SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
Schedule 14D-1
Tender Offer Statement
(Amendment No. 6)
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 10. ADDITIONAL INFORMATION.
On February 26, 1997, Parent and the Purchaser filed
a motion for a preliminary injunction requiring the Company to
conduct its annual meeting in May 1997 (the "Meeting Motion"),
together with a memorandum of points and authorities in support
of the Meeting Motion (the "Meeting Memorandum"). A copy of
the Meeting Motion and the Meeting Memorandum are filed here-
with as Exhibit (g)(12) and are incorporated herein by refer-
ence.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(g)(12) Meeting Motion and Meeting Memorandum.<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: February 27, 1997
HILTON HOTELS CORPORATION
By: /s/ Matthew J. Hart
Name: Matthew J. Hart
Title: Executive Vice President
and Chief Financial Officer
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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: February 27, 1997
HLT CORPORATION
By: /s/ Arthur M. Goldberg
Name: Arthur M. Goldberg
Title: President
-3-<PAGE>
EXHIBIT INDEX
Exhibit Description
(g)(12) Meeting Motion and Meeting Memorandum.
Exhibit (g)(12)
SCHRECK MORRIS
STEVE MORRIS
KRISTINA PICKERING
300 S. Fourth Street, #1200
Las Vegas, Nevada 89101
(702) 474-9400
WACHTELL, LIPTON, ROSEN & KATZ
BERNARD W. NUSSBAUM
ERIC M. ROTH
MARC WOLINSKY
MEIR FEDER
SCOTT L. BLACK
ALEXANDER SHAKNES
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Attorneys for Plaintiffs,
HILTON HOTELS CORPORATION and HLT CORPORATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
HILTON HOTELS CORPORATION and )
HLT CORPORATION, )
)
Plaintiffs, )
)
-vs- )
ITT CORPORATION, ) CV-S-97-00095-PMP (RLH)
)
Defendant. ) MOTION FOR PRELIMINARY
) INJUNCTION REQUIRING
________________________________ ) ITT TO CONDUCT ITS ANNUAL
) MEETING IN MAY 1997
ITT CORPORATION, )
) MEMORANDUM OF POINTS AND
Defendant and ) AUTHORITIES IN SUPPORT OF
Counterclaimant, ) MOTION
)
)
-vs- ) AFFIDAVIT OF DANIEL H. BURCH
) AND EXHIBITS THERETO
)
HILTON HOTELS CORPORATION and )
HLT CORPORATION, ) [ORAL ARGUMENT REQUESTED]
)
Plaintiffs and )
Counterdefendants. )
)
________________________________ )
<PAGE>
MOTION FOR PRELIMINARY INJUNCTION
Pursuant to Rule 65 of the Federal Rules of Civil Procedure, plaintiffs
Hilton Hotels Corporation ("Hilton") and HLT Corporation ("HLT") hereby move
this Court for an order preliminarily requiring defendant ITT Corporation
("ITT") to conduct its 1997 annual meeting for the election of directors in May
in accordance with the requirements of Sections 1.2 and 1.3 of the ITT by-laws
and principles of common law that prohibit an incumbent board from manipulating
the corporate machinery to extend its term of office.
This motion is based upon the accompanying Memorandum of Points and
Authorities, the Affidavit of Daniel H. Burch and the Exhibits thereto,
matters of which the Court may take judicial notice, including the Court's
own file in this matter, and arguments and other evidence that may be presented
prior to the decision on this Motion.
RESPECTFULLY SUBMITTED this 26th day of February, 1997.
By: /s/ Steve Morris
___________________________
STEVE MORRIS, ESQ.
KRISTINA PICKERING, ESQ.
300 S. Fourth Street, #1200
Las Vegas, Nevada 89101
BERNARD W. NUSSBAUM
ERIC M. ROTH
MARC WOLINSKY
MEIR FEDER
SCOTT L. BLACK
ALEXANDER SHAKNES
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
Attorneys for Plaintiffs,
HILTON HOTELS CORPORATION
and HLT CORPORATION
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<PAGE>
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
For each of the last 20 years, ITT and its predecessor
have conducted their annual meeting and election of directors in
mid-May. This year, however, ITT is threatening to delay the
election. The reason is that this year, the incumbent board is
faced with the prospect of being voted out of office by
shareholders who disagree with the directors' decision to reject
Hilton's premium offer for ITT shares. This is not a lawful
justification for failing to hold an annual meeting on a timely
basis.
