<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Information to be Included in Statements Filed Pursuant to Rule 13d-1(a)
and Amendments Thereto Filed Pursuant to 13d-2(a)
(Amendment No. 2)*
ITT Educational Services, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
45068B 10 9
(CUSIP Number)
Thomas C. Janson, Jr.
Executive Vice President, General Counsel and Secretary
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue, White Plains, New York 10604, (914)
640-8100
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 18, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
(Continued on following page)
(Page 1 of 7 Pages)
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SCHEDULE 13D
CUSIP NO. 45068B 10 9 PAGE 2 OF 7 PAGES
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Starwood Hotels & Resorts Worldwide, Inc.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK, OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 9,450,000
BENEFICIALLY ---------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING -0-
PERSON ---------------------------------
WITH 9 SOLE DISPOSITIVE POWER
9,450,000
---------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,450,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.0%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 45068B 10 9 PAGE 3 OF 7 PAGES
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ITT Corporation
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 9,450,000
BENEFICIALLY ---------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING -0-
PERSON ---------------------------------
WITH 9 SOLE DISPOSITIVE POWER
9,450,000
---------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,450,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.0%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 4 of 7
Starwood Hotels & Resorts Worldwide, Inc. and ITT Corporation hereby
amend and supplement their statement on Schedule 13D relating to the common
stock, par value $.01 per share ("ESI Common Stock"), of ITT Educational
Services, Inc., a Delaware corporation ("ESI"), as originally filed with the
Securities and Exchange Commission (the "Commission") on March 5, 1998, and as
amended by Amendment No. 1 thereto, filed with the Commission on June 29, 1998.
This Schedule 13D of Starwood Hotels & Resorts Worldwide, Inc. and ITT
Corporation is hereinafter referred to as the "Statement." ITT Corporation
previously reported its ownership in the securities covered by this Statement on
its statement on Schedule 13D originally filed with the Commission on October
17, 1995, as amended by Amendment No. 1 thereto, filed with the Commission on
March 17, 1997, Amendment No. 2 thereto, filed with the Commission on July 23,
1997, and Amendment No. 3 thereto, filed with the Commission on November 19,
1997.
On February 23, 1998, Chess Acquisition Corp., a subsidiary of Starwood
Hotels & Resorts Worldwide, Inc. ("Merger Sub"), merged with ITT Corporation
(the "Merger") pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of November 12, 1997 among Starwood Hotels & Resorts Worldwide, Inc.,
Merger Sub, Starwood Hotels & Resorts and ITT Corporation. As a result of the
Merger, Starwood Hotels & Resorts Worldwide, Inc. became the beneficial owner of
the 22,500,000 shares of ESI Common Stock then held by ITT Corporation.
On June 9, 1998, ITT Corporation sold 13,050,000 shares of ESI Common
Stock in a public offering.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Statement is hereby amended to read in its entirety as
follows:
"As a result of the Merger, the Corporation became the beneficial owner
of the 22,500,000 shares of ESI Common Stock held by ITT. The Corporation has
previously announced that it is exploring a range of disposition strategies for
ESI. To that end, on February 13, 1998, ESI filed with the Commission a
registration statement on Form S-3 (as amended, the "Registration Statement")
for an underwritten public offering of 11,000,000 shares of the ESI Common Stock
held by ITT. The number of shares to be offered was subsequently increased to
11,350,000. The Registration Statement also covered an additional 1,700,000
shares of the ESI Common Stock held by ITT to cover over-allotments, if any. The
Commission declared the Registration Statement effective on June 3, 1998, and on
June 9, 1998, the Corporation closed the sale (the "Sale") of the 11,350,000
shares of ESI Common Stock and the 1,700,000 shares subject to the
over-allotment (a total of 13,050,000 shares of ESI Common Stock).
On December 18, 1998, ESI filed a registration statement (the "December
Registration Statement") for the underwritten public offering (the "Public
Offering") by ITT of 7,000,000 shares of ESI Common Stock. The registration
statement also includes up to an additional 950,000 shares to cover
over-allotments, if any. In addition, ESI and ITT have entered into a Stock
Repurchase Agreement (the "Stock Repurchase Agreement") dated as of December 18,
1998, pursuant to which ESI has agreed to repurchase (the "Stock Repurchase")
from ITT 1,500,000 shares of ESI Common Stock at a price equal to the lesser of
(1) the public offering price per share, less underwriting discounts and
commissions and (2) $32.84 per share. The closing of the Stock Repurchase is
expected to occur concurrently with the closing of the Public Offering.
