10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ Joint Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2004

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from                      to                     

Commission File Number: 1-7959 STARWOOD HOTELS & RESORTS WORLDWIDE, INC (Exact name of Registrant as specified in its charter)	Commission File Number: 1-6828 STARWOOD HOTELS & RESORTS (Exact name of Registrant as specified in its charter)
Maryland (State or other jurisdiction of incorporation or organization) 52-1193298 (I.R.S. employer identification no.) 1111 Westchester Avenue White Plains, NY 10604 (Address of principal executive offices, including zip code) (914) 640-8100 (Registrant’s telephone number, including area code)	Maryland (State or other jurisdiction of incorporation or organization) 52-0901263 (I.R.S. employer identification no.) 1111 Westchester Avenue White Plains, NY 10604 (Address of principal executive offices, including zip code) (914) 640-8100 (Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share (“Corporation Share”), of Starwood Hotels & Resorts Worldwide, Inc. (the “Corporation”), Class B shares of beneficial interest, par value $0.01 per share (“Class B Shares”), of Starwood Hotels & Resorts (the “Trust”), and Preferred Stock Purchase Rights of the Corporation, all of which are attached and trade together as a Share	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

None

     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 þ      No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ      No o

     As of June 30, 2004, the aggregate market value of the Registrants’ voting and non-voting common equity (for purposes of this Joint Annual Report only, includes all Shares other than those held by the Registrants’ Directors, Trustees and executive officers) was $9,295,225,021.

     As of February 25, 2005, the Corporation had outstanding 212,467,631 Corporation Shares and the Trust had outstanding 212,467,631 Class B Shares and 100 Class A shares of beneficial interest, par value $0.01 per share (“Class A Shares”).

     For information concerning ownership of Shares, see the Proxy Statement for the Corporation’s Annual Meeting of Stockholders that is currently scheduled for May 5, 2005 (the “Proxy Statement”), which is incorporated by reference under various Items of this Joint Annual Report.

Document Incorporated by Reference:

Document	Where Incorporated
Proxy Statement	Part III (Items 11 and 12)

TABLE OF CONTENTS

		Page
PART I
	Forward-Looking Statements		1
Item 1.	Business		10
Item 2.	Properties		16
Item 3.	Legal Proceedings		19
Item 4.	Submission of Matters to a Vote of Security Holders		19
	Executive Officers of the Registrants		19
PART II
Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		19
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		36
Item 8.	Financial Statements and Supplementary Data		36
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure		37
Item 9A.	Controls and Procedures		37
PART III
Item 10.	Directors, Trustees and Executive Officers of the Registrants		39
Item 11.	Executive Compensation		42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		43
Item 13.	Certain Relationships and Related Transactions		43
Item 14.	Principal Accountant Fees and Services		47
PART IV
Item 15.	Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K		48
EX-3.2
EX-3.4
EX-10.3
EX-10.4
EX-10.13
EX-10.14
EX-10.15
EX-10.17
EX-10.19
EX-10.23
EX-10.26
EX-10.30
EX-10.31
EX-10.35
EX-10.41
EX-10.70
EX-10.73
EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-31.3
EX-31.4
EX-32.1
EX-32.2
EX-32.3
EX-32.4

      This Joint Annual Report is filed by Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the “Corporation”), and its subsidiary, Starwood Hotels & Resorts, a Maryland real estate investment trust (the “Trust”). Unless the context otherwise requires, all references to the Corporation include those entities owned or controlled by the Corporation, including SLC Operating Limited Partnership, a Delaware limited partnership (the “Operating Partnership”), but excluding the Trust; all references to the Trust include the Trust and those entities owned or controlled by the Trust, including SLT Realty Limited Partnership, a Delaware limited partnership (the “Realty Partnership”); and all references to “we”, “us”, “our”, “Starwood”, or the “Company” refer to the Corporation, the Trust and their respective subsidiaries, collectively. The shares of common stock, par value $0.01 per share, of the Corporation (“Corporation Shares”) and the Class B shares of beneficial interest, par value $0.01 per share, of the Trust (“Class B Shares”) are attached and trade together and may be held or transferred only in units consisting of one Corporation Share and one Class B Share (a “Share”).

PART I

Forward-Looking Statements

      This Joint Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in several places in this Joint Annual Report, including, without limitation, the section of Item 1. Business, captioned “Business Strategy” and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Such forward-looking statements may include statements regarding the intent, belief or current expectations of Starwood, its Directors or Trustees or its officers with respect to the matters discussed in this Joint Annual Report. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements including, without limitation, the risks and uncertainties set forth below. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances.

Where you can find more information

      We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. Our SEC filings are also available on our website at http://www.starwoodhotels.com/corporate/investor  relations.html as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any document we file with the SEC at its public reference rooms in Washington, D.C. Please call the SEC at (800) SEC-0330 for further information on the public reference rooms. Our filings with the SEC are also available at the New York Stock Exchange. For more information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. You may also obtain a copy of our filings free of charge by calling Alisa Rosenberg, Vice President, Investor Relations at (914) 640-5214.

Risks Relating to Hotel, Resort and Vacation Ownership Operations

      We Are Subject to All the Operating Risks Common to the Hotel and Vacation Ownership Industries. Operating risks common to the hotel and vacation ownership industries include:

•   changes in general economic conditions, including the timing and robustness of the apparent recovery in the United States from the recent economic downturn and the prospects for improved performance in other parts of the world;

•   impact of war and terrorist activity (including threatened terrorist activity) and heightened travel security measures instituted in response thereto;

•   domestic and international political and geopolitical conditions;

•   travelers’ fears of exposures to contagious diseases or the occurrence of natural disasters;

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•   decreases in the demand for transient rooms and related lodging services, including a reduction in business travel as a result of general economic conditions;

•   the impact of internet intermediaries on pricing and our increasing reliance on technology;

•   cyclical over-building in the hotel and vacation ownership industries;

•   restrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental laws, rules and regulations and other governmental and regulatory action;

•   changes in travel patterns;

•   changes in operating costs including, but not limited to, energy, labor costs (including the impact of unionization), workers’ compensation and health-care related costs, insurance and unanticipated costs such as acts of nature and their consequences;

•   disputes with owners of properties, franchisees and homeowner associations which may result in litigation;

•   the availability of capital to allow us and potential hotel owners and franchisees to fund construction, renovations and investments;

•   foreign exchange fluctuations;

•   the financial condition of third-party property owners and franchisees; and

•   the financial condition of the airline industry and the impact on air travel.

      We are also impacted by our relationships with owners and franchisees. Our hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace us if certain financial or performance criteria are not met. Our ability to meet these financial and performance criteria is subject to, among other things, the risks described in this section. Additionally, our operating results would be adversely affected if we could not maintain existing management, franchise or representation agreements or obtain new agreements on as favorable terms as the existing agreements.

      General Economic Conditions May Negatively Impact Our Results. Moderate or severe economic downturns or adverse conditions may negatively affect our operations. These conditions may be widespread or isolated to one or more geographic regions. A tightening of the labor markets in one or more geographic regions may result in fewer and/or less qualified applicants for job openings in our facilities. Higher wages, related labor costs and the increasing cost trends in the insurance markets may negatively impact our results as wages, related labor costs and insurance premiums increase.

      We Must Compete for Customers. The hotel and vacation ownership industries are highly competitive. Our properties compete for customers with other hotel and resort properties, and, with respect to our vacation ownership resorts and residential projects, with owners reselling their vacation ownership interests (“VOIs”), including fractional ownership, or apartments. Some of our competitors may have substantially greater marketing and financial resources than we do, and they may improve their facilities, reduce their prices or expand or improve their marketing programs in ways that adversely affect our operating results.

      We Must Compete for Management and Franchise Agreements. We compete with other hotel companies for management and franchise agreements. As a result, the terms of such agreements may not be as favorable as our current agreements. In connection with entering into management or franchise agreements, we may be required to make investments in or guarantee the obligations of third parties or guarantee minimum income to third parties.

      The Hotel Industry Is Seasonal in Nature. The hotel industry is seasonal in nature; however, the periods during which we experience higher revenue vary from property to property and depend principally upon location. Our revenue historically has been lower in the first quarter than in the second, third or fourth quarters.

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      Internet Reservation Channels May Negatively Impact our Bookings. Some of our hotel rooms are booked through internet travel intermediaries such as Travelocity.com®, Expedia.com® and Priceline.com®. As the percentage of internet bookings increases, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to commoditize hotel rooms, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to our lodging brands. Although we expect to derive most of our business from traditional channels, if the amount of sales made through internet intermediaries increases significantly, our business and profitability may be significantly harmed.

      We Place Significant Reliance on Technology. The hospitality industry continues to demand the use of sophisticated technology and systems including technology utilized for property management, procurement, reservation systems, operation of our customer loyalty program, distribution and guest amenities. These technologies can be expected to require refinements and there is the risk that advanced new technologies will be introduced. There can be no assurance that as various systems and technologies become outdated or new technology is required we will be able to replace or introduce them as quickly as our competition or within budgeted costs for such technology. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system.

      Our Businesses Are Capital Intensive. For our owned, managed and franchised properties to remain attractive and competitive, the property owners and we have to spend money periodically to keep the properties well maintained, modernized and refurbished. This creates an ongoing need for cash and, to the extent the property owners and we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained. This may depend on the financial condition of the third-party owners and franchisees. Their financial condition may also impact our ability to recover amounts that may be owed to us by owners, developers and franchisees such as indemnity payments. In addition, to continue growing our vacation ownership business and residential projects, we need to spend money to develop new units. Accordingly, our financial results may be sensitive to the cost and availability of funds and the carrying cost of VOI and residential inventory.

      Real Estate Investments Are Subject to Numerous Risks. We are subject to the risks that generally relate to investments in real property because we own and lease hotels and resorts. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, and the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, real estate, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate hotels. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Finally, under eminent domain laws, governments can take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have a material adverse impact on our results of operations or financial condition. In addition, equity real estate investments are difficult to sell quickly and we may not be able to adjust our portfolio of owned properties quickly in response to economic or other conditions. If our properties do not generate revenue sufficient to meet operating expenses, including debt service and capital expenditures, our income will be adversely affected.

      Hotel and Resort Development Is Subject to Timing, Budgeting and Other Risks. We intend to develop hotel and resort properties, including VOIs and residential components of hotel properties, as suitable

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opportunities arise, taking into consideration the general economic climate. New project development has a number of risks, including risks associated with:

•   construction delays or cost overruns that may increase project costs;

•   receipt of zoning, occupancy and other required governmental permits and authorizations;

•   development costs incurred for projects that are not pursued to completion;

•   so-called acts of God such as earthquakes, hurricanes, floods or fires that could adversely impact a project;

•   defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation;

•   ability to raise capital; and

•   governmental restrictions on the nature or size of a project or timing of completion.

      We cannot assure you that any development project will be completed on time or within budget.

      Environmental Regulations. Environmental laws, ordinances and regulations of various federal, state, local and foreign governments regulate our properties and could make us liable for the costs of removing or cleaning up hazardous or toxic substances on, under, or in property we currently own or operate or that we previously owned or operated. These laws could impose liability without regard to whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to properly clean up such substances when present, could jeopardize our ability to develop, use, sell or rent the real property or to borrow using the real property as collateral. If we arrange for the disposal or treatment of hazardous or toxic wastes, we could be liable for the costs of removing or cleaning up wastes at the disposal or treatment facility, even if we never owned or operated that facility. Other laws, ordinances and regulations could require us to manage, abate or remove lead or asbestos containing materials. Similarly, the operation and closure of storage tanks are often regulated by federal, state, local and foreign laws. Certain laws, ordinances and regulations, particularly those governing the management or preservation of wetlands, coastal zones and threatened or endangered species, could limit our ability to develop, use, sell or rent our real property.

      International Operations Are Subject to Special Political and Monetary Risks. We have significant international operations which as of December 31, 2004 included 175 owned, managed or franchised properties in Europe, Africa and the Middle East (including 29 properties with majority ownership); 46 owned, managed or franchised properties in Latin America (including 12 properties with majority ownership); and 94 owned, managed or franchised properties in the Asia Pacific region (including 4 properties with majority ownership). International operations generally are subject to various political, geopolitical, and other risks that are not present in U.S. operations. These risks include the risk of war, terrorism, civil unrest, expropriation and nationalization. In addition, some international jurisdictions restrict the repatriation of non-U.S. earnings. Various international jurisdictions also have laws limiting the ability of non-U.S. entities to pay dividends and remit earnings to affiliated companies unless specified conditions have been met. In addition, sales in international jurisdictions typically are made in local currencies, which subject us to risks associated with currency fluctuations. Currency devaluations and unfavorable changes in international monetary and tax policies could have a material adverse effect on our profitability and financing plans, as could other changes in the international regulatory climate and international economic conditions. Other than Italy, where our risks are heightened due to the 13 properties we own, our international properties are geographically diversified and are not concentrated in any particular region.

Debt Financing

      As a result of our debt obligations, we are subject to: (i) the risk that cash flow from operations will be insufficient to meet required payments of principal and interest; and (ii) interest rate risk. Although we anticipate that we will be able to repay or refinance our existing indebtedness and any other indebtedness when

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it matures, there can be no assurance that we will be able to do so or that the terms of such refinancings will be favorable. Our leverage may have important consequences including the following: (i) our ability to obtain additional financing for acquisitions, working capital, capital expenditures or other purposes, if necessary, may be impaired or such financing may not be available on terms favorable to us; (ii) a substantial decrease in operating cash flow or an increase in our expenses could make it difficult for us to meet our debt service requirements and force us to sell assets and/or modify our operations; and (iii) our higher level of debt and resulting interest expense may place us at a competitive disadvantage with respect to certain competitors with lower amounts of indebtedness and/or higher credit ratings. On January 7, 2004, Moody’s Investor Services and Standard & Poor’s placed the Company’s Ba1 and BB+ corporate credit ratings on review/watch for a possible downgrade. The review/watch was prompted by the Company’s announcement that it had invested $200 million in Le Meridien Hotels and Resorts Ltd. (“Le Meridien”) senior debt and would be in discussions to negotiate the potential recapitalization of Le Meridien. On January 27, 2005, Standard & Poor’s removed the Company from its credit review/watch and affirmed the Company’s BB+ rating with a stable outlook. Any downgrading of the Company’s credit rating may result in higher borrowing costs on future financings and impact our ability to access capital markets.

Risks Relating to So-Called Acts of God, Terrorist Activity and War

      Our financial and operating performance may be adversely affected by so-called acts of God, such as natural disasters, in locations where we own and/or operate significant properties and areas of the world from which we draw a large number of customers. Similarly, wars (including the potential for war), terrorist activity (including threats of terrorist activity), political unrest and other forms of civil strife and geopolitical uncertainty have caused in the past, and may cause in the future, our results to differ materially from anticipated results.

Some Potential Losses are Not Covered by Insurance

      We carry comprehensive insurance coverage for general liability, property, business interruption and other risks with respect to our owned and leased properties and we make available insurance programs for owners of properties we manage and franchise. These policies offer coverage features and insured limits that we believe are customary for similar type properties. Generally, our “all-risk” property policies provide that coverage is available on a per occurrence basis and that, for each occurrence, there is a limit as well as various sub-limits on the amount of insurance proceeds we can receive. In addition, there may be overall limits under the policies. Sub-limits exist for certain types of claims such as service interruption, abatement, expediting costs or landscaping replacement, and the dollar amounts of these sub-limits are significantly lower than the dollar amounts of the overall coverage limit. Our property policies also provide that for the coverage of critical earthquake (California and Mexico) and flood, all of the claims from each of our properties resulting from a particular insurable event must be combined together for purposes of evaluating whether the annual aggregate limits and sub-limits contained in our policies have been exceeded and any such claims will also be combined with the claims of owners of managed hotels that participate in our insurance program for the same purpose. Therefore, if insurable events occur that affect more than one of our owned hotels and/or managed hotels owned by third parties that participate in our insurance program, the claims from each affected hotel will be added together to determine whether the annual aggregate limit or sub-limits, depending on the type of claim, have been reached. If the limits or sub-limits are exceeded, each affected hotel will only receive a proportional share of the amount of insurance proceeds provided for under the policy. In addition, under those circumstances, claims by third party owners will reduce the coverage available for our owned and leased properties.

      In addition, there are also other risks such as war, certain forms of terrorism such as nuclear, biological or chemical terrorism, acts of God such as hurricanes and earthquakes and some environmental hazards that may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or may be too expensive to justify insuring against.

      We may also encounter challenges with an insurance provider regarding whether it will pay a particular claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of insured

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limits occur, we could lose all or a portion of the capital we have invested in a hotel or resort, as well as the anticipated future revenue from the hotel or resort. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.

Acquisitions

      We intend to make acquisitions that complement our business. There can be no assurance, however, that we will be able to identify acquisition candidates or complete acquisitions on commercially reasonable terms or at all. On December 30, 2003, we announced our share ($200 million) of the acquisition with Lehman Brothers Holdings Inc. (“Lehman Brothers”) of all of the outstanding senior debt of Le Meridien. As part of this investment, we entered into an agreement with Lehman Brothers whereby they would negotiate with us on an exclusive basis towards a recapitalization of Le Meridien. The exclusivity period expired in early April 2004 although negotiations with Lehman Brothers are continuing. While negotiations are continuing, there can be no assurance that transaction agreements will be entered into or a transaction consummated and if consummated what the terms and form of such a transaction would be.

      If the Le Meridien transaction or additional acquisitions are made, there can be no assurance that any anticipated benefits will actually be realized. Similarly, there can be no assurance that we will be able to obtain additional financing for acquisitions, or that the ability to obtain such financing will not be restricted by the terms of our debt agreements.

Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk

      In addition to acquiring or developing hotels and resorts directly, we have from time to time invested, and expect to continue to invest, as a co-venturer. Joint venturers often have shared control over the operation of the joint venture assets. Therefore, joint venture investments may involve risks such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our business interests or goals, or be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. Consequently, actions by a co-venturer might subject hotels and resorts owned by the joint venture to additional risk. Although we generally seek to maintain sufficient control of any joint venture, we may be unable to take action without the approval of our joint venture partners. Alternatively, our joint venture partners could take actions binding on the joint venture without our consent. Additionally, should a joint venture partner become bankrupt, we could become liable for our partner’s share of joint venture liabilities.

Dispositions

      We periodically review our business to identify properties or other assets that we believe either are non-core, (including hotels where the return on invested capital is not adequate), no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on restructuring and enhancing real estate returns and monetizing investments and from time to time, attempt to sell these identified properties and assets. There can be no assurance, however, that we will be able to complete dispositions on commercially reasonable terms or at all.

Our Vacation Ownership Business Is Subject to Extensive Regulation and Risk of Default

      We market and sell VOIs, which typically entitle the buyer to ownership of a fully-furnished resort unit for a one-week period (or in the case of fractional ownership interests, generally for three or more weeks) on either an annual or an alternate-year basis. We also acquire, develop and operate vacation ownership resorts, and provide financing to purchasers of VOIs. These activities are all subject to extensive regulation by the federal government and the states in which vacation ownership resorts are located and in which VOIs are marketed and sold including regulation of our telemarketing activities under state and federal “Do Not Call” laws. In addition, the laws of most states in which we sell VOIs grant the purchaser the right to rescind the purchase contract at any time within a statutory rescission period. Although we believe that we are in material

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compliance with all applicable federal, state, local and foreign laws and regulations to which vacation ownership marketing, sales and operations are currently subject, changes in these requirements or a determination by a regulatory authority that we were not in compliance, could adversely affect us. In particular, increased regulations of telemarketing activities could adversely impact the marketing of our VOIs.

      We bear the risk of defaults under purchaser mortgages on VOIs. If a VOI purchaser defaults on the mortgage during the early part of the loan amortization period, we will not have recovered the marketing, selling (other than commissions in certain events), and general and administrative costs associated with such VOI, and such costs will be incurred again in connection with the resale of the repossessed VOI. Accordingly, there is no assurance that the sales price will be fully or partially recovered from a defaulting purchaser or, in the event of such defaults, that our allowance for losses will be adequate.

Recent Privacy Initiatives

      We collect information relating to our guests for various business purposes, including marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations enacted in the United States and other jurisdictions around the world. Privacy regulations continue to evolve and on occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests. In addition, non-compliance with applicable privacy regulations by us (or in some circumstances non-compliance by third parties engaged by us) may result in fines or restrictions on our use or transfer of data.

Certain Interests

      Barry S. Sternlicht is the Executive Chairman of the Corporation and the Trust and, until October 1, 2004, was the Chief Executive Officer. Mr. Sternlicht also serves as the President and Chief Executive Officer of, and may be deemed to control, Starwood Capital Group, L.L.C. (“Starwood Capital”), a real estate investment firm. Starwood Capital and the Company have entered into a non-compete agreement whereby Starwood Capital may not purchase a hotel property in the United States without the consent of the Company. Although Starwood Capital is not subject to a non-compete agreement with the Company for hotel properties outside of the United States, as a matter of practice, all opportunities to purchase such properties are also first presented to the Company in accordance with the Company’s Corporate Opportunity Policy. In each case, to the extent that management of the Company recommends not to pursue an opportunity, the Governance and Nominating Committee of the Board of Directors (or other committee of independent directors) will make a decision as to whether or not the Company will pursue the opportunity. In addition, from time to time, the Company has entered into transactions in which Mr. Sternlicht has an interest. See Item 13. Certain Relationships and Related Transactions. To the extent any executive officer or director of the Company has an interest in businesses that seek to do business with the Company, any agreements with those businesses are subject to Governance and Nominating Committee (or other committee of independent directors) approval pursuant to the Company’s Corporate Opportunity Policy.

Ability to Manage Growth

      Our future success and our ability to manage future growth depend in large part upon the efforts of our senior management and our ability to attract and retain key officers and other highly qualified personnel. Competition for such personnel is intense. During 2004, we experienced changes in our senior management, including a new Chief Executive Officer and Chief Financial Officer. In addition, in February 2005 our President and Chief Operating Officer announced his intention to retire at the end of 2005. There can be no assurance that we will continue to be successful in attracting and retaining qualified personnel. Accordingly, there can be no assurance that our senior management will be able to successfully execute and implement our growth and operating strategies.

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Tax Risks

      Failure of the Trust to Qualify as a REIT Would Increase Our Tax Liability. Qualifying as a real estate investment trust (a “REIT”) requires compliance with highly technical and complex tax provisions that courts and administrative agencies have interpreted only to a limited degree. Also, facts and circumstances that we do not control may affect the Trust’s ability to qualify as a REIT. The Trust believes that since the taxable year ended December 31, 1995, it has qualified as a REIT under the Internal Revenue Code of 1986, as amended. The Trust intends to continue to operate so it qualifies as a REIT. However, the Trust cannot assure you that it will continue to qualify as a REIT. If the Trust fails to qualify as a REIT for any prior tax year(s), the Trust would be liable to pay a significant amount of taxes for those year(s). Similarly, if the Trust fails to qualify as a REIT in the future, our liability for taxes would increase.

      Additional Legislation Could Eliminate or Reduce Certain Benefits of Our Structure. On January 6, 1999, we consummated a reorganization pursuant to an Agreement and Plan of Restructuring dated as of September 16, 1998, as amended, among the Corporation, ST Acquisition Trust, a wholly owned subsidiary of the Corporation, and the Trust (the “Reorganization”). Pursuant to the Reorganization, the Trust became a subsidiary of the Corporation, which, through a wholly-owned subsidiary, holds all the outstanding Class A shares of beneficial interest, par value $0.01 per share, of the Trust. The Reorganization was proposed in response to the Internal Revenue Service Restructuring and Reform Act of 1998 (“H.R. 2676”), which made it difficult for us to acquire and operate additional hotels while still maintaining our former status as a “grandfathered paired share real estate investment trust.” While we believe that the Reorganization was the best alternative in light of H.R. 2676 and that our current structure does not raise the same concerns that led Congress to enact such legislation, no assurance can be given that additional legislation, regulations or administrative interpretations will not be adopted that would eliminate or reduce certain benefits of the Reorganization and could have a material adverse effect on our results of operations, financial condition and prospects.

      As part of the Jobs and Growth Tax Relief Reconciliation Act of 2003, the tax rates on corporate dividends to shareholders were decreased to 15 and 5 percent, depending on the shareholders’ individual tax brackets. However, dividends paid by a REIT are generally not eligible for the reduced dividend tax rate. REIT dividends largely represent rents and other income that are passed through to shareholders as dividends deductible to the REIT, rather than corporate earnings subject to the corporate income tax. The implementation of this statute may cause individual investors to view stocks of non-REIT corporations as more attractive relative to shares of REITs than was the case previously.

      Furthermore, the American Jobs Creation Act of 2004 (the “Act”) was enacted on October 22, 2004. The Act made certain changes to the rules relating to REITs including, for example, changes to the “straight debt” safe harbor rules and provisions permitting a REIT in certain circumstances to pay a monetary penalty for failure to satisfy a REIT requirement in lieu of being subject to disqualification as a REIT. However, given the fact that the statute was only recently enacted, it is not entirely clear how the Internal Revenue Service will apply and interpret each new provision of the Act.

      We undertake global tax planning in the normal course of business. These activities may be subject to review by tax authorities. As a result of the review process, uncertainties exist and it is possible that some matters could be resolved adversely to us.

      Evolving government regulation could impose taxes or other burdens on our business. We rely upon generally available interpretations of tax laws and regulations in the countries and locales in which we operate. We cannot be sure that these interpretations are accurate or that the responsible taxing authority is in agreement with our views. The imposition of additional taxes could cause us to have to pay taxes that we currently do not collect or pay or increase the costs of our services or increase our costs of operations.

      Our current business practice with our internet reservation channels is that the intermediary collects hotel occupancy tax from its customer based on the price that the intermediary paid us for the hotel room. We then remit these taxes to the various tax authorities. Several jurisdictions have stated that they may take the position that the tax is also applicable to the intermediaries’ gross profit on these hotel transactions. If

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jurisdictions take this position, they should seek the additional tax payments from the intermediary; however, it is possible that they may seek to collect the additional tax payment from us and we would not be able to collect these taxes from the customers. To the extent that any tax authority succeeds in asserting that the hotel occupancy tax applies to the gross profit on these transactions, we believe that any additional tax would be the responsibility of the intermediary. However, it is possible that we might have additional tax exposure. In such event, such actions could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to Ownership of Our Shares

      No Person or Group May Own More Than 8% of Our Shares. Our governing documents provide (subject to certain exceptions) that no one person or group may own or be deemed to own more than 8% of our outstanding stock or Shares of beneficial interest, whether measured by vote, value or number of Shares. There is an exception for shareholders who owned more than 8% as of February 1, 1995, who may not own or be deemed to own more than the lesser of 9.9% or the percentage of Shares they held on that date, provided, that if the percentage of Shares beneficially owned by such a holder decreases after February 1, 1995, such a holder may not own or be deemed to own more than the greater of 8% or the percentage owned after giving effect to the decrease. We may waive this limitation if we are satisfied that such ownership will not jeopardize the Trust’s status as a REIT. In addition, if Shares which would cause the Trust to be beneficially owned by fewer than 100 persons are issued or transferred to any person, such issuance or transfer shall be null and void. This ownership limit may have the effect of precluding a change in control of us by a third party without the consent of our Board of Directors, even if such change in control would otherwise give the holders of Shares or other of our equity securities the opportunity to realize a premium over then-prevailing market prices, and even if such change in control would not reasonably jeopardize the status of the Trust as a REIT.

      Our Board of Directors May Issue Preferred Stock and Establish the Preferences and Rights of Such Preferred Stock. Our charter provides that the total number of shares of stock of all classes which the Corporation has authority to issue is 1,350,000,000, initially consisting of one billion shares of common stock, 50 million shares of excess common stock, 200 million shares of preferred stock and 100 million shares of excess preferred stock. Our Board of Directors has the authority, without a vote of shareholders, to establish the preferences and rights of any preferred or other class or series of shares to be issued and to issue such shares. The issuance of preferred shares or other shares having special preferences or rights could delay or prevent a change in control even if a change in control would be in the interests of our shareholders. Since our Board of Directors has the power to establish the preferences and rights of additional classes or series of shares without a shareholder vote, our Board of Directors may give the holders of any class or series preferences, powers and rights, including voting rights, senior to the rights of holders of our shares.

      Our Board of Directors May Implement Anti-Takeover Devices and our Charter and By-Laws Contain Provisions which May Prevent Takeovers. Certain provisions of Maryland law permit our Board of Directors, without stockholder approval, to implement possible takeover defenses that are not currently in place, such as a classified board. In addition, our charter contains provisions relating to restrictions on transferability of the Corporation Shares, which may be amended only by the affirmative vote of our shareholders holding two-thirds of the votes entitled to be cast on the matter. As permitted under the Maryland General Corporation Law, our Bylaws provide that directors have the exclusive right to amend our Bylaws.

      Our Shareholder Rights Plan Would Cause Substantial Dilution to Any Shareholder That Attempts to Acquire Us on Terms Not Approved by Our Board of Directors. We adopted a shareholder rights plan which provides, among other things, that when specified events occur, our shareholders will be entitled to purchase from us a newly created series of junior preferred stock, subject to the ownership limit described above. The preferred stock purchase rights are triggered by the earlier to occur of (i) ten days after the date of a public announcement that a person or group acting in concert has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of our outstanding Corporation Shares or (ii) ten business days after the commencement of or announcement of an intention to make a tender offer or exchange offer, the consummation of which would result in the acquiring person becoming the beneficial owner of 15% or more of

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our outstanding Corporation Shares. The preferred stock purchase rights would cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors.

      Changes in Stock Option Accounting Rules May Adversely Impact Our Reported Operating Results Prepared in Accordance with Generally Accepted Accounting Principles, Our Stock Price and Our Competitiveness in the Employee Marketplace. We have a history of using broad based employee stock option programs to hire, incentivize and retain our workforce. Currently, Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” allows companies the choice of either using a fair value method of accounting for options, which would result in expense recognition for all options granted, or using an intrinsic value method, as prescribed by Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” with a pro forma disclosure of the impact on net income of using the fair value recognition method. We have elected to apply APB No. 25 and accordingly, we do not recognize any expense with respect to employee stock options as long as such options are granted at exercise prices equal to the fair value of our Shares on the date of grant.

      In the fourth quarter of 2004, the Financial Accounting Standards Board (“FASB”) concluded that SFAS No. 123(R), “Share-Based Payment,” will be effective for public companies for interim or annual periods beginning after June 15, 2005. Under SFAS No. 123(R), companies must measure compensation cost for all share-based payments, including employee stock options, using a fair value based method and these payments must be recognized as expenses in our statements of operations. The implementation of SFAS No. 123(R) beginning in the third quarter of fiscal 2005 will require us to expense the fair value of our stock options in our consolidated statement of operations rather than disclosing the impact on results of operations within our footnotes in accordance with the disclosure provisions of SFAS No. 123 (see Note 2 of the Notes to Consolidated Financial Statements). The implementation of SFAS No. 123(R) will result in lower reported earnings per share, which could negatively impact our future stock price. In addition, this could negatively impact our ability to utilize employee stock plans to recruit and retain employees and could result in a competitive disadvantage to us in the employee marketplace.

Item 1. Business.

General

      We are one of the world’s largest hotel and leisure companies. We conduct our hotel and leisure business both directly and through our subsidiaries. Our brand names include St. Regis®, The Luxury Collection®, Sheraton®, Westin®, W® and Four Points® by Sheraton. Through these brands, we are well represented in most major markets around the world. Our operations are grouped into two business segments, hotels and vacation ownership operations.

      Our revenue and earnings are derived primarily from hotel operations, which include the operation of our owned hotels; management and other fees earned from hotels we manage pursuant to management contracts; and the receipt of franchise and other fees.

      Our hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. We seek to acquire interests in, or management or franchise rights with respect to properties in this segment. At December 31, 2004, our hotel portfolio included owned, leased, managed and franchised hotels totaling 733 hotels with approximately 231,000 rooms in more than 80 countries, and is comprised of 140 hotels that we own or lease or in which we have a majority equity interest, 283 hotels managed by us on behalf of third-party owners (including entities in which we have a minority equity interest) and 310 hotels for which we receive franchise fees.

      Our revenues and earnings are also derived from the development, ownership and operation of vacation ownership resorts, marketing and selling VOIs in the resorts and providing financing to customers who purchase such interests. Generally these resorts are marketed under the brand names mentioned above. At December 31, 2004, we had 19 vacation ownership resorts in the United States and the Bahamas.

      The Trust was organized in 1969, and the Corporation was incorporated in 1980, both under the laws of Maryland. Sheraton Hotels & Resorts and Westin Hotels & Resorts, Starwood’s largest brands, have been

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serving guests for more than 60 years. Starwood Vacation Ownership (and its predecessor, Vistana, Inc.) has been selling VOIs for more than 20 years.

      Our principal executive offices are located at 1111 Westchester Avenue, White Plains, New York 10604, and our telephone number is (914) 640-8100.

      For a discussion of our revenues, profits, assets and geographical segments, see the notes to financial statements of this Joint Annual Report. For additional information concerning our business, see Item 2. Properties, of this Joint Annual Report.

Competitive Strengths

      Management believes that the following factors contribute to our position as a leader in the lodging and vacation ownership industry and provide a foundation for the Company’s business strategy:

      Brand Strength. We have assumed a leadership position in markets worldwide based on our superior global distribution, coupled with strong brands and brand recognition. Our upscale and luxury brands continue to capture market share from our competitors by aggressively cultivating new customers while maintaining loyalty among the world’s most active travelers. The strength of our brands is evidenced, in part, by the superior ratings received from our hotel guests and from industry publications. In 2004 we had more than 30 of our hotels on the Condé Nast Traveler’s 2004 Readers Choice Awards List, including four hotels on their “Top 100 Best Hotels in the World.” For the third year in a row we were named the “World’s Leading Hotel Group” at the World Travel Awards.

      Frequent Guest Program. Our loyalty program, Starwood Preferred Guest® (“SPG”), has over 22 million members and since its inception in 1999, has been awarded the Hotel Program of the Year five times by consumers via the prestigious Freddie Awards. SPG has also received awards for Best Customer Service, Best Web Site, Best Elite-Level Program and Best Award Redemption. SPG, which was the first loyalty program in the hotel industry with a policy of no blackout dates and no capacity controls, enables members to redeem stays when they want and where they want. SPG yields repeat guest business due to rewarding frequent stays and purchasers of VOIs with points towards free hotel stays and other rewards, or airline miles with any of the participating 32 airline programs.

      Significant Presence in Top Markets. Our luxury and upscale hotel and resort assets are well positioned throughout the world. These assets are primarily located in major cities and resort areas that management believes have historically demonstrated a strong breadth, depth and growing demand for luxury and upscale hotels and resorts, in which the supply of sites suitable for hotel development has been limited and in which development of such sites is relatively expensive.

      Premier and Distinctive Properties. We control a distinguished and diversified group of hotel properties throughout the world, including the St. Regis in New York, New York; The Phoenician in Scottsdale, Arizona; the Hotel Gritti Palace in Venice, Italy; the St. Regis in Beijing, China; and the Westin Palace in Madrid, Spain. These are among the leading hotels in the industry and are at the forefront of providing the highest quality and service. Our properties are consistently recognized as the best of the best by readers of Condé Nast Traveler, who are among the world’s most sophisticated and discerning group of travelers. The November 2004 edition of the Condé Nast Traveler Magazine named four Starwood properties in the top 100 “Best in the World”, with over 30 properties listed in the Readers’ Choice Awards list. In addition, the Condé Nast Traveler Magazine January 2005 issue included 51 Starwood properties among its prestigious Gold List and Gold List Reserve, more than any other hotel company.

      Scale. As one of the largest hotel and leisure companies focusing on the luxury and upscale full-service lodging market, we have the scale to support our core marketing and reservation functions. We also believe that our scale will contribute to lower our cost of operations through purchasing economies areas such as insurance, energy, telecommunications, technology, employee benefits, food and beverage, furniture, fixtures and equipment and operating supplies.

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      Diversification of Cash Flow and Assets. Management believes that the diversity of our brands, market segments served, revenue sources and geographic locations provides a broad base from which to enhance revenue and profits and to strengthen our global brands. This diversity limits our exposure to any particular lodging or vacation ownership asset, brand or geographic region.

      While we focus on the luxury and upscale portion of the full-service lodging and vacation ownership markets, our brands cater to a diverse group of sub-markets within this market. For example, the St. Regis hotels cater to high-end hotel and resort clientele while Four Points by Sheraton hotels deliver extensive amenities and services at more affordable rates.

      We derive our cash flow from multiple sources within our hotel and vacation ownership segments, including owned hotels activity and management and franchise fees, and are geographically diverse with operations around the world. The following tables reflect our hotel and vacation ownership properties by type of revenue source and geographical presence by major geographic area as of December 31, 2004:

	Number of
	Properties		Rooms
Owned hotels(a)		140		50,000
Managed and unconsolidated joint venture hotels		283		101,000
Franchised hotels		310		80,000
Vacation ownership resorts		19		5,000
Total properties		752		236,000

(a) Includes wholly owned, majority owned and leased hotels.

	Number of
	Properties		Rooms
North America		437		151,000
Europe, Africa and the Middle East		175		43,000
Latin America		46		10,000
Asia Pacific		94		32,000
Total		752		236,000

Business Segment and Geographical Information

      Incorporated by reference in Note 21. Business Segment and Geographical Information, in the notes to financial statements set forth in Part II, Item 8. Financial Statements and Supplementary Data.

Business Strategy

      Our primary business objective is to maximize earnings and cash flow by increasing the profitability of our existing portfolio; selectively acquiring interests in additional assets; increasing the number of our hotel management contracts and franchise agreements; acquiring and developing vacation ownership resorts and selling VOIs; and maximizing the value of our owned real estate properties, including selectively disposing of non-core hotels (including hotels where the return on invested capital is not adequate) and “trophy” assets that may be sold at significant premiums. We plan to meet these objectives by leveraging our global assets, broad customer base and other resources and by taking advantage of our scale to reduce costs. The uncertainty relating to political and economic environments around the world and their consequent impact on travel in their respective regions and the rest of the world, make financial planning and implementation of our strategy more challenging.

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      Growth Opportunities. Management has identified several growth opportunities with a goal of enhancing our operating performance and profitability, including:

•   Continuing to expand our role as a third-party manager of hotels and resorts. This allows us to expand the presence of our lodging brands and gain additional cash flow generally with modest capital commitment;

•   Franchising the Sheraton, Westin, Four Points by Sheraton and Luxury Collection brands to selected third-party operators and licensing the Westin, W and St. Regis brand names to selected third parties in connection with luxury residential condominiums, thereby expanding our market presence, enhancing the exposure of our hotel brands and providing additional income through franchise and license fees;

•   Expanding our internet presence and sales capabilities to increase revenue and improve customer service;

•   Continuing to grow our frequent guest program, thereby increasing occupancy rates while providing our customers with benefits based upon loyalty to our hotels and vacation ownership resorts;

•   Enhancing our marketing efforts by integrating our proprietary customer databases, so as to sell additional products and services to existing customers, improve occupancy rates and create additional marketing opportunities;

•   Optimizing use of our real estate assets to improve ancillary revenue, such as condominium sales and restaurant, beverage and parking revenue from our hotels and resorts;

•   Continuing to build the “W” hotel brand to appeal to upscale business travelers and other customers seeking full-service hotels in major markets by, among other things, placing Bliss Spas® and Bliss branded amenities in “W” hotels and expanding the W brand to resorts, in non-urban areas;

•   Innovations such as the Heavenly Bed® and Heavenly Bath®, the Sheraton Sweet Sleeper^sm Bed, the Sheraton Service Promise^sm and the Four Points by Sheraton Four Comfort Bed^sm;

•   Renovating, upgrading and expanding our branded hotels to further our strategy of strengthening brand identity;

•   Developing additional vacation ownership resorts and leveraging our hotel real estate assets where possible through VOI construction and residential or condominium sales;

•   Leveraging the Bliss product line and distribution channels; and

•   Increasing operating efficiencies through increased use of technology.

      We intend to explore opportunities to expand and diversify our hotel portfolio through internal development, minority investments and selective acquisitions of properties domestically and internationally that meet some or all of the following criteria:

•   Luxury and upscale hotels and resorts in major metropolitan areas and business centers;

•   Major tourist hotels, destination resorts or conference centers that have favorable demographic trends and are located in markets with significant barriers to entry or with major room demand generators such as office or retail complexes, airports, tourist attractions or universities;

•   Undervalued hotels whose performance can be increased by re-branding to one of our hotel brands, the introduction of better and more efficient management techniques and practices and/or the injection of capital for renovating, expanding or repositioning the property;

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•   Hotels or brands which would enable us to provide a wider range of amenities and services to customers or provide attractive geographic distribution; and

•   Portfolios of hotels or hotel companies that exhibit some or all of the criteria listed above, where the purchase of several hotels in one transaction enables us to obtain favorable pricing or obtain attractive assets that would otherwise not be available or realize cost reductions on operating the hotels by incorporating them into the Starwood system.

      We may also selectively choose to develop and construct desirable hotels and resorts to help us meet our strategic goals, such as the ongoing development of the St. Regis Museum Tower Hotel in San Francisco, California which is expected to have approximately 260 hotel rooms and 102 residential condominiums.

      Furthermore, we have developed plans along with third party developers for flexible new-build Sheraton and Westin prototypes, with the intent of expanding these brands into tertiary markets.

Competition

      The hotel industry is highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, the ability to earn and redeem loyalty program points and other factors. Management believes that we compete favorably in these areas. Our properties compete with other hotels and resorts, including facilities owned by local interests and facilities owned by national and international chains, in their geographic markets. Our principal competitors include other hotel operating companies, ownership companies (including hotel REITs) and national and international hotel brands.

      We encounter strong competition as a hotel, resort and vacation ownership operator and developer. While some of our competitors are private management firms, several are large national and international chains that own and operate their own hotels, as well as manage hotels for third-party owners and develop and sell VOIs, under a variety of brands that compete directly with our brands. In addition, hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace the management firm if certain financial or performance criteria are not met.

Environmental Matters

      We are subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances and regulations (“Environmental Laws”). For example, a current or previous owner or operator of real property may become liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws require abatement or removal of certain asbestos-containing materials (“ACMs”) (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or certain renovations or remodeling. These laws also govern emissions of and exposure to asbestos fibers in the air. Environmental Laws also regulate polychlorinated biphenyls (“PCBs”), which may be present in electrical equipment. A number of our hotels have underground storage tanks (“USTs”) and equipment containing chlorofluorocarbons (“CFCs”); the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection

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with our ownership, operation and management of our properties, we could be held liable for costs of remedial or other action with respect to PCBs, USTs or CFCs.

      Environmental Laws are not the only source of environmental liability. Under the common law, owners and operators of real property may face liability for personal injury or property damage because of various environmental conditions such as alleged exposure to hazardous or toxic substances (including, but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon or poor drinking water quality.

      Although we have incurred and expect to incur remediation and various environmental-related costs during the ordinary course of operations, management anticipates that such costs will not have a material adverse effect on the operations or financial condition of the Company.

Seasonality and Diversification

      The hotel industry is seasonal in nature; however, the periods during which our properties experience higher revenue activities vary from property to property and depend principally upon location. Generally, our revenues and operating income have been lower in the first quarter than in the second, third or fourth quarters.

Comparability of Owned Hotel Results

      We continually update and renovate our 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 our revenues and operating income.

Employees

      At December 31, 2004, we employed approximately 120,000 employees at our corporate offices, owned and managed hotels and vacation ownership resorts, of whom approximately 44% were employed in the United States. At December 31, 2004, approximately 35% of the U.S.-based employees were covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that our employee relations are good, although labor negotiations continue in San Francisco and Los Angeles, where the union is attempting to negotiate a contract term that will expire at the same time as union contracts in other cities.

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Item 2. Properties.

      We are one of the largest hotel and leisure companies in the world, with operations in more than 80 countries. We consider our hotels and resorts, including vacation ownership resorts (together “Resorts”), generally to be premier establishments with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Although obsolescence arising from age and condition of facilities can adversely affect our Resorts, Starwood and third-party owners of managed and franchised Resorts expend substantial funds to renovate and maintain their facilities in order to remain competitive. For further information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources in this Joint Annual Report.

      Our hotel business included 733 owned, managed or franchised hotels with approximately 231,000 rooms and our vacation ownership business included 19 vacation ownership resorts at December 31, 2004, predominantly under six brands. All brands represent full-service properties that range in amenities from luxury hotels and resorts to more moderately priced hotels. We also lease three stand-alone Bliss Spas, two in New York, New York and one in London, England. In addition, we are opening a Bliss Spa at the W New York and a Remedé Spa at the St. Regis Aspen.

      The following table reflects our hotel and vacation ownership properties, by brand:

	Hotels				VOI
	Properties		Rooms		Properties		Rooms
St. Regis and Luxury Collection		50		8,000		1		—
Sheraton		391		135,000		6		3,000
Westin		120		52,000		4		1,000
W		20		6,000		—		—
Four Points		135		24,000		—		—
Independent/Other		17		6,000		8		1,000
Total		733		231,000		19		5,000

      St. Regis Hotels & Resorts (luxury full-service hotels and resorts) deliver the most discreet, personalized and anticipatory level of service to high-end leisure and business travelers. St. Regis hotels typically have individual design characteristics to accentuate each individual location and city. Most St. Regis hotels have spacious, luxurious rooms and suites with highly designed, residential surroundings and include a 4- or 5-Star restaurant on premises. We are in the process of developing several condominium and fractional residential properties as part of existing, or to be built, St. Regis hotels. Some of these properties include the St. Regis Museum Tower Hotel in San Francisco, California, scheduled to open in mid 2005, the St. Regis in Aspen, Colorado, which opened in December 2004, and Temenos, Anguilla, a St. Regis Retreat, which is scheduled to debut in 2006.

      The Luxury Collection (luxury full-service hotels and resorts) is a group of unique hotels and resorts offering exceptional service to an elite clientele (some of which may also be branded a St. Regis, Sheraton or Westin). The Luxury Collection includes some of the world’s most renowned and legendary hotels generally well known by the individual hotel name. These hotels are distinguished by magnificent decor, spectacular settings and impeccable service.

      Sheraton Hotels & Resorts (upscale full-service hotels and resorts) is the Company’s largest brand serving the needs of upscale business and leisure travelers worldwide. Sheraton hotels and resorts offer the entire spectrum of comfort, from full-service hotels in major cities to luxurious resorts. These hotels and resorts typically feature a wide variety of on-site business services and a full range of amenities including rooms that feature generous work spaces, allowing business travelers to stay productive on the road.

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      Westin Hotels & Resorts (luxury and upscale full-service hotels and resorts) are first-class, signature hotels that typically make up an integral part of a city or region in which the hotels are located. Westin hotels and resorts are characterized by a commitment to uncompromised elegance, service and guest experience.

      W Hotels (stylish boutique full-service urban hotels and resorts) was inaugurated in December 1998 with the opening of the W New York. W hotels provide a unique hotel alternative to business travelers, combining the personality, style and distinctive flavor of an intimate hotel with the functionality, reliability and attentive service of a major business and leisure hotel. W hotels feature modern, sophisticated design with custom-made furnishings and accessories, fully wired rooms with the most advanced technology in the industry, and unique, high-quality signature restaurants and bars. Together with partners, we are in the process of developing several condominium residences as part of the W hotels, including the W Dallas Victory Hotel and Residences which is expected to open in late 2005.

      Four Points by Sheraton (moderately priced full-service hotels) deliver extensive amenities and services such as room service, dry cleaning, fitness centers, meeting facilities and business centers to frequent business travelers at reasonable prices. These hotels provide a comfortable, well-appointed room, which typically includes a two-line telephone, a large desk for working or in-room dining, comfortable seating and full-service restaurants.

Hotel Business

      Owned, Leased and Consolidated Joint Venture Hotels. The following table summarizes revenue per available room (“REVPAR”)⁽¹⁾, average daily rates (“ADR”) and average occupancy rates on a year-to-year basis for our 138 owned, leased and consolidated joint venture hotels (excluding 26 hotels sold or closed during 2004 and 2003) (“Same-Store Owned Hotels”) for the years ended December 31, 2004 and 2003:

	Year Ended
	December 31,
	2004			2003			Variance
Worldwide (138 hotels with approximately 49,000 rooms)
REVPAR	$	110.81		$	98.03			13.0	%
ADR	$	161.74		$	151.49			6.8	%
Occupancy		68.5	%		64.7	%		3.8
North America (93 hotels with approximately 36,000 rooms)
REVPAR	$	110.13		$	98.21			12.1	%
ADR	$	156.65		$	147.15			6.5	%
Occupancy		70.3	%		66.7	%		3.6
International (45 hotels with approximately 13,000 rooms)
REVPAR	$	112.72		$	97.52			15.6	%
ADR	$	177.57		$	165.37			7.4	%
Occupancy		63.5	%		59.0	%		4.5

(1)  REVPAR is calculated by dividing room revenue which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues.

     During the years ended December 31, 2004 and 2003, we invested approximately $299 million, excluding the inventory expenditures at the St. Regis Museum Tower in San Francisco, California discussed below, and $259 million, respectively, for capital improvements at owned hotels and capital expenditures on technology development. During 2004 and 2003, these capital expenditures included the significant renovation of our flagship Sheraton, the Sheraton New York Hotel and Towers in New York, New York.

      Managed and Franchised Hotels. Hotel and resort properties in the United States are often owned by entities that do not manage hotels or own a brand name. Hotel owners typically enter into management contracts with hotel management companies to operate their hotels. When a management company does not

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offer a brand affiliation, the hotel owner often chooses to pay separate franchise fees to secure the benefits of brand marketing, centralized reservations and other centralized administrative functions, particularly in the sales and marketing area. Management believes that companies, such as Starwood, that offer both hotel management services and well-established worldwide brand names appeal to hotel owners by providing the full range of management and marketing services.

      Managed Hotels. We manage hotels worldwide, usually under a long-term agreement with the hotel owner (including entities in which we have a minority equity interest). Our responsibilities under hotel management contracts typically include hiring, training and supervising the managers and employees that operate these facilities. For additional fees, we provide reservation services and coordinate national advertising and certain marketing and promotional services. We prepare and implement annual budgets for the hotels we manage and are responsible for allocating property-owner funds for periodic maintenance and repair of buildings and furnishings. In addition to our owned and leased hotels, at December 31, 2004, we managed 283 hotels with approximately 101,000 rooms worldwide.

      Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits as well as fees for other services, including centralized reservations, sales and marketing, public relations and national and international media advertising. In our experience, owners seek hotel managers that can provide attractively priced base, incentive, marketing and franchise fees combined with demonstrated sales and marketing expertise and operations-focused management designed to enhance profitability. Some of our management contracts permit the hotel owner to terminate the agreement when the hotel is sold or otherwise transferred to a third party, as well as if we fail to meet established performance criteria. In addition, many hotel owners seek equity, debt or other investments from us to help finance hotel renovations or conversions to a Starwood brand so as to align the interests of the owner and the Company. Our ability or willingness to make such investments may determine, in part, whether we will be offered, will accept, or will retain a particular management contract. During 2004, we signed management agreements for 29 hotels with approximately 9,000 rooms, and 15 hotels with approximately 3,000 rooms left the system.

      Brand Franchising and Licensing. We franchise our Sheraton, Westin, Four Points by Sheraton and Luxury Collection brand names and generally derive licensing and other fees from franchisees based on a fixed percentage of the franchised hotel’s room revenue, as well as fees for other services, including centralized reservations, sales and marketing, public relations and national and international media advertising. In addition, a franchisee may also purchase hotel supplies, including brand-specific products, from certain Starwood-approved vendors. We approve certain plans for, and the location of, franchised hotels and review their design. At December 31, 2004, there were 310 franchised properties with approximately 80,000 rooms operating under the Sheraton, Westin, Four Points by Sheraton and Luxury Collection brands. During 2004, we signed franchise agreements with 35 hotels with approximately 7,000 rooms, and 16 hotels with approximately 4,000 rooms left the system.

      We have also entered into arrangements with several owners for mixed use hotel projects that will include a residential component. We entered into licensing agreements for the use of our W, Westin and St. Regis brands to allow the owners to offer branded condominiums to prospective purchasers. In consideration, we will receive a licensing fee equal to a percentage of the gross sales revenue of the units sold. The licensing arrangement terminates upon the earlier of sell-out of the units or a specified length of time.

Vacation Ownership and Residential Business

      We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their interval for intervals at other Starwood vacation ownership resorts, for intervals at certain vacation ownership resorts not otherwise sponsored by Starwood through an exchange company, or for hotel stays at Starwood properties. From time to time, we securitize or sell the receivables generated from our sale of VOIs.

      At December 31, 2004, we had 19 vacation ownership resorts in our portfolio with 12 actively selling VOIs, two expected to start construction in the future and five that have sold all existing inventory. During 2004 and 2003, we invested approximately $162 million and $140 million, respectively, for capital expendi-

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tures, including VOI construction at Westin Ka’anapali Ocean Resort and Villas in Maui, Hawaii and Westin Mission Hills Resort in Rancho Mirage, California, and construction of fractional units at the St. Regis in Aspen, Colorado.

      In December 2004, we completed the conversion of 98 guest rooms at the St. Regis in Aspen, Colorado into 25 fractional units which are being sold in four week intervals, and 20 new hotel rooms. Also in late 2004, we began selling condominiums at the St. Regis Museum Tower which is under construction in San Francisco, California. For the year ended December 31, 2004, the Company invested approximately $75 million for construction of the hotel and residences at the St. Regis Museum Tower.

Item 3. Legal Proceedings.

      Incorporated by reference to the description of legal proceedings in Note 20. Commitments and Contingencies, in the notes to financial statements set forth in Part II, Item 8. Financial Statements and Supplementary Data.

Item 4. Submission of Matters to a Vote of Security Holders.

      Not applicable.

Executive Officers of the Registrants

      See Part III, Item 10. of this Joint Annual Report for information regarding the executive officers of the Registrants, which information is incorporated herein by reference.

PART II

Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

      The Shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “HOT.” The Class A Shares are all indirectly held by the Corporation and have never been traded.

      The following table sets forth, for the fiscal periods indicated, the high and low sale prices per Share on the NYSE Composite Tape.

	High		Low
2004
Fourth quarter	$	59.50	$	46.20
Third quarter	$	46.65	$	40.06
Second quarter	$	45.04	$	38.15
First quarter	$	40.93	$	34.81
2003
Fourth quarter	$	37.60	$	32.96
Third quarter	$	36.55	$	28.31
Second quarter	$	30.65	$	23.44
First quarter	$	26.95	$	21.68

Holders

      As of February 25, 2005, there were approximately 212,468,000 holders of record of Shares and one holder of record of the Class A Shares.

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Distributions Made/ Declared

      The following table sets forth the frequency and amount of distributions made by the Trust to holders of Shares for the years ended December 31, 2004 and 2003:

	Distributions
	Made
2004
Annual distribution	$	0.84(a	)
2003
Annual distribution	$	0.84(a	)

(a)  The Trust declared distributions in the fourth quarter of 2004 and 2003 to shareholders of record on December 31, 2004 and 2003, respectively. The distributions were paid in January 2005 and 2004, respectively.

     The Corporation has not paid any cash dividends since its organization and does not anticipate that it will pay any dividends in the foreseeable future.

      Holders of Class B Shares are entitled, subject to certain conditions, to receive a non-cumulative annual distribution, which was set at an initial rate of $0.60 per Share for 1999, to the extent the distribution is authorized by the Board of Trustees of the Trust. The distribution was increased to an annual rate of $0.80 in 2001. In the beginning of 2002, we shifted from paying a quarterly distribution to paying an annual distribution (and intend to continue our distributions on an annual basis for 2005). For 2003 and 2004, the Trust paid a distribution of $0.84 per Share. Unless distributions for the then current distribution period have been paid on the Class B Shares, the Trust is not permitted to pay a distribution on the Class A Shares (except in certain circumstances). At this time, we anticipate that the 2005 distributions will be held constant at $0.84 per Share. The final determination of the amount of the distribution will be subject to economic and financial conditions, as well as approval by the Board of Trustees of the Trust.

Conversion of Securities; Sale of Unregistered Securities

      During 2004, approximately 109,000 shares of Class B Exchangeable Preferred Shares (“Class B EPS”) were converted into 119,000 shares of Class A Exchangeable Preferred Shares (“Class A EPS”). No shares of Class A EPS were exchanged for Shares during 2004. In accordance with the terms of the Class B EPS, approximately 567,000 shares of Class B EPS were redeemed for approximately $22 million in cash in 2004. As of December 31, 2004 approximately 53,000 Class B EPS remained outstanding.

Issuer Purchases of Equity Securities

      Pursuant to the Share Repurchase Program, Starwood repurchased 7.0 million Shares in the open market for an aggregate cost of $310 million during 2004. The Company repurchased the following Shares during the three months ended December 31, 2004:

							Maximum Number (or
							Approximate Dollar
	Total		Average		Total Number of Shares		Value) of Shares that
	Number of		Price		Purchased as Part		May Yet Be Purchased
	Shares		Paid for		of Publicly Announced		Under the Plans or
Period	Purchased		Share		Plans or Programs		Programs (in millions)
October		—	$	—		—	$	374
November		816,600	$	51.22		816,600	$	332
December		670,000	$	53.81		670,000	$	296
Total		1,486,600	$	52.38		1,486,600

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Item 6. Selected Financial Data.

      The following financial and operating data should be read in conjunction with the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto appearing elsewhere in this Joint Annual Report and incorporated herein by reference.

	Year Ended December 31,
	2004			2003			2002			2001			2000
	(In millions, except per Share data)
Income Statement Data
Revenues	$	5,368		$	4,630		$	4,588		$	4,633		$	4,945
Operating income	$	653		$	427		$	551		$	576		$	968
Income from continuing operations	$	369		$	105		$	251		$	147		$	397
Diluted earnings per Share from continuing operations	$	1.72		$	0.51		$	1.22		$	0.71		$	1.94
Operating Data
Cash from continuing operations	$	577		$	755		$	744		$	736		$	796
Cash from (used for) investing activities	$	(415	)	$	515		$	(282	)	$	(617	)	$	(660	)
Cash used for financing activities	$	(273	)	$	(979	)	$	(487	)	$	(162	)	$	(417	)
Aggregate cash distributions paid	$	172		$	170		$	40 (a	)	$	156		$	134
Cash distributions declared per Share	$	0.84		$	0.84		$	0.84		$	0.80		$	0.69

(a)  This balance reflects the payment made in January 2002 for the dividends declared for the fourth quarter of 2001. As the Trust now declares dividends annually, the 2002 annual dividend payment, which was made in January 2003, is reflected in the 2003 column.

	At December 31,
	2004		2003		2002		2001		2000
	(In millions)
Balance Sheet Data
Total assets	$	12,298	$	11,857	$	12,190	$	12,416	$	12,627
Long-term debt, net of current maturities and including exchangeable units and Class B preferred shares	$	3,823	$	4,424	$	4,500	$	5,301	$	5,090

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those relating to revenue recognition, bad debts, inventories, investments, plant, property and equipment, goodwill and intangible assets, income taxes, financing operations, frequent guest program liability, self-insurance claims payable, restructuring costs, retirement benefits and contingencies and litigation.

      Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

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CRITICAL ACCOUNTING POLICIES

      We believe the following to be our critical accounting policies:

      Revenue Recognition. Our revenues are primarily derived from the following sources: (1) hotel and resort revenues at our owned, leased and consolidated joint venture properties; (2) management and franchise fees; (3) vacation ownership revenues; and (4) other revenues which are ancillary to our operations. Generally, revenues are recognized when the services have been rendered. The following is a description of the composition of our revenues:

•  Owned, Leased and Consolidated Joint Ventures — Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales from owned leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered. These revenues are impacted by global economic conditions affecting the travel and hospitality industry as well as relative market share of the local competitive set of hotels. REVPAR is a leading indicator of revenue trends at owned, leased and consolidated joint venture hotels.

•  Management and Franchise Fees — Represents fees earned on hotels managed worldwide, usually under long-term contracts, and franchise fees received in connection with the franchise of the our Sheraton, Westin, Four Points by Sheraton and Luxury Collection brand names. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the property’s profitability. For any time during the year, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Therefore, during periods prior to year-end, the incentive fees recorded may not be indicative of the eventual incentive fees that will be recognized at year-end as conditions and incentive hurdle calculations may not be final. Franchise fees are generally based on a percentage of hotel room revenues. As with hotel revenues discussed above, these revenue sources are affected by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies.

•  Vacation Ownership and Residential — We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component of mixed use projects that include a hotel. Such revenues are impacted by the state of the global economies and, in particular, the U.S. economy, as well as interest rate and other economic conditions affecting the lending market. We determine the portion of revenues to recognize for sales accounted for under the percentage of completion method based on judgments and estimates including total project costs to complete. Additionally, we record reserves against these revenues based on expected default levels. Changes in costs could lead to adjustments to the percentage of completion status of a project, which may result in differences in the timing and amount of revenues recognized from the projects. We anticipate developing future high end VOI projects adjacent to or as part of our luxury resorts, resulting in cross-selling opportunities and an audience of higher-end purchasers, yielding both higher revenues and reduced risks associated with financing these VOI sales.

      Frequent Guest Program. SPG is our frequent guest incentive marketing program. SPG members earn points based on spending at our properties, as incentives to first time buyers of VOIs and, to a lesser degree, through participation in affiliated partners’ programs. Points can be redeemed at most of our owned, leased, managed and franchised properties. The cost of operating the program, including the estimated cost of award redemption, is charged to properties based on members’ qualifying expenditures. Revenue is recognized by participating hotels and resorts when points are redeemed for hotel stays.

      We, through the services of third-party actuarial analysts, determine the fair value of the future redemption obligation based on statistical formulas which project the timing of future point redemption based on historical experience, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed. Actual expenditures for SPG may differ from the actuarially determined liability. The total actuarially determined liability as of December 31, 2004 and 2003 is

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$255 million and $201 million, respectively. A 10% reduction in the “breakage” of points would result in an increase of $38 million to the liability at December 31, 2004.

      Long-Lived Assets. We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets if certain trigger events occur. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. We evaluate the carrying value of our long-lived assets based on our plans, at the time, for such assets and such qualitative factors as future development in the surrounding area, status of expected local competition and projected incremental income from renovations. Changes to our plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset. When a decision is made to sell an asset, we do not record that asset as held for sale until all the criteria in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” have been met and we have received a non-refundable deposit.

      Legal Contingencies. We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. SFAS No. 5, “Accounting for Contingencies,” requires that an estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss and changes in these factors could materially impact our financial position or our results of operations.

      Income Taxes. We provide for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns.

RESULTS OF OPERATIONS

      The following discussion presents an analysis of results of our operations for the years ended December 31, 2004, 2003 and 2002.

      Our operating results for 2004 improved significantly when compared to 2003 due, in large part, to the continued economic recovery in the United States, particularly its effect on the hospitality industry. Our operating results for a substantial part of 2003 were significantly impacted by the weakened worldwide economic environment, the war in Iraq and its aftermath, and the Severe Acute Respiratory Syndrome (“SARS”) epidemic, all of which resulted in a dramatic slowdown in business and international travel. In the latter part of 2003 and continuing into 2004, transient travel in North America, where we have our largest concentration of owned hotels, began to increase, more than offsetting the then weaknesses in group travel.

      We derive the majority of our revenues and operating income from our owned, leased and consolidated joint venture hotels and, as discussed above, a significant portion of these results are driven by these hotels in North America. Total revenues generated from our hotels in North America for the years ending December 31, 2004 and 2003 were $2.423 billion and $2.285 billion, respectively (our worldwide owned, leased and consolidated joint venture revenues were $3.326 billion and $3,085 billion for 2004 and 2003, respectively).

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The following represents the geographical breakdown of our owned, leased and consolidated joint venture revenues in North America by metropolitan area for the years ended December 31, 2004 and 2003:

Top Ten Metropolitan Areas as a % of Owned North America Revenues for
the Year Ended December 31, 2004 with Comparable Data for 2003
	2004			2003
Metropolitan Area	Revenues			Revenues
New York, NY		19.2	%		17.1	%
Boston, MA		9.4	%		9.2	%
San Diego, CA		5.2	%		5.8	%
Phoenix, AZ		5.0	%		4.9	%
Los Angeles-Long Beach, CA		4.8	%		4.6	%
Atlanta, GA		4.4	%		4.7	%
Toronto, Canada		3.9	%		3.3	%
Seattle, WA		3.8	%		3.9	%
Maui, HI		3.5	%		3.1	%
Houston, TX		2.8	%		2.7	%
All Other		38.0	%		40.7	%
Total		100	%		100	%

      A leading indicator for the performance of our owned, leased and consolidated joint venture hotels is REVPAR, which we consider to be a meaningful indicator of our performance, as it measures the period-over-period growth in rooms revenue for comparable properties. This is particularly the case in the United States where there is no impact on this measure from foreign exchange rates.

Year Ended December 31, 2004 Compared with Year Ended December 31, 2003

Continuing Operations

      Revenues. Total revenues, including other revenues from managed and franchised properties, were $5.368 billion, an increase of $738 million when compared to 2003 levels. Revenues reflect a 7.8% increase in revenues from our owned, leased and consolidated joint venture hotels to $3.326 billion for the year ended December 31, 2004 when compared to $3.085 billion in the corresponding period of 2003, an increase of $164 million in management fees, franchise fees and other income to $419 million for the year ended December 31, 2004 when compared to $255 million in the corresponding period of 2003, an increase of $201 million in vacation ownership and residential revenues to $640 million for the year ended December 31, 2004 when compared to $439 million in the corresponding period of 2003 and an increase of $132 million in other revenues from managed and franchised properties to $983 million for the year ended December 31, 2004 when compared to $851 million in the corresponding period of 2003.

      The increase in revenues from owned, leased and consolidated joint venture hotels is due in large part to the continued economic recovery, particularly its effect on the hospitality industry. The war in Iraq, the SARS epidemic and the weakened worldwide economic environment in 2003 negatively impacted the results for a substantial part of the year ended December 31, 2003. Results in 2004 were also favorably impacted by the addition of the Sheraton Kauai in Hawaii which we acquired in March 2004. These improved results in 2004 were offset, in part, by the absence in 2004 of the revenues generated by 16 non-strategic domestic hotels and four hotels in Costa Smeralda, Italy, which were for the most part, sold in the first half of 2003. Revenues from these hotels in 2003 were $110 million. Revenues at our hotels owned during both periods (“Same-Store Owned Hotels”) (138 hotels for the year ended December 31, 2004 and 2003, excluding 26 hotels sold or closed or without comparable results in 2004 and 2003) increased 11.4%, or $333 million, to $3.266 billion for the year ended December 31, 2004 when compared to $2.933 billion in the same period of 2003 due primarily to an increase in REVPAR. REVPAR at our Same-Store Owned Hotels increased 13.0% to $110.81 for the year ended December 31, 2004 when compared to the corresponding 2003 period. The increase in REVPAR

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was attributed to increases in occupancy rates to 68.5% in the year ended December 31, 2004 when compared to 64.7% in the same period in 2003, and a 6.8% increase in ADR at these Same-Store Owned Hotels to $161.74 for the year ended December 31, 2004 compared to $151.49 for the corresponding 2003 period. REVPAR at Same-Store Owned Hotels in North America increased 12.1% for the year ended December 31, 2004 when compared to the same period of 2003 due to increased transient and group travel business for the period. REVPAR growth at these hotels, and thereby revenues, was strongest in major metropolitan cities such as New York, Boston, Toronto and Los Angeles where we have a large concentration of owned hotels. REVPAR at our international Same-Store Owned Hotels, increased by 15.6% for the year ended December 31, 2004 when compared to the same period of 2003, with Europe, where we have our biggest concentration of international owned hotels, increasing 13.2%. REVPAR for Same-Store Owned Hotels internationally increased 6.7% for the year ended December 31, 2004 excluding the favorable effects of foreign currency translation. REVPAR for Same-Store Owned Hotels in Europe increased 3.1% excluding the favorable effect of foreign currency translation.

      The increase in vacation ownership and residential sales and services is primarily due to the increase in the sales of VOIs of 47.1% to $531 million in 2004 compared to $361 million in 2003. These increases represent increased sales volume as well as the revenue recognition from progressing and completed projects accounted for under the percentage of completion accounting methodology as required by generally accepted accounting principles primarily at the Westin Ka’anapali Ocean Resort Villas in Maui, Hawaii, The St. Regis in Aspen, Colorado, the Westin Kierland Resort and Spa in Scottsdale, Arizona, the Sheraton Vistana Villages in Orlando, Florida, and the Westin Mission Hills Resort in Rancho Mirage, California. Contract sales of VOI inventory, which represents vacation ownership revenues before adjustments for percentage of completion accounting and rescissions and excluding fractional sales at the St. Regis Aspen and residential sales at the St. Regis Museum Tower in San Francisco, California described below, increased 28.4% in the year ended December 31, 2004 when compared to the same period in 2003. The increase in vacation ownership and residential sales in 2004, when compared to 2003, was also due to sales of fractional units at the St. Regis in Aspen, Colorado and residential units at the St. Regis Museum Tower in San Francisco, California, both of which were new projects in 2004. In December 2004, we completed the conversion of 98 guest rooms at the St. Regis in Aspen into 25 fractional units, which are being sold in four week intervals, and 20 new hotel rooms. In 2004, we recognized approximately $51 million of revenues from this project. We also began selling condominiums at the St. Regis Museum Tower in San Francisco in late 2004 and recognized approximately $15 million of revenues from this project in 2004. The St. Regis Museum Tower is under construction and is expected to open in the summer of 2005 with 260 hotel rooms and 102 condominium units.

      The increase in management fees, franchise fees and other income of $164 million was primarily due to the inclusion of approximately $49 million of revenues from the Bliss spas and product sales, which were acquired at the beginning of 2004, and approximately $46 million of income (including the impact of foreign exchange rates) earned on the Le Meridien debt participation acquired by us in late December 2003. Additionally, management and franchise fees increased approximately $53 million to $303 million for the year ended December 31, 2004, when compared to $250 million in the same period of 2003, due to strong top line growth resulting from the economic recovery discussed earlier.

      Other revenues and expenses from managed and franchised properties increased to $983 million from $851 million for the year ended December 31, 2004 and 2003, respectively. These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income.

      Operating Income. Our total operating income was $653 million in the year ended December 31, 2004 compared to $427 million in 2003. Excluding depreciation and amortization of $431 million and $429 million for the years ended December 31, 2004 and 2003, respectively, operating income increased 26.6% or $228 million to $1.084 billion for the year ended December 31, 2004 when compared to $856 million in the same period in 2003, primarily due to the improved owned hotel performance and vacation ownership sales

25

discussed above, offset in part by certain non-recurring increases in selling, general, and administrative costs, including the accrual, not payment, for separation costs for our Executive Chairman as provided for in his employment agreement, higher incentive compensation costs commensurate with our improved performance, certain legal settlement costs, and costs associated with our World Conference in January 2004 (we did not have a conference in the prior year).

      Operating income at our hotel segment was $664 million in the year ended December 31, 2004 compared to $445 million in the same period of 2003. The improved operating results at our owned, leased and consolidated joint venture hotels more than offset the absence of operating income from the hotels sold in 2003 as discussed above, as well as the increased energy and health insurance costs. Operating income for the vacation ownership and residential segment was $142 million in the year ended December 31, 2004 compared to $89 million for the same period in 2003 primarily due to the significant increase in income from the sales of VOIs and the percentage of completion accounting methodology discussed above.

      Restructuring and Other Special Credits, Net. During the twelve months ended December 31, 2004, we reversed a $37 million reserve previously recorded through restructuring and other special charges due to a favorable judgment in a litigation matter. During the twelve months ended December 31, 2003, we received $12 million in a favorable settlement of a litigation matter. This credit was offset by an increase of $13 million in a reserve for legal defense costs associated with a separate litigation matter. Additionally, we reversed a $9 million liability that was originally established in 1997 for the ITT Excess Pension Plan and is no longer required as we finalized the settlement of the remaining obligations associated with the plan and reversed $1 million related to the collection of receivables previously deemed impaired.

      Depreciation and Amortization. Depreciation expense increased $3 million to $413 million during the year ended December 31, 2004 compared to $410 million in the corresponding period of 2003. This slight increase was due to additional depreciation expense resulting from capital expenditures at our owned, leased and consolidated joint venture hotels in the past 12 months. Amortization expense decreased to $18 million in the year ended December 31, 2004 compared to $19 million in the corresponding period of 2003.

      Gain on Sale of VOI Notes Receivable. Gains from the sale of VOI receivables of $14 million and $15 million in 2004 and 2003, respectively, are primarily due to the sale of $113 million and $181 million of vacation ownership receivables during the years ended December 31, 2004 and 2003, respectively.

      Net Interest Expense. Interest expense, which is net of discontinued operations allocations of $7 million for the year ended December 31, 2003, decreased to $254 million from $282 million. This decrease was due primarily to the lower debt balances in 2004 compared to the same period of 2003 as a result of the paydown of debt in 2003 with the proceeds from asset sales, the payoff of the Series B Convertible Senior Notes in 2004, and the amortization of deferred gains recorded as a result of interest rate swap terminations completed in early March 2004, offset in part by slightly higher interest rates. Our weighted average interest rate was 5.81% at December 31, 2004 versus 5.46% at December 31, 2003.

      Loss On Asset Dispositions and Impairments, Net. During 2004, we recorded a net loss of $33 million primarily related to the sale of two hotels in 2004, the sale of one hotel in January 2005, and three investments deemed impaired in 2004.

      During 2003, we recorded a $181 million charge related to the impairment of 18 non-core domestic hotels that were held for sale. We sold 16 of these hotels for net proceeds of $404 million. We also recorded a $9 million gain on the sale of a 51% interest in undeveloped land in Costa Smeralda in Sardinia, Italy. This gain was offset by a $9 million write down of the value of a hotel which was formerly operated together with one of the non-core domestic hotels and is now closed and under review for alternative use and a $2 million charge related to an impairment of an investment.

      Discontinued Operations. For the year ended December 31, 2004, the net gain on dispositions includes $16 million related to the favorable resolution of certain tax matters and $10 million primarily related to the reversal of reserves, both of which related to our former gaming business which was disposed of in 1999. The reserves were reversed as the related contingencies were resolved.

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      For the year ended December 31, 2003, loss from discontinued operations represents the results of the Principe di Savoia Hotel in Milan, Italy (“Principe”) net of $7 million of allocated interest expense. We sold the Principe in June 2003, with no continuing involvement. The net gain on dispositions for the year ended December 31, 2003 consists of $174 million of gains recorded in connection with the sale of the Principe on June 30, 2003 and the reversal of a $32 million accrual relating to our former gaming business disposed of in 1999 and 2000. We believe that these accruals are no longer required as the related contingencies have been resolved.

      Income Tax Expense. The effective income tax rate for continuing operations for the year ended December 31, 2004 was approximately 10.5%. Our effective income tax rate is determined by the level and composition of pre-tax income subject to varying foreign, state and local taxes and other items. The effective tax rate for the year ended December 31, 2004 benefited from approximately $28 million primarily related to the reversal of tax reserves as a result of the resolution of certain tax matters during the year. For the year ended December 31, 2003 we had a tax benefit of $113 million on a pre-tax loss of $11 million, primarily due to the tax exempt Trust income and the favorable settlement of various tax matters.

Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

Continuing Operations

      Revenues. Total revenues, including other revenues from managed and franchised properties, were $4.630 billion, remaining virtually flat compared to 2002 levels. Revenues reflect a 3.3% decrease in revenues from our owned, leased and consolidated joint venture hotels to $3.085 billion for the year ended December 31, 2003 when compared to $3.190 billion in the corresponding period of 2002, a decrease of $10 million in management fees, franchise fees and other income to $255 million for the year ended December 31, 2003 when compared to $265 million in the corresponding period of 2002, an increase of $86 million in vacation ownership and residential revenues to $439 million for the year ended December 31, 2003 when compared to $353 million in the corresponding period of 2002 and an increase of $71 million in other revenues from managed and franchised properties to $851 million for the year ended December 31, 2003 when compared to $780 million in the corresponding period of 2002.

      The decrease in revenues from owned, leased and consolidated joint venture hotels is due primarily to the absence of revenues generated by 16 non-strategic domestic hotels and four hotels in Costa Smeralda, Italy, which were mostly sold in the first half of 2003, and offset by increased revenues from our Same-Store Owned Hotels (140 hotels for 2003 and 2002, excluding 25 hotels sold or closed during these periods). Revenues from the 20 sold hotels during 2003 were $110 million, a decrease of $140 million as compared to $250 million in the same period of 2002. Revenues from our Same-Store Owned Hotels increased 2.0% to $2.967 billion for the year ended December 31, 2003 when compared to $2.909 billion in the same period of 2002 due primarily to an increase in REVPAR. REVPAR at our Same-Store Owned Hotels increased 1.3% to $98.34 for the year ended December 31, 2003 when compared to the corresponding 2002 period. The increase in REVPAR at these Same-Store Owned Hotels was attributed to an increase in occupancy to 64.6% in the year ended December 31, 2003 when compared to 64.0% in the same period of 2002 and a slight increase in ADR of 0.3% to $152.12 for the year ended December 31, 2003 compared to $151.69 for the corresponding 2002 period. REVPAR at Same-Store Owned Hotels in North America decreased 0.2% for the year ended December 31, 2003 when compared to the same period of 2002. The slight decrease in REVPAR and revenues from owned, leased and consolidated joint venture hotels in North America was primarily due to the decline in business transient demand as a result of the weakened global economies. REVPAR at our international Same-Store Owned Hotels increased by 5.8% for the year ended December 31, 2003 when compared to the same period of 2002, primarily due to the favorable effect of foreign currency translation. Including the impact of foreign currency, REVPAR for Same-Store Owned Hotels in Europe increased 6.2%, in Latin America decreased 5.5% and in Asia Pacific increased 31.7% when compared to 2002. Excluding the favorable effect of foreign exchange, REVPAR at our Same-Store Owned Hotels internationally decreased 6.5% for the year ended 2003 when compared to 2002 due to the weakened global economies and adverse political and economic conditions.

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      The increase in vacation ownership and residential sales and services primarily resulted from the increase in VOI sales of 30.7% to $361 million in 2003 compared to $276 million in 2002. Contract sales of VOI inventory increased 23.2% in the year ended December 31, 2003 when compared to the same period in 2002, primarily as a result of sales at the Westin Ka’anapali Ocean Resort Villas in Maui, Hawaii, which sold out the first phase prior to the opening, as well as strong demand reflected in our resorts in Scottsdale and Orlando in the latter part of the year.

      The decrease in management fees, franchise fees and other income of $10 million was primarily due to reduced interest income and increased insurance claims at our captive insurance company offset, in part, by an increase in management and franchise fees.

      Other revenues and expenses from managed and franchised properties increased to $851 million in 2003 when compared to $780 million in 2002, primarily due to the addition of hotels to our portfolio of managed and franchised hotels. These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and net income.

      Operating Income. Our total operating income (which includes $9 million of restructuring and other special credits in 2003 and $7 million of restructuring and other special credits and $30 million of foreign exchange gains related to the devaluation of the Argentine Peso in 2002) was $427 million for the year ended December 31, 2003 compared to $551 million in the same period of 2002. Excluding depreciation and amortization of $429 million and $488 million for the years ended December 31, 2003 and 2002, respectively, operating income decreased 17.6% or $183 million to $856 million for the year ended December 31, 2003 when compared to $1.039 million in the same period in 2002, primarily due to the decline in operating income at our owned, leased and consolidated joint venture hotels as a result of the weakened global economies, the war in Iraq and its aftermath and the SARS epidemic and the absence of the revenues and corresponding operating income from the sold properties discussed above. Operating income at our owned, leased and consolidated joint venture hotels was $445 million for the year ended December 31, 2003 compared to $589 million in the same period of 2002. These hotels were also negatively impacted by increased energy, workers compensation insurance and other health benefits related costs and reduced cancellation and telecommunication fees in 2003 when compared to 2002. In addition, our total operating income in 2003 was adversely impacted by the nonrecurring Argentina foreign exchange gains in 2002 of $30 million.

      Operating income for the vacation ownership segment was $89 million in the year ended December 31, 2003 compared to $69 million in 2002 primarily due to the increased sales from the vacation ownership projects discussed above.

      Restructuring and Other Special Credits, Net. During 2003, we received $12 million in a favorable settlement of a litigation matter. This credit was offset by an increase of $13 million in a reserve for legal defense costs associated with a separate litigation matter. Additionally, we reversed a $9 million liability that was originally established in 1997 for the ITT Excess Pension Plan and is no longer required as we finalized the settlement of its remaining obligations associated with the plan and reversed $1 million related to the collection of receivables previously deemed impaired. During the year ended December 31, 2002, we reversed $7 million of previously recorded restructuring and other special charges primarily related to adjustments to the severance liability established in connection with the cost containment efforts after the events of September 11, 2001, sales of our investments in certain e-business ventures previously deemed impaired and the collection of receivables which were previously deemed uncollectible.

      Depreciation and Amortization. Depreciation expense decreased to $410 million in the year ended December 31, 2003 compared to $473 million in the corresponding period of 2002. Additional depreciation resulting from capital expenditures at our owned, leased and consolidated joint venture hotels was more than offset by the reduced depreciation expense from fully depreciated furniture, fixtures and equipment, as we reached the five year anniversary of the merger with ITT Corporation in February 2003 and the 16 non-core domestic hotels, and the four Costa Smeralda hotels which were initially classified as held for sale and depreciation suspended effective March 31, 2003. Amortization expense increased to $19 million in the year

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ended December 31, 2003 compared to $15 million in the corresponding period of 2002 due to the additional amortization of intangible assets associated with costs incurred in connection with new management contracts.

      Gain on Sale of VOI Notes Receivable. Gains from the sale of VOI receivables of $15 million and $16 million in 2003 and 2002, respectively, are primarily due to the sale of $181 million and $133 million of vacation ownership receivables during the years ended December 31, 2003 and 2002, respectively. Included in the $181 million of VOI receivable sales in 2003 are $89 million of VOI receivables which were repurchased from existing securitizations.

      Net Interest Expense. Interest expense for the years ended December 31, 2003 and 2002, which is net of interest income of $5 million and $2 million, respectively, and discontinued operations allocations of $7 million and $15 million for 2003 and 2002, respectively, decreased to $282 million from $323 million, due primarily to the pay down of debt with $1.1 billion of proceeds from the hotel sales discussed previously, $30 million of early debt extinguishment charges recorded in the second quarter of 2002, lower interest rates in 2003 compared to 2002 and the impact of certain financing transactions, including the issuance of debt in April 2002 and May 2003. Our weighted average interest rate was 5.46% at December 31, 2003 versus 5.64% at December 31, 2002.

      Gain (loss) on Asset Dispositions and Impairments, Net. During 2003, we recorded a $181 million charge related to the impairment of 18 non-core domestic hotels that were held for sale. We sold 16 of these hotels for net proceeds of $404 million. We also recorded a $9 million gain on the sale of a 51% interest in undeveloped land in Costa Smeralda in Sardinia, Italy. This gain was offset by a $9 million write down of the value of a hotel which was formerly operated together with one of the non-core domestic hotels and is now closed and under review for alternative use and a $2 million charge related to an impairment of an investment. During 2002, we sold our investment in Interval International, for a gain of $6 million. This gain is offset in part by a net loss of $3 million on the disposition of two hotels.

      Income Tax Expense. The income tax benefit of $113 million on the pre-tax loss of $11 million for 2003 is primarily the result of tax exempt Trust income and the favorable settlement of various tax matters. The 2002 income tax provision of $2 million on pre-tax income of $255 million is primarily the result of tax exempt Trust income and net tax benefits primarily related to approximately $39 million of various adjustments to federal and state tax liabilities resulting from the successful settlement of tax matters dating back to 1993. Our effective income tax rate is determined by the level and composition of pretax income subject to varying foreign, state and local taxes and other items. The tax rate for the year ended December 31, 2003 is significantly lower than the prior year due to the combination of lower pretax income and the distribution of $0.84 per Share.

      Discontinued Operations. For the years ended 2003 and 2002, loss from discontinued operations represents the results of the Principe, net of $7 million and $15 million, of allocated interest expense, respectively. We sold the Principe with no continuing involvement in June 2003. The net gain on dispositions for 2003 consists of $174 million of gains recorded in connection with the sale of the Principe and the reversal of a $32 million accrual relating to our gaming businesses disposed of in 1999 and 2000 which are no longer required as the related contingencies have been resolved.

      During 2002, we recorded an after tax gain of $109 million from discontinued operations primarily related to the issuance of new Internal Revenue Service (“IRS”) regulations in early 2002, which allowed us to recognize a $79 million tax benefit from a tax loss on the 1999 sale of the former gaming business. The tax loss was previously disallowed under the old regulations. In addition, we recorded a $25 million gain resulting from an adjustment to our tax basis in ITT World Directories, a subsidiary which was disposed of in early 1998 through a tax deferred reorganization. The increase in the tax basis has the effect of reducing the deferred tax charge recorded on the disposition in 1998. This gain also included the reversal of $5 million of liabilities set up in conjunction with the sale of the former gaming business that are no longer required as the related contingencies have been resolved.

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LIQUIDITY AND CAPITAL RESOURCES

Cash From Operating Activities

      Cash flow from operating activities is the principal source of cash used to fund our operating expenses, interest payments on debt, maintenance capital expenditures and distribution payments by the Trust. We anticipate that cash flow provided by operating activities will be sufficient to service these cash requirements. In 2002, we shifted from a quarterly distribution to an annual distribution, and declared a distribution of $0.84 per Share to shareholders of record on December 31, 2003 and 2004. We paid the 2003 distribution in January 2004 and the 2004 distribution in January 2005. We believe that existing borrowing availability together with capacity from additional borrowings and cash from operations will be adequate to meet all funding requirements for our operating expenses, interest payments on debt, maintenance capital expenditures and distribution payments by the Trust for the foreseeable future.

      Provisions of certain of our secured debt require that cash reserves be maintained. Additional cash reserves are required if aggregate operations of the related hotels fall below a specified level. Additional cash reserves for certain debt became required in late 2003 following a difficult period in the hospitality industry, resulting from the war in Iraq and the worldwide economic downturn. As of December 31, 2004 and 2003, $132 million and $13 million, respectively, of cash related to these required cash reserves was classified as restricted cash in our consolidated balance sheet. The cash reserves, which are expected to continue to accrue and remain restricted through September 2005, are not expected to have a material impact on our liquidity. Once aggregate hotel operations meet the specified levels over the required time period, the additional cash reserves, plus accrued interest, will be released to us.

      In addition, state and local regulations governing sales of VOIs allow the purchaser of such a VOI to rescind the sale subsequent to its completion for a pre-specified number of days or until a certificate of occupancy is obtained. As such, cash collected from such sales during the rescission period is also classified as restricted cash in our consolidated balance sheets. At December 31, 2004 and 2003, we have $200 million and $56 million, respectively, of such restricted cash.

Cash Used for Investing Activities

      Contractual Obligations. On December 30, 2003, together with Lehman Brothers, we announced the acquisition of all of the outstanding senior debt (approximately $1.3 billion), at a discount, of Le Meridien. Our approximate $200 million investment is represented by a high yield junior participation interest. As part of this investment, we entered into an agreement with Lehman Brothers whereby they would negotiate with us on an exclusive basis towards a recapitalization of Le Meridien. The exclusivity period expired in early April 2004 although negotiations with Lehman Brothers are continuing. While negotiations are continuing, there can be no assurance that transaction agreements will be entered into or a transaction consummated and if consummated what the terms and form of such a transaction would be.

      In limited cases, we have made loans to owners of or partners in hotel or resort ventures for which we have a management or franchise agreement. Loans outstanding under this program totaled $160 million at December 31, 2004. We evaluate these loans for impairment, and at December 31, 2004, believe these loans are collectible. Unfunded loan commitments, excluding the Westin Boston, Seaport Hotel discussed below, aggregating $46 million were outstanding at December 31, 2004, of which $7 million are expected to be funded in 2005 and $30 million are expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. We also have $78 million of equity and other potential contributions associated with managed or joint venture properties, $34 million of which is expected to be funded in 2005.

      We participate in programs with unaffiliated lenders in which we may partially guarantee loans made to facilitate third-party ownership of hotels that we manage or franchise. As of December 31, 2004, we were a guarantor for a loan which could reach a maximum of $30 million related to the St. Regis in Monarch Beach, California, which opened in mid-2001. We do not anticipate any funding under the loan guarantee in 2005, as the project is well capitalized. Furthermore, since this property was funded with significant equity and

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subordinated debt financing, if our loan guarantee was to be called, we could take an equity position in this property at a value significantly below construction costs.

      Additionally, during the second quarter of 2004, we entered into a long-term management contract to manage the Westin Boston, Seaport Hotel in Boston, Massachusetts, which is under construction and scheduled to open in 2006. In connection with this agreement, we will provide up to $28 million in mezzanine loans and other investments ($13 million of which has been funded) as well as various guarantees, including a principal repayment guarantee for the term of the senior debt (four years with a one-year extension option), which is capped at $40 million, and a debt service guarantee during the term of the senior debt which is limited to the interest expense on the amounts drawn under such debt and principal amortization. Any payments under the debt service guarantee, attributable to principal, will reduce the cap under the principal repayment guarantee. The fair value of these guarantees of $3 million is reflected in other liabilities in our accompanying balance sheet as of December 31, 2004. In addition, we have issued a completion guarantee for this approximate $200 million project. In the event the completion guarantee is called on, we would have recourse to a guaranteed maximum price contract from the general contractor, performance bonds from all major trade contractors and a payment bond from the general contractor. We would only be required to perform under the completion guaranty in the event of a default by the general contractor that is not cured by the contractor or the applicable bonds. We do not anticipate that we would be required to perform under these guarantees.

      Surety bonds issued on behalf of us as of December 31, 2004 totaled $38 million, the majority of which were required by state or local governments relating to our vacation ownership operations and by our insurers to secure large deductible insurance programs.

      To secure management contracts, we may provide performance guarantees to third-party owners. Most of these performance guarantees allow us to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, we are obliged to fund shortfalls in performance levels through the issuance of loans. As of December 31, 2004, we had nine management contracts with performance guarantees with possible cash outlays of up to $76 million, $50 million of which, if required, would be funded over a period of 25 years and would be largely offset by management fees received under these contracts. Many of the performance tests are multi-year tests, are tied to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. We do not anticipate any significant funding under the performance guarantees in 2005. In addition, we have agreed to guarantee certain performance levels at a managed property that has authorized VOI sales and marketing. The exact amount and nature of the guaranty is currently under dispute. However, we do not believe that any payments under this guaranty will be significant. We do not anticipate losing a significant number of management or franchise contracts in 2005.

      We had the following contractual obligations outstanding as of December 31, 2004 (in millions):

			Due in Less
			Than		Due in		Due in		Due After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Long-term debt	$	4,440	$	619	$	1,744	$	468	$	1,609
Capital lease obligations		2		—		—		—		2
Operating lease obligations		1,133		74		137		122		800
Unconditional purchase obligations(1)		161		50		65		26		20
Other long-term obligations		2		2		—		—		—
Total contractual obligations	$	5,738	$	745	$	1,946	$	616	$	2,431

(1)  Included in these balances are commitments that may be satisfied by our managed and franchised properties.

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     We had the following commercial commitments outstanding as of December 31, 2004 (in millions):

			Amount of Commitment Expiration Per Period
			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Standby letters of credit	$	125	$	125	$	—	$	—	$	—
Hotel loan guarantees(1)(2)		67		—		—		37		30
Other commercial commitments		—		—		—		—		—
Total commercial commitments	$	192	$	125	$	—	$	37	$	30

(1)	Excludes fair value of guarantees which are reflected in our consolidated balance sheet.
(2)	Excludes a debt service guarantee since no substantial debt has been drawn.

