-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KCi9rYP5YEfFXg+U6tEgGaGQ0mp5OL5FqsONN4/0SNY4yow/1KNUwyqnTqtngcB0 K1S7u+mpOlv7uxY18aVF1g== 0000950153-99-001394.txt : 19991117 0000950153-99-001394.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950153-99-001394 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD HOTEL & RESORTS WORLDWIDE INC CENTRAL INDEX KEY: 0000316206 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521193298 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07959 FILM NUMBER: 99751792 BUSINESS ADDRESS: STREET 1: 777 WESTERCHESTER AVENUE STREET 2: SUITE 400 CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 9146408100 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD. 4TH FL STREET 2: SUITE 4O0 CITY: PHOENOX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: STARWOOD LODGING CORP DATE OF NAME CHANGE: 19950215 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD HOTELS & RESORTS CENTRAL INDEX KEY: 0000048595 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 520901263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-73069 FILM NUMBER: 99751793 BUSINESS ADDRESS: STREET 1: 777 WESTCHESTER AVENUE STREET 2: STE 410 CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 9146408100 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD STREET 2: STE 410 CITY: PHOENIX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: STARWOOD LODGING TRUST DATE OF NAME CHANGE: 19950215 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST /MD/ DATE OF NAME CHANGE: 19930506 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 1-7959 COMMISSION FILE NUMBER: 1-6828 STARWOOD HOTELS & STARWOOD HOTELS & RESORTS WORLDWIDE, INC. RESORTS (Exact name of Registrant as specified in its (Exact name of Registrant as specified in its charter) charter) MARYLAND MARYLAND (State or other jurisdiction (State or other jurisdiction of incorporation or organization) of incorporation or organization) 52-1193298 52-0901263 (I.R.S. employer identification no.) (I.R.S. employer identification no.) 777 WESTCHESTER AVENUE 777 WESTCHESTER AVENUE WHITE PLAINS, NY 10604 WHITE PLAINS, NY 10604 (Address of principal executive (Address of principal executive offices, including zip code) offices, including zip code) (914) 640-8100 (914) 640-8100 (Registrant's telephone number, (Registrant's telephone number, including area code) including area code)
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 189,185,601 shares of common stock, par value $0.01 per share, of Starwood Hotels & Resorts Worldwide, Inc. attached to and traded together with 189,185,601 Class B shares of beneficial interest, par value $0.01 per share, of Starwood Hotels & Resorts, and 100 Class A shares of beneficial interest, par value $0.01 per share, of Starwood Hotels & Resorts, all outstanding as of October 31, 1999. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Starwood Hotels & Resorts Worldwide, Inc.: Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998...................................... 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1999 and 1998............... 4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 1999 and 1998................................................... 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998...................... 6 Starwood Hotels & Resorts: Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998...................................... 7 Consolidated Statements of Operations for the Three Months Ended September 30, 1999 and 1998, for the Nine Months Ended September 30, 1999 and for the Period from February 23, 1998 to September 30, 1998................ 8 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and for the Period from February 23, 1998 to September 30, 1998................ 9 Notes to Financial Statements............................... 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 17 Item 3. Quantitative and Qualitative Disclosures about Market Risk................................................... 31 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................... 32 Item 2. Changes in Securities and Use of Proceeds................... 32 Item 6. Exhibits and Reports on Form 8-K............................ 32
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The following unaudited consolidated financial statements of Starwood Hotels & Resorts Worldwide, Inc. (the "Corporation") and Starwood Hotels & Resorts (the "Trust" and, together with the Corporation, "Starwood" or the "Company") are provided pursuant to the requirements of this Item. In the opinion of management, all adjustments necessary for fair presentation, consisting of normal recurring adjustments, have been included. The consolidated financial statements presented herein have been prepared in accordance with the accounting policies described in the Company's Joint Annual Report on Form 10-K, as amended, for the year ended December 31, 1998 and should be read in conjunction therewith, and with the Form 8-K filed on July 23, 1999, which reflects Starwood's gaming segment as a discontinued operation. See the notes to financial statements for the basis of presentation. The consolidated financial statements should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein. Results for the three and nine months ended September 30, 1999 are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 1999. 2 4 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 195 $ 157 Accounts receivable, net of allowance for doubtful accounts of $51 and $55................................................ 536 484 Inventories............................................... 63 58 Prepaid expenses and other................................ 77 75 ------- ------- Total current assets................................... 871 774 Investments................................................. 380 336 Plant, property and equipment, net.......................... 7,838 7,857 Goodwill and intangible assets, net......................... 2,685 2,714 Other assets................................................ 403 570 Net assets held for sale.................................... -- 63 Net assets of discontinued operations....................... 1,061 1,103 ------- ------- $13,238 $13,417 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 188 $ 169 Accrued expenses.......................................... 799 782 Short-term borrowings and current maturities of long-term debt................................................... 233 687 Other current liabilities................................. 215 183 ------- ------- Total current liabilities.............................. 1,435 1,821 Long-term debt.............................................. 6,015 5,802 Deferred income taxes....................................... 1,525 529 Other liabilities........................................... 367 384 ------- ------- 9,342 8,536 ------- ------- Minority interest........................................... 230 244 ------- ------- Equity put options.......................................... -- 32 ------- ------- Class B exchangeable preferred shares of the Trust, at redemption value of $38.50................................ 136 149 ------- ------- Commitments and contingencies Stockholders' equity: Class A exchangeable preferred shares of the Trust; $0.01 par value; authorized 30,000,000 shares; outstanding 3,669,546 and 4,373,457 shares at September 30, 1999 and December 31, 1998, respectively.................... -- -- Corporation common stock; $0.01 par value; authorized 1,050,000,000 shares; outstanding 180,074,966 and 175,574,135 shares at September 30, 1999 and December 31, 1998, respectively................................. 2 2 Trust common shares of beneficial interest; $0.01 par value; authorized 1,200,000,000 shares; outstanding 175,574,135 shares at December 31, 1998................ -- 2 Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 180,074,966 shares at September 30, 1999............... 2 -- Additional paid-in capital................................ 4,564 4,570 Cumulative translation and marketable securities adjustments............................................ (205) (120) Retained earnings (accumulated deficit)................... (833) 2 ------- ------- Total stockholders' equity............................. 3,530 4,456 ------- ------- $13,238 $13,417 ======= =======
The accompanying notes to financial statements are an integral part of the above statements. 3 5 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1999 1998 1999 1998 ------- ------- ------- ------- REVENUES Owned, leased and consolidated joint venture hotels..... $ 855 $ 800 $2,496 $2,154 Management and franchise fees........................... 70 55 195 163 Unconsolidated joint ventures and other................. 31 29 84 77 ------ ------ ------ ------ 956 884 2,775 2,394 ------ ------ ------ ------ COSTS AND EXPENSES Owned, leased and consolidated joint venture hotels..... 587 545 1,709 1,470 Selling, general and administrative..................... 37 67 123 168 Restructuring and other special charges (credits)....... -- 185 (41) 185 Depreciation and amortization........................... 117 105 353 309 ------ ------ ------ ------ 741 902 2,144 2,132 ------ ------ ------ ------ 215 (18) 631 262 Interest expense, net of interest income of $5, $6, $15 and $22............................................... (125) (158) (364) (322) Gains (losses) on sales of real estate and investments........................................... (8) -- 22 51 Miscellaneous expense................................... -- -- (15) -- ------ ------ ------ ------ 82 (176) 274 (9) Income tax (expense) benefit............................ (28) 102 (999) 66 Minority equity in net income........................... (10) (5) (14) (12) ------ ------ ------ ------ Income (loss) from continuing operations................ 44 (79) (739) 45 Discontinued operations: Net loss from operations, net of tax benefit of $0, $6, $0 and $12..................................... -- (27) -- (59) Net gain (loss) on dispositions, net of tax of $0, $(14), $(121) and $(604)........................... -- 25 (7) 1,165 Extraordinary item, net of tax benefit of $1, $0, $1 and $0.................................................... (2) -- (2) -- ------ ------ ------ ------ Net income (loss)....................................... $ 42 $ (81) $ (748) $1,151 ====== ====== ====== ====== EARNINGS PER SHARE -- BASIC Continuing operations................................... $ 0.23 $(0.42) $(3.98) $ 0.16 Discontinued operations................................. -- (0.01) (0.04) 5.71 Extraordinary item...................................... (0.01) -- (0.01) -- ------ ------ ------ ------ Net income (loss)....................................... $ 0.22 $(0.43) $(4.03) $ 5.87 ====== ====== ====== ====== EARNINGS PER SHARE -- DILUTED Continuing operations................................... $ 0.23 $(0.42) $(3.98) $ 0.16 Discontinued operations................................. -- (0.01) (0.04) 5.71 Extraordinary item...................................... (0.01) -- (0.01) -- ------ ------ ------ ------ Net income (loss)....................................... $ 0.22 $(0.43) $(4.03) $ 5.87 ====== ====== ====== ====== Weighted average number of shares....................... 186 199 186 194 ====== ====== ====== ====== Weighted average number of shares assuming dilution..... 195 199 186 194 ====== ====== ====== ======
The accompanying notes to financial statements are an integral part of the above statements. 4 6 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN MILLIONS) (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- --------------- 1999 1998 1999 1998 ---- ----- ----- ------ Net income (loss)........................................... $42 $(81) $(748) $1,151 Other comprehensive income (loss): Foreign currency translation adjustments -- Foreign currency translation arising during the period.... 9 46 (85) -- Unrealized holding losses arising during the period....... -- -- -- (1) Reclassification adjustment for losses included in net income................................................. -- -- -- 33 --- ---- ----- ------ 9 46 (85) 32 --- ---- ----- ------ Comprehensive income (loss)................................. $51 $(35) $(833) $1,183 === ==== ===== ======
The accompanying notes to financial statements are an integral part of the above statements. 5 7 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------- 1999 1998 ----- ------ OPERATING ACTIVITIES Net income (loss)........................................... $(748) $1,151 Exclude: Discontinued operations -- Net loss from operations.................................. -- 59 Net loss (gain) on dispositions........................... 7 (1,165) Extraordinary item.......................................... 2 -- ----- ------ Income (loss) from continuing operations.................... (739) 45 Adjustments to income (loss) from continuing operations: Depreciation and amortization............................. 353 309 Amortization of deferred loan costs....................... 13 15 Non-cash portion of Reorganization charge................. 936 -- Non-cash portion of restructuring and other special charges (credits)....................................... (46) 150 Provision for doubtful accounts........................... 6 5 Minority equity........................................... 14 12 Equity income, net of dividends received.................. (23) (11) Gains on sale of real estate and investments.............. (22) (51) Changes in working capital: Accounts receivable....................................... (86) (83) Inventories............................................... (7) 1 Accounts payable.......................................... 24 7 Accrued expenses.......................................... (43) (277) Accrued and deferred income taxes........................... (28) (139) Other, net.................................................. (48) (31) ----- ------ Cash from (used for) continuing operations................ 304 (48) Cash used for discontinued operations..................... (53) (281) ----- ------ Cash from (used for) operating activities................. 251 (329) ----- ------ INVESTING ACTIVITIES Additions to plant, property and equipment.................. (310) (370) Proceeds from asset sales................................... 502 2,811 Collection of notes receivable, net of advances............. 53 -- Acquisitions, net of acquired cash.......................... -- (60) Investments................................................. (62) -- Employee benefit trust...................................... -- 146 Other, net.................................................. (11) (257) ----- ------ Cash from investing activities............................ 172 2,270 ----- ------ FINANCING ACTIVITIES Short-term debt issued (repaid)............................. (597) 505 Long-term debt issued....................................... 636 2,447 Long-term debt repaid....................................... (282) (1,477) Proceeds from forward equity contracts and settlement of equity put options........................................ (16) 245 Distributions paid.......................................... (87) (3,249) Stock repurchases........................................... (42) (343) Other, net.................................................. 3 (16) ----- ------ Cash used for financing activities........................ (385) (1,888) ----- ------ Increase in cash and cash equivalents....................... 38 53 Cash and cash equivalents -- beginning of period............ 157 126 ----- ------ Cash and cash equivalents -- end of period.................. $ 195 $ 179 ===== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest.................................................. $ 441 $ 219 ===== ====== Income taxes, net of refunds.............................. $ 98 $ 42 ===== ======
The accompanying notes to financial statements are an integral part of the above statements. 6 8 STARWOOD HOTELS & RESORTS CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 8 $ 12 Accounts receivable....................................... 2 24 Receivable, Corporation................................... 45 42 Prepaid expenses and other................................ 4 3 ------ ------ Total current assets................................... 59 81 Investments, Corporation.................................... 1,056 1,057 Investments................................................. 49 86 Plant, property and equipment, net.......................... 4,393 4,411 Long-term receivables, net, Corporation..................... 2,954 2,583 Goodwill and intangible assets, net......................... 247 258 Other assets................................................ 17 152 Net assets held for sale.................................... -- 18 ------ ------ $8,775 $8,646 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 11 $ 6 Accrued expenses.......................................... 93 68 Short-term borrowings and current maturities of long-term debt................................................... 105 1 ------ ------ Total current liabilities.............................. 209 75 Long-term debt.............................................. 497 737 ------ ------ 706 812 ------ ------ Minority interest........................................... 35 39 ------ ------ Equity put options and forward equity contracts............. -- 23 ------ ------ Class B exchangeable preferred shares, at redemption value of $38.50................................................. 136 149 ------ ------ Commitments and contingencies Stockholders' equity: Class A exchangeable preferred shares; $0.01 par value; authorized 30,000,000 shares; outstanding 3,669,546 and 4,373,457 shares at September 30, 1999 and December 31, 1998, respectively..................................... -- -- Trust common shares of beneficial interest; $0.01 par value; authorized 1,200,000,000 shares; outstanding 175,574,135 shares at December 31, 1998................ -- 2 Class A shares of beneficial interest; $0.01 par value; authorized 5,000 shares; outstanding 1,000 shares at September 30, 1999..................................... -- -- Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 180,074,966 shares at September 30, 1999............... 2 -- Additional paid-in capital................................ 7,570 7,557 Retained earnings......................................... 326 64 ------ ------ Total stockholders' equity............................. 7,898 7,623 ------ ------ $8,775 $8,646 ====== ======
The accompanying notes to financial statements are an integral part of the above statements. 7 9 STARWOOD HOTELS & RESORTS CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS PERIOD FROM SEPTEMBER 30, ENDED FEBRUARY 23, 1998 -------------- SEPTEMBER 30, TO SEPTEMBER 30, 1999 1998 1998 1998 ----- ----- ------------- ----------------- REVENUES Unconsolidated joint ventures and other......... $ -- $ 4 $ 8 $ 5 Rent and interest, Corporation.................. 187 180 552 435 ---- ---- ---- ---- 187 184 560 440 ---- ---- ---- ---- COSTS AND EXPENSES Selling, general and administrative............. -- 6 -- 12 Depreciation and amortization................... 43 35 132 110 ---- ---- ---- ---- 43 41 132 122 ---- ---- ---- ---- 144 143 428 318 Interest expense, net of interest income of $0, $0, $2 and $0................................. (10) (6) (35) (14) Losses on sales of real estate.................. (40) -- (40) -- Income tax expense.............................. (1) -- (2) (1) Minority equity in net income................... (1) (3) (2) (4) ---- ---- ---- ---- Net income...................................... $ 92 $134 $349 $299 ==== ==== ==== ====
The accompanying notes to financial statements are an integral part of the above statements. 8 10 STARWOOD HOTELS & RESORTS CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
NINE MONTHS PERIOD FROM ENDED FEBRUARY 23, 1998 SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1998 ------------------ --------------------- OPERATING ACTIVITIES Net income............................................... $ 349 $ 299 Adjustments to net income: Depreciation and amortization.......................... 132 110 Minority equity in net income.......................... 2 4 Equity income, net of dividends received............... (3) -- Losses on sales of real estate......................... 40 -- Changes in working capital: Accounts receivable.................................... 6 (8) Accounts payable....................................... 5 10 Accrued expenses....................................... 10 (13) Other, net............................................... 4 1 ----- ----- Cash from operating activities......................... 545 403 ----- ----- INVESTING ACTIVITIES Additions to plant, property and equipment............... (176) (139) Proceeds from asset sales................................ 61 250 Collection of notes receivable........................... 56 -- Acquisitions, net of acquired cash....................... -- (13) Investments.............................................. (6) -- Notes receivable, Corporation............................ (243) 45 Other, net............................................... (9) (275) ----- ----- Cash used for investing activities..................... (317) (132) ----- ----- FINANCING ACTIVITIES Long-term debt issued.................................... 291 12 Long-term debt repaid.................................... (427) -- Proceeds from equity offering............................ -- 171 Distributions paid....................................... (87) (213) Stock repurchases........................................ (7) (240) Other, net............................................... (2) 8 ----- ----- Cash used for financing activities..................... (232) (262) ----- ----- Increase (decrease) in cash and cash equivalents......... (4) 9 Cash and cash equivalents -- beginning of period......... 12 -- ----- ----- Cash and cash equivalents -- end of period............... $ 8 $ 9 ===== ===== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for interest................. $ 24 $ 15 ===== =====
The accompanying notes to financial statements are an integral part of the above statements. 9 11 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The accompanying consolidated balance sheets as of September 30, 1999 and December 31, 1998 and the consolidated statements of operations, comprehensive income and cash flows for the three and nine months ended September 30, 1999 represent (i) Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the "Corporation"), including ITT Corporation and its subsidiaries ("ITT") and Starwood Hotels & Resorts and its subsidiaries (the "Trust"), and (ii) the Trust. Because the acquisition of ITT (the "ITT Merger") was treated as a reverse purchase for financial accounting purposes, the consolidated statements of operations, comprehensive income and cash flows for the three and nine months ended September 30, 1998 include the accounts of ITT for the three and nine months ended September 30, 1998 and the accounts of the Corporation and the Trust for the period from the closing of the ITT Merger on February 23, 1998 through September 30, 1998. The Trust was formed in 1969 and elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code (the "Code"). In 1980, the Trust formed the Corporation and made a distribution to the Trust's shareholders of one share of common stock, par value $0.01 per share, of the Corporation (a "Corporation Share") for each common share of beneficial interest, par value $0.01 per share, of the Trust (a "Trust Share"). Through January 6, 1999, the Corporation Shares and Trust Shares were paired on a one-for-one basis and, pursuant to an agreement between the Corporation and the Trust, could be held or transferred only in units ("Paired Shares") consisting of one Corporation Share and one Trust Share. During 1998, Congress enacted tax legislation that had the effect of eliminating this grandfathering for certain interests in real property acquired after March 26, 1998. In response to this legislation, a reorganization of the Corporation and the Trust (the "Reorganization") was proposed by the Company and was approved by the shareholders of the Corporation and Trust on January 6, 1999. As a result of the Reorganization, the combined Corporation and Trust entity is no longer a grandfathered paired share REIT. The Trust became a subsidiary of the Corporation, which holds all outstanding shares of new Class A shares of beneficial interest in the Trust. Each outstanding Trust Share was converted into one new non-voting Class B share of beneficial interest in the Trust (a "Class B Share"). Pursuant to an agreement between the Corporation and the Trust, the Corporation Shares and the Class B Shares are attached on a one-for-one basis and may be transferred only in units ("Shares") consisting of one Corporation Share and one Class B Share. The Reorganization was accounted for as a reorganization of two companies under common control. As such, there was no revaluation of the assets and liabilities of the combining companies. Any further references in this filing to Starwood Hotels & Resorts Worldwide, Inc. ("Starwood" or the "Company") include the Trust and its subsidiaries. Unless otherwise stated herein, all information with respect to Shares refers to Shares since January 6, 1999 and to Paired Shares for periods before January 6, 1999. During the first quarter of 1999, the Company recorded pretax charges of $15 million for costs directly attributable to the Reorganization, such as legal, accounting and investment banking fees, which are included in miscellaneous expense in the accompanying 1999 consolidated statements of operations. As a result of the Reorganization, the Company also recorded a one-time charge of $936 million in the first quarter to establish a deferred tax liability relating to the difference between the book and tax basis in the assets of the Trust. This charge is included in income tax expense in the accompanying consolidated statements of operations. The Company, through its subsidiaries, is the general partner of, and held, as of September 30, 1999, an aggregate 90.2% partnership interest in, SLC Operating Limited Partnership (the "Operating Partnership"). The Trust, through its subsidiaries, is the general partner of, and held, as of September 30, 1999, an aggregate 94.9% partnership interest in, SLT Realty Limited Partnership (the "Realty Partnership" and, together with the Operating Partnership, the "Partnerships"), and the Corporation held an aggregate 2.2% partnership interest in the Realty Partnership. The Realty Partnership principally owns, directly or indirectly, fee, ground lease and mortgage loan interests in hotel properties. The Operating Partnership, directly or indirectly, 10 12 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) principally leases hotel properties from the Realty Partnership and also owns fee interests in other hotel properties and manages hotels for third parties. The units of these Partnerships ("LP Units") held by the limited partners ("Limited Partners") of the Partnerships are exchangeable on a one-to-one basis for Shares. At September 30, 1999, there were approximately 9.9 million LP Units outstanding (including 4.2 million LP Units held by the Corporation). The Company is one of the largest hotel companies in the world. The hotel business is comprised of a worldwide hospitality network of approximately 710 full-service hotels primarily serving three markets: luxury, upscale and mid-price. The Company's hotel operations are represented on six continents and in nearly every major world market. NOTE 2. EARNINGS PER SHARE The following reconciliation of basic earnings per share to diluted earnings per share for income (loss) from continuing operations assumes the conversion of LP Units to Shares (in millions, except per share data):
