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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): February 23, 1998
ITT EDUCATIONAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-13144 36-2061311
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
5975 Castle Creek Parkway N. Drive
P.O. Box 50466
Indianapolis, Indiana 46250-0466
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 594-9499
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On February 23, 1998, Starwood Hotels & Resorts (formerly Starwood Hotels &
Resorts Trust or Starwood Lodging Trust), a Maryland real estate investment
trust ("Starwood Trust"), and Starwood Hotels & Resorts Worldwide, Inc.
(formerly Starwood Lodging Corporation), a Maryland corporation ("Starwood,
Inc." and, together with Starwood Trust, "Starwood Hotels"), completed the
acquisition of ITT Corporation, a Nevada corporation ("ITT"), in accordance with
the Amended and Restated Agreement and Plan of Merger dated as of November 12,
1997 (the "Merger Agreement") among Starwood, Inc., Chess Acquisition Corp., a
Nevada corporation and a subsidiary of Starwood, Inc. ("Chess"), Starwood Trust
and ITT. Pursuant to the terms of the Merger Agreement, Chess was merged with
and into ITT (the "Merger") and ITT became a subsidiary of Starwood, Inc.
Under the terms of the Merger Agreement, each outstanding share of common stock,
no par value, of ITT ("ITT Common Stock"), together with the associated right to
purchase shares of Series A Participating Cumulative Preferred Stock of ITT (the
"Rights" and, together with the ITT Common Stock, "ITT Shares"), other than
those that were converted into cash pursuant to a cash election by the holder
(and other than ITT Shares owned directly or indirectly by ITT or Starwood
Hotels, which shares were cancelled), was converted into 1.543 Paired Shares of
Starwood Hotels, each such Paired Share consisting of one share of common stock,
par value $.01 per share, of Starwood, Inc. and one share of beneficial
interest, par value $.01 per share, of Starwood Trust. Pursuant to cash election
procedures, 35,195,664 ITT Shares, representing approximately 30% of the
outstanding ITT Shares, were converted into $85 in cash per share. In addition,
each ITT Share was converted into additional cash consideration in the amount of
$.37493151, which amount represents the interest that would have accrued
(without compounding) on $85 at an annual rate of 7% during the period from and
including January 31, 1998 to but excluding the date of the closing (February
23, 1998). The aggregate value of the acquisition of ITT in cash, Paired Shares
and assumed debt was approximately $14.6 billion.
Starwood Hotels borrowed the cash portion of the consideration under a $3.1
billion credit facility co-administered by Bankers Trust Company and The Chase
Manhattan Bank and co-syndicated by Lehman Commercial Paper Inc. and Bank of
Montreal and a $2.5 billion senior secured increasing rate note facility
arranged by Lehman Commercial Paper Inc., co-syndicated by BT Alex. Brown
Incorporated and Chase Securities, Inc. and for which NationsBank, N.A. serves
as documentation agent.
As a result of the Merger, Starwood, Inc. also acquired control of ITT
Educational Services, Inc. (the "Company"). ITT holds 22,500,000 shares, or
83.3%, of the Company's outstanding common stock (the "Common Stock"), and
4,499,952 shares, or 16.7%, of the outstanding Common Stock are owned by the
general public.
At the time the Merger was consummated, four of the ten members of the Board of
Directors of the Company (i.e., Bette B. Anderson, Robert A. Bowman, Richard S.
Ward and Margita E. White) resigned effective February 23, 1998. On February
25, 1998, the remaining members of the Board of Directors of the Company elected
Tony Coelho, Robin Josephs, Merrick R. Kleeman and Barry S. Sternlicht to fill
the vacancies caused by such resignations and to serve as Directors for terms
expiring at the 2000, 1999, 2000 and 1998 Annual Meeting of Stockholders,
respectively, and until such Director's successor is duly elected and qualified.
Starwood, Inc. has previously announced that it is exploring a range of
disposition strategies for the Company. To that end, on February 13, 1998, the
Company filed with the Securities and Exchange Commission a registration
statement on Form S-3 (the "Registration Statement") for an underwritten public
offering of 11,000,000 shares of the
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Common Stock held by ITT. The Registration Statement also covers an additional
1,650,000 shares of the Common Stock held by ITT to cover over-allotments, if
any.