     In January 2004, we acquired a 95% interest in Blissworld LLC which operates three stand alone spas (two in New York, New York and one in London, England) and a beauty products business with distribution through its own internet site and catalogue as well as through third party retail stores. The purchase price for the acquired interest was approximately $25 million, and was funded from available cash.

      We intend to finance the acquisition of additional hotel properties (including equity investments), hotel renovations, VOI construction, capital improvements, technology spend and other core business acquisitions and investments and provide for general corporate purposes through our credit facilities described below, through the net proceeds from dispositions, through the assumption of debt and through the issuance of additional equity or debt securities.

      We periodically review our business to identify properties or other assets that we believe either are non-core (including hotels where the return on invested capital is not adequate), no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on restructuring and enhancing real estate returns and monetizing investments and from time to time, attempt to sell these identified properties and assets. There can be no assurance, however, that we will be able to complete dispositions on commercially reasonable terms or at all.

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Cash Used for Financing Activities

      Following is a summary of our debt portfolio (including capital leases) as of December 31, 2004:

		Amount				Interest Rate at
		Outstanding at				December 31,			Average
		December 31, 2004(a)			Interest Terms	2004			Maturity
		(Dollars in millions)
Floating Rate Debt
Senior Credit Facility:
	Term Loan	$	550		LIBOR(b)+1.25%		3.65	%		1.5  years
	Revolving Credit Facility		11		CBA+1.25%		3.81	%		1.8  years
Mortgages and Other			207		Various		5.37	%		2.1  years
Interest Rate Swaps			300				6.72	%		—
Total/ Average		$	1,068				4.85	%		1.7  years
Fixed Rate Debt
Sheraton Holding Public Debt		$	1,058	(c)			6.00	%		7.9  years
Senior Notes			1,514	(c)			6.70	%		4.9  years
Convertible Debt			360				3.50	%		1.4  years
Mortgages and Other			742				7.25	%		6.2  years
Interest Rate Swaps			(300	)			7.88	%		—
Total/ Average		$	3,374				6.11	%		5.7  years
Total Debt
Total Debt and Average Terms		$	4,442				5.81	%		5.0  years

(a)	Excludes approximately $438 million of our share of unconsolidated joint venture debt, all of which was non-recourse, except as noted earlier.
(b)	At December 31, 2004, LIBOR was 2.40%
(c)	Included approximately $11 million and $18 million at December 31, 2004 of fair value adjustments related to the fixed-to-floating interest rate swaps for the Sheraton Holding Public Debt and the Senior Notes, respectively.

     Fiscal 2004 Developments. In August 2004, we completed a $300 million addition to the term loan under our existing Senior Credit Facility. The proceeds were used to repay a portion of the existing revolving credit facility and for general corporate purposes. The Senior Credit Facility now consists of a $1.0 billion revolving loan and a $600 million term loan, each maturing in 2006 with a one year extension option and a current interest rate of LIBOR plus 1.25%. We currently expect to be in compliance with all covenants for the remainder of the Senior Credit Facility term.

      In March 2004, we terminated certain interest rate swap agreements, with a notional amount of $1 billion, under which we paid floating rates and received fixed rates of interest (the “Fair Value Swaps”), resulting in a $33 million cash payment to us. These proceeds were used for general corporate purposes and will result in a decrease to interest expense for the corresponding underlying debt (Sheraton Holding Public Debt and the Senior Notes) through 2007, the final scheduled maturity date of the terminated Fair Value Swaps. In order to adjust our fixed versus floating rate debt position, we immediately entered into two new Fair Value Swaps with an aggregate notional amount of $300 million.

      In May 2001, we sold an aggregate face amount of $572 million Series B zero coupon convertible senior notes (along with $244 million of Series A notes, which were subsequently repurchased in May 2002) due 2021. The Series B convertible notes were convertible when the market price of our Shares exceeds 120% of the then-accreted conversion price of the convertible senior notes. The maximum conversion of notes was approximately 5.8 million Shares. Holders of Series B Convertible Senior Notes put the majority of these

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notes to us in May 2004 for a purchase price of approximately $311 million, and in December 2004 we purchased the remaining $20 million, leaving a zero balance as of December 31, 2004.

      Fiscal 2003 Developments. In May 2003, we sold an aggregate of $360 million 3.5% coupon convertible senior notes due 2023. The notes are convertible, subject to certain conditions, into 7.2 million Shares based on a conversion price of $50.00 per Share. Gross proceeds received were used to repay a portion of our Senior Credit Facility and for other operational purposes. Holders may first present their notes to us for repurchase in May 2006.

      During the second quarter of 2003, we amended our Senior Credit Facility. The amendment adjusted the leverage coverage ratio for the second quarter of 2003 and for the next eight quarters (through June 30, 2005). In addition, we modified our current covenant on encumbered EBITDA (as defined) and added a restriction on the level of cash dividends.

      Fiscal 2002 Developments. In October 2002, we refinanced our previous senior credit facility with a new four-year $1.3 billion senior credit facility. The new facility is comprised of a $1.0 billion revolving facility and a $300 million term loan (later increased to $600 million as discussed earlier), each maturing in 2006, with a one-year extension option, and an initial interest rate of LIBOR + 1.625%. The proceeds from the new Senior Credit Facility were used to pay off all amounts owed under our previous senior credit facility, which was due to mature in February 2003. We incurred approximately $1 million in charges in connection with this early extinguishment of debt.

      In September 2002, we terminated certain Fair Value Swaps, resulting in a $78 million cash payment to us. These proceeds were used to pay down the previous revolving credit facility and will result in a decrease to interest expense on the hedged debt through its maturity in 2007. In order to retain our fixed versus floating rate debt position, we immediately entered into five new Fair Value Swaps on the same underlying debt as the terminated swaps.

      In April 2002, we sold $1.5 billion of senior notes in two tranches — $700 million principal amount of 7³/8% senior notes due 2007 and $800 million principal amount of 7⁷/8% senior notes due 2012. We used the proceeds to repay all of our senior secured notes facility and a portion of our previous senior credit facility. In connection with the repayment of debt, we incurred charges of approximately $29 million including approximately $23 million for the early termination of interest rate swap agreements associated with repaid debt, and $6 million for the write-off of deferred financing costs and termination fees associated with the early extinguishment of debt.

      Other. We have approximately $619 million of outstanding debt maturing in 2005. Based upon the current level of operations, management believes that our cash flow from operations, together with available borrowings under the Revolving Credit Facility (approximately $864 million at December 31, 2004), available borrowings from international revolving lines of credit (approximately $103 million at December 31, 2004), and capacity for additional borrowings will be adequate to meet anticipated requirements for scheduled maturities, dividends, working capital, capital expenditures, marketing and advertising program expenditures, other discretionary investments, interest and scheduled principal payments for the foreseeable future. However, we have a substantial amount of indebtedness and had a working capital deficiency of $445 million at December 31, 2004. There can be no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, on favorable terms. In addition, there can be no assurance that our business will continue to generate cash flow at or above historical levels or that currently anticipated results will be achieved.

      We maintain non-U.S.-dollar-denominated debt, which provides a hedge of our international net assets and operations but also exposes our debt balance to fluctuations in foreign currency exchange rates. During the years ended December 31, 2004 and 2003, the effect of changes in foreign currency exchange rates was a net increase in debt of approximately $13 million and $54 million, respectively. Our debt balance is also affected by changes in interest rates as a result of our Fair Value Swaps. The fair market value of the Fair Value Swaps is recorded as an asset or liability and as the Fair Value Swaps are deemed to be effective, an adjustment is recorded against the corresponding debt. At December 31, 2004, our debt included an increase of

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approximately $29 million related to the unamortized premium on terminated Fair Value Swaps and the fair market value of current Fair Value Swap assets. At December 31, 2003 our debt included an increase of approximately $57 million related to fair value swap liabilities.

      If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to sell additional assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. Our ability to make scheduled principal payments, to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel and vacation ownership industries and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

      On May 6, 2003, Standard & Poor’s announced its decision to downgrade our Credit Rating to BB+ (non-investment grade with a stable outlook) from BBB- (investment grade rating on Credit Watch with negative implications). On January 7, 2004, Moody’s Investor Services and Standard & Poor’s placed our Ba1 (non-investment grade) and BB+ corporate credit ratings on review/watch for a possible downgrade. The review/watch was prompted by our announcement that we had invested $200 million in Le Meridien’s senior debt and would be in discussions to negotiate the potential recapitalization of Le Meridien. On January 27, 2005, Standard & Poor’s removed our review/watch and affirmed our BB+ rating with a stable outlook. Any downgrading of our credit rating may result in higher borrowing costs on future financings.

      In 2002, we shifted from a quarterly distribution to an annual distribution. A distribution of $0.84 per Share, was paid in January 2005 and January 2004 to shareholders of record as of December 31, 2004 and 2003, respectively.

      On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”). The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and, as of today, uncertainty remains as to how to interpret numerous provisions in the Act. As such, we are not yet in a position to decide on whether, and to what extent, we might repatriate foreign earnings that have not yet been remitted to the U.S. Based on our preliminary analysis to date, however, it is possible that we may repatriate some amount up to $500 million, with the respective tax liability of up to $26 million. We expect to be in a position to finalize our assessment by mid-2005.

Stock Sales and Repurchases

      At December 31, 2004, we had outstanding approximately 209 million Shares, 1.2 million partnership units and 651,000 million Class A EPS and Class B EPS. Through December 31, 2004, in accordance with the terms of the Class B EPS, approximately 567,000 shares of Class B EPS and Exchangeable Units were redeemed for approximately $22 million. During 2004, no shares of Class A EPS were exchanged for Shares.

      In 1998, the Corporation’s Board of Directors approved the repurchase of up to $1 billion of Shares under a Share repurchase program (the “Share Repurchase Program”). On April 2, 2001, the Corporation’s Board of Directors authorized the repurchase of up to an additional $500 million of Shares under the Share Repurchase Program. Pursuant to the Share Repurchase Program, Starwood repurchased 7.0 million Shares in the open market for an aggregate cost of $310 million during 2004.

Off-Balance Sheet Arrangements

      Our off-balance sheet arrangements include beneficial interest in securitizations of $58 million, third-party loan guarantees of $67 million, letters of credit of $125 million, unconditional purchase obligations of $161 million and surety bonds of $38 million. These items are more fully discussed earlier in this section and in the Notes to Consolidated Financial Statements, Item 8 of Part II of this report.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

      In limited instances, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged.

      Interest rate swap agreements are the primary instruments used to manage interest rate risk. At December 31, 2004, we had two outstanding long-term interest rate swap agreements under which we pay variable interest rates and receive fixed interest rates. At December 31, 2004, we had no interest rate swap agreements under which we pay a fixed rate and receive a variable rate. The following table sets forth the scheduled maturities and the total fair value of our debt portfolio:

		Expected Maturity or
		Transaction Date															Total Fair
		At December 31,												Total at			Value at
														December 31,			December 31,
		2005		2006		2007		2008		2009		Thereafter		2004			2004
Liabilities
Fixed rate (in millions)		$	480	$	379	$	754	$	22	$	432	$	1,607	$	3,674		$	4,024
Average interest rate															6.25	%
Floating rate (in millions)		$	139	$	521	$	90	$	5	$	9	$	4	$	768		$	768
Average interest rate															4.12	%
Interest Rate Swaps
Fixed to variable (in millions)		$	—	$	—	$	—	$	—	$	—	$	300	$	300
	Average pay rate														6.72	%
	Average receive rate														7.88	%

      We use foreign currency hedging instruments to manage exposure to foreign currency exchange rate fluctuations. The gains or losses on the hedging instruments are largely offset by gains or losses on the underlying asset or liability, and consequently, a sudden significant change in foreign currency exchange rates would not have a material impact on future net income or cash flows of the hedged item. We monitor our foreign currency exposure on a monthly basis to maximize the overall effectiveness of our foreign currency hedge positions. Changes in the fair value of hedging instruments are classified in the same manner as changes in the underlying assets or liabilities due to fluctuations in foreign currency exchange rates. At December 31, 2004, the notional amount of our open foreign exchange hedging contracts protecting the value of our foreign currency denominated assets and liabilities was approximately $562 million, which includes a hedge on a portion of the principal amount of the Le Meridien investment. A hypothetical 10% change in the spot currency exchange rates would result in an increase or decrease of approximately $61 million in the fair value of the hedges at December 31, 2004, which would be offset by an opposite effect on the related underlying net asset or liability.

      We enter into a derivative financial arrangement to the extent it meets the objectives described above, and we do not engage in such transactions for trading or speculative purposes.

      See Note 18. Derivative Financial Instruments in the notes to financial statements filed as part of this Joint Annual Report and incorporated herein by reference for further description of derivative financial instruments.

Item 8. Financial Statements and Supplementary Data.

      The financial statements and supplementary data required by this Item are included in Item 15 of this Joint Annual Report and are incorporated herein by reference.

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Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

      Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

      Our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2004. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in our Securities and Exchange Commission reports. There has been no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting.

      Management of Starwood Hotels & Resorts Worldwide Inc. and its subsidiaries and Starwood Hotels & Resorts and its subsidiaries (“the Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) or 15(d)-15(f). Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”) and includes those policies and procedures that:

•   Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•   Provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

      The Company’s management assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2004. In making this assessment, the Company’s management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, management believes that, as of December 31, 2004, the Company’s internal control over financial reporting is effective.

      Management has engaged Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, to attest to and report on management’s evaluation of the Company’s internal control over financial reporting. Its report is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors, Board of Trustees and Shareholders of

Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the “Company”) and Starwood Hotels & Resorts and its subsidiaries (the “Trust”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s and the Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s and the Trust’s internal control over financial reporting based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audits included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that the Company and the Trust maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company and the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company and the Trust as of December 31, 2004 and 2003, and the related consolidated statements of income, comprehensive income, equity, and cash flows of the Company for each of the three years in the period ended December 31, 2004 and the consolidated statements of income and cash flows of the Trust for each of the three years in the period ended December 31, 2004 and our report dated March 1, 2005, expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

New York, New York

March 1, 2005

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Changes in Internal Controls

      There has not been any change in our internal control over financial reporting identified in connection with the evaluation that occurred during the year ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, those controls.

PART III

Item 10. Directors, Trustees and Executive Officers of the Registrants.

      The Board of Directors of the Corporation and the Board of Trustees of the Trust are currently comprised of 10 members, each of whom is elected for a one-year term. The following table sets forth, for each of the members of the Board of Directors and the Board of Trustees as of the date of this Joint Annual Report, certain information regarding such Director or Trustee.

Name (Age)	Principal Occupation and Business Experience	Service Period
Steven J. Heyer (52)	Chief Executive Officer of the Company since October 2004. Served as President and Chief Operating Officer of The Coca-Cola Company from December 2002 to September 2004, President and Chief Operating Officer, Coca-Cola Ventures from April 2001 to December 2002. Mr. Heyer was President and Chief Operating Officer of Turner Broadcasting System, Inc. from 1996 until April 2001. Mr. Heyer is a director of Internet Security Systems, Inc.
Barry S. Sternlicht (44)	Executive Chairman of the Company since October 2004. Chairman and Chief Executive Officer of the Company since September 1997 and January 1999, respectively. Mr. Sternlicht has served as Chairman and Chief Executive Officer of the Trust since January 1995. Mr. Sternlicht also has been the President and Chief Executive Officer of Starwood Capital (and its predecessor entities) since its formation in 1991. Mr. Sternlicht was Chief Executive Officer of iStar Financial, Inc. (‘iStar”), a publicly-held real estate investment firm, from September 1996 to November 1997 and served as the Chairman of the Board of Directors of iStar from September 1996 to April 2000. He is a director of The Estee Lauder Companies, Inc.
Charlene Barshefsky (54)	Senior International Partner at the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C. From March 1997 to January 2001, Ambassador Barshefsky was the United States Trade Representative, the chief trade negotiator and principal trade policy maker for the United States and a member of the President’s Cabinet. Ambassador Barshefsky is a director of The Estee Lauder Companies, Inc., American Express Company, Intel Corporation and Idenix Pharmaceuticals.	Director and Trustee since October 2001

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Name (Age)	Principal Occupation and Business Experience	Service Period
Jean-Marc Chapus (45)	Group Managing Director and Portfolio Manager of Trust Company of the West, an investment management firm, and President of TCW/ Crescent Mezzanine L.L.C., a private investment fund, since March 1995. Mr. Chapus is a director of MEMC Electronic Materials, Inc.	Director from August 1995 to November 1997; since April 1999 Trustee since November 1997
Bruce W. Duncan (53)	President, Chief Executive Officer and Trustee of Equity Residential (‘EQR”) the largest publicly traded apartment company in the United States since April 2002. From April 2000 until March 2002, he was a private investor. From December 1995 until March 2000, Mr. Duncan served as Chairman, President and Chief Executive Officer of The Cadillac Fairview Corporation Limited, a real estate operating company.	Director since April 1999 Trustee since August 1995
Eric Hippeau (53)	Managing Partner of Softbank Capital Partners, a technology venture capital firm, since March 2000. Mr. Hippeau served as Chairman and Chief Executive Officer of Ziff-Davis Inc., an integrated media and marketing company, from 1993 to March 2000 and held various other positions with Ziff-Davis from 1989 to 1993. Mr. Hippeau is a director of Yahoo! Inc.	Director and Trustee since April 1999
Stephen R. Quazzo (45)	Managing Director, Chief Executive Officer and co- founder of Transwestern Investment Company, L.L.C., a real estate principal investment firm, since March 1996. From April 1991 to March 1996, Mr. Quazzo was President of Equity Institutional Investors, Inc., a subsidiary of Equity Group Investments, Inc., a Chicago-based holding company controlled by Samuel Zell.	Director since April 1999 Trustee since August 1995
Thomas O. Ryder (60)	Chairman of the Board and Chief Executive Officer of The Reader’s Digest Association, Inc. since April 1998. Mr. Ryder was President, American Express Travel Related Services International, a division of American Express Company, which provides travel, financial and network services, from October 1995 to April 1998. He is a director of Amazon.com, Inc.	Director and Trustee since April 2001
Daniel W. Yih (46)	Principal and Chief Operating Officer of GTCR Golder Rauner, LLC, a private equity firm, since September 2000. From June 1995 until March 2000, Mr. Yih was a general partner of Chilmark Partners, L.P., a private equity firm.	Director since August 1995 Trustee since April 1999
Kneeland C. Youngblood (49)	Co-founder and managing partner of Pharos Capital Group, L.L.C., a private equity fund focused on technology companies, business service companies and health care companies, since January 1998. He is Chairman of the Board of the American Beacon Funds, a mutual fund company managed by AMR Investments, an investment affiliate of American Airlines. He is a director of the Burger King Corp.	Director and Trustee since April 2001

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Executive Officers of the Registrants

      The following table includes certain information with respect to each of Starwood’s executive officers.

Name	Age		Position
Barry S. Sternlicht		44	Executive Chairman and a Director of the Corporation and Executive Chairman and a Trustee of the Trust
Steven J. Heyer		52	Chief Executive Officer and a Director of the Corporation and Chief Executive Officer and a Trustee of the Trust
Robert F. Cotter		53	President and Chief Operating Officer of the Corporation and a Vice President of the Trust
Vasant M. Prabhu		45	Executive Vice President and Chief Financial Officer of the Corporation and Vice President, Chief Financial Officer and Chief Accounting Officer of the Trust
Kenneth S. Siegel		49	Executive Vice President, General Counsel and Secretary of the Corporation and Vice President, General Counsel and Secretary of the Trust
David K. Norton		49	Executive Vice President — Human Resources of the Corporation and Vice President — Human Resources of the Trust
Theodore W. Darnall		47	President, Real Estate Group of the Corporation and the Trust

      Barry S. Sternlicht. See Item 10. Directors, Trustees and Executive Officers of the Registrants above.

      Steven J, Heyer. See Item 10. Directors, Trustees and Executive Officers of the Registrants above.

      Robert F. Cotter. Mr. Cotter was the President and Chief Operating Officer of the Corporation from November 2003 until February 2005, and the Chief Operating Officer of the Corporation from February 2000 to February 2005. He has served as a Vice President of the Trust since August 2000. From December 1999 to February 2000, he was President, International Operations, and from March 1998 to December 1999, he served as President, Europe, of the Company. In February 2005, Mr. Cotter announced his intention to retire at the end of 2005.

      Vasant M. Prabhu. Mr. Prabhu has been the Executive Vice President and Chief Financial Officer of the Corporation and has served as Vice President, Chief Financial Officer and Chief Accounting Officer of the Trust since January 2004. Prior to joining the Company, Mr. Prabhu served as Executive Vice President and Chief Financial Officer for Safeway Inc., from September 2000 through December 2003. Mr. Prabhu was previously the President of the Information and Media Group at the McGraw-Hill Companies, Inc., from June 1998 to August 2000, and held several senior positions at divisions of PepsiCo, Inc. from June 1992 to May 1998. From August 1983 to May 1992 he was a partner at Booz Allen Hamilton, an international management consulting firm.

      Kenneth S. Siegel. Mr. Siegel has been the Executive Vice President and General Counsel of the Corporation and Vice President and General Counsel of the Trust since November 2000. In February 2001, he was also appointed as the Secretary to both the Corporation and the Trust. Mr. Siegel was formerly the Senior Vice President and General Counsel of Gartner, Inc., a provider of research and analysis on information technology industries, from January 2000 to November 2000. Prior to that time, he served as Senior Vice President, General Counsel and Corporate Secretary of IMS Health Incorporated, an information services company, and its predecessors from February 1997 to December 1999. Prior to that time, Mr. Siegel was a Partner in the law firm of Baker & Botts, LLP.

      David K. Norton. Mr. Norton has been the Executive Vice President — Human Resources of the Corporation and Vice President — Human Resources of the Trust since May 2000. Prior to joining the Company, Mr. Norton held various positions with PepsiCo, Inc. from September 1990 to April 2000 including Senior Vice President, Human Resources of Frito-Lay, a division of PepsiCo, from November 1995 to April

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2000 and Senior Vice President, Human Resources of PepsiCo Food Systems from December 1994 to October 1995.

      Theodore W. Darnall. Mr. Darnall has been the President of the Real Estate Group since August 2002. From July 1999 to August 2002, he was the President of the Company’s North America Group.

Corporate Governance

      The Corporation and the Trust have an Audit Committee that is currently comprised of directors and trustees, Thomas O. Ryder (chairman), Daniel W. Yih, Kneeland C. Youngblood and Eric Hippeau. The Boards of Directors and Trustees have determined that each member of the Audit Committee is “independent” as defined by applicable federal securities laws and the Listing Requirements of the New York Stock Exchange, Inc. and that Messrs. Ryder and Yih are audit committee financial experts, as defined by federal securities laws.

      The Company has adopted a Finance Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Corporate Treasurer, Senior Vice President-Taxes and persons performing similar functions. The text of this code of ethics may be found on the Company’s web site at http://starwoodhotels.com/corporate/investor       relations.html. We intend to post amendments to and waivers from, the Finance Code of Ethics that require disclosure under applicable SEC rules on our web site. You may obtain a free copy of this code in print by writing to our Investor Relations Department, 1111 Westchester Avenue, White Plains, New York 10604.

      The Company has adopted a Worldwide Code of Conduct applicable to all of its directors, officers and employees. The text of this code of conduct may be found on the Company’s website at http://starwoodhotels.com/corporate/investor       relations.html. You may also obtain a free copy of this code in print by writing to our Investor Relations Department, 1111 Westchester Avenue, White Plains, New York 10604.

      The Company’s Corporate Governance Guidelines and the charters of its Audit Committee, Compensation and Option Committee, and Governance and Nominating Committee are also available on its website at http://starwoodhotels.com/corporate/investor       relations.html. The information on our website is not incorporated by reference into this Joint Annual Report on Form 10-K.

      We have submitted the CEO certification to the NYSE pursuant to NYSE Rule 303A.12(a) following the 2004 Annual Meeting of Shareholders.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that Directors, Trustees and executive officers of the Company, and persons who own more than 10 percent of the outstanding Shares, file with the SEC (and provide a copy to the Company) certain reports relating to their ownership of Shares and other equity securities of the Company.

      To the Company’s knowledge, based solely on a review of the copies of these reports furnished to the Company for the fiscal year ended December 31, 2004, and written representations that no other reports were required, all Section 16(a) filing requirements applicable to its Directors, Trustees, executive officers and greater than 10 percent beneficial owners were complied with for the most recent fiscal year, except that Mr. Sternlicht failed to timely file one Form 4 with respect to four transactions, and each of the non-employee directors (see above) failed to timely file one Form 4 with respect to one transaction. These transactions were filed late by the Company on behalf of the individuals.

Item 11. Executive Compensation

      The information called for by Item 11 is incorporated by reference to the information under the following captions in the Proxy Statement: “Compensation of Directors and Trustees,” “Summary of Cash and Certain Other Compensation,” “Executive Compensation,” “Option Grants,” “Option Exercises and Holdings,”

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“Employment and Compensation Agreements with Executive Officers,” “Compensation Committee Interlocks and Insider Participation” and “Compensation and Option Committee Report.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Equity Compensation Plan Information — December 31, 2004

	(a)		(b)		(c)
					Number of securities
	Number of securities				remaining available for
	to be issued upon		Weighted-average		future issuance under
	exercise of		exercise price of		equity compensation plans
	outstanding options,		outstanding options,		(excluding securities
	warrants and rights		warrants and rights		reflected in Column (a))
Equity compensation plans approved by security holders		34,548,670	$	33.81		57,531,550	(1)
Equity compensation plans not approved by security holders		—		—		—
Total		34,548,670	$	33.81		57,531,550

(1)  Does not include deferred share units (that vest over three years and may be settled in Shares) that may be issued pursuant to obligations under the Executive Annual Incentive Plan (“AIP”). The Executive AIP does not limit the number of deferred share units that may be issued. This plan has been amended to provide for a termination date of May 26, 2009 to comply with new NYSE requirements. In addition, 9,242,379 Shares remain available for issuance under our Employee Stock Purchase Plan, a stock purchase plan meeting the requirements of Section 423 of the Internal Revenue Code.

     The remaining information called for by Item 12 is incorporated by reference to the information under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

Policies of the Board of Directors of the Corporation and the Board of Trustees of the Trust

      The policy of the Board of Directors of the Corporation and the Board of Trustees of the Trust provides that any contract or transaction between the Corporation or the Trust, as the case may be, and any other entity in which one or more of its Directors, Trustees or executive officers are directors or officers, or have a financial interest, must be approved or ratified by the Governance and Nominating Committee (which is currently comprised of Stephen R. Quazzo, Ambassador Barshefsky and Bruce W. Duncan, the “Governance Committee”) and/or by a majority of the disinterested Directors or Trustees in either case after the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to them.

Starwood Capital

      General. Barry S. Sternlicht, Executive Chairman and a Director of the Corporation, and Executive Chairman and a Trustee of the Trust, may be deemed to control and has been and remains the President and Chief Executive Officer of Starwood Capital since its formation in 1991.

      Trademark License. An affiliate of Starwood Capital has granted to us, subject to Starwood Capital’s unrestricted right to use such name, an exclusive, non-transferable, royalty-free license to use the “Starwood” name and trademarks in connection with the acquisition, ownership, leasing, management, merchandising, operation and disposition of hotels worldwide, and to use the “Starwood” name in our corporate name worldwide, in perpetuity.

      Starwood Capital Noncompete. In connection with our restructuring of the Company in 1995, Starwood Capital voluntarily agreed that, with certain exceptions, Starwood Capital would not compete directly or indirectly with us within the United States and would present to us all opportunities presented to Starwood Capital to acquire fee interests in hotels in the United States and debt interests in hotels in the United States

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where it is anticipated that the equity will be acquired by the debt holder within one year from the acquisition of such debt (the “Starwood Capital Noncompete”). During the term of the Starwood Capital Noncompete, Starwood Capital and its affiliates are not permitted to acquire any such interest, or any ground lease interest or other equity interest, in hotels in the United States without the consent of the Board. In addition, our Corporate Opportunity Policy requires that each executive officer submit to the Governance Committee any opportunity that the executive officer reasonably believes is within our lines of business or in which we have an interest. Non-employee directors are subject to the same obligations with respect to opportunities presented to them in their capacity as directors. Therefore, as a matter of practice, all opportunities to purchase hotel assets, even those outside of the United States, that Starwood Capital may pursue are first presented to us. The Starwood Capital Noncompete continues until no officer, director, general partner or employee of Starwood Capital is on either the Board of Directors of the Corporation or the Board of Trustees of the Trust (subject to exceptions for certain restructurings, mergers or other combination transactions with unaffiliated parties). Several properties owned or managed by us, including the Westin Innisbrook Resort (the “Innisbrook Resort”), the Westin Mission Hills Resort and the Westin Turnberry Resort, were opportunities brought to us or our predecessors by Starwood Capital or entities related to Mr. Sternlicht. With the approval in each case of the Governance Committee of the Board of Directors of the Corporation and the Board of Trustees of the Trust, from time to time we have waived the restrictions of the Starwood Capital Noncompete, in whole or in part, (or passed on the opportunity in cases of the Corporate Opportunity Policy for non-U.S. opportunities) with respect to particular acquisition or investment opportunities in which we have no business or strategic interest. In each instance, members of management not having an interest in the transaction review and analyze the proposed transaction and may seek the advice of independent advisors. Following its review and analysis, management makes a recommendation to the Governance Committee. Upon receiving such recommendation and analysis, the Governance Committee will consider the recommendations and advice of management and may, depending on the transaction involved, retain independent financial and legal advisors in determining whether or not to pursue an opportunity or waive the Starwood Capital Noncompete.

      Miscellaneous. In July 2003, we waived the Starwood Capital Noncompete in connection with the acquisition of the Renaissance Wailea hotel in Hawaii by an affiliate of Starwood Capital. We signed a letter of intent with the affiliate to manage this property after it is extensively repositioned and renovated. We are currently negotiating the management agreement. Our Governance Committee, advised by separate independent legal and hospitality advisors, approved the waiver of the Starwood Capital Noncompete and the terms of the proposed management agreement as being at or better than market terms. We also declined the opportunity to purchase the asset because the expected after tax return on investment as determined by management based on its experience in the industry and concurred to by the Governance Committee was less than our minimum threshold and because the acquisition was not consistent with our strategic priorities.

      In August 2003, we acquired from an affiliate of Starwood Capital its beneficial ownership interest in 15 acres of land contiguous to the Westin Mission Hills Resort for a purchase price of $2.8 million. Our Governance Committee approved the transaction, which was at a discount from the price determined by an independent third party appraiser engaged by the Governance Committee.

      In November 2004, we waived the Starwood Capital Noncompete in connection with the potential acquisition of two hotels in Florida which are currently franchised under a Starwood brand. Pursuant to the waiver, we permitted Starwood Capital to enter into a contract to acquire the assets on the condition that it enters into a management agreement for us to manage the assets for up to three years. The management agreement would provide for a management fee of 5% of gross operating revenues in exchange for us loaning Starwood Capital up to $2 million to facilitate capital improvements on the properties. The loan would be repayable upon expiration of the management contracts unless Starwood Capital enters into long term contracts with us. If Starwood Capital determines to operate the properties as hotels, time shares, fractional interests, branded residential or any type of transient lodging facility, Starwood Capital would be required to negotiate a “market” management agreement with us. The Governance Committee approved the waiver of the Starwood Capital Noncompete and the proposed management fee as being at or better than market rates based on management’s recommendation. In addition, we were provided an opportunity to acquire the assets but declined to do so because the expected after tax return on investment as determined by management based

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on its experience in the industry was less than our minimum threshold and the acquisition of the assets was not consistent with our strategic priorities. To date, Starwood Capital has not acquired the hotels.

      In November 2004, we declined the opportunity to purchase an equity interest in a Starwood branded hotel in Asia through a joint venture consisting of Starwood Capital and a third party. The hotel is subject to a long term management contract with us that was entered into with independent third parties and that will remain in place. The Governance Committee determined that we would not be interested in acquiring the hotel based on management’s recommendation because the expected after tax return on investment as determined by management based on its experience in the industry was less than our minimum threshold because of the existing long term management contract and because the acquisition of the assets was not consistent with our strategic priorities.

      In February 2005, we agreed to waive the Starwood Capital Noncompete and the application of the Corporate Opportunity Policy with respect to a portfolio of seven hotels and a minority interest in an eighth hotel, each of which is subject to a long term management agreement with us. Under the terms of the waiver, affiliates of Starwood Capital will acquire the portfolio subject to the existing management agreements in favor of us. Starwood Capital has agreed that, following its planned restructuring of the ownership of the portfolio, the new management agreements will be revised to reflect our current form of management arrangement while preserving their current favorable economic terms. Starwood Capital has also agreed to grant us a right of first offer for an appropriate management, franchise, and/or services agreement with respect to any time share, residential or similar development opportunity at certain of the properties, to fully comply with all applicable brand standards and to certain restrictions on Mr. Sternlicht’s involvement with the operation of the properties. We declined the opportunity to acquire the properties based on management’s recommendation, because the expected after tax return on investment as determined by management based on its experience in the industry was less than our minimum threshold because of the existence of the favorable long-term management agreements and because the acquisition was not consistent with our strategic priorities.

      Beginning in the fourth quarter of 2004, Starwood Capital entered into discussions regarding a transaction with us and a third party which would involve, among other things, Starwood Capital acquiring an interest in hotels together with a third party, with us managing such properties. In the first quarter of 2005, we agreed to reimburse Starwood Capital for certain of its third party due diligence expenses in connection with its consideration of the transaction if a transaction is not consummated. A transaction involving Starwood Capital, if any, would be subject to the review and approval of the Governance Committee.

      In October 2004, in connection with a potential acquisition that we were considering jointly with Starwood Capital, Starwood Capital agreed to reimburse us for certain due diligence reviews conducted on its behalf by Starwood for which we billed them approximately $25,800.

      Portfolio Investments. An affiliate of Starwood Capital holds an approximately 31% co-controlling interest in Troon Golf (“Troon”), one of the largest third-party golf course management companies that currently manages over 120 high-end golf courses. Mr. Sternlicht’s indirect interest in Troon held through such affiliate is approximately 12%. In January 2002, after extensive review of alternatives and with the approval of the Governance Committee, we entered into a Master Agreement with Troon covering the United States and Canada whereby we have agreed to have Troon manage all golf courses in the United States and Canada that are owned by us and to use reasonable efforts to have Troon manage golf courses at resorts that we manage or franchise. We believe that the terms of the Troon agreement are at or better than market terms. Mr. Sternlicht did not participate in the negotiations or the approval of the Troon Master Agreement. During 2004, Troon managed 17 golf courses at resorts owned or managed by us. We paid Troon a total of $1,440,000 for management fees and payments for other services in 2004 for nine golf courses at resorts owned or managed by us. During 2003 and 2002, we paid $948,000 and $813,000 for management fees and payments for other services for the nine and eight golf courses at resorts owned or managed by us, respectively.

      In addition, a subsidiary of Starwood Capital is a general partner of a limited partnership which owns approximately 45% in an entity that manages over 40 health clubs, including one health club and spa space in a hotel owned by us. We paid approximately $84,000 annually to the management company for such

45

management services in 2003 and 2002, and $42,000 in 2004. We believe that the terms of the management agreement were at or better than market terms. The management agreement terminated on September 30, 2003 and the management company has since managed the health club and spa on a month-to-month agreement. We and the management company continued this arrangement until we closed the health club and spa in June 2004 for conversion to a Bliss spa.

      An entity in which Mr. Sternlicht has an indirect interest held 259 limited partnership units in Westin Hotels Limited Partnership (the owner of the Westin Michigan Avenue Hotel.) The units were acquired in 1995 and 1996, prior to our acquisition of Westin. The entity tendered all of its units to us in connection with our tender offer. We purchased all shares tendered to us and the entity received approximately $190,000 for its units.

      Other Management-Related Investments. Innisbrook. Mr. Sternlicht has a 38% indirect interest in an entity (the “Innisbrook Entity”) that owned the common area facilities and certain undeveloped land (but not the hotel) at the Innisbrook Resort. In May 1997, the Innisbrook Entity entered into a management agreement for the Innisbrook Resort with Westin, which was then a privately held company partly owned by Starwood Capital and Goldman, Sachs & Co. When we acquired Westin in January 1998, we acquired Westin’s rights and obligations under the management and other related agreements. Under these agreements, the hotel manager was obligated to loan up to $12.5 million to the owner in the event certain performance levels were not achieved. Management fees earned under these agreements were $636,000, $512,000 and $584,000 in 2004, 2003 and 2002, respectively. The operations of the Innisbrook Entity did not and continue not to generate sufficient cash flow to service its outstanding debt and current obligations for much of the past several years.

      We reached an agreement in 2004 with the Innisbrook Entity and its primary lender regarding certain outstanding obligations of the Innisbrook Entity, including approximately $11 million (consisting principally of loans made by us as hotel manager under the $12.5 million obligation) payable to us upon certain events. Pursuant to the agreement, the Innisbrook Entity conveyed the Innisbrook Resort to the lender (in lieu of foreclosure) and we were paid approximately $465,000 for outstanding receivables. Under the terms of the agreement, we entered into a new management agreement for the Innisbrook Resort with the lender providing for (i) an increased base management fee percentage, (ii) management of the Innisbrook Resort’s golf facilities (which we subcontracted to Troon, the manager of the facilities prior to the new agreement) (iii) the right to receive a termination fee of up to $5.9 million (declining to $5.5 million over three years) upon certain events and (iv) the right to be repaid certain capital expenditures made by us if the management agreement is terminated prior to January 1, 2006. As part of the agreement, each of the parties released substantially all of their claims against the others (including our right to receive payment of approximately $10.26 million loaned by us to the Innisbrook Entity upon the occurrence of certain events). Under the new agreement, affiliates of the Innisbrook Entity also loaned the lender $2 million to provide working capital for the Innisbrook Resort. The resolution of the matter did not have a material impact on our financial position, results of operations or cash flows and was approved by the Governance Committee based on the recommendation of management and outside legal advisors.

      Savannah. In July 2002, we acquired a 49% interest in the Westin Savannah Harbor Resort and Spa in connection with the restructuring of the indebtedness of that property. An unrelated party holds an additional 49% interest in the property. The remaining 2% is held by Troon. Troon invested in the project on a pari-passu basis and manages the golf course at the Westin Savannah. The unrelated third party negotiated the terms of the golf management agreement with Troon, and approved the terms of its equity interest, and therefore, we believe the arrangements are on an arms-length basis.

      Aircraft Lease. In February 1998, we leased a Gulfstream III Aircraft (“GIII”) from Star Flight LLC, an affiliate of Starwood Capital. The term of the lease was one year and automatically renews for one-year terms until either party terminates the lease upon 90 days’ written notice. The rent for the aircraft, which was set at approximately 90% of fair market value at the time (based on two estimates from unrelated third parties), is (i) a monthly payment of 1.25% of the lessor’s total costs relating to the aircraft (approximately $123,000 at the beginning of the lease with this amount increasing as additional costs are incurred by the

46

lessor), plus (ii) $300 for each hour that the aircraft is in use. The lease was revised effective January 1, 2004. Under the revised terms, the monthly lease payment is equal to (i) 1% of the fair market value of the aircraft as determined by an independent appraisal in February 2005, with the fair market value of the aircraft to be determined annually, plus (ii) $300 for each hour that the aircraft is in use. The term of the new lease agreement is for one year and it automatically renews for one-month terms unless either party terminates the lease upon 90 days’ written notice. The amount paid in 2004 in excess of the revised amount due (approximately $658,000) will be refunded by Star Flight LLC upon execution of the amended lease. Payments to Star Flight LLC were $1,724,000 (before the refunded amount disclosed above), $1,865,000 and $2,052,000 in 2004, 2003 and 2002, respectively. Starwood Capital has used the GIII as well as the Gulfstream IV Aircraft (“GIV”) operated by us. For use of the GIII, Star Flight LLC relieves us of lease payments for the days the plane is used and reimburses us for costs of operating the aircraft. For use of the GIV, Starwood Capital pays a charter rate that is at least equal to the amount we would have received from an unaffiliated third party through our charter agent, net of commissions. Lease relief and reimbursed operating costs were approximately $208,000, $52,000 and $161,000 for fiscal 2004, 2003 and 2002, respectively.

Other

      We on occasion made loans to employees, including executive officers prior to August 23, 2002, principally in connection with home purchases upon relocation. As of December 31, 2004, approximately $5.6 million in loans to approximately 15 employees was outstanding of which approximately $4.4 million were non-interest bearing home loans. Home loans are generally due five years from the date of issuance or upon termination of employment and are secured by a second mortgage on the employee’s home. Executive officers receiving home loans in connection with relocation were Robert F. Cotter, President and Chief Operating Officer, in June 2001 (original balance of $600,000), David K. Norton, Executive Vice President of Human Resources, in July 2000 (original balance of $500,000), and Theodore W. Darnall, President, Real Estate Group, in 1996 and 1998 (original balance of $750,000 ($150,000 bridge loan in 1996 and $600,000 home loan in 1998), of which $600,000 was repaid in August 2003). As a result of the acquisition of ITT Corporation in 1998, restricted stock awarded to Messrs. Sternlicht and Darnall in 1996 vested at a price for tax purposes of $53 per Share. This amount was taxable at ordinary income rates. By late 1998, the value of the stock had fallen below the amount of income tax owed. In order to avoid a situation in which the executives could be required to sell all of the Shares acquired by them to cover income taxes, in April 1999 we made interest-bearing loans at 5.67% to Messrs. Sternlicht and Darnall of approximately $1,222,000 and $416,000 respectively, to cover the taxes payable. Mr. Darnall’s loan was repaid in 2004. Accrued interest on Mr. Sternlicht’s loan at December 31, 2004 is approximately $396,000. The note and all associated accumulated interest become due on their tenth anniversary.

      Dina Diagonale held various positions with us from January 2001 through June 2004. In 2004, Ms. Diagonale earned a total of $241,409, which includes (i) approximately $77,500 upon the exercise of in-the-money options and restricted stock that vested or became exercisable in the ordinary course, (ii) Ms. Diagonale’s 2003 bonus which was paid in March 2004, and (iii) base compensation and severance. In addition, Ms. Diagonale was awarded 2,500 options to purchase Company shares in 2004, which terminated prior to vesting upon her ceasing to be employed by us. Subsequent to her departure from the Company, Ms. Diagonale married Kenneth S. Siegel, Executive Vice President and General Counsel.

Item 14. Principal Accountant Fees and Services

      The Audit Committee has adopted a policy requiring pre-approval by the committee of all services (audit and non-audit) to be provided to us by our independent auditors. In accordance with that policy, the Audit Committee has given its approval for the provision of audit services by Ernst & Young LLP for fiscal 2004. All other services must be specifically pre-approved by the full Audit Committee or by a designated member of the Audit Committee who has been delegated the authority to pre-approve the provision of services.

      Fees paid by us to our independent auditors are set forth in the proxy statement under the heading “Audit Fees” and are incorporated herein by reference. The auditors do not specifically allocate any of the audit fees for the audit of the Trust.

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PART IV

Item 15. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as a part of this Joint Annual Report:

1.	The financial statements and financial statement schedules listed in the Index to Financial Statements and Schedules following the signature pages hereof.
2.	Exhibits:

Exhibit
Number			Description of Exhibit
	2	.1	Formation Agreement, dated as of November 1, 1994, among the Trust, the Corporation, Starwood Capital and the Starwood Partners (incorporated by reference to Exhibit 2 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K dated November 16, 1994). (The SEC file numbers of all filings made by the Corporation and the Trust pursuant to the Securities Exchange Act of 1934, as amended, and referenced herein are: 1-7959 (the Corporation) and 1-6828 (the Trust)).
	2	.2	Form of Amendment No. 1 to Formation Agreement, dated as of July 1995, among the Trust, the Corporation and the Starwood Partners (incorporated by reference to Exhibit 10.23 to the Trust’s and the Corporation’s Joint Registration Statement on Form S-2 filed with the SEC on June 29, 1995 (Registration Nos. 33-59155 and 33-59155-01)).
	2	.3	Transaction Agreement, dated as of September 8, 1997, by and among the Trust, the Corporation, Realty Partnership, Operating Partnership, WHWE L.L.C., Woodstar Investor Partnership (“Woodstar”), Nomura Asset Capital Corporation, Juergen Bartels, Westin Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp., Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp. and W&S Hotel L.L.C. (incorporated by reference to Exhibit 2 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on September 25, 1997, as amended by the Form 8-K/ A filed with the SEC on December 18, 1997).
	3	.1	Amended and Restated Declaration of Trust of the Trust, amended and restated through April 16, 1999 (incorporated by reference to Exhibit 3.1 of the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999 (the “1999 Form  10-Q1”).
	3	.2	Articles of Amendment to the Amended and Restated Declaration of Trust of the Trust, dated as of November 15, 2004.(2)
	3	.3	Articles of Restatement of the Corporation, as of May 7, 2004 (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 (the “2004 Form 10-Q2”)).
	3	.4	Bylaws of the Trust, as amended and restated through November 8, 2004.(2)
	3	.5	Amended and Restated Bylaws of the Corporation, as amended and restated through May 7, 2004 (incorporated by reference to Exhibit 10.2 to the 2004 Form 10-Q2).
	4	.1	Amended and Restated Intercompany Agreement, dated as of January 6, 1999, between the Corporation and the Trust (incorporated by reference to Exhibit 3 to the Trust Form 8-A, except that on January 6, 1999, the Intercompany Agreement was executed and dated as of January 6, 1999).
	4	.2	Rights Agreement, dated as of March 15, 1999, between the Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights Agent (incorporated by reference to Exhibit 4 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on March 15, 1999).
	4	.3	First Amendment to Rights Agreement, dated as of October 2, 2003 (incorporated by reference to Exhibit 4 of Form 8-A/ A filed on October 7, 2003).
	4	.4	Second Amendment to Rights Agreement, dated as of October 24, 2003 (incorporated by reference to Exhibit 4 of Form 8-A/ A filed on October 30, 2003).

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Exhibit
Number			Description of Exhibit
	4	.5	Amended and Restated Indenture, dated as of November 15, 1995, as Amended and Restated as of December 15, 1995 between ITT Corporation (formerly known as ITT Destinations, Inc.) and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.A.IV to the First Amendment to ITT Corporation’s Registration Statement on Form S-3 filed November 13, 1996).
	4	.6	First Indenture Supplement, dated as of December 31, 1998, among ITT Corporation, the Corporation and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed January 8, 1999).
	4	.7	Indenture, dated as of May 25, 2001, by and among the Corporation, as Issuer, the guarantors named therein and Firstar Bank, N.A., as Trustee (incorporated by reference to Exhibit 10.2 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 (the “2001 Form 10-Q2”)).
	4	.8	Indenture, dated as of April 19, 2002, among the Corporation, the guarantor parties named therein and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Corporation’s and Sheraton Holding Corporation’s Joint Registration Statement on Form S-4 filed on November 19, 2002 the “2002 Forms S-4”)).
	4	.9	Indenture dated May 16, 2003 between the Corporation, the Trust, the Guarantor and U.S. Bank National Association as trustee (incorporated by reference to Exhibit 4.9 to the July 8, 2003 Form S-3) (Registration Nos. 333-106888, 333-106888-01, 333-106888-02) (the “Form S-3”).
			The Registrants hereby agree to file with the Commission a copy of any instrument, including indentures, defining the rights of long-term debt holders of the Registrants and their consolidated subsidiaries upon the request of the Commission.
	10	.1	Third Amended and Restated Limited Partnership Agreement for Realty Partnership, dated January 6, 1999, among the Trust and the limited partners of Realty Partnership (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the “1998 Form 10-K”)).
	10	.2	Third Amended and Restated Limited Partnership Agreement for Operating Partnership, dated January 6, 1999, among the Corporation and the limited partners of Operating Partnership (incorporated by reference to Exhibit 10.2 to the 1998 Form 10-K).
	10	.3	Form of Lease Agreement, entered into as of February 14, 1997, between the Trust (or a subsidiary) as Lessor and the Corporation (or a subsidiary) as Lessee.(2)
	10	.4	Form of Amendment of Lease, dated as of June 1, 2002, between the Trust (or a subsidiary) as Lessor and the Corporation (or a subsidiary) as Lessee.(2)
	10	.5	Form of Trademark License Agreement, dated as of December 10, 1997, between Starwood Capital and the Trust (incorporated by reference to Exhibit 10.22 to the Trust’s and the Corporation’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the “1997 Form 10-K”)).
	10	.6	Credit Agreement, dated October 9, 2002, among the Corporation, certain additional alternative currency revolving loan borrowers and various lenders, Deutsche Bank, AG, New York Branch, as Administrative Agent, JP Morgan Chase Bank, as Syndication Agent, Bank of America, N.A., Fleet National Bank and Societe Generale, as Co-Documentation Agents, and Deutsche Bank Securities Inc. and JP Morgan Securities Inc. as Co-Lead Arrangers and joint Book Running Managers (incorporated by reference to Exhibit 10.1 of Form 8-K filed on October 11, 2002).
	10	.7	First Amendment to Credit Agreement (incorporated by reference to Exhibit 10.5 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (the “2003 10-Q1”)).
	10	.8	Second Amendment to Credit Agreement (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2003 (the “2003 10-Q2”)).

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Exhibit
Number			Description of Exhibit
	10	.9	Third Amendment to Credit Agreement (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2004 (the “2004 10-Q3”)).
	10	.10	Incremental Term Loan Commitment to Credit Agreement (incorporated by reference to Exhibit 10.2 to the 2004 10-Q3).
	10	.11	Pledge and Security Agreement, dated as of February 23, 1998, executed and delivered by the Trust, the Corporation and the other Pledgors party thereto, in favor of Bankers Trust Company as Collateral Agent (incorporated by reference to Exhibit 10.63 to the 1997 Form 10-K).
	10	.12	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $3,282,000,000 (incorporated by reference to Exhibit 10.65 to the 1997 Form 10-K).
	10	.13	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, Realty Partnership, Sheraton Phoenician Corporation, and Starwood Phoenician CMBS I LLC.(2)
	10	.14	Second Modification, dated as of December 30, 1999, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, Realty Partnership, the Trust and Starwood Hotels and Resorts Holdings, Inc.(2)
	10	.15	Third Modification, dated as of June 30, 2000, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, the Corporation, Realty Partnership, the Trust and Starwood Hotels and Resorts Holdings, Inc.(2)
	10	.16	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $100,000,000 (incorporated by reference to Exhibit 10.66 to the 1997 Form 10-K).
	10	.17	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among the Corporation, Harbor-Cal S.D., Starwood Sheraton San Diego CMBS I LLC and Realty Partnership.(2)
	10	.18	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $50,000,000 (incorporated by reference to Exhibit 10.67 to the 1997 Form 10-K).
	10	.19	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among the Corporation, Harbor-Cal S.D., Starwood Sheraton San Diego CMBS I LLC and Realty Partnership.(2)
	10	.20	Loan Agreement, dated as of January 27, 1999, among the Borrowers named therein, as Borrowers, Starwood Operator I LLC, as Operator, and Lehman Brothers Holding Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc. (incorporated by reference to Exhibit 10.58 to the 1998 Form 10-K).
	10	.21	Starwood Hotels & Resorts 1995 Long-Term Incentive Plan (the “Trust 1995 LTIP”) (Amended and Restated as of December 3, 1998) (incorporated by reference to Annex D to the Trust’s and the Corporation’s Joint Proxy Statement dated December 3, 1998 (the “1998 Proxy Statement”))(1)
	10	.22	Second Amendment to the Trust 1995 LTIP (incorporated by reference to Exhibit 10.4 to the 2003 10-Q1).(1)
	10	.23	Form of Non-Qualified Stock Option Agreement pursuant to the Trust 1995 LTIP.(1)(2)
	10	.24	Starwood Hotels & Resorts Worldwide, Inc. 1995 Long-Term Incentive Plan (the “Corporation 1995 LTIP”) (Amended and Restated as of December 3, 1998) (incorporated by reference to Annex E to the 1998 Proxy Statement).(1)

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Exhibit
Number			Description of Exhibit
	10	.25	Second Amendment to the Corporation 1995 LTIP (incorporated by reference to Exhibit 10.3 to the 2003 10-Q1).(1)
	10	.26	Form of Non-Qualified Stock Option Agreement pursuant to the Corporation 1995 LTIP.(1)(2)
	10	.27	Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the “1999 LTIP”) (incorporated by reference to Exhibit 10.4 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (the “1999 Form  10-Q2”)).(1)
	10	.28	First Amendment to the 1999 LTIP, dated as of August 1, 2001 (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001).(1)
	10	.29	Second Amendment to the 1999 LTIP (incorporated by reference to Exhibit 10.2 to the 2003 10-Q1).(1)
	10	.30	Form of Non-Qualified Stock Option Agreement pursuant to the 1999 LTIP.(1)(2)
	10	.31	Form of Restricted Stock Agreement pursuant to the 1999 LTIP.(1)(2)
	10	.32	Starwood Hotels & Resorts Worldwide, Inc. 2002 Long-Term Incentive Compensation Plan (the “2002 LTIP”) (incorporated by reference to Annex B of the Corporation’s 2002 Proxy Statement).(1)
	10	.33	First Amendment to the 2002 LTIP (incorporated by reference to Exhibit 10.1 to the 2003 10-Q1).(1)
	10	.34	Form of Non-Qualified Stock Option Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.49 to the 2002 Form 10-K filed on February 28, 2003 (the “2002 10-K”)).(1)
	10	.35	Form of Restricted Stock Agreement pursuant to the 2002 LTIP.(1)(2)
	10	.36	2004 Long-Term Incentive Compensation Plan (“2004 LTIP”) (incorporated by reference to the Corporation’s 2004 Notice of Annual Meeting of Stockholders and Proxy Statement, pages A-1 through A-20).(1)
	10	.37	Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.4 to the 2004 10-Q2).(1)
	10	.38	Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 99.1 to the Corporation and the Trust’s Joint Current Report on Form 8-K filed with the SEC on February 16, 2005 (the “February 2005 8-K”)).(1)
	10	.39	Starwood Hotels & Resorts Worldwide, Inc. 1999 Annual Incentive Plan for Certain Executives (the “1999 AIP”) (incorporated by reference to Exhibit 10.5 to the 1999 Form 10-Q2).(1)
	10	.40	First Amendment to the 1999 AIP, dated as of December 17, 2003 (incorporated by reference to Exhibit 10.65 to the Corporation’s and the Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”)).(1)
	10	.41	Starwood Hotels & Resorts Worldwide, Inc. Annual Incentive Plan, dated June 1, 2001.(1)(2)
	10	.42	Starwood Hotels & Resorts Worldwide, Inc. Deferred Compensation Plan, effective as of January 1, 2001 (incorporated by reference to Exhibit 10.1 to the 2001 Form 10-Q2).(1)
	10	.43	Form of Indemnification Agreement between the Corporation, the Trust and each of its Directors/ Trustees and executive officers (incorporated by reference to Exhibit 10.10 to the 2003 10-K).(1)
	10	.44	Registration Rights Agreement, dated May 16, 2003, among the Corporation, the Guarantor and the Initial Purchasers (incorporated by reference to Exhibit 4.10 to the Form S-3).
	10	.45	Exchange Rights Agreement, dated as of January 1, 1995, among the Trust, the Corporation, Realty Partnership, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 2B to the Trust’s and the Corporation’s Joint Current Report on Form 8-K dated January 31, 1995 (the “Formation Form 8-K”)).

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Exhibit
Number			Description of Exhibit
	10	.46	Registration Rights Agreement, dated as of January 1, 1995, among the Trust, the Corporation and Starwood Capital (incorporated by reference to Exhibit 2C to the Formation Form 8-K).
	10	.47	Exchange Rights Agreement, dated as of June 3, 1996, among the Trust, the Corporation, Realty Partnership, Operating Partnership, Philadelphia HIR Limited Partnership and Philadelphia HSR Limited Partnership (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (the “1996 Form 10-Q2”)).
	10	.48	Registration Rights Agreement, dated as of June 3, 1996, among the Trust, the Corporation and Philadelphia HSR Limited Partnership (incorporated by reference to Exhibit 10.2 to the 1996 Form 10-Q2).
	10	.49	Units Exchange Rights Agreement, dated as of February 14, 1997, by and among, inter alia, the Trust, the Corporation, Realty Partnership, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 10.34 to the 1997 Form 10-K).
	10	.50	Class A Exchange Rights Agreement, dated as of February 14, 1997, by and among, inter alia, the Trust, the Corporation, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 10.35 to the 1997 Form 10-K).
	10	.51	Exchange Rights Agreement, dated as of January 2, 1998, among, inter alia, the Trust, Realty Partnership and Woodstar (incorporated by reference to Exhibit 10.50 to the 1997 Form 10-K).
	10	.52	Amendment to Exchange Rights Agreement (Class A Realty Partnership Units), dated as of October 10, 2002, among the Trust, Realty Partnership and certain limited partners of the Realty Partnership (incorporated by reference to Exhibit 10.53 to the 2002 Form 10-K).
	10	.53	Amendment to Exchange Rights Agreement, dated as of December 17, 2003 for the Class A Realty Partnership Units (incorporated by reference to Exhibit 10.67 to the 2003 10-K).
	10	.54	Exchange Rights Agreement, dated as of January 2, 1998, among, inter alia, the Corporation, Operating Partnership and Woodstar (incorporated by reference to Exhibit 10.51 to the 1997 Form 10-K).
	10	.55	Amendment to Exchange Rights Agreement (Class B Operating Partnership Units), dated as of October 10, 2002, among the Corporation, Operating Partnership and certain limited partners of the Operating Partnership (incorporated by reference to Exhibit 10.54 to the 2002 form 10-K).
	10	.56	Amendment to Exchange Rights Agreement, dated as of December 17, 2003 for the Class B Operating Partnership Units (incorporated by reference to Exhibit 10.66 to the 2003 10-K).
	10	.57	Second Amended and Restated Employment Agreement, dated as of January 1, 2003, between Barry S. Sternlicht and the Company (incorporated by reference to Exhibit 10.69 to the 2003 10-K).(1)
	10	.58	Form of Severance Agreement, dated December 1999, between the Corporation and Barry S. Sternlicht (incorporated by reference to Exhibit 10.52 to the 1999 Form 10-K).(1)
	10	.59	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on June 29, 1995 (incorporated by reference to Exhibit 10.3 to the 2002 Form 10-Q2).(1)
	10	.60	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on August 12, 1996 (incorporated by reference to Exhibit 10.4 to the 2002 Form 10-Q2).(1)
	10	.61	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on August 12, 1996 (incorporated by reference to Exhibit 10.5 to the 2002 Form 10-Q2).(1)

52

Exhibit
Number			Description of Exhibit
	10	.62	Employment Agreement, dated as of June 27, 2000, between the Corporation and Robert F. Cotter (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000).(1)
	10	.63	Addendum to Robert F. Cotter Offer Letter, effective as of February 16, 2002 (incorporated by reference to Exhibit 10.1 to the Corporation’s and Trust’s Joint Quarterly Report on Form 10-Q for the quarter ended March 31, 2002).(1)
	10	.64	Form of Severance Agreement, dated as of August 14, 2000, between the Corporation and Robert F. Cotter (incorporated by reference to Exhibit 10.56 to the 2000 Form 10-K).(1)
	10	.65	Letter Agreement, dated March 9, 2004 between the Corporation and Robert Cotter (incorporated by reference to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004). (1)
	10	.66	Employment Agreement, dated March 25, 1998, between Theodore Darnall and the Corporation (incorporated by reference to Exhibit 10.61 to the 2002 Form 10-K).(1)
	10	.67	Severance Agreement, dated December 1999, between the Corporation and Theodore Darnall (incorporated by reference to Exhibit 10.55 to the 2002 Form 10-K).(1)
	10	.68	Employment Agreement, dated as of November 13, 2003, between the Corporation and Vasant Prabhu (incorporated by reference to Exhibit 10.68 to the 2003 10-K).(1)
	10	.69	Employment Agreement, dated as of September 20, 2004, between the Corporation and Steven J. Heyer (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on September 24, 2004).(1)
	10	.70	Form of Non-Qualified Stock Option Agreement between the Corporation and Steven J. Heyer pursuant to the 2004 LTIP. (1)(2)
	10	.71	Form of Restricted Stock Unit Agreement between the Corporation and Steven J. Heyer pursuant to the 2004 LTIP (incorporated by reference to Exhibit 99.2 to the February 2005 8-K.(1)
	10	.72	Employment Agreement, dated as of September 25, 2000, between the Corporation and Kenneth Siegel (incorporated by reference to Exhibit 10.57 to the Corporation’s and Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 2000).(1)
	10	.73	Letter Agreement, dated July 22, 2004 between the Corporation and Kenneth Siegel.(1)(2)
	12	.1	Calculation of Ratio of Earnings to Total Fixed Charges. (2)
	21	.1	Subsidiaries of the Registrants.(2)
	23	.1	Consent of Ernst & Young LLP.(2)
	31	.1	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer — Corporation.(2)
	31	.2	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial Officer — Corporation.(2)
	31	.3	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer — Trust. (2)
	31	.4	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial and Accounting Officer — Trust.(2)
	32	.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer — Corporation.(2)
	32	.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer — Corporation.(2)

53

Exhibit
Number			Description of Exhibit
	32	.3	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer — Trust.(2)
	32	.4	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial and Accounting Officer — Trust.(2)

(1)	Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(2)	Filed herewith.

54

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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.

STARWOOD HOTELS & RESORTS

WORLDWIDE, INC.

By:  /s/ Steven J. Heyer

Steven J. Heyer

Chief Executive Officer and

Director

By:  /s/ Vasant M. Prabhu

Vasant M. Prabhu

Executive Vice President and

Chief Financial Officer

Date: March 2, 2005

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Steven J. Heyer Steven J. Heyer	Chief Executive Officer and Director	March 2, 2005
/s/ Barry S. Sternlicht Barry S. Sternlicht	Executive Chairman and Director	March 3, 2005
/s/ Vasant M. Prabhu Vasant M. Prabhu	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 2, 2005
/s/ Charlene Barshefsky Charlene Barshefsky	Director	March 3, 2005
/s/ Jean-Marc Chapus Jean-Marc Chapus	Director	March 3, 2005
/s/ Bruce W. Duncan Bruce W. Duncan	Director	March 3, 2005
/s/ Eric Hippeau Eric Hippeau	Director	March 3, 2005

55

Signature	Title	Date
/s/ Thomas O. Ryder Thomas O. Ryder	Director	March 3, 2005
/s/ Daniel W. Yih Daniel W. Yih	Director	March 3, 2005
/s/ Kneeland C. Youngblood Kneeland C. Youngblood	Director	March 3, 2005

56

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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.

STARWOOD HOTELS & RESORTS

By:  /s/ Steven J. Heyer

Steven J. Heyer

Chief Executive Officer and

Trustee

By:  /s/ Vasant M. Prabhu

Vasant M. Prabhu

Vice President and

Chief Financial and Accounting Officer

Date: March 2, 2005

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Steven J. Heyer Steven J. Heyer	Chief Executive Officer and Trustee (Principal Executive Officer)	March 2, 2005
/s/ Barry S. Sternlicht Barry S. Sternlicht	Chairman and Trustee	March 3, 2005
/s/ Vasant M. Prabhu Vasant M. Prabhu	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	March 2, 2005
/s/ Charlene Barshefsky Charlene Barshefsky	Trustee	March 3, 2005
/s/ Jean-Marc Chapus Jean-Marc Chapus	Trustee	March 3, 2005
/s/ Bruce W. Duncan Bruce W. Duncan	Trustee	March 3, 2005
/s/ Eric Hippeau Eric Hippeau	Trustee	March 3, 2005

57

Signature	Title	Date
/s/ Thomas O. Ryder Thomas O. Ryder	Trustee	March 3, 2005
/s/ Daniel W. Yih Daniel W. Yih	Trustee	March 3, 2005
/s/ Kneeland C. Youngblood Kneeland C. Youngblood	Trustee	March 3, 2005

58

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

		Page
Report of Independent Registered Public Accounting Firm			F-2
Starwood Hotels & Resorts Worldwide, Inc.:
	Consolidated Balance Sheets as of December 31, 2004 and 2003		F-3
	Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002		F-4
	Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2004, 2003 and 2002		F-5
	Consolidated Statements of Equity for the Years Ended December 31, 2004, 2003 and 2002		F-6
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002		F-7
Starwood Hotels & Resorts:
	Consolidated Balance Sheets as of December 31, 2004 and 2003		F-8
	Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002		F-9
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002		F-10
Notes to Financial Statements			F-11
Schedules:
	Schedule II — Valuation and Qualifying Accounts		S-1
	Schedule III — Real Estate and Accumulated Depreciation		S-2
	Schedule IV — Mortgage Loans on Real Estate		S-4

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors, Board of Trustees and Shareholders of

Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts

We have audited the accompanying consolidated balance sheets of Starwood Hotels & Resorts Worldwide, Inc. (a Maryland corporation) (the “Company”) and Starwood Hotels & Resorts (a Maryland real estate investment trust) (the “Trust”) as of December 31, 2004 and 2003, and the related consolidated statements of income, comprehensive income, equity, and cash flows of the Company for each of the three years in the period ended December 31, 2004 and the consolidated statements of income and cash flows of the Trust for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedules listed in the Index to Financial Statements and Schedules. These financial statements and schedules are the responsibility of the Company’s and Trust’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and the Trust at December 31, 2004 and 2003, and the consolidated results of the Company’s and the Trust’s operations and cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s and the Trust’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2005 expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

New York, New York

March 1, 2005

F-2

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			December 31,
			2004			2003
ASSETS
Current assets:
	Cash and cash equivalents		$	326		$	427
	Restricted cash			347			81
	Accounts receivable, net of allowance for doubtful accounts of $58 and $53			482			381
	Inventories			371			232
	Prepaid expenses and other			157			104
		Total current assets		1,683			1,225
Investments				453			415
Plant, property and equipment, net				6,997			7,106
Goodwill and intangible assets, net				2,544			2,488
Other assets				621			623
			$	12,298		$	11,857
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Short-term borrowings and current maturities of long-term debt		$	619		$	233
	Accounts payable			200			171
	Accrued expenses			872			799
	Accrued salaries, wages and benefits			299			228
	Accrued taxes and other			138			176
		Total current liabilities		2,128			1,607
Long-term debt				3,823			4,393
Deferred income taxes				880			898
Other liabilities				652			574
				7,483			7,472
Minority interest				27			28
Exchangeable units and Class B preferred shares, at redemption value of $38.50				—			31
Commitments and contingencies
Stockholders’ equity:
	Class A exchangeable preferred shares of the Trust; $0.01 par value; authorized 30,000,000 shares; outstanding 597,825 and 480,880 shares at December 31, 2004 and 2003, respectively			—			—
	Corporation common stock; $0.01 par value; authorized 1,050,000,000 shares; outstanding 208,730,800 and 201,812,126 shares at December 31, 2004 and 2003, respectively			2			2
	Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 208,730,800 and 201,812,126 shares at December 31, 2004 and 2003, respectively			2			2
	Additional paid-in capital			5,121			4,952
	Deferred compensation			(14	)		(9	)
	Accumulated other comprehensive loss			(255	)		(334	)
	Accumulated deficit			(68	)		(287	)
		Total stockholders’ equity		4,788			4,326
			$	12,298		$	11,857

The accompanying notes to financial statements are an integral part of the above statements.

F-3

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per Share data)

		Year Ended December 31,
		2004			2003			2002
Revenues
Owned, leased and consolidated joint venture hotels		$	3,326		$	3,085		$	3,190
Vacation ownership and residential sales and services			640			439			353
Management fees, franchise fees and other income			419			255			265
Other revenues from managed and franchised properties			983			851			780
			5,368			4,630			4,588
Costs and Expenses
Owned, leased and consolidated joint venture hotels			2,519			2,392			2,350
Vacation ownership and residential			488			340			274
Selling, general, administrative and other			331			200			152
Restructuring and other special credits, net			(37	)		(9	)		(7	)
Depreciation			413			410			473
Amortization			18			19			15
Other expenses from managed and franchised properties			983			851			780
			4,715			4,203			4,037
Operating income			653			427			551
Gain on sale of VOI notes receivable			14			15			16
Equity earnings from unconsolidated ventures, net			32			12			8
Interest expense, net of interest income of $3, $5 and $2			(254	)		(282	)		(323	)
Gain (loss) on asset dispositions and impairments, net			(33	)		(183	)		3
Income (loss) from continuing operations before taxes and minority equity			412			(11	)		255
Income tax benefit (expense)			(43	)		113			(2	)
Minority equity in net loss (income)			—			3			(2	)
Income from continuing operations			369			105			251
Discontinued operations:
	Loss from operations, net of taxes of $0, $0 and $2		—			(2	)		(5	)
	Gain on dispositions, net of tax expense (benefit) expense of $(10), $40 and $(104)		26			206			109
Net income		$	395		$	309		$	355
Earnings Per Share — Basic
Continuing operations		$	1.78		$	0.52		$	1.24
Discontinued operations			0.13			1.01			0.52
Net income		$	1.91		$	1.53		$	1.76
Earnings Per Share — Diluted
Continuing operations		$	1.72		$	0.51		$	1.22
Discontinued operations			0.12			0.99			0.51
Net income		$	1.84		$	1.50		$	1.73
Weighted average number of Shares			207			203			201
Weighted average number of Shares assuming dilution			215			207			205

The accompanying notes to financial statements are an integral part of the above statements.

F-4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

		Year Ended December 31,
		2004			2003			2002
Net income		$	395		$	309		$	355
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments			79			139			(2	)
Minimum pension liability adjustments			(4	)		(1	)		(13	)
Unrealized holding gains			4			3			4
Derivative instruments, net — Change in fair value of derivative instruments			—			(1	)		6
	Early termination of derivative instruments		—			—			15
			79			140			10
Comprehensive income		$	474		$	449		$	365

The accompanying notes to financial statements are an integral part of the above statements.

F-5

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

		Exchangeable
		units and																						Accumulated			Retained
		Class B EPS						Class A EPS					Shares					Additional						Other			Earnings
																		Paid-in			Deferred			Comprehensive			(Accumulated
		Shares			Amount			Shares			Amount		Shares			Amount		Capital(b)			Compensation			Loss(a)			Deficit)
Balance at December 31, 2001			1		$	52			1		$	—		198		$	4	$	4,851		$	(16	)	$	(484	)	$	(609	)
	Net income		—			—			—			—		—			—		—			—			—			355
	Stock option and restricted stock award transactions, net		—			—			—			—		2			—		52			2			—			—
	ESPP stock issuances		—			—			—			—		—			—		1			—			—			—
	Conversion and cancellation of Class A EPS, Class B EPS and Partnership Units		—			(1	)		(1	)		—		—			—		1			—			—			—
	Foreign currency translation		—			—			—			—		—			—		—			—			(2	)		—
	Minimum pension liability adjustment		—			—			—			—		—			—		—			—			(13	)		—
	Unrealized gain on securities, net		—			—			—			—		—			—		—			—			4			—
	Unrealized gain on derivative instruments		—			—			—			—		—			—		—			—			6			—
	Early termination of derivative instruments		—			—			—			—		—			—		—			—			15			—
	Distributions declared		—			—			—			—		—			—		—			—			—			(170	)
Balance at December 31, 2002			1			51			—			—		200			4		4,905			(14	)		(474	)		(424	)
	Net income		—			—			—			—		—			—		—			—			—			309
	Stock option and restricted stock award transactions, net		—			—			—			—		2			—		67			5			—			—
	ESPP stock issuances		—			—			—			—		—			—		8			—			—			—
	Share repurchases		—			—			—			—		—			—		(28	)		—			—			—
	Conversion or redemption and cancellation of Class A EPS, Class B EPS and Partnership Units		—			(20	)		—			—		—			—		—			—			—			—
	Foreign currency translation		—			—			—			—		—			—		—			—			139			—
	Minimum pension liability adjustment		—			—			—			—		—			—		—			—			(1	)		—
	Unrealized gain on securities, net		—			—			—			—		—			—		—			—			3			—
	Unrealized loss on derivative instruments		—			—			—			—		—			—		—			—			(1	)		—
	Distributions declared		—			—			—			—		—			—		—			—			—			(172	)
Balance at December 31, 2003			1			31			—			—		202			4		4,952			(9	)		(334	)		(287	)
	Net income		—			—			—			—		—			—		—			—			—			395
	Stock option and restricted stock award transactions, net		—			—			—			—		14			—		456			(5	)		—			—
	ESPP stock issuances		—			—			—			—		—			—		12			—			—			—
	Share repurchases		—			—			—			—		(7	)		—		(310	)		—			—			—
	Conversion or redemption and cancellation of Class A EPS, Class B EPS and Partnership Units		(1	)		(31	)		1			—		—			—		11			—			—			—
	Foreign currency translation		—			—			—			—		—			—		—			—			79			—
	Minimum pension liability adjustment		—			—			—			—		—			—		—			—			(4	)		—
	Unrealized gain on securities, net		—			—			—			—		—			—		—			—			4			—
	Distributions declared		—			—			—			—		—			—		—			—			—			(176	)
Balance at December 31, 2004			—		$	—			1		$	—		209		$	4	$	5,121		$	(14	)	$	(255	)	$	(68	)

(a)  As of December 31, 2004, this balance is comprised of $239 million of cumulative translation adjustments, $8 million of cumulative unrealized gains on securities, including derivative instruments, and $24 million of cumulative minimum pension liability adjustments.

(b)  Stock option exercises are net of a tax benefit of $70 million, $5 million and $6 million in 2004, 2003 and 2002, respectively.

The accompanying notes to financial statements are an integral part of the above statements.

F-6

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

		Year Ended December 31,
		2004			2003			2002
Operating Activities
Net income		$	395		$	309		$	355
Exclude:
Discontinued operations			(26	)		(204	)		(104	)
Income from continuing operations			369			105			251
Adjustments to income from continuing operations:
	Depreciation and amortization		431			429			488
	Amortization of deferred loan costs		12			14			15
	Non-cash portion of restructuring and other special credits, net		(37	)		(9	)		(3	)
	Non-cash foreign currency gains, net		(9	)		(4	)		(33	)
	Provision for doubtful accounts		25			34			27
	Minority equity in net income (loss)		—			(3	)		2
	Distributions in excess of equity earnings		31			71			31
	Gain on sale of VOI notes receivable		(14	)		(15	)		(16	)
	Loss (gain) on asset dispositions and impairments, net		33			183			(3	)
Changes in working capital:
	Restricted cash		(257	)		17			(54	)
	Accounts receivable		(67	)		6			21
	Inventories		(22	)		6			10
	Prepaid expenses and other		(52	)		8			(19	)
	Accounts payable and accrued expenses		118			55			39
Accrued and deferred income taxes			7			(138	)		(90	)
Other, net			9			(4	)		78
	Cash from continuing operations		577			755			744
	Cash from discontinued operations		1			11			18
	Cash from operating activities		578			766			762
Investing Activities
Purchases of plant, property and equipment			(333	)		(302	)		(296	)
Proceeds from asset sales, net			74			1,042			65
Collection (issuance) of notes receivable, net			(2	)		(2	)		7
Acquisitions, net of acquired cash			(65	)		—			(7	)
Investments			(73	)		(11	)		(41	)
Acquisition of senior debt			(4	)		(203	)		—
Other, net			(12	)		(9	)		(10	)
	Cash from (used for) investing activities		(415	)		515			(282	)
Financing Activities
Revolving credit facility and short-term repayments, net			(20	)		(344	)		(400	)
Long-term debt issued			300			446			1,964
Long-term debt repaid			(451	)		(911	)		(2,017	)
Distributions paid			(172	)		(170	)		(40	)
Proceeds from employee stock option exercises			379			54			35
Share repurchases			(310	)		(28	)		—
Other, net			1			(26	)		(29	)
	Cash used for financing activities		(273	)		(979	)		(487	)
Exchange rate effect on cash and cash equivalents			9			17			8
Increase (decrease) in cash and cash equivalents			(101	)		319			1
Cash and cash equivalents — beginning of period			427			108			107
Cash and cash equivalents — end of period		$	326		$	427		$	108
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
	Interest	$	293		$	287		$	310
	Income taxes, net of refunds	$	21		$	17		$	94

The accompanying notes to financial statements are an integral part of the above statements.

F-7

STARWOOD HOTELS & RESORTS

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			December 31,
			2004			2003
ASSETS
Current assets:
	Cash and cash equivalents		$	1		$	2
	Receivable, Corporation			535			465
	Prepaid expenses and other			—			1
		Total current assets		536			468
Investments, Corporation				848			848
Investments				28			25
Plant, property and equipment, net				3,254			3,324
Long-term receivables, Corporation, net				2,043			2,098
Goodwill and intangible assets, net				207			207
Other assets				9			8
			$	6,925		$	6,978
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Short-term borrowings and current maturities of long-term debt		$	10		$	9
	Accounts payable			3			4
	Accrued expenses			24			20
	Distributions payable, Corporation			225			183
	Distributions payable			176			172
		Total current liabilities		438			388
Long-term debt				435			445
				873			833
Minority interest				29			29
Exchangeable units and Class B preferred shares, at redemption value of $38.50				—			30
Commitments and contingencies
Stockholders’ equity:
	Class A exchangeable preferred shares; $0.01 par value; authorized 30,000,000 shares; outstanding 597,825 and 480,880 shares at December 31, 2004 and 2003, respectively			—			—
	Class A shares of beneficial interest; $0.01 par value; authorized 5,000 shares; outstanding 100 shares at December 31, 2004 and 2003			—			—
	Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 208,730,800 and 201,812,126 shares at December 31, 2004 and 2003, respectively			2			2
	Additional paid-in capital			7,761			7,714
	Distributions in excess of net income			(1,740	)		(1,630	)
		Total stockholders’ equity		6,023			6,086
			$	6,925		$	6,978

The accompanying notes to financial statements are an integral part of the above statements.

F-8

STARWOOD HOTELS & RESORTS

CONSOLIDATED STATEMENTS OF INCOME

(In millions)

	Year Ended December 31,
	2004			2003			2002
Revenues
Rent and interest, Corporation	$	536		$	526		$	587
		536			526			587
Costs and Expenses
Selling, general and administrative		3			3			3
Depreciation		156			165			222
		159			168			225
Operating income		377			358			362
Equity losses from unconsolidated joint venture		(1	)		(2	)		(1	)
Interest expense, net		(36	)		(35	)		(36	)
Loss on asset dispositions and impairments, net		(23	)		(186	)		(3	)
Income tax benefit (expense)		7			(3	)		(4	)
Minority equity in net loss (income)		(2	)		1			(3	)
Net income	$	322		$	133		$	315

The accompanying notes to financial statements are an integral part of the above statements.

F-9

STARWOOD HOTELS & RESORTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

		Year Ended December 31,
		2004			2003			2002
Operating Activities
Net income		$	322		$	133		$	315
Adjustments to net income:
	Depreciation and amortization		156			165			222
	Amortization of deferred loan costs		1			—			1
	Minority equity in net income (loss)		2			(1	)		3
	Distributions in excess of equity earnings		—			2			3
	Loss on asset dispositions and impairments, net		23			186			3
Receivable, Corporation			(52	)		(441	)		(446	)
Other, net			3			(1	)		3
	Cash from operating activities		455			43			104
Investing Activities
Purchases of plant, property and equipment			(100	)		(66	)		(82	)
Proceeds from asset sales, net			43			402			52
Acquisitions, net of acquired cash			—			—			(7	)
Collection of notes receivable			—			—			2
Other, net			(4	)		—			—
	Cash from (used for) investing activities		(61	)		336			(35	)
Financing Activities
Long-term debt issued			—			70			—
Long-term debt repaid			(9	)		(63	)		(36	)
Distributions paid			(172	)		(170	)		(40	)
Distributions paid to Corporation			(213	)		(206	)		—
Share repurchases			(30	)		(3	)		—
Other, net			29			(7	)		6
	Cash used for financing activities		(395	)		(379	)		(70	)
Decrease in cash and cash equivalents			(1	)		—			(1	)
Cash and cash equivalents — beginning of period			2			2			3
Cash and cash equivalents — end of period		$	1		$	2		$	2
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period for:
	Interest	$	33		$	33		$	35
	Income taxes, net of refunds	$	(21	)	$	3		$	4

The accompanying notes to financial statements are an integral part of the above statements.

F-10

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS

Note 1. Basis of Presentation

      The accompanying consolidated financial statements represent the consolidated financial position and consolidated results of operations of (i) Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the “Corporation”), including Sheraton Holding Corporation and its subsidiaries (“Sheraton Holding”) (formerly ITT Corporation) and Starwood Hotels & Resorts and its subsidiaries (the “Trust” and, together with the Corporation, “Starwood” or the “Company”), and (ii) the Trust.

      Starwood is one of the world’s largest hotel and leisure companies. The Company’s principal business is hotels and leisure, which is comprised of a worldwide hospitality network of more than 750 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. The principal operations of Starwood Vacation Ownership, Inc. (“SVO”) include the acquisition, development and operation of vacation ownership resorts; marketing and selling vacation ownership interests (“VOIs”) in the resorts; and providing financing to customers who purchase such interests.

      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”). The Trust is one of the largest REITs in the United States.

      Pursuant to a reorganization in 1999, the Trust became a subsidiary of the Corporation, which indirectly holds all outstanding shares of the new Class A shares of beneficial interest of the Trust (“Class A Shares”). Each Trust Share was converted into one share of the new non-voting Class B Shares of beneficial interest in the Trust (a “Class B Share”). The Corporation Shares and the Class B Shares trade together on a one-for-one basis, and pursuant to an agreement between the Corporation and the Trust, may be transferred only in units (“Shares”) consisting of one Corporation Share and one Class B Share.

      The Corporation, through its subsidiaries, is the general partner of, and held, as of December 31, 2004, an aggregate 98.4% partnership interest in, SLC Operating Limited Partnership (the “Operating Partnership”). The Trust, through its subsidiaries, is the general partner of, and held an aggregate 97.4% partnership interest in, SLT Realty Limited Partnership (the “Realty Partnership” and, together with the Operating Partnership, the “Partnerships”) as of December 31, 2004. The units of the Partnerships (“LP Units”) held by the limited partners of the respective Partnerships are exchangeable on a one-for-one basis for Shares. At December 31, 2004, there were approximately 5.6 million LP Units outstanding (including 4.3 million LP Units held by the Corporation). For all periods presented, the LP Units are assumed to have been converted to Shares for purposes of calculating basic and diluted weighted average Shares outstanding.

Note 2. Significant Accounting Policies

      Principles of Consolidation. The accompanying consolidated financial statements of the Company and the Trust and their subsidiaries include the assets, liabilities, revenues and expenses of majority-owned subsidiaries over which the Company and/or the Trust exercise control. Intercompany transactions and balances have been eliminated in consolidation.

      Cash and Cash Equivalents. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

      Restricted Cash. Restricted cash primarily consists of deposits received on sales of VOIs that are held in escrow until a certificate of occupancy is obtained, the legal rescission period has expired and the deed of trust has been recorded in governmental property ownership records. Additionally, provisions of certain of the Company’s secured debt require that cash reserves be maintained because aggregate operations of the related

F-11

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

hotels fell below a specified level due to the war in Iraq and the worldwide economic downturn. Once aggregate hotel operations meet the specified levels over the required time period, the additional cash reserves, plus accrued interest, will be released to the Company.

      Inventories. Inventories are comprised principally of VOIs of $187 million and $162 million as of December 31, 2004 and 2003, respectively, and residential of $108 million and $0 at December 31, 2004 and 2003, respectively, and hotel operating supplies. VOI and residential inventory is carried at the lower of cost or net realizable value and includes $13 million, $7 million and $4 million of capitalized interest incurred in 2004, 2003 and 2002, respectively. Operating supplies are generally valued at the lower of cost (first-in, first-out) or market.

      Loan Loss Reserves. For the hotel segment, the Company measures loan impairment based on the present value of expected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the collateral. For impaired loans, the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The Company applies the loan impairment policy individually to all loans in the portfolio and does not aggregate loans for the purpose of applying such policy. For loans that the Company has determined to be impaired, the Company recognizes interest income on a cash basis.

      For the vacation ownership segment, the Company provides for estimated mortgages receivable cancellations and defaults at the time the VOI sales are recorded with a charge to vacation ownership and residential expenses. The Company performs an analysis of factors such as economic condition and industry trends, defaults, past due aging and historical write-offs of mortgages and contracts receivable to evaluate the adequacy of the allowance.

      Assets Held for Sale. The Company considers properties to be assets held for sale when management approves and commits to a formal plan to actively market a property for sale, a signed sales contract and a non-refundable deposit exists. Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and the Company stops recording depreciation expense. Any gain realized in connection with the sale of properties for which the Company has significant continuing involvement (such as through a long-term management or franchise agreement) is deferred and recognized over the life of the associated involvement (e.g., the initial term of the related agreement).

      Investments. Investments in joint ventures are accounted for using the guidance of the revised Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 “Consolidation of Variable Interest Entities” (“FIN 46(R)”) for all ventures deemed to be variable interest entities. See additional discussion in the “Impact of Recently Issued Accounting Standards” section to this footnote. All other joint venture investments are accounted for under the equity method of accounting when the Company has a 20% to 50% ownership interest or exercises significant influence over the venture. If the Company’s interest exceeds 50% or in certain cases, if the Company exercises control over the venture, the results of the joint venture are consolidated herein. All other investments are generally accounted for under the cost method.

      The fair market value of investments is based on the market prices for the last day of the period if the investment trades on quoted exchanges. For non-traded investments, fair value is estimated based on the underlying value of the investment, which is dependent on the performance of the investment as well as the volatility inherent in external markets for these types of investments. In assessing potential impairment for these investments, the Company will consider these factors as well as forecasted financial performance of its investment. If these forecasts are not met, the Company may have to record impairment charges.

F-12

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Plant, Property and Equipment. Plant, property and equipment, including capitalized interest of $5 million, $7 million and $6 million incurred in 2004, 2003 and 2002, respectively, applicable to major project expenditures, are recorded at cost. The cost of improvements that extend the life of plant, property and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. Costs for normal repairs and maintenance are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful economic lives of 15 to 40 years for buildings and improvements; 3 to 10 years for furniture, fixtures and equipment; 3 to 7 years for information technology software and equipment and the lesser of the lease term or the economic useful life for leasehold improvements. Gains or losses on the sale or retirement of assets are included in income when the assets are sold provided there is reasonable assurance of the collectibility of the sales price and any future activities to be performed by the Company relating to the assets sold are insignificant.

      The Company evaluates the carrying value of its assets for impairment. For assets in use when the trigger events specified in Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” are met, the expected undiscounted future cash flows of the assets are compared to the net book value of the assets. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of such assets. If the fair value of the assets which have been identified for sale is less than the net book value of the assets, the carrying value of the assets is reduced to fair value less selling costs. Fair value is determined based upon discounted cash flows of the assets at rates deemed reasonable for the type of property and prevailing market conditions, appraisals and, if appropriate, current estimated net sales proceeds from pending offers.

      Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management contracts. Effective January 1, 2002, the Company adopted SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with this guidance, the Company ceased amortizing goodwill and intangible assets with indefinite lives. Intangible assets with finite lives continue to amortize on a straight-line basis over their respective useful lives. The Company reviews all goodwill and intangible assets with indefinite lives for impairment by comparisons of fair value to book value annually, or upon the occurrence of a trigger event. Impairment charges, if any, will be recognized in operating results. In connection with the adoption of this standard, the Company has completed its initial and subsequent annual recoverability tests on goodwill and intangible assets, which did not result in any impairment charges.

      Frequent Guest Program. Starwood Preferred Guest® (“SPG”) is the Company’s frequent guest incentive marketing program. SPG members earn points based on their spending at the Company’s properties, as incentives to first-time buyers of VOIs, and, to a lesser degree, through participation in affiliated partners’ programs, such as those offered by airlines. Points can be redeemed at most of the Company’s owned, leased, managed and franchised properties. The cost of operating the program, including the estimated cost of award redemption, is charged to hotel and vacation ownership properties based on members’ qualifying expenditures. Revenue is recognized by participating hotels and resorts when points are redeemed for hotel stays.

      The Company, through the services of third-party actuarial analysts, determines the fair value of the future redemption obligation based on statistical formulas which project the timing of future point redemption based on historical experience, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed. The Company’s management and franchise agreements require that the Company be reimbursed currently for the costs of operating the program,

F-13

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

including marketing, promotion, communications with, and performing member services for the SPG members. Actual expenditures for SPG may differ from the actuarially determined liability.

      The liability for the SPG program is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. The total actuarially determined liability as of December 31, 2004 and 2003 is $255 million and $201 million, respectively.

      Legal Contingencies. The Company is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. SFAS No. 5, “Accounting for Contingencies,” requires that an estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. The Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact the Company’s financial position or its results of operations.

      Derivative Financial Instruments. The Company enters into interest rate swap agreements to manage interest rate exposure. The net settlements paid or received under these agreements are accrued consistent with the terms of the agreements and are recognized in interest expense over the term of the related debt. The related fair value of the swaps is included in other liabilities or assets.

      The Company enters into foreign currency hedging contracts to manage exposure to foreign currency fluctuations. All foreign currency hedging instruments have an inverse correlation to the hedged assets or liabilities. Changes in the fair value of the derivative instruments are classified in the same manner as the classification of the changes in the underlying assets or liabilities due to fluctuations in foreign currency exchange rates.

      The Company does not enter into derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties.

      Foreign Currency Translation. Balance sheet accounts are translated at the exchange rates in effect at each period end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The national currencies of foreign operations are generally the functional currencies. Gains and losses from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are generally included in other comprehensive income. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature are reported currently in costs and expenses and amounted to a gain of $9 million, $4 million and $33 million in 2004, 2003 and 2002, respectively. The $33 million gain in 2002 includes a $30 million gain recorded in selling, general, administrative and other expenses related to the mark-to-market of U.S. dollar intercompany receivables in Argentina as a result of the devaluation of the Argentine Peso. Gains and losses from foreign currency transactions are reported currently in costs and expenses and were insignificant for all periods presented.

      Income Taxes. The Company provides for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.

      Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted.

F-14

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The Trust has elected to be treated as a REIT under the provisions of the Code. As a result, the Trust is not subject to federal income tax on its taxable income at corporate rates provided it distributes annually all of its taxable income to its shareholders and complies with certain other requirements.

      Earnings Per Share. The following represents a reconciliation of basic earnings per Share to diluted earnings per Share for income from continuing operations (in millions, except per Share data):

		Year Ended December 31,
		2004						2003						2002
		Earnings		Shares		Per Share		Earnings		Shares		Per Share		Earnings		Shares		Per Share
Basic earnings from continuing operations		$	369		207	$	1.78	$	105		203	$	0.52	$	251		201	$	1.24
Effect of dilutive securities:
	Employee options and restricted stock awards		—		8				—		4				—		4
Diluted earnings from continuing operations		$	369		215	$	1.72	$	105		207	$	0.51	$	251		205	$	1.22

      Included in the Basic Share numbers for the years ended December 31, 2004, 2003 and 2002 are approximately 1 million, 1 million and 2 million shares, respectively, of Class A Exchangeable Preferred Shares (“Class A EPS”) and Class B Exchangeable Preferred Shares (“Class B EPS”).

      As of December 31, 2004 and 2003, 7 million shares and 13 million shares, respectively, issuable under convertible debt were excluded from the calculation of diluted earnings per Share numbers as the trigger events for conversion had not occurred. As the terms of the contingently convertible debt instrument allow for the Company to redeem such instruments in cash and the Company has a history of settling convertible debt instruments in cash, the Company, in accordance with SFAS No. 128, “Earnings Per Share,” has utilized the if-converted method if certain trigger events are met.