Section 1.2 of ITT's by-laws requires that ITT conduct
an "annual" meeting for the election of directors and the
transaction of any other proper business. Section 1.3 of the by-
laws provides that the directors' term of office is one "year."
Case law confirms that the by-laws mean what they say: ITT must
hold an annual meeting for the election of directors and any
other proper business once every twelve months. Common law prin-
ciples governing the directors' exercise of their fiduciary duty
also confirm that the incumbent ITT board cannot unilaterally
extend its term of office by refusing to call an annual meeting.
If the incumbent ITT directors believe that the
shareholders would be best served by their remaining in office,
then they should make their case to the shareholders. The de-
cision as to who should guide ITT in the coming year, however, is
for the shareholders to make, not the incumbent board.
<PAGE>
II. STATEMENT OF FACTS
Hilton announced its $55 per share offer for ITT on
January 27, 1997. ITT formally rejected the offer on February
12, and has repeatedly refused Hilton's requests that the parties
meet to discuss the offer. Instead, ITT has abandoned its
previous corporate strategy of combining diverse hotel and gam-
ing, education, entertainment and other businesses and embarked
on a plan of "monetization" of all assets other than its "core"
hotel and casino operations. As part of this shift in strategy,
ITT sold approximately one-half of its stake in Alcatel Alstholm
for approximately $300 million, and has undertaken an effort to
sell its interests in Madison Square Garden, WBIS+, ITT
Educational Services and ITT World Directories. According to
press reports, ITT expects to sell more than $3 billion worth of
assets. The ITT board has made clear, however, that it is not
pursuing a sale of Sheraton hotels and Caesars gaming, and that
it is committed to remaining independent --that is, it is
committed to have its incumbent board of directors continue to
run the company. Burch Aff. Paragraph 7; Exs. I-K.
In the face of ITT's opposition, Hilton has determined
to take its case directly to the owners of the corporation: its
fellow shareholders. On February 11, in accordance with the
requirements of ITT by-law Section 2.2, Hilton submitted a notice
of intention to nominate directors at ITT's annual meeting and a
notice that it intends to present a resolution urging the ITT
board to arrange a sale of the company to Hilton or any higher
bidder. The Hilton slate is committed to remove obstacles to the
consummation of Hilton's proposed tender offer and merger. Hilton
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<PAGE>
has also filed preliminary proxy materials with the SEC so
that it will be able to solicit proxies for ITT's annual meeting.
Id. Exs. A, C.
ITT held last year's annual meeting on May 14, 1996.
This was in keeping with a practice -- begun by ITT's corporate
predecessor at least 20 years ago -- of holding its annual
meetings in May. It appears, however, that the incumbent ITT
board intends to delay the annual meeting and thereby perpetuate
itself in office. ITT has failed to take the routine steps that
would ordinarily have been taken by this time of year to go
forward with a May meeting and has entered into a fee agreement
with its financial advisors that expressly contemplates that the
annual meeting may not go forward before September 30, 1997. The
objective apparently is to turn the takeover battle into a
"marathon, giving the company the time to complete the [asset]
sales" that ITT has undertaken as part of its strategy to remain
independent. Burch Aff. Paragraphs 4-8, Exs. G-L.
ARGUMENT
III. ITT'S BY-LAWS REQUIRE THAT THE 1997 ANNUAL MEETING GO
FORWARD IN MID-MAY
It is well-established that by-laws are contracts
between the corporation and its shareholders, and that share-
holders can sue to enforce their contractual rights under the by-
laws. See, e.g., ER Holdings, Inc. v. Norton Co., 735 F. Supp.
1094, 1097 (D. Mass. 1990) ("The corporate by-laws constitute a
contract between the corporation's owners -- the shareholders --
and its managers, the Board."); Centaur Partners, IV v. National
Intergroup, Inc., 582 A.2d 923, 928 (Del. 1990) ("Corporate
charters and by-laws are contracts among the shareholders of a
corporation and the general
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<PAGE>
rules of contract interpretation are held to apply."). See also Rotary Club of
Chicago v. Harry F. Shea & Co., 458 N.E.2d 1002, 1009 (Ill. App. Ct. 1983);
Delmarmo Assocs. v. New Jersey Eng'g & Supply Co., 424 A.2d 847, 848 (N.J.
