<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 36)
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
ITT CORPORATION
(NAME OF SUBJECT COMPANY)
HILTON HOTELS CORPORATION
HLT CORPORATION
(BIDDER)
COMMON STOCK, WITHOUT PAR VALUE
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
450912100
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
MATTHEW J. HART
EXECUTIVE VICE PRESIDENT & 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 BIDDER)
----------------
WITH A COPY TO:
STEVEN A. ROSENBLUM, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 403-1000
----------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$5,200,000,000 $1,040,000
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 65,000,000 shares of Common Stock, without par value, of ITT
Corporation and the associated Series A Participating Cumulative Preferred
Stock Purchase Rights at $80 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(a) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered by HLT Corporation for such
number of shares.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $856,037
Filing Party: Hilton Hotels Corporation
Form of Registration No.: Schedule 14D-1 (005-44647)
Date Filed: January 31, 1997 and August 7, 1997
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<PAGE>
This Amendment No. 36 to the Tender Offer Statement on Schedule 14D-1 filed
with the Securities and Exchange Commission (the "Commission") on January 31,
1997 (the "Schedule 14D-1") relates to the offer by HLT Corporation (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of Hilton
Hotels Corporation, a Delaware corporation ("Parent"), to purchase 65,000,000
shares (the "Maximum Number") of Common Stock, without par value, of the
Company (the "Common Stock"), and unless and until validly redeemed by the
Board of Directors of the Company, 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, as previously
amended, between the Company and The Bank of New York, as Rights Agent, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated January 31, 1997 (the "Offer to Purchase"), a copy of which is attached
as Exhibit (a)(1) to the Schedule 14D-1, as supplemented by the Supplement
thereto, dated August 7, 1997 (the "First Supplement"), and the Second
Supplement thereto, dated November 3, 1997 (the "Second Supplement"), which is
attached as Exhibit (a)(34) hereto and in the related Letters of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer"), at a purchase price of $80 per share (and associated Right), net to
the tendering stockholder in cash, without interest thereon.
Capitalized terms used but not defined herein have the meanings assigned to
such terms in the Offer to Purchase, the First Supplement, the Second
Supplement and the Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
Item 1(b) is hereby amended and supplemented by reference to the
Introduction and Section 1 of the Second Supplement, which Introduction and
Section 1 are incorporated herein by reference.
Item 1(c) is hereby amended and supplemented by reference to Section 2 of
the Second Supplement, which Section 2 is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
Item 3(b) is hereby amended and supplemented by reference to Section 6 of
the Second Supplement, which Section 6 is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4 is hereby amended and supplemented by reference to Section 5 of the
Second Supplement, which Section 5 is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
Item 5 is hereby amended and supplemented by reference to the Introduction,
Section 1, and Section 8 of the Second Supplement, which Introduction, Section
1, and Section 8 are incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Item 9 is hereby amended and supplemented by reference to Section 4 of the
Second Supplement, which Section 4 is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
Items 10(b) and (e) are hereby amended and supplemented by reference to
Section 7 of the Second Supplement, which Section 7 is incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(34) Second Supplement to Offer to Purchase, dated November 3, 1997.
(a)(35) Revised Letter of Transmittal.
2
<PAGE>
(a)(36) Revised Notice of Guaranteed Delivery.
(a)(37) Revised Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(38) Revised Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(39) Summary Advertisement as published on November 3, 1997.
(a)(40) Press Release, dated November 3, 1997, issued by Parent.
(g)(33) Proposed Merger Agreement.
(g)(35) Complaint, dated November 3, 1997.
(g)(36) Definitive Additional Proxy Materials.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
HLT CORPORATION
/s/ Arthur M. Goldberg
By: _________________________________
Name:Arthur M. Goldberg
Title:President
Dated: November 3, 1997
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
HILTON HOTELS CORPORATION
/s/ Matthew J. Hart
By: _________________________________
Name:Matthew J. Hart
Title:Executive Vice President
Dated: November 3, 1997
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(a)(34) Second Supplement to Offer to Purchase, dated November 3, 1997.
(a)(35) Revised Letter of Transmittal.
(a)(36) Revised Notice of Guaranteed Delivery.
(a)(37) Revised Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(38) Revised Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(39) Summary Advertisement as published on November 3, 1997.
(a)(40) Press Release, dated November 3, 1997, issued by Parent.
(g)(33) Proposed Merger Agreement.
(g)(34) Complaint, dated November 3, 1997.
(g)(35) Definitive Additional Proxy Materials.
