<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
<TABLE>
<S> <C>
COMMISSION FILE NUMBER: 1-7959 COMMISSION FILE NUMBER: 1-6828
STARWOOD HOTELS & STARWOOD HOTELS &
RESORTS WORLDWIDE, INC. RESORTS
(Exact name of Registrant as specified in its (Exact name of Registrant as specified in its
charter) charter)
MARYLAND MARYLAND
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
52-1193298 52-0901263
(I.R.S. employer identification no.) (I.R.S. employer identification no.)
777 WESTCHESTER AVENUE 777 WESTCHESTER AVENUE
WHITE PLAINS, NY 10604 WHITE PLAINS, NY 10604
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(914) 640-8100 (914) 640-8100
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
</TABLE>
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
189,185,601 shares of common stock, par value $0.01 per share, of Starwood
Hotels & Resorts Worldwide, Inc. attached to and traded together with
189,185,601 Class B shares of beneficial interest, par value $0.01 per share, of
Starwood Hotels & Resorts, and 100 Class A shares of beneficial interest, par
value $0.01 per share, of Starwood Hotels & Resorts, all outstanding as of
October 31, 1999.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Starwood Hotels & Resorts Worldwide, Inc.:
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998...................................... 3
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1999 and 1998............... 4
Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 1999 and
1998................................................... 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998...................... 6
Starwood Hotels & Resorts:
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998...................................... 7
Consolidated Statements of Operations for the Three Months
Ended September 30, 1999 and 1998, for the Nine Months
Ended September 30, 1999 and for the Period from
February 23, 1998 to September 30, 1998................ 8
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and for the Period from
February 23, 1998 to September 30, 1998................ 9
Notes to Financial Statements............................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................. 17
Item 3. Quantitative and Qualitative Disclosures about Market
Risk................................................... 31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 32
Item 2. Changes in Securities and Use of Proceeds................... 32
Item 6. Exhibits and Reports on Form 8-K............................ 32
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following unaudited consolidated financial statements of Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation") and Starwood Hotels &
Resorts (the "Trust" and, together with the Corporation, "Starwood" or the
"Company") are provided pursuant to the requirements of this Item. In the
opinion of management, all adjustments necessary for fair presentation,
consisting of normal recurring adjustments, have been included. The consolidated
financial statements presented herein have been prepared in accordance with the
accounting policies described in the Company's Joint Annual Report on Form 10-K,
as amended, for the year ended December 31, 1998 and should be read in
conjunction therewith, and with the Form 8-K filed on July 23, 1999, which
reflects Starwood's gaming segment as a discontinued operation. See the notes to
financial statements for the basis of presentation. The consolidated financial
statements should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein. Results for the three and nine months ended September 30, 1999 are not
necessarily indicative of results to be expected for the full fiscal year ending
December 31, 1999.
2
<PAGE> 4
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 195 $ 157
Accounts receivable, net of allowance for doubtful
accounts of $51
and $55................................................ 536 484
Inventories............................................... 63 58
Prepaid expenses and other................................ 77 75
------- -------
Total current assets................................... 871 774
Investments................................................. 380 336
Plant, property and equipment, net.......................... 7,838 7,857
Goodwill and intangible assets, net......................... 2,685 2,714
Other assets................................................ 403 570
Net assets held for sale.................................... -- 63
Net assets of discontinued operations....................... 1,061 1,103
------- -------
$13,238 $13,417
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 188 $ 169
Accrued expenses.......................................... 799 782
Short-term borrowings and current maturities of long-term
debt................................................... 233 687
Other current liabilities................................. 215 183
------- -------
Total current liabilities.............................. 1,435 1,821
Long-term debt.............................................. 6,015 5,802
Deferred income taxes....................................... 1,525 529
Other liabilities........................................... 367 384
------- -------
9,342 8,536
------- -------
Minority interest........................................... 230 244
------- -------
Equity put options.......................................... -- 32
------- -------
Class B exchangeable preferred shares of the Trust, at
redemption value of $38.50................................ 136 149
------- -------
Commitments and contingencies
Stockholders' equity:
Class A exchangeable preferred shares of the Trust; $0.01
par value; authorized 30,000,000 shares; outstanding
3,669,546 and 4,373,457 shares at September 30, 1999
and December 31, 1998, respectively.................... -- --
Corporation common stock; $0.01 par value; authorized
1,050,000,000 shares; outstanding 180,074,966 and
175,574,135 shares at September 30, 1999 and December
31, 1998, respectively................................. 2 2
Trust common shares of beneficial interest; $0.01 par
value; authorized 1,200,000,000 shares; outstanding
175,574,135 shares at December 31, 1998................ -- 2
Trust Class B shares of beneficial interest; $0.01 par
value; authorized 1,000,000,000 shares; outstanding
180,074,966 shares at September 30, 1999............... 2 --
Additional paid-in capital................................ 4,564 4,570
Cumulative translation and marketable securities
adjustments............................................ (205) (120)
Retained earnings (accumulated deficit)................... (833) 2
------- -------
Total stockholders' equity............................. 3,530 4,456
------- -------
$13,238 $13,417
======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
3
<PAGE> 5
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Owned, leased and consolidated joint venture hotels..... $ 855 $ 800 $2,496 $2,154
Management and franchise fees........................... 70 55 195 163
Unconsolidated joint ventures and other................. 31 29 84 77
------ ------ ------ ------
956 884 2,775 2,394
------ ------ ------ ------
COSTS AND EXPENSES
Owned, leased and consolidated joint venture hotels..... 587 545 1,709 1,470
Selling, general and administrative..................... 37 67 123 168
Restructuring and other special charges (credits)....... -- 185 (41) 185
Depreciation and amortization........................... 117 105 353 309
------ ------ ------ ------
741 902 2,144 2,132
------ ------ ------ ------
215 (18) 631 262
Interest expense, net of interest income of $5, $6, $15
and $22............................................... (125) (158) (364) (322)
Gains (losses) on sales of real estate and
investments........................................... (8) -- 22 51
Miscellaneous expense................................... -- -- (15) --
------ ------ ------ ------
82 (176) 274 (9)
Income tax (expense) benefit............................ (28) 102 (999) 66
Minority equity in net income........................... (10) (5) (14) (12)
------ ------ ------ ------
Income (loss) from continuing operations................ 44 (79) (739) 45
Discontinued operations:
Net loss from operations, net of tax benefit of $0,
$6, $0 and $12..................................... -- (27) -- (59)
Net gain (loss) on dispositions, net of tax of $0,
$(14), $(121) and $(604)........................... -- 25 (7) 1,165
Extraordinary item, net of tax benefit of $1, $0, $1 and
$0.................................................... (2) -- (2) --
------ ------ ------ ------
Net income (loss)....................................... $ 42 $ (81) $ (748) $1,151
====== ====== ====== ======
EARNINGS PER SHARE -- BASIC
Continuing operations................................... $ 0.23 $(0.42) $(3.98) $ 0.16
Discontinued operations................................. -- (0.01) (0.04) 5.71
Extraordinary item...................................... (0.01) -- (0.01) --
------ ------ ------ ------
Net income (loss)....................................... $ 0.22 $(0.43) $(4.03) $ 5.87
====== ====== ====== ======
EARNINGS PER SHARE -- DILUTED
Continuing operations................................... $ 0.23 $(0.42) $(3.98) $ 0.16
Discontinued operations................................. -- (0.01) (0.04) 5.71
Extraordinary item...................................... (0.01) -- (0.01) --
------ ------ ------ ------
Net income (loss)....................................... $ 0.22 $(0.43) $(4.03) $ 5.87
====== ====== ====== ======
Weighted average number of shares....................... 186 199 186 194
====== ====== ====== ======
Weighted average number of shares assuming dilution..... 195 199 186 194
====== ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
4
<PAGE> 6
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- ---------------
1999 1998 1999 1998
---- ----- ----- ------
<S> <C> <C> <C> <C>
Net income (loss)........................................... $42 $(81) $(748) $1,151
Other comprehensive income (loss):
Foreign currency translation adjustments --
Foreign currency translation arising during the period.... 9 46 (85) --
Unrealized holding losses arising during the period....... -- -- -- (1)
Reclassification adjustment for losses included in net
income................................................. -- -- -- 33
--- ---- ----- ------
9 46 (85) 32
--- ---- ----- ------
Comprehensive income (loss)................................. $51 $(35) $(833) $1,183
=== ==== ===== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
5
<PAGE> 7
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------
1999 1998
----- ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $(748) $1,151
Exclude:
Discontinued operations --
Net loss from operations.................................. -- 59
Net loss (gain) on dispositions........................... 7 (1,165)
Extraordinary item.......................................... 2 --
----- ------
Income (loss) from continuing operations.................... (739) 45
Adjustments to income (loss) from continuing operations:
Depreciation and amortization............................. 353 309
Amortization of deferred loan costs....................... 13 15
Non-cash portion of Reorganization charge................. 936 --
Non-cash portion of restructuring and other special
charges (credits)....................................... (46) 150
Provision for doubtful accounts........................... 6 5
Minority equity........................................... 14 12
Equity income, net of dividends received.................. (23) (11)
Gains on sale of real estate and investments.............. (22) (51)
Changes in working capital:
Accounts receivable....................................... (86) (83)
Inventories............................................... (7) 1
Accounts payable.......................................... 24 7
Accrued expenses.......................................... (43) (277)
Accrued and deferred income taxes........................... (28) (139)
Other, net.................................................. (48) (31)
----- ------
Cash from (used for) continuing operations................ 304 (48)
Cash used for discontinued operations..................... (53) (281)
----- ------
Cash from (used for) operating activities................. 251 (329)
----- ------
INVESTING ACTIVITIES
Additions to plant, property and equipment.................. (310) (370)
Proceeds from asset sales................................... 502 2,811
Collection of notes receivable, net of advances............. 53 --
Acquisitions, net of acquired cash.......................... -- (60)
Investments................................................. (62) --
Employee benefit trust...................................... -- 146
Other, net.................................................. (11) (257)
----- ------
Cash from investing activities............................ 172 2,270
----- ------
FINANCING ACTIVITIES
Short-term debt issued (repaid)............................. (597) 505
Long-term debt issued....................................... 636 2,447
Long-term debt repaid....................................... (282) (1,477)
Proceeds from forward equity contracts and settlement of
equity put options........................................ (16) 245
Distributions paid.......................................... (87) (3,249)
Stock repurchases........................................... (42) (343)
Other, net.................................................. 3 (16)
----- ------
Cash used for financing activities........................ (385) (1,888)
----- ------
Increase in cash and cash equivalents....................... 38 53
Cash and cash equivalents -- beginning of period............ 157 126
----- ------
Cash and cash equivalents -- end of period.................. $ 195 $ 179
===== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 441 $ 219
===== ======
Income taxes, net of refunds.............................. $ 98 $ 42
===== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
6
<PAGE> 8
STARWOOD HOTELS & RESORTS
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8 $ 12
Accounts receivable....................................... 2 24
Receivable, Corporation................................... 45 42
Prepaid expenses and other................................ 4 3
------ ------
Total current assets................................... 59 81
Investments, Corporation.................................... 1,056 1,057
Investments................................................. 49 86
Plant, property and equipment, net.......................... 4,393 4,411
Long-term receivables, net, Corporation..................... 2,954 2,583
Goodwill and intangible assets, net......................... 247 258
Other assets................................................ 17 152
Net assets held for sale.................................... -- 18
------ ------
$8,775 $8,646
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 11 $ 6
Accrued expenses.......................................... 93 68
Short-term borrowings and current maturities of long-term
debt................................................... 105 1
------ ------
Total current liabilities.............................. 209 75
Long-term debt.............................................. 497 737
------ ------
706 812
------ ------
Minority interest........................................... 35 39
------ ------
Equity put options and forward equity contracts............. -- 23
------ ------
Class B exchangeable preferred shares, at redemption value
of $38.50................................................. 136 149
------ ------
Commitments and contingencies
Stockholders' equity:
Class A exchangeable preferred shares; $0.01 par value;
authorized 30,000,000 shares; outstanding 3,669,546 and
4,373,457 shares at September 30, 1999 and December 31,
1998, respectively..................................... -- --
Trust common shares of beneficial interest; $0.01 par
value; authorized 1,200,000,000 shares; outstanding
175,574,135 shares at December 31, 1998................ -- 2
Class A shares of beneficial interest; $0.01 par value;
authorized 5,000 shares; outstanding 1,000 shares at
September 30, 1999..................................... -- --
Trust Class B shares of beneficial interest; $0.01 par
value; authorized 1,000,000,000 shares; outstanding
180,074,966 shares at September 30, 1999............... 2 --
Additional paid-in capital................................ 7,570 7,557
Retained earnings......................................... 326 64
------ ------
Total stockholders' equity............................. 7,898 7,623
------ ------
$8,775 $8,646
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
7
<PAGE> 9
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS PERIOD FROM
SEPTEMBER 30, ENDED FEBRUARY 23, 1998
-------------- SEPTEMBER 30, TO SEPTEMBER 30,
1999 1998 1998 1998
----- ----- ------------- -----------------
<S> <C> <C> <C> <C>
REVENUES
Unconsolidated joint ventures and other......... $ -- $ 4 $ 8 $ 5
Rent and interest, Corporation.................. 187 180 552 435
---- ---- ---- ----
187 184 560 440
---- ---- ---- ----
COSTS AND EXPENSES
Selling, general and administrative............. -- 6 -- 12
Depreciation and amortization................... 43 35 132 110
---- ---- ---- ----
43 41 132 122
---- ---- ---- ----
144 143 428 318
Interest expense, net of interest income of $0,
$0, $2 and $0................................. (10) (6) (35) (14)
Losses on sales of real estate.................. (40) -- (40) --
Income tax expense.............................. (1) -- (2) (1)
Minority equity in net income................... (1) (3) (2) (4)
---- ---- ---- ----
Net income...................................... $ 92 $134 $349 $299
==== ==== ==== ====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
8
<PAGE> 10
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED FEBRUARY 23, 1998
SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1998
------------------ ---------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 349 $ 299
Adjustments to net income:
Depreciation and amortization.......................... 132 110
Minority equity in net income.......................... 2 4
Equity income, net of dividends received............... (3) --
Losses on sales of real estate......................... 40 --
Changes in working capital:
Accounts receivable.................................... 6 (8)
Accounts payable....................................... 5 10
Accrued expenses....................................... 10 (13)
Other, net............................................... 4 1
----- -----
Cash from operating activities......................... 545 403
----- -----
INVESTING ACTIVITIES
Additions to plant, property and equipment............... (176) (139)
Proceeds from asset sales................................ 61 250
Collection of notes receivable........................... 56 --
Acquisitions, net of acquired cash....................... -- (13)
Investments.............................................. (6) --
Notes receivable, Corporation............................ (243) 45
Other, net............................................... (9) (275)
----- -----
Cash used for investing activities..................... (317) (132)
----- -----
FINANCING ACTIVITIES
Long-term debt issued.................................... 291 12
Long-term debt repaid.................................... (427) --
Proceeds from equity offering............................ -- 171
Distributions paid....................................... (87) (213)
Stock repurchases........................................ (7) (240)
Other, net............................................... (2) 8
----- -----
Cash used for financing activities..................... (232) (262)
----- -----
Increase (decrease) in cash and cash equivalents......... (4) 9
Cash and cash equivalents -- beginning of period......... 12 --
----- -----
Cash and cash equivalents -- end of period............... $ 8 $ 9
===== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest................. $ 24 $ 15
===== =====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
9
<PAGE> 11
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated balance sheets as of September 30, 1999 and
December 31, 1998 and the consolidated statements of operations, comprehensive
income and cash flows for the three and nine months ended September 30, 1999
represent (i) Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries
(the "Corporation"), including ITT Corporation and its subsidiaries ("ITT") and
Starwood Hotels & Resorts and its subsidiaries (the "Trust"), and (ii) the
Trust. Because the acquisition of ITT (the "ITT Merger") was treated as a
reverse purchase for financial accounting purposes, the consolidated statements
of operations, comprehensive income and cash flows for the three and nine months
ended September 30, 1998 include the accounts of ITT for the three and nine
months ended September 30, 1998 and the accounts of the Corporation and the
Trust for the period from the closing of the ITT Merger on February 23, 1998
through September 30, 1998.
The Trust was formed in 1969 and elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code (the "Code"). In 1980,
the Trust formed the Corporation and made a distribution to the Trust's
shareholders of one share of common stock, par value $0.01 per share, of the
Corporation (a "Corporation Share") for each common share of beneficial
interest, par value $0.01 per share, of the Trust (a "Trust Share"). Through
January 6, 1999, the Corporation Shares and Trust Shares were paired on a
one-for-one basis and, pursuant to an agreement between the Corporation and the
Trust, could be held or transferred only in units ("Paired Shares") consisting
of one Corporation Share and one Trust Share.
During 1998, Congress enacted tax legislation that had the effect of
eliminating this grandfathering for certain interests in real property acquired
after March 26, 1998. In response to this legislation, a reorganization of the
Corporation and the Trust (the "Reorganization") was proposed by the Company and
was approved by the shareholders of the Corporation and Trust on January 6,
1999. As a result of the Reorganization, the combined Corporation and Trust
entity is no longer a grandfathered paired share REIT. The Trust became a
subsidiary of the Corporation, which holds all outstanding shares of new Class A
shares of beneficial interest in the Trust. Each outstanding Trust Share was
converted into one new non-voting Class B share of beneficial interest in the
Trust (a "Class B Share"). Pursuant to an agreement between the Corporation and
the Trust, the Corporation Shares and the Class B Shares are attached on a
one-for-one basis and may be transferred only in units ("Shares") consisting of
one Corporation Share and one Class B Share. The Reorganization was accounted
for as a reorganization of two companies under common control. As such, there
was no revaluation of the assets and liabilities of the combining companies. Any
further references in this filing to Starwood Hotels & Resorts Worldwide, Inc.
("Starwood" or the "Company") include the Trust and its subsidiaries. Unless
otherwise stated herein, all information with respect to Shares refers to Shares
since January 6, 1999 and to Paired Shares for periods before January 6, 1999.
During the first quarter of 1999, the Company recorded pretax charges of
$15 million for costs directly attributable to the Reorganization, such as
legal, accounting and investment banking fees, which are included in
miscellaneous expense in the accompanying 1999 consolidated statements of
operations. As a result of the Reorganization, the Company also recorded a
one-time charge of $936 million in the first quarter to establish a deferred tax
liability relating to the difference between the book and tax basis in the
assets of the Trust. This charge is included in income tax expense in the
accompanying consolidated statements of operations.
The Company, through its subsidiaries, is the general partner of, and held,
as of September 30, 1999, an aggregate 90.2% partnership interest in, SLC
Operating Limited Partnership (the "Operating Partnership"). The Trust, through
its subsidiaries, is the general partner of, and held, as of September 30, 1999,
an aggregate 94.9% partnership interest in, SLT Realty Limited Partnership (the
"Realty Partnership" and, together with the Operating Partnership, the
"Partnerships"), and the Corporation held an aggregate 2.2% partnership interest
in the Realty Partnership. The Realty Partnership principally owns, directly or
indirectly, fee, ground lease and mortgage loan interests in hotel properties.
The Operating Partnership, directly or indirectly,
10
<PAGE> 12
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
principally leases hotel properties from the Realty Partnership and also owns
fee interests in other hotel properties and manages hotels for third parties.
The units of these Partnerships ("LP Units") held by the limited partners
("Limited Partners") of the Partnerships are exchangeable on a one-to-one basis
for Shares. At September 30, 1999, there were approximately 9.9 million LP Units
outstanding (including 4.2 million LP Units held by the Corporation).
The Company is one of the largest hotel companies in the world. The hotel
business is comprised of a worldwide hospitality network of approximately 710
full-service hotels primarily serving three markets: luxury, upscale and
mid-price. The Company's hotel operations are represented on six continents and
in nearly every major world market.
NOTE 2. EARNINGS PER SHARE
The following reconciliation of basic earnings per share to diluted
earnings per share for income (loss) from continuing operations assumes the
conversion of LP Units to Shares (in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations..... $ 44 $(79)
Dividends on Class A and Class B EPS......... (1) (4)
----- ----
Basic earnings (loss)........................ 43 186 $0.23 (83) 199 $(0.42)
Effect of dilutive securities:
Employee options........................... -- 1 -- --
Class A and Class B EPS.................... 1 8 -- --
----- --- ---- ---
Diluted earnings (loss)...................... $ 44 195 $0.23 $(83) 199 $(0.42)
===== === ===== ==== === ======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations..... $(739) $ 45
Dividends on Class A and Class B EPS......... (3) (15)
----- ----
Basic earnings (loss)........................ (742) 186 $(3.98) 30 194 $0.16
Effect of dilutive securities:
Employee options........................... -- -- -- --
----- --- ---- ---
Diluted earnings (loss)...................... $(742) 186 $(3.98) $ 30 194 $0.16
===== === ====== ==== === =====
</TABLE>
As a result of antidilutive effects, approximately 7.7 million Class A and
Class B Exchangeable Preferred Shares ("EPS") of the Trust and approximately 1.4
million employee options and other common stock equivalents were not included in
the computation of diluted earnings per share for the nine months ended
September 30, 1999. Additionally, as a result of antidilutive effects,
approximately 7.4 million Class A and Class B EPS of the Trust were not included
in the computation of diluted earnings per share for the nine months ended
September 30, 1998.
11
<PAGE> 13
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ACQUISITIONS
On October 1, 1999, the Corporation completed the acquisition of Vistana,
Inc. ("Vistana"), whereby Vistana merged with and into a subsidiary of the
Corporation and thereby became a wholly owned subsidiary of the Corporation.
Vistana's principal operations include the acquisition, development and
operation of vacation ownership resorts, marketing and selling vacation
ownership interests in the resorts, and providing financing to customers who
purchase such interests. The Company financed the acquisition of Vistana with
cash of approximately $110 million, the assumption of approximately $280 million
of debt and the issuance of approximately 10.1 million Shares.
NOTE 4. DISCONTINUED OPERATIONS
GAMING. In April 1999, management developed a formal plan to dispose of the
Company's gaming operations. On April 27, 1999, the Company entered into a
definitive agreement to sell its gaming operations, excluding the Desert Inn
Resort & Casino in Las Vegas, Nevada (the "Desert Inn"), for cash proceeds of
approximately $3.0 billion to Park Place Entertainment Corporation. This sale,
which is subject to customary closing conditions including obtaining approvals
from certain gaming regulatory authorities, is expected to close prior to the
end of 1999. On May 18, 1999, the Company entered into a definitive agreement
with Sun International Hotels Limited to sell the Desert Inn for approximately
$275 million in cash. This sale, which is also subject to customary closing
conditions including approvals by the Nevada gaming authorities, is expected to
close in 2000.
As a result of the definitive agreements to sell the gaming operations, the
accompanying consolidated financial statements reflect the results of operations
and net assets of the gaming segment as a discontinued operation. Long-term debt
of approximately $2.1 billion and the related interest expense of $42 million,
$40 million, $122 million and $120 million for the three months ended September
30, 1999 and 1998 and for the nine months ended September 30, 1999 and 1998,
respectively, has been allocated to the discontinued operation. This allocation
was based upon the ratio of net gaming segment assets to the Company's total
capitalization. During the first quarter of 1999, the Company provided for
estimated after-tax losses on the disposal of the discontinued operations of
$180 million ($158 million pretax), which included anticipated operating results
through the expected closing date of approximately $50 million prior to the
disposal. Summary financial information of the discontinued gaming operations is
as follows (in millions) (unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA
Total assets................................................ $ 3,569 $ 3,751
Total liabilities........................................... (326) (368)
Debt related to discontinued operations:
Allocated debt............................................ (2,140) (2,140)
Other..................................................... (42) (176)
------- -------
Net assets of the discontinued gaming operations............ $ 1,061 $ 1,067
======= =======
</TABLE>
12
<PAGE> 14
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ----------------
1999 1998 1999 1998
----- ----- ------ ------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................................................... $402 $391 $1,164 $1,038
Restructuring and other special charges.................... $ -- $(55) $ -- $ (55)
Operating income........................................... $ 53 $ 3 $ 131 $ 53
Interest expense:
Allocated debt........................................... $(42) $(40) $ (122) $ (120)
Other.................................................... $ (2) $ (1) $ (10) $ (2)
Income tax (expense) benefit............................... $ (1) $ 7 $ (3) $ 13
Minority equity............................................ $ -- $ 4 $ 2 $ 6
Income (loss) from discontinued operations................. $ 8 $(27) $ (2) $ (50)
</TABLE>
ITT EDUCATIONAL SERVICES, INC. In June 1998, the Company sold approximately
13.0 million shares of ITT Educational Services, Inc. ("Educational Services")
for net proceeds of approximately $304 million, recognizing a gain of $163
million, net of income taxes of $90 million. In February 1999, the Company
completed the sale of its remaining interest in Educational Services, selling
8.0 million shares of common stock of Educational Services in an underwritten
public offering at a price per share of $34.00. Concurrently, Educational
Services repurchased the Company's remaining 1.5 million shares of Educational
Services common stock at $32.73 per share. Starwood received aggregate net
proceeds of approximately $310 million from these transactions, which were used
to repay a portion of the Company's outstanding debt. As a result of this sale,
the Company recognized a gain of $173 million, net of taxes of $99 million in
the first quarter of 1999. Net assets of discontinued operations included $36
million related to Educational Services as of December 31, 1998.
ITT WORLD DIRECTORIES. In February 1998, the Company disposed of ITT World
Directories ("WD"), the subsidiary through which ITT conducted its telephone
directories publishing business, to VNU International B.V., a leading
international publishing and information company based in the Netherlands, for
gross consideration of $2.1 billion. The Company recorded a gain of $1.002
billion, net of income taxes of $514 million, on the disposition.
