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
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
Exhibit
No. Description
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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.
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