[Exhibit 71]
Investment Agreement
between
ITT Corporation
and
CDRV Acquisition, L.L.C.
Dated as of July 15, 1997
TABLE OF CONTENTS
ARTICLE I
Purchase and Sale of Shares and
Warrants
Page
SECTION 1.01. Purchase and Sale of Shares and
Warrants................................... 3
SECTION 1.02. Time and Place of the Closing................ 3
SECTION 1.03. Transactions at the Closing.................. 4
ARTICLE II
Covenants
SECTION 2.01. Covenants of the Company..................... 4
SECTION 2.02. Covenants of Purchaser Related
Parties.................................... 6
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of
the Company................................ 8
SECTION 3.02. Representations and Warranties of
Purchaser.................................. 27
Page
ARTICLE IV
Corporate Governance
SECTION 4.01. Composition of the Board of
Directors.................................. 29
SECTION 4.02. Solicitation and Voting
of Shares.................................. 32
SECTION 4.03. Supermajority Voting
Provisions................................. 32
SECTION 4.04. Committees................................... 33
SECTION 4.05. Enforcement of this Agreement................ 33
SECTION 4.06. Certificate of Incorporation and
By-laws.................................... 33
SECTION 4.07. Termination of Article IV.................... 33
ARTICLE V
Equity Purchases from the Company
SECTION 5.01. Subscription Rights.......................... 34
SECTION 5.02. Issuance and Delivery of New
Securities and Voting Stock................ 35
SECTION 5.03. Limitation on Repurchase
of Shares.................................. 35
ARTICLE VI
Limitations on Purchases of
Additional Equity Securities
SECTION 6.01. Purchase of Equity Securities................ 36
SECTION 6.02. Additional Limitations....................... 37
Page
ARTICLE VII
Transfer of Common Stock
SECTION 7.01. Transfer of Common Stock..................... 38
ARTICLE VIII
Covenants and Additional Agreements
SECTION 8.01. Covenants of the Company..................... 39
SECTION 8.02. Directories Transaction
Proposal................................... 43
SECTION 8.03. Modification of Reorganization
Documents; Abandonment of
Distributions.............................. 46
SECTION 8.04. Reorganization Documents and
Schedules.................................. 46
SECTION 8.05. Company Stockholder Approval; Proxy
Statement.................................. 47
SECTION 8.06. Debt Repayment............................... 48
SECTION 8.07. Retained Companies Financing................. 48
SECTION 8.08. Employee Benefits............................ 49
SECTION 8.09. Access and Information....................... 49
SECTION 8.10. Further Actions.............................. 49
SECTION 8.11. Further Assurances........................... 50
ARTICLE IX
Conditions Precedent
SECTION 9.01. Conditions to Each Party's
Obligation................................. 50
Page
SECTION 9.02. Conditions to the Obligation of the
Company.................................... 52
SECTION 9.03. Conditions to the Obligation of
Purchaser.................................. 53
ARTICLE X
Termination
SECTION 10.01. Termination.................................. 56
SECTION 10.02. Effect of Termination........................ 58
ARTICLE XI
Indemnification
SECTION 11.01. Indemnification of
Purchaser.................................. 58
SECTION 11.02. Indemnification Procedures................... 60
ARTICLE XII
Definitions
SECTION 12.01. Definitions.................................. 61
ARTICLE XIII
Miscellaneous
SECTION 13.01. Severability................................. 65
SECTION 13.02. Specific Enforcement......................... 65
SECTION 13.03. Entire Agreement............................. 65
Page
SECTION 13.04. Counterparts................................. 66
SECTION 13.05. Notices...................................... 66
SECTION 13.06. Amendments................................... 66
SECTION 13.07. Cooperation.................................. 67
SECTION 13.08. Successors and Assigns....................... 67
SECTION 13.09. Expenses and Remedies........................ 67
SECTION 13.10. Non-Survival of Representations and
Warranties................................. 68
SECTION 13.11. Transfer of Shares and Warrants.............. 69
SECTION 13.12. Governing Law................................ 69
SECTION 13.13. Publicity.................................... 69
SECTION 13.14. No Third Party Beneficiaries ................ 70
SECTION 13.15. Consent to Jurisdiction...................... 71
EXHIBITS
1 Terms of Warrants
2 Terms of Registration Rights
3 Proposed Charter Amendment
ANNEX
A Retained Business Financial
Statements
SCHEDULES
1 Distributions
3.01(c)(ii) Certain Filings
3.01(c)(iii) Intercompany Services
3.01(d) Preemptive Rights
3.01(e) Capital Structur
3.01(i) Certain Liabilities
3.01(j) Adverse Developments
3.01(l) Certain Assets
3.01(m) Certain Litigation
3.01(n) Contracts
3.01(o) Taxes
3.01(p) Employee Benefits Plans
3.01(t) Intellectual Property
3.01(u) Certain Guarantees
8.01 Operation of Business
9.03(l) Debt Capital Structure
EXECUTION COPY
INVESTMENT AGREEMENT, dated as of
July 15, 1997, between CDRV Acquisition,
L.L.C., a Delaware limited liability company
("Purchaser") and ITT Corporation, a Nevada
corporation (the "Company").
WHEREAS the Board of Directors of the Company has approved a
transaction pursuant to which (a) all the assets of the Company, other
than the Directories Assets (as defined in Schedule 1) and the shares
of common stock (the "ESI Shares") of ITT Educational Services, Inc.
("ESI"), will be contributed by the Company to a wholly owned
Subsidiary (as defined in Section 12.01) of the Company organized
under the laws of the State of Nevada ("Newco") and all the
liabilities of the Company, other than the Directories Liabilities (as
defined in Schedule 1), will be assumed by Newco and certain other
transactions will be consummated and (b) the Company will distribute
all the issued and outstanding shares of Common Stock, no par value,
of Newco ("Newco Common Stock"), to the holders of record of shares of
Common Stock, no par value, of the Company ("Common Stock"), other
than shares held in the treasury of the Company, on a share-for-share
basis (the "Newco Distribution" and, together with the ESI
Distribution (as defined below), the "Distributions").
WHEREAS the Board of the Directors of the Company has
approved a transaction pursuant to which and subject to the terms of
which, the Company will distribute the ESI Shares to the holders of
record of Common Stock on a pro rata basis (the "ESI Distribution").
WHEREAS, in connection with the Distributions, the Company
expects to (a) execute and deliver (i) a distribution agreement to
effect the Newco Distribution (the "Newco Distribution Agreement"),
(ii) a distribution agreement to effect the ESI Distribution (the "ESI
Distribution Agreement" and, together with the Newco Distribution
Agreement, the "Distribution Agreements"), (iii) a tax allocation
agreement (the "Tax Allocation Agreement"), (iv) an employee benefits
services and liability agreement (the "Employee Benefits Services and
Liability Agreement"), (v) an intellectual property agreement (the
"Newco Intellectual Property Agreement") and (vi) an intellectual
property agreement (the "ESI Intellectual Property Agreement" and,
together with the Newco Intellectual Property Agreement, the
"Intellectual Property Agreements"), (b) cause Newco to execute and
deliver the Tax Allocation Agreement, the Employee Benefits
Services and Liability Agreement and the Newco Intellectual Property
Agreement and (c) cause ESI to execute and deliver the Tax Allocation
Agreement, the Employee Benefits Services and Liability Agreement and
the ESI Intellectual Property Agreement.
WHEREAS, prior to the Distributions and pursuant to the
terms of the Distribution Agreements, the Company, ESI and Newco will
consummate the transactions contemplated by the Newco Distribution
Agreement and the ESI Distribution Agreement and those other
transactions specified to occur in the Distribution Agreements prior
to the Distributions. For the purposes of this Agreement, (i) the
"Pre-Distribution Transactions" means the contribution of certain
assets, the assumption of certain liabilities and other transfers
contemplated by Article II of the respective Distribution Agreements
and described on Schedule 1 and (ii) the "Retained Business" means the
Directories Business, (as defined in Schedule 1).
WHEREAS the Company expects to (a) execute and deliver the
Newco Distribution Agreement, (b) cause Newco to execute and deliver
the Newco Distribution Agreement and (c) after the satisfaction or
waiver of all of the conditions to the Company's obligation to
consummate the Newco Distribution set forth in the Newco Distribution
Agreement, and pursuant to the terms of the Newco Distribution
Agreement, effect the Newco Distribution.
WHEREAS the Company expects to (a) execute and deliver the
ESI Distribution Agreement, (b) cause ESI to execute and deliver the
ESI Distribution Agreement and (c) after the satisfaction or waiver of
all of the conditions to the Company's obligation to consummate the
ESI Distribution set forth in the ESI Distribution Agreement, and
pursuant to the terms of the ESI Distribution Agreement, effect the
ESI Distribution.
WHEREAS, following the Pre-Distribution Transactions and the
Distributions, Purchaser wishes to purchase from the Company, and the
Company wishes to sell to Purchaser, shares of Common Stock
representing 32.9% of the outstanding shares of Common Stock as of the
Closing Date (giving effect to the issuance of such shares and
assuming for such purposes that all Rollover Options in existence on
the Closing Date have been exercised calculated on the treasury stock
method), and warrants (the "Warrants") entitling the holder thereof to
purchase 0.78 shares of Common Stock for each share so purchased on
the terms and
subject to the conditions set forth in Exhibit 1 hereto, and the
Company and Purchaser wish to enter into a registration rights
agreement (the "Registration Rights Agreement"), the principal terms
of which are attached hereto as Exhibit 2.
WHEREAS Purchaser and the Company are entering into this
Agreement to provide for such purchase and sale and to establish
various rights and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties agree as follows:
ARTICLE I
Purchase and Sale of Shares and Warrants
SECTION 1.01. Purchase and Sale of Shares and Warrants. Upon
the terms and subject to the conditions set forth herein, the Company
agrees to sell to Purchaser and Purchaser agrees to purchase from the
Company shares of previously unissued Common Stock (including the
associated Rights) representing 32.9% of the outstanding shares of
Common Stock as of the Closing Date (giving effect to the issuance of
such shares and assuming for such purposes that all Rollover Options
in existence on the Closing Date have been exercised calculated on the
treasury stock method) and Warrants to purchase 0.78 shares of Common
Stock for each share so purchased for an aggregate purchase price of
$225 million (the "Purchase Price"). The shares of Common Stock being
purchased pursuant hereto are referred to herein as the "Shares"; and
unless the context otherwise requires, the term "Shares" as used
herein includes the associated Series A Participating Cumulative
Preferred Stock Purchase Rights (the "Rights") issuable in respect of
such shares of Common Stock pursuant to the Rights Agreement dated as
of November 1, 1995, between the Company and The Bank of New York, as
Rights Agent (the "Rights Agreement").
SECTION 1.02. Time and Place of the Closing. The closing
(the "Closing") shall take place at the offices of Cravath, Swaine &
▇▇▇▇▇, Worldwide Plaza, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, at
10:00 A.M., New York time, on the third Business Day following the
first date on which the conditions to Closing set forth in Article IX
have first been satisfied or waived. The Company shall give Purchaser
ten Business Days prior written notice of the date the Closing is
scheduled to occur. The "Closing Date" shall be the date the Closing
occurs.
SECTION 1.03. Transactions at the Closing. At the Closing,
subject to the terms and conditions of this Agreement, the Company
shall issue and sell to Purchaser and Purchaser shall purchase the
Shares and the Warrants. At the Closing, the Company shall deliver to
Purchaser a certificate representing the Shares and a certificate
representing the Warrants, in each case registered in the name of
Purchaser against payment of the Purchase Price with respect thereto
by wire transfer of immediately available funds to an account or
accounts previously designated by the Company.
ARTICLE II
Covenants
SECTION 2.01. Covenants of the Company.
(a) Financial Statements and Other Reports. The Company
covenants that it will deliver to Purchaser so long as Purchaser's
Percentage Interest exceeds 10%:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, a consolidated statement
of income and a consolidated statement of cash flow of the
Company and its Subsidiaries for the period from the beginning of
the then current fiscal year to the end of such quarterly period,
and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period, setting
forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, all in
reasonable detail and certified by the principal financial
officer of the Company as presenting fairly, in accordance with
United States generally accepted accounting principles ("GAAP")
applied (except as specifically set forth therein) on a basis
consistent with such prior fiscal period, the information
contained therein, subject to changes resulting from year-end
closing and audit adjustments; provided, however, that delivery
pursuant to clause (iii) below of a copy of the Quarterly Report
on Form 10-Q of the Company for such quarterly period
filed with the Securities and Exchange Commission (the "SEC")
shall be deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, a consolidated statement of
income, a consolidated statement of cash flow and a consolidated
statement of stockholders equity of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such year,
setting forth in each case in comparative form the corresponding
figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of
recognized national standing selected by the Company, which
report shall state that such consolidated financial statements
present fairly the financial position of the Company and its
Subsidiaries as at the dates indicated and the results of their
operations and changes in their financial position for the
periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise specified in
such report) and that the audit by such accountants in connection
with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; provided,
however, that delivery pursuant to clause (iii) below of a copy
of the Annual Report on Form 10-K of the Company for such fiscal
year filed with the SEC shall be deemed to satisfy the
requirements of this clause (ii);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it
shall send to its stockholders and copies of all such
registration statements (without exhibits), other than
registration statements relating to employee benefit or dividend
reinvestment plans, and all such regular and periodic reports as
it shall file with the SEC; and
(iv) promptly upon receipt thereof, copies of all reports
submitted to the Company by independent public accountants in
connection with each annual, interim or special audit of the
books of the Company or any Subsidiary made by such accountants,
including the comment letter submitted by such accountants to
management in connection with their annual audit; and
(v) with reasonable promptness, such other financial data
of the Company and its Subsidiaries as Purchaser may reasonably
request.
(b) Inspection of Property. The Company covenants that so
long as Purchaser's Percentage Interest exceeds 20%, it will permit
representatives of Purchaser to visit and inspect, at Purchaser's
expense, any of the properties of the Company and its Subsidiaries, to
examine the corporate books and make copies or extracts therefrom and
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the officers and employees of the Company and its
Subsidiaries and independent public accountants (and by this provision
the Company authorizes such accountants to discuss with such
representatives the affairs, finances and accounts of the Company and
its Subsidiaries), all at such reasonable times and as often as
Purchaser may reasonably request; provided, however, that the
foregoing shall be subject to compliance with reasonable safety
requirements and shall not require the Company or any of its
Subsidiaries to permit any inspection which in the reasonable judgment
of the Company would violate any statute or regulation with respect to
confidentiality or security. Purchaser agrees not (i) to use for any
purpose detrimental to the Company or (ii) to disclose to any Person
any information or data obtained by it pursuant to this Section
2.01(b) or Section 2.01(a)(iv) until, in the case of the foregoing
clause (ii) only, such information or data otherwise becomes publicly
available or except pursuant to a valid subpoena, judicial process or
its equivalent or in connection with a claim against the Company;
provided that Purchaser shall have used its reasonable best efforts to
give the Company advance notice of such subpoena or judicial process
so that the Company may seek an appropriate protective order.
Purchaser acknowledges that information obtained pursuant to the
rights granted hereby may constitute material non-public information
and agrees that it will comply with all applicable laws relating to
the purchase or sale of securities while in possession of such
information.
SECTION 2.02 Covenants of Purchaser Related Parties. (a) For
the period beginning on the date hereof and ending on the date that is
two years after the later of the date of the ESI Distribution and the
date of the Newco Distribution (the "Relevant Period"), none of
Purchaser, ▇▇▇▇▇▇▇, Dubilier & Rice Fund V Limited Partnership (the
"Fund"), ▇▇▇▇▇▇▇, Dubilier & Rice, Inc. ("CD&R"), CD&R Associates V
Limited Partnership and CD&R Investment
Associates, Inc., any professional employee of CD&R, the Company or
the Retained Subsidiaries (collectively, the "Purchaser Related
Parties") shall take any action that might cause, or shall omit to
take any action reasonably available to it, if such omission might
cause, the Company to cease being actively engaged in the conduct of
the Directories Business within the meaning of Section 355(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury Regulation Section 1.355-3(b).