      Stock-Based Compensation. The Company has four stock-based employee long-term incentive plans, which are described in Note 17. Stock Incentive Plans. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. In general no stock-based employee compensation cost is reflected in net income as all options granted to employees under these plans have an exercise price equal to the fair value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per Share if the Company had applied the fair value

F-15

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation:

			Year Ended December 31,
			2004			2003			2002
			(In millions, except per
			Share data)
Net income, as reported			$	395		$	309		$	355
	Deduct: SFAS No. 123 compensation cost			(83	)		(75	)		(81	)
		Tax effect		28			26			28
	Proforma net income		$	340		$	260		$	302
	Earnings per Share:
	Basic, as reported		$	1.91		$	1.53		$	1.76
	Basic, proforma		$	1.64		$	1.28		$	1.50
	Diluted, as reported		$	1.84		$	1.50		$	1.73
	Diluted, proforma		$	1.59		$	1.26		$	1.47
Average Black Scholes Assumptions:
	Dividend Yield			2.5	%		3.1	%		2.7	%
	Volatility			42	%		42	%		41	%
	Risk-free rate			3.2	%		3.2	%		3.2	%
	Expected life			6 yrs			6 yrs			6 yrs

      The weighted average fair value per Share of options granted in 2004, 2003 and 2002 was $13.78, $8.48 and $10.01, respectively, using the assumptions noted in the table above. During the fourth quarter of 2004, the Company determined that the calculation of its pro forma net income reported under SFAS No. 123 for the years ended December 31, 2003 and 2002, as reported in those years, included errors in certain assumptions used in the Black Scholes calculations, including the dividend yield and the expected lives of the outstanding options. The errors were not material to the pro forma net income in either period. The pro forma net income reported under SFAS No. 123 for the years ended December 31, 2003 and 2002 presented in the table above have been revised, resulting in an increase in the previously reported amounts of $0.08 and $0.09 per diluted share for 2003 and 2002, respectively. This revision had no effect on the Company’s previously reported consolidated results of operations or financial condition.

      Revenue Recognition. The Company’s revenues are primarily derived from the following sources: (1) hotel and resort revenues at the Company’s owned, leased and consolidated joint venture properties; (2) management and franchise fees; (3) vacation ownership and residential revenues; (4) revenues from managed and franchised properties; and (5) other revenues which are ancillary to the Company’s operations. Generally, revenues are recognized when the services have been rendered. The following is a description of the composition of revenues for the Company:

•   Owned, Leased and Consolidated Joint Ventures — Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales, from owned, leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered.

•   Management and Franchise Fees — Represents fees earned on hotels managed worldwide, usually under long-term contracts, and franchise fees received in connection with the franchise of the

F-16

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

	Company’s Sheraton, Westin, Four Points by Sheraton and Luxury Collection brand names. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the property’s profitability. Base fee revenues are recognized when earned in accordance with the terms of the contract. For any time during the year, when the provisions of the management contracts allow receipt of incentive fees upon termination, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Franchise fees are generally based on a percentage of hotel room revenues and are recognized in accordance with SFAS No. 45, “Accounting for Franchise Fee Revenue,” as the fees are earned and become due from the franchisee.
•	Vacation Ownership and Residential — The Company recognizes revenue from VOI and residential sales in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” The Company recognizes sales when a minimum of 10% of the purchase price for the VOI or residential deposit has been received in cash, the period of cancellation with refund has expired and receivables are deemed collectible. For sales that do not qualify for full revenue recognition as the project has progressed beyond the preliminary stages but has not yet reached completion, all revenue and profit are initially deferred and recognized in earnings through the percentage-of-completion method.
•	Revenues from Managed and Franchised Properties — These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where the Company is the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on the Company’s operating income and net income.

      Insurance Retention. Through its captive insurance company, the Company provides insurance coverage for workers’ compensation, property and general liability claims arising at hotel properties owned or managed by the Company through policies written directly and through reinsurance arrangements. Estimated insurance claims payable represent expected settlement of outstanding claims and a provision for costs that have been incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information including pending claims, historical experience and current cost trends. The amount of the ultimate liability may vary from these estimates. Estimated costs of these self-insurance programs are accrued, based on the analysis of third-party actuaries.

      Costs Incurred to Sell VOIs. The Company capitalizes direct costs attributable to the sale of VOIs until the sales are recognized. Selling and marketing costs capitalized under this methodology were approximately $23 million and $17 million as of December 31, 2004 and 2003, respectively, and all such capitalized costs are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. Costs eligible for capitalization follow the guidelines of SFAS No. 67, “Accounting for Costs and Initial Rental Operation of Real Estate Projects.” If a contract is cancelled, the Company charges the unrecoverable direct selling and marketing costs to expense, and records forfeited deposits as income.

      VOI Inventory Costs. Real estate and development costs are valued at the lower of cost or net realizable value. Development costs include both hard and soft construction costs and together with real estate costs are allocated to VOIs on the relative sales value method. Interest, property taxes and certain other carrying costs incurred during the construction process are capitalized as incurred. Such costs associated with completed VOI units are expensed as incurred.

      Advertising Costs. Starwood and its brand marketing co-ops enter into multi-media ad campaigns, including television, radio, internet and print advertisements. Costs associated with these campaigns, including communication and production costs, are aggregated and expensed the first time that the advertising takes place in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of

F-17

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Position (“SOP”) No. 93-7 “Reporting on Advertising Costs.” If it becomes apparent that the media campaign will not take place, all costs are expensed at that time. During the years ended December 31, 2004, 2003 and 2002, the Company incurred approximately $120 million, $110 million and $105 million of advertising expense, respectively, a significant portion of which was reimbursed by managed and franchised hotels.

      Retained Interests. The Company periodically sells notes receivable originated by our vacation ownership business in connection with the sale of VOIs. The Company retains interests in the assets transferred to qualified and non-qualified special purpose entities which are accounted for as over-collateralizations and interest only strips. These Retained Interests are treated as “trading” for transactions prior to 2002 and “available-for-sale” for transactions thereafter under the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The Company reports changes in the fair values of these Retained Interests through the accompanying consolidated statement of income for trading securities and through the accompanying consolidated statement of comprehensive income for available-for-sale securities. The Company had Retained Interests of $58 million and $50 million at December 31, 2004 and 2003, respectively.

      Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

      Reclassifications. Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation.

      Impact of Recently Issued Accounting Standards. In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.” SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair value. Proforma disclosure is no longer an alternative. The new standard is effective for interim or annual reporting periods beginning after June 15, 2005 and therefore will be implemented for Starwood in the third quarter of 2005. Adoption of this standard will reduce the Company’s net income and earnings per share, however it will have no impact on cash flow. The Company is still analyzing the various valuation models and does not expect the expense to be higher than the proforma stock-based compensation disclosed under Stock-Based Compensation on page F-16.

      In December 2004 the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions”. SFAS No. 152 amends SFAS No. 66, “Accounting for the Sales of Real Estate” and SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” in association with the issuance of AICPA SOP 04-2, “Accounting for Real Estate Time-Sharing Transactions”. These statements were issued to address the diversity in practice caused by a lack of guidance specific to real estate time-sharing transactions. SFAS No. 152 is effective for financial statements for fiscal years beginning after June 15, 2005 and therefore will be implemented by the Company in the first quarter of 2006. The Company expects the adoption of this standard to have an impact on the timing of recognition of vacation ownership profits, and the impact is currently being evaluated.

      In December 2004, the FASB issued FASB Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Repatriation Provision within the American Jobs Creation Act of 2004” in response to the American Jobs Creation Act of 2004 (the “Act”) which provides for a special one-time dividends received deduction of 85 percent for certain foreign earnings that are repatriated (as defined in the Act) in

F-18

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

either an enterprise’s last tax year that began before the December 2004 enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. Starwood is reviewing the Act in order to determine if funds can be repatriated.

      In November 2004, the Emerging Issues Task Force (“EITF”) issued EITF No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share” which states that contingently convertible debt instruments are subject to the if-converted method under FASB Statement No. 128 regardless of the contingent features included in the instrument. As the terms of the contingently convertible debt instrument allow for the Company to redeem such instruments in cash and the Company has a history of settling convertible debt instruments in cash, the Company, in accordance with SFAS No. 128, has utilized the if-converted method if certain trigger events are met. Accordingly, EITF No. 04-08 did not have an impact to the Company’s net income or earnings per share.

      In December 2003, FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (SFAS No. 132(R)). SFAS No. 132(R) retains the disclosure requirements in the original SFAS No. 132, but requires additional disclosures related to plan assets, plan obligations, cash flows and net periodic benefit cost of defined benefit pension and other postretirement plans. In addition, this statement requires interim period disclosure of the components of net periodic benefit costs and contributions if significantly different from previously reported amounts. In accordance with the transition rules, the Company adopted SFAS No. 132(R) effective December 31, 2003 for its domestic pension and postretirement plans and effective December 31, 2004 for the Company’s foreign pension plans, and incorporated the new disclosure requirements into Note 14. Employee Benefit Plans.

      In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. As a result of further discussion by the FASB on October 8, 2003, the FASB announced that minority interests in consolidated partnerships with specified finite lives should be reclassified as liabilities and presented at fair market value unless the interests are convertible into the equity of the parent. Fair market value adjustments occurring subsequent to July 1, 2003 should be recorded as a component of interest expense. At their October 29, 2003 meeting, the FASB agreed to indefinitely defer the implementation of their announcement at the October 8, 2003 meeting regarding the accounting treatment for minority interests in finite life partnerships. Therefore, until a final resolution is reached, the Company will not implement this aspect of the standard. If the Company were to adopt this aspect of the standard under its current provisions, it is not expected to have a material impact on the Company’s financial statements.

      In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for derivative instruments and hedging activities, including the qualifications for the normal purchases and normal sales exception, under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The amendment reflects decisions made by the FASB in connection with issues raised about the application of SFAS No. 133. Generally, the provisions of SFAS No. 149 will be applied prospectively for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. Adoption of SFAS No. 149 did not have a material effect on the Company’s financial statements.

      In January 2003, the FASB issued FIN 46 which requires a variable interest entity (“VIE”) to be consolidated by its primary beneficiary (“PB”). The PB is the party that absorbs a majority of the VIE’s expected losses and/or receives a majority of the expected residual returns. In December 2003, the FASB issued FIN 46(R) delaying the effective date for certain entities created before February 1, 2003 and making

F-19

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

other amendments to clarify the application of the guidance. In adopting FIN 46(R), the Company has evaluated its various variable interests to determine whether they are in VIE’s. These variable interests, which generally represent modest interests relative to the other investors in the ventures, are primarily related to the Company’s strategy to expand its role as a third-party manager of hotels and resorts, allowing the Company to increase the presence of its lodging brands and gain additional cash flow. The evaluation identified the following types of variable interests: (a) subordinated loans to ventures which have typically taken the form of first or second mortgage loans, (b) equity investments in ventures which have typically ranged from 10% to 30% of the equity, (c) guarantees to ventures which have typically related to loan guarantees on new construction projects that are well capitalized and which typically expire within a few years of the hotels opening and (d) other types of contributions to ventures owning hotels to secure the management or franchise contract. The Company also reviewed its other management and franchise agreements related to hotels that the Company has no other investments in and concluded that such arrangements were not variable interests since the Company is paid at a level commensurate with the services provided and on the same level as other operating liabilities and the hotel owners retain the right to terminate the arrangements under certain circumstances.

      Of the nearly 600 hotels that the Company manages or franchises, the Company has identified approximately 20 hotels that it has a variable interest in. For those ventures that the Company holds a variable interest, it determined that the Company was not the PB and such VIE’s should not be consolidated in the Company’s financial statements. The Company’s outstanding net loan balances exposed to losses as a result of its involvement in VIE’s totaled $75 million and $69 million at December 31, 2004 and 2003, respectively. Equity investments and other types of investments related to VIE’s totaled $34 million and $37 million, respectively, at December 31, 2004 and $24 million and $21 million, respectively, at December 31, 2003. Information concerning the Company’s exposure to loss on loan guarantees and commitments to fund other types of contributions is summarized in Note 20. Commitments and Contingencies.

Note 3.     Significant Acquisitions

      Acquisition of Sheraton Kauai Resort. In March 2004, the Company acquired the 413-room Sheraton Kauai Resort on Poipu Beach in Kauai, Hawaii. The purchase price for the property was approximately $40 million and was funded from available cash. Prior to the acquisition, the Company managed the property for the former owner.

      Tender Offer to Acquire Partnership Units of Westin Hotels Limited Partnership. In the fourth quarter of 2003, the Company commenced a tender offer to acquire any and all of the outstanding limited partnership units of Westin Hotels Limited Partnership, the entity that indirectly owns the Westin Michigan Avenue Hotel in Chicago, Illinois, one of the Company’s managed hotels. The tender offer expired on February 20, 2004 and approximately 34,000 units were tendered to the Company and accepted for payment, representing approximately 25% of the outstanding units. The purchase price of approximately $26 million was funded from available cash.

      Acquisition of BlissWorld LLC. In January 2004, the Company acquired a 95% interest in BlissWorld LLC which, at the time of the acquisition, operated three stand alone spas (two in New York, New York and one in London, England) and a beauty products business with distribution through its own internet site and catalogue as well as through third party retail stores. The aggregate purchase price for the acquired interest was approximately $25 million and was funded from available cash. The Company recorded approximately $22 million in goodwill associated with this acquisition.

F-20

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 4. Gain (Loss) on Asset Dispositions and Impairments, Net

      During 2004, the Company sold two hotels for net proceeds of $56 million. The Company recorded a net loss of $33 million primarily related to the sale of these hotels, the impairment of one hotel sold in January 2005, and three investments deemed impaired in 2004.

      During 2003, the Company recorded a $183 million charge primarily related to the impairment of 18 non-core domestic hotels that were held for sale. The Company sold 16 of these hotels for net proceeds of $404 million, the majority of which were sold subject to franchise agreements.

      In June 2003, the Company also sold a portfolio of assets including four hotels, a marina and shipyard, a golf club and a 51% interest in its undeveloped land in Costa Smeralda in Sardinia, Italy (“Sardinia Assets”) for 290 million Euro (approximately $340 million based on exchange rates at the time the sale closed) in gross cash proceeds. The Company continues to manage the four hotels subject to long-term management contracts. Accordingly, the results related to the Sardinia Assets prior to the sale date are not classified as discontinued operations and the gain on sale of approximately $77 million was deferred and is being recognized in earnings over the 10.5 year life of the management contracts. The Company recorded a $9 million gain on the sale of the 51% interest in the undeveloped land. This gain was offset by a $9 million write down of the value of a hotel which was formerly operated together with one of the non-core domestic hotels and is now closed and under review for alternative use and a $2 million charge related to an impairment of an investment.

      During 2002, the Company sold two hotels for net proceeds of $51 million. The Company recorded a net loss on these sales of $3 million in 2002. In September 2002, the Company sold its 2% investment in Interval International, a timeshare exchange company. The Company received gross proceeds of approximately $8 million as a result of this sale and recorded a gain of approximately $6 million.

Note 5. Notes Receivable Securitizations and Sales

      From time to time, the Company securitizes or sells, without recourse, its fixed rate VOI notes receivable. To accomplish these securitizations, the Company transfers a pool of VOI notes receivable to special purpose entities (together with the special purpose entities in the next sentence, the “SPEs”) and the SPEs transfer the VOI notes receivable to qualifying special purpose entities (“QSPEs”), as defined in SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a Replacement of FASB Statement No. 125.” To accomplish these sales, the Company transfers a pool of VOI notes receivable to special purpose entities and the SPEs transfer the VOI notes receivables to a third party purchaser. The Company continues to service the securitized and sold VOI notes receivable pursuant to servicing agreements negotiated on an arms-length basis based on market conditions; accordingly, the Company has not recognized any servicing assets or liabilities. All of the Company’s VOI notes receivable securitizations and sales to date have qualified to be, and have been, accounted for as SFAS No. 140 sales.

      With respect to those transactions still outstanding at December 31, 2004, the Company retains economic interests (the “Retained Interests”) in securitized and sold VOI notes receivables through SPE ownership of QSPE beneficial interests (securitizations) and the right to a deferred purchase price payable by the purchaser of the sold VOI notes receivable. The Retained Interest, which is comprised of subordinated interests and interest only strips in the related VOI notes receivable, provides credit enhancement to the third-party purchasers of the related QSPE beneficial interests (securitizations) and VOI notes receivable (sales). Retained Interests cash flows are limited to the cash available from the related VOI notes receivable, after servicing fees, absorbing 100% of any credit losses on the related VOI notes receivable, QSPE fixed rate interest expense, the third party purchaser’s contractual floating rate yield (VOI notes receivable sales), and program fees (VOI note receivables sales).

F-21

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Retained Interests relating to pre-2002 securitizations and sales are classified and accounted for as “trading” while Retained Interests relating to subsequent securitizations and sales are classified and accounted for as “available-for-sale” securities, respectively, both in accordance with SFAS No. 115 and SFAS No. 140.

      The Company’s securitization and sale agreements provide the Company with the option, subject to certain limitations, to repurchase defaulted VOI notes receivable at their outstanding principal amounts. Such repurchases totaled $15 million, $19 million and $19 million during 2004, 2003, and 2002, respectively. The Company has been able to resell the VOIs underlying the VOI notes repurchased under these provisions without incurring significant losses. As allowed under the related agreements, the Company replaced the defaulted VOI notes receivable under the securitization and sale agreements with new VOI notes receivable, resulting in net gains of approximately $1 million, $6 million and $2 million in 2004, 2003 and 2002, respectively, which amounts are included in gain on sale of VOI notes receivable in the Company’s statements of income and are not included in the 2004, 2003 and 2002 gain amounts indicated below.

      During 2004, the Company sold, in several sales, $113 million of VOI notes receivable pursuant to an arrangement (the “2004 Purchase Facility”) with third party purchasers. Under the 2004 Purchase Facility, the Company can continue to sell VOI notes receivable through June 13, 2005 (may be extended by mutual agreement) subject to a facility limit at any one time of $150,000,000. The Company’s net cash proceeds received from these sales were approximately $103 million. Total gains from these sales of $13 million are included in gain on sale of VOI notes receivable in the Company’s statements of income. The purchaser’s floating contractual yield on the sold VOI notes receivables increases from the purchaser’s commercial paper cost plus 0.8% or LIBOR plus 1.25% to Prime plus 2% in December 2005.

      Key assumptions used in measuring the fair value of the Retained Interests at the time of sale at December 31, 2004 under the 2004 Purchase Facility were as follows: discount rate of 12%; annual prepayments, which yields an average expected life of the prepayable VOI notes receivable of 99 months; and expected gross VOI notes receivable balance defaulting as a percentage of the total initial pool of 15.1%. These key assumptions are based on the Company’s experience.

      During 2003, the Company securitized (the “2003 Securitization”) $181 million of VOI notes receivable. The Company’s net cash proceeds from this securitization were approximately $63 million. The related gain of $9 million is included in gain on sale of VOI notes receivable in the Company’s statements of income. In connection with the 2003 Securitization, the Company repurchased all existing receivables under the 2002 Note Sales described below.

      Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2003 Securitization and at December 31, 2004, relating to the 2003 Securitization, were as follows: discount rate of 14%; annual prepayments, which yields an average expected life of prepayable notes receivable of 89 months; and expected gross VOI notes receivable balance defaulting as a percentage of the total initial pool of 17.8%.

      During 2002, the Company sold, in several sales, (the “2002 Note Sales”), $133 million of VOI notes receivable to a third party purchaser. The Company’s aggregate net cash proceeds from these sales was approximately $120 million. Related gains of $14 million are included in gain on sale of VOI notes receivable in the Company’s statements of income. As discussed above, in connection with the 2003 Securitizations, the Company repurchased all then existing receivables under the 2002 Note Sales. The Company can no longer sell VOI notes receivable under the agreements related to the 2002 Asset Sales.

      Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2002 Note Sale were as follows: discount rate of 14%; annual prepayments, which yields an average expected life of prepayable notes receivable of 86 months; and expected gross VOI notes receivable balance defaulting as a percentage of the total initial pool of 2.2%.

F-22

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      At December 31, 2004, the aggregate outstanding principal balance of VOI notes receivable that have been securitized or sold was $292 million. The delinquent principal amounts of those VOI notes receivables that were more than 90 days delinquent at December 31, 2004 was approximately $4 million.

      At December 31, 2004 and 2003, the Company owned approximately $180 million and $119 million, respectively, of fixed rate VOI notes receivable, which are included in accounts receivable and other assets in the Company’s balance sheets. The delinquent principal balance of those VOI notes receivables that were more than 90 days delinquent at December 31, 2004 was approximately $14 million.

      Net credit losses for all VOI notes receivable were $14 million, $19 million, and $19 million during 2004, 2003, and 2002, respectively.

      The Company received aggregate cash proceeds of $32 million, $33 million and $22 million from the Retained Interests during 2004, 2003, and 2002, respectively, and aggregate servicing fees of $3 million annually related to these VOI notes receivable in 2004, 2003, and 2002.

      At the time of each receivable sale and at the end of each financial reporting period, the Company estimates the fair value of its Retained Interests using a discounted cash flow model. All assumptions used in the models are reviewed and updated, if necessary, based on current trends and historical experience.

      The Company has completed a sensitivity analysis on the net present value of the Retained Interests to measure the change in value associated with independent changes in individual key variables. The methodology used applied unfavorable changes for the key variables of expected prepayment rates, discount rates and expected gross credit losses. The aggregate net present value and carrying value of Retained Interests at December 31, 2004 was approximately $58 million. The decrease in value of the Retained Interests that would result from various independent changes in key variables are shown in the chart that follows (dollar amounts are in millions). These factors may not move independently of each other.

Annual prepayment rate:
	100 basis points-dollars	$	0.4
	100 basis points-percentage		0.7	%
	200 basis points-dollars	$	0.8
	200 basis points-percentage		1.4	%
Discount rate:
	100 basis points-dollars	$	1.6
	100 basis points-percentage		3.0	%
	200 basis points-dollars	$	3.1
	200 basis points-percentage		5.8	%
Gross annual rate of credit losses:
	100 basis points-dollars	$	3.5
	100 basis points-percentage		6.6	%
	200 basis points-dollars	$	6.9
	200 basis points-percentage		12.9	%

Note 6. Discontinued Operations

      In June 2003, the Company sold the Hotel Principe di Savoia in Milan, Italy (“Principe”) for 275 million Euro (approximately $315 million based on current exchange rates at the time the sale closed) in gross cash proceeds. The Company will have no continuing involvement with the Principe. Therefore, in

F-23

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

accordance with SFAS No. 144, the accompanying consolidated financial statements reflect the results of operations of the Principe as a discontinued operation. Interest expense of $7 million and $15 million, respectively, for the years ended December 31, 2003 and 2002 was allocated to discontinued operations based upon the amount of Euro denominated debt that was required to be repaid upon the consummation of the sale. The amount of Euro denominated debt allocated to discontinued operations was approximately $284 million at December 31, 2002. Summary financial information for discontinued operations is as follows (in millions):

	Year Ended
	December 31,
	2004		2003			2002
Income Statement Data
Revenues	$	—	$	22		$	42
Operating income	$	—	$	5		$	12
Interest expense on debt repaid with sales proceeds	$	—	$	7		$	15
Income tax expense	$	—	$	—		$	2
Loss from operations, net of tax	$	—	$	(2	)	$	(5	)
Gain on disposition, net of tax	$	26	$	206		$	109

      For the year ended December 31, 2004, the net gain on disposition primarily consists of the reversal of $10 million of reserves set up in conjunction with the sale of the Company’s former gaming business in 1999. The related contingencies were resolved in January 2005 and, therefore, the reserves are no longer required. The gain on disposition also includes a tax benefit of $16 million associated with the disposition of the Company’s former gaming business as a result of the favorable resolution of certain tax matters.

      For the year ended December 31, 2003, the net gain on disposition consists of $174 million of gains recorded in connection with the sale of the Principe on June 30, 2003 and the reversal of $32 million of reserves relating to the Company’s former gaming business disposed of in 1999 that are no longer required as the related contingencies have been resolved.

      During 2002, the Company recorded an after tax gain of $109 million from discontinued operations primarily related to the issuance of new Internal Revenue Service (“IRS”) regulations in early 2002, which allowed the Company to recognize a $79 million tax benefit from a tax loss on the 1999 sale of its former gaming business. The tax loss was previously disallowed under the old regulations. In addition, the Company recorded a $25 million gain resulting from an adjustment to the Company’s tax basis in ITT World Directories, a subsidiary which was disposed of in early 1998 through a tax deferred reorganization. The increase in the tax basis has the effect of reducing the deferred tax charge recorded on the disposition in 1998. This gain also included the reversal of $5 million of liabilities set up in conjunction with the sale of the former gaming business that are no longer required as the related contingencies have been resolved.

F-24

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 7. Goodwill and Intangible Assets

      The changes in the carrying amount of goodwill for the year ended December 31, 2004 are as follows (in millions):

				Vacation
	Hotel			Ownership
	Segment			Segment		Total
Balance at January 1, 2004	$	1,869		$	241	$	2,110
Acquisitions		22			—		22
Settlement of tax contingency		(3	)		—		(3	)
Purchase price adjustment		22			—		22
Cumulative translation adjustment		11			—		11
Asset dispositions		(5	)		—		(5	)
Balance at December 31, 2004	$	1,916		$	241	$	2,157

      Intangible assets consisted of the following (in millions):

	December 31,
	2004			2003
Trademarks and trade names	$	232		$	226
Management and franchise agreements		177			168
Other		64			59
		473			453
Accumulated amortization		(86	)		(75	)
	$	387		$	378

      Amortization expense of $15 million, $13 million and $13 million, respectively, related to intangible assets with finite lives was recorded during the years ended December 31, 2004, 2003 and 2002. Amortization expense relating to these assets is expected to be at least $14 million in each of the fiscal years 2005 through 2011.

Note 8. Other Assets

      Other assets include notes receivable, net of $295 million and $275 million at December 31, 2004 and 2003, respectively, primarily related to the financing of VOIs (as discussed in Note 5. Notes Receivable Securitizations and Sales).

      Contractual Obligations. On December 30, 2003, the Company together with Lehman Brothers Holdings Inc. (“Lehman Brothers”), announced the acquisition of all of the outstanding senior debt (approximately $1.3 billion), at a discount, of Le Meridien Hotels and Resorts Ltd. (“Le Meridien”). The approximate $200 million investment is represented by a high yield junior participation interest. As part of this investment, the Company entered into an agreement with Lehman Brothers whereby they would negotiate with the Company on an exclusive basis towards a recapitalization of Le Meridien. The exclusivity period expired in early April 2004 although negotiations with Lehman Brothers are continuing. While negotiations are continuing, there can be no assurance that transaction agreements will be entered into or a transaction consummated and if consummated what the terms and form of such a transaction would be.

F-25

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 9. Restructuring and Other Special Charges (Credits)

      The Company had remaining accruals related to restructuring charges of $23 million at December 31, 2004 and $24 million at December 31, 2003, of which $19 million and $20 million is included in other liabilities in the accompanying December 31, 2004 and 2003 consolidated balance sheets, respectively. The following tables summarize restructuring and other special charges (credits) activity during the years ended December 31, 2004, 2003 and 2002:

		Noncash			Cash			Expenditures			Total Charge
		Credits			Receipts			Accrued			(Credit)
Year Ended December 31, 2004
Restructuring charges (credits):
	Adjustments to liability as a result of benefit plan termination	$	—		$	—		$	—		$	—
Other special credits:
	Adjustments from favorable settlement of litigation	$	(37	)	$	—		$	—		$	(37	)
Total other special credits		$	(37	)	$	—		$	—		$	(37	)
Year Ended December 31, 2003
Restructuring credits:
	Adjustments to liability as a result of benefit plan termination	$	(9	)	$	—		$	—		$	(9	)
Other special credits:
	Proceeds from favorable settlement of litigation	$	—		$	(12	)	$	—		$	(12	)
	Legal defense costs		—			—			13			13
	Adjustments to receivables previously written down		—			—			(1	)		(1	)
Total other special credits		$	—		$	(12	)	$	12		$	—
Year Ended December 31, 2002
Restructuring credits		$	—		$	(1	)	$	—		$	(1	)
Other special credits:
	Adjustments to receivables previously written down	$	—		$	—		$	(3	)	$	(3	)
	Adjustments to e-business investments previously written down		(3	)		—			—			(3	)
Total other special credits		$	(3	)	$	—		$	(3	)	$	(6	)

      2004 Other Special Credits. During the year ended December 31, 2004, the Company reversed a $37 million special charge previously recorded in 1999 due to the favorable resolution of a litigation matter.

      2003 Restructuring and Other Special Charges (Credits). During the year ended December 31, 2003, the Company received $12 million in a favorable settlement of a litigation matter. This special credit was offset by an increase of $13 million in a reserve for legal defense costs associated with a separate litigation matter. Additionally, the Company reversed through restructuring credits a $9 million liability that was originally established in 1997 for the ITT Excess Pension Plan through restructuring charges and is no longer required as the Company finalized the settlement of its remaining obligations associated with the plan.

F-26

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      2002 Restructuring and Other Special Credits. During the year ended December 31, 2002, the Company recorded reversals of restructuring charges of $1 million and reversals of other special charges of $6 million. The reversal of the restructuring charge relates to an adjustment to the severance liability established in connection with the cost containment efforts following the events of September 11, 2001 based on actual costs incurred. The reversal of the other special charges primarily related to sales of investments in certain e-business ventures previously deemed impaired and the collections of receivables which were previously deemed uncollectible.

Note 10. Plant, Property and Equipment

      Plant, property and equipment consisted of the following (in millions):

	December 31,
	2004			2003
Land and improvements	$	1,337		$	1,334
Buildings and improvements		6,350			6,193
Furniture, fixtures and equipment		2,095			1,942
Construction work in process		189			217
		9,971			9,686
Less accumulated depreciation and amortization		(2,974	)		(2,580	)
	$	6,997		$	7,106

Note 11. Accrued Expenses

      Accrued expenses include accrued distributions of $176 million and $172 million at December 31, 2004 and 2003, respectively. Accrued expenses also include the current portion of insurance reserves (as discussed in Note 20. Commitments and Contingencies), SPG point liability and other marketing accruals and other restructuring reserves (as discussed in Note 9. Restructuring and Other Special Charges (Credits)).

F-27

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 12. Income Taxes

      Income tax data from continuing operations of the Company is as follows (in millions):

		Year Ended December 31,
		2004			2003			2002
Pretax income (loss)
U.S.		$	307		$	(64	)	$	169
Foreign			105			53			86
		$	412		$	(11	)	$	255
Provision (benefit) for income tax
Current:
	U.S. federal	$	(33	)	$	1		$	(14	)
	State and local		6			4			(3	)
	Foreign		39			48			69
			12			53			52
Deferred:
	U.S. federal		32			(108	)		(32	)
	State and local		(7	)		(14	)		(4	)
	Foreign		6			(44	)		(14	)
			31			(166	)		(50	)
		$	43		$	(113	)	$	2

      No provision has been made for U.S. taxes payable on undistributed foreign earnings amounting to approximately $858 million as of December 31, 2004, since these amounts are permanently reinvested.

      On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”). The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and, as of today, uncertainty remains as to how to interpret numerous provisions in the Act. As such, the Company is not yet in a position to decide on whether, and to what extent, it might repatriate foreign earnings that have not yet been remitted to the U.S. Based on the preliminary analysis to date, however, it is possible that the Company may repatriate some amount up to $500 million, with the respective tax liability up to $26 million. The Company expects to be in a position to finalize its assessment by mid-2005.

F-28

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets (liabilities) include the following (in millions):

	December 31,
	2004			2003
Plant, property and equipment	$	(546	)	$	(575	)
Intangibles		(157	)		(153	)
Allowances for doubtful accounts and other reserves		125			155
Employee benefits		53			44
Deferred gain on ITT World Directories disposition		(551	)		(551	)
Net operating loss and tax credit carryforwards		397			373
Deferred income		(134	)		(136	)
Other		(62	)		(38	)
		(875	)		(881	)
Less valuation allowance		(5	)		(17	)
Deferred income taxes	$	(880	)	$	(898	)

      At December 31, 2004, the Company had net operating loss and tax credit carryforwards of approximately $963 million and $35 million, respectively, for federal income tax purposes. Substantially all operating loss carryforwards, available to provide future tax benefits, expire between 2018 and 2024.

      In February 1998, the Company disposed of ITT World Directories. Through December 31, 2004, the Company recorded $551 million of income taxes relating to this transaction, which are included in deferred income taxes in the accompanying consolidated balance sheets. While the Company strongly believes this transaction was completed on a tax-deferred basis, this position is currently being challenged by the IRS. In 2002, the IRS proposed an adjustment to increase Starwood’s 1998 taxable income by approximately $1.4 billion.

      If the transaction is deemed to be fully taxable in 1998, then the Company’s federal tax obligation would be approximately $499 million, plus interest, and would be partially offset by the Company’s net operating loss carryforwards discussed above.

      During 2004, the matter was transferred from IRS Appeals to the jurisdiction of the United States Tax Court. The Company plans to vigorously defend its position and filed a petition in United States Tax Court on October 28, 2004 to contest the IRS’s proposed adjustment. The Company expects to litigate this matter with the ultimate outcome unpredictable and could result in tax liabilities that are significantly higher or lower than what has been recorded in the financial statements.

F-29

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      A reconciliation of the tax provision of the Company at the U.S. statutory rate to the provision for income tax as reported is as follows (in millions):

	Year Ended December 31,
	2004			2003			2002
Tax provision (benefit) at U.S. statutory rate	$	144		$	(4	)	$	89
U.S. state and local income taxes		(1	)		(7	)		(5	)
Exempt Trust income		(62	)		(60	)		(60	)
Tax on repatriation of foreign earnings		13			12			15
Foreign tax rate differential		(6	)		(1	)		10
Change in tax law and regulations		(15	)		—			—
Tax settlements		(15	)		(36	)		(30	)
Basis difference on asset sales		—			(5	)		—
Reduction of valuation allowance		(12	)		(12	)		(18	)
Other		(3	)		—			1
Provision for income tax (benefit)	$	43		$	(113	)	$	2

      During 2004, the IRS completed its audits of the Company’s 1999 and 2000 tax returns and issued its final audit adjustments to the Company. As a result of the completion of these audits and the receipt of the final audit adjustments, the Company recorded a $5 million tax benefit. In addition, the Company recognized a $10 million tax benefit related to the reversal of previously accrued income taxes after an evaluation of the applicable exposures and the expiration of the related statutes of limitations.

      In 2003, the Company filed for tax amnesty in Italy for certain of its Italian subsidiaries related to the 1997-2001 tax years. As a result of these filings, the Company recognized a $2 million tax benefit, which represented the reversal of reserves associated with these tax years, net of the tax amnesty cost. In addition, the Company recognized a $26 million tax benefit for the reversal of a valuation allowance associated with a tax matter, which can no longer be contested as a result of the tax amnesty filings. Also in 2003, the Company recognized an $8 million tax benefit relating to the reduction of previously accrued taxes after an evaluation of the exposure items and the expiration of related statutes of limitation.

      During 2002, the IRS completed its audits of various tax returns of the Company for tax periods dating back to 1993. As a result of the completion of these audits, the Company recorded a tax benefit in the fourth quarter of 2002 of approximately $30 million, which consists of $17 million in expected refunds offset by a $5 million reduction to the Company’s net operating loss, and $18 million of reversals of accrued income tax liabilities associated with these audit years, which are no longer deemed necessary.

F-30

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 13. Debt

      Long-term debt and short-term borrowings consisted of the following (in millions):

		December 31,
		2004			2003
Senior Credit Facility:
	Term loan, interest at LIBOR+1.25% (3.65% at December 31, 2004) maturing through 2006	$	550		$	300
	Revolving Credit Facility, interest at Canadian Bankers’ Acceptance rate + 1.25% (3.81% at December 31, 2004), maturing 2006		11			15
Senior Notes interest rates of 7.375% and 7.875%, maturing 2007 and 2012			1,514			1,532
Sheraton Holding public debt, interest rates ranging from 6.75% to 7.75%, maturing through 2025			1,058			1,067
Convertible Senior Notes — Series B			—			326
Convertible Debt			360			360
Mortgages and other, interest rates ranging from 2.00% to 9.21%, various maturities			949			1,026
			4,442			4,626
Less current maturities			(619	)		(233	)
Long-term debt		$	3,823		$	4,393

      Aggregate debt maturities for each of the years ended December 31 are as follows (in millions):

2005	$	619
2006		900
2007		844
2008		27
2009		441
Thereafter		1,611
	$	4,442

      In August 2004, the Company completed a $300 million addition to the term loan under its existing Senior Credit Facility. The Senior Credit Facility now consists of a $1.0 billion revolving loan and a $600 million term loan, each maturing in 2006 with a one year extension option and a current interest rate of LIBOR plus 1.25%. The proceeds were used to repay a portion of the existing revolving credit facility and for general corporate purposes. The Company currently expects to be in compliance with all covenants for the remainder of the Senior Credit Facility term.

      In May 2004, holders of Series B Convertible Senior Notes put the majority of these notes to the Company for a purchase price of $311 million, and in December 2004 the Company purchased the remaining $20 million, leaving a zero balance as of December 31, 2004. In May 2001, the Company sold these zero coupon Series B Convertible Senior Notes due 2021 for an aggregate face amount of $572 million (along with $244 million of Series A notes, which were subsequently repurchased for $202 million in May 2002). The two series of notes had an initial blended yield to maturity of 2.35%. The Series B convertible notes were convertible when the market price of our Shares exceeded 120% of the then-accreted conversion price of the convertible senior notes. The maximum conversion of notes was approximately 5.8 million Shares. The

F-31

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Company received gross proceeds from these sales of approximately $500 million, which were used to repay a portion of its senior secured notes facility that bore interest at LIBOR plus 275 basis points.

      In May 2003, the Company sold an aggregate of $360 million 3.5% coupon convertible senior notes due 2023. The notes are convertible, subject to certain conditions, into 7.2 million Shares based on a conversion price of $50.00 per Share (the “Convertible Debt”). Gross proceeds received were used to repay a portion of the Company’s Senior Credit Facility and for other operational purposes. Holders may first present their Convertible Debt to the Company for repurchase in May 2006.

      During the second quarter of 2003, the Company amended its Senior Credit Facility. The amendment adjusted the leverage coverage ratio for the second quarter of 2003 and for the next eight quarters (through June 30, 2005). In addition, the Company modified its current covenant on encumbered EBITDA (as defined) and added a restriction on the level of cash dividends.

      In October 2002, the Company refinanced its previous senior credit facility with a new four-year $1.3 billion Senior Credit Facility. The new facility was comprised of a $1.0 billion Revolving Credit Facility and a $300 million Term Loan (later increased to $600 million as discussed earlier), each maturing in 2006, with a one-year extension option. The proceeds of the new Senior Credit Facility were used to pay off all amounts owed under the Company’s previous senior credit facility, which was due to mature in February 2003. The Company incurred a charge of approximately $1 million in connection with this early extinguishment of debt.

      In April 2002, the Company sold $1.5 billion of senior notes in two tranches — $700 million principal amount of 7³/8% senior notes due 2007 and $800 million principal amount of 7⁷/8% senior notes due 2012 (collectively, the “Senior Notes”). The Company used the proceeds to repay all of its senior secured notes facility and a portion of its previous senior credit facility. In connection with the repayment of debt, the Company incurred charges of approximately $29 million including approximately $23 million for the early termination of interest rate swap agreements associated with the repaid debt, and $6 million for the write-off of deferred financing costs and termination fees for the early extinguishment of debt.

      The Company has the ability to draw down on its Revolving Credit Facility in various currencies. Drawdowns in currencies other than the U.S. dollar represent a natural hedge of the Company’s foreign denominated net assets and operations. At December 31, 2004, the Company had $11 million drawn in Canadian dollars.

      The Senior Credit Facility, Senior Notes and the Convertible Debt are guaranteed by the Sheraton Holding Corporation, a wholly owned subsidiary of the Corporation. The Sheraton Holding public debt is guaranteed by the Corporation. See Note 22. Guarantor Subsidiary for consolidating financial information for Starwood Hotels & Resorts Worldwide, Inc. (the “Parent”), Sheraton Holding Corporation (the “Guarantor Subsidiary”) and all other legal entities that are consolidated into the Company’s results including the Trust, but which are not the Guarantor Subsidiary (the “Non-Guarantor Subsidiaries”).

      The Company maintains lines of credit under which bank loans and other short-term debt are drawn. In addition, smaller credit lines are maintained by the Company’s foreign subsidiaries. The Company had approximately $967 million of available borrowing capacity under its domestic and foreign lines of credit as of December 31, 2004.

      The Company is subject to certain restrictive debt covenants under its short-term borrowing and long-term debt obligations including defined financial covenants, limitations on incurring additional debt, escrow account funding requirements for debt service, capital expenditures, tax payments and insurance premiums, among other restrictions. The Company was in compliance with all of the short-term and long-term debt covenants at December 31, 2004.

F-32

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The weighted average interest rate for short-term borrowings was 5.44% and 5.15% at December 31, 2004 and 2003, respectively, and their fair values approximated carrying value given their short-term nature. These average interest rates are composed of interest rates on both U.S. dollar and non-U.S. dollar denominated indebtedness.

      For adjustable rate debt, fair value approximates carrying value due to the variable nature of the interest rates. For non-public fixed rate debt, fair value is determined based upon discounted cash flows for the debt at rates deemed reasonable for the type of debt and prevailing market conditions and the length to maturity for the debt. The estimated fair value of debt at December 31, 2004 and 2003 was $4.8 billion and $4.7 billion, respectively, and was determined based on quoted market prices and/or discounted cash flows. See Note 18. Derivative Financial Instruments for additional discussion regarding the Company’s interest rate swap agreements.

Note 14. Employee Benefit Plans

      Defined Benefit and Postretirement Benefit Plans. The Company and its subsidiaries sponsor or previously sponsored numerous funded and unfunded domestic and international pension plans, including the ITT Sheraton Corporation Ongoing Retirement Plan (“Ongoing Plan”), the ITT Corporation Excess Pension Plan (“Excess Plan”) and several other plans. All defined benefit plans covering U.S. employees are frozen. Certain plans covering non-U.S. employees remain active.

      The Ongoing Plan, a frozen pension plan, purchased annuities for $4 million and $8 million in 2004 and 2003, respectively. The Ongoing Plan also paid out $1 million and $3 million in lump-sum benefit payments in 2004 and 2003, respectively. The purchase of the annuities and lump-sum benefit payments settled the remaining pension liabilities of the Ongoing Plan. In conjunction with the settlement of the Ongoing Plan’s liabilities, the investment in 174,000 Company Shares were sold in 2003 for $6 million. The Excess Plan was a frozen plan providing benefits to certain former executives of ITT Corporation. Lump-sum distributions of $1 million were made from the Excess Plan in 2003, settling the remaining liabilities of the Excess Plan.

      As a result of annuity purchases and lump sum distributions from our domestic pension plans, the Company recorded net settlement gains of approximately $2 million, $5 million and $3 million during the years ended December 31, 2004, 2003 and 2002, respectively.

      The Company also sponsors the Starwood Hotels & Resorts Worldwide, Inc. Retiree Welfare Program. This plan provides health care and life insurance benefits for certain eligible retired employees. The Company has prefunded a portion of the health care and life insurance obligations through trust funds where such prefunding can be accomplished on a tax effective basis. The Company also funds this program on a pay-as-you-go basis.

F-33

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table sets forth the projected benefit obligation, fair value of plan assets, the funded status of the Company’s defined benefit pension and postretirement benefit plans, and the amounts recognized in the Company’s consolidated balance sheets at December 31, 2004 and 2003 (in millions):

		Pension						Foreign						Postretirement
		Benefits						Pension Benefits						Benefits
		2004			2003			2004			2003			2004			2003
Change in Benefit Obligation
Benefit obligation at beginning of year		$	20		$	34		$	134		$	112		$	31		$	29
	Service cost		—			—			4			4			—			—
	Interest cost		1			2			8			7			2			2
	Actuarial loss (gain)		1			(2	)		9			8			(3	)		2
	Settlements		(1	)		(3	)		—			—			—			—
	Annuity purchase		(4	)		(8	)		—			—			—			—
	Effect of foreign exchange rates		—			—			6			7			—			—
	Benefits paid		(1	)		(3	)		(5	)		(4	)		(3	)		(2	)
Benefit obligation at end of year		$	16		$	20		$	156		$	134		$	27		$	31
Change in Plan Assets
Fair value of plan assets at beginning of year		$	5		$	16		$	97		$	80		$	13		$	13
	Actual return on plan assets, net of expenses		—			1			9			12			1			2
	Reimbursement of benefit payments		—			—			—			—			(3	)		(3	)
	Employer contribution		1			2			5			4			3			3
	Settlements		(1	)		(3	)		—			—			—			—
	Annuity purchase		(4	)		(8	)		—			—			—			—
	Effect of foreign exchange rates		—			—			4			5			—			—
	Benefits paid		(1	)		(3	)		(5	)		(4	)		(3	)		(2	)
Fair value of plan assets at end of year		$	—		$	5		$	110		$	97		$	11		$	13
Funded status		$	(16	)	$	(15	)	$	(46	)	$	(37	)	$	(16	)	$	(18	)
	Unrecognized net actuarial loss (gain)		2			(1	)		58			50			(1	)		1
	Unrecognized prior service cost		—			—			(3	)		(3	)		—			—
Net amount recognized at end of year		$	(14	)	$	(16	)	$	9		$	10		$	(17	)	$	(17	)
Amounts recognized in the consolidated balance sheets consist of:
	Accrued benefit cost	$	(18	)	$	(18	)	$	(19	)	$	(16	)	$	(17	)	$	(17	)
	Accumulated other comprehensive income		4			2			28			26			N/A			N/A
Net amount recognized at end of year		$	(14	)	$	(16	)	$	9		$	10		$	(17	)	$	(17	)
Increase (decrease) in additional minimum liability included in accumulated other comprehensive income		$	2		$	1		$	2		$	(1	)		N/A			N/A

      All domestic pension plans are frozen plans, where employees do not accrue additional benefits. Therefore, at December 31, 2004 and 2003, the projected benefit obligation is equal to the accumulated

F-34

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

benefit obligation. At December 31, 2004 and 2003, the accumulated benefit obligation for the foreign pension plans was $129 million and $112 million, respectively. At December 31, 2004 and 2003, the projected benefit obligation and accumulated benefit obligation exceeded the fair value of plan assets for all of the Company’s domestic and foreign pension plans, and the accumulated postretirement benefit obligation exceeded plan assets of the postretirement benefit plan.

      The following table presents the components of net periodic benefit cost for the years ended December 31, 2004, 2003 and 2002 (in millions):

	Pension									Foreign									Postretirement
	Benefits									Pension Benefits									Benefits
	2004			2003			2002			2004			2003			2002			2004			2003			2002
Service cost	$	—		$	—		$	—		$	4		$	4		$	3		$	—		$	—		$	—
Interest cost		1			2			3			8			7			6			2			2			2
Expected return on plan assets		—			(1	)		(2	)		(8	)		(7	)		(8	)		(1	)		(1	)		(1	)
Amortization of actuarial loss (gain)		—			—			—			3			2			—			—			—			(1	)
SFAS No. 87 cost/ SFAS No. 106 cost		1			1			1			7			6			1			1			1			—
SFAS No. 88 settlement gain		(2	)		(5	)		(3	)		—			—			—			—			—			—
Net periodic benefit cost (income)	$	(1	)	$	(4	)	$	(2	)	$	7		$	6		$	1		$	1		$	1		$	—

      For measurement purposes, a 9% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2005. The rate was assumed to decrease gradually to 5.00% for 2009 and remain at that level thereafter. A one-percentage-point change in assumed health care cost trend rates would have a $1 million effect on the postretirement obligation and a nominal impact on the total of service and interest cost components of net periodic benefit cost.

      The weighted average assumptions used to determine benefit obligations at December 31, were as follows:

	Pension						Foreign						Postretirement
	Benefits						Pension Benefits						Benefits
	2004			2003			2004			2003			2004			2003
Discount rate		5.51	%		5.99	%		5.49	%		5.87	%		5.50	%		6.25	%
Rate of compensation increase		N/A			N/A			3.63	%		3.74	%		N/A			N/A

      The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, were as follows:

	Pension									Foreign									Postretirement
	Benefits									Pension Benefits									Benefits
	2004			2003			2002			2004			2003			2002			2004			2003			2002
Discount rate		5.99	%		5.86	%		6.37	%		5.87	%		6.09	%		6.44	%		6.25	%		6.75	%		7.25	%
Rate of compensation increase		N/A			N/A			N/A			3.74	%		3.96	%		4.29	%		N/A			N/A			N/A
Expected return on plan assets		6.00	%		6.00	%		6.00	%		7.02	%		7.37	%		7.94	%		8.00	%		8.75	%		8.00	%

      A number of factors were considered in the determination of the expected return on plan assets. These factors included current and expected allocation of plan assets, the investment strategy, historical rates of return and Company and investment expert expectations for investment performance over approximately a ten year period.

F-35

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The weighted average asset allocations at December 31, 2004 and 2003 for the Company’s domestic defined benefit pension and postretirement benefit plans and the Company’s current target asset allocation ranges are as follows:

	Pension Benefits							Foreign Pension Benefits									Postretirement Benefits
			Percentage of								Percentage of									Percentage of
			Plan Assets								Plan Assets									Plan Assets
	Target							Target									Target
	Allocation		2004		2003			Allocation			2004			2003			Allocation			2004			2003
Equity securities		N/A		N/A		0	%		62	%		66	%		67	%		60	%		63	%		57	%
Debt securities		N/A		N/A		79	%		37	%		29	%		26	%		40	%		35	%		42	%
Cash and other		N/A		N/A		21	%		1	%		5	%		7	%		0	%		2	%		1	%
						100	%		100	%		100	%		100	%		100	%		100	%		100	%

      The investment objective of the foreign pension plans and postretirement benefit plan is to seek long-term capital appreciation and current income by investing in a diversified portfolio of equity and fixed income securities with a moderate level of risk. At December 31, 2004, all remaining domestic pension plans are unfunded plans.

      The Company expects to contribute approximately $1 million to its domestic pension plans, approximately $5 million to its foreign pension plans, and approximately $3 million to the postretirement benefit plan in 2005. The following table represents the Company’s expected pension and postretirement benefit plan payments for the next five years and the five years thereafter (in millions):

	Pension		Foreign Pension		Postretirement
	Benefits		Benefits		Benefits
2005	$	1	$	2	$	3
2006	$	1	$	2	$	2
2007	$	1	$	2	$	3
2008	$	1	$	2	$	2
2009	$	1	$	2	$	2
2010-2014	$	6	$	10	$	11

      Defined Contribution Plans. The Company and its subsidiaries sponsor various defined contribution plans, including the Starwood Hotels & Resorts Worldwide, Inc. Savings and Retirement Plan, which is a voluntary defined contribution plan allowing participation by employees on U.S. payroll who meet certain age and service requirements. Each participant may contribute on a pretax basis between 1% and 18% of his or her compensation to the plan subject to certain maximum limits. The plan also contains provisions for matching contributions to be made by the Company, which are based on a portion of a participant’s eligible compensation. The amount of expense for matching contributions totaled $20 million in 2004, $18 million in 2003 and $17 million in 2002.

      Multi-Employer Pension Plans. Certain employees are covered by union sponsored multi-employer pension plans. Pursuant to agreements between the Company and various unions, contributions of $10 million in 2004 and $8 million in 2003 and 2002 were made by the Company and charged to expense.

Note 15. Leases and Rentals

      The Corporation leases certain equipment for the hotels’ operations under various lease agreements. The leases extend for varying periods through 2012 and generally are for a fixed amount each month. In addition, several of the Corporation’s hotels are subject to leases of land or building facilities from third parties, which

F-36

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

extend for varying periods through 2071 and generally contain fixed and variable components, including a 25-year building lease of the Westin Dublin hotel in Dublin, Ireland (22 years remaining under the lease) with fixed annual payments of $3 million and a building lease of the W Times Square hotel in New York City which has a term of 25 years (22 years remaining under the lease) with fixed annual lease payments of $16 million.

      In June 2004, the Company entered into an agreement to lease the W Barcelona hotel in Spain, which is in the process of being constructed with an anticipated opening date of June 2008. The term of this lease is 15 years with annual fixed rent payments which range from approximately 7 million Euro to 9 million Euro. In conjunction with entering into this lease, the Company made a 9 million Euro guarantee to the lessor that it will not terminate the lease prior to the lease commencement date. At the lease commencement date, the Company must provide a letter of credit to the lessor for 9 million Euro as security for the first three years of rent. This letter of credit would supersede the Company’s guarantee once the hotel opens.

      The Company’s minimum future rents at December 31, 2004 payable under non-cancelable operating leases with third parties are as follows (in millions):

2005	$	74
2006	$	70
2007	$	67
2008	$	63
2009	$	59
Thereafter	$	800

      Rent expense under non-cancelable operating leases was $85 million, $77 million and $77 million in 2004, 2003 and 2002, respectively.

      The Trust owned equity interests in 73 hotels, all of which were leased to the Corporation during the year ended December 31, 2004. The leases between the Trust and the Corporation are generally for five-year terms and provide for annual base, or minimum rents, plus contingent, or percentage rents based on the gross revenues of the properties and are accounted for as operating leases. The leases are “triple-net” in that the lessee is generally responsible for paying all operating expenses of the properties, including maintenance, insurance and real property taxes. The lessee is also generally responsible for any payments required pursuant to underlying ground leases. Total rental expense incurred by the Corporation under such leases with the Trust was approximately $339 million for the year ended December 31, 2004, of which approximately $77 million related to percentage rent. The Trust’s rents receivable from the Corporation relating to leased hotel properties at December 31, 2004 and 2003 was $535 million and $465 million, respectively.

      The Corporation’s minimum future rents at December 31, 2004 payable under non-cancelable operating leases with the Trust, are as follows (in millions):

2005	$	262
2006	$	262
2007	$	109

Note 16. Stockholders’ Equity

      Share Repurchases. In 1998, the Board of Directors of the Company approved the repurchase of up to $1 billion of Shares under a Share repurchase program (the “Share Repurchase Program”). On April 2, 2001, the Company’s Board of Directors authorized the repurchase of up to an additional $500 million of Shares

F-37

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

under the Share Repurchase Program. During the year ended December 31, 2004, the Company purchased 7.0 million shares at a total cost of $310 million. Pursuant to the Share Repurchase Program, through December 31, 2004, Starwood has repurchased 33.7 million Shares in the open market for an aggregate cost of $1.2 billion. As of December 31, 2004, approximately $296 million remains available under the Share Repurchase Program.

      Exchangeable Units and Preferred Shares. During 1998, 6.3 million shares of Class A EPS, 5.5 million shares of Class B EPS and approximately 800,000 limited partnership units of the Realty Partnership and Operating Partnership (“Exchangeable Units”) were issued by the Trust in connection with the acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain of its affiliates. Class A EPS have a par value of $0.01 per share and are convertible on a one-for-one basis (subject to certain adjustments) to Shares. Exchangeable Units and Class B EPS have a liquidation preference of $38.50 per share and provide the holders with the right, for a one year period, from and after the fifth anniversary of the closing date of the Westin Merger, which expired on January 3, 2004, to require the Trust to redeem such shares for cash at a price of $38.50 per share. Subsequent to January 3, 2004, the Company may choose to settle Class B EPS redemptions in cash at $38.50 per share or shares of Class A EPS at the equivalent of $38.50 per share. Exchangeable Units may be converted to Class B EPS or Shares on a one-for-one basis (subject to certain adjustments). Through December 31, 2004, in accordance with the terms of the Class B EPS discussed above, approximately 567,000 shares of Class B EPS and Exchangeable Units were redeemed for approximately $22 million in cash. Also during 2004, 109,000 shares of Class B EPS were converted into 119,000 Class A EPS. No shares of Class A EPS were exchanged for Shares in 2004. At December 31, 2004, the Trust had 150 million preferred shares authorized and approximately 598,000 of Class A EPS and 126,000 Exchangeable Units and Class B EPS outstanding.

Note 17. Stock Incentive Plans

      In 2004, the Company adopted the 2004 Long-Term Incentive Compensation Plan (“2004 LTIP”), which superseded the 2002 Long Term Incentive Compensation Plan (the “2002 LTIP”) and provides for the purchase of Shares by Directors, officers, employees, consultants and advisors, pursuant to equity award grants. Although no additional awards will be granted under the 2002 LTIP, the Company’s 1999 Long Term Incentive Compensation Plan (the “1999 LTIP”) or the Company’s 1995 Share Option Plan (the “1995 LTIP”), the provisions under each of the previous plans will continue to govern awards that have been granted and remain outstanding under those plans. The aggregate number of Shares subject to non-qualified or incentive stock options, performance shares, restricted stock or any combination of the foregoing which are available to be granted under the 2004 LTIP at December 31, 2004 was approximately 57.5 million.

F-38

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table summarizes stock option activity for the Company:

					Weighted Average
					Exercise
		Options			Price Per Share
Outstanding at December 31, 2001			32,865,304			33.22
	Granted		15,641,647			29.54
	Exercised		(1,439,332	)		24.30
	Forfeited		(2,260,305	)		33.48
Outstanding at December 31, 2002			44,807,314			32.22
	Granted		682,596			26.01
	Exercised		(2,336,980	)		23.59
	Forfeited		(3,851,559	)		38.97
Outstanding at December 31, 2003			39,301,371			32.01
	Granted		8,724,616			39.18
	Exercised		(13,209,744	)		28.73
	Forfeited		(1,428,237	)		36.90
Outstanding at December 31, 2004			33,388,006		$	34.98
Exercisable at December 31, 2004			17,297,333		$	35.02

      The following table summarizes information about outstanding stock options at December 31, 2004:

		Options Outstanding
								Options Exercisable
				Weighted Average
				Remaining		Weighted Average				Weighted Average
Range of		Number		Contractual Life		Exercise		Number		Exercise
Exercise Prices		Outstanding		in Years		Price/Share		Exercisable		Price/Share
	$15.00 – $23.92		3,663,330		3.57	$	22.47		3,424,422	$	22.45
	$24.00 – $24.25		2,399,854		4.34	$	24.01		2,396,750	$	24.01
	$24.88 – $24.88		5,447,165		5.98	$	24.88		2,092,475	$	24.88
	$25.16 – $34.52		620,385		6.00	$	30.21		456,864	$	30.37
	$34.58 – $34.58		4,056,928		7.13	$	34.58		1,220,864	$	34.58
	$34.90 – $37.83		1,676,904		5.75	$	36.55		794,334	$	36.81
	$37.84 – $38.50		3,162,290		6.07	$	37.85		1,962,689	$	37.86
	$38.75 – $38.75		6,353,885		7.13	$	38.75		36,000	$	38.75
	$38.76 – $58.81		6,007,265		3.83	$	50.99		4,912,935	$	52.56
	Total/ Average		33,388,006		5.57	$	34.98		17,297,333	$	35.02

      During 2004, the Company granted restricted stock awards for approximately 785,000 Shares. Restricted stock awards outstanding as of December 31, 2004 totaled approximately 1.2 million Shares. Compensation expense of approximately $14.5 million, $6.5 million and $9.9 million was recorded during 2004, 2003 and 2002, respectively, related to restricted stock awards.

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

2002 Employee Stock Purchase Plan

      In April 2002, the Board of Directors adopted (and in May 2002 the shareholders approved) the Company’s 2002 Employee Stock Purchase Plan (the “ESPP”) to provide employees of the Company with an opportunity to purchase common stock through payroll deductions and reserved 10,000,000 Shares for issuance under the ESPP. The ESPP commenced in October 2002.

      All full-time regular employees who have completed 30 days of continuous service and who are employed by the Company on U.S. payrolls are eligible to participate in the ESPP. Eligible employees may contribute up to 20% of their total cash compensation to the ESPP. Amounts withheld are applied at the end of every three month accumulation period to purchase Shares. The value of the Shares (determined as of the beginning of the offering period) that may be purchased by any participant in a calendar year is limited to $25,000. Participants may withdraw their contributions at any time before Shares are purchased.

      The purchase price is equal to 85% of the lower of (a) the fair market value of Shares on the day of the beginning of the offering period or (b) the fair market value of Shares on the date of purchase. Approximately 334,000 Shares were issued under the ESPP during the year ended December 31, 2004 at purchase prices ranging from $29.66 to $37.91. Approximately 350,000 Shares were issued under the ESPP during the year ended December 31, 2003 at purchase prices ranging from $19.13 to $28.73.

Note 18. Derivative Financial Instruments

      The Company enters into interest rate swap agreements to manage interest expense. The Company’s objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of the Company’s debt. At December 31, 2004, the Company had no outstanding interest rate swap agreements under which the Company pays a fixed rate and receives a variable rate of interest.

      In March 2004, the Company terminated certain interest rate swap agreements, with a notional amount of $1 billion under which the Company was paying floating rates and receiving fixed rates of interest (“Fair Value Swaps”), resulting in a $33 million cash payment to the Company. The proceeds were used for general corporate purposes and will result in a reduction of the interest expense on the corresponding underlying debt (Sheraton Holding Public Debt and Senior Notes) through 2007, the scheduled maturity of the terminated Fair Value Swaps. In order to adjust its fixed versus floating rate debt position, the Company immediately entered into two new Fair Value Swaps with an aggregate notional amount of $300 million.

      The new Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2012. The aggregate notional amount of the Fair Value Swaps was $300 million at December 31, 2004. The Fair Value Swaps modify the Company’s interest rate exposure by effectively converting debt with a fixed rate to a floating rate. The fair value of the Fair Value Swaps was a liability of approximately $14.8 million at December 31, 2004.

      From time to time, the Company uses various hedging instruments to manage the foreign currency exposure associated with the Company’s foreign currency denominated assets and liabilities (“Foreign Currency Hedges”). At December 31, 2004, the Company had two Foreign Currency Hedges outstanding with a U.S dollar equivalent of the contractual amount of the contracts of approximately $319 million. These contracts hedge certain Euro-denominated assets and mature through May 2005. Changes in the fair value of the hedging instruments are classified in the same manner as changes in the underlying asset due to fluctuations in foreign currency exchange rates. The fair value of the Foreign Currency Hedges at December 31, 2004 was a liability of approximately $19.5 million.

      Periodically, the Company hedges the net assets of certain international subsidiaries (“Net Investment Hedges”) using various hedging instruments to manage the translation and economic exposures related to the

F-40

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Company’s net investments in these subsidiaries. The Company measures the effectiveness of derivatives designated as Net Investment Hedges by using the changes in forward exchange rates because this method best reflects the Company’s risk management strategies and the economics of those strategies in the financial statements. Under this method, the change in fair value of the hedging instrument attributable to the changes in forward exchange rates is reported in stockholders’ equity to offset the translation results on the hedged net investment. The remaining change in fair value of the hedging instrument, if any, is recognized through income. As of December 31, 2004, the Company had one Net Investment Hedge with a U.S. dollar equivalent of the contractual amount of $243 million that matures in June 2005. The Net Investment Hedge minimizes the effect fluctuations in foreign currency exchange rates have on a portion of the Company’s net investment in certain Euro-denominated subsidiaries (“Euro Net Investment Hedges”). The fair value of the Euro Net Investment Hedges at December 31, 2004 was a liability of approximately $29 million.

      In April 2002, in connection with the sale of $1.5 billion of the Senior Notes, the Company terminated four interest rate swap agreements (with a notional amount of $850 million) and realized a net loss of approximately $23 million associated with this early termination.

      In September 2002, the Company terminated certain Fair Value Swaps, resulting in a $78 million cash payment to the Company. These proceeds were used to pay down the previous revolving credit facility and will result in a decrease to interest expense on the hedged debt through its maturity in 2007. In order to retain it’s fixed versus floating rate debt position, the Company immediately entered into the current Fair Value Swaps on the same underlying debt as the terminated swaps.

      The counterparties to the Company’s derivative financial instruments are major financial institutions. The Company does not expect its derivative financial instruments to significantly impact earnings in the next twelve months.

Note 19. Related Party Transactions

      General. Barry S. Sternlicht, Executive Chairman and a Director of the Corporation, and Executive Chairman and a Trustee of the Trust, may be deemed to control and has been and remains the President and Chief Executive Officer of Starwood Capital since its formation in 1991.

      Trademark License. An affiliate of Starwood Capital has granted to the Company, subject to Starwood Capital’s unrestricted right to use such name, an exclusive, non-transferable, royalty-free license to use the “Starwood” name and trademarks in connection with the acquisition, ownership, leasing, management, merchandising, operation and disposition of hotels worldwide, and to use the “Starwood” name in its corporate name worldwide, in perpetuity.

      Starwood Capital Noncompete. In connection with a restructuring of the Company in 1995, Starwood Capital voluntarily agreed that, with certain exceptions, Starwood Capital would not compete directly or indirectly with the Company within the United States and would present to the Company all opportunities presented to Starwood Capital to acquire fee interests in hotels in the United States and debt interests in hotels in the United States where it is anticipated that the equity will be acquired by the debt holder within one year from the acquisition of such debt (the “Starwood Capital Noncompete”). During the term of the Starwood Capital Noncompete, Starwood Capital and its affiliates are not permitted to acquire any such interest, or any ground lease interest or other equity interest, in hotels in the United States without the consent of the Board. In addition, the Company’s Corporate Opportunity Policy requires that each executive officer submit to the Corporate Governance and Nominating Committee (which is currently comprised of Stephen R. Quazzo, Ambassador Barshefsky and Bruce W. Duncan, the “Governance Committee”) any opportunity that the executive officer reasonably believes is within the Company’s lines of business or in which the Company has an interest. Non-employee directors are subject to the same obligations with respect to opportunities presented to them in their capacity as directors. Therefore, as a matter of practice, all

F-41

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

opportunities to purchase hotel assets, even those outside of the United States, that Starwood Capital may pursue are first presented to the Company. The Starwood Capital Noncompete continues until no officer, director, general partner or employee of Starwood Capital is on either the Board of Directors of the Corporation or the Board of Trustees of the Trust (subject to exceptions for certain restructurings, mergers or other combination transactions with unaffiliated parties). Several properties owned or managed by the Company, including the Westin Innisbrook Resort (the “Innisbrook Resort”), the Westin Mission Hills Resort and the Westin Turnberry Resort, were opportunities brought to the Company or its predecessors by Starwood Capital or entities related to Mr. Sternlicht. With the approval in each case of the Governance Committee of the Board of Directors of the Corporation and the Board of Trustees of the Trust, from time to time the Company has waived the restrictions of the Starwood Capital Noncompete, in whole or in part, (or passed on the opportunity in cases of the Corporate Opportunity Policy for non-U.S. opportunities) with respect to particular acquisition or investment opportunities in which it has no business or strategic interest. In each instance, members of management not having an interest in the transaction review and analyze the proposed transaction and may seek the advice of independent advisors. Following its review and analysis, management makes a recommendation to the Governance Committee. Upon receiving such recommendation and analysis, the Governance Committee will consider the recommendations and advice of management and may, depending on the transaction involved, retain independent financial and legal advisors in determining whether or not to pursue an opportunity or waive the Starwood Capital Noncompete.

      Miscellaneous. In July 2003, the Company waived the Starwood Capital Noncompete in connection with the acquisition of the Renaissance Wailea hotel in Hawaii by an affiliate of Starwood Capital. The Company signed a letter of intent with the affiliate to manage this property after it is extensively repositioned and renovated. The Company is currently negotiating the management agreement. The Company’s Governance Committee, advised by separate independent legal and hospitality advisors, approved the waiver of the Starwood Capital Noncompete and the terms of the proposed management agreement as being at or better than market terms. The Company also declined the opportunity to purchase the asset because the expected after tax return on investment as determined by management based on its experience in the industry and concurred to by the Governance Committee was less than the Company’s minimum threshold and because the acquisition was not consistent with the Company’s strategic priorities.

      In August 2003, the Company acquired from an affiliate of Starwood Capital its beneficial ownership interest in 15 acres of land contiguous to the Westin Mission Hills Resort for a purchase price of $2.8 million. The Company’s Governance Committee approved the transaction, which was at a discount from the price determined by an independent third party appraiser engaged by the Governance Committee.

      In November 2004, the Company waived the Starwood Capital Noncompete in connection with the potential acquisition of two hotels in Florida which are currently franchised under a Starwood brand. Pursuant to the waiver, the Company permitted Starwood Capital to enter into a contract to acquire the assets on the condition that it enters into a management agreement for the Company to manage the assets for up to three years. The management agreement would provide for a management fee of 5% of gross operating revenues in exchange for the Company loaning Starwood Capital up to $2 million to facilitate capital improvements on the properties. The loan would be repayable upon expiration of the management contracts unless Starwood Capital enters into long term contracts with the Company. If Starwood Capital determines to operate the properties as hotels, time shares, fractional interests, branded residential or any type of transient lodging facility, Starwood Capital would be required to negotiate a “market” management agreement with the Company. The Governance Committee approved the waiver of the Starwood Capital Noncompete and the proposed management fee as being at or better than market rates based on management’s recommendation. In addition, the Company was provided an opportunity to acquire the assets but declined to do so because the expected after tax return on investment as determined by management based on its experience in the industry

F-42

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

was less than the Company’s minimum threshold and the acquisition of the assets was not consistent with the Company’s strategic priorities. To date, Starwood Capital has not acquired the hotels.

      In November 2004, the Company declined the opportunity to purchase an equity interest in a Starwood branded hotel in Asia through a joint venture consisting of Starwood Capital and a third party. The hotel is subject to a long term management contract with the Company that was entered into with independent third parties and that will remain in place. The Governance Committee determined that the Company would not be interested in acquiring the hotel based on management’s recommendation because the expected after tax return on investment as determined by management based on its experience in the industry was less than the Company’s minimum threshold because of the existing long term management contract and because the acquisition was not consistent with the Company’s strategic priorities.

      In February 2005, the Company agreed to waive the Starwood Capital Noncompete and the application of the Corporate Opportunity Policy with respect to a portfolio of seven hotels and a minority interest in an eighth hotel, each of which is subject to a long term management agreement with the Company. Under the terms of the waiver, affiliates of Starwood Capital will acquire the portfolio subject to the existing management agreements in favor of the Company. Starwood Capital has agreed that, following its planned restructuring of the ownership of the portfolio, the new management agreements will be revised to reflect the Company’s current form of management arrangement while preserving their current favorable economic terms. Starwood Capital has also agreed to grant the Company a right of first offer for an appropriate management, franchise, and/or services agreement with respect to any time share, residential or similar development opportunity at certain of the properties, to fully comply with all applicable brand standards and to certain restrictions on Mr. Sternlicht’s involvement with the operation of the properties. The Company declined the opportunity to acquire the properties based on management’s recommendation, because the expected after tax return on investment as determined by management based on its experience in the industry was less than the Company’s minimum threshold because of the existence of the favorable long-term management agreements and because the acquisition was not consistent with the Company’s strategic priorities.

      Beginning in the fourth quarter of 2004, Starwood Capital entered into discussions regarding a transaction with the Company and a third party which would involve, among other things, Starwood Capital acquiring an interest in hotels together with a third party, with the Company managing such properties. In the first quarter of 2005, the Company agreed to reimburse Starwood Capital for certain of its third party due diligence expenses in connection with its consideration of the transaction if a transaction is not consummated. A transaction involving Starwood Capital, if any, would be subject to the review and approval of the Governance Committee.

      In October 2004, in connection with a potential acquisition that the Company was considering jointly with Starwood Capital, Starwood Capital agreed to reimburse the Company for certain due diligence reviews conducted on their behalf by Starwood for which the Company billed them approximately $25,800.

      Portfolio Investments. An affiliate of Starwood Capital holds an approximately 31% co-controlling interest in Troon Golf (“Troon”), one of the largest third-party golf course management companies that currently manages over 120 high-end golf courses. Mr. Sternlicht’s indirect interest in Troon held through such affiliate is approximately 12%. In January 2002, after extensive review of alternatives and with the approval of the Governance Committee, the Company entered into a Master Agreement with Troon covering the United States and Canada whereby it has agreed to have Troon manage all golf courses in the United States and Canada that are owned by the Company and to use reasonable efforts to have Troon manage golf courses at resorts that it manages or franchises. The Company believes that the terms of the Troon agreement are at or better than market terms. Mr. Sternlicht did not participate in the negotiations or the approval of the Troon Master Agreement. During 2004, Troon managed 17 golf courses at resorts owned

F-43

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

or managed by the Company. The Company paid Troon a total of $1,440,000 for management fees and payments for other services in 2004 for nine golf courses at resorts owned or managed by it. During 2003 and 2002, the Company paid $948,000 and $813,000 for management fees and payments for other services for the nine and eight golf courses at resorts owned or managed by it, respectively.

      In addition, a subsidiary of Starwood Capital is a general partner of a limited partnership which owns approximately 45% in an entity that manages over 40 health clubs, including one health club and spa space in a hotel owned by the Company. The Company paid approximately $84,000 annually to the management company for such management services in 2003 and 2002, and $42,000 in 2004. The Company believes that the terms of the management agreement were at or better than market terms. The management agreement terminated on September 30, 2003 and the management company has since managed the health club and spa on a month-to-month agreement. The Company and the management company continued this arrangement until the Company closed the health club and spa in June 2004 for conversion to a Bliss spa.

      An entity in which Mr. Sternlicht has an indirect interest held 259 limited partnership units in Westin Hotels Limited Partnership (the owner of the Westin Michigan Avenue Hotel.) The units were acquired in 1995 and 1996, prior to the Company’s acquisition of Westin. The entity tendered all of its units to the Company in connection with the Company’s tender offer. The Company purchased all shares tendered to it and the entity received approximately $190,000 for its units.

      Other Management-Related Investments. Innisbrook. Mr. Sternlicht has a 38% indirect interest in an entity (the “Innisbrook Entity”) that owned the common area facilities and certain undeveloped land (but not the hotel) at the Innisbrook Resort. In May 1997, the Innisbrook Entity entered into a management agreement for the Innisbrook Resort with Westin, which was then a privately held company partly owned by Starwood Capital and Goldman, Sachs & Co. When the Company acquired Westin in January 1998, it acquired Westin’s rights and obligations under the management and other related agreements. Under these agreements, the hotel manager was obligated to loan up to $12.5 million to the owner in the event certain performance levels were not achieved. Management fees earned under these agreements were $636,000, $512,000 and $584,000 in 2004, 2003 and 2002, respectively. The operations of the Innisbrook Entity did not and continues not to generate sufficient cash flow to service its outstanding debt and current obligations for much of the past several years.

      The Company reached an agreement in 2004 with the Innisbrook Entity and its primary lender regarding certain outstanding obligations of the Innisbrook Entity, including approximately $11 million (consisting principally of loans made by the Company as hotel manager under the $12.5 million obligation) payable to it upon certain events. Pursuant to the agreement, the Innisbrook Entity conveyed the Innisbrook Resort to the lender (in lieu of foreclosure) and the Company was paid approximately $465,000 for outstanding receivables. Under the terms of the agreement, the Company entered into a new management agreement for the Innisbrook Resort with the lender providing for (i) an increased base management fee percentage, (ii) management of the Innisbrook Resort’s golf facilities (which the Company subcontracted to Troon, the manager of the facilities prior to the new agreement) (iii) the right to receive a termination fee of up to $5.9 million (declining to $5.5 million over three years) upon certain events and (iv) the right to be repaid certain capital expenditures made by the Company if the management agreement is terminated prior to January 1, 2006. As part of the agreement, each of the parties released substantially all of their claims against the others (including the Company’s right to receive payment of approximately $10.26 million loaned by it to the Innisbrook Entity upon the occurrence of certain events). Under the new agreement, affiliates of the Innisbrook Entity also loaned the lender $2 million to provide working capital for the Innisbrook Resort. The resolution of the matter did not have a material impact on the Company’s financial position, results of operations or cash flows and was approved by the Governance Committee based on the recommendation of management and outside legal advisors.

F-44

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Savannah. In July 2002, the Company acquired a 49% interest in the Westin Savannah Harbor Resort and Spa in connection with the restructuring of the indebtedness of that property. An unrelated party holds an additional 49% interest in the property. The remaining 2% is held by Troon. Troon invested in the project on a pari-passu basis and manages the golf course at the Westin Savannah. The unrelated third party negotiated the terms of the golf management agreement with Troon, and approved the terms of its equity interest, and therefore, the Company believes the arrangements are on an arms-length basis.

      Aircraft Lease. In February 1998, the Company leased a Gulfstream III Aircraft (“GIII”) from Star Flight LLC, an affiliate of Starwood Capital. The term of the lease was one year and automatically renews for one-year terms until either party terminates the lease upon 90 days’ written notice. The rent for the aircraft, which was set at approximately 90% of fair market value at the time (based on two estimates from unrelated third parties), is (i) a monthly payment of 1.25% of the lessor’s total costs relating to the aircraft (approximately $123,000 at the beginning of the lease with this amount increasing as additional costs are incurred by the lessor), plus (ii) $300 for each hour that the aircraft is in use. The lease was revised effective January 1, 2004. Under the revised terms, the monthly lease payment is equal to (i) 1% of the fair market value of the aircraft as determined by an independent appraisal in February 2005, with the fair market value of the aircraft to be determined annually, plus (ii) $300 for each hour that the aircraft is in use. The term of the new lease agreement is for one year and it automatically renews for one-month terms unless either party terminates the lease upon 90 days’ written notice. The amount paid in 2004 in excess of the revised amount due (approximately $658,000) will be refunded by Star Flight LLC upon execution of the amended lease. Payments to Star Flight LLC were $1,724,000 (before the refunded amount disclosed above), $1,865,000 and $2,052,000 in 2004, 2003 and 2002, respectively. Starwood Capital has used the GIII as well as the Gulfstream IV Aircraft (“GIV”) operated by the Company. For use of the GIII, Star Flight LLC relieves the Company of lease payments for the days the plane is used and reimburses it for costs of operating the aircraft. For use of the GIV, Starwood Capital pays a charter rate that is at least equal to the amount the Company would have received from an unaffiliated third party through the Company’s charter agent, net of commissions. Lease relief and reimbursed operating costs were approximately $208,000, $52,000 and $161,000 for fiscal 2004, 2003 and 2002, respectively.

Other

      The Company on occasion made loans to employees, including executive officers prior to August 23, 2002, principally in connection with home purchases upon relocation. As of December 31, 2004, approximately $5.6 million in loans to approximately 15 employees was outstanding of which approximately $4.4 million were non-interest bearing home loans. Home loans are generally due five years from the date of issuance or upon termination of employment and are secured by a second mortgage on the employee’s home. Executive officers receiving home loans in connection with relocation were Robert F. Cotter, President and Chief Operating Officer, in June 2001 (original balance of $600,000), David K. Norton, Executive Vice President of Human Resources, in July 2000 (original balance of $500,000), and Theodore W. Darnall, President, Real Estate Group, in 1996 and 1998 (original balance of $750,000 ($150,000 bridge loan in 1996 and $600,000 home loan in 1998), of which $600,000 was repaid in August 2003). As a result of the acquisition of ITT Corporation in 1998, restricted stock awarded to Messrs. Sternlicht and Darnall in 1996 vested at a price for tax purposes of $53 per Share. This amount was taxable at ordinary income rates. By late 1998, the value of the stock had fallen below the amount of income tax owed. In order to avoid a situation in which the executives could be required to sell all of the Shares acquired by them to cover income taxes, in April 1999 the Company made interest-bearing loans at 5.67% to Messrs. Sternlicht and Darnall of approximately $1,222,000 and $416,000 respectively, to cover the taxes payable. Mr. Darnall’s loan was repaid in 2004. Accrued interest on Mr. Sternlicht’s loan at December 31, 2004 is approximately $396,000. The note and all associated accumulated interest become due on their tenth anniversary.

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Dina Diagonale held various positions with the Company from January 2001 through June 2004. In 2004, Ms. Diagonale earned a total of $241,409, which includes (i) approximately $77,500 upon the exercise of in-the-money options and restricted stock that vested or became exercisable in the ordinary course, (ii) Ms. Diagonale’s 2003 bonus which was paid in March 2004, and (iii) base compensation and severance. In addition, Ms. Diagonale was awarded 2,500 options to purchase Company shares in 2004, which terminated prior to vesting upon her ceasing to be employed by the Company. Subsequent to her departure from the Company, Ms. Diagonale married Kenneth S. Siegel, Executive Vice President and General Counsel of the Company.

Note 20.      Commitments and Contingencies

      The Company had the following contractual obligations outstanding as of December 31, 2004 (in millions):

			Due in Less		Due in		Due in		Due After
	Total		Than 1 Year		1-3 Years		4-5 Years		5 Years
Unconditional purchase obligations(a)	$	161	$	50	$	65	$	26	$	20
Other long-term obligations		2		2		—		—		—
Total contractual obligations	$	163	$	52	$	65	$	26	$	20

(a)  Included in these balances are commitments that may be satisfied by the Company’s managed and franchised properties.

     The Company had the following commercial commitments outstanding as of December 31, 2004 (in millions):

			Amount of Commitment Expiration Per Period
			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Standby letters of credit	$	125	$	125	$	—	$	—	$	—
Hotel loan guarantees(1)(2)		67		—		—		37		30
Other commercial commitments		—		—		—		—		—
Total commercial commitments	$	192	$	125	$	—	$	37	$	30

(1)	Excludes fair value of guarantees which are reflected in the Company’s consolidated balance sheet.
(2)	Excludes a debt service guarantee since no substantial debt has been drawn.

     Guaranteed Loans and Commitments. In limited cases, the Company has made loans to owners of or partners in hotel or resort ventures for which the Company has a management or franchise agreement. Loans outstanding under this program totaled $160 million at December 31, 2004. The Company evaluates these loans for impairment, and at December 31, 2004, believes these loans are collectible. Unfunded loan commitments, excluding the Westin Boston, Seaport Hotel discussed below, aggregating $46 million were outstanding at December 31, 2004, of which $7 million are expected to be funded in 2005 and $30 million are expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. The Company also has $78 million of equity and other potential contributions associated with managed or joint venture properties, $34 million of which is expected to be funded in 2005.

      The Company participates in programs with unaffiliated lenders in which the Company may partially guarantee loans made to facilitate third-party ownership of hotels that the Company manages or franchises. As of December 31, 2004, the Company was a guarantor for a loan which could reach a maximum of $30 million related to the St. Regis in Monarch Beach, California, which opened in mid-2001. The Company does not anticipate any funding under the loan guarantee in 2005, as the project is well capitalized. Furthermore, since

F-46

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

this property was funded with significant equity and subordinated debt financing, if the Company’s loan guarantee was to be called, the Company could take an equity position in this property at a value significantly below construction costs.

      Additionally, during the second quarter of 2004, the Company entered into a long-term management contract to manage the Westin Boston, Seaport Hotel in Boston, Massachusetts, which is under construction and scheduled to open in 2006. In connection with this agreement, the Company will provide up to $28 million in mezzanine loans and other investments ($13 million of which has been funded) as well as various guarantees, including a principal repayment guarantee for the term of the senior debt (four years with a one-year extension option), which is capped at $40 million, and a debt service guarantee during the term of the senior debt, which is limited to the interest expense on the amounts drawn under such debt and principal amortization. Any payments under the debt service guarantee, attributable to principal, will reduce the cap under the principal repayment guarantee. The fair value of these guarantees of $3 million is reflected in other liabilities in the accompanying balance sheet as of December 31, 2004. In addition, Starwood has issued a completion guarantee for this approximate $200 million project. In the event the completion guarantee is called on, Starwood would have recourse to a guaranteed maximum price contract from the general contractor, performance bonds from all major trade contractors and a payment bond from the general contractor. Starwood would only be required to perform under the completion guarantee in the event of a default by the general contractor that is not cured by the contractor or the applicable bonds. The Company does not anticipate that it would be required to perform under these guarantees.

      Surety bonds issued on behalf of the Company as of December 31, 2004 totaled $38 million, the majority of which were required by state or local governments relating to our vacation ownership operations and by insurers to secure large deductible insurance programs.

      In order to secure management contracts, the Company may provide performance guarantees to third-party owners. Most of these performance guarantees allow the Company to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, the Company is obliged to fund shortfalls in performance levels through the issuance of loans. As of December 31, 2004, the Company had nine management contracts with performance guarantees with possible cash outlays of up to $76 million, $50 million of which, if required, would be funded over a period of 25 years and would be largely offset by management fees received under these contracts. Many of the performance tests are multi-year tests, are tied to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. The Company does not anticipate any significant funding under the performance guarantees in 2005. In addition, the Company has agreed to guarantee certain performance levels at a managed property that has authorized VOI sales and marketing. The exact amount and nature of the guaranty is currently under dispute. However, the Company does not believe that any payments under this guaranty will be significant. The Company does not anticipate losing a significant number of management or franchise contracts in 2005.

      Litigation. The Sheraton Corporation (“Sheraton Corp.”) (formerly ITT Sheraton Corporation), a subsidiary of the Company, is a defendant in certain litigation relating to Sheraton Corp.’s management of a hotel. The case is titled 2660 Woodley Road Joint Venture v. ITT Sheraton Corporation, Civil Action No. 97-450-JJF (U.S.D.C., D. Del.). In December 1999, following trial, the jury returned a verdict finding that Sheraton Corp. had violated its contractual obligations to the hotel owner and awarded contractual damages totaling $11 million. The jury also found for the plaintiff on certain common law and other claims and awarded compensatory and other damages of $2 million and punitive damages of $38 million. These amounts were fully reserved for as of December 31, 1999 through a charge to restructuring and other special charges, net. The jury found for Sheraton Corp. and rejected the plaintiff’s additional claims that Sheraton Corp. had violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and that Sheraton Corp. had engaged in fraud. Sheraton Corp. believes that the jury’s determination against it on liability issues was erroneous as a

F-47

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

matter of law, and that the damage awards were excessive and not supported by the evidence. Sheraton Corp. sought to have the verdict set aside in the trial court. In response to Sheraton Corp.’s motion, the court, in January 2002, amended the judgment and reduced the punitive damages award from $38 million to approximately $17 million; the court also trebled the jury’s $750,000 award for Robinson-Patman Act violations to $2.25 million on the basis of the court’s interpretation of that statute. The amount of the judgment was then set at $31.4 million. Sheraton Corp. appealed to the United States Court of Appeals (the “Court”) and the plaintiff filed a Cross-Notice of Appeal. The appeal was signed in February 2003.

      On May 25, 2004, the Court issued its decision. On the Robinson-Patman Act claim, the Court agreed with Sheraton Corp. that the plaintiff lacked antitrust standing. The Court further found that there was no basis for the $10 million portion of the award related to the breach of the contractual agency provision claim, and overturned that portion of the judgment. Finally, although the Court agreed with Sheraton Corp. that the jury had been misinstructed on a crucial point regarding liability for punitive damages, because of invited error that misinstruction could not form a basis for relief on appeal. The Court did, nonetheless, further reduce the award of punitive damages from approximately $17 million to approximately $2 million.

      On June 15, 2004, both Sheraton Corp. and the plaintiffs filed petitions for rehearing with the Court. The plaintiffs asked the Court to reconsider its overturning the $10 million award for breach of the agency provision. Sheraton Corp. argued that the Court had inadvertently included some contract damages in its computation of punitive damages and that the Court should exclude those damages and therefore reduce the punitive damages by an additional $375,000. Both petitions were denied by the Third Circuit on September 15, 2004, leaving the Court’s May 25, 2004 decision in tact. As a result of the petitions being denied, the Company reduced its reserve for this matter by approximately $37 million in the third quarter of 2004, resulting in a credit to restructuring and other special credits, net.

      The Corporation, Sheraton Corp. and Sheraton Holding (“Company Defendants”) are defendants in certain litigations arising out of purported contracts allegedly requiring the purchase of telecommunication, video and power services from Intelnet International Corp. (“Intelnet”). The first suit was commenced in late 1997 by Intelnet in the Superior Court of New Jersey Law Division: Camden County, alleging that Sheraton Corp. violated what Intelnet claimed were Intelnet’s exclusive rights to provide telecommunications and other services to Sheraton Holding and its affiliates (“First Suit”). The complaint sought injunctive relief to enforce alleged exclusivity rights and unquantified monetary damages. The complaint was subsequently amended in November 1998 to seek specific monetary and unspecified punitive damages. Sheraton Holding and Sheraton Corp. served an answer denying Intelnet’s claims, and asserting counterclaims seeking damages and a declaration that the purported contracts at issue were unenforceable.

      In June 1999, Intelnet commenced a second lawsuit in the Superior Court of New Jersey Law Division: Camden County, naming Boardwalk Regency Corp. (formerly a subsidiary of the Corporation) and the Corporation (the “BRC Action”). The claims in this case are similar in nature to those made in the First Suit, and relate to an alleged breach of a purported exclusive contract to provide certain services to the Caesar’s Atlantic City Hotel and Casino. The two suits have been consolidated and were in mediation until 2001. The mediation ended during the first half of 2001. In late 2003, the Company Defendants filed several dispositive motions on various grounds. In February 2004, the court granted the Company Defendants’ motion for summary judgment dismissing Intelnet’s claims under one of the agreements at issue. The court denied summary judgment on the claims under the principal contract at issue, but directed a trial solely on the issue of whether that contract was valid and enforceable or fraudulently executed. A non-jury trial commenced in March 2004. At the conclusion of the evidentiary hearing, the court found that the principal contract was not signed until after the allegedly breaching event. Accordingly, the court dismissed all of the claims alleged by Intelnet against the Company Defendants under the principal contract. In June 2004, the court dismissed all of the remaining claims asserted against the Company Defendants. The Company filed a motion for summary

F-48

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

judgment seeking dismissal of all claims pending in the BRC Action. On August 24, 2004, Intelnet agreed to sever and dismiss with prejudice the BRC Action in its entirety, with the condition that if its claims in the First Suit are reinstated on appeal, the BRC Action will be reinstated. On August 19, 2004, Intelnet filed a notice of appeal with respect to the First Suit. The Company has accrued for the expected legal costs associated with the dispute and does not expect that the resolution will have a material adverse effect on the consolidated results of operations, financial position or cash flows.

      In November 2001, the Corporation, Sheraton Corp., and Sheraton Holding commenced a separate litigation in the United States District Court for the District of New Jersey, asserting claims arising under RICO as well as fraud claims against the principals of Intelnet. The case was subsequently dismissed by the court on the grounds that it was brought subsequent to the running of the statute of limitations. An appeal was filed and in April 2004 the Court of Appeals affirmed the District Court’s dismissal of the claims.

      In July 2000, the Company filed suit in New York City against Aoki Corporation (“Aoki”) and certain other related and unrelated entities regarding Starwood’s management of nine hotels in the United States and Canada owned by Aoki and/or such other entities. Starwood is seeking to enforce the management agreements relating to these hotels and the rights Starwood acquired in connection with the purchase of those agreements from Aoki in 1995. In addition, Starwood seeks monetary damages and other relief for defendants’ fraud, breach of contract, negligence, breach of duty of good faith and fair dealing, and other alleged acts of wrongdoing.

      In October 2000, Aoki and the other defendants in the lawsuit described above filed an action in New York state court against Starwood claiming that policies and practices constitute breaches of its contractual and fiduciary duties with respect to fees and cost allocations relating to central reservations, the SPG program, and marketing and sales initiatives; Starwood’s purchasing practices, and the receipt of rebates; cross-selling and other joint marketing and promotional programs undertaken by Starwood; and Starwood’s management and accounting practices regarding the hotels, including the extent to which Starwood responded to the owners’ prior demands for information and documents.

      During 2001, the parties to both lawsuits participated in a mediation, which resulted in a May 2002 settlement between Starwood and the owners of two of the hotels. On October 14, 2004, the remaining parties to both lawsuits executed a Stipulation of Settlement, which was approved by the Court. As a result, both actions have been dismissed.