</TABLE>
<PAGE>
EXHIBIT (A)(34)
SECOND SUPPLEMENT TO THE OFFER TO PURCHASE DATED JANUARY 31, 1997
HLT CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
HILTON HOTELS CORPORATION
HAS AMENDED ITS OFFER AND IS NOW OFFERING TO PURCHASE FOR CASH
65,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING
CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS)
OF
ITT CORPORATION
AT
$80 NET PER SHARE IN CASH
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, NOVEMBER 17, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE AT LEAST 63,500,000
SHARES (THE "MINIMUM CONDITION"), (2) THE RIGHTS HAVING BEEN REDEEMED BY THE
BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING SATISFIED THAT THE
RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND
THE PROPOSED MERGER (THE "RIGHTS CONDITION"), (3) THE PURCHASER BEING
SATISFIED THAT THE NEVADA CONTROL SHARE ACQUISITION STATUTE SHALL BE
INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER (THE "CONTROL SHARE
CONDITION"), (4) THE PURCHASER BEING SATISFIED THAT THE NEVADA BUSINESS
COMBINATION STATUTE SHALL BE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER
(THE "BUSINESS COMBINATION CONDITION"), AND (5) THE PURCHASER BEING SATISFIED
THAT ALL MATERIAL GAMING APPROVALS HAVE BEEN OBTAINED ON TERMS SATISFACTORY TO
THE PURCHASER (THE "GAMING CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. THE OFFER IS NOT
CONDITIONED ON OBTAINING FINANCING. SEE THE INTRODUCTION AND SECTIONS 1, 14
AND 15 OF THE OFFER TO PURCHASE, AND THE SCHEDULE 14D-1.
----------------
IMPORTANT
HILTON HOTELS CORPORATION ("PARENT") AND HLT CORPORATION (THE "PURCHASER")
ARE STILL SEEKING TO NEGOTIATE WITH THE COMPANY WITH RESPECT TO THE
ACQUISITION OF THE COMPANY BY PARENT OR THE PURCHASER. THE PURCHASER RESERVES
THE RIGHT TO AMEND THE OFFER (INCLUDING AMENDING THE NUMBER OF SHARES TO BE
PURCHASED, THE PURCHASE PRICE AND THE PROPOSED SECOND-STEP MERGER
CONSIDERATION) UPON ENTERING INTO A MERGER AGREEMENT WITH THE COMPANY, OR TO
NEGOTIATE A MERGER AGREEMENT WITH THE COMPANY NOT INVOLVING A TENDER OFFER
PURSUANT TO WHICH THE PURCHASER WOULD TERMINATE THE OFFER AND THE SHARES
WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED INTO CASH, COMMON STOCK
OF PARENT AND/OR OTHER SECURITIES IN SUCH AMOUNTS AS ARE NEGOTIATED BY PARENT,
THE PURCHASER AND THE COMPANY.
----------------
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
November 3, 1997
<PAGE>
Any stockholder desiring to tender all or any portion of his Shares, and the
associated Rights, should either (i) complete and sign the Letter of
Transmittal which accompanies the Offer to Purchase, the First Supplement or
this Second Supplement (or a facsimile thereof) in accordance with the
instructions in such Letter of Transmittal and (A) mail or deliver it together
with the certificate(s) representing tendered Shares and, if separate, the
certificate(s) representing the associated Rights ("Rights Certificates"), and
any other required documents, to the Depositary or (B) tender such Shares (and
associated Rights, if applicable) pursuant to the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase, or (ii) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such stockholder. A stockholder whose Shares
(and associated Rights, if applicable) are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares and, if applicable, the associated
Rights. Stockholders will be required to tender one associated Right for each
Share tendered in order to effect a valid tender of such Share. See Section 3
of the Offer to Purchase.
A stockholder who desires to tender Shares and associated Rights, and whose
certificates representing such Shares (and, if applicable, associated Rights)
are not immediately available, or who cannot comply with the procedures for
book-entry transfer (as described in Section 3 of the Offer to Purchase) on a
timely basis, may tender such Shares (and, if applicable, associated Rights)
by following the procedures for guaranteed delivery set forth in Section 3 of
the Offer to Purchase.
Questions and requests for assistance, or for additional copies of the Offer
to Purchase, the First Supplement, this Second Supplement, the revised (green)
Letter of Transmittal or other tender offer materials may be directed to the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of this Second Supplement.
Holders of Shares may also contact brokers, dealers, commercial banks and
trust companies for additional copies of the Offer to Purchase, the First
Supplement, this Second Supplement, the revised (green) Letter of Transmittal,
or other tender offer materials.
2
<PAGE>
To the Holders of Shares of Common Stock (Including the Associated Series A
Participating Cumulative Preferred Stock Purchase Rights) of ITT Corporation:
INTRODUCTION
The following information amends and supplements the Offer to Purchase dated
January 31, 1997 (as amended and supplemented by the Schedule 14D-1 to which
the Offer to Purchase is an exhibit, the "Offer to Purchase") and the
Supplement to the Offer to Purchase dated August 7, 1997 (the "First
Supplement") of HLT Corporation, a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of Hilton Hotels Corporation, a Delaware corporation
("Parent"). Pursuant to this Second Supplement, the Purchaser is now offering
to purchase (i) 65,000,000 shares (the "Maximum Number") of common stock,
without par value (the "Shares"), of ITT Corporation, a Nevada corporation
(the "Company"), and (ii) unless and until validly redeemed by the Board of
Directors of the Company (the "Board"), the Series A Participating Cumulative
Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 1, 1995, between the Company and The Bank of
New York, as Rights Agent (as previously amended, the "Rights Agreement"), at
a price of $80 per Share (including associated Right), net to the seller in
cash without interest thereon (the "Offer Price"), upon the terms and subject
to the conditions set forth in the Offer to Purchase, as amended and
supplemented by the First Supplement, this Second Supplement, and in the
related Letter of Transmittal (which together constitute the "Offer"). Unless
the context requires otherwise, all references in this Second Supplement to
Shares shall include the associated Rights and all references to the Rights
shall include all benefits that may inure to holders of the Rights pursuant to
the Rights Agreement.