(b) None of the Purchaser Related Parties shall take any
action that would reasonably be expected to cause, or shall omit to
take any action reasonably available to it if such omission would
reasonably be expected to cause, the Company to breach any of the
covenants, or cause to be untrue any of the representations or
statements that the Company makes in connection with the Tax
Allocation Agreement or to the Company's outside tax counsel in
connection with such firm's rendering an opinion to the Company as to
certain tax aspects of the Contribution and Distributions in a
representation letter, provided that such representations and
covenants are substantially the same as would be required by the
Internal Revenue Service in connection with the issuance of a private
letter ruling with respect to the Contribution and Distributions.
(c) None of the Purchaser Related Parties shall take any
action (including but not limited to a breach of any covenant or
obligation set forth in this Section 2.02, Section 5.03, Article VI or
Article VII of this Agreement) that would reasonably be expected to
materially contribute to a Final Determination that the Contribution,
the ESI Distribution and/or the Newco Distribution results in the
recognition of gain to any of the Company, ESI, and Newco by virtue of
the Contribution, the ESI Distribution and/or the Newco Distribution
failing to qualify under Section 355 of the Code by reason of Section
355(e) (as ultimately enacted) or otherwise.
(d) If any of the Purchaser Related Parties takes any action
during the Relevant Period that, if such action had been taken on the
date of any of the Contribution, the ESI Distribution or the Newco
Distribution, would have been inconsistent with any of the
representations made in the representation letters described in
Section 2.02(b) of this Agreement, and such action or omission
materially contributes to a Final Determination that the Contribution,
the ESI Distribution and/or the Newco Distribution, as the case may
be, results in the recognition of gain to any of
the Company, ESI and Newco by virtue of the Contribution, the ESI
Distribution and/or the Newco Distribution failing to qualify under
Section 355 of the Code by reason of Section 355(e) (as ultimately
enacted) or otherwise (a Person which takes or omits any such action,
a "Breaching Person"), such Breaching Person shall be treated for
purposes of this Agreement as having actually violated any such
representation or covenant.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.
As used in this Agreement, (i) any reference to the Company and its
Subsidiaries means the Company and each of its Subsidiaries, (ii) any
reference to the "Retained Company" and its Subsidiaries or the
"Retained Companies" means the Company (solely with respect to the
Retained Business) and those of its Subsidiaries included in the
Retained Business, (iii) any reference to the "Retained Subsidiaries"
means the Subsidiaries of the Company included in the Retained
Business, (iv) any reference to Newco and its Subsidiaries or the
"Newco Companies" means Newco immediately after the Newco Distribution
Time (as defined in Schedule 1) and those entities that immediately
after the Newco Distribution Time will be Subsidiaries of Newco and
(v) any reference to ESI and its Subsidiaries means ESI immediately
after the ESI Distribution Time (as defined in Schedule 1) and those
entities that immediately after the ESI Distribution Time will be
Subsidiaries of ESI. As used in this Agreement, any reference to any
state of facts, event, change or effect having a "Material Adverse
Effect" on or with respect to an entity (or group of entities taken as
a whole) means such state of facts, event, change or effect has had,
or would reasonably be expected to have, a material adverse effect on
the business, properties, results of operations or financial condition
of such entity (or, if with respect thereto, of such group of entities
taken as a whole), or on the ability of such entity (or group of
entities) to consummate the transactions contemplated hereby,
including the Pre-Distribution Transactions and the Distributions, or
to perform its obligations under this Agreement, the Warrant, the
Registration Rights Agreement, the Distribution Agreements, the Tax
Allocation Agreement, the tax representation letters to be delivered
in connection with the Distributions, the Employee Benefits Services
and
Liability Agreement, the Intellectual Property Agreements and such
other agreements as are entered into to effect the Pre-Distribution
Transactions (collectively, the "Reorganization Agreements") to which
it is or will be a party.
The Company hereby represents and warrants to Purchaser as
follows:
(a) Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Nevada. Each Retained Subsidiary is duly
organized and validly existing and, if applicable, is in good
standing, under the laws of the jurisdiction of its incorporation
or organization. Each of the Retained Companies is duly qualified
or licensed and, if applicable, is in good standing as a foreign
corporation, in each jurisdiction in which the properties owned,
leased or operated, or the business conducted, by it require such
qualification or licensing, except for any such failure so to
qualify or be in good standing which, individually or in the
aggregate, would not have a Material Adverse Effect on the
Retained Companies, taken as a whole. Each of the Retained
Companies has the requisite power and authority to carry on its
businesses as they are now being or will be (immediately after
the Distributions) conducted. The Company has heretofore made
available to Purchaser complete and correct copies of the
Restated Articles of Incorporation of the Company (the "Company
Charter") and the Amended and Restated By-laws of the Company
(the "Company By-laws") and the certificate of incorporation and
by-laws, or the comparable organizational documents, of each of
the Retained Subsidiaries, each as amended to date and currently
in full force and effect.
(b) Corporate Authority. Each of the Company, ESI and Newco
has (or will have at the time of such act) the requisite
corporate power and authority to execute, deliver and perform
each Reorganization Agreement to which it is or will be a party
and to consummate the transactions contemplated thereby (other
than, with respect to the issuance and sale by the Company of the
Shares and Warrants, the approval of such issuance and sale by
the affirmative vote of the holders of a majority of the voting
power of the Common Stock (the "Company Stockholder Approval")
and, with
respect to the Distributions, formal declaration of the
Distributions by the Company's Board of Directors). The
execution, delivery and performance of each Reorganization
Agreement by the Company and the consummation by the Company of
the Pre-Distribution Transactions, the Newco Merger (as defined
in the Newco Distribution Agreement), the Distributions and the
issuance and sale by the Company of the Shares and Warrants and
of the other transactions contemplated thereby have been duly
authorized (or will have been duly authorized at the time of such
act) by the Company's Board of Directors, and no other corporate
proceedings on the part of the Company are necessary to authorize
any Reorganization Agreement or for the Company to consummate the
transactions so contemplated (other than, with respect to the
issuance and sale by the Company of the Shares and Warrants, the
Company Stockholder Approval and, with respect to the
Distributions, formal declaration of the Distributions by the
Company's Board of Directors). The execution, delivery and
performance by Newco of each Reorganization Agreement to which it
will be a party and the consummation by it of the transactions
contemplated thereby will be duly authorized by Newco's Board of
Directors and its stockholder, if required, and no other
corporate proceedings on the part of Newco will be necessary to
authorize any Reorganization Agreement to which it will be a
party or for it to consummate the transactions so contemplated.
The execution, delivery and performance by ESI of each
Reorganization Agreement to which it will be a party and the
consummation by it of the transactions contemplated thereby will
be duly authorized by ESI's Board of Directors and its
stockholders, if required, and no other corporate proceedings on
the part of ESI will be necessary to authorize any Reorganization
Agreement to which it will be a party or for it to consummate the
transactions so contemplated. Each Reorganization Agreement to
which the Company, ESI or Newco is or will be a party is, or when
executed and delivered will be, a valid and binding agreement of
such party, enforceable against such party in accordance with the
terms thereof, assuming (in the case of this Agreement and the
Registration Rights Agreement) that each Reorganization Agreement
to which Purchaser is a party is a valid and binding agreement of
Purchaser.
(c) No Violations; Consents and Approvals. (i) None of the
execution, delivery or performance by the Company, ESI or Newco
of each Reorganization Agreement to which any of them is or will
be a party or the consummation by the Company, ESI or Newco of
the transactions contemplated thereby (A) will result in a
violation or breach of the Company Charter or the Company
By-laws, the articles of incorporation or by-laws of ESI, the
articles of incorporation or by-laws of Newco or the
organizational documents of any of the Retained Subsidiaries or
(B) will result in a violation or breach of (or give rise to any
right of termination, revocation, cancelation or acceleration
under or increased payments under), or constitute a default (with
or without due notice or lapse of time or both) under, or result
in the creation of any lien, charge, encumbrance or security
interest of any kind (a "Lien") upon any of the properties or
assets of the Retained Companies under, (1) subject to the
governmental filings and other matters referred to in clause (ii)
below, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, contract, agreement, obligation,
instrument, offer, commitment, understanding or other arrangement
(each a "Contract") or of any license, waiver, exemption, order,
franchise, permit or concession (each a "Permit") to which any of
the Retained Companies is a party or by which any of their
properties or assets may be bound, or (2) subject to the
governmental filings and other matters referred to in clause (ii)
below, any judgment, order, decree, statute, law, regulation or
rule applicable to the Retained Companies, except, in the case of
clause (B), for violations, breaches, defaults, rights of
cancelation, termination, revocation or acceleration or Liens
that would not, individually or in the aggregate, have a Material
Adverse Effect on the Retained Companies, taken as a whole.
(ii) Except for consents, approvals, orders, authorizations,
registrations, declarations or filings as may be required under,
and other applicable requirements of, the Securities Act of 1933
(the "Securities Act"), the Securities Exchange Act of 1934 (the
"Exchange Act") and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), filings under state
securities or "blue sky" laws, filings referred to in Schedule
3.01(c)(ii), and the filing of articles of
merger relating to the Newco Merger (collectively, the
"Regulatory Filings"), no consent, approval, order or
authorization of, or registration, declaration or filing with,
any government or any court, administrative agency or commission
or other governmental authority or agency, Federal, state or
local or foreign (a "Governmental Entity"), is required with
respect to the Company, ESI, Newco or any of their respective
Subsidiaries, in connection with the execution, delivery or
performance by the Company, ESI, or Newco of each Reorganization
Agreement to which any of them is or will be a party or the
consummation by the Company, ESI and Newco of the transactions
contemplated thereby (except where the failure to obtain such
consents, approvals, orders or authorizations, or to make such
registrations, declarations, filings or agreements would not,
individually or in the aggregate, have a Material Adverse Effect
on the Retained Companies, taken as a whole.
(iii) Except as set forth on Schedule 3.01(c)(iii), none of
the Company, ESI or Newco provide any support, assets,
properties, rights, goods, services or benefits to the Retained
Companies that will be terminated or modified adversely as a
result of the execution, delivery or performance by the Company,
ESI or Newco of this Agreement, in the case of the Company, or
each Reorganization Agreement to which any of them is or will be
a party or the consummation by the Company, ESI or Newco, as the
case may be, of the transactions contemplated hereby or thereby.
(d) Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of (i) 200,000,000 shares
of Common Stock, of which an aggregate of 116,528,691 shares of
Common Stock were issued and outstanding as of the close of
business on June 30, 1997, and (ii) 50,000,000 shares of
preferred stock, without par value ("Preferred Stock") of which
none are issued and outstanding; as of June 30, 1997, 200,000
shares of Preferred Stock, all denominated as Series A
Participating Cumulative Preferred Stock (subject to increase and
adjustment as set forth in the Rights Agreement and the
Certificate of Designation attached as an exhibit thereto) were
reserved for issuance in connection with the Rights. As of the
close of business on June 30, 1997, there were outstanding under
the Company's 1995 Corporation
Incentive Stock Plan, the 1996 ITT Restricted Stock Plan for
Non-Employee Directors and in respect of 1995 substitute options
(collectively, the "Company Stock Plans") options to acquire an
aggregate of 9,301,939 shares of Common Stock (subject to
adjustment on the terms set forth therein). As of the close of
business on June 30, 1997, the Company had no shares of Common
Stock reserved for issuance, other than 9,346,262 shares of
Common Stock reserved for issuance upon exercise of outstanding
stock options issued pursuant to the Company Stock Plans. As of
the close of business on June 30, 1997, there were outstanding
under the Company Stock Plans 154,030 shares of restricted stock.
As of the close of business on June 30, 1997, the company had no
shares of Common Stock reserved for issuance of restricted stock,
other than 266,865 shares of Common Stock reserved for issuance
of restricted stock pursuant to the Company Stock Plans. All of
the outstanding shares of Common Stock have been duly authorized
and validly issued, and are fully paid and nonassessable. Except
as set forth on Schedule 3.01(d), there are no preemptive or
similar rights on the part of any holders of any class of
securities of the Company or of any of the Retained Subsidiaries.
Except as set forth above, the Company has outstanding no bonds,
debentures, notes or other obligations or securities (other than
the Common Stock) the holders of which have the right to vote (or
are convertible or exchangeable into or exercisable for
securities having the right to vote) with the stockholders of the
Company on any matter. Except as set forth above, as of the date
of this Agreement, there are no securities convertible into or
exchangeable for, or options, warrants, calls, subscriptions,
rights, contracts, commitments, arrangements or understandings of
any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or
any of its Subsidiaries contingently or otherwise to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of
the Company or of any of the Retained Subsidiaries. Except (w)
pursuant to an agreement dated as of July 15, 1997 between the
Company and BellSouth Corporation (a copy of which has been made
available to Purchaser), (x) to the extent that Article Ninth of
the Company Charter or any comparable provision of the articles
of incorporation of any Subsidiary of the Company required under
any Gaming Law
(as defined below) could be construed as a Contract, (y) with
respect to the withholding of exercise price or withholding taxes
under any stock option plan or (z) pursuant to any Share
Repurchase (as defined below), there are no outstanding Contracts
of the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company
or of any of the Retained Subsidiaries. As used herein, the term
"Gaming Laws" means any Federal, state, local or foreign statute,
ordinance, rule, regulation, policy, permit, consent, approval,
license, judgment, order, decree, injunction or other
authorization governing or relating to the current or
contemplated casino and gaming activities and operations of the
Company or any of its Subsidiaries, as applicable, and (2) the
term "Share Repurchase" means a tender offer, exchange offer,
open market purchase, private repurchase or other similar
arrangement providing for the repurchase by the Company of
approximately 25% of the outstanding shares of Common Stock.
(e) Subsidiaries. Schedule 3.01(e) contains a complete and
correct description of the shares of stock or other equity
interests that are authorized, or issued and outstanding, of each
of the Retained Companies (other than the Company). Except for
Subsidiaries which will not be Subsidiaries of the Company after
the Distributions, the Company has no equity interests in any
Person other than the Retained Companies. Each of the outstanding
shares of capital stock of each of the Retained Subsidiaries has
been duly authorized and validly issued, and is fully paid and
nonassessable. Except as set forth on Schedule 3.01(e), all the
outstanding shares of capital stock of each Retained Subsidiary
are owned, either directly or indirectly, by the Company free and
clear of all Liens.
(f) SEC Filings. (i) The Company has timely filed all
reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Act
and the Exchange Act since June 30, 1996 (the "Company SEC
Documents"). As of its filing date, each Company SEC Document
filed, as amended or supplemented, if applicable, (A) complied in
all material respects with the applicable requirements of the
Securities Act or the Exchange Act, as applicable, and the rules
and regulations thereunder
and (B) did not, at the time it was filed, contain any untrue
statement of a material fact regarding the Retained Business or
omit to state any material fact regarding the Retained Business
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(ii) The proxy statement (as amended or supplemented and
including documents incorporated by reference therein, the "Proxy
Statement") relating to the meeting of stockholders to approve
the transactions contemplated hereby the ("Company Meeting") will
not, at the date mailed to the Company's stockholders and at the
date of the Company Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, except that no representation
is made by the Company with respect to statements made therein
based on information supplied in writing by Purchaser or any of
its Affiliates for inclusion in the Proxy Statement.
(g) Retained Business Financial Statements. (i) Attached
hereto as Annex A(i) are a consolidated balance sheet as of
December 31, 1996 (the "Balance Sheet") and a consolidated
balance sheet as of December 31, 1995 and consolidated income
statements, consolidated cash flow statements and consolidated
statements of stockholders equity for the years ended December
31, 1994, 1995 and 1996, in each case for the Retained Business
(such financial statements, including the notes thereto, the
"Retained Business Financial Statements"), together with the
report of the Company's independent accountants thereon. Each of
the Balance Sheet and the balance sheet as of December 31, 1995
(including any related notes and schedules) fairly presents in
all material respects the consolidated financial position of the
Retained Business as of their respective dates, and each of the
consolidated income statements, consolidated cash flow statements
and consolidated statements of stockholders equity included in
the Retained Business Financial Statements (including any related
notes and schedules) fairly
presents in all material respects the income, cash flows and
stockholders equity, as the case may be, of the Retained Business
for the periods set forth therein, in each case in accordance
with GAAP applied on a consistent basis throughout the periods
presented therein except as indicated in the notes thereto. The
Retained Business Financial Statements may not necessarily be
indicative of the financial position, results of operations or
cash flows that would have existed if the Retained Business had
operated as a stand-alone company.
