SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
Schedule 14D-1
Tender Offer Statement
(Amendment No. 10)
Pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934
_______________________
ITT CORPORATION
(Name of Subject Company)
HILTON HOTELS CORPORATION
HLT CORPORATION
(Bidders)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
450912100
(CUSIP Number of Class of Securities)
MATTHEW J. HART
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
HILTON HOTELS CORPORATION
9336 CIVIC CENTER DRIVE
BEVERLY HILLS, CALIFORNIA 90210
(310) 278-4321
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Bidders)
With a copy to:
STEVEN A. ROSENBLUM
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 403-1000<PAGE>
This Statement amends and supplements the Tender Of-
fer Statement on Schedule 14D-1 filed with the Securities and
Exchange Commission on January 31, 1997, as previously amended
(the "Schedule 14D-1"), relating to the offer by HLT Corpora-
tion, a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of Hilton Hotels Corporation, a Delaware cor-
poration ("Parent"), to purchase (i) 61,145,475 shares of Com-
mon Stock, no par value (the "Common Stock"), of ITT Corpora-
tion, a Nevada corporation (the "Company"), or such greater
number of shares of Common Stock which, when added to the num-
ber of shares of Common Stock owned by the Purchaser and its
affiliates, constitutes a majority of the total number of
shares of Common Stock outstanding on a fully diluted basis as
of the expiration of the Offer, and (ii) unless and until val-
idly redeemed by the Board of Directors of the Company, the
Series A Participating Cumulative Preferred Stock Purchase
Rights (the "Rights") associated therewith, upon the terms and
subject to the conditions set forth in the Offer to Purchase,
dated January 31, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal, at a purchase price of $55 per
share (and associated Right), net to the tendering stockholder
in cash, without interest thereon. Capitalized terms used and
not defined herein shall have the meanings assigned such terms
in the Offer to Purchase and the Schedule 14D-1.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF
THE BIDDER.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-
SHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
ITEM 10. ADDITIONAL INFORMATION.
On March 21, 1997, Parent and the Purchaser filed a
definitive proxy statement (the "Definitive Proxy Statement")
with the Commission in connection with the solicitation of
proxies from the stockholders of the Company with respect to
the Company's 1997 annual meeting of stockholders. A copy of
the Definitive Proxy Statement is filed herewith as Exhibit
(g)(15) and is incorporated herein by reference.
The introductory clause of the first full paragraph
of Section 14 ("Certain Conditions of the Offer") of the Offer
to Purchase is hereby amended to read as follows:
Notwithstanding any other provisions of the Offer,
and in addition to (and not in limitation of) the<PAGE>
Purchaser's rights to extend and amend the Offer at any
time, in its sole discretion, the Purchaser shall not be
required to accept for payment or, subject to any ap-
plicable rules and regulations of the Commission, includ-
ing Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment
of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate the
Offer, if (i) at or prior to the Expiration Date, any one
or more of the Minimum Condition, the Rights Condition,
the Control Share Condition, the Business Combination Con-
dition and the Gaming Condition has not been satisfied, or
(ii) at any time on or after January 27, 1997 and prior to
the Expiration Date (or, with respect to any action or
proceeding by any government or governmental authority or
agency, domestic or foreign, in the case of subparagraph
(a) below, at any time on or after January 27, 1997 and
prior to the time of payment for any such Shares (whether
or not any Shares have theretofore been accepted for pay-
ment pursuant to the Offer)), any of the following events
shall occur or shall be determined by the Purchaser to
have occurred:
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(g)(15) Definitive Proxy Statement dated March 21, 1997.
-2-<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and be-
lief, I certify that the information set forth in this state-
ment is true, complete and correct.
Dated: March 21, 1997
HILTON HOTELS CORPORATION
By: /s/ Matthew J. Hart
Name: Matthew J. Hart
Title: Executive Vice President
and Chief Financial Officer
-3-<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and be-
lief, I certify that the information set forth in this state-
ment is true, complete and correct.
Dated: March 21, 1997
HLT CORPORATION
By: /s/ Arthur M. Goldberg
Name: Arthur M. Goldberg
Title: President
-4-<PAGE>
EXHIBIT INDEX
Exhibit Description
(g)(15) Definitive Proxy Statement dated March 21, 1997.
Exhibit (g)(15)
PROXY STATEMENT
OF
HILTON HOTELS CORPORATION
AND
HLT CORPORATION
-----------
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
ITT CORPORATION
PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD
This proxy statement (the "Proxy Statement") and the enclosed WHITE proxy
card are being furnished to stockholders of ITT Corporation, a Nevada
corporation (the "Company"), by Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), and HLT Corporation, a Delaware corporation and wholly
owned subsidiary of Hilton ("HLT"), in connection with the solicitation of
proxies from the Company's stockholders to be used at the 1997 Annual Meeting of
Stockholders of the Company, including any adjournments or postponements thereof
and any special meeting called in lieu thereof (the "Annual Meeting"), to take
the following actions: (i) to elect up to 25 persons to be nominated by Hilton
and HLT (the "Hilton Nominees") to the Board of Directors of the Company (the
"Board"), who are expected, subject to their fiduciary duties, to take all
actions as may be necessary to facilitate the Offer (as defined herein) and the
Proposed Hilton Merger (as defined herein); (ii) to approve a non-binding
stockholder resolution urging the Board to arrange for the sale of the Company
to Hilton, HLT or any bidder offering a higher price for the Company (the "Sale
Resolution"); and (iii) to approve a stockholder resolution to repeal each and
every provision of the Amended and Restated By-laws of the Company (the
"Bylaws") adopted on or after July 23, 1996 and prior to the adoption of such
resolution (the "Bylaws Resolution," and together with the Sale Resolution, the
"Proposals"). The principal executive offices of the Company are located at 1330
Avenue of the Americas, New York, New York 10019-5490. This Proxy Statement and
the WHITE proxy card are first being furnished to the Company's stockholders on
or about March 21, 1997.
While the Company has not yet announced the date of the Annual Meeting, the
Company's annual meeting of stockholders is regularly held in May. Hilton and
HLT are soliciting proxies for use at the Annual Meeting whenever it may be
held. Similarly, the record date for determining stockholders entitled to notice
of and to vote at the Annual Meeting (the "Record Date") has not yet been set by
the Company. Stockholders of record at the close of business on the Record Date
will be entitled to one vote at the Annual Meeting for each Share (as defined
herein) held on the Record Date. Hilton is the beneficial owner of 315,500
Shares (including 100 Shares held of record by HLT), and HLT is the beneficial
owner of 100 Shares, which collectively represent less than 1% of the Shares
outstanding (based on information publicly disclosed by the Company). Hilton and
HLT intend to vote such Shares for the election of the Hilton Nominees and for
adoption of the Proposals.
THIS SOLICITATION IS BEING MADE BY HILTON AND HLT AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
On January 27, 1997, Hilton made a proposal to acquire all of the
outstanding shares of the Company's common stock, no par value (the "Shares"),
in a two-step transaction. In accordance with such proposal, on January 31,
1997, HLT commenced a tender offer, as set forth in its Offer to Purchase dated
January 31, 1997 (the "Offer to Purchase") and the Tender Offer Statement on
Schedule 14D-1, filed by Hilton and HLT with the Securities and Exchange
Commission (as amended, the "Tender Offer Statement"), of which the Offer to
Purchase is an exhibit. The tender offer is for (i) 61,145,475 Shares or such
greater number of Shares which, when added to the number of Shares beneficially
owned by HLT and its affiliates, constitutes a majority of the total number of
Shares outstanding on a fully diluted basis as of the Expiration Date (as
defined herein) of the Offer, and (ii) unless and until validly redeemed by the
Board, the Series A Participating Cumulative Preferred Stock Purchase Rights
(the "Rights") associated therewith and issued pursuant to the Rights Agreement,
dated as of November 1, 1995, between the Company
<PAGE>
and The Bank of New York, as Rights Agent (the "Rights Agreement"), at a
price of $55 per Share (including the associated Right), net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related letter of transmittal (the
"Letter of Transmittal") (which, as amended from time to time, together
constitute the "Offer"). The purpose of the Offer is for Hilton to acquire
control of, and ultimately the entire equity interest in, the Company. Hilton
has also proposed a merger in which Hilton or HLT or another direct or indirect
wholly owned subsidiary of Hilton would acquire the remaining Shares in exchange
for shares of Hilton common stock, par value $2.50 per share ("Hilton Common
Stock").
Under the terms of Hilton's proposal, the Company would, as soon as
practicable following consummation of the Offer, consummate a merger with Hilton
or HLT or another direct or indirect wholly owned subsidiary of Hilton (the
"Proposed Hilton Merger"). At the effective time of the Proposed Hilton Merger,
each Share that is issued and outstanding immediately prior to the effective
time (other than Shares held in the treasury of the Company or owned by Hilton,
HLT or any direct or indirect wholly owned subsidiary of Hilton) would be
converted into a number of shares of Hilton Common Stock with a value of $55 per
Share, subject to appropriate collar provisions. At any time and from time to
time, the period of time during which the Offer is open may be extended for any
reason, and because the timing of the Offer and the Proposed Hilton Merger is
dependent on a variety of factors, the Offer could be extended beyond the
current Expiration Date. The Offer is currently scheduled to expire at 12:00
Midnight, New York City time, on Friday, March 28, 1997, unless extended (as
such date may be extended, the "Expiration Date").
THIS PROXY STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN
OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE OFFER
TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL.
In order to facilitate the Offer and the Proposed Hilton Merger, Hilton and
HLT are soliciting proxies in support of the following proposals to be
considered and voted upon at the Annual Meeting:
1. To elect to the Board such number of the following Hilton Nominees
as equals the size of the Board: Daniel J. Altobello, George N.
Aronoff, Scott H. Bice, James J. Florio, Fred D. Gibson, Jr., Dianne
Jett, Robert S. Kingsley, Aubrey C. Lewis, Celeste Pinto McLain,
Gilbert L. Shelton, Warren C. Woo, Barrie K. Brunet, Henry A. Collins,
John Danhakl, Ernest E. East, John E. Humphreville, Robert L.
Johander, Russell D. Jones, J. Kenneth Looloian, Rocco J. Marano,
James F. McAnally, Morris Pashman, Alan C. Snyder, Caroline L.
Williams and Robert H. Wolf. The first eleven of such individuals will
be nominated to be elected to succeed the current eleven Directors (or
any Director named to fill any vacancy created by the death,
retirement, resignation or removal of any of such eleven Directors) of
the Company. One or more of such other individuals will be nominated
to be elected (a) in the event that the Company purports to increase
the number of Directorships pursuant to Section 2.2 of the Bylaws, to
each additional Directorship created, and/or (b) in the event any of
the first eleven of such individuals is unable for any reason to serve
as a Director.
2. To adopt the following resolution:
RESOLVED, that the stockholders of ITT Corporation ("ITT") urge the
ITT Board of Directors to arrange for the sale of ITT to Hilton
Hotels Corporation ("Hilton") or to any bidder offering a higher
price, and if there be no higher bidder, to take all necessary
action to permit the tender offer of Hilton and HLT Corporation
("HLT") and the proposed merger of ITT with Hilton, HLT or a
subsidiary of Hilton to proceed, including, without limitation,
action to satisfy the Rights Condition, the Control Share Condition
and the Business Combination Condition set forth in HLT's Offer to
Purchase dated January 31, 1997 (as such offer may be amended).
3. To adopt the following resolution:
RESOLVED, that each and every provision of the Amended and Restated
Bylaws of ITT Corporation adopted on or after July 23, 1996 and
prior to the adoption of this resolution is hereby repealed.
2
<PAGE>
Neither Hilton nor HLT is aware of any other proposals to be brought before
the Annual Meeting. However, should other proposals be brought before the Annual
Meeting, the persons named as proxies in the enclosed WHITE proxy card will vote
on such matters in their discretion.
THE HILTON NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES TO THE
COMPANY'S STOCKHOLDERS, TO GIVING ALL THE COMPANY'S STOCKHOLDERS THE OPPORTUNITY
TO RECEIVE THE CONSIDERATION FOR THE SHARES CONTEMPLATED BY THE OFFER AND THE
PROPOSED HILTON MERGER. IF ELECTED, THE HILTON NOMINEES ARE EXPECTED TO TAKE ALL
NECESSARY ACTIONS, SUBJECT TO THEIR FIDUCIARY DUTIES TO THE COMPANY'S
STOCKHOLDERS, TO FACILITATE THE OFFER AND THE PROPOSED HILTON MERGER.
3
<PAGE>
YOUR VOTE IS IMPORTANT
ELECTION OF THE HILTON NOMINEES TO THE BOARD IS EXPECTED TO FACILITATE THE
OFFER AND THE PROPOSED HILTON MERGER. IF YOU WANT THE OFFER AND THE PROPOSED
HILTON MERGER TO BE CONSUMMATED, WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL (OR
FAX BOTH SIDES OF) THE ENCLOSED WHITE PROXY CARD TO VOTE FOR THE ELECTION OF THE
HILTON NOMINEES AS DIRECTORS.
ELECTION OF THE HILTON NOMINEES WILL BE AN IMPORTANT STEP IN SECURING THE
CONSUMMATION OF THE OFFER AND THE PROPOSED HILTON MERGER. HOWEVER, YOU MUST
TENDER YOUR SHARES PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE
OFFER. YOUR VOTE FOR THE HILTON NOMINEES DOES NOT OBLIGATE YOU TO TENDER YOUR
SHARES PURSUANT TO THE OFFER, AND YOUR FAILURE TO VOTE FOR THE HILTON NOMINEES
DOES NOT PREVENT YOU FROM TENDERING YOUR SHARES PURSUANT TO THE OFFER.
IMPORTANT NOTE: If you hold your Shares in the name of one or more
brokerage firms, banks or nominees, only they can exercise voting rights with
respect to your Shares and only upon receipt of your specific instructions.
Accordingly, it is critical that you promptly contact the person responsible for
your account and give instructions to sign, date and mail (or fax both sides of)
the WHITE proxy card representing your Shares. Hilton urges you to confirm in
writing your instructions to the person responsible for your account and to
provide a copy of those instructions to Hilton and HLT in care of MacKenzie
Partners, Inc., who is assisting in this solicitation, at the address and
telephone numbers set forth below and on the back cover of this Proxy Statement,
so that Hilton and HLT will be aware of all instructions and can attempt to
ensure that such instructions are followed.
If you have any questions regarding your proxy, or need assistance in
voting your Shares, please call:
[MACKENZIE PARTNERS, INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
FAX (212) 929-0308
4
<PAGE>
WHY YOU SHOULD VOTE FOR THE HILTON NOMINEES
The Hilton Nominees are committed to giving all of the Company's
stockholders the opportunity to receive the consideration for the Shares
contemplated by the Offer and the Proposed Hilton Merger, and if elected are
expected to take all necessary actions, subject to their fiduciary duties to the
Company's stockholders, to facilitate consummation of the Offer and the Proposed
Hilton Merger.
Hilton and HLT believe that the Offer and the Proposed Hilton Merger are in
the best interests of the Company's stockholders.
- IMMEDIATE 29% CASH PREMIUM FOR HALF OF THE COMPANY'S SHARES
The value of the Offer at $55 per Share is a 29% premium over the
closing market price of $42.625 on the New York Stock Exchange, Inc. on
January 27, 1997, the last full trading day prior to Hilton's public
announcement of the Offer. The Offer is subject to a number of
conditions and will not be consummated until those conditions are
satisfied or waived. Further information concerning the Offer is
contained in the Offer to Purchase.
