competitive Borrowing 1/ __________________ (C) Interest rate basis 2/ __________________ (D) Interest Period and the last day thereof 3/ __________________ Upon acceptance of any or all of the Loans offered by the Lenders in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Section 4.01(b) and (c) of the 5-Year Agreement have been satisfied. Very truly yours, [NAME OF BORROWER], by __________________________ Name: Title: [Financial Officer] ____________________ 1/ Not less than $10,000,000 (and in integral multiples of $5,000,000) or greater than the Total Commitment then available. 2/ Eurocurrency Competitive Loan or Fixed Rate Loan. 3/ Which shall be subject to the definition of "Interest Period" and end not later than the Maturity Date. 39 EXHIBIT A-2 FORM OF NOTICE OF COMPETITIVE BID REQUEST [Name of Lender] [Address] [Date] Attention: [ ] Dear Ladies and Gentlemen: Reference is made to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may hereafter be amended, modified, extended or restated from time to time, the "5-Year Agreement"), among ITT Corporation [,__________] (the "Borrower"), the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 5-Year Agreement. The Borrower made a Competitive Bid Request on __________, 19[ ], pursuant to Section 2.03(a) of the 5-Year Agreement, and in that connection you are invited to submit a Competitive Bid by [Date]/[Time]. 1/ Your Competitive Bid must comply with Section 2.03(b) of the 5-Year Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Borrowing _________________ (B) Principal amount of Competitive Borrowing _________________ (C) Interest rate basis _________________ (D) Interest Period and the last day thereof _________________ Very truly yours, CHEMICAL BANK, as Administrative Agent, by __________________________ Name: Title: ____________________ 1/ The Competitive Bid must be received by the Administrative Agent (i) in the case of Eurocurrency Competitive Loans, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Borrowing, and (ii) in the case of Fixed Rate Loans, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Borrowing. 40 EXHIBIT A-3 FORM OF COMPETITIVE BID Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, N.Y. 10017 [Date] Attention: [ ] Dear Ladies and Gentlemen: The undersigned, [Name of Lender], refers to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "5-Year Agreement"), among ITT Corporation (the "Borrower"), the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 5-Year Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section 2.03(b) of the 5-Year Agreement, in response to the Competitive Bid Request made by the Borrower on ___________, 19[ ], and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount 1/ _________________ (B) Competitive Bid Rate 2/ _________________ (C) Interest Period and last day thereof _________________ The undersigned hereby confirms that it is prepared, subject to the conditions set forth in the 5-Year Agreement, to extend credit to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.03(d) of the 5-Year Agreement. Very truly yours, [NAME OF LENDER], by _____________________________________ Name: Title: ____________________ 1/ Not less than $5,000,000 or greater than the requested Competitive Borrowing and in integral multiples of $1,000,000. Multiple bids will be accepted by the Administrative Agent. 2/ i.e., LIBO Rate + or - __%, in the case of Eurocurrency Competitive Loans or ___%, in the case of Fixed Rate Loans. 41 EXHIBIT A-4 FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER [Date] Chemical Bank, as Administrative Agent for the Lenders referred to below 270 Park Avenue New York, N.Y. 10017 Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the 5-Year Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent for the Lenders. In accordance with Section 2.03(c) of the 5-Year Agreement, we have received a summary of bids in connection with our Competitive Bid Request dated _____________, and in accordance with Section 2.03(d) of the 5-Year Agreement, we hereby accept the following bids for maturity on [date]:
Principal Amount Fixed Rate/Margin Lender - - ---------------- ----------------- ------ $ [%]/[+/-. %] $
We hereby reject the following bids:
Principal Amount Fixed Rate/Margin Lender - - ---------------- ----------------- ------ $ [%]/[+/-. %] $
The $__________ should be deposited in Chemical Bank account number [ ] on [date]. Very truly yours, [NAME OF BORROWER], by _________________________________________ Name: Title: 42 EXHIBIT A-5 FORM OF STANDBY BORROWING REQUEST Chemical Bank, as Administrative Agent for the Lenders referred to below, 270 Park Avenue New York, N.Y. 10017 [Date] Attention: [ ] Dear Ladies and Gentlemen: The undersigned, _______________ (the "Borrower"), refers to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as it may be amended, modified, extended or restated from time to time, the "5- Year Agreement"), among the Borrower, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the 5-Year Agreement. The Borrower hereby gives you notice pursuant to Section 2.04 of the 5-Year Agreement that it requests a Standby Borrowing under