NOTE 5. UNAUDITED PRO FORMA RESULTS
The following unaudited pro forma information reflects the ITT Merger, the
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain of its
affiliates ("Westin") ("Westin Merger") and certain actual and planned asset
dispositions (including the disposition of the gaming operations) as if they
occurred at the beginning of each period presented and does not purport to
present what actual results would have been had such transactions, in fact,
occurred at the beginning of each period presented, or to project results for
any future period (in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ----------------
1999 1998 1999 1998
----- ------ ------ ------
<S> <C> <C> <C> <C>
Revenues................................................. $ 956 $ 884 $2,775 $2,655
Income (loss) from continuing operations................. $ 67 $ (74) $ (672) $ 45
Net income (loss)........................................ $ 65 $ (76) $ (681) $1,151
Basic income (loss) from continuing operations per
share.................................................. $0.35 $(0.39) $(3.62) $ 0.16
Diluted income (loss) from continuing operations per
share.................................................. $0.34 $(0.39) $(3.62) $ 0.15
</TABLE>
13
<PAGE> 15
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. DISPOSITIONS
At December 31, 1998, net assets held for sale in the accompanying
consolidated balance sheet included the Company's investment in Madison Square
Garden, L.P. ("MSG"). In April 1999, the Company disposed of its remaining
interest in MSG for net cash proceeds of approximately $87 million and recorded
a pretax gain of $42 million.
In July 1999, the Company sold the Westin Central Park South for
approximately $63 million in net cash proceeds. The Company recognized a pretax
loss of $23 million during the second quarter of 1999 in anticipation of this
sale.
In October 1999, the Company sold The Tyee Hotel for approximately $5
million in net cash proceeds, recognizing a pretax loss of $4 million in the
third quarter of 1999 in anticipation of the loss.
In September and October of 1999, the Company reduced its stake in Lampsa
SA, a Greek company that owns the Grande Bretagne Hotel in Athens, from 52.8% to
0.01%. The Company owned its interest in Lampsa SA through its 70.3% ownership
of CIGA S.p.A. The Company received gross proceeds (before minority interest) of
$290 million as a result of these sales. A pretax gain (before minority
interest) of $11 million has been recorded in the third quarter of 1999, with an
estimated pretax gain (before minority interest) of approximately $260 million
in the fourth quarter of 1999.
In early November 1999, the Company sold the Kansas City Ritz Carlton for
approximately $61 million in net cash proceeds, recognizing a pretax loss of $13
million in the third quarter of 1999 in anticipation of the loss.
NOTE 7. RESTRUCTURING AND OTHER SPECIAL CHARGES/CREDITS
In connection with the ITT Merger, the Company recorded restructuring and
other special charges totaling $185 million (pretax) in the third quarter of
1998 for (i) ITT Merger-related costs and (ii) write-down of certain assets. At
September 30, 1999, the Company had remaining accruals related to these 1998
restructuring and other special charges of approximately $9 million primarily
related to costs to be incurred to complete the integration of the Company's
reservations systems, integration of global benefits programs and other ITT
Merger-related costs, which will be paid out over the next several quarters.
During the second quarter of 1999, the Company reversed approximately $50
million in restructuring charges recorded during 1997 due to the resolution of
certain employment related contingencies, net of restructuring and other special
charges of $5 million attributed to the rationalization of one of Starwood's
technical centers and $4 million attributed to the severance benefits for the
former President and Chief Operating Officer of the Corporation. Additionally,
in the second quarter of 1999, the Company recorded a tax benefit of $37 million
primarily related to the resolution of certain employment related contingencies,
which is included in income tax expense in the accompanying consolidated
statements of operations.
During 1997, ITT recorded pretax charges totaling $260 million to
restructure and rationalize operations at its World Headquarters and the
headquarters of its field operations. Additionally, ITT recorded restructuring
and other special charges in connection with the ITT Merger totaling $600
million. At September 30, 1999, the Company had remaining accruals related to
these restructuring and other special charges of approximately $64 million
primarily related to remaining lease commitments which expire through 2006 and
certain employee benefits scheduled to be utilized in the first quarter of 2000.
14
<PAGE> 16
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. EXTRAORDINARY ITEM
In August 1999, Caesars World, Inc., a wholly owned subsidiary of the
Company, redeemed its senior subordinated notes for an aggregate payment of $152
million, recognizing an extraordinary pretax loss of $3 million.
NOTE 9. STOCKHOLDERS' EQUITY
As a part of its ongoing Share repurchase program, the Company sold equity
put options during 1998 for $1.8 million, which entitled the holder, at the
expiration date, to sell one million Shares to the Company at contractually
specified prices. During the first quarter of 1999, the Company repurchased
500,000 Shares for $16 million under a portion of the equity put option
contracts. In the first quarter of 1999, all of the remaining equity put option
contracts expired.
Pursuant to its Share repurchase program, the Company repurchased
approximately 1.6 million Shares in the open market at an average purchase price
of $25.67 during the third quarter of 1999.
NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into interest rate swap agreements to manage interest
rate fluctuations on its variable rate debt. The Company currently has nine
outstanding interest rate swap agreements under which the Company pays a fixed
rate and receives variable rates of interest. The aggregate notional amount of
these interest rate swaps was approximately $1.8 billion (including $700 million
with an original maturity of less than one year) and the estimated unrealized
gain on these interest rate swaps was approximately $7 million at September 30,
1999. The unrealized gain represents the amount the Company would receive upon
the termination of the swap agreements based on current interest rates.
From time to time, the Company enters into forward foreign exchange
contracts to hedge the foreign currency exposure associated with the Company's
foreign currency denominated assets and liabilities. The Company currently has
four forward foreign exchange contracts outstanding with a U.S. dollar
equivalent of the contractual amounts of these hedges at September 30, 1999 of
approximately $85 million. These contracts mature through December 1999.
NOTE 11. BUSINESS SEGMENT INFORMATION
The Company has one operating segment, Hotels. The Hotels segment
represents a worldwide network of owned, leased and consolidated joint venture
hotels and resorts (operated primarily under the Company's proprietary brand
names including Sheraton, Westin, St. Regis/Luxury Collection, Four Points and
W) and hotels operated or flagged under these brand names in exchange for
management and franchise fees. This segment also includes earnings from the
Company's interests in unconsolidated joint ventures.
15
<PAGE> 17
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The performance of the Hotels segment is evaluated primarily on operating
profit before corporate selling, general and administrative expense, interest,
gains and losses on the sale of real estate and investments, and restructuring
and other special charges (credits). The Company does not allocate these items
to this segment.
The following table presents revenues, operating profit, assets and capital
expenditures for the Company's reportable segment:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ----------------
1999 1998 1999 1998
----- ----- ------ ------
<S> <C> <C> <C> <C>
Revenues................................................... $956 $884 $2,775 $2,394
==== ==== ====== ======
Operating profit (a)(b).................................... $214 $200 $ 622 $ 496
==== ==== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Assets:
Hotels.................................................... $11,931 $11,827
Corporate................................................. 246 487
Discontinued operations................................... 1,061 1,103
------- -------
$13,238 $13,417
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1999 1998
----- -----
<S> <C> <C>
Capital expenditures........................................ $120 $164
==== ====
</TABLE>
- -------------------
(a) Hotels operating profit has been reduced by the minority-owned portion of
consolidated joint ventures totaling $15 and $8 for the three months ended
September 30, 1999 and 1998, respectively, and $27 and $23 for the nine
months ended September 30, 1999 and 1998, respectively.
(b) The following costs are not allocated to Hotels in evaluating operating
profit:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Corporate selling, general and administrative............... $14 $ 41 $ 59 $ 72
Restructuring and other special charges (credits)........... $-- $185 $(41) $185
</TABLE>
NOTE 12. SUBSEQUENT EVENTS
The Company currently owns approximately 70.32% of the ordinary shares and
approximately 30.85% of the outstanding savings shares of CIGA S.p.A. On October
29, 1999, the Company announced that one of its wholly owned subsidiaries has
notified the Borsa Italiana S.p.A., CONSOB and CIGA S.p.A. that it intends to
make a tender offer to purchase all of the outstanding shares of CIGA S.p.A. not
currently owned. If all of the shares are tendered, the aggregate purchase price
would be approximately $297 million.
NOTE 13. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
16
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Forward-looking statements contained herein include, but are not limited
to, statements relating to the Company's objectives, strategies and plans, and
all statements (other than statements of historical fact) that address actions,
events or circumstances that the Company or its management expects, believes or
intends will occur in the future. Forward-looking statements are not guarantees
of future performance and involve risks and uncertainties that could cause
actual results to differ materially from historical results or those anticipated
at the time the forward-looking statements are made, including, without
limitation, risks and uncertainties associated with the following: the
Reorganization; the Trust's continued ability to qualify for taxation as a REIT;
completion of future acquisitions and dispositions, including the pending sale
of the Company's gaming operations; the availability of capital for acquisitions
and for renovations; execution of hotel renovation and expansion programs; the
ability to maintain existing management, franchise or representation agreements
and to obtain new agreements on favorable terms; competition within the lodging
industry; the cyclicality of the real estate business and the hotel business;
foreign exchange fluctuations; general real estate and national and
international economic conditions; political, financial and economic conditions
and uncertainties in countries in which the Company owns property or operates;
the ability of the Company, owners of properties it manages or franchises and
others with which it does business to address the Year 2000 issue, and the costs
associated therewith; the adoption by several European countries of the Euro as
their national currency; and the other risks and uncertainties set forth in
Starwood's annual, quarterly and current reports and proxy statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
RESULTS OF OPERATIONS
To facilitate a meaningful comparison between periods, this Management's
Discussion and Analysis focuses on the comparison of historical information for
the three and nine months ended September 30, 1999 with the historical
information for the three months ended September 30, 1998 and the Historical As
Adjusted (as defined below) information for the nine months ended September 30,
1998, respectively. Pro forma information for selling, general and
administrative and interest expense for these same periods is also provided.
Management believes this information provides the most meaningful comparison
among periods presented. The Historical As Adjusted information for the three
and nine months ended September 30, 1998 reflects the historical results of ITT,
inclusive of Starwood and Westin, as if the ITT Merger had taken place on
January 1, 1998. The pro forma information reflects the ITT Merger and certain
actual and planned asset dispositions as if they had occurred on January 1,
1998. Period-to-period comparisons of the Company's historical information are,
in management's view, less relevant to an understanding of the Company due to
the significance of the ITT Merger, the Westin Merger and the dispositions of
certain non-core assets.
17
<PAGE> 19
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
The following unaudited condensed consolidated pro forma statements of
operations for the three and nine months ended September 30, 1999 give effect as
of January 1, 1999 to certain actual and planned asset dispositions and certain
cost savings relating to the ITT Merger. The pro forma information is based upon
the historical financial information for the Company for the three and nine
months ended September 30, 1999 and the assumptions and adjustments set forth
below. The pro forma information does not purport to present what actual results
would have been had such transactions, in fact, occurred at January 1, 1999, or
to project results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Owned, leased and consolidated joint venture hotels........ $ 855 $ -- $ 855
Management and franchise fees.............................. 70 -- 70
Unconsolidated joint ventures and other.................... 31 -- 31
----- ---- -----
956 -- 956
----- ---- -----
COSTS AND EXPENSES
Owned, leased and consolidated joint venture hotels........ 587 -- 587
Selling, general and administrative........................ 37 -- 37
Depreciation and amortization.............................. 117 -- 117
----- ---- -----
741 -- 741
----- ---- -----
215 -- 215
Interest expense, net...................................... (125) 34(a) (90)
1(b)
Losses on sales of real estate and investments............. (8) -- (8)
----- ---- -----
82 35 117
Income tax expense......................................... (28) (12) (40)
Minority equity............................................ (10) -- (10)
----- ---- -----
Income from continuing operations.......................... $ 44 $ 23 $ 67
===== ==== =====
Earnings per Share -- basic................................ $0.23 $0.35
===== =====
Earnings per Share -- diluted.............................. $0.23 $0.34
===== =====
Weighted average number of Shares.......................... 186 186
===== =====
Weighted average number of Shares assuming dilution........ 187 195
===== =====
</TABLE>
- -------------------
(a) Represents the reduction of interest expense assuming the partial paydown of
the Company's senior secured notes facility ("Senior Secured Notes
Facility") with a portion of the estimated $3.2 billion of net proceeds from
the pending sale of the Company's gaming operations (including the Desert
Inn), net of the interest allocated to discontinued operations in the
historical results (see Note 4 in the notes to financial statements).
(b) Represents reduced deferred loan fee amortization on debt assumed to have
been paid down as of January 1, 1999 with proceeds from the disposition of
the Company's gaming operations (including the Desert Inn).
18
<PAGE> 20
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Owned, leased and consolidated joint venture hotels........ $2,496 $ -- $ 2,496
Management and franchise fees.............................. 195 -- 195
Unconsolidated joint ventures and other.................... 84 -- 84
------ ---- -------
2,775 -- 2,775
------ ---- -------
COSTS AND EXPENSES
Owned, leased and consolidated joint venture hotels........ 1,709 -- 1,709
Selling, general and administrative........................ 123 (7)(a) 116
Restructuring and other special credits.................... (41) -- (41)
Depreciation and amortization.............................. 353 -- 353
------ ---- -------
2,144 (7) 2,137
------ ---- -------
631 7 638
Interest expense, net...................................... (364) 87(b) (266)
4(c)
7(d)
Gains on sales of real estate and investments.............. 22 -- 22
Miscellaneous expense...................................... (15) -- (15)
------ ---- -------
274 105 379
Income tax expense......................................... (999) (38) (1,037)
Minority equity............................................ (14) -- (14)
------ ---- -------
Income (loss) from continuing operations................... $ (739) $ 67 $ (672)
====== ==== =======
Earnings per Share -- basic................................ $(3.98) $ (3.62)
====== =======
Earnings per Share -- diluted.............................. $(3.98) $ (3.62)
====== =======
Weighted average number of Shares.......................... 186 186
====== =======
Weighted average number of Shares assuming dilution........ 186 186
====== =======
</TABLE>
- -------------------
(a) Represents the estimated savings resulting from the combination of certain
identified benefit plans as a result of the ITT Merger as if the new
combined plans had been in place as of January 1, 1999.
(b) Represents the reduction of interest expense assuming the partial paydown of
the Company's Senior Secured Notes Facility with a portion of the estimated
$3.2 billion of net proceeds from the pending sale of the Company's gaming
operations (including the Desert Inn), net of the interest allocated to
discontinued operations in the historical results (see Note 4 in the notes
to financial statements).
(c) Represents the reduction of interest expense assuming the paydown of a
portion of the Senior Credit Facility with the net proceeds of approximately
$397 million from the disposition of ITT's remaining interest in MSG and
Educational Services as if those dispositions had occurred on January 1,
1999.
(d) Represents reduced deferred loan fee amortization on debt assumed to have
been paid down as of January 1, 1999 with proceeds from actual and planned
asset dispositions described in (b) and (c) above.
19
<PAGE> 21
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
The following unaudited condensed consolidated pro forma statements of
operations for the three and nine months ended September 30, 1998 give effect as
of January 1, 1998 to the ITT Merger and certain actual and planned asset
dispositions. The pro forma information for the three months ended September 30,
1998 is based upon the historical information for the Company for the three
months ended September 30, 1998 and the assumptions and adjustments set forth
below. The pro forma information for the nine months ended September 30, 1998 is
based upon the total of historical information for the Company for the nine
months ended September 30, 1998 combined with the historical results of the
Corporation (including Westin) and the Trust prior to the ITT Merger on February
23, 1998 ("Historical As Adjusted") and other assumptions and adjustments set
forth below. These statements do not purport to present what actual results
would have been had such transactions, in fact, occurred at January 1, 1998, or
to project results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Owned, leased and consolidated joint venture hotels......... $ 800 $ -- $ 800
Management and franchise fees............................... 55 -- 55
Unconsolidated joint ventures and other..................... 29 -- 29
------ ----- ------
884 -- 884
------ ----- ------
COSTS AND EXPENSES
Owned, leased and consolidated joint venture hotels......... 545 -- 545
Selling, general and administrative......................... 67 (22)(a) 45
Restructuring and other special charges..................... 185 -- 185
Depreciation and amortization............................... 105 -- 105
------ ----- ------
902 (22) 880
------ ----- ------
(18) 22 4
Interest expense, net....................................... (158) 8(b) (119)
26(c)
5(d)
------ ----- ------
(176) 61 (115)
Income tax (expense) benefit................................ 102 (56)(e) 46
Minority equity............................................. (5) -- (5)
------ ----- ------
Income (loss) from continuing operations.................... $ (79) $ 5 $ (74)
====== ===== ======
Earnings per Share -- basic................................. $(0.42) $(0.39)
====== ======
Earnings per Share -- diluted............................... $(0.42) $(0.39)
====== ======
Weighted average number of Shares........................... 199 199
====== ======
Weighted average number of Shares assuming dilution......... 199 199
====== ======
</TABLE>
- -------------------
(a) Represents the estimated savings resulting from the combination of certain
identified benefit plans for the period from January 1, 1998 to September
30, 1998, as a result of the ITT Merger, as if the new combined plans had
been in place as of January 1, 1998.
(b) Represents the reduction of interest expense assuming the paydown of a
portion of the Company's Senior Credit Facility with the net proceeds of
approximately $932 million from the following asset dispositions, as if the
dispositions had occurred on January 1, 1998. The dispositions include ITT's
interest in WBIS+, Channel 31 in New York City; MSG; Educational Services;
and the sale of an aircraft.
(c) Represents the reduction of interest expense assuming the partial paydown of
the Senior Secured Notes Facility with a portion of the estimated $3.2
billion of net proceeds from the pending sale of the Company's gaming
operations (including the Desert Inn), net of the interest allocated to
discontinued operations in the historical results (see Note 4 in the notes
to financial statements).
(d) Represents reduced deferred loan fee amortization on debt assumed to have
been paid down as of January 1, 1998 with proceeds from the actual and
planned asset dispositions described in (b) and (c) above.
(e) Represents the adjustment needed to reflect an effective tax rate of 40% on
historical net income and the pro forma adjustments, assuming the
Reorganization had occurred effective January 1, 1998.
20
<PAGE> 22
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------
OTHER
PRO FORMA HISTORICAL PRO FORMA
HISTORICAL STARWOOD(a) AS ADJUSTED ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Owned, leased and consolidated joint
venture hotels......................... $2,154 $241 $2,395 $ -- $2,395
Management and franchise fees........... 163 6 169 -- 169
Unconsolidated joint ventures and
other................................. 77 14 91 -- 91
------ ---- ------ ------ ------
2,394 261 2,655 -- 2,655
------ ---- ------ ------ ------
COSTS AND EXPENSES
Owned, leased and consolidated joint
venture hotels........................ 1,470 176 1,646 -- 1,646
Selling, general and administrative..... 168 11 179 (31)(b) 148
Restructuring and other special
charges............................... 185 -- 185 -- 185
Depreciation and amortization........... 309 43 352 13(c) 365
------ ---- ------ ------ ------
2,132 230 2,362 (18) 2,344
------ ---- ------ ------ ------
262 31 293 18 311
Interest expense, net................... (322) (25) (347) (39)(d) (269)
37(e)
66(f)
3(g)
11(h)
Gain on sale of real estate and
investments........................... 51 -- 51 -- 51
------ ---- ------ ------ ------
(9) 6 (3) 96 93
Income tax expense...................... 66 (2) 64 (101)(i) (37)
Minority equity......................... (12) 1 (11) -- (11)
------ ---- ------ ------ ------
Income (loss) from continuing
operations............................ $ 45 $ 5 $ 50 $ (5) $ 45
====== ==== ====== ====== ======
Earnings per Share -- basic............. $ 0.16 $ 0.16
====== ======
Earnings per Share -- diluted........... $ 0.16 $ 0.15
====== ======
Weighted average number of Shares....... 194 194
====== ======
Weighted average number of Shares
assuming dilution..................... 194 197
====== ======
</TABLE>
- -------------------
(a) Represents the historical results of the Corporation and the Trust,
inclusive of Westin, for the period of January 1, 1998 through the closing
of the ITT Merger on February 23, 1998.
(b) Represents the effects of termination of certain executives under
contractual severance agreements, net of additional costs for new executives
under employment contracts, removal of duplicate third-party consulting
fees, termination of certain advertising contracts and rental agreements
(less related termination fees) and the estimated savings resulting from the
combination of certain identified benefit plans as if the new combined plans
had been in place as of January 1, 1998.
(c) Represents the amortization expense related to the goodwill and intangible
assets recorded as a result of the purchase consideration exceeding the fair
market value of the combined net assets of Starwood and Westin, as if the
merger transactions had taken place on January 1, 1998.
(d) Represents the interest expense on the additional debt incurred to finance
the ITT Merger for the period January 1, 1998 through February 23, 1998 at
the Company's average borrowing rate.
(e) Represents the reduction of interest expense assuming the paydown of a
portion of the Company's Senior Credit Facility with the net proceeds of
approximately $932 million from the following asset dispositions, as if the
dispositions had occurred on January 1, 1998. The dispositions include ITT's
interest in WBIS+, Channel 31 in New York City; MSG; Educational Services;
and the sale of an aircraft.
(f) Represents the reduction of interest expense assuming the partial paydown of
the Senior Secured Notes Facility with a portion of the estimated $3.2
billion of net proceeds from the pending sale of the Company's gaming
operations (including the Desert Inn), net of the interest allocated to
discontinued operations in the historical results (see Note 4 in the notes
to financial statements).
(g) Represents the reduction of interest expense for the paydown of term loans
with the net proceeds of $239 million from the sale of 4.6 million Shares on
February 24, 1998 as if such offering had taken place on January 1, 1998.
(h) Represents reduced deferred loan fee amortization on debt assumed to have
been paid down as of January 1, 1998 with proceeds from the actual and
planned asset dispositions described in (e) and (f) above.
(i) Represents the adjustment needed to reflect an effective tax rate of 40% on
historical net income and the pro forma adjustments, assuming the
Reorganization had occurred effective January 1, 1998.
21
<PAGE> 23
HISTORICAL THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH
HISTORICAL/HISTORICAL AS ADJUSTED THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
CONTINUING OPERATIONS
Revenues. Revenues increased 8.1% and 4.5% to $956 million and $2.775
billion for the three and nine months ended September 30, 1999, respectively,
when compared to the corresponding periods in 1998. The increase in revenues was
primarily due to the 6.9% and 4.2% increase in revenues for the Company's owned,
leased and consolidated joint venture hotels to $855 million and $2.496 billion
for the three and nine months ended September 30, 1999, respectively, when
compared to $800 million and $2.395 billion in the corresponding periods of
1998. The increase resulted primarily from the 5.3% and 5.9% increase in
revenues at the Company's 169 owned, leased and consolidated joint venture
hotels (excluding minority interest in consolidated joint ventures) held in both
periods ("Same-Store Hotels") to $777 million and $2.337 billion for the three
and nine months ended September 30, 1999, respectively, when compared to $737
million and $2.207 billion in the same periods of 1998. The increase also
resulted from the acquisition, in July 1999, of the Westin hotel in Maui (the
Company previously had a 95% non-controlling interest in this property), the
opening of the 423-room W hotel in San Francisco in May 1999 and the 426-room W
hotel in Seattle in September 1999. The increase in revenues for the nine months
ended September 30, 1999 was offset, in part, by a $27 million decrease in
revenues as a result of the sale of nine hotels in May 1998 and the sale of the
Westin Central Park South in New York in July 1999. The increase in revenues at
the Same-Store Hotels resulted from an increase in revenue per available room
("REVPAR") at these hotels of 4.9% and 3.5% to $105 and $103 for the three and
nine months ended September 30, 1999, respectively, when compared to the same
periods of 1998. The increase in REVPAR at these hotels was attributed to an
increase in average daily rate ("ADR") of 3.6% and 3.5% to $145 and $147 for the
three and nine months ended September 30, 1999, respectively, when compared to
the corresponding 1998 periods. Occupancy for Same-Store Hotels rose to 72.3%
from 71.4% in the three months ended September 30, 1999 when compared to the
same period in 1998, and for the nine months ended September 30, 1999 versus
1998, occupancy remained flat at 70.0%. REVPAR at Same-Store Hotels in North
America increased 6.0% and 3.8% for the three and nine months ended September
30, 1999, respectively, when compared to the same periods of 1998. REVPAR at the
Company's international owned, leased and consolidated joint venture hotels
increased 3.0% and 2.9% for the three and nine months ended September 30, 1999,
respectively, when compared to the same periods of 1998.
Management and franchise fees earned by Starwood increased 27.3% and 15.4%
to $70 million and $195 million for the three and nine months ended September
30, 1999, respectively, when compared to $55 million and $169 million in the
corresponding periods of 1998. The increase resulted primarily from the addition
of hotels to the Company's management and franchise system and the stronger
performance at the Company's existing managed and franchised hotels. The Company
added 14 and 77 hotels to the management and franchise system during the three
and nine months ended September 30, 1999, respectively, offset by 3 and 18
hotels deleted from the system during the same periods.
Revenues from unconsolidated joint ventures and other were $31 million and
$84 million for the three and nine months ended September 30, 1999,
respectively, versus $29 million and $91 million, respectively, in the same
periods of 1998.
Costs and Expenses. Costs and expenses for the Company's owned, leased and
consolidated joint venture hotels increased 7.7% and 3.8% to $587 million and
$1.709 billion for the three and nine months ended September 30, 1999,
respectively, when compared to $545 million and $1.646 billion in the
corresponding periods of 1998. The increase in costs and expenses is due
primarily to the reopening of hotels in late 1998 that were not operating at
full capacity during most of 1998 because they were under renovation as well as
the addition of the Westin hotel in Maui and the opening of the W hotels in San
Francisco and Seattle discussed above.
Selling, general and administrative expenses were $37 million and $67
million for the three months ended September 30, 1999 and 1998, respectively.