- CONTINUED PARTICIPATION IN THE FUTURE GROWTH OF A HILTON/ITT COMBINATION
Upon consummation of the Proposed Hilton Merger, the Company's
stockholders will receive shares of Hilton Common Stock, allowing them
to participate in the future of the combined company. The combination
of Hilton and the Company would bring together two of the world's
leading lodging companies as well as two premier gaming businesses.
Hilton and HLT believe the combination of Hilton and the Company would
be of enormous benefit to each company and its respective stockholders,
employees and other constituencies.
- A MANAGEMENT COMMITTED TO STOCKHOLDER VALUE
Following consummation of the Offer and the Proposed Hilton
Merger, the combined entity would be led by Hilton's management team--a
management team that emphasizes the creation of stockholder value.
Hilton and HLT believe that the Hilton management team's strategic
experience and operating background in hotels and gaming will bring
tremendous value to the combined stockholder base and will seek to
generate superior returns relative to those realized historically by
the Company's stockholders.
Upon their election, the Hilton Nominees are expected, subject to their
fiduciary duties to the Company's stockholders, to remove obstacles to the
consummation of the Offer and the Proposed Hilton Merger that the current
members of the Board have failed to remove. In particular, the Hilton Nominees
are expected: (i) to redeem the Rights (or amend the Rights Agreement to make
the Rights inapplicable to the Offer and the Proposed Hilton Merger), which
would have the effect of satisfying the Rights Condition (as defined herein);
(ii) to approve the Offer and the Proposed Hilton Merger under Sections 78.411
to 78.444 of the Nevada General Corporation Law (the "Nevada Business
Combination Statute"), which would have the effect of satisfying the Business
Combination Condition (as defined herein); and (iii) to amend the Bylaws so
that, by the tenth day following the acquisition of Shares pursuant to the
Offer, Sections 78.378 to 78.3793 of the Nevada General Corporation Law (the
"Nevada Control Share Acquisition Statute") do not apply, which would have the
effect of satisfying the Control Share Condition (as defined herein), subject in
all cases to fulfillment of the fiduciary duties that the Hilton Nominees would
have as Directors of the Company. Accordingly, election of the Hilton Nominees
is expected to expedite the prompt consummation of the Offer and the Proposed
Hilton Merger.
The Rights Condition, the Business Combination Condition and the Control
Share Condition are described herein, see "Background--The Offer," and in the
Offer to Purchase. Hilton and HLT have filed a complaint in the United States
District Court for the District of Nevada seeking, among other things, to
require the Board to redeem
5
<PAGE>
the Rights. The Company has filed counterclaims seeking, among other
things, to enjoin the Offer. See "Background--Certain Litigation."
THE HILTON NOMINEES
Hilton is proposing that the stockholders of the Company elect the Hilton
Nominees to the Board at the Annual Meeting. The first eleven individuals named
in the table below will be nominated to be elected to succeed the current eleven
Directors (or any Director named to fill any vacancy created by the death,
retirement, resignation or removal of any of such eleven Directors) of the
Company. One or more of the other individuals named in the table below will be
nominated to be elected (i) in the event that the Company purports to increase
the number of Directorships pursuant to Section 2.2 of the Bylaws, to each
additional Directorship created, and/or (ii) in the event any of the first
eleven individuals named in the table below is unable for any reason to serve as
a Director. Additional nominations made pursuant to the preceding clause (i) are
without prejudice to the position of Hilton and HLT that any attempt to increase
the size of the Board constitutes an unlawful manipulation of the Company's
corporate machinery to disenfranchise the Company's stockholders. If required,
Hilton intends to distribute to the stockholders of the Company supplemental
materials in the event that the Board amends the Bylaws after the date of this
Proxy Statement (which amendment would be repealed by the Bylaws Resolution) to
increase the number of Directors of the Company.
The following table sets forth the name, age, present principal occupation,
business (or residence) address and business experience for the past five years,
and certain other information, with respect to each of the Hilton Nominees. This
information has been furnished to Hilton by the respective Hilton Nominees. Each
of the Hilton Nominees has consented to serve as a Director and, if elected,
would hold office until the 1998 Annual Meeting of Stockholders of the Company
and until his or her successor has been elected and qualified or until earlier
death, retirement, resignation or removal.
<TABLE>
<CAPTION>
<S> <C>
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME, AGE AND BUSINESS (OR RESIDENCE) ADDRESS DURING THE LAST FIVE YEARS; CURRENT DIRECTORSHIPS
Daniel J. Altobello (55)..............................Chairman, ONEX Food Services, Inc. (airline catering),
ONEX Food Services, Inc. since September 1995. Prior thereto, Chairman, Chief
6550 Rock Spring Drive Executive Officer and President, Caterair International
Bethesda, Maryland 20817 Corporation (airline catering), from before 1992 until
September 1995. Mr. Altobello is also a director of
American Management Systems, Inc. and Blue Cross & Blue
Shield of Maryland, Inc., and a member of the Board of
Advisors to Thayer Capital Partners.
George N. Aronoff (63) (1)(2).........................Partner, Benesch, Friedlander, Coplan & Aronoff LLP (law
Benesch, Friedlander, Coplan & Aronoff LLP firm), since before 1992. Mr. Aronoff is also a director
2300 BP America Building of Specialty Chemical Resources, Inc.
200 Public Square
Cleveland, Ohio 44114
Scott H. Bice (53)....................................Dean of the University of Southern California Law School,
University of Southern California Law School since before 1992. Mr. Bice is also a director of Jenny
University Park Craig, Inc.
Los Angeles, California 90089
James J. Florio (59)..................................Partner, Florio & Perrucci, P.C. (law firm), since 1995.
Florio & Perrucci, P.C. Prior thereto, Partner, Mudge, Rose, Guthrie, Alexander &
371 Hoes Lane Ferdon (law firm), from January 1994 until October 1995;
Piscataway, New Jersey 08854 Governor of the State of New Jersey, from January 1990
until January 1994.
6
<PAGE>
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME, AGE AND BUSINESS (OR RESIDENCE) ADDRESS DURING THE LAST FIVE YEARS; CURRENT DIRECTORSHIPS
Fred D. Gibson, Jr. (69)..............................Chairman, President and Chief Executive Officer, American
American Pacific Corporation Pacific Corporation (specialty chemicals production),
3770 Howard Hughes Parkway since before 1992. Mr. Gibson is also a director of
Suite 300 American Pacific Corporation and Nevada Power Company.
Las Vegas, Nevada 89109
Dianne Jett (47)......................................Retired since August 1996. Prior thereto, President,
7833 Surfcrest Court Sprint-Central Telephone Company of Nevada
Las Vegas, Nevada 89128 (telecommunications), from March 1993 until August 1996;
and General Regulatory Manager, Central Telephone Company of
Nevada (telecommunications), from before 1992 until
March 1993.
Robert S. Kingsley (50)...............................Private Investor. Prior thereto, President and Chief
397 Mine Brook Road Operating Officer, HFS Gaming Corp. (gaming development
Far Hills, New Jersey 07931 and marketing), from July 1994 until December 1996;
President and Chief Operating Officer, Caesars World
Resorts, Inc. (gaming development), from before 1992
until June 1994.
Aubrey C. Lewis (62)..................................On leave from Woolworth Corporation (retail stores),
44 Pleasant Avenue where Mr. Lewis was Vice President-Corporate Liaison,
Montclair, New Jersey 07042 from before 1992 until January 1995. Mr. Lewis is a
director of Bally Total Fitness Holding Corporation.
Celeste Pinto McLain (47).............................Attorney, Celeste Pinto McLain, P.C. (law firm), and
Celeste Pinto McLain, P.C. Arbitrator, American Arbitration Association and IVAMS,
P.O. Box 49835 since before 1992. Ms. McLain is also a director of the
Los Angeles, California 90049 National Passenger Railroad Corporation (Amtrak).
Gilbert L. Shelton (60)...............................Private Investor since before 1992. Also, Chief
6467 Leeds Manor Road Executive Officer, Westranch, Inc. (cattle ranching),
Marshall, Virginia 20115 from before 1992 until December 1994.
Warren C. Woo (36)....................................President-Corporate Development, Snyder Communications,
Snyder Communications, Inc. Inc. (outsource targeted marketing) since September
Two Democracy Center 1996. Prior thereto, Managing Director, Donaldson,
6903 Rockledge Drive Lufkin & Jenrette Securities Corporation (investment
Bethesda, Maryland 20817 banking), from before 1992 until September 1996.
Barrie K. Brunet (71) (1)(3)..........................Retired since March 1990. Mr. Brunet is also a director
1510 Patrick Avenue of Reno Air, Inc.
Reno, Nevada 89509
Henry A. Collins (55) (4).............................Portfolio Manager, Barrett Associates (investment
Barrett Associates counseling), since before 1992.
565 Fifth Avenue
New York, New York 10017
7
<PAGE>
PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME, AGE AND BUSINESS (OR RESIDENCE) ADDRESS DURING THE LAST FIVE YEARS; CURRENT DIRECTORSHIPS
John Danhakl (40).....................................Partner, Leonard Green & Partners (private merchant
Leonard Green & Partners banking), since March 1995. Prior thereto, Managing
333 S. Grand Avenue Director, Donaldson, Lufkin & Jenrette Securities
Los Angeles, California 90071 Corporation (investment banking), from before 1992 until
March 1995.
Ernest E. East (54) (5)...............................Vice President, General Counsel and Secretary, Artisoft,
Artisoft, Inc. Inc. (personal computer software), since January 1996.
2202 North Forbes Boulevard Prior thereto, Vice President, General Counsel and
Tucson, Arizona 85745 Secretary, Elsinore Corporation (gaming), from October
1994 until January 1996; Executive Vice President, General
Counsel and Secretary, Trump Hotels and Casino Resorts
(gaming), Vice President, Trump Taj Mahal Casino (gaming),
Vice President, Trump's Castle Casino (gaming), and Vice
President, Trump Plaza Casino (gaming), from before 1992
until August 1994.
John E. Humphreville (49).............................Private investor since before 1992.
456 South Arden Boulevard
Los Angeles, California 90020
Robert L. Johander (50)...............................Chairman and Chief Executive Officer, ValueVision
ValueVision International, Inc. International, Inc. (television and mail order home
6740 Shady Oak Road shopping), since before 1992.
Eden Prairie, Minnesota 55347
Russell D. Jones (63) (6).............................Vice President, Sonnenblick-Goldman Company (real estate
Sonnenblick-Goldman Company investment banking), since September 1995. Prior
1901 Avenue of the Stars thereto, President, Russell D. Jones & Associates (real
Suite 1901 estate development and consulting), from before 1992
Los Angeles, California 90067 until September 1995.
J. Kenneth Looloian (74) (1)..........................Executive Vice President, DiGiorgio Corporation (food
DiGiorgio Corporation distributor), since February 1992. Mr. Looloian is also
380 Middlesex Avenue a director of Bally Total Fitness Holding Corporation and
Carteret, New Jersey 07008 Science Management Corporation.
Rocco J. Marano (68) (1)..............................Retired since June 1991. Mr. Marano is also a director
153 Van Houton Avenue of Computer Horizons Corp. and Blue Cross & Blue Shield
Chatham, New Jersey 07928 of New Jersey.
James F. McAnally, M.D. (47)..........................Director of Nephrology, Elizabeth General Medical Center
38 Oak Knoll Road (hospital), since before 1992. Dr. McAnally is also a
Mendham, New Jersey 07945 director of Bally Total Fitness Holding Corporation.
Morris Pashman (84)...................................Counsel to Pashman Stein P.C. (law firm), since 1995.
Pashman Stein P.C. Prior thereto, from before 1992, Judge of Superior Court
45 Essex Street of New Jersey and Associate Justice, New Jersey Supreme
Hackensack, New Jersey 07601 Court.
8
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PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME, AGE AND BUSINESS (OR RESIDENCE) ADDRESS DURING THE LAST FIVE YEARS; CURRENT DIRECTORSHIPS
Alan C. Snyder (50) (7)...............................Manager, Shinnecock Group, LLC (investment acquisitions),
Shinnecock Group, LLC since September 1994 and Managing Partner, Shinnecock
1999 Avenue of the Stars Partners (investment management), since before 1992.
9th Floor Also, Chief Executive Officer, Aurora National Life
Los Angeles, California 90067 Assurance Company (insurance), from September 1993 until
September 1994; and President, Chief Operating Officer,
Executive Life Insurance Company (insurance), from April
1991 until September 1993.
Caroline Williams (50)................................Private investor, since January 1992, and Acting Chair
417 Park Avenue and Lecturer, The New School for Social Research-Milano
New York, New York 10022 School of Management and Urban Policy (non-profit
school), since September 1996. Prior thereto, Vice
President-Finance, Techno Serve, Inc. (non-profit
economic development agency), from July 1992 until
September 1993; and Managing Director, Donaldson, Lufkin
& Jenrette Securities Corporation (investment banking),
from before 1992 until January 1992. Ms. Williams is
also a director of Argyle Television, Inc., Swing-N-Slide
Corporation and DEVCAP Shared Return Trust.
Robert H. Wolf (55)...................................President, Bob Wolf Company (marketing and advertising
Bob Wolf Company consultants), since December 1995. Prior thereto,
11755 Wilshire Boulevard Chairman and Chief Executive Officer-North America,
Suite 880 Chiat/Day Inc. (advertising agency), from before 1992
Los Angeles, California 90025 until November 1995. Mr. Wolf is also a director of
Jenny Craig, Inc.
</TABLE>
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(1)Messrs. Aronoff, Brunet, Looloian and Marano were directors of Bally
Entertainment Corporation ("Bally") prior to its merger with Hilton in
December 1996 (the "Bally Merger"). They were also members of an advisory
transition committee (which is no longer in operation) established by Hilton
after the merger, pursuant to which each of them received fees from Hilton in
the amount of $50,000.
(2)The law firm of which Mr. Aronoff is a partner has performed and is expected
to continue to perform legal services from time to time for certain
subsidiaries of Hilton that were formerly subsidiaries of Bally.
(3)Mr. Brunet was an executive officer and director of Bally's Grand, Inc. until
March 1990. From November 1991, Bally's Grand Inc. operated as a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code
until it emerged from bankruptcy in August 1993.
(4)Mr. Collins is the brother-in-law of Matthew J. Hart, Executive Vice
President and Chief Financial Officer of Hilton.
(5)Mr. East was Vice President, General Counsel and Secretary of Elsinore
Corporation at the time of its Chapter 11 bankruptcy petition in October
1995. He was also Vice President of Trump Taj Mahal, Trump Plaza and Trump's
Castle at the time of their bankruptcy petitions in 1991 and 1992, as
applicable.
(6)Sonnenblick-Goldman Company is the plaintiff in a currently pending civil
lawsuit, filed November 29, 1994 in the Supreme Court of the State of New
York, County of New York, against the Company and others for damages not to
exceed $10 million. The suit seeks, among other things, the payment of fees
for certain services performed by Sonnenblick-Goldman Company for the Company
in connection with the Company's acquisition of its interest in Ciga S.p.A.
in 1994. Mr. Jones was not involved in the events that underlie the
litigation.