(ii) Attached hereto as Annex A(ii) are the unaudited
consolidated balance sheet for the Retained Business as of March
31, 1997 and the unaudited consolidated statement of income of
the Retained Business for the three months then ended (such
financial statements, including the notes thereto, the "Unaudited
Retained Business Financial Statements"). The Unaudited Retained
Business Financial Statements have been prepared in all material
respects in accordance with GAAP consistently applied and on that
basis fairly present the consolidated financial condition and
results of operations of the Retained Business as of the date
thereof and for the period indicated, except that the Unaudited
Retained Business Financial Statements omit the statement of cash
flows and footnote disclosures required by GAAP and are subject
to normal, recurring year-end closing and audit adjustments.
(iii) The balance sheets included in the Retained Business
Financial Statements do not include any material assets or
liabilities not intended to constitute a part of the Retained
Business after giving effect to the transactions contemplated by
the Reorganization Agreements. The statements of income,
statements of stockholders equity and statements of cash flows
included in the Retained Business Financial Statements do not
reflect the operations of any entity or business not intended to
constitute a part of the Retained Business after giving effect to
all such transactions. The statements of income included in the
Retained Business Financial Statements reflect all of the
material costs and expenses incurred in connection with the
Retained Business, including those incurred in generating the
revenues reflected in the Retained Business Financial Statements,
in each case, for the periods covered thereby, that would be
required to be
so reflected under GAAP in consolidated financial statements of
the Retained Business prepared on a pro forma basis after giving
effect to all such transactions.
(h) [Intentionally omitted]
(i) Undisclosed Liabilities. Except (i) for the items listed
in Schedule 3.01(i) hereto, (ii) as and to the extent disclosed
or reserved against on the Balance Sheet and (iii) as incurred
after the date of the Balance Sheet in the ordinary course of the
Retained Business consistent with prior practice and not
prohibited by this Agreement, the Retained Companies do not have
any liabilities or obligations of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, that, individually or in the aggregate,
have had or would have a Material Adverse Effect on the Retained
Companies, taken as a whole.
(j) Absence of Certain Events and Changes. Except as
disclosed in the Company SEC Documents filed with the SEC and
publicly available prior to the date hereof, including the
Solicitation/Recommendation Statement on Schedule 14D-9
originally filed by the Company on February 12, 1997, and any
amendments filed with respect thereto prior to the date hereof
(the "Filed Company SEC Documents") or as otherwise contemplated
or permitted by this Agreement or the Reorganization Agreements,
and except for any items referred to in Schedule 3.01(j), since
March 31, 1997, the Company and its Subsidiaries have conducted
the Retained Business in the ordinary course consistent with past
practice and there has not been any event, change or development
which, individually or in the aggregate, would have a Material
Adverse Effect on the Retained Companies, taken as a whole, other
than events, changes or developments relating to the economy in
general.
(k) Compliance with Applicable Laws. Except as disclosed in
the Filed Company SEC Documents, each of the Retained Companies
is in compliance with all statutes, laws, regulations, rules,
judgments, orders and decrees of all Governmental Entities
applicable to it that relate to the Retained Business, and
neither the Company nor any of the Retained Companies has
received any notice alleging noncompliance except with
reference to all the foregoing where the failure to be in
compliance would not, individually or in the aggregate, have a
Material Adverse Effect on the Retained Companies, taken as a
whole. This Section 3.01(k) does not relate to employee benefits
matters (for which Section 3.01(p) is applicable), environmental
matters (for which Section 3.01(q) is applicable) or tax matters
(for which Section 3.01(o) is applicable). Each of the Retained
Companies has all Permits that are required in order to permit it
to carry on its business as it is presently conducted, except
where the failure to have such Permits or rights would not,
individually or in the aggregate, have a Material Adverse Effect
on the Retained Companies, taken as a whole. All such Permits are
in full force and effect and the Retained Companies are in
compliance with the terms of such Permits, except where the
failure to be in full force and effect or in compliance would
not, individually or in the aggregate, have a Material Adverse
Effect on the Retained Companies, taken as a whole.
(l) Title to Assets. (i) Except as set forth in Schedule
3.01(l)(i), each of the Retained Companies owns and has good and
valid title to, or a valid leasehold interest in, or otherwise
has sufficient and legally enforceable rights to use, all of the
properties and assets (real, personal or mixed, tangible or
intangible), used by the Retained Business or held for use by the
Retained Business in connection with, the conduct of, or
otherwise material to, the Retained Business (the "Assets"),
including Assets reflected on the Balance Sheet or acquired since
the date thereof, except for Assets disposed of in the ordinary
course of business consistent with past practice and in
accordance with this Agreement and except for such defects in
title which, individually or in the aggregate, would not have a
Material Adverse Effect on the Retained Companies, taken as a
whole, in each case free and clear of any Liens except for
Permitted Liens (as defined in clause (iii) below). This Section
3.01(l) does not relate to intellectual property (for which
Section 3.01(t) is applicable). A list of all owned and leased
real property relating to the Retained Business is set forth on
Schedule 3.01(l) and such owned and leased real property
constitutes all the fee and leasehold interests held by the
Retained Companies, except for any such fee or leasehold
interests acquired or disposed of in the ordinary
course of business consistent with past practice after the date
hereof and in accordance with this Agreement, and constitutes all
the fee and leasehold interests used by the Retained Business or
held for use by the Retained Business in connection with, the
conduct of, or otherwise material to the Retained Business.
(ii) Except as referred to in Schedule 3.01(l)(ii), each
Retained Company has (A) good and insurable title to its owned
real properties and (B) valid and subsisting leasehold interests
in its leased real properties, in each case, free and clear of
any Liens, except for (1) Permitted Liens, (2) easements,
covenants, rights-of-way, other matters of record and other
matters subject to which the leases of the Retained Companies'
real properties are granted and (3) such state of facts as an
accurate survey would show.
(iii) "Permitted Liens" shall mean those Liens (A) securing
debt that is reflected on the Balance Sheet or the notes thereto
or securing debt incurred as part of the Proposed Financings, (B)
referred to in Schedule 3.01(l), (C) for Taxes not yet due or
payable or being contested in good faith, (D) that constitute
mechanics', carriers', workmens' or like liens, liens arising
under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary
course, (E) Liens incurred or deposits made in the ordinary
course of business consistent with past practice in connection
with workers' compensation, unemployment insurance and social
security, retirement and other legislation and in the case of
Liens described in clauses (B), (C), (D) or (E) that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Retained Companies, taken as a whole.
(m) Litigation. Other than actions brought by or on behalf
of Hilton Hotels Corporation ("Hilton") or derivative actions
related to Hilton's proposed acquisition of the Company, and
except as disclosed in the Filed Company SEC Documents or
referred to in Schedule 3.01(m), as of the date hereof there are
no civil, criminal or administrative actions, suits or
proceedings pending or, to the knowledge of the Company,
threatened, against any of the Retained Companies that,
individually or in the aggregate, are likely to have a Material
Adverse Effect on the
Retained Companies, taken as a whole. Except as disclosed in the
Company SEC Documents, there are no outstanding judgments,
orders, decrees, or injunctions of any Governmental Entity
against any of the Retained Companies that, insofar as can
reasonably be foreseen, individually or in the aggregate, in the
future would have a Material Adverse Effect on the Retained
Companies, taken as a whole.
(n) Contracts. (i) Schedule 3.01(n) contains a complete and
correct list, as of the date hereof, of all Contracts that are of
the types listed in clauses (A) through (G) below to which any of
the Retained Companies is a party (the "Material Contracts"):
(A) leases and subleases and other Contracts concerning or
relating to the real property, each with an annual base rental of
more than $150,000 and a remaining term of more than three years;
(B) employment, consulting, severance, and other material
Contracts relating to or for the benefit of the most senior
executive of the Retained Business in each country in which the
Retained Companies operate and any such Contracts requiring
annual base payments in excess of $200,000 relating to or for the
benefit of current, future or former employees, officers,
directors, sales representatives, distributors, dealers, agents,
independent contractors or consultants, and material sales agency
or distributorship agreements or arrangements for the sale of any
of the products or services of any of the Retained Companies;
(C) Contracts relating to the borrowing of money or
obtaining of or extension of credit (other than in the ordinary
course of business), including letters of credit, guarantees and
material security agreements;
(D) material licenses and other material Contracts providing
in whole or in part for the use of, or limiting the use of, any
Intellectual Property;
(E) joint venture, partnership and similar Contracts
involving a sharing of profits or expenses;
(F) Contracts prohibiting or materially restricting the
ability of any Retained Company to conduct its
business, to engage in any business or operate in any
geographical area or to compete with any Person;
(G) Contracts that are material to the business, operations,
results of operations, condition (financial or otherwise), assets
or properties of any of the Retained Companies.
(ii) All Material Contracts are legal, valid, binding, in
full force and effect and enforceable against each party thereto,
except to the extent that any failure to be enforceable,
individually and in the aggregate, would not reasonably be
expected to have or result in a Material Adverse Effect. Except
as set forth in Schedule 3.01(n), there does not exist under any
Material Contract any violation, breach or event of default, or
event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default
thereunder, on the part of any of the Retained Companies or, to
the knowledge of the Company, any other Person, other than such
violations, breaches or events of default as would not,
individually or in the aggregate, have a Material Adverse Effect
on the Retained Companies, taken as a whole. Except as set forth
in Schedule 3.01(n), the enforceability of all Material Contracts
will not be affected in any manner by the execution, delivery or
performance of this Agreement, and no Material Contract contains
any change in control or other terms or conditions that will
become applicable or inapplicable as a result of the consummation
of the transactions contemplated by this Agreement and the other
Reorganization Agreements.
(o) Taxes. (i) Except as set forth on Schedule 3.01(o), (A)
all Tax Returns required to be filed by or on behalf of each of
the Company and the Retained Subsidiaries have been filed except
to the extent that a failure to file, individually or in the
aggregate, would not have a material adverse effect on the
Retained Companies, taken as a whole; (B) all such Tax Returns
filed are complete and accurate in all respects, other than any
incompleteness or any inaccuracy that would not, individually or
in the aggregate, have a Material Adverse Effect on the Retained
Companies taken as a whole, and all Taxes shown to be due on such
Tax Returns have been paid; (C) none of the Company and the
Retained Subsidiaries is currently the beneficiary of any
extension of time
within which to file any Tax Return; (D) no written claim (other
than a claim that has been finally settled) has been made by a
taxing authority that any of the Retained Companies is subject to
an obligation to file Tax Returns or to pay or collect Taxes
imposed by any jurisdiction in which such Retained Company does
not file Tax Returns or pay or collect Taxes; (E) there is no
deficiency with respect to any Taxes which would, individually or
in the aggregate, have a Material Adverse Effect on the Retained
Companies; and (F) all material assessments for Taxes due with
respect to completed and settled examinations or concluded
litigation have been paid. As used in this Agreement, "Taxes"
shall include all Federal, state, local and foreign income,
franchise, property, sales, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, including interest
and penalties, and additions thereto; and "Tax Returns" shall
mean all Federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and
information returns relating to Taxes.
(ii) Except as set forth in Schedule 3.01(o), (A) there are
no liens for Taxes (other than for current Taxes not yet due and
payable) on the assets of the Retained Companies; and (B) each of
the Retained Companies has duly and timely withheld all Taxes
required to be withheld in connection with its business and
assets, and such withheld Taxes have been either duly and timely
paid to the proper governmental authorities or properly set aside
in accounts for such purpose, except to the extent that any
failure to do so would not have a Material Adverse Effect on the
Retained Companies, taken as a whole.
(iii) Except as set forth in Section 3.01(o) of the
disclosure Schedule, (A) none of the Company or the Retained
Subsidiaries is a party to or bound by or has any obligation
under any Tax allocation, sharing, indemnification or similar
agreement or arrangement; and (B) none of the Company or the
Retained Subsidiaries is or has been at any time since 1990 a
member of any group of companies filing a consolidated, combined
or unitary income tax return.
(iv) Except as set forth in Section 3.01(o) of the
Disclosure Schedule, (A) all taxable periods of each of the
Company and the Retained Subsidiaries ending before 1994 are
closed or no longer subject to audit; (B) none
of the Company and the Retained Subsidiaries is currently under
audit by any taxing authority; and (C) no waiver of the statute
of limitations is in effect with respect to any taxable year of
the Company or any of the Retained Subsidiaries.
(p) Employee Benefit Plans. With respect to each employee
benefit plan which is sponsored or maintained by any of the
Retained Companies (each an "Employee Benefit Plan"): (i) if the
Employee Benefit Plan is intended to comply with, or qualify
under, any foreign or domestic tax law or regulation, it has
received approval (to the extent such approval is required under
applicable law) from the appropriate governmental authority or
agency to the effect that such Employee Benefit Plan is so
qualified (excluding any Employee Benefit Plan with respect to
which any applicable remedial amendment period has not yet
expired) and no event has occurred or condition is known to exist
that would reasonably be expected to adversely affect such
tax-qualified status; (ii) except as set forth on Schedule
3.01(p) if the Employee Benefit Plan is a defined benefit plan or
other plan subject to funding requirements, the present value of
the benefit obligations accrued under such Employee Benefit Plan
does not exceed the fair market value of the assets of such
Employee Benefit Plan as of the date hereof, determined on an
accumulated benefit obligation basis by an amount which
individually or in the aggregate would have a Material Adverse
Effect on any of the Retained Companies; (iii) to the extent that
contributions are required to be made to any Employee Benefit
Plan, such contributions have been made in a timely manner; (iv)
to the Company's knowledge, there are no claims (other than
claims for benefits in the normal course), actions or lawsuits
asserted, instituted or threatened with respect to any Employee
Benefit Plan, which, if adversely determined could, individually
or in the aggregate, have a Material Adverse Effect on any of the
Retained Companies; (v) except as otherwise set forth in Schedule
3.01(p), if the Employee Benefit Plan is maintained by the
Retained Companies, there is no material unfunded liability with
respect to retiree or further employee benefits, including but
not limited to, retiree medical and life insurance benefits, and
severance payments (vi) to the Company's knowledge, there are no
claims, actions, or lawsuits asserted, instituted or threatened
by any current employees, former employees or retirees
against the Retained Companies, which, if adversely determined
could, individually or in the aggregate, have a Material Adverse
Effect on any of the Retained Companies; and (vii) each Employee
Benefit Plan has been maintained and administered in compliance
in all material respects with its terms and all applicable laws
of the jurisdiction to which such plan is subject.
Except as disclosed in the Filed Company SEC Documents or as
set forth in Schedule 3.01(p), neither the execution and delivery
of this Investment Agreement or the Distribution Agreements nor
the consummation of the transactions contemplated hereby or
thereby will (i) result in any payment to be made by Purchaser or
the Retained Companies (including without limitation, severance,
termination or other similar payment) becoming due to any
employee under any Employee Benefit Plan or otherwise or (ii)
increase any benefits otherwise payable under any Employee
Benefit Plan.
(q) Environmental Matters. Except as disclosed in the Filed
Company SEC Documents and except for such matters that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Retained Companies, taken as a whole, (i)
the Retained Companies are in compliance with all applicable
Environmental Laws (as defined below), (ii) the Retained
Companies have all Permits required under Environmental Laws for
the operation of the Retained Business as presently conducted
("Environmental Permits") and (iii) to the Company's knowledge,
as of the date hereof none of the Retained Companies has received
any written notices from any Governmental Entity that remain
outstanding and assert that any of the Retained Companies may be
in violation of, or liable under, any Environmental Law.
For purposes of this Agreement, "Environmental Law" means
any Federal, state, local or foreign law, statute, regulation or
decree relating to (x) the protection of the environment or (y)
the use, storage, treatment, generation, transportation,
processing, handling, release or disposal of Hazardous
Substances, in each case as in effect on the date hereof.
"Hazardous Substance" means any waste, substance, material,
pollutant or contaminant presently listed, defined, designated or
classified as hazardous, toxic or radioactive, or otherwise
regulated, under any Environmental Law.