The decrease was primarily due to the inclusion, in the 1998 period, of a $30
million charge primarily related to the vesting of certain restricted stock
granted earlier in 1998 to the former President and Chief Operating Officer of
the Company. The decrease was also due to savings associated with the ITT Merger
and Westin Merger that resulted in the ITT World Headquarters
22
<PAGE> 24
closure in New York and a significant downsizing at the Westin office in
Seattle, Washington and the Sheraton office in Boston, Massachusetts, offset by
the increase in corporate employees at the Company's new headquarters in White
Plains, New York. Selling, general and administrative expenses were $123 million
and $179 million for the nine months ended September 30, 1999 and 1998,
respectively. This decrease was primarily due to the 1998 vesting of restricted
stock and savings associated with the ITT Merger and Westin Merger noted above,
offset by the increase in corporate employees also noted above and by the
inclusion in selling, general and administrative expenses, in the first quarter
of 1998, of a foreign exchange gain of $7 million.
EBITDA.(1) EBITDA at the Company's owned, leased and consolidated joint
venture hotels rose approximately 6.8% and 5.6% to $252 million and $755 million
for the three and nine months ended September 30, 1999, respectively, when
compared to the same periods in 1998. This increase is due, in part, to the
addition of the Westin hotel in Maui and the W hotels in San Francisco and
Seattle discussed previously, offset by an approximate $11 million reduction in
EBITDA as a result of the sale of nine hotels in May 1998 and the Westin Central
Park South in July 1999. EBITDA for the Company's Same-Store Hotels increased to
$244 million and $747 million for the three and nine months ended September 30,
1999, respectively, from $231 million and $704 million for the three and nine
months ended September 30, 1998, respectively. The EBITDA improvement at the
Same-Store Hotels was due primarily to the increase in ADR discussed previously.
Depreciation and Amortization. Depreciation and amortization expense
increased to $117 million and $353 million in the three and nine months ended
September 30, 1999, respectively, compared to $105 million and $352 million in
the corresponding periods of 1998. The increase in depreciation expense for the
three months ended September 30, 1999 was primarily attributed to the addition
of the Westin hotel in Maui and the opening of the W hotels in San Francisco and
Seattle. The increase for the nine months ended September 30, 1999 was primarily
attributed to the hotel additions discussed above, offset by a reduction in
depreciation expense as a result of the sale of nine hotels in May 1998. The
increase in depreciation expense for the three and nine months ended September
30, 1999 was also attributed to the completion, in December 1998, of a
significant renovation of the W hotel in New York, New York.
Net Interest Expense. Interest expense for the three months ended September
30, 1999 and 1998, which is net of interest income of $5 million and $6 million,
respectively, and discontinued gaming operations allocations of $42 million and
$40 million, respectively, decreased to $125 million from $158 million. The
decrease relates primarily to the inclusion, in the third quarter of 1998, of a
$40 million non-recurring charge associated with the settlement of certain
forward interest swap agreements as well as a reduction in debt of approximately
$730 million from the proceeds of non-core asset dispositions since the third
quarter of 1998, partially offset by an increase in the average debt balance due
to the repurchase of approximately $720 million in Shares since the middle of
the third quarter of 1998. Interest expense for the nine months ended September
30, 1999 and 1998, which is net of interest income of $15 million and $22
million, respectively, and discontinued gaming operations allocations of $122
million and $120 million, respectively, was $364 million and $347 million,
respectively. The increase relates primarily to the debt incurred to finance the
ITT Merger and Westin Merger, the inclusion in 1998, of the $40 million
non-recurring charge noted above, the repurchase of Shares and capital
expenditures, offset by the reduction in debt from the proceeds from
dispositions noted previously.
- ---------------
(1) EBITDA is defined as income before interest expense, income tax expense,
depreciation and amortization and minority interest. Non-recurring items and
gains and losses from sales of real estate and investments are also excluded
from EBITDA as these items do not impact operating results on a recurring
basis. Management considers EBITDA to be one measure of the cash flows from
operations of the Company before debt service that provides a relevant basis
for comparison, and EBITDA is presented to assist investors in analyzing the
performance of the Company. This information should not be considered as an
alternative to any measure of performance as promulgated under generally
accepted accounting principles, nor should it be considered as an indicator
of the overall financial performance of the Company. The Company's
calculation of EBITDA may be different from the calculation used by other
companies and, therefore, comparability may be limited.
23
<PAGE> 25
DISCONTINUED OPERATIONS
Results for the Company's gaming operations and former investments in WD
and Educational Services are included in discontinued operations in the nine
months ended September 30, 1999 and the three and nine months ended September
30, 1998. Net loss from discontinued operations was $27 million and $59 million
for the three and nine months ended September 30, 1998, respectively. These
results include the allocation of pretax corporate interest expense of $40
million and $120 million in the three and nine months ended September 30, 1998,
respectively. The anticipated operating results of the gaming operations were
provided for in the first quarter of 1999 in the estimated net loss on the
disposal of the discontinued gaming operations.
The after-tax loss on the disposition of discontinued operations for the
nine months ended September 30, 1999 was $7 million and includes, on an
after-tax basis, a $173 million gain on the sale of the Company's remaining
interest in Educational Services, offset by an estimated $180 million loss on
the pending disposition of the Company's gaming operations. After-tax gains of
$25 million and $1.165 billion were recognized in the three and nine months
ended September 30, 1998, respectively, in connection with the Educational
Services and WD dispositions.
Revenues from discontinued gaming operations increased 2.8% and 12.1% to
$402 million and $1.164 billion for the three and nine months ended September
30, 1999, respectively, when compared to the corresponding periods of 1998.
Costs and expenses from discontinued gaming operations for the three and nine
months ended September 30, 1999 increased 4.8% and 11.1% to $349 million and
$1.033 billion, respectively, when compared to the same periods of 1998. Costs
and expenses exclude a third quarter 1998 restructuring charge of $55 million
relating to a write-down of certain receivables and an investment in a shared
services center established by ITT. The increase in revenues and costs and
expenses resulted primarily from the opening of Caesars Indiana in November
1998. The results of the discontinued gaming operations from April 1, 1999 (date
of announcement of the formal plan to dispose of gaming operations) through
September 30, 1999 are included in the net gain (loss) on the disposition of
discontinued operations for the three and nine months ended September 30, 1999
as noted previously.
EBITDA from discontinued gaming operations for the three and nine months
ended September 30, 1999 was $102 million and $275 million, respectively,
compared to $96 million and $213 million in the corresponding periods of 1998.
EBITDA excludes a third quarter 1998 restructuring charge of $55 million
discussed above. The increase in gaming EBITDA resulted from improved
performances at Caesars Atlantic City and the opening of Caesars Indiana.
PRO FORMA THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH PRO FORMA
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
The discussion and analysis above regarding Historical and Historical As
Adjusted results is applicable to the operating results of the Company on a pro
forma basis except for selling, general and administrative expenses and interest
expense. Therefore, the following discussion and analysis of pro forma results
is provided to facilitate a meaningful comparison of these expenses between
periods.
CONTINUING OPERATIONS
Costs and Expenses. Selling, general and administrative expenses decreased
to $37 million from $45 million for the three months ended September 30, 1999
and 1998, respectively. The decrease was primarily due to the inclusion, in the
1998 period, of a $30 million charge primarily related to the vesting of certain
restricted stock granted earlier in 1998 to the former President and Chief
Operating Officer of the Company. The decrease was also due to savings
associated with the ITT Merger and Westin Merger that resulted in the ITT World
Headquarters closure in New York and a significant downsizing at the Westin
office in Seattle, Washington and the Sheraton office in Boston, Massachusetts,
offset by the increase in corporate employees at the Company's new headquarters
in White Plains, New York and the inclusion, in the third quarter of 1998, of a
$22 million pro forma adjustment to reflect the identified savings from the
combination of certain benefit plans of which $15 million related to the first
and second quarters of 1998. Selling, general and administrative expenses
decreased to $116 million from $148 million for the nine months ended September
30, 1999 and
24
<PAGE> 26
1998, respectively. This decrease was due primarily to the 1998 vesting of
restricted stock and savings associated with the ITT Merger and Westin Merger
noted above, offset by the increase in corporate employees noted above and the
inclusion in selling, general and administrative expenses, in the first quarter
of 1998, of a foreign exchange gain of $7 million.
Net Interest Expense. Interest expense for the three months ended
September 30, 1999 and 1998, which is net of interest income of $5 million and
$6 million, respectively, and discontinued gaming operations allocations of $76
million and $62 million in 1999 and 1998, respectively, decreased to $90 million
in 1999 from $119 million in 1998. Interest expense for the nine months ended
September 30, 1999 and 1998, which is net of interest income of $15 million and
$22 million, respectively, and discontinued gaming operations allocations of
$209 million and $201 million in 1999 and 1998, respectively, decreased to $266
million in 1999 from $269 million in 1998. These decreases relate primarily to
the inclusion, in the third quarter of 1998, of a $40 million non-recurring
charge associated with the settlement of certain forward interest swap
agreements, partially offset by an increase in the average debt balance due to
the repurchase of approximately $720 million of Shares since the middle of the
third quarter of 1998 in connection with the Company's Share repurchase program.
SEASONALITY AND DIVERSIFICATION
The hotel industry is seasonal in nature; however, the periods during which
the Company's properties experience higher hotel revenue activities vary from
property to property and depend principally upon location. The Company's
revenues historically have been lower in the first quarter than in the second,
third or fourth quarters.
COMPARABLE OWNED HOTEL RESULTS
Starwood continually updates and renovates its owned, leased and
consolidated joint venture hotels. While undergoing renovation, these hotels are
generally not operating at full capacity and, as such, these renovations can
negatively impact Starwood's hotel revenues. Starwood expects to continue
renovating its owned, leased and consolidated joint venture hotels in the fourth
quarter of 1999 and 2000 to pursue its brand and quality strategies.
The following table summarizes average occupancy, ADR and REVPAR for the
Company's comparable owned, leased and consolidated joint venture hotel
properties for the three and nine months ended September 30, 1999 and 1998. The
results for the three months represent results for 153 owned, leased and
consolidated joint venture hotels (excluding 19 hotels under significant
renovation, held for sale or for which comparable results are not available).
The results for the nine months represent results for 144 owned, leased and
consolidated joint venture hotels (excluding 28 hotels under significant
renovation, held for sale or for which comparable results are not available).
25
<PAGE> 27
OWNED, LEASED AND CONSOLIDATED JOINT VENTURE HOTELS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998 VARIANCE
------- ------- --------
<S> <C> <C> <C>
WORLDWIDE
Number of hotels........................................... 153
Number of rooms............................................ 49,335
REVPAR..................................................... $106.58 $101.77 4.7%
ADR........................................................ $145.94 $141.46 3.2%
Occupancy.................................................. 73.0% 71.9% 1.1
NORTH AMERICA
Number of hotels........................................... 105
Number of rooms............................................ 35,925
REVPAR..................................................... $100.93 $ 95.79 5.4%
ADR........................................................ $134.90 $131.48 2.6%
Occupancy.................................................. 74.8% 72.9% 1.9
INTERNATIONAL
Number of hotels........................................... 48
Number of rooms............................................ 13,410
REVPAR..................................................... $121.86 $117.67 3.6%
ADR........................................................ $178.67 $169.24 5.6%
Occupancy.................................................. 68.2% 69.5% (1.3)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998 VARIANCE
------- ------- --------
<S> <C> <C> <C>
WORLDWIDE
Number of hotels........................................... 144
Number of rooms............................................ 44,973
REVPAR..................................................... $106.93 $102.29 4.5%
ADR........................................................ $148.36 $143.27 3.6%
Occupancy.................................................. 72.1% 71.4% 0.7
NORTH AMERICA
Number of hotels........................................... 97
Number of rooms............................................ 31,884
REVPAR..................................................... $103.87 $ 98.79 5.1%
ADR........................................................ $141.37 $137.04 3.2%
Occupancy.................................................. 73.5% 72.1% 1.4
INTERNATIONAL
Number of hotels........................................... 47
Number of rooms............................................ 13,089
REVPAR..................................................... $114.46 $110.76 3.3%
ADR........................................................ $166.84 $158.87 5.0%
Occupancy.................................................. 68.6% 69.7% (1.1)
</TABLE>
26
<PAGE> 28
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Cash flow from operating activities is the principal source of cash used to
fund the Company's operating expenses, interest expense, recurring capital
expenditures and distribution payments by the Trust. The Company anticipates
that cash flow provided by operating activities will be sufficient to service
short-term and long-term indebtedness, fund maintenance requirements and capital
expenditures and meet operating cash requirements, including all distributions
to shareholders.
CASH FLOW FROM INVESTING AND FINANCING ACTIVITIES
In addition to cash flow from operating activities, the Company intends to
finance the acquisition of additional hotel properties (including equity
investments), hotel renovations, capital improvements and other core business
acquisitions and provide for general corporate purposes through its credit
facilities described below, through the net proceeds from dispositions of
certain non-core assets and, when market conditions warrant, through the
issuance of additional equity or debt securities.
During 1998, the Company completed over $2.9 billion in non-core asset
divestitures. As of January 1, 1999 through the date of this filing, Starwood
has completed approximately $850 million of non-core asset divestitures.
Management expects to complete the sale of its gaming operations (excluding the
Desert Inn) and the Desert Inn for aggregate net proceeds of approximately $3.2
billion by year-end 1999 and the second quarter of 2000, respectively. In
addition, the Company plans to evaluate its portfolio of owned hotels and
dispose of non-strategic assets. The proceeds from the completed divestitures
have been used primarily to retire debt, and the Company plans to use the
proceeds generated from future divestitures to pay down debt, to buy back Shares
and for general corporate purposes.
As a result of the Reorganization, Starwood will pay significantly more in
federal income taxes, and will have the ability to retain significantly more
earnings than was previously the case. Starwood anticipates that its enhanced
ability to retain earnings will allow it to utilize cash flow from operating
activities to fund maintenance, capital expenditures and acquisitions.
DISTRIBUTIONS. In connection with the Reorganization, the Company reduced
its annual distribution to be paid by the Trust to $0.60 per Share. During the
first, second and third quarters of 1999, the Trust paid a distribution of $0.15
per Share for the fourth quarter of 1998 and each of the first and second
quarters of 1999. A distribution of $0.15 per Share for the third quarter of
1999 was paid on October 22, 1999.
27
<PAGE> 29
Following is a summary of the Company's debt portfolio as of September 30,
1999:
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT INTEREST RATE AT
AMOUNT OF SEPTEMBER 30, SEPTEMBER 30, AVERAGE
FACILITY 1999 INTEREST TERMS 1999 MATURITY
--------- -------------- -------------- ---------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FLOATING RATE DEBT
Senior Credit Facility:
Five-Year Term Loan........... $1,000 $ 1,000 LIBOR+1.00% 6.40% 3.4 years
Revolving Credit Facility..... 1,100 588 LIBOR+1.00% 6.40% 3.4 years
Senior Secured Notes Facility:
Tranche One Loans............. 2,500 2,500 LIBOR+3.75% 9.15% 3.4 years
Tranche Two Loans............. 1,000 1,000 LIBOR+2.75% 8.15% 3.4 years
Mortgages and other............. 477 Various 6.06% 5.2 years
Long-term interest rate swaps... (1,083) 5.39% --
-------
Total/average................... $ 4,482 8.53% 3.6 years
======= ===== ==========
FIXED RATE DEBT
ITT public debt................. $ 1,995 6.79% 7.9 years
Mortgages and other............. 870 7.36% 11.6 years
Long-term interest rate swaps... 1,083 6.04% --
-------
Total/average................... $ 3,948 6.71% 8.9 years
======= ===== ==========
TOTAL DEBT
Total debt and average terms.... $ 8,430 7.68% 5.4 years
------- ===== ==========
Less: debt allocated or
attributable to discontinued
gaming operations............. (2,182)
-------
Total debt directly attributable
to continuing operations...... $ 6,248
=======
</TABLE>
In February 1999, the Company entered into a $542 million long-term
mortgage financing ("Mortgage Loan"), secured by the assets of special purpose
subsidiaries, which assets consist primarily of a portfolio of 11 hotels. This
obligation bears interest at a blended rate of 6.98%, matures February 2009 and
includes various restrictive covenants including, but not limited to, various
cash restrictions, capital expenditure requirements and restrictions on the sale
of the hotels. The proceeds from this facility were used to pay down the asset
sale loan under the Senior Credit Facility.
In March 1999, certain subsidiaries of the Company entered into an $83
million long-term debt obligation secured by mortgages on two international
hotels. This obligation bears interest at LIBOR plus 1.35%, matures in March
2006 and is subject to various restrictive covenants including maintaining a
minimum debt service coverage ratio. The proceeds from this financing were used
to pay down certain intercompany loans due from the international hotels.
In August 1999, Caesars World, Inc., a wholly owned subsidiary of the
Company, redeemed senior subordinated notes for an aggregate payment of $152
million recognizing an extraordinary pretax loss of $3 million.
Based upon the current level of operations, the proceeds from recent
dispositions and the expected disposition of the gaming operations, together
with available borrowings under the Senior Credit Facility, management believes
that the Company's cash flow from operations will be adequate to meet the
Company's anticipated requirements for working capital, capital expenditures,
marketing and advertising expenditures, program and other discretionary
investments, interest payments and scheduled principal payments for the
foreseeable future, including at least the next three years. There can be no
assurance, however, that the
28
<PAGE> 30
Company's business will continue to generate cash flow at or above current
levels or that currently anticipated improvements will be achieved. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its debt, the Company may be required to sell assets, reduce capital
expenditures, refinance all or a portion of its existing debt or obtain
additional financing. The Company's ability to make scheduled principal
payments, to pay interest on or to refinance its indebtedness depends on its
future performance and financial results, which, to a certain extent, are
subject to general conditions in or affecting the hotel industry and to general
economic, political, financial, competitive, legislative and regulatory factors
beyond the Company's control. There can be no assurance that sufficient funds
will be available to enable the Company to service its indebtedness or to make
necessary capital expenditures, marketing and advertising expenditures and
program and other discretionary investments.
STOCK SALES AND REPURCHASES
As a part of its ongoing Share repurchase program, the Company sold equity
put options during 1998 for $1.8 million, which options entitled the holder, at
the expiration date, to sell one million Shares to the Company at contractually
specified prices. During the first quarter of 1999, the Company repurchased
500,000 Shares for $16 million under a portion of the equity put option
contracts. In the first quarter of 1999, all of the remaining equity put option
contracts had expired.
Pursuant to the Share repurchase program, the Company repurchased
approximately 1.6 million Shares in the open market at an average purchase price
of $25.67 during the third quarter of 1999.
OTHER MATTERS
YEAR 2000
Many computer systems were originally designed to recognize calendar years
by the last two digits in the date code field. Beginning with dates in the year
2000, these date code fields need to accept four-digit entries to distinguish
twenty-first century dates from twentieth century dates ("Year 2000 Compliant").
As a result, the computerized systems, which include information technology and
non-information technology systems, and applications used by the Company need to
be reviewed, evaluated and modified or replaced, if necessary, to ensure all
such financial, information and operational systems are Year 2000 Compliant.
STATE OF READINESS. Starwood is addressing the Year 2000 Compliance issue
by separately focusing on the Company's central facilities, which include all of
its non-operating facilities, and on the Company's hotel properties.
Starwood has identified the critical central facility business applications
that may be affected by the Year 2000, such as the reservation system
application, including the frequent stay programs, and communication system
applications. The Company has conducted the discovery and assessment stages on
the reservations and communication system applications and assembled a team to
implement modifications or upgrades, as necessary, and to test results. The
majority of the Company's core business applications passed the final testing,
which was performed by internal personnel and independent third parties in the
second quarter of 1998. This testing process consisted of testing of the
internal code and conducting over 9,000 test cases on the applicable systems.
The specific testing included a three-step process comprised of baseline tests,
Year 2000 date tests and code enhancement tests. Additional independent and
internal testing took place during 1999 that validated previous findings of Year
2000 readiness.
Starwood has communicated with others with whom it does significant
business to determine their Year 2000 Compliance. During 1998, Starwood and an
independent third-party reservation information service provider began testing
to ensure the compatibility of the Company's reservation system with the service
provider's reservation services. Starwood and this service provider have
substantially completed their compatibility validation testing; although
Starwood believes that these tests were successful, there can be no assurances
that these systems are fully compatible for purposes of complete Year 2000
Compliance.
29
<PAGE> 31
Starwood also assessed its hardware components at its central facilities,
all of which were modified or upgraded, as necessary, to ensure Year 2000
Compliance.
Starwood has completed the initial assessment of the applications and
hardware at substantially all of the Company's owned and managed hotel
properties. In the third quarter of 1998, validation tools and resources were
deployed to the hotel properties that did not have an existing program in place.
These tools consisted of asset management tools for analysis of all applications
and data checking tools for patch application purposes and testing Year 2000
readiness of the equipment. Any equipment failing the testing was remediated.
The domestic Year 2000 team has substantially completed its visits to domestic
hotel properties. The team is comprised of independent consultants and five
individuals from the Company that are dedicated to the Year 2000 project. Each
of the international properties had appointed internal personnel to address Year
2000 Compliance and has access to such independent consultants, if necessary.
The test statistics for the hotel property applications and hardware have been
collected through the combined efforts of internal staff, Year 2000 team members
and third-party consultants. Substantially all of the critical hotel property
applications and hardware have satisfied Year 2000 Compliance verification.
Starwood expects to address remaining remediation efforts by the end of 1999,
although there can be no assurances that this will be completed by the end of
1999.
YEAR 2000 PROJECT COSTS. Starwood estimates that total costs for the Year
2000 Compliance review, evaluation, assessment and remediation efforts for the
central facilities and owned hotel properties should not exceed $20 million,
although there can be no assurance that actual costs will not exceed this
amount. Of this amount, approximately $13 million had been expended as of
September 30, 1999.
STARWOOD YEAR 2000 RISKS. Since all major computerized central facilities
reservation systems and applications have been tested and reservations for the
year 2000 have been accepted, Starwood believes that it has addressed all
significant risks related to the Company's reservation function. The remaining
risks relate primarily to the non-critical business applications, support
hardware for the central facilities and embedded systems at the properties owned
or managed by the Company. A failure of certain of these systems to become Year
2000 Compliant could disrupt the timeliness or the accuracy of management
information provided by the central facilities.
Starwood has asked substantially all of its significant vendors and service
providers to provide reasonable assurances as to those parties' Year 2000 state
of readiness. To the extent that vendors and service providers do not provide
satisfactory evidence that their products and services are Year 2000 Compliant,
the Company has and will continue to seek to obtain the necessary products and
services from alternative sources. There can be no assurance, however, that Year
2000 remediation by vendors and service providers will be completed timely or
that qualified replacement vendors and service providers will be available, and
any failure of such third parties' systems could have a material adverse impact
on the Company's computer systems and operations.
CONTINGENCY PLAN. Starwood appointed an internal committee to direct the
contingency planning efforts. This team is comprised of individuals who
represent various disciplines within the organization. The team created
contingency planning guidelines that were distributed to all hotels. The
contingency planning has been substantially completed by a majority of hotels by
October 31, 1999. Although it is expected that substantially all of the
remaining hotels will have completed their contingency plans by November 30,
1999, there can be no assurance that they will be completed on schedule. Also,
testing of these contingency plans, including training of hotel personnel, has
commenced. The majority of critical contingency plans are expected to have been
tested by November 30, 1999. The balance of this testing will continue
throughout the month of December 1999.
EUROPEAN UNION CURRENCY CONVERSIONS
On January 1, 1999, 11 of the 15 member countries of the European Union
(the "Participating Countries") established fixed conversion rates between their
existing sovereign currencies and the Euro. Following the introduction of the
Euro, the legacy currencies of the Participating Countries will remain legal
tender during a transition period ending on January 1, 2002. During the
transition period, both the legacy
30
<PAGE> 32
currency and the Euro will be legal tender in the respective Participating
Countries. During the transition period, currency conversions will be computed
by a triangulation with reference to conversion rates between the respective
currencies and the Euro. The Company currently operates in 10 of the 11
Participating Countries. The effect on the Company of the adoption of the Euro
by the Participating Countries in which it operates is currently uncertain.
However, it is possible that the Euro adoption will result in increased
competition within the European market. In addition, a number of the Company's
information systems are not currently Euro compliant. The Company is currently
evaluating and updating its information systems to make them Euro compliant;
however, there is no assurance that the Company or third-party vendors of
applications used by the Company will successfully bring all of their systems
into compliance. Failure of the Company or such third parties to do so could
result in disruptions in the processing of transactions in Euros or computed by
reference to the Euro.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There were no material changes to the information provided in Item 7A in
the Company's Joint Annual Report on Form 10-K, as amended, regarding the
Company's market risk.
31
<PAGE> 33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in various claims and lawsuits arising in the
ordinary course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
As a part of its ongoing Share repurchase program, the Company sold equity
put options during 1998 for $1.8 million, which options entitled the holder, at
the expiration date, to sell one million Shares to the Company at contractually
specified prices. During the first quarter of 1999, the Company repurchased
500,000 Shares for $16 million under a portion of the equity put option
contracts. In the first quarter of 1999, all of the remaining equity put option
contracts had expired. The offer and sale of these options was exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) thereof.
Pursuant to the Share repurchase program, the Company repurchased
approximately 1.6 million Shares in the open market at an average purchase price
of $25.67 during the third quarter of 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.1 Eighth Amendment to the Credit Agreement and Modification to
Pledge and Security Agreement, dated as of July 2, 1999,
among the Trust, Realty Partnership, the Corporation, ITT,
the lenders party to the Credit Agreement, Bankers Trust
Company and The Chase Manhattan Bank, as Administrative
Agents, Lehman Commercial Paper Inc. and Bank of Montreal,
as Syndication Agents, and Bankers Trust Company, as
Collateral Agent.(1)
10.2 Ninth Amendment to the Credit Agreement and Modification to
Pledge and Security Agreement, dated as of September 20,
1999, among the Trust, Realty Partnership, the Corporation,
ITT, the lenders party to the Credit Agreement, Bankers
Trust Company and The Chase Manhattan Bank, as
Administrative Agents, Lehman Commercial Paper Inc. and Bank
of Montreal, as Syndication Agents, and Bankers Trust
Company, as Collateral Agent.(1)
27.1 Financial Data Schedule for the Corporation.(1)
27.2 Financial Data Schedule for the Trust.(1)
</TABLE>
- -------------------
(1) Filed herewith.