The ownership and operation of educational institutions in the United States are
subject to extensive federal and state laws and regulations, including laws and
regulations relating to a change in control of the Company. In this regard, the
Company must obtain certain approvals under the applicable laws, regulations and
standards of the U.S. Department of Education ("DOE"), the accrediting
commissions that accredit the Company's ITT Technical Institutes (the
"Accrediting Commissions") and the state education authorities that regulate the
Company's ITT Technical Institutes (the "SEAs") relating to the change in
control caused by the Merger. The Company obtained all prior approvals required
by the DOE, the Accrediting Commissions and the SEAs necessitated by the Merger
and is now in the process of obtaining any approvals required by such
authorities after the Merger. The Company believes that the proposed public
offering and any future dispositions by ITT of a significant portion of its
shares of Common Stock might cause a change in control of the Company or its ITT
Technical Institutes to occur under the regulations of the DOE, most of the SEAs
and the Accrediting Commissions, requiring the Company to obtain certain
approvals from these authorities before and after the disposition. For a more
complete discussion of the effects of a change in control of the Company,
reference is made to "Item 1. Business -- Change in Control." in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The exhibits set forth in the Index to Exhibits on page S-2 are
incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ITT Educational Services, Inc.
Date: March 10, 1998
By: /s/ Clark D. Elwood
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Clark D. Elwood
Senior Vice President, General Counsel
& Secretary
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INDEX TO EXHIBITS
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Exhibit
No. Description
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<S> <C>
99.1 Text of a Press Release issued by the Company dated March 9, 1998.
99.2 (1) Credit Agreement (the "Credit Agreement") dated as of February 23,
1998 among Starwood Hotels & Resorts, SLT Realty Limited
Partnership, Starwood Hotels & Resorts Worldwide, Inc., Chess
Acquisition Corp. (and ITT Corporation as its successor by
merger), certain additional borrowers, various lenders, Bankers
Trust Company and The Chase Manhattan Bank, as Administrative
Agents, and Lehman Commercial Paper Inc. and Bank of Montreal, as
Syndication Agents.
99.3 (2) First Amendment dated as of March 3, 1998 among Starwood Hotels &
Resorts, SLT Realty Limited Partnership, Starwood Hotels & Resorts
Worldwide, Inc., ITT Corporation, the lenders party to the Credit
Agreement, Bankers Trust Company and The Chase Manhattan Bank, as
Administrative Agents, and Lehman Commercial Paper Inc. and Bank
of Montreal, as Syndication Agents, and the new lenders.
99.4 (3) Senior Secured Increasing Rate Note Agreement dated as of February
23, 1998 by and among Starwood Hotels & Resorts Worldwide, Inc.,
Starwood Hotels & Resorts, the Guarantors named therein and the
Lenders named therein.
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(1) The copy of this exhibit filed as Exhibit 10.1 to Starwood Hotels &
Resorts Worldwide, Inc.'s and Starwood Hotels & Resorts' Joint Current
Report on Form 8-K dated February 23, 1998 is incorporated herein by
reference.
(2) The copy of this exhibit filed as Exhibit 10.2 to Starwood Hotels &
Resorts Worldwide, Inc.'s and Starwood Hotels & Resorts' Joint Current
Report on Form 8-K dated February 23, 1998 is incorporated herein by
reference.
(3) The copy of this exhibit filed as Exhibit 10.3 to Starwood Hotels & Resorts
Worldwide, Inc.'s and Starwood Hotels & Resort's Joint Current Report on
Form 8-K dated February 23, 1998 is incorporated herein by reference.
S-2
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Exhibit 99.1
FOR FURTHER INFORMATION CONTACT:
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
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Edward Hartigan George Zagoudis Janine Warell Darcy Bretz
Senior Vice President General Information Analyst Contact Media Contact
(317) 594-9499 x207 (312) 640-6663 (312) 640-6775 (312) 640-6756
FOR IMMEDIATE RELEASE
MARCH 9, 1998
ITT EDUCATIONAL SERVICES, INC. ANNOUNCES
CHANGES ON ITS BOARD OF DIRECTORS
Indianapolis, IN, March 9, 1998 -- ITT Educational Services, Inc., (NYSE:
ESI) a leading proprietary provider of technology-oriented postsecondary degree
programs, today reported that four new directors have been elected to fill the
vacancies caused by the resignation of four of the ten members of its Board of
Directors.