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------- 1999 1998 ----------------------------- ----------------------------- EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE -------- ------ --------- -------- ------ --------- Income (loss) from continuing operations..... $ 44 $(79) Dividends on Class A and Class B EPS......... (1) (4) ----- ---- Basic earnings (loss)........................ 43 186 $0.23 (83) 199 $(0.42) Effect of dilutive securities: Employee options........................... -- 1 -- -- Class A and Class B EPS.................... 1 8 -- -- ----- --- ---- --- Diluted earnings (loss)...................... $ 44 195 $0.23 $(83) 199 $(0.42) ===== === ===== ==== === ======
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------- 1999 1998 ----------------------------- ----------------------------- EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE -------- ------ --------- -------- ------ --------- Income (loss) from continuing operations..... $(739) $ 45 Dividends on Class A and Class B EPS......... (3) (15) ----- ---- Basic earnings (loss)........................ (742) 186 $(3.98) 30 194 $0.16 Effect of dilutive securities: Employee options........................... -- -- -- -- ----- --- ---- --- Diluted earnings (loss)...................... $(742) 186 $(3.98) $ 30 194 $0.16 ===== === ====== ==== === =====
As a result of antidilutive effects, approximately 7.7 million Class A and Class B Exchangeable Preferred Shares ("EPS") of the Trust and approximately 1.4 million employee options and other common stock equivalents were not included in the computation of diluted earnings per share for the nine months ended September 30, 1999. Additionally, as a result of antidilutive effects, approximately 7.4 million Class A and Class B EPS of the Trust were not included in the computation of diluted earnings per share for the nine months ended September 30, 1998. 11 13 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 3. ACQUISITIONS On October 1, 1999, the Corporation completed the acquisition of Vistana, Inc. ("Vistana"), whereby Vistana merged with and into a subsidiary of the Corporation and thereby became a wholly owned subsidiary of the Corporation. Vistana's principal operations include the acquisition, development and operation of vacation ownership resorts, marketing and selling vacation ownership interests in the resorts, and providing financing to customers who purchase such interests. The Company financed the acquisition of Vistana with cash of approximately $110 million, the assumption of approximately $280 million of debt and the issuance of approximately 10.1 million Shares. NOTE 4. DISCONTINUED OPERATIONS GAMING. In April 1999, management developed a formal plan to dispose of the Company's gaming operations. On April 27, 1999, the Company entered into a definitive agreement to sell its gaming operations, excluding the Desert Inn Resort & Casino in Las Vegas, Nevada (the "Desert Inn"), for cash proceeds of approximately $3.0 billion to Park Place Entertainment Corporation. This sale, which is subject to customary closing conditions including obtaining approvals from certain gaming regulatory authorities, is expected to close prior to the end of 1999. On May 18, 1999, the Company entered into a definitive agreement with Sun International Hotels Limited to sell the Desert Inn for approximately $275 million in cash. This sale, which is also subject to customary closing conditions including approvals by the Nevada gaming authorities, is expected to close in 2000. As a result of the definitive agreements to sell the gaming operations, the accompanying consolidated financial statements reflect the results of operations and net assets of the gaming segment as a discontinued operation. Long-term debt of approximately $2.1 billion and the related interest expense of $42 million, $40 million, $122 million and $120 million for the three months ended September 30, 1999 and 1998 and for the nine months ended September 30, 1999 and 1998, respectively, has been allocated to the discontinued operation. This allocation was based upon the ratio of net gaming segment assets to the Company's total capitalization. During the first quarter of 1999, the Company provided for estimated after-tax losses on the disposal of the discontinued operations of $180 million ($158 million pretax), which included anticipated operating results through the expected closing date of approximately $50 million prior to the disposal. Summary financial information of the discontinued gaming operations is as follows (in millions) (unaudited):
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ BALANCE SHEET DATA Total assets................................................ $ 3,569 $ 3,751 Total liabilities........................................... (326) (368) Debt related to discontinued operations: Allocated debt............................................ (2,140) (2,140) Other..................................................... (42) (176) ------- ------- Net assets of the discontinued gaming operations............ $ 1,061 $ 1,067 ======= =======
12 14 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ---------------- 1999 1998 1999 1998 ----- ----- ------ ------ INCOME STATEMENT DATA Revenues................................................... $402 $391 $1,164 $1,038 Restructuring and other special charges.................... $ -- $(55) $ -- $ (55) Operating income........................................... $ 53 $ 3 $ 131 $ 53 Interest expense: Allocated debt........................................... $(42) $(40) $ (122) $ (120) Other.................................................... $ (2) $ (1) $ (10) $ (2) Income tax (expense) benefit............................... $ (1) $ 7 $ (3) $ 13 Minority equity............................................ $ -- $ 4 $ 2 $ 6 Income (loss) from discontinued operations................. $ 8 $(27) $ (2) $ (50)
ITT EDUCATIONAL SERVICES, INC. In June 1998, the Company sold approximately 13.0 million shares of ITT Educational Services, Inc. ("Educational Services") for net proceeds of approximately $304 million, recognizing a gain of $163 million, net of income taxes of $90 million. In February 1999, the Company completed the sale of its remaining interest in Educational Services, selling 8.0 million shares of common stock of Educational Services in an underwritten public offering at a price per share of $34.00. Concurrently, Educational Services repurchased the Company's remaining 1.5 million shares of Educational Services common stock at $32.73 per share. Starwood received aggregate net proceeds of approximately $310 million from these transactions, which were used to repay a portion of the Company's outstanding debt. As a result of this sale, the Company recognized a gain of $173 million, net of taxes of $99 million in the first quarter of 1999. Net assets of discontinued operations included $36 million related to Educational Services as of December 31, 1998. ITT WORLD DIRECTORIES. In February 1998, the Company disposed of ITT World Directories ("WD"), the subsidiary through which ITT conducted its telephone directories publishing business, to VNU International B.V., a leading international publishing and information company based in the Netherlands, for gross consideration of $2.1 billion. The Company recorded a gain of $1.002 billion, net of income taxes of $514 million, on the disposition. NOTE 5. UNAUDITED PRO FORMA RESULTS The following unaudited pro forma information reflects the ITT Merger, the acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain of its affiliates ("Westin") ("Westin Merger") and certain actual and planned asset dispositions (including the disposition of the gaming operations) as if they occurred at the beginning of each period presented and does not purport to present what actual results would have been had such transactions, in fact, occurred at the beginning of each period presented, or to project results for any future period (in millions, except per share data):
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------- ---------------- 1999 1998 1999 1998 ----- ------ ------ ------ Revenues................................................. $ 956 $ 884 $2,775 $2,655 Income (loss) from continuing operations................. $ 67 $ (74) $ (672) $ 45 Net income (loss)........................................ $ 65 $ (76) $ (681) $1,151 Basic income (loss) from continuing operations per share.................................................. $0.35 $(0.39) $(3.62) $ 0.16 Diluted income (loss) from continuing operations per share.................................................. $0.34 $(0.39) $(3.62) $ 0.15
13 15 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. DISPOSITIONS At December 31, 1998, net assets held for sale in the accompanying consolidated balance sheet included the Company's investment in Madison Square Garden, L.P. ("MSG"). In April 1999, the Company disposed of its remaining interest in MSG for net cash proceeds of approximately $87 million and recorded a pretax gain of $42 million. In July 1999, the Company sold the Westin Central Park South for approximately $63 million in net cash proceeds. The Company recognized a pretax loss of $23 million during the second quarter of 1999 in anticipation of this sale. In October 1999, the Company sold The Tyee Hotel for approximately $5 million in net cash proceeds, recognizing a pretax loss of $4 million in the third quarter of 1999 in anticipation of the loss. In September and October of 1999, the Company reduced its stake in Lampsa SA, a Greek company that owns the Grande Bretagne Hotel in Athens, from 52.8% to 0.01%. The Company owned its interest in Lampsa SA through its 70.3% ownership of CIGA S.p.A. The Company received gross proceeds (before minority interest) of $290 million as a result of these sales. A pretax gain (before minority interest) of $11 million has been recorded in the third quarter of 1999, with an estimated pretax gain (before minority interest) of approximately $260 million in the fourth quarter of 1999. In early November 1999, the Company sold the Kansas City Ritz Carlton for approximately $61 million in net cash proceeds, recognizing a pretax loss of $13 million in the third quarter of 1999 in anticipation of the loss. NOTE 7. RESTRUCTURING AND OTHER SPECIAL CHARGES/CREDITS In connection with the ITT Merger, the Company recorded restructuring and other special charges totaling $185 million (pretax) in the third quarter of 1998 for (i) ITT Merger-related costs and (ii) write-down of certain assets. At September 30, 1999, the Company had remaining accruals related to these 1998 restructuring and other special charges of approximately $9 million primarily related to costs to be incurred to complete the integration of the Company's reservations systems, integration of global benefits programs and other ITT Merger-related costs, which will be paid out over the next several quarters. During the second quarter of 1999, the Company reversed approximately $50 million in restructuring charges recorded during 1997 due to the resolution of certain employment related contingencies, net of restructuring and other special charges of $5 million attributed to the rationalization of one of Starwood's technical centers and $4 million attributed to the severance benefits for the former President and Chief Operating Officer of the Corporation. Additionally, in the second quarter of 1999, the Company recorded a tax benefit of $37 million primarily related to the resolution of certain employment related contingencies, which is included in income tax expense in the accompanying consolidated statements of operations. During 1997, ITT recorded pretax charges totaling $260 million to restructure and rationalize operations at its World Headquarters and the headquarters of its field operations. Additionally, ITT recorded restructuring and other special charges in connection with the ITT Merger totaling $600 million. At September 30, 1999, the Company had remaining accruals related to these restructuring and other special charges of approximately $64 million primarily related to remaining lease commitments which expire through 2006 and certain employee benefits scheduled to be utilized in the first quarter of 2000. 14 16 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 8. EXTRAORDINARY ITEM In August 1999, Caesars World, Inc., a wholly owned subsidiary of the Company, redeemed its senior subordinated notes for an aggregate payment of $152 million, recognizing an extraordinary pretax loss of $3 million. NOTE 9. STOCKHOLDERS' EQUITY As a part of its ongoing Share repurchase program, the Company sold equity put options during 1998 for $1.8 million, which entitled the holder, at the expiration date, to sell one million Shares to the Company at contractually specified prices. During the first quarter of 1999, the Company repurchased 500,000 Shares for $16 million under a portion of the equity put option contracts. In the first quarter of 1999, all of the remaining equity put option contracts expired. Pursuant to its Share repurchase program, the Company repurchased approximately 1.6 million Shares in the open market at an average purchase price of $25.67 during the third quarter of 1999. NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into interest rate swap agreements to manage interest rate fluctuations on its variable rate debt. The Company currently has nine outstanding interest rate swap agreements under which the Company pays a fixed rate and receives variable rates of interest. The aggregate notional amount of these interest rate swaps was approximately $1.8 billion (including $700 million with an original maturity of less than one year) and the estimated unrealized gain on these interest rate swaps was approximately $7 million at September 30, 1999. The unrealized gain represents the amount the Company would receive upon the termination of the swap agreements based on current interest rates. From time to time, the Company enters into forward foreign exchange contracts to hedge the foreign currency exposure associated with the Company's foreign currency denominated assets and liabilities. The Company currently has four forward foreign exchange contracts outstanding with a U.S. dollar equivalent of the contractual amounts of these hedges at September 30, 1999 of approximately $85 million. These contracts mature through December 1999. NOTE 11. BUSINESS SEGMENT INFORMATION The Company has one operating segment, Hotels. The Hotels segment represents a worldwide network of owned, leased and consolidated joint venture hotels and resorts (operated primarily under the Company's proprietary brand names including Sheraton, Westin, St. Regis/Luxury Collection, Four Points and W) and hotels operated or flagged under these brand names in exchange for management and franchise fees. This segment also includes earnings from the Company's interests in unconsolidated joint ventures. 15 17 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS & RESORTS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The performance of the Hotels segment is evaluated primarily on operating profit before corporate selling, general and administrative expense, interest, gains and losses on the sale of real estate and investments, and restructuring and other special charges (credits). The Company does not allocate these items to this segment. The following table presents revenues, operating profit, assets and capital expenditures for the Company's reportable segment:
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ---------------- 1999 1998 1999 1998 ----- ----- ------ ------ Revenues................................................... $956 $884 $2,775 $2,394 ==== ==== ====== ====== Operating profit (a)(b).................................... $214 $200 $ 622 $ 496 ==== ==== ====== ======
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ Assets: Hotels.................................................... $11,931 $11,827 Corporate................................................. 246 487 Discontinued operations................................... 1,061 1,103 ------- ------- $13,238 $13,417 ======= =======
NINE MONTHS ENDED SEPTEMBER 30, -------------- 1999 1998 ----- ----- Capital expenditures........................................ $120 $164 ==== ====
- ------------------- (a) Hotels operating profit has been reduced by the minority-owned portion of consolidated joint ventures totaling $15 and $8 for the three months ended September 30, 1999 and 1998, respectively, and $27 and $23 for the nine months ended September 30, 1999 and 1998, respectively. (b) The following costs are not allocated to Hotels in evaluating operating profit:
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- -------------- 1999 1998 1999 1998 ----- ----- ----- ----- Corporate selling, general and administrative............... $14 $ 41 $ 59 $ 72 Restructuring and other special charges (credits)........... $-- $185 $(41) $185
NOTE 12. SUBSEQUENT EVENTS The Company currently owns approximately 70.32% of the ordinary shares and approximately 30.85% of the outstanding savings shares of CIGA S.p.A. On October 29, 1999, the Company announced that one of its wholly owned subsidiaries has notified the Borsa Italiana S.p.A., CONSOB and CIGA S.p.A. that it intends to make a tender offer to purchase all of the outstanding shares of CIGA S.p.A. not currently owned. If all of the shares are tendered, the aggregate purchase price would be approximately $297 million. NOTE 13. RECLASSIFICATIONS Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. 16 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FORWARD-LOOKING STATEMENTS Forward-looking statements contained herein include, but are not limited to, statements relating to the Company's objectives, strategies and plans, and all statements (other than statements of historical fact) that address actions, events or circumstances that the Company or its management expects, believes or intends will occur in the future. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated at the time the forward-looking statements are made, including, without limitation, risks and uncertainties associated with the following: the Reorganization; the Trust's continued ability to qualify for taxation as a REIT; completion of future acquisitions and dispositions, including the pending sale of the Company's gaming operations; the availability of capital for acquisitions and for renovations; execution of hotel renovation and expansion programs; the ability to maintain existing management, franchise or representation agreements and to obtain new agreements on favorable terms; competition within the lodging industry; the cyclicality of the real estate business and the hotel business; foreign exchange fluctuations; general real estate and national and international economic conditions; political, financial and economic conditions and uncertainties in countries in which the Company owns property or operates; the ability of the Company, owners of properties it manages or franchises and others with which it does business to address the Year 2000 issue, and the costs associated therewith; the adoption by several European countries of the Euro as their national currency; and the other risks and uncertainties set forth in Starwood's annual, quarterly and current reports and proxy statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. RESULTS OF OPERATIONS To facilitate a meaningful comparison between periods, this Management's Discussion and Analysis focuses on the comparison of historical information for the three and nine months ended September 30, 1999 with the historical information for the three months ended September 30, 1998 and the Historical As Adjusted (as defined below) information for the nine months ended September 30, 1998, respectively. Pro forma information for selling, general and administrative and interest expense for these same periods is also provided. Management believes this information provides the most meaningful comparison among periods presented. The Historical As Adjusted information for the three and nine months ended September 30, 1998 reflects the historical results of ITT, inclusive of Starwood and Westin, as if the ITT Merger had taken place on January 1, 1998. The pro forma information reflects the ITT Merger and certain actual and planned asset dispositions as if they had occurred on January 1, 1998. Period-to-period comparisons of the Company's historical information are, in management's view, less relevant to an understanding of the Company due to the significance of the ITT Merger, the Westin Merger and the dispositions of certain non-core assets. 17 19 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 The following unaudited condensed consolidated pro forma statements of operations for the three and nine months ended September 30, 1999 give effect as of January 1, 1999 to certain actual and planned asset dispositions and certain cost savings relating to the ITT Merger. The pro forma information is based upon the historical financial information for the Company for the three and nine months ended September 30, 1999 and the assumptions and adjustments set forth below. The pro forma information does not purport to present what actual results would have been had such transactions, in fact, occurred at January 1, 1999, or to project results for any future period.
THREE MONTHS ENDED SEPTEMBER 30, 1999 -------------------------------------- PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) REVENUES Owned, leased and consolidated joint venture hotels........ $ 855 $ -- $ 855 Management and franchise fees.............................. 70 -- 70 Unconsolidated joint ventures and other.................... 31 -- 31 ----- ---- ----- 956 -- 956 ----- ---- ----- COSTS AND EXPENSES Owned, leased and consolidated joint venture hotels........ 587 -- 587 Selling, general and administrative........................ 37 -- 37 Depreciation and amortization.............................. 117 -- 117 ----- ---- ----- 741 -- 741 ----- ---- ----- 215 -- 215 Interest expense, net...................................... (125) 34(a) (90) 1(b) Losses on sales of real estate and investments............. (8) -- (8) ----- ---- ----- 82 35 117 Income tax expense......................................... (28) (12) (40) Minority equity............................................ (10) -- (10) ----- ---- ----- Income from continuing operations.......................... $ 44 $ 23 $ 67 ===== ==== ===== Earnings per Share -- basic................................ $0.23 $0.35 ===== ===== Earnings per Share -- diluted.............................. $0.23 $0.34 ===== ===== Weighted average number of Shares.......................... 186 186 ===== ===== Weighted average number of Shares assuming dilution........ 187 195 ===== =====
- ------------------- (a) Represents the reduction of interest expense assuming the partial paydown of the Company's senior secured notes facility ("Senior Secured Notes Facility") with a portion of the estimated $3.2 billion of net proceeds from the pending sale of the Company's gaming operations (including the Desert Inn), net of the interest allocated to discontinued operations in the historical results (see Note 4 in the notes to financial statements). (b) Represents reduced deferred loan fee amortization on debt assumed to have been paid down as of January 1, 1999 with proceeds from the disposition of the Company's gaming operations (including the Desert Inn). 18 20
NINE MONTHS ENDED SEPTEMBER 30, 1999 -------------------------------------- PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) REVENUES Owned, leased and consolidated joint venture hotels........ $2,496 $ -- $ 2,496 Management and franchise fees.............................. 195 -- 195 Unconsolidated joint ventures and other.................... 84 -- 84 ------ ---- ------- 2,775 -- 2,775 ------ ---- ------- COSTS AND EXPENSES Owned, leased and consolidated joint venture hotels........ 1,709 -- 1,709 Selling, general and administrative........................ 123 (7)(a) 116 Restructuring and other special credits.................... (41) -- (41) Depreciation and amortization.............................. 353 -- 353 ------ ---- ------- 2,144 (7) 2,137 ------ ---- ------- 631 7 638 Interest expense, net...................................... (364) 87(b) (266) 4(c) 7(d) Gains on sales of real estate and investments.............. 22 -- 22 Miscellaneous expense...................................... (15) -- (15) ------ ---- ------- 274 105 379 Income tax expense......................................... (999) (38) (1,037) Minority equity............................................ (14) -- (14) ------ ---- ------- Income (loss) from continuing operations................... $ (739) $ 67 $ (672) ====== ==== ======= Earnings per Share -- basic................................ $(3.98) $ (3.62) ====== ======= Earnings per Share -- diluted.............................. $(3.98) $ (3.62) ====== ======= Weighted average number of Shares.......................... 186 186 ====== ======= Weighted average number of Shares assuming dilution........ 186 186 ====== =======
- ------------------- (a) Represents the estimated savings resulting from the combination of certain identified benefit plans as a result of the ITT Merger as if the new combined plans had been in place as of January 1, 1999. (b) Represents the reduction of interest expense assuming the partial paydown of the Company's Senior Secured Notes Facility with a portion of the estimated $3.2 billion of net proceeds from the pending sale of the Company's gaming operations (including the Desert Inn), net of the interest allocated to discontinued operations in the historical results (see Note 4 in the notes to financial statements). (c) Represents the reduction of interest expense assuming the paydown of a portion of the Senior Credit Facility with the net proceeds of approximately $397 million from the disposition of ITT's remaining interest in MSG and Educational Services as if those dispositions had occurred on January 1, 1999. (d) Represents reduced deferred loan fee amortization on debt assumed to have been paid down as of January 1, 1999 with proceeds from actual and planned asset dispositions described in (b) and (c) above. 19 21 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 The following unaudited condensed consolidated pro forma statements of operations for the three and nine months ended September 30, 1998 give effect as of January 1, 1998 to the ITT Merger and certain actual and planned asset dispositions. The pro forma information for the three months ended September 30, 1998 is based upon the historical information for the Company for the three months ended September 30, 1998 and the assumptions and adjustments set forth below. The pro forma information for the nine months ended September 30, 1998 is based upon the total of historical information for the Company for the nine months ended September 30, 1998 combined with the historical results of the Corporation (including Westin) and the Trust prior to the ITT Merger on February 23, 1998 ("Historical As Adjusted") and other assumptions and adjustments set forth below. These statements do not purport to present what actual results would have been had such transactions, in fact, occurred at January 1, 1998, or to project results for any future period.