(b) REPORTS ON FORM 8-K
Starwood filed the following Current Reports on Form 8-K during the third
quarter of 1999:
(i) Joint Current Report on Form 8-K dated July 21, 1999, reporting under
Item 5 the execution by Starwood of an Agreement and Plan of Merger
with Vistana relating to the merger of Vistana into a subsidiary of
Starwood.
(ii) Joint Current Report on Form 8-K dated July 23, 1999, reporting under
Items 5 and 7 the restatement of Starwood's financial statements to
reflect Starwood's gaming operations as a discontinued operation.
32
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
STARWOOD HOTELS & RESORTS STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By: /s/ RONALD C. BROWN
By: /s/ RONALD C. BROWN -------------------------------------------------
------------------------------------------------- Ronald C. Brown
Ronald C. Brown Vice President and Chief Financial
Executive Vice President and and Accounting Officer
Chief Financial Officer
</TABLE>
Date: November 12, 1999
33
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.1 Eighth Amendment to the Credit Agreement and Modification to
Pledge and Security Agreement, dated as of July 2, 1999,
among the Trust, Realty Partnership, the Corporation, ITT,
the lenders party to the Credit Agreement, Bankers Trust
Company and The Chase Manhattan Bank, as Administrative
Agents, Lehman Commercial Paper Inc. and Bank of Montreal,
as Syndication Agents, and Bankers Trust Company, as
Collateral Agent.(1)
10.2 Ninth Amendment to the Credit Agreement and Modification to
Pledge and Security Agreement, dated as of September 20,
1999, among the Trust, Realty Partnership, the Corporation,
ITT, the lenders party to the Credit Agreement, Bankers
Trust Company and The Chase Manhattan Bank, as
Administrative Agents, Lehman Commercial Paper Inc. and Bank
of Montreal, as Syndication Agents, and Bankers Trust
Company, as Collateral Agent.(1)
27.1 Financial Data Schedule for the Corporation.(1)
27.2 Financial Data Schedule for the Trust.(1)
</TABLE>
- -------------------
(1) Filed herewith.
<PAGE> 1
EXHIBIT 10.1
EIGHTH AMENDMENT TO CREDIT AGREEMENT AND MODIFICATION TO
PLEDGE AND SECURITY AGREEMENT
EIGHTH AMENDMENT TO CREDIT AGREEMENT AND MODIFICATION TO
PLEDGE AND SECURITY AGREEMENT (this "Amendment"), dated as of July 2, 1999,
among STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust
("Starwood REIT"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership ("SLT RLP"), STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation (the "Corporation"), ITT CORPORATION, a Nevada corporation
("ITT" and, together with Starwood REIT, SLT RLP and the Corporation, the
"Original Borrowers"), the other Credit Parties (as defined in the Credit
Agreement referred to below), the lenders from time to time party to the Credit
Agreement referred to below (the "Lenders"), BANKERS TRUST COMPANY and THE CHASE
MANHATTAN BANK, as Administrative Agents (in such capacity, the "Administrative
Agents") and LEHMAN COMMERCIAL PAPER INC. and BANK OF MONTREAL, as Syndication
Agents (in such capacity, the "Syndication Agents") and BANKERS TRUST COMPANY,
as Collateral Agent (in such capacity, the "Collateral Agent"). Unless otherwise
defined herein, all capitalized terms used herein shall have the respective
meanings provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Original Borrowers, the Lenders, the
Administrative Agents and the Syndication Agents are parties to that certain
Credit Agreement, dated as of February 23, 1998 (as amended, modified or
supplemented to the date hereof, the "Credit Agreement");
WHEREAS, the Credit Parties and the Collateral Agent are
parties to that certain Pledge and Security Agreement as defined in the Credit
Agreement (as amended, modified or supplemented to the date hereof, the "Pledge
and Security Agreement");
WHEREAS, SLT RLP presently owns ninety-nine (99) shares of
common stock, no par value, of ITT (the "Option Shares"), which Option Shares
represent 9.9 percent of the issued and outstanding shares of Capital Stock of
ITT;
WHEREAS, the Corporation desired to obtain the ability to
purchase all or a portion of the Option Shares from SLT RLP in order to provide
flexibility for structuring future transactions;
WHEREAS, SLT RLP granted to the Corporation, and the
Corporation purchased from SLT RLP, an option to acquire from time to time all
or a portion of the Option Shares from SLT RLP pursuant to that certain Option
Agreement (the "Option Agreement") dated as of March 8, 1999, a true, correct
and complete copy of which is attached hereto as EXHIBIT A;
<PAGE> 2
WHEREAS, the Parent Companies are requesting the Lenders'
consent to the performance by the Corporation and SLT RLP of their respective
obligations under the Option Agreement in accordance with the terms of the
Option Agreement, including, without limitation, (i) the granting of the option
by SLT RLP to the Corporation and the payment of consideration in connection
therewith and (ii) the exercise of all or any part of the option from time to
time by the Corporation and the payment of consideration in connection therewith
(all of the foregoing being collectively referred to herein as the "ITT Stock
Option Transaction"); it being understood and agreed that the Option Shares will
at all times (both before and after any purchase thereof pursuant to the Option
Agreement) be pledged, and be delivered for pledge, pursuant to the Pledge and
Security Agreement;
WHEREAS, on or about April 27, 1999, the Corporation, ITT,
Starwood Canada Corp. ("Starwood Canada"), Caesars World, Inc. ("Caesars
World"), Sheraton Desert Inn Corporation, Sheraton Tunica Corporation ("Tunica")
and Park Place Entertainment Corporation ("Park Place") entered into a Stock
Purchase Agreement (as amended or modified from time to time and in accordance
with the requirements of Section 2(d) of Part I of this Amendment, the "Caesars
Stock Purchase Agreement") pursuant to which, inter alia, Park Place agreed to
purchase, and the Corporation and certain Subsidiaries of the Corporation agreed
to sell, (i) all of the outstanding shares of common stock of each of Caesars
World and Tunica and (ii) all of Starwood Canada's partnership interests in
Metropolitan Entertainment Group, a Canadian partnership, which partnership
interests represent ninety-five percent (95%) of the economic ownership interest
therein (all of the foregoing, the "Caesars World Sale" and, together with the
matters described in the following four recitals, being collectively referred to
herein as the "Caesars World Transaction" and the date upon which the Caesars
World Sale is consummated being referred to as the "Caesars World Effective
Date");
WHEREAS, approximately $150 Million in aggregate principal
amount of Senior Subordinated Debt Securities of Caesars World are currently
outstanding pursuant to that certain Indenture dated as of August 15, 1992 (the
"Caesars Bonds"), and the Corporation desires to redeem all of the outstanding
Caesars Bonds;
WHEREAS, certain real property assets relating to the Caesars
World Sale (collectively, the "Caesars World Assets") presently secure the
Intercompany Mortgage Note, and it is a condition to the consummation of the
Caesars World Sale that the Caesars World Assets be released from the collateral
security for the Intercompany Mortgage Note;
WHEREAS, in connection with the release of the Caesars World
Assets, (i) the Corporation and ITT may either (x) reduce the outstanding
principal balance of the Intercompany Mortgage Note by all or any portion of the
minimum amount (the "Undercollateralized Amount") necessary to prevent the
Intercompany Mortgage Note from being undercollateralized after the release of
the Caesars World Assets (the amount of such reduction being referred to herein
as the "Intercompany Mortgage Reduction Amount") and (y) cause a portion of the
payee's interest under the Intercompany Mortgage Note in an amount equal to all
or a portion of the Undercollateralized Amount to be assigned or distributed to
the Corporation or any Wholly-
-2-
<PAGE> 3
Owned Domestic Subsidiary of the Corporation, subject to the requirements
hereinafter set forth and (ii) the Corporation may, in order to reduce the
Intercompany Mortgage Reduction Amount, grant mortgages on certain real estate
assets owned by the Corporation or any Subsidiary of the Corporation in order to
further secure the Intercompany Mortgage Note;
WHEREAS, the Corporation desires to use a portion of the Net
Sale Proceeds from the Caesars World Transaction to repay all or a portion of
(a) the Senior Secured Bridge Notes issued under Section 9.04(viii)(A) of the
Credit Agreement and commonly referred to as the Tranche I Increasing Rate
Senior Secured Bridge Notes (the "Tranche I IRN's") and (b) the Senior Secured
Bridge Notes issued under Section 9.04(viii)(B) of the Credit Agreement and
commonly referred to as the Tranche II Increasing Rate Senior Secured Bridge
Notes (the "Tranche II IRN's");
WHEREAS, the Corporation and certain Subsidiaries of the
Corporation are contemplating the intercompany transactions described in greater
detail in Schedule 1 attached hereto (collectively, the "Intercompany
Transactions");
WHEREAS, the Borrowers wish to request certain waivers from
certain restrictions set forth in certain sections of the Credit Agreement in
order to permit the ITT Stock Option Transaction, the Caesars World Transaction
and certain other transactions described herein; and
WHEREAS, the parties hereto also wish to amend the Credit
Agreement and the Pledge and Security Agreement in certain respects as herein
provided;
NOW, THEREFORE, it is agreed:
I. Waivers, Amendments and Agreements with Respect to the Credit
Agreement
SECTION 1. ITT Stock Option Transaction.
(a) Consent. Notwithstanding anything to the contrary
contained in the Credit Agreement (including, without limitation, Section 9.02
thereof) or the other Credit Documents, but subject to the terms of this
Amendment (including, without limitation, the following clause (b)), the Lenders
hereby consent to the ITT Stock Option Transaction; provided that, in accordance
with the terms of the Option Agreement, no Option (as defined therein) shall be
exercised if any Event of Default (as defined in the Credit Agreement) exists
and is continuing unless the prior written consent of the Required Lenders is
obtained.
(b) Confirmation of Pledge. The Original Borrowers and the
other Credit Parties hereby confirm and agree that, both before and after giving
effect to the ITT Stock Option Transaction, 100% of the Stock of ITT Corporation
shall continue to be pledged to the Secured Creditors (and held by the
Collateral Agent on their behalf) pursuant to the Pledge and Security Agreement
and the other Credit Documents.
- 3 -
<PAGE> 4
SECTION 2. Caesars World Transaction.
(a) Consent. Notwithstanding anything to the contrary
contained in the Credit Agreement or the other Credit Documents, but subject to
the terms of this Amendment, the Lenders hereby consent to the Caesars World
Transaction and agree that the Corporation and any of its Subsidiaries
(including, without limitation, Starwood REIT, SLT RLP, and any Wholly-Owned
Subsidiary of Starwood REIT or SLT RLP) shall be permitted to enter into and
consummate the Caesars World Transaction in accordance with the terms set forth
in the Caesars Stock Purchase Agreement as in effect on the date hereof, with
such amendments, modifications or supplements thereto adopted after the date
hereof; provided the same could not reasonably be expected to be materially
adverse in any respect to the Corporation and its Subsidiaries or to the
Lenders; and provided further that the aggregate Net Sale Proceeds received by
the Corporation and its Wholly-Owned Domestic Subsidiaries on the Caesars World
Effective Date as a result of the Caesars World Sale equals or exceeds
$2,500,000,000.
(b) Section 4.02, Proceeds from Asset Sales; Section 9.02,
Consolidation, Merger, etc. Notwithstanding anything to the contrary contained
in Sections 4.02, 9.02 or elsewhere in the Credit Agreement or the other Credit
Documents, the parties hereto hereby agree that all of the Net Sale Proceeds
received by the Corporation and its Subsidiaries from the Caesars World Sale
shall be applied promptly (and in any event within five (5) Business Days, or
such longer period as is necessary to comply with the redemption or prepayment
provisions of the respective issue of Indebtedness being repaid) after the
receipt thereof by the Corporation or its respective Subsidiaries in the
following order of priority (in each case to the extent of the then remaining
Net Sale Proceeds): (A) first (to the extent the amount of Net Sale Proceeds has
not already been applied to reduce the outstanding Caesars Bonds), to redeem all
of the then outstanding Caesars Bonds and to pay any penalty, premium,
defeasance payment or other amount due in connection therewith (collectively,
the "Caesars Bonds Redemption Amount") or, if the Caesars Bonds Redemption
Amount shall have been paid prior to the consummation of the Caesars World
Transaction, then to prepay the principal amount of any Revolving Loans then
outstanding under the Credit Agreement in an amount up to the Caesars Bonds
Redemption Amount, (B) second, to repay permanently the principal amount of any
Tranche I IRN's then outstanding, (C) third, to repay permanently the principal
amount of any Tranche II IRN's then outstanding, (D) fourth, to prepay the
principal amount of any Revolving Loans then outstanding under the Credit
Agreement, and (E) fifth, to prepay the principal amount of other Indebtedness
of the Corporation and its Wholly-Owned Subsidiaries then outstanding.
(c) Section 9.12; Limitations on Voluntary Payments, etc.
Notwithstanding anything to the contrary contained in the Credit Agreement,
including, without limitation, Section 9.12 thereof, or any other Credit
Document, the Corporation and/or ITT shall be permitted to enter into and
consummate any of the following transactions or do any of the following actions:
(i) release the Caesars World Assets from the
collateral security for the Intercompany Mortgage Note;
- 4 -
<PAGE> 5
(ii) make a prepayment on the Intercompany Mortgage
Note in an amount up to the Undercollateralized Amount, and the
proceeds received by SLT RLP as a result of such prepayment shall not
be required to be used to prepay the then outstanding principal balance
of the Loans in accordance with Section 4.02(h) of the Credit Agreement
as long as such proceeds are held by SLT RLP and the subsequent use of
such funds is otherwise in compliance with the terms of the Credit
Agreement;
(iii) grant mortgages on certain real estate assets
owned by the Corporation or any Subsidiary of the Corporation to secure
the Intercompany Mortgage Note and to reduce the Intercompany Mortgage
Reduction Amount;
(iv) cause a portion of the payee's interest under
the Intercompany Mortgage Note in an amount up to the
Undercollateralized Amount to be assigned, contributed or distributed
by SLT RLP to the Corporation or any Wholly-Owned Domestic Subsidiary
of the Corporation which is (and remains) a Credit Party; provided that
(x) such Credit Party acknowledges and agrees in writing that all
payments to be received by it with respect to the Intercompany Mortgage
Note or portion thereof assigned to it are subordinated on the terms
applicable to the Intercompany Mortgage Note and (y) such Credit Party
is party to or executes a Subordination Agreement in accordance with
the requirements of the first sentence of the last paragraph of Section
9.04 of the Credit Agreement; and
(v) amend, modify or change, and permit the
amendment, modification or change of any provision of the Intercompany
Mortgage Note or any documents evidencing, or relating to, the
Intercompany Mortgage Note, including, without limitation, any
modification, amendment or change permitting prepayments, reloans or
readvances under the Intercompany Mortgage Note; provided that (A) the
aggregate outstanding principal balance of the Intercompany Mortgage
Note at any time shall not exceed $3,450,000,000, (B) no changes shall
be made to the subordination provisions applicable to the Intercompany
Mortgage Note, (C) the Corporation shall provide the Lead Agents with
prior written notice of any such amendment, modification, or change,
and (D) either (i) the prior written consent of the Lead Agents shall
be obtained (it being understood and agreed that the Lead Agents may
(but shall not be required to) withhold taking such action without
obtaining the consent of the Required Lenders) or (ii) the Corporation
in good faith determines, prior to entering into the respective
amendment, modification or change, that the respective amendment,
modification or change could not reasonably be expected to result in a
Material Adverse Effect or be adverse to the Lenders, in which case the
Corporation shall be deemed to have made a representation and warranty
to the Lenders, on the effective date of such amendment, modification
or change, that such amendment, modification or change could not
reasonably be expected to result in a Material Adverse Effect or be
adverse to the Lenders.
(d) Amendments to the Caesars Stock Purchase Agreement.
Notwithstanding anything to the contrary contained elsewhere in this Amendment,
in the Credit Agreement or in
- 5 -
<PAGE> 6
any of the other Credit Documents, the Corporation shall not, and shall not
permit any of its Subsidiaries to, agree to any amendment, modification or
supplement to the Caesars Stock Purchase Agreement which (x) could reasonably be
expected to result in a Material Adverse Effect or be materially adverse to the
Lenders or (y) would result in the Corporation and its Wholly-Owned Domestic
Subsidiaries receiving less than $2,500,000,000 of Net Sale Proceeds on the
Caesars World Effective Date as a result of the Caesars World Sale.
(e) Use of Proceeds from Permanent Senior Notes; Section
9.04(viii)(A); Indebtedness. Effective as of the Caesars World Effective Date,
Section 9.04(viii)(A) of the Credit Agreement shall be amended and restated in
its entirety to read as follows:
"(A) the Corporation shall be permitted to issue
Senior Secured Bridge Notes on the Initial Borrowing
Date as required by Section 5.06(a) (with the Senior
Secured Bridge Note Documents to be in the form
provided pursuant to Section 5.06(b) on or prior to
the Initial Borrowing Date) and shall be permitted
from time to time to issue (but not to any Borrower
or Affiliate thereof) Permanent Senior Notes for
cash; provided that
(1) all of the terms and conditions of the
Permanent Senior Notes (including, without
limitation, amortization, maturities, interest rates,
covenants, defaults, remedies, guaranties, sinking
fund provisions and other terms) shall be reasonably
satisfactory to the Lead Agents;
(2) at the option of the Corporation,
Permanent Senior Notes may be issued as Permanent
Senior Secured Notes and, in such event, may be
secured to the extent provided in the Pledge and
Security Agreement;
(3) notwithstanding anything to the contrary
contained elsewhere in the Credit Agreement or any
Credit Documents, all Net Proceeds from any issuance
of Permanent Senior Notes under this clause (viii)(A)
or clause (viii)(B) below shall be applied in the
following order of priority (in each case to the
extent of such remaining Net Proceeds): (I) first, to
repay the then outstanding Senior Secured Bridge
Notes until all such Senior Secured Bridge Notes are
repaid in full and (II) second, any remaining Net
Proceeds shall be used as follows:
(a) if (1) either (x) the Combined
Leverage Ratio (after giving effect to any
issuance of Indebtedness then
- 6 -
<PAGE> 7
being made and any concurrent application of
the proceeds thereof) is less than 4.5:1.0
or (y) the Unsecured Debt Rating of the
Corporation shall be at least BBB- by S&P
and Baa3 by Moody's, and (2) no Specified
Default, and no Event of Default, then
exists, such Net Proceeds shall be used for
general corporate purposes of the
Corporation otherwise permitted under the
terms of this Agreement;
(b) if (1) the Combined Leverage
Ratio (after giving effect to any issuance
of Indebtedness then being made and any
concurrent application of the proceeds
thereof) is less than 4.75:1.00 and greater
than or equal to 4.50:1.00, (2) no Specified
Default and no Event of Default then exists,
and (3) the test set forth in sub-clause
(a)(1)(y) above is not satisfied, fifty
percent (50%) of such Net Proceeds to be
applied pursuant to this clause (II) shall
be used for general corporate purposes of
the Corporation otherwise permitted under
the terms of this Agreement and fifty
percent (50%) of such Net Proceeds to be
applied pursuant to this clause (II) shall
be used to permanently prepay (and in the
case of any prepayment of revolving or
similar types of facilities, with a
corresponding permanent reduction to the
commitments thereunder) the principal amount
of any Indebtedness (excluding the Senior
Secured Bridge Notes) then outstanding of
any Original Borrower and the Wholly-Owned
Subsidiaries of one or more Original
Borrowers; provided that at such time (if
any) as the application of amounts to the
permanent prepayment of Indebtedness as
required by this clause (b) would cause the
Combined Leverage Ratio to be less than
4.5:1.0, the remaining amount which would
have been required to be applied to
permanently prepay outstanding Indebtedness
may instead, so long as no Specified Default
and no Event of Default then exists, be used
by the Corporation as otherwise provided in
preceding clause (a); and
(c) if neither preceding clause (a)
or (b) is applicable in accordance with its
terms (whether because of the existence of a
Specified Default or Event of Default, or
because the Combined Leverage Ratio
requirements or rating requirements are not
satisfied), 100% of such Net Proceeds to be
applied pursuant to this clause (II) shall
be used to permanently prepay (and in the
case of any prepayment of revolving or
similar types of facilities, with a
- 7 -
<PAGE> 8
corresponding permanent reduction to the
commitments thereunder) the principal amount
of any Indebtedness (excluding the Senior
Secured Bridge Notes) of any Original
Borrower and the Wholly-Owned Subsidiaries
of one or more Original Borrowers; provided
that, so long as no Specified Default and no
Event of Default is in existence, at such
time as the application of amounts required
by this clause (c) results in the Combined
Leverage Ratio being less than 4.75:1.00,
all remaining amounts which would otherwise
have been required to be applied pursuant to
this clause (c) may instead be applied
pursuant to the provisions of preceding
clause (b) (and at such time, if any, as the
conditions specified in the proviso thereto
are satisfied, giving effect to such
proviso); and
(4) in no event shall the aggregate
principal amount of Indebtedness at any time
outstanding pursuant to this Section 9.04(viii)(A)
exceed $2.5 billion (as the same may be adjusted
pursuant to the Seventh Amendment); and"
(f) Clarification to Section 9.04(viii)(B). Effective as of
the Caesars World Effective Date, Section 9.04(viii)(B) of the Credit Agreement
shall be amended by (i) inserting, immediately after the phrase "cash; provided
that" appearing therein the following new clause:
"(v) all Net Proceeds from any issuance of Permanent
Senior Notes under this clause (viii)(B) shall be
applied in accordance with the requirements of clause
(viii)(A)(3) above,"
and (ii) inserting, immediately after the words "exceed $1.0 billion" thereof,
the following parenthetical: "(as the same may be adjusted pursuant to the
Seventh Amendment)."
SECTION 3. Interest; Section 1.09. Section 1.09(i) of the
Credit Agreement shall be amended by deleting the parenthetical in clause (iii)
of Section 1.09(i) and by inserting in lieu thereof the following new
parenthetical:
"(and (x) in the case of any Interest Period with a duration in excess
of one month at any time when the proviso to the definition of F&I
Payment Date is operative in accordance with its terms, at one-calendar
month intervals occurring after the first day of the respective
Interest Period and (y) in the case of any Interest Period with a
duration of six months, at the date which occurs three calendar months
after the first day of such Interest Period, as well as on the last day
of the respective Interest Period)."
SECTION 4. Interest Periods; Section 1.10. Section 1.10 of the
Credit Agreement shall be amended by deleting the word "or" appearing
immediately before the word
- 8 -
<PAGE> 9
"three" and replacing the same with "," and inserting the words "or six"
immediately after the word "three" thereof.
SECTION 5. Clarification of Use of Proceeds; Sections 4.02(d),
(e) and (k).
(a) Sections 4.02(d) and (e) of the Credit Agreement shall be
amended and restated in their entirety to read as follows:
"(d) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each
date after the Effective Date upon which the Corporation or
any of its Subsidiaries receives any Debt Proceeds, an amount
equal to the Applicable Debt Percentage of the Net Proceeds
from the respective issuance of Indebtedness shall be applied
in accordance with the requirements of Sections 4.02(h) and
(j); provided that (x) the Net Proceeds of any issuance of
Indebtedness pursuant to Section 9.04(viii) shall be applied
in accordance with the requirements of said Section
9.04(viii), (y) the requirements set forth in this Section
4.02(d) are subject to the qualifications expressly set forth
in Section I.A of the Fourth Amendment, and (z) Net Proceeds
received in respect of Indebtedness incurred pursuant to, and
in accordance with the requirements of, clause (xii) of
Section 9.04 and which otherwise would be required to be
applied as mandatory repayments or commitment reductions
hereunder shall not be required to be so applied and may be
reinvested in assets used or to be used in Hotel and Gaming
Businesses if the following conditions are satisfied:
(1) no Specified Default and no Event of Default then
exists; and
(2) the Corporation delivers a certificate to the Paying
Agent on or prior to such date stating that such Net
Proceeds shall be used (or contractually committed to
be used) to purchase Assets used or to be used in
Hotel and Gaming Businesses within 360 days (or
earlier to the extent required to be so applied
pursuant to the terms of any outstanding
Indebtedness) following the date of the incurrence of
such Indebtedness (which certificate shall set forth
the estimates of the proceeds to be so expended);
provided further, that if (x) all or any portion of such Net
Proceeds not so applied pursuant to the immediately preceding
proviso in
- 9 -
<PAGE> 10
clause (z) above as a mandatory repayment are not so used (or
contractually committed to be used) within the 360-day period
after the date of the respective incurrence of Indebtedness
(or earlier to the extent required to be so applied pursuant
to the terms of any outstanding Indebtedness), such remaining
portion shall be applied on the last day of such period as
provided above in this Section 4.02(d) (without regard to the
immediately preceding proviso in clause (z) above) and (y) all
or any portion of such Net Proceeds are contractually
committed to be used and subsequent to such date such contract
is terminated or expires without such portion being so used,
then such remaining portion shall be applied on the date of
such termination or expiration as provided in this Section
4.02(d) (without regard to the immediately preceding proviso
in clause (z) above).