(7)On April 11, 1991, Executive Life Insurance Company ("Executive Life") was
conserved by the California Department of Insurance. At the request of the
California Insurance Commissioner, Mr. Snyder joined Executive Life in April
1991 as Presi-
9
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dent and Chief Operating Officer, where he served through the
conservation and rehabilitation of Executive Life. Prior to joining Executive
Life, Mr. Snyder had been President and Chief Operating Officer of First
Executive Corporation, the parent company of Executive Life, from January
1990. First Executive Corporation filed for bankruptcy on May 13, 1991.
The Hilton Nominees will not receive any compensation from Hilton for their
services as Directors of the Company. Hilton has agreed to indemnify all of the
Hilton Nominees against any costs, expenses and other liabilities associated
with their nomination and the election contest. In addition, Hilton has agreed
to make a contribution to a charity selected by each Hilton Nominee in the
amount of $25,000 per Hilton Nominee in consideration of such Hilton Nominee's
service as a Hilton Nominee. Hilton has also agreed to reimburse Hilton Nominees
for counsel fees that they may have incurred in reviewing the materials sent to
them by Hilton in connection with their consideration of service as a Hilton
Nominee. Each of the Hilton Nominees has executed a written consent agreeing to
be a Hilton Nominee for election as a Director of the Company and to serve as a
Director if so elected. It is expected that the Hilton Nominees will, subject to
their fiduciary duties, support the Offer and the Proposed Hilton Merger. Within
the past ten years, none of the Hilton Nominees has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
According to the Company's public filings, if elected as Directors of the
Company, the Hilton Nominees who are not employees of the Company would receive
an annual retainer of $48,000 payable solely in restricted Shares, plus $1,000
for each meeting of the Board and each committee meeting attended. All Directors
of the Company would be reimbursed by the Company for expenses incurred in
connection with their services as Directors of the Company. The Hilton Nominees,
if elected, will be indemnified by the Company for service as a Director of the
Company to the extent indemnification is provided to Directors of the Company
under the Restated Articles of Incorporation of the Company, as amended (the
"Articles") and the Bylaws. In addition, Hilton and HLT believe that upon
election, the Hilton Nominees will be covered by the Company's officer and
director liability insurance. Hilton and HLT disclaim any responsibility for the
accuracy of the foregoing information, which has been extracted from the
Company's public filings.
Except as disclosed herein, none of the Hilton Nominees is adverse to the
Company or any of its subsidiaries in any material pending legal proceedings,
other than ordinary routine litigation incidental to the business to which the
Company or any of its subsidiaries is a party or of which any of their property
is the subject.
Hilton and HLT do not expect that any of the Hilton Nominees will be unable
to stand for election, but, in the event that any vacancy in the Hilton Nominees
should occur, the Shares represented by the enclosed WHITE proxy card will be
voted in each such case for a substitute nominee selected by Hilton and HLT from
among the Hilton Nominees listed above. In addition, Hilton and HLT reserve the
right to nominate substitute or additional persons if the Company makes or
announces any changes to its Bylaws or takes or announces any other action that
has, or if consummated would have, the effect of disqualifying any or all of the
Hilton Nominees. In any such case, Shares represented by the enclosed WHITE
proxy card will be voted for all such substitute or additional nominees selected
by Hilton and HLT.
Pursuant to Section 2.2 of the Bylaws, at each meeting of stockholders of
the Company at which a quorum is present, the persons receiving the greatest
number of votes, up to the number of Directors to be elected, shall be the
Directors. In accordance with applicable regulations of the Securities and
Exchange Commission (the "Commission"), the WHITE proxy card affords each
stockholder the opportunity to designate the names of any of the Hilton Nominees
whom he or she does not desire to elect to the Board. Notwithstanding the
foregoing, Hilton urges stockholders to vote for all of the Hilton Nominees on
the enclosed WHITE proxy card. The persons named as proxies in the enclosed
WHITE proxy card will vote, in their discretion, for each of the Hilton Nominees
who is nominated for election and for whom authority has not been withheld.
The Hilton Nominees are not presently aware of any competing third party
acquisition proposals. Given the widespread publicity concerning the proposal of
Hilton and HLT to acquire the Company, the fact that there have been no other
publicly disclosed proposals to acquire the Company, and the fact that the
Hilton Nominees, if elected, will be elected by the stockholders of the Company
to take the actions outlined herein, it is not expected that the Hilton Nominees
would actively solicit additional offers for the Company. If the Hilton Nominees
are
10
<PAGE>
elected at the Annual Meeting and following the Annual Meeting a third party
were to make a proposal to acquire the Company, the interests of Hilton and
those of the other stockholders of the Company may differ. In any such case, it
is expected that the Hilton Nominees would comply fully with their obligations
owed to the Company and its stockholders under Nevada law. Other than complying
with such obligations, Hilton and HLT have no knowledge as to any plans of the
Hilton Nominees as to the specific steps they would take in connection with any
such third party proposal, including whether they would appoint an independent
financial advisor, retain independent legal counsel or provide an interested
third party with access to the Company's books and records (whether pursuant to
a confidentiality agreement or otherwise).
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE HILTON NOMINEES ON THE
ENCLOSED WHITE PROXY CARD.
WHY YOU SHOULD VOTE FOR THE PROPOSALS
THE SALE RESOLUTION
The Sale Resolution urges the Board to arrange for the sale of the Company
to Hilton or to any bidder offering a higher price, and if there is no higher
bidder, to take all necessary action to permit the Offer and the Proposed Hilton
Merger to proceed, including, without limitation, action to satisfy the Rights
Condition, the Control Share Condition and the Business Combination Condition
set forth in the Offer to Purchase.
As stated above, the Offer is subject to a number of conditions including,
without limitation, the Rights Condition, the Business Combination Condition and
the Control Share Condition (see "Background--The Offer"), which can be
satisfied by the Board. As of the date of this Proxy Statement, the current
Directors of the Company have failed to take action to satisfy these conditions.
If the Board does not take action to satisfy these conditions prior to the
Annual Meeting, Hilton and HLT will be proposing the Sale Resolution for
adoption by the stockholders of the Company at the Annual Meeting. The Sale
Resolution is intended to facilitate satisfaction of the Rights Condition, the
Business Combination Condition and the Control Share Condition by demonstrating
to the Board the support of the stockholders of the Company for the Offer and
the Proposed Hilton Merger.
BY VOTING FOR THE SALE RESOLUTION, YOU WILL BE SENDING THE BOARD A STRONG
MESSAGE THAT THE STOCKHOLDERS OF THE COMPANY, AS THE OWNERS OF THE COMPANY, WANT
TO DECIDE FOR THEMSELVES WHETHER TO ACCEPT THE OFFER.
YOU ARE URGED TO VOTE FOR THE SALE RESOLUTION ON THE ENCLOSED WHITE PROXY
CARD.
THE BYLAWS RESOLUTION
Adoption of the Bylaws Resolution would repeal each and every provision of
the Bylaws adopted on or after July 23, 1996 and prior to the adoption of the
Bylaws Resolution. Section 13 of the Bylaws provides that the Bylaws may be
repealed by the stockholders of the Company if such repeal is approved by the
affirmative vote of the holders of at least a majority of the voting power of
all outstanding Shares entitled to vote generally in an election of Directors.
The Bylaws Resolution is designed to prevent the Board from taking actions
to amend the Bylaws to attempt to nullify the actions to be taken by the
stockholders at the Annual Meeting or to create new obstacles to the
consummation of the Offer and the Proposed Hilton Merger. According to publicly
available information, the most recent version of the Bylaws was adopted on July
23, 1996 and no amendments subsequent to that date have been publicly disclosed.
If the Board has adopted since July 23, 1996, or adopts prior to the adoption of
the Proposals at the Annual Meeting, any other amendment to the Bylaws, the
Bylaws Resolution would repeal such amendment.
As of the date of this Proxy Statement, the Board has failed to indicate
that it will refrain from taking action designed to nullify actions of the
stockholders of the Company with respect to the Offer or the Proposed Hilton
11
<PAGE>
Merger, or create new obstacles to the Offer and the Proposed Hilton Merger. If
the Board does take such action in the form of amendments to the Bylaws, Hilton
and HLT will be proposing the Bylaws Resolution at the Annual Meeting for
adoption by the stockholders of the Company to prevent the Board from taking
action (or if the Board takes or has taken such action, to repeal such action)
to amend the Bylaws to attempt to nullify the actions taken or to be taken by
the stockholders of the Company with respect to the Offer or the Proposed Hilton
Merger or to create new obstacles to the Offer or the Proposed Hilton Merger. If
required, Hilton intends to distribute to the stockholders of the Company
supplemental materials in the event that the Board amends the Bylaws after the
date of this Proxy Statement (which amendment would be repealed by the Bylaws
Resolution).
On January 27, 1997, Hilton and HLT filed a complaint against the Company
in the United States District Court for the District of Nevada (the
"Complaint"). The Complaint seeks, among other things injunctive and declaratory
relief to forestall any effort by the Company to manipulate or otherwise subvert
the process of corporate democracy by amending the Bylaws. See
"Background--Certain Litigation."
YOU ARE URGED TO VOTE FOR THE BYLAWS RESOLUTION ON THE ENCLOSED WHITE PROXY
CARD.
Section 13 of the Bylaws provides that the Bylaws may be repealed by the
stockholders. Specifically, Section 13 of the Bylaws states that:
These By-laws, or any of them, may from time to time be supplemented,
amended or repealed, or new By-laws may be adopted, by the
stockholders at any regular or special meeting of the stockholders
at which a quorum is present, if such supplement, amendment, repeal or
adoption is approved by the affirmative vote of the holders of at
least a majority of the voting power of all outstanding shares of
stock of the Corporation entitled to vote generally in an election of
directors.
Although Hilton and HLT are not aware of specific case law regarding the
validity of the Bylaws Resolution, Hilton and HLT believe it is valid under
Nevada Law and if approved by the requisite vote will have the effect set forth
above. However, if the Bylaws Resolution is deemed to be invalid, the Bylaws in
effect at the time of the stockholder vote will continue to be the Bylaws of the
Company following the Annual Meeting.
BACKGROUND
THE OFFER
The primary purpose of this solicitation of proxies is to elect to the
Board the Hilton Nominees, who believe that the Company's stockholders should
have the opportunity to approve the Offer and the Proposed Hilton Merger and to
receive the consideration offered by Hilton and HLT pursuant to the Offer and
the Proposed Hilton Merger. On January 27, 1997, Hilton made a proposal to
acquire all the Shares in a two-step transaction. In accordance with such
proposal, on January 31, 1997, HLT commenced the Offer. The purpose of the Offer
is for Hilton to acquire control of, and ultimately the entire equity interest
in, the Company. The Offer is currently scheduled to expire at 12:00 Midnight,
New York City time, on Friday, March 28, 1997, unless extended.
The Offer is conditioned upon, among other things, the following:
The Minimum Condition. The Offer is conditioned upon there being validly
tendered and not withdrawn prior to the Expiration Date a number of Shares,
which when added together with the Shares owned by Hilton and HLT and its
affiliates as of such time, represent a majority of the Shares outstanding on a
fully diluted basis (the "Minimum Condition"). According to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996,
filed with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as of November 6, 1996, there were 116.4 million
Shares issued and outstanding. In addition, according to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "Company
1995 10-K"), as of December 31, 1995, there were outstanding options to purchase
6,276,596 Shares. Hilton beneficially owns 315,500 Shares, 100 of which Shares
are beneficially owned by HLT. The Shares beneficially owned by Hilton and HLT
were acquired in open market purchases. See Schedule II. For purposes of the
Offer, "fully diluted basis" assumes that all outstanding stock options are
presently exercisable.
Based on the foregoing and assuming no additional Shares (or options,
warrants or rights exercisable for, or securities convertible into, Shares) have
been issued since November 6, 1996 (other than Shares issued pursuant to the
exercise of the stock options referred to above), or, in the case of options,
since December 31, 1995, if HLT were to purchase 61,145,475 Shares pursuant to
the Offer, the Minimum Condition would be satisfied.
The Rights Condition. The Offer is conditioned upon the Rights having been
redeemed by the Board, or HLT being satisfied that the Rights have been
invalidated or are otherwise inapplicable to the Offer and the Proposed Hilton
Merger (the "Rights Condition"). The Rights are described in the Company's
Amended Registration Statement on Form S-3, dated November 13, 1996 (the
"Company Registration Statement"), and a summary of that description follows:
12
<PAGE>
On November 1, 1995, the Company adopted the Rights Agreement and declared
a dividend of one Right for each outstanding Share. The Rights are transferable
only with the Shares until they become exercisable. The Rights will not be
exercisable until the Distribution Date (as defined herein) and will expire on
the tenth anniversary of the Rights Agreement (the "Rights Expiration Date"),
unless earlier redeemed by the Company as described below. Each Right, when it
becomes exercisable as described below, will entitle the registered holder to
purchase from the Company one one-thousandths (1/1000ths) of a share of
Preferred Stock of the Company (the "Preferred Stock") at a price (substantially
above the expected current trading value of the Company) to be determined,
subject to adjustment in certain circumstances (the "Purchase Price").
Under the Rights Agreement, the "Distribution Date" is the earlier of (i)
such time as the Company learns that a person or group (including any affiliate
or associate of such person or group) has acquired, or has obtained the right to
acquire, beneficial ownership of more than 15% of the outstanding Shares (such
person or group being an "Acquiring Person"), unless provisions preventing
accidental triggering of the distribution of the Rights apply and (ii) the close
of business on such date, if any, as may be designated by the Board following
the commencement of, or the first public disclosure of an intent to commence, a
tender or exchange offer for 15% or more of the outstanding Shares.
At such time as there is an Acquiring Person, the Rights will entitle each
holder (other than such Acquiring Person) of a Right to purchase, for the
Purchase Price, that number of one one-thousandths (1/1000ths) of a share of
Preferred Stock equivalent to the number of Shares that, at the time of such
event, would have a market value of twice the Purchase Price.
Until the Distribution Date, the Rights will be evidenced by the
certificates for Shares registered in the names of the holders thereof. As soon
as practicable following the Distribution Date, separate certificates evidencing
the Rights (the "Rights Certificates") will be mailed to holders of record of
Shares as of the close of business on the Distribution Date (and to each initial
record holder of certain Shares originally issued after the Distribution Date),
and such separate Rights Certificates alone will thereafter evidence the Rights.
In the event the Company is acquired in a merger or other business
combination by an Acquiring Person or an affiliate or associate of an Acquiring
Person or 50% or more of the Company's assets or assets representing 50% or more
of the Company's revenues or cash flow are sold, leased, exchanged or otherwise
transferred (in one or more transactions) to an Acquiring Person or an affiliate
or associate of an Acquiring Person, each Right will entitle its holder (other
than Rights beneficially owned by such Acquiring Person or its affiliates or
associates) to purchase, for the Purchase Price, that number of common shares of
such corporation (or, in the event that such corporation is not a publicly
traded corporation, that number of common shares of an affiliate of such
corporation that has publicly traded shares) that, at the time of the
transaction, would have a market value (or, in certain circumstances, book
value) of twice the Purchase Price.
At any time prior to the earlier of such time as a person or group becomes
an Acquiring Person and the Rights Expiration Date, the Board may redeem the
Rights in whole, but not in part, at a price (in cash, Shares or other
securities of the Company deemed by the Board to be at least equivalent in
value) of $.01 per Right (the "Redemption Price"), which amount shall be subject
to adjustment as provided in the Rights Agreement.
In addition, at any time after there is an Acquiring Person, the Board may
elect to exchange each Right for consideration per Right consisting of one-half
of the securities that would be issuable at such time upon exercise of one Right
pursuant to the terms of the Rights Agreement.
At any time prior to the Distribution Date, the Company may supplement or
amend any provision of the Rights Agreement, except that no supplement or
amendment shall be made that reduces the Redemption Price (other than pursuant
to certain adjustments therein) or provides for an earlier Rights Expiration
Date.
Based on publicly available information, Hilton believes that, as of the
date of this Proxy Statement, the Rights were not exercisable, Rights
Certificates had not been issued and the Rights were evidenced by the
certificates for
13
<PAGE>
Shares. Hilton believes that, as a result of the commencement
of the Offer, the Distribution Date may occur at any time, if the Board so
designates such a Distribution Date.