the 5-Year Agreement, and in that connection sets forth below the terms on which such Standby Borrowing is requested to be made: (A) Date of Standby Borrowing (which is a Business Day) __________________ (B) Principal amount of Standby Borrowing 1/ __________________ (C) Interest rate basis 2/ __________________ (D) Interest Period and the last day thereof 3/ __________________ Upon acceptance of any or all of the Loans made by the Lenders in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Section 4.01(b) and (c) of the 5-Year Agreement have been satisfied. Very truly yours, [NAME OF BORROWER], by __________________________ Name: Title: [Financial Officer] ____________________ 1/ Not less than $20,000,000 (and in integral multiples of $5,000,000) or greater than the Total Commitment then available. 2/ Eurocurrency Standby Loan or Fixed Rate Loan. 3/ Which shall be subject to the definition of "Interest Period" and end not later than the Maturity Date. 43 EXHIBIT B [CHEMICAL LOGO] CHEMICAL BANK 140 East 45th Street New York, NY 10017-3162 212/622-0001 Fax 212/622-0002 Telex 353006 ABSC NYK ITT CORPORATION ADMINISTRATIVE QUESTIONNAIRE Please accurately complete the following information and return via FAX to the attention of Janet Belden at Chemical Bank as soon as possible: FAX NUMBER: 212-622-0122 LEGAL NAME TO APPEAR IN DOCUMENTATION: _______________________________________________________________________________ GENERAL INFORMATION - DOMESTIC LENDING OFFICE: Institution Name: ____________________________________________________________ Street Address: __________________________________________________________ City, State, Zip Code: _______________________________________________________ GENERAL INFORMATION - EURODOLLAR LENDING OFFICE: Institution Name: __________________________________________________________ Street Address: _________________________________________________________ City, State, Zip Code: _______________________________________________________ CONTACTS/NOTIFICATION METHODS: CREDIT CONTACTS: Primary contact: ______________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ______________________________________________________________ FAX Number: ______________________________________________________________ Backup Contact: ______________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ______________________________________________________________ FAX Number: ______________________________________________________________ 44 EXHIBIT B TAX WITHHOLDING: Non Resident Alien __________ Y* _________N * Form 4224 Enclosed Tax ID Number _______________________________ CONTACTS/NOTIFICATION METHODS: ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC. Contact: _____________________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: ________________________________________________________ Phone Number: _________________________________________________________________ FAX Number: ___________________________________________________________________ BID LOAN NOTIFICATION: Contact: _____________________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: ________________________________________________________ Phone Number: _________________________________________________________________ FAX Number: ___________________________________________________________________ PAYMENT INSTRUCTIONS: Name of Bank where funds are to be transferred: _______________________________________________________________________________ Routing Transit/ABA number of Bank where funds are to be transferred: _______________________________________________________________________________ Name of Account, if applicable: _______________________________________________________________________________ Account Number: ______________________________________________________________ Additional Information: _______________________________________________________ MAILINGS: Please specified who should receive financial information: Name: _________________________________________________________________________ Street Address: _______________________________________________________________ City, State, Zip Code: ________________________________________________________ It is very important that all of the above information is accurately filled in and returned promptly. If there is someone other than yourself who should receive this questionnaire, please notify us of their name and FAX number and we will FAX them a copy of the questionnaire. If you have any questions, please call me on 212-622-0011. 45 EXHIBIT C [FORM OF] ASSIGNMENT AND ACCEPTANCE Dated: _________, 19__ Reference is made to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (the "5-Year Agreement"), among ITT Corporation (the "Company"), the Borrowing Subsidiaries parties thereto, the Lenders parties thereto (the "Lenders") and Chemical Bank, as Administrative Agent for the Lenders. Terms defined in the 5-Year Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the 5-Year Agreement, including, without limitation, the interests set forth below in the Commitment of the Assignor on the Effective Date and the Competitive Loans and Standby Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04 of the 5-Year Agreement, a copy of which has been received by each such party. From and after the Effective Date, (i) the Assignee shall be a party to and be bound by the provisions of the 5-Year Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the 5-Year Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.19(g) of the 5-Year Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the 5-Year Agreement, an Administrative Questionnaire in the form of Exhibit B to the 5-Year Agreement and (iii) a processing and recordation fee of $3,000. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: 46 Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment):