(e) In addition to any other mandatory repayments or
commitment reductions pursuant to this Section 4.02, on each
date after the Effective Date upon which either the
Corporation or any of its Subsidiaries receives cash proceeds
from any Asset Sale or the Corporation and any of its
Subsidiaries receives Equity Proceeds, an amount equal to the
Applicable Asset Sale Percentage of the Net Proceeds therefrom
shall be applied in accordance with the requirements of
Sections 4.02(h) and (j); provided that, Net Proceeds received
in respect of Asset Sales made pursuant to, and in accordance
with the requirements of, clause (viii) of Section 9.02 and
which otherwise would be required to be applied as mandatory
repayments or commitment reductions hereunder shall not be
required to be so applied and may be reinvested in assets used
or to be used in Hotel and Gaming Businesses if the following
conditions are satisfied:
(1) no Specified Default, and no Event of
Default, then exists;
(2) the Corporation delivers a certificate to
the Paying Agent on or prior to such date
stating that such Net Proceeds shall be used
(or contractually committed to be used) to
purchase Assets used or to be used in Hotel
and Gaming Businesses within 360 days (or
earlier to the extent required to be so
applied pursuant to the terms of any
outstanding Indebtedness) following the date
of such Asset Sale (which certificate shall
set forth the estimates of the proceeds to
be so expended);
- 10 -
<PAGE> 11
(3) the amount of Net Sale Proceeds which may be
reinvested (including the amounts of any
"deemed reinvestments" pursuant to following
clause (4)) shall not exceed $500,000,000
for Net Sale Proceeds received during any
Fiscal Year; and, if, at the time of the
respective Asset Sale and after giving
effect thereto, either (1) the Combined
Leverage Ratio is less than 4.5:1.0 or (2)
the Unsecured Debt Rating of the Corporation
shall be at least BBB- by S&P and Baa3 by
Moody's), then there shall be no further
limitation on the amount of such permitted
reinvestments; and
(4) any Asset Sale structured in the form of a
"like-kind exchange" in accordance with
Section 1031 of the Code shall be treated as
the sale of an Asset with the Net Sale
Proceeds (deemed to be an amount equal to
the fair market value of the Assets so
exchanged) therefrom reinvested pursuant to
clause (3) of this proviso;
provided further, that if (x) all or any portion of such Net
Sale Proceeds not so applied pursuant to the immediately
preceding proviso as a mandatory repayment are not so used (or
contractually committed to be used) within the 360 day period
after the date of the respective Asset Sale (or earlier to the
extent required to be so applied pursuant to the terms of any
outstanding Indebtedness), such remaining portion shall be
applied on the last day of such period as provided above in
this Section 4.02(e) (without regard to the immediately
preceding proviso) and (y) all or any portion of such Net Sale
Proceeds are contractually committed to be used and subsequent
to such date such contract is terminated or expires without
such portion being so used, then such remaining portion shall
be applied on the date of such termination or expiration as
provided in this Section 4.02(e) (without regard to the
immediately preceding proviso). Notwithstanding the foregoing,
the Net Sale Proceeds from the Caesars World Sale (as defined
in the Eighth Amendment) shall be applied in accordance with
the requirements of the Eighth Amendment.
(b) Section 4.02(k) of the Credit Agreement is hereby amended
by deleting the phrase "and/or (y) pursuant to the second proviso to Section
9.12(iii)" appearing therein and by inserting in lieu thereof the following new
phrase:
", (y) pursuant to the second proviso to Section 9.12(iii)
and/or made with Net Sale Proceeds of the Caesars World Sale (as
defined in the Eighth Amendment) in accordance with the requirements of
the Eighth Amendment)."
SECTION 6. Assets of Starwood REIT; Section 7.29. Section 7.29
of the Credit Agreement shall be deleted in its entirety and replaced with the
following: "[Intentionally Deleted]."
- 11 -
<PAGE> 12
SECTION 7. Reporting Requirements; Section 8.01; Information
Covenants. Section 8.01(g) shall be amended and restated in its entirety to read
as follows:
"(g) Other Reports and Filings. The Corporation shall promptly
notify the Lead Agents after any Borrower or any Subsidiary
files with, or delivers to, the Securities and Exchange
Commission (or any successor thereto) any Form 8-K or any
other financial information, proxy material, registration
statement, or report which contains information materially
adverse to the Corporation or any of its Subsidiaries, and, if
requested by any Lead Agent or Lender, shall furnish it with a
copy thereof."
SECTION 8. Creation of Intermediate Holding Company; Section
8.17. Notwithstanding anything to the contrary contained in the Credit Agreement
or the other Credit Documents, but subject to the terms of this Amendment, the
Lenders hereby consent to the Corporation creating a direct Wholly-Owned
Domestic Subsidiary of the Corporation (such subsidiary being referred to herein
as the "New Intermediate Holding Company") so that (i) the Corporation shall
directly own 100% of the equity interests in the New Intermediate Holding
Company and (ii) the New Intermediate Holding Company shall own 100% of the
Class A Shares in Starwood REIT; provided that (x) the New Intermediate Holding
Company, concurrently with the establishment thereof, executes and delivers
counterparts of the Guaranty and the Pledge and Security Agreement, and thereby
becomes a Guarantor, and otherwise complies with the applicable provisions of
Section 8.15 of the Credit Agreement, (y) all of the Corporation's equity
interest in the New Intermediate Holding Company shall at all times be pledged,
and be delivered for pledge, pursuant to the Pledge and Security Agreement, and
(z) all of the Class A Shares in Starwood REIT shall at all times (both before
and after the creation of the New Intermediate Holding Company) be pledged, and
be delivered for pledge, pursuant to the Pledge and Security Agreement.
SECTION 9. Hedges and Interest Rate Protection Agreements;
Section 8.20. Section 8.20 of the Credit Agreement shall be amended by
inserting, immediately after the last word thereof, the following:
"; provided that neither the Corporation nor any of its
Subsidiaries shall be required to comply with this Section
8.20 at any time that fifty percent (50%) or more of the
Combined Indebtedness of the Corporation and its Subsidiaries
is either based on a fixed rate of interest or, if subject to
a floating rate of interest, subject to Interest Rate
Protection Agreements which have the effect of fixing the rate
of interest applicable thereto or subjecting same to a cap or
collar, in each case on terms reasonably satisfactory to the
Lead Agents."
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<PAGE> 13
SECTION 10. Pre-Consent Requirement for Permitted
Acquisitions; Section 9.02; Consolidation, Merger, Purchase or Sale of Assets.
(a) Pre-Consent Requirement. Section 9.02 of the Credit
Agreement shall be amended by (i) deleting the word "and" appearing at the end
of clause (x) thereof, (ii) deleting the period appearing in clause (xi) thereof
and inserting in lieu thereof ", and" and (iii) inserting the following new
clause (xii) immediately after clause (xi) thereof:
"(xii) provided no Specified Default and no Event of
Default then exists or would result therefrom, the Corporation
or any of its Subsidiaries, (including, without limitation,
Starwood REIT, SLT RLP or any of their Subsidiaries) may enter
into any agreement to do any of the transactions prohibited by
this Section 9.02 (although the consummation of the respective
transaction may not occur until such time, if any, as the
Required Lenders have consented thereto in their sole
discretion), provided that (x) the Corporation or such
Subsidiary shall provide written notice to the Lead Agents
within 5 Business Days after it has entered into any such
agreement and (y) either (i) the consummation of such
transaction is expressly contingent upon obtaining the prior
written consent of the Required Lenders (with no damages,
break-up fees or other similar amounts payable as a result of
any failure to obtain such consent) or (ii) with respect to
all agreements entered into pursuant to this Section 9.02
(excluding any such agreements where the respective
transactions subject thereto have been consummated with the
consent of the Required Lenders or have otherwise been
terminated with no amounts payable thereunder), the failure of
the Corporation or any such Subsidiary to consummate the
transactions contemplated by such agreements could not
reasonably be expected to result in the Corporation and its
Subsidiaries being (or becoming) obligated to pay, or having
paid, amounts in respect of damages, breakup fees, or other
similar amounts to any Person or Persons in an aggregate
amount for all agreements as contemplated by this clause (xii)
in excess of $100,000,000; and"
(b) Permitted Acquisitions. Section 9.02(ix) of the Credit
Agreement is hereby amended by deleting "$750,000,000" in each place it appears
therein and by inserting "$1,000,000,000" in lieu thereof in each such place.
SECTION 11. Intercompany Transactions; Sections 9.01, 9.02,
9.05 and 9.06.
(a) Consent. Notwithstanding anything to the contrary
contained in the Credit Agreement or the other Credit Documents, but subject to
the terms of this Amendment, the Lenders hereby consent to each of the
Intercompany Transactions.
- 13 -
<PAGE> 14
(b) Section 9.01(xiv); Intercompany Liens. Section 9.01(xiv)
of the Credit Agreement is amended and restated in its entirety to read as
follows:
"(xiv) Indebtedness owed by any Original Borrower or any
Wholly-Owned Domestic Subsidiary of any Original Borrower
which is a Credit Party to any Original Borrower or any
Wholly-Owned Domestic Subsidiary of any Original Borrower
which is a Credit Party, in each case to the extent permitted
to be outstanding pursuant to Section 9.04(vii), may be
secured by any Assets (but excluding Capital Stock or other
equity interests in any Persons) of the respective such
obligor;"
(c) Section 9.02(xiii); Intercompany Asset Transfers and
Sales. Section 9.02 of the Credit Agreement is amended by inserting, immediately
after new clause (xii) in Section 9.02, the following new clause:
"(xiii) provided no Specified Default and no Event of Default
then exists or would result therefrom, any Original Borrower
or any Wholly-Owned Domestic Subsidiary of any Original
Borrower which is a Credit Party may, in addition to any of
the matters described in Section 9.02 (xi), transfer, convey,
purchase, sell, lease (including, without limitation, by way
of sale-leaseback transactions) or otherwise dispose of all or
any portion of its Assets to, or make, cancel, eliminate,
exchange, prepay, redeem, distribute, contribute, or transfer
intercompany loans and advances of cash or any other Assets to
or with (or agree to do any of the foregoing at any future
time), in one or a series of related transactions, any
Original Borrower or any Wholly-Owned Domestic Subsidiary of
any Original Borrower which is a Credit Party; provided that
(x) the Corporation delivers at least 5 Business Day's prior
written notice to the Lead Agents of such Asset transfer,
which notice shall describe in reasonably sufficient detail
the nature of such transaction and (y) in the case of any
transfer of any Capital Stock or other equity interests which
were theretofore subject to pledge pursuant to the Pledge and
Security Agreement, or which will be required to be pledged in
accordance with the terms of the Pledge and Security Agreement
after the consummation of the respective Asset transfer, the
Corporation takes, and causes its respective Subsidiaries to
take, all actions so that the respective Capital Stock or
other equity interests remain, or become, as the case may be,
pledged and delivered for pledge pursuant to the Pledge and
Security Agreement in accordance with the requirements
thereof."
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<PAGE> 15
(d) Section 9.05(viii); Intercompany Advances, Investments and
Loans. Section 9.05(viii) of the Credit Agreement is amended and restated in its
entirety to read as follows:
"(viii) after the Initial Borrowing Date and subject to
Section 9.03, (i) the Corporation or any Subsidiary of the
Corporation which is a Guarantor may make intercompany loans
and advances of cash to the Corporation or any other
Subsidiary of the Corporation which is a Guarantor, and (II)
provided no Specified Default and no Event of Default then
exists or would result therefrom, the Corporation, any
Original Borrower, or any Wholly-Owned Domestic Subsidiary of
any Original Borrower which is a Credit Party may (x) make
Investments or intercompany loans and advances, in each case,
resulting from intercompany Asset transfers made in accordance
with the requirements of Section 9.02(xiii) and (y) cancel,
forgive, eliminate, exchange, prepay, redeem or otherwise
reduce the amount of any intercompany loans or advances of
cash or any other Assets owed to it by any other Credit Party;
provided that all intercompany loans and advances made
pursuant to this clause (viii) are subject to the provisions
of validly executed Subordination Agreements as required by
the last paragraph of Section 9.04."
(e) Section 9.06; Transactions with Affiliates. Section
9.06(iii) of the Credit Agreement is amended by inserting, immediately after the
word "Sections" in the last line thereof, "9.01,".
(f) The first sentence of the last paragraph of Section 9.02
shall be amended by (i) deleting the word "and" immediately before clause (iii)
and inserting "," in its place and (ii) inserting, immediately after the last
word of said sentence, the following:
", and (iv) sales, transfers or other dispositions of Capital
Stock may be made to one or more Credit Parties in accordance
with the provisions (and requirements) of Section 9.02(xiii),
provided no violation of Section 8.17 arises as a result
thereof."
(g) Notwithstanding anything to the contrary contained in the
Credit Agreement or the other Credit Documents, the Corporation or any of its
Subsidiaries (including, without limitation, Starwood REIT, SLT RLP, and any of
their Subsidiaries), and, with respect to clause (iii) below only, any Preferred
Stock Subsidiary, may enter into and consummate any of the following
transactions or do any of the following actions:
(i) wind up, liquidate or dissolve its affairs (or
agree to do any of the foregoing at any future time) provided (A) none
of the Corporation, Starwood REIT, SLT RLP, SLC OLP, or ITT shall
either be dissolved, liquidated or wound up and (B) the Assets, if any,
of the Person being dissolved, liquidated or wound up shall be
transferred
- 15 -
<PAGE> 16
or succeeded (whether by operation of law or otherwise) to the
Corporation, any Wholly-Owned Domestic Subsidiary of the Corporation
which is a Credit Party, Starwood REIT, SLT RLP, or any Wholly-Owned
Domestic Subsidiary of Starwood REIT or SLT RLP which is a Credit
Party;
(ii) enter into and consummate any transaction of
merger or consolidation with the Corporation, Starwood REIT, SLT RLP,
or any other Person that, prior to the consummation of such merger or
consolidation, is either a Borrower or a Wholly-Owned Domestic
Subsidiary of the Corporation, Starwood REIT, or SLT RLP (or agree to
do any of the foregoing at any future time) provided (A) the surviving
Person shall either be any Original Borrower or any Wholly-Owned
Domestic Subsidiary of any Original Borrower which is a Credit Party,
(B) in no event shall the Corporation, Starwood REIT, SLT RLP, SLC OLP,
or ITT enter into any transaction of merger or consolidation with any
other Person where such other Person is the surviving entity of such
merger or consolidation, (C) none of the Corporation, Starwood REIT,
SLT RLP, SLC OLP or ITT shall be merged or consolidated out of
existence (or shall cease to be in existence after giving effect to any
transaction otherwise permitted pursuant to this clause (ii)), and (D)
no consideration shall be paid to any Person (other than to the
Corporation, Starwood REIT, SLT RLP, or any other Person that, prior to
the consummation of such merger or consolidation, is either an Original
Borrower or a Wholly-Owned Domestic Subsidiary of an Original Borrower
which is a Credit Party); or
(iii) any Preferred Stock Subsidiary which is a
Wholly-Owned Domestic Subsidiary of the Corporation but which is not a
Credit Party may (A) wind up, liquidate or dissolve its affairs (or
agree to do any of the foregoing at any future time), provided the
Assets, if any, of such Preferred Stock Subsidiary being dissolved,
liquidated or wound up shall be transferred or succeeded (whether by
operation of law or otherwise) to another Preferred Stock Subsidiary
which is a Wholly-Owned Domestic Subsidiary of the Corporation, the
Corporation, any Wholly-Owned Domestic Subsidiary of the Corporation
which is a Credit Party, Starwood REIT, SLT RLP, or any Wholly-Owned
Domestic Subsidiary of Starwood REIT or SLT RLP which is a Credit Party
and (B) enter into and consummate any transaction of merger or
consolidation with any other Preferred Stock Subsidiary which is a
Wholly-Owned Domestic Subsidiary of the Corporation but which is not a
Credit Party; provided that no consideration shall be paid to any
Person (other than to a Preferred Stock Subsidiary which is a
Wholly-Owned Domestic Subsidiary of the Corporation); and
provided further that, in each case, (A) no Specified Default and no Event of
Default then exists or would result therefrom; (B) the Corporation determines in
good faith that the respective transaction or transactions could not reasonably
be expected to result in a Material Adverse Effect or otherwise be adverse to
the Lenders; (C) the Corporation delivers, or causes its respective Subsidiary
to deliver, at least 5 Business Days' prior written notice to the Lead Agents of
the intended consummation of the respective transaction, which shall describe in
reasonably sufficient detail the nature of such transaction; and (D) the
Corporation shall take, or cause its respective
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<PAGE> 17
Subsidiaries to take, such actions as may from time to time be reasonably
requested by the Lead Agents to assure that all surviving Persons of mergers or
consolidations permitted above are parties to the respective Credit Documents
(and that they deliver such acknowledgments or assumption agreements as may from
time to time be reasonably requested by any Lead Agent) and take such actions as
may be necessary or desirable to assure that all collateral required to be
pledged by them pursuant to the Pledge and Security Agreement has in fact been
so pledged (and appropriate financing statements and other required security
instruments have been filed).
SECTION 12. Recourse Basket; Section 9.04; Indebtedness.
Effective as of the Caesars World Effective Date, Section 9.04(xii) of the
Credit Agreement shall be amended and restated in its entirety to read as
follows:
"(xii) additional Indebtedness of the Corporation and any of
its Subsidiaries not otherwise permitted hereunder in
aggregate principal amount outstanding at any time not
exceeding $600,000,000 (with the amount of Indebtedness
permitted to be outstanding at any time pursuant to this
clause (xii) being herein referred to as the "Recourse
Basket"); provided that (a) the amount of the Recourse Basket
shall be reduced from time to time to the extent provided in
Parts I.A. and I.B. of the Fourth Amendment and the last
sentence of the definition of Permitted Refinancing
Indebtedness contained herein and (b) the Net Proceeds
therefrom are applied as a mandatory repayment and/or
commitment reduction if and to the extent required by the
provisions of Section 4.02(e);"
SECTION 13. Loans to Employees; Section 9.05(x); Advances,
Investments and Loans. Effective as of the Caesars World Effective Date, clause
(x) of Section 9.05 of the Credit Agreement shall be amended by deleting the
number "$10,000,000" appearing therein and by inserting the number "$20,000,000"
in its place.
SECTION 14. Sliver Equity Transactions and Loans; Sections
9.05(xi) and (xii); Advances, Investments and Loans.
(a) Section 9.05(xi) of the Credit Agreement shall be amended
by inserting, immediately after the words "equity investments (in respect of
minority interests only)," the following:
"in, or make mortgage, mezzanine or other loans to, any
Person, in each case,".
(b) Effective as of the Caesars World Effective Date, Section
9.05(xi) of the Credit Agreement shall be further amended by deleting the amount
"$300,000,000" appearing in Section 9.05(xi) and inserting "$400,000,000" in
lieu thereof.
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<PAGE> 18
(c) Effective as of the Caesars World Effective Date, Section
9.05(xii) of the Credit Agreement is amended by deleting "$250,000,000" in said
Section and inserting "$150,000,000" in its place.
SECTION 15. Section 9.09; Maximum Combined Leverage Ratio.
Effective as of the Caesars World Effective Date, the periods and ratios set
forth in Section 9.09 of the Credit Agreement are amended and restated in their
entirety to read as follows:
<TABLE>
<CAPTION>
Period Ratio
------- ---------
<S> <C>
From and including the Initial 6.50:1.00
Borrowing Date to and including
September 30, 1998
From and including October 1, 1998 to 5.75:1.00
and including March 31, 1999
From and including April 1, 1999 to 5.50:1.00
and including the Amendment
Effective Date
From and including the Amendment 5.00:1.00
Effective Date to and including
September 30, 1999
From and including October 1, 1999 to 4.75:1.00
and including June 30, 2000
From and including July 1, 2000 and 4.50:1.00
thereafter
</TABLE>
SECTION 16. Business; Section 9.15. Effective as of the
Caesars World Effective Date, Section 9.15 of the Credit Agreement is amended
and restated in its entirety to read as follows:
"No Borrower will, nor will any Borrower permit any of its
Subsidiaries to, engage (directly or indirectly) in any
business other than the Hotel and Gaming Businesses, and in no
event shall the Gaming Business be a material part of the
Hotel and Gaming Business of the Corporation and its
Subsidiaries taken as one enterprise."
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<PAGE> 19
SECTION 17. Partnership Agreements; Section 9.20. Section 9.20
of the Credit Agreement is amended and restated in its entirety to read as
follows:
"9.20. Partnership Agreements. (x) Neither Starwood REIT nor
SLT RLP shall default under any obligations under SLT RLP's
Partnership Agreement, (y) neither the Corporation nor SLC OLP
shall default under any obligations under SLC OLP's
Partnership Agreement, and (z) promptly after the written
request of any Lead Agent, each of Starwood REIT and the
Corporation shall deliver true, correct and complete copies of
SLT RLP's Partnership Agreement and SLC OLP's Partnership
Agreement, respectively."
SECTION 18. Section 9.23; Encumbered EBITDA Ratio. Section
9.23 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:
"The Borrowers will not permit the ratio of Combined EBITDA to
Encumbered EBITDA for any Test Period ending during a period
set forth below to be less than the ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fifth Amendment Effective Date 4.00:1.00
through March 30, 1999
March 31, 1999 through 3.00:1.00
July 31, 1999
August 1, 1999 and thereafter 2.86:1.00"
</TABLE>
SECTION 19. Certain Definitions. (a) The following new
definitions shall be inserted in proper alphabetical order in Section 11.01:
"Caesars World Effective Date" shall mean the date upon which
the Caesars World Sale is consummated.
"Debt Proceeds" means any cash proceeds from the incurrence by
the Corporation or any of its Subsidiaries of Indebtedness for
borrowed money or from any CMBS Transaction to the extent the
Indebtedness incurred pursuant to the respective CMBS
Transaction is permitted as a result of an increase in
availability as specifically contemplated in the last sentence
of Section 9.04 (with such increased Indebtedness pursuant to
CMBS Transactions being herein called "Increased CMBS
Indebtedness"); provided that (x) except as otherwise provided
in clause (y) below, Debt Proceeds
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<PAGE> 20
shall not include proceeds from incurrences of Indebtedness
permitted to be incurred pursuant to Section 9.04 as such
Section is in effect on the Eighth Amendment Effective Date
after giving effect to the Eighth Amendment and (y) Debt
Proceeds shall include proceeds from incurrences of (i)
Indebtedness incurred pursuant to clause (viii) of Section
9.04, (ii) Indebtedness incurred pursuant to clause (xii) of
Section 9.04 in excess of amounts permitted to be incurred
under such clause as same was in effect on the Effective Date
and (iii) Increased CMBS Indebtedness.
"Eighth Amendment" shall mean that certain Eighth Amendment to
Credit Agreement, dated as of July 2, 1999.
"Eighth Amendment Effective Date" shall mean the date upon
which the Eighth Amendment becomes effective in accordance
with its terms.
"Equity Proceeds" shall mean any cash proceeds from the
issuance or sale of equity by the Corporation or any of its
Subsidiaries; provided that Equity Proceeds shall not include
cash proceeds from the issuance of common stock of the
Corporation, Perpetual Preferred Stock of the Corporation and
Qualified Preferred Stock permitted to be issued pursuant to
Section 9.14(c), unless and to the extent such Qualified
Preferred Stock is issued as a result of an increase in
availability as specifically contemplated by the last sentence
of Section 9.04.
"Maximum Indebtedness Scheduled Asset Sale Credit Amount"
shall mean $0.
"Original Borrower" shall mean any Borrower which is one of
the Corporate Borrowers or one of the REIT Borrowers.
"Seventh Amendment" shall mean that certain Seventh Amendment,
dated as of March 5, 1999.
(b) The definition of "Combined Indebtedness" appearing in
Section 11.01 of the Credit Agreement is hereby amended by adding, immediately
after the phrase "notwithstanding anything to the contrary contained above, to
the extent not already reflected therein," appearing in the last sentence
thereof the following phrase:
"(x) the amount of Contingent Obligations at any time
outstanding pursuant to Section 9.04(xii) of the Credit Agreement (as
described in the last sentence of the definition of Contingent
Obligation contained herein) shall be added to, and form part of,
Combined Indebtedness (regardless of any contrary treatment under GAAP)
and (y)."
- 20 -
<PAGE> 21
(c) The definition of "Net Proceeds" appearing in Section
11.01 of the Credit Agreement is hereby amended by deleting the proviso thereto
in its entirety.
II. Modification of the Pledge and Security Agreement
The parties hereto acknowledge and agree that the Pledge and
Security Agreement shall be, and hereby is, modified as follows:
A. Section 2(a) of the Pledge and Security Agreement is hereby
amended by deleting the phrase "and (iv) the term "Securities" shall mean all of
the Stock, Limited Liability Company Interests and Partnership Interests"
appearing therein and inserting in lieu thereof the following phrase:
"(iv) the term "REIT Interest" shall mean all equity interests
at any time owned by each Pledgor in any real estate
investment trust, in any event including all equity interests
(including all Class A Shares) owned by each Pledgor in
Starwood REIT; and (v) the term "Securities" shall mean all of
the Stock, Limited Liability Company Interests, Partnership
Interests and REIT Interests."
B. Section 2(b) of the Pledge and Security Agreement is hereby
amended by deleting the phrase "all of the Pledged Stock, Pledged Limited
Liability Interests and Pledged Partnership Interests" appearing therein and
inserting in lieu thereof the following phrase:
"all of the REIT Interests at any time pledged or required to
be pledged hereunder are hereinafter called the "Pledged REIT
Interests," and all of the Pledged Stock, Pledged Limited
Liability Company Interests, Pledged Partnership Interests and
Pledged REIT Interests."
C. Section 3.2 of the Pledge and Security Agreement is hereby
amended by deleting the phrase "or Partnership Interests" appearing in the first
sentence thereof and inserting in lieu thereof the phrase ", Partnership
Interests or REIT Interests."
D. Section 5 of the Pledge and Security Agreement is hereby
amended by inserting, immediately after the phrase "pertaining to the Pledged
Stock" appearing in clause (i) thereof, the phrase "and Pledged REIT Interests."
E. Each of Sections 6 and 7 of the Pledge and Security
Agreement are hereby amended by inserting, immediately after the phrase "Pledged
Stock," in each place it appears therein the phrase "Pledged REIT Interests."