Hilton and HLT believe that under the circumstances of the Offer and the
Proposed Hilton Merger, the Board has a fiduciary obligation to redeem the
Rights (or amend the Rights Agreement to make the Rights inapplicable to the
Offer and the Proposed Hilton Merger), and Hilton and HLT have requested that
the Board do so. However, the Board has refused to respond to this request and
there can be no assurance that the Board will redeem the Rights (or amend the
Rights Agreement). Hilton and HLT have commenced litigation against the Company
in the United States District Court for the District of Nevada seeking, among
other things, an order compelling the Board to redeem the Rights or to amend the
Rights Agreement to make the Rights inapplicable to the Offer and the Proposed
Hilton Merger on the grounds that failure to do so would constitute a breach of
fiduciary duty to the Company's stockholders. There can be no assurance that
such an order will be obtained. See "Background--Certain Litigation."
The Business Combination Condition. The Offer is conditioned upon HLT being
satisfied that the Nevada Business Combination Statute is inapplicable to the
Offer and the Proposed Hilton Merger (the "Business Combination Condition").
The Nevada Business Combination Statute restricts the ability of a
"resident domestic corporation" to engage in any combination with an "interested
stockholder" for three years following the interested stockholder's date of
acquiring the shares that caused such stockholder to become an interested
stockholder, unless the combination or the purchase of shares by the interested
stockholder on the interested stockholder's date of acquiring the shares that
caused such stockholder to become an interested stockholder is approved by the
board of directors of the resident domestic corporation before that date.
If the combination was not previously approved, the interested stockholder
may effect a combination after the three-year period only if such stockholder
receives approval from a majority of the disinterested shares or the offer meets
certain fair price criteria.
For purposes of the above provisions, "resident domestic corporation" means
a Nevada corporation that has 200 or more stockholders. "Interested stockholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation, or (ii) an affiliate or associate of the resident domestic
corporation and, at any time within three years immediately before the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding shares of the resident domestic
corporation. The above provisions do not apply to corporations that so elect in
their articles of incorporation or in a charter amendment approved by a majority
of the outstanding voting shares of disinterested stockholders. Such a charter
amendment, however, would not become effective for 18 months after its passage
and could apply only to stock acquisitions occurring after its effective date.
The Articles do not exclude the Company from the restrictions imposed by such
provisions.
The Business Combination Condition would be satisfied if the Board approved
the Offer and the Proposed Hilton Merger prior to consummation of the Offer and
the Proposed Hilton Merger or if HLT were satisfied that the Nevada Business
Combination Statute was invalid or its restrictions were otherwise inapplicable
to HLT in connection with the Offer and the Proposed Hilton Merger for any
reason, including, without limitation, those specified in the Nevada Business
Combination Statute.
The Control Share Condition. The Offer is conditioned upon HLT being
satisfied that the Nevada Control Share Acquisition Statute shall be
inapplicable to the Offer and the Proposed Hilton Merger (the "Control Share
Condition"). Pursuant to the Nevada Control Share Acquisition Statute, an
"acquiring person," who acquires a "controlling interest" in an "issuing
corporation," may not exercise voting rights on any "control share" unless
such voting rights are conferred by a majority vote of the disinterested
stockholders of the issuing corporation at a meeting of such stockholders. In
the event that the control shares are accorded full voting rights and the
acquiring person acquires control shares with a majority or more of all the
voting power, any stockholder, other than
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<PAGE>
the acquiring person, who does not vote in favor of authorizing voting
rights for the control shares, is entitled to demand payment for the fair value
of such stockholder's shares, and the corporation must comply with the demand.
For purposes of the provisions under this subsection, "acquiring person" means
any person who, individually or in association with others, acquires or offers
to acquire, directly or indirectly, a "controlling interest" in an issuing
corporation.
"Control share" means those outstanding voting shares of an issuing
corporation which an acquiring person acquires or offers to acquire in an
acquisition or within 90 days immediately preceding the date when the acquiring
person became an acquiring person. "Issuing corporation" means a corporation
that is organized in Nevada, has 200 or more stockholders (at least 100 of whom
are stockholders of record and residents of Nevada) and does business in Nevada
directly or through an affiliated corporation. "Controlling interest" means the
ownership of outstanding voting shares of an issuing corporation sufficient, but
for the provisions of the Nevada Control Share Acquisition Statute, to enable
the acquiring person, directly or indirectly and individually or in association
with others, to exercise (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more of all
the voting power of the issuing corporation in the election of directors.
The above provisions do not apply if the Articles or Bylaws in effect on
the tenth day following the acquisition of a controlling interest by an
acquiring person provide that said provisions do not apply. The Articles and
Bylaws currently do not exclude the Company from the restrictions imposed by
such provisions. The Control Share Condition would be satisfied if the Bylaws
were amended such that, on the tenth day following consummation of the Offer,
the Bylaws provide that the provisions of the Nevada Control Share Acquisition
Statute do not apply, or if HLT were satisfied that the Nevada Control Share
Acquisition Statute was invalid or its restrictions were otherwise inapplicable
to HLT in connection with the Offer and the Proposed Hilton Merger for any
reason, including, without limitation, those specified in the Nevada Control
Share Acquisition Statute.
Gaming Condition. The Offer is conditioned upon HLT being satisfied that
all material consents, approvals, orders or authorizations of, or registrations,
declarations or filing with, any governmental authority with jurisdiction in
respect of the Company's active gaming operations required or necessary in
connection with the Offer, the Proposed Hilton Merger and the transactions
contemplated thereunder (including the changes in the composition of the Board
brought about by the nomination and solicitation by Hilton of proxies for the
election of the Hilton Nominees) have been obtained and are in full force and
effect (the "Gaming Condition") and, in the case of New Jersey, that the New
Jersey Casino Control Commission (the "CCC") has approved all arrangements with
respect to a trust holding Shares (or, if approved by the New Jersey
authorities, shares of a subsidiary of the Company) and that the directors of
HLT have been qualified, on a permanent or temporary basis, to serve as
directors of a company (including the Company) that either directly or
through its subsidiary holds a New Jersey casino license (collectively, the
"Gaming Approvals").
Hilton is currently registered in Nevada as a publicly traded corporation
and has been found suitable to own the shares of subsidiaries that have been
licensed to conduct gaming operations in Nevada. The CCC has found Hilton
qualified as a holding company of a casino licensee. Additionally, the Ontario
authorities have conducted an investigation of, and have found suitable, Hilton
(as well as the Company) in connection with the Ontario registration of Windsor
Casino Limited, which Hilton owns with the Company. To date, Hilton has obtained
all gaming licenses or permits necessary for the operation of its gaming
activities. Accordingly, Hilton does not expect significant delays in
obtaining final action on its applications for necessary Gaming Approvals.
However, there can be no assurances as to whether any or all Gaming Approvals
will be granted or as to the timing of such Gaming Approvals. See "--Gaming
Regulation."
The Offer is also subject to other terms and conditions which are described
in the Offer to Purchase, copies of which are available from MacKenzie Partners,
Inc. ("MacKenzie") at the address and telephone numbers set forth on the back
cover of this Proxy Statement. Hilton urges the Company's stockholders to obtain
a copy of and review the Offer to Purchase and other Offer documents.
Pursuant to the Delaware General Corporation Law and the rules promulgated
by the National Association of Securities Dealers, Inc., approval by
stockholders of Hilton prior to the issuance of Hilton Common Stock is re-
15
<PAGE>
quired where the present or potential issuance of such stock to be issued
is or will be equal to or in excess of 20% of the number of shares of common
stock outstanding before the issuance of the stock. Accordingly, consummation of
the Proposed Hilton Merger as currently contemplated will require approval by
stockholders of Hilton. Hilton has not commenced and does not intend to commence
a solicitation of Hilton stockholders to approve the Proposed Hilton Merger
until a definitive merger agreement has been executed by Hilton and the Company.
It is anticipated that any such definitive merger agreement will be consistent
with the terms of the Proposed Hilton Merger. The timing of consummation of the
Offer and the Proposed Hilton Merger will depend on a variety of factors and
legal requirements, the actions of the Board, the number of Shares (if any)
acquired by HLT pursuant to the Offer, and whether the Minimum Condition, the
Rights Condition, the Control Share Condition, the Business Combination
Condition and the Gaming Condition, among others, are satisfied or waived.
GAMING REGULATION
Nevada Gaming Regulation. The ownership and operation of casino gaming
facilities in Nevada are subject to: (i) The Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, the "Nevada Act") and (ii)
various local ordinances and regulations. Hilton's and the Company's respective
gaming operations are subject to the licensing and regulatory control of the
Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control
Board ("Nevada Board"), the Clark County Liquor and Gaming Licensing Board (the
"CCLGLB"), the City of Reno and the Douglas County Commission (the "DCC") (the
Nevada Commission, the Nevada Board, the CCLGLB, the City of Reno and the DCC
collectively, the "Nevada Gaming Authorities").
The policy of the State of Nevada with respect to corporate acquisitions
such as the Offer is to (i) assure the financial stability of corporate gaming
licensees and their affiliates, (ii) preserve the beneficial aspects of
conducting business in the corporate form, and (iii) promote a neutral
environment for the orderly governance of corporate affairs.
Hilton and the Company are each registered with the Nevada Commission as a
publicly traded corporation (a "Registered Corporation") and have each been
found suitable to own the stock of subsidiaries that are licensed to conduct
gaming operations in the State of Nevada. Changes in control of a Registered
Corporation through merger, consolidation, stock or asset acquisitions,
management or consulting agreements, proxy or power of attorney, consummation of
a tender offer or any act or conduct by a person whereby it obtains control, may
not occur without the prior approval of the Nevada Commission upon the
recommendation of the Nevada Board.
Because the Offer will result in Hilton acquiring control of the Company,
the Offer may not be consummated without the prior approval of the Nevada
Commission upon the recommendation of the Nevada Board. Consummation of the
Offer may also require the approval of, or notices to, the CCLGLB, the City of
Reno and the DCC.
In seeking approval to acquire control of the Company, Hilton and HLT must
satisfy the Nevada Board and Nevada Commission as to a variety of specific
standards. The Nevada Board and Nevada Commission will consider all relevant
material facts in determining whether to grant such approval, and may consider
not only the effects of the Offer and the Proposed Hilton Merger but also any
other facts that are deemed relevant. Such facts may include, among other
things, (i) the business history of Hilton, including its record of financial
stability, integrity and success of its operations, as well as its current
business activities; and (ii) whether the Offer and the Proposed Hilton Merger
will create a significant risk that Hilton, the Company or their subsidiaries
will not satisfy their financial obligations as they become due or satisfy all
financial and regulatory requirements imposed by the Nevada Act. The Nevada
Board or Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control of a Registered Corporation, to be
investigated and licensed as part of the approval process relating to the
transaction. The Nevada Gaming Authorities may deny an application for licensing
or a finding of suitability for any cause that they deem reasonable. A finding
of suitability is comparable to licensing and both require the submission of
detailed personal and financial information followed by a thorough
investigation.
Hilton and HLT do not believe that the solicitation of proxies from the
Company's stockholders for the election of the Hilton Nominees (the "Proxy
Solicitation"), or the election of the Hilton Nominees, will constitute Hilton,
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HLT or the Hilton Nominees "acquiring control" (as such term is defined in the
Nevada Act) of the Company so as to require the prior approval of the Nevada
Commission. Hilton and HLT have filed a written request for a ruling (the
"Ruling Request") from the Chairman of the Nevada Board to confirm that the
Proxy Solicitation and the election of the Hilton Nominees do not require the
prior approval of the Nevada Commission. No assurances can be given that the
Chairman of the Nevada Board will issue a ruling in response to the Ruling
Request or if he does issue a ruling, that he will agree with Hilton and HLT
that no prior approval for the Proxy Solicitation or election of the Hilton
Nominees is required. If the Chairman of the Nevada Board rules that the Proxy
Solicitation or the election of the Hilton Nominees requires the prior approval
of the Nevada Commission, Hilton and HLT will comply with such ruling and will
seek to obtain such approvals on an expedited basis. No assurances can be given
that such approvals would be considered on an expedited basis or that such
approvals would be granted.
Officers, directors and key employees of a Registered Corporation who are
actively and directly involved in the licensed activities of a licensed gaming
subsidiary may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The Hilton Nominees may be
required to file applications with the Nevada Commission after taking office and
may thereafter be required to be licensed or found suitable as directors of the
Company in the discretion of the Nevada Gaming Authorities.
The Nevada Act also requires that beneficial owners of more than 10% of a
Registered Corporation's voting securities apply to the Nevada Commission for a
finding of suitability within thirty days after the Chairman of the Nevada Board
mails the written notice requiring such filing. HLT will be required to be found
suitable to own more than 10% of the Company's voting securities in connection
with the Offer and Hilton will be required to be found suitable to own the stock
of HLT.
The Nevada Act requires that the Nevada Commission use its best efforts to
take final action upon an application to acquire control of a Registered
Corporation by a person making a tender offer within sixty days after the
application is filed and any fees are paid. If the Nevada Commission cannot take
final action upon the application within sixty days of the filing of such
application, it must provide the applicant with written notice of a time certain
for completion of the investigation and the final action at least ten days prior
to the sixtieth day after filing of the application. There can be no assurances
that the Nevada Commission will consider the applications of Hilton and HLT
within such sixty day period. Because Hilton is currently a Registered
Corporation, it does not expect significant delays in final action being taken
by the Nevada Commission although there can be no assurances in that regard.
Furthermore, any such approval of the Offer, if granted, does not constitute a
finding, recommendation or approval by the Nevada Board or Nevada Commission as
to the accuracy or adequacy of the Offer to Purchase or the merits of the Offer
and the Proposed Hilton Merger. Any representation to the contrary is unlawful.
Hilton may not make a public offering of its securities without the prior
approval of the Nevada Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. The
issuance of Hilton Common Stock in the Proposed Hilton Merger will qualify as a
public offering. On September 20, 1996, Hilton received approval to make public
offerings for a period of one year, subject to certain conditions (the "Shelf
Approval"). On November 21, 1996, the Nevada Commission issued a revised Shelf
Approval effective for a period of ten months to include approvals relating to
Hilton's acquiring control of Bally. The Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an interlocutory stop order
by the Chairman of the Nevada Board. The Shelf Approval does not constitute a
finding, recommendation or approval by the Nevada Commission or the Nevada Board
as to the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful. Hilton
intends to apply for a renewal of the Shelf Approval (the "New Shelf Approval")
and anticipates that the application for the New Shelf Approval will be
considered by the Nevada Board and Nevada Commission prior to the expiration of
the Shelf Approval. The issuance of Hilton Common Stock in the Proposed Hilton
Merger will be made pursuant to the Shelf Approval or, if necessary, the New
Shelf Approval.
If Hilton and HLT receive prior approval from the Nevada Commission for the
Offer and for the acquisition of control of the Company, the Proposed Hilton
Merger will require additional prior approvals, including, but not lim-
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ited to, (i) a finding of suitability for Hilton, HLT, or another direct or
indirect wholly owned subsidiary of Hilton ("Sub") to own the stock of the
Company or ITT Sheraton, (ii) registration of HLT, Sub or the Company as an
intermediary company, and (iii) de-registration of the Company as a Registered
Corporation.
On January 31, 1997, Hilton and HLT filed applications with the Nevada
Board and Nevada Commission requesting approvals of the Offer and the
acquisition of control of the Company and approvals for the Proposed Hilton
Merger. Hilton and HLT will promptly file any required applications or notices
with the CCLGLB, the City of Reno and the DCC. No assurances can be given that
such applications will be approved or that they will be considered on a timely
basis.