Following the Public Offering and the Stock Repurchase, ITT will own 950,000
shares of ESI Common Stock. If the underwriters' over-allotment option is
exercised in full, ITT will no longer own any shares of ESI Common Stock. If the
underwriters' over-allotment option is not exercised in full, subject to market
conditions and any restrictions in the Stock Repurchase Agreement and any
underwriting agreement, the Corporation and ITT plan to dispose of any remaining
shares of ESI Common Stock owned by ITT as soon as practicable.
At the time the Merger was consummated, four of the ten members of the
Board of Directors of ESI (the "ESI Board") resigned, effective February 23,
1998. On February 25, 1998, the remaining members of the ESI Board elected Tony
Coelho, Robin Josephs, Merrick R. Kleeman and Barry S. Sternlicht to fill the
vacancies created by the foregoing resignations and to serve as directors of ESI
for terms expiring at the 2000, 1999, 2000 and 1998 Annual Meetings of
stockholders of ESI, respectively, and until such director's successor is duly
elected and qualified. Mr. Sternlicht was re-elected as a director at ESI's 1998
Annual Meeting of Shareholders for a term expiring at the 2001 Annual Meeting of
Shareholders.
A Stockholder Agreement (the "Stockholder Agreement") dated June 3,
1998 between ITT and ESI, among other things, provides that (a) the authorized
number of directors on the ESI Board shall not exceed 10, (b) the authorized
number
<PAGE> 5
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 5 of 7
of classes of directors of the ESI Board shall not exceed three, (c) in
connection with each annual meeting of ESI's shareholders the ESI Board shall
nominate and recommend such number of persons (rounded up to the next whole
number but not to exceed four) designated by ITT to be elected to the ESI Board
so that the total number of ITT designees on the ESI Board is in relative
proportion to the percentage of the outstanding shares of ESI Common Stock held
by ITT and its affiliates (collectively, the "ITT Group") and (d) the membership
of the standing Nominating Committee of the ESI Board shall be limited to four
members, two of whom must be directors who are ITT designees until the number of
ITT designees on the ESI Board is two, in which event only one ITT designated
director must be on the Nominating Committee, and if there is one ITT designee
on the ESI Board, such designee is not required to be on the Nominating
Committee (collectively, the "Board Rights"). The Stockholder Agreement also
provides that the Board Rights shall terminate when the ITT Group holds less
than 7.5% of the outstanding shares of ESI Common Stock. The ITT Group may
assign the Board Rights in whole, but not in part, to any one transferee from
the ITT Group of 10% or more of the outstanding shares of ESI Common Stock (the
"Rights Transferee"). The ITT designees currently on the ESI Board are Mr.
Coelho, Ms. Josephs, Mr. Kleeman and Mr. Sternlicht. Upon completion of the
Public Offering and the Stock Repurchase, whether or not the underwriters
exercise the over-allotment option, the ITT Group will hold less than 7.5% of
the outstanding ESI Common Stock, terminating the Board Rights.
The Stock Repurchase Agreement provides that ITT will use its best
efforts to cause each of its designated representatives, Tony Coelho, Robin
Josephs, Merrick R. Kleeman and Barry S. Sternlicht, to resign from the ESI
Board, effective upon completion of the Public Offering and the Stock
Repurchase."
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Item 6 of the Statement is hereby amended to read in its entirety as
follows:
"An Amended and Restated Registration Rights Agreement (the
"Registration Rights Agreement") dated June 3, 1998 between ITT and ESI, among
other things, provides that, upon request of ITT, ESI will register under the
Securities Act of 1933, as amended (the "Securities Act"), any of the shares of
ESI Common Stock held by ITT for sale in accordance with ITT's intended method
of disposition thereof, and will take such other action necessary to permit the
sale thereof in other jurisdictions. ITT has the right to request two such
registrations after the Sale. ESI will pay all registration expenses (other than
underwriting discounts and commissions and ITT's legal, accounting and advisors
expenses) in connection with such registrations. ITT also has the right, which
it may exercise at any time and from time to time during the term of the
agreement, to include the shares of ESI Common Stock held by it in other
registrations of shares of ESI Common Stock initiated by ESI on its own behalf
or on behalf of any other person. ESI will pay all registration expenses (other
than underwriting discounts and commissions related to the shares of ESI Common
Stock sold by ITT, ITT's legal, accounting and advisors expenses, and the filing
fees payable under the Securities Act for the shares of ESI Common Stock sold by
ITT) in connection with each such registration. The rights of ITT under the
Registration Rights Agreement are transferable by ITT. The Registration Rights
Agreement terminates five years after the Sale.