      Starwood Asia Pacific Management Pte Ltd and Starwood Hotels and Resorts Worldwide, Inc. are Defendants in Suit No. 961 of 2002/ C commenced by Asia Hotel Investments Ltd (“AHIL”) in the High Court of Singapore. In connection with its interest in the acquisition of a majority stake in a hotel in Bangkok, Thailand, AHIL considered Starwood as a potential operator of the hotel and the parties signed a Confidentiality and Non-Circumvention Agreement (the “AHIL Agreement”) in December of 2001. The AHIL Agreement placed certain restrictions on Starwood’s dealings as they related to the hotel. AHIL proved unsuccessful in its acquisition attempt and Starwood was contacted by the successful bidder to manage the hotel as a Westin and a management contract was signed. AHIL is alleging that the new owner of the majority stake could not have completed the acquisition of that stake without an agreement by Starwood to operate the hotel as a Westin and that Starwood’s agreement to do so was in violation of the AHIL Agreement.

      AHIL brought suit in the trial court in Singapore and claimed loss of profits of approximately US$54 million. However, at the time of the trial AHIL reduced its claim to one of loss of chance and asked

F-49

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

the court to assess damages. Starwood vigorously objected to such claims and put forth a two-fold defense claiming:

(a)	that no breach had been committed; and
(b)	that even if a breach had been committed, it was merely technical, that is as AHIL was unsuccessful in acquiring the majority stake in the hotel, AHIL’s loss, if any, was not caused by Starwood, but by its own inability to consummate the acquisition.

      The trial judge agreed with Starwood that the breach was merely technical and awarded AHIL nominal damages of ten Singapore dollars.

      AHIL appealed its case to the Court of Appeal (which is the highest court in the Singapore judicial system) and in a majority decision of 2:1 (with the Chief Justice strongly dissenting), AHIL’s appeal was allowed. The majority ruled that the matter should be sent for assessment of damages for the court to ascertain what chance AHIL had to acquire the majority stake in the hotel, and place a value on that chance.

      No dates have been fixed for the hearing of the assessment of damages, but it is expected to take place in the first half of 2005. Starwood believes that the numerous obstacles AHIL faced in its failed attempt to acquire the majority stake in the hotel will make it difficult for AHIL to prove that it had a significant chance to acquire such stake. Accordingly, Starwood does not expect the resolution of this matter will have a material adverse effect on the consolidated results of operations, financial position or cash flows.

      The Company is involved in various other legal matters that have arisen in the normal course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the resolution of all legal matters will have a material adverse effect on its consolidated results of operations, financial position or cash flow. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.

      Environmental Matters. The Company is subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances and regulations. Such laws often impose liability without regard to whether the current or previous owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Although the Company has incurred and expects to incur remediation and other environmental costs during the ordinary course of operations, management anticipates that such costs will not have a material adverse effect on the operations or financial condition of the Company.

      Captive Insurance Company. Estimated insurance claims payable at December 31, 2004 were $106 million. At December 31, 2004, standby letters of credit amounting to $97 million had been issued to provide collateral for the estimated claims. The letters of credit are guaranteed by the Company’s captive insurance company.

      ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (“ITT Industries”), distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation, then a wholly owned subsidiary of ITT Industries (the “Distribution”). In connection with this Distribution, ITT Corporation, which was then named ITT Destinations, Inc., changed its name to ITT Corporation.

      For purposes of governing certain of the ongoing relationships between the Company and ITT Industries after the Distribution and spin-off of ITT Corporation and to provide for an orderly transition, the Company and ITT Industries have entered into various agreements including a spin-off agreement, Employee Benefits Services and Liability Agreement, Tax Allocation Agreement and Intellectual Property Transfer and License Agreements. The Company may be liable to or due reimbursement from ITT Industries relating to the

F-50

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

resolution of certain pre-spin-off matters under these agreements. Based on available information, management does not believe that these matters would have a material impact on the consolidated results of operations, financial position or cash flows.

Note 21. Business Segment and Geographical Information

      The Company has two operating segments: hotels and vacation ownership and residential. The hotel segment generally represents a worldwide network of owned, leased and consolidated joint venture hotels and resorts operated primarily under the Company’s proprietary brand names including St. Regis®, The Luxury Collection®, Sheraton®, Westin®, W® and Four Points® by Sheraton as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees. The vacation ownership and residential segment includes the development, ownership and operation of vacation ownership resorts, marketing and selling VOIs, providing financing to customers who purchase such interests and the sale of residential units.

      The performance of the hotels and vacation ownership and residential segments is evaluated primarily on operating profit before corporate selling, general and administrative expense, interest, gains on the sale of real estate, investments, restructuring and other special charges, and income taxes. The Company does not allocate these items to its segments.

F-51

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table presents revenues, operating income, assets and capital expenditures for the Company’s reportable segments (in millions):

			2004			2003			2002
Revenues:
	Hotel		$	4,656		$	4,130		$	4,177
	Vacation ownership and residential			712			500			411
	Total		$	5,368		$	4,630		$	4,588
Operating income:
	Hotel		$	664		$	445		$	589
	Vacation ownership and residential			142			89			69
	Total segment operating income			806			534			658
Selling, general, administrative and other				190			116			114
Restructuring and other special credits, net				(37	)		(9	)		(7	)
Operating income				653			427			551
Gain on sale of VOI notes receivable				14			15			16
Equity earnings (loss) from unconsolidated ventures, net:
	Hotel			24			7			14
	Vacation ownership and residential			8			5			(6	)
Interest expense, net				(254	)		(282	)		(323	)
Gain (loss) on asset dispositions and impairments, net				(33	)		(183	)		3
Income (loss) from continuing operations before taxes and minority interest			$	412		$	(11	)	$	255
Depreciation and amortization:
	Hotel		$	372		$	372		$	431
	Vacation ownership and residential			11			10			10
	Corporate			48			47			47
	Total		$	431		$	429		$	488
Assets:
	Hotel		$	11,019		$	10,885		$	11,183
	Vacation ownership and residential			1,220			879			882
	Corporate			59			93			125
	Total		$	12,298		$	11,857		$	12,190
Capital expenditures:
	Hotel		$	245		$	233		$	227
	Vacation ownership and residential			34			43			34
	Corporate			54			26			35
		Total	$	333		$	302		$	296

F-52

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table presents revenues and long-lived assets by geographical region (in millions):

	Revenues						Long-Lived Assets
	2004		2003		2002		2004		2003
	(In millions)
United States	$	4,157	$	3,600	$	3,479	$	5,304	$	5,438
Italy		434		404		413		889		841
All other international		777		626		696		1,257		1,242
Total	$	5,368	$	4,630	$	4,588	$	7,450	$	7,521

      Other than Italy, there were no individual international countries, which comprised over 10% of the total revenues of the Company for the years ended December 31, 2004, 2003 or 2002, or 10% of the total long-lived assets of the Company as of December 31, 2004 or 2003.

Note 22. Guarantor Subsidiary

      The Company’s payment obligations under the Senior Credit Facility, the Senior Notes and the Convertible Debt are fully and unconditionally guaranteed by the Sheraton Holding Corporation, a wholly-owned subsidiary (the “Guarantor Subsidiary”). The obligation of the Guarantor Subsidiary under its guarantee of the Senior Credit Facility, the Senior Notes and the Convertible Debt is equal in right of payment to its obligations under the public debt issued by Sheraton Holding.

      Presented below is condensed consolidating financial information for the Company (the “Parent”), the Guarantor Subsidiary and all other legal entities that are consolidated into the Company, including the Trust, but which are not the Guarantor Subsidiary (the “Non-Guarantor Subsidiaries”). Investments in subsidiaries are accounted for by the Parent and the Guarantor Subsidiary on the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Parent’s and Guarantor Subsidiary’s investments in subsidiaries’ accounts. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

      The December 31, 2003 balance sheet provided below has been adjusted to reflect an intercompany dividend made in 1998 from the Guarantor Subsidiary to the Parent of $3.1 billion that had not been included in the balance sheet information prior to December 31, 2003. Accordingly, the intercompany and stockholders’ equity of the Guarantor Subsidiary has been reduced by $3.1 billion and the intercompany increased and investment in subsidiaries has decreased by $3.1 billion on the Parent’s balance sheet. This reclassification had no impact on the December 31, 2003 consolidated balance sheet of the Company or the Non-Guarantor Subsidiaries, or the statements of income and cash flows of the Parent, Guarantor Subsidiaries, Non-Guarantor Subsidiaries or consolidated financial statements of the Company.

F-53

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

			Balance Sheet
			December 31, 2004
			(In millions)
									Non-
						Guarantor			Guarantor
			Parent			Subsidiary			Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents		$	160		$	—		$	166	$	—		$	326
	Restricted cash			5			—			342		—			347
	Inventories			21			—			350		—			371
	Other current assets			142			2			495		—			639
		Total current assets		328			2			1,353		—			1,683
Intercompany				(4,754	)		(8,100	)		12,854		—			—
Investments in consolidated subsidiaries				10,442			10,541			—		(20,983	)		—
Plant, property and equipment, net				269			—			6,728		—			6,997
Goodwill and intangible assets, net				1,681			1			862		—			2,544
Other assets				394			17			663		—			1,074
			$	8,360		$	2,461		$	22,460	$	(20,983	)		12,298
Liabilities and stockholders’ equity
Current liabilities:
	Short-term borrowings and current maturities of long-term debt		$	101		$	461		$	57	$	—		$	619
	Other current liabilities			466			30			1,013		—			1,509
		Total current liabilities		567			491			1,070		—			2,128
Long-term debt				2,326			597			900		—			3,823
Deferred income taxes				630			—			250		—			880
Other liabilities				53			80			519		—			652
				3,576			1,168			2,739		—			7,483
Minority interest				(4	)		—			31		—			27
Commitments and contingencies
Total stockholders’ equity				4,788			1,293			19,690		(20,983	)		4,788
			$	8,360		$	2,461		$	22,460	$	(20,983	)	$	12,298

F-54

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

			Balance Sheet
			December 31, 2003
			(In millions)
									Non-
						Guarantor			Guarantor
			Parent			Subsidiary			Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents		$	262		$	—		$	165	$	—		$	427
	Restricted cash			13			—			68		—			81
	Inventories			22			—			210		—			232
	Other current assets			111			3			371		—			485
		Total current assets		408			3			814		—			1,225
Intercompany				(4,743	)		(7,878	)		12,621		—			—
Investments in consolidated subsidiaries				10,009			10,017			—		(20,026	)		—
Plant, property and equipment, net				322			—			6,784		—			7,106
Goodwill and intangible assets, net				1,665			2			821		—			2,488
Other assets				369			34			635		—			1,038
			$	8,030		$	2,178		$	21,675	$	(20,026	)	$	11,857
Liabilities and stockholders’ equity
Current liabilities:
	Short-term borrowings and current maturities of long-term debt		$	51		$	—		$	182	$	—		$	233
	Other current liabilities			411			30			933		—			1,374
		Total current liabilities		462			30			1,115	$	—			1,607
Long-term debt				2,470			1,067			856		—			4,393
Deferred income taxes				733			—			165		—			898
Other liabilities				40			86			448		—			574
				3,705			1,183			2,584		—			7,472
Minority interest				(2	)		—			30		—			28
Exchangeable units and Class B preferred shares, at redemption value of $38.50				1			—			30		—			31
Commitments and contingencies
Total stockholders’ equity				4,326			995			19,031		(20,026	)		4,326
			$	8,030		$	2,178		$	21,675	$	(20,026	)	$	11,857

F-55

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

		Statement of Income
		Year Ended December 31, 2004
		(In millions)
								Non-
					Guarantor			Guarantor
		Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Revenues
Owned, leased and consolidated joint venture hotels		$	1,062		$	—		$	2,264		$	—		$	3,326
Vacation ownership and residential sales and services			—			—			640			—			640
Management fees, franchise fees and other income			112			—			600			(293	)		419
Other revenues from managed and franchised properties			888			—			95			—			983
			2,062			—			3,599			(293	)		5,368
Costs and Expenses
Owned, leased and consolidated joint venture hotels			1,078			—			1,734			(293	)		2,519
Vacation ownership and residential			—			—			488			—			488
Selling, general and administrative and other			263			(2	)		70			—			331
Restructuring and other special credits, net			—			—			(37	)		—			(37	)
Depreciation and amortization			42			—			389			—			431
Other expenses from managed and franchised properties			888			—			95			—			983
			2,271			(2	)		2,739			(293	)		4,715
Operating income (loss)			(209	)		2			860			—			653
Gain on sale of VOI notes receivable			—			—			14			—			14
Equity earnings in consolidated subsidiaries			604			410			—			(1,014	)		—
Equity earnings from unconsolidated ventures, net			1			—			31			—			32
Interest expense, net of interest income			(197	)		(346	)		289			—			(254	)
Loss on asset dispositions and impairments, net			(6	)		—			(27	)		—			(33	)
Income from continuing operations before taxes and minority equity			193			66			1,167			(1,014	)		412
Income tax benefit (expense)			174			120			(337	)		—			(43	)
Minority equity in net loss (income)			2			—			(2	)		—			—
Income from continuing operations			369			186			828			(1,014	)		369
Discontinued operations:
	Gain on dispositions, net of taxes		26			17			18			(35	)		26
Net income		$	395		$	203		$	846		$	(1,049	)	$	395

F-56

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

		Statement of Income
		Year Ended December 31, 2003
		(In millions)
								Non-
					Guarantor			Guarantor
		Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Revenues
Owned, leased and consolidated joint venture hotels		$	1,092		$	—		$	1,993		$	—		$	3,085
Vacation ownership and residential sales and services			—			—			439			—			439
Management fees, franchise fees and other income			51			—			501			(297	)		255
Other revenues from managed and franchised properties			774			—			77			—			851
			1,917			—			3,010			(297	)		4,630
Costs and Expenses
Owned, leased and consolidated joint venture hotels			1,128			—			1,561			(297	)		2,392
Vacation ownership and residential			—			—			340			—			340
Selling, general and administrative and other			209			(2	)		(7	)		—			200
Restructuring and other special credits, net			—			(9	)		—			—			(9	)
Depreciation and amortization			49			—			380			—			429
Other expenses from managed and franchised properties			774			—			77			—			851
			2,160			(11	)		2,351			(297	)		4,203
Operating income (loss)			(243	)		11			659			—			427
Gain on sale of VOI notes receivable			—			—			15			—			15
Equity earnings in consolidated subsidiaries			371			320			—			(691	)		—
Equity earnings from unconsolidated ventures, net			—			1			11			—			12
Interest expense, net of interest income			(180	)		(360	)		258			—			(282	)
Loss on asset dispositions and impairments, net			(3	)		—			(180	)		—			(183	)
Income (loss) from continuing operations before taxes and minority equity			(55	)		(28	)		763			(691	)		(11	)
Income tax benefit (expense)			158			122			(167	)		—			113
Minority equity in net loss			2			—			1			—			3
Income from continuing operations			105			94			597			(691	)		105
Discontinued operations:
	Loss from operations, net of taxes		(2	)		(2	)		(2	)		4			(2	)
	Gain on dispositions, net of taxes		206			203			174			(377	)		206
Net income		$	309		$	295		$	769		$	(1,064	)	$	309

F-57

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

		Statement of Income
		Year Ended December 31, 2002
		(In millions)
								Non-
					Guarantor			Guarantor
		Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Revenues
Owned, leased and consolidated joint venture hotels		$	1,187		$	—		$	2,003		$	—		$	3,190
Vacation ownership and residential sales and services			—			—			353			—			353
Management fees, franchise fees and other income			59			—			564			(358	)		265
Other revenues from managed and franchised properties			703			—			77			—			780
			1,949			—			2,997			(358	)		4,588
Costs and Expenses
Owned, leased and consolidated joint venture hotels			1,221			—			1,472			(343	)		2,350
Vacation ownership and residential			—			—			274			—			274
Selling, general and administrative and other			195			(3	)		(25	)		(15	)		152
Restructuring and other special credits, net			(5	)		—			(2	)		—			(7	)
Depreciation and amortization			50			—			438			—			488
Other expenses from managed and franchised properties			703			—			77			—			780
			2,164			(3	)		2,234			(358	)		4,037
Operating income (loss)			(215	)		3			763			—			551
Gain on sale of VOI notes receivable			—			—			16			—			16
Equity earnings in consolidated subsidiaries			521			356			—			(877	)		—
Equity earnings from unconsolidated ventures, net			2			1			5			—			8
Interest expense, net of interest income			(210	)		(359	)		246			—			(323	)
Gain on asset dispositions			—			—			3			—			3
Income from continuing operations before taxes and minority equity			98			1			1,033			(877	)		255
Income tax benefit (expense)			152			155			(309	)		—			(2	)
Minority equity in net loss (income)			1			—			(3	)		—			(2	)
Income from continuing operations			251			156			721			(877	)		251
Discontinued operations:
	Loss from operations, net of taxes		(5	)		(5	)		(5	)		10			(5	)
	Gain on dispositions, net of taxes		109			108			83			(191	)		109
Net income		$	355		$	259		$	799		$	(1,058	)	$	355

F-58

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

			Statement of Cash Flows
			Year Ended December 31, 2004
			(In millions)
									Non-
						Guarantor			Guarantor
			Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating Activities
Net income			$	395		$	203		$	846		$	(1,049	)	$	395
Exclude:
Discontinued operations				(26	)		(17	)		(18	)		35			(26	)
Income from continuing operations				369			186			828			(1,014	)		369
	Adjustments to income from continuing operations and changes in working capital			(378	)		(195	)		(233	)		1,014			208
	Cash from (used for) continuing operations			(9	)		(9	)		595			—			577
		Cash from discontinued operations		1			—			—			—			1
		Cash from (used for) operating activities		(8	)		(9	)		595			—			578
Investing Activities
Purchases of plant, property and equipment				(63	)		—			(270	)		—			(333	)
Proceeds from asset sales				—			—			74			—			74
Acquisitions and investments				(28	)		—			(110	)		—			(138	)
Other, net				(2	)		—			(16	)		—			(18	)
	Cash used for investing activities			(93	)		—			(322	)		—			(415	)
Financing Activities
Revolving credit facility and short-term borrowings, net				1			—			(21	)		—			(20	)
Long-term debt issued				300			—			—			—			300
Long-term debt repaid				(381	)		—			(70	)		—			(451	)
Distributions paid				—			—			(172	)		—			(172	)
Proceeds from employee stock option exercises				379			—			—			—			379
Share repurchases				(310	)		—			—			—			(310	)
Other, net				10			9			(18	)		—			1
	Cash from (used for) financing activities			(1	)		9			(281	)		—			(273	)
Exchange rate effect on cash and cash equivalents				—			—			9			—			9
Increase (decrease) in cash and cash equivalents				(102	)		—			1			—			(101	)
Cash and cash equivalents — beginning of period				262			—			165			—			427
Cash and cash equivalents — end of period			$	160		$	—		$	166		$	—		$	326

F-59

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

			Statement of Cash Flows
			Year Ended December 31, 2003
			(In millions)
									Non-
						Guarantor			Guarantor
			Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating Activities
Net income			$	309		$	295		$	769		$	(1,064	)	$	309
	Exclude:
		Discontinued operations		(204	)		(201	)		(172	)		373			(204	)
Income from continuing operations				105			94			597			(691	)		105
	Adjustments to income from continuing operations and changes in working capital			333			155			(529	)		691			650
	Cash from continuing operations			438			249			68			—			755
	Cash from discontinued operations			—			—			11			—			11
	Cash from operating activities			438			249			79			—			766
Investing Activities
Purchases of plant, property and equipment				(30	)		—			(272	)		—			(302	)
Proceeds from asset sales				—			—			1,042			—			1,042
Acquisitions and investments				—			—			(11	)		—			(11	)
Acquisition of senior debt				(203	)		—			—			—			(203	)
Other, net				(10	)		—			(1	)		—			(11	)
	Cash from (used for) investing activities			(243	)		—			758			—			515
Financing Activities
Revolving credit facility and short-term borrowings, net				(319	)		—			(25	)		—			(344	)
Long-term debt issued				360			—			86			—			446
Long-term debt repaid				—			(250	)		(661	)					(911	)
Distributions paid				—			—			(170	)		—			(170	)
Other, net				23			—			(23	)		—			—
	Cash from (used for) financing activities			64			(250	)		(793	)		—			(979	)
Exchange rate effect on cash and cash equivalents				—			—			17			—			17
Increase (decrease) in cash and cash equivalents				259			(1	)		61			—			319
Cash and cash equivalents — beginning of period				3			1			104			—			108
Cash and cash equivalents — end of period			$	262		$	—		$	165		$	—		$	427

F-60

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

			Statement of Cash Flows
			Year Ended December 31, 2002
			(In millions)
									Non-
						Guarantor			Guarantor
			Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating Activities
Net income			$	355		$	259		$	799		$	(1,058	)	$	355
	Exclude:
		Discontinued operations		(104	)		(103	)		(78	)		181			(104	)
Income from continuing operations				251			156			721			(877	)		251
	Adjustments to income from continuing operations and changes in working capital			228			(151	)		(461	)		877			493
	Cash from continuing operations			479			5			260			—			744
	Cash from discontinued operations			—			—			18			—			18
	Cash from operating activities			479			5			278			—			762
Investing Activities
Purchases of plant, property and equipment				(38	)		—			(258	)		—			(296	)
Acquisitions and investments				(3	)		(4	)		(41	)		—			(48	)
Other, net				10			—			52			—			62
	Cash used for investing activities			(31	)		(4	)		(247	)		—			(282	)
Financing Activities
Revolving credit facility and short-term borrowings, net				(333	)		—			(67	)		—			(400	)
Long-term debt issued				1,800			—			164			—			1,964
Long-term debt repaid				(1,926	)		—			(91	)		—			(2,017	)
Distributions paid				—			—			(40	)		—			(40	)
Other, net				7			—			(1	)		—			6
	Cash used for financing activities			(452	)		—			(35	)		—			(487	)
Exchange rate effect on cash and cash equivalents				—			—			8			—			8
Increase (decrease) in cash and cash equivalents				(4	)		1			4			—			1
Cash and cash equivalents — beginning of period				7			—			100			—			107
Cash and cash equivalents — end of period			$	3		$	1		$	104		$	—		$	108

F-61

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 23. Quarterly Results (Unaudited)

		Three Months Ended
		March 31			June 30		September 30		December 31			Year
		(In millions, except per Share data)
2004
Revenues		$	1,227		$	1,363	$	1,336	$	1,442		$	5,368
Costs and expenses		$	1,132		$	1,190	$	1,138	$	1,255		$	4,715
Income from continuing operations		$	33		$	120	$	105	$	111		$	369
Discontinued operations		$	1		$	34	$	2	$	(11	)	$	26
Net income		$	34		$	154	$	107	$	100		$	395
Earnings per Share:
Basic —
	Income from continuing operations	$	0.16		$	0.57	$	0.51	$	0.53		$	1.78
	Discontinued operations	$	—		$	0.17	$	0.01	$	(0.05	)	$	0.13
	Net income	$	0.16		$	0.74	$	0.52	$	0.48		$	1.91
Diluted —
	Income from continuing operations	$	0.16		$	0.56	$	0.49	$	0.51		$	1.72
	Discontinued operations	$	—		$	0.16	$	0.01	$	(0.05	)	$	0.12
	Net income	$	0.16		$	0.72	$	0.50	$	0.46		$	1.84
2003
Revenues		$	1,086		$	1,211	$	1,136	$	1,197		$	4,630
Costs and expenses		$	1,032		$	1,089	$	1,027	$	1,055		$	4,203
Income (loss) from continuing operations		$	(117	)	$	87	$	47	$	88		$	105
Discontinued operations		$	1		$	203	$	1	$	(1	)	$	204
Net income (loss)		$	(116	)	$	290	$	48	$	87		$	309
Earnings per Share:
Basic —
	Income (loss) from continuing operations	$	(0.58	)	$	0.43	$	0.23	$	0.43		$	0.52
	Discontinued operations	$	—		$	1.00	$	0.01	$	—		$	1.01
	Net income (loss)	$	(0.58	)	$	1.43	$	0.24	$	0.43		$	1.53
Diluted —
	Income (loss) from continuing operations	$	(0.58	)	$	0.42	$	0.23	$	0.42		$	0.51
	Discontinued operations	$	—		$	0.99	$	—	$	—		$	0.99
	Net income (loss)	$	(0.58	)	$	1.41	$	0.23	$	0.42		$	1.50

F-62

SCHEDULE II

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AND STARWOOD HOTELS & RESORTS

VALUATION AND QUALIFYING ACCOUNTS

(In millions)

		Additions (Deductions)
				Charged
				to/reversed			Charged
		Balance		from			to/from Other			Payments/			Balance
		January 1,		Expenses			Accounts(a)			Other			December 31,
2004
Trade receivables — allowance for doubtful accounts		$	53	$	8		$	2		$	(5	)	$	58
Notes receivable — allowance for doubtful accounts		$	64	$	17		$	(10	)	$	(11	)	$	60
Reserves included in accrued and other liabilities:
	Restructuring and other special charges	$	77	$	(37	)	$	—		$	(11	)	$	29
2003
Trade receivables — allowance for doubtful accounts		$	45	$	17		$	1		$	(10	)	$	53
Notes receivable — allowance for doubtful accounts		$	46	$	17		$	7		$	(6	)	$	64
Reserves included in accrued and other liabilities:
	Restructuring and other special charges	$	86	$	(9	)	$	21		$	(21	)	$	77
2002
Trade receivables — allowance for doubtful accounts		$	48	$	11		$	(8	)	$	(6	)	$	45
Notes receivable — allowance for doubtful accounts		$	41	$	16		$	10		$	(21	)	$	46
Reserves included in accrued and other liabilities:
	Restructuring and other special charges	$	98	$	(7	)	$	6		$	(11	)	$	86

(a)  Charged to/from other accounts:

	Trade and Notes
	Receivable —
	Allowance for			Restructuring
	Doubtful			and Other
	Accounts			Special Charges
2004
Other assets	$	(5	)	$	—
Other liabilities		(3	)		—
Total charged to/from other accounts	$	(8	)	$	—
2003
Other assets	$	7		$	12
Other liabilities		1			9
Total charged to/from other accounts	$	8		$	21
2002
Other assets	$	—		$	6
Other liabilities		2			—
Total charged to/from other accounts	$	2		$	6

S-1

SCHEDULE III

STARWOOD HOTELS & RESORTS

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2004

(In millions)

												Gross Amount
			Initial Cost to				Costs Subsequent to					Book Value
			Company				Acquisition					at December 31, 2004
												(a)		(a)(b)
																Accumulated
					Building and					Building and				Building and		Depreciation &		Year of		Date
Description	City	State	Land		Improvements		Land			Improvements		Land		Improvements		Amortization		Construction		Acquired	Life
The St. Regis, New York	New York	NY	$	65	$	150	$	—		$	10	$	65	$	160	$	26		1904	6/98	40
Hotel properties, each less than 5% of total	Various	Various		335		2,788		(11	)		429		324		3,217		630		Various	Various	Various
			$	400	$	2,938	$	(11	)	$	439	$	389	$	3,377	$	656
Land															389		—
Furniture, fixtures and equipment															516		388
Construction in progress															16		—
														$	4,298	$	1,044

(a)	As of December 31, 2004, land, building and improvements, furniture, fixtures and equipment and construction in progress have a cost basis of $321 million, $1,644 million, $58 million and $14 million, respectively, for federal income tax purposes.
(b)	Building and improvements include amounts allocated for leasehold interest in land.

S-2

SCHEDULE III (Continued)

STARWOOD HOTELS & RESORTS

REAL ESTATE AND ACCUMULATED DEPRECIATION

(In millions)

      A reconciliation of the Trust’s investment in real estate, furniture and fixtures and related accumulated depreciation is as follows:

		Year Ended December 31,
		2004			2003			2002
Real Estate and Furniture and Fixtures
Balance at beginning of period		$	4,229		$	4,108		$	4,109
Additions during period:
	Improvements		153			62			75
	Transfer from assets held for sale		—			80			—
Deductions during period:
	Sale of properties		(84	)		(21	)		(76	)
Balance at end of period		$	4,298		$	4,229		$	4,108
Accumulated Depreciation
Balance at beginning of period		$	(905	)	$	(746	)	$	(581	)
Additions during period:
	Depreciation expense		(156	)		(155	)		(186	)
	Transfer from assets held for sale		—			(16	)		—
Deductions during period:
	Sale of properties		17			12			21
Balance at end of period		$	(1,044	)	$	(905	)	$	(746	)

S-3

SCHEDULE IV

STARWOOD HOTELS & RESORTS

MORTGAGE LOANS ON REAL ESTATE

December 31, 2004

(In millions)

												Interest Earned
						Amount of						During the
						Principal				Interest		Twelve Months
				Carrying		Unpaid at		Amount		Due at		Ended
		Prior		Amount of		December 31,		Being		December 31,		December 31,
Description		Liens		Mortgages(a)		2004		Foreclosed		2004		2004
First Mortgage:
	Ramada Inn — GA		No	$	2	$	2	$	—	$	—	$	—
Second Mortgage:
	Tara Merrimack, New Hampshire		No		2		2		—		—		—
				$	4	$	4	$	—	$	—	$	—
Intercompany Mortgage Loans
First Mortgages:
	W New York — New York		No	$	—	$	—	$	—	$	—	$	4
	Westin Maui — Hawaii		No		163		105		—		58		10
	Other, all (5) less than 3% of total carrying value		No		127		107		—		20		10
	Sheraton Holding Corporation Mortgage Note		No		2,106		1,289		—		817		129
	Sheraton Holding Corporation Mortgage Note		No		323		210		—		113		18
	Starwood Hotels & Resorts		No		227		150		—		77		13
				$	2,946	$	1,861	$	—	$	1,085	$	184

S-4

SCHEDULE IV (Continued)

STARWOOD HOTELS & RESORTS

RECONCILIATION OF MORTGAGE LOANS

(In millions)

		Year Ended December 31,
		2004			2003		2002
Balance at beginning of period		$	2,812		$	2,637	$	2,468
Additions:
	Accrued interest(a)		178			175		173
Deductions:
	Principal repayments		(40	)		—		(4	)
Balance at end of period		$	2,950		$	2,812	$	2,637

(a)  Per the mortgage loan agreements, several of the loans do not require monthly interest payments if cash flows are insufficient. Thus, the Trust has accrued interest on such loans.

S-5

EXHIBIT INDEX

Exhibit
Number			Description of Exhibit
	2	.1	Formation Agreement, dated as of November 1, 1994, among the Trust, the Corporation, Starwood Capital and the Starwood Partners (incorporated by reference to Exhibit 2 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K dated November 16, 1994). (The SEC file numbers of all filings made by the Corporation and the Trust pursuant to the Securities Exchange Act of 1934, as amended, and referenced herein are: 1-7959 (the Corporation) and 1-6828 (the Trust)).
	2	.2	Form of Amendment No. 1 to Formation Agreement, dated as of July 1995, among the Trust, the Corporation and the Starwood Partners (incorporated by reference to Exhibit 10.23 to the Trust’s and the Corporation’s Joint Registration Statement on Form S-2 filed with the SEC on June 29, 1995 (Registration Nos. 33-59155 and 33-59155-01)).
	2	.3	Transaction Agreement, dated as of September 8, 1997, by and among the Trust, the Corporation, Realty Partnership, Operating Partnership, WHWE L.L.C., Woodstar Investor Partnership (“Woodstar”), Nomura Asset Capital Corporation, Juergen Bartels, Westin Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp., Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp. and W&S Hotel L.L.C. (incorporated by reference to Exhibit 2 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on September 25, 1997, as amended by the Form 8-K/A filed with the SEC on December 18, 1997).
	3	.1	Amended and Restated Declaration of Trust of the Trust, amended and restated through April 16, 1999 (incorporated by reference to Exhibit 3.1 of the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999 (the “1999 Form 10-Q1”).
	3	.2	Articles of Amendment to the Amended and Restated Declaration of Trust of the Trust, dated as of November 15, 2004.(2)
	3	.3	Articles of Restatement of the Corporation, as of May 7, 2004 (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 (the “2004 Form 10-Q2”)).
	3	.4	Bylaws of the Trust, as amended and restated through November 8, 2004.(2)
	3	.5	Amended and Restated Bylaws of the Corporation, as amended and restated through May 7, 2004 (incorporated by reference to Exhibit 10.2 to the 2004 Form 10-Q2).
	4	.1	Amended and Restated Intercompany Agreement, dated as of January 6, 1999, between the Corporation and the Trust (incorporated by reference to Exhibit 3 to the Trust Form 8-A, except that on January 6, 1999, the Intercompany Agreement was executed and dated as of January 6, 1999).
	4	.2	Rights Agreement, dated as of March 15, 1999, between the Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights Agent (incorporated by reference to Exhibit 4 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on March 15, 1999).
	4	.3	First Amendment to Rights Agreement, dated as of October 2, 2003 (incorporated by reference to Exhibit 4 of Form 8-A/A filed on October 7, 2003).
	4	.4	Second Amendment to Rights Agreement, dated as of October 24, 2003 (incorporated by reference to Exhibit 4 of Form 8-A/A filed on October 30, 2003).
	4	.5	Amended and Restated Indenture, dated as of November 15, 1995, as Amended and Restated as of December 15, 1995 between ITT Corporation (formerly known as ITT Destinations, Inc.) and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.A.IV to the First Amendment to ITT Corporation’s Registration Statement on Form S-3 filed November 13, 1996).
	4	.6	First Indenture Supplement, dated as of December 31, 1998, among ITT Corporation, the Corporation and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed January 8, 1999).

E-1

Exhibit
Number			Description of Exhibit
	4	.7	Indenture, dated as of May 25, 2001, by and among the Corporation, as Issuer, the guarantors named therein and Firstar Bank, N.A., as Trustee (incorporated by reference to Exhibit 10.2 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 (the “2001 Form 10-Q2”)).
	4	.8	Indenture, dated as of April 19, 2002, among the Corporation, the guarantor parties named therein and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Corporation’s and Sheraton Holding Corporation’s Joint Registration Statement on Form S-4 filed on November 19, 2002 the “2002 Forms S-4”)).
	4	.9	Indenture dated May 16, 2003 between the Corporation, the Trust, the Guarantor and U.S. Bank National Association as trustee (incorporated by reference to Exhibit 4.9 to the July 8, 2003 Form S-3) (Registration Nos. 333-106888, 333-106888-01, 333-106888-02) (the “Form S-3”). The Registrants hereby agree to file with the Commission a copy of any instrument, including indentures, defining the rights of long-term debt holders of the Registrants and their consolidated subsidiaries upon the request of the Commission.
	10	.1	Third Amended and Restated Limited Partnership Agreement for Realty Partnership, dated January 6, 1999, among the Trust and the limited partners of Realty Partnership (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the “1998 Form 10-K”)).
	10	.2	Third Amended and Restated Limited Partnership Agreement for Operating Partnership, dated January 6, 1999, among the Corporation and the limited partners of Operating Partnership (incorporated by reference to Exhibit 10.2 to the 1998 Form 10-K).
	10	.3	Form of Lease Agreement, entered into as of February 14, 1997, between the Trust (or a subsidiary) as Lessor and the Corporation (or a subsidiary) as Lessee.(2)
	10	.4	Form of Amendment of Lease, dated as of June 1, 2002, between the Trust (or a subsidiary) as Lessor and the Corporation (or a subsidiary) as Lessee.(2)
	10	.5	Form of Trademark License Agreement, dated as of December 10, 1997, between Starwood Capital and the Trust (incorporated by reference to Exhibit 10.22 to the Trust’s and the Corporation’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the “1997 Form 10-K”)).
	10	.6	Credit Agreement, dated October 9, 2002, among the Corporation, certain additional alternative currency revolving loan borrowers and various lenders, Deutsche Bank, AG, New York Branch, as Administrative Agent, JP Morgan Chase Bank, as Syndication Agent, Bank of America, N.A., Fleet National Bank and Societe Generale, as Co-Documentation Agents, and Deutsche Bank Securities Inc. and JP Morgan Securities Inc. as Co-Lead Arrangers and joint Book Running Managers (incorporated by reference to Exhibit 10.1 of Form 8-K filed on October 11, 2002).
	10	.7	First Amendment to Credit Agreement (incorporated by reference to Exhibit 10.5 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (the “2003 10-Q1”)).
	10	.8	Second Amendment to Credit Agreement (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2003 (the “2003 10-Q2”)).
	10	.9	Third Amendment to Credit Agreement (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2004 (the “2004 10-Q3”)).
	10	.10	Incremental Term Loan Commitment to Credit Agreement (incorporated by reference to Exhibit 10.2 to the 2004 10-Q3).
	10	.11	Pledge and Security Agreement, dated as of February 23, 1998, executed and delivered by the Trust, the Corporation and the other Pledgors party thereto, in favor of Bankers Trust Company as Collateral Agent (incorporated by reference to Exhibit 10.63 to the 1997 Form 10-K).

E-2

Exhibit
Number			Description of Exhibit
	10	.12	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $3,282,000,000 (incorporated by reference to Exhibit 10.65 to the 1997 Form 10-K).
	10	.13	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, Realty Partnership, Sheraton Phoenician Corporation, and Starwood Phoenician CMBS I LLC.(2)
	10	.14	Second Modification, dated as of December 30, 1999, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, Realty Partnership, the Trust and Starwood Hotels and Resorts Holdings, Inc.(2)
	10	.15	Third Modification, dated as of June 30, 2000, to Loan Agreement, dated as of February 23, 1998, among ITT Corporation, the Corporation, Realty Partnership, the Trust and Starwood Hotels and Resorts Holdings, Inc.(2)
	10	.16	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $100,000,000 (incorporated by reference to Exhibit 10.66 to the 1997 Form 10-K).
	10	.17	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among the Corporation, Harbor-Cal S.D., Starwood Sheraton San Diego CMBS I LLC and Realty Partnership.(2)
	10	.18	Loan Agreement, dated as of February 23, 1998, between the Trust and the Corporation, together with Promissory Note executed in connection therewith, by the Corporation to the order of the Trust, in the principal amount of $50,000,000 (incorporated by reference to Exhibit 10.67 to the 1997 Form 10-K).
	10	.19	First Modification, dated as of January 27, 1999, to Loan Agreement, dated as of February 23, 1998, among the Corporation, Harbor-Cal S.D., Starwood Sheraton San Diego CMBS I LLC and Realty Partnership.(2)
	10	.20	Loan Agreement, dated as of January 27, 1999, among the Borrowers named therein, as Borrowers, Starwood Operator I LLC, as Operator, and Lehman Brothers Holding Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc. (incorporated by reference to Exhibit 10.58 to the 1998 Form 10-K).
	10	.21	Starwood Hotels & Resorts 1995 Long-Term Incentive Plan (the “Trust 1995 LTIP”) (Amended and Restated as of December 3, 1998) (incorporated by reference to Annex D to the Trust’s and the Corporation’s Joint Proxy Statement dated December 3, 1998 (the “1998 Proxy Statement”))(1)
	10	.22	Second Amendment to the Trust 1995 LTIP (incorporated by reference to Exhibit 10.4 to the 2003 10-Q1).(1)
	10	.23	Form of Non-Qualified Stock Option Agreement pursuant to the Trust 1995 LTIP.(1)(2)
	10	.24	Starwood Hotels & Resorts Worldwide, Inc. 1995 Long-Term Incentive Plan (the “Corporation 1995 LTIP”) (Amended and Restated as of December 3, 1998) (incorporated by reference to Annex E to the 1998 Proxy Statement).(1)
	10	.25	Second Amendment to the Corporation 1995 LTIP (incorporated by reference to Exhibit 10.3 to the 2003 10-Q1).(1)
	10	.26	Form of Non-Qualified Stock Option Agreement pursuant to the Corporation 1995 LTIP.(1)(2)
	10	.27	Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the “1999 LTIP”) (incorporated by reference to Exhibit 10.4 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (the “1999 Form 10-Q2”)).(1)

E-3

Exhibit
Number			Description of Exhibit
	10	.28	First Amendment to the 1999 LTIP, dated as of August 1, 2001 (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001). (1)
	10	.29	Second Amendment to the 1999 LTIP (incorporated by reference to Exhibit 10.2 to the 2003 10-Q1).(1)
	10	.30	Form of Non-Qualified Stock Option Agreement pursuant to the 1999 LTIP.(1)(2)
	10	.31	Form of Restricted Stock Agreement pursuant to the 1999 LTIP.(1)(2)
	10	.32	Starwood Hotels & Resorts Worldwide, Inc. 2002 Long-Term Incentive Compensation Plan (the “2002 LTIP”) (incorporated by reference to Annex B of the Corporation’s 2002 Proxy Statement).(1)
	10	.33	First Amendment to the 2002 LTIP (incorporated by reference to Exhibit 10.1 to the 2003 10-Q1).(1)
	10	.34	Form of Non-Qualified Stock Option Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.49 to the 2002 Form 10-K filed on February 28, 2003 (the “2002 10-K”)).(1)
	10	.35	Form of Restricted Stock Agreement pursuant to the 2002 LTIP.(1)(2)
	10	.36	2004 Long-Term Incentive Compensation Plan (“2004 LTIP”) (incorporated by reference to the Corporation’s 2004 Notice of Annual Meeting of Stockholders and Proxy Statement, pages A-1 through A-20).(1)
	10	.37	Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.4 to the 2004 10-Q2).(1)
	10	.38	Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 99.1 to the Corporation and the Trust’s Joint Current Report on Form 8-K filed with the SEC on February 16, 2005 (the “February 2005 8-K”)).(1)
	10	.39	Starwood Hotels & Resorts Worldwide, Inc. 1999 Annual Incentive Plan for Certain Executives (the “1999 AIP”) (incorporated by reference to Exhibit 10.5 to the 1999 Form 10-Q2).(1)
	10	.40	First Amendment to the 1999 AIP, dated as of December 17, 2003 (incorporated by reference to Exhibit 10.65 to the Corporation’s and the Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “2003 10-K”)).(1)
	10	.41	Starwood Hotels & Resorts Worldwide, Inc. Annual Incentive Plan, dated June 1, 2001.(1)(2)
	10	.42	Starwood Hotels & Resorts Worldwide, Inc. Deferred Compensation Plan, effective as of January 1, 2001 (incorporated by reference to Exhibit 10.1 to the 2001 Form 10-Q2).(1)
	10	.43	Form of Indemnification Agreement between the Corporation, the Trust and each of its Directors/Trustees and executive officers (incorporated by reference to Exhibit 10.10 to the 2003 10-K).(1)
	10	.44	Registration Rights Agreement, dated May 16, 2003, among the Corporation, the Guarantor and the Initial Purchasers (incorporated by reference to Exhibit 4.10 to the Form S-3).
	10	.45	Exchange Rights Agreement, dated as of January 1, 1995, among the Trust, the Corporation, Realty Partnership, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 2B to the Trust’s and the Corporation’s Joint Current Report on Form 8-K dated January 31, 1995 (the “Formation Form 8-K”)).
	10	.46	Registration Rights Agreement, dated as of January 1, 1995, among the Trust, the Corporation and Starwood Capital (incorporated by reference to Exhibit 2C to the Formation Form 8-K).
	10	.47	Exchange Rights Agreement, dated as of June 3, 1996, among the Trust, the Corporation, Realty Partnership, Operating Partnership, Philadelphia HIR Limited Partnership and Philadelphia HSR Limited Partnership (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (the “1996 Form 10-Q2”)).

E-4

Exhibit
Number			Description of Exhibit
	10	.48	Registration Rights Agreement, dated as of June 3, 1996, among the Trust, the Corporation and Philadelphia HSR Limited Partnership (incorporated by reference to Exhibit 10.2 to the 1996 Form 10-Q2).
	10	.49	Units Exchange Rights Agreement, dated as of February 14, 1997, by and among, inter alia, the Trust, the Corporation, Realty Partnership, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 10.34 to the 1997 Form 10-K).
	10	.50	Class A Exchange Rights Agreement, dated as of February 14, 1997, by and among, inter alia, the Trust, the Corporation, Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 10.35 to the 1997 Form 10-K).
	10	.51	Exchange Rights Agreement, dated as of January 2, 1998, among, inter alia, the Trust, Realty Partnership and Woodstar (incorporated by reference to Exhibit 10.50 to the 1997 Form 10-K).
	10	.52	Amendment to Exchange Rights Agreement (Class A Realty Partnership Units), dated as of October 10, 2002, among the Trust, Realty Partnership and certain limited partners of the Realty Partnership (incorporated by reference to Exhibit 10.53 to the 2002 Form 10-K).
	10	.53	Amendment to Exchange Rights Agreement, dated as of December 17, 2003 for the Class A Realty Partnership Units (incorporated by reference to Exhibit 10.67 to the 2003 10-K).
	10	.54	Exchange Rights Agreement, dated as of January 2, 1998, among, inter alia, the Corporation, Operating Partnership and Woodstar (incorporated by reference to Exhibit 10.51 to the 1997 Form 10-K).
	10	.55	Amendment to Exchange Rights Agreement (Class B Operating Partnership Units), dated as of October 10, 2002, among the Corporation, Operating Partnership and certain limited partners of the Operating Partnership (incorporated by reference to Exhibit 10.54 to the 2002 form 10-K).
	10	.56	Amendment to Exchange Rights Agreement, dated as of December 17, 2003 for the Class B Operating Partnership Units (incorporated by reference to Exhibit 10.66 to the 2003 10-K).
	10	.57	Second Amended and Restated Employment Agreement, dated as of January 1, 2003, between Barry S. Sternlicht and the Company (incorporated by reference to Exhibit 10.69 to the 2003 10-K).(1)
	10	.58	Form of Severance Agreement, dated December 1999, between the Corporation and Barry S. Sternlicht (incorporated by reference to Exhibit 10.52 to the 1999 Form 10-K).(1)
	10	.59	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on June 29, 1995 (incorporated by reference to Exhibit 10.3 to the 2002 Form 10-Q2).(1)
	10	.60	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on August 12, 1996 (incorporated by reference to Exhibit 10.4 to the 2002 Form 10-Q2).(1)
	10	.61	Starwood Hotels & Resorts Amended and Restated Non-Qualified Stock Option Agreement by and between the Trust and Barry S. Sternlicht, dated as of May 22, 2002 relating to a grant made on August 12, 1996 (incorporated by reference to Exhibit 10.5 to the 2002 Form 10-Q2).(1)
	10	.62	Employment Agreement, dated as of June 27, 2000, between the Corporation and Robert F. Cotter (incorporated by reference to Exhibit 10.1 to the Corporation’s and the Trust’s Joint Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000).(1)
	10	.63	Addendum to Robert F. Cotter Offer Letter, effective as of February 16, 2002 (incorporated by reference to Exhibit 10.1 to the Corporation’s and Trust’s Joint Quarterly Report on Form 10-Q for the quarter ended March 31, 2002). (1)
	10	.64	Form of Severance Agreement, dated as of August 14, 2000, between the Corporation and Robert F. Cotter (incorporated by reference to Exhibit 10.56 to the 2000 Form 10-K).(1)

E-5

Exhibit
Number			Description of Exhibit
	10	.65	Letter Agreement, dated March 9, 2004 between the Corporation and Robert Cotter (incorporated by reference to the Trust’s and the Corporation’s Joint Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004). (1)
	10	.66	Employment Agreement, dated March 25, 1998, between Theodore Darnall and the Corporation (incorporated by reference to Exhibit 10.61 to the 2002 Form 10-K).(1)
	10	.67	Severance Agreement, dated December 1999, between the Corporation and Theodore Darnall (incorporated by reference to Exhibit 10.55 to the 2002 Form 10-K).(1)
	10	.68	Employment Agreement, dated as of November 13, 2003, between the Corporation and Vasant Prabhu (incorporated by reference to Exhibit 10.68 to the 2003 10-K).(1)
	10	.69	Employment Agreement, dated as of September 20, 2004, between the Corporation and Steven J. Heyer (incorporated by reference to Exhibit 10.1 to the Trust’s and the Corporation’s Joint Current Report on Form 8-K filed with the SEC on September 24, 2004).(1)
	10	.70	Form of Non-Qualified Stock Option Agreement between the Corporation and Steven J. Heyer pursuant to the 2004 LTIP. (1)(2)
	10	.71	Form of Restricted Stock Unit Agreement between the Corporation and Steven J. Heyer pursuant to the 2004 LTIP (incorporated by reference to Exhibit 99.2 to the February 2005 8-K.(1)
	10	.72	Employment Agreement, dated as of September 25, 2000, between the Corporation and Kenneth Siegel (incorporated by reference to Exhibit 10.57 to the Corporation’s and Trust’s Joint Annual Report on Form 10-K for the fiscal year ended December 31, 2000).(1)
	10	.73	Letter Agreement, dated July 22, 2004 between the Corporation and Kenneth Siegel.(1)(2)
	12	.1	Calculation of Ratio of Earnings to Total Fixed Charges. (2)
	21	.1	Subsidiaries of the Registrants.(2)
	23	.1	Consent of Ernst & Young LLP.(2)
	31	.1	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer — Corporation.(2)
	31	.2	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial Officer — Corporation.(2)
	31	.3	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer — Trust. (2)
	31	.4	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial and Accounting Officer — Trust.(2)
	32	.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer — Corporation.(2)
	32	.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer — Corporation.(2)
	32	.3	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer — Trust.(2)
	32	.4	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial and Accounting Officer — Trust.(2)

(1)	Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(2)	Filed herewith.