New Jersey Gaming Regulations. Casino gaming activities in New Jersey are
subject to the New Jersey Casino Control Act ("Casino Control Act"), the
regulations of the CCC and other applicable laws. In the case of the transfer of
control of a casino licensee to an individual or entity not currently deemed
qualified under the standards of the Casino Control Act, Section 95.12 of the
Casino Control Act permits an individual or entity that obtains publicly traded
securities conferring control of a casino licensee to hold such securities on an
interim basis prior to obtaining approval from the CCC. During the period of
interim authorization, the publicly traded securities that have been acquired by
the as yet unqualified individual or entity must be held in a trust ("ICA
Trust") pursuant to the provisions of the Casino Control Act. Hilton is
currently qualified under the provisions of the Casino Control Act as a holding
company of a New Jersey casino licensee.
As a result of the transfer of Shares to HLT pursuant to the Offer and the
Proposed Hilton Merger, HLT will be required to qualify as a holding company of
a New Jersey casino licensee. Qualification of HLT would include review and
approval of HLT as an entity and of its officers and directors as individuals.
If at the time of the transfer of Shares to HLT pursuant to the Offer and the
Proposed Hilton Merger, HLT has been found qualified under the provisions of the
Casino Control Act, it may not be subject to the requirements of an ICA Trust
under Section 95.12 of the Casino Control Act. On February 14, 1997, Hilton
petitioned the CCC for approval of HLT as a holding company of a casino
licensee. Because the sole stockholder of HLT (Hilton), and the sole officer and
director of HLT (Arthur M. Goldberg) are already qualified under the Casino
Control Act, it is anticipated that HLT will be found qualified under the Casino
Control Act; however, there can be no assurances as to whether or when HLT will
be so qualified.
If a person holding debt or equity securities is required to place such
securities into an ICA trust pending qualification, the person retains the
ability to direct the trustee as to how to vote or whether to dispose of such
securities, unless and until the CCC has reason to believe such person may not
qualify. If the CCC denies interim authorization or has reasonable cause to
believe that a person required to be qualified may be found unqualified, it
shall order that the trust become operative. During the time the trust is
operative, the person required to be qualified may not participate in the
earnings of the casino hotel or receive any return on its investment. If the CCC
thereafter denies qualification, the trustee shall dispose of the trust
property. In such event, the proceeds distributed to the unqualified applicant
may not exceed the lower of the actual cost of the securities to the unqualified
applicant or their value calculated as if the investment had been made on the
date the trust became operative. Any excess remaining proceeds shall be paid to
the Casino Revenue Fund maintained in the New Jersey Department of the Treasury.
The qualification criteria with respect to a holding or intermediary
company of a casino licensee include its financial stability, integrity and
responsibility, the integrity and adequacy of its financial resources which bear
any relation to the casino project; its good character, honesty and integrity;
and the sufficiency of its business ability and casino experience to establish
the likelihood of a successful, efficient casino operation.
If the CCC finds that a holder of such securities is not qualified under
the Casino Control Act, the CCC has the right to take any remedial action it may
deem appropriate. Such action may include an order to divest such securities. In
the event that certain disqualified holders fail to divest such securities, the
CCC has the power to revoke or suspend the casino license of the entity
affiliated with the issuer of such securities. If a holder is found unqualified,
it is unlawful for the holder (i) to exercise, directly or through any trustee
or nominee, any right conferred by such securities, or (ii) to receive any
dividends or interest upon any such securities or any remuneration, in any form,
from its affiliated casino licensee, whether for services rendered or otherwise.
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Hilton does not believe that the Proxy Solicitation requires the approval
of the CCC; however, should the Hilton Nominees be elected, they would not be
permitted under the Casino Control Act to function as directors of the Company
until they have been qualified by the CCC on at least a temporary basis. The
Hilton Nominees have petitioned the CCC for their qualification. It is
anticipated that such Hilton Nominees will be found qualified under the Casino
Control Act, however, there can be no assurances as to whether or when such
Hilton Nominees will be found so qualified. Should a majority of the Board
consist of directors who are only temporarily qualified by the CCC, the CCC
could require that the stock of the Company's New Jersey casino licensee
be placed into a trust pending plenary qualification of enough Directors to
constitute a majority of the Board.
Mississippi Gaming Regulations. The ownership and operation of casino
gaming facilities in Mississippi are subject to: (i) the Mississippi Gaming
Control Act (the "Mississippi Act"), (ii) the regulations of the Mississippi
Gaming Commission (the "Mississippi Commission"), and (iii) other applicable
laws. Hilton's and the Company's respective gaming operations are subject to the
licensing and regulatory control of the Mississippi Commission.
The policy of the State of Mississippi with respect to corporate
acquisitions, such as the Offer, is to (i) assure the financial stability of
corporate gaming licensees and their affiliates, (ii) preserve the beneficial
aspects of conducting business in the corporate form and (iii) promote a neutral
environment for the orderly governance of corporate affairs.
No direct or indirect changes in control of a registered, publicly traded
corporation, such as the Company, can occur without the prior approval of the
Mississippi Commission. The staff of the Mississippi Commission reviews and
investigates applications for such approvals and makes recommendations on such
applications to the Mississippi Commission for final action.
In seeking approval to acquire control of the Company, Hilton and HLT must
satisfy the Mississippi Commission as to a variety of specific standards. The
Mississippi Commission will consider all relevant material facts in determining
whether to grant such approval, and may consider not only the effects of the
Offer and the Proposed Hilton Merger but also any other facts that are deemed
relevant. Such facts may include, among others, (i) the business history of the
applicant, including its record of financial stability, integrity and success of
its operations, as well as its current business activities, and (ii) whether the
Offer and the Proposed Hilton Merger will create a significant risk that Hilton,
the Company or their subsidiaries will not satisfy their financial obligations
as they become due or satisfy all financial and regulatory requirements imposed
by the Mississippi Act. Officers, directors and other persons having a material
involvement or relationship with Hilton and HLT prior to the Proposed Hilton
Merger who will be actively and directly involved in gaming activities may also
be required to be found suitable or licensed by the Mississippi Commission as a
part of the approval process relating to the transaction. The Mississippi
Commission may deny an application for licensing or registration for any cause
that it deems reasonable. A finding of suitability is comparable to licensing,
and both require the submission of detailed personal and financial information
followed by a thorough investigation.
The Mississippi Act also requires beneficial owners of more than 10% of the
voting securities of a corporation registered with the Mississippi Commission to
apply for a finding of suitability within 30 days after receiving a request from
the Executive Director of the Mississippi Commission. In addition to obtaining
approval of the application to acquire control, HLT may be required to be found
suitable to own more than 10% of the Company's voting securities in connection
with the Offer and Hilton may be required to be found suitable to own the stock
of HLT.
Hilton has registered with the Mississippi Commission as a publicly traded
corporation and has been found suitable to own the shares of a subsidiary that
operates a casino in Tunica County, Mississippi; therefore, Hilton does not
expect significant delays in obtaining necessary approvals. However, there can
be no assurances that such approvals will be granted or as to the timing of such
approvals. Furthermore, any such approval, if granted, does not constitute a
finding, recommendation or approval by the Mississippi Commission as to the
accuracy or adequacy of the Offer to Purchase or the merits of the Offer and the
Proposed Hilton Merger, nor is it intended to show favor to HLT in relation to
the Proposed Hilton Merger. Any representation to the contrary is unlawful.
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Generally, no corporation registered with the Mississippi Commission may
make a public offering of its securities without the prior approval of the
Mississippi Commission if the securities or proceeds therefrom are intended to
be used to construct, acquire or finance gaming facilities in Mississippi, or to
retire or extend obligations incurred for such purposes. The sale by Hilton of
any equity or debt securities in the Proposed Hilton Merger may qualify as a
public offering. On October 17, 1996, Hilton received continuous approval to
make public offerings for a period of one year, subject to certain conditions
(the "Continuous Approval"). The Continuous Approval does not constitute a
finding, recommendation or approval by the Mississippi Commission as to the
accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful. It is
anticipated that the issuance by Hilton of any equity or debt securities in the
Proposed Hilton Merger will be made pursuant to the Continuous Approval.
If Hilton and HLT receive prior approval from the Mississippi Commission
for the Offer and for the acquisition of control of the Company, the Proposed
Hilton Merger may require additional prior approvals, including, but not limited
to, (i) a finding of suitability for Hilton, HLT, or another direct or indirect
wholly owned subsidiary of Hilton to own the stock of the Company or ITT
Sheraton and (ii) registration of HLT, such other direct or indirect wholly
owned subsidiary or the Company as an intermediary company. The Proxy
Solicitation to elect the Hilton Nominees may require the approval of the
Mississippi Commission. In the event it is determined that such approval is
required, Hilton will apply for such approval and request that such application
be considered by the Mississippi Commission at the same time as, and as a part
of, the application for approval of the Offer and acquisition of control of the
Company.
On February 4, 1997, Hilton and HLT filed an application with the
Mississippi Commission requesting approval of the acquisition of control of the
Company. It is anticipated that all individuals required to file applications
for findings of suitability as officers and directors of HLT will promptly have
applications filed on their behalf for the necessary approvals with the
Mississippi Commission. No assurances can be given that such applications will
be approved or that they will be considered on a timely basis.
Nova Scotia Gaming Regulations. The Company, through a subsidiary (the
"Subsidiary"), operates casinos in Halifax and Sydney, Nova Scotia and is
required to be registered and comply with licensing requirements and operational
regulations under the Gaming Control Act (the "Nova Scotia Act"). Under the Nova
Scotia Act, the Director of Registration of the Nova Scotia Gaming Control
Commission must be notified, within fifteen days, of any change in the officers
or directors of the Subsidiary. The Subsidiary is also required to file a
disclosure form with the Director of Registration within fifteen days of (i) a
person acquiring a beneficial interest in the business of the Subsidiary; (ii) a
person exercising control, either directly or indirectly, over the business of
the Subsidiary; or (iii) a person providing financing, either directly or
indirectly, to the business of the Subsidiary. HLT intends to file any required
disclosure forms within the applicable time period. No prior approval or consent
is required under the Nova Scotia Act in respect of the Offer or the Proposed
Hilton Merger. However, under the Nova Scotia Act, the Director of Registration
may require information or material from the Subsidiary or any person who has an
interest in the Subsidiary. Hilton and HLT will submit to the Director of
Registration any information required with respect to them. The Director of
Registration may, at any time, subject to the provisions of the Nova Scotia Act,
revoke or suspend the Subsidiary's registration under the Nova Scotia Act, or
refuse to grant a renewal of its registration. Although Hilton does not
anticipate any unfavorable action by the Director of Registration or the Nova
Scotia Gaming Control Commission prior to the consummation of the Offer or the
Proposed Hilton Merger, there can be no assurance that the Subsidiary will not
have its registration revoked or suspended prior to the consummation of the
Offer.
Ontario Gaming Regulations. Windsor Casino Limited, an Ontario corporation
which operates a Windsor, Ontario gaming facility and of which each of Hilton
and the Company owns a one-half interest, is registered under the Gaming Control
Act, 1992 (the "Ontario Act") and is required to comply with licensing
requirements and operational regulations under the Ontario Act. Under the
Ontario Act, the Registrar of the Gaming Control Commission (the "Registrar")
must approve any change in the directors or officers of Windsor Casino Limited.
No prior approval or consent is required under the Ontario Act in respect of the
Offer or the Proposed Hilton Merger. However, under the Ontario Act, the
Registrar may require information and material from Windsor Casino Limited or
any person who has an interest in Windsor Casino Limited. Hilton and HLT will
submit to the Registrar any information required with respect to them. The
Registrar may, at any time, subject to the provisions of the Ontario Act,
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revoke or suspend Windsor Casino Limited's registration under the Ontario
Act, or refuse to grant a renewal of its registration. Although Hilton does not
anticipate unfavorable action by the Registrar or the Gaming Control Commission
prior to the consummation of the Offer or the Proposed Hilton Merger, there can
be no assurance that Windsor Casino Limited will not have its registration
revoked or suspended prior to the consummation of the Offer.
Other Gaming Regulations. The Company owns and operates gaming facilities
in a number of domestic and foreign jurisdictions in addition to those discussed
above. The relevant statutes and regulatory schemes governing such gaming
operations may require that prior to or following consummation of the Offer
and/or the Proposed Hilton Merger, Hilton and/or HLT must qualify or otherwise
be approved to conduct such gaming operations. It is the intention of Hilton and
HLT to comply with any such statutes and regulations and to seek any required
approvals or to otherwise become qualified as may be necessary to consummate the
Offer and the Proposed Hilton Merger. There can be no assurance that Hilton and
HLT will receive such approvals or become so qualified or as to the timing of
any such approvals or qualifications.
For further information regarding gaming regulations applicable to Hilton,
the Offer and the Proposed Hilton Merger, see the Offer to Purchase and Hilton's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
FEDERAL COMMUNICATIONS COMMISSION REGULATION
According to the Company Registration Statement, on July 1, 1996, in
partnership with Dow Jones & Co., the Company acquired television station
WNYC-TV (which has since been renamed WBIS+) from the City of New York. The
Communications Act of 1934, as amended (the "Communications Act") and applicable
Federal Communications Commission ("FCC") regulations require prior FCC approval
for the transfer or deemed transfer of control or ownership of companies holding
FCC licenses. Applications must be filed with the FCC seeking such approval. The
Communications Act requires that the FCC find that the proposed transfer would
serve the public interest, convenience and necessity as a prerequisite to
granting its approval. To this end, the FCC requires that the transferee
demonstrate that it possesses the requisite legal, financial, technical and
other qualifications to operate the licensed entities in order for the transfer
to be approved.
Before Hilton or HLT can acquire ownership or control of the Company's
interests in the WBIS+ partnership ("WBIS+") pursuant to the Offer, FCC approval
will be required. Hilton and HLT have filed with the FCC an application seeking
FCC approval to take control of the Company (the "Long Form Approval"). There
can be no assurance that the FCC will grant such approval or that, if granted,
such FCC approval will be on terms and conditions acceptable to Hilton.
In connection with the Offer, Hilton and HLT have also submitted to the FCC
for its approval a request for special temporary authority to enter into a
voting trust agreement (the "Voting Trust Agreement") which, if approved by the
FCC (the "Voting Trust Approval"), will permit HLT to purchase Shares pursuant
to the Offer prior to receipt of the Long Form Approval. The Voting Trust
Agreement provides among other things that, pending grant of the Long Form
Approval, an independent voting trustee approved by the FCC (the "Trustee")
will hold the Company's equity interests in WBIS+ and take such action as
may be necessary to maintain the present management and operations of WBIS+.
Following receipt of the Long Form Approval, the voting trust would be
dissolved, and the Trustee would transfer control of the Company's equity
interests in WBIS+ to Hilton and HLT. In the event that the Long Form Approval
is denied, the Trustee would be obligated to sell such interests
as soon as practicable to an FCC approved transferee.
If Hilton receives Voting Trust Approval, Hilton intends to proceed with
the purchase of Shares pursuant to the Offer unless, at the time at which the
Offer would otherwise be consummated, the Voting Trust Approval contains
conditions unacceptable to Hilton, in its sole discretion, or Hilton has any
reason to believe that the Long Form Approval will not be obtained within a
reasonable time thereafter. Although in the past the FCC generally has expedited
its consideration of such applications, Hilton cannot predict how long such
consideration will take. The FCC has, however, established a pleading schedule
regarding the Voting Trust Approval that is completed on March 21, 1997, which
would permit a FCC decision on the request to enter into the Voting Trust
Agreement as early as mid-April. There are no assurances that a decision will
be issued then, however. Nor can there be any assurance that the FCC will grant
the Long Form Approval or the Voting Trust Approval or that, if granted, such
approvals will be on terms and conditions acceptable to Hilton.