On February 25, 1998, the ESI Board of Directors elected Tony Coelho, Robin
Josephs, Merrick R. Kleeman and Barry S. Sternlicht as directors of ESI with
terms expiring at the 2000, 1999, 2000 and 1998 Annual Meeting of Stockholders,
respectively, to fill the vacancies caused by the resignation of Bette B.
Anderson, Robert A. Bowman, Margita E. White and Richard S. Ward that were
effective February 23, 1998.
Each of the ESI directors who resigned was an officer and/or director of ITT
Corporation ("ITT") prior to the merger of Chess Acquisition Corp. with and into
ITT, pursuant to which ITT became a wholly-owned subsidiary of Starwood Hotels &
Resorts Worldwide, Inc. ("Starwood, Inc."). ITT holds 22,500,000 shares, or
83.3%, of the outstanding ESI common stock.
Mr. Coelho, former Congressman and Majority Whip of the U.S. House of
Representatives, is a director of several public companies and provides
consulting services. Ms. Josephs, a former vice president of Goldman Sachs, is
an advisor to various real estate entities. Mr. Kleeman is a managing director
of Starwood Capital Group, L.L.C. ("Starwood Capital"). Mr. Sternlicht is
chairman of the board of directors of Starwood, Inc. and chairman and chief
executive officer of Starwood Hotels & Resorts, a real estate investment trust
whose shares are paired with those of Starwood, Inc., and founder and general
manager of Starwood Capital.
"I am very grateful for the dedicated service ESI received from its former
directors," said Rene R. Champagne, chairman, president and chief executive
officer of ESI. "I look forward to the contributions of the newly elected
directors."
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"ESI's past performance and future growth plans have been presented in periodic
reports filed with the Securities and Exchange Commission," said Champagne," and
in the recently filed registration statement for an underwritten public offering
of 11 million shares of ESI common stock by ITT. These changes in the
membership of ESI's Board are not expected to materially affect ESI's publicly
announced plans."
ITT Educational Services, Inc. operates 62 ITT Technical Institutes in 27 states
which provide career-focused programs in fields of technology to more than
24,000 students. Curriculum offerings, leading primarily to associate's and
bachelor's degrees are designed to help students begin to prepare for career
opportunities in various fields of technology, including electronics, computer-
aided drafting, industrial design, automated manufacturing, chemical technology,
telecommunications and other areas. Four and one-half million shares, or 16.7
percent, of the Company's outstanding common stock are traded on the New York
Stock Exchange under the symbol ESI. ITT Corporation owns the remaining 83.3
percent of the common stock.
Except for the historical information contained herein, the matters discussed in
this press release are forward looking statements that involve a number of risks
and uncertainties. Among the factors that could cause actual results to differ
materially are the following: business conditions and growth in the
postsecondary education industry and in the general economy; changes in federal
and state governmental regulations with respect to education and accreditation
standards, or the interpretation or enforcement thereof, including, but not
limited to, the level of government funding for, and the Company's eligibility
to participate in, student financial aid programs utilized by the Company's
students; the results of the Company's appeal in Eldredge, et al. v. ITT
Educational Services, Inc., et al. and the results of any related litigation;
effects of any change in ownership of the Company resulting in a change in
control of the Company, including, but not limited to, the consequences of such
changes on the accreditation and federal and state regulation of the institutes;
receptivity of students and employers to the Company's existing program
offerings and new curricula; loss of lender access to the Company's students for
student loans; a substantial increase in the shares of Common Stock available
for sale in the market if some or all of ITT Corporation's Common Stock holdings
are divested; and other risks and uncertainties detailed from time to time in
the Company's filings with the Securities and Exchange Commission.
For more information on ITT Educational Services, Inc. via facsimile at no cost,
simply dial 1-800-PRO-INFO and enter the company code ESI.