(r) Rights Agreement; Charter and By-laws; Nevada Law. The
Company has taken or will take all action reasonably necessary to
ensure that (i) neither (x) the execution of this Agreement and
the other Reorganization Agreements nor (y) consummation of the
transactions contemplated hereby or thereby will result in the
occurrence of a Distribution Date (as defined in the Rights
Agreement) or enable or require the Rights (as defined in the
Rights Agreement) to be exercised, (ii) neither the Purchaser nor
any of its Affiliates is an Acquiring Person (as defined in the
Rights Agreement), (iii) the transactions contemplated hereby do
not violate the Company Charter or Company By-laws, and (iv)
Sections 78.378 to 78.3793 or any other provision of the Nevada
General Corporate Law (the "NGCL") do not limit the ability of
Purchaser to exercise voting rights with respect to the Shares,
Warrants, shares issuable upon exercise of Warrants and any other
Equity Securities acquired by Purchaser not in violation of this
Agreement and the limitations of Sections 78.411 to 78.444 or any
other provision of the NGCL will not apply as a result of the
transactions contemplated in this Agreement.
(s) Status of Shares. Assuming the Company Stockholder
Approval has been obtained, the Shares being issued at the
Closing will have been duly authorized by all necessary corporate
action on the part of the Company, and such Shares will have been
validly issued and, assuming payment therefor has been made, will
be validly issued, fully paid and nonassessable, and the issuance
of such Shares will not be subject to preemptive rights of any
other Stockholder of the Company. Assuming the Company
Stockholder Approval has been obtained, the Warrant Shares will
have been duly authorized by all necessary corporate action on
the part of the Company, and such shares of Common Stock have
been validly reserved for issuance, and, assuming payment
therefor has been made, will be upon issuance upon exercise of
the Warrants will be validly issued and outstanding, fully paid
and nonassessable.
(t) Intellectual Property. Schedule 3.01(t) sets forth a
list of all Intellectual Property that is owned by any of the
Retained Companies (the "Owned Intellectual Property") and is
material to the Company. The Owned Intellectual Property
constitutes all of the Intellectual Property used or held for use
in
connection with, necessary for the conduct of, or otherwise
material to its business, except for Intellectual Property
subject to the written or oral licenses, agreements or
arrangements set forth in Schedule 3.01(t) pursuant to which (i)
the use of Intellectual Property by any Retained Company is
permitted by any Person or (ii) the use by any Person of
Intellectual Property is permitted by any Retained Company
(together with any licenses, agreements and arrangements that are
not material, the "Intellectual Property Licenses" and, together
with the Owned Intellectual Property, the "Company Intellectual
Property"). The Owned Intellectual Property is owned free from
any Liens (other than Permitted Liens). Except as set forth in
Schedule 3.01(t), all Intellectual Property Licenses are in full
force and effect in accordance with their terms, and are free and
clear of any Liens (other than Permitted Liens). The Company has
delivered to Purchaser complete and correct copies of all
material written Intellectual Property Licenses (including
amendments, supplements, waivers and other modifications). Except
as set forth in Schedule 3.01(t), all royalties, license fees,
charges and other amounts payable by, on behalf of, to or for the
account of any of the Retained Companies in respect of any
Intellectual Property are reflected in the Retained Business
Financial Statements. Except as set forth in Schedule 3.01(t),
immediately after the Closing, the Retained Companies will own or
have the right to use all the Company Intellectual Property, in
each case free from Liens (except for Permitted Liens incurred in
the ordinary course of business) and on the same terms and
conditions as in effect prior to the Closing, except with respect
to the license to use the ITT name and the ITT ▇▇▇▇. Except as
set forth in Schedule 3.01(t), the conduct of the Retained
Business does not infringe or conflict with the rights of any
third party in respect of any Intellectual Property. Except as
set forth in Schedule 3.01(t), to the knowledge of the Company,
none of the Company Intellectual Property is being infringed by
any third party. Except as set forth in Schedule 3.01(t), there
is no claim or demand of any Person pertaining to, or any
proceeding which is pending or, to the knowledge of the Company,
threatened, that challenges the rights of any of the Retained
Companies in respect of any Company Intellectual Property, or
that claims that any default exists under any Intellectual
Property License. Except as set forth in Schedule 3.01(t), none
of the Company
Intellectual Property is subject to any outstanding order,
ruling, decree, judgment or stipulation by or with any court,
tribunal, arbitrator, or other Governmental Entity adverse to
the Company. Except as set forth in Schedule 3.01(t), the Owned
Intellectual Property has been duly registered with, filed in or
issued by, as the case may be, the appropriate filing offices,
domestic or foreign, to the extent necessary or desirable to
ensure usual and customary protection for intellectual property
in the relevant jurisdiction under any applicable law, and the
same remain in full force and effect. The Retained Companies have
taken all necessary actions to ensure usual and customary
protection for intellectual property in the relevant jurisdiction
of the Company Intellectual Property (including maintaining the
secrecy of all confidential Intellectual Property) under any
applicable law.
(u) Guarantees. Except as set forth on Schedule 3.01(u),
none of the obligations or liabilities of the Retained Business
is guaranteed by or subject to a contingent obligation of any
other Person. Except as set forth in Schedule 3.01(u), neither
the Company nor any of its Subsidiaries (other than the Retained
Subsidiaries) has guaranteed or become subject to a contingent
obligation (except as may arise as a matter of law or as
contemplated by this Agreement or the Reorganization Agreements)
in respect of the obligations of any of the Retained Companies.
(v) Brokers or Finders. No agent, broker, investment banker
or other firm or Person, including any of the foregoing that is
an Affiliate of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee
following the Closing Date from the Company in connection with
any of the transactions contemplated by this Agreement.
(w) Disclosure. To the knowledge of the Company, no
representation or warranty by the Company contained in this
Agreement or in any certificate to be furnished by or on behalf
of the Company pursuant hereto, taken as a whole, contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the
circumstances under which they were made, not misleading with
respect to the Retained Business or the
transactions contemplated by this Agreement. The Company does not
know of any fact (other than matters of a general economic or
political nature that do not affect the business of the Retained
Companies uniquely) that could reasonably be expected to have or
result in a Material Adverse Effect on the Retained Companies,
taken as a whole.
SECTION 3.02. Representations and Warranties of Purchaser.
Purchaser represents and warrants as of the date hereof as follows:
(a) Organization. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with all requisite
power and authority to own, lease and operate its properties and
to conduct its business as now being conducted.
(b) Authority. Purchaser has the requisite limited liability
company power and authority to execute, deliver and perform each
Reorganization Agreement to which it is a party and to consummate
the transactions contemplated hereby. All necessary action
required to have been taken by or on behalf of Purchaser by
applicable law, its limited liability company agreement or
otherwise to authorize the approval, execution, delivery and
performance by Purchaser of this Agreement and the consummation
by it of the transactions contemplated hereby have been duly
authorized, and no other proceedings on its part are or will be
necessary to authorize this Agreement or for it to consummate the
transactions so contemplated. This Agreement is a valid and
binding agreement of Purchaser, enforceable against Purchaser in
accordance with the terms hereof, assuming that this Agreement is
a valid and binding agreement of the Company.
(c) Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by
Purchaser of its obligations hereunder will conflict with, result
in a breach of the terms, conditions or provisions of, constitute
a default under, result in the creation of any mortgage, security
interest, encumbrance, lien or charge of any kind upon any of the
properties or assets of Purchaser pursuant to, or require any
consent, approval or other action by or any notice to or filing
with any court or administrative or governmental body pursuant
to, the
organizational documents or agreements of Purchaser or any
agreement, instrument, order, judgment, decree, statute, law,
rule or regulation by which Purchaser is bound, except for
filings after the Closing under Section 13(d) of the Exchange Act
and filings under the HSR Act.
(d) Acquisition for Investment; Sufficiency and Source of
Funds. Purchaser is acquiring the Shares and Warrants being
purchased by it for its own account for the purpose of investment
and not with a view to or for sale in connection with any
distribution thereof, and Purchaser has no present intention or
plan to effect any distribution of shares of Common Stock,
Warrants or Warrant Shares; provided that the disposition of such
Purchaser's property shall at all times be and remain within its
control and subject to the provisions of this Agreement and the
Registration Rights Agreement. Purchaser has delivered to the
Company a complete and correct copy of a commitment letter from
the Fund for $225 million of common equity financing. The Fund
constitutes a "venture capital operating company" within the
meaning of Section 2510.3-101(d) of the regulations promulgated
under ERISA and the transactions contemplated by this Agreement
shall not adversely affect such status.
(e) Ownership of Securities. At the date hereof Purchaser
does not Beneficially Own, directly or, to the knowledge of
Purchaser, indirectly (or have any option or other right to
acquire), any securities of the Company other than the Shares and
Warrants being purchased by it hereunder.
(f) Brokers or Finders. No agent, broker, investment banker
or other firm or Person, including any of the foregoing that is
an Affiliate of Purchaser, is or will be entitled to any broker's
or finder's fee or any other commission or similar fee from
Purchaser in connection with any of the transactions contemplated
by this Agreement.
(g) Future Acquisitions. Purchaser has no present plan or
intention to acquire, directly or indirectly, 50% or more of the
Total Voting Power or 50% or more of the total Fair Market Value
of all shares of outstanding capital stock of the Company.
ARTICLE IV
Corporate Governance
SECTION 4.01. Composition of the Board of Directors. Subject
to this Article IV, the fundamental policies and strategic direction
of the Company shall be determined by its Board of Directors as
provided in this Article IV. The composition of the Board of Directors
and manner of selecting members thereof shall be as follows:
(a) At and after the Closing, the Board of Directors shall
be comprised of 11 Directors consisting of six designees of the
Company (no more than one of whom may be an employee of the Retained
Company and its Subsidiaries) (the "Non-Investor Directors") and five
designees of Purchaser (no more than three of whom may be employees of
Purchaser or CD&R (the "Investor Directors").
(b) Immediately following the Closing on the Closing Date,
the Company shall elect to its Board of Directors the five individuals
notified prior to the Closing by Purchaser to the Company (unless any
such individual is unable or unwilling to serve, in which event the
Company shall elect a substitute individual designated by Purchaser
prior to the Closing), each of whom is designated as an Investor
Director by Purchaser.
(c) Except as otherwise provided herein, at all times from
and after the Closing, the Directors shall be nominated as follows (it
being understood that such nomination shall include any nomination of
any incumbent Director for reelection to the Board of Directors):
(i) Purchaser's designees on the corporate governance
committee of the Board of Directors (the "Corporate Governance
Committee") shall nominate a number of Investor Directors as
follows:
(1) so long as Purchaser's Percentage Interest equals
or exceeds 35%, Purchaser's designees have the
right to nominate 5 directors;
(2) if Purchaser's Percentage Interest is less than
35% but equals or exceeds 25%, then Purchaser's
designees have the right to nominate 4 directors;
(3) if Purchaser's Percentage Interest is less than
25% but equals or exceeds 10%, then Purchaser's
designees have the right to nominate 3 directors;
(4) if Purchaser's Percentage Interest is less than
10% but equals or exceeds 5%, then Purchaser's
designees have the right to nominate 2 directors;
and
(ii) the Company's designees on the Corporate Governance
Committee shall nominate the remaining Directors, each of whom
shall be a "Non-Investor" Director.
(d) The entire Board of Directors (excluding any director
who is an employee of the Company or its Affiliates or of Purchaser or
CD&R) shall approve or disapprove the individuals nominated by the
respective designees on the Corporate Governance Committee.
(e) Purchaser's designee on the Corporate Governance
Committee (or if none remain in office, the remaining Investor
Directors) shall have the right to designate any replacement for an
Investor Director upon the death, resignation, retirement,
disqualification or removal from office of such Director. The
Company's designees on the Corporate Governance Committee shall have
the right to designate any replacement for a Non-Investor Director
upon the death, resignation, retirement, disqualification or removal
from office of such Director. The entire Board of Directors (excluding
any director who is an employee of the Company or its Affiliates or
Purchaser or CD&R) shall approve or disapprove the individuals so
nominated.
(f) Without limiting the generality of Section 4.01(c), in
the event that at any time after the Closing the number of Investor
Directors on the Board of Directors differs from the number that
Purchaser has the right (and wishes) to designate pursuant to this
Section 4.01, (i) if the number of Investor Directors exceeds such
number, Purchaser shall promptly take all appropriate action to cause
to resign that number of Investor Directors as is required to make the
remaining number of such Investor Directors conform to this Section
4.01 or (ii) if the number of Investor Directors otherwise is less
than such number, the Company shall take all necessary action to
create sufficient vacancies on the Board of Directors of the Company
to permit Purchaser to
designate the full number of Investor Directors which it is entitled
(and wishes) to designate pursuant to this 30 Section 4.01 (such
action to include expanding the size of the Board of Directors
(provided that the size of the Board of Directors shall not be other
than 11 members at any time), seeking the resignation or removal of
Directors or, at the request of Purchaser, calling a special meeting
of the stockholders of the Company for the purpose of removing
Directors to create such vacancies to the extent permitted by
applicable law). Upon the creation of any vacancy pursuant to the
preceding sentence Purchaser's designees on the Corporate Governance
Committee shall designate the person to fill such vacancy in
accordance with this Section 4.01 and the Board of Directors shall
elect such person so designated.
(g) Notwithstanding anything herein to the contrary, no
individual who is an officer, director, partner or principal
stockholder of any competitor of the Company or any of its
Subsidiaries shall serve as a Director without the unanimous consent
of the Corporate Governance Committee.
(h) Notwithstanding anything herein to the contrary,
Non-Investor Directors shall at all times constitute a majority of the
members of the Board of Directors.
SECTION 4.02. Solicitation and Voting of Shares. (a) The
Company shall use its best efforts to solicit from the stockholders of
the Company eligible to vote for the election of Directors proxies in
favor of the nominees selected in accordance with Section 4.01.
(b) In any election of Directors or any meeting of the
stockholders of the Company called expressly for the removal of
Directors, so long as the Board of Directors includes (and will
include after any such removal) the number of Investor Directors
contemplated by Section 4.01, Purchaser shall be present for purposes
of establishing a quorum and shall vote all its shares of Voting Stock
(i) in favor of any nominees for Director selected in accordance with
Section 4.01, (ii) in favor of removal of any Director as contemplated
by Section 4.01(f) and (iii) otherwise against the removal of any
Director designated in accordance with Section 4.01. In any other
matter submitted to a vote of the stockholders of the Company,
Purchaser may vote any or all of its shares in its sole discretion.
(c) Purchaser agrees that it will take all action as a
stockholder of the Company or as is otherwise reasonably within its
control, as necessary to effect the provisions of this Agreement.
SECTION 4.03. Supermajority Voting Provisions. Neither the
Company nor the Board of Directors shall cause or permit to happen any
of the following events without the affirmative vote of two thirds of
the Board of Directors:
(a) any issuance of Equity Securities other than issuances
pursuant to employee stock option or incentive compensation plans
of Equity Securities in an amount not to exceed 5% of the Common
Stock outstanding immediately following the Closing on a fully
diluted basis (assuming exercise of the Warrant and the Rollover
Options);
(b) (i) any merger, consolidation or other business
combination involving the Company or any decision whether to
approve a tender offer involving the Company's Equity Securities,
(ii) any sale, lease, transfer or other disposition in one
transaction or a series of transactions of all or substantially
all the assets of the Company, (iii) any major recapitalization
or similar transaction or series of transactions involving the
Company or (iv) any dissolution or complete or partial
liquidation of the Company; provided, however, that the foregoing
shall not prevent the Company from undertaking any transaction in
the ordinary course of business; or
(c) any amendment or modification of the Company Charter or
the Company By-laws that is inconsistent with the provisions of
this Agreement and the rights afforded to Purchaser hereunder.
SECTION 4.04. Committees. The Board of Directors shall have
the following committees: an Executive Committee, a Corporate
Governance Committee, an Audit Committee and a Compensation Committee.