Super. Ct. App. Div. 1980).
Building on this authority, courts have ordered di-
rectors to abide by the terms of by-laws that require the cor-
poration to hold an annual meeting for the election of directors.
See, e.g., ER Holdings, 735 F. Supp. at 1103; Silver v. Farrell,
450 N.Y.S.2d 938, 942 (N.Y. Sup. Ct. 1982); Albert E. Touchet,
Inc. v. Touchet, 163 N.E. 184, 188 (Mass. 1928). Cf. Holly Sugar
Corp. v. Buchsbaum, [1981-82 Transfer Binder] Fed. Sec. L. Rep.
Paragraph 98,366 (D. Colo. Oct. 28, 1981) (ordering board to reconvene
annual meeting where previous meeting did not comply with by-law
quorum requirements).1
ITT's threatened postponement of its meeting violates
its by-laws. By-law Section 1.2 provides: "An annual meeting of
stockholders shall be held at such place (within or outside the
State of Nevada), date and hour as shall be determined by the
Board and designated in the notice thereof." (Emphasis added.)
Section 1.3 adds: "At each annual meeting, the stockholders
shall elect
- --------
1 See also Nevada ex rel. Flagg v. Board of Trustees, 4
Nev. 400, 406 (1868) (ordering board to hold meeting pursuant to
statutory requirement); Tullos v. Parks, 915 F.2d 1192, 1194 (8th
Cir. 1990) (issuing mandatory injunction ordering election and
annual meeting); Danaher Corp. v. Chicago Pneumatic Tool Co.,
Nos. 86 Civ. 3499 (PNL), 86 Civ. 3638 (PNL), 1986 WL 7001, at *13
(S.D.N.Y. June 19, 1986) ("The law is clear that when a board of
directors has improperly postponed or manipulated the timing of
the shareholders annual meeting, courts have the authority to
compel the board to promptly hold such a meeting."); Studebaker
Corp. v. Allied Prods. Corp., 256 F. Supp. 173, 192 (W.D. Mich.
1966); Silverman v. Gibert, 185 So. 2d 373, 376 (La. Ct. App.
1966); Penn-Texas Corp. v. Niles-Bement-Pond Co., 112 A.2d 302,
307 (N.J. Super. Ct. Ch. Div. 1955); 55 C.J.S. Mandamus Section 221
(1948).
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<PAGE>
the members of the Board for the succeeding year."
(Emphasis added.) Section 1.3 also permits the conduct of any
other proper business at the annual meeting.
Furthermore, Sections 1.3(b) and 2.2 contemplate that
ITT will conduct its annual meeting at the same time each year by
requiring shareholders to submit director nominations and
proposed resolutions to the corporation "not later than 90 days
in advance of the anniversary date of the immediately preceding
annual meeting." (Emphasis added.) Requiring that new business
and director nominations be proposed 90 days before the
anniversary date of the prior year's meeting reflects the un-
derstanding that each year's meeting will be held on or about
that anniversary date.
Controlling Nevada authority confirms the common sense
proposition that "annual" means "yearly," that a "year" means
"twelve months," and that a by-law that requires an "annual
meeting" every "year" means just that. In Nevada ex rel. Curtis
v. McCullough, 3 Nev. 202 (1867), a board of trustees purported
to extend their term of office to 15 months by amending a by-law
requiring that annual meetings be held in July to provide that
annual meetings be held in October. Holding that this purported
amendment was "utterly unauthorized and void," 3 Nev. at 227, the
Nevada Supreme Court explained:
The law requires an annual election of Trustees.
Annual, from the Latin annus, usually means yearly, or
every twelve months.
Wherever used in contracts, it is construed to
mean every twelve calendar months. Annual interest is
interest payable every twelve months. Annual rent is
construed in the same way....