In addition to the amendments specifically set forth above,
the Corporation acknowledges and agrees that all of the Class A Shares of
Starwood REIT owned by it have previously been delivered to the Collateral Agent
for pledge pursuant to the Pledge and Security
- 21 -
<PAGE> 22
Agreement, and that all of such Class A Shares have been, and shall remain,
validly pledged pursuant thereto.
III. Miscellaneous Provisions
A. Each Guarantor and each Borrower, by their signatures
below, hereby confirms that (x) the Guaranty shall remain in full force and
effect and the Guaranty covers the obligations of each of the Borrowers under
the Credit Agreement, as modified and amended by this Amendment, as provided in
the Guaranty, and (y) the Pledge and Security Agreement (as modified by this
Amendment) shall remain in full force and effect as security for the obligations
under the Credit Agreement, as modified and amended by this Amendment.
B. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
C. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrowers and the Paying Agent.
D. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.
E. This Amendment shall become effective on the date (the
"Amendment Effective Date") when each of the Borrowers, each Guarantor and the
Required Lenders shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Paying Agent at its Notice Office.
F. From and after the Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.
G. The Borrowers hereby covenant and agree that, so long as
the Amendment Effective Date occurs, they shall pay (and shall be jointly and
severally obligated to pay) each Lender which executes and delivers to the
Paying Agent a counterpart hereof by the later to occur of (x) the close of
business on the Amendment Effective Date or (y) 12:00 p.m. (New York time) on
Friday, July 2, 1999 (the "Outside Date") or which is an immediate or successive
assignee of any Lender described above (with respect to amounts obtained,
directly or indirectly, by assignment from such Lender), the following:
- 22 -
<PAGE> 23
(i) a non-refundable cash fee in an amount equal to
17.5 basis points (0.175%) of an amount equal to the sum of the
outstanding principal amount of Term Loans of such Lender and the
Revolving Loan Commitment of such Lender, in each case as same is in
effect on the Amendment Effective Date, which fees shall be paid by the
Borrowers to the Paying Agent for distribution to the Lenders not later
than the fifth Business Day following the Outside Date; and
(ii) if the Caesars World Sale has not been
consummated by the close of business on October 1, 1999, then
commencing on November 1, 1999 and on the first day of each calendar
month thereafter to and including April 1, 2000 (with the first day of
each such calendar month being herein called an "Eighth Amendment
Monthly Fee Payment Date"), a non-refundable cash fee, in arrears, in
an amount equal to 3.25 basis points (0.0325%) of an amount equal to
the sum of the outstanding principal amount of Term Loans of such
Lender and the Revolving Loan Commitment of such Lender, in each case
as same is in effect on the first day of the preceding month, which fee
shall be paid by the Borrowers to the Paying Agent for distribution to
the Lenders not later than the third Business Day following each Eighth
Amendment Monthly Fee Payment Date; provided that (x) if the Caesars
World Sale is consummated in accordance with the requirements of this
Eighth Amendment on any day other than the first day of a calendar
month, the fee due on the immediately succeeding Eighth Amendment
Monthly Fee Payment Date shall be prorated by taking the fee which
would otherwise have been payable as provided above (i.e., 3.25 basis
points on the amount of Term Loans and Revolving Loan Commitments
provided above) and multiplying same by a fraction the numerator of
which is the number of days in the calendar month in which the Caesars
World Sale occurred through and including the date upon which the
Caesars World Sale occurred and the denominator of which is the actual
number of days in such calendar month and (y) no fees shall be payable
on (or in respect of) any Eighth Amendment Monthly Fee Payment Date if
the Caesars World Sale was actually consummated in accordance with the
requirements of this Eighth Amendment on or before the first day of the
immediately preceding calendar month.
[SCHEDULE 1 AND SIGNATURE PAGES FOLLOW]
- 23 -
<PAGE> 24
SCHEDULE I
Description of Intercompany Transactions
1. Poconos Resorts: The Poconos resorts are currently operated by six
separate Subsidiaries owned by Caesars World, Inc. Five of these
Subsidiaries shall be merged into the sixth Subsidiary, and the Stock
of the remaining Subsidiary shall be transferred to ITT Sheraton Corp.
ITT Sheraton Corp. shall pledge the stock of this new Subsidiary
pursuant to the Pledge and Security Agreement and shall (and shall
cause the remaining Subsidiary so transferred to) comply with Section
8.15 of the Credit Agreement. It is understood and agreed that the
remaining Subsidiary referenced above shall be a Wholly-Owned Domestic
Subsidiary of the Corporation, which shall be (or become) a Guarantor
and shall be (or become) party to each of the Guaranty and the Pledge
and Security Agreement.
2. San Antonio: Starwood REIT shall distribute, contribute or transfer all
of its equity interest in San Antonio Resort Company to the
Corporation. The Corporation shall pledge the stock of this Subsidiary
pursuant to the Pledge and Security Agreement.
3. Boardwalk Regency: Boardwalk Regency Corp. ("Boardwalk") indirectly
owns an interest in the Atlantic City Convention Center Hotel. All of
Boardwalk's interests and other assets relating to said hotel
(including, without limitation, certain cash deposits and notes made by
Headquarters Hotel Associates L.P.) shall be contributed, distributed
or transferred (either in one transaction or a series of transactions)
to ITT Sheraton Corp., the Corporation, or another Wholly-Owned
Domestic Subsidiary of the Corporation which is a Credit Party.
4. Headquarters Hotel Assoc. L.P.: Baltic Investment Company LLC ("Baltic
LLC") currently is the limited partner of Headquarters Hotel Assoc.
L.P., the owner of the Atlantic City Hotel. Boardwalk and certain other
Subsidiaries of the Corporation currently own all of the outstanding
limited liability company interests of Baltic LLC. Headquarters Hotel
Management LLC ("HHM") is a limited liability company, the members of
which are Caesars New Jersey, Inc. ("Caesars NJ") and Boardwalk. HHM is
the manager of the Atlantic City Hotel. All of the limited liability
company interests in Baltic LLC and HHM will be transferred,
contributed or distributed to ITT Sheraton Corp. or another
Wholly-Owned Domestic Subsidiary of the Corporation which is a Credit
Party, and said limited liability company interests will be pledged to
the Secured Creditors pursuant to the Pledge and Security Agreement. In
addition, any other assets relating to the Atlantic City Hotel and not
being sold to the buyer in connection with the Caesars World Sale shall
be transferred to the Corporation or a Wholly-Owned Domestic Subsidiary
of any Original Borrower which is a Credit Party.
<PAGE> 25
5. Foreign Licenses: Sheraton International, Inc. (or, if applicable, the
Corporation or any of its Subsidiaries) ("Licensor") shall, in the
ordinary course of its business, enter into certain foreign license
agreements relating to certain intangibles or other assets held by the
Corporation and its Subsidiaries with a Wholly-Owned Subsidiary of the
Corporation ("Licensee"). These intangibles and other assets shall not
be transferred to Licensee, but Licensee shall have the license rights
with respect to said assets. In connection with the foregoing, Licensee
shall, in the ordinary course of business, pay certain consideration to
Licensor and enter into sub-license agreements with other Subsidiaries
of the Corporation with respect to such license rights.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
STARWOOD HOTELS & RESORTS,
a Maryland real estate investment trust
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Vice President and Treasurer
SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts, a Maryland real estate
investment trust, its general partner
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Vice President and Treasurer
ITT CORPORATION, a Nevada corporation
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
<PAGE> 27
CHARLESTON HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
CRYSTAL CITY HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
LONG BEACH HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SANTA ROSA HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SLT ALLENTOWN LLC,
a Delaware limited liability company,
SLT ARLINGTON LLC,
a Delaware limited liability company,
SLT ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLT BLOOMINGTON LLC,
a Delaware limited liability company,
SLT CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company,
SLT DANIA LLC,
a Delaware limited liability company,
SLT DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
SLT INDIANAPOLIS LLC,
a Delaware limited liability company,
SLT KANSAS CITY LLC,
a Delaware limited liability company,
SLT LOS ANGELES LLC,
a Delaware limited liability company,
<PAGE> 28
SLT MINNEAPOLIS LLC,
a Delaware limited liability company,
SLT PALM DESERT LLC,
a Delaware limited liability company,
SLT PHILADELPHIA LLC,
a Delaware limited liability company,
SLT REALTY COMPANY, LLC,
a Delaware limited liability company,
SLT SAN DIEGO LLC,
a Delaware limited liability company,
SLT SOUTHFIELD LLC,
a Delaware limited liability company,
SLT ST. LOUIS LLC,
a Delaware limited liability company,
SLT TUCSON LLC,
a Delaware limited liability company,
STARLEX LLC,
a New York limited liability company,
STARWOOD ATLANTA II LLC,
a Delaware limited liability company,
STARWOOD ATLANTA LLC,
a Delaware limited liability company,
STARWOOD MISSION HILLS, L.L.C.,
a Delaware limited liability company,
STARWOOD NEEDHAM LLC,
a Delaware limited liability company,
<PAGE> 29
STARWOOD WALTHAM LLC,
a Delaware limited liability company,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the managing member of
each of the above listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
--------------------------------------------
Title: Vice President and Treasurer
BW HOTEL REALTY, LP,
a Maryland limited partnership,
CP HOTEL REALTY, LP,
a Maryland limited partnership,
EDISON HOTEL ASSOCIATES, LP,
a New Jersey limited partnership,
NOVI HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
PARK RIDGE HOTEL ASSOCIATES LP,
a Delaware limited partnership,
SLT FINANCING PARTNERSHIP,
a Delaware general partnership,
SLT HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership,
VIRGINIA HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
<PAGE> 30
PRUDENTIAL HEI JOINT VENTURE,
a Georgia general partnership,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the general partner of
each of the above listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
---------------------------------------------
Title: Vice President and Treasurer
HEI HOTELS, L.L.C.,
a Delaware limited liability company,
OPERATING PHILADELPHIA LLC,
a Delaware limited liability company,
SLC ALLENTOWN LLC,
a Delaware limited liability company,
SLC ARLINGTON LLC,
a Delaware limited liability company,
SLC ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLC ATLANTA II LLC,
a Delaware limited liability company,
SLC ATLANTA LLC,
a Delaware limited liability company,
SLC BLOOMINGTON LLC,
a Delaware limited liability company,
SLC CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company,
<PAGE> 31
SLC DANIA LLC,
a Delaware limited liability company,
SLC DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
SLC INDIANAPOLIS LLC,
a Delaware limited liability company,
SLC KANSAS CITY L.L.C.,
a Delaware limited liability company,
SLC LOS ANGELES LLC,
a Delaware limited liability company,
SLC MINNEAPOLIS LLC,
a Delaware limited liability company,
SLC NEEDHAM LLC,
a Delaware limited liability company,
SLC PALM DESERT LLC,
a Delaware limited liability company,
SLC SAN DIEGO LLC,
a Delaware limited liability company,
SLC SOUTHFIELD LLC,
a Delaware limited liability company,
SLC ST. LOUIS LLC,
a Delaware limited liability company,
SLC TUCSON LLC,
a Delaware limited liability company,
SLC WALTHAM LLC,
a Delaware limited liability company,
<PAGE> 32
STARWOOD MANAGEMENT COMPANY, LLC,
a Delaware limited liability company,
By: SLC Operating Limited Partnership,
a Delaware limited partnership, the managing member of
each of the above listed entities
By: Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation, its
general partner
By: /s/ Mark D. Rozells
----------------------------------------
Title: Senior Vice President Finance
and Treasurer
SLC OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation, its general partner
By: /s/ Mark D. Rozells
----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
MILWAUKEE BROOKFIELD LP,
a Wisconsin limited partnership,
SLC-CALVERTON LP,
a Delaware limited partnership,
SLC HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership,
By: SLC Operating Limited Partnership,
a Delaware limited partnership, the general partner of
each of the above listed entities
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, its general partner
By: /s/ Mark D. Rozells
---------------------------------------------
Title: Senior Vice President Finance
and Treasurer
<PAGE> 33
MOORLAND HOTEL LP,
a Wisconsin limited partnership,
By: Milwaukee Brookfield LP,
a Wisconsin limited partnership, its general partner
By: SLC Operating Limited Partnership,
a Delaware limited partnership, its general partner
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, its general partner
By: /s/ Mark D. Rozells
--------------------------------------------
Title: Senior Vice President Finance
and Treasurer
ITT BROADCASTING CORP.,
a Delaware corporation
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
ITT SHERATON CORPORATION,
a Delaware corporation,
DESTINATION SERVICES OF SCOTTSDALE, INC.,
a Delaware corporation,
GENERAL FIDUCIARY CORPORATION,
a Massachusetts corporation,
GLOBAL CONNEXIONS INC.,
a Delaware corporation,
ITT SHERATON RESERVATIONS CORPORATION,
a Delaware corporation,
MANHATTAN SHERATON CORPORATION,
a New York corporation,
<PAGE> 34
SAN DIEGO SHERATON CORPORATION,
a Delaware corporation,
SAN FERNANDO SHERATON CORPORATION,
a Delaware corporation,
SHERATON ARIZONA CORPORATION,
a Delaware corporation,
SHERATON 45 PARK CORPORATION,
a Delaware corporation,
SHERATON ASIA-PACIFIC CORPORATION,
a Delaware corporation,
SHERATON BLACKSTONE CORPORATION,
a Delaware corporation,
SHERATON BOSTON CORPORATION
a Massachusetts corporation,
SHERATON CALIFORNIA CORPORATION,
a Delaware corporation,
SHERATON CAMELBACK CORPORATION,
a Delaware corporation,
SHERATON FLORIDA CORPORATION,
a Delaware corporation,
SHERATON HARBOR ISLAND CORPORATION,
a Delaware corporation,
SHERATON HARTFORD CORPORATION,
a Connecticut corporation,
SHERATON HAWAII HOTELS CORPORATION,
a Hawaii corporation,
SHERATON INTERNATIONAL, INC.,
a Delaware corporation,
<PAGE> 35
SHERATON INTER-AMERICAS, LTD.,
a Delaware corporation,
SHERATON INTERNATIONAL DE MEXICO, INC.,
a Delaware corporation,
SHERATON MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON OVERSEAS MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON WARSAW CORPORATION,
a Delaware corporation,
SHERATON MARKETING CORPORATION,
a Delaware corporation,
SHERATON MIAMI CORPORATION,
a Delaware corporation,
SHERATON MIDDLE EAST MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON NEW YORK CORPORATION,
a New York corporation,
SHERATON OVERSEAS TECHNICAL SERVICES CORPORATION,
a Delaware corporation,
SHERATON PEACHTREE CORPORATION,
a Delaware corporation,
SHERATON PHOENICIAN CORPORATION,
a Delaware corporation,
SHERATON SAVANNAH CORPORATION,
a Delaware corporation,
SHERATON SERVICES CORPORATION,
a Delaware corporation,
<PAGE> 36
SOUTH CAROLINA SHERATON CORPORATION,
a Delaware corporation,
ST. REGIS SHERATON CORPORATION,
a New York corporation,
WORLDWIDE FRANCHISE SYSTEMS, INC.,
a Delaware corporation,
SHERATON VERMONT CORPORATION,
a Vermont corporation,
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
HUDSON SHERATON CORPORATION LLC,
a Delaware limited liability company
By: ITT SHERATON CORPORATION
a Delaware corporation, its managing member
By: /s/ Mark D. Rozells
--------------------------------------------------
Title: Senior Vice President Finance and Treasurer
W&S DENVER CORP.,
a Delaware corporation,
W&S REALTY CORPORATION OF DELAWARE,
a Delaware corporation,
BENJAMIN FRANKLIN HOTEL, INC.,
a Washington corporation,
LAUDERDALE HOTEL COMPANY,
a Delaware corporation,
WESTIN BAY HOTEL COMPANY,
a Delaware corporation,
CINCINNATI PLAZA COMPANY,
a Delaware corporation,
<PAGE> 37
SOUTH COAST WESTIN HOTEL COMPANY,
a Delaware corporation,
TOWNHOUSE MANAGEMENT INC.,
a Delaware corporation,
WVC RANCHO MIRAGE, INC.,
a Delaware corporation,
WESTIN ASSET MANAGEMENT COMPANY,
a Delaware corporation,
WESTIN HOTEL COMPANY,
a Delaware corporation,
W&S ATLANTA CORP.,
a Delaware corporation,
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
WESTIN SEATTLE HOTEL COMPANY,
a Washington general partnership,
By: Benjamin Franklin Hotel, Inc.,
its general partner
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
By: W&S Realty Corporation of Delaware,
its general partner
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
WESTIN PREMIER, INC.,
a Delaware corporation,
WESTIN VACATION MANAGEMENT CORPORATION,
a Delaware corporation,
<PAGE> 38
WESTIN VACATION EXCHANGE COMPANY,
a Delaware corporation,
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, the sole stockholder of each
of the above listed entities
By: /s/ Mark D. Rozells
---------------------------------------------------
Title: Senior Vice President Finance and Treasurer
W&S LAUDERDALE CORP.,
a Delaware corporation,
W&S SEATTLE CORP.,
a Delaware corporation,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the sole stockholder
of each of the above listed entities
By: Starwood Hotels & Resorts
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
----------------------------------------
Title: Vice President and Treasurer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent and as Paying Agent
By: /s/ Laura S. Burwick
----------------------------------------
Title: Principal
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent
By: /s/ Alan Breindel
----------------------------------------
Title: Managing Director
<PAGE> 39
LEHMAN COMMERCIAL PAPER, INC.,
Individually and as Syndication Agent
By: /s/ William J. Gallagher
----------------------------------------
Title: Authorized Signatory
BANK OF MONTREAL, CHICAGO BRANCH,
Individually and as Syndication Agent
By: /s/ Heather L. Turf
----------------------------------------
Title: Director
ARAB BANKING CORPORATION (B.S.C.)
By: /s/ Louise Bilbro
----------------------------------------
Title: Vice President
BANCA POPOLARE DI MILANO
By: /s/ Fulvio Montanari
----------------------------------------
Title: First Vice President
By: /s/ Patrick F. Dillon
----------------------------------------
Title: Vice President/Chief Credit Officer
BANKBOSTON, N.A.
By: /s/ Kathleen M. Ahern
----------------------------------------
Title: Vice President
By:
----------------------------------------
Name:
Title:
<PAGE> 40
BANK LEUMI USA
By: /s/ Gloria Bucher
-------------------------------------------------
Title: Managing Director and First Vice President
THE BANK OF TOKYO-MITSUBISHI, LIMITED,
NEW YORK BRANCH
By: /s/ N. Saffra
----------------------------------------
Title: Vice President
BANK OF HAWAII
By: /s/ Donna R. Parker
----------------------------------------
Title: Vice President
BANK POLSKA KASA OPIEKI S.A. PEKAO S.A.
GROUP, NEW YORK BRANCH
By: /s/ B.W. Henry
----------------------------------------
Title: Vice President
PARIBAS
By: /s/ John W. Kopcha
----------------------------------------
Title: Director
By: /s/ Marc A. Preiser
----------------------------------------
Title: Vice President
BANQUE WORMS CAPITAL CORP.
By: /s/ P. Fleming /F. Garnet
----------------------------------------
Title: VP& General Counsel/Senior VP
<PAGE> 41
BEAR STEARNS INVESTMENT PRODUCTS INC.
By: /s/ Gregory Hanley
----------------------------------------
Title: Vice President
BARCLAYS BANK PLC
By: /s/ John Giannone
----------------------------------------
Title: Director
CHANG HWA COMMERCIAL BANK, LTD., NEW
YORK BRANCH
By: /s/ Wan-Tu Yeh
----------------------------------------
Title: VP & General Manager
CHIAO TUNG BANK CO., LTD. NEW YORK AGENCY
By: /s/ Kuang-Si Shiu
----------------------------------------------
Title: Senior Vice President & General Manager
CIBC INC.
By: /s/ Dean J. Decker
-------------------------------------------
Title: Executive Director
CIBC World Markets Corp., AS AGENT
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
By: /s/ Marcus Edward
----------------------------------------
Title: Vice President
By: /s/ Sean Mounier
----------------------------------------
Title: First Vice President
<PAGE> 42
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mary P. Daly
----------------------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Chris T. Horgan / Kristin Lepri
----------------------------------------
Title: Vice President /Associate
CREDITO ITALIANO
By: /s/ Gianfranco BBisagni
----------------------------------------
Title: First Vice President
By: /s/ Charles Michael
----------------------------------------
Title: Vice President
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Hans-Josef Thiele
----------------------------------------
Title: Director
By: /s/ Stephan A. Wiedmann
----------------------------------------
Title: Director
DOMINION BANK
By:
----------------------------------------
Name:
Title:
<PAGE> 43
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By: /s/ Paul Judicke /David Maheim
------------------------------------------------
Title: Vice President /Assistant Vice President
Erste Bank New York Branch
FIRST COMMERCIAL BANK
By: /s/ Bruce Ju
----------------------------------------
Title: Deputy General Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW
YORK BRANCH
By: /s/ William Kennedy
----------------------------------------
Title: Senior Vice President
KZH CNC LLC
By: /s/ Peter Chin
----------------------------------------
Title: Authorized Agent
LAND BANK OF TAIWAN, LOS ANGELES BRANCH
By:
----------------------------------------
Name:
Title:
THE LONG TERM CREDIT BANK
OF JAPAN, LTD.
By:
----------------------------------------
Name:
Title:
<PAGE> 44
MITSUBISHI TRUST & BANKING CORPORATION
By: /s/ Toshihiro Hayashi
----------------------------------------
Title: Senior Vice President
ML KZH STERLING LLC
By:
----------------------------------------
Name:
Title:
NATIONSBANK, N.A.
By: /s/ Ansel McDowell
----------------------------------------
Title: Vice President
THE ROYAL BANK OF SCOTLAND, PLC
By:
----------------------------------------
Name:
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Thomas K. Day
----------------------------------------
Title: Director
SOUTHERN PACIFIC BANK
By: /s/ Sean R. Walker
----------------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED, NEW YORK
BRANCH
By: /s/ Suresh S. Tata
----------------------------------------
Title: Senior Vice President
<PAGE> 45
MC CLO XIX STERLING (Cayman) Ltd.
Sterling Asset Manager, L.L.C.,
as its Investment Advisor
By:
----------------------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By:
----------------------------------------
Name:
Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By: /s/ Andrew B. Stein
----------------------------------------
Title: Managing Director
By: /s/ Mark H. Lanspa
----------------------------------------
Title: Director
VAN KAMPEN
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------------------
Title: Sr. Vice Pres. & Director
VAN KAMPEN SENION FLOATING RATE FUND
By: /s/ Jeffrey W. Maillet
----------------------------------------
Title: Sr. Vice Pres. & Director
<PAGE> 46
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By: /s/ Jeffrey W. Maillet
----------------------------------------
Title: Sr. Vice Pres. & Director
VAN KAMPEN
SENIOR INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------------------
Title: Sr. Vice Pres. & Director
MELLON BANK, N.A., solely in its capacity as Trustee for the
GENERAL MOTORS CASH MANAGEMENT MASTER TRUST, (as directed by
Shenkman Capital Management, Inc.), and not in its individual
capacity
By:
----------------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:
----------------------------------------
Name:
Title:
OXFORD STRATEGIC INCOME FUND
By: EATON VANCE MANAGEMENT,
as Investment Advisor
By:
----------------------------------------
Name:
Title:
<PAGE> 47
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital as Portfolio Advisor
By: /s/ Dan H. Smith
----------------------------------------
Title: First Vice President
EATON VANCE SENIOR INCOME TRUST
By: EATON VANCE MANAGEMENT,
as Investment Advisor
By:
----------------------------------------
Name:
Title:
ISTITUTO BANCARIO SAN PAOLO DI TORINO ISTITUTO MOBILIARE
ITALIANO S.P.A.
By: /s/ Robert Wurster / Carlo Persico
---------------------------------------------------
Title: First Vice President / Deputy General Manager
FIRST SECURITY BANK, N.A.
By: /s/ David P. Williams
----------------------------------------
Title: Vice President
FLEET BANK, N.A.
By: /s/ John T. Harrison
----------------------------------------
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ William E. Magee
----------------------------------------
Title: Duly Authorized Signatory
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ John Wilson
----------------------------------------
Title: Authorized Signatory
<PAGE> 48
GULF INTERNATIONAL BANK B.S.C.
By: /s/ Mireille Khalidi /Abdel-Pattsh Tahoun
------------------------------------------
Title: AVP / SVP
HUA NAN COMMERCIAL BANK, LTD. NEW YORK
AGENCY
By: /s/ Jeffrey C.P. Lee
----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
NINTH AMENDMENT TO CREDIT AGREEMENT
NINTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of September 20, 1999, among STARWOOD HOTELS & RESORTS, a Maryland real
estate investment trust ("Starwood REIT"), SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership ("SLT RLP"), STARWOOD HOTELS & RESORTS WORLDWIDE,
INC., a Maryland corporation (the "Corporation"), ITT CORPORATION, a Nevada
corporation ("ITT" and, together with Starwood REIT, SLT RLP and the
Corporation, the "Original Borrowers"), the other Credit Parties (as defined in
the Credit Agreement referred to below), the lenders from time to time party to
the Credit Agreement referred to below (the "Lenders"), BANKERS TRUST COMPANY
and THE CHASE MANHATTAN BANK, as Administrative Agents (in such capacity, the
"Administrative Agents") and LEHMAN COMMERCIAL PAPER INC. and BANK OF MONTREAL,
as Syndication Agents (in such capacity, the "Syndication Agents") and BANKERS
TRUST COMPANY, as Collateral Agent (in such capacity, the "Collateral Agent").