Subject to any law or stock exchange rule prohibiting committee
membership by Affiliates of the Company, (i) each of the Executive
Committee, the Audit Committee and the Compensation Committee shall
have four members, of whom, in each case, two members shall be
Investor Directors and two shall be Non-Investor Directors and (ii)
the Chairperson of each of the Executive Committee and the
Compensation Committee shall be an Investor Director and the
Chairperson of the Audit
Committee shall be a Non-Investor Director. If the members of any of
the Executive Committee, the Audit Committee or the Compensation
Committee become deadlocked over any action or decision, such action
or decision shall be decided by the full Board of Directors. The
Corporate Governance Committee shall have five members, of whom three
shall be Non-Investor Directors and two shall be Investor Directors,
and the Chairperson shall be a Non-Investor Director.
SECTION 4.05. Enforcement of this Agreement. A majority of
the Non-Investor Directors shall have full and complete authority on
behalf of the Company to enforce the terms of this Agreement.
SECTION 4.06. Certificate of Incorporation and By-laws. In
connection with the Company Meeting, the Company shall propose that
the stockholders of the Company approve such amendments to the Company
Charter as are set forth in Exhibit 3 (the "Proposed Charter
Amendments"), and the Board of Directors of the Company shall
recommend that the stockholders of the Company approve the Proposed
Charter Amendments. The Company and Purchaser shall take or cause to
be taken all lawful action necessary to ensure at all times as of and
following the Closing Date that the Company Charter and Company
By-laws are not inconsistent with the provisions of this Agreement or
the transactions contemplated hereby.
SECTION 4.07. Termination of Article IV. This Article IV
shall terminate and be of no further force or effect on the earlier to
occur of (a) the fifth anniversary of the Closing and (b) the date on
which the percentage of the Total Voting Power represented by the
aggregate voting power of all Voting Securities then owned by
Purchaser (other than any Voting Securities acquired in violation of
this Agreement) is greater than 50%.
ARTICLE V
Equity Purchases from the Company
SECTION 5.01. Subscription Rights. So long as Purchaser has
the right to designate any Investor Directors pursuant to Section
4.01, if the Board of Directors shall authorize the issuance of New
Securities for cash (other than any New Securities issued (i) to
officers, employees or directors of the Company or any of its
Subsidiaries pursuant to any employee stock offering, plan or
arrangement
currently in effect or approved by a majority of the Investor
Directors, (ii) in connection with any acquisition transaction, (iii)
in any public offering registered under the Securities Act or in any
financing transaction in which sales or resales are effected through
Rule 144A or Regulation S under the Securities Act or any successor or
comparable provisions thereto and (iv) to Purchaser or its Affiliates
(other than the Company and its Subsidiaries)), then, prior to each
such issuance of New Securities, the Company shall offer to Purchaser
a Pro Rata Share of such New Securities. Any offer of New Securities
made to Purchaser under this Section 5.01 shall be made by notice in
writing (the "Subscription Notice") at least 10 Business Days prior to
the date on which the meeting of the Board of Directors is held to
authorize the issuance of such New Securities. The Subscription Notice
shall set forth (i) the number of New Securities proposed to be issued
to Persons other than Purchaser and the terms of such New Securities,
(ii) the consideration (or manner of determining the consideration),
if any, for which such New Securities are proposed to be issued and
the terms of payment, (iii) the number of New Securities offered to
Purchaser in compliance with the provisions of this Section 5.01 and
(iv) the proposed date of issuance of such New Securities. Not later
than 20 Business Days after its receipt of a Subscription Notice,
Purchaser shall notify the Company in writing whether it elects to
purchase all or any portion of the New Securities offered to Purchaser
pursuant to the Subscription Notice. If Purchaser shall elect to
purchase any such New Securities, the New Securities which it shall
have elected to purchase shall be issued and sold to Purchaser by the
Company at the same time and on the same terms and conditions as the
New Securities are issued and sold to third parties. If, for any
reason, the issuance of New Securities to third parties is not
consummated, Purchaser's right to its Pro Rata Share of such issuance
shall lapse, subject to Purchaser's ongoing subscription right with
respect to issuances of New Securities at later dates or times.
SECTION 5.02. Issuance and Delivery of New Securities and
Voting Stock. The Company represents and covenants to Purchaser that
(i) upon issuance, all the shares of New Securities sold to Purchaser
pursuant to this Article V shall be duly authorized, validly issued,
fully paid and nonassessable and will be approved (if outstanding
securities of the Company of the same type are at the time already
approved) for listing on the New York Stock Exchange or for quotation
or listing on the principal trading market
for the securities of the Company at the time of issuance, (ii) upon
delivery of such shares, they shall be free and clear of all claims,
Liens, encumbrances, security interests and charges of any nature and
shall not be subject to any preemptive right of any stockholder of the
Company and (iii) in connection with any such issuance, the Company
shall take such actions as are specified in Section 3.01(r) with
respect to such shares. If at the time of issuance of any shares of
Common Stock pursuant to this Article V, the Company shall not have
redeemed the Rights, then each share of Common Stock issued pursuant
hereto shall have attached to it Rights or new rights with terms
substantially the same as, and at least as favorable to Purchaser as,
are provided under the Rights. Each share issued or delivered by the
Company hereunder shall bear the legend set forth in Section 13.11.
SECTION 5.03. Limitation on Repurchase of Shares. During the
Relevant Period the Company shall not purchase any outstanding Common
Stock. During the three-year period beginning on the day after the
Relevant Period, the Company shall not purchase any outstanding Common
Stock unless the Company delivers to the Tax Administrator an opinion
of nationally recognized tax counsel, which opinion is reasonably
satisfactory in form and substance to the Tax Administrator, to the
effect that such purchase will not cause the ESI Distribution and/or
the Newco Distribution to result in the recognition of gain to the
Company, ESI or Newco by virtue of the ESI Distribution and/or Newco
Distribution failing to qualify under Section 355 of the Code by
reason of Section 355(e) (as ultimately enacted) or otherwise.
ARTICLE VI
Limitations on Purchases of Additional Equity Securities
SECTION 6.01. Purchases of Equity Securities. (a) Except as
expressly permitted by Section 6.01(c) or 6.01(d), during the
five-year period beginning on the date of this Agreement, none of the
Purchaser Related Parties (other than the Company) shall (i) acquire
any Securities (including by exercise of the Warrants) or otherwise
increase, or take any action that would reasonably be expected to
cause, or shall omit to take any action reasonably available to it, if
such omission would reasonably be expected to cause, Purchaser's
Percentage Interest to be increased or (ii) solicit the acquisition of
Securities, warrants, options or conversion rights with respect to
Securities, provided that the provision by the Fund to its limited
partners of customary reports and information, and customary
communications with such limited partners on behalf of the Fund, with
respect to the Fund's investment in the Company, that in either case
do not recommend any such acquisition, shall not be treated as a
solicitation by Purchaser or its Affiliates within the meaning of this
clause (ii), if any such action, omission or solicitation would
reasonably be expected to result in the ESI Distribution and/or Newco
Distribution resulting in the recognition of gain to any of the
Company, ESI and Newco by virtue of the ESI Distribution and/or Newco
Distribution failing to qualify under Section 355 of the Code by
reason of Section 355(e) (as ultimately enacted) or otherwise.
(b) Except as expressly permitted by Section 6.01(c) or
6.01(d), during the five-year period beginning on the date of this
Agreement, none of the Purchaser Related Parties shall exercise any
warrants (including the Warrants), options or conversion rights with
respect to Securities to the extent that such exercise might result in
the ESI Distribution and/or Newco Distribution resulting in the
recognition of gain to any of the Company, ESI and Newco by virtue of
the ESI Distribution and/or Newco Distribution failing to qualify
under Section 355 of the Code by reason of Section 355(e) (as
ultimately enacted) or otherwise.
(c) From and after the second anniversary of the later of
the Newco Distribution Time and the ESI Distribution Time, Purchaser
may, directly or indirectly, purchase or otherwise acquire Equity
Securities or options
to acquire (through purchase, exchange, conversion or otherwise) any
Equity Securities pursuant to a Buyout Transaction, provided that a
majority of the Non-Investor Directors shall have approved such
transaction; it being understood that Purchaser has no present
intention to purchase or acquire any additional Equity Securities as
permitted under this Section 6.01(b) and provided further, however
that prior to any such Buyout Transaction, Purchaser delivers to the
Company and the Tax Administrator an opinion of nationally recognized
tax counsel, which opinion is reasonably satisfactory in form and
substance to both the Company and the Tax Administrator, to the effect
that such Buyout Transaction will not cause the ESI Distribution
and/or Newco Distribution to result in the recognition of gain to the
Company, ESI or Newco by virtue of the ESI Distribution and/or Newco
Distribution failing to qualify under Section 355 of the Code by
reason of Section 355(e) (as ultimately enacted) or otherwise.
(d) Nothing herein shall prevent Purchaser from purchasing
the Securities pursuant to the terms of this Agreement (including
through exercise of the Warrant pursuant to its terms), and none of
the Purchaser Related Parties shall be treated as having breached any
covenant in this Agreement solely as a result of such purchase (or
exercise), except to the extent that (i) such purchase (or exercise)
would result in the breach of a covenant set forth in this Agreement
and (ii) such breach would result on account of a change in law (or
issuance of administrative guidance) occurring after the date hereof,
assuming for this purpose that Section 355(e) of the Code in its
proposed form as of the date hereof (H.R. 2014, as approved by the
Senate on June 27, 1997 and by the House of Representatives on June
26, 1997) is current law.
(e) This Article VI shall terminate and be of no further
force or effect on the earlier to occur of (i) the fifth anniversary
of the Closing and (ii) the date on which the percentage of the Total
Voting Power represented by the aggregate voting power of all Voting
Securities then owned by Purchaser (other than any Voting Securities
acquired in violation of this Agreement) is greater than 50%.
SECTION 6.02. Additional Limitations. Other than in
connection with a Buyout Transaction (provided, however, that in the
case of a Buyout Transaction initiated by Purchaser, such Buyout
Transaction is permitted under Section 6.01(b)) or as specifically
approved by a majority
of the Non-Investor Directors, Purchaser shall not, and shall not
permit its Affiliates to:
(i) contrary to the Board of Directors, make, or in any way
participate, directly or indirectly, in any "solicitation" of
"proxies" to vote (as such terms are used in the proxy rules of
the SEC) or seek to advise, encourage or influence any person or
entity with respect to the voting of any shares of capital stock
of the Company, initiate, propose or otherwise solicit
stockholders of the Company for the approval of one or more
stockholder proposals or induce or attempt to induce any other
individual, firm, corporation, partnership or other entity to
initiate any stockholder proposal;
(ii) deposit any Voting Securities into a voting trust or
subject any Voting Securities to any arrangement or agreement
with respect to the voting of such securities or form, join a
partnership, limited partnership, syndicate or other group, or
otherwise act in concert with any other Person, for the purpose
of acquiring, holding, voting or disposing of Voting Securities,
or otherwise become a "person" within the meaning of Section
13(d)(3) of the Exchange Act;
(iii) seek to control the Board of Directors of the Company;
provided, however, that actions taken by representatives of such
Purchaser solely by exercise of such Purchaser's right to vote
Voting Securities held by such Purchaser in accordance with the
provisions of this Agreement shall not violate this provision; or
(iv) make a public request to the Company (or its directors,
officers, stockholders, employees or agents) to amend or waive
any provisions of this Agreement including, without limitation,
any public request to permit Purchaser or any other Person to
take any action in respect of the matters referred to in this
Section 6.02.
ARTICLE VII
Transfer of Common Stock
SECTION 7.01. Transfer of Common Stock. (a) Other than as
specifically approved by a majority of the Non-Investor Directors
prior to the fifth anniversary of
the Closing, Purchaser will not, directly or indirectly, sell,
transfer or otherwise dispose of any shares of Common Stock except (i)
pursuant to a registered underwritten public offering intended to
achieve a broad distribution in accordance with the Registration
Rights Agreement, (ii) in accordance with the volume and
manner-of-sale limitations of Rule 144 promulgated under the
Securities Act (regardless of whether such limitations are
applicable), (iii) in a transaction exempt from the registration
requirements of the Securities Act to any Person or group (within the
meaning of Section 13(d)(3) of the Exchange Act) of Persons, if, prior
to and after giving effect to such sale, such Person or group of
Persons (A) does not or would not to Purchaser's knowledge after due
inquiry, Beneficially Own (provided that for purposes of this Section
7.01(a) a Person shall be deemed to Beneficially Own all shares that
such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) 3% or more
of the then outstanding shares of Common Stock or (B) is an investment
company registered under the Investment Company Act of 1940, as
amended, or (iv) in connection with a Buyout Transaction. Purported
transfers of shares of Common Stock that are not in compliance with
this Article VII shall be of no force or effect.
(b) This Article VII shall terminate and be of no further
force or effect on the earlier to occur of (i) the fifth anniversary
of the Closing and (ii) the date on which the percentage of the Total
Voting Power represented by the aggregate voting power of all Voting
Securities then owned by Purchaser (other than any Voting Securities
acquired in violation of this Agreement) is greater than 50%.
ARTICLE VIII
Covenants and Additional Agreements
SECTION 8.01. Covenants of the Company. During the period
from the date of this Agreement and continuing until the Closing, the
Company agrees as to itself and the Retained Subsidiaries that, except
as set forth in Schedule 8.01, or to the extent that Purchaser
otherwise consents in writing:
(a) Ordinary Course. The Retained Business will be conducted
in the ordinary course in substantially the same manner as
presently conducted and the Company will use commercially
reasonable efforts to keep
available the services of the current officers and key employees
engaged primarily in the Retained Business and to preserve the
relationships with key customers, suppliers and others having
business dealings with the Retained Business, except as
contemplated or permitted by the Distribution Agreements or as
set forth in Schedule 8.01.
(b) No Acquisitions. The Company will not, nor will it
permit any of the Retained Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire
or agree to acquire any assets (other than inventory) in any such
case, that would be material to the Retained Business.
(c) No Dispositions. The Company will not, nor will it
permit any of the Retained Subsidiaries to, sell, lease, license,
encumber or otherwise dispose of, or agree to sell, lease,
license, encumber or otherwise dispose of, any of the Assets of
the Retained Business other than in the ordinary course of
business or pursuant to existing contractual obligations for the
sale or other disposition of obsolete equipment.
(d) Other Transactions. The Company will not, nor will it
permit any of the Retained Subsidiaries to, do any of the
following:
(i) Amend its Certificate of Incorporation Articles of
Association, By-laws or other organizational documents;
(ii) declare or pay any non-cash dividend or make any
non-cash distribution with respect to the Assets;
(iii) redeem or otherwise acquire any shares of its
capital stock or issue any capital stock or any option,
warrant or right relating thereto;
(iv) incur any liabilities, obligations or indebtedness
for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than in the ordinary
course of business consistent with past practice;
(v) permit, allow or suffer any of the Directories
Assets to be subject to any Lien other than Permitted Liens;
(vi) cancel any material indebtedness (individually or
in the aggregate) relating to the Retained Business or waive
any claims or rights of substantial value relating to the
Retained Business;
(vii) pay, loan or advance any amount to, or sell
transfer or lease any of its assets relating to the Retained
Business, or enter into any agreement or arrangement
relating to the Retained Business with Newco or ESI or any
of their respective Affiliates other than intercompany
transactions in the ordinary course of business consistent
with past practice of the Company and its Affiliates;
(viii) make any change in any method of accounting or
accounting practice or policy, except as may be required by
GAAP;
(ix) modify, amend, terminate or permit the lapse of
any material lease of real property used in connection with
the Retained Business (except modifications or amendments
associated with renewals of leases in the ordinary course of
business consistent with past practice of the Retained
Companies with respect to which Purchaser shall have the
right to participate and to approve);
(x) enter into any Contract concerning telephone
directories publishing, Contract for subscriber data or
other material Contract with a telephone company;
(xi) enter into any agreement or take any action in
violation of the terms of this Agreement or any of the
Reorganization Agreements;
(xii) settle any material tax audit, make or change any
material tax election with respect to any of the Retained
Subsidiaries (other than in connection with the
Pre-Distribution Restructuring) without the consent of
Purchaser
(which consent shall not unreasonably withheld or delayed);
or
(xiii) agree, whether in writing or otherwise, to do
any of the foregoing.