THREE MONTHS ENDED SEPTEMBER 30, 1998 -------------------------------------- PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) REVENUES Owned, leased and consolidated joint venture hotels......... $ 800 $ -- $ 800 Management and franchise fees............................... 55 -- 55 Unconsolidated joint ventures and other..................... 29 -- 29 ------ ----- ------ 884 -- 884 ------ ----- ------ COSTS AND EXPENSES Owned, leased and consolidated joint venture hotels......... 545 -- 545 Selling, general and administrative......................... 67 (22)(a) 45 Restructuring and other special charges..................... 185 -- 185 Depreciation and amortization............................... 105 -- 105 ------ ----- ------ 902 (22) 880 ------ ----- ------ (18) 22 4 Interest expense, net....................................... (158) 8(b) (119) 26(c) 5(d) ------ ----- ------ (176) 61 (115) Income tax (expense) benefit................................ 102 (56)(e) 46 Minority equity............................................. (5) -- (5) ------ ----- ------ Income (loss) from continuing operations.................... $ (79) $ 5 $ (74) ====== ===== ====== Earnings per Share -- basic................................. $(0.42) $(0.39) ====== ====== Earnings per Share -- diluted............................... $(0.42) $(0.39) ====== ====== Weighted average number of Shares........................... 199 199 ====== ====== Weighted average number of Shares assuming dilution......... 199 199 ====== ======
- ------------------- (a) Represents the estimated savings resulting from the combination of certain identified benefit plans for the period from January 1, 1998 to September 30, 1998, as a result of the ITT Merger, as if the new combined plans had been in place as of January 1, 1998. (b) Represents the reduction of interest expense assuming the paydown of a portion of the Company's Senior Credit Facility with the net proceeds of approximately $932 million from the following asset dispositions, as if the dispositions had occurred on January 1, 1998. The dispositions include ITT's interest in WBIS+, Channel 31 in New York City; MSG; Educational Services; and the sale of an aircraft. (c) Represents the reduction of interest expense assuming the partial paydown of the Senior Secured Notes Facility with a portion of the estimated $3.2 billion of net proceeds from the pending sale of the Company's gaming operations (including the Desert Inn), net of the interest allocated to discontinued operations in the historical results (see Note 4 in the notes to financial statements). (d) Represents reduced deferred loan fee amortization on debt assumed to have been paid down as of January 1, 1998 with proceeds from the actual and planned asset dispositions described in (b) and (c) above. (e) Represents the adjustment needed to reflect an effective tax rate of 40% on historical net income and the pro forma adjustments, assuming the Reorganization had occurred effective January 1, 1998. 20 22
NINE MONTHS ENDED SEPTEMBER 30, 1998 -------------------------------------------------------------------- OTHER PRO FORMA HISTORICAL PRO FORMA HISTORICAL STARWOOD(a) AS ADJUSTED ADJUSTMENTS PRO FORMA ---------- ----------- ----------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) REVENUES Owned, leased and consolidated joint venture hotels......................... $2,154 $241 $2,395 $ -- $2,395 Management and franchise fees........... 163 6 169 -- 169 Unconsolidated joint ventures and other................................. 77 14 91 -- 91 ------ ---- ------ ------ ------ 2,394 261 2,655 -- 2,655 ------ ---- ------ ------ ------ COSTS AND EXPENSES Owned, leased and consolidated joint venture hotels........................ 1,470 176 1,646 -- 1,646 Selling, general and administrative..... 168 11 179 (31)(b) 148 Restructuring and other special charges............................... 185 -- 185 -- 185 Depreciation and amortization........... 309 43 352 13(c) 365 ------ ---- ------ ------ ------ 2,132 230 2,362 (18) 2,344 ------ ---- ------ ------ ------ 262 31 293 18 311 Interest expense, net................... (322) (25) (347) (39)(d) (269) 37(e) 66(f) 3(g) 11(h) Gain on sale of real estate and investments........................... 51 -- 51 -- 51 ------ ---- ------ ------ ------ (9) 6 (3) 96 93 Income tax expense...................... 66 (2) 64 (101)(i) (37) Minority equity......................... (12) 1 (11) -- (11) ------ ---- ------ ------ ------ Income (loss) from continuing operations............................ $ 45 $ 5 $ 50 $ (5) $ 45 ====== ==== ====== ====== ====== Earnings per Share -- basic............. $ 0.16 $ 0.16 ====== ====== Earnings per Share -- diluted........... $ 0.16 $ 0.15 ====== ====== Weighted average number of Shares....... 194 194 ====== ====== Weighted average number of Shares assuming dilution..................... 194 197 ====== ======
- ------------------- (a) Represents the historical results of the Corporation and the Trust, inclusive of Westin, for the period of January 1, 1998 through the closing of the ITT Merger on February 23, 1998. (b) Represents the effects of termination of certain executives under contractual severance agreements, net of additional costs for new executives under employment contracts, removal of duplicate third-party consulting fees, termination of certain advertising contracts and rental agreements (less related termination fees) and the estimated savings resulting from the combination of certain identified benefit plans as if the new combined plans had been in place as of January 1, 1998. (c) Represents the amortization expense related to the goodwill and intangible assets recorded as a result of the purchase consideration exceeding the fair market value of the combined net assets of Starwood and Westin, as if the merger transactions had taken place on January 1, 1998. (d) Represents the interest expense on the additional debt incurred to finance the ITT Merger for the period January 1, 1998 through February 23, 1998 at the Company's average borrowing rate. (e) Represents the reduction of interest expense assuming the paydown of a portion of the Company's Senior Credit Facility with the net proceeds of approximately $932 million from the following asset dispositions, as if the dispositions had occurred on January 1, 1998. The dispositions include ITT's interest in WBIS+, Channel 31 in New York City; MSG; Educational Services; and the sale of an aircraft. (f) Represents the reduction of interest expense assuming the partial paydown of the Senior Secured Notes Facility with a portion of the estimated $3.2 billion of net proceeds from the pending sale of the Company's gaming operations (including the Desert Inn), net of the interest allocated to discontinued operations in the historical results (see Note 4 in the notes to financial statements). (g) Represents the reduction of interest expense for the paydown of term loans with the net proceeds of $239 million from the sale of 4.6 million Shares on February 24, 1998 as if such offering had taken place on January 1, 1998. (h) Represents reduced deferred loan fee amortization on debt assumed to have been paid down as of January 1, 1998 with proceeds from the actual and planned asset dispositions described in (e) and (f) above. (i) Represents the adjustment needed to reflect an effective tax rate of 40% on historical net income and the pro forma adjustments, assuming the Reorganization had occurred effective January 1, 1998. 21 23 HISTORICAL THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH HISTORICAL/HISTORICAL AS ADJUSTED THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 CONTINUING OPERATIONS Revenues. Revenues increased 8.1% and 4.5% to $956 million and $2.775 billion for the three and nine months ended September 30, 1999, respectively, when compared to the corresponding periods in 1998. The increase in revenues was primarily due to the 6.9% and 4.2% increase in revenues for the Company's owned, leased and consolidated joint venture hotels to $855 million and $2.496 billion for the three and nine months ended September 30, 1999, respectively, when compared to $800 million and $2.395 billion in the corresponding periods of 1998. The increase resulted primarily from the 5.3% and 5.9% increase in revenues at the Company's 169 owned, leased and consolidated joint venture hotels (excluding minority interest in consolidated joint ventures) held in both periods ("Same-Store Hotels") to $777 million and $2.337 billion for the three and nine months ended September 30, 1999, respectively, when compared to $737 million and $2.207 billion in the same periods of 1998. The increase also resulted from the acquisition, in July 1999, of the Westin hotel in Maui (the Company previously had a 95% non-controlling interest in this property), the opening of the 423-room W hotel in San Francisco in May 1999 and the 426-room W hotel in Seattle in September 1999. The increase in revenues for the nine months ended September 30, 1999 was offset, in part, by a $27 million decrease in revenues as a result of the sale of nine hotels in May 1998 and the sale of the Westin Central Park South in New York in July 1999. The increase in revenues at the Same-Store Hotels resulted from an increase in revenue per available room ("REVPAR") at these hotels of 4.9% and 3.5% to $105 and $103 for the three and nine months ended September 30, 1999, respectively, when compared to the same periods of 1998. The increase in REVPAR at these hotels was attributed to an increase in average daily rate ("ADR") of 3.6% and 3.5% to $145 and $147 for the three and nine months ended September 30, 1999, respectively, when compared to the corresponding 1998 periods. Occupancy for Same-Store Hotels rose to 72.3% from 71.4% in the three months ended September 30, 1999 when compared to the same period in 1998, and for the nine months ended September 30, 1999 versus 1998, occupancy remained flat at 70.0%. REVPAR at Same-Store Hotels in North America increased 6.0% and 3.8% for the three and nine months ended September 30, 1999, respectively, when compared to the same periods of 1998. REVPAR at the Company's international owned, leased and consolidated joint venture hotels increased 3.0% and 2.9% for the three and nine months ended September 30, 1999, respectively, when compared to the same periods of 1998. Management and franchise fees earned by Starwood increased 27.3% and 15.4% to $70 million and $195 million for the three and nine months ended September 30, 1999, respectively, when compared to $55 million and $169 million in the corresponding periods of 1998. The increase resulted primarily from the addition of hotels to the Company's management and franchise system and the stronger performance at the Company's existing managed and franchised hotels. The Company added 14 and 77 hotels to the management and franchise system during the three and nine months ended September 30, 1999, respectively, offset by 3 and 18 hotels deleted from the system during the same periods. Revenues from unconsolidated joint ventures and other were $31 million and $84 million for the three and nine months ended September 30, 1999, respectively, versus $29 million and $91 million, respectively, in the same periods of 1998. Costs and Expenses. Costs and expenses for the Company's owned, leased and consolidated joint venture hotels increased 7.7% and 3.8% to $587 million and $1.709 billion for the three and nine months ended September 30, 1999, respectively, when compared to $545 million and $1.646 billion in the corresponding periods of 1998. The increase in costs and expenses is due primarily to the reopening of hotels in late 1998 that were not operating at full capacity during most of 1998 because they were under renovation as well as the addition of the Westin hotel in Maui and the opening of the W hotels in San Francisco and Seattle discussed above. Selling, general and administrative expenses were $37 million and $67 million for the three months ended September 30, 1999 and 1998, respectively. The decrease was primarily due to the inclusion, in the 1998 period, of a $30 million charge primarily related to the vesting of certain restricted stock granted earlier in 1998 to the former President and Chief Operating Officer of the Company. The decrease was also due to savings associated with the ITT Merger and Westin Merger that resulted in the ITT World Headquarters 22 24 closure in New York and a significant downsizing at the Westin office in Seattle, Washington and the Sheraton office in Boston, Massachusetts, offset by the increase in corporate employees at the Company's new headquarters in White Plains, New York. Selling, general and administrative expenses were $123 million and $179 million for the nine months ended September 30, 1999 and 1998, respectively. This decrease was primarily due to the 1998 vesting of restricted stock and savings associated with the ITT Merger and Westin Merger noted above, offset by the increase in corporate employees also noted above and by the inclusion in selling, general and administrative expenses, in the first quarter of 1998, of a foreign exchange gain of $7 million. EBITDA.(1) EBITDA at the Company's owned, leased and consolidated joint venture hotels rose approximately 6.8% and 5.6% to $252 million and $755 million for the three and nine months ended September 30, 1999, respectively, when compared to the same periods in 1998. This increase is due, in part, to the addition of the Westin hotel in Maui and the W hotels in San Francisco and Seattle discussed previously, offset by an approximate $11 million reduction in EBITDA as a result of the sale of nine hotels in May 1998 and the Westin Central Park South in July 1999. EBITDA for the Company's Same-Store Hotels increased to $244 million and $747 million for the three and nine months ended September 30, 1999, respectively, from $231 million and $704 million for the three and nine months ended September 30, 1998, respectively. The EBITDA improvement at the Same-Store Hotels was due primarily to the increase in ADR discussed previously. Depreciation and Amortization. Depreciation and amortization expense increased to $117 million and $353 million in the three and nine months ended September 30, 1999, respectively, compared to $105 million and $352 million in the corresponding periods of 1998. The increase in depreciation expense for the three months ended September 30, 1999 was primarily attributed to the addition of the Westin hotel in Maui and the opening of the W hotels in San Francisco and Seattle. The increase for the nine months ended September 30, 1999 was primarily attributed to the hotel additions discussed above, offset by a reduction in depreciation expense as a result of the sale of nine hotels in May 1998. The increase in depreciation expense for the three and nine months ended September 30, 1999 was also attributed to the completion, in December 1998, of a significant renovation of the W hotel in New York, New York. Net Interest Expense. Interest expense for the three months ended September 30, 1999 and 1998, which is net of interest income of $5 million and $6 million, respectively, and discontinued gaming operations allocations of $42 million and $40 million, respectively, decreased to $125 million from $158 million. The decrease relates primarily to the inclusion, in the third quarter of 1998, of a $40 million non-recurring charge associated with the settlement of certain forward interest swap agreements as well as a reduction in debt of approximately $730 million from the proceeds of non-core asset dispositions since the third quarter of 1998, partially offset by an increase in the average debt balance due to the repurchase of approximately $720 million in Shares since the middle of the third quarter of 1998. Interest expense for the nine months ended September 30, 1999 and 1998, which is net of interest income of $15 million and $22 million, respectively, and discontinued gaming operations allocations of $122 million and $120 million, respectively, was $364 million and $347 million, respectively. The increase relates primarily to the debt incurred to finance the ITT Merger and Westin Merger, the inclusion in 1998, of the $40 million non-recurring charge noted above, the repurchase of Shares and capital expenditures, offset by the reduction in debt from the proceeds from dispositions noted previously. - --------------- (1) EBITDA is defined as income before interest expense, income tax expense, depreciation and amortization and minority interest. Non-recurring items and gains and losses from sales of real estate and investments are also excluded from EBITDA as these items do not impact operating results on a recurring basis. Management considers EBITDA to be one measure of the cash flows from operations of the Company before debt service that provides a relevant basis for comparison, and EBITDA is presented to assist investors in analyzing the performance of the Company. This information should not be considered as an alternative to any measure of performance as promulgated under generally accepted accounting principles, nor should it be considered as an indicator of the overall financial performance of the Company. The Company's calculation of EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. 23 25 DISCONTINUED OPERATIONS Results for the Company's gaming operations and former investments in WD and Educational Services are included in discontinued operations in the nine months ended September 30, 1999 and the three and nine months ended September 30, 1998. Net loss from discontinued operations was $27 million and $59 million for the three and nine months ended September 30, 1998, respectively. These results include the allocation of pretax corporate interest expense of $40 million and $120 million in the three and nine months ended September 30, 1998, respectively. The anticipated operating results of the gaming operations were provided for in the first quarter of 1999 in the estimated net loss on the disposal of the discontinued gaming operations. The after-tax loss on the disposition of discontinued operations for the nine months ended September 30, 1999 was $7 million and includes, on an after-tax basis, a $173 million gain on the sale of the Company's remaining interest in Educational Services, offset by an estimated $180 million loss on the pending disposition of the Company's gaming operations. After-tax gains of $25 million and $1.165 billion were recognized in the three and nine months ended September 30, 1998, respectively, in connection with the Educational Services and WD dispositions. Revenues from discontinued gaming operations increased 2.8% and 12.1% to $402 million and $1.164 billion for the three and nine months ended September 30, 1999, respectively, when compared to the corresponding periods of 1998. Costs and expenses from discontinued gaming operations for the three and nine months ended September 30, 1999 increased 4.8% and 11.1% to $349 million and $1.033 billion, respectively, when compared to the same periods of 1998. Costs and expenses exclude a third quarter 1998 restructuring charge of $55 million relating to a write-down of certain receivables and an investment in a shared services center established by ITT. The increase in revenues and costs and expenses resulted primarily from the opening of Caesars Indiana in November 1998. The results of the discontinued gaming operations from April 1, 1999 (date of announcement of the formal plan to dispose of gaming operations) through September 30, 1999 are included in the net gain (loss) on the disposition of discontinued operations for the three and nine months ended September 30, 1999 as noted previously. EBITDA from discontinued gaming operations for the three and nine months ended September 30, 1999 was $102 million and $275 million, respectively, compared to $96 million and $213 million in the corresponding periods of 1998. EBITDA excludes a third quarter 1998 restructuring charge of $55 million discussed above. The increase in gaming EBITDA resulted from improved performances at Caesars Atlantic City and the opening of Caesars Indiana. PRO FORMA THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH PRO FORMA THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 The discussion and analysis above regarding Historical and Historical As Adjusted results is applicable to the operating results of the Company on a pro forma basis except for selling, general and administrative expenses and interest expense. Therefore, the following discussion and analysis of pro forma results is provided to facilitate a meaningful comparison of these expenses between periods. CONTINUING OPERATIONS Costs and Expenses. Selling, general and administrative expenses decreased to $37 million from $45 million for the three months ended September 30, 1999 and 1998, respectively. The decrease was primarily due to the inclusion, in the 1998 period, of a $30 million charge primarily related to the vesting of certain restricted stock granted earlier in 1998 to the former President and Chief Operating Officer of the Company. The decrease was also due to savings associated with the ITT Merger and Westin Merger that resulted in the ITT World Headquarters closure in New York and a significant downsizing at the Westin office in Seattle, Washington and the Sheraton office in Boston, Massachusetts, offset by the increase in corporate employees at the Company's new headquarters in White Plains, New York and the inclusion, in the third quarter of 1998, of a $22 million pro forma adjustment to reflect the identified savings from the combination of certain benefit plans of which $15 million related to the first and second quarters of 1998. Selling, general and administrative expenses decreased to $116 million from $148 million for the nine months ended September 30, 1999 and 24 26 1998, respectively. This decrease was due primarily to the 1998 vesting of restricted stock and savings associated with the ITT Merger and Westin Merger noted above, offset by the increase in corporate employees noted above and the inclusion in selling, general and administrative expenses, in the first quarter of 1998, of a foreign exchange gain of $7 million. Net Interest Expense. Interest expense for the three months ended September 30, 1999 and 1998, which is net of interest income of $5 million and $6 million, respectively, and discontinued gaming operations allocations of $76 million and $62 million in 1999 and 1998, respectively, decreased to $90 million in 1999 from $119 million in 1998. Interest expense for the nine months ended September 30, 1999 and 1998, which is net of interest income of $15 million and $22 million, respectively, and discontinued gaming operations allocations of $209 million and $201 million in 1999 and 1998, respectively, decreased to $266 million in 1999 from $269 million in 1998. These decreases relate primarily to the inclusion, in the third quarter of 1998, of a $40 million non-recurring charge associated with the settlement of certain forward interest swap agreements, partially offset by an increase in the average debt balance due to the repurchase of approximately $720 million of Shares since the middle of the third quarter of 1998 in connection with the Company's Share repurchase program. SEASONALITY AND DIVERSIFICATION The hotel industry is seasonal in nature; however, the periods during which the Company's properties experience higher hotel revenue activities vary from property to property and depend principally upon location. The Company's revenues historically have been lower in the first quarter than in the second, third or fourth quarters. COMPARABLE OWNED HOTEL RESULTS Starwood continually updates and renovates its owned, leased and consolidated joint venture hotels. While undergoing renovation, these hotels are generally not operating at full capacity and, as such, these renovations can negatively impact Starwood's hotel revenues. Starwood expects to continue renovating its owned, leased and consolidated joint venture hotels in the fourth quarter of 1999 and 2000 to pursue its brand and quality strategies. The following table summarizes average occupancy, ADR and REVPAR for the Company's comparable owned, leased and consolidated joint venture hotel properties for the three and nine months ended September 30, 1999 and 1998. The results for the three months represent results for 153 owned, leased and consolidated joint venture hotels (excluding 19 hotels under significant renovation, held for sale or for which comparable results are not available). The results for the nine months represent results for 144 owned, leased and consolidated joint venture hotels (excluding 28 hotels under significant renovation, held for sale or for which comparable results are not available). 25 27 OWNED, LEASED AND CONSOLIDATED JOINT VENTURE HOTELS
THREE MONTHS ENDED SEPTEMBER 30, ---------------------- 1999 1998 VARIANCE ------- ------- -------- WORLDWIDE Number of hotels........................................... 153 Number of rooms............................................ 49,335 REVPAR..................................................... $106.58 $101.77 4.7% ADR........................................................ $145.94 $141.46 3.2% Occupancy.................................................. 73.0% 71.9% 1.1 NORTH AMERICA Number of hotels........................................... 105 Number of rooms............................................ 35,925 REVPAR..................................................... $100.93 $ 95.79 5.4% ADR........................................................ $134.90 $131.48 2.6% Occupancy.................................................. 74.8% 72.9% 1.9 INTERNATIONAL Number of hotels........................................... 48 Number of rooms............................................ 13,410 REVPAR..................................................... $121.86 $117.67 3.6% ADR........................................................ $178.67 $169.24 5.6% Occupancy.................................................. 68.2% 69.5% (1.3)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 1999 1998 VARIANCE ------- ------- -------- WORLDWIDE Number of hotels........................................... 144 Number of rooms............................................ 44,973 REVPAR..................................................... $106.93 $102.29 4.5% ADR........................................................ $148.36 $143.27 3.6% Occupancy.................................................. 72.1% 71.4% 0.7 NORTH AMERICA Number of hotels........................................... 97 Number of rooms............................................ 31,884 REVPAR..................................................... $103.87 $ 98.79 5.1% ADR........................................................ $141.37 $137.04 3.2% Occupancy.................................................. 73.5% 72.1% 1.4 INTERNATIONAL Number of hotels........................................... 47 Number of rooms............................................ 13,089 REVPAR..................................................... $114.46 $110.76 3.3% ADR........................................................ $166.84 $158.87 5.0% Occupancy.................................................. 68.6% 69.7% (1.1)
26 28 LIQUIDITY AND CAPITAL RESOURCES CASH FLOW PROVIDED BY OPERATING ACTIVITIES Cash flow from operating activities is the principal source of cash used to fund the Company's operating expenses, interest expense, recurring capital expenditures and distribution payments by the Trust. The Company anticipates that cash flow provided by operating activities will be sufficient to service short-term and long-term indebtedness, fund maintenance requirements and capital expenditures and meet operating cash requirements, including all distributions to shareholders. CASH FLOW FROM INVESTING AND FINANCING ACTIVITIES In addition to cash flow from operating activities, the Company intends to finance the acquisition of additional hotel properties (including equity investments), hotel renovations, capital improvements and other core business acquisitions and provide for general corporate purposes through its credit facilities described below, through the net proceeds from dispositions of certain non-core assets and, when market conditions warrant, through the issuance of additional equity or debt securities. During 1998, the Company completed over $2.9 billion in non-core asset divestitures. As of January 1, 1999 through the date of this filing, Starwood has completed approximately $850 million of non-core asset divestitures. Management expects to complete the sale of its gaming operations (excluding the Desert Inn) and the Desert Inn for aggregate net proceeds of approximately $3.2 billion by year-end 1999 and the second quarter of 2000, respectively. In addition, the Company plans to evaluate its portfolio of owned hotels and dispose of non-strategic assets. The proceeds from the completed divestitures have been used primarily to retire debt, and the Company plans to use the proceeds generated from future divestitures to pay down debt, to buy back Shares and for general corporate purposes. As a result of the Reorganization, Starwood will pay significantly more in federal income taxes, and will have the ability to retain significantly more earnings than was previously the case. Starwood anticipates that its enhanced ability to retain earnings will allow it to utilize cash flow from operating activities to fund maintenance, capital expenditures and acquisitions. DISTRIBUTIONS. In connection with the Reorganization, the Company reduced its annual distribution to be paid by the Trust to $0.60 per Share. During the first, second and third quarters of 1999, the Trust paid a distribution of $0.15 per Share for the fourth quarter of 1998 and each of the first and second quarters of 1999. A distribution of $0.15 per Share for the third quarter of 1999 was paid on October 22, 1999. 27 29 Following is a summary of the Company's debt portfolio as of September 30, 1999:
AMOUNT OUTSTANDING AT INTEREST RATE AT AMOUNT OF SEPTEMBER 30, SEPTEMBER 30, AVERAGE FACILITY 1999 INTEREST TERMS 1999 MATURITY --------- -------------- -------------- ---------------- ---------- (DOLLARS IN MILLIONS) FLOATING RATE DEBT Senior Credit Facility: Five-Year Term Loan........... $1,000 $ 1,000 LIBOR+1.00% 6.40% 3.4 years Revolving Credit Facility..... 1,100 588 LIBOR+1.00% 6.40% 3.4 years Senior Secured Notes Facility: Tranche One Loans............. 2,500 2,500 LIBOR+3.75% 9.15% 3.4 years Tranche Two Loans............. 1,000 1,000 LIBOR+2.75% 8.15% 3.4 years Mortgages and other............. 477 Various 6.06% 5.2 years Long-term interest rate swaps... (1,083) 5.39% -- ------- Total/average................... $ 4,482 8.53% 3.6 years ======= ===== ========== FIXED RATE DEBT ITT public debt................. $ 1,995 6.79% 7.9 years Mortgages and other............. 870 7.36% 11.6 years Long-term interest rate swaps... 1,083 6.04% -- ------- Total/average................... $ 3,948 6.71% 8.9 years ======= ===== ========== TOTAL DEBT Total debt and average terms.... $ 8,430 7.68% 5.4 years ------- ===== ========== Less: debt allocated or attributable to discontinued gaming operations............. (2,182) ------- Total debt directly attributable to continuing operations...... $ 6,248 =======
In February 1999, the Company entered into a $542 million long-term mortgage financing ("Mortgage Loan"), secured by the assets of special purpose subsidiaries, which assets consist primarily of a portfolio of 11 hotels. This obligation bears interest at a blended rate of 6.98%, matures February 2009 and includes various restrictive covenants including, but not limited to, various cash restrictions, capital expenditure requirements and restrictions on the sale of the hotels. The proceeds from this facility were used to pay down the asset sale loan under the Senior Credit Facility. In March 1999, certain subsidiaries of the Company entered into an $83 million long-term debt obligation secured by mortgages on two international hotels. This obligation bears interest at LIBOR plus 1.35%, matures in March 2006 and is subject to various restrictive covenants including maintaining a minimum debt service coverage ratio. The proceeds from this financing were used to pay down certain intercompany loans due from the international hotels. In August 1999, Caesars World, Inc., a wholly owned subsidiary of the Company, redeemed senior subordinated notes for an aggregate payment of $152 million recognizing an extraordinary pretax loss of $3 million. Based upon the current level of operations, the proceeds from recent dispositions and the expected disposition of the gaming operations, together with available borrowings under the Senior Credit Facility, management believes that the Company's cash flow from operations will be adequate to meet the Company's anticipated requirements for working capital, capital expenditures, marketing and advertising expenditures, program and other discretionary investments, interest payments and scheduled principal payments for the foreseeable future, including at least the next three years. There can be no assurance, however, that the 28 30 Company's business will continue to generate cash flow at or above current levels or that currently anticipated improvements will be achieved. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt, the Company may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing debt or obtain additional financing. The Company's ability to make scheduled principal payments, to pay interest on or to refinance its indebtedness depends on its future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond the Company's control. There can be no assurance that sufficient funds will be available to enable the Company to service its indebtedness or to make necessary capital expenditures, marketing and advertising expenditures and program and other discretionary investments. STOCK SALES AND REPURCHASES As a part of its ongoing Share repurchase program, the Company sold equity put options during 1998 for $1.8 million, which options entitled the holder, at the expiration date, to sell one million Shares to the Company at contractually specified prices. During the first quarter of 1999, the Company repurchased 500,000 Shares for $16 million under a portion of the equity put option contracts. In the first quarter of 1999, all of the remaining equity put option contracts had expired. Pursuant to the Share repurchase program, the Company repurchased approximately 1.6 million Shares in the open market at an average purchase price of $25.67 during the third quarter of 1999. OTHER MATTERS YEAR 2000 Many computer systems were originally designed to recognize calendar years by the last two digits in the date code field. Beginning with dates in the year 2000, these date code fields need to accept four-digit entries to distinguish twenty-first century dates from twentieth century dates ("Year 2000 Compliant"). As a result, the computerized systems, which include information technology and non-information technology systems, and applications used by the Company need to be reviewed, evaluated and modified or replaced, if necessary, to ensure all such financial, information and operational systems are Year 2000 Compliant. STATE OF READINESS. Starwood is addressing the Year 2000 Compliance issue by separately focusing on the Company's central facilities, which include all of its non-operating facilities, and on the Company's hotel properties. Starwood has identified the critical central facility business applications that may be affected by the Year 2000, such as the reservation system application, including the frequent stay programs, and communication system applications. The Company has conducted the discovery and assessment stages on the reservations and communication system applications and assembled a team to implement modifications or upgrades, as necessary, and to test results. The majority of the Company's core business applications passed the final testing, which was performed by internal personnel and independent third parties in the second quarter of 1998. This testing process consisted of testing of the internal code and conducting over 9,000 test cases on the applicable systems. The specific testing included a three-step process comprised of baseline tests, Year 2000 date tests and code enhancement tests. Additional independent and internal testing took place during 1999 that validated previous findings of Year 2000 readiness. Starwood has communicated with others with whom it does significant business to determine their Year 2000 Compliance. During 1998, Starwood and an independent third-party reservation information service provider began testing to ensure the compatibility of the Company's reservation system with the service provider's reservation services. Starwood and this service provider have substantially completed their compatibility validation testing; although Starwood believes that these tests were successful, there can be no assurances that these systems are fully compatible for purposes of complete Year 2000 Compliance. 29 31 Starwood also assessed its hardware components at its central facilities, all of which were modified or upgraded, as necessary, to ensure Year 2000 Compliance. Starwood has completed the initial assessment of the applications and hardware at substantially all of the Company's owned and managed hotel properties. In the third quarter of 1998, validation tools and resources were deployed to the hotel properties that did not have an existing program in place. These tools consisted of asset management tools for analysis of all applications and data checking tools for patch application purposes and testing Year 2000 readiness of the equipment. Any equipment failing the testing was remediated. The domestic Year 2000 team has substantially completed its visits to domestic hotel properties. The team is comprised of independent consultants and five individuals from the Company that are dedicated to the Year 2000 project. Each of the international properties had appointed internal personnel to address Year 2000 Compliance and has access to such independent consultants, if necessary. The test statistics for the hotel property applications and hardware have been collected through the combined efforts of internal staff, Year 2000 team members and third-party consultants. Substantially all of the critical hotel property applications and hardware have satisfied Year 2000 Compliance verification. Starwood expects to address remaining remediation efforts by the end of 1999, although there can be no assurances that this will be completed by the end of 1999. YEAR 2000 PROJECT COSTS. Starwood estimates that total costs for the Year 2000 Compliance review, evaluation, assessment and remediation efforts for the central facilities and owned hotel properties should not exceed $20 million, although there can be no assurance that actual costs will not exceed this amount. Of this amount, approximately $13 million had been expended as of September 30, 1999. STARWOOD YEAR 2000 RISKS. Since all major computerized central facilities reservation systems and applications have been tested and reservations for the year 2000 have been accepted, Starwood believes that it has addressed all significant risks related to the Company's reservation function. The remaining risks relate primarily to the non-critical business applications, support hardware for the central facilities and embedded systems at the properties owned or managed by the Company. A failure of certain of these systems to become Year 2000 Compliant could disrupt the timeliness or the accuracy of management information provided by the central facilities. Starwood has asked substantially all of its significant vendors and service providers to provide reasonable assurances as to those parties' Year 2000 state of readiness. To the extent that vendors and service providers do not provide satisfactory evidence that their products and services are Year 2000 Compliant, the Company has and will continue to seek to obtain the necessary products and services from alternative sources. There can be no assurance, however, that Year 2000 remediation by vendors and service providers will be completed timely or that qualified replacement vendors and service providers will be available, and any failure of such third parties' systems could have a material adverse impact on the Company's computer systems and operations. CONTINGENCY PLAN. Starwood appointed an internal committee to direct the contingency planning efforts. This team is comprised of individuals who represent various disciplines within the organization. The team created contingency planning guidelines that were distributed to all hotels. The contingency planning has been substantially completed by a majority of hotels by October 31, 1999. Although it is expected that substantially all of the remaining hotels will have completed their contingency plans by November 30, 1999, there can be no assurance that they will be completed on schedule. Also, testing of these contingency plans, including training of hotel personnel, has commenced. The majority of critical contingency plans are expected to have been tested by November 30, 1999. The balance of this testing will continue throughout the month of December 1999. EUROPEAN UNION CURRENCY CONVERSIONS On January 1, 1999, 11 of the 15 member countries of the European Union (the "Participating Countries") established fixed conversion rates between their existing sovereign currencies and the Euro. Following the introduction of the Euro, the legacy currencies of the Participating Countries will remain legal tender during a transition period ending on January 1, 2002. During the transition period, both the legacy 30 32 currency and the Euro will be legal tender in the respective Participating Countries. During the transition period, currency conversions will be computed by a triangulation with reference to conversion rates between the respective currencies and the Euro. The Company currently operates in 10 of the 11 Participating Countries. The effect on the Company of the adoption of the Euro by the Participating Countries in which it operates is currently uncertain. However, it is possible that the Euro adoption will result in increased competition within the European market. In addition, a number of the Company's information systems are not currently Euro compliant. The Company is currently evaluating and updating its information systems to make them Euro compliant; however, there is no assurance that the Company or third-party vendors of applications used by the Company will successfully bring all of their systems into compliance. Failure of the Company or such third parties to do so could result in disruptions in the processing of transactions in Euros or computed by reference to the Euro. ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There were no material changes to the information provided in Item 7A in the Company's Joint Annual Report on Form 10-K, as amended, regarding the Company's market risk. 31 33 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is involved in various claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. As a part of its ongoing Share repurchase program, the Company sold equity put options during 1998 for $1.8 million, which options entitled the holder, at the expiration date, to sell one million Shares to the Company at contractually specified prices. During the first quarter of 1999, the Company repurchased 500,000 Shares for $16 million under a portion of the equity put option contracts. In the first quarter of 1999, all of the remaining equity put option contracts had expired. The offer and sale of these options was exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof. Pursuant to the Share repurchase program, the Company repurchased approximately 1.6 million Shares in the open market at an average purchase price of $25.67 during the third quarter of 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Eighth Amendment to the Credit Agreement and Modification to Pledge and Security Agreement, dated as of July 2, 1999, among the Trust, Realty Partnership, the Corporation, ITT, the lenders party to the Credit Agreement, Bankers Trust Company and The Chase Manhattan Bank, as Administrative Agents, Lehman Commercial Paper Inc. and Bank of Montreal, as Syndication Agents, and Bankers Trust Company, as Collateral Agent.(1) 10.2 Ninth Amendment to the Credit Agreement and Modification to Pledge and Security Agreement, dated as of September 20, 1999, among the Trust, Realty Partnership, the Corporation, ITT, the lenders party to the Credit Agreement, Bankers Trust Company and The Chase Manhattan Bank, as Administrative Agents, Lehman Commercial Paper Inc. and Bank of Montreal, as Syndication Agents, and Bankers Trust Company, as Collateral Agent.(1) 27.1 Financial Data Schedule for the Corporation.(1) 27.2 Financial Data Schedule for the Trust.(1)
- ------------------- (1) Filed herewith. (b) REPORTS ON FORM 8-K Starwood filed the following Current Reports on Form 8-K during the third quarter of 1999: (i) Joint Current Report on Form 8-K dated July 21, 1999, reporting under Item 5 the execution by Starwood of an Agreement and Plan of Merger with Vistana relating to the merger of Vistana into a subsidiary of Starwood. (ii) Joint Current Report on Form 8-K dated July 23, 1999, reporting under Items 5 and 7 the restatement of Starwood's financial statements to reflect Starwood's gaming operations as a discontinued operation. 32 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STARWOOD HOTELS & RESORTS STARWOOD HOTELS & RESORTS WORLDWIDE, INC. By: /s/ RONALD C. BROWN By: /s/ RONALD C. BROWN ------------------------------------------------- ------------------------------------------------- Ronald C. Brown Ronald C. Brown Vice President and Chief Financial Executive Vice President and and Accounting Officer Chief Financial Officer
Date: November 12, 1999 33 35 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Eighth Amendment to the Credit Agreement and Modification to Pledge and Security Agreement, dated as of July 2, 1999, among the Trust, Realty Partnership, the Corporation, ITT, the lenders party to the Credit Agreement, Bankers Trust Company and The Chase Manhattan Bank, as Administrative Agents, Lehman Commercial Paper Inc. and Bank of Montreal, as Syndication Agents, and Bankers Trust Company, as Collateral Agent.(1) 10.2 Ninth Amendment to the Credit Agreement and Modification to Pledge and Security Agreement, dated as of September 20, 1999, among the Trust, Realty Partnership, the Corporation, ITT, the lenders party to the Credit Agreement, Bankers Trust Company and The Chase Manhattan Bank, as Administrative Agents, Lehman Commercial Paper Inc. and Bank of Montreal, as Syndication Agents, and Bankers Trust Company, as Collateral Agent.(1) 27.1 Financial Data Schedule for the Corporation.(1) 27.2 Financial Data Schedule for the Trust.(1)
- ------------------- (1) Filed herewith. EX-10.1 2 EX-10.1 1 EXHIBIT 10.1 EIGHTH AMENDMENT TO CREDIT AGREEMENT AND MODIFICATION TO PLEDGE AND SECURITY AGREEMENT EIGHTH AMENDMENT TO CREDIT AGREEMENT AND MODIFICATION TO PLEDGE AND SECURITY AGREEMENT (this "Amendment"), dated as of July 2, 1999, among STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust ("Starwood REIT"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership ("SLT RLP"), STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the "Corporation"), ITT CORPORATION, a Nevada corporation ("ITT" and, together with Starwood REIT, SLT RLP and the Corporation, the "Original Borrowers"), the other Credit Parties (as defined in the Credit Agreement referred to below), the lenders from time to time party to the Credit Agreement referred to below (the "Lenders"), BANKERS TRUST COMPANY and THE CHASE MANHATTAN BANK, as Administrative Agents (in such capacity, the "Administrative Agents") and LEHMAN COMMERCIAL PAPER INC. and BANK OF MONTREAL, as Syndication Agents (in such capacity, the "Syndication Agents") and BANKERS TRUST COMPANY, as Collateral Agent (in such capacity, the "Collateral Agent"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Credit Agreement referred to below. W I T N E S S E T H: WHEREAS, the Original Borrowers, the Lenders, the Administrative Agents and the Syndication Agents are parties to that certain Credit Agreement, dated as of February 23, 1998 (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the Credit Parties and the Collateral Agent are parties to that certain Pledge and Security Agreement as defined in the Credit Agreement (as amended, modified or supplemented to the date hereof, the "Pledge and Security Agreement"); WHEREAS, SLT RLP presently owns ninety-nine (99) shares of common stock, no par value, of ITT (the "Option Shares"), which Option Shares represent 9.9 percent of the issued and outstanding shares of Capital Stock of ITT; WHEREAS, the Corporation desired to obtain the ability to purchase all or a portion of the Option Shares from SLT RLP in order to provide flexibility for structuring future transactions; WHEREAS, SLT RLP granted to the Corporation, and the Corporation purchased from SLT RLP, an option to acquire from time to time all or a portion of the Option Shares from SLT RLP pursuant to that certain Option Agreement (the "Option Agreement") dated as of March 8, 1999, a true, correct and complete copy of which is attached hereto as EXHIBIT A; 2 WHEREAS, the Parent Companies are requesting the Lenders' consent to the performance by the Corporation and SLT RLP of their respective obligations under the Option Agreement in accordance with the terms of the Option Agreement, including, without limitation, (i) the granting of the option by SLT RLP to the Corporation and the payment of consideration in connection therewith and (ii) the exercise of all or any part of the option from time to time by the Corporation and the payment of consideration in connection therewith (all of the foregoing being collectively referred to herein as the "ITT Stock Option Transaction"); it being understood and agreed that the Option Shares will at all times (both before and after any purchase thereof pursuant to the Option Agreement) be pledged, and be delivered for pledge, pursuant to the Pledge and Security Agreement; WHEREAS, on or about April 27, 1999, the Corporation, ITT, Starwood Canada Corp. ("Starwood Canada"), Caesars World, Inc. ("Caesars World"), Sheraton Desert Inn Corporation, Sheraton Tunica Corporation ("Tunica") and Park Place Entertainment Corporation ("Park Place") entered into a Stock Purchase Agreement (as amended or modified from time to time and in accordance with the requirements of Section 2(d) of Part I of this Amendment, the "Caesars Stock Purchase Agreement") pursuant to which, inter alia, Park Place agreed to purchase, and the Corporation and certain Subsidiaries of the Corporation agreed to sell, (i) all of the outstanding shares of common stock of each of Caesars World and Tunica and (ii) all of Starwood Canada's partnership interests in Metropolitan Entertainment Group, a Canadian partnership, which partnership interests represent ninety-five percent (95%) of the economic ownership interest therein (all of the foregoing, the "Caesars World Sale" and, together with the matters described in the following four recitals, being collectively referred to herein as the "Caesars World Transaction" and the date upon which the Caesars World Sale is consummated being referred to as the "Caesars World Effective Date"); WHEREAS, approximately $150 Million in aggregate principal amount of Senior Subordinated Debt Securities of Caesars World are currently outstanding pursuant to that certain Indenture dated as of August 15, 1992 (the "Caesars Bonds"), and the Corporation desires to redeem all of the outstanding Caesars Bonds; WHEREAS, certain real property assets relating to the Caesars World Sale (collectively, the "Caesars World Assets") presently secure the Intercompany Mortgage Note, and it is a condition to the consummation of the Caesars World Sale that the Caesars World Assets be released from the collateral security for the Intercompany Mortgage Note; WHEREAS, in connection with the release of the Caesars World Assets, (i) the Corporation and ITT may either (x) reduce the outstanding principal balance of the Intercompany Mortgage Note by all or any portion of the minimum amount (the "Undercollateralized Amount") necessary to prevent the Intercompany Mortgage Note from being undercollateralized after the release of the Caesars World Assets (the amount of such reduction being referred to herein as the "Intercompany Mortgage Reduction Amount") and (y) cause a portion of the payee's interest under the Intercompany Mortgage Note in an amount equal to all or a portion of the Undercollateralized Amount to be assigned or distributed to the Corporation or any Wholly- -2- 3 Owned Domestic Subsidiary of the Corporation, subject to the requirements hereinafter set forth and (ii) the Corporation may, in order to reduce the Intercompany Mortgage Reduction Amount, grant mortgages on certain real estate assets owned by the Corporation or any Subsidiary of the Corporation in order to further secure the Intercompany Mortgage Note; WHEREAS, the Corporation desires to use a portion of the Net Sale Proceeds from the Caesars World Transaction to repay all or a portion of (a) the Senior Secured Bridge Notes issued under Section 9.04(viii)(A) of the Credit Agreement and commonly referred to as the Tranche I Increasing Rate Senior Secured Bridge Notes (the "Tranche I IRN's") and (b) the Senior Secured Bridge Notes issued under Section 9.04(viii)(B) of the Credit Agreement and commonly referred to as the Tranche II Increasing Rate Senior Secured Bridge Notes (the "Tranche II IRN's"); WHEREAS, the Corporation and certain Subsidiaries of the Corporation are contemplating the intercompany transactions described in greater detail in Schedule 1 attached hereto (collectively, the "Intercompany Transactions"); WHEREAS, the Borrowers wish to request certain waivers from certain restrictions set forth in certain sections of the Credit Agreement in order to permit the ITT Stock Option Transaction, the Caesars World Transaction and certain other transactions described herein; and WHEREAS, the parties hereto also wish to amend the Credit Agreement and the Pledge and Security Agreement in certain respects as herein provided; NOW, THEREFORE, it is agreed: I. Waivers, Amendments and Agreements with Respect to the Credit Agreement SECTION 1. ITT Stock Option Transaction. (a) Consent. Notwithstanding anything to the contrary contained in the Credit Agreement (including, without limitation, Section 9.02 thereof) or the other Credit Documents, but subject to the terms of this Amendment (including, without limitation, the following clause (b)), the Lenders hereby consent to the ITT Stock Option Transaction; provided that, in accordance with the terms of the Option Agreement, no Option (as defined therein) shall be exercised if any Event of Default (as defined in the Credit Agreement) exists and is continuing unless the prior written consent of the Required Lenders is obtained. (b) Confirmation of Pledge. The Original Borrowers and the other Credit Parties hereby confirm and agree that, both before and after giving effect to the ITT Stock Option Transaction, 100% of the Stock of ITT Corporation shall continue to be pledged to the Secured Creditors (and held by the Collateral Agent on their behalf) pursuant to the Pledge and Security Agreement and the other Credit Documents. - 3 - 4 SECTION 2. Caesars World Transaction. (a) Consent. Notwithstanding anything to the contrary contained in the Credit Agreement or the other Credit Documents, but subject to the terms of this Amendment, the Lenders hereby consent to the Caesars World Transaction and agree that the Corporation and any of its Subsidiaries (including, without limitation, Starwood REIT, SLT RLP, and any Wholly-Owned Subsidiary of Starwood REIT or SLT RLP) shall be permitted to enter into and consummate the Caesars World Transaction in accordance with the terms set forth in the Caesars Stock Purchase Agreement as in effect on the date hereof, with such amendments, modifications or supplements thereto adopted after the date hereof; provided the same could not reasonably be expected to be materially adverse in any respect to the Corporation and its Subsidiaries or to the Lenders; and provided further that the aggregate Net Sale Proceeds received by the Corporation and its Wholly-Owned Domestic Subsidiaries on the Caesars World Effective Date as a result of the Caesars World Sale equals or exceeds $2,500,000,000. (b) Section 4.02, Proceeds from Asset Sales; Section 9.02, Consolidation, Merger, etc. Notwithstanding anything to the contrary contained in Sections 4.02, 9.02 or elsewhere in the Credit Agreement or the other Credit Documents, the parties hereto hereby agree that all of the Net Sale Proceeds received by the Corporation and its Subsidiaries from the Caesars World Sale shall be applied promptly (and in any event within five (5) Business Days, or such longer period as is necessary to comply with the redemption or prepayment provisions of the respective issue of Indebtedness being repaid) after the receipt thereof by the Corporation or its respective Subsidiaries in the following order of priority (in each case to the extent of the then remaining Net Sale Proceeds): (A) first (to the extent the amount of Net Sale Proceeds has not already been applied to reduce the outstanding Caesars Bonds), to redeem all of the then outstanding Caesars Bonds and to pay any penalty, premium, defeasance payment or other amount due in connection therewith (collectively, the "Caesars Bonds Redemption Amount") or, if the Caesars Bonds Redemption Amount shall have been paid prior to the consummation of the Caesars World Transaction, then to prepay the principal amount of any Revolving Loans then outstanding under the Credit Agreement in an amount up to the Caesars Bonds Redemption Amount, (B) second, to repay permanently the principal amount of any Tranche I IRN's then outstanding, (C) third, to repay permanently the principal amount of any Tranche II IRN's then outstanding, (D) fourth, to prepay the principal amount of any Revolving Loans then outstanding under the Credit Agreement, and (E) fifth, to prepay the principal amount of other Indebtedness of the Corporation and its Wholly-Owned Subsidiaries then outstanding. (c) Section 9.12; Limitations on Voluntary Payments, etc. Notwithstanding anything to the contrary contained in the Credit Agreement, including, without limitation, Section 9.12 thereof, or any other Credit Document, the Corporation and/or ITT shall be permitted to enter into and consummate any of the following transactions or do any of the following actions: (i) release the Caesars World Assets from the collateral security for the Intercompany Mortgage Note; - 4 - 5 (ii) make a prepayment on the Intercompany Mortgage Note in an amount up to the Undercollateralized Amount, and the proceeds received by SLT RLP as a result of such prepayment shall not be required to be used to prepay the then outstanding principal balance of the Loans in accordance with Section 4.02(h) of the Credit Agreement as long as such proceeds are held by SLT RLP and the subsequent use of such funds is otherwise in compliance with the terms of the Credit Agreement; (iii) grant mortgages on certain real estate assets owned by the Corporation or any Subsidiary of the Corporation to secure the Intercompany Mortgage Note and to reduce the Intercompany Mortgage Reduction Amount; (iv) cause a portion of the payee's interest under the Intercompany Mortgage Note in an amount up to the Undercollateralized Amount to be assigned, contributed or distributed by SLT RLP to the Corporation or any Wholly-Owned Domestic Subsidiary of the Corporation which is (and remains) a Credit Party; provided that (x) such Credit Party acknowledges and agrees in writing that all payments to be received by it with respect to the Intercompany Mortgage Note or portion thereof assigned to it are subordinated on