E-6 EX-3.2 2 p70255exv3w2.txt EX-3.2 EXH. 3.2 ARTICLES OF AMENDMENT OF STARWOOD HOTELS AND RESORTS THIS IS TO CERTIFY THAT: FIRST: The Amended and Restated Declaration of Trust of Starwood Hotels and Resorts, a Maryland real estate investment trust (the "Trust"), is hereby amended by deleting the second paragraph of Article II, section 2.1 in its entirety and inserting the following in lieu thereof: "At each Annual Meeting of Shareholders beginning at the Annual Meeting of Shareholders in 2005, all Trustees shall be elected to hold office for a term of one year. Trustees may be re-elected any number of times. Each Trustee shall hold office until the election and qualification of his or her successor." SECOND: The Amended and Restated Declaration of Trust of the Trust is hereby further amended by deleting the third sentence of Article II, section 2.4 in its entirety and inserting the following in lieu thereof: "Vacancies occurring among the Trustees (including vacancies created by increases in number) may be filled by a majority of the remaining Trustees, though less than a quorum, or by a sole remaining Trustee, and the person so appointed shall hold office for a term expiring at the next Annual Meeting of Shareholders and until such trustee's successor shall have been duly elected and qualified." THIRD: The amendments to the Amended and Restated Declaration of Trust of the Trust as set forth above have been duly advised by the Board of Trustees and approved by the shareholders of the Trust entitled to vote as required by law. FOURTH: The undersigned Vice President and Chief Financial and Accounting Officer acknowledges these Articles of Amendment to be the trust act of the Trust and as to all matters or facts required to be verified under oath, the undersigned Vice President and Chief Financial and Accounting Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. EXH. 3.2 IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment to be signed in its name and on its behalf by its Vice President and Chief Financial and Accounting Officer and attested to by its Secretary on this 15th day of November, 2004. ATTEST: STARWOOD HOTELS AND RESORTS By: /s/ Kenneth S. Siegel By: /s/ Vasant M. Prabhu _____________________ _____________________ Name: Kenneth S. Siegel Name: Vasant M. Prabhu Title: Secretary Title: Vice President and Chief Financial and Accounting Officer EX-3.4 3 p70255exv3w4.txt EX-3.4 EXH. 3.4 BYLAWS OF STARWOOD HOTELS & RESORTS (AS AMENDED AND RESTATED THROUGH NOVEMBER 8, 2004) ARTICLE I TRUSTEES SECTION 1. Number; Tenure. There shall be not less than three (3) nor more than twenty (20) Trustees; within such limits, the number of Trustees may be fixed, increased or decreased from time to time by the Trustees, but no such action may affect the tenure of office of any Trustee. SECTION 2. Qualifying Shares not Required. No Trustee need be a Shareholder. SECTION 3. Quorum. A majority of the Trustees shall constitute a quorum. SECTION 4. Election. At each Annual Meeting of Shareholders beginning at the Annual Meeting of Shareholders in 2005, all Trustees shall be elected to hold office for a term of one year. Trustees may be re-elected any number of times. Each Trustee shall hold office until the election and qualification of his or her successor. SECTION 5. CHAIRMAN OF THE BOARD. The Board of Trustees may from time to time appoint one of its members to act as Chairman of the Board by the vote of a majority of the entire Board of Trustees. The Board of Trustees may designate the Chairman as an Executive Chairman, who shall in the capacity as Chairman of the Board be deemed an officer of the Trust, or a Non-Executive Chairman, who shall not in the capacity as Chairman of the Board be deemed an officer of the Trust. The Chairman shall have such powers and perform such duties as are prescribed for him from time to time by the Trustees. SECTION 6. Vacancies. Vacancies occurring among the Trustees (including vacancies created by increases in number) may be filled by a majority of the remaining Trustees, though less than a quorum, or by a sole remaining Trustee, and the person so appointed shall hold office for a term expiring at the Annual Meeting of Shareholders at which the term of office of the class to which he or she has been appointed expires and until his or her successor is elected and qualified. SECTION 7. Place of Meeting. Each meeting of the Trustees shall be held at such place within or without the State of Maryland as is fixed from time to time by resolution of the Trustees (or, in the absence of such resolution, as specified in the notice of such meeting). 1 SECTION 8. Annual Meetings. Promptly following each Annual Meeting of Shareholders, a meeting of the Trustees shall be held for the purpose of electing officers and transacting other business. Notice of such meetings need not be given. SECTION 9. Regular Meetings. Regular meetings of the Board of Trustees need not be held. SECTION 10. Special Meetings. Special meetings of the Trustees may be called at any time by the Chairman, and the Chairman shall call a special meeting at any time upon the written request of two (2) Trustees. Written notice of the time and place of a special meeting shall be given to each Trustee, either personally or by sending a copy thereof by mail or by telecopier to his or her address appearing on the books of the Trust or theretofore given by him to the Trust for the purpose of notice. In case of personal service or notice by telecopier, such notice shall be so delivered at least twenty-four (24) hours prior to the time fixed for the meeting. If such notice is mailed, it shall be deposited in the United States mail at least seventy-two (72) hours prior to the time fixed for the holding of the meeting. Notice of a meeting may be given by the Chairman, the Trustees requesting the meeting or the Secretary. SECTION 11. Adjourned Meetings. A quorum of the Trustees may adjourn any Trustees' meeting to meet again at a stated day and hour. In the absence of a quorum a majority of the Trustees present may adjourn from time to time to meet again at a stated day and hour prior to the time fixed for the next regular meeting of the Trustees. Notice of the time and place of an adjourned meeting need not be given to any Trustee if the time and place is fixed at the meeting adjourned. SECTION 12. Waiver of Notice. The transactions of any meeting of the Trustees, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if either before or after the meeting each of the Trustees not present signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents, or approvals shall be lodged with the Trust records or made a part of the minutes of the meeting. SECTION 13. Action Without Meeting. Any action required or permitted to be taken by the Trustees may be taken without a meeting, if a majority of the Trustees shall individually or collectively consent in writing to such action. Such written consent or consents shall be lodged with the records of the Trust. Such action by written consent shall have the same force and effect as a vote of the Trustees adopted at a meeting duly called and held. SECTION 14. Powers and Duties. The powers and duties of the Trustees, in addition to the powers and duties set forth in the Declaration, are: (a) Selection and Removal of Officers, Agents and Employees. To select all the other officers, agents and employees of the Trust, to remove them at pleasure, either with or without cause, to prescribe for them duties consistent with the Declaration and the Trustees' Regulations, and to fix their compensation. 2 (b) Authorization of Signatures. From time to time to designate the person or persons authorized to sign or endorse checks, drafts, or other orders for the payment of money, issued in the name of or payable to the Trust. (c) Fixing Principal Office and Place of Meetings. From time to time to change the location of the principal office of the Trust and from time to time to designate any place within or without the State of Maryland as the place at which meetings of Trustees or of the Shareholders shall be held. (d) General Powers. Generally to exercise such other powers as are usually vested in directors of corporations organized under the laws of the State of Maryland. SECTION 15. Executive Committee. (a) The Board of Trustees may appoint two or more trustees to constitute an Executive Committee. One of such trustees shall be designated as Chairman of the Executive Committee. The Executive Committee shall have and may exercise all of the rights, powers and authority of the Board of Trustees, except as expressly limited by the Maryland General Corporation Law as amended from time to time. (b) The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as it may determine. The Chairman of the Executive Committee or, in the absence of a Chairman, a member of the Executive Committee chosen by a majority of the members present, shall preside at meetings of the Executive Committee, and another member thereof chosen by the Executive Committee shall act as secretary. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members present at a meeting shall be required for any action of the Executive Committee. SECTION 16. Other Committees. The Board of Trustees may appoint such other committees as it shall deem advisable and with such authority as the Board of Trustees shall from time to time determine. SECTION 17. Other Provisions Regarding Committees. (a) The Board of Trustees shall have the power at any time to fill vacancies in, change the membership of, or discharge any committee. (b) Members of any committee shall be entitled to such compensation for their services as from time to time may be fixed by the Board of Trustees. No committee member who receives compensation as a member of any one or more committees shall be barred from serving the Trust in any other capacity or from receiving compensation and reimbursement of reasonable expenses for any or all such other services. (c) Unless prohibited by law, the provisions of Sections 12, 13 and 18 of this Article I shall apply to all committees. SECTION 18. Meetings by Telephone or Similar Communications. The Board of Trustees may participate in meetings by means of conference telephone or similar communications equipment, whereby all trustees participating in the meeting can hear each other at the same time, and participation in any such meeting shall constitute presence in person at 3 such meeting. A written record shall be made of all actions taken at any meeting conducted by a means of a conference telephone or similar communications equipment. SECTION 19. Transactions with Interested Persons. (a) Notwithstanding anything to the contrary contained in these Trustees' Regulations, in addition to any affirmative vote required either by law, the Partnership Agreement, the Declaration of Trust of the Trust or these Trustees' Regulations, any Transaction involving the Trust or any of its subsidiaries or the Realty Partnership shall require the affirmative vote of a majority of the Trustees ("Disinterested Members") on the Board of Trustees of the Trust who are not employees, officers, directors, Affiliates or Associates of the Interested Person who or which is a party to the Transaction. (b) As used in these Trustee's Regulations: (i) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on June 25, 1998 (the "Exchange Act"); (ii) A Person shall "Beneficially Own" and be the "Beneficial Owner" of any Paired Shares or Units: (A) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly, within the meaning of Rule 13d-3 under the Exchange Act; or (B) which such Person or any of its Affiliates or Associates has (I) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (II) the right to vote pursuant to any agreement, arrangement or understanding (but neither such Person nor any such Affiliate or Associate shall be deemed to be the Beneficial Owner of any Paired Shares or Units solely by reason of a revocable proxy granted for a particular meeting of shareholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which Paired Shares or Units neither such Person nor any such Affiliate or Associate is otherwise deemed the Beneficial Owner); or (C) which are beneficially owned, directly or indirectly, within the meaning of the Rule 13d-3 under the Exchange Act, by any other Person with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than solely by reason of a revocable proxy as described in subparagraph (B) above) or disposing of any Paired Shares or Units. (iii) "Corporation" shall mean Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation. (iv) "Interested Person" shall mean any Person who or which is the Beneficial Owner, directly or indirectly, of 5% or more of the outstanding Paired Shares or the outstanding Units or who or which is an Affiliate or Associate of the Trust, the Corporation or either of the Partnerships. For the purposes of determining whether a 4 Person is an Interested Person, the number of Paired Shares or Units deemed to be outstanding shall include Paired Shares or Units deemed owned through application of paragraphs (A), (B) and (C) of paragraph (ii) above but shall not include any other unissued Paired Shares or Units which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (v) "Paired Shares" shall mean the shares of common stock of the Corporation and the shares of beneficial interest of the Trust which are paired pursuant to the Pairing Agreement dated June 25, 1980 between the Trust and the Corporation, as amended from time to time. (vi) "Partnership Agreement" shall mean the Limited Partnership Agreement of the Realty Partnership, as amended from time to time. (vii) "Partnerships" shall mean the Realty Partnership and SLC Operating Limited Partnership, a Delaware limited partnership. (viii) "Person" shall mean any individual, limited partnership, general partnership, corporation, limited liability company or any other firm or entity. (ix) "Realty Partnership" shall mean SLT Realty Limited Partnership, a Delaware limited partnership. (x) "Shareholder" shall mean a Person that owns Paired Shares. (xi) "Transaction" shall mean any contract, sale, lease, exchange, mortgage, transfer or disposition to or with, or any other transaction with, any Interested Person, including, without limitation, any election with respect to the method of payment for an exchange of Units for Paired Shares, or any action to be taken by the Trust, the Corporation or the Partnership with respect to the senior debt of the Realty Partnership. (xii) "Trust" means Starwood Hotels & Resorts, a Maryland real estate investment trust. (xiii) "Units" shall have the meaning set forth in the Partnership Agreement. (c) A majority of the Disinterested Members shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Section 19, including, without limitation, (i) whether a Person is an Interested Person, (ii) the number of Paired Shares or Units that any Person Beneficially Owns, and (iii) whether a Person is an Affiliate or Associate of another. A majority of the Disinterested Members shall have the right to demand that any Person who is reasonably believed to be an Interested Person (or who holds of record Paired Shares or Units that any Interested Person Beneficially Owns) supply the Trust with complete information as to (i) the record owner(s) of all Paired Shares or Units that such Person who is reasonably believed to be an Interested Person Beneficially Owns, (ii) the number of, and class or series of, Paired Shares or Units that such Person who is reasonably believed to be an Interested Person Beneficially Owns and the number(s) of the certificate(s), if any, evidencing such Paired Shares or Units, and (iii) any other factual matter relating to the applicability or effect of this Section 19, as may be 5 reasonably requested of such Person, and such Person shall furnish such information within 10 days after receipt of such demand. (d) Nothing contained in this Section 19 shall be construed to relieve any Interested Person from any fiduciary obligation imposed by law. (e) Notwithstanding anything to the contrary contained in these Trustees' Regulations this Section 19 may be amended or repealed only by a majority of Trustees on the Board of Trustees of the Trust who are not employees, officers, Affiliates or Associates of the Trust, the Corporation, the Partnerships or any Interested Person. SECTION 20. Independent Trustees. Notwithstanding anything to the contrary contained in these Trustees' Regulations, not less than a majority of the Board of Trustees of the Trust shall be composed of "Independent Trustees." For purposes of this Section 20, an "Independent Trustee" is a Trustee of the Trust who is not employed by or an affiliate (as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act), of the Trust, the Corporation or Starwood Capital Group, L.L.C. ARTICLE II OFFICERS SECTION 1. Enumeration. The officers of the Trust shall be a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer, and such other officers as are elected by the Trustees. Officers shall be elected by the Trustees. The Board of Trustees may delegate to the Chief Executive Officer of the Trust the authority to appoint any officer or agent of the Trust and to fill a vacancy other than the President, Secretary or Treasurer, and may delegate to any other officer of the Trust the authority to appoint any officer or agent of the Trust having a lower rank than the officer making such appointment. Officers shall hold office at the pleasure of the Trustees, provided that any officer appointed by any other officer pursuant to authority delegated to such appointing officer by the Board of Trustees may be removed, with or without cause, at any time whenever such appointing officer in his or her absolute discretion shall consider that the best interests of the Trust shall be served by such removal. Any two or more offices, except those of Chief Executive Officer and President, President and Secretary, or President and Assistant Secretary, may be held by the same person. SECTION 2. Powers and Duties of the Chief Executive Officer. Subject to the control of the Trustees, the Chief Executive Officer shall have general supervision, direction and control of the business of the Trust and its employees and shall have such other powers and duties as are usually vested in the office of chief executive officer of a corporation. The Chief Executive Officer shall, exercise and perform such other powers and duties as may be from time to time assigned to him by the Trustees. The Chief Executive Officer shall have the power and authority to execute all written instruments on behalf of the Trust of every nature whatsoever, and except as prohibited by applicable law or the rules of the New York Stock Exchange or other primary exchange or market on which the Shares are listed, shall be, ex officio, a member of all standing committees. In the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board of Trustees and of the Shareholders. 6 SECTION 3. Powers and Duties of the President. In the absence of a Chief Executive Officer, the President shall in general supervise and control all of the business and affairs of the Trust. The President shall have such duties and responsibilities for the supervision, direction and control of the Trust as may be delegated to the President by the Board of Trustees or the Chief Executive Officer. The President shall have the power and authority to execute all written instruments on behalf of the Trust of every nature whatsoever. SECTION 4. Powers and Duties of the Vice Presidents. In the absence or disability of the President, the Vice-Presidents in order of their rank as fixed by the Trustees or, if not ranked, the Vice-President designated by the Trustees, shall perform all of the duties of the President and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. The Vice-Presidents shall have the power and authority to execute on behalf of the Trust all written instruments of every nature whatsoever. The Vice-Presidents shall have such other powers and perform such other duties as are prescribed for them from time to time by the Trustees. SECTION 5. Duties of the Secretary. The Secretary shall keep full and complete minutes of the meetings of the Trustees and of the meetings of the Shareholders and give notice, as required, of all such meetings. The Secretary shall perform all other duties that pertain to such office and which are required by the Trustees. SECTION 6. Duties of the Chief Financial Officer. The Chief Financial Officer shall (i) maintain custody of and keep the books of account of the Trust; (ii) receive, deposit and disburse funds belonging to the Trust, and (iii) perform all other duties that pertain to such office and which are required by the Trustees. ARTICLE III SHAREHOLDERS SECTION 1. Quorum. The presence in person or by proxy of Persons entitled to vote a majority of the voting shares at any meeting of Shareholders shall constitute a quorum. The Shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment notwithstanding the withdrawal of enough Shareholders to leave less than a quorum. SECTION 2. Place of Meeting. Meetings of the Shareholders shall be held at the principal office of the Trust or at another convenient location within or without the State of Maryland as is designated by the Trustees or by the written consent of all Shareholders entitled to vote thereat, given either before or after the meeting and filed with the Secretary of the Trust. SECTION 3. Annual Meeting. A regular annual meeting of the Shareholders shall be held on such date and at such time as may be fixed by the Board of Trustees. SECTION 4. Special Meetings. Special meetings of the Shareholders may be held at any time for any purpose or purposes. Such special meetings may be called at any time by the Chairman, the Chief Executive Officer or by the Trustees or by any two or more Trustees, 7 or by one or more Shareholders holding not less than twenty-five percent (25%) of the outstanding Shares of the Trust entitled to vote. SECTION 5. Nomination of Trustees. Nominations of Persons for election as Trustees at an annual meeting of the Shareholders may be made at such meeting only by or at the direction of the Trustees, by any nominating committee or person(s) appointed by the Trustees, or by any Shareholder entitled to vote for the election of Trustees at the meeting who complies with the notice procedures set forth in this Section 5. Any Shareholder entitled to vote for the election of Trustees may nominate one or more Persons for election as Trustee at a meeting of Shareholders only if written notice of such Shareholder's intent to make such nomination or nominations has been delivered personally to the Secretary at, or been mailed to the Secretary and received at, the principal executive offices of the Trust not earlier than the close of business on the 75th day nor later than the close of business on the 50th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date or if the Trust has not previously held an annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 75th day prior to such annual meeting and not later than the close of business on the later of the 50th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Trust. Such Shareholder's notice to the Secretary shall set forth: (i) the name and address of the Shareholder who intends to make the nominations(s) and of the Person or Persons to be nominated; (ii) the class and number of Shares that are held of record, beneficially owned and represented by proxy by such Shareholder as of the record date for the meeting (if such date then shall have been made publicly available) and as of the date of such notice; (iii) a representation that such Shareholder intends to appear in person or by proxy at the meeting to nominate the Person or Persons specified in the notice; (iv) a description of any contract, arrangement or understanding between such Shareholder and each nominee and any other Person or Persons (naming such Person or Persons) pursuant to which the nomination or nominations are to be made by such Shareholder; (v) such other information regarding each nominee proposed by such Shareholder as would be required to be disclosed in a proxy statement used in a solicitation of proxies for the election of directors which solicitation was subject to the rules and regulations of the Securities and Exchange Commission (the "SEC") under Section 14 of the Exchange Act, as from time to time amended; and (vi) the consent of each nominee to serve as a Trustee if so elected. No Person shall be eligible for election as a Trustee unless as nominated in accordance with the procedures set forth herein. SECTION 6. Adjourned Meetings. Whether or not a quorum is present at any meeting of Shareholders, the presiding officer at the meeting shall have the power to adjourn the meeting from time to time, without notice of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. Any business which might have been transacted at a meeting as originally called may be transacted at any meeting held after adjournment as provided in this Section 6, if a quorum is present in person or by proxy at such reconvened meeting. 8 SECTION 7. Notice of Regular or Special Meetings. Written notice specifying the place, day and hour of any regular or special meeting, the general nature of the business to be transacted thereof, to the extent required by law, and all other matters required by law shall be given to each Shareholder of record entitled to vote, either personally or by sending a copy thereof by mail or telegraph to his or her address appearing on the books of the Trust or theretofore given by him to the Trust for the purpose of notice or, if no address appears or has been given, addressed to the place where the principal office of the Trust is situated. It shall be the duty of the Secretary to give notice of each Annual Meeting of the Shareholders at least ten (10) days and not more than ninety (90) days before the date on which it is to be held. If notice is not so given by the Secretary, it may be given by any other officer. Within twenty (20) days after the Trust receives a Shareholder request for the calling of a special meeting, the Trustees shall designate the date on which such meeting is to be held and the Secretary shall inform the Shareholders who make the request of the reasonably estimated costs of preparing and mailing a notice of the meeting, and on payment of those costs to the Trust, notify each Shareholder entitled to notice of the meeting. Any such special meeting shall be held on a date not earlier than the twentieth (20th) day, and not later than the ninetieth (90th) day, following the date on which such notice is given. If the date of such special meeting is not so fixed and notice thereof given within twenty (20) days after the date such Shareholder request is received by the Trust, the date of such meeting may be fixed by the Person or Persons requesting the meeting, in which event notice of such meeting shall be given by such Person or Persons not less than twenty (20), nor more than sixty (60), days before the date on which the meeting is to be held. Notwithstanding the foregoing, if as of the date a Shareholder request for a special meeting is received or within twenty (20) days thereafter, the Trustees have called or call a meeting of Shareholders (whether annual or special) for a purpose or purposes other than the purpose(s) stated in the Shareholder request, the Trustees need not call, and the Secretary need not give notice of, a separate and additional meeting of Shareholders for the purpose(s) stated in the Shareholder request if (i) the Trustees determine in good faith that calling such a separate and additional meeting would require the Trust to incur undue cost and expense, and (ii) the Secretary notifies both the requesting Shareholder(s) and all other Shareholders entitled to vote, within twenty (20) days after the Trust receives the Shareholder request, that the matter(s) proposed by the requesting Shareholder(s) to be considered at a special meeting may be proposed and considered at the meeting otherwise called by the Trustees. In addition, if not later than the thirtieth (30th) day prior to the date on which any special meeting called by the Trustees pursuant to a Shareholder request is to be held, the Trustees determine in good faith to present for consideration by the Shareholders of the Trust one or more matters other than those proposed by the requesting Shareholder(s) to be considered, the Trustees may postpone the previously called special meeting for a period of up to sixty (60) days following the date of which notice of such postponement is given. Notice of such postponement and of the additional matter(s) to be considered at such meeting shall be given by the Secretary to all Shareholders entitled to vote at the meeting not later than the thirtieth (30th) day prior to the originally scheduled meeting date. For purposes of this Section 7, a Shareholder request shall be deemed received by the Trust when delivered to an officer of the Trust in person or on the date on which such request is mailed to the Trust, duly addressed to its principal office. 9 SECTION 8. Notice of Adjourned Meetings. It shall not be necessary to give any notice of the time and place of any adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. SECTION 9. Proxies. The appointment of a proxy or proxies shall be made by an instrument in writing executed by the Shareholder or his or her duly authorized agent and filed with the Secretary of the Trust. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless the Shareholder executing it specifies therein the length of time for which it is to continue in force, which is no case shall exceed seven (7) years from the date of its execution. At a meeting of Shareholders all questions concerning the qualification of voters, the validity of proxies, and the acceptance or rejection of votes, shall be decided by the secretary of the meeting unless inspectors of election are appointed pursuant to Section 13 of this Article III, in which event such inspectors shall pass upon all questions and shall have all other duties specified in said section. SECTION 10. Consent of Absentees. The transactions of any meeting of Shareholders, either annual, special, or adjourned, however called and noticed, shall be as valid as though had at a meeting duly held after the regular call and notice if a quorum is present and, if either before or after the meeting, each Shareholder entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be lodged with the Trust records or made a part of the minutes of the meeting. SECTION 11. Voting Rights. If no future date is fixed for the determination of the Shareholders entitled to vote at any meeting of Shareholders, only Persons in whose names Shares entitled to vote stand on the stock records of the Trust on the day of any meeting of Shareholders shall be entitled to vote at such meeting SECTION 12. No Cumulative Voting. Shareholders shall not be entitled to cumulate votes in any elections of Trustees of the Trust. SECTION 13. Conduct of Meetings; Inspectors of Election. The presiding officer at a meeting of the Shareholders shall have all power and authority vested in a presiding officer by law or practice, including, without limitation, the authority to determine whether the nomination of any person is made in compliance with applicable provisions of these Trustees' Regulations (and to refuse to acknowledge the nomination of any Person not made in such compliance); to determine whether any item of business proposed to be brought before the meeting has been properly brought (and to declare that any business not so brought shall be disregarded and not transacted); to establish rules pertaining to reasonable time limits and the amount of time that may be taken up in remarks by any Shareholder or group of Shareholders and otherwise pertaining to the conduct of the meeting; and to otherwise decide all matters relating to the conduct of the meeting. The presiding officer may appoint a parliamentarian and one or more sergeants-at-arms. The parliamentarian may advise the presiding officer upon matters relating to the conduct of the meeting. The sergeant- or sergeants-at-arms shall have authority to take any and all actions that such Persons deem necessary or appropriate to assure that the meeting is conducted with decorum and in an orderly manner, including, without limitation, authority to 10 expel or cause the expulsion of any Person who the presiding officer determines is failing to comply with the rules concerning the conduct of, or is otherwise disrupting, the meeting. In advance of any meeting of the Shareholders, the Trustees may appoint any one or more Persons (other than nominees for office) to act as inspectors of election at the meeting or any adjournment thereof. If no inspector of election is so appointed, the presiding officer of the meeting may, and on the request of any Shareholder or any Shareholder's proxy shall, appoint one or more such inspectors of election. The number of inspectors shall be either one (1) or three (3), as determined by the presiding officer; provided, however, that if such inspector(s) is or are to be appointed at the meeting on the request of one or more Shareholders or proxies, the holders of a majority of Shares present (in person or by duly executed proxy) shall determine whether one (1) or three (3) inspectors are to be appointed. If the Person appointed as inspector of election fails to appear at the meeting or fails or refuses to act as inspector, the presiding officer of the meeting may, and upon the request of any Shareholder or any Shareholder's proxy shall, appoint a Person to fill that vacancy. The inspector(s) of election shall: (a) Determine the number of Shares outstanding and the voting power of each, the Shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; (b) Receive votes, ballots or consents; (c) Count and tabulate all vote or consents; (d) Determine and report to the Trust the results of the voting; and (e) Do any other acts that may be proper to conduct the election or vote with fairness to all Shareholders. On the request of the presiding officer of the meeting or of any Shareholder or such Shareholder's proxy, the inspector(s) of election shall make a report in writing of any question or other matter determined by him or them and execute a certificate of any facts found by him or them. If there are three (3) inspectors of election, the decision, act, report or certificate of a majority shall be effective in all respects as the decision, act, report or certificate of the inspectors." SECTION 14. Business. Except as may be otherwise provided by applicable law, the only business that shall be conducted at any meeting of the Shareholders (other than matters incident to the conduct of the meeting) shall be business brought before the meeting by or at the direction of the Trustees or by a Shareholder who complies with the procedures set forth in this Section 14. Except as otherwise provided by Section 5 of this Article III or by applicable law, the only business that shall be conducted at any meeting of the Shareholders shall (i) have been specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Trustees, (ii) otherwise be brought before such meeting by or at the direction of the Trustees 11 or the presiding officer of the meeting, or (iii) be otherwise properly brought before the meeting by or on behalf of a Shareholder who shall have been a Shareholder of record on the record date for such meeting, who shall continue to be entitled to vote thereat, and who shall have complied with the procedures set forth in the remainder of this Section 14. In addition to any and all other applicable requirements, for business to be properly brought before a meeting of the Shareholders by a Shareholder, the Shareholder must have given timely notice thereof in writing to the Secretary. To be timely, a Shareholder's notice must be delivered personally or mailed to and received at the principal executive offices of the Trust (i) in the case of an annual meeting, not earlier than the close of business on the 75th day nor later than the close of business on the 50th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date or if the Trust has not previously held an annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 75th day prior to such annual meeting and not later than the close of business on the later of the 50th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Trust, or (ii) in the case of a special meeting, within ten days of the earlier of (a) the date that notice of the meeting was mailed in accordance with this Article III or prior public disclosure of the date of the meeting was made or (b) the date that a request for a special meeting was made by a Shareholder in accordance with Section 7 of this Article III. A Shareholder's notice to the Secretary shall set forth (i) a description of each item of business the Shareholder proposes to bring before the meeting and the wording of the proposal, if any, to be submitted for a vote of the Shareholders with respect thereto; (ii) the name and address of the Shareholder; (iii) the class and number of Shares held of record, owned beneficially and represented by proxy by such Shareholder as of the record date for the meeting (if such date shall then have been publicly disclosed) and as of the date of such notice; and (iv) all other information that would be required to be included in a proxy statement filed with the SEC if, with respect to any such item of business, such Shareholder were a participant in a solicitation subject to Section 14 of the Exchange Act. SECTION 15. Informal Action by Shareholders. Whenever Shareholders are required or permitted to take any action, such action may be taken without a meeting on written consent setting forth the action so taken, signed by the holders of a majority of all outstanding Shares entitled to vote thereon, or such larger proportion thereof as would be required for a vote of Shareholders at a meeting. ARTICLE IV MISCELLANEOUS SECTION 1. Record Dates and Closing of Transfer Books. From time to time the Trustees may fix a future date as the record date for the purpose of making any proper determination with respect to Shareholders, including which Shareholders are entitled to notice of a meeting, to vote at a meeting, to receive a dividend or to be allocated other rights. Such record date may not be prior to the close of business on the day the record date is fixed. Except 12 as may be otherwise set forth in the Section 2-511 of the Corporations and Associations Article, Annotated Code of Maryland, as in effect from time to time and as applicable to Maryland corporations, the record date for any determination shall not be more than 90 days before the date on which the action requiring the determination will be taken. If a record date is so fixed for a meeting, to receive a dividend or to be allocated other rights, only Shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive such dividend or allotment of rights, as the case may be, notwithstanding any transfer of Shares on the books of the Trust after the record date so fixed. SECTION 2. Inspection of Trust Records. The share register or duplicate share register, the books of account, and the minutes of the proceedings of the Shareholders and Trustees shall be open to inspection upon the written demand of any Shareholder to the same extent as is permitted by the laws of Maryland for the inspection of corporate records by corporate shareholders. Such inspection may be made in person or by an agent or attorney and shall include the right to make extracts. Demand for inspection shall be made in writing upon the President, Secretary or Assistant Secretary of the Trust. SECTION 3. Inspection of Trustees' Regulations. The Trustees shall keep at the principal office for the transaction of business of the Trust the original or a copy of the Trustees' Regulations as amended or otherwise altered to date, certified by the Secretary, which shall be open to inspection by the Shareholders at all reasonable times during office hours. SECTION 4. Representation of Shares of Corporations. The Chairman, the Chief Executive Officer, the President or any Vice-President and the Secretary or Assistant Secretary of the Trust, acting either in person or by a proxy or proxies designated in a written instrument duly executed by said officers, are authorized to vote, represent, and exercise on behalf of the Trust all rights incident to any shares of any corporation standing in the name of the Trust. SECTION 5. Exemption from Control Share Acquisition Statute. The provisions of Sections 3-701 to 3-709 of the Corporations and Associations Article of the Annotated Code of Maryland shall not apply to any shares of beneficial interest of the Trust now or hereafter held of record or beneficially held by any person whatsoever, it being the intent of this provision that the Trust opt out of the aforementioned sections in their entirety and that all persons and shares of beneficial interest held by such persons be exempted from such sections to the fullest extent permitted by Maryland law. ARTICLE V SEAL The Trust may have a seal containing the name of the Trust and the words "Maryland, 1969." ARTICLE VI AMENDMENTS 13 These Trustees' Regulations may be amended or repealed or new or additional Trustees' Regulations may be adopted only by the vote or written consent of the Trustees, and the Shareholders shall not have any power to amend or repeal these Trustees' Regulations or to adopt new or additional Trustees' Regulations. ARTICLE VII DEFINITIONS All terms defined in the Declaration of Trust of Hotel Investors Trust dated as of August 15, 1969, as amended from time to time, shall have the same meaning when used in these Trustees' Regulations. 14 EX-10.3 4 p70255exv10w3.txt EX-10.3 EXHIBIT 10.3 LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") is dated as of February 14, 1997, and is entered into by and between LONG BEACH HOTEL ASSOCIATES, L.P., as lessor (hereinafter called "Lessor"), and SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, as lessee (hereinafter called "Lessee"). As parties hereto, Lessor and Lessee agree as follows: ARTICLE I DEFINITIONS AND CONSTRUCTION Section 1. Definitions: "Shall" or "will" means "covenants to" whenever the context permits. "According to law" means in strict compliance with applicable statutes, ordinances and regulations of any governmental authority having jurisdiction. Section 2. Construction: This lease shall be governed by and construed in accordance with the laws of the State of Arizona. The validity or unenforceability of any provision hereof shall not affect any other provision, and any invalid or unenforceable provision shall be limited only to the extent necessary to conform to law and so as most closely to carry out the intent of the parties hereto as expressed herein. Whenever provision is made for either party to secure the consent or approval of the other, such consent or approval shall not be unreasonably withheld. Section 3. Captions: The headings of the articles and sections of this Lease are for convenience only and do not define or limit, and shall not be used to construe, such articles or sections. ARTICLE II PREMISES AND TERM Section 1. Leased Premises: Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, on the terms and conditions contained in this Lease, Lessor's interest in (a) the real property commonly known as the Sheraton Long Beach Hotel and located at 333 East Ocean Boulevard, Long Beach, California 90802, and more fully described on Exhibit "A" attached hereto (the "Land"), (b) all buildings and improvements now or in the future located on the Land, and all appurtenances thereto (the "Improvements"), (c) all easements, licenses, permits and other rights or privileges appurtenant to or necessary for the intended use of the Land or Improvements (the "Appurtenances") (the Land, Improvements and Appurtenances are collectively referred to herein as the "Real Property"), and (d) all equipment, furniture and other personal property owned by Lessor and located in or on the Real Property, or associated therewith, or that may in the future be installed therein or thereon by Lessor (the "Personal Property"). The Real Property and the Personal Property are sometimes hereinafter collectively referred to as the "Premises." Lessee hereby acknowledges that Lessor has delivered possession of the Premises to Lessee, and that Lessee accepts the Premises in an "as is" condition as of the Commencement Date (as defined below). Lessee further acknowledges that Lessor shall not have any obligation to make any improvements or repairs in or to the Premises except as may be expressly set forth in this Lease. Section 2. Lease Term: The term of this Lease (the "Lease Term") shall commence on February 14, 1997 (the "Commencement Date") and shall end on February 13, 2000, unless sooner terminated as set forth in this Lease. Section 3. Lease Year: As used in this Lease, the term "Lease Year" means the full calendar year, except that the first Lease Year shall commence on the Commencement Date, and shall end on December 31 of the same calendar year, and the last Lease Year shall end at the same time as the Lease Term shall end, even if less than a full calendar year. Section 4. Recording: Neither this Lease nor a copy thereof shall be recorded by either party hereto in any public record. Upon request of either party after the Commencement Date, Lessor and Lessee shall execute a memorandum of lease in recordable form containing the terms and provisions required by applicable law. The memorandum may be recorded by either party in the county where the Premises are located. ARTICLE III IMPROVEMENTS, FURNISHINGS AND INVENTORY Section 1. Furnishings: Lessee shall keep all of the furnishings, fixtures and equipment (the "Furnishings") installed in or furnished to the Premises, whether installed or furnished by Lessee, Lessor or a third party, in good condition and repair (ordinary wear and tear excepted) and keep the same free of all liens, claims, encumbrances and rights of others, and shall replace the same when needed at all times during the Lease Term at Lessee's sole cost and expense. Section 2. Improvements: Any property permanently installed, affixed or embedded in the Premises such as could not be removed without damage to the Premises, and any and all alterations or repairs thereto or replacements thereof, shall at once become a part of Lessor's estate in the realty and belong to Lessor, without any obligation of Lessor to compensate Lessee therefor other than as expressly set forth in this Lease. Section 3. Inventories: Lessee shall be obligated to provide, at its sole cost and expense, all food, beverage, supplies and other inventories (the "Inventories") necessary to the operation of the Premises as a high-quality hotel facility, and to maintain or replace such Inventories in the ordinary course of business. Lessor shall have no obligations with respect to the Inventories. ARTICLE IV RENT Section 1. Amount of Rent: (a) At such place or places as Lessor shall designate from time to time in writing, Lessee shall pay to Lessor when due, without prior demand therefor and without any deduction or offset whatsoever, rent as follows: Page 2 (i) A "Basic Rent" equal to Thirty-Three Thousand Three Hundred Thirty-Three and 33/100 Dollars ($33,333.33) per month (partial months, if any, being prorated on the basis of a 30-day month). The Basic Rent shall be payable in advance on or before the first day of each month (in the event that the first Lease Year commences on a day other than the first day of a month, said rent for the first month of the Lease Term shall be paid on a prorated basis on the Commencement Date) beginning with the start of the first Lease Year and continuing until the end of the Lease Term, and shall constitute the minimum monthly rental hereunder. (ii) A quarterly percentage rent, cumulated and adjusted quarterly (the "Percentage Rent"), equal to the sum of Forty-two percent (42%) of Lessee's "Gross Receipts" (as hereinafter defined) from the operation of Lessee's business in the hotel portion of the Premises (the "Rooms Percentage") during each Lease Year, plus Five percent (5%) of the "Gross Sales" (as hereinafter defined) of the business in the restaurant and lounge portions of the Premises during each Lease Year. Said sums shall be monthly and shall be accompanied by a detailed statement (certified by the chief accounting officer of Lessee) of Gross Receipts and Gross Sales. Lessee shall be entitled to a deduction, from the Percentage Rent, of all Basic Rent actually paid. (b) Within 45 days after the end of each Lease Year during the term hereof, a Percentage Rent computation for such prior Lease Year shall be delivered by Lessee to Lessor. If requested in writing, by either party, such Percentage Rent calculation shall be certified by a nationally recognized certified public accountant reasonably acceptable to Lessor, and shall set forth a detailed statement of the Gross Receipts of the hotel portion of the Premises and the Gross Sales of the restaurant and lounge portions of the Premises. If the aggregate Percentage Rent paid during any Lease Year is less than the Percentage Rent payable hereunder computed with respect to such Lease Year, the deficit shall forthwith be paid over to Lessor by Lessee. If the aggregate Percentage Rent paid during such Lease Year exceeds the Percentage Rent payable hereunder with respect to such Lease Year, the excess Percentage Rent amount shall be carried over as a credit against the Percentage Rent payable with respect to the following one or more subsequent Lease Year quarterly periods until such credit shall have been used up completely. Section 2. Gross Receipts and Gross Sales: As used in this Lease: (a) "Gross Receipts" means the total revenue received from the rental of guest rooms and meeting rooms in the hotel portion of the Premises, without deduction. Gross Receipts shall not include revenue of Lessee derived from or in respect of vending machines, telephones, laundry or dry cleaning. Gross Receipts also shall not include sales, rooms or other excise taxes, if any, required to be collected by Lessee to the extent such taxes are actually paid to the proper tax receiving authorities. (b) "Gross Sales" means the gross sales price of all food and beverages sold by Lessee, or any subtenant, agent, licensee, or concessionaire of Lessee at, in or from the restaurant, bar and banquet portions of the Premises; provided, however, that "Gross Sales" shall exclude any and all rebates and/or refunds to customers, proceeds from vending machines, meals charged to or paid for by employees and deducted for tax accounting purposes or minimum wage requirements during hours of employment, the amount of all sales tax receipts or other taxes that are required by law to be and are in fact accounted for and paid by Lessee, or such subtenant, agent, licensee or concessionaire of Lessee, to any government or governmental agency. Page 3 Section 3. Additional Rent: In addition to the rental provided for in Section 1 of this Article IV, Lessee shall pay, as additional rent, each and all of the payments called for by all equipment leases, if any, to which Lessor is a party and that relate to equipment currently utilized on the Premises, whether in effect as of the date hereof or entered into subsequent to the Commencement Date of this Lease (the "Equipment Leases"), as such payments may be adjusted from time to time in accordance with the terms of the Equipment Leases. Such payments shall be made by Lessee directly to the lessor under each of the Equipment Leases. Such payments by Lessee under the Equipment Leases shall be wholly separate from, and shall not affect, Lessee's obligations to make all other payments provided for in this Lease, including, without limitation, payments of any type of rental provided for by Section 1 of this Article IV, and shall not be included in, or affect in any fashion, the calculation of any Basic Rent or Percentage Rent owed or payable thereunder. Lessor shall retain all rights under the Equipment Leases, and Lessee shall have no right, title or interest in or with respect to the Equipment Leases, or the equipment covered by the Equipment Leases, other than the right to use such equipment for so long as it may be located on the Premises. Section 4. Net: Lessee acknowledges that this Lease is a "net" lease. Accordingly, in addition to the rental provided for in Sections 1 and 3 of this Article IV, Lessee shall pay, as additional rent hereunder, all insurance, taxes, water, heat, gas, electricity, rubbish removal, landscape, parking lot maintenance and all other utilities and services supplied to the Premises, and all other charges, costs and expenses relating to the Premises or the use and occupancy of the same by Lessee or any other person or entity. Anything herein contained to the contrary notwithstanding, Lessee shall not engage for the account of Lessor the services of any consultant (including, without limitation, legal counsel, management consultants, appraisers and accountants) for the Premises without Lessor's prior written consent. Section 5. Reports and Records: Lessee shall keep, at the Premises or at Lessee's corporate offices, permanent and accurate records of all Gross Receipts and Gross Sales, which records shall be open to inspection by Lessor or its agents during ordinary business hours. Lessee will preserve, or cause to be preserved, all such records for at least five years after the expiration of each Lease Year. In addition, Lessee shall give Lessor, (i) on the 10th, 20th and last day of each calendar month, Gross Receipts, Gross Sales and occupancy reports, (ii) on a monthly basis, on or before the 20th day following the end of each month, a complete set of financial statements, including a balance sheet and a detailed monthly profit and loss statement, and (iii) on an annual basis, within 45 days after the end of each Lease Year, a complete set of financial statements, including a balance sheet and profit and loss statement certified by a nationally recognized independent certified public accountant reasonably acceptable to Lessor. Page 4 Section 6. Special Audit of Annual Reports: At any time, upon reasonable notice to Lessee, Lessor may make a special audit of any of Lessee's books and records in respect of business operations on the Premises; provided, however, that Lessor shall give Lessee a copy of any audit report. If such audit discloses a deficiency in Percentage Rent for any Lease Year, the amount thereof, together with interest thereon at a floating rate five percentage points (5%) above Wells Fargo Bank's announced "prime rate" from the date that the Percentage Rent should have been paid to the date of payment, shall be paid to Lessor no later than the first day of the next calendar month. If such audit shows the Percentage Rent to have been overpaid, the amount thereof shall be deducted from the next Percentage Rent payments thereafter becoming due. If such audit discloses a deficiency in the payment of the Percentage Rent of more than three percent (3%) of the amount that should have been paid, Lessee shall pay for the special audit. Otherwise, such audit shall be at Lessor's expense. The auditor shall be a reputable firm of national standing chosen by Lessor, and whose rates shall be comparable to rates charged by accounting firms of similar size and reputation. Section 7. Financial Plan: Lessee shall provide to Lessor, within 30 days prior to the beginning of each Lease Year, an annual financial and operating plan (the "Financial Plan") for Lessor's approval, which approval will not be unreasonably withheld. The Financial Plan shall include a month-to-month forecast of all revenues expected to be generated at the Premises, and operating expenses associated therewith, including a schedule of proposed capital improvements and refurbishment, and cost estimates thereof, for the next succeeding Lease Year. The Financial Plan shall be updated within 15 days after the end of each calendar quarter of each Lease Year, if Gross Receipts or Gross Sales vary by more than ten percent (10%) from amounts set forth on the Financial Plan, or if gross operating profit, as that term is generally understood, varies by more than twenty percent (20%) from amounts set forth on the Financial Plan. ARTICLE V USE, REPAIR, REPLACEMENTS AND ALTERATIONS Section 1. Business Use: The Premises may be used solely for the purpose of operating a hotel, together with (i) such ancillary uses as are commonly associated therewith or incidental thereto; and (ii) to the extent not covered by the foregoing, such uses as are, as of the date of execution of this Lease, being made of the Premises by Lessee or its subtenants, agents, licensees or concessionaires. Lessee agrees to operate its business on the Premises continuously during the Lease Term, and to keep the Premises open for business during usual business hours each and every day as is customary for such businesses in the metropolitan area in which the Premises are located, subject only to such periodic closures as may be necessary to complete required repairs, restoration, replacements, refurbishment or construction. Lessee shall conduct its business according to law and as a high grade and reputable concern. Lessee shall not permit the Premises or any part thereof to be vacated or abandoned at any time during the Lease Term nor remove from service any of the guest rooms of the hotel portion of the Premises or any of the seating capacity in the restaurant or lounge portions of the Premises, without Lessor's prior written consent; provided, however, that if a fire, flood, explosion, earthquake, act of God or other accident or contingency beyond the control of Lessee and not caused by the action or inaction of Lessee (an "Unusual Circumstance") shall occur on the Premises, Lessee shall be permitted to vacate or abandon that part of the Premises directly affected by such Unusual Circumstance for such period of time as the same remains untenantable; and provided, further, that if any law, ordinance, regulation, ruling or order (a "Governmental Order") shall be enacted or otherwise properly put into effect by any governmental authority mandating vacation or abandonment of any part or all of the Page 5 Premises, Lessee shall be permitted to vacate or abandon that part of the Premises directly affected by such Governmental Order for such period of time as the Governmental Order remains in effect with respect to the Premises. Lessee shall give Lessor written notice within two days after any portion of the Premises is abandoned or any guest room or any of the seating capacity of the restaurant or lounge portions of the Premises are taken out of service because of an Unusual Circumstance or Governmental Order. Lessee's right to vacate or abandon the Premises shall cease, and Lessee shall reoccupy the vacated or abandoned portion of the Premises, within 30 days after the Premises become tenantable or the Governmental Order ceases to affect such Premises, as the case may be. If the Premises (whether in whole or in part) shall be abandoned, vacated or surrendered for any reason other than due to an Unusual Circumstance or Governmental Order, or if Lessee shall be dispossessed therefrom by process of law or otherwise, any personal property left in or upon the Premises shall be deemed to have been abandoned and shall become the property of Lessor. Lessee shall use and operate the Premises in strict compliance with (i) all applicable laws, statutes, ordinances, rules and regulations of any governmental body with jurisdiction over the Premises ("Applicable Laws") including, without limitation, all environmental laws and all laws prohibiting discrimination or segregation by reason of race, color, religion, disability, sex, natural origin or otherwise; (ii) all orders or decrees affecting the Premises ("Applicable Decrees"); and (iii) all conditions and restrictions contained in recorded covenants, conditions and restrictions affecting the Premises, if any ("Applicable Restrictions"). Lessee shall not take any action, or permit the Premises to be used or operated in any manner, that would violate any Applicable Law, Applicable Decree or Applicable Restriction. Lessee or its assignee shall obtain and maintain, at its sole cost and expense, such licenses as are necessary in connection with operation of the restaurant and lounge. Section 2. Repairs and Replacements: Lessee, at its sole cost and expense, shall keep the Premises, or cause them to be kept, in good order and repair, in a clean and sanitary condition, and shall comply with all laws, statutes, rules and regulations of all governmental authorities having jurisdiction over the Premises. Lessee, at no cost or expense to Lessor, shall make or cause to be made such ordinary and necessary repairs to the Premises as are caused or made necessary by Lessee's use or occupation of the Premises or the conduct of Lessee or its agents, employees or invitees upon the Premises. Sections 3. Operating Expenses and Working Capital: Except as otherwise provided in this Lease, Lessee shall pay all expenses and costs associated with the operation of the Premises and shall provide all working capital therefor whether from funds originating from the operation of the property or otherwise. Section 4. Alterations: Lessee may make, at its sole cost and expense, reasonable alterations or additions to the Premises, but alterations estimated to cost in excess of Ten Thousand Dollars ($10,000) may only be made with Lessor's prior written consent, which consent shall not be unreasonably withheld. Lessor shall be deemed to have given its consent if Lessor fails to respond to any notice of such alterations within 15 business days of the giving of notice thereof by Lessee. Section 5. Construction in Accordance with all Laws: All improvements constructed by Lessee on or about the Premises, if any, shall be constructed in strict compliance with the plans as approved by Lessor and in strict compliance with all applicable laws and governmental regulations. Lessee agrees to procure and deliver to Lessor at Lessee's expense evidence of compliance with all applicable codes, ordinances, regulations and requirements for permits and approvals, including, but not limited to, building permits, zoning and planning requirements, and approvals from various governmental agencies having jurisdiction over the Premises. Lessor shall have Page 6 the right to post and maintain on the Premises any notice of non-responsibility provided for under applicable law, and to inspect the Premises in relation to the construction at all reasonable times. Section 6. Mechanics' Liens: Lessee shall neither cause nor permit any claim of lien to be filed against the Premises for labor done or materials furnished to or contracted for by Lessee or alleged to have been so done or furnished, and in the event that any such claim shall nevertheless be so filed, Lessee shall discharge or adequately bond the same within 10 days after the filing thereof; provided, however, that Lessee shall not be in default of this Section 6, and shall not be required to provide any such discharge or bond, if any such claim is filed against the Premises due to the fault of Lessor. Section 7. Capital Expenditures by Lessor: Lessor shall pay for those capital expenditures set forth in the Financial Plan that are approved by Lessor. Within 10 days after receiving the Financial Plan, Lessor shall advise Lessee as to which capital expenditures in the Financial Plan Lessor approves. Such approval shall be in Lessor's absolute discretion. If Lessee disagrees with such decision made by Lessor, Lessee's sole remedy shall be to terminate the Lease upon not less than 90 days written notice to Lessor. If the capital expenditure agreed to by Lessor is greater than four percent (4%) of the Gross Receipts, then, and in that event, the Basic Rent payable hereunder shall be renegotiated, at the option of Lessor. If the parties are unable to reach agreement on a new Basic Rent amount, Lessor shall have the option of reducing the amount of its capital expenditure so that such expenditure is not greater than said 4% of Gross Receipts. ARTICLE VI ADDITIONAL COVENANTS Section 1. Additional Obligations: Lessee agrees: (a) To purchase all Inventories for the Premises, and to maintain such Inventories at levels necessary for the ongoing operation of the Premises; (b) To provide all working capital reasonably necessary to operate the Premises efficiently and effectively; and (c) To pay all costs and expenses in connection with obtaining and maintaining liquor licenses utilized in the restaurant and bar portion of the Premises. Section 2. Liquor License: (a) To the extent permitted by law, Lessee hereby grants to Lessor, to secure each and all of Lessee's obligations hereunder, a security interest in each liquor license for the restaurant and bar portions of the Premises. Lessee warrants that upon its acquisition of said liquor license(s), Lessee will have title to such license(s) free and clear of all liens, claims, encumbrances and rights of third parties except as may have been approved by Lessor. Lessee further warrants that the grant of the foregoing security interest is not and will not be in violation of the terms, conditions or covenants of any agreement, arrangement or understanding, whether oral or written, between Lessee and any third party. Lessee shall not sell, contract to sell, lease, encumber or otherwise dispose of any such license without the prior written consent of Lessor. Page 7 (b) Lessee shall pay when due all fees, assessments, charges, liens or encumbrances, if any, that might at any time, either in accordance with or in violation of the terms of this Lease, affect the liquor license(s). Lessee shall take no action in connection with the operation of Lessee's business on the Premises that would jeopardize Lessee's possession of such license(s), and shall immediately notify Lessor in writing about any communication received from any party, public or private, relating to Lessee's possession of said license(s). Lessee, at Lessor's request, shall execute and deliver to Lessor any and all financing statements, deeds of trust and other documents or instruments deemed necessary by Lessor in connection with or for the perfection of Lessor's security interest hereunder. In the event of any default under this Lease, Lessor may exercise all rights and remedies of a secured party, all of which rights and remedies shall be cumulative. Lessee hereby waives any right to require Lessor to proceed against any other person or entity or to exhaust Lessor's rights against any collateral or to pursue any other remedy in Lessor's power in the event of a default under this Lease. Each of Lessor and Lessee acknowledges that, under local law, the liquor license(s) may not be transferable. (c) Lessor acknowledges that Lessee plans to take title to each of the above-described liquor licenses, to the extent permissible by law, in Lessee's own name, in the name of a subsidiary or affiliate of Lessee or in the name of the manager of the Premises and hereby consents to such vesting, provided that if and to the extent requested by Lessor, Lessee shall have (if permitted by law) caused (d) the holder(s) of the license(s) to have (i) executed an agreement granting to Lessor a security interest in the license(s) on the same terms as set forth above; and (ii) executed a financing statement on Form UCC-1 or such other documentation as may be necessary to perfect Lessor's security interest in such license(s). ARTICLE VII INDEMNITY. INSURANCE AND TAXES Section 1. Indemnity: To the maximum extent permitted by applicable law, Lessee shall indemnify and save Lessor harmless against any and all claims of third parties for damage, injury or expenses arising from or incidental to the use or occupation of the Premises, or from any act or negligence of Lessee or its agents, employees, invitees or licensees or of any other person or entity, who, with or without authority of Lessee, enter upon or perform any act relating to the Premises. If any such claim or action shall be brought against Lessor, Lessor shall give Lessee written notice of such claim or action within 15 days of receipt by Lessor of such claim or action, and Lessee shall assume the defense thereof. Lessee, for itself, its successors and assigns, hereby waives, to the maximum extent permitted by applicable law, any and all claims against Lessor for damage, injury, loss or expense arising or resulting from the use or occupation of the Premises. Section 2. Insurance: Lessee shall procure and maintain throughout the Lease Term, at Lessee's sole cost and expense, standard fire and extended coverage insurance on the Premises to such extent as to cover the full replacement costs of the Premises, which insurance shall be (in form and substance) subject to Lessor's approval and shall be adjusted annually to reflect the then-current full replacement costs thereof. Except as hereinafter provided, the proceeds of this insurance shall be used for the repair or replacement of the property so insured. Lessor shall be named as an insured as Lessor's interest may appear. Lessee shall, at all times, keep Lessor supplied with certificates evidencing that such insurance is in effect, and that Lessor is named as an additional insured. Page 8 Lessee shall procure and maintain throughout the Lease Term, at Lessee's sole cost and expense, public liability insurance (including liquor liability) against all claims or actions arising from or incident to the business conducted by Lessee on or about the Premises or from or incident to any act or negligence of Lessee, or of the agents, employees, invitees or licensees of Lessee or of any other person or entity who, with or without authority of Lessee, enter upon or perform any act relating to the Premises; such insurance shall be in an amount approved by Lessor, but in any event not less than Five Million Dollars ($5,000,000) for injury to or death of one person, also including injury to or death of two or more persons and damage to property. In addition, Lessee shall cause any sublessee to procure and maintain, throughout the Lease Term and at no cost or expense to Lessor, a policy or policies of public liability and property damage insurance, with identical policy limits, including products liability insurance, issued by an insurance company or companies approved by Lessor. Lessor shall be named as an additional insured on said policies as Lessor's interest may appear. Lessee shall also procure and maintain business interruption insurance, which insurance shall be (in form and substance) satisfactory to Lessor. Lessee shall at all times keep Lessor supplied with certificates evidencing that such insurance is in effect and that Lessor is named as an additional insured. Lessee shall not do, omit to do, or permit to be done or omitted any act or thing upon the Premises that will invalidate or be in conflict with any such insurance policy. The amounts of insurance specified in this Section 2 shall be subject to review and adjustment by Lessor on every anniversary of the Commencement Date in Lessor's reasonable discretion, and shall in no event be permitted by Lessee to fall below amounts customary in the hotel and restaurant industry in the metropolitan area where the Premises are located. Lessee shall not be obligated to procure and maintain earthquake, flood or structural defect insurance on the improvements on the Premises, unless required by law. Lessor and Lessee each hereby waive their entire right to recovery against the other party, and the other party's officers, directors, agents, representatives, employees, successors and assigns, with respect to any loss or damage, including any consequential damage, to the insured party's property caused or occasioned by any peril (including negligent acts) that is actually covered by any policy or policies of insurance required to be carried by the insured party and under that such waiver of subrogation is permitted. Section 3. Taxes: Lessee shall pay before delinquency all real and personal property taxes and assessments levied upon or against the Premises imposed by any state, county or local government during the Lease Term. Real and personal property taxes shall be prorated as of the Commencement Date. Real and personal property taxes payable for the last Lease Year shall be prorated as of the termination date of this Lease. Lessee shall have the right before any delinquency occurs to contest the amount or validity of any such tax by appropriate legal proceedings, but this shall not be deemed or construed in any way as relieving, modifying or extending Lessee's covenant to pay any such tax prior to delinquency. Page 9 ARTICLE VIII DESTRUCTION Section 1. Total Destruction: If thirty percent (30%) or more of the total guest rooms (the "Total Rooms") available for rental at the Premises should be totally destroyed, either Lessor or Lessee may elect to terminate this Lease upon giving the other party 30 days' written notice, and all insurance proceeds, if any, payable as a result of the destruction shall be paid to Lessor. Lessor and Lessee each expressly agree that prior to electing to terminate this Lease as permitted in this Section 1, such party will first attempt to negotiate in good faith with the other party towards an appropriate amendment to this Lease to take into account such destruction, including an equitable abatement of rent, and will only give such notice of termination after a good faith attempt towards such negotiation. Section 2. Other Destruction: If less than thirty percent (30%) of the Total Rooms should be destroyed, or if thirty percent (30%) or more of the Total Rooms are destroyed and neither Lessor nor Lessee elects to terminate this Lease as permitted under the foregoing Section 1 of this Article VIII, the Premises shall be repaired or reconstructed (which for purposes of this Article VIII shall include refurnishing and re-equipping destroyed Furnishings) in accordance with subparagraphs (a) through (c) hereof as speedily as possible at Lessor's sole cost and expense (but only if insurance proceeds are sufficient for such purposes); such repairs or reconstruction shall conform to all applicable laws, ordinances and regulations and be at least comparable to the quality of the original improvements; provided, however, that if this Lease is not terminated under Section 1 of this Article VIII, the proceeds of any insurance payable as a result thereof shall be applied toward the reconstruction of the Premises, and if such proceeds are insufficient to complete such reconstruction, Lessee shall be obligated to provide the additional funds for the reconstruction, and this Lease shall remain in full force and effect. If Lessee does not provide such additional funds for reconstruction, Lessor shall, at its sole option, have the right to terminate this Lease. (a) If the destruction costs Fifty Thousand Dollars ($50,000) or less to repair or reconstruct, Lessee shall be entitled to receive and retain any and all insurance proceeds payable as a result of the destruction and shall use same for the repair or reconstruction of the Premises. (b) If the destruction costs more than Fifty Thousand Dollars ($50,000), but not more than Two Hundred Fifty Thousand Dollars ($250,000), to repair or reconstruct, Lessor shall be entitled to receive any and all insurance proceeds payable as a result of the destruction, shall hold such proceeds in escrow and shall pay such proceeds to Lessee upon receipt of certificates from Lessee's contractor or architect (or from Lessee, if Lessee shall act as its own contractor) that said repair or reconstruction has been completed. Before making any such payment, however, Lessor shall have the right to make such inspections as Lessor deems necessary to assure itself that the work required to be performed has been so performed. Lessor shall make payments out of such proceeds as the repair or reconstruction progresses, in accordance with certificates from Lessee's contractor and subject to the inspection of Lessor; provided, however, that the last such payment shall not be made until after the expiration of the period for filing of mechanic's or similar liens without any such lien having been filed. (c) If the destruction costs more than Two Hundred Fifty Thousand Dollars ($250,000) to repair or reconstruct, Lessor shall be entitled to receive any and all insurance Page 10 proceeds payable as a result of the destruction, shall hold such proceeds in escrow and shall pay such proceeds out in the following manner: (i) Lessee shall obtain firm bids for the repair or reconstruction of the Premises from three or more qualified contractors other than Lessee. (ii) Lessee shall submit said bids to Lessor. Thereafter, Lessee shall, with Lessor's prior approval, hire one of the bidding contractors to do the repair or reconstruction and shall provide in said contract that the contractor shall provide performance, labor and materials bonds or other appropriate security to insure complete repair or reconstruction of the Premises in accordance with such contractor's bid, free of liens, in the full amount of the estimated cost thereof. (iii) If the amount estimated by the contractor chosen to complete the repair or reconstruction should be in excess of the amount of the insurance proceeds, if any, Lessor shall have the right to terminate this Lease unless Lessee shall deposit with Lessor sufficient additional monies to create a fund that shall equal the difference. Title to such insurance funds shall reside in Lessor who shall have the sole right to said funds. (iv) Lessor shall make payments out of the insurance proceeds and the aforesaid fund as the repair or reconstruction progresses. In the event that any sum deposited by Lessee remain after completion of the repair or reconstruction, such sums shall be paid to Lessee. Section 3. Abatement of Rent: Unless otherwise expressly provided herein, there shall be no abatement or reduction of rent in the event of any destruction of less than thirty percent (30%) of the Total Rooms on the Premises, and Lessee expressly waives the provisions of any law that purports to effect a termination of this Lease upon such destruction. Section 4. Disputes: If there should be any dispute as to whether any work required to be performed under this Article VIII has been performed, said dispute shall be settled by Arbitration (as defined in Article XVII, Section 11 hereof). Section 5. Constructive Destruction: In the event that the Premises or any part thereof shall be declared unsafe or unfit for occupancy by any authorized public agency for any reason and the cause of such declaration is capable of cure through repair or reconstruction, then the provisions of Section 2 of this Article VIII shall be applicable as if a destruction of the type referred to therein had occurred. In the event that any authorized public agency shall declare the Premises or any part thereof unsafe or unfit for occupancy by reason of the act, or failure to act by Lessee, and the cause of such declaration is not capable of cure through repair or reconstruction, this Lease shall nevertheless remain in full force and effect, with no reduction or abatement in rent. In the event that the Premises or any party thereof shall be declared unsafe or unfit for occupancy due to any other reason, and the cause of such declaration is not capable of cure through repair or reconstruction, then the provisions of Section 1 of this Article VIII shall be applicable as if a destruction of the type referred to therein had occurred. Page 11 ARTICLE IX EMINENT DOMAIN Section 1. Definitions: The term "eminent domain" shall include both the exercise of the power of eminent domain or any similar governmental power, whether by public authority or a private corporation, and any purchase or other acquisition in lieu of or in exercise of condemnation. The expression "date of taking" means the date on which actual physical possession is taken by the condemning, purchasing or acquiring entity. Section 2. Right of Termination: If thirty percent (30%) or more of the Total Rooms should be taken under the power of eminent domain, either party shall be permitted to terminate this Lease upon giving the other party not less than 30 days' written notice; provided, however, that prior to the giving of such notice of termination, both parties shall have been unable to negotiate an abatement of the Rent satisfactory to both parties after a good faith attempt by both parties to effect such an abatement. If less than thirty percent (30%) of the Total Rooms on the Premises should be taken under the power of eminent domain, this Lease shall remain in full force and effect. Section 3. Damages Upon Termination: In the event of a termination of this Lease pursuant to Section 2 of this Article IX by reason of the taking under the power of eminent domain of thirty percent (30%) or more of the Total Rooms, Lessor and Lessee shall divide the amount of the award for such taking based upon the appraised value of their respective interests as determined in the eminent domain proceeding or by independent appraisal. Section 4. Assignment of Rights: Subject to the right to receive payments as provided in Section 3 of this Article, Lessee hereby assigns to Lessor all rights or interests Lessee may have now or hereafter in any such condemnation award. In the event of a termination under this Article IX, Lessor and Lessee shall have no liability thereafter one to the other hereunder with respect to the property taken for the period after said termination takes place. Section 5. Abatement of Rent: Unless otherwise expressly provided herein, in the event of any taking under the power of eminent domain of less than thirty percent (30%) of the Total Rooms, rent shall not be abated, and the Lease Term shall not be reduced in any way, and Lessor and Lessee shall each be entitled to their respective equitable share of any award for the use or estate taken. If a result of the taking is to necessitate expenditures for changes, repairs, alterations, modifications, or reconstruction to restore the Premises or the furnishings therein to their condition at the date of the taking, Lessor shall receive, hold and disburse the award in trust for such work. At the completion of the work and the discharge of the Premises from all liens and claims, Lessor and Lessee shall divide any surplus based on the relative percentage value of their respective interests in the Premises . Section 6. Temporary Taking: In the event of any taking of all or any part or parts of the Premises for a period ending before the expiration date of the Lease Term, neither the Lease Term nor the rent shall be reduced or abated in any way, and Lessee shall be entitled to any award for the use or estate taken. If a result of the taking is to necessitate expenditures for changes, repairs, alterations, modifications, or reconstruction to restore the Premises or the Furnishings to their condition at the time of the taking, Lessee shall receive, hold, and disburse the award in trust for such work. At the completion of the work and the discharge of the Premises from all liens and claims, Lessee shall be entitled to any surplus and shall be liable for any deficit. Page 12 ARTICLE X ASSIGNMENT AND SUBLETTING Section 1. Lessee: Lessee may not assign this Lease, or any interest therein, or sublet the Premises, or any part thereof, without Lessor's prior written consent, which consent shall not be unreasonably withheld. At Lessor's option, Lessee shall, concurrently with the execution of each sublease, assign to Lessor all of Lessee's right, title and interest in the said sublease as additional security for the performance of Lessee's obligations under this Lease. Lessee agrees to execute an assignment of rents or such other documents or instruments as Lessor reasonably requests to evidence such assignment. Except as permitted by this Section 1, any attempt to assign this Lease, or any interest therein, or any rights thereunder, or to sublease the Premises, or any part thereof, shall be null and void ab initio. For purposes of this Section 1, an assignment of this Lease shall be deemed to include the transfer of a majority of Lessee's outstanding interests; provided, however, that transfers between existing stockholders or partners and transfers of stock or partnership interests on the death of any stockholder or partner, whether by will or intestacy, regardless of the amount so transferred, shall not constitute an assignment of this Lease. Section 2. Lessor: Lessor shall have the right, at any time, to freely assign all or any part of Lessor's interest in this Lease. ARTICLE XI BANKRUPTCY If, during the term hereof, there is filed by or against Lessee, in any court pursuant to any statute or law of either the United States or any state, a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of Lessee's property, and within 90 days thereafter, said petition is not discharged, or if Lessee makes an assignment for the benefit of creditors or petitions for or enters into an arrangement with creditors, this Lease, at the sole option of Lessor exercisable within a reasonable time after notice of the happening of any one or more of such events, may be canceled and terminated. Such cancellation and termination will be effective retroactively as of the expiration of said period of 90 days or as of the date of such assignment or of such petitioning for or entering into, in which event neither Lessee nor any person or entity claiming through or under Lessee by virtue of any statute, law or order of any court shall be entitled to possession or to remain in possession of the Premises, but shall forthwith quit and surrender the Premises to Lessor. In the event of a termination of this Lease pursuant to this Article XI, an Event of Default shall have deemed to occur under this Lease, and Lessor shall have all of the rights and remedies set forth in Article XII, Section 2 hereof. ARTICLE XII REMEDIES Section 1. Defaults: Unless permitted by the terms of this Lease or consented to by Lessor, upon the occurrence of any of the events designated hereunder as Paragraphs (a), (b), (c) and (d), an Event of Default shall have occurred under this Lease, and Lessor shall have all of the rights and remedies set forth in Section 2 of this Article XII: (a) Lessee shall fail to pay any monies payable by Lessee to Lessor or otherwise required hereunder to be paid by Lessee, including but not limited to the Basic Rent Page 13 or the Percentage Rent, and such failure shall continue for five days after written notice by Lessor or any other party to whom such obligation shall be payable of such failure; or (b) Lessee shall permit the Premises to become vacant or deserted, and Lessee shall fail to occupy or cause to be occupied the vacated or deserted portion of the Premises within 10 days after written notice from Lessor; or (c) Lessee shall default in the performance of any of Lessee's obligations hereunder, including, without limitation, the obligation to cause the Premises to remain occupied, and shall fail to cure such default within 30 days after written notice from Lessor (or if the default is of such a nature that the default cannot be cured within said 30-day period if Lessee shall not commence the cure of such default during such 30-day period and proceed diligently with the cure thereof); or (d) Any attachment or execution shall be issued against Lessee's property (whether or not contained on the Premises), the Premises or a portion thereof shall be taken or occupied or attempted to be taken or occupied in connection with such attachment or execution by someone other than Lessee, and such attachment or execution shall not be released, discharged, or adequately bonded within 30 days thereafter. Section 2. Remedies Upon Default: Upon the occurrence of an Event of Default, in addition to all other remedies available at law or in equity, Lessor shall have the following remedies: (a) The right to terminate Lessee's right to possession (including the right of re-entry) in any manner permitted by law; (b) Upon termination of such right to possession or upon abandonment of the Premises by Lessee, Lessor may recover from Lessee (i) the worth at the time of award of the unpaid rent that had been earned at the time of termination, calculated by allowing interest on such unpaid rent at the lesser of ten percent (10%) per annum or the highest interest rate allowable under applicable law at the time of award; (ii) the worth at the time of award (calculated by allowing interest as in clause (i) above) of the amount by which the unpaid rent that would have been earned after termination, until the time of award, exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; (iii) the worth at the time of award (calculated by discounting such amount to present value at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%) per annum) of the amount by which the unpaid rent for the balance of the Lease Term, after the time of award, exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all of the detriment proximately caused by Lessee's failure to perform Lessee's obligations under this Lease, or that in the ordinary course of things would be likely to result therefrom; (c) If there should be an abandonment, without a termination by Lessor of Lessee's right to possession, this Lease shall continue in effect (unless and until there shall be such a termination), and Lessor may enforce all rights and remedies under this Lease, including, without limitation, the right to recover the rent (including, without limitation, all amounts payable hereunder) as the rent becomes due under this Lease. Such abandonment shall be an Event of Default and shall be grounds for termination, at Lessor's sole option, of such right to possession at any time unless and until (i) such default shall be cured by occupancy by a permitted assignee or sublessee or reoccupancy by Lessee; and (ii) any other Page 14 Event of Default shall have been cured. No acts of maintenance or preservation of the Premises by Lessor, nor efforts to relet the Premises or a portion thereof, shall be deemed to constitute a termination of Lessee's right to possession; (d) In the event of the exercise by Lessor of any one or more of Lessor's rights and remedies hereunder, Lessee expressly waives, to the maximum extent permitted by applicable law, any and all rights of redemption granted by or under any present or future law; (e) Lessee hereby waives, to the maximum extent permitted by applicable law, (i) all claims and demands against Lessor for damages or loss arising out of or in connection with any re-entering and taking possession of the Premises as permitted by law, and (ii) all claims for damages or loss arising out of or in connection with any destruction of or damage to the Premises, or for any loss of property belonging to Lessee or to any other person or entity that may be in or upon the Premises at the time of such re-entry; (f) Upon taking possession of the Premises, Lessor may, at its sole option, remove all of Lessee's property therefrom and store the same at a public warehouse or elsewhere at the cost and for the account of Lessee. No re-entry nor any reletting under this Article XII shall be deemed to constitute a surrender or termination of this Lease, or of any of the rights reserved by Lessor hereunder, or a release of Lessee from any of Lessee's obligations hereunder, unless Lessor shall specifically notify Lessee, in writing, to that effect. No such reletting shall preclude Lessor from thereafter at any time terminating this Lease as herein provided; and, (g) The various rights, options, elections, powers and remedies of Lessor contained in this Lease shall be cumulative, and no one of them shall be deemed to be exclusive of any of the others or of any right or priority allowed by law or in equity. Section 3. Advances: If Lessee shall default in the observance or performance of any term or covenant on Lessee's part to be observed or performed under or in connection with this Lease, Lessor may, but without obligation so to do, in addition to any and all other rights and remedies that Lessor has or may have hereunder at law or in equity, immediately or at any time thereafter perform the same for the account of Lessee. If Lessor makes any expenditure or incurs any obligation for the payment of money in connection therewith, including, without limitation, attorneys' fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest thereon at the then-maximum lawful rate (or, if there shall be none, at a floating rate five percentage points (5%) above Wells Fargo Bank's announced "prime rate"), shall be deemed to be additional rent hereunder and shall be paid by Lessee to Lessor within 10 days after rendition of a bill to Lessee therefor. ARTICLE XIII SURRENDER OF POSSESSION Section 1. Surrender: At the expiration by lapse of time or other termination of the Lease Term, Lessee shall surrender the Premises in good condition and repair, reasonable wear and tear excepted. Section 2. Furnishings: Upon the expiration or other termination of the Lease Term, all Furnishings and other personal property shall immediately become the property of Lessor. Page 15 \ Section 3. No Waiver: No agreement to accept a surrender of this Lease and the Premises, or to waive any provision hereof, shall be valid unless in writing and signed by Lessor. The receipt by Lessor of rent with knowledge of any breach of this Lease by Lessee (other than the failure by Lessee to pay the rent being accepted) shall not be deemed a waiver of such breach. No acceptance by Lessor of a lesser amount than the Basic Rent or Percentage Rent actually due shall be deemed an accord and satisfaction or shall prejudice Lessor's right to recover the balance of such rent or to pursue any other right or remedy. Lessee hereby waives any right to seek damages based upon a claim that Lessor has unreasonably withheld its consent or approval under any provision of this Lease, and acknowledges that Lessee's sole remedy shall be to seek declaratory or injunctive relief. ARTICLE XIV SUBORDINATION This Lease shall be subject and subordinate to, and Lessee covenants that it will upon Lessor's request execute an agreement subordinating this Lease to, the lien, terms and provisions of any mortgage, deed of trust, deed to secure debt or other encumbrance that may hereafter be placed upon the Premises by Lessor; provided, however, that Lessor first executes (and procures execution by each and every secured party or beneficiary under the encumbrance) and records an agreement that provides, among other things, that if and as long as Lessee is not in default under the terms of this Lease, the secured party or beneficiary: (a) Will at all times and under all conditions (including, without limitation, any foreclosure or other repossession proceedings) recognize, permit and continue the tenancy of Lessee or its permitted successors and assigns on the Premises under the provisions of and for the then-remaining term of this Lease; and (b) Will require that any purchaser or purchasers acquiring the Premises take the Premises subject to such agreement so that the rights of Lessee, or those holding under Lessee, shall not be interfered with or affected in any manner or means. ARTICLE XV QUIET ENJOYMENT Section 1. Covenant: Lessor hereby covenants and agrees with Lessee that, conditioned upon Lessee's prompt payment of the rent and Lessee's performance of all of the terms, covenants and conditions hereof to be performed or observed by Lessee, and subject to the provisions of Section 2 of this Article XV, Lessee may peaceably and quietly enjoy the Premises in accordance with the provisions of this Lease. Section 2. Inability to Perform: If, by reason of a strike, labor troubles, act of God, or other cause outside Lessor's control, including, without limitation, governmental preemption in connection with a national emergency, any rule, order or regulation of any governmental agency, or conditions of supply and demand that are affected by war (whether or not declared by Congress) or other emergency, Lessor shall be unable to fulfill Lessor's obligations under this Lease or shall be unable to supply any service that Lessor is obligated to supply to Lessee that does not affect Lessee's ability to perform hereunder, this Lease and Lessee's obligation to pay rent hereunder shall in no way be affected, impaired or excused. Page 16 ARTICLE XVI INDEMNITY Without limiting or modifying anything in this Lease, Lessee shall, to the maximum extent permitted by applicable law, indemnify Lessor for all expenses, damages or fines incurred or suffered by Lessor, by reason of any breach, violation or nonperformance by Lessee, or its agents or employees or invitees, of any covenant, condition or provision of this Lease. ARTICLE XVII MISCELLANEOUS Section 1. Additional Rent. Any and all monetary obligations of Lessee under this Lease shall be deemed to be additional rent. Section 2. Notices: All notices to be delivered pursuant to this Lease shall be in writing and delivered in person or sent by registered or certified mail, to: LESSOR: LONG BEACH HOTEL ASSOCIATES, L.L.C. c/o Starwood Lodging Trust, General Partner 2231 East Camelback Road, Suite 410 Phoenix, AZ 85016 Attention: Ronald C. Brown, Sr. Vice President and Chief Financial Officer LESSEE: SLC OPERATING LIMITED PARTNERSHIP c/o Starwood Lodging Corporation, Managing General Partner 2231 East Camelback Road, Suite 400 Phoenix, AZ 85016 Attention: Nir E. Margalit, Secretary and General Counsel or to such other places as either party may designate in writing from time to time in the manner provided herein for giving notices. All such notices shall be deemed given when mailed. Section 3. Successors in Interest: Subject to the provisions set forth in Article X hereof, the obligations of Lessor and Lessee set forth in this Lease shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of both parties. Section 4. No Merger: The voluntary or other surrender of this Lease by Lessee or mutual cancellation thereof shall not work a merger, and shall, at Lessor's sole option, either terminate any and all existing subleases or subtenancies, or operate as an assignment to Lessor of any or all of such subleases or subtenancies. Page 17 Section 5. Excise Taxes: Lessee shall assume and pay to Lessor at the time of paying rent hereunder any excise, sales, gross receipts or other tax that may be imposed upon or measured by the gross amount of rent received by Lessor or by virtue of the letting of real property, under any law now in effect or hereinafter enacted. The foregoing provision shall not apply to any tax imposed upon or measured by net income from renting. Section 6. Survival: Lessee's obligation to observe and perform the terms and conditions of this Lease shall survive the expiration or termination of the Lease Term. Section 7. Attorneys' Fees. In the event that any action, suit or proceeding is commenced under or in connection with this Lease or for the recovery of possession of the Premises, the losing party shall pay to the prevailing party in any such action, suit or proceeding the reasonable attorneys' fees incurred in connection therewith, together with all costs and expenses of said prevailing party. Section 8. Counterparts: This Lease may be entered into in several counterparts, each of which shall be deemed an original when executed, and which together shall constitute but one and the same Lease. Section 9. Lessor's Disclaimer: The name "Starwood Lodging Trust" is the designation of Lessor, a Maryland real estate investment trust, and its trustees (as trustees but not personally) under a Declaration of Trust dated as of August 15, 1969, as amended as of June 6, 1988, and further amended from time to time, and all persons dealing with Lessor must look solely to Lessor's property for the enforcement of any claim against Lessor, as the trustees, officers, agents and security holders of Lessor assume no personal liability for obligations entered into on behalf of Lessor, and their respective properties shall not be subject to claims relating to any such obligation. Section 10. Franchise Affiliation; Ground Leases: Lessee agrees to operate the Premises in accordance with the rules and regulations of any franchise agreement under which the Premises are operated, and all expenses associated with maintaining said franchise shall be borne by the Lessee. Lessee, at Lessee's sole cost and expense, shall comply with the terms of any ground lease or similar agreement affecting the Premises. Section 11. Arbitration: All references in this Lease to the use of "Arbitration" shall mean an arbitration in accordance with the rules of the American Arbitration Association, or its successor. Notice of demand for arbitration shall be filed in writing with the other party and with the American Arbitration Association. The demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen. Nothing contained herein shall prevent any party from (i) seeking and obtaining equitable relief, including but not limited to prohibitory or mandatory injunctions, specific performance or extraordinary writs, nor (ii) joining any other party as defendant in any action brought by or against a third party. All fees and expenses of the arbitrators and all other expenses of the arbitration shall be paid as ordered by the arbitrators. Judgment may be entered upon the arbitrator's decision. Section 12. No Usury: If the interest rate on any obligation owed by Lessee to Lessor hereunder exceeds the highest lawful rate under any applicable law, such interest rate shall be reduced to the maximum legal limit. Section 13. Time: Time is of the essence of this Lease and of the performance or observance of every provision hereof. Page 18 Section 14. Holding Over: In the event Lessee remains in possession of all or any part of the Premises after the expiration of this Lease and without the execution of a new lease, Lessee shall be deemed to be occupying the Premises as a tenant from month to month at a rental equal to the Basic Rent and Percentage Rate and additional rent herein provided and otherwise subject to all the conditions, provisions and obligations of this Lease insofar as the same are applicable to a month-to-month tenancy. Section 15. Lessor's Right of Access: Lessor and its authorized agents shall be entitled to enter the premises at reasonable times after reasonable written notice, except in case of emergency, for the purpose of (i) inspecting the Premises; (ii) showing the Premises to prospective purchasers and lenders; (iii) posting notices of nonresponsibility and such notices as may be required by law to protect Lessor's interest in the Premises; and (iv) monitoring the observance and performance by Lessee of its obligations hereunder. Section 16. Estoppel Certificates: At any time and from time to time within 20 days after request by either party, the other party shall execute and deliver to the requesting party, or to such other recipient as the notice shall direct, a statement certifying that this Lease is unmodified and in full force and effect, or, if there have been modifications, that this Lease is in full force and effect as modified in the manner specified in the statement, and that there are no defenses or offsets claimed by the party making such statement other than those specified therein. The statement shall also state the dates to which the rent and all other charges have been paid in advance. The statement shall be such that it can be relied upon by any person or entity specified in the request. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY THE PARTIES. Section 17. Amendments. This Lease may be amended, extended or otherwise modified only by a writing signed by each of Lessee and Lessor. Lessor and Lessee acknowledge and confirm their mutual intention to review the terms and conditions hereof at such time following the Commencement Date as the parties determine to be appropriate and to make such modifications hereto, if any, as Lessor and Lessee then may agree are appropriate. [remainder of page left intentionally blank] Page 19 IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first written above. LESSOR: LESSEE: By: Long Beach Hotel Associates, L.P. By: SLC Operating Limited Partnership, a Delaware limited partnership By: Starwood Lodging Trust, By: Starwood Lodging Corporation, a Maryland real estate a Maryland corporation investment trust Its: Managing General Partner Its: General Partner By: /s/ Ronald C. Brown By: /s/ Nir E. Margalit ----------------------------- ------------------------------- Ronald C. Brown Nir E. Margalit Sr. Vice President, CFO Vice President, Secretary WITNESS: WITNESS: /s/ Gail Jackson /s/ Gail Jackson - ------------------------------------- -------------------------------- Print Name: Gail Jackson Print Name: Gail Jackson Page 20 EX-10.4 5 p70255exv10w4.txt EX-10.4 EXH. 10.4 (________________HOTEL) AMENDMENT OF LEASE THIS AMENDMENT (this "AMENDMENT") is made as of the 1st day of June, 2002, by and between SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership as lessor ("LESSOR"), AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation, as Lessee ("LESSEE"). WITNESSETH WHEREAS, Lessor and Lessee are parties to that certain lease agreement dated as of ________, 199_ concerning premises commonly known as the ________________ Hotel, _____________________________(the "LEASE"), the lessee's interest in which was assigned to Lessee on December 31, 1998; and WHEREAS, Lessor and Lessee desire to extend and amend the Lease on the terms and conditions set forth herein. NOW THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lessor and Lessee hereby agree as follows: 1. Unless otherwise defined herein, capitalized words and phrases defined in the Lease shall have the same definitions when used herein. 2. The expiration date of the Lease is extended to May 31, 2007. 3. Effective from and after June 1, 2002, the Basic Rent under Section IV.1(a)(i) of the Lease shall be $___________ per month. 4. Effective from and after June 1, 2002, the first sentence of Section IV.1(a)(ii) of the Lease is amended to read as follows: "(ii) For each Lease Year or portion thereof, a percentage rent, cumulated and adjusted monthly (the "Percentage Rent"), equal to the sum of percent (__%) of Lessee's "Gross Receipts" (as hereinafter defined) from the operation of Lessee's business in the hotel portion of the Premises (the "Rooms Percentage") during such Lease Year, plus Five percent (5%) of the "Gross Sales" (as hereinafter defined) of the business in the restaurant and lounge portions of the Premises during such Lease Year. Said sums shall be payable within 30 days after the end of each calendar month of such Lease Year and shall be accompanied by a detailed statement (certified by the chief accounting officer of Lessee) of Gross Receipts and Gross Sales. Lessee shall be entitled to a deduction, from the Percentage Rent payable in each monthly period, of all Basic Rent actually paid with respect to such monthly period." 5. Lessor and Lessee shall each have the right to initiate a renegotiation of the Basic Rent and Percentage Rent any time on or after June 1, 2003 if such party's revised projections for the Hotel vary significantly from its current projections on which it agreed to the rents stated in paragraphs 3 and 4 above. Each party agrees to make and/or consider such requests in good faith; provided, that if a party requests a renegotiation of the rents and the parties are unable to agree on revised terms, the sole right of the requesting party shall be to terminate the Lease on at least 90 days notice to the other party. 5. Lessee's address for notices under Section XVII.2 of the Lease is amended to read as follows: Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue White Plains, New York 10604-3500 Attn: General Counsel 6. Except as amended hereby all terms and conditions of the Lease remain unmodified and in full force and effect. IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment as of the date first set forth above. LESSOR: LESSEE: SLT REALTY LIMITED PARTNERSHIP, STARWOOD HOTELS & RESORTS a Delaware limited partnership, WORLDWIDE, INC., By: Starwood Hotels & Resorts, a Maryland corporation a Maryland real estate investment trust Its: General Partner By: /s/ Alan Schnaid By: /s/ Jeff Drew _________________________ _________________________ Name: Alan Schnaid Name: Jeff Drew Title: Vice President Title: Senior Vice President 2 EX-10.13 6 p70255exv10w13.txt EX-10.13 EXHIBIT 10.13 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT among ITT CORPORATION, SLT REALTY LIMITED PARTNERSHIP, SHERATON PHOENICIAN CORPORATION and STARWOOD PHOENICIAN CMBS I LLC -------------------------- Dated as of January 27, 1999 --------------------------- $3,282,000,000 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999 ("First Modification"), among ITT CORPORATION, a Nevada Corporation (the "Borrower"), successor-in-interest to Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Corporation"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender"), successor-in-interest to Starwood Hotels & Resorts, a Maryland real estate investment trust (the "Trust"), SHERATON PHOENICIAN CORPORATION, a Delaware corporation ("Sheraton Phoenician") and STARWOOD PHOENICIAN CMBS I LLC, a Delaware limited liability company (the "Guarantor"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Loan Agreement referred to below. WITNESSETH: WHEREAS, the Trust has previously made a loan to the Corporation in the maximum principal amount of $3,282,000,000 (the "Loan") pursuant to that certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"), as assigned by the Trust to the Lender pursuant to that certain General Assignment dated as of February 23, 1998 and as evidenced by that certain Promissory Note, dated as of February 23, 1998 (the "Original Note"); WHEREAS, the Corporation assigned its existing rights and obligations under the Loan Agreement to the Borrower pursuant to that certain Assignment and Assumption Agreement dated as of December 17, 1998; WHEREAS, in connection with the Loan Agreement, Sheraton Phoenician Corporation ("Sheraton Phoenician") executed a certain Deed of Trust, Security Agreement and Financing Statement, dated as of February 23, 1998, in favor of the Trust and covering the premises known as the Sheraton Phoenician (the "Sheraton Phoenician Property"), as assigned to Lender pursuant to that certain Assignment of Mortgage dated as of February 23, 1998 (the "Phoenician Deed of Trust"); WHEREAS, the Guarantor and certain subsidiaries of the Trust and the Corporation are entering into a certain Loan Agreement dated as of January_____, 1999 and among the borrowers named therein, Starwood Operator I LLC and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc., as lender (as amended from time to time, the "CMBS Loan Agreement"); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, the Borrower, Sheraton Phoenician and Lender have entered into a certain Agreement of Severance of Note and Modification of Deed of Trust, dated as of January __, 1999 (the "Severance Agreement"), pursuant to which the parties thereto have agreed (i) to sever the Original Note into two notes, one of which is to evidence a portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $2,489,467,038.25 and the other of which is to evidence the remaining portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $210,000,000 (the "Substitute Note (Phoenician)") and (ii) to amend the Phoenician Deed of Trust to secure only the indebtedness evidenced by the Substitute Note (Phoenician); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to provide for, among other things, (i) the severance of the Original Note and the modification of the Phoenician Deed of Trust, (ii) the guaranty by the Guarantor for all payments due and payable under the Substitute Note (Phoenician) on a non-recourse basis, (iii) the extension of the Final Maturity Date of the Loan to February 23, 2014 and, additionally, the further extension of the Final Maturity Date of the Loan upon any extension of the maturity date of the loan advanced under the CMBS Loan Agreement, and (iv) the amendment of certain definitions under the Loan Agreement. NOW, THEREFORE, the parties hereto have agreed as follows: 1. All references to "Final Maturity Date" under the Loan Agreement, as it applies to the Substitute Note (Phoenician), shall hereby be amended to mean "February 23, 2014". Moreover, upon the exercise of any option to extend the maturity date of the loan under the CMBS Loan Agreement (the "CMBS Loan Maturity Date Extension"), the Final Maturity Date under the Loan Agreement, as it applies to the Substitute Note (Phoenician), shall be further extended to February 23, 2029 or one (1) year beyond any such CMBS Loan Maturity Date Extension, whichever shall be a later date. 2. All references to "Note" under the Loan Agreement shall hereby be modified to include the Substitute Note (Phoenician) and the Original Note, as severed pursuant to the Severance Agreement to constitute two separate notes. 3. The parties hereto acknowledge and agree that the Phoenician Deed of Trust, as amended, shall secure a portion of the outstanding principal balance of the Original Note, with interest thereon pursuant to the Substitute Note (Phoenician) and the Loan Agreement, as hereby modified, equal to $210,000,000, and the other Mortgages (as defined in the Loan Agreement) shall secure the remaining portion of the outstanding principal balance under the Original Note, with interest thereon, equal to $2,489,467,038.25. Notwithstanding anything to the contrary contained herein, the portion of the outstanding principal balance of the Substitute Note (Phoenician) secured by the Phoenician Deed of Trust, as amended, together with all accrued and unpaid interest thereon and all other sums due in connection therewith (the "Guaranteed Amount") shall not exceed an amount which, when combined with the outstanding principal balance, with interest thereon, of the loan advanced pursuant to the CMBS Loan Agreement and allocated to the Sheraton Phoenician Property, together with the amount of all other Permitted Indebtedness (as defined in the CMBS Loan Agreement) on the Sheraton Phoenician Property under the CMBS Loan Agreement shall not exceed one hundred percent (100%) of the total market value of the premises secured by the Phoenician Deed of Trust, as amended. -2- 4. The parties hereto acknowledge and agree that the Guarantor shall guarantee to the Lender full and prompt payment when due of the principal of, and interest on, the Guaranteed Amount. The liability and obligation of the Guarantor or any member, officer, director, successor or assign of the Guarantor, to perform and observe and fulfill its obligations set forth hereunder shall not be enforced by any action or proceeding wherein damages or any money judgment or any deficiency judgment or any judgment establishing any personal obligation or liability shall be sought, collected or otherwise obtained against the guarantor or any of its officers, members, directors, partners, successors or assigns, it being agreed that the Lender shall only look to the interest of the Guarantor in the Sheraton Phoenician Property for the satisfaction of any obligation of the Guarantor hereunder. 5. The terms and provisions of this First Modification shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 6. This First Modification shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws. 7. This First Modification may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 8. The parties hereto acknowledge and agree that the name "Starwood Hotels & Resorts" is a designation of the Trust and its trustees (as trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated as of June 6, 1988 and as further amended and restated as of January [6], 1999, and as the same has been or may be amended from time to time thereafter, and that the parties hereto shall look solely to the Trust's assets for the enforcement of any claims against the Trust, as the trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. The foregoing shall govern all direct and indirect obligations of the Trust under this First Modification. [SIGNATURE PAGE FOLLOWS] -3- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this First Modification to be duly executed and delivered as of the date first above written. BORROWER: ITT CORPORATION, a Nevada corporation By: /s/ Jonathan H. Yellen ---------------------------------------------- Name : Jonathan H. Yellen Title: Authorized Signatory LENDER: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Jonathan H. Yellen ------------------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory SHERATON PHOENICIAN CORPORATION, a Delaware Corporation By: /s/ Jonathan H. Yellen ---------------------------------------------- Name : Jonathan H. Yellen Title: Authorized Signatory GUARANTOR: STARWOOD PHOENICIAN CMBS I LLC, a Delaware limited liability company By: /s/ Jonathan H. Yellen --------------------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory -4- EX-10.14 7 p70255exv10w14.txt EX-10.14 EXHIBIT 10.14 ================================================================================ SECOND MODIFICATION TO LOAN AGREEMENT among ITT CORPORATION, SLT REALTY LIMITED PARTNERSHIP, STARWOOD HOTELS & RESORTS and STARWOOD HOTELS & RESORTS HOLDINGS, INC. ----------------------------------------------- Dated as of December 30, 1999 ----------------------------------------------- (Original Principal Amount of up to $3,282,000,000) ================================================================================ -1- SECOND MODIFICATION TO LOAN AGREEMENT, dated as of December 30, 1999 ("Second Modification"), among ITT CORPORATION, a Nevada Corporation (the '"Borrower" or "ITT"), successor-in-interest to Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Corporation"). SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender" or "SLT Realty"), STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust (the "Trust"), and STARWOOD HOTELS & RESORTS HOLDINGS, INC., an Arizona corporation ("Starwood Holdings"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Loan Agreement, as amended, referred to below. WITNESSETH: WHEREAS, the Trust previously made a loan to the Corporation in the maximum principal amount of up to $3,282,000,000 (the "Loan") pursuant to that certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Original Loan Agreement"); as assigned by the Trust to the Lender pursuant to that certain General Assignment dated as of February 23, 1998 and as evidenced by that certain Promissory Note, dated as of February 23, 1998 (the "Original Note"); WHEREAS, the Corporation assigned its existing rights and obligations under the Original Loan Agreement to the Borrower pursuant to that certain Assignment and Assumption Agreement dated as of December 17, 1998; WHEREAS, in connection with the transactions contemplated under a certain Loan Agreement dated as of January 27, 1999 (as amended from time to time, the "CMBS Loan Agreement"), Borrower, the Sheraton Phoenician Corporation and Lender entered into a certain Agreement of Severance of Note and Modification of Deed of Trust, dated as of January 27, 1999 (the "Severance Agreement"), pursuant to which the parties thereto agreed (i) to separate the Original Note into two notes, one of which evidenced a portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $2,489,467,038.25 (the "Mortgage Note") and the other of which evidenced the remaining portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $210,000,000 (the "Substitute Note (Phoenician)") and (ii) to amend a certain Deed of Trust, Security Agreement and Financing Statement dated as of February 23, 1998 (the "Phoenician Deed of Trust") to secure only the indebtedness evidenced by the Substitute Note (Phoenician) (all of the foregoing being herein referred to as the "Phoenician Note Transaction"); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement and the Phoenician Note Transaction, the parties thereto agreed to modify the Original Loan Agreement by First Modification to Loan Agreement dated as of January 27, 1999 (as modified, the "Loan Agreement") to provide for, among other things, (i) the severance of the Original Note and the modification of the Phoenician Deed of Trust, (ii) the extension of the Final Maturity Date of the Loan to February 23, 2014 and, additionally, the further extension of the Final Maturity Date of the Loan upon any extension of the maturity date of the loan advanced -2- under the CMBS Loan Agreement, and (iii) the amendment of certain definitions under the Loan Agreement; WHEREAS, on or about April 27, 1999, the Corporation, ITT Sheraton Corporation, 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 that certain Stock Purchase Agreement (as amended or modified from time to time, 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 and notes receivable from Metropolitan Entertainment Group, a Canadian partnership, which partnership interests represent ninety-five percent (95%) of the economic ownership interest therein, and (iii) the Halifax Sheraton Hotel owned by Clocktower Hotel Limited Partnership, in each case, subject to and in addition to all of the other matters described in the Caesars Stock Purchase Agreement (all of the foregoing, together with the matters described in the following paragraphs, being collectively referred to herein as the "Caesars World Transaction"); WHEREAS, certain real property assets relating to the Caesars World Transaction (collectively, the "Caesars World Assets") presently secure the Mortgage Note, and it is a condition to the consummation of the Caesars World Transaction that the Caesars World Assets be released from the collateral security for the Mortgage Note; WHEREAS, in connection with the release of the Caesars World Assets, the Corporation and ITT desire to (i) reduce the outstanding principal balance of the Mortgage Note by $1,200,000,000.00 (the "Undercollateralized Amount") in order to prevent the Mortgage Note from being Undercollateralized after the release of the Caesars World Assets (the amount of such reduction being referred to herein as the "Mortgage Reduction Amount"), and (ii) consummate certain other transactions in connection therewith (all of the foregoing, together with the next recital, being referred to herein, collectively, as the "Caesars Mortgage Note Transaction"); WHEREAS, in order to effectuate all of the foregoing, the Corporation, the Trust, SLT Realty and ITT have agreed pursuant to a certain Agreement of Severance of Note and Release of Security Instruments dated of even date herewith, to separate the Mortgage Note into two notes (which after giving effect to such separation the two notes shall sometimes be referred to herein as the "New Mortgage Note" and the "Unsecured Note") so that, immediately after giving effect to such separation, (i) the principal amount of the New Mortgage Note shall be in an amount equal to the balance of the Mortgage Note prior to the separation into two new notes, less the Mortgage Reduction Amount, (ii) the outstanding principal amount of the new Unsecured Note shall be equal to the Mortgage Reduction Amount, and (iii) the aggregate outstanding principal amount of both the New Mortgage Note and the new Unsecured Note immediately subsequent to the consummation of the Caesars Mortgage Note Transaction shall be equal to the outstanding principal amount of the Mortgage Note immediately prior to the consummation of the Caesars Mortgage Note Transaction; -3- WHEREAS, prior to the consummation of the transactions contemplated under the Caesars Mortgage Note Transaction, the Mortgage Note was secured by, inter alia, certain Mortgages (as defined in the Loan Agreement) (other than the Phoenician Deed of Trust); WHEREAS, upon completion of the separation of the Mortgage Note into the New Mortgage Note and the Unsecured Note, (i) the Trust desires to cause Lender to distribute to the Trust the Unsecured Note and (ii) immediately thereafter, the Trust desires to distribute the Unsecured Note to Starwood Holdings; and WHEREAS, in connection with the transactions contemplated under the Caesars Mortgage Note Transaction, the parties hereto desire to modify the Loan Agreement to provide for, among other things, (i) (a) the separation of the Mortgage Note and (b) the modification of the Mortgages (other than the Phoenician Deed of Trust) and the discharge and release of the liens of the Mortgages set forth on Exhibit A hereto from such Mortgages so that the remaining Mortgages shall secure only the New Mortgage Note and all of the indebtedness evidenced thereunder, (ii) (a) the assignment of all of Lender's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith to the Trust and (b) the subsequent assignment of all of the Trust's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith to Starwood Holdings, and the assumption by Starwood Holdings of all of such right, title and interest and (iii) the amendment of certain definitions under the Loan Agreement; NOW, THEREFORE, the parties hereto have agreed as follows: 1. All references to "Note" under the Loan Agreement shall hereby be modified to include (i) the Substitute Note (Phoenician), (ii) the New Mortgage Note and (iii) the Unsecured Note. 2. The parties hereto acknowledge and agree that (i) the liens of the Mortgages set forth on Exhibit A hereto shall be released and discharged from such Mortgages and (ii) the remaining Mortgages (other than the Phoenician Deed of Trust) shall secure the outstanding principal balance under the New Mortgage Note, with interest thereon, equal to $1,289,467,038.25. 3. The parties hereto acknowledge, confirm and agree to (a) the assignment to the Trust of all of Lender's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith and (b) the subsequent assignment by the Trust to Starwood Holdings of all of the Trust's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith, and Starwood Holdings hereby assumes all of the "Lender's" obligations under the Loan Agreement (but only with respect to any obligations specific to the Unsecured Note). 4. The terms and provisions of this Second Modification shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. -4- 5. This Second Modification shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws. 6. This Second Modification is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Loan Agreement. 7. This Second Modification may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 8. The parties hereto acknowledge and agree that the name "Starwood Hotels & Resorts" is a designation of the Trust and its trustees (as trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated as of June 6, 1988 and as further amended and restated as of January 6, 1999, and as the same has been or may be amended from time to time thereafter, and that the parties hereto shall look solely to the Trust's assets for the enforcement of any claims against the Trust, as the trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. The foregoing shall govern all direct and indirect obligations of the Trust under this Second Modification. [SIGNATURE PAGE FOLLOWS] -5- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second Modification to be duly executed and delivered as of the date first above written. BORROWER: ITT CORPORATION, a Nevada corporation By: /s/ Alan M. Schnaid ----------------------------------------------- Name: Alan M. Schnaid Title: Vice President LENDER: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ David A. Hughes ------------------------------------------- Name: David A. Hughes Title: Vice President STARWOOD HOTELS & RESORTS HOLDINGS, INC., an Arizona corporation By: /s/ David A. Hughes ---------------------------------------------- Name: David A. Hughes Title: President STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust By: /s/ David A. Hughes ---------------------------------------------- Name: David A. Hughes Title: Vice President Exhibit A (Released Mortgages) 1. Mortgage between Starwood Hotels & Resorts and Boardwalk Regency Corp., Leisure Themes, Maritial Development Corp. and Atlantic HMO, Inc., dated as of February 23, 1998 and secured by property located at Caesars Atlantic City, 2100 Pacific Avenue, Atlantic City, New Jersey 08401. 2. Deed of Trust between Starwood Hotels & Resorts and Caesars Palace Realty Corp., dated as of February 23, 1998 and secured by property located at Caesars Palace, 3570 Las Vegas Blvd., South, Las Vegas, Nevada 89109. 3. Deed of Trust between Starwood Hotels & Resorts and Desert Palace, Inc., dated as of February 23, 1998 and secured by property located at Caesars Tahoe, 55 Highway 50, Stateline, Nevada 89449. EX-10.15 8 p70255exv10w15.txt EX-10.15 EXHIBIT 10.15 THIRD MODIFICATION TO LOAN AGREEMENT between ITT CORPORATION, STARWOOD HOTELS & RESORTS WORLDWIDE, INC. SLT REALTY LIMITED PARTNERSHIP, STARWOOD HOTELS & RESORTS and STARWOOD HOTELS & RESORTS HOLDINGS, INC. --------------------------------------------- Dated as of June 23, 2000 --------------------------------------------- THIRD MODIFICATION TO LOAN AGREEMENT, dated as of June 23, 2000 (this "Agreement"), between ITT CORPORATION, a Nevada Corporation (the "Borrower" or "ITT"), successor-in-interest to Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Corporation"), and SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender" or "SLT Realty"), STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust (the "Trust"), and STARWOOD HOTELS & RESORTS HOLDINGS, INC, an Arizona corporation ("Starwood Holdings"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Loan Agreement, as amended, referred to below. WITNESSETH: WHEREAS, the Trust previously made a loan to the Corporation in the maximum principal amount of up to $3,282,000,000 (the "Loan") pursuant to that certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Original Loan Agreement"), which Loan was assigned by the Trust to the Lender pursuant to that certain General Assignment dated as of February 23, 1998 and is evidenced, inter alia, by that certain Promissory Note, dated as of February 23, 1998 (the "Original Note"); WHEREAS, the Corporation assigned its existing rights and obligations under the Original Loan Agreement to the Borrower pursuant to that certain Assignment and Assumption Agreement dated as of December 17, 1998; WHEREAS, in connection with the transactions contemplated under a certain Loan Agreement dated as of January 27, 1999 (as amended from time to time, the "CMBS Loan Agreement"), Borrower, the Sheraton Phoenician Corporation and Lender entered into a certain Agreement of Severance of Note and Modification of Deed of Trust, dated as of January 27, 1999 (the "Severance Agreement"), pursuant to which the parties thereto agreed (i) to separate the Original Note into two notes, one of which evidenced a portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $2,489,467,038.25 (the "Mortgage Note") and the other of which evidenced the remaining portion of the outstanding principal balance of the Original Note, with interest thereon, equal to $210,000,000 (the "Substitute Note (Phoenician)") and (ii) to amend a certain Deed of Trust, Security Agreement and Financing Statement dated as of February 23, 1998 (the "Phoenician Deed of Trust") to secure only the indebtedness evidenced by the Substitute Note (Phoenician) (all of the foregoing being herein referred to as the "Phoenician Note Transaction"); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement and the Phoenician Note Transaction, the parties thereto agreed to modify the Original Loan Agreement by First Modification to Loan Agreement dated as of January 27, 1999 (as modified, the "Loan Agreement") to provide for, among other things, (i) the severance of the Original Note and the modification of the Phoenician Deed of Trust, (ii) the extension of the Final Maturity Date of the Loan to February 23, 2014 and, additionally, the further extension of the Final Maturity Date of the Loan upon any extension of the maturity date of the loan advanced under the CMBS Loan Agreement, and (iii) the amendment of certain definitions under the Original Loan Agreement; 1 WHEREAS, on or about April 27, 1999, the Corporation, ITT Sheraton Corporation, 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 that certain Stock Purchase Agreement (as amended or modified from time to time, 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 and notes receivable from Metropolitan Entertainment Group, a Canadian partnership, which partnership interests represent ninety-five percent (95%) of the economic ownership interest therein, and (iii) the Halifax Sheraton Hotel owned by Clocktower Hotel Limited Partnership, in each case, subject to and in addition to all of the other matters described in the Caesars Stock Purchase Agreement (all of the foregoing, together with the matters described in the following paragraphs, being collectively referred to herein as the "Caesars World Transaction"); WHEREAS, certain real property assets relating to the Caesars World Transaction (collectively, the "Caesars World Assets") secured the Mortgage Note, and, as a condition to the consummation of the Caesars World Transaction, the Caesars World Assets were required to be released from the collateral security for the Mortgage Note; WHEREAS, in connection with the consummation of the Caesars World Transaction and the release of the Caesars World Assets, the Corporation and ITT agreed to (i) reduce the outstanding principal balance of the Mortgage Note by $1,200,000,000 in order to prevent the Mortgage Note from being undercollateralized after the release of the Caesars World Assets (the amount of such reduction being referred to herein as the "Mortgage Reduction Amount"), and (ii) consummate certain other transactions in connection therewith (all of the foregoing, together with the next recital, being referred to herein, collectively, as the "Caesars Mortgage Note Transaction"); WHEREAS, in order to effectuate all of the foregoing, the Corporation, the Trust, SLT Realty and ITT entered into a certain Agreement of Severance of Note and Release of Security Instruments dated as of December 30, 1999, whereby the Mortgage Note was separated into two notes (the two notes being referred to herein as the "New Mortgage Note" and the "Unsecured Note"), so that (i) the principal amount of the New Mortgage Note was in an amount equal to the balance of the Mortgage Note prior to the separation into two new notes, less the Mortgage Reduction Amount, (ii) the outstanding principal amount of the new Unsecured Note was equal to the Mortgage Reduction Amount, and (iii) the aggregate outstanding principal amount of both the New Mortgage Note and the new Unsecured Note immediately subsequent to the consummation of the Caesars Mortgage Note Transaction was equal to the outstanding principal amount of the Mortgage Note immediately prior to the consummation of the Caesars Mortgage Note Transaction; WHEREAS, prior to the consummation of the transactions contemplated under the Caesars Mortgage Note Transaction, the Mortgage Note was secured by, inter alia, certain Mortgages (as defined in the Loan Agreement) (other than the Phoenician Deed of Trust); 2 WHEREAS, in connection with the transactions contemplated under the Caesars Mortgage Note Transaction, the parties additionally modified the Original Loan Agreement (as modified, the "Loan Agreement"), pursuant to that certain Second Modification to Loan Agreement dated as of December 30,1999, to provide for, among other things, (i) (a) the separation of the Mortgage Note and (b) the modification of the Mortgages (other than the Phoenician Deed of Trust) and the discharge and release of the liens of certain Mortgages from the Caesars World Assets so that the remaining Mortgages secured only the New Mortgage Note and all of the indebtedness evidenced thereunder, (ii) (a) the assignment of all of Lender's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith to the Trust and (b) the subsequent assignment of all of the Trust's right, title and interest in the Unsecured Note and all documents and agreements in connection therewith to Starwood Holdings, and the assumption by Starwood Holdings of all of such right, title and interest and (iii) the amendment of certain definitions under the Loan Agreement; WHEREAS, Borrower has agreed to sell the hotel property known as the "Desert Inn" (the matters contemplated under such sale being referred to herein as the "Desert Inn Transaction") and, as a consequence of the Desert Inn Transaction, Borrower has requested that the Lender release the Desert Inn from the collateral security for the New Mortgage Note; and WHEREAS, in consideration for, and in connection with, the release of the Desert Inn from the collateral security of the New Mortgage Note, the parties hereto desire to modify the New Mortgage Note and the Loan Agreement (but only with respect to provisions specific to the New Mortgage Note) to provide for (i) the increase in the Interest Rate, only as applied to the New Mortgage Note, from the current interest rate of eight and one half percent (8.5%) per annum to ten percent (10%) per annum and (ii) the release of the Desert Inn from the collateral security for the New Mortgage Note; NOW, THEREFORE, the parties hereto have agreed as follows: 1. The parties hereto acknowledge and agree that the Interest Rate of, and only as applied to, the New Mortgage Note is hereby modified and increased from eight and one half percent (8.5%) per annum to ten percent (10%) per annum. 2. The parties hereto acknowledge and agree that (i) the lien of the Mortgage(s) set forth on Exhibit A hereto shall be released and discharged from such Mortgage(s) and (ii) the remaining Mortgages (other than the Phoenician Deed of Trust) shall continue to secure the outstanding principal balance under the New Mortgage Note, with interest thereon, equal to $1,289,467,038.25. 3. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 4. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws. 3 5. This Agreement is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Loan Agreement or New Mortgage Note. 6. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 7. The parties hereto acknowledge and agree that the name "Starwood Hotels & Resorts" is a designation of the Trust and its trustees (as trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated as of June 6, 1988 and as further amended and restated as of January 6, 1999, and as the same has been or may be amended from time to time thereafter, and that the parties hereto shall look solely to the Trust's assets for the enforcement of any claims against the Trust, as the trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. The foregoing shall govern all direct and indirect obligations of the Trust under this Agreement. 8. The Lender and the Borrower acknowledge, agree and hereby reaffirm that all rights of the Lender to receive any payments from the Borrower under the New Mortgage Note and the Loan Agreement, as amended hereby, or under any guarantees, mortgages, other types of security documents or otherwise are and shall continue to be subject and subordinate in payment to the prior payment in full, in cash, of all Senior Indebtedness (as defined in the Subordination Agreement), to the extent, and in the manner set forth in the Subordination Agreement. All of the terms, covenants and conditions hereof are hereby and shall continue to be subordinate to all of the terms, covenants and conditions of the Senior Indebtedness. The foregoing shall apply, notwithstanding the availability of other collateral to the Senior Creditors (as defined in the Subordination Agreement) or the actual date and time of execution, delivery, recordation, filing or perfection of any of the Senior Indebtedness, or the lien or priority of payment thereof, and in any instance where the Senior Indebtedness or any claim for the Senior Indebtedness is subordinated, avoided or disallowed, in whole or in part, under Title 11 of the United States Code (the "Bankruptcy Code") or other applicable federal or state law. [SIGNATURE PAGE FOLLOWS] 4 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. BORROWER: ITT CORPORATION, a Nevada corporation By: /s/ Peter C. Morrow ----------------------------------------------- Name: Peter C. Morrow Title: Vice President - Assistant Treasurer LENDER: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Alan M. Schnaid ----------------------------------------------- Name: Alan M. Schnaid Title: Vice President and Assistant Treasurer STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust By: /s/ Alan M. Schnaid ----------------------------------------------- Name: Alan M. Schnaid Title: Vice President and Assistant Treasurer STARWOOD HOTELS & RESORTS HOLDINGS, INC., an Arizona corporation By: /s/ David A. Hughes ---------------------------------------------- Name: David A. Hughes Title: President 5 EXHIBIT A (Released Mortgage) 1. Deed of Trust, Security Agreement and Financing Statement, dated as of February 23, 1998, by Sheraton Desert Inn Corporation, 357 Inc., Aronimink Corporation, NEWYORK 169899V4: Baumgartner Company, Robert T. Knott, Jr., as Trustee of the TMA Trust dated July 1, 1996 and Robert T. Knott, Jr., as Trustee of the Levy Trust, and Charles W. Deaner, secured by property located at the Desert Inn, Las Vegas, Nevada. EX-10.17 9 p70255exv10w17.txt EX-10.17 EXHIBIT 10.17 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., HARBOR-CAL S. D., STARWOOD SHERATON SAN DIEGO CMBS I LLC and SLT REALTY LIMITED PARTNERSHIP ----------------------------------------- Dated as of January 27, 1999 ----------------------------------------- $100,000,000 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999 ("First Modification"), among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the "Borrower"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender"), successor-in-interest to Starwood Hotels & Resorts, a Maryland real estate investment trust (the "Trust"), HARBOR-CAL S.D., a California joint venture ("Harbor-Cal"), and STARWOOD SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company (the "Guarantor"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Loan Agreement referred to below. WITNESSETH: WHEREAS, the Trust has previously made a loan to the Borrower in the maximum principal amount of $100,000,000 (the "Loan") pursuant to that certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"), as assigned by the Trust to the Lender pursuant to that certain General Assignment dated as of February 23, 1998 and as evidenced by that certain Promissory Note, dated as of February 23, 1998 (as may be amended from time to time, the "Note"); WHEREAS, in connection with the Loan Agreement, Harbor-Cal executed a certain Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated as of February 23, 1998, in favor of the Trust and covering a portion of the premises known as the Sheraton San Diego Hotel & Marina (the "Sheraton San Diego Property"), as assigned to Lender pursuant to that certain Assignment of Mortgage dated as of February 23, 1998 (the "Sheraton San Diego Deed of Trust"); WHEREAS, the Guarantor and certain subsidiaries of the Trust and the Borrower are entering into a certain Loan Agreement dated as of January 27, 1999 and among the borrowers named therein, Starwood Operator I LLC and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc., as lender (the "CMBS Lender") (as amended from time to time, the "CMBS Loan Agreement"); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, Harbor-Cal has executed an Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing dated as of January 27, 1999 (the "Amended and Restated Leasehold Deed of Trust"), amending and restating the Sheraton San Diego Deed of Trust to provide for, among other things, a limit on the indebtedness secured by the Amended and Restated Leasehold Deed of Trust to an amount which, when added to the indebtedness allocable under the CMBS Loan Agreement to the Sheraton San Diego Property and the amount secured by that certain Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated the date hereof and executed by Harbor-Cal (the "Amended and Restated Leasehold Deed of Trust (West Tower)"), shall not exceed the total market value of the Sheraton San Diego Property; WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to provide for, among other things, (i) the guaranty by the Guarantor for all payments due and payable under the Note on a non-recourse basis, (ii) the extension of the Final Maturity Date of the Loan to February 23, 2014 and, additionally, the further extension of the Final Maturity Date of the Loan upon any extension of the maturity date of the loan advanced under the CMBS Loan Agreement, and (iii) the amendment of certain definitions under the Loan Agreement. NOW, THEREFORE, the parties hereto have agreed as follows: 1. All references to "Final Maturity Date" under the Loan Agreement shall hereby be amended to mean "February 23, 2014". Moreover, upon the exercise of any option to extend the maturity date of the loan under the CMBS Loan Agreement (the "CMBS Loan Maturity Date Extension"), the Final Maturity Date under the Loan Agreement shall be further extended to February 23, 2029 or one (1) year beyond any such CMBS Loan Maturity Date Extension, whichever shall be a later date. 2. All references to "Mortgage" under the Loan Agreement shall hereby be modified to mean the Amended and Restated Leasehold Deed of Trust. 3. The parties hereto acknowledge and agree that, notwithstanding anything to the contrary contained herein, the outstanding principal balance of the Note, together with all accrued and unpaid interest thereon and all other sums due in connection therewith (the "Guaranteed Amount"), secured by the Amended and Restated Leasehold Deed of Trust shall not exceed an amount which, when combined with (i) the outstanding principal balance, with interest thereon, of the loan advanced pursuant to the CMBS Loan Agreement and allocable to the Sheraton San Diego Property, together with the amount of all other Permitted Indebtedness (as defined in the CMBS Loan Agreement) on the Sheraton San Diego Property under the CMBS Loan Agreement, and (ii) the amount secured by the Amended and Restated Leasehold Deed of Trust (West Tower), shall not exceed one hundred percent (100%) of the total market value of the Sheraton San Diego Property. 4. The parties hereto acknowledge and agree that the Guarantor shall guarantee to the Lender full and prompt payment when due of the principal of, and interest on, the Guaranteed Amount. The liability and obligation of the Guarantor or any member, officer, director, successor or assign of the Guarantor, to perform and observe and fulfill its obligations set forth hereunder shall not be enforced by any action or proceeding wherein damages or any money judgment or any deficiency judgment or any judgment establishing any personal obligation or liability shall be sought, collected or otherwise obtained against the guarantor or any of its officers, members, directors, partners, successors or assigns, it being agreed that the Lender shall only look to the interest of the Guarantor in the Sheraton San Diego Property for the satisfaction of any obligation of the Guarantor hereunder. -2- 5. The parties hereto agree that all rights of the Lender to receive any payments from the Borrower under the Loan Agreement or under any guarantees, mortgages, other types of security documents or otherwise are and shall continue to be subject and subordinate in payment to the prior payment in full, in cash, of (i) all Senior Indebtedness (as defined in the Subordination Agreement (as defined in the Loan Agreement)) and (ii) the indebtedness outstanding under the CMBS Loan Agreement (the "CMBS Indebtedness") pursuant to, and in the manner set forth in, that certain Subordination and Intercreditor Agreement executed and delivered in connection with the CMBS Loan Agreement (the "CMBS Subordination Agreement"). All of the terms, covenants and conditions hereof are hereby and shall continue to be subordinate to all of the terms, covenants and conditions of the Senior Indebtedness and the CMBS Indebtedness. The foregoing shall apply, notwithstanding the availability of other collateral to the Senior Creditors (as defined in the Subordination Agreement) or to the CMBS Lender or the actual date and time of execution, delivery, recordation, filing or perfection of any of the Senior Indebtedness or the CMBS Indebtedness, or the lien or priority of payment thereof, and in any instance wherein the Senior Indebtedness or CMBS Indebtedness or any claim for the Senior Indebtedness or CMBS Indebtedness is subordinated, avoided or disallowed, in whole or in part, under Title 11 of the United States Code (the "Bankruptcy Code") or other applicable federal or state law. 6. The terms and provisions of this First Modification shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 7. This First Modification shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws. 8. This First Modification may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 9. The parties hereto acknowledge and agree that the name "Starwood Hotels & Resorts" is a designation of the Trust and its trustees (as trustees but not personally) under a Declaration of Trust dated August 25,1969, as amended and restated as of June 6, 1988 and as further amended and restated as of January [6], 1999, and as the same has been or may be amended from time to time thereafter, and that the parties hereto shall look solely to the Trust's assets for the enforcement of any claims against the Trust, as the trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. The foregoing shall govern all direct and indirect obligations of the Trust under this First Modification. -3- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this First Modification to be duly executed and delivered as of the date first above written. BORROWER: STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation By: /s/ Jonathan H. Yellen --------------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory LENDER: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Jonathan H. Yellen ----------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory HARBOR-CAL S. D., a California joint venture By: Sheraton Harbor Island Corporation, Its joint venture partner By: /s/ Jonathan H. Yellen ----------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory By: Sheraton California Corporation, Its joint venture partner By: /s/ Jonathan H. Yellen ----------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory -4- GUARANTOR: STARWOOD SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company By: /s/ Jonathan H. Yellen ----------------------------------------------- Title: Authorized Signatory EX-10.19 10 p70255exv10w19.txt EX-10.19 EXHIBIT 10.19 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., HARBOR-CAL S.D., STARWOOD SHERATON SAN DIEGO CMBS I LLC and SLT REALTY LIMITED PARTNERSHIP ------------------------------------ Dated as of January 27, 1999 ------------------------------------ $50,000,000 ================================================================================ FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999 ("First Modification"), among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the "Borrower"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender"), successor-in-interest to Starwood Hotels & Resorts, a Maryland real estate investment trust (the "Trust"), HARBOR-CAL S.D., a California joint venture ("Harbor-Cal"), and STARWOOD SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company (the "Guarantor"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Loan Agreement referred to below. WITNESSETH: WHEREAS, the Trust has previously made a loan to the Borrower in the maximum principal amount of $50,000,000 (the "Loan") pursuant to that certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"), as assigned by the Trust to the Lender pursuant to that certain General Assignment dated as of February 23, 1998 and as evidenced by that certain Promissory Note, dated as of February 29, 1998 (as may be amended from time to time, the "Note"); WHEREAS, in connection with the Loan Agreement, Harbor-Cal executed a certain Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated as of February 23, 1998, in favor of the Trust and covering a portion of the premises known as the Sheraton San Diego Hotel & Marina (the "Sheraton San Diego Property"), as assigned to Lender pursuant to that certain Assignment of Mortgage dated as of February 23, 1998 (the "Sheraton San Diego Deed of Trust"); WHEREAS, the Guarantor and certain subsidiaries of the Trust and the Borrower are entering into a certain Loan Agreement dated as of January 27, 1999 and among the borrowers named therein, Starwood Operator I LLC and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc., as lender (the "CMBS Lender") (as amended from time to time, the "CMBS Loan Agreement"); WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, Harbor-Cal has executed an Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing dated as of January 27, 1999 (the "Amended and Restated Leasehold Deed of Trust"), amending and restating the Sheraton San Diego Deed of Trust to provide for, among other things, a limit on the indebtedness secured by the Amended and Restated Leasehold Deed of Trust to an amount which, when added to the indebtedness allocable under the CMBS Loan Agreement to the Sheraton San Diego Property and the amount secured by that certain Amended and Restated Leasehold Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated the date hereof and executed by Harbor-Cal (the "Amended and Restated Leasehold Deed of Trust (East Tower)"), shall not exceed the total market value of the Sheraton San Diego Property; WHEREAS, in connection with the transactions contemplated under the CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to provide for, among other things, (i) the guaranty by the Guarantor for all payments due and payable under the Note on a non-recourse basis, (ii) the extension of the Final Maturity Date of the Loan to February 23, 2014 and, additionally, the further extension of the Final Maturity Date of the Loan upon any extension of the maturity date of the loan advanced under the CMBS Loan Agreement, and (iii) the amendment of certain definitions under the Loan Agreement. NOW, THEREFORE, the parties hereto have agreed as follows: 1. All references to "Final Maturity Date" under the Loan Agreement shall hereby be amended to mean "February 23, 2014". Moreover, upon the exercise of any option to extend the maturity date of the loan under the CMBS Loan Agreement (the "CMBS Loan Maturity Date Extension"), the Final Maturity Date under the Loan Agreement shall be further extended to February 23, 2029 or one (1) year beyond any such CMBS Loan Maturity Date Extension, whichever shall be a later date. 2. All references to "Mortgage" under the Loan Agreement shall hereby be modified to mean the Amended and Restated Leasehold Deed of Trust. 3. The parties hereto acknowledge and agree that, notwithstanding anything to the contrary contained herein, the outstanding principal balance of the Note, together with all accrued and unpaid interest thereon and all other sums due in connection therewith (the "Guaranteed Amount"), secured by the Amended and Restated Leasehold Deed of Trust shall not exceed an amount which, when combined with (i) the outstanding principal balance, with interest thereon, of the loan advanced pursuant to the CMBS Loan Agreement and allocable to the Sheraton San Diego Property, together with the amount of all other Permitted Indebtedness (as defined in the CMBS Loan Agreement) on the Sheraton San Diego Property under the CMBS Loan Agreement, and (ii) the amount secured by the Amended and Restated Leasehold Deed of Trust (East Tower), shall not exceed one hundred percent (100%) of the total market value of the Sheraton San Diego Property. 4. The parties hereto acknowledge and agree that the Guarantor shall guarantee to the Lender full and prompt payment when due of the principal of, and interest on, the Guaranteed Amount. The liability and obligation of the Guarantor or any member, officer, director, successor or assign of the Guarantor, to perform and observe and fulfill its obligations set forth hereunder shall not be enforced by any action or proceeding wherein damages or any money judgment or any deficiency judgment or any judgment establishing any personal obligation or liability shall be sought, collected or otherwise obtained against the guarantor or any of its officers, members, directors, partners, successors or assigns, it being agreed that the Lender shall only look to the interest of the Guarantor in the Sheraton San Diego Property for the satisfaction of any obligation of the Guarantor hereunder. -3- 5. The parties hereto agree that all rights of the Lender to receive any payments from the Borrower under the Loan Agreement or under any guarantees, mortgages, other types of security documents or otherwise are and shall continue to be subject and subordinate in payment to the prior payment in full, in cash, of (i) all Senior Indebtedness (as defined in the Subordination Agreement (as defined in the Loan Agreement)) and (ii) the indebtedness outstanding under the CMBS Loan Agreement (the "CMBS Indebtedness") pursuant to, and in the manner set forth in, that certain Subordination and Intercreditor Agreement executed and delivered in connection with the CMBS Loan Agreement (the "CMBS Subordination Agreement"). All of the terms, covenants and conditions hereof are hereby and shall continue to be subordinate to all of the terms, covenants and conditions of the Senior Indebtedness and the CMBS Indebtedness. The foregoing shall apply, notwithstanding the availability of other collateral to the Senior Creditors (as defined in the Subordination Agreement) or to the CMBS Lender or the actual date and time of execution, delivery, recordation, filing or perfection of any of the Senior Indebtedness or the CMBS Indebtedness, or the lien or priority of payment thereof, and in any instance wherein the Senior Indebtedness or CMBS Indebtedness or any claim for the Senior Indebtedness or CMBS Indebtedness is subordinated, avoided or disallowed, in whole or in part, under Title 11 of the United States Code (the "Bankruptcy Code") or other applicable federal or state law. 6. The terms and provisions of this First Modification shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 7. This First Modification shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws. 8. This First Modification may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 9. The parties hereto acknowledge and agree that the name "Starwood Hotels & Resorts" is a designation of the Trust and its trustees (as trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated as of June 6, 1988 and as further amended and restated as of January [6], 1999, and as the same has been or may be amended from time to time thereafter, and that the parties hereto shall look solely to the Trust's assets for the enforcement of any claims against the Trust, as the trustees, officers, agents and security holders of the Trust assume no personal liability for obligations entered into on behalf of the Trust, and their respective individual assets shall not be subject to the claims of any person relating to such obligations. The foregoing shall govern all direct and indirect obligations of the Trust under this First Modification. -4- IN WITNESS WHEREOF,each of the parties hereto has caused a counterpart of this First Modification to be duly executed and delivered as of the date first above written. BORROWER: STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation By: /s/ Jonathan H. Yellen ------------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory LENDER: SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Jonathan H. Yellen ---------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory HARBOR-CAL S. D., a California joint venture By: Sheraton Harbor Island Corporation, Its joint venture partner By: /s/ Jonathan H. Yellen ---------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory By: Sheraton California Corporation, Its joint venture partner By: /s/ Jonathan H. Yellen ---------------------------- Name: Jonathan H. Yellen Title: Authorized Signatory -5- GUARANTOR: STARWOOD SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company By: /s/ Jonathan H. Yellen ----------------------------------------------- Title: Authorized Signatory EX-10.23 11 p70255exv10w23.txt EX-10.23 Exh. 10.23 STARWOOD LODGING TRUST NON-QUALIFIED STOCK OPTION AGREEMENT Starwood Lodging Trust, a real estate investment trust organized under the laws of Maryland (the "Company"), hereby grants to _____________ (the "Optionee"), as of _____ ___, 199_ (the "Option Date"), pursuant to the provisions of the Starwood Lodging Trust 1995 Share Option Plan (the "Plan"), an non-qualified option to purchase form the Company (the "Option") ________ Shares, at the price of $_____ per Paired Share upon and subject to the terms and conditions set forth below. References to employment by the Company shall include employment by a "subsidiary corporation" of the Company, as such term is defined in Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"). Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Option Subject to Acceptance of Agreement. The Option may not be exercised unless (i) the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company and (ii) the Plan is approved by a majority of all the votes cast at a meeting of shareholders at which a quorum is present. 2. Time and Manner of Exercise of Option. 2.1 Maximum Term of Option. In no event may the option be exercised, in whole or in part, after _________ __, ____ (the "Expiration Date"). 2.2 Exercise of Option. (a) The Option shall become exercisable (i) on __________ __, ____ with respect to ________ Paired Shares subject to the Option, (ii) on __________ __, ____ with respect to an additional __________ Paired Shares subject to the Option, and (iii) on __________ __, _____ with respect to the remaining ________ Paired Shares subject to the Option. (b) If the Optionee's employment by the Company terminates for any reason other than Cause, the Option shall be exercisable to the extent it is exercisable on the effective date of the Optionee's termination of employment, shall continue to become exercisable in accordance with Section 2.2(a) and may be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until the Expiration Date. (c) If the Optionee's employment by the Company terminates for Cause, the Option, whether or not then exercisable, shall terminate automatically on the effective date of the Optionee's termination of employment. (d) For purposes of this Section 2.2, "Cause" shall be limited to conviction of a felony, or determination of a court of competent jurisdiction of significant 1. violation of the Optionee's duty of loyalty to the Company or of a substantial disregard of the duties properly assigned to the Optionee (other than as a result of disability). 2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the Option may be exercised by the Optionee (1) by giving written notice to the Company specifying the number of whole Paired Shares to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) previously owned whole Paired Shares (which the Optionee has held for at least six months prior to the delivery of such Paired Shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value, determined as of the date of exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to either clause (ii) or (iii). Any fraction of a Paired Share which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Paired Share shall be delivered until the full purchase therefor has been paid. 2.4 Termination of Option. (a) In no event may the Option be exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the Paired Shares subject to the Option expire or are exercised, cancelled or forfeited, the Optionee shall promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase Paired Shares hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 3. Additional Terms and Conditions of Option. 3.1 Nontransferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to the beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to the extent permitted by the foregoing, during the Optionee's lifetime the Options are exercisable only by the Optionee or the Optionee's Legal Representative. Except as permitted by the foregoing, the Options may not be sold, transferred, assigned, pledged, hypothecated, voluntarily 2. encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose of the Options (unless permitted by Section 3.1(a) above or this Section 3.1(b)), the Options and all rights hereunder shall, to the extent of any such attempt, immediately become null and void. 3.2 Investment Representation. The Optionee hereby represents and covenants that (a) any Paired Shares purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), unless such purchase has been registered under the Securities Act and any applicable state securities laws; (b) any subsequent sale of any such Paired Shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any Paired Shares hereunder or (y) is true and correct as of the date of any sale of any such Paired Shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the Paired Shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3 Withholding Taxes. (a) As a condition precedent to the delivery of Paired Shares upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the Paired Shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company of previously owned whole Paired Shares (which the Optionee has held for at least six months prior to the delivery of such Paired Shares or which the optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) a cash payment by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (4) any combination of (1) and (2). The Committee shall have sole discretion to disapprove of an 3. election pursuant to any of clauses (2)-(4). Paired Shares to be delivered may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Paired Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Paired Share shall be delivered until the Required Tax payments have been satisfied in full. (c) Unless the Committee otherwise determines, if the Optionee is subject to Section 16 of the Exchange Act, the Optionee may deliver to the Company previously owned whole Paired Shares in accordance with Section 3.3(b), but only if such delivery is in connection with the delivery of Paired Shares in payment of the exercise price of the Option. 3.4 Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Paired Shares other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Option, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the fair market value of a Paired Share on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5 Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the Paired Shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any government body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of Paired Shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6 Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of Paired Shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. 3.7 Option Confers No Rights as Stockholder. The Optionee shall not be entitled to any privileges of ownership with respect to Paired Shares subject to the Option unless and until purchased and delivered upon the exercise of the Option, in 4. whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered Paired Shares; and the Optionee shall not be considered a stockholder of the Company or the Corporation with respect to any Paired Shares not so purchased and delivered. 3.8 Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any affiliate of the Company. 3.9 Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10 Company to Reserve Paired Shares. The Company shall at all times prior to the expiration or termination of the Option reserve or cause to be reserved and keep or cause to be kept available, either in its treasury or out of its authorized but unissued Paired Shares, the full number of Paired Share subject to the Option from time to time. 3.11 Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. 4.1 Designation as Pledged Stock Option. The Option is hereby designated as not constituting an "incentive stock option" within meaning of section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this Agreement shall be interpreted and treated consistently with such designation. 4.2 Meaning of Certain Terms. (a) As used herein, the term "Legal Representative" shall include an executor, administrator, legal representative, beneficiary or similar person and the term "Permitted Transferee" shall include any transferee (i) pursuant to a transfer permitted under Section 4.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures which may be approved by the Company. 4.3 Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 5. 4.4 Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the President of the Company at 11845 West Olympic Blvd., Suite 560, Los Angeles, California 90064, and if to the Optionee, to __________________, or to such other address as either party may give by notice to the other in the manner herein provided. All notices, requests or other communications provided for in this Agreement shall be in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5 Governing Law. The Option, this Agreement, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of California and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.6 Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. 4.7 Disclaimer. The name "Starwood Lodging Trust" is the designation of Starwood Lodging Trust and its Trustees (as Trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated and all persons dealings with Starwood Lodging Trust must look solely to Starwood Lodging Trust's property for the enforcement of any claims against Starwood Lodging Trust, as the Trustees, officers, agents and security holders of Starwood Lodging Trust assume no personal obligation of Starwood Lodging Trust, and their respective property shall not be subject to claims of any person relating to such obligation. STARWOOD LODGING TRUST By:____________________________ Name:__________________________ Its:___________________________ Accepted: _________________________ "Optionee" 6. EX-10.26 12 p70255exv10w26.txt EX-10.26 Exh. 10.26 STARWOOD LODGING TRUST NON-QUALIFIED STOCK OPTION AGREEMENT Starwood Lodging Trust, a real estate investment trust organized under the laws of Maryland (the "Company"), hereby grants to _____________ (the "Optionee"), as of _____ ___, 199_ (the "Option Date"), pursuant to the provisions of the Starwood Lodging Trust 1995 Share Option Plan (the "Plan"), an non-qualified option to purchase form the Company (the "Option") ________ Shares, at the price of $_____ per Paired Share upon and subject to the terms and conditions set forth below. References to employment by the Company shall include employment by a "subsidiary corporation" of the Company, as such term is defined in Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"). Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Option Subject to Acceptance of Agreement. The Option may not be exercised unless (i) the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company and (ii) the Plan is approved by a majority of all the votes cast at a meeting of shareholders at which a quorum is present. 2. Time and Manner of Exercise of Option. 2.1 Maximum Term of Option. In no event may the option be exercised, in whole or in part, after _________ __, ____ (the "Expiration Date"). 2.2 Exercise of Option. (a) The Option shall become exercisable (i) on __________ __, ____ with respect to ________ Paired Shares subject to the Option, (ii) on __________ __, ____ with respect to an additional __________ Paired Shares subject to the Option, and (iii) on __________ __, _____ with respect to the remaining ________ Paired Shares subject to the Option. (b) If the Optionee's employment by the Company terminates for any reason other than Cause, the Option shall be exercisable to the extent it is exercisable on the effective date of the Optionee's termination of employment, shall continue to become exercisable in accordance with Section 2.2(a) and may be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until the Expiration Date. (c) If the Optionee's employment by the Company terminates for Cause, the Option, whether or not then exercisable, shall terminate automatically on the effective date of the Optionee's termination of employment. (d) For purposes of this Section 2.2, "Cause" shall be limited to conviction of a felony, or determination of a court of competent jurisdiction of significant 1. violation of the Optionee's duty of loyalty to the Company or of a substantial disregard of the duties properly assigned to the Optionee (other than as a result of disability). 2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the Option may be exercised by the Optionee (1) by giving written notice to the Company specifying the number of whole Paired Shares to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) previously owned whole Paired Shares (which the Optionee has held for at least six months prior to the delivery of such Paired Shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value, determined as of the date of exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to either clause (ii) or (iii). Any fraction of a Paired Share which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Paired Share shall be delivered until the full purchase therefor has been paid. 2.4 Termination of Option. (a) In no event may the Option be exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the Paired Shares subject to the Option expire or are exercised, cancelled or forfeited, the Optionee shall promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase Paired Shares hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 3. Additional Terms and Conditions of Option. 3.1 Nontransferability of Option. The Option may not be transferred by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to the beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to the extent permitted by the foregoing, during the Optionee's lifetime the Options are exercisable only by the Optionee or the Optionee's Legal Representative. Except as permitted by the foregoing, the Options may not be sold, transferred, assigned, pledged, hypothecated, voluntarily 2. encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose of the Options (unless permitted by Section 3.1(a) above or this Section 3.1(b)), the Options and all rights hereunder shall, to the extent of any such attempt, immediately become null and void. 3.2 Investment Representation. The Optionee hereby represents and covenants that (a) any Paired Shares purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), unless such purchase has been registered under the Securities Act and any applicable state securities laws; (b) any subsequent sale of any such Paired Shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any Paired Shares hereunder or (y) is true and correct as of the date of any sale of any such Paired Shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the Paired Shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3 Withholding Taxes. (a) As a condition precedent to the delivery of Paired Shares upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the Paired Shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company of previously owned whole Paired Shares (which the Optionee has held for at least six months prior to the delivery of such Paired Shares or which the optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) a cash payment by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (4) any combination of (1) and (2). The Committee shall have sole discretion to disapprove of an 3. election pursuant to any of clauses (2)-(4). Paired Shares to be delivered may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Paired Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Paired Share shall be delivered until the Required Tax payments have been satisfied in full. (c) Unless the Committee otherwise determines, if the Optionee is subject to Section 16 of the Exchange Act, the Optionee may deliver to the Company previously owned whole Paired Shares in accordance with Section 3.3(b), but only if such delivery is in connection with the delivery of Paired Shares in payment of the exercise price of the Option. 3.4 Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Paired Shares other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Option, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the fair market value of a Paired Share on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5 Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the Paired Shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any government body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of Paired Shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6 Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of Paired Shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. 3.7 Option Confers No Rights as Stockholder. The Optionee shall not be entitled to any privileges of ownership with respect to Paired Shares subject to the Option unless and until purchased and delivered upon the exercise of the Option, in 4. whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered Paired Shares; and the Optionee shall not be considered a stockholder of the Company or the Corporation with respect to any Paired Shares not so purchased and delivered. 3.8 Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any affiliate of the Company. 3.9 Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10 Company to Reserve Paired Shares. The Company shall at all times prior to the expiration or termination of the Option reserve or cause to be reserved and keep or cause to be kept available, either in its treasury or out of its authorized but unissued Paired Shares, the full number of Paired Share subject to the Option from time to time. 3.11 Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. 4.1 Designation as Pledged Stock Option. The Option is hereby designated as not constituting an "incentive stock option" within meaning of section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this Agreement shall be interpreted and treated consistently with such designation. 4.2 Meaning of Certain Terms. (a) As used herein, the term "Legal Representative" shall include an executor, administrator, legal representative, beneficiary or similar person and the term "Permitted Transferee" shall include any transferee (i) pursuant to a transfer permitted under Section 4.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures which may be approved by the Company. 4.3 Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 5. 4.4 Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the President of the Company at 11845 West Olympic Blvd., Suite 560, Los Angeles, California 90064, and if to the Optionee, to __________________, or to such other address as either party may give by notice to the other in the manner herein provided. All notices, requests or other communications provided for in this Agreement shall be in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5 Governing Law. The Option, this Agreement, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of California and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.6 Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. 4.4 4.7 Disclaimer. The name "Starwood Lodging Trust" is the designation of Starwood Lodging Trust and its Trustees (as Trustees but not personally) under a Declaration of Trust dated August 25, 1969, as amended and restated and all persons dealings with Starwood Lodging Trust must look solely to Starwood Lodging Trust's property for the enforcement of any claims against Starwood Lodging Trust, as the Trustees, officers, agents and security holders of Starwood Lodging Trust assume no personal obligation of Starwood Lodging Trust, and their respective property shall not be subject to claims of any person relating to such obligation. STARWOOD LODGING TRUST By:____________________________ Name:__________________________ Its:___________________________ Accepted: ____________________ "Optionee" 6. EX-10.30 13 p70255exv10w30.txt EX-10.30 EXH. 10.30 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NONQUALIFIED STOCK OPTION AGREEMENT Starwood Hotels & Resorts Worldwide, Inc., a corporation organized under the laws of Maryland (the "Company"), has granted to the individual (the "Optionee") named in the award notification attached hereto as Appendix A (the "Award Notification") as of the grant date set forth in the Award Notification (the "Option Date"), pursuant to the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the "Plan"), a Nonqualified Stock Option (the "Option") to purchase from the Company that number of Units and at the Option Price per Unit set forth in the Award Notification upon and subject to the terms and conditions set forth below. References to employment by or service as a director of the Company shall include employment by or service as a director of a Subsidiary. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Option Subject to Acceptance of Agreement. The Option may not be exercised unless the Optionee shall accept this Agreement by executing the Award Notification in the space provided therefor and returning the original execution copy of the Award Notification to the Company. 2. Time and Manner of Exercise of Option. 2.1. Maximum Term of Option. In no event may the Option be exercised, in whole or in part, after the tenth anniversary of the Option Date (the "Expiration Date"). 2.2. Exercise of Option. (a) The Option shall become exercisable (i) on the first anniversary of the Option Date with respect to one-fourth of the Units subject to the Option on the Option Date, (ii) on the second anniversary of the Option Date with respect to an additional one-fourth of the Units subject to the Option on the Option Date, (iii) on the third anniversary of the Option Date with respect to an additional one-fourth of the Units subject to the Option on the Option Date, (iv) on the fourth anniversary of the Option Date with respect to the remaining one-fourth of the Units subject to the Option on the Option Date and (v) as otherwise provided pursuant to Section 2.2(b) hereof. After the Option has become exercisable, subject to Sections 2.1, 2.2(b), 2.2(c), 2.2(d), 2.2(e), 2.2(f), 2.2(g) and 2.4, the Option may be exercised in the manner prescribed by Section 2.3 with respect to all or any portion of the Units with respect to which the Option has become exercisable but has not yet been exercised. (b) If the Optionee's employment by the Company or service as a director terminates by reason of Disability or death of the Optionee, the Option shall be fully exercisable with respect to all of the Units subject to the Option on the date of Disability or death and may thereafter be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is one year after the effective date of the Optionee's termination of employment or service by reason of Disability or death and (ii) the Expiration Date. (c) If the Optionee's employment by the Company or service as a director is terminated by the Company for Cause, the Option, whether or not then exercisable, shall terminate automatically on the effective date of the Optionee's termination of employment or service. (d) If the Optionee's employment with the Company or service as a director terminates because of voluntary resignation by the Optionee, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment or service because of voluntary resignation and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is thirty days after the effective date of the Optionee's termination of employment or service by voluntary resignation and (ii) the Expiration Date. (e) If the Optionee's employment with the Company or service as a director terminates for any reason other than Disability, death, Retirement or voluntary resignation by the Optionee or termination by the Company for Cause, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment or service and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is three months after the effective date of the Optionee's termination of employment or service and (ii) the Expiration Date. (f) If the Optionee's employment with the Company or service as a director terminates because of Retirement, the Option shall continue to vest as set forth in this Award Agreement and the Optionee may exercise any vested portion of the Option up until and including the earliest to occur of (i) the fifth anniversary of the Optionee's effective date of Retirement and (ii) the expiration date of the term of such Option; provided, however, that any unvested portion of an Option not exercised by the fifth anniversary of the Optionee's effective date of Retirement shall be canceled. The foregoing notwithstanding, during the five year period beginning from the date of Retirement, all vested but unexercised Options and all unvested Options held by Optionee will be canceled in the event Optionee accepts any employment, assignment, position of responsibility, or acquires any ownership interest (other than holding and making investments in common equity securities of any corporation, limited partnership or other entity that has its common equity securities traded in a generally recognized market, provided such equity interest therein does not exceed 5% of the outstanding shares or equity interests in such corporation, limited partnership or other entity), which involves the Optionee's participation in a hotel and leisure company engaged in the operation of owned hotels, management of hotels, franchising hotels, development and operation of vacation ownership resorts or the marketing and selling of vacation ownership interests. (g) If the Optionee dies during the one-year period following termination of employment or service as a director by reason of Disability, during the thirty-day period following voluntary resignation by the Optionee or during the three-month period following termination of employment or service as a director for any reason other than Disability, Retirement, death, voluntary resignation by the Optionee or termination by the Company for Cause, the Option shall be exercisable only to the extent it is exercisable on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferees, as 2 the case may be, until and including the earliest to occur of (i) the date which is three months (thirty days in the case of voluntary resignation by the Optionee) after the date of death (but in the case of death following termination of employment or service by reason of Disability, no less than one year after the date of such termination of employment or service) and (ii) the Expiration Date. If the Optionee dies during the five-year period following termination of employment or service by reason of Retirement, the Option shall be fully exercisable with respect to all of the Units subject to the Option on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferee until and including the earliest to occur of (i) the date which is one year after the date of death and (ii) the Expiration Date. 2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the Option may be exercised by the Optionee (1) by giving oral, written or electronic notice to the Company or its designated representative specifying the number of whole Units to be purchased and accompanied by payment therefor in full either (i) in cash or its equivalent, (ii) by tendering previously owned whole Units (which the Optionee has held for at least six months prior to the delivery of such Units and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price for the Units being purchased pursuant to such exercise, (iii) in a combination of (i) and (ii), or (iv) by means of a cashless exercise as permitted under Federal Reserve Board's Regulation T and using a broker-dealer acceptable to the Company and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii) - (iv). Any fraction of a Unit which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Unit shall be delivered until the full purchase price therefor has been paid. 2.4 Termination of Option. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. In no event may the Option be exercised after it terminates as set forth in this Section 2.4. 3. Additional Terms and Conditions of Option. 3.1. Nontransferability of Option. The Option may not be transferred by the Optionee other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by the foregoing sentence, during the Optionee's lifetime the Option is exercisable only by the Optionee or the Optionee's Legal Representative. Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 3.2. Withholding Taxes. (a) As a condition precedent to the delivery of Units upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the Units, such amount of cash as the Company 3 may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company of previously owned whole Units (which the Optionee has held for at least six months prior to the delivery of such Units and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) by having the Company withhold Units having a Fair Market Value as of the Tax Date equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company pursuant to a cashless exercise permitted by Federal Reserve Board's Regulation T or (5) any combination of (1) - - (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2) - (5). Units to be delivered to or withheld by the Company may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Unit which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Unit shall be delivered until the Required Tax Payments have been satisfied in full. 3.3 Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Units other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee; provided that the number of Units subject to the Option shall always be a whole number. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.4. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the Units subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of Units hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the Units and, in connection therewith, shall execute any documents which the Board or the Committee shall deem necessary or advisable in its sole discretion. 4 3.5. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of Units purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.2. 3.6. Option Confers No Rights as Stockholder. The Optionee shall not be entitled to any privileges of ownership with respect to Units subject to the Option unless and until purchased and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered Units; and the Optionee shall not be considered a stockholder of the Company with respect to any such Units not so purchased and delivered. 3.7. Option Confers No Rights to Continued Employment. In no event shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company or any affiliate of the Company. 3.8. Decisions of Board or Committee. The Board or the Committee shall have the exclusive right to resolve all questions that may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.9. Company to Reserve Units. The Company shall at all times prior to the expiration or termination of the Option reserve or cause to be reserved and keep or cause to be kept available, either in its treasury or out of its authorized but unissued Units, the full number of Units subject to the Option from time to time. 3.10. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. 4.1. Designation as Nonqualified Stock Option. The Option is hereby designated as not constituting an Incentive Stock Option; this Agreement shall be interpreted and treated consistently with such designation. 4.2. Meaning of Certain Terms. As used herein, the term "Legal Representative" shall include an executor, administrator, beneficiary or person legally authorized to act on behalf of the Optionee and the term "Permitted Transferee" shall include any transferee (i) pursuant to a transfer permitted under Section 6.9 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures which may be approved by the Company. 4.3. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, 5 upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Company or its designated representative at corporate headquarters in White Plains, New York, Attention: Human Resources, or such other address specified by the Company, and if to the Optionee, to the address set forth for the Optionee on the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5. Governing Law. The Option and this Agreement, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of New York and construed in accordance therewith without giving effect to principles of conflicts of laws. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. /s/ David Norton ----------------------------------------- By: David Norton, Executive Vice President, Human Resources 6 EX-10.31 14 p70255exv10w31.txt EX-10.31 EXH. 10.31 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. RESTRICTED STOCK AWARD AGREEMENT Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Company"), has granted to the individual (the "Holder") named in the award notification attached hereto as Appendix A (the "Award Notification") as of the grant date set forth in the Award Notification (the "Grant Date"), pursuant to the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the "Plan"), a Restricted Stock Award (the "Award) of the number of Units set forth in the Award Notification, upon and subject to the restrictions, terms and conditions set forth below. References to employment by the Company shall include employment by a Subsidiary. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Holder shall accept this Agreement by executing the Award Notification in the space provided therefor and returning the original execution copy of the Award Notification to the Company. As soon as practicable after the Holder has executed the Award Notification and returned the same to the Company, the Company shall cause to be issued in the Holder's name a stock certificate or certificates representing the total number of Units subject to the Award. 2. Rights as a Stockholder. The Holder shall have the right to vote the Units subject to the Award unless and until such Units are forfeited pursuant to Paragraph 4 hereof. Any dividend and any other distribution (including, without limitation, a stock dividend or stock split) with respect to Units subject to the Award that have not vested pursuant to Paragraph 4 hereof shall be delivered to the Company and shall be subject to the same restrictions as the Units with respect to which such dividend or other distribution was made. Any dividends and other distributions with respect to unvested Units that later become vested shall be delivered to the Holder at the time the certificate or certificates for such vested Units are delivered pursuant to Paragraph 3 hereof. Any dividends and other distributions with respect to unvested Units that are later forfeited shall be forfeited. 3. Custody and Delivery of Certificates Representing Units. The Company shall hold the certificate or certificates representing the Units subject to the Award until such Award shall have vested, in whole or in part, pursuant to Paragraph 4 hereof, and the Company shall as soon thereafter as practicable, subject to Section 6.2, deliver the certificate or certificates for the vested Units to the Holder. 4. Restriction Period and Vesting. (a) The Award shall vest (i) with respect to such portion of the Units subject to the Award and on such dates as set forth in the Award Notification, or (ii) earlier pursuant to Section 4(b) hereof or in accordance with Section 8.7 or Section 15.1 of the Plan (the "Restriction Period"). (b) If the Holder's employment by the Company terminates by reason of Disability, or death, the Award shall become fully vested as of the effective date of the Holder's termination of employment. (c) If the Holder's employment by the Company terminates by reason of Retirement, the Award will continue to vest as set forth in the Award Agreement relating to such Restricted Stock Award, provided that any unvested portion of a Restricted Stock Award will be canceled on the fifth anniversary of the Participant's effective date of Retirement. The foregoing notwithstanding, during the five year period beginning from the date of Retirement, all unvested Restricted Stock Awards held by Participant will be canceled in the event Participant accepts any employment, assignment, position or responsibility, or acquires any ownership interest (other than holding and making investments in common equity securities of any corporation, limited partnership or other entity that has its common equity securities traded in a generally recognized market, provided such equity interest therein does not exceed 5% of the outstanding shares or equity interests in such corporation, limited partnership or other entity), which involves the Participant's participation in a hotel and leisure company engaged in the operation of owned hotels, management of hotels, franchising hotels, development and operation of vacation ownership resorts and the marketing or selling of vacation ownership interests. If Holder dies during the five-year period following termination of employment by reason of Retirement, the Award shall become fully vested on the date of death. (d) If the Holder's employment by the Company terminates for any reason other than Disability, Retirement or death, the portion of the Award which is not vested as of the effective date of the Holder's termination of employment shall be forfeited by the Holder and such portion shall be cancelled by the Company. 5. Termination of Award. In the event that the Holder shall forfeit all or a portion of the Units subject to the Award, the Holder shall, upon the Company's request, promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Holder returns this Agreement. 6. Additional Terms and Conditions of Award. 6.1. Nontransferability of Award. During the Restriction Period, the Units subject to the Award and not then vested may not be transferred by the Holder other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by the foregoing, during the Restriction Period, the Units subject to the Award and not then vested may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate or encumber, or otherwise dispose of such Units, the Award shall immediately become null and void. 6.2. Withholding Taxes. (a) As a condition precedent to the delivery to the Holder of any Units subject to the Award, the Holder shall, upon request by the Company, pay to the Company such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to the Award. If the Holder shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Holder. 2 (b) The Holder may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 6.2(a), (2) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole Units (which the Holder has held for at least six months prior to the delivery of such Units or which the Holder purchased on the open market and for which the Holder has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Award (the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the Company to withhold from the Units otherwise to be delivered to the Holder pursuant to the Award, a number of whole Units having a Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company through whom the Holder has sold the Units with respect to which the Required Tax Payments have arisen or (5) any combination of (1), (2) and (3). The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (2)-(5). Units to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Unit which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the Holder. No certificate representing a Unit shall be delivered until the Required Tax Payments have been satisfied in full. 6.3. Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of Units, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Units other than a regular cash dividend, the number and class of securities subject to the Award shall be appropriately adjusted by the Committee. If any adjustment would result in a fractional security being subject to the Award, the Company shall pay the Holder in connection with the vesting, if any, of such fractional security, an amount in cash determined by multiplying (i) such fraction (rounded to the nearest hundredth) by (ii) the Fair Market Value on the vesting date. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 6.4. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Units subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of Units hereunder, the Units subject to the Award shall not vest or be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. As a further condition precedent to the delivery to the Holder of any Units subject to the Award, the Holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance of the Units and, in connection therewith, shall execute any documents which the Board or any committee authorized by the Board shall in its sole discretion deem necessary or advisable. 6.5. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Holder give or be deemed to give the Holder any right to continued employment by the Company or any affiliate of the Company. 3 6.6. Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions that may arise in connection with the Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 6.7. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Holder hereby acknowledges receipt of a copy of the Plan. 7. Miscellaneous Provisions. 7.1. Meaning of Certain Terms. As used herein, the term "vest" shall mean no longer subject to forfeiture. References in this Agreement to sections of the Code shall be deemed to refer to any successor section of the Code or any successor internal revenue law. 7.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Holder, acquire any rights hereunder in accordance with this Agreement or the Plan. 7.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Company, or its designated representative at corporate headquarters in White Plains, New York, Attention: Human Resources, and if to the Holder, to the address set forth for the Holder on the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission, or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 7.4. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of New York and construed in accordance therewith without giving effect to conflicts of laws principles. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. /s/ David Norton ----------------------------------------- By: David Norton, Executive Vice President, Human Resources March 2002 4 EX-10.35 15 p70255exv10w35.txt EX-10.35 EXH. 10.35 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. RESTRICTED STOCK AWARD AGREEMENT (GRANT PURSUANT TO THE 2002 LONG-TERM INCENTIVE COMPENSATION PLAN) Pursuant to the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 2002 Long-Term Incentive Compensation Plan (the "Plan"), Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Company"), has granted to the individual (the "Participant") named in the award notification attached as Appendix A (the "Award Notification") as of the date set forth in the Award Notification (the "Grant Date"), a Restricted Stock Award (the "Award"), upon and subject to the restrictions, terms and conditions set forth in the Plan and below. References to employment by the Company shall include employment by a Subsidiary. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Award Subject to Acceptance of Agreement. The Award shall be void unless the Participant accepts this Agreement by executing the Award Notification in the space provided and returns it to the Company within 60 days of the Grant Date. 2. Rights as a Stockholder. (a) Voting. During the Restriction Period (as defined in section 4), the Participant shall have the right to vote the Restricted Stock. (b) Dividends and Other Distributions. If any dividends are paid or other distributions are made on the Company's Shares, such dividends and other distributions shall be paid in the same proportion on the Restricted Stock to the Company for the account of the Participant and paid to the Participant, without interest, when the Restricted Stock vests. Participant will forfeit automatically any dividends and other distributions held by the Company for the account of the Participant if the Restricted Stock is forfeited. 3. Custody of Certificates Representing Restricted Stock. The Company shall hold the certificate or certificates representing the Restricted Stock until the Award vests in accordance with section 4. 4. Restriction Period and Vesting. (a) The Award shall vest (i) as set forth in the Award Notification, or (ii) earlier pursuant to Section 4(b). The period of time from the Grant Date until the Award vests is referred to as the "Restriction Period". (b) If the Participant's employment by the Company terminates by reason of Disability, or death, the Restricted Stock shall become fully vested on the date of the Participant's termination of employment. (c) If the Participant's employment by the Company terminates by reason of Retirement, the Award will continue to vest unless Participant accepts any employment, assignment, position or responsibility, or acquires any ownership interest (other than holding and making investments in common equity securities of any corporation, limited partnership or other entity that has its common equity securities traded in a generally recognized market, provided such equity interest does not exceed 5% of the outstanding shares or equity interests in such corporation, limited partnership or other entity), which involves the Participant's participation in a hotel and leisure 2003 Restricted Stock Grant company engaged in the operation of owned hotels, management of hotels, franchising hotels, development and operation of vacation ownership resorts and the marketing or selling of vacation ownership interests, in which case the Participant shall forfeit automatically any unvested Restricted Stock. If Participant dies prior to the vesting of the entire Award following termination of employment by reason of Retirement, the Award shall become fully vested on the date of death. (d) If the Participant's employment by the Company terminates for any reason other than Disability, Retirement or death, Participant shall forfeit automatically the portion of the Award that is not vested as of the effective date of the Participant's termination of employment and such portion shall be cancelled by the Company. 5. Additional Terms and Conditions. 5.1. Nontransferability of Award. Restricted Stock shall not be transferable except by will or the laws of descent and distribution. 5.2. Required Tax Payments and Withholding Shares. As a condition precedent to the delivery of any Shares at the expiration of the Restriction Period, the Participant shall pay to the Company all applicable federal, state, local or other taxes, domestic or foreign, (the "Required Tax Payments"). Unless other arrangements are made with the consent of the Company, all Required Tax Payments will be satisfied by the Company withholding Shares otherwise to be delivered to the Participant, having a Fair Market value on the date the tax is to be determined, sufficient to make the Required Tax Payments. The Company shall withhold the whole number of shares sufficient to make the Required Tax Payments and shall make a cash payment to the Participant for the difference between the Fair Market Value of the Shares and the Required Tax Payment. 5.3. Compliance with Applicable Laws. If the listing, registration or qualification of the Restricted Stock upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary in connection with the vesting or delivery of Shares hereunder, the Restricted Stock shall not vest or be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. As a further condition precedent to the delivery of any Shares upon the expiration of the Restriction Period, the Participant shall comply with all regulations and requirements of any applicable regulatory authority and shall execute any documents that the Company shall in its sole discretion deem necessary or advisable. 5.4. Delivery of Certificates. Upon the expiration of the Restriction Period and payment of the Required Tax Payments, unless the Company otherwise agrees, the Company shall cause its designated broker to credit an account for Participant with the appropriate number of Shares. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery. 2003 Restricted Stock Grant 2 5.5. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance with the Plan. The Participant acknowledges receipt of a copy of the Plan. 6. Miscellaneous Provisions. 6.1. Meaning of Certain Terms. As used herein, the term "vest" shall mean no longer subject to forfeiture. References in this Agreement to sections of the Code shall be deemed to refer to any successor section of the Code or any successor internal revenue law. 6.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Participant, acquire any rights hereunder in accordance with this Agreement or the Plan. 6.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Company or its designated representative at corporate headquarters in White Plains, New York, Attention: Human Resources, and if to the Participant, to the address set forth for the Participant on the records of the Company or to the Participant's e-mail or other electronic address with the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing by (a) personal delivery, (b) facsimile with confirmation of receipt, (c) e-mail or other electronic transmission to the Participant, (d) mailing in the United States mails, or (e) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, confirmation of receipt of facsimile transmission, one day after sending an e-mail or other electronic transmission to the Participant, or receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 6.4. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not otherwise governed by the laws of the United States, shall be construed in accordance with and governed by the laws of the State of Maryland without giving effect to conflicts of laws principles. 6.5 Personal Data. By accepting the Award, Participant has voluntarily consented to the collection, use, processing and transfer of personal data about Participant, including Participant's name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, details of the Award for the purpose of managing and administering the Plan ("Data"). Company and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Participant's participation in the Plan, and Company and/or any of its Subsidiaries may each further transfer Data to any third parties assisting Company in the implementation, administration and management of the Plan. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. /s/ David Norton ---------------------------------- By: David Norton, Executive Vice President, Human Resources 2003 Restricted Stock Grant 3 EX-10.41 16 p70255exv10w41.txt EX-10.41 Exh. 10.41 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. ANNUAL INCENTIVE PLAN 1. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: AIP - shall mean the Starwood Hotels & Resorts Worldwide, Inc. Annual Incentive Plan as set forth herein and as from time to time amended. COMPANY - Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation. FAIR MARKET VALUE - shall mean the fair market value of a Unit, as determined by the Company, which, unless otherwise specified, shall be the closing sale price of a Unit as reported in the New York Stock Exchange Composite Transactions on the business day immediately preceding the date as of which such value is being determined, or, if there is no such sale on the relevant date, then on the next preceding business day on which a sale was reported. FINANCIAL PERFORMANCE MEASURES - The Financial Performance Measures shall be directly and specifically tied to one or more of the following business criteria, determined with respect to the Company as a whole or with respect to an operating division of the Company: earnings before interest, taxes, depreciation and amortization ("EBITDA"), consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and taxes, cash flow, return on equity, return on net assets employed or earnings per share for the applicable Performance Period, all as computed in accordance with generally accepted accounting principles as in effect from time to time and as applied by the Company in the preparation of its financial statements and subject to such other special rules and conditions as the Company may establish. INDIVIDUAL OBJECTIVES - The Individual Objectives applicable to a Participant for a Performance Period shall be key individual objectives that link individual contributions to Corporate/Division/functional objectives and major financial/operating goals for such Performance Period. The Individual Objectives applicable to a Participant for a Performance Period will be developed by the Participant and discussed and jointly agreed to by the Participant and the Participant's manager. PARTICIPANT - shall mean an employee of the Company or an affiliate of the Company who is designated by the Company at any time before the end of the ninth month of each Performance Period as a Participant in the AIP for such Performance Period. Company associates participating in other incentive plans or Corporate Human Resources-approved formal retention plans will not be eligible to participate in the AIP, unless an exception is approved by Corporate Human Resources. PERFORMANCE PERIOD - shall mean the twelve consecutive month period which coincides with the Company's fiscal year. RETIREMENT - shall mean termination of employment with the Company and all affiliates of the Company with a combined age plus years of service of not less than 65, with a minimum age requirement of 55 and a minimum service requirement of 5 years (full-time or full-time-equivalent). UNIT - shall mean a Unit consisting of one share of common stock, par value $.01 per share, of the Company and one Class B share of beneficial interest, par value $.01 per share, of Starwood Hotels & Resorts. 2. ADMINISTRATION. 2.1 COMPANY. The AIP shall be administered by the Company. 2.2 DETERMINATIONS MADE FOR EACH PERFORMANCE PERIOD. For each Performance Period the Company shall: (a) Designate Participants for that Performance Period and their incentive award opportunities; (b) Determine the amount or formula for determining each Participant's bonus payment for the Performance Period; (c) Establish the Financial Performance Measures for the Performance Period; and (d) Establish the Financial Performance Measure targets for the Performance Period. The Company reserves the right, exercisable in its sole discretion, to change any of the above determinations with respect to a Performance Period at any time before, during or after such Performance Period, provided that the Financial Performance Measure and the Financial Performance Measure targets may not be changed after the ninetieth day of the Performance Period. 3. BONUS PAYMENTS. 3.1 AMOUNT. Each Participant shall be eligible to receive a bonus payment for a Performance Period in an amount determined by the Company based on the attainment of the Financial Performance Measure targets and Individual Objectives applicable to the Participant for the Performance Period. The aggregate amount of the bonus payments for a Performance Period shall be subject to the approval of the Compensation and Option Committee of the Board of Directors of the Company. 3.2 TIME AND FORM OF PAYMENTS. 2 (a) CASH PAYMENTS. Not less than 75% of a Participant's bonus payment for a Performance Period shall be paid to the Participant in cash. The cash portion of a Participant's bonus payment for a Performance Period shall be paid to the Participant as soon as practicable after the amount of the Participant's bonus payment for the Performance Period has been determined by the Company. (b) RESTRICTED STOCK. For Participants at organizational levels designated by the Company, up to 25% of a Participant's bonus payment for a Performance Period shall be paid to the Participant in the form of Units pursuant to an award of restricted stock under the Starwood Hotels & Resorts, Inc. 1999 Long-Term Incentive Compensation Plan (the "LTIP"). The portion of a Participant's bonus payment for a Performance Period to be so paid as a restricted stock award under the LTIP shall be determined by the Company, or as elected by the Participant in accordance with procedures established by the Company, and shall be subject to such restrictions as determined in accordance with the LTIP by the committee that administers the LTIP. The number of Units representing the restricted stock portion of a Participant's bonus payment for a Performance Period shall be calculated by increasing the dollar amount of such portion by one-third and then converting such amount into Units based on the Fair Market Value of a Unit on the date on which the bonus payment is paid to the Participant and shall be issued to the Participant at the time the cash portion of the Participant's bonus payment for the Performance Period is paid. 3.3 EMPLOYMENT ON PAYMENT DATE REQUIRED. A Participant's entitlement to a bonus payment for a Performance Period is conditioned upon the Participant's active employment with the Company or an affiliate of the Company on the date on which the bonus payment is to be paid to the Participant, unless an exception is approved by Corporate Human Resources. Pro-rata awards may be paid in the event of a Participant's death, disability (as defined in the applicable long-term disability plan, or, if no such plan exists, as determined by the Company) or Retirement. Otherwise, no bonus payment shall be earned by or payable to any Participant until the date on which the bonus payment is paid to the Participant. If a Participant is terminated or resigns from the Company before the date on which a bonus payment is to be paid to the Participant, such bonus payment is forfeited, unless an exception is approved by Corporate Human Resources. 3.4 NONTRANSFERABILITY. Participants shall not have the right to assign, encumber or otherwise anticipate the payments to be made under the AIP, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant. 3.5 TAX WITHHOLDING. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, 3 which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. 4. AMENDMENT AND TERMINATION. The Company may amend the AIP at any time and for any reason deemed sufficient by it without notice to any person affected by the AIP and may likewise terminate or curtail the benefits of the AIP both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action. 5. MISCELLANEOUS. 5.1 HEADINGS. Headings are given to the Sections and subsections of the AIP solely as a convenience to facilitate reference. Such headings shall not be deemed in any ways material or relevant to the construction or interpretation of the AIP or any provision thereof. 5.2 APPLICABILITY TO SUCCESSORS. The AIP shall be binding upon and inure to the benefit of the Company and each Participant, the successors and assigns of the Company, and the personal representatives and heirs of each Participant. 5.3 EMPLOYMENT RIGHTS AND OTHER BENEFITS PROGRAMS. The provisions of the AIP shall not give any Participant any right to be retained in the employment of the Company. In the absence of any specific agreement to the contrary, the AIP shall not affect any right of the Company, or of any affiliate of the Company, to terminate, with or without cause, any Participant's employment at any time. The AIP shall not replace any contract of employment, whether oral, or written, between the Company and any Participant, but shall be considered a supplement thereto. The AIP is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Company. Receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such other plan or program may specify. 5.4 NO TRUST FUND CREATED. The AIP shall not create or be construed to create a trust or separate fund of any kind or fiduciary relationship between the Company or any affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any affiliate pursuant to the AIP, such right shall be no greater than the right of any unsecured general creditor of the Company or of any affiliate. 5.5 GOVERNING LAW. The place of administration of the AIP shall be in the State of New York. The corporate law of the State of Maryland shall govern issues relating to the validity and issuance of Units. Otherwise, the AIP shall be construed and administered in accordance with the laws of the State of New York, without giving effect to principles relating to conflict of laws. 5.6 SEVERABILITY. If any provision of the AIP is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction such provision shall be construed or deemed 4 amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Company, materially altering the purpose or intent of the AIP, such provision shall be stricken as to such jurisdiction, and the remainder of the AIP shall remain in full force and effect. Date: June 1, 2001 5 EX-10.70 17 p70255exv10w70.txt EX-10.70 EXH. 10.70 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. STEVEN J. HEYER NONQUALIFIED STOCK OPTION AGREEMENT PURSUANT TO THE 2004 LONG-TERM INCENTIVE COMPENSATION PLAN Starwood Hotels & Resorts Worldwide, Inc., a corporation organized under the laws of Maryland (the "Company"), has granted to the individual (the "Optionee") named in the award notification attached hereto as Appendix A (the "Award Notification") as of the grant date set forth in the Award Notification (the "Option Date"), pursuant to the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 2004 Long-Term Incentive Compensation Plan (the "Plan"), a Nonqualified Stock Option (the "Option") to purchase from the Company that number of Shares and at the Option Price per Share set forth in the Award Notification upon and subject to the terms and conditions set forth below and the terms and conditions set forth in the Plan. References to employment by the Company shall include employment by of a Subsidiary. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Option Subject to Acceptance of Agreement. The Option may not be exercised unless the Optionee shall accept this Agreement by executing the Award Notification in the space provided therefor and returning the original execution copy of the Award Notification to the Company. 2. Time and Manner of Exercise of Option. 2.1. Maximum Term of Option. In no event may the Option be exercised, in whole or in part, after the eighth anniversary of the Option Date (the "Expiration Date"). 2.2. Exercise of Option. (a) The Option shall become exercisable pursuant to the vesting schedule set forth in the attached Award Notification. After the Option has become exercisable, subject to termination of the Option pursuant to the terms of this Agreement or the Plan, the Option may be exercised in the manner prescribed by Section 2.3 with respect to all or any portion of the Shares with respect to which the Option has become exercisable but has not yet been exercised. (b) If the Optionee's employment by the Company terminates by reason of Disability or death of the Optionee, the Option shall be fully exercisable with respect to all of the Shares subject to the Option on the date of Disability or death and may thereafter be exercised by the Optionee, the Optionee's Legal Representative or Permitted Transferee, as the case may be, until the earlier of (i) the third anniversary of the date of Executive's termination of employment by reason of Disability or death, and (ii) the Expiration Date. The foregoing notwithstanding, in the case of termination as a result of Disability, during the one-year period beginning from the date of Disability, all vested but unexercised Options held by Optionee will be canceled in the event Optionee accepts any employment (including, but not limited to, a position that is substantially comparable to a position the Optionee held with the Company), any assignment, any position of responsibility, or acquires any ownership interest (other than holding and making investments in common equity securities of any corporation, limited partnership or other entity that has its common equity securities traded in a generally recognized market, provided such equity interest therein does not exceed 5% of the outstanding shares or equity interests in such corporation, limited partnership or other entity), which involves the Optionee's participation in a hotel and leisure company engaged in the operation of owned hotels, management of hotels, franchising hotels, development and operation of vacation ownership resorts or the marketing and selling of vacation ownership interests in each such case in a (i) state within 500 miles of the Optionee's last (or immediately prior) worksite for the Company, (ii) the country in which the Optionee worked for the Company, (iii) in any other country in which the Company does any of the enumerated acts, or (iv) in any other country of the world. (c) If the Optionee's employment by the Company is terminated by the Company for Cause, the Option, whether or not then exercisable, shall terminate automatically on the effective date of the Optionee's termination of employment or service. (d) If the Optionee's employment with the Company terminates because of voluntary resignation by the Optionee without "Good Reason", the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee, the Optionee's Legal Representative or Permitted Transferee until and including the earlier to occur of (i) the date which is thirty days after the effective date of the Optionee's termination of employment by voluntary resignation, and (ii) the Expiration Date. (e) If the Optionee's employment with the Company terminates because of Retirement, the Option shall continue to vest as set forth in this Award Agreement and the Optionee may exercise any vested portion of the Option up until and including the earlier to occur of (i) the fifth anniversary of the Optionee's effective date of Retirement, and (ii) the Expiration Date; provided, however, that any unvested portion of an Option not exercised by the fifth anniversary of the Optionee's effective date of Retirement shall be canceled. The foregoing notwithstanding, during the three-year period beginning from the date of Retirement, all vested but unexercised Options and all unvested Options held by Optionee will be canceled in the event Optionee accepts any employment (including, but not limited to, a position that is substantially comparable to a position the Optionee held with the Company), any assignment, any position of responsibility, or acquires any ownership interest (other than holding and making investments in common equity securities of any corporation, limited partnership or other entity that has its common equity securities traded in a generally recognized market, provided such equity interest therein does not exceed 5% of the outstanding shares or equity interests in such corporation, limited partnership or other entity), which involves the Optionee's participation in a hotel and leisure company engaged in the operation of owned hotels, management of hotels, franchising hotels, development and operation of vacation ownership resorts or the marketing and selling of vacation ownership 2 interests in each such case in a (i) state within 500 miles of the Optionee's last (or immediately prior) worksite for the Company, (ii) the country in which the Optionee worked for the Company, (iii) in any other country in which the Company does any of the enumerated acts, or (iv) in any other country of the world. (f) If the Optionee's employment with the Company terminates because of Optionee's resignation for "Good Reason" or by the Company without Cause, the Option shall be fully exercisable with respect to all of the Shares subject to the Option on the date of termination of employment and may thereafter be exercised by the Optionee, the Optionee's Legal Representative or Permitted Transferee, as the case may be, until the earlier of (i) the third anniversary of the date of Executive's termination of employment, and (ii) the Expiration Date. (g) If the Optionee dies during the thirty-day period following voluntary resignation by the Optionee, the Option shall be exercisable only to the extent it is exercisable on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferee until and including the earlier to occur of (i) the date which is thirty days after the date of death and (ii) the Expiration Date. If the Optionee dies during the five-year period following termination of employment or service by reason of Retirement, the Option shall be fully exercisable with respect to all of the Shares subject to the Option on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferee until and including the earliest to occur of (i) the date which is one year after the date of death and (ii) the Expiration Date. (h) Notwithstanding anything to the contrary contained herein, in the event that Optionee's employment with the Company terminates at the end of the employment term by reason of the Company providing a notice of non-renewal pursuant to Section 2.1 of Optionee's employment agreement with the Company, the Option shall be fully exercisable with respect to all of the Shares subject to the Option on the date of termination of employment and may thereafter be exercised by the Optionee, the Optionee's Legal Representative or Permitted Transferee, as the case may be, until the earlier of (i) the third anniversary of the date of Executive's termination of employment, and (ii) the Expiration Date. 2.3. Method of Exercise and Payment. Subject to the limitations set forth in this Agreement, the Option may be exercised by the Optionee (1) by giving oral, written or electronic notice to the Company or its designated representative specifying the number of whole Shares to be purchased and payment therefor in full on or prior to the Payment Date (as defined below) either (i) in cash or its equivalent, (ii) by tendering previously owned whole Shares (or delivering a certification or attestation of ownership of such Shares) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price for the Shares being purchased pursuant to such exercise (which the Optionee has held for at least six months prior to the delivery of such Shares and for which the Optionee has good title, free and clear of all liens and encumbrances), (iii) in a combination of (i) and (ii), or (iv) by means of a cashless exercise as permitted under Federal Reserve Board's Regulation T and using a 3 broker-dealer acceptable to the Company and (2) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove an election pursuant to any of clauses (ii) - (iv). Any fraction of a Share which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Share shall be delivered until the full purchase price therefor has been paid. "Payment Date" shall mean the date on which a sale transaction in connection with a cashless exercise (whether or not payment is actually made pursuant to a cashless exercise) would have settled in connection with the subject option exercise. 2.4 Termination of Option. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, at 5:00 p.m. New York time, on the Expiration Date. In no event may the Option be exercised after it terminates as set forth in this Section 2.4. 3. Additional Terms and Conditions of Option. 3.1 Nontransferability of Option. The Option may not be transferred by the Optionee other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by the foregoing, during the Grantee's lifetime the Option is exercisable only by the Optionee or the Grantee's Legal Representative. Except as permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 3.2. Withholding Taxes. (a) As a condition precedent to the delivery of Shares upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the Shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company of previously owned whole Shares (which the Optionee has held for at least six months prior to the delivery of such Shares and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first 4 arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) by having the Company withhold Shares having a Fair Market Value as of the Tax Date equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company pursuant to a cashless exercise permitted by Federal Reserve Board's Regulation T or (5) any combination of (1) - - (3). The Committee shall have the sole discretion to disapprove of an election pursuant to any of clauses (1), (2), (4) or (5). Shares to be delivered to or withheld by the Company may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full. 3.3 Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Shares other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee; provided that the number of Shares subject to the Option shall always be a whole number. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.4. Change in Control. In the event of a Change in Control, unless otherwise prohibited under applicable laws or by the rules and regulations of any governmental agencies or national securities exchange, the Option shall become immediately exercisable and shall remain exercisable throughout the remainder of its term. The Committee shall determine whether a Change in Control has occurred and such determination shall be conclusive and binding upon the Company and the Optionee. 3.5. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the Shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of Shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. As a further condition precedent to any exercise of the Option, the Optionee (1) shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the Shares, (2) shall comply with all laws, rules and regulations applicable to the ownership of stock options and stock and the exercise of stock options, including, without limitation, currency and exchange laws, rules and regulations and (3) in connection therewith, shall execute any documents which the Board or the Committee shall deem necessary or advisable in its sole discretion. 5 3.6. Delivery of Certificates. Upon the exercise of the Option, in whole or in part, and the satisfaction of all requirements of this Agreement related to such exercise, the Company shall deliver or cause to be delivered one or more certificates representing the number of Shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.2. 3.7. Option Confers No Rights as Stockholder. The Optionee shall not be entitled to any privileges of ownership with respect to Shares subject to the Option unless and until purchased and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered Shares; and the Optionee shall not be considered a stockholder of the Company with respect to any such Shares not so purchased and delivered. 3.8. Option Confers No Rights to Continued Employment; Agreement Survival. In no event shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to employment by the Company or any affiliate of the Company. The Optionee's terms of employment are pursuant to the terms of the EMPLOYMENT AGREEMENT, dated as of September 20, 2004, between STARWOOD HOTELS & RESORTS WORLDWIDE, INC. and STEVEN J. HEYER. This Agreement shall survive the termination of the Optionee's employment for any reason. 3.9. Decisions of Board or Committee. The Board or the Committee shall have the exclusive right to resolve all questions that may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10. Company to Reserve Shares. The Company shall at all times prior to the expiration or termination of the Option reserve or cause to be reserved and keep or cause to be kept available, either in its treasury or out of its authorized but unissued Shares, the full number of Shares subject to the Option from time to time. 3.11. Prospectus. The Optionee will be provided a copy of the Prospectus relating to the Plan, the Option and the Shares covered thereby. The Optionee agrees that he or she has reviewed the Prospectus, and fully understands his or her rights under the Plan. 3.12. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. 4.1. Designation as Nonqualified Stock Option. The Option is hereby designated as not constituting an Incentive Stock Option; this Agreement shall be interpreted and treated consistently with such designation. 6 4.2. Meaning of Certain Terms. As used herein, the term "Legal Representative" shall include an executor, administrator, beneficiary or person legally authorized to act on behalf of the Optionee and the term "Permitted Transferee" shall include any transferee designated pursuant to beneficiary designation procedures which may be approved by the Company. 4.3. Successors. This Agreement shall (i) be binding upon the Company and its successors and assigns and (ii) inure to the benefit of any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Company or its designated representative at corporate headquarters in White Plains, New York, Attention: Human Resources, or such other address specified by the Company, and if to the Optionee, to the address set forth for the Optionee on the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5. Reform by Court or Severability. In the event that any provision of this Agreement is deemed by a court to be broader than permitted by applicable law, then such provision shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement shall be declared by a court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining provisions of this Agreement shall not be affected. 4.6. Amendment; Waiver. No provision of this Agreement may be amended or waived unless agreed to in writing and signed by the Executive Vice President-Human Resources of the Company. The failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement shall not waive any right, power or remedy which the Company has under this Agreement. 4.7. Governing Law. The Option and this Agreement, and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Maryland and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.8 Personal Data. By accepting the Award, Participant has voluntarily consented to the collection, use, processing and transfer of personal data about Participant, 7 including Participant's name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, details of the Award for the purpose of managing and administering the Plan ("Data"). Company and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Participant's participation in the Plan, and Company and/or any of its Subsidiaries may each further transfer Data to any third parties assisting Company in the implementation, administration and management of the Plan. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. /s/ David Norton By: David Norton, Executive Vice President, Human Resources 8 EX-10.73 18 p70255exv10w73.txt EX-10.73 Exh. 10.73 STARWOOD Hotels & Resorts Worldwide, Inc. July 22, 2004 Mr. Kenneth S. Siegel Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue White Plains, NY 10604 Dear Ken, This letter supplements the letter dated September 25, 2000 from Starwood Hotels & Resorts Worldwide, Inc. (the "Company") to you that sets forth the terms of your employment with the Company (the "Employment Letter"). As previously announced, the Company has commenced a search for a new Chief Executive Officer ("CEO"). The new CEO is expected to be hired in 2004. The Company desires to offer you special severance benefits in the event your employment is terminated after the CEO is hired. In the event that, after the new CEO is hired, the Company terminates your employment for any reason other than "cause" (as defined in the Employment Letter), in addition to the payments and benefits provided in such circumstances under the Employment Agreement, (1) all of your stock options and restricted stock which have been granted to you under any of the Company's benefit plans prior to the date of this letter shall become vested and exercisable as of the date of termination and (2) the Termination Payment payable to you pursuant to the Employment Letter shall equal 12 months of your then current base salary and 100% of your target annual incentive. The special severance benefit under clause (1) will expire on the second anniversary of the date the new CEO commences employment with the Company. Except as modified by this letter, the Employment Letter remains in full force and effect. By signing and returning this letter, you confirm that this letter accurately sets forth the understanding between you and the Company and that you accept and agree to the terms as outlined. Very truly yours, /s/ Barry S. Sternlicht ------------------------------ Barry S. Sternlicht ACCEPTED AND AGREED TO: /s/ Kenneth S. Siegel - ------------------------------ EX-12.1 19 p70255exv12w1.htm EX-12.1