(e) Employee Benefits. Except as set forth in Schedule
8.01(e) or except in the ordinary course of business and as
consistent with past practice (which shall include normal
periodic performance reviews and related benefit increases) or
pursuant to the existing terms of any collective bargaining
agreement, the Company will not, nor will it permit any of the
Retained Subsidiaries to (i) increase in any manner the
compensation of any of the officers or other employees of the
Retained Companies; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by
any existing plan, agreement or arrangement to any such officer
or employee, whether past or present; (iii) enter into, or
negotiate, any collective bargaining agreement with respect to
employees of the Retained Companies except as required by law, in
which case the Company or such Retained Subsidiary shall first
notify Purchaser; or (iv) commit itself to any additional
pension, profit-sharing, bonus, incentive, deferred compensation,
stock purchase, stock option, equity purchase (or other equity
based plan), stock appreciation right, group insurance, severance
pay, retirement or other employee benefit plan, policy, program,
understanding, agreement or arrangement, or to any employment
agreement or consulting agreement (arising out of prior
employment), regardless of the applicable funding arrangements,
with or for the benefit of any officer or employee of the
Retained Companies, or amend any of such plan or any of such
agreements in existence on the date hereof in any manner which
would have a Material Adverse Effect on any of the Retained
Companies, it being understood that the Retained Companies may
establish new employee benefit plans as necessary to replace any
plans assumed by Newco pursuant to the Newco Distribution.
Purchaser agrees that it shall not seek, nor be entitled to
receive, relief from the Company or Newco for any breach of the
covenants set forth in Section 8.01(d) after the Closing Date
other than any breach of the covenants set forth in Sections
8.01(d)(ii), (iv),
(vii), (x), (xi) and, with respect to the foregoing, (xiii).
SECTION 8.02. Directories Transaction Proposal. (a) Subject
to Section 8.02(d), the Company shall not, nor shall it permit any of
its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries
to, (i) solicit or initiate, or encourage the submission of, any
Directories Transaction Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish
to any Person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Directories
Transaction Proposal; provided, however, that prior to the Company
Meeting, in response to an unsolicited written bona fide Directories
Transaction Proposal that in the good faith opinion of the Board of
Directors of the Company could reasonably be expected to result in a
Superior Directories Proposal (as defined below), the Company may,
subject to compliance with Section 8.02(c), (A) furnish information
with respect to the Company to such Person making such proposal
pursuant to a customary confidentiality agreement with such Person and
(B) participate in negotiations regarding such Directories Transaction
Proposal. For purposes of this Agreement, "Directories Transaction
Proposal" means any inquiry, proposal or offer conditional upon the
occurrence of the Distributions (each, a "proposal") from any person
relating to any purchase or other acquisition from the Company of a
substantial amount of assets of the Retained Companies or purchase or
other acquisition of any equity interest in the Retained Companies, or
any tender offer or exchange offer, that if consummated would result
in any person beneficially owning 5% or more of the Total Voting Power
following the Distributions other than the transactions contemplated
by this Agreement, provided that an Alternative Company Proposal shall
not constitute a Directories Transaction Proposal. Immediately after
the execution and delivery of this Agreement, the Company will, and
will cause its Subsidiaries and affiliates, and their respective
officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, cease and terminate any existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any possible
Directories Transaction Proposal and shall notify each party that it,
or any officer, director, investment advisor, financial advisor,
attorney or other representative retained by it, has had discussions
with during the 30 days prior to the date of this Agreement that the
Board of Directors of the Company no longer seeks the making of any
Directories Transaction Proposal. The Company represents to Purchaser
that as of the date hereof the Company is not currently engaged in
discussions with any parties regarding an Alternative Company
Proposal.
(b) Except as set forth in this Section 8.02(b) or as
permitted by Section 8.02(d), neither the Board of Directors of the
Company nor any committee thereof shall (A) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Purchaser, the
approval or recommendation by such Board of Directors or any such
committee of this Agreement or the transactions contemplated hereby,
(B) approve or recommend, or propose to approve or recommend, any
Directories Transaction Proposal (C) cause or permit the Company or
any of its Subsidiaries to enter into any agreement with respect to
any Directories Transaction Proposal or (D) terminate this Agreement
in response to a Directories Transaction Proposal. Notwithstanding the
foregoing, if prior to the Company Meeting the Company has received a
Directories Transaction Proposal that the Board considers in good
faith is a Superior Directories Proposal, then the Board of Directors
of the Company may (subject to the terms of this sentence and
compliance with the following sentence) (i) withdraw or modify its
recommendation of this Agreement, or the transactions contemplated
hereby, (ii) approve or recommend such Superior Directories Proposal,
(iii) cause the Company to enter into an agreement with respect to a
Superior Directories Proposal and (iv) terminate this Agreement, in
each case (as contemplated by Section 8.02(c)) no earlier than 5
Business Days following Purchaser's receipt of a written notice from
the Company advising Purchaser that the Board of Directors of the
Company has received a Superior Directories Proposal, specifying the
material terms and conditions of such Superior Directories Proposal
and identifying the person making such Superior Directories Proposal;
provided, however, that neither the Company nor its Board of Directors
shall take any of the actions specified in such clauses (i), (ii) or
(iii) unless the Company shall have furnished Purchaser with written
notice (a "Section 8.02(b) Notice") on a date prior to the date any
such actions are proposed to be taken specifying such actions to be
taken. In addition, if the Company or the Board of Directors of the
Company
proposes to take any of the actions permitted by the preceding
sentence with respect to any Directories Transaction Proposal, then
the Company shall, prior to the taking of any such action, pay, or
cause to be paid, to Purchaser's Expenses and the Termination Fee
(each as defined in Section 12.09). The term "Superior Directories
Proposal" shall mean any bona fide written Directories Transaction
Proposal that has the following characteristics: (1) it is a proposal
conditional upon the occurrence of the Distributions to acquire,
directly or indirectly, following the Distributions for consideration
consisting of cash and/or readily marketable securities, (x) shares of
Common Stock representing at least 20% of the Total Voting Power
following the Distributions, or (y) a substantial amount of the assets
of the Retained Subsidiaries and (2) the terms of such proposal in the
good faith judgment of the Board of Directors of the Company provide
consideration to the Company or the Company's stockholders that is
superior to the consideration provided pursuant to this Agreement
(after taking into account any modifications to this Agreement
proposed by Purchaser in writing).
(c) The Company shall immediately advise Purchaser orally
and in writing of (i) any request for information which may relate to
a Directories Transaction Proposal, (ii) any Directories Transaction
Proposal, (iii) any inquiry with respect to or that could lead to any
Directories Transaction Proposal or (iv) any action taken in
accordance with Section 8.02(a)(A) or (B), and in each case the
material terms and conditions of such request, Directories Transaction
Proposal, inquiry or action and the identity of the Person making any
such request, alternative transaction proposal or inquiry or with
respect to which such action is taken. The Company will keep Purchaser
fully and timely informed of the status and details (including
amendments or proposed amendments) of any such request, Directories
Transaction Proposal, inquiry or action and any restrictions relating
thereto. Notwithstanding the foregoing, if after receiving a Superior
Directories Proposal, the Board of Directors of the Company determines
in good faith that an auction of all or any portion of the assets of
or equity interest in the Retained Business would be in the best
interest of the stockholders of the Company, the Board of Directors of
the Company may, having established and promulgated reasonable
procedures to govern the conduct thereof, conduct such an auction and
the foregoing information delivery obligations and the obligation to
deliver a Section 8.02(b) Notice shall not apply.
(d) Notwithstanding any provision of this Agreement to the
contrary, if the Board of Directors of the Company determines in good
faith, based on consultation with outside legal counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company under applicable law, the Company or any of its
representatives may, at any time, solicit, initiate or encourage
proposals with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of, all or
substantially all of the assets or more than 50% of the Voting
Securities or any other transaction or series of transactions the
consummation of which would preclude consummation of either or both of
the Distributions (an "Alternative Company Proposal"), and the Company
may, at any time, enter into any written agreement relating to an
Alternative Company Proposal, provided that for the avoidance of
doubt, a Directories Transaction Proposal shall not constitute
"substantially all" of the assets of the Company. Notwithstanding any
provision of this Agreement to the contrary, in the event that the
Board of Directors of the Company determines in good faith that it is
in the best interest of the Company to pursue an Alternative Company
Proposal, the Board of Directors of the Company may (x) withdraw or
modify its approval or recommendation of this Agreement in favor of an
Alternative Company Proposal, (y) approve or recommend an Alternative
Company Proposal or (z) terminate this Agreement in order to pursue an
Alternative Company Proposal.
(e) Nothing contained in this Section 8.02 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the stockholders of the Company if, in
the good faith opinion of the Board of Directors of the Company, after
consultation with outside legal counsel, failure to so disclose would
be inconsistent with its duties under applicable law.
SECTION 8.03. Modification of Reorganization Documents;
Abandonment of Distributions. Notwithstanding anything to the contrary
in this Agreement, the Company may in its sole discretion modify each
of the Reorganization Agreements relating to the Distributions and, if
the Board of Directors of the Company determines in good faith that it
is in the best interest of the Company to do so, abandon the
Distributions.
SECTION 8.04. Reorganization Documents and Schedules. The
Company shall use reasonable best efforts to cause (i) each of the
Reorganization Agreements to be entered into by or among the Company,
Newco or ESI, as the case may be, in connection with the Distributions
and (ii) each of the Schedules called for in this Agreement (and
during such period may unilaterally amend this Agreement to add
additional Schedules) to be delivered to Purchaser and its counsel by
7:00 p.m., New York City time, prior to August 22, 1997 (the "Delivery
Cut-off Time"). Purchaser shall review such Reorganization Documents
and Schedules in good faith. Prior to the applicable Review Cut-off
Time (as defined) the Company shall make available to Purchaser and
its counsel at their request all documentation related to any item set
forth on any Schedule. Purchaser shall complete its review of the
Reorganization Documents and the Schedules and notify the Company that
such review is complete by 7:00 p.m., New York City time, on September
12, 1997 (the "Review Cut-off Time); provided, however, that if any
Reorganization Document or Schedule is delivered after the Delivery
Cut-off Time, the Review Cut-off Time for all Reorganization Documents
and Schedules shall be extended by the number of days elapsed (which,
in any case, shall not be less than one) between the date of the
Delivery Cut-off Time and the date of receipt by Purchaser and its
counsel of such Reorganization Document or Schedule; and provided
further, however, that if Purchaser objects to (i) any term of the
Reorganization Agreements as being inconsistent with Purchaser's good
faith understanding of the transactions contemplated by this Agreement
or (ii) any change or addition to the Schedules made after the date
hereof, Purchaser may terminate this Agreement upon written notice to
the Company without further liability on the part of Purchaser or the
Company other than pursuant to Sections 10.02 and 13.09.
SECTION 8.05. Company Stockholder Approval; Proxy Statement.
(a) The Company shall call a meeting of its stockholders (the "Company
Meeting") for the purpose, among others, of voting upon the issuance
of the Shares and the Warrants (and, in each case, the associated
Rights) to Purchaser (the "Issuance") and the Charter Amendment
Proposals (collectively, the "Company Meeting Proposals").
(b) The Company will prepare and file with the SEC the Proxy
Statement with respect to the Company Meeting and will use its
reasonable best efforts to respond to any comments of the SEC or its
staff and to cause the Proxy Statement to be cleared by the SEC. The
Company will notify
Purchaser of the receipt of any comments from the SEC or its staff and
of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and will supply
Purchaser and its counsel with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the
SEC or its staff, on the other hand, with respect to the Proxy
Statement. The Company shall give Purchaser and its counsel the
opportunity to review the Proxy Statement prior to its being filed
with the SEC and shall give Purchaser and its counsel the opportunity
to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to
comments prior to their being filed with, or sent to, the SEC. Each of
the Company and Purchaser agrees to use its reasonable best efforts,
after consultation with the other party hereto, to respond promptly to
all such comments of and requests by the SEC. After the Proxy
Statement has been cleared by the SEC, the Company shall mail the
Proxy Statement to the stockholders of the Company. If at any time
prior to the Company Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Proxy Statement, the
Company will prepare and mail to its stockholders such an amendment or
supplement.
(c) Subject to the fiduciary duties of the Board of
Directors as advised by counsel, the Company shall use its best
efforts to obtain the necessary approvals by its stockholders of the
Company Meeting Proposals.
SECTION 8.06. Debt Repayment. Prior to the Distributions,
the Company shall repay all of its currently outstanding indebtedness
on a consolidated basis or enter into arrangements satisfactory to
Purchaser as will result in the economic equivalent to the Company of
having no outstanding indebtedness on the Closing Date other than as
referred to in Schedule 9.03(l).
SECTION 8.07. Retained Companies Financing. In connection
with the financings proposed to be undertaken by the Company and the
Retained Company as part of the transactions contemplated by the
Reorganization Agreements (the "Proposed Financings"), the Company
shall (i) permit Purchaser and its counsel to participate in any
discussions or negotiations between the Company and any of its
representatives, on the one hand, and its prospective lenders and
their counsel, on the other, and to comment on draft commitment
letters (the "Commitment Letters") and loan and other documentation in
respect of any such Proposed
Financings and (ii) provide Purchaser and its counsel copies of all
correspondence between the Company and its lenders relating thereto.
If, prior to the execution of any Commitment Letters in final form and
based on its review of such Commitment Letters, Purchaser determines
in the good faith exercise of its reasonable judgment not to proceed
with the transactions contemplated by this Agreement, Purchaser may
terminate this Agreement upon written notice to the Company.
SECTION 8.08. Employee Benefits. The Company, through its
Board of Directors, shall take any actions that are necessary or
desirable with respect to the 1995 ITT Corporation Incentive Stock
Plan, to give effect to the transactions contemplated under this
Agreement or the Reorganization Agreements to maintain the economic
value of the optionees benefits under such plan.
SECTION 8.09. Access and Information. So long as this
Agreement remains in effect, the Company will (and will cause each of
the Retained Companies, and each of their respective accountants,
counsel, consultants, officers, directors, employees, agents and
representatives ("Representatives") of or to any of the Retained
Companies, to) give Purchaser and its Representatives, full access
during reasonable business hours to all of their respective
properties, assets, books, contracts, commitments, reports and records
relating to the Retained Companies, and furnish to them all such
documents, records and information with respect to the properties,
assets and business of the Retained Companies and copies of any work
papers relating thereto as Purchaser shall from time to time
reasonably request. The Company will keep Purchaser generally informed
as to the affairs of the Retained Business.
SECTION 8.10. Further Actions. (a) Subject to Section 8.03,
the Company shall, and shall cause each of the Retained Companies to,
use all reasonable efforts to take or cause to be taken all actions,
and to do or cause to be done all other things, necessary, proper or
advisable in order for each of the Retained Companies to fulfill and
perform its obligations in respect of this Agreement and the
Reorganization Agreements to which it is a party, or otherwise to
consummate and make effective the transactions contemplated hereby and
thereby.
(b) The Company shall (and shall cause each of the Retained
Companies to), as promptly as practicable, (i) make, or cause to be
made, all filings and submissions
(including but not limited to under the HSR Act and foreign antitrust
filings) required under any law applicable to any of the Retained
Companies, and give such reasonable undertakings as may be required in
connection therewith, and (ii) use all reasonable efforts to obtain or
make, or cause to be obtained or made, all Permits necessary to be
obtained or made by any of the Retained Companies, in each case in
connection with this Agreement or the Reorganization Agreements, the
sale and transfer of the Shares pursuant hereto, or the consummation
of the other transactions contemplated hereby or thereby.
(c) The Company shall, and shall cause each of the Retained
Companies to, coordinate and cooperate with Purchaser in exchanging
such information and supplying such reasonable assistance as may be
reasonably requested by Purchaser in connection with the filings and
other actions contemplated by this Agreement.
(d) At all times prior to the Closing Date, the Company
shall promptly notify Purchaser in writing of any fact, condition,
event or occurrence that could reasonably be expected to result in the
failure of any of the conditions contained in Article IX to be
satisfied, promptly upon becoming aware of the same.