Percentage Assigned of Facility/Commitment (set forth, to at least 8 decimals, as a Principal Amount Assigned (and percentage of the Facility and identifying information as to the aggregate Commitments of Facility individual Competitive Loans) all Lenders thereunder) -------- ----------------------------- ----------------------- Commitment Assigned: $____________ ___________ % Standby Loans: $____________ ___________ % Competitive Loans: $____________ ___________ %
The terms set forth and on the reverse side Accepted: hereof are hereby agreed to: ITT CORPORATION, ________________________________, as by: ___________________________ Assignor, Name: Title: by: ____________________________ Name: Title: ________________________________, as Assignee, by: ____________________________ Name: Title: 47 EXHIBIT D [FORM OF] OPINION OF COUNSEL FOR ITT CORPORATION 1/ 1. ITT Corporation (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (iii) is qualified to do business in every jurisdiction within the United States where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect on ITT Corporation, and (iv) has all requisite corporate power and authority to execute, deliver and perform its obligations under the Agreement and to borrow funds thereunder. 2. The execution, delivery and performance by ITT Corporation of the Agreement and the borrowings of ITT Corporation thereunder (collectively, the "Transactions") (i) have been duly authorized by all requisite corporate action and (ii) will not (a) violate (1) any provision of law, statute, rule or regulation (including without limitation, the Margin Regulations), or of the certificate of incorporation or other constitutive documents or by-laws of ITT Corporation, (2) any order of any governmental authority or (3) any provision of any indenture, agreement or other instrument to which ITT Corporation is a party or by which it or its property is or may be bound, (b) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (c) result in the creation or imposition of any lien upon any property or assets of ITT Corporation. 3. The Agreement has been duly executed and delivered by ITT Corporation and constitutes a legal, valid and binding obligation of ITT Corporation enforceable against ITT Corporation in accordance with its terms, subject as to the enforceability of rights and remedies to any applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors' rights from time to time in effect. 4. No action, consent or approval of, registration or filing with, or any other action by, any government authority is or will be required in connection with the Transactions, except such as have been made or obtained and are in full force and effect. 5. Neither ITT Corporation nor any of its subsidiaries is (a) except as set forth in the next sentence, an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 (the "1940 Act") or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. ____________________ 1/ Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the 5-Year Competitive Advance and Revolving Credit Facility Agreement (the "Agreement") dated as of November 10, 1995, among ITT Corporation, the lenders listed in Schedule 2.01 thereto, and Chemical Bank, as Administrative Agent. 48 EXHIBIT E to the Credit Agreement BORROWING SUBSIDIARY AGREEMENT dated as of [ ], among ITT CORPORATION, a Nevada corporation (the "Company"), [Name of Subsidiary], a [ ] corporation ("the Subsidiary"), and CHEMICAL BANK, as administrative agent (the "Administrative Agent") for the lenders (the "Lenders") party to the 5-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995, as amended (the "Agreement"), among the Company, the Administrative Agent and the Lenders. Under the Agreement, the Lenders have agreed, upon the terms and subject to the conditions therein set forth, to make competitive advance and revolving credit loans and to issue Letters of Credit to the Company and to Subsidiaries (as defined in the Agreement) of the Company which execute and deliver to the Administrative Agent Borrowing Subsidiary Agreements in the form of this Borrowing Subsidiary Agreement. The Company represents that the Subsidiary is a subsidiary (as so defined) of the Company and that the guarantee of the Company contained in Article VII of the Agreement applies to the obligations of the Subsidiary. In consideration of being permitted to borrow or have Letters of Credit issued under the Agreement upon the