EXHIBIT 12.1

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CALCULATION OF RATIO OF EARNINGS TO TOTAL FIXED CHARGES
(Dollars in Millions)

	Year Ended December 31,
	2004			2003			2002		2001			2000
Earnings:
Income (loss) from continuing operations		369			105			251		147			397
Add:
Adjustment for distributions in excess of equity earnings and losses (a)		(9	)		37			3		(13	)		(14	)
Provision for income taxes		43			(113	)		2		42			201
Minority equity in net income		—			(3	)		2		3			8
Amortization of interest capitalized		1			1			1		1			1
		404			27			259		180			593
Fixed Charges:
Interest and other financial charges		275			305			356		403			460
Interest factor attributable to rentals (b)		28			26			26		25			21
		303			331			382		428			481
Earnings, as adjusted, from continuing operations		707			358			641		608			1,074
Fixed Charges:
Fixed charges above		303			331			382		428			481
Interest capitalized		18			14			10		11			6
Total fixed charges		321			345			392		439			487
Ratio:
Earnings, as adjusted, from continuing operations to fixed charges		2.20			1.04			1.64		1.38			2.21

Notes:

(a) The adjustment represents distributions in excess of undistributed earnings and losses of companies in which at least 20% but less than 50% equity is owned.

(b) The interest factor attributable to rentals consists of one-third of rental charges, which is deemed by Starwood to be representative of the interest factor inherent in rents.

Page 1

EX-3.2

                                                                        EXH. 3.2

                              ARTICLES OF AMENDMENT
                                       OF
                           STARWOOD HOTELS AND RESORTS

THIS IS TO CERTIFY THAT:

            FIRST: The Amended and Restated Declaration of Trust of Starwood
      Hotels and Resorts, a Maryland real estate investment trust (the "Trust"),
      is hereby amended by deleting the second paragraph of Article II, section
      2.1 in its entirety and inserting the following in lieu thereof:

            "At each Annual Meeting of Shareholders beginning at the Annual
            Meeting of Shareholders in 2005, all Trustees shall be elected to
            hold office for a term of one year. Trustees may be re-elected any
            number of times. Each Trustee shall hold office until the election
            and qualification of his or her successor."

            SECOND: The Amended and Restated Declaration of Trust of the Trust
      is hereby further amended by deleting the third sentence of Article II,
      section 2.4 in its entirety and inserting the following in lieu thereof:

            "Vacancies occurring among the Trustees (including vacancies created
            by increases in number) may be filled by a majority of the remaining
            Trustees, though less than a quorum, or by a sole remaining Trustee,
            and the person so appointed shall hold office for a term expiring at
            the next Annual Meeting of Shareholders and until such trustee's
            successor shall have been duly elected and qualified."

            THIRD: The amendments to the Amended and Restated Declaration of
      Trust of the Trust as set forth above have been duly advised by the Board
      of Trustees and approved by the shareholders of the Trust entitled to vote
      as required by law.

            FOURTH: The undersigned Vice President and Chief Financial and
      Accounting Officer acknowledges these Articles of Amendment to be the
      trust act of the Trust and as to all matters or facts required to be
      verified under oath, the undersigned Vice President and Chief Financial
      and Accounting Officer acknowledges that to the best of his knowledge,
      information and belief, these matters and facts are true in all material
      respects and that this statement is made under the penalties for perjury.



                                                                        EXH. 3.2

      IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment to be
signed in its name and on its behalf by its Vice President and Chief Financial
and Accounting Officer and attested to by its Secretary on this 15th day of
November, 2004.

ATTEST:                               STARWOOD HOTELS AND RESORTS

By: /s/ Kenneth S. Siegel             By: /s/ Vasant M. Prabhu
    _____________________                 _____________________
Name: Kenneth S. Siegel               Name: Vasant M. Prabhu
Title:  Secretary                     Title: Vice President and Chief Financial
                                             and Accounting Officer

EX-3.4

                                                                        EXH. 3.4

                                    BYLAWS OF

                            STARWOOD HOTELS & RESORTS

               (AS AMENDED AND RESTATED THROUGH NOVEMBER 8, 2004)

                                    ARTICLE I

                                    TRUSTEES

            SECTION 1. Number; Tenure. There shall be not less than three (3)
nor more than twenty (20) Trustees; within such limits, the number of Trustees
may be fixed, increased or decreased from time to time by the Trustees, but no
such action may affect the tenure of office of any Trustee.

            SECTION 2. Qualifying Shares not Required. No Trustee need be a
Shareholder.

            SECTION 3. Quorum. A majority of the Trustees shall constitute a
quorum.

            SECTION 4. Election. At each Annual Meeting of Shareholders
beginning at the Annual Meeting of Shareholders in 2005, all Trustees shall be
elected to hold office for a term of one year. Trustees may be re-elected any
number of times. Each Trustee shall hold office until the election and
qualification of his or her successor.

            SECTION 5. CHAIRMAN OF THE BOARD. The Board of Trustees may from
time to time appoint one of its members to act as Chairman of the Board by the
vote of a majority of the entire Board of Trustees. The Board of Trustees may
designate the Chairman as an Executive Chairman, who shall in the capacity as
Chairman of the Board be deemed an officer of the Trust, or a Non-Executive
Chairman, who shall not in the capacity as Chairman of the Board be deemed an
officer of the Trust. The Chairman shall have such powers and perform such
duties as are prescribed for him from time to time by the Trustees.

            SECTION 6. Vacancies. Vacancies occurring among the Trustees
(including vacancies created by increases in number) may be filled by a majority
of the remaining Trustees, though less than a quorum, or by a sole remaining
Trustee, and the person so appointed shall hold office for a term expiring at
the Annual Meeting of Shareholders at which the term of office of the class to
which he or she has been appointed expires and until his or her successor is
elected and qualified.

            SECTION 7. Place of Meeting. Each meeting of the Trustees shall be
held at such place within or without the State of Maryland as is fixed from time
to time by resolution of the Trustees (or, in the absence of such resolution, as
specified in the notice of such meeting).

                                       1


            SECTION 8. Annual Meetings. Promptly following each Annual Meeting
of Shareholders, a meeting of the Trustees shall be held for the purpose of
electing officers and transacting other business. Notice of such meetings need
not be given.

            SECTION 9. Regular Meetings. Regular meetings of the Board of
Trustees need not be held.

            SECTION 10. Special Meetings. Special meetings of the Trustees may
be called at any time by the Chairman, and the Chairman shall call a special
meeting at any time upon the written request of two (2) Trustees. Written notice
of the time and place of a special meeting shall be given to each Trustee,
either personally or by sending a copy thereof by mail or by telecopier to his
or her address appearing on the books of the Trust or theretofore given by him
to the Trust for the purpose of notice. In case of personal service or notice by
telecopier, such notice shall be so delivered at least twenty-four (24) hours
prior to the time fixed for the meeting. If such notice is mailed, it shall be
deposited in the United States mail at least seventy-two (72) hours prior to the
time fixed for the holding of the meeting. Notice of a meeting may be given by
the Chairman, the Trustees requesting the meeting or the Secretary.

            SECTION 11. Adjourned Meetings. A quorum of the Trustees may adjourn
any Trustees' meeting to meet again at a stated day and hour. In the absence of
a quorum a majority of the Trustees present may adjourn from time to time to
meet again at a stated day and hour prior to the time fixed for the next regular
meeting of the Trustees. Notice of the time and place of an adjourned meeting
need not be given to any Trustee if the time and place is fixed at the meeting
adjourned.

            SECTION 12. Waiver of Notice. The transactions of any meeting of the
Trustees, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if either before or after the meeting each of the Trustees not
present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be lodged with the Trust records or made a part of the minutes
of the meeting.

            SECTION 13. Action Without Meeting. Any action required or permitted
to be taken by the Trustees may be taken without a meeting, if a majority of the
Trustees shall individually or collectively consent in writing to such action.
Such written consent or consents shall be lodged with the records of the Trust.
Such action by written consent shall have the same force and effect as a vote of
the Trustees adopted at a meeting duly called and held.

            SECTION 14. Powers and Duties. The powers and duties of the
Trustees, in addition to the powers and duties set forth in the Declaration,
are:

            (a) Selection and Removal of Officers, Agents and Employees. To
      select all the other officers, agents and employees of the Trust, to
      remove them at pleasure, either with or without cause, to prescribe for
      them duties consistent with the Declaration and the Trustees' Regulations,
      and to fix their compensation.

                                       2


            (b) Authorization of Signatures. From time to time to designate the
      person or persons authorized to sign or endorse checks, drafts, or other
      orders for the payment of money, issued in the name of or payable to the
      Trust.

            (c) Fixing Principal Office and Place of Meetings. From time to time
      to change the location of the principal office of the Trust and from time
      to time to designate any place within or without the State of Maryland as
      the place at which meetings of Trustees or of the Shareholders shall be
      held.

            (d) General Powers. Generally to exercise such other powers as are
      usually vested in directors of corporations organized under the laws of
      the State of Maryland.

            SECTION 15. Executive Committee. (a) The Board of Trustees may
appoint two or more trustees to constitute an Executive Committee. One of such
trustees shall be designated as Chairman of the Executive Committee. The
Executive Committee shall have and may exercise all of the rights, powers and
authority of the Board of Trustees, except as expressly limited by the Maryland
General Corporation Law as amended from time to time.

            (b) The Executive Committee shall fix its own rules of procedure and
shall meet at such times and at such place or places as it may determine. The
Chairman of the Executive Committee or, in the absence of a Chairman, a member
of the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as secretary. A majority of the
Executive Committee shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the members present at a meeting shall
be required for any action of the Executive Committee.

            SECTION 16. Other Committees. The Board of Trustees may appoint such
other committees as it shall deem advisable and with such authority as the Board
of Trustees shall from time to time determine.

            SECTION 17. Other Provisions Regarding Committees. (a) The Board of
Trustees shall have the power at any time to fill vacancies in, change the
membership of, or discharge any committee.

            (b) Members of any committee shall be entitled to such compensation
for their services as from time to time may be fixed by the Board of Trustees.
No committee member who receives compensation as a member of any one or more
committees shall be barred from serving the Trust in any other capacity or from
receiving compensation and reimbursement of reasonable expenses for any or all
such other services.

            (c) Unless prohibited by law, the provisions of Sections 12, 13 and
18 of this Article I shall apply to all committees.

            SECTION 18. Meetings by Telephone or Similar Communications. The
Board of Trustees may participate in meetings by means of conference telephone
or similar communications equipment, whereby all trustees participating in the
meeting can hear each other at the same time, and participation in any such
meeting shall constitute presence in person at

                                       3


such meeting. A written record shall be made of all actions taken at any meeting
conducted by a means of a conference telephone or similar communications
equipment.

            SECTION 19. Transactions with Interested Persons. (a)
Notwithstanding anything to the contrary contained in these Trustees'
Regulations, in addition to any affirmative vote required either by law, the
Partnership Agreement, the Declaration of Trust of the Trust or these Trustees'
Regulations, any Transaction involving the Trust or any of its subsidiaries or
the Realty Partnership shall require the affirmative vote of a majority of the
Trustees ("Disinterested Members") on the Board of Trustees of the Trust who are
not employees, officers, directors, Affiliates or Associates of the Interested
Person who or which is a party to the Transaction.

            (b) As used in these Trustee's Regulations:

                  (i) "Affiliate" and "Associate" shall have the respective
            meanings ascribed to such terms in Rule 12b-2 of the General Rules
            and Regulations under the Securities Exchange Act of 1934, as in
            effect on June 25, 1998 (the "Exchange Act");

                  (ii) A Person shall "Beneficially Own" and be the "Beneficial
            Owner" of any Paired Shares or Units:

                        (A) which such Person or any of its Affiliates or
                  Associates beneficially owns, directly or indirectly, within
                  the meaning of Rule 13d-3 under the Exchange Act; or

                        (B) which such Person or any of its Affiliates or
                  Associates has (I) the right to acquire (whether such right is
                  exercisable immediately or only after the passage of time),
                  pursuant to any agreement, arrangement or understanding or
                  upon the exercise of conversion rights, exchange rights,
                  warrants or options, or otherwise, or (II) the right to vote
                  pursuant to any agreement, arrangement or understanding (but
                  neither such Person nor any such Affiliate or Associate shall
                  be deemed to be the Beneficial Owner of any Paired Shares or
                  Units solely by reason of a revocable proxy granted for a
                  particular meeting of shareholders, pursuant to a public
                  solicitation of proxies for such meeting, and with respect to
                  which Paired Shares or Units neither such Person nor any such
                  Affiliate or Associate is otherwise deemed the Beneficial
                  Owner); or

                        (C) which are beneficially owned, directly or
                  indirectly, within the meaning of the Rule 13d-3 under the
                  Exchange Act, by any other Person with which such Person or
                  any of its Affiliates or Associates has any agreement,
                  arrangement or understanding for the purpose of acquiring,
                  holding, voting (other than solely by reason of a revocable
                  proxy as described in subparagraph (B) above) or disposing of
                  any Paired Shares or Units.

                  (iii) "Corporation" shall mean Starwood Hotels & Resorts
            Worldwide, Inc., a Maryland corporation.

                  (iv) "Interested Person" shall mean any Person who or which is
            the Beneficial Owner, directly or indirectly, of 5% or more of the
            outstanding Paired Shares or the outstanding Units or who or which
            is an Affiliate or Associate of the Trust, the Corporation or either
            of the Partnerships. For the purposes of determining whether a

                                       4


            Person is an Interested Person, the number of Paired Shares or Units
            deemed to be outstanding shall include Paired Shares or Units deemed
            owned through application of paragraphs (A), (B) and (C) of
            paragraph (ii) above but shall not include any other unissued Paired
            Shares or Units which may be issuable pursuant to any agreement,
            arrangement or understanding, or upon exercise of conversion rights,
            warrants or options, or otherwise.

                  (v) "Paired Shares" shall mean the shares of common stock of
            the Corporation and the shares of beneficial interest of the Trust
            which are paired pursuant to the Pairing Agreement dated June 25,
            1980 between the Trust and the Corporation, as amended from time to
            time.

                  (vi) "Partnership Agreement" shall mean the Limited
            Partnership Agreement of the Realty Partnership, as amended from
            time to time.

                  (vii) "Partnerships" shall mean the Realty Partnership and SLC
            Operating Limited Partnership, a Delaware limited partnership.

                  (viii) "Person" shall mean any individual, limited
            partnership, general partnership, corporation, limited liability
            company or any other firm or entity.

                  (ix) "Realty Partnership" shall mean SLT Realty Limited
            Partnership, a Delaware limited partnership.

                  (x) "Shareholder" shall mean a Person that owns Paired Shares.

                  (xi) "Transaction" shall mean any contract, sale, lease,
            exchange, mortgage, transfer or disposition to or with, or any other
            transaction with, any Interested Person, including, without
            limitation, any election with respect to the method of payment for
            an exchange of Units for Paired Shares, or any action to be taken by
            the Trust, the Corporation or the Partnership with respect to the
            senior debt of the Realty Partnership.

                  (xii) "Trust" means Starwood Hotels & Resorts, a Maryland real
            estate investment trust.

                  (xiii) "Units" shall have the meaning set forth in the
            Partnership Agreement.

            (c) A majority of the Disinterested Members shall have the power and
      duty to determine, on the basis of information known to them after
      reasonable inquiry, all facts necessary to determine compliance with this
      Section 19, including, without limitation, (i) whether a Person is an
      Interested Person, (ii) the number of Paired Shares or Units that any
      Person Beneficially Owns, and (iii) whether a Person is an Affiliate or
      Associate of another. A majority of the Disinterested Members shall have
      the right to demand that any Person who is reasonably believed to be an
      Interested Person (or who holds of record Paired Shares or Units that any
      Interested Person Beneficially Owns) supply the Trust with complete
      information as to (i) the record owner(s) of all Paired Shares or Units
      that such Person who is reasonably believed to be an Interested Person
      Beneficially Owns, (ii) the number of, and class or series of, Paired
      Shares or Units that such Person who is reasonably believed to be an
      Interested Person Beneficially Owns and the number(s) of the
      certificate(s), if any, evidencing such Paired Shares or Units, and (iii)
      any other factual matter relating to the applicability or effect of this
      Section 19, as may be

                                       5


      reasonably requested of such Person, and such Person shall furnish such
      information within 10 days after receipt of such demand.

            (d) Nothing contained in this Section 19 shall be construed to
      relieve any Interested Person from any fiduciary obligation imposed by
      law.

            (e) Notwithstanding anything to the contrary contained in these
      Trustees' Regulations this Section 19 may be amended or repealed only by a
      majority of Trustees on the Board of Trustees of the Trust who are not
      employees, officers, Affiliates or Associates of the Trust, the
      Corporation, the Partnerships or any Interested Person.

            SECTION 20. Independent Trustees. Notwithstanding anything to the
contrary contained in these Trustees' Regulations, not less than a majority of
the Board of Trustees of the Trust shall be composed of "Independent Trustees."
For purposes of this Section 20, an "Independent Trustee" is a Trustee of the
Trust who is not employed by or an affiliate (as defined in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act), of the Trust, the
Corporation or Starwood Capital Group, L.L.C.

                                   ARTICLE II

                                    OFFICERS

            SECTION 1. Enumeration. The officers of the Trust shall be a Chief
Executive Officer, a President, one or more Vice-Presidents, a Secretary, a
Treasurer, and such other officers as are elected by the Trustees. Officers
shall be elected by the Trustees. The Board of Trustees may delegate to the
Chief Executive Officer of the Trust the authority to appoint any officer or
agent of the Trust and to fill a vacancy other than the President, Secretary or
Treasurer, and may delegate to any other officer of the Trust the authority to
appoint any officer or agent of the Trust having a lower rank than the officer
making such appointment. Officers shall hold office at the pleasure of the
Trustees, provided that any officer appointed by any other officer pursuant to
authority delegated to such appointing officer by the Board of Trustees may be
removed, with or without cause, at any time whenever such appointing officer in
his or her absolute discretion shall consider that the best interests of the
Trust shall be served by such removal. Any two or more offices, except those of
Chief Executive Officer and President, President and Secretary, or President and
Assistant Secretary, may be held by the same person.

            SECTION 2. Powers and Duties of the Chief Executive Officer. Subject
to the control of the Trustees, the Chief Executive Officer shall have general
supervision, direction and control of the business of the Trust and its
employees and shall have such other powers and duties as are usually vested in
the office of chief executive officer of a corporation. The Chief Executive
Officer shall, exercise and perform such other powers and duties as may be from
time to time assigned to him by the Trustees. The Chief Executive Officer shall
have the power and authority to execute all written instruments on behalf of the
Trust of every nature whatsoever, and except as prohibited by applicable law or
the rules of the New York Stock Exchange or other primary exchange or market on
which the Shares are listed, shall be, ex officio, a member of all standing
committees. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the Board of Trustees and of the
Shareholders.

                                       6


            SECTION 3. Powers and Duties of the President. In the absence of a
Chief Executive Officer, the President shall in general supervise and control
all of the business and affairs of the Trust. The President shall have such
duties and responsibilities for the supervision, direction and control of the
Trust as may be delegated to the President by the Board of Trustees or the Chief
Executive Officer. The President shall have the power and authority to execute
all written instruments on behalf of the Trust of every nature whatsoever.

            SECTION 4. Powers and Duties of the Vice Presidents. In the absence
or disability of the President, the Vice-Presidents in order of their rank as
fixed by the Trustees or, if not ranked, the Vice-President designated by the
Trustees, shall perform all of the duties of the President and when so acting
shall have all the powers of and be subject to all of the restrictions upon the
President. The Vice-Presidents shall have the power and authority to execute on
behalf of the Trust all written instruments of every nature whatsoever. The
Vice-Presidents shall have such other powers and perform such other duties as
are prescribed for them from time to time by the Trustees.

            SECTION 5. Duties of the Secretary. The Secretary shall keep full
and complete minutes of the meetings of the Trustees and of the meetings of the
Shareholders and give notice, as required, of all such meetings. The Secretary
shall perform all other duties that pertain to such office and which are
required by the Trustees.

            SECTION 6. Duties of the Chief Financial Officer. The Chief
Financial Officer shall (i) maintain custody of and keep the books of account of
the Trust; (ii) receive, deposit and disburse funds belonging to the Trust, and
(iii) perform all other duties that pertain to such office and which are
required by the Trustees.

                                   ARTICLE III

                                  SHAREHOLDERS

            SECTION 1. Quorum. The presence in person or by proxy of Persons
entitled to vote a majority of the voting shares at any meeting of Shareholders
shall constitute a quorum. The Shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough Shareholders to leave less
than a quorum.

            SECTION 2. Place of Meeting. Meetings of the Shareholders shall be
held at the principal office of the Trust or at another convenient location
within or without the State of Maryland as is designated by the Trustees or by
the written consent of all Shareholders entitled to vote thereat, given either
before or after the meeting and filed with the Secretary of the Trust.

            SECTION 3. Annual Meeting. A regular annual meeting of the
Shareholders shall be held on such date and at such time as may be fixed by the
Board of Trustees.

            SECTION 4. Special Meetings. Special meetings of the Shareholders
may be held at any time for any purpose or purposes. Such special meetings may
be called at any time by the Chairman, the Chief Executive Officer or by the
Trustees or by any two or more Trustees,

                                       7


or by one or more Shareholders holding not less than twenty-five percent (25%)
of the outstanding Shares of the Trust entitled to vote.

            SECTION 5. Nomination of Trustees. Nominations of Persons for
election as Trustees at an annual meeting of the Shareholders may be made at
such meeting only by or at the direction of the Trustees, by any nominating
committee or person(s) appointed by the Trustees, or by any Shareholder entitled
to vote for the election of Trustees at the meeting who complies with the notice
procedures set forth in this Section 5.

            Any Shareholder entitled to vote for the election of Trustees may
nominate one or more Persons for election as Trustee at a meeting of
Shareholders only if written notice of such Shareholder's intent to make such
nomination or nominations has been delivered personally to the Secretary at, or
been mailed to the Secretary and received at, the principal executive offices of
the Trust not earlier than the close of business on the 75th day nor later than
the close of business on the 50th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date or if the Trust has not previously held
an annual meeting, notice by the shareholder to be timely must be so delivered
not earlier than the close of business on the 75th day prior to such annual
meeting and not later than the close of business on the later of the 50th day
prior to such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made by the Trust. Such
Shareholder's notice to the Secretary shall set forth: (i) the name and address
of the Shareholder who intends to make the nominations(s) and of the Person or
Persons to be nominated; (ii) the class and number of Shares that are held of
record, beneficially owned and represented by proxy by such Shareholder as of
the record date for the meeting (if such date then shall have been made publicly
available) and as of the date of such notice; (iii) a representation that such
Shareholder intends to appear in person or by proxy at the meeting to nominate
the Person or Persons specified in the notice; (iv) a description of any
contract, arrangement or understanding between such Shareholder and each nominee
and any other Person or Persons (naming such Person or Persons) pursuant to
which the nomination or nominations are to be made by such Shareholder; (v) such
other information regarding each nominee proposed by such Shareholder as would
be required to be disclosed in a proxy statement used in a solicitation of
proxies for the election of directors which solicitation was subject to the
rules and regulations of the Securities and Exchange Commission (the "SEC")
under Section 14 of the Exchange Act, as from time to time amended; and (vi) the
consent of each nominee to serve as a Trustee if so elected.

            No Person shall be eligible for election as a Trustee unless as
nominated in accordance with the procedures set forth herein.

            SECTION 6. Adjourned Meetings. Whether or not a quorum is present at
any meeting of Shareholders, the presiding officer at the meeting shall have the
power to adjourn the meeting from time to time, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. Any business which might have been transacted at a meeting
as originally called may be transacted at any meeting held after adjournment as
provided in this Section 6, if a quorum is present in person or by proxy at such
reconvened meeting.

                                       8


            SECTION 7. Notice of Regular or Special Meetings. Written notice
specifying the place, day and hour of any regular or special meeting, the
general nature of the business to be transacted thereof, to the extent required
by law, and all other matters required by law shall be given to each Shareholder
of record entitled to vote, either personally or by sending a copy thereof by
mail or telegraph to his or her address appearing on the books of the Trust or
theretofore given by him to the Trust for the purpose of notice or, if no
address appears or has been given, addressed to the place where the principal
office of the Trust is situated. It shall be the duty of the Secretary to give
notice of each Annual Meeting of the Shareholders at least ten (10) days and not
more than ninety (90) days before the date on which it is to be held. If notice
is not so given by the Secretary, it may be given by any other officer.

            Within twenty (20) days after the Trust receives a Shareholder
request for the calling of a special meeting, the Trustees shall designate the
date on which such meeting is to be held and the Secretary shall inform the
Shareholders who make the request of the reasonably estimated costs of preparing
and mailing a notice of the meeting, and on payment of those costs to the Trust,
notify each Shareholder entitled to notice of the meeting. Any such special
meeting shall be held on a date not earlier than the twentieth (20th) day, and
not later than the ninetieth (90th) day, following the date on which such notice
is given. If the date of such special meeting is not so fixed and notice thereof
given within twenty (20) days after the date such Shareholder request is
received by the Trust, the date of such meeting may be fixed by the Person or
Persons requesting the meeting, in which event notice of such meeting shall be
given by such Person or Persons not less than twenty (20), nor more than sixty
(60), days before the date on which the meeting is to be held.

            Notwithstanding the foregoing, if as of the date a Shareholder
request for a special meeting is received or within twenty (20) days thereafter,
the Trustees have called or call a meeting of Shareholders (whether annual or
special) for a purpose or purposes other than the purpose(s) stated in the
Shareholder request, the Trustees need not call, and the Secretary need not give
notice of, a separate and additional meeting of Shareholders for the purpose(s)
stated in the Shareholder request if (i) the Trustees determine in good faith
that calling such a separate and additional meeting would require the Trust to
incur undue cost and expense, and (ii) the Secretary notifies both the
requesting Shareholder(s) and all other Shareholders entitled to vote, within
twenty (20) days after the Trust receives the Shareholder request, that the
matter(s) proposed by the requesting Shareholder(s) to be considered at a
special meeting may be proposed and considered at the meeting otherwise called
by the Trustees. In addition, if not later than the thirtieth (30th) day prior
to the date on which any special meeting called by the Trustees pursuant to a
Shareholder request is to be held, the Trustees determine in good faith to
present for consideration by the Shareholders of the Trust one or more matters
other than those proposed by the requesting Shareholder(s) to be considered, the
Trustees may postpone the previously called special meeting for a period of up
to sixty (60) days following the date of which notice of such postponement is
given. Notice of such postponement and of the additional matter(s) to be
considered at such meeting shall be given by the Secretary to all Shareholders
entitled to vote at the meeting not later than the thirtieth (30th) day prior to
the originally scheduled meeting date.

            For purposes of this Section 7, a Shareholder request shall be
deemed received by the Trust when delivered to an officer of the Trust in person
or on the date on which such request is mailed to the Trust, duly addressed to
its principal office.

                                       9


            SECTION 8. Notice of Adjourned Meetings. It shall not be necessary
to give any notice of the time and place of any adjourned meeting or of the
business to be transacted thereat other than by announcement at the meeting at
which such adjournment is taken.

            SECTION 9. Proxies. The appointment of a proxy or proxies shall be
made by an instrument in writing executed by the Shareholder or his or her duly
authorized agent and filed with the Secretary of the Trust. No proxy shall be
valid after the expiration of eleven (11) months from the date of its execution
unless the Shareholder executing it specifies therein the length of time for
which it is to continue in force, which is no case shall exceed seven (7) years
from the date of its execution. At a meeting of Shareholders all questions
concerning the qualification of voters, the validity of proxies, and the
acceptance or rejection of votes, shall be decided by the secretary of the
meeting unless inspectors of election are appointed pursuant to Section 13 of
this Article III, in which event such inspectors shall pass upon all questions
and shall have all other duties specified in said section.

            SECTION 10. Consent of Absentees. The transactions of any meeting of
Shareholders, either annual, special, or adjourned, however called and noticed,
shall be as valid as though had at a meeting duly held after the regular call
and notice if a quorum is present and, if either before or after the meeting,
each Shareholder entitled to vote, not present in person or by proxy, signs a
written waiver of notice or a consent to the holding of such meeting or an
approval of the minutes thereof. All such waivers, consents or approvals shall
be lodged with the Trust records or made a part of the minutes of the meeting.

            SECTION 11. Voting Rights. If no future date is fixed for the
determination of the Shareholders entitled to vote at any meeting of
Shareholders, only Persons in whose names Shares entitled to vote stand on the
stock records of the Trust on the day of any meeting of Shareholders shall be
entitled to vote at such meeting

            SECTION 12. No Cumulative Voting. Shareholders shall not be entitled
to cumulate votes in any elections of Trustees of the Trust.

            SECTION 13. Conduct of Meetings; Inspectors of Election. The
presiding officer at a meeting of the Shareholders shall have all power and
authority vested in a presiding officer by law or practice, including, without
limitation, the authority to determine whether the nomination of any person is
made in compliance with applicable provisions of these Trustees' Regulations
(and to refuse to acknowledge the nomination of any Person not made in such
compliance); to determine whether any item of business proposed to be brought
before the meeting has been properly brought (and to declare that any business
not so brought shall be disregarded and not transacted); to establish rules
pertaining to reasonable time limits and the amount of time that may be taken up
in remarks by any Shareholder or group of Shareholders and otherwise pertaining
to the conduct of the meeting; and to otherwise decide all matters relating to
the conduct of the meeting. The presiding officer may appoint a parliamentarian
and one or more sergeants-at-arms. The parliamentarian may advise the presiding
officer upon matters relating to the conduct of the meeting. The sergeant- or
sergeants-at-arms shall have authority to take any and all actions that such
Persons deem necessary or appropriate to assure that the meeting is conducted
with decorum and in an orderly manner, including, without limitation, authority
to

                                       10


expel or cause the expulsion of any Person who the presiding officer determines
is failing to comply with the rules concerning the conduct of, or is otherwise
disrupting, the meeting.

            In advance of any meeting of the Shareholders, the Trustees may
appoint any one or more Persons (other than nominees for office) to act as
inspectors of election at the meeting or any adjournment thereof. If no
inspector of election is so appointed, the presiding officer of the meeting may,
and on the request of any Shareholder or any Shareholder's proxy shall, appoint
one or more such inspectors of election. The number of inspectors shall be
either one (1) or three (3), as determined by the presiding officer; provided,
however, that if such inspector(s) is or are to be appointed at the meeting on
the request of one or more Shareholders or proxies, the holders of a majority of
Shares present (in person or by duly executed proxy) shall determine whether one
(1) or three (3) inspectors are to be appointed. If the Person appointed as
inspector of election fails to appear at the meeting or fails or refuses to act
as inspector, the presiding officer of the meeting may, and upon the request of
any Shareholder or any Shareholder's proxy shall, appoint a Person to fill that
vacancy. The inspector(s) of election shall:

            (a) Determine the number of Shares outstanding and the voting power
      of each, the Shares represented at the meeting, the existence of a quorum,
      and the authenticity, validity and effect of proxies;

            (b) Receive votes, ballots or consents;

            (c) Count and tabulate all vote or consents;

            (d) Determine and report to the Trust the results of the voting; and

            (e) Do any other acts that may be proper to conduct the election or
      vote with fairness to all Shareholders.

            On the request of the presiding officer of the meeting or of any
Shareholder or such Shareholder's proxy, the inspector(s) of election shall make
a report in writing of any question or other matter determined by him or them
and execute a certificate of any facts found by him or them.

            If there are three (3) inspectors of election, the decision, act,
report or certificate of a majority shall be effective in all respects as the
decision, act, report or certificate of the inspectors."

            SECTION 14. Business. Except as may be otherwise provided by
applicable law, the only business that shall be conducted at any meeting of the
Shareholders (other than matters incident to the conduct of the meeting) shall
be business brought before the meeting by or at the direction of the Trustees or
by a Shareholder who complies with the procedures set forth in this Section 14.

            Except as otherwise provided by Section 5 of this Article III or by
applicable law, the only business that shall be conducted at any meeting of the
Shareholders shall (i) have been specified in the notice of the meeting (or any
supplement thereto) given by or at the direction of the Trustees, (ii) otherwise
be brought before such meeting by or at the direction of the Trustees

                                       11


or the presiding officer of the meeting, or (iii) be otherwise properly brought
before the meeting by or on behalf of a Shareholder who shall have been a
Shareholder of record on the record date for such meeting, who shall continue to
be entitled to vote thereat, and who shall have complied with the procedures set
forth in the remainder of this Section 14. In addition to any and all other
applicable requirements, for business to be properly brought before a meeting of
the Shareholders by a Shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary. To be timely, a Shareholder's notice must
be delivered personally or mailed to and received at the principal executive
offices of the Trust (i) in the case of an annual meeting, not earlier than the
close of business on the 75th day nor later than the close of business on the
50th day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date or if the Trust has not previously held an annual meeting,
notice by the stockholder to be timely must be so delivered not earlier than the
close of business on the 75th day prior to such annual meeting and not later
than the close of business on the later of the 50th day prior to such annual
meeting or the tenth day following the day on which public announcement of the
date of such meeting is first made by the Trust, or (ii) in the case of a
special meeting, within ten days of the earlier of (a) the date that notice of
the meeting was mailed in accordance with this Article III or prior public
disclosure of the date of the meeting was made or (b) the date that a request
for a special meeting was made by a Shareholder in accordance with Section 7 of
this Article III.

            A Shareholder's notice to the Secretary shall set forth (i) a
description of each item of business the Shareholder proposes to bring before
the meeting and the wording of the proposal, if any, to be submitted for a vote
of the Shareholders with respect thereto; (ii) the name and address of the
Shareholder; (iii) the class and number of Shares held of record, owned
beneficially and represented by proxy by such Shareholder as of the record date
for the meeting (if such date shall then have been publicly disclosed) and as of
the date of such notice; and (iv) all other information that would be required
to be included in a proxy statement filed with the SEC if, with respect to any
such item of business, such Shareholder were a participant in a solicitation
subject to Section 14 of the Exchange Act.

            SECTION 15. Informal Action by Shareholders. Whenever Shareholders
are required or permitted to take any action, such action may be taken without a
meeting on written consent setting forth the action so taken, signed by the
holders of a majority of all outstanding Shares entitled to vote thereon, or
such larger proportion thereof as would be required for a vote of Shareholders
at a meeting.

                                   ARTICLE IV

                                  MISCELLANEOUS

            SECTION 1. Record Dates and Closing of Transfer Books. From time to
time the Trustees may fix a future date as the record date for the purpose of
making any proper determination with respect to Shareholders, including which
Shareholders are entitled to notice of a meeting, to vote at a meeting, to
receive a dividend or to be allocated other rights. Such record date may not be
prior to the close of business on the day the record date is fixed. Except

                                       12


as may be otherwise set forth in the Section 2-511 of the Corporations and
Associations Article, Annotated Code of Maryland, as in effect from time to time
and as applicable to Maryland corporations, the record date for any
determination shall not be more than 90 days before the date on which the action
requiring the determination will be taken. If a record date is so fixed for a
meeting, to receive a dividend or to be allocated other rights, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting or to receive such dividend or allotment of rights, as
the case may be, notwithstanding any transfer of Shares on the books of the
Trust after the record date so fixed.

            SECTION 2. Inspection of Trust Records. The share register or
duplicate share register, the books of account, and the minutes of the
proceedings of the Shareholders and Trustees shall be open to inspection upon
the written demand of any Shareholder to the same extent as is permitted by the
laws of Maryland for the inspection of corporate records by corporate
shareholders. Such inspection may be made in person or by an agent or attorney
and shall include the right to make extracts. Demand for inspection shall be
made in writing upon the President, Secretary or Assistant Secretary of the
Trust.

            SECTION 3. Inspection of Trustees' Regulations. The Trustees shall
keep at the principal office for the transaction of business of the Trust the
original or a copy of the Trustees' Regulations as amended or otherwise altered
to date, certified by the Secretary, which shall be open to inspection by the
Shareholders at all reasonable times during office hours.

            SECTION 4. Representation of Shares of Corporations. The Chairman,
the Chief Executive Officer, the President or any Vice-President and the
Secretary or Assistant Secretary of the Trust, acting either in person or by a
proxy or proxies designated in a written instrument duly executed by said
officers, are authorized to vote, represent, and exercise on behalf of the Trust
all rights incident to any shares of any corporation standing in the name of the
Trust.

            SECTION 5. Exemption from Control Share Acquisition Statute. The
provisions of Sections 3-701 to 3-709 of the Corporations and Associations
Article of the Annotated Code of Maryland shall not apply to any shares of
beneficial interest of the Trust now or hereafter held of record or beneficially
held by any person whatsoever, it being the intent of this provision that the
Trust opt out of the aforementioned sections in their entirety and that all
persons and shares of beneficial interest held by such persons be exempted from
such sections to the fullest extent permitted by Maryland law.

                                    ARTICLE V

                                      SEAL

            The Trust may have a seal containing the name of the Trust and the
words "Maryland, 1969."

                                   ARTICLE VI

                                   AMENDMENTS

                                       13


            These Trustees' Regulations may be amended or repealed or new or
additional Trustees' Regulations may be adopted only by the vote or written
consent of the Trustees, and the Shareholders shall not have any power to amend
or repeal these Trustees' Regulations or to adopt new or additional Trustees'
Regulations.

                                   ARTICLE VII

                                   DEFINITIONS

            All terms defined in the Declaration of Trust of Hotel Investors
Trust dated as of August 15, 1969, as amended from time to time, shall have the
same meaning when used in these Trustees' Regulations.

                                       14

EX-10.3

                                                                    EXHIBIT 10.3

                                 LEASE AGREEMENT

            THIS LEASE AGREEMENT (this "Lease") is dated as of February 14,
1997, and is entered into by and between LONG BEACH HOTEL ASSOCIATES, L.P., as
lessor (hereinafter called "Lessor"), and SLC OPERATING LIMITED PARTNERSHIP, a
Delaware limited partnership, as lessee (hereinafter called "Lessee"). As
parties hereto, Lessor and Lessee agree as follows:

                                   ARTICLE I

                          DEFINITIONS AND CONSTRUCTION

      Section 1. Definitions: "Shall" or "will" means "covenants to" whenever
the context permits. "According to law" means in strict compliance with
applicable statutes, ordinances and regulations of any governmental authority
having jurisdiction.

      Section 2. Construction: This lease shall be governed by and construed in
accordance with the laws of the State of Arizona. The validity or
unenforceability of any provision hereof shall not affect any other provision,
and any invalid or unenforceable provision shall be limited only to the extent
necessary to conform to law and so as most closely to carry out the intent of
the parties hereto as expressed herein. Whenever provision is made for either
party to secure the consent or approval of the other, such consent or approval
shall not be unreasonably withheld.

      Section 3. Captions: The headings of the articles and sections of this
Lease are for convenience only and do not define or limit, and shall not be used
to construe, such articles or sections.

                                   ARTICLE II

                               PREMISES AND TERM

      Section 1. Leased Premises: Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, on the terms and conditions contained in this Lease,
Lessor's interest in (a) the real property commonly known as the Sheraton Long
Beach Hotel and located at 333 East Ocean Boulevard, Long Beach, California
90802, and more fully described on Exhibit "A" attached hereto (the "Land"), (b)
all buildings and improvements now or in the future located on the Land, and all
appurtenances thereto (the "Improvements"), (c) all easements, licenses, permits
and other rights or privileges appurtenant to or necessary for the intended use
of the Land or Improvements (the "Appurtenances") (the Land, Improvements and
Appurtenances are collectively referred to herein as the "Real Property"), and
(d) all equipment, furniture and other personal property owned by Lessor and
located in or on the Real Property, or associated therewith, or that may in the
future be installed therein or thereon by Lessor (the "Personal Property"). The
Real Property and the Personal Property are sometimes hereinafter collectively
referred to as the "Premises."

            Lessee hereby acknowledges that Lessor has delivered possession of
the Premises to Lessee, and that Lessee accepts the Premises in an "as is"
condition as of the Commencement Date (as defined below). Lessee further
acknowledges that Lessor shall not have any obligation to make any improvements
or repairs in or to the Premises except as may be expressly set forth in this
Lease.

      Section 2. Lease Term: The term of this Lease (the "Lease Term") shall
commence on February 14, 1997 (the "Commencement Date") and shall end on
February 13, 2000, unless sooner terminated as set forth in this Lease.



            Section 3. Lease Year: As used in this Lease, the term "Lease Year"
means the full calendar year, except that the first Lease Year shall commence on
the Commencement Date, and shall end on December 31 of the same calendar year,
and the last Lease Year shall end at the same time as the Lease Term shall end,
even if less than a full calendar year.

            Section 4. Recording: Neither this Lease nor a copy thereof shall be
recorded by either party hereto in any public record. Upon request of either
party after the Commencement Date, Lessor and Lessee shall execute a memorandum
of lease in recordable form containing the terms and provisions required by
applicable law. The memorandum may be recorded by either party in the county
where the Premises are located.

                                  ARTICLE III

                    IMPROVEMENTS, FURNISHINGS AND INVENTORY

            Section 1. Furnishings: Lessee shall keep all of the furnishings,
fixtures and equipment (the "Furnishings") installed in or furnished to the
Premises, whether installed or furnished by Lessee, Lessor or a third party, in
good condition and repair (ordinary wear and tear excepted) and keep the same
free of all liens, claims, encumbrances and rights of others, and shall replace
the same when needed at all times during the Lease Term at Lessee's sole cost
and expense.

            Section 2. Improvements: Any property permanently installed, affixed
or embedded in the Premises such as could not be removed without damage to the
Premises, and any and all alterations or repairs thereto or replacements
thereof, shall at once become a part of Lessor's estate in the realty and belong
to Lessor, without any obligation of Lessor to compensate Lessee therefor other
than as expressly set forth in this Lease.

            Section 3. Inventories: Lessee shall be obligated to provide, at its
sole cost and expense, all food, beverage, supplies and other inventories (the
"Inventories") necessary to the operation of the Premises as a high-quality
hotel facility, and to maintain or replace such Inventories in the ordinary
course of business. Lessor shall have no obligations with respect to the
Inventories.

                                   ARTICLE IV

                                      RENT

      Section 1. Amount of Rent:

            (a) At such place or places as Lessor shall designate from time to
time in writing, Lessee shall pay to Lessor when due, without prior demand
therefor and without any deduction or offset whatsoever, rent as follows:

                                                                          Page 2



            (i) A "Basic Rent" equal to Thirty-Three Thousand Three Hundred
      Thirty-Three and 33/100 Dollars ($33,333.33) per month (partial months, if
      any, being prorated on the basis of a 30-day month). The Basic Rent shall
      be payable in advance on or before the first day of each month (in the
      event that the first Lease Year commences on a day other than the first
      day of a month, said rent for the first month of the Lease Term shall be
      paid on a prorated basis on the Commencement Date) beginning with the
      start of the first Lease Year and continuing until the end of the Lease
      Term, and shall constitute the minimum monthly rental hereunder.

            (ii) A quarterly percentage rent, cumulated and adjusted quarterly
      (the "Percentage Rent"), equal to the sum of Forty-two percent (42%) of
      Lessee's "Gross Receipts" (as hereinafter defined) from the operation of
      Lessee's business in the hotel portion of the Premises (the "Rooms
      Percentage") during each Lease Year, plus Five percent (5%) of the "Gross
      Sales" (as hereinafter defined) of the business in the restaurant and
      lounge portions of the Premises during each Lease Year. Said sums shall be
      monthly and shall be accompanied by a detailed statement (certified by the
      chief accounting officer of Lessee) of Gross Receipts and Gross Sales.
      Lessee shall be entitled to a deduction, from the Percentage Rent, of all
      Basic Rent actually paid.