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The election of the Hilton Nominees to the Board at the Annual Meeting
would be deemed an insubstantial transfer of control of the Company and will
require the approval of the FCC before the Hilton Nominees, if elected, can take
office. A short form application is permitted to be used in the case of an
insubstantial transfer of control, and such an application has been filed with
the FCC, seeking the required approval (the "Short Form Approval"). This
application is also subject to the pleading cycle discussed above with respect
to Voting Trust Approval. There can be no assurance that the FCC will grant
the Short Form Approval or that, if granted, such approval will be on terms and
conditions acceptable to Hilton.
CERTAIN LITIGATION
On January 27, 1997, Hilton and HLT filed a Complaint against the Company
in the United States District Court for the District of Nevada. The Complaint
seeks, among other things: (i) injunctive relief requiring the Board to redeem
the Rights and to make inapplicable to the Offer and the Proposed Hilton Merger
the Nevada Control Share Acquisition Statute and the Nevada Business Combination
Statute; (ii) injunctive and declaratory relief to forestall any effort by the
Company to manipulate or otherwise subvert the process of corporate democracy by
amending the Bylaws, postponing its Annual Meeting, increasing the size of the
Board or taking other actions to frustrate the proxy contest that Hilton plans
to conduct pursuant to this Proxy Statement; and (iii) a declaratory judgment
that the Company does not have standing to institute an action under the federal
antitrust laws to block or impede the Offer or the Proposed Hilton Merger and
that, in any event, the consummation of the Offer and the Proposed Hilton Merger
would not violate such laws.
On January 27, 1997, Hilton and HLT filed a motion for a preliminary
injunction enjoining the Company from (i) increasing the size of the Board, or
in the alternative, requiring the Company to give Hilton and HLT the opportunity
to supplement their written notice of intention to nominate individuals for
election as directors in the event that the Company does increase the size of
the Board, or (ii) amending the Bylaws to impede in any way the effective
exercise of the stockholder franchise in connection with the election of
Directors at the Annual Meeting. On March 6, 1997, the motion was denied.
On January 29, 1997, the Nevada court denied a motion filed by Hilton and
HLT for a temporary restraining order and preliminary injunction enjoining the
Company from filing and prosecuting any action against Hilton or HLT in
connection with or arising out of the Offer in any jurisdiction other than the
United States District Court for the District of Nevada. In its ruling, the
Nevada court stated that if the Company does bring suit regarding the Offer in
any other jurisdiction, Hilton and HLT, at that time, can apply for an
injunction or other relief to prevent duplicative litigation.
On February 12, 1997, the Company filed an answer and counterclaims to the
Complaint denying certain allegations of the Complaint. The counterclaims seek
injunctive relief prohibiting Hilton from proceeding with the Offer. The
counterclaims allege that the Offer and the Proposed Hilton Merger are the
product of the misuse of confidential information concerning the Company
obtained by: (i) certain employees of Bally during the course of due diligence
by those employees with respect to a potential business combination of Bally and
the Company; and (ii) a law firm that performed certain services for the
Company, one of its subsidiaries, and a joint venture between the Company and
Dow Jones & Co. The counterclaims also allege that the Tender Offer Statement
fails to disclose: (i) that there is a significant risk that the Offer and
Proposed Hilton Merger may be found to violate the antitrust laws; (ii) that
there is a significant risk that the Offer and Proposed Hilton Merger will not
be approved by gaming authorities; and (iii) information concerning the role of
HFS Incorporated ("HFS") in the Offer and Proposed Hilton Merger and the
potential negative impact of HFS's role on the value of the Company's Sheraton
and Four Points hotel businesses, including the risk that HFS's role will
trigger anti-assignment or exclusivity clauses in various agreements and will
lead to termination or non-renewal of hotel management contracts and franchise
agreements. In connection with its counterclaims, the Company filed a motion for
a preliminary and permanent injunction requiring Hilton to discharge the law
firm that is the subject of the allegations in the counterclaims. On March 13,
1997, the motion was denied. Hilton believes that the allegations of the
counterclaims are without merit and denies that it received confidential
information concerning the Company from either the Bally executives or the law
firm mentioned in the counterclaims. Hilton also believes that its Tender Offer
Statement complies in all material respects with disclosure requirements of the
federal securities laws.
On February 26, 1997, Hilton and HLT filed a motion for a preliminary
injunction requiring the Company to conduct the Annual Meeting in May 1997.
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Hilton has been advised that stockholders of the Company have filed suit in
a number of jurisdictions alleging claims against the Company similar to the
claims alleged in the Complaint. Several stockholders have filed suit in the
United States District Court for the District of Nevada, and the court has
consolidated those actions. The stockholder plaintiffs have moved for
consolidation of their action with that brought by Hilton and HLT.
VOTING AND PROXY PROCEDURES
Under the Bylaws, if the Board does not establish the Record Date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting, the Record Date will be at the close of business on the day next
preceding the day on which notice of the meeting is given or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. In any case, only stockholders of record on the Record Date
will be entitled to notice of and to vote at the Annual Meeting. Each Share is
entitled to one vote. Stockholders who sell Shares before the Record Date (or
acquire them without voting rights after the Record Date) may not vote such
Shares. Stockholders of record on the Record Date, will retain their voting
rights in connection with the Annual Meeting even if they sell such Shares after
the Record Date. Based on publicly available information, Hilton believes that
the only outstanding class of securities of the Company entitled to vote at the
Annual Meeting are the Shares. According to publicly available information as of
November 6, 1996, there were 116.4 million Shares issued and outstanding.
Shares represented by properly executed WHITE proxy cards will be voted at
the Annual Meeting as marked and, in the absence of specific instructions, will
be voted FOR the election of Hilton Nominees to the Board, FOR the Proposals and
in the discretion of the persons named as proxies on all other matters as may
properly come before the Annual Meeting. Election of the Hilton Nominees
requires the affirmative vote of a plurality of the Shares represented and
entitled to vote at the Annual Meeting. Approval of the Sale Resolution requires
the affirmative vote of a majority of Shares represented and entitled to vote at
the Annual Meeting. Approval of the Bylaws Resolution requires the affirmative
vote of a majority of the Shares entitled to vote generally in an election of
directors. Abstentions and broker non-votes will have the same effect as votes
against the Bylaws Resolution and will each be included in determining the
number of Shares present for purposes of determining the presence of a quorum.
Stockholders of the Company may revoke their proxies at any time prior to
its exercise by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy) or by delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to
Hilton in care of MacKenzie Partners, Inc. at the address set forth on the back
cover of this Proxy Statement or to the Company at 1330 Avenue of the Americas,
New York, New York 10019-5490 or any other address provided by the Company.
Although a revocation is effective if delivered to the Company, Hilton requests
that either the original or photostatic copies of all revocations be mailed or
faxed to Hilton in care of MacKenzie Partners, Inc. at the address or facsimile
number set forth on the back cover of this Proxy Statement so that Hilton will
be aware of all revocations and can more accurately determine if and when
proxies have been received from the holders of record on the Record Date of a
majority of the outstanding Shares.
IF YOU WISH TO VOTE FOR THE ELECTION OF THE HILTON NOMINEES TO THE BOARD
AND FOR THE PROPOSALS, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED WHITE
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED OR FAX BOTH SIDES OF THE
ENCLOSED WHITE PROXY CARD TO MACKENZIE PARTNERS, INC. AT THE NUMBER SET FORTH ON
THE BACK COVER OF THIS PROXY STATEMENT.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being made
by Hilton and HLT. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Solicitations may be made by certain
directors, officers and employees of Hilton, none of whom will receive
additional compensation for such solicitation.
23
<PAGE>
Hilton has retained MacKenzie for solicitation and advisory services in
connection with this solicitation and the Offer, for which MacKenzie will
receive $750,000 together with reimbursement for its reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses,
including certain liabilities under the federal securities laws. MacKenzie will
solicit proxies from individuals, brokers, banks, bank nominees and other
institutional holders. Hilton has requested banks, brokerage houses and other
custodians, nominees and fiduciaries to forward all solicitation materials to
the beneficial owners of the Shares they hold of record. Hilton will reimburse
these record holders for their reasonable out-of-pocket expenses in so doing. It
is anticipated that MacKenzie will employ approximately 60 persons to solicit
the Company's stockholders for the Annual Meeting. MacKenzie is also acting as
Information Agent in connection with the Offer, for which MacKenzie will be paid
customary compensation in addition to reimbursement of reasonable out-of-pocket
expenses.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") is acting as
the Dealer Manager in connection with the Offer and is acting as financial
advisor to Hilton in connection with its effort to acquire the Company. In
connection with the Offer, in addition to a fee of $1 million paid upon
execution of the engagement letter, Hilton has agreed to pay DLJ for its
services (i) $250,000 upon the commencement of the Offer, (ii) an additional
$1.25 million upon mailing of any proxy statement to the stockholders of the
Company, and (iii) $15 million (less the amount of the opinion fee described
below, if any) if Hilton completes a transaction (as defined in the engagement
letter, but including an acquisition of a majority of the Shares) with the
Company. In the event DLJ notifies the Board of Directors of Hilton that it is
prepared to deliver an opinion as to the fairness of the consideration to be
paid by Hilton, from a financial point of view, then Hilton shall pay an
additional $1 million to DLJ. Hilton has also agreed that in the event a
transaction is not consummated and Hilton receives cash, securities or assets
from the Company, Hilton shall also pay to DLJ an amount in cash equal to 15% of
such cash, securities or assets (less credits for amounts previously paid to
DLJ). Hilton has also agreed to reimburse DLJ (in its capacity as Dealer Manager
and financial advisor) for its reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its legal counsel, incurred in connection with
its engagement, and to indemnify DLJ and certain related persons against certain
liabilities and expenses in connection with their engagement, including certain
liabilities under the federal securities laws. DLJ renders various investment
banking and other advisory services to Hilton and its affiliates and is expected
to continue to render such services, for which it has received and will continue
to receive customary compensation from Hilton and its affiliates. In connection
with DLJ's engagement as financial advisor, Hilton anticipates that employees of
DLJ may communicate in person, by telephone or otherwise with a limited number
of institutions, brokers, or other persons who are stockholders of the Company
for the purpose of assisting in the solicitation of proxies for the Annual
Meeting. DLJ will not receive any additional fee for or in connection with such
activities apart from the fees which it is otherwise entitled to receive as
described herein. It is anticipated that DLJ will employ approximately 21
persons to solicit the Company's stockholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by Hilton. Hilton
does not currently intend to seek reimbursement of the costs of this
solicitation from the Company. Costs of this solicitation of proxies (excluding
costs relating to the Offer) are currently estimated to be approximately $5
million. Hilton estimates that through the date hereof, its expenses in
connection with this solicitation (excluding costs relating to the Offer) are
approximately $1.2 million.
INFORMATION ABOUT PARTICIPANTS
HLT. HLT is a newly incorporated Delaware corporation organized in
connection with the Offer and the Proposed Hilton Merger and has not carried on
any activities other than in connection with the Offer and the Proposed Hilton
Merger. The principal executive offices of HLT are located at 9336 Civic Center
Drive, Beverly Hills, California 90210; telephone number: (310) 278-4321. HLT is
a wholly owned subsidiary of Hilton. Until immediately prior to the time that
HLT will purchase Shares pursuant to the Offer, it is not expected that HLT will
have any significant assets or liabilities or engage in activities other than
those incidental to its formation and capitalization and the transactions
contemplated by the Offer and the Proposed Hilton Merger.
Hilton. Hilton, a Delaware corporation, is a leading owner and operator of
full-service hotels and gaming properties located in gateway cities, urban and
suburban centers and resort areas throughout the United States and in se-
24
<PAGE>
lected international cities. The principal executive offices of Hilton are
located at 9336 Civic Center Drive, Beverly Hills, California 90210; telephone
number: (310) 278-4321. Hilton's operations include 231 hotel properties
representing approximately 84,000 rooms and 17 gaming properties with
approximately 950,000 square feet of casino space. On February 1, 1997, Hilton
owned or leased and operated 29 hotels and managed 42 hotels partially or wholly
owned by others. An additional 174 hotels were operated by franchisees, under
the Hilton, Hilton Garden Inn and Hilton Suites brand names. Hilton's
international hotel operations currently include seven full-service hotel
properties. Hilton's owned or partially owned hotels include such well-known
urban and resort properties as the Waldorf=Astoria in New York, the New York
Hilton & Towers, the Palmer House Hilton in Chicago, the Chicago Hilton &
Towers, the Washington Hilton & Towers and the Capital Hilton in Washington,
D.C., the O'Hare Hilton in Chicago, the New Orleans Hilton Riverside & Towers,
the Hilton Hawaiian Village in Honolulu and the San Francisco Hilton & Towers.
In December 1996, Hilton acquired Bally pursuant to the Bally Merger.
Hilton operates its domestic gaming business under the Hilton, Bally and
Flamingo brand names. Hilton's Nevada casino operations include the Las Vegas
Hilton, the Flamingo Hilton-Las Vegas, Bally's Las Vegas, the Flamingo
Hilton-Laughlin, the Reno Hilton and the Flamingo Hilton-Reno. Hilton's Atlantic
City casinos are Bally's Park Place and The Atlantic City Hilton, formerly The
Grand casino hotel resort. Under the Conrad International name, Hilton also
partially owns and manages casinos in Brisbane and the Gold Coast in Queensland,
Australia, Punta del Este, Uruguay and Istanbul, Turkey.
In December 1996, subsequent to the Bally Merger, Hilton consummated cash
tender offers to purchase the outstanding debt securities of certain Bally
subsidiaries and related consent solicitations (collectively, the "Bally
Offers"). In total, Hilton received tenders and consents of approximately $1.1
billion, or 98% of the total aggregate principal amount of the securities
subject to the Bally Offers. Hilton funded the Bally Offers primarily with
commercial paper. In February 1997, Hilton redeemed its 6% Convertible
Subordinated Debentures due 1998 (the "6% Notes") and its 10% Convertible
Subordinated Debentures due 2006 (the "10% Notes"). Each of these issues was
originally incurred by Bally and was assumed by Hilton in the Bally Merger. At
December 31, 1996, approximately $1.4 million aggregate principal amount of the
6% Notes and $69.5 million aggregate principal amount of the 10% Notes were
outstanding. The 6% Notes and the 10% Notes are redeemable at 100% of their
respective principal amounts.
In January 1997, Hilton and Ladbroke Group PLC ("Ladbroke"), which owns the
rights to the Hilton name outside the United States, entered into a strategic
alliance with respect to 400 hotels in 49 countries. Hilton believes the
alliance will improve the performance of Hilton's operations as its properties
benefit from the worldwide integration of the Hilton brand, reservation systems,
marketing programs and sales organizations. The companies have already
integrated their reservation systems and launched the Hilton HHonors Worldwide
loyalty program in February 1997. In addition, the agreement permits Hilton and
Ladbroke to acquire a 20% equity interest in each other and provides for mutual
participation in certain future hotel development focusing primarily upon
management contracts and franchises. Implementation of certain features of the
alliance is subject to the receipt of regulatory approvals.
As of the date of this Proxy Statement, Hilton and HLT collectively
beneficially own 315,500 Shares. For more detailed information regarding the
directors and executive officers of Hilton and transactions involving Shares
over the past two years by Hilton or HLT, see Schedule II of this Proxy
Statement.
See "Why You Should Vote for the Hilton Nominees--The Hilton Nominees."