SECTION 8.11. Further Assurances. Following the Closing
Date, the Company shall, and shall cause each of the Retained
Companies to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably be requested by
Purchaser, to confirm and assure the rights and obligations provided
for in this Agreement and the Reorganization Agreements and render
effective the consummation of the transactions contemplated hereby and
thereby, or otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE IX
Conditions Precedent
SECTION 9.01. Conditions to Each Party's Obligation. The
obligation of the Company and Purchaser to consummate the transactions
contemplated to occur at the
Closing shall be subject to the satisfaction prior to the Closing of
each of the following conditions, each of which may be waived only if
it is legally permissible to do so:
(a) HSR and Other Approvals. Any applicable waiting period
under the HSR Act relating to the transactions contemplated
hereby shall have expired or been terminated, and all other
material authorizations, consents, orders or approvals of, or
regulations, declarations or filings with, or expirations of
applicable waiting periods imposed by, any Governmental Entity
(including, without limitation, any foreign antitrust filing)
necessary for the consummation of the transactions contemplated
hereby, shall have been obtained or filed or shall have occurred.
(b) No Litigation, Injunctions, or Restraints. No statute,
rule, regulation, executive order, decree, temporary restraining
order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any
Governmental Entity or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by
this Agreement or any of the Reorganization Agreements shall be
in effect.
(c) Stockholders Vote. The Company Stockholder Approval
shall have been obtained.
(d) NYSE Listing. The Shares shall have been approved for
listing on the New York Stock Exchange, subject only to official
notice of issuance.
(e) Consummation of Distributions. The distribution of the
businesses of ESI and Newco and their respective Subsidiaries
shall have occurred.
(f) Tax Allocation Agreement. The Tax Allocation Agreement
shall contain the following provisions:
(i) an indemnity from Newco in favor of the Company and
the Retained Subsidiaries that covers (A) Taxes arising from
the Distributions, other than Taxes for which the Company is
responsible pursuant to a provision substantially similar to
Section 9.01(f)(ii) of this Agreement; (B) Taxes arising
from the Pre-Distribution Transactions attributable to
periods prior to the Closing, including as a result of the
transfer of stock of
a Subsidiary of the Company and the liquidation of a
Subsidiary of the Company; and (C) pre-closing Taxes of the
Company and the Retained Subsidiaries; provided, that the
Company shall agree to timely file all notices required to
be filed in respect of gain recognition agreements entered
into under Section 367 of the Code for pre-Closing taxable
years;
(ii) an indemnity from the Company in favor of Newco
with respect to any Taxes that arise from, in connection
with, or relating to (A) any breach of any covenant made by
Purchaser Related Parties in connection with this Agreement,
including but not limited to the covenants contained in
Section 2.02 of this Agreement; or (B) any breach of
Purchaser's obligations under Section 5.03, Article VI or
Article VII of this Agreement;
(iii) Notwithstanding Sections 9.01(f)(i) and
9.01(f)(ii) above, the Tax Allocation Agreement shall
provide that if any liability for Taxes arises as a result
of the ESI Distribution and/or the Newco Distribution
failing to qualify under Section 355 of the Code, by reason
of Section 355(e) (as ultimately enacted), and such
liability for Taxes does not result from (A) a breach by any
of the Purchaser Related Parties of any of their covenants
or obligations under Section 2.02, Article VI or Article VII
of this Agreement or (B) any action by Newco, then any such
liability for Taxes shall be shared 10% by the Company and
90% by Newco; and
(iv) The Tax Allocation Agreement shall contain
customary provisions providing for control and participation
rights with respect to any administrative and judicial
proceedings with respect to Taxes, including the right of
the Person primarily responsible for the relevant
indemnification obligation thereunder to control any such
proceeding, and in the case of an indemnification obligation
described in Section 9.01(f)(iii), the right of the Company
to participate in such proceeding. Notwithstanding anything
to the contrary in the preceding sentence, Company shall not
be entitled to assume control of any administrative or
judicial
proceeding with respect to Taxes unless Company shall have
theretofore acknowledged in writing the breach by the
relevant Purchaser Related Party of the covenants under this
Agreement that resulted in the claim or assertion giving
rise to such proceeding.
SECTION 9.02. Conditions to the Obligation of the Company.
The obligation of the Company to consummate the transactions
contemplated to occur at the Closing shall be subject to the
satisfaction or waiver thereof prior to the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser that are qualified as to materiality
shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of the
date of this Agreement and as of the time of the Closing as
though made at and as of such time, except to the extent such
representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are
qualified as to materiality shall be true and correct, and those
that are not so qualified shall be true and correct in all
material respects, on and as of such earlier date) and the
Company shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
(b) Opinion of Purchaser's Counsel. The Company shall have
received an opinion dated as of the Closing of Debevoise &
▇▇▇▇▇▇▇▇, counsel to Purchaser, in form and substance
satisfactory to the Company.
(c) Registration Rights Agreement. Purchaser shall have
executed and delivered the Registration Rights Agreement.
SECTION 9.03. Conditions to the Obligation of Purchaser. The
obligation of Purchaser to consummate the transactions contemplated to
occur at the Closing shall be subject to the satisfaction or waiver
thereof prior to the Closing of each of the following conditions:
(a) Representations and Warranties. Except as set forth in
Schedule 8.01, the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true
and
correct in all material respects, as of the date of this Agreement and
as of the time of the Closing as though made at and as of such time,
except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and
warranties that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct
in all material respects, on and as of such earlier date), and
Purchaser shall have received a certificate signed by an authorized
officer of the Company to such effect.
(b) Reorganization Agreements. Each Reorganization Agreement
to which the Company is a party shall have been executed without
modification from the forms as in existence at the Review Cut-off Time
or such earlier date as Purchaser completed its review of such
agreement.
(c) Performance of Obligations of the Company. The Company
shall have performed or complied in all material respects with all
obligations and covenants required to be performed or complied with by
the Company under this Agreement, and Purchaser shall have received a
certificate signed by an authorized officer of the Company to such
effect.
(d) Opinion of the Company's Counsel. Purchaser shall have
received opinions dated as of the Closing of the general counsel of
the Company, and Cravath, Swaine & ▇▇▇▇▇, counsel to the Company,
satisfactory in form and substance to Purchaser.
(e) Registration Rights Agreements. Purchaser shall have
executed and delivered the Registration Rights Agreement.
(f) Debt Repayment. The Company shall have repaid all of its
indebtedness outstanding on the date of this Agreement or have entered
into other arrangements satisfactory to Purchaser in respect of such
indebtedness.
(g) Financings. The Company shall have entered into
definitive documentation for new bank and public debt financing and
such definitive documentation shall reflect substantially the terms
and conditions of the Commitment Letters or if no such Commitment
Letters shall have been entered into prior to executing such
definitive documentation, then such definitive documentation shall be
satisfactory in form and substance to Purchaser.
(h) Consulting Agreement. The Company or a Significant
Subsidiary of the Company shall have entered into a consulting
agreement with CD&R providing for an annual fee of $500,000 in
connection with consulting and advisory services.
(i) Other Parties. (A) No Person or "group" (as defined in
the Exchange Act), other than Purchaser, shall have acquired
beneficial ownership of more than 15% of the outstanding shares of
Voting Stock, and (B) no Person (other than Purchaser or one or more
of its Affiliates) shall have entered into an agreement in principle
or definitive agreement with the Company with respect to a tender or
exchange offer for any shares of Common Stock or a merger,
consolidation or other business combination with or involving the
Company.
(j) Transaction Fee. The Company shall have authorized
payment to CD&R of the Transaction Fee and the Transaction Fee shall
have been paid.
(k) Assumption By Newco. Newco shall have assumed the
obligations of the Company under Article XI of this Agreement as
contemplated by Section 11.01(b).
(l) New Debt. The Company's debt capital structure shall be
as set forth in Schedule 9.03(l), which shall reflect total
indebtedness not to exceed $1.056 billion on a pro forma basis
prepared as though the Closing occurred on September 30, 1997.
(m) Corporate Proceedings. All corporate proceedings of the
Company in connection with the transactions contemplated by this
Agreement and the Reorganization Agreements, and all documents and
instruments incident thereto, shall be satisfactory in form and
substance to Purchaser and its counsel, and Purchaser and its counsel
shall have received all such documents and instruments, or copies
thereof, certified or requested, as may be reasonably requested.
(n) Certain Indemnities. The indemnity with respect to
liabilities arising from the 1995 spinoffs, the transactions
contemplated by the Reorganization Agreements, including, without
limitation, the debt repayments contemplated by Section 8.06, the
financings contemplated by 9.03(g) and the use of the proceeds thereof
and claims by Hilton Corporation and contingent obligations to
BellSouth Corporation (including claims in respect of payment of
additional consideration or other contingent liabilities to BellSouth)
to be provided to the Company by Newco in the Newco Distribution
Agreement shall be satisfactory to Purchaser.
(o) By-Law Amendments. The Company By-laws shall have been
amended to the extent necessary to assure that the acquisition of the
Shares, the Warrants, the shares issuable upon exercise of the
Warrants and, to the extent permitted by applicable law, any other
Equity Securities acquired by Purchaser not in violation of this
Agreement do not limit the ability of Purchaser to exercise voting
rights with respect thereto.
(p) Litigation. Except as disclosed in the Filed Company SEC
Documents, there shall be no civil, criminal or administrative
actions, suits or proceedings pending or, to the knowledge of the
Company, threatened, against any of the Retained Companies that,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on the Retained Companies, taken as a whole.
(q) Material Adverse Effect. No event, change or development
shall exist or have occurred since March 31, 1997 which has had or is
reasonably likely to have a Material Adverse Effect on the Retained
Companies, taken as a whole.
ARTICLE X
Termination
SECTION 10.01. Termination. This Agreement may be terminated
at any time prior to the Closing, whether before or after the Company
Stockholder Approval has been obtained:
(a) by mutual written consent of Purchaser and the Company;
(b) by Purchaser or the Company at any time after January
15, 1998;
(c) by the Company if any of the conditions set forth in
Section 9.01 or 9.02 shall become impossible to fulfill (other
than as a result of any breach by the Company of the terms of
this Agreement) and shall not
have been waived in accordance with the terms of this Agreement;
(d) by Purchaser if (i) the Board of Directors of the
Company or any committee thereof withdraws or modifies (or
publicly announces its intention to do so) in a manner adverse to
Purchaser (as determined by Purchaser in its reasonable judgment)
its approval or recommendation of this Agreement or the
transactions contemplated hereby or approves or recommends a
Directories Transaction Proposal or resolves to do any of the
foregoing or (ii) the Company shall have entered into an
agreement with respect to a Directories Transaction Proposal or
resolved to take such action;
(e) by Purchaser, if the Board of Directors of the Company
publicly announces its determination not to effect the
Distributions or enters into an agreement with respect to an
Alternative Company Proposal;
(f) by Purchaser, if any of the conditions set forth in
Section 9.01 or 9.03 shall become impossible to fulfill (other
than as a result of any breach by Purchaser of the terms of this
Agreement) and shall not have been waived in accordance with the
terms of this Agreement;
(g) by Purchaser if the Company fails to perform in any
material respect any of its material obligations hereunder or
breaches in any material respect any material provision hereof,
and the Company has failed to perform such obligation or cure
such breach, within 10 days of its receipt of written notice
thereof from Purchaser, and such failure to perform shall not
have been waived in accordance with the terms of this Agreement;
(h) by the Company if Purchaser fails to perform in any
material respect any of its material obligations hereunder or
breaches in any material respect any material provision hereof,
and Purchaser has failed to perform such obligation or cure such
breach, within 10 days of its receipt of written notice thereof
from the Company, and such failure to perform shall not have been
waived in accordance with the terms of this Agreement;
(i) by Purchaser or the Company if the Company Stockholder
Approval shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or at any adjournment
thereof;
(j) by the Company if (i) the Company enters into a
definitive agreement in accordance with Section 8.02(b)(iii) and
(ii) the Company simultaneously with terminating pays Purchaser's
Expenses and the Termination Fee (each as set forth in Section
13.09) in cash and otherwise complies with the provisions of
Section 8.02;
(k) by the Company if (i) the Board of Directors of the
Company determines not to effect the Distributions and (ii) the
Company simultaneously with terminating pays Purchaser
Purchaser's Expenses and the Termination Fee (each as set forth
in Section 13.09) in cash; or
(l) by Purchaser if the Company shall make any material
amendment to any Reorganization Agreement after the Review
Cut-Off Time without Purchaser's consent which, in its good faith
judgment, is materially adverse to the proposed investment of
Purchaser hereunder.
SECTION 10.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Purchaser as
provided in Section 10.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of
Purchaser or the Company, other than the provisions of this Section
10.02 and Section 13.09 and except to the extent that such termination
results from the wilful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE XI
Indemnification
SECTION 11.01 Indemnification of Purchaser.
(a) By the Company. The Company covenants and agrees to
defend, indemnify and hold harmless each of Purchaser, its Affiliates
(other than the Company and any Retained Companies), and their
respective officers, directors,
partners, employees, agents, advisers and representatives including,
without limitation, the Fund and CD&R (collectively, the "Purchaser
Indemnitees") from and against, and pay or reimburse the Purchaser
Indemnitees for, the amount of any judgment or settlement obtained by
a claimant against any Purchaser Indemnitee, including interest and
penalties with respect thereto plus out-of-pocket expenses and
reasonable attorneys' and accountants' fees and expenses incurred in
the investigation or defense of any of the same or in asserting,
preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or based on (or allegedly
resulting from or based on):
(i) any actions brought by any third parties (including any
shareholders of the Company in connection with any derivative
actions) resulting from or based on (or allegedly resulting from
or based on) any of the transactions (including any financings,
restructurings and the Pre-Distribution Transactions)
contemplated by this Agreement or any of the other Reorganization
Agreements, provided that the indemnity provided in this clause
(i) shall not include (A) actions brought by any limited partner
of the Fund against Purchaser or any of its Affiliates relating
to the transactions contemplated by this Agreement, (B) Losses
resulting from or based on the acts or omissions of a Purchaser
Indemnitee following the Closing,(C) claims resulting from or
based on a breach by Purchaser of its obligations under this
Agreement,(D) any contract, agreement, obligation, commitment,
understanding or other arrangement between the claimant and any
Purchaser Indemnitee, (E) any intentional tort by a Purchaser
Indemnitee or (F) to the extent relating to any fee, compensation
or other payment to be paid to any Purchaser Indemnitee;
(ii) any actions brought by BellSouth Corporation or any
shareholder of BellSouth Corporation or any other third party
resulting from or arising out of the purchase by the Company of
the shares of ITT World Directories, Inc. from BellSouth
Corporation pursuant to the Stock Purchase Agreement, dated as of
July 15, 1997, between BellSouth Corporation and the Company; and
(iii) any actions brought by or on behalf of Hilton Hotels
Corporation or other actions by third parties (including any
shareholder of the Company in connection
with any derivative action) related to Hilton's proposed
acquisition of the Company.
The Losses described in clauses (i), (ii) and (iii) of this Section
11.01(a) are herein referred to as "Purchaser Indemnifiable Losses".
The Company shall reimburse the Purchaser Indemnitees for any legal or
other expenses incurred by such Purchaser Indemnitees in connection
with investigating or defending any such Purchaser Indemnifiable
Losses as such expenses are incurred.
(b) By Newco. From and after the Newco Distribution Time,
Newco shall in a writing reasonably satisfactory to Purchaser assume
and agree to pay, perform and fully discharge all obligations of the
Company under this Article XI and shall agree in a writing reasonably
satisfactory to Purchaser to indemnify and hold harmless Purchaser
from and against all losses (including reasonable attorneys' and
accountants' fees and expenses, resulting from or based on any breach
by the Company of the covenants set forth in clauses (ii), (iv),
(vii), (x), (xi) and, with respect to the foregoing, (xiii) of Section
8.01(d).