[T]o amend the by-laws so as to deprive the
stockholders of that control or
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<PAGE>
supervision over the affairs of the corporation which
the right to elect their officers annually gives them,
or to interfere with that right in any way, would
certainly seem to be incompatible with the relations
existing between the Trustees and stockholders. It is
like an agent taking advantage of his position to
deprive his principal of the power of removing him....
How can it be said the Trustees acted within the
legitimate scope of their authority when they assumed
the power of continuing themselves in office three
months beyond the term fixed by the stockholders? ...
We announce, as a general principle, that no
elective officer should be allowed to do any act which
will prevent the election of his successor at the time
and in the manner fixed by law, or by the persons
having the power or right of election; or to do any act
which will continue him in office beyond the time for
which he was elected. 3 Nev. at 224-27 (italics in
original; emphasis added).
The fact that Section 1.2 gives the ITT Board the authority
to set the precise date and time of the annual meeting does not
change the analysis. As the Nevada Supreme Court held in Nevada ex
rel. Flagg v. Board of Trustees, 4 Nev. 400, 406 (1868), board
discretion to determine the "time and place" of the corporation's
"annual election" does not license the directors to materially
extend their term in office. The only function of a statutory pro-
vision providing such discretion, the Court explained, is that the
term "might expire on the Sabbath or some holiday upon which the
election could not well be held -- hence it becomes necessary to
designate some day, and the time of day when it shall be
held.... [T]his is the extent of the authority given them" by
the "time and place" provision.2
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2 McCullough also recognizes that an "annual" meeting
could not always occur exactly 365 days after the previous
meeting, but that only immaterial divergences were permitted:
"It would perhaps be impossible to fix a period which would
always recur within
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Nor can ITT legitimately argue that the statutory remedy
provided by NRS 78.345 limits Hilton's right to require ITT to
comply with its by-laws.3 NRS 78.345 by its terms addresses annual
meetings "required by NRS 78.330" -- it says nothing about meetings
that are mandated by a by-law provision. Moreover, both the courts
of Nevada and the courts of other jurisdictions with similar
provisions have held that the statutory remedy is not exclusive.
See Double O Mining Co. v. Simrak, 61 Nev. 431, 439, 132 P.2d 605
(1942) (Section 1634 of the Nevada Compiled Laws, the predecessor
statute to NRS 78.345, created a "new right," distinct from the
right of shareholders in equity, to petition a court to compel a
meeting); Ocilla Indus. v. Katz, 677 F. Supp. 1291, 1301 (E.D.N.Y.
1987) ("Although Section 603 provides a remedy for shareholders
when directors fail to call annual or special meetings within the
contemplated time, this is not exclusive," particularly where
statutory remedy would result in meeting being held 16 months after
previous year's annual meeting). Cf. Danaher Corp. v. Chicago
Pneumatic Tool Co., Nos. 86 Civ. 3499 (PNL), 86 Civ. 3638 (PNL),
1986 WL 7001, at *7 (S.D.N.Y. June 19, 1986) (statutory provision
- ----------
twelve months exactly, and upon which an election might
be held, because the calendar day may be the Christian
Sabbath, and a given day in the week in any month would
not always agree precisely with the solar year.... However,
to extend the term of office to fifteen months ... would seem
to be irregular." 3 Nev. at 225.
3 Nevada Revised Statutes 78.345 provides in relevant part:
If any corporation fails to elect directors
within 18 months after the last election of directors
required by NRS 78.330, the district court has
jurisdiction in equity, upon application of any one or
more stockholders holding stock entitling them to exercise
at least 15 percent of the voting power, to order the
election of directors in the manner required by NRS
78.330.
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<PAGE>
allowing the holders of 10% of the stock to apply to a court for an
order compelling a meeting does not replace the "alternative"
mechanism of allowing the shareholders to act by written consent).
Whatever the effect of NRS 78.345 on a claim that a Nevada
corporation has a statutory obligation to conduct an annual meeting
every twelve months, the statute does not relieve ITT of its
contractual obligation under its by-laws to hold an annual meeting
on a timely basis. See Silver v. Farrell, 450 N.Y.S.2d 938, 940-41
(N.Y. Sup. Ct. 1982) (statutory provision entitling 10% of
shareholders to call special meeting is not exclusive remedy where
directors fail to call annual meeting as required by the by-laws);
Ocilla Indus. v. Katz, 677 F. Supp. at 1301 (same).