terms and subject to the conditions set forth therein, the Subsidiary agrees that from and after the date of this Borrowing Subsidiary Agreement it will be, and will be liable for the observance and performance of all the obligations of, a Borrowing Subsidiary under the Agreement, as the same may be amended from time to time, to the same extent as if it had been one of the original parties to the Agreement and that it will furnish to the Administrative Agent and the Lenders copies of its financial statements on an annual basis. IN WITNESS WHEREOF, the Company and the Subsidiary have caused this Borrowing Subsidiary Agreement to be duly executed by their authorized officers as of the date first appearing above. ITT CORPORATION, by ______________________ Name: Title: [NAME OF SUBSIDIARY], by ______________________ Name: Title: Accepted as of the date first appearing above: CHEMICAL BANK, as Administrative Agent, by ______________________ Name: Title: 49 EXHIBIT F to the Credit Agreement ISSUING BANK AGREEMENT dated as of [ ], 1995, between ITT CORPORATION, a Nevada corporation ("ITT") and the financial institution identified on Schedule I hereto as the Issuing Bank (the "Issuing Bank"). Reference is made to the 5-Year Competitive Advance and Revolving Credit Facility Agreement dated as of November 10, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ITT, the Borrowing Subsidiaries parties thereto, the Lenders named therein and Chemical Bank, as Administrative Agent. ITT and the Issuing Bank desire to enter into this Agreement in order to provide for Letters of Credit to be issued by the Issuing Bank as contemplated by the Credit Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement. The provisions of Section 1.02 of the Credit Agreement shall apply to this Agreement as though set forth herein. SECTION 2. Letter of Credit Commitment. The Issuing Bank hereby agrees to be an "Issuing Bank" under, and, subject to the terms and conditions hereof and of the Credit Agreement, to issue Letters of Credit under, the Credit Agreement; provided, however, that Letters of Credit issued by the Issuing Bank hereunder shall be subject to the limitations, if any, set forth on Schedule I hereto, in addition to the limitations set forth in the Credit Agreement. SECTION 3. Issuance Procedure. In order to request the issuance of a Letter of Credit hereunder, the Account Party (or ITT on behalf of the applicable Account Party) shall hand deliver or telecopy a notice (specifying the information required by Section 2.23(b) of the Credit Agreement) to the Issuing Bank, at its address or telecopy number specified on Schedule I hereto (or such other address or telecopy number as the Issuing Bank may specify by notice to ITT), not later than the time of day (local time at such address) specified on Schedule I hereto prior to the proposed date of issuance of such Letter of Credit. A copy of such notice shall be sent, concurrently, by the applicable Account Party (or ITT on behalf of the applicable Account Party) to the Administrative Agent in the manner specified for Borrowing Requests under the Credit Agreement. Upon receipt of such notice, the Issuing Bank shall consult the Administrative Agent by telephone in order to determine (i) whether the conditions specified in the last sentence of Section 2.23(b) of the Credit Agreement will be satisfied in connection with the issuance of such Letter of Credit and (ii) whether the requested expiration date for such Letter of Credit complies with the proviso to Section 2.23(c) of the Credit Agreement. SECTION 4. Issuing Bank Fees, Interest and Payments. The Issuing Bank Fees payable to the Issuing Bank in respect of Letters of Credit issued hereunder are specified on Schedule I hereto (and such fees shall be in addition to the Issuing Bank's customary documentary and processing charges in connection with the issuance, amendment or transfer of any Letter of Credit issued hereunder). Each payment of Issuing Bank Fees payable hereunder shall be made not later than 12:00 (noon), local time at the place of payment, on the date when due, in immediately available funds, to the account of the Issuing Bank specified on Schedule I hereto (or to such other account of the Issuing Bank as it may specify by notice to ITT). 50 SECTION 5. Credit Agreement Terms. Notwithstanding any provision hereof which may be construed to the contrary, it is expressly understood and agreed that (a) this Agreement is supplemental to the Credit Agreement and is intended to constitute an Issuing Bank Agreement, as defined therein (and, as such, constitutes an integral part of the Credit Agreement as though the terms of this Agreement were set forth in the Credit Agreement), (b) each Letter of Credit issued hereunder and each and every L/C Disbursement made under any such Letter of Credit shall constitute a "Letter of Credit" and an "L/C Disbursement", respectively, for all purposes of the Credit Agreement and the other Loan Documents, (c) the Issuing Bank's commitment to issue Letters of Credit hereunder and each and every Letter of Credit requested or issued hereunder shall be subject to the