            (b) Within 45 days after the end of each Lease Year during the term
hereof, a Percentage Rent computation for such prior Lease Year shall be
delivered by Lessee to Lessor. If requested in writing, by either party, such
Percentage Rent calculation shall be certified by a nationally recognized
certified public accountant reasonably acceptable to Lessor, and shall set forth
a detailed statement of the Gross Receipts of the hotel portion of the Premises
and the Gross Sales of the restaurant and lounge portions of the Premises. If
the aggregate Percentage Rent paid during any Lease Year is less than the
Percentage Rent payable hereunder computed with respect to such Lease Year, the
deficit shall forthwith be paid over to Lessor by Lessee. If the aggregate
Percentage Rent paid during such Lease Year exceeds the Percentage Rent payable
hereunder with respect to such Lease Year, the excess Percentage Rent amount
shall be carried over as a credit against the Percentage Rent payable with
respect to the following one or more subsequent Lease Year quarterly periods
until such credit shall have been used up completely.

            Section 2. Gross Receipts and Gross Sales: As used in this Lease:

              (a) "Gross Receipts" means the total revenue received from the
      rental of guest rooms and meeting rooms in the hotel portion of the
      Premises, without deduction. Gross Receipts shall not include revenue of
      Lessee derived from or in respect of vending machines, telephones, laundry
      or dry cleaning. Gross Receipts also shall not include sales, rooms or
      other excise taxes, if any, required to be collected by Lessee to the
      extent such taxes are actually paid to the proper tax receiving
      authorities.

               (b) "Gross Sales" means the gross sales price of all food and
      beverages sold by Lessee, or any subtenant, agent, licensee, or
      concessionaire of Lessee at, in or from the restaurant, bar and banquet
      portions of the Premises; provided, however, that "Gross Sales" shall
      exclude any and all rebates and/or refunds to customers, proceeds from
      vending machines, meals charged to or paid for by employees and deducted
      for tax accounting purposes or minimum wage requirements during hours of
      employment, the amount of all sales tax receipts or other taxes that are
      required by law to be and are in fact accounted for and paid by Lessee, or
      such subtenant, agent, licensee or concessionaire of Lessee, to any
      government or governmental agency.

                                                                          Page 3



            Section 3. Additional Rent: In addition to the rental provided for
in Section 1 of this Article IV, Lessee shall pay, as additional rent, each and
all of the payments called for by all equipment leases, if any, to which Lessor
is a party and that relate to equipment currently utilized on the Premises,
whether in effect as of the date hereof or entered into subsequent to the
Commencement Date of this Lease (the "Equipment Leases"), as such payments may
be adjusted from time to time in accordance with the terms of the Equipment
Leases. Such payments shall be made by Lessee directly to the lessor under each
of the Equipment Leases. Such payments by Lessee under the Equipment Leases
shall be wholly separate from, and shall not affect, Lessee's obligations to
make all other payments provided for in this Lease, including, without
limitation, payments of any type of rental provided for by Section 1 of this
Article IV, and shall not be included in, or affect in any fashion, the
calculation of any Basic Rent or Percentage Rent owed or payable thereunder.
Lessor shall retain all rights under the Equipment Leases, and Lessee shall have
no right, title or interest in or with respect to the Equipment Leases, or the
equipment covered by the Equipment Leases, other than the right to use such
equipment for so long as it may be located on the Premises.

            Section 4. Net: Lessee acknowledges that this Lease is a "net"
lease. Accordingly, in addition to the rental provided for in Sections 1 and 3
of this Article IV, Lessee shall pay, as additional rent hereunder, all
insurance, taxes, water, heat, gas, electricity, rubbish removal, landscape,
parking lot maintenance and all other utilities and services supplied to the
Premises, and all other charges, costs and expenses relating to the Premises or
the use and occupancy of the same by Lessee or any other person or entity.
Anything herein contained to the contrary notwithstanding, Lessee shall not
engage for the account of Lessor the services of any consultant (including,
without limitation, legal counsel, management consultants, appraisers and
accountants) for the Premises without Lessor's prior written consent.

            Section 5. Reports and Records: Lessee shall keep, at the Premises
or at Lessee's corporate offices, permanent and accurate records of all Gross
Receipts and Gross Sales, which records shall be open to inspection by Lessor or
its agents during ordinary business hours. Lessee will preserve, or cause to be
preserved, all such records for at least five years after the expiration of each
Lease Year. In addition, Lessee shall give Lessor, (i) on the 10th, 20th and
last day of each calendar month, Gross Receipts, Gross Sales and occupancy
reports, (ii) on a monthly basis, on or before the 20th day following the end of
each month, a complete set of financial statements, including a balance sheet
and a detailed monthly profit and loss statement, and (iii) on an annual basis,
within 45 days after the end of each Lease Year, a complete set of financial
statements, including a balance sheet and profit and loss statement certified by
a nationally recognized independent certified public accountant reasonably
acceptable to Lessor.

                                                                          Page 4




            Section 6. Special Audit of Annual Reports: At any time, upon
reasonable notice to Lessee, Lessor may make a special audit of any of Lessee's
books and records in respect of business operations on the Premises; provided,
however, that Lessor shall give Lessee a copy of any audit report. If such audit
discloses a deficiency in Percentage Rent for any Lease Year, the amount
thereof, together with interest thereon at a floating rate five percentage
points (5%) above Wells Fargo Bank's announced "prime rate" from the date that
the Percentage Rent should have been paid to the date of payment, shall be paid
to Lessor no later than the first day of the next calendar month. If such audit
shows the Percentage Rent to have been overpaid, the amount thereof shall be
deducted from the next Percentage Rent payments thereafter becoming due. If such
audit discloses a deficiency in the payment of the Percentage Rent of more than
three percent (3%) of the amount that should have been paid, Lessee shall pay
for the special audit. Otherwise, such audit shall be at Lessor's expense. The
auditor shall be a reputable firm of national standing chosen by Lessor, and
whose rates shall be comparable to rates charged by accounting firms of similar
size and reputation.

            Section 7. Financial Plan: Lessee shall provide to Lessor, within 30
days prior to the beginning of each Lease Year, an annual financial and
operating plan (the "Financial Plan") for Lessor's approval, which approval will
not be unreasonably withheld. The Financial Plan shall include a month-to-month
forecast of all revenues expected to be generated at the Premises, and operating
expenses associated therewith, including a schedule of proposed capital
improvements and refurbishment, and cost estimates thereof, for the next
succeeding Lease Year. The Financial Plan shall be updated within 15 days after
the end of each calendar quarter of each Lease Year, if Gross Receipts or Gross
Sales vary by more than ten percent (10%) from amounts set forth on the
Financial Plan, or if gross operating profit, as that term is generally
understood, varies by more than twenty percent (20%) from amounts set forth on
the Financial Plan.

                                   ARTICLE V

                   USE, REPAIR, REPLACEMENTS AND ALTERATIONS

            Section 1. Business Use: The Premises may be used solely for the
purpose of operating a hotel, together with (i) such ancillary uses as are
commonly associated therewith or incidental thereto; and (ii) to the extent not
covered by the foregoing, such uses as are, as of the date of execution of this
Lease, being made of the Premises by Lessee or its subtenants, agents, licensees
or concessionaires. Lessee agrees to operate its business on the Premises
continuously during the Lease Term, and to keep the Premises open for business
during usual business hours each and every day as is customary for such
businesses in the metropolitan area in which the Premises are located, subject
only to such periodic closures as may be necessary to complete required repairs,
restoration, replacements, refurbishment or construction. Lessee shall conduct
its business according to law and as a high grade and reputable concern.

            Lessee shall not permit the Premises or any part thereof to be
vacated or abandoned at any time during the Lease Term nor remove from service
any of the guest rooms of the hotel portion of the Premises or any of the
seating capacity in the restaurant or lounge portions of the Premises, without
Lessor's prior written consent; provided, however, that if a fire, flood,
explosion, earthquake, act of God or other accident or contingency beyond the
control of Lessee and not caused by the action or inaction of Lessee (an
"Unusual Circumstance") shall occur on the Premises, Lessee shall be permitted
to vacate or abandon that part of the Premises directly affected by such Unusual
Circumstance for such period of time as the same remains untenantable; and
provided, further, that if any law, ordinance, regulation, ruling or order (a
"Governmental Order") shall be enacted or otherwise properly put into effect by
any governmental authority mandating vacation or abandonment of any part or all
of the

                                                                          Page 5



Premises, Lessee shall be permitted to vacate or abandon that part of the
Premises directly affected by such Governmental Order for such period of time as
the Governmental Order remains in effect with respect to the Premises. Lessee
shall give Lessor written notice within two days after any portion of the
Premises is abandoned or any guest room or any of the seating capacity of the
restaurant or lounge portions of the Premises are taken out of service because
of an Unusual Circumstance or Governmental Order. Lessee's right to vacate or
abandon the Premises shall cease, and Lessee shall reoccupy the vacated or
abandoned portion of the Premises, within 30 days after the Premises become
tenantable or the Governmental Order ceases to affect such Premises, as the case
may be. If the Premises (whether in whole or in part) shall be abandoned,
vacated or surrendered for any reason other than due to an Unusual Circumstance
or Governmental Order, or if Lessee shall be dispossessed therefrom by process
of law or otherwise, any personal property left in or upon the Premises shall be
deemed to have been abandoned and shall become the property of Lessor.

            Lessee shall use and operate the Premises in strict compliance with
(i) all applicable laws, statutes, ordinances, rules and regulations of any
governmental body with jurisdiction over the Premises ("Applicable Laws")
including, without limitation, all environmental laws and all laws prohibiting
discrimination or segregation by reason of race, color, religion, disability,
sex, natural origin or otherwise; (ii) all orders or decrees affecting the
Premises ("Applicable Decrees"); and (iii) all conditions and restrictions
contained in recorded covenants, conditions and restrictions affecting the
Premises, if any ("Applicable Restrictions"). Lessee shall not take any action,
or permit the Premises to be used or operated in any manner, that would violate
any Applicable Law, Applicable Decree or Applicable Restriction. Lessee or its
assignee shall obtain and maintain, at its sole cost and expense, such licenses
as are necessary in connection with operation of the restaurant and lounge.

            Section 2. Repairs and Replacements: Lessee, at its sole cost and
expense, shall keep the Premises, or cause them to be kept, in good order and
repair, in a clean and sanitary condition, and shall comply with all laws,
statutes, rules and regulations of all governmental authorities having
jurisdiction over the Premises. Lessee, at no cost or expense to Lessor, shall
make or cause to be made such ordinary and necessary repairs to the Premises as
are caused or made necessary by Lessee's use or occupation of the Premises or
the conduct of Lessee or its agents, employees or invitees upon the Premises.

            Sections 3. Operating Expenses and Working Capital: Except as
otherwise provided in this Lease, Lessee shall pay all expenses and costs
associated with the operation of the Premises and shall provide all working
capital therefor whether from funds originating from the operation of the
property or otherwise.

            Section 4. Alterations: Lessee may make, at its sole cost and
expense, reasonable alterations or additions to the Premises, but alterations
estimated to cost in excess of Ten Thousand Dollars ($10,000) may only be made
with Lessor's prior written consent, which consent shall not be unreasonably
withheld. Lessor shall be deemed to have given its consent if Lessor fails to
respond to any notice of such alterations within 15 business days of the giving
of notice thereof by Lessee.

            Section 5. Construction in Accordance with all Laws: All
improvements constructed by Lessee on or about the Premises, if any, shall be
constructed in strict compliance with the plans as approved by Lessor and in
strict compliance with all applicable laws and governmental regulations. Lessee
agrees to procure and deliver to Lessor at Lessee's expense evidence of
compliance with all applicable codes, ordinances, regulations and requirements
for permits and approvals, including, but not limited to, building permits,
zoning and planning requirements, and approvals from various governmental
agencies having jurisdiction over the Premises. Lessor shall have

                                                                          Page 6



the right to post and maintain on the Premises any notice of non-responsibility
provided for under applicable law, and to inspect the Premises in relation to
the construction at all reasonable times.

            Section 6. Mechanics' Liens: Lessee shall neither cause nor permit
any claim of lien to be filed against the Premises for labor done or materials
furnished to or contracted for by Lessee or alleged to have been so done or
furnished, and in the event that any such claim shall nevertheless be so filed,
Lessee shall discharge or adequately bond the same within 10 days after the
filing thereof; provided, however, that Lessee shall not be in default of this
Section 6, and shall not be required to provide any such discharge or bond, if
any such claim is filed against the Premises due to the fault of Lessor.

            Section 7. Capital Expenditures by Lessor: Lessor shall pay for
those capital expenditures set forth in the Financial Plan that are approved by
Lessor. Within 10 days after receiving the Financial Plan, Lessor shall advise
Lessee as to which capital expenditures in the Financial Plan Lessor approves.
Such approval shall be in Lessor's absolute discretion. If Lessee disagrees with
such decision made by Lessor, Lessee's sole remedy shall be to terminate the
Lease upon not less than 90 days written notice to Lessor. If the capital
expenditure agreed to by Lessor is greater than four percent (4%) of the Gross
Receipts, then, and in that event, the Basic Rent payable hereunder shall be
renegotiated, at the option of Lessor. If the parties are unable to reach
agreement on a new Basic Rent amount, Lessor shall have the option of reducing
the amount of its capital expenditure so that such expenditure is not greater
than said 4% of Gross Receipts.

                                   ARTICLE VI

                              ADDITIONAL COVENANTS

            Section 1. Additional Obligations: Lessee agrees:

                  (a) To purchase all Inventories for the Premises, and to
      maintain such Inventories at levels necessary for the ongoing operation of
      the Premises;

                  (b) To provide all working capital reasonably necessary to
      operate the Premises efficiently and effectively; and

                  (c) To pay all costs and expenses in connection with obtaining
      and maintaining liquor licenses utilized in the restaurant and bar portion
      of the Premises.

            Section 2. Liquor License:

            (a) To the extent permitted by law, Lessee hereby grants to Lessor,
to secure each and all of Lessee's obligations hereunder, a security interest in
each liquor license for the restaurant and bar portions of the Premises. Lessee
warrants that upon its acquisition of said liquor license(s), Lessee will have
title to such license(s) free and clear of all liens, claims, encumbrances and
rights of third parties except as may have been approved by Lessor. Lessee
further warrants that the grant of the foregoing security interest is not and
will not be in violation of the terms, conditions or covenants of any agreement,
arrangement or understanding, whether oral or written, between Lessee and any
third party. Lessee shall not sell, contract to sell, lease, encumber or
otherwise dispose of any such license without the prior written consent of
Lessor.

                                                                          Page 7



            (b) Lessee shall pay when due all fees, assessments, charges, liens
or encumbrances, if any, that might at any time, either in accordance with or in
violation of the terms of this Lease, affect the liquor license(s). Lessee shall
take no action in connection with the operation of Lessee's business on the
Premises that would jeopardize Lessee's possession of such license(s), and shall
immediately notify Lessor in writing about any communication received from any
party, public or private, relating to Lessee's possession of said license(s).
Lessee, at Lessor's request, shall execute and deliver to Lessor any and all
financing statements, deeds of trust and other documents or instruments deemed
necessary by Lessor in connection with or for the perfection of Lessor's
security interest hereunder. In the event of any default under this Lease,
Lessor may exercise all rights and remedies of a secured party, all of which
rights and remedies shall be cumulative. Lessee hereby waives any right to
require Lessor to proceed against any other person or entity or to exhaust
Lessor's rights against any collateral or to pursue any other remedy in Lessor's
power in the event of a default under this Lease. Each of Lessor and Lessee
acknowledges that, under local law, the liquor license(s) may not be
transferable.


            (c) Lessor acknowledges that Lessee plans to take title to each of
the above-described liquor licenses, to the extent permissible by law, in
Lessee's own name, in the name of a subsidiary or affiliate of Lessee or in the
name of the manager of the Premises and hereby consents to such vesting,
provided that if and to the extent requested by Lessor, Lessee shall have (if
permitted by law) caused

            (d) the holder(s) of the license(s) to have (i) executed an
agreement granting to Lessor a security interest in the license(s) on the same
terms as set forth above; and (ii) executed a financing statement on Form UCC-1
or such other documentation as may be necessary to perfect Lessor's security
interest in such license(s).

                                  ARTICLE VII

                         INDEMNITY. INSURANCE AND TAXES

            Section 1. Indemnity: To the maximum extent permitted by applicable
law, Lessee shall indemnify and save Lessor harmless against any and all claims
of third parties for damage, injury or expenses arising from or incidental to
the use or occupation of the Premises, or from any act or negligence of Lessee
or its agents, employees, invitees or licensees or of any other person or
entity, who, with or without authority of Lessee, enter upon or perform any act
relating to the Premises. If any such claim or action shall be brought against
Lessor, Lessor shall give Lessee written notice of such claim or action within
15 days of receipt by Lessor of such claim or action, and Lessee shall assume
the defense thereof. Lessee, for itself, its successors and assigns, hereby
waives, to the maximum extent permitted by applicable law, any and all claims
against Lessor for damage, injury, loss or expense arising or resulting from the
use or occupation of the Premises.

            Section 2. Insurance: Lessee shall procure and maintain throughout
the Lease Term, at Lessee's sole cost and expense, standard fire and extended
coverage insurance on the Premises to such extent as to cover the full
replacement costs of the Premises, which insurance shall be (in form and
substance) subject to Lessor's approval and shall be adjusted annually to
reflect the then-current full replacement costs thereof. Except as hereinafter
provided, the proceeds of this insurance shall be used for the repair or
replacement of the property so insured. Lessor shall be named as an insured as
Lessor's interest may appear. Lessee shall, at all times, keep Lessor supplied
with certificates evidencing that such insurance is in effect, and that Lessor
is named as an additional insured.

                                                                          Page 8




            Lessee shall procure and maintain throughout the Lease Term, at
Lessee's sole cost and expense, public liability insurance (including liquor
liability) against all claims or actions arising from or incident to the
business conducted by Lessee on or about the Premises or from or incident to any
act or negligence of Lessee, or of the agents, employees, invitees or licensees
of Lessee or of any other person or entity who, with or without authority of
Lessee, enter upon or perform any act relating to the Premises; such insurance
shall be in an amount approved by Lessor, but in any event not less than Five
Million Dollars ($5,000,000) for injury to or death of one person, also
including injury to or death of two or more persons and damage to property. In
addition, Lessee shall cause any sublessee to procure and maintain, throughout
the Lease Term and at no cost or expense to Lessor, a policy or policies of
public liability and property damage insurance, with identical policy limits,
including products liability insurance, issued by an insurance company or
companies approved by Lessor. Lessor shall be named as an additional insured on
said policies as Lessor's interest may appear. Lessee shall also procure and
maintain business interruption insurance, which insurance shall be (in form and
substance) satisfactory to Lessor. Lessee shall at all times keep Lessor
supplied with certificates evidencing that such insurance is in effect and that
Lessor is named as an additional insured. Lessee shall not do, omit to do, or
permit to be done or omitted any act or thing upon the Premises that will
invalidate or be in conflict with any such insurance policy.

            The amounts of insurance specified in this Section 2 shall be
subject to review and adjustment by Lessor on every anniversary of the
Commencement Date in Lessor's reasonable discretion, and shall in no event be
permitted by Lessee to fall below amounts customary in the hotel and restaurant
industry in the metropolitan area where the Premises are located. Lessee shall
not be obligated to procure and maintain earthquake, flood or structural defect
insurance on the improvements on the Premises, unless required by law.

            Lessor and Lessee each hereby waive their entire right to recovery
against the other party, and the other party's officers, directors, agents,
representatives, employees, successors and assigns, with respect to any loss or
damage, including any consequential damage, to the insured party's property
caused or occasioned by any peril (including negligent acts) that is actually
covered by any policy or policies of insurance required to be carried by the
insured party and under that such waiver of subrogation is permitted.

            Section 3. Taxes: Lessee shall pay before delinquency all real and
personal property taxes and assessments levied upon or against the Premises
imposed by any state, county or local government during the Lease Term. Real and
personal property taxes shall be prorated as of the Commencement Date. Real and
personal property taxes payable for the last Lease Year shall be prorated as of
the termination date of this Lease. Lessee shall have the right before any
delinquency occurs to contest the amount or validity of any such tax by
appropriate legal proceedings, but this shall not be deemed or construed in any
way as relieving, modifying or extending Lessee's covenant to pay any such tax
prior to delinquency.

                                                                          Page 9



                                  ARTICLE VIII

                                   DESTRUCTION

            Section 1. Total Destruction: If thirty percent (30%) or more of the
total guest rooms (the "Total Rooms") available for rental at the Premises
should be totally destroyed, either Lessor or Lessee may elect to terminate this
Lease upon giving the other party 30 days' written notice, and all insurance
proceeds, if any, payable as a result of the destruction shall be paid to
Lessor. Lessor and Lessee each expressly agree that prior to electing to
terminate this Lease as permitted in this Section 1, such party will first
attempt to negotiate in good faith with the other party towards an appropriate
amendment to this Lease to take into account such destruction, including an
equitable abatement of rent, and will only give such notice of termination after
a good faith attempt towards such negotiation.

            Section 2. Other Destruction: If less than thirty percent (30%) of
the Total Rooms should be destroyed, or if thirty percent (30%) or more of the
Total Rooms are destroyed and neither Lessor nor Lessee elects to terminate this
Lease as permitted under the foregoing Section 1 of this Article VIII, the
Premises shall be repaired or reconstructed (which for purposes of this Article
VIII shall include refurnishing and re-equipping destroyed Furnishings) in
accordance with subparagraphs (a) through (c) hereof as speedily as possible at
Lessor's sole cost and expense (but only if insurance proceeds are sufficient
for such purposes); such repairs or reconstruction shall conform to all
applicable laws, ordinances and regulations and be at least comparable to the
quality of the original improvements; provided, however, that if this Lease is
not terminated under Section 1 of this Article VIII, the proceeds of any
insurance payable as a result thereof shall be applied toward the reconstruction
of the Premises, and if such proceeds are insufficient to complete such
reconstruction, Lessee shall be obligated to provide the additional funds for
the reconstruction, and this Lease shall remain in full force and effect. If
Lessee does not provide such additional funds for reconstruction, Lessor shall,
at its sole option, have the right to terminate this Lease.

                  (a) If the destruction costs Fifty Thousand Dollars ($50,000)
      or less to repair or reconstruct, Lessee shall be entitled to receive and
      retain any and all insurance proceeds payable as a result of the
      destruction and shall use same for the repair or reconstruction of the
      Premises.

                  (b) If the destruction costs more than Fifty Thousand Dollars
      ($50,000), but not more than Two Hundred Fifty Thousand Dollars
      ($250,000), to repair or reconstruct, Lessor shall be entitled to receive
      any and all insurance proceeds payable as a result of the destruction,
      shall hold such proceeds in escrow and shall pay such proceeds to Lessee
      upon receipt of certificates from Lessee's contractor or architect (or
      from Lessee, if Lessee shall act as its own contractor) that said repair
      or reconstruction has been completed. Before making any such payment,
      however, Lessor shall have the right to make such inspections as Lessor
      deems necessary to assure itself that the work required to be performed
      has been so performed. Lessor shall make payments out of such proceeds as
      the repair or reconstruction progresses, in accordance with certificates
      from Lessee's contractor and subject to the inspection of Lessor;
      provided, however, that the last such payment shall not be made until
      after the expiration of the period for filing of mechanic's or similar
      liens without any such lien having been filed.

                  (c) If the destruction costs more than Two Hundred Fifty
      Thousand Dollars ($250,000) to repair or reconstruct, Lessor shall be
      entitled to receive any and all insurance

                                                                         Page 10



      proceeds payable as a result of the destruction, shall hold such proceeds
      in escrow and shall pay such proceeds out in the following manner:

                  (i) Lessee shall obtain firm bids for the repair or
            reconstruction of the Premises from three or more qualified
            contractors other than Lessee.

                  (ii) Lessee shall submit said bids to Lessor. Thereafter,
            Lessee shall, with Lessor's prior approval, hire one of the bidding
            contractors to do the repair or reconstruction and shall provide in
            said contract that the contractor shall provide performance, labor
            and materials bonds or other appropriate security to insure complete
            repair or reconstruction of the Premises in accordance with such
            contractor's bid, free of liens, in the full amount of the estimated
            cost thereof.

                  (iii) If the amount estimated by the contractor chosen to
            complete the repair or reconstruction should be in excess of the
            amount of the insurance proceeds, if any, Lessor shall have the
            right to terminate this Lease unless Lessee shall deposit with
            Lessor sufficient additional monies to create a fund that shall
            equal the difference. Title to such insurance funds shall reside in
            Lessor who shall have the sole right to said funds.

                  (iv) Lessor shall make payments out of the insurance proceeds
            and the aforesaid fund as the repair or reconstruction progresses.
            In the event that any sum deposited by Lessee remain after
            completion of the repair or reconstruction, such sums shall be paid
            to Lessee.

            Section 3. Abatement of Rent: Unless otherwise expressly provided
herein, there shall be no abatement or reduction of rent in the event of any
destruction of less than thirty percent (30%) of the Total Rooms on the
Premises, and Lessee expressly waives the provisions of any law that purports to
effect a termination of this Lease upon such destruction.

            Section 4. Disputes: If there should be any dispute as to whether
any work required to be performed under this Article VIII has been performed,
said dispute shall be settled by Arbitration (as defined in Article XVII,
Section 11 hereof).

            Section 5. Constructive Destruction: In the event that the Premises
or any part thereof shall be declared unsafe or unfit for occupancy by any
authorized public agency for any reason and the cause of such declaration is
capable of cure through repair or reconstruction, then the provisions of Section
2 of this Article VIII shall be applicable as if a destruction of the type
referred to therein had occurred. In the event that any authorized public agency
shall declare the Premises or any part thereof unsafe or unfit for occupancy by
reason of the act, or failure to act by Lessee, and the cause of such
declaration is not capable of cure through repair or reconstruction, this Lease
shall nevertheless remain in full force and effect, with no reduction or
abatement in rent. In the event that the Premises or any party thereof shall be
declared unsafe or unfit for occupancy due to any other reason, and the cause of
such declaration is not capable of cure through repair or reconstruction, then
the provisions of Section 1 of this Article VIII shall be applicable as if a
destruction of the type referred to therein had occurred.

                                                                         Page 11



                                   ARTICLE IX

                                 EMINENT DOMAIN

      Section 1. Definitions: The term "eminent domain" shall include both
the exercise of the power of eminent domain or any similar governmental power,
whether by public authority or a private corporation, and any purchase or other
acquisition in lieu of or in exercise of condemnation. The expression "date of
taking" means the date on which actual physical possession is taken by the
condemning, purchasing or acquiring entity.

            Section 2. Right of Termination: If thirty percent (30%) or more of
the Total Rooms should be taken under the power of eminent domain, either party
shall be permitted to terminate this Lease upon giving the other party not less
than 30 days' written notice; provided, however, that prior to the giving of
such notice of termination, both parties shall have been unable to negotiate an
abatement of the Rent satisfactory to both parties after a good faith attempt by
both parties to effect such an abatement. If less than thirty percent (30%) of
the Total Rooms on the Premises should be taken under the power of eminent
domain, this Lease shall remain in full force and effect.

            Section 3. Damages Upon Termination: In the event of a termination
of this Lease pursuant to Section 2 of this Article IX by reason of the taking
under the power of eminent domain of thirty percent (30%) or more of the Total
Rooms, Lessor and Lessee shall divide the amount of the award for such taking
based upon the appraised value of their respective interests as determined in
the eminent domain proceeding or by independent appraisal.

            Section 4. Assignment of Rights: Subject to the right to receive
payments as provided in Section 3 of this Article, Lessee hereby assigns to
Lessor all rights or interests Lessee may have now or hereafter in any such
condemnation award. In the event of a termination under this Article IX, Lessor
and Lessee shall have no liability thereafter one to the other hereunder with
respect to the property taken for the period after said termination takes place.

            Section 5. Abatement of Rent: Unless otherwise expressly provided
herein, in the event of any taking under the power of eminent domain of less
than thirty percent (30%) of the Total Rooms, rent shall not be abated, and the
Lease Term shall not be reduced in any way, and Lessor and Lessee shall each be
entitled to their respective equitable share of any award for the use or estate
taken. If a result of the taking is to necessitate expenditures for changes,
repairs, alterations, modifications, or reconstruction to restore the Premises
or the furnishings therein to their condition at the date of the taking, Lessor
shall receive, hold and disburse the award in trust for such work. At the
completion of the work and the discharge of the Premises from all liens and
claims, Lessor and Lessee shall divide any surplus based on the relative
percentage value of their respective interests in the Premises .

            Section 6. Temporary Taking: In the event of any taking of all or
any part or parts of the Premises for a period ending before the expiration date
of the Lease Term, neither the Lease Term nor the rent shall be reduced or
abated in any way, and Lessee shall be entitled to any award for the use or
estate taken. If a result of the taking is to necessitate expenditures for
changes, repairs, alterations, modifications, or reconstruction to restore the
Premises or the Furnishings to their condition at the time of the taking, Lessee
shall receive, hold, and disburse the award in trust for such work. At the
completion of the work and the discharge of the Premises from all liens and
claims, Lessee shall be entitled to any surplus and shall be liable for any
deficit.

                                                                         Page 12



                                    ARTICLE X

                            ASSIGNMENT AND SUBLETTING

            Section 1. Lessee: Lessee may not assign this Lease, or any interest
therein, or sublet the Premises, or any part thereof, without Lessor's prior
written consent, which consent shall not be unreasonably withheld. At Lessor's
option, Lessee shall, concurrently with the execution of each sublease, assign
to Lessor all of Lessee's right, title and interest in the said sublease as
additional security for the performance of Lessee's obligations under this
Lease. Lessee agrees to execute an assignment of rents or such other documents
or instruments as Lessor reasonably requests to evidence such assignment. Except
as permitted by this Section 1, any attempt to assign this Lease, or any
interest therein, or any rights thereunder, or to sublease the Premises, or any
part thereof, shall be null and void ab initio. For purposes of this Section 1,
an assignment of this Lease shall be deemed to include the transfer of a
majority of Lessee's outstanding interests; provided, however, that transfers
between existing stockholders or partners and transfers of stock or partnership
interests on the death of any stockholder or partner, whether by will or
intestacy, regardless of the amount so transferred, shall not constitute an
assignment of this Lease.

            Section 2. Lessor: Lessor shall have the right, at any time, to
freely assign all or any part of Lessor's interest in this Lease.

                                   ARTICLE XI

                                   BANKRUPTCY

            If, during the term hereof, there is filed by or against Lessee, in
any court pursuant to any statute or law of either the United States or any
state, a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Lessee's property,
and within 90 days thereafter, said petition is not discharged, or if Lessee
makes an assignment for the benefit of creditors or petitions for or enters into
an arrangement with creditors, this Lease, at the sole option of Lessor
exercisable within a reasonable time after notice of the happening of any one or
more of such events, may be canceled and terminated. Such cancellation and
termination will be effective retroactively as of the expiration of said period
of 90 days or as of the date of such assignment or of such petitioning for or
entering into, in which event neither Lessee nor any person or entity claiming
through or under Lessee by virtue of any statute, law or order of any court
shall be entitled to possession or to remain in possession of the Premises, but
shall forthwith quit and surrender the Premises to Lessor. In the event of a
termination of this Lease pursuant to this Article XI, an Event of Default shall
have deemed to occur under this Lease, and Lessor shall have all of the rights
and remedies set forth in Article XII, Section 2 hereof.

                                  ARTICLE XII

                                    REMEDIES

            Section 1. Defaults: Unless permitted by the terms of this Lease or
consented to by Lessor, upon the occurrence of any of the events designated
hereunder as Paragraphs (a), (b), (c) and (d), an Event of Default shall have
occurred under this Lease, and Lessor shall have all of the rights and remedies
set forth in Section 2 of this Article XII:

                  (a) Lessee shall fail to pay any monies payable by Lessee to
      Lessor or otherwise required hereunder to be paid by Lessee, including but
      not limited to the Basic Rent

                                                                         Page 13



      or the Percentage Rent, and such failure shall continue for five days
      after written notice by Lessor or any other party to whom such obligation
      shall be payable of such failure; or

                  (b) Lessee shall permit the Premises to become vacant or
      deserted, and Lessee shall fail to occupy or cause to be occupied the
      vacated or deserted portion of the Premises within 10 days after written
      notice from Lessor; or

                  (c) Lessee shall default in the performance of any of Lessee's
      obligations hereunder, including, without limitation, the obligation to
      cause the Premises to remain occupied, and shall fail to cure such default
      within 30 days after written notice from Lessor (or if the default is of
      such a nature that the default cannot be cured within said 30-day period
      if Lessee shall not commence the cure of such default during such 30-day
      period and proceed diligently with the cure thereof); or

                  (d) Any attachment or execution shall be issued against
      Lessee's property (whether or not contained on the Premises), the Premises
      or a portion thereof shall be taken or occupied or attempted to be taken
      or occupied in connection with such attachment or execution by someone
      other than Lessee, and such attachment or execution shall not be released,
      discharged, or adequately bonded within 30 days thereafter.

            Section 2. Remedies Upon Default: Upon the occurrence of an Event of
Default, in addition to all other remedies available at law or in equity, Lessor
shall have the following remedies:

            (a) The right to terminate Lessee's right to possession (including
      the right of re-entry) in any manner permitted by law;

            (b) Upon termination of such right to possession or upon abandonment
      of the Premises by Lessee, Lessor may recover from Lessee (i) the worth at
      the time of award of the unpaid rent that had been earned at the time of
      termination, calculated by allowing interest on such unpaid rent at the
      lesser of ten percent (10%) per annum or the highest interest rate
      allowable under applicable law at the time of award; (ii) the worth at the
      time of award (calculated by allowing interest as in clause (i) above) of
      the amount by which the unpaid rent that would have been earned after
      termination, until the time of award, exceeds the amount of such rental
      loss that Lessee proves could have been reasonably avoided; (iii) the
      worth at the time of award (calculated by discounting such amount to
      present value at the discount rate of the Federal Reserve Bank of San
      Francisco at the time of award plus one percent (1%) per annum) of the
      amount by which the unpaid rent for the balance of the Lease Term, after
      the time of award, exceeds the amount of such rental loss that Lessee
      proves could have been reasonably avoided; and (iv) any other amount
      necessary to compensate Lessor for all of the detriment proximately caused
      by Lessee's failure to perform Lessee's obligations under this Lease, or
      that in the ordinary course of things would be likely to result therefrom;

                  (c) If there should be an abandonment, without a termination
      by Lessor of Lessee's right to possession, this Lease shall continue in
      effect (unless and until there shall be such a termination), and Lessor
      may enforce all rights and remedies under this Lease, including, without
      limitation, the right to recover the rent (including, without limitation,
      all amounts payable hereunder) as the rent becomes due under this Lease.
      Such abandonment shall be an Event of Default and shall be grounds for
      termination, at Lessor's sole option, of such right to possession at any
      time unless and until (i) such default shall be cured by occupancy by a
      permitted assignee or sublessee or reoccupancy by Lessee; and (ii) any
      other

                                                                         Page 14



      Event of Default shall have been cured. No acts of maintenance or
      preservation of the Premises by Lessor, nor efforts to relet the Premises
      or a portion thereof, shall be deemed to constitute a termination of
      Lessee's right to possession;

                  (d) In the event of the exercise by Lessor of any one or more
      of Lessor's rights and remedies hereunder, Lessee expressly waives, to the
      maximum extent permitted by applicable law, any and all rights of
      redemption granted by or under any present or future law;

                  (e) Lessee hereby waives, to the maximum extent permitted by
      applicable law, (i) all claims and demands against Lessor for damages or
      loss arising out of or in connection with any re-entering and taking
      possession of the Premises as permitted by law, and (ii) all claims for
      damages or loss arising out of or in connection with any destruction of or
      damage to the Premises, or for any loss of property belonging to Lessee or
      to any other person or entity that may be in or upon the Premises at the
      time of such re-entry;

                  (f) Upon taking possession of the Premises, Lessor may, at its
      sole option, remove all of Lessee's property therefrom and store the same
      at a public warehouse or elsewhere at the cost and for the account of
      Lessee. No re-entry nor any reletting under this Article XII shall be
      deemed to constitute a surrender or termination of this Lease, or of any
      of the rights reserved by Lessor hereunder, or a release of Lessee from
      any of Lessee's obligations hereunder, unless Lessor shall specifically
      notify Lessee, in writing, to that effect. No such reletting shall
      preclude Lessor from thereafter at any time terminating this Lease as
      herein provided; and,

                  (g) The various rights, options, elections, powers and
      remedies of Lessor contained in this Lease shall be cumulative, and no one
      of them shall be deemed to be exclusive of any of the others or of any
      right or priority allowed by law or in equity.

            Section 3. Advances: If Lessee shall default in the observance or
performance of any term or covenant on Lessee's part to be observed or performed
under or in connection with this Lease, Lessor may, but without obligation so to
do, in addition to any and all other rights and remedies that Lessor has or may
have hereunder at law or in equity, immediately or at any time thereafter
perform the same for the account of Lessee. If Lessor makes any expenditure or
incurs any obligation for the payment of money in connection therewith,
including, without limitation, attorneys' fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred, with
interest thereon at the then-maximum lawful rate (or, if there shall be none, at
a floating rate five percentage points (5%) above Wells Fargo Bank's announced
"prime rate"), shall be deemed to be additional rent hereunder and shall be paid
by Lessee to Lessor within 10 days after rendition of a bill to Lessee therefor.

                                  ARTICLE XIII

                             SURRENDER OF POSSESSION

            Section 1. Surrender: At the expiration by lapse of time or other
termination of the Lease Term, Lessee shall surrender the Premises in good
condition and repair, reasonable wear and tear excepted.

            Section 2. Furnishings: Upon the expiration or other termination of
the Lease Term, all Furnishings and other personal property shall immediately
become the property of Lessor.

                                                                         Page 15


\
            Section 3. No Waiver: No agreement to accept a surrender of this
Lease and the Premises, or to waive any provision hereof, shall be valid unless
in writing and signed by Lessor. The receipt by Lessor of rent with knowledge of
any breach of this Lease by Lessee (other than the failure by Lessee to pay the
rent being accepted) shall not be deemed a waiver of such breach. No acceptance
by Lessor of a lesser amount than the Basic Rent or Percentage Rent actually due
shall be deemed an accord and satisfaction or shall prejudice Lessor's right to
recover the balance of such rent or to pursue any other right or remedy. Lessee
hereby waives any right to seek damages based upon a claim that Lessor has
unreasonably withheld its consent or approval under any provision of this Lease,
and acknowledges that Lessee's sole remedy shall be to seek declaratory or
injunctive relief.

                                  ARTICLE XIV

                                 SUBORDINATION

            This Lease shall be subject and subordinate to, and Lessee covenants
that it will upon Lessor's request execute an agreement subordinating this Lease
to, the lien, terms and provisions of any mortgage, deed of trust, deed to
secure debt or other encumbrance that may hereafter be placed upon the Premises
by Lessor; provided, however, that Lessor first executes (and procures execution
by each and every secured party or beneficiary under the encumbrance) and
records an agreement that provides, among other things, that if and as long as
Lessee is not in default under the terms of this Lease, the secured party or
beneficiary:

                  (a) Will at all times and under all conditions (including,
      without limitation, any foreclosure or other repossession proceedings)
      recognize, permit and continue the tenancy of Lessee or its permitted
      successors and assigns on the Premises under the provisions of and for the
      then-remaining term of this Lease; and

                  (b) Will require that any purchaser or purchasers acquiring
      the Premises take the Premises subject to such agreement so that the
      rights of Lessee, or those holding under Lessee, shall not be interfered
      with or affected in any manner or means.

                                   ARTICLE XV

                                QUIET ENJOYMENT

            Section 1. Covenant: Lessor hereby covenants and agrees with Lessee
that, conditioned upon Lessee's prompt payment of the rent and Lessee's
performance of all of the terms, covenants and conditions hereof to be performed
or observed by Lessee, and subject to the provisions of Section 2 of this
Article XV, Lessee may peaceably and quietly enjoy the Premises in accordance
with the provisions of this Lease.

            Section 2. Inability to Perform: If, by reason of a strike, labor
troubles, act of God, or other cause outside Lessor's control, including,
without limitation, governmental preemption in connection with a national
emergency, any rule, order or regulation of any governmental agency, or
conditions of supply and demand that are affected by war (whether or not
declared by Congress) or other emergency, Lessor shall be unable to fulfill
Lessor's obligations under this Lease or shall be unable to supply any service
that Lessor is obligated to supply to Lessee that does not affect Lessee's
ability to perform hereunder, this Lease and Lessee's obligation to pay rent
hereunder shall in no way be affected, impaired or excused.

                                                                         Page 16



                                   ARTICLE XVI

                                    INDEMNITY

            Without limiting or modifying anything in this Lease, Lessee shall,
to the maximum extent permitted by applicable law, indemnify Lessor for all
expenses, damages or fines incurred or suffered by Lessor, by reason of any
breach, violation or nonperformance by Lessee, or its agents or employees or
invitees, of any covenant, condition or provision of this Lease.

                                  ARTICLE XVII

                                  MISCELLANEOUS

            Section 1. Additional Rent. Any and all monetary obligations of
Lessee under this Lease shall be deemed to be additional rent.

            Section 2. Notices: All notices to be delivered pursuant to this
Lease shall be in writing and delivered in person or sent by registered or
certified mail, to:

            LESSOR: LONG BEACH HOTEL ASSOCIATES, L.L.C.
                    c/o Starwood Lodging Trust, General Partner
                    2231 East Camelback Road, Suite 410
                    Phoenix, AZ 85016
                    Attention: Ronald C. Brown, Sr. Vice President
                    and Chief Financial Officer

            LESSEE: SLC OPERATING LIMITED PARTNERSHIP
                    c/o Starwood Lodging Corporation, Managing General Partner
                    2231 East Camelback Road, Suite 400
                    Phoenix, AZ 85016
                    Attention: Nir E. Margalit, Secretary and
                    General Counsel

or to such other places as either party may designate in writing from time to
time in the manner provided herein for giving notices. All such notices shall be
deemed given when mailed.

            Section 3. Successors in Interest: Subject to the provisions set
forth in Article X hereof, the obligations of Lessor and Lessee set forth in
this Lease shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of both parties.

            Section 4. No Merger: The voluntary or other surrender of this Lease
by Lessee or mutual cancellation thereof shall not work a merger, and shall, at
Lessor's sole option, either terminate any and all existing subleases or
subtenancies, or operate as an assignment to Lessor of any or all of such
subleases or subtenancies.

                                                                         Page 17



             Section 5. Excise Taxes: Lessee shall assume and pay to Lessor at
the time of paying rent hereunder any excise, sales, gross receipts or other tax
that may be imposed upon or measured by the gross amount of rent received by
Lessor or by virtue of the letting of real property, under any law now in effect
or hereinafter enacted. The foregoing provision shall not apply to any tax
imposed upon or measured by net income from renting.

            Section 6. Survival: Lessee's obligation to observe and perform the
terms and conditions of this Lease shall survive the expiration or termination
of the Lease Term.

            Section 7. Attorneys' Fees. In the event that any action, suit or
proceeding is commenced under or in connection with this Lease or for the
recovery of possession of the Premises, the losing party shall pay to the
prevailing party in any such action, suit or proceeding the reasonable
attorneys' fees incurred in connection therewith, together with all costs and
expenses of said prevailing party.

            Section 8. Counterparts: This Lease may be entered into in several
counterparts, each of which shall be deemed an original when executed, and which
together shall constitute but one and the same Lease.

            Section 9. Lessor's Disclaimer: The name "Starwood Lodging Trust" is
the designation of Lessor, a Maryland real estate investment trust, and its
trustees (as trustees but not personally) under a Declaration of Trust dated as
of August 15, 1969, as amended as of June 6, 1988, and further amended from time
to time, and all persons dealing with Lessor must look solely to Lessor's
property for the enforcement of any claim against Lessor, as the trustees,
officers, agents and security holders of Lessor assume no personal liability for
obligations entered into on behalf of Lessor, and their respective properties
shall not be subject to claims relating to any such obligation.

            Section 10. Franchise Affiliation; Ground Leases: Lessee agrees to
operate the Premises in accordance with the rules and regulations of any
franchise agreement under which the Premises are operated, and all expenses
associated with maintaining said franchise shall be borne by the Lessee. Lessee,
at Lessee's sole cost and expense, shall comply with the terms of any ground
lease or similar agreement affecting the Premises.

            Section 11. Arbitration: All references in this Lease to the use of
"Arbitration" shall mean an arbitration in accordance with the rules of the
American Arbitration Association, or its successor. Notice of demand for
arbitration shall be filed in writing with the other party and with the American
Arbitration Association. The demand for arbitration shall be made within a
reasonable time after the claim, dispute or other matter in question has arisen.
Nothing contained herein shall prevent any party from (i) seeking and obtaining
equitable relief, including but not limited to prohibitory or mandatory
injunctions, specific performance or extraordinary writs, nor (ii) joining any
other party as defendant in any action brought by or against a third party. All
fees and expenses of the arbitrators and all other expenses of the arbitration
shall be paid as ordered by the arbitrators. Judgment may be entered upon the
arbitrator's decision.

            Section 12. No Usury: If the interest rate on any obligation owed by
Lessee to Lessor hereunder exceeds the highest lawful rate under any applicable
law, such interest rate shall be reduced to the maximum legal limit.

            Section 13. Time: Time is of the essence of this Lease and of the
performance or observance of every provision hereof.

                                                                         Page 18



            Section 14. Holding Over: In the event Lessee remains in possession
of all or any part of the Premises after the expiration of this Lease and
without the execution of a new lease, Lessee shall be deemed to be occupying the
Premises as a tenant from month to month at a rental equal to the Basic Rent and
Percentage Rate and additional rent herein provided and otherwise subject to all
the conditions, provisions and obligations of this Lease insofar as the same are
applicable to a month-to-month tenancy.

            Section 15. Lessor's Right of Access: Lessor and its authorized
agents shall be entitled to enter the premises at reasonable times after
reasonable written notice, except in case of emergency, for the purpose of (i)
inspecting the Premises; (ii) showing the Premises to prospective purchasers and
lenders; (iii) posting notices of nonresponsibility and such notices as may be
required by law to protect Lessor's interest in the Premises; and (iv)
monitoring the observance and performance by Lessee of its obligations
hereunder.

            Section 16. Estoppel Certificates: At any time and from time to time
within 20 days after request by either party, the other party shall execute and
deliver to the requesting party, or to such other recipient as the notice shall
direct, a statement certifying that this Lease is unmodified and in full force
and effect, or, if there have been modifications, that this Lease is in full
force and effect as modified in the manner specified in the statement, and that
there are no defenses or offsets claimed by the party making such statement
other than those specified therein. The statement shall also state the dates to
which the rent and all other charges have been paid in advance. The statement
shall be such that it can be relied upon by any person or entity specified in
the request.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES.

            Section 17. Amendments. This Lease may be amended, extended or
otherwise modified only by a writing signed by each of Lessee and Lessor. Lessor
and Lessee acknowledge and confirm their mutual intention to review the terms
and conditions hereof at such time following the Commencement Date as the
parties determine to be appropriate and to make such modifications hereto, if
any, as Lessor and Lessee then may agree are appropriate.

                  [remainder of page left intentionally blank]

                                                                         Page 19



            IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the date first written above.

LESSOR:                                  LESSEE:

By: Long Beach Hotel Associates, L.P.    By: SLC Operating Limited Partnership,
                                             a Delaware limited partnership

By: Starwood Lodging Trust,              By: Starwood Lodging Corporation,
    a Maryland real estate                   a Maryland corporation
    investment trust                         Its: Managing General Partner
    Its: General Partner

    By: /s/ Ronald C. Brown                  By: /s/ Nir E. Margalit
        -----------------------------            -------------------------------
        Ronald C. Brown                          Nir E. Margalit
        Sr. Vice President, CFO                  Vice President, Secretary

WITNESS:                                     WITNESS:

/s/ Gail Jackson                             /s/ Gail Jackson
- -------------------------------------        --------------------------------
Print Name: Gail Jackson                     Print Name: Gail Jackson

                                                                         Page 20

EX-10.4

                                                                       EXH. 10.4

                                                         (________________HOTEL)

                               AMENDMENT OF LEASE

THIS AMENDMENT (this "AMENDMENT") is made as of the 1st day of June, 2002, by
and between SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership as
lessor ("LESSOR"), AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland
corporation, as Lessee ("LESSEE").

                                   WITNESSETH

WHEREAS, Lessor and Lessee are parties to that certain lease agreement dated as
of ________, 199_ concerning premises commonly known as the ________________
Hotel, _____________________________(the "LEASE"), the lessee's interest in
which was assigned to Lessee on December 31, 1998; and

WHEREAS, Lessor and Lessee desire to extend and amend the Lease on the terms and
conditions set forth herein.

NOW THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Lessor and Lessee hereby agree as follows:

      1. Unless otherwise defined herein, capitalized words and phrases defined
in the Lease shall have the same definitions when used herein.

      2. The expiration date of the Lease is extended to May 31, 2007.

      3. Effective from and after June 1, 2002, the Basic Rent under Section
IV.1(a)(i) of the Lease shall be $___________ per month.

      4. Effective from and after June 1, 2002, the first sentence of Section
IV.1(a)(ii) of the Lease is amended to read as follows:

            "(ii) For each Lease Year or portion thereof, a percentage rent,
                  cumulated and adjusted monthly (the "Percentage Rent"), equal
                  to the sum of percent (__%) of Lessee's "Gross Receipts" (as
                  hereinafter defined) from the operation of Lessee's business
                  in the hotel portion of the Premises (the "Rooms Percentage")
                  during such Lease Year, plus Five percent (5%) of the "Gross
                  Sales" (as hereinafter defined) of the business in the
                  restaurant and lounge portions of the Premises during such
                  Lease Year. Said sums shall be payable within 30 days after
                  the end of each calendar month of such Lease Year and shall be
                  accompanied by a detailed statement (certified by the chief
                  accounting officer of Lessee) of Gross Receipts and Gross
                  Sales. Lessee shall be



                  entitled to a deduction, from the Percentage Rent payable in
                  each monthly period, of all Basic Rent actually paid with
                  respect to such monthly period."

5. Lessor and Lessee shall each have the right to initiate a renegotiation of
the Basic Rent and Percentage Rent any time on or after June 1, 2003 if such
party's revised projections for the Hotel vary significantly from its current
projections on which it agreed to the rents stated in paragraphs 3 and 4 above.
Each party agrees to make and/or consider such requests in good faith; provided,
that if a party requests a renegotiation of the rents and the parties are unable
to agree on revised terms, the sole right of the requesting party shall be to
terminate the Lease on at least 90 days notice to the other party.

      5. Lessee's address for notices under Section XVII.2 of the Lease is
amended to read as follows:

         Starwood Hotels & Resorts Worldwide, Inc.
         1111 Westchester Avenue
         White Plains, New York  10604-3500
         Attn:  General Counsel

      6. Except as amended hereby all terms and conditions of the Lease remain
unmodified and in full force and effect.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment as of the
date first set forth above.

LESSOR:                                         LESSEE:

SLT REALTY LIMITED PARTNERSHIP,                 STARWOOD HOTELS & RESORTS
a Delaware limited partnership,                 WORLDWIDE, INC.,
By:  Starwood Hotels & Resorts,                 a Maryland corporation
     a Maryland real estate investment trust
Its: General Partner

     By: /s/ Alan Schnaid                       By: /s/ Jeff Drew
         _________________________                  _________________________
     Name:  Alan Schnaid                        Name:  Jeff Drew
     Title: Vice President                      Title: Senior Vice President

                                       2

EX-10.13

                                                                   EXHIBIT 10.13

================================================================================

                      FIRST MODIFICATION TO LOAN AGREEMENT

                                      among

                                ITT CORPORATION,

                         SLT REALTY LIMITED PARTNERSHIP,

                         SHERATON PHOENICIAN CORPORATION

                                       and

                         STARWOOD PHOENICIAN CMBS I LLC

                           --------------------------

                          Dated as of January 27, 1999

                          ---------------------------

                                 $3,282,000,000

================================================================================



            FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999
("First Modification"), among ITT CORPORATION, a Nevada Corporation (the
"Borrower"), successor-in-interest to Starwood Hotels & Resorts Worldwide,
Inc., a Maryland corporation (the "Corporation"), SLT REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Lender"),
successor-in-interest to Starwood Hotels & Resorts, a Maryland real estate
investment trust (the "Trust"), SHERATON PHOENICIAN CORPORATION, a Delaware
corporation ("Sheraton Phoenician") and STARWOOD PHOENICIAN CMBS I LLC, a
Delaware limited liability company (the "Guarantor"). Unless otherwise defined
herein, all capitalized terms used herein shall have the respective meanings
provided such terms in the Loan Agreement referred to below.

                                   WITNESSETH:

            WHEREAS, the Trust has previously made a loan to the Corporation in
the maximum principal amount of $3,282,000,000 (the "Loan") pursuant to that
certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Loan Agreement"), as assigned by
the Trust to the Lender pursuant to that certain General Assignment dated as of
February 23, 1998 and as evidenced by that certain Promissory Note, dated as of
February 23, 1998 (the "Original Note");

            WHEREAS, the Corporation assigned its existing rights and
obligations under the Loan Agreement to the Borrower pursuant to that certain
Assignment and Assumption Agreement dated as of December 17, 1998;

            WHEREAS, in connection with the Loan Agreement, Sheraton Phoenician
Corporation ("Sheraton Phoenician") executed a certain Deed of Trust, Security
Agreement and Financing Statement, dated as of February 23, 1998, in favor of
the Trust and covering the premises known as the Sheraton Phoenician (the
"Sheraton Phoenician Property"), as assigned to Lender pursuant to that certain
Assignment of Mortgage dated as of February 23, 1998 (the "Phoenician Deed of
Trust");

            WHEREAS, the Guarantor and certain subsidiaries of the Trust and the
Corporation are entering into a certain Loan Agreement dated as of January_____,
1999 and among the borrowers named therein, Starwood Operator I LLC and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc., as lender (as amended from time to time, the "CMBS Loan
Agreement");

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, the Borrower, Sheraton Phoenician and Lender have entered
into a certain Agreement of Severance of Note and Modification of Deed of Trust,
dated as of January __, 1999 (the "Severance Agreement"), pursuant to which the
parties thereto have agreed (i) to sever the Original Note into two notes, one
of which is to evidence a portion of the outstanding principal balance of the
Original Note, with interest thereon, equal to $2,489,467,038.25 and the other
of which is to evidence the remaining portion of the outstanding principal
balance of the Original



Note, with interest thereon, equal to $210,000,000 (the "Substitute Note
(Phoenician)") and (ii) to amend the Phoenician Deed of Trust to secure only the
indebtedness evidenced by the Substitute Note (Phoenician);

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to
provide for, among other things, (i) the severance of the Original Note and the
modification of the Phoenician Deed of Trust, (ii) the guaranty by the Guarantor
for all payments due and payable under the Substitute Note (Phoenician) on a
non-recourse basis, (iii) the extension of the Final Maturity Date of the Loan
to February 23, 2014 and, additionally, the further extension of the Final
Maturity Date of the Loan upon any extension of the maturity date of the loan
advanced under the CMBS Loan Agreement, and (iv) the amendment of certain
definitions under the Loan Agreement.

           NOW, THEREFORE, the parties hereto have agreed as follows:

            1. All references to "Final Maturity Date" under the Loan Agreement,
as it applies to the Substitute Note (Phoenician), shall hereby be amended to
mean "February 23, 2014". Moreover, upon the exercise of any option to extend
the maturity date of the loan under the CMBS Loan Agreement (the "CMBS Loan
Maturity Date Extension"), the Final Maturity Date under the Loan Agreement, as
it applies to the Substitute Note (Phoenician), shall be further extended to
February 23, 2029 or one (1) year beyond any such CMBS Loan Maturity Date
Extension, whichever shall be a later date.

            2. All references to "Note" under the Loan Agreement shall hereby be
modified to include the Substitute Note (Phoenician) and the Original Note, as
severed pursuant to the Severance Agreement to constitute two separate notes.

            3. The parties hereto acknowledge and agree that the Phoenician Deed
of Trust, as amended, shall secure a portion of the outstanding principal
balance of the Original Note, with interest thereon pursuant to the Substitute
Note (Phoenician) and the Loan Agreement, as hereby modified, equal to
$210,000,000, and the other Mortgages (as defined in the Loan Agreement) shall
secure the remaining portion of the outstanding principal balance under the
Original Note, with interest thereon, equal to $2,489,467,038.25.
Notwithstanding anything to the contrary contained herein, the portion of the
outstanding principal balance of the Substitute Note (Phoenician) secured by the
Phoenician Deed of Trust, as amended, together with all accrued and unpaid
interest thereon and all other sums due in connection therewith (the "Guaranteed
Amount") shall not exceed an amount which, when combined with the outstanding
principal balance, with interest thereon, of the loan advanced pursuant to the
CMBS Loan Agreement and allocated to the Sheraton Phoenician Property, together
with the amount of all other Permitted Indebtedness (as defined in the CMBS Loan
Agreement) on the Sheraton Phoenician Property under the CMBS Loan Agreement
shall not exceed one hundred percent (100%) of the total market value of the
premises secured by the Phoenician Deed of Trust, as amended.

                                      -2-



            4. The parties hereto acknowledge and agree that the Guarantor shall
guarantee to the Lender full and prompt payment when due of the principal of,
and interest on, the Guaranteed Amount. The liability and obligation of the
Guarantor or any member, officer, director, successor or assign of the
Guarantor, to perform and observe and fulfill its obligations set forth
hereunder shall not be enforced by any action or proceeding wherein damages or
any money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against the guarantor or any of its officers, members, directors,
partners, successors or assigns, it being agreed that the Lender shall only look
to the interest of the Guarantor in the Sheraton Phoenician Property for the
satisfaction of any obligation of the Guarantor hereunder.

            5. The terms and provisions of this First Modification shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.

            6. This First Modification shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws.

            7. This First Modification may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

            8. The parties hereto acknowledge and agree that the name "Starwood
Hotels & Resorts" is a designation of the Trust and its trustees (as trustees
but not personally) under a Declaration of Trust dated August 25, 1969, as
amended and restated as of June 6, 1988 and as further amended and restated as
of January [6], 1999, and as the same has been or may be amended from time to
time thereafter, and that the parties hereto shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, as the trustees,
officers, agents and security holders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations. The foregoing shall govern all direct and indirect obligations
of the Trust under this First Modification.

                            [SIGNATURE PAGE FOLLOWS]

                                      -3-



            IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this First Modification to be duly executed and delivered as of
the date first above written.

                             BORROWER:

                             ITT CORPORATION,
                             a Nevada corporation

                             By: /s/ Jonathan H. Yellen
                                 ----------------------------------------------
                                 Name : Jonathan H. Yellen
                                 Title: Authorized Signatory

                             LENDER:

                             SLT REALTY LIMITED PARTNERSHIP,
                             a Delaware limited partnership

                             By: Starwood Hotels & Resorts, a Maryland real
                                 estate investment trust, its general partner

                                 By: /s/ Jonathan H. Yellen
                                     -------------------------------------------
                                     Name: Jonathan H. Yellen
                                     Title: Authorized Signatory

                             SHERATON PHOENICIAN CORPORATION,
                             a Delaware Corporation

                             By: /s/ Jonathan H. Yellen
                                 ----------------------------------------------
                                 Name : Jonathan H. Yellen
                                 Title: Authorized  Signatory

                             GUARANTOR:

                             STARWOOD PHOENICIAN CMBS I LLC,
                             a Delaware limited liability company

                             By: /s/ Jonathan H. Yellen
                                 ---------------------------------------------
                                 Name: Jonathan H. Yellen
                                 Title: Authorized Signatory

                                   -4-

EX-10.14

                                                                   EXHIBIT 10.14


================================================================================

                   SECOND MODIFICATION TO LOAN AGREEMENT

                                     among

                                ITT CORPORATION,

                         SLT REALTY LIMITED PARTNERSHIP,

                            STARWOOD HOTELS & RESORTS

                                       and

                    STARWOOD HOTELS & RESORTS HOLDINGS, INC.

                -----------------------------------------------

                          Dated as of December 30, 1999

                -----------------------------------------------

               (Original Principal Amount of up to $3,282,000,000)

================================================================================

                                      -1-



            SECOND MODIFICATION TO LOAN AGREEMENT, dated as of December 30, 1999
("Second Modification"), among ITT CORPORATION, a Nevada Corporation (the
'"Borrower" or "ITT"), successor-in-interest to Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation (the "Corporation"). SLT REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Lender" or "SLT Realty"),
STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust (the
"Trust"), and STARWOOD HOTELS & RESORTS HOLDINGS, INC., an Arizona corporation
("Starwood Holdings"). Unless otherwise defined herein, all capitalized terms
used herein shall have the respective meanings provided such terms in the Loan
Agreement, as amended, referred to below.

                                   WITNESSETH:

            WHEREAS, the Trust previously made a loan to the Corporation in the
maximum principal amount of up to $3,282,000,000 (the "Loan") pursuant to that
certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Original Loan Agreement"); as
assigned by the Trust to the Lender pursuant to that certain General Assignment
dated as of February 23, 1998 and as evidenced by that certain Promissory Note,
dated as of February 23, 1998 (the "Original Note");

            WHEREAS, the Corporation assigned its existing rights and
obligations under the Original Loan Agreement to the Borrower pursuant to that
certain Assignment and Assumption Agreement dated as of December 17, 1998;

            WHEREAS, in connection with the transactions contemplated under a
certain Loan Agreement dated as of January 27, 1999 (as amended from time to
time, the "CMBS Loan Agreement"), Borrower, the Sheraton Phoenician Corporation
and Lender entered into a certain Agreement of Severance of Note and
Modification of Deed of Trust, dated as of January 27, 1999 (the "Severance
Agreement"), pursuant to which the parties thereto agreed (i) to separate the
Original Note into two notes, one of which evidenced a portion of the
outstanding principal balance of the Original Note, with interest thereon, equal
to $2,489,467,038.25 (the "Mortgage Note") and the other of which evidenced the
remaining portion of the outstanding principal balance of the Original Note,
with interest thereon, equal to $210,000,000 (the "Substitute Note
(Phoenician)") and (ii) to amend a certain Deed of Trust, Security Agreement and
Financing Statement dated as of February 23, 1998 (the "Phoenician Deed of
Trust") to secure only the indebtedness evidenced by the Substitute Note
(Phoenician) (all of the foregoing being herein referred to as the "Phoenician
Note Transaction");

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement and the Phoenician Note Transaction, the parties thereto
agreed to modify the Original Loan Agreement by First Modification to Loan
Agreement dated as of January 27, 1999 (as modified, the "Loan Agreement") to
provide for, among other things, (i) the severance of the Original Note and the
modification of the Phoenician Deed of Trust, (ii) the extension of the Final
Maturity Date of the Loan to February 23, 2014 and, additionally, the further
extension of the Final Maturity Date of the Loan upon any extension of the
maturity date of the loan advanced

                                      -2-



under the CMBS Loan Agreement, and (iii) the amendment of certain definitions
under the Loan Agreement;

            WHEREAS, on or about April 27, 1999, the Corporation, ITT Sheraton
Corporation, 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
that certain Stock Purchase Agreement (as amended or modified from time to time,
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 and notes receivable from Metropolitan Entertainment Group, a
Canadian partnership, which partnership interests represent ninety-five percent
(95%) of the economic ownership interest therein, and (iii) the Halifax Sheraton
Hotel owned by Clocktower Hotel Limited Partnership, in each case, subject to
and in addition to all of the other matters described in the Caesars Stock
Purchase Agreement (all of the foregoing, together with the matters described in
the following paragraphs, being collectively referred to herein as the "Caesars
World Transaction");

            WHEREAS, certain real property assets relating to the Caesars World
Transaction (collectively, the "Caesars World Assets") presently secure the
Mortgage Note, and it is a condition to the consummation of the Caesars World
Transaction that the Caesars World Assets be released from the collateral
security for the Mortgage Note;

            WHEREAS, in connection with the release of the Caesars World Assets,
the Corporation and ITT desire to (i) reduce the outstanding principal balance
of the Mortgage Note by $1,200,000,000.00 (the "Undercollateralized Amount") in
order to prevent the Mortgage Note from being Undercollateralized after the
release of the Caesars World Assets (the amount of such reduction being referred
to herein as the "Mortgage Reduction Amount"), and (ii) consummate certain other
transactions in connection therewith (all of the foregoing, together with the
next recital, being referred to herein, collectively, as the "Caesars Mortgage
Note Transaction");

            WHEREAS, in order to effectuate all of the foregoing, the
Corporation, the Trust, SLT Realty and ITT have agreed pursuant to a certain
Agreement of Severance of Note and Release of Security Instruments dated of even
date herewith, to separate the Mortgage Note into two notes (which after giving
effect to such separation the two notes shall sometimes be referred to herein as
the "New Mortgage Note" and the "Unsecured Note") so that, immediately after
giving effect to such separation, (i) the principal amount of the New Mortgage
Note shall be in an amount equal to the balance of the Mortgage Note prior to
the separation into two new notes, less the Mortgage Reduction Amount, (ii) the
outstanding principal amount of the new Unsecured Note shall be equal to the
Mortgage Reduction Amount, and (iii) the aggregate outstanding principal amount
of both the New Mortgage Note and the new Unsecured Note immediately subsequent
to the consummation of the Caesars Mortgage Note Transaction shall be equal to
the outstanding principal amount of the Mortgage Note immediately prior to the
consummation of the Caesars Mortgage Note Transaction;

                                      -3-



            WHEREAS, prior to the consummation of the transactions contemplated
under the Caesars Mortgage Note Transaction, the Mortgage Note was secured by,
inter alia, certain Mortgages (as defined in the Loan Agreement) (other than the
Phoenician Deed of Trust);

            WHEREAS, upon completion of the separation of the Mortgage Note into
the New Mortgage Note and the Unsecured Note, (i) the Trust desires to cause
Lender to distribute to the Trust the Unsecured Note and (ii) immediately
thereafter, the Trust desires to distribute the Unsecured Note to Starwood
Holdings; and

            WHEREAS, in connection with the transactions contemplated under the
Caesars Mortgage Note Transaction, the parties hereto desire to modify the Loan
Agreement to provide for, among other things, (i) (a) the separation of the
Mortgage Note and (b) the modification of the Mortgages (other than the
Phoenician Deed of Trust) and the discharge and release of the liens of the
Mortgages set forth on Exhibit A hereto from such Mortgages so that the
remaining Mortgages shall secure only the New Mortgage Note and all of the
indebtedness evidenced thereunder, (ii) (a) the assignment of all of Lender's
right, title and interest in the Unsecured Note and all documents and agreements
in connection therewith to the Trust and (b) the subsequent assignment of all of
the Trust's right, title and interest in the Unsecured Note and all documents
and agreements in connection therewith to Starwood Holdings, and the assumption
by Starwood Holdings of all of such right, title and interest and (iii) the
amendment of certain definitions under the Loan Agreement;

           NOW, THEREFORE, the parties hereto have agreed as follows:

            1. All references to "Note" under the Loan Agreement shall hereby be
modified to include (i) the Substitute Note (Phoenician), (ii) the New Mortgage
Note and (iii) the Unsecured Note.

            2. The parties hereto acknowledge and agree that (i) the liens of
the Mortgages set forth on Exhibit A hereto shall be released and discharged
from such Mortgages and (ii) the remaining Mortgages (other than the Phoenician
Deed of Trust) shall secure the outstanding principal balance under the New
Mortgage Note, with interest thereon, equal to $1,289,467,038.25.

            3. The parties hereto acknowledge, confirm and agree to (a) the
assignment to the Trust of all of Lender's right, title and interest in the
Unsecured Note and all documents and agreements in connection therewith and (b)
the subsequent assignment by the Trust to Starwood Holdings of all of the
Trust's right, title and interest in the Unsecured Note and all documents and
agreements in connection therewith, and Starwood Holdings hereby assumes all of
the "Lender's" obligations under the Loan Agreement (but only with respect to
any obligations specific to the Unsecured Note).

            4. The terms and provisions of this Second Modification shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.

                                      -4-



            5. This Second Modification shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws.

            6. This Second Modification is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Loan Agreement.

            7. This Second Modification may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

            8. The parties hereto acknowledge and agree that the name "Starwood
Hotels & Resorts" is a designation of the Trust and its trustees (as trustees
but not personally) under a Declaration of Trust dated August 25, 1969, as
amended and restated as of June 6, 1988 and as further amended and restated as
of January 6, 1999, and as the same has been or may be amended from time to time
thereafter, and that the parties hereto shall look solely to the Trust's assets
for the enforcement of any claims against the Trust, as the trustees, officers,
agents and security holders of the Trust assume no personal liability for
obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations. The foregoing shall govern all direct and indirect obligations of
the Trust under this Second Modification.

                            [SIGNATURE PAGE FOLLOWS]

                                      -5-



            IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Second Modification to be duly executed and delivered as of
the date first above written.

                             BORROWER:

                             ITT CORPORATION,
                             a Nevada corporation

                             By: /s/ Alan M. Schnaid
                                 -----------------------------------------------
                                 Name: Alan M. Schnaid
                                 Title: Vice President

                             LENDER:

                             SLT REALTY LIMITED PARTNERSHIP,
                             a Delaware limited partnership

                             By: Starwood Hotels & Resorts, a Maryland real
                                 estate investment trust, its general partner

                                 By: /s/ David A. Hughes
                                     -------------------------------------------
                                     Name: David A. Hughes
                                     Title: Vice President

                             STARWOOD HOTELS & RESORTS HOLDINGS, INC.,
                             an Arizona corporation

                             By: /s/ David A. Hughes
                                 ----------------------------------------------
                                 Name: David A. Hughes
                                 Title: President

                             STARWOOD HOTELS & RESORTS,
                             a Maryland real estate investment trust

                             By: /s/ David A. Hughes
                                 ----------------------------------------------
                                 Name: David A. Hughes
                                 Title: Vice President



                                    Exhibit A
                              (Released Mortgages)

1.    Mortgage between Starwood Hotels & Resorts and Boardwalk Regency Corp.,
      Leisure Themes, Maritial Development Corp. and Atlantic HMO, Inc., dated
      as of February 23, 1998 and secured by property located at Caesars
      Atlantic City, 2100 Pacific Avenue, Atlantic City, New Jersey 08401.

2.    Deed of Trust between Starwood Hotels & Resorts and Caesars Palace Realty
      Corp., dated as of February 23, 1998 and secured by property located at
      Caesars Palace, 3570 Las Vegas Blvd., South, Las Vegas, Nevada 89109.

3.    Deed of Trust between Starwood Hotels & Resorts and Desert Palace, Inc.,
      dated as of February 23, 1998 and secured by property located at Caesars
      Tahoe, 55 Highway 50, Stateline, Nevada 89449.

EX-10.15

                                                                   EXHIBIT 10.15

                      THIRD MODIFICATION TO LOAN AGREEMENT

                                     between

                                ITT CORPORATION,

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

                         SLT REALTY LIMITED PARTNERSHIP,

                            STARWOOD HOTELS & RESORTS

                                       and

                    STARWOOD HOTELS & RESORTS HOLDINGS, INC.

                  ---------------------------------------------

                            Dated as of June 23, 2000

                  ---------------------------------------------



            THIRD MODIFICATION TO LOAN AGREEMENT, dated as of June 23, 2000
(this "Agreement"), between ITT CORPORATION, a Nevada Corporation (the
"Borrower" or "ITT"), successor-in-interest to Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation (the "Corporation"), and SLT REALTY
LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender" or "SLT
Realty"), STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust
(the "Trust"), and STARWOOD HOTELS & RESORTS HOLDINGS, INC, an Arizona
corporation ("Starwood Holdings"). Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings provided such
terms in the Loan Agreement, as amended, referred to below.

                                   WITNESSETH:

            WHEREAS, the Trust previously made a loan to the Corporation in the
maximum principal amount of up to $3,282,000,000 (the "Loan") pursuant to that
certain Loan Agreement, dated as of February 23, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Original Loan Agreement"), which
Loan was assigned by the Trust to the Lender pursuant to that certain General
Assignment dated as of February 23, 1998 and is evidenced, inter alia, by that
certain Promissory Note, dated as of February 23, 1998 (the "Original Note");

            WHEREAS, the Corporation assigned its existing rights and
obligations under the Original Loan Agreement to the Borrower pursuant to that
certain Assignment and Assumption Agreement dated as of December 17, 1998;

            WHEREAS, in connection with the transactions contemplated under a
certain Loan Agreement dated as of January 27, 1999 (as amended from time to
time, the "CMBS Loan Agreement"), Borrower, the Sheraton Phoenician Corporation
and Lender entered into a certain Agreement of Severance of Note and
Modification of Deed of Trust, dated as of January 27, 1999 (the "Severance
Agreement"), pursuant to which the parties thereto agreed (i) to separate the
Original Note into two notes, one of which evidenced a portion of the
outstanding principal balance of the Original Note, with interest thereon, equal
to $2,489,467,038.25 (the "Mortgage Note") and the other of which evidenced the
remaining portion of the outstanding principal balance of the Original Note,
with interest thereon, equal to $210,000,000 (the "Substitute Note
(Phoenician)") and (ii) to amend a certain Deed of Trust, Security Agreement and
Financing Statement dated as of February 23, 1998 (the "Phoenician Deed of
Trust") to secure only the indebtedness evidenced by the Substitute Note
(Phoenician) (all of the foregoing being herein referred to as the "Phoenician
Note Transaction");

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement and the Phoenician Note Transaction, the parties thereto
agreed to modify the Original Loan Agreement by First Modification to Loan
Agreement dated as of January 27, 1999 (as modified, the "Loan Agreement") to
provide for, among other things, (i) the severance of the Original Note and the
modification of the Phoenician Deed of Trust, (ii) the extension of the Final
Maturity Date of the Loan to February 23, 2014 and, additionally, the further
extension of the Final Maturity Date of the Loan upon any extension of the
maturity date of the loan advanced under the CMBS Loan Agreement, and (iii) the
amendment of certain definitions under the Original Loan Agreement;

                                       1



            WHEREAS, on or about April 27, 1999, the Corporation, ITT Sheraton
Corporation, 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
that certain Stock Purchase Agreement (as amended or modified from time to time,
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 and notes receivable from Metropolitan Entertainment Group, a
Canadian partnership, which partnership interests represent ninety-five percent
(95%) of the economic ownership interest therein, and (iii) the Halifax Sheraton
Hotel owned by Clocktower Hotel Limited Partnership, in each case, subject to
and in addition to all of the other matters described in the Caesars Stock
Purchase Agreement (all of the foregoing, together with the matters described in
the following paragraphs, being collectively referred to herein as the "Caesars
World Transaction");

            WHEREAS, certain real property assets relating to the Caesars World
Transaction (collectively, the "Caesars World Assets") secured the Mortgage
Note, and, as a condition to the consummation of the Caesars World Transaction,
the Caesars World Assets were required to be released from the collateral
security for the Mortgage Note;

            WHEREAS, in connection with the consummation of the Caesars World
Transaction and the release of the Caesars World Assets, the Corporation and ITT
agreed to (i) reduce the outstanding principal balance of the Mortgage Note by
$1,200,000,000 in order to prevent the Mortgage Note from being
undercollateralized after the release of the Caesars World Assets (the amount of
such reduction being referred to herein as the "Mortgage Reduction Amount"), and
(ii) consummate certain other transactions in connection therewith (all of the
foregoing, together with the next recital, being referred to herein,
collectively, as the "Caesars Mortgage Note Transaction");

            WHEREAS, in order to effectuate all of the foregoing, the
Corporation, the Trust, SLT Realty and ITT entered into a certain Agreement of
Severance of Note and Release of Security Instruments dated as of December
30, 1999, whereby the Mortgage Note was separated into two notes (the two notes
being referred to herein as the "New Mortgage Note" and the "Unsecured Note"),
so that (i) the principal amount of the New Mortgage Note was in an amount equal
to the balance of the Mortgage Note prior to the separation into two new notes,
less the Mortgage Reduction Amount, (ii) the outstanding principal amount of the
new Unsecured Note was equal to the Mortgage Reduction Amount, and (iii) the
aggregate outstanding principal amount of both the New Mortgage Note and the new
Unsecured Note immediately subsequent to the consummation of the Caesars
Mortgage Note Transaction was equal to the outstanding principal amount of the
Mortgage Note immediately prior to the consummation of the Caesars Mortgage Note
Transaction;

            WHEREAS, prior to the consummation of the transactions contemplated
under the Caesars Mortgage Note Transaction, the Mortgage Note was secured by,
inter alia, certain Mortgages (as defined in the Loan Agreement) (other than the
Phoenician Deed of Trust);

                                       2



            WHEREAS, in connection with the transactions contemplated under the
Caesars Mortgage Note Transaction, the parties additionally modified the
Original Loan Agreement (as modified, the "Loan Agreement"), pursuant to that
certain Second Modification to Loan Agreement dated as of December 30,1999, to
provide for, among other things, (i) (a) the separation of the Mortgage Note and
(b) the modification of the Mortgages (other than the Phoenician Deed of Trust)
and the discharge and release of the liens of certain Mortgages from the Caesars
World Assets so that the remaining Mortgages secured only the New Mortgage Note
and all of the indebtedness evidenced thereunder, (ii) (a) the assignment of all
of Lender's right, title and interest in the Unsecured Note and all documents
and agreements in connection therewith to the Trust and (b) the subsequent
assignment of all of the Trust's right, title and interest in the Unsecured Note
and all documents and agreements in connection therewith to Starwood Holdings,
and the assumption by Starwood Holdings of all of such right, title and interest
and (iii) the amendment of certain definitions under the Loan Agreement;

            WHEREAS, Borrower has agreed to sell the hotel property known as the
"Desert Inn" (the matters contemplated under such sale being referred to herein
as the "Desert Inn Transaction") and, as a consequence of the Desert Inn
Transaction, Borrower has requested that the Lender release the Desert Inn from
the collateral security for the New Mortgage Note; and

            WHEREAS, in consideration for, and in connection with, the release
of the Desert Inn from the collateral security of the New Mortgage Note, the
parties hereto desire to modify the New Mortgage Note and the Loan Agreement
(but only with respect to provisions specific to the New Mortgage Note) to
provide for (i) the increase in the Interest Rate, only as applied to the New
Mortgage Note, from the current interest rate of eight and one half percent
(8.5%) per annum to ten percent (10%) per annum and (ii) the release of the
Desert Inn from the collateral security for the New Mortgage Note;

            NOW, THEREFORE, the parties hereto have agreed as follows:

            1. The parties hereto acknowledge and agree that the Interest Rate
of, and only as applied to, the New Mortgage Note is hereby modified and
increased from eight and one half percent (8.5%) per annum to ten percent (10%)
per annum.

            2. The parties hereto acknowledge and agree that (i) the lien of the
Mortgage(s) set forth on Exhibit A hereto shall be released and discharged from
such Mortgage(s) and (ii) the remaining Mortgages (other than the Phoenician
Deed of Trust) shall continue to secure the outstanding principal balance under
the New Mortgage Note, with interest thereon, equal to $1,289,467,038.25.

            3. The terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns.

            4. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to principles of
conflicts of laws.

                                       3



            5. This Agreement is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Loan Agreement
or New Mortgage Note.

            6. This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

            7. The parties hereto acknowledge and agree that the name "Starwood
Hotels & Resorts" is a designation of the Trust and its trustees (as trustees
but not personally) under a Declaration of Trust dated August 25, 1969, as
amended and restated as of June 6, 1988 and as further amended and restated as
of January 6, 1999, and as the same has been or may be amended from time to time
thereafter, and that the parties hereto shall look solely to the Trust's assets
for the enforcement of any claims against the Trust, as the trustees, officers,
agents and security holders of the Trust assume no personal liability for
obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations. The foregoing shall govern all direct and indirect obligations of
the Trust under this Agreement.

            8. The Lender and the Borrower acknowledge, agree and hereby
reaffirm that all rights of the Lender to receive any payments from the Borrower
under the New Mortgage Note and the Loan Agreement, as amended hereby, or under
any guarantees, mortgages, other types of security documents or otherwise are
and shall continue to be subject and subordinate in payment to the prior payment
in full, in cash, of all Senior Indebtedness (as defined in the Subordination
Agreement), to the extent, and in the manner set forth in the Subordination
Agreement. All of the terms, covenants and conditions hereof are hereby and
shall continue to be subordinate to all of the terms, covenants and conditions
of the Senior Indebtedness. The foregoing shall apply, notwithstanding the
availability of other collateral to the Senior Creditors (as defined in the
Subordination Agreement) or the actual date and time of execution, delivery,
recordation, filing or perfection of any of the Senior Indebtedness, or the lien
or priority of payment thereof, and in any instance where the Senior
Indebtedness or any claim for the Senior Indebtedness is subordinated, avoided
or disallowed, in whole or in part, under Title 11 of the United States Code
(the "Bankruptcy Code") or other applicable federal or state law.

                            [SIGNATURE PAGE FOLLOWS]

                                       4



            IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.

                             BORROWER:

                             ITT CORPORATION,
                             a Nevada corporation

                             By:  /s/ Peter C. Morrow
                                 -----------------------------------------------
                                 Name: Peter C. Morrow
                                 Title: Vice President - Assistant Treasurer

                             LENDER:

                             SLT REALTY LIMITED PARTNERSHIP,
                             a Delaware limited partnership

                             By: Starwood Hotels & Resorts, a Maryland real
                                 estate investment trust, its general partner

                             By: /s/ Alan M. Schnaid
                                 -----------------------------------------------
                                 Name: Alan M. Schnaid
                                 Title: Vice President and Assistant Treasurer

                             STARWOOD HOTELS & RESORTS,
                             a Maryland real estate investment trust

                             By: /s/ Alan M. Schnaid
                                 -----------------------------------------------
                                 Name: Alan M. Schnaid
                                 Title: Vice President and Assistant Treasurer

                             STARWOOD HOTELS & RESORTS HOLDINGS, INC.,
                             an Arizona corporation

                             By:  /s/ David A. Hughes
                                  ----------------------------------------------
                                  Name: David A. Hughes
                                  Title: President

                                       5



                                    EXHIBIT A

                               (Released Mortgage)

1.    Deed of Trust, Security Agreement and Financing Statement, dated as of
      February 23, 1998, by Sheraton Desert Inn Corporation, 357 Inc., Aronimink
      Corporation,

NEWYORK 169899V4:

      Baumgartner Company, Robert T. Knott, Jr., as Trustee of the TMA Trust
      dated July 1, 1996 and Robert T. Knott, Jr., as Trustee of the Levy Trust,
      and Charles W. Deaner, secured by property located at the Desert Inn, Las
      Vegas, Nevada.

EX-10.17

                                                                   EXHIBIT 10.17

================================================================================

                      FIRST MODIFICATION TO LOAN AGREEMENT

                                     among

                   STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,

                               HARBOR-CAL S. D.,

                     STARWOOD SHERATON SAN DIEGO CMBS I LLC

                                       and

                         SLT REALTY LIMITED PARTNERSHIP

                    -----------------------------------------

                          Dated as of January 27, 1999

                    -----------------------------------------

                                  $100,000,000

================================================================================



            FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999
("First Modification"), among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation (the "Borrower"), SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Lender"), successor-in-interest to Starwood
Hotels & Resorts, a Maryland real estate investment trust (the "Trust"),
HARBOR-CAL S.D., a California joint venture ("Harbor-Cal"), and STARWOOD
SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company (the
"Guarantor"). Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings provided such terms in the Loan Agreement
referred to below.

                                   WITNESSETH:

            WHEREAS, the Trust has previously made a loan to the Borrower in the
maximum principal amount of $100,000,000 (the "Loan") pursuant to that certain
Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), as assigned by the
Trust to the Lender pursuant to that certain General Assignment dated as of
February 23, 1998 and as evidenced by that certain Promissory Note, dated as of
February 23, 1998 (as may be amended from time to time, the "Note");

            WHEREAS, in connection with the Loan Agreement, Harbor-Cal executed
a certain Leasehold Deed of Trust, Security Agreement, Financing Statement and
Fixture Filing, dated as of February 23, 1998, in favor of the Trust and
covering a portion of the premises known as the Sheraton San Diego Hotel &
Marina (the "Sheraton San Diego Property"), as assigned to Lender pursuant to
that certain Assignment of Mortgage dated as of February 23, 1998 (the "Sheraton
San Diego Deed of Trust");

            WHEREAS, the Guarantor and certain subsidiaries of the Trust and the
Borrower are entering into a certain Loan Agreement dated as of January 27, 1999
and among the borrowers named therein, Starwood Operator I LLC and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc., as lender (the "CMBS Lender") (as amended from time to time, the
"CMBS Loan Agreement");

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, Harbor-Cal has executed an Amended and Restated Leasehold
Deed of Trust, Security Agreement, Financing Statement and Fixture Filing dated
as of January 27, 1999 (the "Amended and Restated Leasehold Deed of Trust"),
amending and restating the Sheraton San Diego Deed of Trust to provide for,
among other things, a limit on the indebtedness secured by the Amended and
Restated Leasehold Deed of Trust to an amount which, when added to the
indebtedness allocable under the CMBS Loan Agreement to the Sheraton San Diego
Property and the amount secured by that certain Amended and Restated Leasehold
Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated
the date hereof and executed by Harbor-Cal (the "Amended and Restated Leasehold
Deed of Trust (West Tower)"), shall not exceed the total market value of the
Sheraton San Diego Property;



         WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to
provide for, among other things, (i) the guaranty by the Guarantor for all
payments due and payable under the Note on a non-recourse basis, (ii) the
extension of the Final Maturity Date of the Loan to February 23, 2014 and,
additionally, the further extension of the Final Maturity Date of the Loan upon
any extension of the maturity date of the loan advanced under the CMBS Loan
Agreement, and (iii) the amendment of certain definitions under the Loan
Agreement.

         NOW, THEREFORE, the parties hereto have agreed as follows:

            1. All references to "Final Maturity Date" under the Loan Agreement
shall hereby be amended to mean "February 23, 2014". Moreover, upon the exercise
of any option to extend the maturity date of the loan under the CMBS Loan
Agreement (the "CMBS Loan Maturity Date Extension"), the Final Maturity Date
under the Loan Agreement shall be further extended to February 23, 2029 or one
(1) year beyond any such CMBS Loan Maturity Date Extension, whichever shall be a
later date.

            2. All references to "Mortgage" under the Loan Agreement shall
hereby be modified to mean the Amended and Restated Leasehold Deed of Trust.

            3. The parties hereto acknowledge and agree that, notwithstanding
anything to the contrary contained herein, the outstanding principal balance of
the Note, together with all accrued and unpaid interest thereon and all other
sums due in connection therewith (the "Guaranteed Amount"), secured by the
Amended and Restated Leasehold Deed of Trust shall not exceed an amount which,
when combined with (i) the outstanding principal balance, with interest thereon,
of the loan advanced pursuant to the CMBS Loan Agreement and allocable to the
Sheraton San Diego Property, together with the amount of all other Permitted
Indebtedness (as defined in the CMBS Loan Agreement) on the Sheraton San Diego
Property under the CMBS Loan Agreement, and (ii) the amount secured by the
Amended and Restated Leasehold Deed of Trust (West Tower), shall not exceed one
hundred percent (100%) of the total market value of the Sheraton San Diego
Property.

            4. The parties hereto acknowledge and agree that the Guarantor shall
guarantee to the Lender full and prompt payment when due of the principal of,
and interest on, the Guaranteed Amount. The liability and obligation of the
Guarantor or any member, officer, director, successor or assign of the
Guarantor, to perform and observe and fulfill its obligations set forth
hereunder shall not be enforced by any action or proceeding wherein damages or
any money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against the guarantor or any of its officers, members, directors,
partners, successors or assigns, it being agreed that the Lender shall only look
to the interest of the Guarantor in the Sheraton San Diego Property for the
satisfaction of any obligation of the Guarantor hereunder.

                                      -2-


            5. The parties hereto agree that all rights of the Lender to receive
any payments from the Borrower under the Loan Agreement or under any guarantees,
mortgages, other types of security documents or otherwise are and shall continue
to be subject and subordinate in payment to the prior payment in full, in cash,
of (i) all Senior Indebtedness (as defined in the Subordination Agreement (as
defined in the Loan Agreement)) and (ii) the indebtedness outstanding under the
CMBS Loan Agreement (the "CMBS Indebtedness") pursuant to, and in the manner set
forth in, that certain Subordination and Intercreditor Agreement executed and
delivered in connection with the CMBS Loan Agreement (the "CMBS Subordination
Agreement"). All of the terms, covenants and conditions hereof are hereby and
shall continue to be subordinate to all of the terms, covenants and conditions
of the Senior Indebtedness and the CMBS Indebtedness. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Creditors (as
defined in the Subordination Agreement) or to the CMBS Lender or the actual date
and time of execution, delivery, recordation, filing or perfection of any of the
Senior Indebtedness or the CMBS Indebtedness, or the lien or priority of payment
thereof, and in any instance wherein the Senior Indebtedness or CMBS
Indebtedness or any claim for the Senior Indebtedness or CMBS Indebtedness is
subordinated, avoided or disallowed, in whole or in part, under Title 11 of the
United States Code (the "Bankruptcy Code") or other applicable federal or state
law.

            6. The terms and provisions of this First Modification shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.

            7. This First Modification shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws.

            8. This First Modification may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

            9. The parties hereto acknowledge and agree that the name "Starwood
Hotels & Resorts" is a designation of the Trust and its trustees (as trustees
but not personally) under a Declaration of Trust dated August 25,1969, as
amended and restated as of June 6, 1988 and as further amended and restated as
of January [6], 1999, and as the same has been or may be amended from time to
time thereafter, and that the parties hereto shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, as the trustees,
officers, agents and security holders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations. The foregoing shall govern all direct and indirect obligations
of the Trust under this First Modification.

                                      -3-



      IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this First Modification to be duly executed and delivered as of the date first
above written.

                         BORROWER:

                         STARWOOD HOTELS & RESORTS WORLDWIDE,
                         INC., a Maryland corporation

                         By: /s/ Jonathan H. Yellen
                             ---------------------------------------
                             Name: Jonathan H. Yellen
                             Title: Authorized Signatory

                         LENDER:

                         SLT REALTY LIMITED PARTNERSHIP,
                         a Delaware limited partnership

                         By: Starwood Hotels & Resorts, a Maryland real estate
                             investment trust, its general partner

                             By: /s/ Jonathan H. Yellen
                                 -----------------------------------
                                 Name: Jonathan H. Yellen
                                 Title: Authorized Signatory

                         HARBOR-CAL S. D.,
                         a California joint venture

                         By: Sheraton Harbor Island Corporation,
                             Its joint venture partner

                             By: /s/ Jonathan H. Yellen
                                 -----------------------------------
                                 Name:  Jonathan H. Yellen
                                 Title: Authorized Signatory

                         By: Sheraton California Corporation,
                             Its joint venture partner

                             By: /s/ Jonathan H. Yellen
                                 -----------------------------------
                                 Name: Jonathan H. Yellen
                                 Title: Authorized Signatory

                                      -4-


                             GUARANTOR:

                             STARWOOD SHERATON SAN DIEGO CMBS I LLC,
                             a Delaware limited liability company

                             By: /s/ Jonathan H. Yellen
                                 -----------------------------------------------
                                 Title: Authorized Signatory

EX-10.19

                                                                   EXHIBIT 10.19

================================================================================

                      FIRST MODIFICATION TO LOAN AGREEMENT

                                     among

                   STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,

                                HARBOR-CAL S.D.,

                     STARWOOD SHERATON SAN DIEGO CMBS I LLC

                                       and

                         SLT REALTY LIMITED PARTNERSHIP

                      ------------------------------------

                          Dated as of January 27, 1999

                      ------------------------------------

                                   $50,000,000

================================================================================



            FIRST MODIFICATION TO LOAN AGREEMENT, dated as of January 27, 1999
("First Modification"), among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation (the "Borrower"), SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Lender"), successor-in-interest to Starwood
Hotels & Resorts, a Maryland real estate investment trust (the "Trust"),
HARBOR-CAL S.D., a California joint venture ("Harbor-Cal"), and STARWOOD
SHERATON SAN DIEGO CMBS I LLC, a Delaware limited liability company (the
"Guarantor"). Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings provided such terms in the Loan Agreement
referred to below.