SECTION 11.02 Indemnification Procedures. Promptly after
receipt by a Purchaser Indemnitee of notice of the commencement of any
action or the written assertion of any claim, such Purchaser
Indemnitee shall, if a claim in respect thereof is to be made against
the Company or Newco, as the case may be (the "Indemnifying Person"),
notify the Indemnifying Person in writing of the commencement or the
written assertion thereof. Failure by a Purchaser Indemnitee to so
notify the Indemnifying Person shall relieve the Indemnifying Person
from the obligation to indemnify such Purchaser Indemnitee only to the
extent that the Indemnifying Person suffers actual and material
prejudice as a result of such failure but in no event shall such
failure to notify the Indemnifying Person (i) constitute prejudice
suffered by the Indemnifying Person if it has otherwise received
notice of the actions giving rise to such obligation to indemnify or
(ii) relieve it from any liability or obligation that it may otherwise
have to such Purchaser Indemnitee. In case any such action or claim
shall be brought or asserted against any Purchaser Indemnitee and it
shall notify the Indemnifying Person of the commencement or assertion
thereof, the Indemnifying Person shall be entitled to participate
therein but the defense of such action or claim shall be conducted by
counsel to the Purchaser Indemnitee, provided, however, that the
Indemnifying Person shall not, in connection with any
one such action or proceeding or separate but substantially similar
actions or proceedings arising out of the same general allegations, be
liable for the fees and expenses of more than one separate firm of
attorneys at any time for all Purchaser Indemnitees, except to the
extent that local counsel, in addition to regular counsel, is required
in order to effectively defend against such action or proceeding and
provided further that a Purchaser Indemnitee shall not enter into any
settlement of any such claim without the prior consent of the Company
or, following the Newco Distribution Time, Newco, such consent not to
be unreasonably withheld.
ARTICLE XII
Definitions
SECTION 12.01. Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2
under the Exchange Act (as in effect on the date of this Agreement).
"Beneficially Own" with respect to any securities shall mean
having "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in
writing.
"Business Day" means any day on which banking institutions
are open in the City of New York.
"Buyout Transaction" means a tender offer, merger, sale of
all or substantially all the Company's assets or any similar
transaction that offers each holder of Voting Securities (other than,
if applicable, the Person proposing such transaction) the opportunity
to dispose of Voting Securities Beneficially Owned by each such holder
for the same consideration or otherwise contemplates the acquisition
of Voting Securities Beneficially Owned by each such holder for the
same consideration.
"Closing" means the date the Shares and Warrants are
accepted for payment.
"Code" shall mean the Internal Revenue Code of 1986.
"Directories Business" means the publishing of telephone
(alphabetical and classified) and specialized directories.
"Employee Benefit Plans" shall mean all defined
contribution, defined benefit, welfare benefit, bonus, incentive
compensation, stock option, stock purchase, stock appreciation right,
stock bonus, incentive, deferred compensation, insurance, medical,
dental, vision, life, death benefit, fringe benefit or other employee
benefit plans, programs, policies or arrangements, including without
limitation, any employment, consulting, offer, secondment, severance
or other termination agreement and any collective bargaining
agreements, maintained by the Company and its subsidiaries other than
any such plan, program, policy or arrangement assumed by Newco
pursuant to the Newco Distribution.
"Equity Security" means (i) any Common Stock or other Voting
Securities, (ii) any securities of the Company convertible into or
exchangeable for Common Stock or other Voting Securities or (iii) any
options, rights or warrants (or any similar securities) issued by the
Company to acquire Common Stock or other Voting Securities.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Final Determination" means the final resolution of
liability for any Tax for any taxable period, including any related
interest or penalties, by or as a result of: (i) a final and
unappealable decision, judgment, decree or other order of a court of
competent jurisdiction; (ii) a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable
agreement under the laws of other jurisdictions, which resolves the
entire tax liability for any tax period; (iii) any allowance of a
refund or credit in respect of an overpayment of Tax, but only after
the expiration of all periods during which such refund may be
recovered (including by way of offset) by the applicable taxing
jurisdiction; or (iv) any other final disposition, including by reason
of the expiration of the applicable statute of limitations.
"Intellectual Property": trademarks, trade names, trade
dress, service marks, copyrights, domain names, and
similar rights (including registrations and applications to register
or renew the registration of any of the foregoing), patents and patent
applications, trade secrets, ideas, inventions, improvements,
practices, processes, formulas, designs, know-how, confidential
business or technical information, computer software, firmware, data
and documentation, licenses of or agreements relating to any of the
foregoing, rights of privacy and publicity, moral rights, and any
other similar intellectual property rights and tangible embodiments of
any of the foregoing (in any medium including electronic media).
"knowledge of the Company" or any like expression means to
the knowledge of the persons listed on Schedule 12.01 after due
inquiry.
"New Security" means any Equity Security issued by the
Company after the Closing; provided that "New Security" shall not
include (i) any securities issuable upon conversion of any convertible
Equity Security, (ii) any securities issuable upon exercise of any
option, warrant or other similar Equity Security or (iii) any
securities issuable in connection with any stock split, stock dividend
or recapitalization of the Company where such securities are issued to
all stockholders of the Company on a proportionate basis.
"Other Holders" means the holders of the Other Shares.
"Other Shares" means Voting Securities not Beneficially
Owned by Purchaser or its Affiliates.
"Person" shall mean any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
"Pro Rata Share" means the fraction of an entire issuance of
New Securities, the numerator of which shall be the number of shares
of Common Stock owned by Purchaser or receivable upon exercise of the
Warrant and its Affiliates (other than the Company and its
Subsidiaries) immediately prior to such issuance of such New
Securities and the denominator of which shall be the aggregate number
of shares of Common Stock outstanding immediately prior to such
issuance of such New Securities and receivable upon exercise of the
Warrant.
"Purchaser's Percentage Interest" means the greater of (i)
the percentage of Total Voting Power, determined on the basis of the
number of Voting Securities actually outstanding, that is controlled
directly or indirectly by Purchaser or any Subsidiary or Affiliate of
Purchaser (other than the Company and its Subsidiaries), including by
beneficial ownership and (ii) the percentage of the total Fair Market
Value of all classes of outstanding capital stock of the Company that
is owned directly or indirectly by Purchaser or any Subsidiary or
Affiliate of Purchaser (other than the Company and its Subsidiaries),
including beneficial ownership. For purposes of determining
Purchaser's Percentage Interest, (a) any options, rights, warrants
(including the Warrants) and similar securities that entitle the
holder thereof to acquire shares of any class of capital stock of the
Company, whether voting or non-voting, shall be treated as exercised;
(b) any debt security that is convertible into shares of any class of
capital stock of the Company, whether voting or non-voting, shall be
treated as converted; and (c) any equity security that is convertible
into shares of any class of capital stock of the Company, whether
voting or non-voting, shall be treated as converted, but only to the
extent that such conversion would result in Purchaser's Percentage
Interest being greater than such interest would be if such conversion
had not been deemed to occur.
"Rollover Options" means options held by employees, former
employees, directors or former directors of the Company to purchase
Common Stock in existence immediately following the later to occur of
the Distributions.
"Security" shall mean at any time Equity Securities and any
shares of any class of capital stock of the Company.
"Significant Subsidiary" means the entities operating the
Retained Business in Belgium, the Netherlands and Portugal.
"Subsidiary" shall mean, as to any Person, any corporation
at least a majority of the shares of stock of which having general
voting power under ordinary circumstances to elect a majority of the
Board of Directors of such corporation (irrespective of whether or not
at the time stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency) is,
at the time as of which the determination is being made,
owned by such Person, or one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries; provided, however, that in
the case of the Retained Business, the term Subsidiary shall include
the interests of the Retained Business in Japan and South Africa.
"Tax Administrator" shall have the meaning assigned to such
term in the Tax Allocation Agreement.
"13D Group" shall mean any group of Persons acquiring,
holding, voting or disposing of Voting Securities which would be
required under Section 13(d) of the Exchange Act and the rules and
regulations thereunder (as in effect, and based on legal
interpretations thereof existing, on the date hereof) to file a
statement on Schedule 13D with the SEC as a "person" within the
meaning of Section 13(d)(3) of the Exchange Act if such group
beneficially owned Voting Securities representing more than 5% of any
class of Voting Securities then outstanding.
"Total Voting Power" at any time shall mean the total
combined voting power in the general election of directors of all the
Voting Securities then outstanding.
"Transaction Fee" means an amount equal to $12 million.
"Voting Securities" shall mean at any time shares of any
class of capital stock of the Company which are then entitled to vote
generally in the election of directors.
"Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
ARTICLE XIII
Miscellaneous
SECTION 13.01. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable.
SECTION 13.02. Specific Enforcement. Purchaser, on the one
hand, and the Company, on the other, acknowledge and agree that
irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at law or
equity.
SECTION 13.03. Entire Agreement. This Agreement (including
the documents set forth in the Exhibits and Schedules hereto) contains
the entire understanding of the parties with respect to the
transactions contemplated hereby.
SECTION 13.04. 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 of the
counterparts have been signed by each party and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
SECTION 13.05. Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein
and all legal process in regard hereto shall be validly given, made or
served, if in writing and delivered personally, by telecopy (except
for legal process) or sent by registered mail, postage prepaid, if to:
The Company: ITT Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of: ▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Purchaser: CDRV Acquisition, L.L.C.
c/o Clayton, Dubilier & Rice, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copy a to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of: ▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or telex number as any party may, from time
to time, designate in a written notice given in a like manner.
SECTION 13.06. Amendments. This Agreement may be amended as
to Purchaser and their successors and assigns (determined as provided
in Section 13.08), and the Company may take any action herein
prohibited, or omit to perform any act required to be performed by it,
if the Company shall obtain the written consent of Purchaser. This
Agreement may not be waived, changed, modified, or discharged orally,
but only by an agreement in writing signed by the party or parties
against whom enforcement of any waiver, change, modification or
discharge is sought or by parties with the right to consent to such
waiver, change, modification or discharge on behalf of such party.
SECTION 13.07. Cooperation. Purchaser and the Company agree
to take, or cause to be taken, all such further or other actions as
shall reasonably be necessary to make effective and consummate the
transactions contemplated by this Agreement, including, without
limitation, making all required filings under the HSR Act, if any;
provided, however, that the foregoing shall not limit the ability of
the Company to modify the Restructuring Agreements or to abandon the
Distributions pursuant to Section 8.03. Purchaser agrees that it will
not take any action the effect of which could reasonably be expected
to result in the Distributions being characterized as taxable events.
SECTION 13.08. Successors and Assigns. All covenants and
agreements contained herein shall bind and
inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that Purchaser may not
assign any of its rights under this Agreement.
SECTION 13.09. Expenses and Remedies. (a) Whether or not the
Closing takes place, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be
borne by the party incurring such expense, except as set forth in the
next eight paragraphs.
(b) Notwithstanding Section 13.09(a), if Purchaser
terminates this Agreement pursuant to Section 10.01(d), (e) or (l) the
Company shall reimburse Purchaser for the reasonable out-of-pocket
expenses (including reasonable fees and expenses of legal counsel)
incurred by Purchaser in connection with this Agreement or the matters
contemplated hereby up to a maximum of $4 million (such expenses,
subject the foregoing maximum, "Purchaser's Expenses") and shall pay
Purchaser a termination fee of $25 million (the "Termination Fee").
(c) Notwithstanding Section 13.09(a), if the Closing does
not occur solely as a result of the failure to satisfy the condition
set forth in Section 9.03(b), the Company shall pay Purchaser
Purchaser's Expenses.
(d) Notwithstanding Section 13.09(a), if (i) the Closing
does not occur prior to January 15, 1998 (other than as a result of
any breach by Purchaser of the terms of this Agreement), (ii) a
Directories Transaction Proposal was made prior to January 15, 1998
and (iii) during the period ending 12 months after termination the
Company consummates, becomes a party to or enters into an agreement
relating to or publicly announces, a sale of Equity Securities
representing in excess of 20% of the Total Voting Power, then promptly
after the Company consummates such transaction, the Company shall pay
Purchaser Purchaser's Expenses and the Termination Fee.
(e) Notwithstanding Section 13.09(a), if the Company
terminates this Agreement pursuant to Section 10.01(j) or (k), the
Company shall pay Purchaser Purchaser's Expenses and the Termination
Fee.
(f) Notwithstanding Section 13.09(a), if Purchaser or the
Company terminates this Agreement pursuant to Section 10.01(i), and
during the period ending 12 months
after termination the Company enters into an agreement with respect to
an Alternative Company Proposal or Directories Transaction Proposal,
the Company shall pay Purchaser Purchaser's Expenses and the
Termination Fee; provided, however, that if the Company enters into an
agreement with respect to an Alternative Company Proposal with Hilton
Hotels Corporation, the termination fee payable shall be $15 million.
(g) Notwithstanding Section 13.09(a), if the Closing has not
occurred prior to January 15, 1998 because of a material breach by the
Company of any representation, warranty or covenant of the Company
under this Agreement, the Company shall pay Purchaser's Expenses and a
Termination Fee equal to $15 million.
(h) Notwithstanding Section 13.09(a), if Purchaser
terminates this Agreement pursuant to clause (i) to the proviso of the
last sentence of Sections 8.04 or Section 8.07, the Company shall pay
Purchaser's Expenses and the Termination Fee.
(i) Notwithstanding Section 13.09(a), upon the occurrence of
the Closing, the Company shall pay Purchaser's Expenses.
SECTION 13.10. Non-Survival of Representations and
Warranties. None of the representations and warranties contained
herein or made in writing by any party in connection herewith shall
survive the Closing.
SECTION 13.11. Transfer of Shares and Warrants. Purchaser
understands and agrees that neither any shares of Common Stock or any
Warrants or the Warrant Shares have been or will be registered under
the Securities Act or the securities laws of any state and that they
may be sold or otherwise disposed of only in one or more transactions
registered under the Securities Act and, where applicable, such laws
or as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws is available.
Purchaser acknowledges that except as provided in the Registration
Rights Agreement Purchaser has no right to require the Company to
register shares of Common Stock, the Warrants or the Warrant Shares.
Purchaser understands and agrees that each certificate representing
shares of Common Stock, Warrants or Warrant Shares (other than, with
respect to the first legend, shares of Common Stock, Warrants or
Warrant Shares that are no longer subject to the provisions of Article
VII and other than, with
respect to the second legend, shares of Common Stock, Warrants or
Warrant Shares which have been transferred in a transaction registered
under the Securities Act or exempt from the registration requirements
of the Securities Act pursuant to Rule 144 thereunder or any similar
rule or regulation) shall bear the following legends:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF
THE CORPORATION."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
and Purchaser agrees to transfer shares of Common Stock, Warrants and
Warrant Shares only in accordance with the provisions of such legends.
SECTION 13.12. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York.
SECTION 13.13. Publicity. The Company and Purchaser will
consult and cooperate with each other to the extent reasonably
practicable prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated by
this Agreement; provided, however, that the initial press release
relating to this Agreement will be issued separately by the Company.
SECTION 13.14. No Third Party Beneficiaries. (a) Nothing
contained in this Agreement is intended to confer upon any person or
entity other than the parties hereto and their respective successors
and permitted assigns, any benefit, right or remedies under or by
reason of this Agreement; provided, however, that the parties hereto
hereby acknowledge and agree that ESI and Newco are each third party
beneficiaries of Sections 2.02, 5.03, 6.01, Article IX and Section
13.14(b) of this Agreement and that the Purchaser Indemnitees (other
than Purchaser) are third party beneficiaries of Article XI of this
Agreement.
(b) Purchaser shall cooperate with the Company and Newco in
connection with any tax audits or
administrative or judicial proceedings with respect to the application
of Section 355(e) (as ultimately enacted), including in rebutting any
presumption arising under Section 355(e) of the Code.
SECTION 13.15. Consent to Jurisdiction. Each of the Company
and Purchaser irrevocably submits to the exclusive jurisdiction of 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 (and, to the
extent permitted under applicable rules of procedure, agrees not to
commence any action, suit or proceeding relating hereto except in such
court). Each of the Company and Purchaser further agrees that service
of any process, summons, notice or document hand delivered or sent by
registered mail to such party's respective address set forth in
Section 12.05 will 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 as set forth in the immediately
preceding sentence. Each of the
Company and Purchaser 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 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 such court that any such action, suit
or proceeding brought in such court has been brought in an
inconvenient forum.
IN WITNESS WHEREOF, Purchaser and the Company have caused
this Agreement to be duly executed, all as of the day and year first
above written.
ITT CORPORATION,
by: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice
President and Chief
Financial Officer
CDRV ACQUISITION, L.L.C.,
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Authorized Officer