terms and conditions of the Credit Agreement and entitled to the benefits of the Loan Documents and (d) the terms and conditions of the Credit Agreement are hereby incorporated herein as though set forth herein in full and shall supersede any contrary provisions hereof. SECTION 6. Assignment. The Issuing Bank may not assign its commitment to issue Letters of Credit hereunder without the consent of ITT and prior notice to the Administrative Agent. In the event of an assignment by the Issuing Bank of all its other interests, rights and obligations under the Credit Agreement, then the Issuing Bank's commitment to issue Letters of Credit hereunder shall terminate unless the Issuing Bank, ITT and the Administrative Agent otherwise agree. SECTION 7. Effectiveness. This Agreement shall not be effective until counterparts hereof executed on behalf of each of ITT and the Issuing Bank have been delivered to and accepted by the Administrative Agent. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. ITT CORPORATION, by ______________________ Name: Title: [ISSUING BANK], by _______________________ Name: Title: Accepted: CHEMICAL BANK, as Administrative Agent, by ____________________________ Name: Title: 51 SCHEDULE I to Issuing Bank Agreement A. Issuing Bank: B. Issuing Bank's Address and Telecopy Number for Notices: C. Time of Day by Which Notices A notice requesting the issuance of a Letter of Credit Must be Received must be received by the Issuing Bank by 10:00 a.m. (New York time) not less than five Business Days prior to the proposed date of issuance. D. Special Terms: The aggregate L/C Exposure in respect of Letters of Credit issued pursuant to this Agreement shall not exceed $[ ]. E. Issuing Bank Fees: [ ]% per annum on the average daily undrawn amount of the Scheduled Letters of Credit, payable on the same dates that L/C Participation Fees are payable under the Credit Agreement. F. Issuing Bank's Account for Payment of Issuing Bank Fees:
52 EXHIBIT G [FORM OF] LOCAL CURRENCY ADDENDUM To: Chemical Bank, as Administrative Agent From: ITT Corporation 1. This Local Currency Addendum is being delivered to you pursuant to Section 2.21(b) of the 5-Year Competitive Bid and Revolving Credit Facility, dated as of November 10, 1995, among ITT Corporation, the Borrowing Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as Administrative Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. 2. The effective date (the "Effective Date") of this Local Currency Addendum will be [ ]. LOCAL CURRENC(Y)(IES): LOCAL CURRENCY FACILITY MAXIMUM BORROWING AMOUNT: $
LOCAL CURRENCY Local Currency Lender LENDERS: Name of Lender Maximum Borrowing Amount -------------- ------------------------ $
LIST OF DOCUMENTATION GOVERNING LOCAL CURRENCY FACILITY (THE "DOCUMENTATION"): 1/ 3. The Company hereby represents and warrants that (i) as of the Effective Date, an Exchange Rate with respect to each Local Currency is determinable by reference to the Reuters currency pages (or comparable publicly available screen), (ii) the Documentation complies in all respects with the requirements of Section 2.21 of the Credit Agreement and (iii)___________ ____________________ 1/ Copies of the Documentation must accompany the Local Currency Addendum, together with, if applicable, an English translation thereof (provided, that the Company may instead furnish a summary term sheet in English so long as an English translation of the Documentation is furnished to the Administrative Agent or its counsel within 90 days after the date of delivery of the Local Currency Addendum). 53 2 of__________ 2/ contains an express acknowledgement that such Local Currency Loan shall be subject to the provisions of Sections 2.21 and 2.22 of the Credit Agreement. ITT CORPORATION By ______________________________ Title: Accepted and Acknowledged: CHEMICAL BANK, as Administrative Agent By _____________________________________ Title: [ ], as Local Currency Lender By ______________________________ Title: ____________________ 2/ Provide citation to relevant provision from the Documentation. 54 Exhibit H ITT Corporation 1330 Avenue of the Americas New York, NY 10019 November ___, 1995 Chemical Bank, as Administrative Agent for the Lenders 270 Park Avenue New York, NY 10019 Attention: Elisabeth Hughes Dear Sirs: Reference is made to the 364-Day Competitive Advance and Revolving Credit Facility Agreement and the Five-Year Competitive Advance and Revolving Credit Facility Agreement (collectively, the "Credit Agreements"), each among ITT Corporation, a Nevada corporation ("New ITT"), the lenders listed in Schedules 2.01 thereto (the "Lenders") and Chemical Bank, as administrative agent for the Lenders (the "Administrative Agent"). 1. As contemplated by Section 9.16 of the 364-Day Credit Agreement, and Section 9.17 of the Five-Year Credit Agreement, ITT Corporation, a Delaware corporation ("Old ITT"), and the Administrative Agent, acting on behalf of the Lenders, hereby agree that the Credit Agreements shall be executed on the date hereof and that, except as otherwise provided herein, Old ITT will have all rights and obligations of the "Company" referred to therein. 