Unless otherwise defined herein, all capitalized terms used herein shall have
the respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, the Original Borrowers, the Lenders, the
Administrative Agents and the Syndication Agents are parties to that certain
Credit Agreement, dated as of February 23, 1998 (as amended, modified or
supplemented to the date hereof, the "Credit Agreement");
WHEREAS, the Corporation has entered into an agreement to
consummate the following transaction (all of the following being collectively
referred to herein as the "Vistana Timeshare Transaction"): (i) Vistana, Inc., a
Florida corporation ("Original Vistana") shall merge with and into Fire
Acquisition Corp., a Florida corporation ("Vistana Parent"), a newly created
Wholly-Owned Subsidiary of the Corporation and (ii) Vistana Parent shall be the
surviving entity of such merger and shall change its name to Vistana, Inc.;
WHEREAS, Original Vistana and its Subsidiaries are, and
Vistana Parent and its Subsidiaries will be, engaged in (i) the acquisition,
development, operation, management and sale of vacation ownership resorts
("Vacation Resorts"), including, without limitation, resorts having vacation
ownership interests, interval ownership interests, timeshare estates, timeshare
licenses, vacation clubs, right-to-use programs or other forms of vacation
ownership programs (all of the foregoing being collectively referred to herein
as "VOIs") and (ii) providing customers who purchase VOIs at Vacation Resorts
financing for such purchases (all of the foregoing, together with (A) the
transactions described on Schedule 1 hereto and (B) any and all businesses that
in the good faith judgment of the board of directors of the Corporation or
Vistana Parent are materially related to the Timeshare Business, collectively,
the "Timeshare Business");
WHEREAS, after the consummation of the Vistana Timeshare
Transaction, the Corporation and its Subsidiaries will require greater
flexibility under the Credit Agreement and the other Credit Documents in order
to conduct the Timeshare Business of Vistana Parent and its
<PAGE> 2
Subsidiaries as presently conducted by Original Vistana and its Subsidiaries and
as contemplated in the future;
WHEREAS, the Borrowers wish to request certain waivers from
certain restrictions set forth in certain sections of the Credit Agreement in
order to permit the Corporation and its Subsidiaries to conduct the Timeshare
Business and the other transactions described herein; and
WHEREAS, the parties hereto also wish to amend the Credit
Agreement in certain respects as herein provided;
NOW, THEREFORE, it is agreed:
I. Waivers, Amendments and Agreements with Respect to the Credit
Agreement
SECTION 1. Vistana Timeshare Transactions.
(a) Permitted Acquisition. (i) The Corporation hereby confirms
and acknowledges to the Lenders that the Vistana Timeshare Transaction is a
Permitted Acquisition (as such term is defined in Section 9.02 of the Credit
Agreement), except that, after the consummation of the Vistana Timeshare
Transaction and without this Amendment becoming effective upon its terms, the
Corporation would be unable to comply with clause (ii) of Section 9.02(ix) of
the Credit Agreement in that said clause requires the Vistana Restricted
Subsidiaries (as hereinafter defined) to comply with Section 8.15 of the Credit
Agreement.
(ii) The Lenders hereby acknowledge and agree that, subject to
the terms and conditions of this Amendment, the Vistana Timeshare Transaction
shall be a Permitted Acquisition even though the Vistana Timeshare Transaction
does not comply with the requirements of clause (ii) of said Section 9.02(ix) to
the extent specifically described in preceding clause (i), provided all other
requirements of Section 9.02(ix) of the Credit Agreement, and the requirements
of following clause (d), are satisfied.
(b) Use of Proceeds; Section 4.02(d) and (e). (i) Section
4.02(d) of the Credit Agreement shall be amended by replacing the words
"provided that (x)" in said Section with the following:
"provided that (w) the Net Proceeds received in respect of any
Indebtedness incurred pursuant to, and in accordance with the
requirements of, clause (xv) of Section 9.04 and which would
otherwise be required to be applied as mandatory repayments or
commitment reductions hereunder shall not be required to be so
applied and may be reinvested in, or otherwise used in
connection with, the Timeshare Business, (x)"
- 2 -
<PAGE> 3
(iii) Section 4.02(e) of the Credit Agreement shall be amended
by inserting, immediately after the words "receives cash proceeds from any Asset
Sale", with the following: "(other than Net Proceeds received pursuant to
Section 9.02(xiv) of this Credit Agreement)."
(c) Definition of Improvements; Section 7.12(c). The
definition of the term "Improvements" (as defined in Section 7.12(c) of the
Credit Agreement) shall include, in addition to the matters set forth in Section
7.12(c), all components of all improvements constituting Timeshare Assets (as
hereinafter defined) owned or leased, as lessee, by Vistana Parent or any of its
Subsidiaries.
(d) Restricted Vistana Subsidiaries Not Required as Guarantors
or Pledgors; Pledge and Security Agreement Collateral; Sections 8.13 and 8.15.
Notwithstanding anything to the contrary contained in the Credit Agreement or
the other Credit Documents (including without limitation, Sections 8.13 and 8.15
of the Credit Agreement), none of the following Persons shall be a Guarantor,
have any of its stock pledged, or be subject to the terms and provisions of
Sections 8.13 or 8.15 of the Credit Agreement (collectively, the "Restricted
Vistana Subsidiaries"): (i) VTM Corp.; (ii) Vistana Timeshare Mortgage Corp.;
(iii) Vistana 1998-A Timeshare Mortgage Corp.; (iv) Vistana 1999-A Timeshare
Mortgage Corp., (v) any other special purpose, bankruptcy remote Subsidiary of
Vistana Parent acquired, established or created by Vistana Parent or any of its
Subsidiaries in connection with a Receivables Financing, Off-Balance Sheet
Transaction or Timeshare Securitization (each as hereinafter defined), (vi) the
Subsidiaries of Vistana Parent listed on Schedule 2 hereto for the reasons
described therein, and (vii) any other non-Wholly-Owned Subsidiary of Vistana
Parent in which all investments therein by the Corporation and its Subsidiaries
have been made pursuant to clauses (C), (D), or (E) of Section 9.05(xvi), in
each case, so long as such Restricted Vistana Subsidiary does not merge or
consolidate with or into Vistana Parent or any other Credit Party; and provided
that, notwithstanding anything to the contrary contained in this paragraph, the
Corporation, Vistana Parent and each of the Subsidiaries of Vistana Parent
(other than the Restricted Vistana Subsidiaries) hereby confirm and agree that,
after giving effect to the Vistana Timeshare Transaction, (x) 100% of the Stock
of Vistana Parent and each of its Subsidiaries (other than the Restricted
Vistana Subsidiaries) shall be pledged to the Secured Creditors (and held by the
Collateral Agent on their behalf) pursuant to the Pledge and Security Agreement
and the other Credit Documents, (y) in accordance with Section 8.13 of the
Credit Agreement and the other Credit Documents, the Corporation shall cause
Vistana Parent and each of its Subsidiaries (other than the Restricted Vistana
Subsidiaries) to deliver such Stock to the Collateral Agent promptly after the
consummation of the Vistana Timeshare Transaction, and (z) Vistana Parent and
each of its Subsidiaries (other than the Restricted Vistana Subsidiaries) shall
comply with the applicable provisions of Sections 8.13 and 8.15 of the Credit
Agreement, including, without limitation, the provisions set forth in Section
8.15 requiring Vistana Parent and such Subsidiaries to execute and deliver
counterparts of the Guaranty and the Pledge and Security Agreement to the
Collateral Agent; provided further that if at any time hereafter any Restricted
Vistana Subsidiary may become a Guarantor, have its stock pledged, or be subject
to the terms and provisions of Sections 8.13 or 8.15 of the Credit Agreement,
then such Person shall no longer be considered a Restricted Vistana Subsidiary
and from and after such time, such Person shall (and the Corporation shall cause
such Person to) fully comply with all of the applicable provisions of Sections
8.13 or 8.15 of the Credit Agreement.
- 3 -
<PAGE> 4
(e) Liens; Section 9.01. Section 9.01 of the Credit Agreement
shall be amended by (i) deleting the last reference to the word "and" in clause
(xvi), (ii) deleting the period from clause (xvii) and inserting the following
word "; and" in its place, and (iii) inserting, immediately after clause (xvii),
the following new clause (xviii):
"(xviii) Liens on Assets of Vistana Parent or any of its
Subsidiaries (other than Assets constituting Collateral)
securing Indebtedness permitted under Sections 9.04(xv) and
(xvi)."
(f) Certain Additional Limitations Relating to Permitted
Acquisitions; Section 9.02(ix); Consolidation, Merger, Purchase or Sale of
Assets, Lease Obligations. Clause (ix) of Section 9.02 of the Credit Agreement
is amended by inserting, immediately after the last word thereof, the following
new proviso:
"provided that neither Vistana Parent nor any of its
Subsidiaries shall acquire all or substantially all of the
Assets or Capital Stock of any Person substantially engaged in
the Timeshare Business unless Vistana Parent (if Vistana
Parent is directly making the acquisition) or the respective
Subsidiary of Vistana Parent which is making the acquisition
is a Credit Party."
(g) Sale of Certain Timeshare Assets in the Ordinary Course of
Business; Section 9.02; Consolidation, Merger, Purchase or Sale of Assets, Lease
Obligations. Section 9.02 of the Credit Agreement is amended by (i) deleting the
last reference to the word "and" in clause (xii), (ii) deleting the period from
clause (xiii) and inserting the following word "; and" in its place, and (iii)
inserting, immediately after clause (xiii), the following new clause (xiv):
"(xiv) Vistana Parent and any of its Subsidiaries may
transfer, convey, sell, lease (including, without limitation,
by way of sale-leaseback transactions) or otherwise dispose of
(A) all or any portion of its VOIs to consumers or (B)
Timeshare Purchase Money Notes in connection with Receivables
Financings, Off-Balance Sheet Transactions or Timeshare
Securitizations, in each case, in one or a series of related
transactions, provided (x) the consideration (including
non-cash consideration) received from such transfer is at fair
market value and (y) such transfer was in the ordinary course
of business of Vistana Parent and its Subsidiaries.
Notwithstanding anything to the contrary contained in Section
4.02 or elsewhere in the Credit Agreement, the cash proceeds
of any transfers permitted under this clause (xiv) shall not
be required to be applied as a mandatory repayment pursuant to
Section 4.02 of the Credit Agreement and may be used for the
operation of, or reinvested in, the Timeshare Business."
(h) Financing Related to the Timeshare Business; Sections
9.04(xii), (xv) and (xvi); Indebtedness. (i) Clause (xii) of Section 9.04 of the
Credit Agreement shall be amended
- 4 -
<PAGE> 5
by (1) deleting the words "herein and (b)" and replacing same with the words
"herein, (b)" and (2) inserting, immediately after the last word of said clause
(xii), the following words:
", and (c) the amount of the Recourse Basket shall be further
reduced from time to time to the extent provided in Schedule 1
to the Ninth Amendment and Sections 9.04(xv) and (xvi) (but
without duplication of any of the same amounts)."
(ii) Section 9.04 of the Credit Agreement is further amended
by (A) deleting the last reference to the word "and" in clause (xiii) thereof,
(B) deleting the period at the end of clause (xiv) in said Section, and (C)
inserting, immediately after clause (xiv) of said Section, the following new
clauses (xv) and (xvi):
"(xv) Indebtedness of Vistana Parent and any of its
Subsidiaries (other than Contingent Obligations and Guarantees
of Vistana Parent and its Subsidiaries) incurred in connection
with the Timeshare Business as described in paragraphs 3
through 7, inclusive, of Schedule 1 to the Ninth Amendment and
the Indebtedness of Original Vistana and its Subsidiaries
outstanding on September 30, 1999; provided that, if any
Indebtedness permitted to be outstanding at any time pursuant
to this clause (xv) shall be or become, in whole or in part,
Recourse Indebtedness of the Corporation or any of its
Subsidiaries (other than Vistana Parent and its Subsidiaries),
then such Recourse Indebtedness shall only be permitted to the
extent incurred under preceding clause (xii), and in such case
the Recourse Basket shall be reduced from time to time by the
amount of such Recourse Indebtedness, and such Recourse
Indebtedness shall be permitted only if the Recourse Basket
would not be reduced below $0; and"
"(xvi) Contingent Obligations and Guarantees of Vistana Parent
and its Subsidiaries incurred in connection with (A) the
construction, development and operation of any Assets used in
connection with the Timeshare Business, (B) any Indebtedness
of Vistana Parent and its Subsidiaries permitted under clause
(xv) above, and (C) customer deposits received in the ordinary
course of business; provided that, if any Contingent
Obligation or Guarantee permitted to be outstanding at any
time pursuant to this clause (xvi) shall be or become, in
whole or in part, Recourse Indebtedness of the Corporation or
any of its Subsidiaries (other than Vistana Parent and its
Subsidiaries), then such Recourse Indebtedness shall only be
permitted to the extent incurred under preceding clause (xii),
and in such case the Recourse Basket shall be reduced from
time to time by the amount of such Recourse Indebtedness, and
such Recourse Indebtedness shall be permitted only if the
Recourse Basket would not be reduced below $0."
- 5 -
<PAGE> 6
(i) Advances, Investments and Loans; 9.05(xvi). Section 9.05
of the Credit Agreement is hereby amended by (i) deleting the last reference to
the word "and" in clause (xiv) thereof, (ii) deleting the period at the end of
clause (xv) in said Section and inserting the following word "; and" in its
place, and (iii) inserting, immediately after clause (xv) of said Section, the
following new clause (xvi);
"(xvi) Vistana Parent and its Subsidiaries may make
Investments consisting of the following: (A) in connection
with the sale of any VOIs, loans to purchasers of such VOIs,
which Loans may be secured by a mortgage, pledge or other
encumbrance on the VOI being purchased and which is made in
the ordinary course of business, (B) in connection with any
Vacation Resort, loans to any owner association established in
connection with such Vacation Resort, but only to the extent
that such loans are made in the ordinary course of business in
an aggregate outstanding principal amount not to exceed
$20,000,000 at any time (determined without regard to any
write-downs or write-offs of such loans and advances), (C) the
Timeshare Joint Ventures (as hereinafter defined) described in
Schedule 1 to the Ninth Amendment, (D) other equity
investments in any Person not otherwise a Guarantor under the
Credit Agreement in the ordinary course of the Timeshare
Business, and (E) intercompany loans and advances of cash to
Subsidiaries of Vistana Parent that are not Guarantors;
provided that (i) the aggregate amount of investments, loans
and advances permitted under clauses (C) , (D), and (E) of
this Section 9.05(xi) shall not exceed $100,000,000 in any
Fiscal Year, (ii) no single equity investment permitted under
clauses (C), (D), and (E) of this Section 9.05(xi) shall
exceed $50,000,000, and (iii) the $300,000,000 basket (and,
after the Caesars World Effective Date, the $400,000,000
basket) set forth in Section 9.05(xvi) shall be reduced in any
Fiscal Year by the amount of investments, loans and advances
actually made as permitted under clauses (C), (D) and (E) of
this Section 9.05(xvi), and the investments pursuant to said
clauses (C), (D), and (E) of this Section 9.05(xvi) shall be
permitted only if the basket referred to above would not be
reduced below $0."
(j) Business of Vistana Parent and its Subsidiaries; Section
9.15. Section 9.15 of the Credit Agreement is hereby amended by inserting,
immediately after the last sentence thereof, the following new sentence:
"Neither Vistana Parent nor any of its Subsidiaries shall (and
no Borrower shall permit Vistana Parent or any of its
Subsidiaries to) engage (directly or indirectly) in any
business other than the Timeshare Business.";
- 6 -
<PAGE> 7
it being agreed that the portion of the Eighth Amendment amending and restating
Section 9.15 shall only amend and restate the first sentence of said Section
9.15 and shall not amend or restate the new second sentence of said Section as
herein provided.
(k) Definition of Hotel and Gaming Business; Section 11.01.
The definition of the term "Hotel and Gaming Businesses" as defined in Section
11.01 of the Credit Agreement shall be deemed to include, without limitation,
the Timeshare Business.
(l) Definition of Hotel; Sections 7.12(c); 9.07(a), etc. The
Credit Agreement is hereby amended so that the term "Hotel," but only as such
term is used in the first sentence of Section 7.12(c) and the second to last
sentence of the definition of "Contingent Obligations," shall be deemed to
include, without limitation, any Real Property or Leasehold comprising a
facility used in connection with the Timeshare Business; it being agreed that,
for purposes of Section 9.07(a), the revenues from such facilities used in
connection with the Timeshare Business shall be excluded.
(m) Sections 9.24 and 9.25; Timeshare Inventory Balance and
New Timeshare Construction. Section 9 of the Credit Agreement is amended by
inserting, immediately after the last Section thereof, the following new
Sections:
"9.24 Timeshare Inventory Balance. (a) The Borrowers will not
permit the amount of the Timeshare Inventory Balance for the last day
of any Test Period ending during a period set forth below to be greater
than the amounts set forth below:
<TABLE>
<S> <C>
"Ninth Amendment Effective $200,000,000
Date through and including
December 31, 1999
January 1, 2000 through and including $350,000,000"
the Final Maturity Date
</TABLE>
"(b) As used in this Section 9.24, the term "Timeshare
Inventory Balance" means the aggregate amount of inventory and
construction in progress as set forth in the consolidated balance
sheets of the Corporation and its Subsidiaries (plus, without
duplication, any amounts previously reflected as inventory with respect
to the Timeshare Business, for so long as the respective assets
continue to be owned by the Corporation or its Subsidiaries, if such
assets have been reclassified and are no longer shown as inventory in
said balance sheets), in each case, to the extent relating to the
Timeshare Business."
"9.25 Certain Limitations on the Timeshare Business. Notwithstanding
anything to the contrary contained in this Credit Agreement, (a) upon
the occurrence and during the continuance of any Specified Default or
any Event of Default, (i) neither Vistana Parent nor any of its
Subsidiaries shall commence the development of any Vacation Resort or
other timeshare project, in each case
- 7 -
<PAGE> 8
where construction has not yet begun, or commence the development of a
new phase of any existing Vacation Resort or other timeshare project,
or acquire any land in connection with the intended development of a
Vacation Resort or other timeshare project and (ii) neither the
Corporation nor any of its Subsidiaries (other than Vistana Parent and
its Subsidiaries) shall guarantee any Indebtedness of, or make any
loans or advances to, Vistana Parent and any of its Subsidiaries except
to the extent reasonably required to complete a Vacation Resort or
other timeshare project then in construction or development, (b) at no
time shall the Corporation or any of its Subsidiaries convert any Hotel
or any portion thereof owned by the Corporation or such Subsidiary into
one or more Vacation Resorts or other timeshare project if the
aggregate book value of all such converted Hotels (or applicable
portions thereof) exceeds $250,000,000 determined at the time of such
conversion, and (c) the aggregate total book value of the Timeshare
Assets of the Corporation and its Subsidiaries shall at no time exceed
ten percent (10%) of the total book value of the Assets of the
Corporation and its Subsidiaries as of the then most recently ended
Test Period."
SECTION 3. Restricted Payments; Section 9.03. Clause (ii) of
Section 9.03 of the Credit Agreement shall be amended by (i) deleting the words
"15% of Adjusted Funds From Operations" in clause (B) therein and replacing the
same with the following: "10% of Combined EBITDA."
SECTION 4. Time Periods for Quarterly and Annual Reports;
Section 8.01. Section 8.01(a) and (b) of the Credit Agreement shall each be
amended by (i) deleting the number "45" appearing in Section 8.01(a) of the
Credit Agreement and inserting "55" in its place and (ii) deleting the number
"90" appearing in Section 8.01(b) of the Credit Agreement and inserting "100" in
its place.
SECTION 5. Certificates by Other Officers; Sections 8.01 and
8.07. Each of Sections 8.01(a), (b), and (e) and Section 8.07 of the Credit
Agreement shall be amended by inserting, immediately after each occurrence of
the phrase "the chief financial officer of the Corporation" in such Sections,
the following parenthetical:
"(or by the Senior Vice President - Finance & Treasurer or
Senior Vice President and Corporate Comptroller of the
Corporation)"
SECTION 6. Capital Expenditures; Section 9.07; Carry-Over of
Certain Unused Baskets. (i) Section 9.07(c) of the Credit Agreement is hereby
amended by inserting at the end thereof the following new proviso:
"provided, further that, to the extent that the amount of
Capital Expenditures made by the Corporation and its
Subsidiaries pursuant to preceding clause (y) is less than
$900,000,000 (unless the amount available for Capital
Expenditures in 1999 has been previously reduced pursuant to
the preceding proviso, then such lesser amount), then the
amount of such difference, but not to exceed $300,000,000,
- 8 -
<PAGE> 9
shall be added to the amount otherwise available for Capital
Expenditures for Fiscal Year 2000."
(ii) Section 9.07(c) of the Credit Agreement shall be amended
by inserting, immediately after the words "additional Capital Expenditures for
the purpose of", the following words: "acquiring, renovating, or constructing
Assets generally considered as corporate expenditures (such as, by way of
illustration only, reservation and telephone systems),".
SECTION 7. Certain Definitions. (a) The following new
definitions shall be inserted in proper alphabetical order in Section 11.01:
"'Ninth Amendment' shall mean that certain Ninth Amendment to
Credit Agreement, dated as of September 20, 1999.
"Ninth Amendment Effective Date" shall mean the date upon
which the Ninth Amendment becomes effective in accordance with
its terms.
"Off-Balance Sheet Transaction" shall have the meaning
assigned to such term in Schedule 1 to the Ninth Amendment.
"Original Vistana" shall have the meaning assigned to such
term in the Recitals to the Ninth Amendment.
"Receivables Financing" shall have the meaning assigned to
such term in Schedule 1 to the Ninth Amendment.
"Timeshare Assets" shall mean any Assets relating to the
Timeshare Business.
"Timeshare Business" shall have the meaning assigned to such
term in the Recitals to the Ninth Amendment.
"Timeshare Inventory Balance" shall have the meaning assigned
to such term in Section 9.24 of the Credit Agreement.
"Timeshare Joint Ventures" shall have the meaning assigned to
such term in Schedule 1 to the Ninth Amendment.
"Vacation Resorts" shall have the meaning assigned to such
term in the Recitals to the Ninth Amendment.
"Vistana Parent" shall have the meaning assigned to such term
in the Recitals to the Ninth Amendment.
"VOIs" shall have the meaning assigned to such term in the
Recitals to the Ninth Amendment.
- 9 -
<PAGE> 10
"Timeshare Purchase Money Notes" shall have the meaning
assigned to such term in Schedule 1 to the Ninth Amendment.
"Timeshare Securitization" shall have the meaning assigned to
such term in Schedule 1 to the Ninth Amendment."
(b) The definition of the term "Combined Indebtedness" in
Section 11.01 of the Credit Agreement is amended by replacing the words "Section
9.04(xii) of the Credit Agreement)" with the following words: "Section 9.04(xii)
or (xvi) of the Credit Agreement."
(c) The definition of the term "Recourse Indebtedness" in
Section 11.01 of the Credit Agreement is amended by deleting the word "secured"
therefrom.
II. Miscellaneous Provisions
A. Each Guarantor and each Borrower, by their signatures
below, hereby confirms that (x) the Guaranty shall remain in full force and
effect and the Guaranty covers the obligations of each of the Borrowers under
the Credit Agreement, as modified and amended by this Amendment, as provided in
the Guaranty, and (y) the Pledge and Security Agreement (as modified by this
Amendment) shall remain in full force and effect as security for the obligations
under the Credit Agreement, as modified and amended by this Amendment.
B. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
C. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrowers and the Paying Agent.
D. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
E. This Amendment shall become effective on the date (the
"Ninth Amendment Effective Date") when each of the Borrowers, each Guarantor and
the Required Lenders shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Paying Agent at its Notice Office; provided that
Sections 1, 7(a) and 7(b) of this Amendment shall only become effective when
both (x) the conditions set forth in this sentence have been satisfied and (y)
the Vistana Timeshare Transaction shall have been consummated; provided further
that if the Vistana Timeshare Transaction is not consummated on or prior to
January 31, 2000, Sections 1, 7(a) and 7(b) of this Amendment shall be of no
force or effect.
- 10 -
<PAGE> 11
F. From and after the Ninth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
modified hereby.
[SCHEDULES 1 AND 2 AND SIGNATURE PAGES FOLLOW]
- 11 -
<PAGE> 12
SCHEDULE 1
DESCRIPTION OF TIMESHARE BUSINESS
1. Sale of VOIs: Vistana Parent and its Subsidiaries may enter into one or more
transactions from time to time where Vistana Parent or such Subsidiary may
transfer, convey and sell VOIs to Persons provided that each such transaction is
at fair market value and otherwise either consistent with the Timeshare Business
presently conducted by Vistana Parent and its Subsidiaries or is considered
ordinary or customary in the Timeshare Business as then conducted. Such sales
may be for cash and non-cash consideration. The cash proceeds of any sales
permitted under this paragraph 1 shall not be required to be applied as a
mandatory repayment pursuant to Section 4.02 of the Credit Agreement.
2. Financing of VOIs: Vistana Parent and its Subsidiaries may enter into one or
more transactions from time to time where Vistana Parent or such Subsidiary
provide purchase money financing to customers who purchase VOIs, which financing
may be evidenced by one or more purchase money notes (each, a "Timeshare
Purchase Money Note" and, collectively, "Timeshare Purchase Money Notes").
3. Receivables Financing: Vistana Parent and its Subsidiaries may enter into
financing arrangements from time to time with one or more lenders or other
financing parties where (a) Vistana Parent or such Subsidiary incur Indebtedness
with such lender or financing party not otherwise permitted under the Credit
Agreement, (b) such Indebtedness is secured by a pledge, mortgage or other Lien
by Vistana Parent or its Subsidiaries of their respective interests in Timeshare
Purchase Money Notes and (c) the Indebtedness incurred does not exceed the then
outstanding principal balance of such Timeshare Purchase Money Notes (all of the
foregoing being collectively referred to as "Receivables Financing"); provided
that, if any Receivables Financing permitted to be outstanding at any time
pursuant to this paragraph 3 shall be or become, in whole or in part, Recourse
Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana
Parent and its Subsidiaries), then the Recourse Basket shall be reduced from
time to time by the amount of such Recourse Indebtedness, and such Recourse
Indebtedness shall be permitted only if the Recourse Basket would not be reduced
below $0.