the terms applicable to the Intercompany Mortgage Note and (y) such Credit Party is party to or executes a Subordination Agreement in accordance with the requirements of the first sentence of the last paragraph of Section 9.04 of the Credit Agreement; and (v) amend, modify or change, and permit the amendment, modification or change of any provision of the Intercompany Mortgage Note or any documents evidencing, or relating to, the Intercompany Mortgage Note, including, without limitation, any modification, amendment or change permitting prepayments, reloans or readvances under the Intercompany Mortgage Note; provided that (A) the aggregate outstanding principal balance of the Intercompany Mortgage Note at any time shall not exceed $3,450,000,000, (B) no changes shall be made to the subordination provisions applicable to the Intercompany Mortgage Note, (C) the Corporation shall provide the Lead Agents with prior written notice of any such amendment, modification, or change, and (D) either (i) the prior written consent of the Lead Agents shall be obtained (it being understood and agreed that the Lead Agents may (but shall not be required to) withhold taking such action without obtaining the consent of the Required Lenders) or (ii) the Corporation in good faith determines, prior to entering into the respective amendment, modification or change, that the respective amendment, modification or change could not reasonably be expected to result in a Material Adverse Effect or be adverse to the Lenders, in which case the Corporation shall be deemed to have made a representation and warranty to the Lenders, on the effective date of such amendment, modification or change, that such amendment, modification or change could not reasonably be expected to result in a Material Adverse Effect or be adverse to the Lenders. (d) Amendments to the Caesars Stock Purchase Agreement. Notwithstanding anything to the contrary contained elsewhere in this Amendment, in the Credit Agreement or in - 5 - 6 any of the other Credit Documents, the Corporation shall not, and shall not permit any of its Subsidiaries to, agree to any amendment, modification or supplement to the Caesars Stock Purchase Agreement which (x) could reasonably be expected to result in a Material Adverse Effect or be materially adverse to the Lenders or (y) would result in the Corporation and its Wholly-Owned Domestic Subsidiaries receiving less than $2,500,000,000 of Net Sale Proceeds on the Caesars World Effective Date as a result of the Caesars World Sale. (e) Use of Proceeds from Permanent Senior Notes; Section 9.04(viii)(A); Indebtedness. Effective as of the Caesars World Effective Date, Section 9.04(viii)(A) of the Credit Agreement shall be amended and restated in its entirety to read as follows: "(A) the Corporation shall be permitted to issue Senior Secured Bridge Notes on the Initial Borrowing Date as required by Section 5.06(a) (with the Senior Secured Bridge Note Documents to be in the form provided pursuant to Section 5.06(b) on or prior to the Initial Borrowing Date) and shall be permitted from time to time to issue (but not to any Borrower or Affiliate thereof) Permanent Senior Notes for cash; provided that (1) all of the terms and conditions of the Permanent Senior Notes (including, without limitation, amortization, maturities, interest rates, covenants, defaults, remedies, guaranties, sinking fund provisions and other terms) shall be reasonably satisfactory to the Lead Agents; (2) at the option of the Corporation, Permanent Senior Notes may be issued as Permanent Senior Secured Notes and, in such event, may be secured to the extent provided in the Pledge and Security Agreement; (3) notwithstanding anything to the contrary contained elsewhere in the Credit Agreement or any Credit Documents, all Net Proceeds from any issuance of Permanent Senior Notes under this clause (viii)(A) or clause (viii)(B) below shall be applied in the following order of priority (in each case to the extent of such remaining Net Proceeds): (I) first, to repay the then outstanding Senior Secured Bridge Notes until all such Senior Secured Bridge Notes are repaid in full and (II) second, any remaining Net Proceeds shall be used as follows: (a) if (1) either (x) the Combined Leverage Ratio (after giving effect to any issuance of Indebtedness then - 6 - 7 being made and any concurrent application of the proceeds thereof) is less than 4.5:1.0 or (y) the Unsecured Debt Rating of the Corporation shall be at least BBB- by S&P and Baa3 by Moody's, and (2) no Specified Default, and no Event of Default, then exists, such Net Proceeds shall be used for general corporate purposes of the Corporation otherwise permitted under the terms of this Agreement; (b) if (1) the Combined Leverage Ratio (after giving effect to any issuance of Indebtedness then being made and any concurrent application of the proceeds thereof) is less than 4.75:1.00 and greater than or equal to 4.50:1.00, (2) no Specified Default and no Event of Default then exists, and (3) the test set forth in sub-clause (a)(1)(y) above is not satisfied, fifty percent (50%) of such Net Proceeds to be applied pursuant to this clause (II) shall be used for general corporate purposes of the Corporation otherwise permitted under the terms of this Agreement and fifty percent (50%) of such Net Proceeds to be applied pursuant to this clause (II) shall be used to permanently prepay (and in the case of any prepayment of revolving or similar types of facilities, with a corresponding permanent reduction to the commitments thereunder) the principal amount of any Indebtedness (excluding the Senior Secured Bridge Notes) then outstanding of any Original Borrower and the Wholly-Owned Subsidiaries of one or more Original Borrowers; provided that at such time (if any) as the application of amounts to the permanent prepayment of Indebtedness as required by this clause (b) would cause the Combined Leverage Ratio to be less than 4.5:1.0, the remaining amount which would have been required to be applied to permanently prepay outstanding Indebtedness may instead, so long as no Specified Default and no Event of Default then exists, be used by the Corporation as otherwise provided in preceding clause (a); and (c) if neither preceding clause (a) or (b) is applicable in accordance with its terms (whether because of the existence of a Specified Default or Event of Default, or because the Combined Leverage Ratio requirements or rating requirements are not satisfied), 100% of such Net Proceeds to be applied pursuant to this clause (II) shall be used to permanently prepay (and in the case of any prepayment of revolving or similar types of facilities, with a - 7 - 8 corresponding permanent reduction to the commitments thereunder) the principal amount of any Indebtedness (excluding the Senior Secured Bridge Notes) of any Original Borrower and the Wholly-Owned Subsidiaries of one or more Original Borrowers; provided that, so long as no Specified Default and no Event of Default is in existence, at such time as the application of amounts required by this clause (c) results in the Combined Leverage Ratio being less than 4.75:1.00, all remaining amounts which would otherwise have been required to be applied pursuant to this clause (c) may instead be applied pursuant to the provisions of preceding clause (b) (and at such time, if any, as the conditions specified in the proviso thereto are satisfied, giving effect to such proviso); and (4) in no event shall the aggregate principal amount of Indebtedness at any time outstanding pursuant to this Section 9.04(viii)(A) exceed $2.5 billion (as the same may be adjusted pursuant to the Seventh Amendment); and" (f) Clarification to Section 9.04(viii)(B). Effective as of the Caesars World Effective Date, Section 9.04(viii)(B) of the Credit Agreement shall be amended by (i) inserting, immediately after the phrase "cash; provided that" appearing therein the following new clause: "(v) all Net Proceeds from any issuance of Permanent Senior Notes under this clause (viii)(B) shall be applied in accordance with the requirements of clause (viii)(A)(3) above," and (ii) inserting, immediately after the words "exceed $1.0 billion" thereof, the following parenthetical: "(as the same may be adjusted pursuant to the Seventh Amendment)." SECTION 3. Interest; Section 1.09. Section 1.09(i) of the Credit Agreement shall be amended by deleting the parenthetical in clause (iii) of Section 1.09(i) and by inserting in lieu thereof the following new parenthetical: "(and (x) in the case of any Interest Period with a duration in excess of one month at any time when the proviso to the definition of F&I Payment Date is operative in accordance with its terms, at one-calendar month intervals occurring after the first day of the respective Interest Period and (y) in the case of any Interest Period with a duration of six months, at the date which occurs three calendar months after the first day of such Interest Period, as well as on the last day of the respective Interest Period)." SECTION 4. Interest Periods; Section 1.10. Section 1.10 of the Credit Agreement shall be amended by deleting the word "or" appearing immediately before the word - 8 - 9 "three" and replacing the same with "," and inserting the words "or six" immediately after the word "three" thereof. SECTION 5. Clarification of Use of Proceeds; Sections 4.02(d), (e) and (k). (a) Sections 4.02(d) and (e) of the Credit Agreement shall be amended and restated in their entirety to read as follows: "(d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Effective Date upon which the Corporation or any of its Subsidiaries receives any Debt Proceeds, an amount equal to the Applicable Debt Percentage of the Net Proceeds from the respective issuance of Indebtedness shall be applied in accordance with the requirements of Sections 4.02(h) and (j); provided that (x) the Net Proceeds of any issuance of Indebtedness pursuant to Section 9.04(viii) shall be applied in accordance with the requirements of said Section 9.04(viii), (y) the requirements set forth in this Section 4.02(d) are subject to the qualifications expressly set forth in Section I.A of the Fourth Amendment, and (z) Net Proceeds received in respect of Indebtedness incurred pursuant to, and in accordance with the requirements of, clause (xii) of Section 9.04 and which otherwise would be required to be applied as mandatory repayments or commitment reductions hereunder shall not be required to be so applied and may be reinvested in assets used or to be used in Hotel and Gaming Businesses if the following conditions are satisfied: (1) no Specified Default and no Event of Default then exists; and (2) the Corporation delivers a certificate to the Paying Agent on or prior to such date stating that such Net Proceeds shall be used (or contractually committed to be used) to purchase Assets used or to be used in Hotel and Gaming Businesses within 360 days (or earlier to the extent required to be so applied pursuant to the terms of any outstanding Indebtedness) following the date of the incurrence of such Indebtedness (which certificate shall set forth the estimates of the proceeds to be so expended); provided further, that if (x) all or any portion of such Net Proceeds not so applied pursuant to the immediately preceding proviso in - 9 - 10 clause (z) above as a mandatory repayment are not so used (or contractually committed to be used) within the 360-day period after the date of the respective incurrence of Indebtedness (or earlier to the extent required to be so applied pursuant to the terms of any outstanding Indebtedness), such remaining portion shall be applied on the last day of such period as provided above in this Section 4.02(d) (without regard to the immediately preceding proviso in clause (z) above) and (y) all or any portion of such Net Proceeds are contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination or expiration as provided in this Section 4.02(d) (without regard to the immediately preceding proviso in clause (z) above). (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Effective Date upon which either the Corporation or any of its Subsidiaries receives cash proceeds from any Asset Sale or the Corporation and any of its Subsidiaries receives Equity Proceeds, an amount equal to the Applicable Asset Sale Percentage of the Net Proceeds therefrom shall be applied in accordance with the requirements of Sections 4.02(h) and (j); provided that, Net Proceeds received in respect of Asset Sales made pursuant to, and in accordance with the requirements of, clause (viii) of Section 9.02 and which otherwise would be required to be applied as mandatory repayments or commitment reductions hereunder shall not be required to be so applied and may be reinvested in assets used or to be used in Hotel and Gaming Businesses if the following conditions are satisfied: (1) no Specified Default, and no Event of Default, then exists; (2) the Corporation delivers a certificate to the Paying Agent on or prior to such date stating that such Net Proceeds shall be used (or contractually committed to be used) to purchase Assets used or to be used in Hotel and Gaming Businesses within 360 days (or earlier to the extent required to be so applied pursuant to the terms of any outstanding Indebtedness) following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended); - 10 - 11 (3) the amount of Net Sale Proceeds which may be reinvested (including the amounts of any "deemed reinvestments" pursuant to following clause (4)) shall not exceed $500,000,000 for Net Sale Proceeds received during any Fiscal Year; and, if, at the time of the respective Asset Sale and after giving effect thereto, either (1) the Combined Leverage Ratio is less than 4.5:1.0 or (2) the Unsecured Debt Rating of the Corporation shall be at least BBB- by S&P and Baa3 by Moody's), then there shall be no further limitation on the amount of such permitted reinvestments; and (4) any Asset Sale structured in the form of a "like-kind exchange" in accordance with Section 1031 of the Code shall be treated as the sale of an Asset with the Net Sale Proceeds (deemed to be an amount equal to the fair market value of the Assets so exchanged) therefrom reinvested pursuant to clause (3) of this proviso; provided further, that if (x) all or any portion of such Net Sale Proceeds not so applied pursuant to the immediately preceding proviso as a mandatory repayment are not so used (or contractually committed to be used) within the 360 day period after the date of the respective Asset Sale (or earlier to the extent required to be so applied pursuant to the terms of any outstanding Indebtedness), such remaining portion shall be applied on the last day of such period as provided above in this Section 4.02(e) (without regard to the immediately preceding proviso) and (y) all or any portion of such Net Sale Proceeds are contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination or expiration as provided in this Section 4.02(e) (without regard to the immediately preceding proviso). Notwithstanding the foregoing, the Net Sale Proceeds from the Caesars World Sale (as defined in the Eighth Amendment) shall be applied in accordance with the requirements of the Eighth Amendment. (b) Section 4.02(k) of the Credit Agreement is hereby amended by deleting the phrase "and/or (y) pursuant to the second proviso to Section 9.12(iii)" appearing therein and by inserting in lieu thereof the following new phrase: ", (y) pursuant to the second proviso to Section 9.12(iii) and/or made with Net Sale Proceeds of the Caesars World Sale (as defined in the Eighth Amendment) in accordance with the requirements of the Eighth Amendment)." SECTION 6. Assets of Starwood REIT; Section 7.29. Section 7.29 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "[Intentionally Deleted]." - 11 - 12 SECTION 7. Reporting Requirements; Section 8.01; Information Covenants. Section 8.01(g) shall be amended and restated in its entirety to read as follows: "(g) Other Reports and Filings. The Corporation shall promptly notify the Lead Agents after any Borrower or any Subsidiary files with, or delivers to, the Securities and Exchange Commission (or any successor thereto) any Form 8-K or any other financial information, proxy material, registration statement, or report which contains information materially adverse to the Corporation or any of its Subsidiaries, and, if requested by any Lead Agent or Lender, shall furnish it with a copy thereof." SECTION 8. Creation of Intermediate Holding Company; Section 8.17. Notwithstanding anything to the contrary contained in the Credit Agreement or the other Credit Documents, but subject to the terms of this Amendment, the Lenders hereby consent to the Corporation creating a direct Wholly-Owned Domestic Subsidiary of the Corporation (such subsidiary being referred to herein as the "New Intermediate Holding Company") so that (i) the Corporation shall directly own 100% of the equity interests in the New Intermediate Holding Company and (ii) the New Intermediate Holding Company shall own 100% of the Class A Shares in Starwood REIT; provided that (x) the New Intermediate Holding Company, concurrently with the establishment thereof, executes and delivers counterparts of the Guaranty and the Pledge and Security Agreement, and thereby becomes a Guarantor, and otherwise complies with the applicable provisions of Section 8.15 of the Credit Agreement, (y) all of the Corporation's equity interest in the New Intermediate Holding Company shall at all times be pledged, and be delivered for pledge, pursuant to the Pledge and Security Agreement, and (z) all of the Class A Shares in Starwood REIT shall at all times (both before and after the creation of the New Intermediate Holding Company) be pledged, and be delivered for pledge, pursuant to the Pledge and Security Agreement. SECTION 9. Hedges and Interest Rate Protection Agreements; Section 8.20. Section 8.20 of the Credit Agreement shall be amended by inserting, immediately after the last word thereof, the following: "; provided that neither the Corporation nor any of its Subsidiaries shall be required to comply with this Section 8.20 at any time that fifty percent (50%) or more of the Combined Indebtedness of the Corporation and its Subsidiaries is either based on a fixed rate of interest or, if subject to a floating rate of interest, subject to Interest Rate Protection Agreements which have the effect of fixing the rate of interest applicable thereto or subjecting same to a cap or collar, in each case on terms reasonably satisfactory to the Lead Agents." - 12 - 13 SECTION 10. Pre-Consent Requirement for Permitted Acquisitions; Section 9.02; Consolidation, Merger, Purchase or Sale of Assets. (a) Pre-Consent Requirement. Section 9.02 of the Credit Agreement shall be amended by (i) deleting the word "and" appearing at the end of clause (x) thereof, (ii) deleting the period appearing in clause (xi) thereof and inserting in lieu thereof ", and" and (iii) inserting the following new clause (xii) immediately after clause (xi) thereof: "(xii) provided no Specified Default and no Event of Default then exists or would result therefrom, the Corporation or any of its Subsidiaries, (including, without limitation, Starwood REIT, SLT RLP or any of their Subsidiaries) may enter into any agreement to do any of the transactions prohibited by this Section 9.02 (although the consummation of the respective transaction may not occur until such time, if any, as the Required Lenders have consented thereto in their sole discretion), provided that (x) the Corporation or such Subsidiary shall provide written notice to the Lead Agents within 5 Business Days after it has entered into any such agreement and (y) either (i) the consummation of such transaction is expressly contingent upon obtaining the prior written consent of the Required Lenders (with no damages, break-up fees or other similar amounts payable as a result of any failure to obtain such consent) or (ii) with respect to all agreements entered into pursuant to this Section 9.02 (excluding any such agreements where the respective transactions subject thereto have been consummated with the consent of the Required Lenders or have otherwise been terminated with no amounts payable thereunder), the failure of the Corporation or any such Subsidiary to consummate the transactions contemplated by such agreements could not reasonably be expected to result in the Corporation and its Subsidiaries being (or becoming) obligated to pay, or having paid, amounts in respect of damages, breakup fees, or other similar amounts to any Person or Persons in an aggregate amount for all agreements as contemplated by this clause (xii) in excess of $100,000,000; and" (b) Permitted Acquisitions. Section 9.02(ix) of the Credit Agreement is hereby amended by deleting "$750,000,000" in each place it appears therein and by inserting "$1,000,000,000" in lieu thereof in each such place. SECTION 11. Intercompany Transactions; Sections 9.01, 9.02, 9.05 and 9.06. (a) Consent. Notwithstanding anything to the contrary contained in the Credit Agreement or the other Credit Documents, but subject to the terms of this Amendment, the Lenders hereby consent to each of the Intercompany Transactions. - 13 - 14 (b) Section 9.01(xiv); Intercompany Liens. Section 9.01(xiv) of the Credit Agreement is amended and restated in its entirety to read as follows: "(xiv) Indebtedness owed by any Original Borrower or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party to any Original Borrower or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party, in each case to the extent permitted to be outstanding pursuant to Section 9.04(vii), may be secured by any Assets (but excluding Capital Stock or other equity interests in any Persons) of the respective such obligor;" (c) Section 9.02(xiii); Intercompany Asset Transfers and Sales. Section 9.02 of the Credit Agreement is amended by inserting, immediately after new clause (xii) in Section 9.02, the following new clause: "(xiii) provided no Specified Default and no Event of Default then exists or would result therefrom, any Original Borrower or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party may, in addition to any of the matters described in Section 9.02 (xi), transfer, convey, purchase, sell, lease (including, without limitation, by way of sale-leaseback transactions) or otherwise dispose of all or any portion of its Assets to, or make, cancel, eliminate, exchange, prepay, redeem, distribute, contribute, or transfer intercompany loans and advances of cash or any other Assets to or with (or agree to do any of the foregoing at any future time), in one or a series of related transactions, any Original Borrower or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party; provided that (x) the Corporation delivers at least 5 Business Day's prior written notice to the Lead Agents of such Asset transfer, which notice shall describe in reasonably sufficient detail the nature of such transaction and (y) in the case of any transfer of any Capital Stock or other equity interests which were theretofore subject to pledge pursuant to the Pledge and Security Agreement, or which will be required to be pledged in accordance with the terms of the Pledge and Security Agreement after the consummation of the respective Asset transfer, the Corporation takes, and causes its respective Subsidiaries to take, all actions so that the respective Capital Stock or other equity interests remain, or become, as the case may be, pledged and delivered for pledge pursuant to the Pledge and Security Agreement in accordance with the requirements thereof." - 14 - 15 (d) Section 9.05(viii); Intercompany Advances, Investments and Loans. Section 9.05(viii) of the Credit Agreement is amended and restated in its entirety to read as follows: "(viii) after the Initial Borrowing Date and subject to Section 9.03, (i) the Corporation or any Subsidiary of the Corporation which is a Guarantor may make intercompany loans and advances of cash to the Corporation or any other Subsidiary of the Corporation which is a Guarantor, and (II) provided no Specified Default and no Event of Default then exists or would result therefrom, the Corporation, any Original Borrower, or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party may (x) make Investments or intercompany loans and advances, in each case, resulting from intercompany Asset transfers made in accordance with the requirements of Section 9.02(xiii) and (y) cancel, forgive, eliminate, exchange, prepay, redeem or otherwise reduce the amount of any intercompany loans or advances of cash or any other Assets owed to it by any other Credit Party; provided that all intercompany loans and advances made pursuant to this clause (viii) are subject to the provisions of validly executed Subordination Agreements as required by the last paragraph of Section 9.04." (e) Section 9.06; Transactions with Affiliates. Section 9.06(iii) of the Credit Agreement is amended by inserting, immediately after the word "Sections" in the last line thereof, "9.01,". (f) The first sentence of the last paragraph of Section 9.02 shall be amended by (i) deleting the word "and" immediately before clause (iii) and inserting "," in its place and (ii) inserting, immediately after the last word of said sentence, the following: ", and (iv) sales, transfers or other dispositions of Capital Stock may be made to one or more Credit Parties in accordance with the provisions (and requirements) of Section 9.02(xiii), provided no violation of Section 8.17 arises as a result thereof." (g) Notwithstanding anything to the contrary contained in the Credit Agreement or the other Credit Documents, the Corporation or any of its Subsidiaries (including, without limitation, Starwood REIT, SLT RLP, and any of their Subsidiaries), and, with respect to clause (iii) below only, any Preferred Stock Subsidiary, may enter into and consummate any of the following transactions or do any of the following actions: (i) wind up, liquidate or dissolve its affairs (or agree to do any of the foregoing at any future time) provided (A) none of the Corporation, Starwood REIT, SLT RLP, SLC OLP, or ITT shall either be dissolved, liquidated or wound up and (B) the Assets, if any, of the Person being dissolved, liquidated or wound up shall be transferred - 15 - 16 or succeeded (whether by operation of law or otherwise) to the Corporation, any Wholly-Owned Domestic Subsidiary of the Corporation which is a Credit Party, Starwood REIT, SLT RLP, or any Wholly-Owned Domestic Subsidiary of Starwood REIT or SLT RLP which is a Credit Party; (ii) enter into and consummate any transaction of merger or consolidation with the Corporation, Starwood REIT, SLT RLP, or any other Person that, prior to the consummation of such merger or consolidation, is either a Borrower or a Wholly-Owned Domestic Subsidiary of the Corporation, Starwood REIT, or SLT RLP (or agree to do any of the foregoing at any future time) provided (A) the surviving Person shall either be any Original Borrower or any Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party, (B) in no event shall the Corporation, Starwood REIT, SLT RLP, SLC OLP, or ITT enter into any transaction of merger or consolidation with any other Person where such other Person is the surviving entity of such merger or consolidation, (C) none of the Corporation, Starwood REIT, SLT RLP, SLC OLP or ITT shall be merged or consolidated out of existence (or shall cease to be in existence after giving effect to any transaction otherwise permitted pursuant to this clause (ii)), and (D) no consideration shall be paid to any Person (other than to the Corporation, Starwood REIT, SLT RLP, or any other Person that, prior to the consummation of such merger or consolidation, is either an Original Borrower or a Wholly-Owned Domestic Subsidiary of an Original Borrower which is a Credit Party); or (iii) any Preferred Stock Subsidiary which is a Wholly-Owned Domestic Subsidiary of the Corporation but which is not a Credit Party may (A) wind up, liquidate or dissolve its affairs (or agree to do any of the foregoing at any future time), provided the Assets, if any, of such Preferred Stock Subsidiary being dissolved, liquidated or wound up shall be transferred or succeeded (whether by operation of law or otherwise) to another Preferred Stock Subsidiary which is a Wholly-Owned Domestic Subsidiary of the Corporation, the Corporation, any Wholly-Owned Domestic Subsidiary of the Corporation which is a Credit Party, Starwood REIT, SLT RLP, or any Wholly-Owned Domestic Subsidiary of Starwood REIT or SLT RLP which is a Credit Party and (B) enter into and consummate any transaction of merger or consolidation with any other Preferred Stock Subsidiary which is a Wholly-Owned Domestic Subsidiary of the Corporation but which is not a Credit Party; provided that no consideration shall be paid to any Person (other than to a Preferred Stock Subsidiary which is a Wholly-Owned Domestic Subsidiary of the Corporation); and provided further that, in each case, (A) no Specified Default and no Event of Default then exists or would result therefrom; (B) the Corporation determines in good faith that the respective transaction or transactions could not reasonably be expected to result in a Material Adverse Effect or otherwise be adverse to the Lenders; (C) the Corporation delivers, or causes its respective Subsidiary to deliver, at least 5 Business Days' prior written notice to the Lead Agents of the intended consummation of the respective transaction, which shall describe in reasonably sufficient detail the nature of such transaction; and (D) the Corporation shall take, or cause its respective - 16 - 17 Subsidiaries to take, such actions as may from time to time be reasonably requested by the Lead Agents to assure that all surviving Persons of mergers or consolidations permitted above are parties to the respective Credit Documents (and that they deliver such acknowledgments or assumption agreements as may from time to time be reasonably requested by any Lead Agent) and take such actions as may be necessary or desirable to assure that all collateral required to be pledged by them pursuant to the Pledge and Security Agreement has in fact been so pledged (and appropriate financing statements and other required security instruments have been filed). SECTION 12. Recourse Basket; Section 9.04; Indebtedness. Effective as of the Caesars World Effective Date, Section 9.04(xii) of the Credit Agreement shall be amended and restated in its entirety to read as follows: "(xii) additional Indebtedness of the Corporation and any of its Subsidiaries not otherwise permitted hereunder in aggregate principal amount outstanding at any time not exceeding $600,000,000 (with the amount of Indebtedness permitted to be outstanding at any time pursuant to this clause (xii) being herein referred to as the "Recourse Basket"); provided that (a) the amount of the Recourse Basket shall be reduced from time to time to the extent provided in Parts I.A. and I.B. of the Fourth Amendment and the last sentence of the definition of Permitted Refinancing Indebtedness contained herein and (b) the Net Proceeds therefrom are applied as a mandatory repayment and/or commitment reduction if and to the extent required by the provisions of Section 4.02(e);" SECTION 13. Loans to Employees; Section 9.05(x); Advances, Investments and Loans. Effective as of the Caesars World Effective Date, clause (x) of Section 9.05 of the Credit Agreement shall be amended by deleting the number "$10,000,000" appearing therein and by inserting the number "$20,000,000" in its place. SECTION 14. Sliver Equity Transactions and Loans; Sections 9.05(xi) and (xii); Advances, Investments and Loans. (a) Section 9.05(xi) of the Credit Agreement shall be amended by inserting, immediately after the words "equity investments (in respect of minority interests only)," the following: "in, or make mortgage, mezzanine or other loans to, any Person, in each case,". (b) Effective as of the Caesars World Effective Date, Section 9.05(xi) of the Credit Agreement shall be further amended by deleting the amount "$300,000,000" appearing in Section 9.05(xi) and inserting "$400,000,000" in lieu thereof. - 17 - 18 (c) Effective as of the Caesars World Effective Date, Section 9.05(xii) of the Credit Agreement is amended by deleting "$250,000,000" in said Section and inserting "$150,000,000" in its place. SECTION 15. Section 9.09; Maximum Combined Leverage Ratio. Effective as of the Caesars World Effective Date, the periods and ratios set forth in Section 9.09 of the Credit Agreement are amended and restated in their entirety to read as follows:
Period Ratio ------- --------- From and including the Initial 6.50:1.00 Borrowing Date to and including September 30, 1998 From and including October 1, 1998 to 5.75:1.00 and including March 31, 1999 From and including April 1, 1999 to 5.50:1.00 and including the Amendment Effective Date From and including the Amendment 5.00:1.00 Effective Date to and including September 30, 1999 From and including October 1, 1999 to 4.75:1.00 and including June 30, 2000 From and including July 1, 2000 and 4.50:1.00 thereafter
SECTION 16. Business; Section 9.15. Effective as of the Caesars World Effective Date, Section 9.15 of the Credit Agreement is amended and restated in its entirety to read as follows: "No Borrower will, nor will any Borrower permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the Hotel and Gaming Businesses, and in no event shall the Gaming Business be a material part of the Hotel and Gaming Business of the Corporation and its Subsidiaries taken as one enterprise." - 18 - 19 SECTION 17. Partnership Agreements; Section 9.20. Section 9.20 of the Credit Agreement is amended and restated in its entirety to read as follows: "9.20. Partnership Agreements. (x) Neither Starwood REIT nor SLT RLP shall default under any obligations under SLT RLP's Partnership Agreement, (y) neither the Corporation nor SLC OLP shall default under any obligations under SLC OLP's Partnership Agreement, and (z) promptly after the written request of any Lead Agent, each of Starwood REIT and the Corporation shall deliver true, correct and complete copies of SLT RLP's Partnership Agreement and SLC OLP's Partnership Agreement, respectively." SECTION 18. Section 9.23; Encumbered EBITDA Ratio. Section 9.23 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "The Borrowers will not permit the ratio of Combined EBITDA to Encumbered EBITDA for any Test Period ending during a period set forth below to be less than the ratio set forth below:
Period Ratio ------ ----- Fifth Amendment Effective Date 4.00:1.00 through March 30, 1999 March 31, 1999 through 3.00:1.00 July 31, 1999 August 1, 1999 and thereafter 2.86:1.00"
SECTION 19. Certain Definitions. (a) The following new definitions shall be inserted in proper alphabetical order in Section 11.01: "Caesars World Effective Date" shall mean the date upon which the Caesars World Sale is consummated. "Debt Proceeds" means any cash proceeds from the incurrence by the Corporation or any of its Subsidiaries of Indebtedness for borrowed money or from any CMBS Transaction to the extent the Indebtedness incurred pursuant to the respective CMBS Transaction is permitted as a result of an increase in availability as specifically contemplated in the last sentence of Section 9.04 (with such increased Indebtedness pursuant to CMBS Transactions being herein called "Increased CMBS Indebtedness"); provided that (x) except as otherwise provided in clause (y) below, Debt Proceeds - 19 - 20 shall not include proceeds from incurrences of Indebtedness permitted to be incurred pursuant to Section 9.04 as such Section is in effect on the Eighth Amendment Effective Date after giving effect to the Eighth Amendment and (y) Debt Proceeds shall include proceeds from incurrences of (i) Indebtedness incurred pursuant to clause (viii) of Section 9.04, (ii) Indebtedness incurred pursuant to clause (xii) of Section 9.04 in excess of amounts permitted to be incurred under such clause as same was in effect on the Effective Date and (iii) Increased CMBS Indebtedness. "Eighth Amendment" shall mean that certain Eighth Amendment to Credit Agreement, dated as of July 2, 1999. "Eighth Amendment Effective Date" shall mean the date upon which the Eighth Amendment becomes effective in accordance with its terms. "Equity Proceeds" shall mean any cash proceeds from the issuance or sale of equity by the Corporation or any of its Subsidiaries; provided that Equity Proceeds shall not include cash proceeds from the issuance of common stock of the Corporation, Perpetual Preferred Stock of the Corporation and Qualified Preferred Stock permitted to be issued pursuant to Section 9.14(c), unless and to the extent such Qualified Preferred Stock is issued as a result of an increase in availability as specifically contemplated by the last sentence of Section 9.04. "Maximum Indebtedness Scheduled Asset Sale Credit Amount" shall mean $0. "Original Borrower" shall mean any Borrower which is one of the Corporate Borrowers or one of the REIT Borrowers. "Seventh Amendment" shall mean that certain Seventh Amendment, dated as of March 5, 1999. (b) The definition of "Combined Indebtedness" appearing in Section 11.01 of the Credit Agreement is hereby amended by adding, immediately after the phrase "notwithstanding anything to the contrary contained above, to the extent not already reflected therein," appearing in the last sentence thereof the following phrase: "(x) the amount of Contingent Obligations at any time outstanding pursuant to Section 9.04(xii) of the Credit Agreement (as described in the last sentence of the definition of Contingent Obligation contained herein) shall be added to, and form part of, Combined Indebtedness (regardless of any contrary treatment under GAAP) and (y)." - 20 - 21 (c) The definition of "Net Proceeds" appearing in Section 11.01 of the Credit Agreement is hereby amended by deleting the proviso thereto in its entirety. II. Modification of the Pledge and Security Agreement The parties hereto acknowledge and agree that the Pledge and Security Agreement shall be, and hereby is, modified as follows: A. Section 2(a) of the Pledge and Security Agreement is hereby amended by deleting the phrase "and (iv) the term "Securities" shall mean all of the Stock, Limited Liability Company Interests and Partnership Interests" appearing therein and inserting in lieu thereof the following phrase: "(iv) the term "REIT Interest" shall mean all equity interests at any time owned by each Pledgor in any real estate investment trust, in any event including all equity interests (including all Class A Shares) owned by each Pledgor in Starwood REIT; and (v) the term "Securities" shall mean all of the Stock, Limited Liability Company Interests, Partnership Interests and REIT Interests." B. Section 2(b) of the Pledge and Security Agreement is hereby amended by deleting the phrase "all of the Pledged Stock, Pledged Limited Liability Interests and Pledged Partnership Interests" appearing therein and inserting in lieu thereof the following phrase: "all of the REIT Interests at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged REIT Interests," and all of the Pledged Stock, Pledged Limited Liability Company Interests, Pledged Partnership Interests and Pledged REIT Interests." C. Section 3.2 of the Pledge and Security Agreement is hereby amended by deleting the phrase "or Partnership Interests" appearing in the first sentence thereof and inserting in lieu thereof the phrase ", Partnership Interests or REIT Interests." D. Section 5 of the Pledge and Security Agreement is hereby amended by inserting, immediately after the phrase "pertaining to the Pledged Stock" appearing in clause (i) thereof, the phrase "and Pledged REIT Interests." E. Each of Sections 6 and 7 of the Pledge and Security Agreement are hereby amended by inserting, immediately after the phrase "Pledged Stock," in each place it appears therein the phrase "Pledged REIT Interests." In addition to the amendments specifically set forth above, the Corporation acknowledges and agrees that all of the Class A Shares of Starwood REIT owned by it have previously been delivered to the Collateral Agent for pledge pursuant to the Pledge and Security - 21 - 22 Agreement, and that all of such Class A Shares have been, and shall remain, validly pledged pursuant thereto. III. Miscellaneous Provisions A. Each Guarantor and each Borrower, by their signatures below, hereby confirms that (x) the Guaranty shall remain in full force and effect and the Guaranty covers the obligations of each of the Borrowers under the Credit Agreement, as modified and amended by this Amendment, as provided in the Guaranty, and (y) the Pledge and Security Agreement (as modified by this Amendment) shall remain in full force and effect as security for the obligations under the Credit Agreement, as modified and amended by this Amendment. B. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. C. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrowers and the Paying Agent. D. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. E. This Amendment shall become effective on the date (the "Amendment Effective Date") when each of the Borrowers, each Guarantor and the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Paying Agent at its Notice Office. F. From and after the Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. G. The Borrowers hereby covenant and agree that, so long as the Amendment Effective Date occurs, they shall pay (and shall be jointly and severally obligated to pay) each Lender which executes and delivers to the Paying Agent a counterpart hereof by the later to occur of (x) the close of business on the Amendment Effective Date or (y) 12:00 p.m. (New York time) on Friday, July 2, 1999 (the "Outside Date") or which is an immediate or successive assignee of any Lender described above (with respect to amounts obtained, directly or indirectly, by assignment from such Lender), the following: - 22 - 23 (i) a non-refundable cash fee in an amount equal to 17.5 basis points (0.175%) of an amount equal to the sum of the outstanding principal amount of Term Loans of such Lender and the Revolving Loan Commitment of such Lender, in each case as same is in effect on the Amendment Effective Date, which fees shall be paid by the Borrowers to the Paying Agent for distribution to the Lenders not later than the fifth Business Day following the Outside Date; and (ii) if the Caesars World Sale has not been consummated by the close of business on October 1, 1999, then commencing on November 1, 1999 and on the first day of each calendar month thereafter to and including April 1, 2000 (with the first day of each such calendar month being herein called an "Eighth Amendment Monthly Fee Payment Date"), a non-refundable cash fee, in arrears, in an amount equal to 3.25 basis points (0.0325%) of an amount equal to the sum of the outstanding principal amount of Term Loans of such Lender and the Revolving Loan Commitment of such Lender, in each case as same is in effect on the first day of the preceding month, which fee shall be paid by the Borrowers to the Paying Agent for distribution to the Lenders not later than the third Business Day following each Eighth Amendment Monthly Fee Payment Date; provided that (x) if the Caesars World Sale is consummated in accordance with the requirements of this Eighth Amendment on any day other than the first day of a calendar month, the fee due on the immediately succeeding Eighth Amendment Monthly Fee Payment Date shall be prorated by taking the fee which would otherwise have been payable as provided above (i.e., 3.25 basis points on the amount of Term Loans and Revolving Loan Commitments provided above) and multiplying same by a fraction the numerator of which is the number of days in the calendar month in which the Caesars World Sale occurred through and including the date upon which the Caesars World Sale occurred and the denominator of which is the actual number of days in such calendar month and (y) no fees shall be payable on (or in respect of) any Eighth Amendment Monthly Fee Payment Date if the Caesars World Sale was actually consummated in accordance with the requirements of this Eighth Amendment on or before the first day of the immediately preceding calendar month. [SCHEDULE 1 AND SIGNATURE PAGES FOLLOW] - 23 - 24 SCHEDULE I Description of Intercompany Transactions 1. Poconos Resorts: The Poconos resorts are currently operated by six separate Subsidiaries owned by Caesars World, Inc. Five of these Subsidiaries shall be merged into the sixth Subsidiary, and the Stock of the remaining Subsidiary shall be transferred to ITT Sheraton Corp. ITT Sheraton Corp. shall pledge the stock of this new Subsidiary pursuant to the Pledge and Security Agreement and shall (and shall cause the remaining Subsidiary so transferred to) comply with Section 8.15 of the Credit Agreement. It is understood and agreed that the remaining Subsidiary referenced above shall be a Wholly-Owned Domestic Subsidiary of the Corporation, which shall be (or become) a Guarantor and shall be (or become) party to each of the Guaranty and the Pledge and Security Agreement. 2. San Antonio: Starwood REIT shall distribute, contribute or transfer all of its equity interest in San Antonio Resort Company to the Corporation. The Corporation shall pledge the stock of this Subsidiary pursuant to the Pledge and Security Agreement. 3. Boardwalk Regency: Boardwalk Regency Corp. ("Boardwalk") indirectly owns an interest in the Atlantic City Convention Center Hotel. All of Boardwalk's interests and other assets relating to said hotel (including, without limitation, certain cash deposits and notes made by Headquarters Hotel Associates L.P.) shall be contributed, distributed or transferred (either in one transaction or a series of transactions) to ITT Sheraton Corp., the Corporation, or another Wholly-Owned Domestic Subsidiary of the Corporation which is a Credit Party. 4. Headquarters Hotel Assoc. L.P.: Baltic Investment Company LLC ("Baltic LLC") currently is the limited partner of Headquarters Hotel Assoc. L.P., the owner of the Atlantic City Hotel. Boardwalk and certain other Subsidiaries of the Corporation currently own all of the outstanding limited liability company interests of Baltic LLC. Headquarters Hotel Management LLC ("HHM") is a limited liability company, the members of which are Caesars New Jersey, Inc. ("Caesars NJ") and Boardwalk. HHM is the manager of the Atlantic City Hotel. All of the limited liability company interests in Baltic LLC and HHM will be transferred, contributed or distributed to ITT Sheraton Corp. or another Wholly-Owned Domestic Subsidiary of the Corporation which is a Credit Party, and said limited liability company interests will be pledged to the Secured Creditors pursuant to the Pledge and Security Agreement. In addition, any other assets relating to the Atlantic City Hotel and not being sold to the buyer in connection with the Caesars World Sale shall be transferred to the Corporation or a Wholly-Owned Domestic Subsidiary of any Original Borrower which is a Credit Party. 25 5. Foreign Licenses: Sheraton International, Inc. (or, if applicable, the Corporation or any of its Subsidiaries) ("Licensor") shall, in the ordinary course of its business, enter into certain foreign license agreements relating to certain intangibles or other assets held by the Corporation and its Subsidiaries with a Wholly-Owned Subsidiary of the Corporation ("Licensee"). These intangibles and other assets shall not be transferred to Licensee, but Licensee shall have the license rights with respect to said assets. In connection with the foregoing, Licensee shall, in the ordinary course of business, pay certain consideration to Licensor and enter into sub-license agreements with other Subsidiaries of the Corporation with respect to such license rights. 26 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written. STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust By: /s/ Mark D. Rozells --------------------------------------------------- Title: Vice President and Treasurer SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells --------------------------------------------------- Title: Vice President and Treasurer ITT CORPORATION, a Nevada corporation By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer 27 CHARLESTON HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, CRYSTAL CITY HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, LONG BEACH HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, SANTA ROSA HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, SLT ALLENTOWN LLC, a Delaware limited liability company, SLT ARLINGTON LLC, a Delaware limited liability company, SLT ASPEN DEAN STREET, LLC, a Delaware limited liability company, SLT BLOOMINGTON LLC, a Delaware limited liability company, SLT CENTRAL PARK SOUTH, LLC, a Delaware limited liability company, SLT DANIA LLC, a Delaware limited liability company, SLT DC MASSACHUSETTS AVENUE, LLC, a Delaware limited liability company, SLT INDIANAPOLIS LLC, a Delaware limited liability company, SLT KANSAS CITY LLC, a Delaware limited liability company, SLT LOS ANGELES LLC, a Delaware limited liability company, 28 SLT MINNEAPOLIS LLC, a Delaware limited liability company, SLT PALM DESERT LLC, a Delaware limited liability company, SLT PHILADELPHIA LLC, a Delaware limited liability company, SLT REALTY COMPANY, LLC, a Delaware limited liability company, SLT SAN DIEGO LLC, a Delaware limited liability company, SLT SOUTHFIELD LLC, a Delaware limited liability company, SLT ST. LOUIS LLC, a Delaware limited liability company, SLT TUCSON LLC, a Delaware limited liability company, STARLEX LLC, a New York limited liability company, STARWOOD ATLANTA II LLC, a Delaware limited liability company, STARWOOD ATLANTA LLC, a Delaware limited liability company, STARWOOD MISSION HILLS, L.L.C., a Delaware limited liability company, STARWOOD NEEDHAM LLC, a Delaware limited liability company, 29 STARWOOD WALTHAM LLC, a Delaware limited liability company, By: SLT Realty Limited Partnership, a Delaware limited partnership, the managing member of each of the above listed entities By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells -------------------------------------------- Title: Vice President and Treasurer BW HOTEL REALTY, LP, a Maryland limited partnership, CP HOTEL REALTY, LP, a Maryland limited partnership, EDISON HOTEL ASSOCIATES, LP, a New Jersey limited partnership, NOVI HOTEL ASSOCIATES, LP, a Delaware limited partnership, PARK RIDGE HOTEL ASSOCIATES LP, a Delaware limited partnership, SLT FINANCING PARTNERSHIP, a Delaware general partnership, SLT HOUSTON BRIAR OAKS, LP, a Delaware limited partnership, VIRGINIA HOTEL ASSOCIATES, LP, a Delaware limited partnership, 30 PRUDENTIAL HEI JOINT VENTURE, a Georgia general partnership, By: SLT Realty Limited Partnership, a Delaware limited partnership, the general partner of each of the above listed entities By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells --------------------------------------------- Title: Vice President and Treasurer HEI HOTELS, L.L.C., a Delaware limited liability company, OPERATING PHILADELPHIA LLC, a Delaware limited liability company, SLC ALLENTOWN LLC, a Delaware limited liability company, SLC ARLINGTON LLC, a Delaware limited liability company, SLC ASPEN DEAN STREET, LLC, a Delaware limited liability company, SLC ATLANTA II LLC, a Delaware limited liability company, SLC ATLANTA LLC, a Delaware limited liability company, SLC BLOOMINGTON LLC, a Delaware limited liability company, SLC CENTRAL PARK SOUTH, LLC, a Delaware limited liability company, 31 SLC DANIA LLC, a Delaware limited liability company, SLC DC MASSACHUSETTS AVENUE, LLC, a Delaware limited liability company, SLC INDIANAPOLIS LLC, a Delaware limited liability company, SLC KANSAS CITY L.L.C., a Delaware limited liability company, SLC LOS ANGELES LLC, a Delaware limited liability company, SLC MINNEAPOLIS LLC, a Delaware limited liability company, SLC NEEDHAM LLC, a Delaware limited liability company, SLC PALM DESERT LLC, a Delaware limited liability company, SLC SAN DIEGO LLC, a Delaware limited liability company, SLC SOUTHFIELD LLC, a Delaware limited liability company, SLC ST. LOUIS LLC, a Delaware limited liability company, SLC TUCSON LLC, a Delaware limited liability company, SLC WALTHAM LLC, a Delaware limited liability company, 32 STARWOOD MANAGEMENT COMPANY, LLC, a Delaware limited liability company, By: SLC Operating Limited Partnership, a Delaware limited partnership, the managing member of each of the above listed entities By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ---------------------------------------- Title: Senior Vice President Finance and Treasurer SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ---------------------------------------------------- Title: Senior Vice President Finance and Treasurer MILWAUKEE BROOKFIELD LP, a Wisconsin limited partnership, SLC-CALVERTON LP, a Delaware limited partnership, SLC HOUSTON BRIAR OAKS, LP, a Delaware limited partnership, By: SLC Operating Limited Partnership, a Delaware limited partnership, the general partner of each of the above listed entities By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells --------------------------------------------- Title: Senior Vice President Finance and Treasurer 33 MOORLAND HOTEL LP, a Wisconsin limited partnership, By: Milwaukee Brookfield LP, a Wisconsin limited partnership, its general partner By: SLC Operating Limited Partnership, a Delaware limited partnership, its general partner By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells -------------------------------------------- Title: Senior Vice President Finance and Treasurer ITT BROADCASTING CORP., a Delaware corporation By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer ITT SHERATON CORPORATION, a Delaware corporation, DESTINATION SERVICES OF SCOTTSDALE, INC., a Delaware corporation, GENERAL FIDUCIARY CORPORATION, a Massachusetts corporation, GLOBAL CONNEXIONS INC., a Delaware corporation, ITT SHERATON RESERVATIONS CORPORATION, a Delaware corporation, MANHATTAN SHERATON CORPORATION, a New York corporation, 34 SAN DIEGO SHERATON CORPORATION, a Delaware corporation, SAN FERNANDO SHERATON CORPORATION, a Delaware corporation, SHERATON ARIZONA CORPORATION, a Delaware corporation, SHERATON 45 PARK CORPORATION, a Delaware corporation, SHERATON ASIA-PACIFIC CORPORATION, a Delaware corporation, SHERATON BLACKSTONE CORPORATION, a Delaware corporation, SHERATON BOSTON CORPORATION a Massachusetts corporation, SHERATON CALIFORNIA CORPORATION, a Delaware corporation, SHERATON CAMELBACK CORPORATION, a Delaware corporation, SHERATON FLORIDA CORPORATION, a Delaware corporation, SHERATON HARBOR ISLAND CORPORATION, a Delaware corporation, SHERATON HARTFORD CORPORATION, a Connecticut corporation, SHERATON HAWAII HOTELS CORPORATION, a Hawaii corporation, SHERATON INTERNATIONAL, INC., a Delaware corporation, 35 SHERATON INTER-AMERICAS, LTD., a Delaware corporation, SHERATON INTERNATIONAL DE MEXICO, INC., a Delaware corporation, SHERATON MANAGEMENT CORPORATION, a Delaware corporation, SHERATON OVERSEAS MANAGEMENT CORPORATION, a Delaware corporation, SHERATON WARSAW CORPORATION, a Delaware corporation, SHERATON MARKETING CORPORATION, a Delaware corporation, SHERATON MIAMI CORPORATION, a Delaware corporation, SHERATON MIDDLE EAST MANAGEMENT CORPORATION, a Delaware corporation, SHERATON NEW YORK CORPORATION, a New York corporation, SHERATON OVERSEAS TECHNICAL SERVICES CORPORATION, a Delaware corporation, SHERATON PEACHTREE CORPORATION, a Delaware corporation, SHERATON PHOENICIAN CORPORATION, a Delaware corporation, SHERATON SAVANNAH CORPORATION, a Delaware corporation, SHERATON SERVICES CORPORATION, a Delaware corporation, 36 SOUTH CAROLINA SHERATON CORPORATION, a Delaware corporation, ST. REGIS SHERATON CORPORATION, a New York corporation, WORLDWIDE FRANCHISE SYSTEMS, INC., a Delaware corporation, SHERATON VERMONT CORPORATION, a Vermont corporation, By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer HUDSON SHERATON CORPORATION LLC, a Delaware limited liability company By: ITT SHERATON CORPORATION a Delaware corporation, its managing member By: /s/ Mark D. Rozells -------------------------------------------------- Title: Senior Vice President Finance and Treasurer W&S DENVER CORP., a Delaware corporation, W&S REALTY CORPORATION OF DELAWARE, a Delaware corporation, BENJAMIN FRANKLIN HOTEL, INC., a Washington corporation, LAUDERDALE HOTEL COMPANY, a Delaware corporation, WESTIN BAY HOTEL COMPANY, a Delaware corporation, CINCINNATI PLAZA COMPANY, a Delaware corporation, 37 SOUTH COAST WESTIN HOTEL COMPANY, a Delaware corporation, TOWNHOUSE MANAGEMENT INC., a Delaware corporation, WVC RANCHO MIRAGE, INC., a Delaware corporation, WESTIN ASSET MANAGEMENT COMPANY, a Delaware corporation, WESTIN HOTEL COMPANY, a Delaware corporation, W&S ATLANTA CORP., a Delaware corporation, By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer WESTIN SEATTLE HOTEL COMPANY, a Washington general partnership, By: Benjamin Franklin Hotel, Inc., its general partner By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer By: W&S Realty Corporation of Delaware, its general partner By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer WESTIN PREMIER, INC., a Delaware corporation, WESTIN VACATION MANAGEMENT CORPORATION, a Delaware corporation, 38 WESTIN VACATION EXCHANGE COMPANY, a Delaware corporation, By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, the sole stockholder of each of the above listed entities By: /s/ Mark D. Rozells --------------------------------------------------- Title: Senior Vice President Finance and Treasurer W&S LAUDERDALE CORP., a Delaware corporation, W&S SEATTLE CORP., a Delaware corporation, By: SLT Realty Limited Partnership, a Delaware limited partnership, the sole stockholder of each of the above listed entities By: Starwood Hotels & Resorts a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells ---------------------------------------- Title: Vice President and Treasurer BANKERS TRUST COMPANY, Individually and as Administrative Agent and as Paying Agent By: /s/ Laura S. Burwick ---------------------------------------- Title: Principal THE CHASE MANHATTAN BANK, Individually and as Administrative Agent By: /s/ Alan Breindel ---------------------------------------- Title: Managing Director 39 LEHMAN COMMERCIAL PAPER, INC., Individually and as Syndication Agent By: /s/ William J. Gallagher ---------------------------------------- Title: Authorized Signatory BANK OF MONTREAL, CHICAGO BRANCH, Individually and as Syndication Agent By: /s/ Heather L. Turf ---------------------------------------- Title: Director ARAB BANKING CORPORATION (B.S.C.) By: /s/ Louise Bilbro ---------------------------------------- Title: Vice President BANCA POPOLARE DI MILANO By: /s/ Fulvio Montanari ---------------------------------------- Title: First Vice President By: /s/ Patrick F. Dillon ---------------------------------------- Title: Vice President/Chief Credit Officer BANKBOSTON, N.A. By: /s/ Kathleen M. Ahern ---------------------------------------- Title: Vice President By: ---------------------------------------- Name: Title: 40 BANK LEUMI USA By: /s/ Gloria Bucher ------------------------------------------------- Title: Managing Director and First Vice President THE BANK OF TOKYO-MITSUBISHI, LIMITED, NEW YORK BRANCH By: /s/ N. Saffra ---------------------------------------- Title: Vice President BANK OF HAWAII By: /s/ Donna R. Parker ---------------------------------------- Title: Vice President BANK POLSKA KASA OPIEKI S.A. PEKAO S.A. GROUP, NEW YORK BRANCH By: /s/ B.W. Henry ---------------------------------------- Title: Vice President PARIBAS By: /s/ John W. Kopcha ---------------------------------------- Title: Director By: /s/ Marc A. Preiser ---------------------------------------- Title: Vice President BANQUE WORMS CAPITAL CORP. By: /s/ P. Fleming /F. Garnet ---------------------------------------- Title: VP& General Counsel/Senior VP 41 BEAR STEARNS INVESTMENT PRODUCTS INC. By: /s/ Gregory Hanley ---------------------------------------- Title: Vice President BARCLAYS BANK PLC By: /s/ John Giannone ---------------------------------------- Title: Director CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH By: /s/ Wan-Tu Yeh ---------------------------------------- Title: VP & General Manager CHIAO TUNG BANK CO., LTD. NEW YORK AGENCY By: /s/ Kuang-Si Shiu ---------------------------------------------- Title: Senior Vice President & General Manager CIBC INC. By: /s/ Dean J. Decker ------------------------------------------- Title: Executive Director CIBC World Markets Corp., AS AGENT COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: /s/ Marcus Edward ---------------------------------------- Title: Vice President By: /s/ Sean Mounier ---------------------------------------- Title: First Vice President 42 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Mary P. Daly ---------------------------------------- Title: Vice President CREDIT SUISSE FIRST BOSTON By: /s/ Chris T. Horgan / Kristin Lepri ---------------------------------------- Title: Vice President /Associate CREDITO ITALIANO By: /s/ Gianfranco BBisagni ---------------------------------------- Title: First Vice President By: /s/ Charles Michael ---------------------------------------- Title: Vice President DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: /s/ Hans-Josef Thiele ---------------------------------------- Title: Director By: /s/ Stephan A. Wiedmann ---------------------------------------- Title: Director DOMINION BANK By: ---------------------------------------- Name: Title: 43 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG By: /s/ Paul Judicke /David Maheim ------------------------------------------------ Title: Vice President /Assistant Vice President Erste Bank New York Branch FIRST COMMERCIAL BANK By: /s/ Bruce Ju ---------------------------------------- Title: Deputy General Manager THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW YORK BRANCH By: /s/ William Kennedy ---------------------------------------- Title: Senior Vice President KZH CNC LLC By: /s/ Peter Chin ---------------------------------------- Title: Authorized Agent LAND BANK OF TAIWAN, LOS ANGELES BRANCH By: ---------------------------------------- Name: Title: THE LONG TERM CREDIT BANK OF JAPAN, LTD. By: ---------------------------------------- Name: Title: 44 MITSUBISHI TRUST & BANKING CORPORATION By: /s/ Toshihiro Hayashi ---------------------------------------- Title: Senior Vice President ML KZH STERLING LLC By: ---------------------------------------- Name: Title: NATIONSBANK, N.A. By: /s/ Ansel McDowell ---------------------------------------- Title: Vice President THE ROYAL BANK OF SCOTLAND, PLC By: ---------------------------------------- Name: Title: SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ Thomas K. Day ---------------------------------------- Title: Director SOUTHERN PACIFIC BANK By: /s/ Sean R. Walker ---------------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: /s/ Suresh S. Tata ---------------------------------------- Title: Senior Vice President 45 MC CLO XIX STERLING (Cayman) Ltd. Sterling Asset Manager, L.L.C., as its Investment Advisor By: ---------------------------------------- Name: Title: WACHOVIA BANK, N.A. By: ---------------------------------------- Name: Title: WESTDEUTSCHE LANDESBANK GIROZENTRALE By: /s/ Andrew B. Stein ---------------------------------------- Title: Managing Director By: /s/ Mark H. Lanspa ---------------------------------------- Title: Director VAN KAMPEN PRIME RATE INCOME TRUST By: /s/ Jeffrey W. Maillet ---------------------------------------- Title: Sr. Vice Pres. & Director VAN KAMPEN SENION FLOATING RATE FUND By: /s/ Jeffrey W. Maillet ---------------------------------------- Title: Sr. Vice Pres. & Director 46 VAN KAMPEN CLO I, LIMITED By: VAN KAMPEN MANAGEMENT INC., as Collateral Manager By: /s/ Jeffrey W. Maillet ---------------------------------------- Title: Sr. Vice Pres. & Director VAN KAMPEN SENIOR INCOME TRUST By: /s/ Jeffrey W. Maillet ---------------------------------------- Title: Sr. Vice Pres. & Director MELLON BANK, N.A., solely in its capacity as Trustee for the GENERAL MOTORS CASH MANAGEMENT MASTER TRUST, (as directed by Shenkman Capital Management, Inc.), and not in its individual capacity By: ---------------------------------------- Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: ---------------------------------------- Name: Title: OXFORD STRATEGIC INCOME FUND By: EATON VANCE MANAGEMENT, as Investment Advisor By: ---------------------------------------- Name: Title: 47 INDOSUEZ CAPITAL FUNDING III, LIMITED By: Indosuez Capital as Portfolio Advisor By: /s/ Dan H. Smith ---------------------------------------- Title: First Vice President EATON VANCE SENIOR INCOME TRUST By: EATON VANCE MANAGEMENT, as Investment Advisor By: ---------------------------------------- Name: Title: ISTITUTO BANCARIO SAN PAOLO DI TORINO ISTITUTO MOBILIARE ITALIANO S.P.A. By: /s/ Robert Wurster / Carlo Persico --------------------------------------------------- Title: First Vice President / Deputy General Manager FIRST SECURITY BANK, N.A. By: /s/ David P. Williams ---------------------------------------- Title: Vice President FLEET BANK, N.A. By: /s/ John T. Harrison ---------------------------------------- Title: Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ William E. Magee ---------------------------------------- Title: Duly Authorized Signatory GOLDMAN SACHS CREDIT PARTNERS L.P. By: /s/ John Wilson ---------------------------------------- Title: Authorized Signatory 48 GULF INTERNATIONAL BANK B.S.C. By: /s/ Mireille Khalidi /Abdel-Pattsh Tahoun ------------------------------------------ Title: AVP / SVP HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY By: /s/ Jeffrey C.P. Lee ---------------------------------------- Name: Title: EX-10.2 3 EX-10.2 1 EXHIBIT 10.2 NINTH AMENDMENT TO CREDIT AGREEMENT NINTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of September 20, 1999, among STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust ("Starwood REIT"), SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership ("SLT RLP"), STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the "Corporation"), ITT CORPORATION, a Nevada corporation ("ITT" and, together with Starwood REIT, SLT RLP and the Corporation, the "Original Borrowers"), the other Credit Parties (as defined in the Credit Agreement referred to below), the lenders from time to time party to the Credit Agreement referred to below (the "Lenders"), BANKERS TRUST COMPANY and THE CHASE MANHATTAN BANK, as Administrative Agents (in such capacity, the "Administrative Agents") and LEHMAN COMMERCIAL PAPER INC. and BANK OF MONTREAL, as Syndication Agents (in such capacity, the "Syndication Agents") and BANKERS TRUST COMPANY, as Collateral Agent (in such capacity, the "Collateral Agent"). Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings provided such terms in the Credit Agreement referred to below. W I T N E S S E T H: WHEREAS, the Original Borrowers, the Lenders, the Administrative Agents and the Syndication Agents are parties to that certain Credit Agreement, dated as of February 23, 1998 (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the Corporation has entered into an agreement to consummate the following transaction (all of the following being collectively referred to herein as the "Vistana Timeshare Transaction"): (i) Vistana, Inc., a Florida corporation ("Original Vistana") shall merge with and into Fire Acquisition Corp., a Florida corporation ("Vistana Parent"), a newly created Wholly-Owned Subsidiary of the Corporation and (ii) Vistana Parent shall be the surviving entity of such merger and shall change its name to Vistana, Inc.; WHEREAS, Original Vistana and its Subsidiaries are, and Vistana Parent and its Subsidiaries will be, engaged in (i) the acquisition, development, operation, management and sale of vacation ownership resorts ("Vacation Resorts"), including, without limitation, resorts having vacation ownership interests, interval ownership interests, timeshare estates, timeshare licenses, vacation clubs, right-to-use programs or other forms of vacation ownership programs (all of the foregoing being collectively referred to herein as "VOIs") and (ii) providing customers who purchase VOIs at Vacation Resorts financing for such purchases (all of the foregoing, together with (A) the transactions described on Schedule 1 hereto and (B) any and all businesses that in the good faith judgment of the board of directors of the Corporation or Vistana Parent are materially related to the Timeshare Business, collectively, the "Timeshare Business"); WHEREAS, after the consummation of the Vistana Timeshare Transaction, the Corporation and its Subsidiaries will require greater flexibility under the Credit Agreement and the other Credit Documents in order to conduct the Timeshare Business of Vistana Parent and its 2 Subsidiaries as presently conducted by Original Vistana and its Subsidiaries and as contemplated in the future; WHEREAS, the Borrowers wish to request certain waivers from certain restrictions set forth in certain sections of the Credit Agreement in order to permit the Corporation and its Subsidiaries to conduct the Timeshare Business and the other transactions described herein; and WHEREAS, the parties hereto also wish to amend the Credit Agreement in certain respects as herein provided; NOW, THEREFORE, it is agreed: I. Waivers, Amendments and Agreements with Respect to the Credit Agreement SECTION 1. Vistana Timeshare Transactions. (a) Permitted Acquisition. (i) The Corporation hereby confirms and acknowledges to the Lenders that the Vistana Timeshare Transaction is a Permitted Acquisition (as such term is defined in Section 9.02 of the Credit Agreement), except that, after the consummation of the Vistana Timeshare Transaction and without this Amendment becoming effective upon its terms, the Corporation would be unable to comply with clause (ii) of Section 9.02(ix) of the Credit Agreement in that said clause requires the Vistana Restricted Subsidiaries (as hereinafter defined) to comply with Section 8.15 of the Credit Agreement. (ii) The Lenders hereby acknowledge and agree that, subject to the terms and conditions of this Amendment, the Vistana Timeshare Transaction shall be a Permitted Acquisition even though the Vistana Timeshare Transaction does not comply with the requirements of clause (ii) of said Section 9.02(ix) to the extent specifically described in preceding clause (i), provided all other requirements of Section 9.02(ix) of the Credit Agreement, and the requirements of following clause (d), are satisfied. (b) Use of Proceeds; Section 4.02(d) and (e). (i) Section 4.02(d) of the Credit Agreement shall be amended by replacing the words "provided that (x)" in said Section with the following: "provided that (w) the Net Proceeds received in respect of any Indebtedness incurred pursuant to, and in accordance with the requirements of, clause (xv) of Section 9.04 and which would otherwise be required to be applied as mandatory repayments or commitment reductions hereunder shall not be required to be so applied and may be reinvested in, or otherwise used in connection with, the Timeshare Business, (x)" - 2 - 3 (iii) Section 4.02(e) of the Credit Agreement shall be amended by inserting, immediately after the words "receives cash proceeds from any Asset Sale", with the following: "(other than Net Proceeds received pursuant to Section 9.02(xiv) of this Credit Agreement)." (c) Definition of Improvements; Section 7.12(c). The definition of the term "Improvements" (as defined in Section 7.12(c) of the Credit Agreement) shall include, in addition to the matters set forth in Section 7.12(c), all components of all improvements constituting Timeshare Assets (as hereinafter defined) owned or leased, as lessee, by Vistana Parent or any of its Subsidiaries. (d) Restricted Vistana Subsidiaries Not Required as Guarantors or Pledgors; Pledge and Security Agreement Collateral; Sections 8.13 and 8.15. Notwithstanding anything to the contrary contained in the Credit Agreement or the other Credit Documents (including without limitation, Sections 8.13 and 8.15 of the Credit Agreement), none of the following Persons shall be a Guarantor, have any of its stock pledged, or be subject to the terms and provisions of Sections 8.13 or 8.15 of the Credit Agreement (collectively, the "Restricted Vistana Subsidiaries"): (i) VTM Corp.; (ii) Vistana Timeshare Mortgage Corp.; (iii) Vistana 1998-A Timeshare Mortgage Corp.; (iv) Vistana 1999-A Timeshare Mortgage Corp., (v) any other special purpose, bankruptcy remote Subsidiary of Vistana Parent acquired, established or created by Vistana Parent or any of its Subsidiaries in connection with a Receivables Financing, Off-Balance Sheet Transaction or Timeshare Securitization (each as hereinafter defined), (vi) the Subsidiaries of Vistana Parent listed on Schedule 2 hereto for the reasons described therein, and (vii) any other non-Wholly-Owned Subsidiary of Vistana Parent in which all investments therein by the Corporation and its Subsidiaries have been made pursuant to clauses (C), (D), or (E) of Section 9.05(xvi), in each case, so long as such Restricted Vistana Subsidiary does not merge or consolidate with or into Vistana Parent or any other Credit Party; and provided that, notwithstanding anything to the contrary contained in this paragraph, the Corporation, Vistana Parent and each of the Subsidiaries of Vistana Parent (other than the Restricted Vistana Subsidiaries) hereby confirm and agree that, after giving effect to the Vistana Timeshare Transaction, (x) 100% of the Stock of Vistana Parent and each of its Subsidiaries (other than the Restricted Vistana Subsidiaries) shall be pledged to the Secured Creditors (and held by the Collateral Agent on their behalf) pursuant to the Pledge and Security Agreement and the other Credit Documents, (y) in accordance with Section 8.13 of the Credit Agreement and the other Credit Documents, the Corporation shall cause Vistana Parent and each of its Subsidiaries (other than the Restricted Vistana Subsidiaries) to deliver such Stock to the Collateral Agent promptly after the consummation of the Vistana Timeshare Transaction, and (z) Vistana Parent and each of its Subsidiaries (other than the Restricted Vistana Subsidiaries) shall comply with the applicable provisions of Sections 8.13 and 8.15 of the Credit Agreement, including, without limitation, the provisions set forth in Section 8.15 requiring Vistana Parent and such Subsidiaries to execute and deliver counterparts of the Guaranty and the Pledge and Security Agreement to the Collateral Agent; provided further that if at any time hereafter any Restricted Vistana Subsidiary may become a Guarantor, have its stock pledged, or be subject to the terms and provisions of Sections 8.13 or 8.15 of the Credit Agreement, then such Person shall no longer be considered a Restricted Vistana Subsidiary and from and after such time, such Person shall (and the Corporation shall cause such Person to) fully comply with all of the applicable provisions of Sections 8.13 or 8.15 of the Credit Agreement. - 3 - 4 (e) Liens; Section 9.01. Section 9.01 of the Credit Agreement shall be amended by (i) deleting the last reference to the word "and" in clause (xvi), (ii) deleting the period from clause (xvii) and inserting the following word "; and" in its place, and (iii) inserting, immediately after clause (xvii), the following new clause (xviii): "(xviii) Liens on Assets of Vistana Parent or any of its Subsidiaries (other than Assets constituting Collateral) securing Indebtedness permitted under Sections 9.04(xv) and (xvi)." (f) Certain Additional Limitations Relating to Permitted Acquisitions; Section 9.02(ix); Consolidation, Merger, Purchase or Sale of Assets, Lease Obligations. Clause (ix) of Section 9.02 of the Credit Agreement is amended by inserting, immediately after the last word thereof, the following new proviso: "provided that neither Vistana Parent nor any of its Subsidiaries shall acquire all or substantially all of the Assets or Capital Stock of any Person substantially engaged in the Timeshare Business unless Vistana Parent (if Vistana Parent is directly making the acquisition) or the respective Subsidiary of Vistana Parent which is making the acquisition is a Credit Party." (g) Sale of Certain Timeshare Assets in the Ordinary Course of Business; Section 9.02; Consolidation, Merger, Purchase or Sale of Assets, Lease Obligations. Section 9.02 of the Credit Agreement is amended by (i) deleting the last reference to the word "and" in clause (xii), (ii) deleting the period from clause (xiii) and inserting the following word "; and" in its place, and (iii) inserting, immediately after clause (xiii), the following new clause (xiv): "(xiv) Vistana Parent and any of its Subsidiaries may transfer, convey, sell, lease (including, without limitation, by way of sale-leaseback transactions) or otherwise dispose of (A) all or any portion of its VOIs to consumers or (B) Timeshare Purchase Money Notes in connection with Receivables Financings, Off-Balance Sheet Transactions or Timeshare Securitizations, in each case, in one or a series of related transactions, provided (x) the consideration (including non-cash consideration) received from such transfer is at fair market value and (y) such transfer was in the ordinary course of business of Vistana Parent and its Subsidiaries. Notwithstanding anything to the contrary contained in Section 4.02 or elsewhere in the Credit Agreement, the cash proceeds of any transfers permitted under this clause (xiv) shall not be required to be applied as a mandatory repayment pursuant to Section 4.02 of the Credit Agreement and may be used for the operation of, or reinvested in, the Timeshare Business." (h) Financing Related to the Timeshare Business; Sections 9.04(xii), (xv) and (xvi); Indebtedness. (i) Clause (xii) of Section 9.04 of the Credit Agreement shall be amended - 4 - 5 by (1) deleting the words "herein and (b)" and replacing same with the words "herein, (b)" and (2) inserting, immediately after the last word of said clause (xii), the following words: ", and (c) the amount of the Recourse Basket shall be further reduced from time to time to the extent provided in Schedule 1 to the Ninth Amendment and Sections 9.04(xv) and (xvi) (but without duplication of any of the same amounts)." (ii) Section 9.04 of the Credit Agreement is further amended by (A) deleting the last reference to the word "and" in clause (xiii) thereof, (B) deleting the period at the end of clause (xiv) in said Section, and (C) inserting, immediately after clause (xiv) of said Section, the following new clauses (xv) and (xvi): "(xv) Indebtedness of Vistana Parent and any of its Subsidiaries (other than Contingent Obligations and Guarantees of Vistana Parent and its Subsidiaries) incurred in connection with the Timeshare Business as described in paragraphs 3 through 7, inclusive, of Schedule 1 to the Ninth Amendment and the Indebtedness of Original Vistana and its Subsidiaries outstanding on September 30, 1999; provided that, if any Indebtedness permitted to be outstanding at any time pursuant to this clause (xv) shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then such Recourse Indebtedness shall only be permitted to the extent incurred under preceding clause (xii), and in such case the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0; and" "(xvi) Contingent Obligations and Guarantees of Vistana Parent and its Subsidiaries incurred in connection with (A) the construction, development and operation of any Assets used in connection with the Timeshare Business, (B) any Indebtedness of Vistana Parent and its Subsidiaries permitted under clause (xv) above, and (C) customer deposits received in the ordinary course of business; provided that, if any Contingent Obligation or Guarantee permitted to be outstanding at any time pursuant to this clause (xvi) shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then such Recourse Indebtedness shall only be permitted to the extent incurred under preceding clause (xii), and in such case the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0." - 5 - 6 (i) Advances, Investments and Loans; 9.05(xvi). Section 9.05 of the Credit Agreement is hereby amended by (i) deleting the last reference to the word "and" in clause (xiv) thereof, (ii) deleting the period at the end of clause (xv) in said Section and inserting the following word "; and" in its place, and (iii) inserting, immediately after clause (xv) of said Section, the following new clause (xvi); "(xvi) Vistana Parent and its Subsidiaries may make Investments consisting of the following: (A) in connection with the sale of any VOIs, loans to purchasers of such VOIs, which Loans may be secured by a mortgage, pledge or other encumbrance on the VOI being purchased and which is made in the ordinary course of business, (B) in connection with any Vacation Resort, loans to any owner association established in connection with such Vacation Resort, but only to the extent that such loans are made in the ordinary course of business in an aggregate outstanding principal amount not to exceed $20,000,000 at any time (determined without regard to any write-downs or write-offs of such loans and advances), (C) the Timeshare Joint Ventures (as hereinafter defined) described in Schedule 1 to the Ninth Amendment, (D) other equity investments in any Person not otherwise a Guarantor under the Credit Agreement in the ordinary course of the Timeshare Business, and (E) intercompany loans and advances of cash to Subsidiaries of Vistana Parent that are not Guarantors; provided that (i) the aggregate amount of investments, loans and advances permitted under clauses (C) , (D), and (E) of this Section 9.05(xi) shall not exceed $100,000,000 in any Fiscal Year, (ii) no single equity investment permitted under clauses (C), (D), and (E) of this Section 9.05(xi) shall exceed $50,000,000, and (iii) the $300,000,000 basket (and, after the Caesars World Effective Date, the $400,000,000 basket) set forth in Section 9.05(xvi) shall be reduced in any Fiscal Year by the amount of investments, loans and advances actually made as permitted under clauses (C), (D) and (E) of this Section 9.05(xvi), and the investments pursuant to said clauses (C), (D), and (E) of this Section 9.05(xvi) shall be permitted only if the basket referred to above would not be reduced below $0." (j) Business of Vistana Parent and its Subsidiaries; Section 9.15. Section 9.15 of the Credit Agreement is hereby amended by inserting, immediately after the last sentence thereof, the following new sentence: "Neither Vistana Parent nor any of its Subsidiaries shall (and no Borrower shall permit Vistana Parent or any of its Subsidiaries to) engage (directly or indirectly) in any business other than the Timeshare Business."; - 6 - 7 it being agreed that the portion of the Eighth Amendment amending and restating Section 9.15 shall only amend and restate the first sentence of said Section 9.15 and shall not amend or restate the new second sentence of said Section as herein provided. (k) Definition of Hotel and Gaming Business; Section 11.01. The definition of the term "Hotel and Gaming Businesses" as defined in Section 11.01 of the Credit Agreement shall be deemed to include, without limitation, the Timeshare Business. (l) Definition of Hotel; Sections 7.12(c); 9.07(a), etc. The Credit Agreement is hereby amended so that the term "Hotel," but only as such term is used in the first sentence of Section 7.12(c) and the second to last sentence of the definition of "Contingent Obligations," shall be deemed to include, without limitation, any Real Property or Leasehold comprising a facility used in connection with the Timeshare Business; it being agreed that, for purposes of Section 9.07(a), the revenues from such facilities used in connection with the Timeshare Business shall be excluded. (m) Sections 9.24 and 9.25; Timeshare Inventory Balance and New Timeshare Construction. Section 9 of the Credit Agreement is amended by inserting, immediately after the last Section thereof, the following new Sections: "9.24 Timeshare Inventory Balance. (a) The Borrowers will not permit the amount of the Timeshare Inventory Balance for the last day of any Test Period ending during a period set forth below to be greater than the amounts set forth below: "Ninth Amendment Effective $200,000,000 Date through and including December 31, 1999 January 1, 2000 through and including $350,000,000" the Final Maturity Date
"(b) As used in this Section 9.24, the term "Timeshare Inventory Balance" means the aggregate amount of inventory and construction in progress as set forth in the consolidated balance sheets of the Corporation and its Subsidiaries (plus, without duplication, any amounts previously reflected as inventory with respect to the Timeshare Business, for so long as the respective assets continue to be owned by the Corporation or its Subsidiaries, if such assets have been reclassified and are no longer shown as inventory in said balance sheets), in each case, to the extent relating to the Timeshare Business." "9.25 Certain Limitations on the Timeshare Business. Notwithstanding anything to the contrary contained in this Credit Agreement, (a) upon the occurrence and during the continuance of any Specified Default or any Event of Default, (i) neither Vistana Parent nor any of its Subsidiaries shall commence the development of any Vacation Resort or other timeshare project, in each case - 7 - 8 where construction has not yet begun, or commence the development of a new phase of any existing Vacation Resort or other timeshare project, or acquire any land in connection with the intended development of a Vacation Resort or other timeshare project and (ii) neither the Corporation nor any of its Subsidiaries (other than Vistana Parent and its Subsidiaries) shall guarantee any Indebtedness of, or make any loans or advances to, Vistana Parent and any of its Subsidiaries except to the extent reasonably required to complete a Vacation Resort or other timeshare project then in construction or development, (b) at no time shall the Corporation or any of its Subsidiaries convert any Hotel or any portion thereof owned by the Corporation or such Subsidiary into one or more Vacation Resorts or other timeshare project if the aggregate book value of all such converted Hotels (or applicable portions thereof) exceeds $250,000,000 determined at the time of such conversion, and (c) the aggregate total book value of the Timeshare Assets of the Corporation and its Subsidiaries shall at no time exceed ten percent (10%) of the total book value of the Assets of the Corporation and its Subsidiaries as of the then most recently ended Test Period." SECTION 3. Restricted Payments; Section 9.03. Clause (ii) of Section 9.03 of the Credit Agreement shall be amended by (i) deleting the words "15% of Adjusted Funds From Operations" in clause (B) therein and replacing the same with the following: "10% of Combined EBITDA." SECTION 4. Time Periods for Quarterly and Annual Reports; Section 8.01. Section 8.01(a) and (b) of the Credit Agreement shall each be amended by (i) deleting the number "45" appearing in Section 8.01(a) of the Credit Agreement and inserting "55" in its place and (ii) deleting the number "90" appearing in Section 8.01(b) of the Credit Agreement and inserting "100" in its place. SECTION 5. Certificates by Other Officers; Sections 8.01 and 8.07. Each of Sections 8.01(a), (b), and (e) and Section 8.07 of the Credit Agreement shall be amended by inserting, immediately after each occurrence of the phrase "the chief financial officer of the Corporation" in such Sections, the following parenthetical: "(or by the Senior Vice President - Finance & Treasurer or Senior Vice President and Corporate Comptroller of the Corporation)" SECTION 6. Capital Expenditures; Section 9.07; Carry-Over of Certain Unused Baskets. (i) Section 9.07(c) of the Credit Agreement is hereby amended by inserting at the end thereof the following new proviso: "provided, further that, to the extent that the amount of Capital Expenditures made by the Corporation and its Subsidiaries pursuant to preceding clause (y) is less than $900,000,000 (unless the amount available for Capital Expenditures in 1999 has been previously reduced pursuant to the preceding proviso, then such lesser amount), then the amount of such difference, but not to exceed $300,000,000, - 8 - 9 shall be added to the amount otherwise available for Capital Expenditures for Fiscal Year 2000." (ii) Section 9.07(c) of the Credit Agreement shall be amended by inserting, immediately after the words "additional Capital Expenditures for the purpose of", the following words: "acquiring, renovating, or constructing Assets generally considered as corporate expenditures (such as, by way of illustration only, reservation and telephone systems),". SECTION 7. Certain Definitions. (a) The following new definitions shall be inserted in proper alphabetical order in Section 11.01: "'Ninth Amendment' shall mean that certain Ninth Amendment to Credit Agreement, dated as of September 20, 1999. "Ninth Amendment Effective Date" shall mean the date upon which the Ninth Amendment becomes effective in accordance with its terms. "Off-Balance Sheet Transaction" shall have the meaning assigned to such term in Schedule 1 to the Ninth Amendment. "Original Vistana" shall have the meaning assigned to such term in the Recitals to the Ninth Amendment. "Receivables Financing" shall have the meaning assigned to such term in Schedule 1 to the Ninth Amendment. "Timeshare Assets" shall mean any Assets relating to the Timeshare Business. "Timeshare Business" shall have the meaning assigned to such term in the Recitals to the Ninth Amendment. "Timeshare Inventory Balance" shall have the meaning assigned to such term in Section 9.24 of the Credit Agreement. "Timeshare Joint Ventures" shall have the meaning assigned to such term in Schedule 1 to the Ninth Amendment. "Vacation Resorts" shall have the meaning assigned to such term in the Recitals to the Ninth Amendment. "Vistana Parent" shall have the meaning assigned to such term in the Recitals to the Ninth Amendment. "VOIs" shall have the meaning assigned to such term in the Recitals to the Ninth Amendment. - 9 - 10 "Timeshare Purchase Money Notes" shall have the meaning assigned to such term in Schedule 1 to the Ninth Amendment. "Timeshare Securitization" shall have the meaning assigned to such term in Schedule 1 to the Ninth Amendment." (b) The definition of the term "Combined Indebtedness" in Section 11.01 of the Credit Agreement is amended by replacing the words "Section 9.04(xii) of the Credit Agreement)" with the following words: "Section 9.04(xii) or (xvi) of the Credit Agreement." (c) The definition of the term "Recourse Indebtedness" in Section 11.01 of the Credit Agreement is amended by deleting the word "secured" therefrom. II. Miscellaneous Provisions A. Each Guarantor and each Borrower, by their signatures below, hereby confirms that (x) the Guaranty shall remain in full force and effect and the Guaranty covers the obligations of each of the Borrowers under the Credit Agreement, as modified and amended by this Amendment, as provided in the Guaranty, and (y) the Pledge and Security Agreement (as modified by this Amendment) shall remain in full force and effect as security for the obligations under the Credit Agreement, as modified and amended by this Amendment. B. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. C. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrowers and the Paying Agent. D. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. E. This Amendment shall become effective on the date (the "Ninth Amendment Effective Date") when each of the Borrowers, each Guarantor and the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Paying Agent at its Notice Office; provided that Sections 1, 7(a) and 7(b) of this Amendment shall only become effective when both (x) the conditions set forth in this sentence have been satisfied and (y) the Vistana Timeshare Transaction shall have been consummated; provided further that if the Vistana Timeshare Transaction is not consummated on or prior to January 31, 2000, Sections 1, 7(a) and 7(b) of this Amendment shall be of no force or effect. - 10 - 11 F. From and after the Ninth Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. [SCHEDULES 1 AND 2 AND SIGNATURE PAGES FOLLOW] - 11 - 12 SCHEDULE 1 DESCRIPTION OF TIMESHARE BUSINESS 1. Sale of VOIs: Vistana Parent and its Subsidiaries may enter into one or more transactions from time to time where Vistana Parent or such Subsidiary may transfer, convey and sell VOIs to Persons provided that each such transaction is at fair market value and otherwise either consistent with the Timeshare Business presently conducted by Vistana Parent and its Subsidiaries or is considered ordinary or customary in the Timeshare Business as then conducted. Such sales may be for cash and non-cash consideration. The cash proceeds of any sales permitted under this paragraph 1 shall not be required to be applied as a mandatory repayment pursuant to Section 4.02 of the Credit Agreement. 2. Financing of VOIs: Vistana Parent and its Subsidiaries may enter into one or more transactions from time to time where Vistana Parent or such Subsidiary provide purchase money financing to customers who purchase VOIs, which financing may be evidenced by one or more purchase money notes (each, a "Timeshare Purchase Money Note" and, collectively, "Timeshare Purchase Money Notes"). 3. Receivables Financing: Vistana Parent and its Subsidiaries may enter into financing arrangements from time to time with one or more lenders or other financing parties where (a) Vistana Parent or such Subsidiary incur Indebtedness with such lender or financing party not otherwise permitted under the Credit Agreement, (b) such Indebtedness is secured by a pledge, mortgage or other Lien by Vistana Parent or its Subsidiaries of their respective interests in Timeshare Purchase Money Notes and (c) the Indebtedness incurred does not exceed the then outstanding principal balance of such Timeshare Purchase Money Notes (all of the foregoing being collectively referred to as "Receivables Financing"); provided that, if any Receivables Financing permitted to be outstanding at any time pursuant to this paragraph 3 shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0. 4. Vacation Resort Financing: Vistana Parent and its Subsidiaries may enter into financing arrangements from time to time with one or more lenders or other financing parties where (a) Vistana Parent or such Subsidiary incur Indebtedness with such lender or financing party not otherwise permitted under the Credit Agreement, (b) such Indebtedness is incurred in connection with the acquisition, construction or renovation of a Vacation Resort by Vistana Parent or its Subsidiaries, and (c) such Indebtedness is secured, in whole or in part, by a pledge, mortgage or other Lien on the applicable Vacation Resort and related Timeshare Assets; provided that, if any Indebtedness permitted to be outstanding at any time pursuant to this paragraph 4 shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0. 13 5. Intercompany Financing: Subject to the restrictions contained in Section 9.25 or the Credit Agreement (as added in the Ninth Amendment), the Timeshare Joint Ventures, Vistana Parent, and its Subsidiaries, may enter into financing arrangements from time to time with the Corporation or one or more of its Subsidiaries in accordance with the Credit Agreement. 6. Off-Balance Sheet Transaction: Vistana Parent and its Subsidiaries may enter into off-balance sheet transactions from time to time with one or more lenders, financing or other parties where (a) Vistana Parent or such Subsidiary sell Timeshare Purchase Money Notes to such lender or financing party for cash consideration and (b) such cash consideration shall not be required to be applied as a mandatory repayment pursuant to Section 4.02 of the Credit Agreement (all of the foregoing being collectively referred to as "Off-Balance Sheet Transactions"); provided that, if any Off-Balance Sheet Transaction permitted to be outstanding at any time pursuant to this paragraph 6 shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0. 7. Timeshare Securitizations: Vistana Parent and its Subsidiaries may enter into one or more transactions from time to time in which certain Timeshare Assets (including, without limitation, certain real estate assets or receivable assets consisting in part of Timeshare Purchase Money Notes) are, directly or indirectly, either (i) sold, transferred to or with, or deposited in, one or more trusts or other pass-through entities or other similar entities that (a) issue pass-through certificates, participation interests or other evidence of beneficial ownership in such Timeshare Assets or (b) sells certificates, participation interests or other instruments to investors evidencing an ownership interest in the Timeshare Assets of such trust or entity or the right to receive income or proceeds therefrom, or (ii) pledged or mortgaged as security for notes or bonds, where such pass-through certificates, participation interests or other evidence of beneficial ownership, notes or bonds are structured for purchase by institutional investors in capital markets transactions (all of the foregoing being collectively referred to as "Timeshare Securitizations" and each, a "Timeshare Securitization"); provided that, if any Timeshare Securitization permitted to be outstanding at any time pursuant to this paragraph 7 shall be or become, in whole or in part, Recourse Indebtedness of the Corporation or any of its Subsidiaries (other than Vistana Parent and its Subsidiaries), then the Recourse Basket shall be reduced from time to time by the amount of such Recourse Indebtedness, and such Recourse Indebtedness shall be permitted only if the Recourse Basket would not be reduced below $0. 8. Operations; Telecommunications: Vistana Parent and its Subsidiaries may enter into one or more transactions from time to time where Vistana Parent or such Subsidiary may (a) furnish management, operations, maintenance and telecommunications services at Vacation Resorts, (b) own or operate vacation clubs and/or VOI exchange companies and (c) provide telecommunications contracting services to other Persons, provided that in each case, such transaction is either consistent with the Timeshare Business presently conducted by Vistana Parent and its Subsidiaries or is considered ordinary or customary in the Timeshare Business as then conducted. Schedule 1 14 9. Joint Ventures Subject to the restrictions contained in the Credit Agreement (as added in the Ninth Amendment) and the Ninth Amendment, Vistana Parent and its Subsidiaries shall be permitted to enter into the following joint ventures (all of the following being collectively referred to as the "Timeshare Joint Ventures"): (a) Harborside at Atlantis. Vistana Parent, through one or more Wholly-Owned Foreign Subsidiaries, intends to acquire 50% equity interest in a Bahamas corporation to be known as Harborside at Atlantis Joint Venture Limited ("HSA") in exchange for an initial capital contribution of approximately $7,820,000. HSA is being formed to develop, operate and manage Harborside at Atlantis Vacation Resort in Paradise Island, Bahamas. The remaining 50% interest in HSA will be acquired by a subsidiary of Sun International Hotels Limited in exchange for contribution of the land on which the resort will be constructed. HSA may conduct its business through one or more Wholly-Owned Subsidiaries of that entity. (b) World Golf Village. Vistana Parent, through various Subsidiaries, owns a 37.5% partnership interest in each of Vistana WGV, Ltd. ("VWL") and Vistana WGV Management, Ltd. ("VWML"). VWL was formed to develop and operate Vistana World Golf Village. VWML was formed to manage Vistana World Golf Village. (c) Oak Plantation. Vistana Parent, through various Subsidiaries, owns a 66.67% partnership interest in Oak Plantation Joint Venture ("OPJV"). OPJV was formed to develop and operate Oak Plantation. (d) Other Joint Venture Investments. Any other Investment in any joint venture relating to the Timeshare Business but only to the extent permitted under the Credit Agreement or otherwise waived by the Lenders. (e) Additional Capital Contributions and Advances. Vistana Parent and its Subsidiaries may make such additional capital contributions and cash advances as may be required under the terms and provisions of the Contractual Obligations relating to the Joint Ventures specifically described above in paragraphs (a) through (d), inclusive. Schedule 1 15 SCHEDULE 2 SUBSIDIARIES NOT SUBJECT TO SECTIONS 8.13 or 8.15
Name of Subsidiary Reason Stock not Pledged or not Guarantor Points of Colorado, Inc. ("POC") Covenant in Heller construction loan agreement prohibits pledge of POC stock Vistana Maintenance Association, Inc. A not-for-profit corporation Vistana MB, Inc. ("VMBI") Covenants in Heller construction and receivables loan agreements prohibit pledge of VMBI stock Vistana Scottsdale Development, Inc. Covenant in Heller construction loan ("VSDI") agreements prohibits pledge of VSDI stock Vistana Scottsdale, Inc. ("VSI") Covenants in Heller construction and receivables loan agreements prohibit pledge of VSI stock Vistana Bahamas Holdings, Ltd. ("VBHL") Foreign corporation; Joint Venture Restriction Harborside at Atlantis Joint Venture Foreign corporation to be 50% owned by VBHL; Joint Venture Restriction VCH Oaks, Inc. Joint Venture Restriction VCH Oaks, Ltd. Joint Venture Restriction Oak Plantation Joint Venture Joint Venture Restriction Vistana WGV Holdings, Inc. Joint Venture Restriction Vistana WGV Investments, Inc. Joint Venture Restriction Vistana WGV, Ltd. Not a Subsidiary; Joint Venture Restriction on pledge of partnership interests Vistana WGV Management, Inc. Joint Venture Restriction Vistana WGV Management, Ltd. Not a Subsidiary; Joint Venture Restriction on pledge of partnership interests
Schedule 2 16 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written. STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation By: /s/ Mark D. Rozells ------------------------------------------- Title: Vice President Finance and Treasurer STARWOOD HOTELS & RESORTS a Maryland real estate investment trust By: /s/ Mark D. Rozells ------------------------------------------- Title: Vice President Finance and Treasurer SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells ------------------------------------------- Title: Vice President and Treasurer ITT CORPORATION, a Nevada corporation By: /s/ Mark D. Rozells ------------------------------------------- Title: Senior Vice President Finance and Treasurer 17 CHARLESTON HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, CRYSTAL CITY HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, LONG BEACH HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, SANTA ROSA HOTEL ASSOCIATES, LLC, a New Jersey limited liability company, SLT ALLENTOWN LLC, a Delaware limited liability company, SLT ARLINGTON LLC, a Delaware limited liability company, SLT ASPEN DEAN STREET, LLC, a Delaware limited liability company, SLT BLOOMINGTON LLC, a Delaware limited liability company, SLT CENTRAL PARK SOUTH, LLC, a Delaware limited liability company, SLT DANIA LLC, a Delaware limited liability company, SLT DC MASSACHUSETTS AVENUE, LLC, a Delaware limited liability company, SLT INDIANAPOLIS LLC, a Delaware limited liability company, SLT KANSAS CITY LLC, a Delaware limited liability company, SLT LOS ANGELES LLC, a Delaware limited liability company, 18 SLT MINNEAPOLIS LLC, a Delaware limited liability company, SLT PALM DESERT LLC, a Delaware limited liability company, SLT PHILADELPHIA LLC, a Delaware limited liability company, SLT REALTY COMPANY, LLC, a Delaware limited liability company, SLT SAN DIEGO LLC, a Delaware limited liability company, SLT SOUTHFIELD LLC, a Delaware limited liability company, SLT ST. LOUIS LLC, a Delaware limited liability company, SLT TUCSON LLC, a Delaware limited liability company, STARLEX LLC, a New York limited liability company, STARWOOD ATLANTA II LLC, a Delaware limited liability company, STARWOOD ATLANTA LLC, a Delaware limited liability company, STARWOOD MISSION HILLS, L.L.C., a Delaware limited liability company, STARWOOD NEEDHAM LLC, a Delaware limited liability company, 19 STARWOOD WALTHAM LLC, a Delaware limited liability company, By: SLT Realty Limited Partnership, a Delaware limited partnership, the managing member of each of the above listed entities By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells -------------------------------------- Title: Vice President and Treasurer BW HOTEL REALTY, LP, a Maryland limited partnership, CP HOTEL REALTY, LP, a Maryland limited partnership, EDISON HOTEL ASSOCIATES, LP, a New Jersey limited partnership, NOVI HOTEL ASSOCIATES, LP, a Delaware limited partnership, PARK RIDGE HOTEL ASSOCIATES, LP, a Delaware limited partnership, SLT FINANCING PARTNERSHIP, a Delaware general partnership, SLT HOUSTON BRIAR OAKS, LP, a Delaware limited partnership, VIRGINIA HOTEL ASSOCIATES, LP, a Delaware limited partnership, 20 PRUDENTIAL HEI JOINT VENTURE, a Georgia general partnership, By: SLT Realty Limited Partnership, a Delaware limited partnership, the general partner of each of the above listed entities By: Starwood Hotels & Resorts, a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells -------------------------------------- Title: Vice President and Treasurer HEI HOTELS, L.L.C., a Delaware limited liability company, OPERATING PHILADELPHIA LLC, a Delaware limited liability company, SLC ALLENTOWN LLC, a Delaware limited liability company, SLC ARLINGTON LLC, a Delaware limited liability company, SLC ASPEN DEAN STREET, LLC, a Delaware limited liability company, SLC ATLANTA II LLC, a Delaware limited liability company, SLC ATLANTA LLC, a Delaware limited liability company, SLC BLOOMINGTON LLC, a Delaware limited liability company, SLC CENTRAL PARK SOUTH, LLC, a Delaware limited liability company, SLC DANIA LLC, a Delaware limited liability company, SLC DC MASSACHUSETTS AVENUE, LLC, a Delaware limited liability company, 21 SLC INDIANAPOLIS LLC, a Delaware limited liability company, SLC KANSAS CITY L.L.C., a Delaware limited liability company, SLC LOS ANGELES LLC, a Delaware limited liability company, SLC MINNEAPOLIS LLC, a Delaware limited liability company, SLC NEEDHAM LLC, a Delaware limited liability company, SLC PALM DESERT LLC, a Delaware limited liability company, SLC SAN DIEGO LLC, a Delaware limited liability company, SLC SOUTHFIELD LLC, a Delaware limited liability company, SLC ST. LOUIS LLC, a Delaware limited liability company, SLC TUCSON LLC, a Delaware limited liability company, SLC WALTHAM LLC, a Delaware limited liability company, 22 STARWOOD MANAGEMENT COMPANY, LLC, a Delaware limited liability company, By: SLC Operating Limited Partnership, a Delaware limited partnership, the managing member of each of the above listed entities By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ----------------------------------------------------- Title: Vice President and Treasurer SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ----------------------------------------------------- Title: Senior Vice President Finance and Treasurer MILWAUKEE BROOKFIELD LP, a Wisconsin limited partnership, SLC-CALVERTON LP, a Delaware limited partnership, SLC HOUSTON BRIAR OAKS, LP, a Delaware limited partnership, By: SLC Operating Limited Partnership, a Delaware limited partnership, the general partner of each of the above listed entities By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ----------------------------------------------------- Title: Senior Vice President Finance and Treasurer 23 MOORLAND HOTEL LP, a Wisconsin limited partnership, By: Milwaukee Brookfield LP, a Wisconsin limited partnership, its general partner By: SLC Operating Limited Partnership, a Delaware limited partnership, its general partner By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, its general partner By: /s/ Mark D. Rozells ----------------------------------------------------- Title: Senior Vice President Finance and Treasurer ITT BROADCASTING CORP., a Delaware corporation By: /s/ Mark D. Rozells ----------------------------------------------------- Title: Senior Vice President Finance and Treasurer ITT SHERATON CORPORATION, a Delaware corporation, DESTINATION SERVICES OF SCOTTSDALE, INC., a Delaware corporation, GENERAL FIDUCIARY CORPORATION, a Massachusetts corporation, GLOBAL CONNEXIONS INC., a Delaware corporation, ITT SHERATON RESERVATIONS CORPORATION, a Delaware corporation, MANHATTAN SHERATON CORPORATION, a New York corporation, SAN DIEGO SHERATON CORPORATION, a Delaware corporation, 24 SAN FERNANDO SHERATON CORPORATION, a Delaware corporation, SHERATON ARIZONA CORPORATION, a Delaware corporation, SHERATON 45 PARK CORPORATION, a Delaware corporation, SHERATON ASIA-PACIFIC CORPORATION, a Delaware corporation, SHERATON BLACKSTONE CORPORATION, a Delaware corporation, SHERATON BOSTON CORPORATION, a Massachusetts corporation, SHERATON CALIFORNIA CORPORATION, a Delaware corporation, SHERATON CAMELBACK CORPORATION, a Delaware corporation, SHERATON FLORIDA CORPORATION, a Delaware corporation, SHERATON HARBOR ISLAND CORPORATION, a Delaware corporation, SHERATON HARTFORD CORPORATION, a Connecticut corporation, SHERATON HAWAII HOTELS CORPORATION, a Hawaii corporation, SHERATON INTERNATIONAL, INC., a Delaware corporation, SHERATON INTER-AMERICAS, LTD., a Delaware corporation, SHERATON INTERNATIONAL DE MEXICO, INC., a Delaware corporation, 25 SHERATON MANAGEMENT CORPORATION, a Delaware corporation, SHERATON OVERSEAS MANAGEMENT CORPORATION, a Delaware corporation, SHERATON WARSAW CORPORATION, a Delaware corporation, SHERATON MARKETING CORPORATION, a Delaware corporation, SHERATON MIAMI CORPORATION, a Delaware corporation, SHERATON MIDDLE EAST MANAGEMENT CORPORATION, a Delaware corporation, SHERATON NEW YORK CORPORATION, A New York corporation, SHERATON OVERSEAS TECHNICAL SERVICES CORPORATION, a Delaware corporation, SHERATON PEACHTREE CORPORATION, a Delaware corporation, SHERATON PHOENICIAN CORPORATION, a Delaware corporation, SHERATON SAVANNAH CORPORATION, a Delaware corporation, SHERATON SERVICES CORPORATION, a Delaware corporation, SOUTH CAROLINA SHERATON CORPORATION, a Delaware corporation, ST. REGIS SHERATON CORPORATION, a New York corporation, WORLDWIDE FRANCHISE SYSTEMS, INC., 26 a Delaware corporation, SHERATON VERMONT CORPORATION, a Vermont corporation, By: /s/ Mark D. Rozells -------------------------- Title: Senior Vice President Finance and Treasurer HUDSON SHERATON CORPORATION LLC, a Delaware limited liability company By: ITT SHERATON CORPORATION a Delaware corporation, its managing member By: /s/ Mark D. Rozells --------------------------- Title: Senior Vice President Finance and Treasurer W&S DENVER CORP., a Delaware corporation, W&S REALTY CORPORATION OF DELAWARE, a Delaware corporation, BENJAMIN FRANKLIN HOTEL, INC., a Washington corporation, LAUDERDALE HOTEL COMPANY, a Delaware corporation, WESTIN BAY HOTEL COMPANY, a Delaware corporation, CINCINNATI PLAZA COMPANY, a Delaware corporation, SOUTH COAST WESTIN HOTEL COMPANY, a Delaware corporation, TOWNHOUSE MANAGEMENT INC., a Delaware corporation, WVC RANCHO MIRAGE, INC., a Delaware corporation, 27 WESTIN ASSET MANAGEMENT COMPANY, a Delaware corporation, WESTIN HOTEL COMPANY, a Delaware corporation, W&S ATLANTA CORP., a Delaware corporation, By: /s/ Mark D. Rozells ---------------------------------------------------- Title: Senior Vice President Finance and Treasurer WESTIN SEATTLE HOTEL COMPANY, a Washington general partnership, By: Benjamin Franklin Hotel, Inc., its general partner By: /s/ Mark D. Rozells ----------------------------------------------- Title: Vice President Finance and Treasurer By: W&S Realty Corporation of Delaware, its general partner By: /s/ Mark D. Rozells ----------------------------------------------- Title: Vice President Finance and Treasurer WESTIN PREMIER, INC., a Delaware corporation, WESTIN VACATION MANAGEMENT CORPORATION, a Delaware corporation, WESTIN VACATION EXCHANGE COMPANY, a Delaware corporation, By: Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, the sole stockholder of each of the above listed entities By: /s/ Mark D. Rozells -------------------------------------------------- Title: Senior Vice President Finance and Treasurer 28 W&S LAUDERDALE CORP., a Delaware corporation, W&S SEATTLE CORP., a Delaware corporation, By: SLT Realty Limited Partnership, a Delaware limited partnership, the sole stockholder of each of the above listed entities By: Starwood Hotels & Resorts a Maryland real estate investment trust, its general partner By: /s/ Mark D. Rozells -------------------- Title: Vice President Finance and Treasurer BANKERS TRUST COMPANY, Individually and as Administrative Agent and as Paying Agent By: /s/ Laura S. Burwick --------------------- Title: Principal THE CHASE MANHATTAN BANK, Individually and as Administrative Agent By: /s/ Alan Breindel ------------------ Title: Managing Director LEHMAN COMMERCIAL PAPER, INC., Individually and as Syndication Agent By: /s/ David Juge --------------- Title: Senior Vice President 29 BANK OF MONTREAL, CHICAGO BRANCH, Individually and as Syndication Agent By: /s/ Heather L. Turf -------------------------------------------- Title: Director ARAB BANKING CORPORATION (B.S.C.) By: /s/ Louise Bilbro -------------------------------------------- Title: Vice President BANCA POPOLARE DI MILANO By: /s/ Patrick F. Dillon -------------------------------------------- Title: Vice President/Chief Credit Officer By: /s/ Esperanza Quintero -------------------------------------------- Title: Vice President BANKBOSTON, N.A. By: /s/ Kathleen M. Ahern -------------------------------------------- Title: Vice President By: -------------------------------------------- Name: Title: BANK LEUMI USA By: -------------------------------------------- Title: THE BANK OF TOKYO-MITSUBISHI, LIMITED, NEW YORK BRANCH By: -------------------------------------------- Title: 30 BANK OF HAWAII By: /s/ Brenda K. Testerman -------------------------------------------- Title: Vice President BANK POLSKA KASA OPIEKI S.A. PEKAO S.A. GROUP, NEW YORK BRANCH By: /s/ Harvey Winter -------------------------------------------- Title: Vice President PARIBAS By: -------------------------------------------- Title: By: -------------------------------------------- Title: BANQUE WORMS CAPITAL CORP. By: -------------------------------------------- Title: BEAR STEARNS INVESTMENT PRODUCTS INC. By: /s/ Gregory Hanley -------------------------------------------- Title: Vice President BARCLAYS BANK PLC By: /s/ John Giannone -------------------------------------------- Title: Director CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH By: -------------------------------------------- Title: 31 CHIAO TUNG BANK CO., LTD. NEW YORK AGENCY By:/s/ Kuang-Si Shiu --------------------------------------------- Title Senior Vice President & General Manager CIBC INC. By: --------------------------------------------- Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: --------------------------------------------- Title: By: --------------------------------------------- Title: CREDIT LYONNAIS NEW YORK BRANCH By:/s/ Mary P. Daly --------------------------------------------- Title: Vice President CREDIT SUISSE FIRST BOSTON By:/s/ Chris T. Horgan / Vitaly G. Butenko --------------------------------------------- Title: Vice President / Asst. Vice President UNICREDITO ITALIANO By:/s/Gianfranco Bisagni --------------------------------------------- Title: First Vice President By:/s/Saiyed A. Abbes --------------------------------------------- Title: Vice President 32 THE DAI-ICHI KANGYO BANK, LIMITED NEW YORK BRANCH By: ----------------------------------------- Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: /s/ Hans-Josef Thiele ----------------------------------------- Title: Director By: /s/ Alexander Karow ----------------------------------------- Title: Assistant Vice President ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG By: /s/ Paul Judicke /John S. Runnion ----------------------------------------- Title: Vice President /First Vice President Erste Bank New York Branch FIRST COMMERCIAL BANK By: /s/ Bruce Ju ----------------------------------------- Title: Deputy General Manager THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW YORK BRANCH By: /s/ Christian Giordano ----------------------------------------- Title: Vice President 33 KZH CNC LLC By: /s/ Peter Chin -------------------------------------- Title: Authorized Agent LAND BANK OF TAIWAN, LOS ANGELES BRANCH By: -------------------------------------- Name: Title: MITSUBISHI TRUST & BANKING CORPORATION By: -------------------------------------- Title: BANK OF AMERICA, N.A. By: /s/ Ansel McDowell -------------------------------------- Title: Vice President THE ROYAL BANK OF SCOTLAND, PLC By: -------------------------------------- Title: SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ Thomas K. Day -------------------------------------- Title: Director SOUTHERN PACIFIC BANK By: /s/ Mun Young Kim -------------------------------------- Title: Vice President 34 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: -------------------------------------- Title: WACHOVIA BANK, N.A. By: -------------------------------------- Name: Title: WESTDEUTSCHE LANDESBANK GIROZENTRALE By: -------------------------------------- Title: VAN KAMPEN PRIME RATE INCOME TRUST By: /s/ Douglas J. Smith -------------------------------------- Title: Vice President VAN KAMPEN SENIOR FLOATING RATE FUND By: Van Kampen Investment Advisory Corp. By: /s/ Douglas J. Smith --------------------------------- Title: Vice President VAN KAMPEN CLO I, LIMITED By: VAN KAMPEN MANAGEMENT INC., as Collateral Manager By: /s/ Douglas J. Smith ---------------------------------- Title: Vice President 35 VAN KAMPEN SENIOR INCOME TRUST By: /s/ Douglas J. Smith ----------------------------------------------------- Title: Vice President MELLON BANK, N.A., solely in its capacity as Trustee for the GENERAL MOTORS CASH MANAGEMENT MASTER TRUST, (as directed by Shenkman Capital Management, Inc.), and not in its individual capacity By: ----------------------------------------------------- Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: ----------------------------------------------------- Name: Title: OXFORD STRATEGIC INCOME FUND By: EATON VANCE MANAGEMENT, as Investment Advisor By: ----------------------------------------------------- Name: Title: INDOSUEZ CAPITAL FUNDING III, LIMITED By: Indosuez Capital as Portfolio Advisor By: /s/ Melissa Marso ----------------------------------------------------- Title: Vice President FIRST SECURITY BANK, N.A. By: ----------------------------------------------------- Title: 36 FLEET BANK, N.A. By: /s/ John T. Harrison ----------------------------------------------------- Title: Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION By: ----------------------------------------------------- Title: GOLDMAN SACHS CREDIT PARTNERS L.P. By: ----------------------------------------------------- Title: GULF INTERNATIONAL BANK B.S.C. By: ----------------------------------------------------- Title: HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY By: ----------------------------------------------------- Name: Title: EX-27.1 4 EX-27.1
5 EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 128, AND BASIC AND DILUTED EPS HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS, RESPECTIVELY. 0000316206 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 1,000,000 U.S. DOLLARS 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 195 0 587 51 63 871 8,892 1,054 13,238 1,435 6,248 136 0 4 3,526 13,238 0 2,775 0 2,144 0 0 364 260 999 (739) (7) (2) 0 (748) (4.03) (4.03)
EX-27.2 5 EX-27.2
5 EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 128, AND BASIC AND DILUTED EPS HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS, RESPECTIVELY. 0000048595 STARWOOD HOTELS & RESORTS 1,000,000 U.S. DOLLARS 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 8 0 3,001 0 0 59 4,658 265 8,775 209 602 136 0 2 7,896 8,775 0 560 0 132 0 0 35 351 2 349 0 0 0 349 0 0
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