Any effort by the incumbents to postpone ITT's "annual"
meeting and to extend their own one-year term would violate the
contract that ITT's by-laws create with its shareholders. ITT's
shareholders have a right to hold their annual meeting, elect new
directors and vote on Hilton's proposed resolution in May 1997.
IV. ANY ATTEMPT BY THE ITT BOARD TO DELAY THE MAY 1997
ANNUAL MEETING WOULD BE AN UNLAWFUL MANIPULATION
OF THE CORPORATE MACHINERY
Even apart from being a violation of ITT's by-laws, the
incumbent board's threatened postponement of ITT's annual meeting
would constitute a breach of fiduciary duty. As this Court made
clear in Shoen v. Amerco, 885 F. Supp. 1332, 1340 (D. Nev. 1994),
modified on other grounds, No. CV-N-94-0475-ECR, 1996 WL 904199 (D.
Nev. Oct. 24, 1994), vacated by stipulation, (D. Nev. Feb. 9,
1995), the business judgment rule does not protect the actions of
directors of a Nevada corporation when they seek to manipulate the
timing of a shareholders' meeting:
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[O]ne of the justifications for the business
judgment rule's [protections] is that unhappy
shareholders can always vote the directors out of
office. . . . Put another way, "the ordinary
considerations to which the business judgment rule
originally responded are simply not present in the
shareholder voting context," because when a
board interferes with shareholder voting it
interferes with the very "allocation, between
shareholders as a class and the board, of
effective power with respect to governance of the
corporation." 885 F. Supp. at 1340-41 (citations
omitted).
As a consequence, the courts have uniformly held that
incumbent directors may not postpone or advance a shareholder
meeting in order to avoid an electoral defeat. In Shoen, for
example, this Court, applying Nevada law, held that it was "very
clearly" a breach of fiduciary duties for a shareholder "meeting
[to be] advanced for the purpose of interfering with free and
fair voting by the shareholders, by incumbent managers afraid
that they would lose an election." 885 F. Supp. at 1344.4
Neither Shoen nor Nevada law stands alone in enforcing
this fundamental principle of corporate law. Federal courts
applying the laws of other states have consistently subjected
board action implicating the shareholder franchise to strict
scrutiny. In Danaher Corp. v. Chicago Pneumatic Tool Co., No. 86
Civ. 3499, 3638 (PNL), 1986 WL 7001 (S.D.N.Y. June 19, 1986),
twelve days after a hostile tender offer resulted in the bidder
acquiring 67% of the target company's outstanding stock, the
incumbent board
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4 While ITT can be expected to argue that the 1991 amend-
ments to the Nevada General Corporation Law empower its board to
delay the annual meeting to protect the corporation from Hilton's
tender offer, the legislative history of those amendments
completely undercuts any such assertion. See Reply Memorandum of
Points & Authorities in Support of Plaintiffs' Motion for
Preliminary Injunction, filed Feb. 21, 1997, at 10 (shareholder
"power to vote out management" is the check on board's power to
reject tender offers).
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postponed the company's annual stockholders' meeting by a month, and
claimed the right to postpone it further. Applying New Jersey law, the court
granted preliminary injunctive relief against postponement:
It has long been established that a board of directors
may not manipulate the timing of the shareholders'
annual meeting to perpetuate its reign of control.
"Special scrutiny" is to be given where directors, bent
on entrenchment, allegedly use their powers to restrict
the ability of shareholders to replace them. The law is
clear that when a board of directors has improperly
postponed or manipulated the timing of the shareholders
annual meeting, courts have the authority to compel the
board to promptly hold such a meeting. Id. at *13
(citations omitted; emphasis added).
To the same effect is Holly Sugar Corp. v. Buchsbaum,
[1981-82 Transfer Binder] Fed. Sec. L. Rep. Paragraph 98,366 (D. Colo.
Oct. 28, 1991), where the incumbents refused to hold a valid
shareholders meeting after one meeting had been conducted without
a quorum. The court issued a preliminary injunction against the
directors' unlawful actions:
The evidence indicates a likelihood that present
management has improperly employed the corporate
machinery and by-laws to the advantage of incumbent
management. . . . The obvious and intended effect of
these actions has been to deprive Holly shareholders of
their valid right to vote in an election of directors
in 1981.... Such behavior by fiduciaries is per se
wrongful. Id. at 92,238 (citations omitted; emphasis
added).