CERTAIN TRANSACTIONS BETWEEN HILTON AND THE COMPANY
Except as set forth in this Proxy Statement (including the Schedules
hereto), none of Hilton, HLT or any of the other participants in this
solicitation, or any of their respective associates: (i) directly or indirectly
beneficially owns any Shares or any securities of the Company; (ii) has had any
relationship with the Company in any capacity other than as a stockholder, or is
or has been a party to any transactions, or series of similar transactions,
since January 1, 1996 with respect to any Shares of the Company; or (iii) knows
of any transactions since January 1, 1996, currently
25
<PAGE>
proposed transaction, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any of them or their respective affiliates
had, or will have, a direct or indirect material interest. In addition, other
than as set forth in Schedule II of this Proxy Statement, there are no
contracts, arrangements or understandings entered into by Hilton or any other
participant in this solicitation or any of their respective associates within
the past year with any person with respect to any of the Company's securities,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
Hilton and the Company jointly own Windsor Casino Limited ("WCL") which
operates the Casino Windsor, an interim 50,000 square-foot casino in Windsor,
Ontario, Canada. Under a shareholders agreement, material decisions of WCL are
reserved to the shareholders of WCL and require their unanimous consent.
Except as set forth in this Proxy Statement (including the Schedules
hereto), neither Hilton nor any of the other participants in this solicitation,
or any of their respective associates, has entered into any agreement or
understanding with any person with respect to (i) any future employment by the
Company or its affiliates or (ii) any future transactions to which the Company
or any of its affiliates will or may be a party. However, in connection with the
Offer, Hilton and HLT have reviewed, and will continue to review, on the basis
of publicly available information, various possible business strategies that
they might consider in the event that HLT acquires control of the Company. In
addition, if and to the extent that HLT acquires control of the Company or
otherwise obtains access to the books and records of the Company, Hilton and HLT
intend to conduct a detailed review of the Company and its assets, financial
projections, corporate structure, dividend policy, capitalization, operations,
properties, policies, management and personnel and consider and determine what,
if any, changes would be desirable in light of the circumstances which then
exist. Such strategies could include, among other things, changes in the
Company's business, facility locations, corporate structure, marketing
strategies, capitalization, management or dividend policy. In particular,
following consummation of the Proposed Hilton Merger, the Company's
entertainment business, including Madison Square Garden, the New York Knicks,
the New York Rangers and WBIS+, as well as ITT World Directories, Inc. and ITT
Educational Services, Inc., would be carefully reviewed as to their long-term
strategic fit with the combined company. The Company has previously announced a
$3 billion capital expenditure plan. Hilton has stated that it believes, based
on information available to it, that a substantial portion of this spending
would be unnecessary in light of the complementary asset base of the combined
company. Further, Hilton has identified numerous potential cost savings,
estimated at more than $100 million annually, that could be realized in a
business combination of Hilton and the Company. Hilton believes that these cost
savings could come from, among other things, the elimination of duplicative
corporate headquarters expenses, including executive salaries and benefits, the
consolidation and/or centralization of facilities and other operating overheads,
and the consolidation of purchasing operations. While Hilton believes, in part
based on its recent experience with the Bally Merger, that its estimated cost
savings can be achieved, Hilton will not be able to determine more precisely the
sources of these savings, and the amount of savings from each source, until it
is able to do a more complete review of the operations of the combined company.
Additionally, Hilton has announced that it has reached a preliminary
understanding with HFS under which HFS would license, on a long-term, worldwide
basis, the Company's "Sheraton" trademark and Four Point, franchise system and
management agreements. See "Background--Certain Litigation."
OTHER MATTERS AND ADDITIONAL INFORMATION
Hilton is unaware of any other matters to be considered at the Annual
Meeting. However, Hilton has notified the Company of its intention to bring
before the Annual Meeting such proposals as it believes to be appropriate.
Should other proposals be brought before the Annual Meeting, the persons named
as proxies on the enclosed WHITE proxy card will vote on such matters in their
discretion.
Schedule III of this Proxy Statement sets forth certain information, as
made available in public documents, regarding Shares held by the Company's
management. The information concerning the Company contained in this Proxy
Statement and the Schedules attached hereto has been taken from, or is based
upon, publicly available information. To date, Hilton has not had access to the
books and records of the Company.
Stockholders will have no appraisal or similar rights of dissenters with
respect to any of the Proposals.
26
<PAGE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Hilton and HLT anticipate that the Company proxy statement with respect to
the Annual Meeting will indicate that proposals of the Company's stockholders
that are intended to be presented by such stockholders at the Company's 1998
Annual Meeting of Stockholders (if the Proposed Hilton Merger is not
consummated) must be received by the Company in order to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
HILTON HOTELS CORPORATION
HLT CORPORATION
March 21, 1997
27
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF HILTON AND HLT AND CERTAIN EMPLOYEES AND
OTHER REPRESENTATIVES OF HILTON AND HLT
Set forth in the tables below are the present principal occupation or
employment and the name, principal business and address of any corporation or
organization in which such employment is carried on for (1) each of the
directors and officers of Hilton and HLT and (2) certain employees and other
representatives of Hilton who may also solicit proxies from the stockholders of
the Company. Unless otherwise indicated, each person identified below is
employed by Hilton. The principal business address of Hilton and HLT and, unless
otherwise indicated below, the principal business address for each individual
listed below is 9336 Civic Center Drive, Beverly Hills, California 90210.
Directors of Hilton are identified by an asterisk. Unless otherwise indicated,
each such person is a citizen of the United States and each occupation set forth
opposite the individual's name refers to employment with Hilton.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
<S> <C>
* Stephen F. Bollenbach.............................. President and Chief Executive Officer, Hilton, since
February 1996. Prior thereto, Chief Financial Officer, The
Trump Organization, until March 1992, Chief Financial
Officer, Marriott Corporation, until October 1993,
President and Chief Executive Officer, Host Marriott
Corporation, until April 1995, Senior Executive Vice
President and Chief Financial Officer, The Walt Disney Co.,
until February 1996. Mr. Bollenbach is also a director of
America West Airlines, Inc., Kmart Corporation and Ladbroke
Group PLC.
* A. Steven Crown.................................... General Partner, Henry Crown and Company, a holding company
Henry Crown and Company which includes diversified manufacturing operations, marine
222 North LaSalle Street operations and real estate ventures.
Suite 2000
Chicago, Illinois 60601
* Peter M. George.................................... Chief Executive Officer, Ladbroke Group PLC. Mr. George is
Maple Court, Central Park a citizen of the United Kingdom.
Reeds Crescent, Watford
Herts WD11H2 U.K.
* Arthur M. Goldberg................................. Executive Vice President and President--Gaming Operations,
380 Middlesex Avenue Hilton, since December 1996. Prior thereto, Chairman and
Carteret, New Jersey 07008 Chief Executive Officer, Bally Entertainment Corporation
from October 1990 to December 1996. He is also Chairman,
President and Chief Executive Officer, DiGiorgio
Corporation, since February 1990 and Managing Partner,
Arveron Investments, LP, since 1986. Mr. Goldberg is also
a director of Bally Total Fitness Holding Corporation,
Bally's Grand, Inc., First Union Corporation and
Continuecare Corp. Mr. Goldberg is President, Treasurer,
Secretary and the sole director of HLT.
I-1
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
Matthew J. Hart.................................... Executive Vice President and Chief Financial Officer,
Hilton, since May 1996. Prior thereto, Senior Vice
President and Treasurer, Marriott Corporation, January 1992
until October 1993, Executive Vice President and Chief
Financial Officer, Host Marriott Corporation, until October
1995, Senior Vice President and Treasurer, The Walt Disney
Company until May 1996. Mr. Hart is also a director of
First Washington Realty Trust, Inc. and Kilroy Realty
Corporation since January 1997.
* Barron Hilton...................................... Chairman of the Board, Hilton, since February 1996. Prior
thereto, Chairman of the Board, President and Chief
Executive Officer, Hilton, until February 1993, Chairman of
the Board and Chief Executive Officer, Hilton, until
February 1996.
* Eric M. Hilton..................................... Vice Chairman of the Board, Hilton, since May 1993. Prior
thereto, Senior Vice President--Real Estate Development,
International, Hilton, until May 1992, Executive Vice
President--International Operations, Hilton, May 1992 until
May 1993.
* Dieter H. Huckestein............................... Executive Vice President, Hilton, and President--Hotel
Operations Division, Hilton, since May 1994. Prior thereto,
Senior Vice President--Hawaii/California/Arizona Region,
Hilton, May 1991 until May 1994, Senior Vice
President--Hawaiian Region, Hilton, until May 1991. Mr.
Huckestein is a citizen of Germany.
* Robert L. Johnson.................................. Chairman and Chief Executive Officer of Black Entertainment
BET Holdings, Inc. Television, a cable programming service, and Chairman,
One BET Plaza President and Chief Executive Officer of BET Holdings,
1900 "W" Place, N.E. Inc., a diversified media holding company, since August
Washington, D.C. 20018 1991, and Chairman and Chief Executive Officer of District
Cablevision, cable operator in the District of Columbia.
* Donald R. Knab..................................... President, Donald R. Knab Associates, Inc., an investment
Residence: advisory firm, since January 1988. Prior thereto, Vice
33 Little Bay Harbor Chairman, Deansbank Investment, Inc.--property investments,
Ponte Vedra Beach, Florida 32082 January 1992 until December 1996, Chairman and Chief
Executive Officer, BPT Properties, L.P., a commercial real estate
development company, until January 1992 and, until December 1992,
Senior Consultant thereto.
* Benjamin V. Lambert................................ Chairman and Chief Executive Officer, 333 Corp., since
Eastdil Realty, Co. January 1995. Prior thereto, Chairman and Chief Executive
40 West 57th Street Officer, Eastdil Realty, Co. L.L.C., real estate investment
New York, New York 10019 bankers.
I-2
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
* Donna F. Tuttle.................................... Owner and Officer, Elmore/Tuttle Sports Group, owns three
Korn Tuttle Capital Group minor league baseball teams, since 1993, President, Korn
1800 Century Park East, #210 Tuttle Capital Group, a Los Angeles financial consulting
Los Angeles, California 90067 and investments firm, and a director of Phoenix Duff &
Phelps, Inc., a financial services firm, since 1992. Prior thereto,
Chairman and Chief Executive Officer, Ayer Tuttle, the western
division of NW Ayer Incorporated, an international advertising
firm, 1989 until 1992 and 1989 until 1995, President, Donna F.
Tuttle, Inc., a travel and tourism consulting and public relations
firm. Ms. Tuttle is also a director of Phoenix Duff & Phelps
Corporation, a financial services firm.
* Sam D. Young, Jr................................... Chairman, Trans West Enterprises, Inc., an investment
P.O. Box 3443 company, and director, Texas Commerce Bank--El Paso.
Texas Commerce
395 Mt. Lake Court
Incline Village, Nevada 89450
</TABLE>
I-3
<PAGE>
CERTAIN REPRESENTATIVES OF HILTON AND HLT WHO MAY ALSO ASSIST
IN THE SOLICITATION OF PROXIES
The following sets forth the name, age and title of individuals, who are
employees of DLJ, who may also assist in the solicitation of proxies: Kenneth
D. Moelis (38) (Managing Director), R. Scott Turicchi (33) (Managing Director),
Marc K. Dien (31) (Senior Vice President), Donald S. Kinsey (34) (Vice
President), Jeffrey A. Raich (30) (Vice President), Pauline M. Yoshihashi (35)
(Vice President), Patrice G. Aitken (39) (Vice President), Jerome C. Axelrod
(55) (Vice President), Bartholomew P. Basola (56) (Vice President), Richard A.
Blond (32) (Vice President), John E. Davison (51) (Senior Vice President),
Samuel S. Evans (35) (Vice President), Pamela H.B. Gross (43) (Vice President),
Teresa M. Hawkins (43) (Vice President), Richard M. Hurd (40) (Vice President),
Mitchell D. Lester (39) (Senior Vice President), Mark E. Manson (46) (Vice
President), Joseph M. Masiello (48) (Vice President), William A. Saer (51)
(Senior Vice President), Joseph F. Spagnola (39) (Senior Vice President),
and Nathan K. Wiesenfeld (Vice President).
The business address of all of the above listed individuals is Donaldson,
Lufkin & Jenrette Securities Corporation, Avenue of the Stars, Suite 3000, Los
Angeles, California 90067. In addition, none of the above listed individuals
beneficially owns any securities of the Company or any subsidiary of the
Company, beneficially or of record, nor has any of them purchased or sold such
securities within the past two years, nor were they within the past year a party
to any contract, arrangement or understanding with any person with respect to
any such securities.
I-4
<PAGE>
SCHEDULE II
SHARES HELD BY HILTON, HLT, THEIR DIRECTORS AND OFFICERS
AND THE HILTON NOMINEES
I. Transactions in Shares by Hilton and HLT
Hilton is the beneficial owner of an aggregate of 315,500 Shares (including
100 Shares held of record by HLT) and HLT is the beneficial owner of 100 Shares.
Such Shares were purchased by Hilton for cash in open market transactions as
follows:
<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE ACQUIRED PRICE PER SHARE(1)
<S> <C> <C>
January 21, 1997 11,500 $ 43.250
30,000(2) $ 43.125
3,200 $ 43.000
January 22, 1997 14,000 $ 44.625
31,000 $ 44.500
20,500 $ 44.375
13,000 $ 44.250
10,000 $ 44.125
3,000 $ 43.875
2,000 $ 43.750
2,000 $ 43.625
January 23, 1997 13,000 $ 45.125
26,500 $ 45.000
51,300 $ 44.875
17,000 $ 44.750
16,000 $ 44.625
7,000 $ 44.500
6,500 $ 44.375
8,000 $ 44.250
6,000 $ 44.125
January 24, 1997 1,000 $ 44.250
1,500 $ 44.125
4,000 $ 44.000
9,000 $ 43.875
8,500 $ 43.750
</TABLE>
II-1
<PAGE>
II. Transactions in Shares by Mr. Kingsley
Mr. Kingsley is not currently the beneficial owner of any Shares. In the
last two years, he has engaged in the following open market cash transactions in
the Shares:
<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE ACQUIRED PRICE PER SHARE(1)
<S> <C> <C>
September 13, 1996 200 $46.500
SHARES
TRANSACTION DATE DISPOSED PRICE PER SHARE(1)
January 28, 1997 200 $57.750
</TABLE>
III. Transactions in Shares by Ms. McLain
In the last two years, the Thomas E. McLain Professional Corporation
Retirement Trust has engaged in the following open market cash transactions in
the Shares:
<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE ACQUIRED PRICE PER SHARE(1)
<S> <C> <C>
August 21, 1995(3) 100 $117.630
SHARES
TRANSACTION DATE DISPOSED PRICE PER SHARE(1)
July 30, 1996 50 $56.280
</TABLE>
Ms. McLain is also a limited partner in various partnerships which may also
beneficially own Shares. She disclaims having any beneficial ownership of such
Shares, if any.
IV. Transactions in Shares by Barrett Associates
Barrett Associates owns 330 Shares for the accounts of its customers. Mr.
Collins, as a portfolio manager for Barrett Associates, may be deemed to have
the power to vote and dispose of the Shares owned by Barrett Associates.