2. Old ITT agrees that upon the completion of the Distribution, it shall cause New ITT to execute, and New ITT shall succeed to the rights and obligations of Old ITT under, the Credit Agreements. 3. Old ITT further agrees that prior to each of (a) the successions referred to in paragraph 2 above, (b) the termination and cancellation of the Existing Credit Facilities (as defined in the Credit Agreements), (c) the completion of the Distribution and (d) the satisfaction of the other conditions set forth in the Credit Agreements, Old ITT shall not make any Borrowing or request the issuance of any Letter of Credit under the Credit Agreements. This letter agreement shall be deemed to be a part of each of the Credit Agreements and shall have the same effect as if set forth in full therein. The failure of the 55 Borrower to comply with the terms of this letter agreement shall constitute an Event of Default under the Credit Agreements. Very truly yours, ITT CORPORATION by __________________________ Name: Title: Accepted and agreed to as of the date first written above: CHEMICAL BANK, as Administrative Agent by ______________________ Name: Title: 56 SCHEDULE 2.01
Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Chemical Bank Ms. Nancy Mistretta $ 103,333,333.14 270 Park Avenue (212) 270-6041 New York, NY 10017 ABN AMRO Bank, N.V. Ms. Margaret Hannahoe $ 26,666,666.67 500 Park Avenue (212) 832-7129 New York, NY 10022 Arab Bank Plc Mr. Peter Boyadjian $ 16,666,666.67 520 Madison Avenue (212) 593-4632 New York, NY 10022 Banca Commerciale Italiana Ms. Elizabeth Cronin $ 26,666,666.67 New York Branch (212) 809-2124 1 William Street New York, NY 10004 Banca di Roma S.p.A. Mr. Ralph Riehle $ 16,666,666.67 34 East 51st Street, 7th Floor (212) 407-1118 New York, NY 10005 Banca Nazionale del Lavoro Mr. Giulio Giovine $ 26,666,666.67 New York Branch (212) 765-2978 25 W. 51st Street Rockefeller Plaza New York, NY 10019 Banca Popolare di Milano Mr. Nicholas Cinosi $ 16,666,666.67 375 Park Avenue (212) 586-3537 New York, NY 10152 Bank of America Illinois Ms. Bonnie Ptaszkowski $ 46,666,666.67 USCG - Account Administration (212) 974-9626 200 W. Jackson Street, 9th Floor Chicago, IL 60679 with copy to: Bank of America Mr. Donald Chin 335 Madison Avenue (212) 503-7771 New York, NY 10017 Bank of Hawaii Mr. Scott G. Balke $ 16,666,666.67 111 South King Street (808) 537-8301 P.O. Box 2900 Honolulu, HI 96813 The Bank of New York Ms. Mary Anne Zagroba $ 36,666,666.67 One Wall Street (212) 635-1480 New York, NY 10286
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- The Bank of Nova Scotia Mr. Philip Adsetts $ 46,666,666.67 One Liberty Plaza (212) 225-5090/91 New York, NY 10006 The Bank of Tokyo Trust Company Mr. Paul P. Malecki $ 46,666,666.67 1251 Avenue of the Americas (212) 782-6440 12th Floor New York, NY 10116-3138 Bankers Trust Company Ms. Katherine Judge $ 46,666,666.67 130 Liberty Street (212) 250-4969 New York, NY 10006 Barclays Bank PLC Ms. Afsaneh Naimollah $ 46,666,666.67 222 Broadway, 11th Floor (212) 412-7580 New York, NY 10038 Bayerische Landesbank Girozentrale Ms. Joanne Cicino $ 26,666,666.67 111 East 50th Street (212) 310-9868 New York, NY 10022 CIBC, Inc. Ms. Judith Domkowski $ 36,666,666.67 425 Lexington Avenue (212) 856-3991 New York, NY 10017 The Chase Manhattan Bank, N.A. Mr. Edward F. McNulty $ 46,666,666.67 One Chase Manhattan Plaza (212) 552-7879 New York, NY 10081 Citibank, N.A. Ms. Elizabeth Palermo $ 46,666,666.67 399 Park Avenue (212) 826-2375 New York, NY 10043 Comerica Bank Ms. Tammy Gurne $ 26,666,666.67 500 Woodward Avenue (313) 222-7806 Detroit, MI 48226-3280 Commerzbank AG Mr. Thomas Ausfahl $ 26,666,666.67 2 World Financial Center (212) 266-7235 New York, NY 10281 Compagnie Financiere de CIC et de Ms. Martha Skidmore $ 16,666,666.67 l'Union Europeenne (212) 715-4535 520 Madison Avenue 37th Floor New York, NY 10022
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Credit Lyonnais Mr. Michael Moretti $ 46,666,666.67 1301 Avenue of the Americas (212) 459-3179 18th Floor New York, NY 10019 Credit Suisse Ms. Carole Lustig $ 46,666,666.67 Tower 49 (212) 238-5439 12 East 49th Street New York, NY 10017 Credito Italiano Mr. Harmon Butler $ 16,666,666.67 375 Park Avenue (212) 546-9675 New York, NY 10152 The Dai-Ichi Kangyo Bank, Ltd. Mr. Timothy White $ 36,666,666.67 One World Trade Center (212) 524-0579 Suite 4911 New York, NY 10048 Den Danske Bank Mr. Mogens Sondergaard $ 16,666,666.67 280 Park Avenue (212) 370-9239 New York, NY 10017 Deutsche Bank AG Mr. Rolf-Peter Mikolayczyk $ 46,666,666.67 New York Branch (212) 474-8212 31 West 52nd Street New York, NY 10019 DG Bank Deutsche Mr. Mark Connelly $ 26,666,666.67 Genossenschaftsbank (212) 745-1556 609 Fifth Avenue 8th Floor New York, NY 10017 Dresdner Bank AG Mr. Michael Leffler $ 46,666,666.67 New York Branch (212) 574-0130 75 Wall Street New York, NY 10005-2889 First Interstate Bank of California Mr. Roy Roberts $ 26,666,666.67 885 Third Avenue (212) 593-5241 New York, NY 10022 The First National Bank of Boston Ms. Cindy Chen $ 26,666,666.67 100 Federal Street (617) 434-0601 01-06-12 Boston, MA 02106