                                   WITNESSETH:

            WHEREAS, the Trust has previously made a loan to the Borrower in the
maximum principal amount of $50,000,000 (the "Loan") pursuant to that certain
Loan Agreement, dated as of February 23, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), as assigned by the
Trust to the Lender pursuant to that certain General Assignment dated as of
February 23, 1998 and as evidenced by that certain Promissory Note, dated as of
February 29, 1998 (as may be amended from time to time, the "Note");

            WHEREAS, in connection with the Loan Agreement, Harbor-Cal executed
a certain Leasehold Deed of Trust, Security Agreement, Financing Statement and
Fixture Filing, dated as of February 23, 1998, in favor of the Trust and
covering a portion of the premises known as the Sheraton San Diego Hotel &
Marina (the "Sheraton San Diego Property"), as assigned to Lender pursuant to
that certain Assignment of Mortgage dated as of February 23, 1998 (the "Sheraton
San Diego Deed of Trust");

            WHEREAS, the Guarantor and certain subsidiaries of the Trust and the
Borrower are entering into a certain Loan Agreement dated as of January 27, 1999
and among the borrowers named therein, Starwood Operator I LLC and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc., as lender (the "CMBS Lender") (as amended from time to time, the
"CMBS Loan Agreement");

            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, Harbor-Cal has executed an Amended and Restated Leasehold
Deed of Trust, Security Agreement, Financing Statement and Fixture Filing dated
as of January 27, 1999 (the "Amended and Restated Leasehold Deed of Trust"),
amending and restating the Sheraton San Diego Deed of Trust to provide for,
among other things, a limit on the indebtedness secured by the Amended and
Restated Leasehold Deed of Trust to an amount which, when added to the
indebtedness allocable under the CMBS Loan Agreement to the Sheraton San Diego
Property and the amount secured by that certain Amended and Restated Leasehold
Deed of Trust, Security Agreement, Financing Statement and Fixture Filing, dated
the date hereof and executed by Harbor-Cal (the "Amended and Restated Leasehold
Deed of Trust (East Tower)"), shall not exceed the total market value of the
Sheraton San Diego Property;



            WHEREAS, in connection with the transactions contemplated under the
CMBS Loan Agreement, the parties hereto desire to modify the Loan Agreement to
provide for, among other things, (i) the guaranty by the Guarantor for all
payments due and payable under the Note on a non-recourse basis, (ii) the
extension of the Final Maturity Date of the Loan to February 23, 2014 and,
additionally, the further extension of the Final Maturity Date of the Loan upon
any extension of the maturity date of the loan advanced under the CMBS Loan
Agreement, and (iii) the amendment of certain definitions under the Loan
Agreement.

           NOW, THEREFORE, the parties hereto have agreed as follows:

            1. All references to "Final Maturity Date" under the Loan Agreement
shall hereby be amended to mean "February 23, 2014". Moreover, upon the exercise
of any option to extend the maturity date of the loan under the CMBS Loan
Agreement (the "CMBS Loan Maturity Date Extension"), the Final Maturity Date
under the Loan Agreement shall be further extended to February 23, 2029 or one
(1) year beyond any such CMBS Loan Maturity Date Extension, whichever shall be a
later date.

            2. All references to "Mortgage" under the Loan Agreement shall
hereby be modified to mean the Amended and Restated Leasehold Deed of Trust.

            3. The parties hereto acknowledge and agree that, notwithstanding
anything to the contrary contained herein, the outstanding principal balance of
the Note, together with all accrued and unpaid interest thereon and all other
sums due in connection therewith (the "Guaranteed Amount"), secured by the
Amended and Restated Leasehold Deed of Trust shall not exceed an amount which,
when combined with (i) the outstanding principal balance, with interest thereon,
of the loan advanced pursuant to the CMBS Loan Agreement and allocable to the
Sheraton San Diego Property, together with the amount of all other Permitted
Indebtedness (as defined in the CMBS Loan Agreement) on the Sheraton San Diego
Property under the CMBS Loan Agreement, and (ii) the amount secured by the
Amended and Restated Leasehold Deed of Trust (East Tower), shall not exceed one
hundred percent (100%) of the total market value of the Sheraton San Diego
Property.

            4. The parties hereto acknowledge and agree that the Guarantor shall
guarantee to the Lender full and prompt payment when due of the principal of,
and interest on, the Guaranteed Amount. The liability and obligation of the
Guarantor or any member, officer, director, successor or assign of the
Guarantor, to perform and observe and fulfill its obligations set forth
hereunder shall not be enforced by any action or proceeding wherein damages or
any money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against the guarantor or any of its officers, members, directors,
partners, successors or assigns, it being agreed that the Lender shall only look
to the interest of the Guarantor in the Sheraton San Diego Property for the
satisfaction of any obligation of the Guarantor hereunder.

                                      -3-



            5. The parties hereto agree that all rights of the Lender to receive
any payments from the Borrower under the Loan Agreement or under any guarantees,
mortgages, other types of security documents or otherwise are and shall continue
to be subject and subordinate in payment to the prior payment in full, in cash,
of (i) all Senior Indebtedness (as defined in the Subordination Agreement (as
defined in the Loan Agreement)) and (ii) the indebtedness outstanding under the
CMBS Loan Agreement (the "CMBS Indebtedness") pursuant to, and in the manner set
forth in, that certain Subordination and Intercreditor Agreement executed and
delivered in connection with the CMBS Loan Agreement (the "CMBS Subordination
Agreement"). All of the terms, covenants and conditions hereof are hereby and
shall continue to be subordinate to all of the terms, covenants and conditions
of the Senior Indebtedness and the CMBS Indebtedness. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Creditors (as
defined in the Subordination Agreement) or to the CMBS Lender or the actual date
and time of execution, delivery, recordation, filing or perfection of any of the
Senior Indebtedness or the CMBS Indebtedness, or the lien or priority of payment
thereof, and in any instance wherein the Senior Indebtedness or CMBS
Indebtedness or any claim for the Senior Indebtedness or CMBS Indebtedness is
subordinated, avoided or disallowed, in whole or in part, under Title 11 of the
United States Code (the "Bankruptcy Code") or other applicable federal or state
law.

            6. The terms and provisions of this First Modification shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.

            7. This First Modification shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws.

            8. This First Modification may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

            9. The parties hereto acknowledge and agree that the name "Starwood
Hotels & Resorts" is a designation of the Trust and its trustees (as trustees
but not personally) under a Declaration of Trust dated August 25, 1969, as
amended and restated as of June 6, 1988 and as further amended and restated as
of January [6], 1999, and as the same has been or may be amended from time to
time thereafter, and that the parties hereto shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, as the trustees,
officers, agents and security holders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations. The foregoing shall govern all direct and indirect obligations
of the Trust under this First Modification.

                                      -4-



      IN WITNESS WHEREOF,each of the parties hereto has caused a counterpart of
this First Modification to be duly executed and delivered as of the date first
above written.

                          BORROWER:

                          STARWOOD HOTELS & RESORTS WORLDWIDE,
                          INC., a Maryland corporation

                          By: /s/ Jonathan H. Yellen
                              -------------------------------
                              Name: Jonathan H. Yellen
                              Title: Authorized Signatory

                          LENDER:

                          SLT REALTY LIMITED PARTNERSHIP,
                          a Delaware limited partnership

                          By: Starwood Hotels & Resorts, a Maryland real estate
                              investment trust, its general partner

                              By: /s/ Jonathan H. Yellen
                                  ----------------------------
                                  Name: Jonathan H. Yellen
                                  Title: Authorized Signatory

                          HARBOR-CAL S. D.,
                          a California joint venture

                          By: Sheraton Harbor Island Corporation,
                              Its joint venture partner

                              By: /s/ Jonathan H. Yellen
                                  ----------------------------
                                  Name: Jonathan H. Yellen
                                  Title: Authorized Signatory

                          By: Sheraton California Corporation,
                              Its joint venture partner

                              By: /s/ Jonathan H. Yellen
                                  ----------------------------
                                  Name: Jonathan H. Yellen
                                  Title:  Authorized Signatory

                                       -5-


                             GUARANTOR:

                             STARWOOD SHERATON SAN DIEGO CMBS I LLC,
                             a Delaware limited liability company

                             By: /s/ Jonathan H. Yellen
                                 -----------------------------------------------
                                Title: Authorized Signatory

EX-10.23

                                                                      Exh. 10.23

                             STARWOOD LODGING TRUST
                      NON-QUALIFIED STOCK OPTION AGREEMENT

      Starwood Lodging Trust, a real estate investment trust organized under the
laws of Maryland (the "Company"), hereby grants to _____________ (the
"Optionee"), as of _____ ___, 199_ (the "Option Date"), pursuant to the
provisions of the Starwood Lodging Trust 1995 Share Option Plan (the "Plan"), an
non-qualified option to purchase form the Company (the "Option") ________
Shares, at the price of $_____ per Paired Share upon and subject to the terms
and conditions set forth below. References to employment by the Company shall
include employment by a "subsidiary corporation" of the Company, as such term is
defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"). Capitalized terms not defined herein shall have the meanings specified
in the Plan.

            1.    Option Subject to Acceptance of Agreement.

      The Option may not be exercised unless (i) the Optionee shall accept this
Agreement by executing it in the space provided below and returning such
original execution copy to the Company and (ii) the Plan is approved by a
majority of all the votes cast at a meeting of shareholders at which a quorum is
present.

            2.    Time and Manner of Exercise of Option.

            2.1 Maximum Term of Option. In no event may the option be exercised,
in whole or in part, after _________ __, ____ (the "Expiration Date").

            2.2 Exercise of Option. (a) The Option shall become exercisable (i)
on __________ __, ____ with respect to ________ Paired Shares subject to the
Option, (ii) on __________ __, ____ with respect to an additional __________
Paired Shares subject to the Option, and (iii) on __________ __, _____ with
respect to the remaining ________ Paired Shares subject to the Option.

            (b) If the Optionee's employment by the Company terminates for any
reason other than Cause, the Option shall be exercisable to the extent it is
exercisable on the effective date of the Optionee's termination of employment,
shall continue to become exercisable in accordance with Section 2.2(a) and may
be exercised by the Optionee or the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until the Expiration Date.

            (c) If the Optionee's employment by the Company terminates for
Cause, the Option, whether or not then exercisable, shall terminate
automatically on the effective date of the Optionee's termination of employment.

            (d) For purposes of this Section 2.2, "Cause" shall be limited to
conviction of a felony, or determination of a court of competent jurisdiction of
significant

                                       1.




violation of the Optionee's duty of loyalty to the Company or of a substantial
disregard of the duties properly assigned to the Optionee (other than as a
result of disability).

            2.3 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole Paired Shares to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) previously
owned whole Paired Shares (which the Optionee has held for at least six months
prior to the delivery of such Paired Shares or which the Optionee purchased on
the open market and for which the Optionee has good title, free and clear of all
liens and encumbrances) having a fair market value, determined as of the date of
exercise, equal to the aggregate purchase price payable pursuant to the Option
by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of exercise or
(iv) a combination of (i) and (ii), and (2) by executing such documents as the
Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to either clause (ii) or (iii). Any fraction
of a Paired Share which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee.
No certificate representing a Paired Share shall be delivered until the full
purchase therefor has been paid.

            2.4 Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.

            (b) In the event that rights to purchase all or a portion of the
Paired Shares subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall promptly return this Agreement to the Company for
full or partial cancellation, as the case may be. Such cancellation shall be
effective regardless of whether the Optionee returns this Agreement. If the
Optionee continues to have rights to purchase Paired Shares hereunder, the
Company shall, within 10 days of the Optionee's delivery of this Agreement to
the Company, either (i) mark this Agreement to indicate the extent to which the
Option has expired or been exercised, cancelled or forfeited or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be substantially similar to this Agreement in form and
substance.

            3.    Additional Terms and Conditions of Option.

            3.1 Nontransferability of Option. The Option may not be transferred
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to the beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to
the extent permitted by the foregoing, during the Optionee's lifetime the
Options are exercisable only by the Optionee or the Optionee's Legal
Representative. Except as permitted by the foregoing, the Options may not be
sold, transferred, assigned, pledged, hypothecated, voluntarily

                                       2.




encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise
dispose of the Options (unless permitted by Section 3.1(a) above or this Section
3.1(b)), the Options and all rights hereunder shall, to the extent of any such
attempt, immediately become null and void.

            3.2 Investment Representation. The Optionee hereby represents and
covenants that (a) any Paired Shares purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and any
applicable state securities laws; (b) any subsequent sale of any such Paired
Shares shall be made either pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee shall submit
a written statement, in form satisfactory to the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
Paired Shares hereunder or (y) is true and correct as of the date of any sale of
any such Paired Shares, as applicable. As a further condition precedent to any
exercise of the Option, the Optionee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance or delivery of the Paired Shares and, in connection therewith,
shall execute any documents which the Board or the Committee shall in its sole
discretion deem necessary or advisable.

            3.3 Withholding Taxes. (a) As a condition precedent to the delivery
of Paired Shares upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
Paired Shares, such amount of cash as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to withhold and
pay over as income or other withholding taxes (the "Required Tax Payments") with
respect to such exercise of the Option. If the Optionee shall fail to advance
the Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.

            (b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole Paired Shares (which the Optionee has held for at
least six months prior to the delivery of such Paired Shares or which the
optionee purchased on the open market and for which the Optionee has good title,
free and clear of all liens and encumbrances) having a fair market value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (4) any
combination of (1) and (2). The Committee shall have sole discretion to
disapprove of an

                                       3.



election pursuant to any of clauses (2)-(4). Paired Shares to be delivered may
not have a Fair Market Value in excess of the minimum amount of the Required Tax
Payments. Any fraction of a Paired Share which would be required to satisfy any
such obligation shall be disregarded and the remaining amount due shall be paid
in cash by the Optionee. No certificate representing a Paired Share shall be
delivered until the Required Tax payments have been satisfied in full.

            (c) Unless the Committee otherwise determines, if the Optionee is
subject to Section 16 of the Exchange Act, the Optionee may deliver to the
Company previously owned whole Paired Shares in accordance with Section 3.3(b),
but only if such delivery is in connection with the delivery of Paired Shares in
payment of the exercise price of the Option.

            3.4 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the fair market value of a Paired Share on
the exercise date over (B) the exercise price of the Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.

            3.5 Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the Paired
Shares subject to the Option upon any securities exchange or under any law, or
the consent or approval of any government body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
purchase or delivery of Paired Shares hereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.

            3.6 Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of Paired Shares purchased against full
payment therefor. The Company shall pay all original issue or transfer taxes and
all fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.

            3.7 Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to Paired Shares subject
to the Option unless and until purchased and delivered upon the exercise of the
Option, in

                                       4.




whole or in part, and the Optionee becomes a stockholder of record with respect
to such delivered Paired Shares; and the Optionee shall not be considered a
stockholder of the Company or the Corporation with respect to any Paired Shares
not so purchased and delivered.

            3.8 Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company or
any affiliate of the Company.

            3.9 Decisions of Board or Committee. The Board or the Committee
shall have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other action
made or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.

            3.10 Company to Reserve Paired Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve or cause to
be reserved and keep or cause to be kept available, either in its treasury or
out of its authorized but unissued Paired Shares, the full number of Paired
Share subject to the Option from time to time.

            3.11 Agreement Subject to the Plan. This Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.

            4.    Miscellaneous Provisions.

            4.1 Designation as Pledged Stock Option. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.

            4.2 Meaning of Certain Terms. (a) As used herein, the term "Legal
Representative" shall include an executor, administrator, legal representative,
beneficiary or similar person and the term "Permitted Transferee" shall include
any transferee (i) pursuant to a transfer permitted under Section 4.4 of the
Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary
designation procedures which may be approved by the Company.

            4.3 Successors. This Agreement shall be binding upon and inure to
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.

                                       5.




            4.4 Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to the President of the
Company at 11845 West Olympic Blvd., Suite 560, Los Angeles, California 90064,
and if to the Optionee, to __________________, or to such other address as
either party may give by notice to the other in the manner herein provided. All
notices, requests or other communications provided for in this Agreement shall
be in writing either (a) by personal delivery to the party entitled thereto, (b)
by facsimile with confirmation of receipt, (c) by mailing in the United States
mails to the last known address of the party entitled thereto or (d) by express
courier service. The notice, request or other communication shall be deemed to
be received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.

            4.5 Governing Law. The Option, this Agreement, and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of California and construed in accordance therewith without giving
effect to principles of conflicts of laws.

            4.6 Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.

            4.7 Disclaimer. The name "Starwood Lodging Trust" is the designation
of Starwood Lodging Trust and its Trustees (as Trustees but not personally)
under a Declaration of Trust dated August 25, 1969, as amended and restated and
all persons dealings with Starwood Lodging Trust must look solely to Starwood
Lodging Trust's property for the enforcement of any claims against Starwood
Lodging Trust, as the Trustees, officers, agents and security holders of
Starwood Lodging Trust assume no personal obligation of Starwood Lodging Trust,
and their respective property shall not be subject to claims of any person
relating to such obligation.

                                                 STARWOOD LODGING TRUST

                                                 By:____________________________
                                                 Name:__________________________
                                                 Its:___________________________

Accepted:

_________________________

"Optionee"

                                       6.

EX-10.26

                                                                      Exh. 10.26

                             STARWOOD LODGING TRUST
                      NON-QUALIFIED STOCK OPTION AGREEMENT

      Starwood Lodging Trust, a real estate investment trust organized under the
laws of Maryland (the "Company"), hereby grants to _____________ (the
"Optionee"), as of _____ ___, 199_ (the "Option Date"), pursuant to the
provisions of the Starwood Lodging Trust 1995 Share Option Plan (the "Plan"), an
non-qualified option to purchase form the Company (the "Option") ________
Shares, at the price of $_____ per Paired Share upon and subject to the terms
and conditions set forth below. References to employment by the Company shall
include employment by a "subsidiary corporation" of the Company, as such term is
defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"). Capitalized terms not defined herein shall have the meanings specified
in the Plan.

            1.    Option Subject to Acceptance of Agreement.

      The Option may not be exercised unless (i) the Optionee shall accept this
Agreement by executing it in the space provided below and returning such
original execution copy to the Company and (ii) the Plan is approved by a
majority of all the votes cast at a meeting of shareholders at which a quorum is
present.

            2.    Time and Manner of Exercise of Option.

            2.1 Maximum Term of Option. In no event may the option be exercised,
in whole or in part, after _________ __, ____ (the "Expiration Date").

            2.2 Exercise of Option. (a) The Option shall become exercisable (i)
on __________ __, ____ with respect to ________ Paired Shares subject to the
Option, (ii) on __________ __, ____ with respect to an additional __________
Paired Shares subject to the Option, and (iii) on __________ __, _____ with
respect to the remaining ________ Paired Shares subject to the Option.

            (b) If the Optionee's employment by the Company terminates for any
reason other than Cause, the Option shall be exercisable to the extent it is
exercisable on the effective date of the Optionee's termination of employment,
shall continue to become exercisable in accordance with Section 2.2(a) and may
be exercised by the Optionee or the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until the Expiration Date.

            (c) If the Optionee's employment by the Company terminates for
Cause, the Option, whether or not then exercisable, shall terminate
automatically on the effective date of the Optionee's termination of employment.

            (d) For purposes of this Section 2.2, "Cause" shall be limited to
conviction of a felony, or determination of a court of competent jurisdiction of
significant

                                       1.



violation of the Optionee's duty of loyalty to the Company or of a substantial
disregard of the duties properly assigned to the Optionee (other than as a
result of disability).

            2.3 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole Paired Shares to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) previously
owned whole Paired Shares (which the Optionee has held for at least six months
prior to the delivery of such Paired Shares or which the Optionee purchased on
the open market and for which the Optionee has good title, free and clear of all
liens and encumbrances) having a fair market value, determined as of the date of
exercise, equal to the aggregate purchase price payable pursuant to the Option
by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of exercise or
(iv) a combination of (i) and (ii), and (2) by executing such documents as the
Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to either clause (ii) or (iii). Any fraction
of a Paired Share which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee.
No certificate representing a Paired Share shall be delivered until the full
purchase therefor has been paid.

            2.4 Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.

            (b) In the event that rights to purchase all or a portion of the
Paired Shares subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall promptly return this Agreement to the Company for
full or partial cancellation, as the case may be. Such cancellation shall be
effective regardless of whether the Optionee returns this Agreement. If the
Optionee continues to have rights to purchase Paired Shares hereunder, the
Company shall, within 10 days of the Optionee's delivery of this Agreement to
the Company, either (i) mark this Agreement to indicate the extent to which the
Option has expired or been exercised, cancelled or forfeited or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be substantially similar to this Agreement in form and
substance.

            3.    Additional Terms and Conditions of Option.

            3.1 Nontransferability of Option. The Option may not be transferred
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to the beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to
the extent permitted by the foregoing, during the Optionee's lifetime the
Options are exercisable only by the Optionee or the Optionee's Legal
Representative. Except as permitted by the foregoing, the Options may not be
sold, transferred, assigned, pledged, hypothecated, voluntarily

                                       2.





encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise
dispose of the Options (unless permitted by Section 3.1(a) above or this Section
3.1(b)), the Options and all rights hereunder shall, to the extent of any such
attempt, immediately become null and void.

            3.2 Investment Representation. The Optionee hereby represents and
covenants that (a) any Paired Shares purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and any
applicable state securities laws; (b) any subsequent sale of any such Paired
Shares shall be made either pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee shall submit
a written statement, in form satisfactory to the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
Paired Shares hereunder or (y) is true and correct as of the date of any sale of
any such Paired Shares, as applicable. As a further condition precedent to any
exercise of the Option, the Optionee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance or delivery of the Paired Shares and, in connection therewith,
shall execute any documents which the Board or the Committee shall in its sole
discretion deem necessary or advisable.

            3.3 Withholding Taxes. (a) As a condition precedent to the delivery
of Paired Shares upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
Paired Shares, such amount of cash as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to withhold and
pay over as income or other withholding taxes (the "Required Tax Payments") with
respect to such exercise of the Option. If the Optionee shall fail to advance
the Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.

            (b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole Paired Shares (which the Optionee has held for at
least six months prior to the delivery of such Paired Shares or which the
optionee purchased on the open market and for which the Optionee has good title,
free and clear of all liens and encumbrances) having a fair market value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (4) any
combination of (1) and (2). The Committee shall have sole discretion to
disapprove of an

                                       3.



election pursuant to any of clauses (2)-(4). Paired Shares to be delivered may
not have a Fair Market Value in excess of the minimum amount of the Required Tax
Payments. Any fraction of a Paired Share which would be required to satisfy any
such obligation shall be disregarded and the remaining amount due shall be paid
in cash by the Optionee. No certificate representing a Paired Share shall be
delivered until the Required Tax payments have been satisfied in full.

            (c) Unless the Committee otherwise determines, if the Optionee is
subject to Section 16 of the Exchange Act, the Optionee may deliver to the
Company previously owned whole Paired Shares in accordance with Section 3.3(b),
but only if such delivery is in connection with the delivery of Paired Shares in
payment of the exercise price of the Option.

            3.4 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the fair market value of a Paired Share on
the exercise date over (B) the exercise price of the Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.

            3.5 Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the Paired
Shares subject to the Option upon any securities exchange or under any law, or
the consent or approval of any government body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
purchase or delivery of Paired Shares hereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.

            3.6 Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of Paired Shares purchased against full
payment therefor. The Company shall pay all original issue or transfer taxes and
all fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.

            3.7 Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to Paired Shares subject
to the Option unless and until purchased and delivered upon the exercise of the
Option, in

                                       4.



whole or in part, and the Optionee becomes a stockholder of record with respect
to such delivered Paired Shares; and the Optionee shall not be considered a
stockholder of the Company or the Corporation with respect to any Paired Shares
not so purchased and delivered.

            3.8 Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company or
any affiliate of the Company.

            3.9 Decisions of Board or Committee. The Board or the Committee
shall have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other action
made or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.

            3.10 Company to Reserve Paired Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve or cause to
be reserved and keep or cause to be kept available, either in its treasury or
out of its authorized but unissued Paired Shares, the full number of Paired
Share subject to the Option from time to time.

            3.11 Agreement Subject to the Plan. This Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.

            4.    Miscellaneous Provisions.

            4.1 Designation as Pledged Stock Option. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.

            4.2 Meaning of Certain Terms. (a) As used herein, the term "Legal
Representative" shall include an executor, administrator, legal representative,
beneficiary or similar person and the term "Permitted Transferee" shall include
any transferee (i) pursuant to a transfer permitted under Section 4.4 of the
Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary
designation procedures which may be approved by the Company.

            4.3 Successors. This Agreement shall be binding upon and inure to
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.


                                       5.



            4.4 Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to the President of the
Company at 11845 West Olympic Blvd., Suite 560, Los Angeles, California 90064,
and if to the Optionee, to __________________, or to such other address as
either party may give by notice to the other in the manner herein provided. All
notices, requests or other communications provided for in this Agreement shall
be in writing either (a) by personal delivery to the party entitled thereto, (b)
by facsimile with confirmation of receipt, (c) by mailing in the United States
mails to the last known address of the party entitled thereto or (d) by express
courier service. The notice, request or other communication shall be deemed to
be received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.

            4.5 Governing Law. The Option, this Agreement, and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of California and construed in accordance therewith without giving
effect to principles of conflicts of laws.

            4.6 Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.

            4.4 4.7 Disclaimer. The name "Starwood Lodging Trust" is the
designation of Starwood Lodging Trust and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969, as amended and
restated and all persons dealings with Starwood Lodging Trust must look solely
to Starwood Lodging Trust's property for the enforcement of any claims against
Starwood Lodging Trust, as the Trustees, officers, agents and security holders
of Starwood Lodging Trust assume no personal obligation of Starwood Lodging
Trust, and their respective property shall not be subject to claims of any
person relating to such obligation.

                                                 STARWOOD LODGING TRUST

                                                 By:____________________________
                                                 Name:__________________________
                                                 Its:___________________________

Accepted:

____________________

"Optionee"



                                       6.

EX-10.30

                                                                      EXH. 10.30

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                       NONQUALIFIED STOCK OPTION AGREEMENT

            Starwood Hotels & Resorts Worldwide, Inc., a corporation organized
under the laws of Maryland (the "Company"), has granted to the individual (the
"Optionee") named in the award notification attached hereto as Appendix A (the
"Award Notification") as of the grant date set forth in the Award Notification
(the "Option Date"), pursuant to the provisions of the Starwood Hotels & Resorts
Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the "Plan"), a
Nonqualified Stock Option (the "Option") to purchase from the Company that
number of Units and at the Option Price per Unit set forth in the Award
Notification upon and subject to the terms and conditions set forth below.
References to employment by or service as a director of the Company shall
include employment by or service as a director of a Subsidiary. Capitalized
terms not defined herein shall have the meanings specified in the Plan.

            1. Option Subject to Acceptance of Agreement.

            The Option may not be exercised unless the Optionee shall accept
this Agreement by executing the Award Notification in the space provided
therefor and returning the original execution copy of the Award Notification to
the Company.

            2. Time and Manner of Exercise of Option.

            2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the tenth anniversary of the Option Date
(the "Expiration Date").

            2.2. Exercise of Option. (a) The Option shall become exercisable (i)
on the first anniversary of the Option Date with respect to one-fourth of the
Units subject to the Option on the Option Date, (ii) on the second anniversary
of the Option Date with respect to an additional one-fourth of the Units subject
to the Option on the Option Date, (iii) on the third anniversary of the Option
Date with respect to an additional one-fourth of the Units subject to the Option
on the Option Date, (iv) on the fourth anniversary of the Option Date with
respect to the remaining one-fourth of the Units subject to the Option on the
Option Date and (v) as otherwise provided pursuant to Section 2.2(b) hereof.
After the Option has become exercisable, subject to Sections 2.1, 2.2(b),
2.2(c), 2.2(d), 2.2(e), 2.2(f), 2.2(g) and 2.4, the Option may be exercised in
the manner prescribed by Section 2.3 with respect to all or any portion of the
Units with respect to which the Option has become exercisable but has not yet
been exercised.

            (b) If the Optionee's employment by the Company or service as a
director terminates by reason of Disability or death of the Optionee, the Option
shall be fully exercisable with respect to all of the Units subject to the
Option on the date of Disability or death and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative or Permitted Transferees, as the
case may be, until and including the earliest to occur of (i) the date which is
one year after the effective date of the Optionee's termination of employment or
service by reason of Disability or death and (ii) the Expiration Date.



            (c) If the Optionee's employment by the Company or service as a
director is terminated by the Company for Cause, the Option, whether or not then
exercisable, shall terminate automatically on the effective date of the
Optionee's termination of employment or service.

            (d) If the Optionee's employment with the Company or service as a
director terminates because of voluntary resignation by the Optionee, the Option
shall be exercisable only to the extent it is exercisable on the effective date
of the Optionee's termination of employment or service because of voluntary
resignation and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative until and including the earliest to occur of (i) the date
which is thirty days after the effective date of the Optionee's termination of
employment or service by voluntary resignation and (ii) the Expiration Date.

            (e) If the Optionee's employment with the Company or service as a
director terminates for any reason other than Disability, death, Retirement or
voluntary resignation by the Optionee or termination by the Company for Cause,
the Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment or service and may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
until and including the earliest to occur of (i) the date which is three months
after the effective date of the Optionee's termination of employment or service
and (ii) the Expiration Date.

            (f) If the Optionee's employment with the Company or service as a
director terminates because of Retirement, the Option shall continue to vest as
set forth in this Award Agreement and the Optionee may exercise any vested
portion of the Option up until and including the earliest to occur of (i) the
fifth anniversary of the Optionee's effective date of Retirement and (ii) the
expiration date of the term of such Option; provided, however, that any unvested
portion of an Option not exercised by the fifth anniversary of the Optionee's
effective date of Retirement shall be canceled. The foregoing notwithstanding,
during the five year period beginning from the date of Retirement, all vested
but unexercised Options and all unvested Options held by Optionee will be
canceled in the event Optionee accepts any employment, assignment, position of
responsibility, or acquires any ownership interest (other than holding and
making investments in common equity securities of any corporation, limited
partnership or other entity that has its common equity securities traded in a
generally recognized market, provided such equity interest therein does not
exceed 5% of the outstanding shares or equity interests in such corporation,
limited partnership or other entity), which involves the Optionee's
participation in a hotel and leisure company engaged in the operation of owned
hotels, management of hotels, franchising hotels, development and operation of
vacation ownership resorts or the marketing and selling of vacation ownership
interests.

            (g) If the Optionee dies during the one-year period following
termination of employment or service as a director by reason of Disability,
during the thirty-day period following voluntary resignation by the Optionee or
during the three-month period following termination of employment or service as
a director for any reason other than Disability, Retirement, death, voluntary
resignation by the Optionee or termination by the Company for Cause, the Option
shall be exercisable only to the extent it is exercisable on the date of death
and may thereafter be exercised by the Optionee's Legal Representative or
Permitted Transferees, as

                                       2


the case may be, until and including the earliest to occur of (i) the date which
is three months (thirty days in the case of voluntary resignation by the
Optionee) after the date of death (but in the case of death following
termination of employment or service by reason of Disability, no less than one
year after the date of such termination of employment or service) and (ii) the
Expiration Date. If the Optionee dies during the five-year period following
termination of employment or service by reason of Retirement, the Option shall
be fully exercisable with respect to all of the Units subject to the Option on
the date of death and may thereafter be exercised by the Optionee's Legal
Representative or Permitted Transferee until and including the earliest to occur
of (i) the date which is one year after the date of death and (ii) the
Expiration Date.

            2.3 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving oral,
written or electronic notice to the Company or its designated representative
specifying the number of whole Units to be purchased and accompanied by payment
therefor in full either (i) in cash or its equivalent, (ii) by tendering
previously owned whole Units (which the Optionee has held for at least six
months prior to the delivery of such Units and for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date of exercise, equal to the aggregate purchase price for
the Units being purchased pursuant to such exercise, (iii) in a combination of
(i) and (ii), or (iv) by means of a cashless exercise as permitted under Federal
Reserve Board's Regulation T and using a broker-dealer acceptable to the Company
and (2) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a Unit which would be required to
pay such purchase price shall be disregarded and the remaining amount due shall
be paid in cash by the Optionee. No certificate representing a Unit shall be
delivered until the full purchase price therefor has been paid.

            2.4 Termination of Option. The Option shall terminate, to the extent
not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section
2.2, on the Expiration Date. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4.

            3. Additional Terms and Conditions of Option.

            3.1. Nontransferability of Option. The Option may not be transferred
by the Optionee other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company. Except
to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the Option is exercisable only by the Optionee or the Optionee's Legal
Representative. Except as permitted by the foregoing, the Option may not be
sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose
of the Option, the Option and all rights hereunder shall immediately become null
and void.

            3.2. Withholding Taxes. (a) As a condition precedent to the delivery
of Units upon exercise of the Option, the Optionee shall, upon request by the
Company, pay to the Company in addition to the purchase price of the Units, such
amount of cash as the Company

                                       3


may be required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such exercise of the Option. If the
Optionee shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments
from any amount then or thereafter payable by the Company to the Optionee.

            (b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company
of previously owned whole Units (which the Optionee has held for at least six
months prior to the delivery of such Units and for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) by having the Company withhold Units having a Fair Market Value as
of the Tax Date equal to the Required Tax Payments, (4) a cash payment by a
broker-dealer acceptable to the Company pursuant to a cashless exercise
permitted by Federal Reserve Board's Regulation T or (5) any combination of (1)
- - (3). The Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (2) - (5). Units to be delivered to or withheld by
the Company may not have a Fair Market Value in excess of the minimum amount of
the Required Tax Payments. Any fraction of a Unit which would be required to
satisfy any such obligation shall be disregarded and the remaining amount due
shall be paid in cash by the Optionee. No certificate representing a Unit shall
be delivered until the Required Tax Payments have been satisfied in full.

            3.3 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Units other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee;
provided that the number of Units subject to the Option shall always be a whole
number. The decision of the Committee regarding any such adjustment shall be
final, binding and conclusive.

            3.4. Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the Units
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of Units hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval. As a further
condition precedent to any exercise of the Option, the Optionee shall comply
with all regulations and requirements of any regulatory authority having control
of or supervision over the issuance or delivery of the Units and, in connection
therewith, shall execute any documents which the Board or the Committee shall
deem necessary or advisable in its sole discretion.

                                       4


            3.5. Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of Units purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.2.

            3.6. Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to Units subject to the
Option unless and until purchased and delivered upon the exercise of the Option,
in whole or in part, and the Optionee becomes a stockholder of record with
respect to such delivered Units; and the Optionee shall not be considered a
stockholder of the Company with respect to any such Units not so purchased and
delivered.

            3.7. Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company or
any affiliate of the Company.

            3.8. Decisions of Board or Committee. The Board or the Committee
shall have the exclusive right to resolve all questions that may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.

            3.9. Company to Reserve Units. The Company shall at all times prior
to the expiration or termination of the Option reserve or cause to be reserved
and keep or cause to be kept available, either in its treasury or out of its
authorized but unissued Units, the full number of Units subject to the Option
from time to time.

            3.10. Agreement Subject to the Plan. This Agreement is subject to
the provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.

            4. Miscellaneous Provisions.

            4.1. Designation as Nonqualified Stock Option. The Option is hereby
designated as not constituting an Incentive Stock Option; this Agreement shall
be interpreted and treated consistently with such designation.

            4.2. Meaning of Certain Terms. As used herein, the term "Legal
Representative" shall include an executor, administrator, beneficiary or person
legally authorized to act on behalf of the Optionee and the term "Permitted
Transferee" shall include any transferee (i) pursuant to a transfer permitted
under Section 6.9 of the Plan and Section 3.1 hereof or (ii) designated pursuant
to beneficiary designation procedures which may be approved by the Company.

            4.3. Successors. This Agreement shall be binding upon and inure to
the benefit of any successor or successors of the Company and any person or
persons who shall,

                                       5


upon the death of the Optionee, acquire any rights hereunder in accordance with
this Agreement or the Plan.

            4.4. Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to the Company or its
designated representative at corporate headquarters in White Plains, New York,
Attention: Human Resources, or such other address specified by the Company, and
if to the Optionee, to the address set forth for the Optionee on the records of
the Company. All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing
in the United States mails to the last known address of the party entitled
thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication is not received during
regular business hours, it shall be deemed to be received on the next succeeding
business day of the Company.

            4.5. Governing Law. The Option and this Agreement, and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of New York and construed in accordance therewith without giving
effect to principles of conflicts of laws.

                                       STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

                                       /s/ David Norton
                                       -----------------------------------------

                                       By: David Norton, Executive Vice
                                           President, Human Resources

                                       6

EX-10.31

                                                                      EXH. 10.31

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                        RESTRICTED STOCK AWARD AGREEMENT

      Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the
"Company"), has granted to the individual (the "Holder") named in the award
notification attached hereto as Appendix A (the "Award Notification") as of the
grant date set forth in the Award Notification (the "Grant Date"), pursuant to
the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term
Incentive Compensation Plan (the "Plan"), a Restricted Stock Award (the "Award)
of the number of Units set forth in the Award Notification, upon and subject to
the restrictions, terms and conditions set forth below. References to employment
by the Company shall include employment by a Subsidiary. Capitalized terms not
defined herein shall have the meanings specified in the Plan.

      1.    Award Subject to Acceptance of Agreement. The Award shall be null
and void unless the Holder shall accept this Agreement by executing the Award
Notification in the space provided therefor and returning the original execution
copy of the Award Notification to the Company. As soon as practicable after the
Holder has executed the Award Notification and returned the same to the Company,
the Company shall cause to be issued in the Holder's name a stock certificate or
certificates representing the total number of Units subject to the Award.

      2.    Rights as a Stockholder. The Holder shall have the right to vote the
Units subject to the Award unless and until such Units are forfeited pursuant to
Paragraph 4 hereof. Any dividend and any other distribution (including, without
limitation, a stock dividend or stock split) with respect to Units subject to
the Award that have not vested pursuant to Paragraph 4 hereof shall be delivered
to the Company and shall be subject to the same restrictions as the Units with
respect to which such dividend or other distribution was made. Any dividends and
other distributions with respect to unvested Units that later become vested
shall be delivered to the Holder at the time the certificate or certificates for
such vested Units are delivered pursuant to Paragraph 3 hereof. Any dividends
and other distributions with respect to unvested Units that are later forfeited
shall be forfeited.

      3.    Custody and Delivery of Certificates Representing Units. The Company
shall hold the certificate or certificates representing the Units subject to the
Award until such Award shall have vested, in whole or in part, pursuant to
Paragraph 4 hereof, and the Company shall as soon thereafter as practicable,
subject to Section 6.2, deliver the certificate or certificates for the vested
Units to the Holder.

      4.    Restriction Period and Vesting. (a) The Award shall vest (i) with
respect to such portion of the Units subject to the Award and on such dates as
set forth in the Award Notification, or (ii) earlier pursuant to Section 4(b)
hereof or in accordance with Section 8.7 or Section 15.1 of the Plan (the
"Restriction Period").

      (b)   If the Holder's employment by the Company terminates by reason of
Disability, or death, the Award shall become fully vested as of the effective
date of the Holder's termination of employment.



            (c)   If the Holder's employment by the Company terminates by reason
of Retirement, the Award will continue to vest as set forth in the Award
Agreement relating to such Restricted Stock Award, provided that any unvested
portion of a Restricted Stock Award will be canceled on the fifth anniversary of
the Participant's effective date of Retirement. The foregoing notwithstanding,
during the five year period beginning from the date of Retirement, all unvested
Restricted Stock Awards held by Participant will be canceled in the event
Participant accepts any employment, assignment, position or responsibility, or
acquires any ownership interest (other than holding and making investments in
common equity securities of any corporation, limited partnership or other entity
that has its common equity securities traded in a generally recognized market,
provided such equity interest therein does not exceed 5% of the outstanding
shares or equity interests in such corporation, limited partnership or other
entity), which involves the Participant's participation in a hotel and leisure
company engaged in the operation of owned hotels, management of hotels,
franchising hotels, development and operation of vacation ownership resorts and
the marketing or selling of vacation ownership interests. If Holder dies during
the five-year period following termination of employment by reason of
Retirement, the Award shall become fully vested on the date of death.

            (d)   If the Holder's employment by the Company terminates for any
reason other than Disability, Retirement or death, the portion of the Award
which is not vested as of the effective date of the Holder's termination of
employment shall be forfeited by the Holder and such portion shall be cancelled
by the Company.

            5.    Termination of Award. In the event that the Holder shall
forfeit all or a portion of the Units subject to the Award, the Holder shall,
upon the Company's request, promptly return this Agreement to the Company for
full or partial cancellation, as the case may be. Such cancellation shall be
effective regardless of whether the Holder returns this Agreement.

            6.    Additional Terms and Conditions of Award.

            6.1.  Nontransferability of Award. During the Restriction Period,
the Units subject to the Award and not then vested may not be transferred by the
Holder other than by will, the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company. Except to the extent
permitted by the foregoing, during the Restriction Period, the Units subject to
the Award and not then vested may not be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate or encumber, or
otherwise dispose of such Units, the Award shall immediately become null and
void.

            6.2.  Withholding Taxes. (a) As a condition precedent to the
delivery to the Holder of any Units subject to the Award, the Holder shall, upon
request by the Company, pay to the Company such amount of cash as the Company
may be required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to the Award. If the Holder shall fail to
advance the Required Tax Payments after request by the Company, the Company may,
in its discretion, deduct any Required Tax Payments from any amount then or
thereafter payable by the Company to the Holder.

                                       2



      (b) The Holder may elect to satisfy his or her obligation to advance the
Required Tax Payments by any of the following means: (1) a cash payment to the
Company pursuant to Section 6.2(a), (2) delivery (either actual delivery or by
attestation procedures established by the Company) to the Company of previously
owned whole Units (which the Holder has held for at least six months prior to
the delivery of such Units or which the Holder purchased on the open market and
for which the Holder has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date the
obligation to withhold or pay taxes first arises in connection with the Award
(the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the
Company to withhold from the Units otherwise to be delivered to the Holder
pursuant to the Award, a number of whole Units having a Fair Market Value,
determined as of the Tax Date, equal to the Required Tax Payments, (4) a cash
payment by a broker-dealer acceptable to the Company through whom the Holder has
sold the Units with respect to which the Required Tax Payments have arisen or
(5) any combination of (1), (2) and (3). The Committee shall have sole
discretion to disapprove of an election pursuant to any of clauses (2)-(5).
Units to be delivered or withheld may not have a Fair Market Value in excess of
the minimum amount of the Required Tax Payments. Any fraction of a Unit which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Holder. No certificate
representing a Unit shall be delivered until the Required Tax Payments have been
satisfied in full.

      6.3.  Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of Units, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Units other than a regular cash
dividend, the number and class of securities subject to the Award shall be
appropriately adjusted by the Committee. If any adjustment would result in a
fractional security being subject to the Award, the Company shall pay the Holder
in connection with the vesting, if any, of such fractional security, an amount
in cash determined by multiplying (i) such fraction (rounded to the nearest
hundredth) by (ii) the Fair Market Value on the vesting date. The decision of
the Committee regarding any such adjustment shall be final, binding and
conclusive.

      6.4.  Compliance with Applicable Law. The Award is subject to the
condition that if the listing, registration or qualification of the Units
subject to the Award upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the vesting
or delivery of Units hereunder, the Units subject to the Award shall not vest or
be delivered, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval. As a further condition precedent to the
delivery to the Holder of any Units subject to the Award, the Holder shall
comply with all regulations and requirements of any regulatory authority having
control of or supervision over the issuance of the Units and, in connection
therewith, shall execute any documents which the Board or any committee
authorized by the Board shall in its sole discretion deem necessary or
advisable.

      6.5.  Award Confers No Rights to Continued Employment. In no event shall
the granting of the Award or its acceptance by the Holder give or be deemed to
give the Holder any right to continued employment by the Company or any
affiliate of the Company.

                                       3



      6.6.  Decisions of Board or Committee. The Board or the Committee shall
have the right to resolve all questions that may arise in connection with the
Award. Any interpretation, determination or other action made or taken by the
Board or the Committee regarding the Plan or this Agreement shall be final,
binding and conclusive.

      6.7.  Agreement Subject to the Plan. This Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Holder hereby acknowledges receipt of a copy of the Plan.

      7.    Miscellaneous Provisions.

      7.1.  Meaning of Certain Terms. As used herein, the term "vest" shall mean
no longer subject to forfeiture. References in this Agreement to sections of the
Code shall be deemed to refer to any successor section of the Code or any
successor internal revenue law.

      7.2.  Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Holder, acquire any rights hereunder in
accordance with this Agreement or the Plan.

      7.3.  Notices. All notices, requests or other communications provided for
in this Agreement shall be made, if to the Company, to the Company, or its
designated representative at corporate headquarters in White Plains, New York,
Attention: Human Resources, and if to the Holder, to the address set forth for
the Holder on the records of the Company. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission, or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication is not received during regular business hours, it shall be deemed
to be received on the next succeeding business day of the Company.

      7.4.  Governing Law. This Agreement, the Award and all determinations made
and actions taken pursuant hereto and thereto, to the extent not otherwise
governed by the laws of the United States, shall be governed by the laws of the
State of New York and construed in accordance therewith without giving effect to
conflicts of laws principles.

                                       STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

                                       /s/ David Norton
                                       -----------------------------------------

                                       By: David Norton, Executive Vice
                                           President, Human Resources

March 2002

                                       4

EX-10.35

                                                                      EXH. 10.35

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                        RESTRICTED STOCK AWARD AGREEMENT

                           (GRANT PURSUANT TO THE 2002
                     LONG-TERM INCENTIVE COMPENSATION PLAN)

      Pursuant to the provisions of the Starwood Hotels & Resorts Worldwide,
Inc. 2002 Long-Term Incentive Compensation Plan (the "Plan"), Starwood Hotels &
Resorts Worldwide, Inc., a Maryland corporation (the "Company"), has granted to
the individual (the "Participant") named in the award notification attached as
Appendix A (the "Award Notification") as of the date set forth in the Award
Notification (the "Grant Date"), a Restricted Stock Award (the "Award"), upon
and subject to the restrictions, terms and conditions set forth in the Plan and
below. References to employment by the Company shall include employment by a
Subsidiary. Capitalized terms not defined herein shall have the meanings
specified in the Plan.

1. Award Subject to Acceptance of Agreement. The Award shall be void unless the
Participant accepts this Agreement by executing the Award Notification in the
space provided and returns it to the Company within 60 days of the Grant Date.

2. Rights as a Stockholder. (a) Voting. During the Restriction Period (as
defined in section 4), the Participant shall have the right to vote the
Restricted Stock.

      (b) Dividends and Other Distributions. If any dividends are paid or other
distributions are made on the Company's Shares, such dividends and other
distributions shall be paid in the same proportion on the Restricted Stock to
the Company for the account of the Participant and paid to the Participant,
without interest, when the Restricted Stock vests. Participant will forfeit
automatically any dividends and other distributions held by the Company for the
account of the Participant if the Restricted Stock is forfeited.

3. Custody of Certificates Representing Restricted Stock. The Company shall hold
the certificate or certificates representing the Restricted Stock until the
Award vests in accordance with section 4.

4. Restriction Period and Vesting. (a) The Award shall vest (i) as set forth in
the Award Notification, or (ii) earlier pursuant to Section 4(b). The period of
time from the Grant Date until the Award vests is referred to as the
"Restriction Period".

      (b) If the Participant's employment by the Company terminates by reason of
Disability, or death, the Restricted Stock shall become fully vested on the date
of the Participant's termination of employment.

      (c) If the Participant's employment by the Company terminates by reason of
Retirement, the Award will continue to vest unless Participant accepts any
employment, assignment, position or responsibility, or acquires any ownership
interest (other than holding and making investments in common equity securities
of any corporation, limited partnership or other entity that has its common
equity securities traded in a generally recognized market, provided such equity
interest does not exceed 5% of the outstanding shares or equity interests in
such corporation, limited partnership or other entity), which involves the
Participant's participation in a hotel and leisure

                                                     2003 Restricted Stock Grant



company engaged in the operation of owned hotels, management of hotels,
franchising hotels, development and operation of vacation ownership resorts and
the marketing or selling of vacation ownership interests, in which case the
Participant shall forfeit automatically any unvested Restricted Stock. If
Participant dies prior to the vesting of the entire Award following termination
of employment by reason of Retirement, the Award shall become fully vested on
the date of death.

      (d) If the Participant's employment by the Company terminates for any
reason other than Disability, Retirement or death, Participant shall forfeit
automatically the portion of the Award that is not vested as of the effective
date of the Participant's termination of employment and such portion shall be
cancelled by the Company.

5.    Additional Terms and Conditions.

5.1. Nontransferability of Award. Restricted Stock shall not be transferable
except by will or the laws of descent and distribution.

5.2. Required Tax Payments and Withholding Shares. As a condition precedent to
the delivery of any Shares at the expiration of the Restriction Period, the
Participant shall pay to the Company all applicable federal, state, local or
other taxes, domestic or foreign, (the "Required Tax Payments"). Unless other
arrangements are made with the consent of the Company, all Required Tax Payments
will be satisfied by the Company withholding Shares otherwise to be delivered to
the Participant, having a Fair Market value on the date the tax is to be
determined, sufficient to make the Required Tax Payments. The Company shall
withhold the whole number of shares sufficient to make the Required Tax Payments
and shall make a cash payment to the Participant for the difference between the
Fair Market Value of the Shares and the Required Tax Payment.

5.3. Compliance with Applicable Laws. If the listing, registration or
qualification of the Restricted Stock upon any securities exchange or under any
law, or the consent or approval of any governmental body, or the taking of any
other action is necessary in connection with the vesting or delivery of Shares
hereunder, the Restricted Stock shall not vest or be delivered, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval. As a further
condition precedent to the delivery of any Shares upon the expiration of the
Restriction Period, the Participant shall comply with all regulations and
requirements of any applicable regulatory authority and shall execute any
documents that the Company shall in its sole discretion deem necessary or
advisable.

5.4. Delivery of Certificates. Upon the expiration of the Restriction Period and
payment of the Required Tax Payments, unless the Company otherwise agrees, the
Company shall cause its designated broker to credit an account for Participant
with the appropriate number of Shares. The Company shall pay all original issue
or transfer taxes and all fees and expenses incident to such delivery.

                                                     2003 Restricted Stock Grant

                                       2



5.5. Agreement Subject to the Plan. This Agreement is subject to the provisions
of the Plan and shall be interpreted in accordance with the Plan. The
Participant acknowledges receipt of a copy of the Plan.

6.    Miscellaneous Provisions.

6.1. Meaning of Certain Terms. As used herein, the term "vest" shall mean no
longer subject to forfeiture. References in this Agreement to sections of the
Code shall be deemed to refer to any successor section of the Code or any
successor internal revenue law.

6.2. Successors. This Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company and any person or persons who
shall, upon the death of the Participant, acquire any rights hereunder in
accordance with this Agreement or the Plan.

6.3. Notices. All notices, requests or other communications provided for in this
Agreement shall be made, if to the Company, to the Company or its designated
representative at corporate headquarters in White Plains, New York, Attention:
Human Resources, and if to the Participant, to the address set forth for the
Participant on the records of the Company or to the Participant's e-mail or
other electronic address with the Company. All notices, requests or other
communications provided for in this Agreement shall be made in writing by (a)
personal delivery, (b) facsimile with confirmation of receipt, (c) e-mail or
other electronic transmission to the Participant, (d) mailing in the United
States mails, or (e) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery,
confirmation of receipt of facsimile transmission, one day after sending an
e-mail or other electronic transmission to the Participant, or receipt by the
party entitled thereto if by United States mail or express courier service;
provided, however, that if a notice, request or other communication is not
received during regular business hours, it shall be deemed to be received on the
next succeeding business day of the Company.

6.4. Governing Law. This Agreement, the Award and all determinations made and
actions taken pursuant hereto and thereto, to the extent not otherwise governed
by the laws of the United States, shall be construed in accordance with and
governed by the laws of the State of Maryland without giving effect to conflicts
of laws principles.

6.5 Personal Data. By accepting the Award, Participant has voluntarily consented
to the collection, use, processing and transfer of personal data about
Participant, including Participant's name, home address and telephone number,
date of birth, social security number or other employee identification number,
salary, nationality, job title, details of the Award for the purpose of managing
and administering the Plan ("Data"). Company and/or its Subsidiaries will
transfer Data amongst themselves as necessary for the purpose of implementation,
administration and management of Participant's participation in the Plan, and
Company and/or any of its Subsidiaries may each further transfer Data to any
third parties assisting Company in the implementation, administration and
management of the Plan.

                                       STARWOOD HOTELS & RESORTS WORLDWIDE, INC.


                                           /s/ David Norton
                                           ----------------------------------
                                       By: David Norton, Executive Vice
                                           President, Human Resources

                                                     2003 Restricted Stock Grant

                                       3

EX-10.41

                                                                      Exh. 10.41

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

                              ANNUAL INCENTIVE PLAN

1.    DEFINITIONS.  When the following terms are used herein with initial
capital letters, they shall have the following meanings:

      AIP - shall mean the Starwood Hotels & Resorts Worldwide, Inc. Annual
      Incentive Plan as set forth herein and as from time to time amended.

      COMPANY - Starwood Hotels & Resorts Worldwide, Inc., a Maryland
      corporation.

      FAIR MARKET VALUE - shall mean the fair market value of a Unit, as
      determined by the Company, which, unless otherwise specified, shall be the
      closing sale price of a Unit as reported in the New York Stock Exchange
      Composite Transactions on the business day immediately preceding the date
      as of which such value is being determined, or, if there is no such sale
      on the relevant date, then on the next preceding business day on which a
      sale was reported.

      FINANCIAL PERFORMANCE MEASURES - The Financial Performance Measures shall
      be directly and specifically tied to one or more of the following business
      criteria, determined with respect to the Company as a whole or with
      respect to an operating division of the Company: earnings before interest,
      taxes, depreciation and amortization ("EBITDA"), consolidated pre-tax
      earnings, net revenues, net earnings, operating income, earnings before
      interest and taxes, cash flow, return on equity, return on net assets
      employed or earnings per share for the applicable Performance Period, all
      as computed in accordance with generally accepted accounting principles as
      in effect from time to time and as applied by the Company in the
      preparation of its financial statements and subject to such other special
      rules and conditions as the Company may establish.

      INDIVIDUAL OBJECTIVES - The Individual Objectives applicable to a
      Participant for a Performance Period shall be key individual objectives
      that link individual contributions to Corporate/Division/functional
      objectives and major financial/operating goals for such Performance
      Period. The Individual Objectives applicable to a Participant for a
      Performance Period will be developed by the Participant and discussed and
      jointly agreed to by the Participant and the Participant's manager.

      PARTICIPANT - shall mean an employee of the Company or an affiliate of the
      Company who is designated by the Company at any time before the end of the
      ninth month of each Performance Period as a Participant in the AIP for
      such Performance Period. Company associates participating in other
      incentive plans or Corporate Human Resources-approved formal retention
      plans will not be eligible to participate in the AIP, unless an exception
      is approved by Corporate Human Resources.



      PERFORMANCE PERIOD - shall mean the twelve consecutive month period which
      coincides with the Company's fiscal year.

      RETIREMENT - shall mean termination of employment with the Company and all
      affiliates of the Company with a combined age plus years of service of not
      less than 65, with a minimum age requirement of 55 and a minimum service
      requirement of 5 years (full-time or full-time-equivalent).

      UNIT - shall mean a Unit consisting of one share of common stock, par
      value $.01 per share, of the Company and one Class B share of beneficial
      interest, par value $.01 per share, of Starwood Hotels & Resorts.

2.    ADMINISTRATION.

      2.1   COMPANY.  The AIP shall be administered by the Company.

      2.2   DETERMINATIONS MADE FOR EACH PERFORMANCE PERIOD.  For each
      Performance Period the Company shall:

            (a)   Designate Participants for that Performance Period and
                  their incentive award opportunities;

            (b)   Determine the amount or formula for determining each
                  Participant's bonus payment for the Performance Period;

            (c)   Establish the Financial Performance Measures for the
                  Performance Period; and

            (d)   Establish the Financial Performance Measure targets for the
                  Performance Period.

      The Company reserves the right, exercisable in its sole discretion, to
      change any of the above determinations with respect to a Performance
      Period at any time before, during or after such Performance Period,
      provided that the Financial Performance Measure and the Financial
      Performance Measure targets may not be changed after the ninetieth day of
      the Performance Period.

3.    BONUS PAYMENTS.

      3.1 AMOUNT. Each Participant shall be eligible to receive a bonus payment
      for a Performance Period in an amount determined by the Company based on
      the attainment of the Financial Performance Measure targets and Individual
      Objectives applicable to the Participant for the Performance Period. The
      aggregate amount of the bonus payments for a Performance Period shall be
      subject to the approval of the Compensation and Option Committee of the
      Board of Directors of the Company.

      3.2   TIME AND FORM OF PAYMENTS.


                                       2




            (a)   CASH PAYMENTS. Not less than 75% of a Participant's bonus
                  payment for a Performance Period shall be paid to the
                  Participant in cash. The cash portion of a Participant's bonus
                  payment for a Performance Period shall be paid to the
                  Participant as soon as practicable after the amount of the
                  Participant's bonus payment for the Performance Period has
                  been determined by the Company.

            (b)   RESTRICTED STOCK.  For Participants at organizational
                  levels designated by the Company, up to 25% of a
                  Participant's bonus payment for a Performance Period shall
                  be paid to the Participant in the form of Units pursuant to
                  an award of restricted stock under the Starwood Hotels &
                  Resorts, Inc. 1999 Long-Term Incentive Compensation Plan
                  (the "LTIP"). The portion of a Participant's bonus payment
                  for a Performance Period to be so paid as a restricted
                  stock award under the LTIP shall be determined by the
                  Company, or as elected by the Participant in accordance
                  with procedures established by the Company, and shall be
                  subject to such restrictions as determined in accordance
                  with the LTIP by the committee that administers the LTIP.
                  The number of Units representing the restricted stock
                  portion of a Participant's bonus payment for a Performance
                  Period shall be calculated by increasing the dollar amount
                  of such portion by one-third and then converting such
                  amount into Units based on the Fair Market Value of a Unit
                  on the date on which the bonus payment is paid to the
                  Participant and shall be issued to the Participant at the
                  time the cash portion of the Participant's bonus payment
                  for the Performance Period is paid.

      3.3 EMPLOYMENT ON PAYMENT DATE REQUIRED. A Participant's entitlement to a
      bonus payment for a Performance Period is conditioned upon the
      Participant's active employment with the Company or an affiliate of the
      Company on the date on which the bonus payment is to be paid to the
      Participant, unless an exception is approved by Corporate Human Resources.
      Pro-rata awards may be paid in the event of a Participant's death,
      disability (as defined in the applicable long-term disability plan, or, if
      no such plan exists, as determined by the Company) or Retirement.
      Otherwise, no bonus payment shall be earned by or payable to any
      Participant until the date on which the bonus payment is paid to the
      Participant. If a Participant is terminated or resigns from the Company
      before the date on which a bonus payment is to be paid to the Participant,
      such bonus payment is forfeited, unless an exception is approved by
      Corporate Human Resources.

      3.4 NONTRANSFERABILITY. Participants shall not have the right to assign,
      encumber or otherwise anticipate the payments to be made under the AIP,
      and the benefits provided hereunder shall not be subject to seizure for
      payment of any debts or judgments against any Participant.

      3.5 TAX WITHHOLDING. In order to comply with all applicable federal or
      state income tax laws or regulations, the Company may take such action as
      it deems appropriate to ensure that all applicable federal or state
      payroll, withholding, income or other taxes,


                                       3


      which are the sole and absolute responsibility of a Participant, are
      withheld or collected from such Participant.

4. AMENDMENT AND TERMINATION. The Company may amend the AIP at any time and for
any reason deemed sufficient by it without notice to any person affected by the
AIP and may likewise terminate or curtail the benefits of the AIP both with
regard to persons expecting to receive benefits hereunder in the future and
persons already receiving benefits at the time of such action.

5.    MISCELLANEOUS.

      5.1 HEADINGS. Headings are given to the Sections and subsections of the
      AIP solely as a convenience to facilitate reference. Such headings shall
      not be deemed in any ways material or relevant to the construction or
      interpretation of the AIP or any provision thereof.

      5.2 APPLICABILITY TO SUCCESSORS. The AIP shall be binding upon and inure
      to the benefit of the Company and each Participant, the successors and
      assigns of the Company, and the personal representatives and heirs of each
      Participant.

      5.3 EMPLOYMENT RIGHTS AND OTHER BENEFITS PROGRAMS. The provisions of the
      AIP shall not give any Participant any right to be retained in the
      employment of the Company. In the absence of any specific agreement to the
      contrary, the AIP shall not affect any right of the Company, or of any
      affiliate of the Company, to terminate, with or without cause, any
      Participant's employment at any time. The AIP shall not replace any
      contract of employment, whether oral, or written, between the Company and
      any Participant, but shall be considered a supplement thereto. The AIP is
      in addition to, and not in lieu of, any other employee benefit plan or
      program in which any Participant may be or become eligible to participate
      by reason of employment with the Company. Receipt of benefits hereunder
      shall have such effect on contributions to and benefits under such other
      plans or programs as the provisions of each such other plan or program may
      specify.

      5.4 NO TRUST FUND CREATED. The AIP shall not create or be construed to
      create a trust or separate fund of any kind or fiduciary relationship
      between the Company or any affiliate and a Participant or any other
      person. To the extent that any person acquires a right to receive payments
      from the Company or any affiliate pursuant to the AIP, such right shall be
      no greater than the right of any unsecured general creditor of the Company
      or of any affiliate.

      5.5 GOVERNING LAW. The place of administration of the AIP shall be in the
      State of New York. The corporate law of the State of Maryland shall govern
      issues relating to the validity and issuance of Units. Otherwise, the AIP
      shall be construed and administered in accordance with the laws of the
      State of New York, without giving effect to principles relating to
      conflict of laws.

5.6   SEVERABILITY. If any provision of the AIP is or becomes or is deemed to be
      invalid, illegal or unenforceable in any jurisdiction such provision shall
      be construed or deemed


                                       4



      amended to conform to applicable laws, or if it cannot be so construed or
      deemed amended without, in the determination of the Company, materially
      altering the purpose or intent of the AIP, such provision shall be
      stricken as to such jurisdiction, and the remainder of the AIP shall
      remain in full force and effect.


                                                            Date: June 1, 2001


                                       5

EX-10.70

                                                                      EXH. 10.70


                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                                 STEVEN J. HEYER
                       NONQUALIFIED STOCK OPTION AGREEMENT
                                 PURSUANT TO THE
                   2004 LONG-TERM INCENTIVE COMPENSATION PLAN

            Starwood Hotels & Resorts Worldwide, Inc., a corporation organized
under the laws of Maryland (the "Company"), has granted to the individual (the
"Optionee") named in the award notification attached hereto as Appendix A (the
"Award Notification") as of the grant date set forth in the Award Notification
(the "Option Date"), pursuant to the provisions of the Starwood Hotels & Resorts
Worldwide, Inc. 2004 Long-Term Incentive Compensation Plan (the "Plan"), a
Nonqualified Stock Option (the "Option") to purchase from the Company that
number of Shares and at the Option Price per Share set forth in the Award
Notification upon and subject to the terms and conditions set forth below and
the terms and conditions set forth in the Plan. References to employment by the
Company shall include employment by of a Subsidiary. Capitalized terms not
defined herein shall have the meanings specified in the Plan.

            1. Option Subject to Acceptance of Agreement.

            The Option may not be exercised unless the Optionee shall accept
this Agreement by executing the Award Notification in the space provided
therefor and returning the original execution copy of the Award Notification to
the Company.

            2. Time and Manner of Exercise of Option.

            2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the eighth anniversary of the Option Date
(the "Expiration Date").

            2.2. Exercise of Option. (a) The Option shall become exercisable
pursuant to the vesting schedule set forth in the attached Award Notification.
After the Option has become exercisable, subject to termination of the Option
pursuant to the terms of this Agreement or the Plan, the Option may be exercised
in the manner prescribed by Section 2.3 with respect to all or any portion of
the Shares with respect to which the Option has become exercisable but has not
yet been exercised.

                        (b) If the Optionee's employment by the Company
terminates by reason of Disability or death of the Optionee, the Option shall be
fully exercisable with respect to all of the Shares subject to the Option on the
date of Disability or death and may thereafter be exercised by the Optionee, the
Optionee's Legal Representative or Permitted Transferee, as the case may be,
until the earlier of (i) the third anniversary of the date of Executive's
termination of employment by reason of Disability or death, and (ii) the
Expiration Date. The foregoing notwithstanding, in the case of termination as a
result of Disability, during the one-year period beginning from the date of
Disability, all vested but

unexercised Options held by Optionee will be canceled in the event Optionee
accepts any employment (including, but not limited to, a position that is
substantially comparable to a position the Optionee held with the Company), any
assignment, any position of responsibility, or acquires any ownership interest
(other than holding and making investments in common equity securities of any
corporation, limited partnership or other entity that has its common equity
securities traded in a generally recognized market, provided such equity
interest therein does not exceed 5% of the outstanding shares or equity
interests in such corporation, limited partnership or other entity), which
involves the Optionee's participation in a hotel and leisure company engaged in
the operation of owned hotels, management of hotels, franchising hotels,
development and operation of vacation ownership resorts or the marketing and
selling of vacation ownership interests in each such case in a (i) state within
500 miles of the Optionee's last (or immediately prior) worksite for the
Company, (ii) the country in which the Optionee worked for the Company, (iii) in
any other country in which the Company does any of the enumerated acts, or (iv)
in any other country of the world.

            (c) If the Optionee's employment by the Company is terminated by the
Company for Cause, the Option, whether or not then exercisable, shall terminate
automatically on the effective date of the Optionee's termination of employment
or service.

            (d) If the Optionee's employment with the Company terminates because
of voluntary resignation by the Optionee without "Good Reason", the Option shall
be exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee, the Optionee's Legal Representative or Permitted Transferee until and
including the earlier to occur of (i) the date which is thirty days after the
effective date of the Optionee's termination of employment by voluntary
resignation, and (ii) the Expiration Date.

            (e) If the Optionee's employment with the Company terminates because
of Retirement, the Option shall continue to vest as set forth in this Award
Agreement and the Optionee may exercise any vested portion of the Option up
until and including the earlier to occur of (i) the fifth anniversary of the
Optionee's effective date of Retirement, and (ii) the Expiration Date; provided,
however, that any unvested portion of an Option not exercised by the fifth
anniversary of the Optionee's effective date of Retirement shall be canceled.
The foregoing notwithstanding, during the three-year period beginning from the
date of Retirement, all vested but unexercised Options and all unvested Options
held by Optionee will be canceled in the event Optionee accepts any employment
(including, but not limited to, a position that is substantially comparable to a
position the Optionee held with the Company), any assignment, any position of
responsibility, or acquires any ownership interest (other than holding and
making investments in common equity securities of any corporation, limited
partnership or other entity that has its common equity securities traded in a
generally recognized market, provided such equity interest therein does not
exceed 5% of the outstanding shares or equity interests in such corporation,
limited partnership or other entity), which involves the Optionee's
participation in a hotel and leisure company engaged in the operation of owned
hotels, management of hotels, franchising hotels, development and operation of
vacation ownership resorts or the marketing and selling of vacation ownership

                                       2

interests in each such case in a (i) state within 500 miles of the Optionee's
last (or immediately prior) worksite for the Company, (ii) the country in which
the Optionee worked for the Company, (iii) in any other country in which the
Company does any of the enumerated acts, or (iv) in any other country of the
world.

            (f) If the Optionee's employment with the Company terminates because
of Optionee's resignation for "Good Reason" or by the Company without Cause, the
Option shall be fully exercisable with respect to all of the Shares subject to
the Option on the date of termination of employment and may thereafter be
exercised by the Optionee, the Optionee's Legal Representative or Permitted
Transferee, as the case may be, until the earlier of (i) the third anniversary
of the date of Executive's termination of employment, and (ii) the Expiration
Date.

            (g) If the Optionee dies during the thirty-day period following
voluntary resignation by the Optionee, the Option shall be exercisable only to
the extent it is exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferee until
and including the earlier to occur of (i) the date which is thirty days after
the date of death and (ii) the Expiration Date. If the Optionee dies during the
five-year period following termination of employment or service by reason of
Retirement, the Option shall be fully exercisable with respect to all of the
Shares subject to the Option on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferee until
and including the earliest to occur of (i) the date which is one year after the
date of death and (ii) the Expiration Date.

            (h) Notwithstanding anything to the contrary contained herein, in
the event that Optionee's employment with the Company terminates at the end of
the employment term by reason of the Company providing a notice of non-renewal
pursuant to Section 2.1 of Optionee's employment agreement with the Company, the
Option shall be fully exercisable with respect to all of the Shares subject to
the Option on the date of termination of employment and may thereafter be
exercised by the Optionee, the Optionee's Legal Representative or Permitted
Transferee, as the case may be, until the earlier of (i) the third anniversary
of the date of Executive's termination of employment, and (ii) the Expiration
Date.

            2.3. Method of Exercise and Payment. Subject to the limitations set
forth in this Agreement, the Option may be exercised by the Optionee (1) by
giving oral, written or electronic notice to the Company or its designated
representative specifying the number of whole Shares to be purchased and payment
therefor in full on or prior to the Payment Date (as defined below) either (i)
in cash or its equivalent, (ii) by tendering previously owned whole Shares (or
delivering a certification or attestation of ownership of such Shares) having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase price for the Shares being purchased pursuant to such exercise (which
the Optionee has held for at least six months prior to the delivery of such
Shares and for which the Optionee has good title, free and clear of all liens
and encumbrances), (iii) in a combination of (i) and (ii), or (iv) by means of a
cashless exercise as permitted under Federal Reserve Board's Regulation T and
using a

                                       3

broker-dealer acceptable to the Company and (2) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove an election pursuant to any of clauses (ii) - (iv). Any fraction of a
Share which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the Optionee. No
certificate representing a Share shall be delivered until the full purchase
price therefor has been paid. "Payment Date" shall mean the date on which a sale
transaction in connection with a cashless exercise (whether or not payment is
actually made pursuant to a cashless exercise) would have settled in connection
with the subject option exercise.

            2.4 Termination of Option. The Option shall terminate, to the extent
not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section
2.2, at 5:00 p.m. New York time, on the Expiration Date. In no event may the
Option be exercised after it terminates as set forth in this Section 2.4.

            3. Additional Terms and Conditions of Option.

            3.1 Nontransferability of Option. The Option may not be transferred
by the Optionee other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company. Except
to the extent permitted by the foregoing, during the Grantee's lifetime the
Option is exercisable only by the Optionee or the Grantee's Legal
Representative. Except as permitted by the foregoing, the Option may not be
sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose
of the Option, the Option and all rights hereunder shall immediately become null
and void.

            3.2. Withholding Taxes. (a) As a condition precedent to the delivery
of Shares upon exercise of the Option, the Optionee shall, upon request by the
Company, pay to the Company in addition to the purchase price of the Shares,
such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.

            (b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.2(a), (2) delivery to the Company
of previously owned whole Shares (which the Optionee has held for at least six
months prior to the delivery of such Shares and for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first

                                       4

arises in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) by having the Company withhold Shares having a Fair Market Value
as of the Tax Date equal to the Required Tax Payments, (4) a cash payment by a
broker-dealer acceptable to the Company pursuant to a cashless exercise
permitted by Federal Reserve Board's Regulation T or (5) any combination of (1)
- - (3). The Committee shall have the sole discretion to disapprove of an election
pursuant to any of clauses (1), (2), (4) or (5). Shares to be delivered to or
withheld by the Company may not have a Fair Market Value in excess of the
minimum amount of the Required Tax Payments. Any fraction of a Share which would
be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a Share shall be delivered until the Required Tax Payments have
been satisfied in full.

            3.3 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Shares other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee;
provided that the number of Shares subject to the Option shall always be a whole
number. The decision of the Committee regarding any such adjustment shall be
final, binding and conclusive.

            3.4. Change in Control. In the event of a Change in Control, unless
otherwise prohibited under applicable laws or by the rules and regulations of
any governmental agencies or national securities exchange, the Option shall
become immediately exercisable and shall remain exercisable throughout the
remainder of its term. The Committee shall determine whether a Change in Control
has occurred and such determination shall be conclusive and binding upon the
Company and the Optionee.

            3.5. Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the Shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of Shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval. As a further
condition precedent to any exercise of the Option, the Optionee (1) shall comply
with all regulations and requirements of any regulatory authority having control
of or supervision over the issuance or delivery of the Shares, (2) shall comply
with all laws, rules and regulations applicable to the ownership of stock
options and stock and the exercise of stock options, including, without
limitation, currency and exchange laws, rules and regulations and (3) in
connection therewith, shall execute any documents which the Board or the
Committee shall deem necessary or advisable in its sole discretion.

                                       5

            3.6. Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, and the satisfaction of all requirements of this Agreement
related to such exercise, the Company shall deliver or cause to be delivered one
or more certificates representing the number of Shares purchased against full
payment therefor. The Company shall pay all original issue or transfer taxes and
all fees and expenses incident to such delivery, except as otherwise provided in
Section 3.2.

            3.7. Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to Shares subject to the
Option unless and until purchased and delivered upon the exercise of the Option,
in whole or in part, and the Optionee becomes a stockholder of record with
respect to such delivered Shares; and the Optionee shall not be considered a
stockholder of the Company with respect to any such Shares not so purchased and
delivered.

            3.8. Option Confers No Rights to Continued Employment; Agreement
Survival. In no event shall the granting of the Option or its acceptance by the
Optionee give or be deemed to give the Optionee any right to employment by the
Company or any affiliate of the Company. The Optionee's terms of employment are
pursuant to the terms of the EMPLOYMENT AGREEMENT, dated as of September 20,
2004, between STARWOOD HOTELS & RESORTS WORLDWIDE, INC. and STEVEN J. HEYER.
This Agreement shall survive the termination of the Optionee's employment for
any reason.

            3.9. Decisions of Board or Committee. The Board or the Committee
shall have the exclusive right to resolve all questions that may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.

            3.10. Company to Reserve Shares. The Company shall at all times
prior to the expiration or termination of the Option reserve or cause to be
reserved and keep or cause to be kept available, either in its treasury or out
of its authorized but unissued Shares, the full number of Shares subject to the
Option from time to time.

            3.11. Prospectus. The Optionee will be provided a copy of the
Prospectus relating to the Plan, the Option and the Shares covered thereby. The
Optionee agrees that he or she has reviewed the Prospectus, and fully
understands his or her rights under the Plan.

            3.12. Agreement Subject to the Plan. This Agreement is subject to
the provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.

            4. Miscellaneous Provisions.

            4.1. Designation as Nonqualified Stock Option. The Option is hereby
designated as not constituting an Incentive Stock Option; this Agreement shall
be interpreted and treated consistently with such designation.


                                       6

            4.2. Meaning of Certain Terms. As used herein, the term "Legal
Representative" shall include an executor, administrator, beneficiary or person
legally authorized to act on behalf of the Optionee and the term "Permitted
Transferee" shall include any transferee designated pursuant to beneficiary
designation procedures which may be approved by the Company.

            4.3. Successors. This Agreement shall (i) be binding upon the
Company and its successors and assigns and (ii) inure to the benefit of any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.

            4.4. Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to the Company or its
designated representative at corporate headquarters in White Plains, New York,
Attention: Human Resources, or such other address specified by the Company, and
if to the Optionee, to the address set forth for the Optionee on the records of
the Company. All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing
in the United States mails to the last known address of the party entitled
thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication is not received during
regular business hours, it shall be deemed to be received on the next succeeding
business day of the Company.

            4.5. Reform by Court or Severability. In the event that any
provision of this Agreement is deemed by a court to be broader than permitted by
applicable law, then such provision shall be reformed (or otherwise revised or
narrowed) so that it is enforceable to the fullest extent permitted by
applicable law. If any provision of this Agreement shall be declared by a court
to be invalid or unenforceable to any extent, the validity or enforceability of
the remaining provisions of this Agreement shall not be affected.

            4.6. Amendment; Waiver. No provision of this Agreement may be
amended or waived unless agreed to in writing and signed by the Executive Vice
President-Human Resources of the Company. The failure to exercise, or any delay
in exercising, any right, power or remedy under this Agreement shall not waive
any right, power or remedy which the Company has under this Agreement.

            4.7. Governing Law. The Option and this Agreement, and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Maryland and construed in accordance therewith without giving
effect to principles of conflicts of laws.

            4.8 Personal Data. By accepting the Award, Participant has
voluntarily consented to the collection, use, processing and transfer of
personal data about Participant,

                                       7

including Participant's name, home address and telephone number, date of birth,
social security number or other employee identification number, salary,
nationality, job title, details of the Award for the purpose of managing and
administering the Plan ("Data"). Company and/or its Subsidiaries will transfer
Data amongst themselves as necessary for the purpose of implementation,
administration and management of Participant's participation in the Plan, and
Company and/or any of its Subsidiaries may each further transfer Data to any
third parties assisting Company in the implementation, administration and
management of the Plan.

                    STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

                                /s/ David Norton

          By: David Norton, Executive Vice President, Human Resources



                                       8

EX-10.73

                                                                      Exh. 10.73

                                    STARWOOD
                        Hotels & Resorts Worldwide, Inc.

                                  July 22, 2004

Mr. Kenneth S. Siegel
Starwood Hotels & Resorts Worldwide, Inc.
1111 Westchester Avenue
White Plains, NY 10604

Dear Ken,

      This letter supplements the letter dated September 25, 2000 from Starwood
Hotels & Resorts Worldwide, Inc. (the "Company") to you that sets forth the
terms of your employment with the Company (the "Employment Letter").

      As previously announced, the Company has commenced a search for a new
Chief Executive Officer ("CEO"). The new CEO is expected to be hired in 2004.
The Company desires to offer you special severance benefits in the event your
employment is terminated after the CEO is hired.

      In the event that, after the new CEO is hired, the Company terminates your
employment for any reason other than "cause" (as defined in the Employment
Letter), in addition to the payments and benefits provided in such circumstances
under the Employment Agreement, (1) all of your stock options and restricted
stock which have been granted to you under any of the Company's benefit plans
prior to the date of this letter shall become vested and exercisable as of the
date of termination and (2) the Termination Payment payable to you pursuant to
the Employment Letter shall equal 12 months of your then current base salary and
100% of your target annual incentive. The special severance benefit under clause
(1) will expire on the second anniversary of the date the new CEO commences
employment with the Company.

      Except as modified by this letter, the Employment Letter remains in full
force and effect.

      By signing and returning this letter, you confirm that this letter
accurately sets forth the understanding between you and the Company and that you
accept and agree to the terms as outlined.

                                            Very truly yours,

                                            /s/ Barry S. Sternlicht
                                            ------------------------------
                                            Barry S. Sternlicht

ACCEPTED AND AGREED TO:

/s/ Kenneth S. Siegel
- ------------------------------

EX-12.1

exv12w1

EX-21.1

EXH. 21.1

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS

SUBSIDIARIES OF THE REGISTRANTS

				Wholly Owned Direct or Indirect
				Subsidiaries Carrying on the Same Line
				of Business as Named Subsidiary
				Operating		Operating
	Jurisdiction of			in the		in Foreign
Name	Organization	Parent	Line of Business	United States		Countries
Starwood Hotels & Resorts Worldwide, Inc. (“SH&RW”)	Maryland	—	Lodging		189		69
SLC Operating Limited Partnership	Delaware	SH&RW	Lodging		0		0
Starwood Hotels & Resorts Holdings, Inc. (“SH&RH”)	Arizona	SH&RW	Lodging		1		0
Starwood Hotels & Resorts (“SH&R”)	Maryland	SH&RH	Lodging		12		1
SLT Realty Limited Partnership	Delaware	SH&R	Lodging		40		1
Sheraton Holding Corporation (“SHC”)	Nevada	SH&RW	—		9		1
The Sheraton Corporation (“SC”)	Delaware	SHC	Lodging		43		4
Sheraton International, Inc. (“SII”)	Delaware	SC	Lodging		7		68
Sheraton Overseas Management Corporation.	Delaware	SII	—		0		0
CIGA S.p.A.	Italy	SII	Lodging		0		16

NOTE: The names of some consolidated wholly owned subsidiaries of the Corporation carrying on the same lines of business as other subsidiaries named above have been omitted, the number of such omitted subsidiaries operating in the United States and in foreign countries being shown. Also omitted from the list are the names of other subsidiaries that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.

EXHIBIT 21.1 (Continued)

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS

ASSUMED NAMES REPORT

Arizona
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Four Points by Sheraton Tucson University Plaza
Starwood Hotels & Resorts Worldwide, Inc.	The Phoenician
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Tucson Hotel & Suites
California
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	The Westin San Francisco Airport
Starwood Hotels & Resorts Worldwide, Inc.	Clarion Hotel — San Francisco Airport
Starwood Hotels & Resorts Worldwide, Inc.	Westin Horton Plaza
Starwood Hotels & Resorts Worldwide, Inc.	W San Francisco
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Long Beach
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Los Angeles Airport
Starwood Hotels & Resorts Worldwide, Inc.	The Westin South Coast Plaza
Starwood Hotels & Resorts Worldwide, Inc.	W Los Angeles — Westwood
Starwood Hotels & Resorts Worldwide, Inc.	Westin Mission Hills Resort
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton San Diego Hotel & Marina
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Universal Hotel
Starwood Hotels & Resorts Worldwide, Inc.	St. Regis San Francisco
Colorado
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Four Points by Sheraton Denver Cherry Creek
Starwood Hotels & Resorts Worldwide, Inc.	St. Regis, Aspen
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Tabor Center
Connecticut
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Stamford Hotel
Florida
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Deerfield Beach Hilton
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Fort Lauderdale Airport Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Suites Tampa Airport
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Fort Lauderdale
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Key West All Suites Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Bal Harbour Beach Resort

2

Georgia
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Lenox Inn
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Midtown Atlanta Hotel @ Colony Square
Starwood Hotels & Resorts Worldwide, Inc.	Westin Atlanta North at Perimeter
Starwood Hotels & Resorts Worldwide, Inc.	Westin Peachtree Plaza
Starwood Hotels & Resorts Worldwide, Inc.	W Atlanta
Hawaii
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Maui
Illinois
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	The Raphael Chicago
Starwood Hotels & Resorts Worldwide, Inc.	The Tremont Chicago
Starwood Hotels & Resorts Worldwide, Inc.	W Chicago City Center
Starwood Hotels & Resorts Worldwide, Inc.	W Chicago Lakeshore
Indiana
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Indianapolis Hotel & Suites
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Indianapolis
Louisiana
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	W New Orleans
Starwood Hotels & Resorts Worldwide, Inc.	W New Orleans-French Quarter
Maine
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton South Portland Hotel
Massachusetts
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Colonial Hotel & Golf Club Boston North
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Boston
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Braintree Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Framingham Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Hyannis Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Inn Lexington
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Newton Hotel
Starwood Hotels & Resorts Worldwide, Inc.	Boston Park Plaza
Starwood Hotels & Resorts Worldwide, Inc.	Westin Waltham
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Needham

3

Minnesota
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Four Points by Sheraton Minneapolis
Nebraska
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Omaha Hotel
New Hampshire
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Nashua Hotel
New Jersey
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Edison Hotel Raritan Center
Starwood Hotels & Resorts Worldwide, Inc.	Westin Princeton at Forrestal Village
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Parsippany Hotel
New York
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	W New York – The Tuscany
Starwood Hotels & Resorts Worldwide, Inc.	W New York – The Court
Starwood Hotels & Resorts Worldwide, Inc.	W New York
Starwood Hotels & Resorts Worldwide, Inc.	W Times Square
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton New York Hotel & Towers
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Manhattan
Starwood Hotels & Resorts Worldwide, Inc.	The St. Regis
North Carolina
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Chapel Hill Hotel
Ohio
Entity Name
Starwood Hotels & Resorts Worldwide, Inc.	Westin Cincinnati
Oregon
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Days Inn City Center
Starwood Hotels & Resorts Worldwide, Inc.	Four Points by Sheraton Portland Downtown

4

Pennsylvania
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Caesars Cove Haven
Starwood Hotels & Resorts Worldwide, Inc.	Caesars Paradise Stream
Starwood Hotels & Resorts Worldwide, Inc.	Caesars Pocono Palace
Starwood Hotels & Resorts Worldwide, Inc.	Caesars Brookdale on the Lake
Starwood Hotels & Resorts Worldwide, Inc.	Four Points by Sheraton Philadelphia Airport
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Park Ridge Hotel & Conference Center
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Suites Philadelphia Airport
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Philadelphia
Rhode Island
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Providence Airport Hotel
Texas
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	The St Regis, Houston
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Galleria Houston
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Oaks
Washington
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Days Inn Town Center
Starwood Hotels & Resorts Worldwide, Inc.	Sixth Avenue Inn
Starwood Hotels & Resorts Worldwide, Inc.	W Seattle
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Seattle
Washington D.C.
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Capitol Hill Suites
Starwood Hotels & Resorts Worldwide, Inc.	The St. Regis
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Grand
Starwood Hotels & Resorts Worldwide, Inc.	The Westin Embassy Row
Wisconsin
Entity Name	Assumed Name
Starwood Hotels & Resorts Worldwide, Inc.	Sheraton Milwaukee Brookfield Hotel

5

EX-23.1

Exh. 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-4 Nos. 333-101310 and 333-106887-01; Form S-3 Nos. 333-96715, 333-96715-01, 333-89310, 333-89130-76, 333-106888 and 333-106888-01; and Form S-8 Nos. 333-115926, 333-115926-01, 333-97469, 333-97469-01, 333-111384 and 333-111384-01) of Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts (the “Company”) and in the related Prospectuses of our reports dated March 1, 2005, with respect to the consolidated financial statements and schedules of the Company, Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts, included in this Joint Annual Report (Form 10-K) for the year ended December 31, 2004.

ERNST & YOUNG LLP

New York, New York
March 1, 2005

EX-31.1

                                                                    EXHIBIT 31.1

 CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Steven J. Heyer, certify that:

      1)    I have reviewed this annual report on Form 10-K of Starwood Hotels &
            Resorts Worldwide, Inc.;

      2)    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4)    The registrant's other certifying officer(s) and I are responsible
            for establishing and maintaining disclosure controls and procedures
            (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
            internal control over financial reporting (as defined in Exchange
            Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

            (b)   Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

            (c)   Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and



            (d)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5)    The registrant's other certifying officer(s) and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions);

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: March 3, 2005

/s/ Steven J. Heyer
___________________________
Steven J. Heyer
Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

 CERTIFICATION PURSUANT TO RULE 13A-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Vasant Prabhu, certify that:

      1)    I have reviewed this annual report on Form 10-K of Starwood Hotels &
            Resorts Worldwide, Inc.;

      2)    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4)    The registrant's other certifying officer(s) and I are responsible
            for establishing and maintaining disclosure controls and procedures
            (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
            internal control over financial reporting (as defined in Exchange
            Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

            (b)   Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

            (c)   Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and



            (d)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5)    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions);

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: March 2, 2005

/s/ Vasant Prabhu
____________________________
Vasant Prabhu
Chief Financial Officer

EX-31.3

                                                                    EXHIBIT 31.3

           CERTIFICATION PURSUANT TO RULE 13A-14 UNDER THE SECURITIES
                              EXCHANGE ACT OF 1934

I, Steven J. Heyer, certify that:

      1)    I have reviewed this annual report on Form 10-K of Starwood Hotels &
            Resorts;

      2)    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4)    The registrant's other certifying officer(s) and I are responsible
            for establishing and maintaining disclosure controls and procedures
            (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
            internal control over financial reporting (as defined in Exchange
            Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

            (b)   Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

            (c)   Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and



            (d)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5)    The registrant's other certifying officer(s) and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions);

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: March 3, 2005

/s/ Steven J. Heyer
- ------------------------------
Steven J. Heyer
Chief Executive Officer

EX-31.4

                                                                    EXHIBIT 31.4

       CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE
                                  ACT OF 1934

I, Vasant Prabhu, certify that:

      1)    I have reviewed this annual report on Form 10-K of Starwood Hotels &
            Resorts;

      2)    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3)    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4)    The registrant's other certifying officer(s) and I are responsible
            for establishing and maintaining disclosure controls and procedures
            (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
            internal control over financial reporting (as defined in Exchange
            Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

            (b)   Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

            (c)   Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and



            (d)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5)    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions);

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: March 2, 2005

/s/ Vasant Prabhu
- -----------------------------
Vasant Prabhu
Chief Financial Officer

EX-32.1

                                                                    Exhibit 32.1

              Certification Pursuant to Section 1350 of Chapter 63
                      of Title 18 of the United States Code

      I, Steven J. Heyer, the Chief Executive Officer of Starwood Hotels &
Resorts Worldwide, Inc. ("Starwood"), certify that (i) the Form 10-K for the
fiscal year ended December 31, 2004 (the "Form 10-K") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and (ii) the information contained in the Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of
Starwood.

                                       /s/ Steven J. Heyer
                                       -----------------------------------------
                                       Steven J. Heyer
                                       Chief Executive Officer
                                       Starwood Hotels & Resorts Worldwide, Inc.

                                       March 3, 2005

EX-32.2

                                                                    Exhibit 32.2

              Certification Pursuant to Section 1350 of Chapter 63
                      of Title 18 of the United States Code

      I, Vasant Prabhu, the Chief Financial Officer of Starwood Hotels & Resorts
Worldwide, Inc. ("Starwood"), certify that (i) the Form 10-K for the fiscal year
ended December 31, 2004 (the "Form 10-K") fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the
information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Starwood.

                                       /s/ Vasant Prabhu
                                       -----------------------------------------
                                       Vasant Prabhu
                                       Chief Financial Officer
                                       Starwood Hotels & Resorts Worldwide, Inc.

                                       March 2, 2005

EX-32.3

                                                                    Exhibit 32.3

              Certification Pursuant to Section 1350 of Chapter 63
                      of Title 18 of the United States Code

      I, Steven J. Heyer, the Chief Executive Officer of Starwood Hotels &
Resorts ("Starwood"), certify that (i) the Form 10-K for the fiscal year ended
December 31, 2004 (the "Form 10-K") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the
information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Starwood.

                                                     /s/ Steven J. Heyer
                                                     ---------------------------
                                                     Steven J. Heyer
                                                     Chief Executive Officer
                                                     Starwood Hotels & Resorts

                                                     March 3, 2005

EX-32.4

                                                                    Exhibit 32.4

              Certification Pursuant to Section 1350 of Chapter 63
                      of Title 18 of the United States Code

      I, Vasant Prabhu, the Chief Financial Officer of Starwood Hotels & Resorts
("Starwood"), certify that (i) the Form 10-K for the fiscal year ended December
31, 2004 (the "Form 10-K") fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and (ii) the information
contained in the Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of Starwood.


                                                     /s/ Vasant Prabhu
                                                     ---------------------------
                                                     Vasant Prabhu
                                                     Chief Financial Officer
                                                     Starwood Hotels & Resorts

                                                     March 2, 2005