However, Mr. Collins disclaims having beneficial ownership of the Shares
beneficially owned by Barrett Associates. In the last two years, Barrett
Associates has engaged in the following open market cash transactions in the
Shares:
<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE DISPOSED PRICE PER SHARE(1)
<S> <C> <C>
July 29, 1996 100 $55.000
</TABLE>
V. Transactions in Shares by Mr. East
Mr. East is not currently the beneficial owner of any Shares. In the last
two years, he has engaged in the following open market cash transactions in the
Shares:
<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE ACQUIRED PRICE PER SHARE(1)
<S> <C> <C>
March 4, 1996 500 $61.500
June 7, 1996 500 $61.000
SHARES
TRANSACTION DATE DISPOSED PRICE PER SHARE(1)
October 31, 1996 1,000 $41.750
</TABLE>
II-2
<PAGE>
VI. Transactions in Shares by Mr. Snyder
Shinnecock Partners, an associate of Mr. Snyder, is the general partner of
two limited partnerships that are characterized as "funds of funds," in that
they allocate investment funds to the investment entities of money managers who
have discretionary authority over the investment of such funds. These investment
entities may own Shares, and Mr. Snyder may be deemed to have the power to vote
and dispose of such Shares. Mr. Snyder, however, disclaims having beneficial
ownership of any such Shares owned by such entities.
VII. Transactions in Shares by Hilton and HLT Directors and Executive
Officers and the Hilton Nominees
Stephen F. Bollenbach, Matthew J. Hart and Scott A. LaPorta have agreed to
serve as proxies on the WHITE proxy card for the Annual Meeting.
Except as disclosed in this Schedule, none of Hilton, HLT, any of their
respective directors or executive officers or the Hilton Nominees owns any
securities of the Company or any subsidiary of the Company, beneficially or of
record, has purchased or sold any of such securities within the past two years
or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any such securities. Except as
disclosed in this Schedule, to the knowledge of Hilton, no associate of Hilton,
HLT or any of their respective directors and executive officers or of the Hilton
Nominees beneficially owns, directly or indirectly, any securities of the
Company.
To the knowledge of Hilton, other than as disclosed in this Schedule, none
of Hilton, HLT any of their respective directors or executive officers, any
directors or executive officers of HLT or the Hilton Nominees has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the Annual Meeting.
None of Messrs. Bollenbach, Hart or LaPorta has, during the last ten years,
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
VIII. Beneficial Ownership Table of the Hilton Nominees
The following table shows, as of February 20, 1997, the beneficial
ownership known to Hilton and HLT, of Shares held by the Hilton Nominees:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
Thomas E. McLain Professional Corporation
Retirement Trust 50 Shares(4) *
c/o Thomas E. McLain
1999 Avenue of the Stars
9th Floor
Los Angeles, California 90067
Hilton Nominees as a group (25) 50 Shares *
- ---------------------
*Less than one percent.
<FN>
(1)All prices are exclusive of commissions.
(2)On January 21, 1997 Hilton contributed 100 of such Shares to the capital of
HLT for no consideration.
(3)Purchase of shares of common stock of ITT Corporation prior to its
spinoff in 1995.
(4)Ms. McLain is currently the beneficial owner of these Shares through her
shared control with her husband, Thomas E. McLain, over the Thomas E. McLain
Professional Corporation Retirement Trust.
</FN>
</TABLE>
II-3
<PAGE>
SCHEDULE III
SHARE OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF THE COMPANY
Set forth below is information regarding the Shares owned by certain
beneficial owners, directors, nominees and executive officers of the Company.
The following table shows as of December 31, 1996 the beneficial ownership of
persons known to the Company to be the beneficial owners of more than five
percent of the outstanding Shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
AXA Assurances I.A.R.D. Mutuelle 5,022,921 Shares(1) 4.3%
La Grande Arche
Pardi Nord
92044 Paris La Defense France
Bankers Trust New York Corporation 7,728,083 Shares(2) 6.6%
280 Park Avenue
New York, New York 10017
FMR Corp. 13,163,423 Shares(3) 11.32%
82 Devonshire Street
Boston, Massachusetts 02109
- ---------------------
<FN>
(1)A February 14, 1997 Schedule 13G filed with the Commission reflects that
subsidiaries of AXA Assurances I.A.R.D. Mutuelle ("AXA") own 5,022,921
Shares. Of the reported Shares, The Equitable Life Assurance Society of the
United States, an indirect subsidiary of AXA ("Equitable"), owns 187,400
Shares. Of these shares, Equitable is deemed to have (i) sole power to vote
or to direct the vote with respect to 107,400 Shares, (ii) shared power to
vote or to direct the vote with respect to 80,000 Shares and (iii) sole power
to dispose or to direct the disposition of 187,000 Shares. Alliance Capital
Management L.P., an indirect subsidiary of AXA ("Alliance"), owns 4,772,456
Shares which have been acquired on behalf of client discretionary investment
advisory accounts. Of these Shares, Alliance is deemed to have (i) sole power
to vote or to direct the vote with respect to 4,618,016 Shares, (ii) shared
power to vote or to direct the vote with respect to 37,640 Shares and (iii)
sole power to dispose or to direct the disposition of 4,772,456 Shares. DLJ,
an indirect subsidiary of AXA, owns 6,810 Shares and is deemed to have shared
power to dispose or to direct the disposition of such Shares. In addition,
Wood, Struthers & Winthrop Management Corporation, an indirect subsidiary of
AXA ("Wood Struthers"), owns 46,255 Shares which have been acquired on behalf
of client discretionary investment advisory accounts. Of these Shares, Wood
Struthers is deemed to have (i) sole power to vote or to direct the vote with
respect to 9,000 Shares, (ii) shared power to vote or to direct the vote with
respect to 3,675 Shares and (iii) sole power to dispose or to direct the
disposition of 44,305 Shares.
(2)A February 14, 1997 Schedule 13G filed with the Commission reflects that
Bankers Trust New York Corporation, through its wholly owned subsidiaries
Bankers Trust Company (as Trustee for various trusts and employee benefit
plans, and as investment advisor) and BT Securities Corporation, and its
indirectly wholly owned subsidiary Bankers Trust International PLC,
beneficially owns 7,728,083 Shares. Of these Shares, Bankers Trust Company is
deemed to have (i) sole power to vote or to direct the vote with respect to
7,725,383 Shares, (ii) shared power to vote or to direct the vote with
respect to 2,700 Shares, (iii) sole power to dispose or to direct the
disposition of 1,990,982 Shares and (iv) shared power to dispose or to direct
the disposition of 16,505 Shares.
(3)A February 14, 1997 Schedule 13G filed with the Commission reflects that FMR
Corp. ("FMR") beneficially owns 13,166,423 Shares. Of such reported shares,
Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR and an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, is the beneficial owner of 12,437,559
Shares as a result of acting as investment adviser to several investment
companies registered under Section 8 of the Investment Company Act of 1940..
Edward C. Johnson 3d, the Chairman of FMR, and FMR, through its control of
Fidelity and the Fidelity Funds, each has sole power to dispose of the
12,437,559 Shares owned by the Fidelity Funds. Fidelity Management Trust
Company ("FMTC"), a wholly owned subsidiary of FMR, and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial
owner of 725,464 Shares as a result of its serving as investment manager of
institutional accounts. Edward C. Johnson 3d and FMR, through its control of
FMTC, has sole dispositive power over 725,464 Shares and sole power to vote
or to direct the voting of 513,264 Shares, and no power to vote or to direct
III-1
<PAGE>
the voting of 212,200 Shares owned by certain institutional accounts. The
number of Shares reported includes 3,400 shares owned directly by Edward C.
Johnson 3d or in trusts for the benefit of Edward C. Johnson 3d or an Edward
C. Johnson 3d family member for which Edward C. Johnson 3d serves as trustee
and over which he has sole voting and dispositive power of 400 Shares and
shared voting and dispositive power over 3,000 Shares.
</FN>
</TABLE>
The following table shows as of January 31, 1996 the beneficial ownership
of Shares by each director and nominee, by each of the executive officers named
in the Summary Compensation Table in the Company's 14D-9, and by the directors
and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
---------------- -------------------- ----------------
<S> <C> <C>
Bette B. Anderson 2,000 Shares(2) *
Rand V. Araskog 1,737,851 Shares 1.5%
Nolan D. Archibald 8,350 Shares(3) *
Robert A. Bowman 546,531 Shares *
Robert A. Burnett 1,170 Shares *
Paul G. Kirk, Jr 1,010 Shares *
Edward C. Meyer 2,500 Shares *
Benjamin F. Payton 492 Shares *
Vin Weber no Shares(4) *
Margita E. White 2,000 Shares *
Kendrick R. Wilson III no Shares(5) *
Daniel P. Weadock 369,897 Shares *
Peter G. Boynton 59,718 Shares(6) *
Richard S. Ward 289,455 Shares *
All directors and executive
officers as a group (22) 4,465,739 Shares 3.8%
- ---------------------
*Less than one percent.
<FN>
(1)All Shares are owned directly except as hereinafter otherwise indicated. Pursuant to regulations of the
Commission, shares (i) receivable by directors and executive officers upon exercise of employee stock options
exercisable within 60 days after January 31, 1996, and (ii) allocated to the accounts of certain directors and
executive officers under the ITT Investment and Savings Plan at January 31, 1996, are deemed to be
beneficially owned by such directors and executive officers at said date. Of the number of Shares shown
above, (i) the following represent shares that may be acquired upon exercise of employee stock options for the
accounts of: Mr. Araskog, 1,251,617 Shares; Mr. Bowman, 521,653 Shares; Mr. Weadock, 322,186 Shares; Mr.
Boynton, 59,718 Shares; Mr. Ward, 261,995 Shares; and all present directors and executive officers as a group,
3,775,342 Shares; and (ii) the following amounts were allocated under the ITT Investment and Savings Plan to
the accounts of: Mr. Araskog, 19,708 Shares; Mr. Bowman, 950 Shares; Mr. Weadock, 26,632 Shares; Mr. Ward,
8,784 Shares; and all present directors and executive officers as a group, 72,085 Shares.
(2)An additional 83 Shares are owned by Mrs. Anderson's husband. Mrs. Anderson disclaims beneficial ownership in
such Shares.
(3)Mr. Archibald sold 7,000 Shares on February 8, 1996.
(4)Mr. Weber purchased 100 Shares on February 22, 1996.
(5)Mr. Wilson purchased 2,000 Shares on February 21, 1996.
(6)Mr. Boynton purchased 1,000 Shares on March 11, 1996.
</FN>
</TABLE>
Except as indicated above, the foregoing information has been taken from
the Company's Solicitation/Recommendation Statement on Schedule 14D-9 dated
February 12, 1997 (the "Company's Schedule 14D-9"). Other information relating
to the Company contained in this Proxy Statement has been taken from the
Company's Schedule 14D-9, the Company 1995 10-K and other documents on file with
the Commission. Although Hilton does
III-2
<PAGE>
not have any information that would indicate that any information contained
in this Proxy Statement that has been taken from such documents is inaccurate or
incomplete, Hilton does not take any responsibility for the accuracy or
completeness of such information.
III-3
<PAGE>
IMPORTANT
Tell your Board what you think! Your vote is important. No matter how many
Shares you own, please give Hilton your proxy FOR the election of the Hilton
Nominees and FOR approving the Proposals by taking three steps:
1. SIGNING the enclosed WHITE proxy card,
2. DATING the enclosed WHITE proxy card, and
3. MAILING the enclosed WHITE proxy card TODAY in the envelope provided (no
postage is required if mailed in the United States) or FAXING BOTH SIDES of the
enclosed WHITE proxy card TODAY to MacKenzie Partners, Inc. at the number
provided below.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the WHITE proxy
card representing your Shares. Hilton urges you to confirm in writing your
instructions to Hilton in care of MacKenzie Partners, Inc. at the address
provided below so that Hilton will be aware of all instructions given and can
attempt to ensure that such instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact, MacKenzie Partners, Inc. at the address
set forth below.
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
FAX: (212) 929-0308
<PAGE>
ITT CORPORATION 1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF HILTON HOTELS CORPORATION
AND HLT CORPORATION
The undersigned appoints Stephen F. Bollenbach, Matthew J. Hart and Scott
A. LaPorta, and each of them, attorneys and agents with full power of
substitution to vote all shares of common stock of ITT Corporation ("ITT") which
the undersigned would be entitled to vote if personally present at the 1997
Annual Meeting of Stockholders of ITT, and including at any adjournments or
postponements thereof and at any special meeting called in lieu thereof, as
follows:
HILTON HOTELS CORPORATION RECOMMENDS A VOTE FOR THE ELECTION OF ALL HILTON
NOMINEES NAMED BELOW AND FOR THE RESOLUTIONS UNDER ITEMS 2 AND 3.
1. ELECTION OF DIRECTORS: To elect to the Board of Directors of ITT
(the "Board") such number of the following Hilton Nominees as
equals the size of the Board: Daniel J. Altobello, George N.
Aronoff, Scott H. Bice, James J. Florio, Fred D. Gibson, Jr.,
Dianne Jett, Robert S. Kingsley, Aubrey C. Lewis, Celeste Pinto
McLain, Gilbert L. Shelton, Warren C. Woo, Barrie K. Brunet,
Henry A. Collins, John Danhakl, Ernest E. East, John E.
Humphreville, Robert L. Johander, Russell D. Jones, J. Kenneth
Looloian, Rocco J. Marano, James F. McAnally, Morris Pashman,
Alan C. Snyder, Caroline L. Williams and Robert H. Wolf. The
first eleven of such individuals will be voted for to be elected
to succeed the current eleven Directors (or any Director named to
fill any vacancy created by the death, retirement, resignation or
removal of any of such eleven Directors) of ITT. One or more of
such other individuals will be voted for to be elected (a) in the
event that ITT purports to increase the number of Directorships
pursuant to Section 2.2 of ITT's Amended and Restated Bylaws, to
each additional Directorship created, and/or (b) in the event any
of the first eleven of such individuals is unable for any reason
to serve as a Director.
FOR ALL HILTON NOMINEES [ ] WITHHOLD AUTHORITY FOR ALL
HILTON NOMINEES [ ]
INSTRUCTION: To withhold authority to vote for one or more
individual Hilton Nominees, mark FOR ALL HILTON NOMINEES above
and write the name(s) of the Hilton Nominee with respect to which
you wish to withhold authority here:
______________________________________________________.
2. RESOLUTION PROPOSED BY HILTON AND HLT. To adopt the following
resolution:
RESOLVED, that the stockholders of ITT Corporation ("ITT") urge the
ITT Board of Directors to arrange for the sale of ITT to Hilton
Hotels Corporation ("Hilton") or to any bidder offering a higher
price, and if there be no higher bidder, to take all necessary
action to permit the tender offer of Hilton and HLT Corporation
("HLT") and the proposed merger of ITT with Hilton, HLT or a
subsidiary of Hilton to proceed, including, without limitation,
action to satisfy the Rights Condition, the Control Share Condition
and the Business Combination Condition set forth in HLT's Offer to
Purchase dated January 31, 1997 (as such offer may be amended).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RESOLUTION PROPOSED BY HILTON AND HLT. To adopt the following
resolution:
RESOLVED, that each and every provision of the Amended and Restated
Bylaws of ITT Corporation adopted on or after July 23, 1996 and
prior to the adoption of this resolution is hereby repealed.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(continued on reverse side)
<PAGE>
(continued from other side)
4. In their discretion with respect to any other matters as may
properly come before the Annual Meeting.
The undersigned hereby revokes any other proxy or proxies heretofore given
to vote or act with respect to the shares of common stock of ITT held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this proxy will be voted as directed above.
If no direction is indicated with respect to the above proposals, this proxy
will be voted FOR the election of all Hilton Nominees and FOR the proposals set
forth in Items 2 and 3 above and in the manner set forth in Item 4 above.
This proxy will be valid until the sooner of one year from the date
indicated below and the completion of the Annual Meeting.
DATED: _________________________________, 1997.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
-------------------------------------------------------
(Signature)
-------------------------------------------------------
(Signature, if held jointly)
-------------------------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD
EACH SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC.,
SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MACKENZIE
PARTNERS, INC. TOLL-FREE (800) 322-2885 - (212) 929-5500 (CALL COLLECT)