The federal courts have also enjoined board interfer-
ence with the shareholder franchise where, as here, a proxy fight
and tender offer have been waged simultaneously. Thus, in
Norfolk Southern Corp. v. Conrail, Inc., Civ. Action Nos.
96-7167, 96-7350 (E.D. Pa. Dec. 17, 1996) (Exhibit 1 hereto), a
case applying
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Pennsylvania law, the court entered a preliminary injunction requiring
the target of an unsolicited takeover bid to proceed with a special meeting of
shareholders. The court held that the board's position that it could refuse to
proceed with the meeting if it were not assured of success "effectively
disenfranchises" shareholders who opposed management's position, and made
"practically a sham" of the election process. Ex. 1 at 68-69.
Thus, the federal courts have been consistently vigi-
lant in preventing manipulations of the corporate electoral
process, for "one of the most sacred rights of any shareholder is
to participate in corporate democracy." ER Holdings, Inc. v.
Norton Co., 735 F. Supp. 1094, 1100 (D. Mass. 1990). Here, the
stockholders are being entirely deprived of their contractual
right to participate in a democratic election on an annual basis;
ITT is not only "'interfering with the effectiveness of a
stockholder vote,'" Shoen, 885 F. Supp. at 1341 -- which by
itself would be illegal -- it is taking away the annual vote
altogether.
The Delaware courts have also subjected board efforts
to manipulate meeting dates to special scrutiny. In the leading
Delaware case of Schnell v. Chris-Craft Indus., 285 A.2d 437
(Del. 1971), the directors advanced, by only one month, an annual
meeting date established by the company's by-laws, to gain an
advantage in a proxy fight. The Delaware Supreme Court held that
this was squarely a violation of fiduciary duty:
management has attempted to utilize the corporate
machinery and the Delaware Law for the purpose of
perpetuating itself in office; and, to that end, for
the purpose of obstructing the legitimate efforts of
dissident stockholders in the exercise of their rights
to undertake a proxy contest against management. These
are inequitable
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<PAGE>
purposes, contrary to established principles of
corporate democracy. The advancement by directors of
the by-law date of a stockholders' meeting, for such
purposes, may not be permitted to stand. 285 A.2d at
439.
The Schnell court also rejected the argument that the directors'
inequitable actions could be justified by their technical
compliance with statutory procedures: "The answer to that con-
tention, of course, is that inequitable action does not become
permissible simply because it is legally possible." Id.
The Schnell doctrine prohibits board actions postponing
stockholder meetings as well as advancing them. In Aprahamian v.
HBO & Co., 531 A.2d 1204 (Del. Ch. 1987), an annual stockholders'
meeting that should have been held in April was rescheduled by
the directors for late September. The incumbents argued that
their action should be sustained because a special committee of
the board thought the postponement necessary to give the board
time "to examine alternatives for maximizing stockholder value."
531 A.2d at 1206. The Delaware Chancery Court held the
directors' actions unlawful:
The corporate election process, if it is to have any
validity, must be conducted with scrupulous fairness
and without any advantage being conferred or denied to
any candidate or slate of candidates. In the interests
of corporate democracy, those in charge of the election
machinery must be held to the highest standards in
providing for and conducting corporate elections. The
business judgment rule therefore does not confer any
presumption of propriety on the acts of the directors
in postponing the annual meeting. 531 A.2d 1206-07
(emphasis added).
As for the argument that the incumbent directors should
be allowed to "oversee the transactions necessary to enhance the
value of the corporation," the Aprahamian court had this to say:
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"Incumbent directors do not have any preemptory right to continue
to serve as directors." 531 A.2d at 1207. The court accordingly
granted preliminary injunctive relief against the directors'
actions.
The Delaware Supreme Court has held that the Schnell
doctrine applies where, as here, an acquiror launches both a
tender offer and a proxy fight to remove the board to facilitate
the offer. Analyzing the interaction between Schnell and the
related Unocal doctrine (which requires takeover defenses to be
"reasonable in relation to the threat posed," Unocal Corp. v.
Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1986)), the Supreme
Court stated that:
A [target] board's unilateral decision to adopt a
defensive measure touching "upon issues of control"
that purposefully disenfranchises its shareholders is
strongly suspect under Unocal, and cannot be sustained
without a "compelling justification." Stroud v. Grace,
606 A.2d 75, 92 n.3 (Del. 1992).
The ITT board cannot meet this burden. Hilton's tender
offer does not present a "threat" to ITT. ITT has abandoned its
previous corporate strategy and the ITT board itself is presiding
over a break-up of the company. By the time of a May annual
meeting, ITT will have had four months to implement its plan.
The only material difference between ITT's plan and Hilton's plan
is that, under ITT's plan, an independent ITT remains under the
control of incumbent management. Burch Aff. Paragraphs 7, 8. Under
these circumstances, there can be no "compelling justification"
for depriving ITT's shareholders of the opportunity to decide
which management team they would prefer to "oversee the
transactions
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<PAGE>
necessary to enhance the value of the corporation."
Aprahamian, 531 A.2d at 1207.5
V. HILTON IS ENTITLED TO AN INJUNCTION REQUIRING ITT
TO PROCEED WITH THE 1997 ANNUAL MEETING IN MID-MAY
To prevail on this motion requiring ITT to follow its
normal procedure and conduct its 1997 annual meeting in May,
Hilton must show either: (1) a likelihood of success on the
merits and the possibility of irreparable injury; or (2) the
existence of serious questions going to the merits and the bal-
ance of hardships tipping in the movant's favor. Shoen, 885
F. Supp. at 1338 (quoting MAI Systems Corp. v. Peak Computer,
Inc., 991 F.2d 511, 516-17 (9th Cir. 1993)).6
As shown above, Hilton has established not only a
likelihood, but certainty of success. ITT's by-laws and basic
principles of corporate law give ITT shareholders the right on
an annual basis to select the individuals they want to guide
their
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5 ITT may seek to rely on Stahl v. Apple Bancorp, Inc.,
579 A.2d 1115 (Del. Ch. 1990), to justify its failure to call a
meeting. The Stahl court refused to compel the board to hold an
annual meeting in mid-May at the behest of an offeror that had
commenced a tender offer in late March. The court noted that,
despite the delay, the meeting would still "go forward at a time
consistent with the company's bylaws," 579 A.2d at 1123, and that
delay would allow the board to explore "the advisability of
pursuing an extraordinary transaction, including the possible
sale of the company" in response to the recently-announced tender
offer. 579 A.2d at 1117 (emphasis added). Accordingly, the
board in Stahl was able to argue that its conduct was authorized
by the company's by-laws and that delay would not necessarily
have the effect of perpetuating itself in office because the
board was considering a sale of the company. Neither of these
arguments is available to ITT, which has committed to remain
independent.
6 It is well-established that a federal court sitting in
diversity is able to afford a plaintiff relief under its tradi-
tional equity power where the plaintiff is entitled to relief
under state law. Stern v. South Chester Tube Co., 390 U.S. 606,
609 (1968).
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<PAGE>
company and to vote on resolutions that involve matters of
concern to them. A board cannot delay an annual meeting to
perpetuate itself in office or to deprive the shareholders of
their right to express their will.