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- The First National Bank of Chicago Mr. Stephen Liggins $ 46,666,666.67 153 West 51st Street (212) 373-1388 New York, NY 10019 First Union National Bank of North Mr. Dave Johnson $ 16,666,666.67 Carolina (704) 374-2802 One First Union Center Charlotte, NC 28288 The Fuji Bank, Limited Mr. Roy Tanfield $ 46,666,666.67 Two World Trade Center 79th Floor (212) 912-0516 New York, NY 10048 The Industrial Bank of Japan, Ltd., Mr. John Veltri $ 36,666,666.67 New York Branch (212) 856-9450 245 Park Avenue 23rd Floor New York, NY 10167-0037 Istituto Bancario San Paolo Bank di Mr. Wendell Jones $ 16,666,666.67 Torino S.p.A. (212) 599-5303 245 Park Avenue New York, NY 10167 Kredietbank N.V. Ms. Jennifer Pariente $ 16,666,666.67 125 West 55th Street (212) 956-5580 New York, NY 10019 Lloyds Bank Plc Mr. Theodore Walser $ 36,666,666.67 199 Water Street (212) 607-4999 9th Floor New York, NY 10038 LTCB Trust Company Mr. Yoshi Nakagawa $ 16,666,666.67 165 Broadway (212) 608-2371 New York, NY 10006 The Mitsubishi Bank Mr. J. Bruce Meredith $ 36,666,666.67 New York Branch (212) 667-3562 225 Liberty Street New York, NY 10281-1059 The Mitsubishi Trust and Banking Mr. Randolph Medrano $ 26,666,666.67 Corporation (212) 593-4691 520 Madison Avenue New York, NY 10022
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- Morgan Guaranty Trust Company of Mr. Stephen J. Kenneally $ 46,666,666.67 New York (212) 648-5018 60 Wall Street New York, NY 10260-0060 National Westminster Bank Plc Mr. Jordan Fragiacorno $ 36,666,666.67 175 Water Street (212) 602-4256 New York, NY 10038-4924 Nationsbank, N.A. Mr. James Gilland $ 46,666,666.67 767 Fifth Avenue (212) 593-1083 23rd Floor New York, NY 10153 Nippon Credit Bank Mr. Jeff Pasquale $ 16,666,666.67 245 Park Avenue (212) 490-3895 New York, NY 10167 The Northern Trust Company Mr. Daryl M. Robicsek $ 16,666,666.67 50 South LaSalle Street (312) 444-3508 Chicago, IL 60675 PNC Bank, National Association Mr. Tom Partridge $ 16,666,666.67 5th and Wood Streets (212) 557-5461 Pittsburgh, PA 15265 Royal Bank of Canada Mr. John Crawford $ 46,666,666.67 One Financial Square (212) 428-6459 New York, NY 10005-3531 The Sakura Bank, Limited, Mr. Pierre Vautravers $ 26,666,666.67 New York Branch (212) 888-7651 277 Park Avenue New York, NY 10172 The Sanwa Bank, Ltd. Mr. Stephen C. Small $ 46,666,666.67 New York Branch (212) 754-1304 55 East 52nd Street New York, NY 10055 Shawmut Bank, N.A. Mr. Frazier Caner $ 16,666,666.67 One Landmark Square (203) 358-6111 P.O. Box 1454 Stamford, CT 06904 Societe Generale Ms. Sedare Coradin $ 46,666,666.67 1221 Avenue of the Americas (212) 278-7430 New York, NY 10020
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Contact Person -------------- Name and Address of Lender and Telecopy Number Commitment -------------------------- ------------------- ---------- The Sumitomo Bank, Limited Mr. Edward McColly $ 46,666,666.67 New York Branch (212) 224-5188 277 Park Avenue New York, NY 10172 SunTrust Bank, Atlanta Ms. May Smith $ 26,666,666.67 711 Fifth Avenue (212) 371-9386 5th Floor New York, NY 10022 Swiss Bank Corporation Ms. Susan Isquith $ 36,666,666.67 New York Branch (212) 574-3228 222 Broadway New York, NY 10038 The Tokai Bank, Limited Mr. Stuart Schulman $ 26,666,666.67 55 East 52nd Street (212) 754-2170 12th Floor New York, NY 10022 The Toronto-Dominion Bank Mr. Reginald Waylen $ 36,666,666.67 31 West 52nd Street (212) 262-1926 New York, NY 10019 Union Bank of Switzerland Mr. Daniel H. Perron $ 46,666,666.67 299 Park Avenue (212) 821-3383 New York, NY 10171 Westdeutsche Landesbank Mr. Ralph White $ 26,666,666.67 Girozentrale (212) 852-8307 1211 Avenue of the Americas New York, NY 10036 The Yasuda Trust and Banking Co., Mr. Rohn Laudenschlager $ 26,666,666.67 Ltd. (212) 373-5796 New York Branch 666 Fifth Avenue Suite 801 New York, NY 10103 _________________ TOTAL COMMITMENT $2,000,000,000.00
62 SCHEDULE 3.13 ITT CORPORATION SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS 1. The use of $275 million in cash balances at various subsidiaries of ITT Destinations, Inc. to repay existing short-term borrowings. 2. Net capital expenditures totaling $106 million in the last three months of 1995 ($57 million was incurred in the comparable 1994 period). 3. Receipt of a $100 million contribution from ITT Industries, Inc. 4. The results of operation between the date of the Distribution and the date projected in the forecasted capitalization table. 5. Such additional modifications as outlined in the Form 8-K filed on November 7, 1995 by Old ITT with the Securities and Exchange Commission. 63 Schedule 5.10 ITT Corporation Liens on Principal Properties Sheraton Boston Liens in favor of Citibank. N.A. to secure approximately $192.6 million of outstanding indebtedness. Sheraton Buenos Aires Liens in favor of Overseas Private Investment Corp. to secure approximately $34 million of indebtedness. Park Grande Sydney Liens in favor of Commonwealth Bank of Australia to secure approximately $200 million of indebtedness. EX-12 12 CALCULATION OF RATIOS 1 EXHIBIT 12 ITT CORPORATION AND SUBSIDIARIES CALCULATION OF RATIO OF EARNINGS TO TOTAL FIXED CHARGES IN MILLIONS