4. Vacation Resort Financing: Vistana Parent and its Subsidiaries may enter into
financing arrangements from time to time with one or more lenders or other
financing parties where (a) Vistana Parent or such Subsidiary incur Indebtedness
with such lender or financing party not otherwise permitted under the Credit
Agreement, (b) such Indebtedness is incurred in connection with the acquisition,
construction or renovation of a Vacation Resort by Vistana Parent or its
Subsidiaries, and (c) such Indebtedness is secured, in whole or in part, by a
pledge, mortgage or other Lien on the applicable Vacation Resort and related
Timeshare Assets; provided that, if any Indebtedness permitted to be outstanding
at any time pursuant to this paragraph 4 shall be or become, in whole or in
part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other
than Vistana Parent and its Subsidiaries), then the Recourse Basket shall be
reduced from time to time by the amount of such Recourse Indebtedness, and such
Recourse Indebtedness shall be permitted only if the Recourse Basket would not
be reduced below $0.
<PAGE> 13
5. Intercompany Financing: Subject to the restrictions contained in Section 9.25
or the Credit Agreement (as added in the Ninth Amendment), the Timeshare Joint
Ventures, Vistana Parent, and its Subsidiaries, may enter into financing
arrangements from time to time with the Corporation or one or more of its
Subsidiaries in accordance with the Credit Agreement.
6. Off-Balance Sheet Transaction: Vistana Parent and its Subsidiaries may enter
into off-balance sheet transactions from time to time with one or more lenders,
financing or other parties where (a) Vistana Parent or such Subsidiary sell
Timeshare Purchase Money Notes to such lender or financing party for cash
consideration and (b) such cash consideration shall not be required to be
applied as a mandatory repayment pursuant to Section 4.02 of the Credit
Agreement (all of the foregoing being collectively referred to as "Off-Balance
Sheet Transactions"); provided that, if any Off-Balance Sheet Transaction
permitted to be outstanding at any time pursuant to this paragraph 6 shall be or
become, in whole or in part, Recourse Indebtedness of the Corporation or any of
its Subsidiaries (other than Vistana Parent and its Subsidiaries), then the
Recourse Basket shall be reduced from time to time by the amount of such
Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if
the Recourse Basket would not be reduced below $0.
7. Timeshare Securitizations: Vistana Parent and its Subsidiaries may enter into
one or more transactions from time to time in which certain Timeshare Assets
(including, without limitation, certain real estate assets or receivable assets
consisting in part of Timeshare Purchase Money Notes) are, directly or
indirectly, either (i) sold, transferred to or with, or deposited in, one or
more trusts or other pass-through entities or other similar entities that (a)
issue pass-through certificates, participation interests or other evidence of
beneficial ownership in such Timeshare Assets or (b) sells certificates,
participation interests or other instruments to investors evidencing an
ownership interest in the Timeshare Assets of such trust or entity or the right
to receive income or proceeds therefrom, or (ii) pledged or mortgaged as
security for notes or bonds, where such pass-through certificates, participation
interests or other evidence of beneficial ownership, notes or bonds are
structured for purchase by institutional investors in capital markets
transactions (all of the foregoing being collectively referred to as "Timeshare
Securitizations" and each, a "Timeshare Securitization"); provided that, if any
Timeshare Securitization permitted to be outstanding at any time pursuant to
this paragraph 7 shall be or become, in whole or in part, Recourse Indebtedness
of the Corporation or any of its Subsidiaries (other than Vistana Parent and its
Subsidiaries), then the Recourse Basket shall be reduced from time to time by
the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall
be permitted only if the Recourse Basket would not be reduced below $0.
8. Operations; Telecommunications: Vistana Parent and its Subsidiaries may enter
into one or more transactions from time to time where Vistana Parent or such
Subsidiary may (a) furnish management, operations, maintenance and
telecommunications services at Vacation Resorts, (b) own or operate vacation
clubs and/or VOI exchange companies and (c) provide telecommunications
contracting services to other Persons, provided that in each case, such
transaction is either consistent with the Timeshare Business presently conducted
by Vistana Parent and its Subsidiaries or is considered ordinary or customary in
the Timeshare Business as then conducted.
Schedule 1
<PAGE> 14
9. Joint Ventures Subject to the restrictions contained in the Credit Agreement
(as added in the Ninth Amendment) and the Ninth Amendment, Vistana Parent and
its Subsidiaries shall be permitted to enter into the following joint ventures
(all of the following being collectively referred to as the "Timeshare Joint
Ventures"):
(a) Harborside at Atlantis. Vistana Parent, through one or
more Wholly-Owned Foreign Subsidiaries, intends to acquire 50% equity
interest in a Bahamas corporation to be known as Harborside at Atlantis
Joint Venture Limited ("HSA") in exchange for an initial capital
contribution of approximately $7,820,000. HSA is being formed to
develop, operate and manage Harborside at Atlantis Vacation Resort in
Paradise Island, Bahamas. The remaining 50% interest in HSA will be
acquired by a subsidiary of Sun International Hotels Limited in
exchange for contribution of the land on which the resort will be
constructed. HSA may conduct its business through one or more
Wholly-Owned Subsidiaries of that entity.
(b) World Golf Village. Vistana Parent, through various
Subsidiaries, owns a 37.5% partnership interest in each of Vistana WGV,
Ltd. ("VWL") and Vistana WGV Management, Ltd. ("VWML"). VWL was formed
to develop and operate Vistana World Golf Village. VWML was formed to
manage Vistana World Golf Village.
(c) Oak Plantation. Vistana Parent, through various
Subsidiaries, owns a 66.67% partnership interest in Oak Plantation
Joint Venture ("OPJV"). OPJV was formed to develop and operate Oak
Plantation.
(d) Other Joint Venture Investments. Any other Investment in
any joint venture relating to the Timeshare Business but only to the
extent permitted under the Credit Agreement or otherwise waived by the
Lenders.
(e) Additional Capital Contributions and Advances. Vistana
Parent and its Subsidiaries may make such additional capital
contributions and cash advances as may be required under the terms and
provisions of the Contractual Obligations relating to the Joint
Ventures specifically described above in paragraphs (a) through (d),
inclusive.
Schedule 1
<PAGE> 15
SCHEDULE 2
SUBSIDIARIES NOT SUBJECT TO SECTIONS 8.13 or 8.15
<TABLE>
<CAPTION>
Name of Subsidiary Reason Stock not Pledged
or not Guarantor
<S> <C>
Points of Colorado, Inc. ("POC") Covenant in Heller construction loan agreement
prohibits pledge of POC stock
Vistana Maintenance Association, Inc. A not-for-profit corporation
Vistana MB, Inc. ("VMBI") Covenants in Heller construction and
receivables loan agreements prohibit pledge of
VMBI stock
Vistana Scottsdale Development, Inc. Covenant in Heller construction loan
("VSDI") agreements prohibits pledge of VSDI stock
Vistana Scottsdale, Inc. ("VSI") Covenants in Heller construction and
receivables loan agreements prohibit pledge of
VSI stock
Vistana Bahamas Holdings, Ltd. ("VBHL") Foreign corporation; Joint Venture Restriction
Harborside at Atlantis Joint Venture Foreign corporation to be 50% owned by
VBHL; Joint Venture Restriction
VCH Oaks, Inc. Joint Venture Restriction
VCH Oaks, Ltd. Joint Venture Restriction
Oak Plantation Joint Venture Joint Venture Restriction
Vistana WGV Holdings, Inc. Joint Venture Restriction
Vistana WGV Investments, Inc. Joint Venture Restriction
Vistana WGV, Ltd. Not a Subsidiary; Joint Venture Restriction on
pledge of partnership interests
Vistana WGV Management, Inc. Joint Venture Restriction
Vistana WGV Management, Ltd. Not a Subsidiary; Joint Venture Restriction on
pledge of partnership interests
</TABLE>
Schedule 2
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
By: /s/ Mark D. Rozells
-------------------------------------------
Title: Vice President Finance and Treasurer
STARWOOD HOTELS & RESORTS
a Maryland real estate investment trust
By: /s/ Mark D. Rozells
-------------------------------------------
Title: Vice President Finance and Treasurer
SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Mark D. Rozells
-------------------------------------------
Title: Vice President and Treasurer
ITT CORPORATION, a Nevada corporation
By: /s/ Mark D. Rozells
-------------------------------------------
Title: Senior Vice President Finance and Treasurer
<PAGE> 17
CHARLESTON HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
CRYSTAL CITY HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
LONG BEACH HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SANTA ROSA HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SLT ALLENTOWN LLC,
a Delaware limited liability company,
SLT ARLINGTON LLC,
a Delaware limited liability company,
SLT ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLT BLOOMINGTON LLC,
a Delaware limited liability company,
SLT CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company,
SLT DANIA LLC,
a Delaware limited liability company,
SLT DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
SLT INDIANAPOLIS LLC,
a Delaware limited liability company,
SLT KANSAS CITY LLC,
a Delaware limited liability company,
SLT LOS ANGELES LLC,
a Delaware limited liability company,
<PAGE> 18
SLT MINNEAPOLIS LLC,
a Delaware limited liability company,
SLT PALM DESERT LLC,
a Delaware limited liability company,
SLT PHILADELPHIA LLC,
a Delaware limited liability company,
SLT REALTY COMPANY, LLC,
a Delaware limited liability company,
SLT SAN DIEGO LLC,
a Delaware limited liability company,
SLT SOUTHFIELD LLC,
a Delaware limited liability company,
SLT ST. LOUIS LLC,
a Delaware limited liability company,
SLT TUCSON LLC,
a Delaware limited liability company,
STARLEX LLC,
a New York limited liability company,
STARWOOD ATLANTA II LLC,
a Delaware limited liability company,
STARWOOD ATLANTA LLC,
a Delaware limited liability company,
STARWOOD MISSION HILLS, L.L.C.,
a Delaware limited liability company,
STARWOOD NEEDHAM LLC,
a Delaware limited liability company,
<PAGE> 19
STARWOOD WALTHAM LLC,
a Delaware limited liability company,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the managing member of each of the above
listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
--------------------------------------
Title: Vice President and Treasurer
BW HOTEL REALTY, LP,
a Maryland limited partnership,
CP HOTEL REALTY, LP,
a Maryland limited partnership,
EDISON HOTEL ASSOCIATES, LP,
a New Jersey limited partnership,
NOVI HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
PARK RIDGE HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
SLT FINANCING PARTNERSHIP,
a Delaware general partnership,
SLT HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership,
VIRGINIA HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
<PAGE> 20
PRUDENTIAL HEI JOINT VENTURE,
a Georgia general partnership,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the general partner of each of the above
listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
--------------------------------------
Title: Vice President and Treasurer
HEI HOTELS, L.L.C.,
a Delaware limited liability company,
OPERATING PHILADELPHIA LLC,
a Delaware limited liability company,
SLC ALLENTOWN LLC,
a Delaware limited liability company,
SLC ARLINGTON LLC,
a Delaware limited liability company,
SLC ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLC ATLANTA II LLC,
a Delaware limited liability company,
SLC ATLANTA LLC,
a Delaware limited liability company,
SLC BLOOMINGTON LLC,
a Delaware limited liability company,
SLC CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company,
SLC DANIA LLC,
a Delaware limited liability company,
SLC DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
<PAGE> 21
SLC INDIANAPOLIS LLC,
a Delaware limited liability company,
SLC KANSAS CITY L.L.C.,
a Delaware limited liability company,
SLC LOS ANGELES LLC,
a Delaware limited liability company,
SLC MINNEAPOLIS LLC,
a Delaware limited liability company,
SLC NEEDHAM LLC,
a Delaware limited liability company,
SLC PALM DESERT LLC,
a Delaware limited liability company,
SLC SAN DIEGO LLC,
a Delaware limited liability company,
SLC SOUTHFIELD LLC,
a Delaware limited liability company,
SLC ST. LOUIS LLC,
a Delaware limited liability company,
SLC TUCSON LLC,
a Delaware limited liability company,
SLC WALTHAM LLC,
a Delaware limited liability company,
<PAGE> 22
STARWOOD MANAGEMENT COMPANY, LLC,
a Delaware limited liability company,
By: SLC Operating Limited Partnership,
a Delaware limited partnership, the managing member of each of
the above listed entities
By: Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation, its
general partner
By: /s/ Mark D. Rozells
-----------------------------------------------------
Title: Vice President and Treasurer
SLC OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation, its general partner
By: /s/ Mark D. Rozells
-----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
MILWAUKEE BROOKFIELD LP,
a Wisconsin limited partnership,
SLC-CALVERTON LP,
a Delaware limited partnership,
SLC HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership,
By: SLC Operating Limited Partnership,
a Delaware limited partnership, the general partner of each of
the above listed entities
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, its general partner
By: /s/ Mark D. Rozells
-----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
<PAGE> 23
MOORLAND HOTEL LP,
a Wisconsin limited partnership,
By: Milwaukee Brookfield LP,
a Wisconsin limited partnership, its general partner
By: SLC Operating Limited Partnership,
a Delaware limited partnership, its general partner
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, its general partner
By: /s/ Mark D. Rozells
-----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
ITT BROADCASTING CORP.,
a Delaware corporation
By: /s/ Mark D. Rozells
-----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
ITT SHERATON CORPORATION,
a Delaware corporation,
DESTINATION SERVICES OF SCOTTSDALE, INC.,
a Delaware corporation,
GENERAL FIDUCIARY CORPORATION,
a Massachusetts corporation,
GLOBAL CONNEXIONS INC.,
a Delaware corporation,
ITT SHERATON RESERVATIONS CORPORATION,
a Delaware corporation,
MANHATTAN SHERATON CORPORATION,
a New York corporation,
SAN DIEGO SHERATON CORPORATION,
a Delaware corporation,
<PAGE> 24
SAN FERNANDO SHERATON CORPORATION,
a Delaware corporation,
SHERATON ARIZONA CORPORATION,
a Delaware corporation,
SHERATON 45 PARK CORPORATION,
a Delaware corporation,
SHERATON ASIA-PACIFIC CORPORATION,
a Delaware corporation,
SHERATON BLACKSTONE CORPORATION,
a Delaware corporation,
SHERATON BOSTON CORPORATION,
a Massachusetts corporation,
SHERATON CALIFORNIA CORPORATION,
a Delaware corporation,
SHERATON CAMELBACK CORPORATION,
a Delaware corporation,
SHERATON FLORIDA CORPORATION,
a Delaware corporation,
SHERATON HARBOR ISLAND CORPORATION,
a Delaware corporation,
SHERATON HARTFORD CORPORATION,
a Connecticut corporation,
SHERATON HAWAII HOTELS CORPORATION,
a Hawaii corporation,
SHERATON INTERNATIONAL, INC.,
a Delaware corporation,
SHERATON INTER-AMERICAS, LTD.,
a Delaware corporation,
SHERATON INTERNATIONAL DE MEXICO, INC.,
a Delaware corporation,
<PAGE> 25
SHERATON MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON OVERSEAS MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON WARSAW CORPORATION,
a Delaware corporation,
SHERATON MARKETING CORPORATION,
a Delaware corporation,
SHERATON MIAMI CORPORATION,
a Delaware corporation,
SHERATON MIDDLE EAST MANAGEMENT CORPORATION,
a Delaware corporation,
SHERATON NEW YORK CORPORATION,
A New York corporation,
SHERATON OVERSEAS TECHNICAL SERVICES CORPORATION,
a Delaware corporation,
SHERATON PEACHTREE CORPORATION,
a Delaware corporation,
SHERATON PHOENICIAN CORPORATION,
a Delaware corporation,
SHERATON SAVANNAH CORPORATION,
a Delaware corporation,
SHERATON SERVICES CORPORATION,
a Delaware corporation,
SOUTH CAROLINA SHERATON CORPORATION,
a Delaware corporation,
ST. REGIS SHERATON CORPORATION,
a New York corporation,
WORLDWIDE FRANCHISE SYSTEMS, INC.,
<PAGE> 26
a Delaware corporation,
SHERATON VERMONT CORPORATION,
a Vermont corporation,
By: /s/ Mark D. Rozells
--------------------------
Title: Senior Vice President Finance and Treasurer
HUDSON SHERATON CORPORATION LLC,
a Delaware limited liability company
By: ITT SHERATON CORPORATION
a Delaware corporation, its managing member
By: /s/ Mark D. Rozells
---------------------------
Title: Senior Vice President Finance and Treasurer
W&S DENVER CORP.,
a Delaware corporation,
W&S REALTY CORPORATION OF DELAWARE,
a Delaware corporation,
BENJAMIN FRANKLIN HOTEL, INC.,
a Washington corporation,
LAUDERDALE HOTEL COMPANY,
a Delaware corporation,
WESTIN BAY HOTEL COMPANY,
a Delaware corporation,
CINCINNATI PLAZA COMPANY,
a Delaware corporation,
SOUTH COAST WESTIN HOTEL COMPANY,
a Delaware corporation,
TOWNHOUSE MANAGEMENT INC.,
a Delaware corporation,
WVC RANCHO MIRAGE, INC.,
a Delaware corporation,
<PAGE> 27
WESTIN ASSET MANAGEMENT COMPANY,
a Delaware corporation,
WESTIN HOTEL COMPANY,
a Delaware corporation,
W&S ATLANTA CORP.,
a Delaware corporation,
By: /s/ Mark D. Rozells
----------------------------------------------------
Title: Senior Vice President Finance and Treasurer
WESTIN SEATTLE HOTEL COMPANY,
a Washington general partnership,
By: Benjamin Franklin Hotel, Inc.,
its general partner
By: /s/ Mark D. Rozells
-----------------------------------------------
Title: Vice President Finance and Treasurer
By: W&S Realty Corporation of Delaware,
its general partner
By: /s/ Mark D. Rozells
-----------------------------------------------
Title: Vice President Finance and Treasurer
WESTIN PREMIER, INC.,
a Delaware corporation,
WESTIN VACATION MANAGEMENT CORPORATION,
a Delaware corporation,
WESTIN VACATION EXCHANGE COMPANY,
a Delaware corporation,
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation, the sole stockholder of each of the above listed
entities
By: /s/ Mark D. Rozells
--------------------------------------------------
Title: Senior Vice President Finance and Treasurer
<PAGE> 28
W&S LAUDERDALE CORP.,
a Delaware corporation,
W&S SEATTLE CORP.,
a Delaware corporation,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the sole stockholder of each of the above
listed entities
By: Starwood Hotels & Resorts
a Maryland real estate investment trust,
its general partner
By: /s/ Mark D. Rozells
--------------------
Title: Vice President Finance and Treasurer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent and as Paying Agent
By: /s/ Laura S. Burwick
---------------------
Title: Principal
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent
By: /s/ Alan Breindel
------------------
Title: Managing Director
LEHMAN COMMERCIAL PAPER, INC.,
Individually and as Syndication Agent
By: /s/ David Juge
---------------
Title: Senior Vice President
<PAGE> 29
BANK OF MONTREAL, CHICAGO BRANCH,
Individually and as Syndication Agent
By: /s/ Heather L. Turf
--------------------------------------------
Title: Director
ARAB BANKING CORPORATION (B.S.C.)
By: /s/ Louise Bilbro
--------------------------------------------
Title: Vice President
BANCA POPOLARE DI MILANO
By: /s/ Patrick F. Dillon
--------------------------------------------
Title: Vice President/Chief Credit Officer
By: /s/ Esperanza Quintero
--------------------------------------------
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Kathleen M. Ahern
--------------------------------------------
Title: Vice President
By:
--------------------------------------------
Name:
Title:
BANK LEUMI USA
By:
--------------------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LIMITED,
NEW YORK BRANCH
By:
--------------------------------------------
Title:
<PAGE> 30
BANK OF HAWAII
By: /s/ Brenda K. Testerman
--------------------------------------------
Title: Vice President
BANK POLSKA KASA OPIEKI S.A. PEKAO S.A.
GROUP, NEW YORK BRANCH
By: /s/ Harvey Winter
--------------------------------------------
Title: Vice President
PARIBAS
By:
--------------------------------------------
Title:
By:
--------------------------------------------
Title:
BANQUE WORMS CAPITAL CORP.
By:
--------------------------------------------
Title:
BEAR STEARNS INVESTMENT PRODUCTS INC.
By: /s/ Gregory Hanley
--------------------------------------------
Title: Vice President
BARCLAYS BANK PLC
By: /s/ John Giannone
--------------------------------------------
Title: Director
CHANG HWA COMMERCIAL BANK, LTD., NEW
YORK BRANCH
By:
--------------------------------------------
Title:
<PAGE> 31
CHIAO TUNG BANK CO., LTD. NEW YORK AGENCY
By:/s/ Kuang-Si Shiu
---------------------------------------------
Title Senior Vice President & General Manager
CIBC INC.
By:
---------------------------------------------
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
By:
---------------------------------------------
Title:
By:
---------------------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:/s/ Mary P. Daly
---------------------------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By:/s/ Chris T. Horgan / Vitaly G. Butenko
---------------------------------------------
Title: Vice President / Asst. Vice President
UNICREDITO ITALIANO
By:/s/Gianfranco Bisagni
---------------------------------------------
Title: First Vice President
By:/s/Saiyed A. Abbes
---------------------------------------------
Title: Vice President
<PAGE> 32
THE DAI-ICHI KANGYO BANK, LIMITED
NEW YORK BRANCH
By:
-----------------------------------------
Title:
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Hans-Josef Thiele
-----------------------------------------
Title: Director
By: /s/ Alexander Karow
-----------------------------------------
Title: Assistant Vice President
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By: /s/ Paul Judicke /John S. Runnion
-----------------------------------------
Title: Vice President /First Vice President
Erste Bank New York Branch
FIRST COMMERCIAL BANK
By: /s/ Bruce Ju
-----------------------------------------
Title: Deputy General Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW
YORK BRANCH
By: /s/ Christian Giordano
-----------------------------------------
Title: Vice President
<PAGE> 33
KZH CNC LLC
By: /s/ Peter Chin
--------------------------------------
Title: Authorized Agent
LAND BANK OF TAIWAN, LOS ANGELES BRANCH
By:
--------------------------------------
Name:
Title:
MITSUBISHI TRUST & BANKING CORPORATION
By:
--------------------------------------
Title:
BANK OF AMERICA, N.A.
By: /s/ Ansel McDowell
--------------------------------------
Title: Vice President
THE ROYAL BANK OF SCOTLAND, PLC
By:
--------------------------------------
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Thomas K. Day
--------------------------------------
Title: Director
SOUTHERN PACIFIC BANK
By: /s/ Mun Young Kim
--------------------------------------
Title: Vice President
<PAGE> 34
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
By:
--------------------------------------
Title:
WACHOVIA BANK, N.A.
By:
--------------------------------------
Name:
Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By:
--------------------------------------
Title:
VAN KAMPEN
PRIME RATE INCOME TRUST
By: /s/ Douglas J. Smith
--------------------------------------
Title: Vice President
VAN KAMPEN SENIOR FLOATING RATE FUND
By: Van Kampen Investment Advisory Corp.
By: /s/ Douglas J. Smith
---------------------------------
Title: Vice President
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By: /s/ Douglas J. Smith
----------------------------------
Title: Vice President
<PAGE> 35
VAN KAMPEN
SENIOR INCOME TRUST
By: /s/ Douglas J. Smith
-----------------------------------------------------
Title: Vice President
MELLON BANK, N.A., solely in its capacity as Trustee for the GENERAL
MOTORS CASH MANAGEMENT MASTER TRUST, (as directed by Shenkman Capital
Management, Inc.), and not in its individual capacity
By:
-----------------------------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:
-----------------------------------------------------
Name:
Title:
OXFORD STRATEGIC INCOME FUND
By: EATON VANCE MANAGEMENT,
as Investment Advisor
By:
-----------------------------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital as Portfolio Advisor
By: /s/ Melissa Marso
-----------------------------------------------------
Title: Vice President
FIRST SECURITY BANK, N.A.
By:
-----------------------------------------------------
Title:
<PAGE> 36
FLEET BANK, N.A.
By: /s/ John T. Harrison
-----------------------------------------------------
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-----------------------------------------------------
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:
-----------------------------------------------------
Title:
GULF INTERNATIONAL BANK B.S.C.
By:
-----------------------------------------------------
Title:
HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY
By:
-----------------------------------------------------
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 128, AND BASIC AND DILUTED EPS
HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS, RESPECTIVELY.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 195
<SECURITIES> 0
<RECEIVABLES> 587
<ALLOWANCES> 51
<INVENTORY> 63
<CURRENT-ASSETS> 871
<PP&E> 8,892
<DEPRECIATION> 1,054
<TOTAL-ASSETS> 13,238
<CURRENT-LIABILITIES> 1,435
<BONDS> 6,248
136
0
<COMMON> 4
<OTHER-SE> 3,526
<TOTAL-LIABILITY-AND-EQUITY> 13,238
<SALES> 0
<TOTAL-REVENUES> 2,775
<CGS> 0
<TOTAL-COSTS> 2,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 364
<INCOME-PRETAX> 260
<INCOME-TAX> 999
<INCOME-CONTINUING> (739)
<DISCONTINUED> (7)
<EXTRAORDINARY> (2)
<CHANGES> 0
<NET-INCOME> (748)
<EPS-BASIC> (4.03)
<EPS-DILUTED> (4.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 128, AND BASIC AND DILUTED EPS
HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS, RESPECTIVELY.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD HOTELS & RESORTS
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 3,001
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59
<PP&E> 4,658
<DEPRECIATION> 265
<TOTAL-ASSETS> 8,775
<CURRENT-LIABILITIES> 209
<BONDS> 602
136
0
<COMMON> 2
<OTHER-SE> 7,896
<TOTAL-LIABILITY-AND-EQUITY> 8,775
<SALES> 0
<TOTAL-REVENUES> 560
<CGS> 0
<TOTAL-COSTS> 132
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 351
<INCOME-TAX> 2
<INCOME-CONTINUING> 349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 349
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