Further, "'the denial or frustration of the right of
shareholders to vote their shares or obtain representation on the
board of directors amounts to an irreparable injury.'" Shoen,
885 F. Supp. at 1352 (citations omitted). Accord AHI Metnall,
L.P. v. J.C. Nichols Co., 891 F. Supp. 1352, 1359 (W.D. Mo. 1995)
("'Courts have consistently found that corporate management
subjects shareholders to irreparable harm by denying them the
right to vote their shares or unnecessarily frustrating them in
their attempt to obtain representation on the board of
directors'") (quoting International Banknote Co. v. Muller, 713
F. Supp. 612, 623 (S.D.N.Y. 1989)); Beztak Co. v. Bank One
Columbus, N.A., 811 F. Supp. 274, 284 (E.D. Mich. 1992) (loss of
stock voting rights constitutes irreparable harm); ER Holdings,
Inc. v. Norton Co., 735 F. Supp. 1094, 1101 (D. Mass. 1990)
(delay in holding annual meeting constitutes irreparable harm).7
- --------
7 See also Aprahamian v. HBO & Co., 531 A.2d 1204, 1208
(Del. Ch. 1987) (postponement of annual meeting constitutes
irreparable harm); Danaher, 1986 WL 7001, at *14 ("It is well
settled in law that corporate management subjects shareholders to
irreparable harm by denying them the right to vote their shares
and to exercise their rightful control over the corporation");
Treco, Inc. v. Land of Lincoln Sav. and Loan, 572 F. Supp. 1447,
1450 (N.D. Ill. 1983) ("plaintiffs would be irreparably harmed if
a preliminary injunction [requiring the directors to convene a
special meeting] were denied because plaintiffs would be
unnecessarily frustrated in their attempt to obtain
representation on [defendants'] Board of Directors at the October
26, 1983 annual meeting"); Holly Sugar Corp. v. Buchsbaum, [1981-
82 Transfer Binder] Fed. Sec. L. Rep. Paragraph 98,366 (D. Colo. Oct. 28,
1981) ("Defendants will also be irreparably injured by the
continued denial of their right to take their case to the Holly
shareholders in a proper corporate election").
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<PAGE>
Finally, the balance of hardships tips decidedly in
Hilton's favor. The incumbent directors have no right to per-
petuate themselves in office, and ITT can suffer no injury if the
annual meeting proceeds on the timetable that has been followed
for each of the last 20 years. Aprahamian, 531 A.2d at 1208
("The incumbent directors have no vested right to continue to
serve as directors and therefore will suffer no harm if they are
defeated."). Delay, however, will infringe on the right of ITT
shareholders to determine the future of their company at an
annual meeting. Delay will also deprive Hilton of its right to
make its case to its fellow shareholders at the time prescribed
by ITT's by-laws. See Coalition to Advocate Pub. Util. Respon-
sibilities, Inc. v. Engels, 364 F. Supp. 1202, 1207 (D. Minn.
1973) (granting injunction against board's changes in election
process where plaintiffs had expended substantial sums of money
and labor "in the expectation that this election would be con-
ducted in the same manner as such elections had been conducted
since 1902").
Any argument that delay is justified because ITT man-
agement has a "better plan" that needs time to be realized cannot
be countenanced. No delay is needed. ITT management can
present its "better plan" to the shareholders. ITT can also
argue to its shareholders that it needs more time to implement
its "better plan." The shareholders are fully capable of de-
ciding at a May annual meeting whether they want to permit the
incumbent board to remain in control of their company, or whether
they want to elect a board that will pursue a sale to Hilton.
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<PAGE>
VI. CONCLUSION
For the reasons set forth above, the injunction sought
by Hilton to ensure that ITT proceeds with its annual meeting in
May should be granted.
RESPECTFULLY SUBMITTED this 26th day of February, 1997.
SCHRECK MORRIS
By: /s/ Steve Morris
______________________________
STEVE MORRIS
KRISTINA PICKERING
300 S. Fourth Street, #1200
Las Vegas, Nevada 89101
BERNARD W. NUSSBAUM
ERIC M. ROTH
MARC WOLINSKY
MEIR FEDER
SCOTT L. BLACK
ALEXANDER SHAKNES
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
Attorneys for Plaintiffs,
HILTON HOTELS CORPORATION
and HLT CORPORATION
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CERTIFICATE OF SERVICE
Pursuant to Fed. R. Civ. P. 5(b), I certify that I am an employee of
SCHRECK MORRIS and that on this day I served a true copy of the enclosed
MOTION FOR PRELIMINARY INJUNCTION REQUIRING ITT TO CONDUCT ITS ANNUAL
MEETING IN MAY 1997; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
MOTION; AFFIDAVIT OF DANIEL H. BURCH AND EXHIBITS THERETO [ORAL ARGUMENT
REQUESTED] in a sealed envelope:
VIA HAND DELIVERY:
Thomas F. Kummer, Esq.
Kummer Kaempfer Bonner & Renshaw
7th Floor
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
VIA U.S. MAIL
Philip Gelston
Cravath, Swaine & Mooore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Dated this 26th day of February 1997.
/s/ Jeana M. Hart
________________________________
Jeana M. Hart
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