YEARS ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Earnings: Income from continuing operations....................................... $147 $ 74 $ 39 $ 2 $ 43 Add: Adjustment for distributions in excess of (less than) equity earnings and losses(a)....................................................... 8 16 13 21 -- Income taxes.......................................................... 114 58 63 4 28 Minority equity in net income......................................... 21 12 17 15 14 Amortization of interest capitalized.................................. 3 3 3 4 17 ---- ---- ---- ---- ---- 293 163 135 46 102 ---- ---- ---- ---- ---- Fixed Charges: Interest and other financial charges.................................. 345 132 30 41 171 Interest factor attributable to rentals(b)............................ 26 25 29 29 27 ---- ---- ---- ---- ---- 371 157 59 70 198 ---- ---- ---- ---- ---- Earnings, as adjusted, from continuing operations....................... $664 $320 $194 $116 $300 ===== ===== ===== ===== ===== Fixed Charges: Fixed charges above................................................... $371 $157 $ 59 $ 70 $198 Interest capitalized.................................................. 7 5 1 8 15 ---- ---- ---- ---- ---- Total fixed charges................................................... $378 $162 $ 60 $ 78 $213 ===== ===== ===== ===== ===== Ratios: Earnings, as adjusted, from continuing operations to total fixed charges............................................................. 1.76 1.98 3.23 1.49 1.41 ===== ===== ===== ===== =====
- - --------------- Notes: (a) The adjustment for distributions in excess of (less than) equity earnings and losses represents the adjustment to income for distributions in excess of (less than) earnings and losses of companies in which at least 20% but less than 50% equity is owned. (b) The interest factor attributable to rentals was computed by calculating the estimated present value of all long-term rental commitments and applying the approximate weighted average interest rate inherent in the lease obligations and adding thereto the interest element assumed in short-term cancelable and contingent rentals excluded from the commitment data but included in rental expense. EX-21 13 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
WHOLLY-OWNED DIRECT OR INDIRECT SUBSIDIARIES OF ITT CARRYING ON THE SAME LINE OF BUSINESS AS NAMED SUBSIDIARIES ------------------------------ PERCENTAGE OPERATING JURISDICTION OF VOTING OPERATING IN IN WHICH SECURITIES IN THE FOREIGN NAME ORGANIZED PARENT OWNED UNITED STATES COUNTRIES - - ---------------------------------------------------- -------------- ------- ----------- --------------- ---------- ITT Corporation ("ITT")............................. Nevada -- -- -- -- ITT Educational Services, Inc..................... Delaware ITT 83.33 -- -- ITT Sheraton Corporation ("ITTSC")................ Delaware ITT 100 74 98 Caesars World, Inc.............................. Florida ITTSC 100 52 -- ITT Broadcasting Corp. ("ITTBC")................ Delaware ITTSC 100 -- -- ITT-Dow Jones Television...................... Delaware ITTBC 50 -- -- ITT Eden Corp. ("Eden")......................... Delaware ITTSC 100 -- -- MSG Eden Corporation ("MSG GP")............... Delaware Eden 50 -- -- Madison Square Garden, L.P.................. Delaware MSG GP 50 -- -- ITT Flight Operations, Inc...................... Pennsylvania ITTSC 100 -- -- ITT Information Services, Inc................... Delaware ITTSC 100 -- -- ITT MSG Inc..................................... Delaware ITTSC 100 -- -- Sheraton International, Inc.("SII") Delaware ITTSC 100 -- 97 Ciga S.p.A.................................. Italy SII 70.3 -- 48 ITT World Directories, Inc........................ Delaware ITT 80 -- 11
Note: The names of some consolidated wholly-owned subsidiaries of ITT carrying on the same lines of business as other subsidiaries named above have been omitted, the number of such omitted subsidiaries operating in the United States or in foreign countries being shown. Also omitted from the list are the names of other subsidiaries since, if considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. EX-23 14 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS TO ITT CORPORATION: As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K into the Corporation's previously filed Registration Statements (i) on Form S-3 (File No. 33-63445 and (ii) on Form S-8 (File Nos. 33-64815 and 33-64817). ARTHUR ANDERSEN LLP New York, New York March 29, 1996 EX-27 15 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the December 31, 1995 Financial Statements included in Form 10-K and is qualified in its entirety by reference to such Financial Statements. 1,000,000 YEAR YEAR DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994 177 191 0 0 890 553 106 55 86 59 1,143 965 4,625 3,363 646 481 8,692 5,012 1,430 624 3,840 631 0 0 0 0 2,944 0 (8) 3,353 8,692 5,012 0 0 6,346 4,760 0 0 5,775 4,468 (2) 17 132 69 291 131 282 144 114 58 147 74 0 0 0 0 0 0 147 74 1.24 .63 1.24 .63
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