The Registration Rights Agreement prohibits the holder of any shares of
ESI Common Stock registered by ESI pursuant to such agreement from disposing of
any such shares if the disposition would cause a change in control of ESI or any
of its ITT Technical Institutes, until ESI receives all of the required prior
approvals of certain accrediting commissions and federal and state regulatory
agencies.
The Stockholder Agreement prevents ESI as a result of any statutory
anti-takeover or other anti-takeover provisions adopted by ESI from (a)
significantly limiting or restricting the ability of the ITT Group or any
transferee from the ITT Group of 10% or more of the outstanding shares of ESI
Common Stock to transfer or vote the ESI Common Stock held by it or (b)
significantly adversely affecting the value of the shares of ESI Common Stock
currently owned by the ITT Group or any transferee from the ITT Group of 10% or
more of the outstanding shares of the ESI Common Stock. The Stockholder
Agreement also prevents ESI from taking any action that would subject any such
shares to any restriction, limitation or provision of law to which other holders
of ESI Common Stock are not subject. These restrictions will end when the ITT
Group holds less than 10% of the outstanding shares of ESI Common Stock. Upon
the closing of the Public Offering and the Stock Repurchase, the ITT Group will
hold less than 10% of the outstanding ESI Common Stock.
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Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 6 of 7
The Stockholder Agreement prohibits the ITT Group or the Rights
Transferee from transferring any of the shares of the ESI Common Stock if such
transfer would cause a change in control of ESI or any of the ITT Technical
Institutes, until ESI receives all of the required prior approvals of certain
accrediting commissions and federal and state regulatory agencies.
Pursuant to the Stock Repurchase Agreement, ESI has agreed to
repurchase from ITT 1,500,000 shares of ESI Common Stock at a price equal to the
lesser of (1) the public offering price per share, less underwriting discounts
and commissions and (2) $32.84 per share. In addition, the Stock Repurchase
Agreement provides, among other things, (1) that upon completion of the Public
Offering and the Stock Repurchase, ITT will pay ESI $500,000 for administrative
expenses and an additional $500,000 for administrative expenses if certain
conditions relating to the Public Offering are satisfied and (2) if the
underwriters' over-allotment option is not exercised in full, ESI will file a
post-effective amendment to the December Registration Statement converting it
into a shelf registration statement covering all remaining shares of ESI Common
Stock held by ITT. ITT has agreed that such shelf registration will constitute
its remaining demand registration right under the Registration Rights Agreement.
In the Stock Repurchase Agreement, ITT also agreed that it would not, without
the prior consent of ESI, whether pursuant to such shelf registration or
otherwise, sell any of its remaining shares in a manner that could reasonably be
expected to cause a significant disruption in the orderly trading of the ESI
Common Stock on the New York Stock Exchange; provided, that, without limiting
the foregoing, ESI agreed that transfers permitted by Rule 144 promulgated under
the Securities Act and transfers to institutional investors would not conflict
or cause a default under this provision of the Stock Repurchase Agreement."
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
99.1 Stock Repurchase Agreement dated as of December 18, 1998
between ITT Corporation and ITT Educational Services, Inc.
(incorporated by reference to Exhibit 99.1 to the Current
Report on Form 8-K dated December 18, 1998 of ITT Educational
Services, Inc.).
* * * * * *
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Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 7 of 7
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated as of December 22, 1998.
<TABLE>
<CAPTION>
STARWOOD HOTELS & RESORTS ITT CORPORATION
WORLDWIDE, INC.
<S> <C>
By: /s/ Thomas C. Janson, Jr. By: /s/ Alan M. Schnaid
Thomas C. Janson, Jr. Alan M. Schnaid
Executive Vice President, General Counsel Vice President, Controller and Assistant
and Secretary Secretary
</TABLE>