The Minimum Condition requires that at least 63,500,000 Shares be tendered
and not withdrawn before the Expiration Date.
Except as otherwise set forth in this Second Supplement, the terms and
conditions previously set forth in the Offer to Purchase and the First
Supplement remain applicable in all respects to the Offer, and this Second
Supplement should be read in conjunction with the Offer to Purchase and the
First Supplement. Unless the context requires otherwise, terms not defined
herein have the meanings ascribed to them in the Offer to Purchase and the
First Supplement.
The Offer is subject to the fulfillment of certain conditions, including the
following: (1) the Minimum Condition, (2) the Rights Condition, (3) the
Control Share Condition, (4) the Business Combination Condition, and (5) the
Gaming Condition, each of which is described in the Offer to Purchase. See the
Introduction and Sections 14 and 15 of the Offer to Purchase and Section 7 of
the First Supplement.
Procedures for tendering Shares are set forth in Section 3 of the Offer to
Purchase. Tendering stockholders may use either the original (blue) Letter of
Transmittal and the original (grey) Notice of Guaranteed Delivery previously
circulated with the Offer to Purchase, the (yellow) Letter of Transmittal and
the (beige) Notice of Guaranteed Delivery circulated with the First
Supplement, or the revised (green) Letter of Transmittal and the revised
(grey) Notice of Guaranteed Delivery circulated with this Second Supplement.
While the original (blue) Letter of Transmittal refers to the Offer to
Purchase dated January 31, 1997, and the (yellow) Letter of Transmittal refers
to the First Supplement dated August 7, 1997, stockholders using such
documents to tender their Shares will nevertheless receive $80 for each Share
validly tendered and not withdrawn and accepted for payment pursuant to the
Offer, subject to the conditions of the Offer.
SHARES PREVIOUSLY VALIDLY TENDERED AND NOT WITHDRAWN CONSTITUTE VALID
TENDERS FOR PURPOSES OF THE OFFER. STOCKHOLDERS ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION WITH RESPECT TO SUCH SHARES IN ORDER TO RECEIVE THE INCREASED
OFFER PRICE OF $80 PER SHARE IF SHARES ARE ACCEPTED FOR PAYMENT AND PAID FOR
BY THE PURCHASER PURSUANT TO THE OFFER, EXCEPT AS MAY BE REQUIRED BY THE
GUARANTEED DELIVERY PROCEDURE IF SUCH PROCEDURE WAS UTILIZED. SEE SECTION 1 OF
THIS SECOND SUPPLEMENT. SEE SECTION 4 OF THE OFFER TO PURCHASE FOR THE
PROCEDURES FOR WITHDRAWING SHARES TENDERED PURSUANT TO THE OFFER.
THE OFFER TO PURCHASE, THE FIRST SUPPLEMENT AND THIS SECOND SUPPLEMENT, THE
AMENDMENTS THERETO AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER.
3
<PAGE>
1. AMENDED TERMS OF THE OFFER
The discussion set forth in Section 1 of the Offer to Purchase and Section 1
of the First Supplement is hereby amended and supplemented as follows:
The price per Share to be paid pursuant to the Offer has been increased from
$70 per Share (and associated Right) to $80 per Share (and associated Right),
net to the seller in cash, and the Maximum Number of Shares to be purchased in
the Offer has been increased to 65,000,000 Shares. All stockholders whose
Shares are validly tendered and not withdrawn and accepted for payment
pursuant to the Offer (including Shares tendered prior to the date of this
Second Supplement) will receive the increased price. The Expiration Date has
been extended to 12:00 Midnight, New York City Time, on Monday, November 17,
1997, unless and until the Purchaser, in its sole discretion, shall further
extend the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire. To the extent required by
applicable law, the Purchaser intends to extend the Offer to expire five
business days following satisfaction or waiver of the material conditions to
the Offer.
The purpose of the Offer is to acquire control of, and ultimately the entire
equity interest in, the Company. Parent is still seeking to negotiate with the
Company a definitive acquisition agreement (the "Proposed Merger Agreement,"
which is being filed as an exhibit to the Schedule 14D-1), pursuant to which
the Company would, as soon as practicable following consummation of the Offer,
consummate the Proposed Merger with Parent or the Purchaser or another direct
or indirect wholly owned subsidiary of Parent. In the Proposed Merger, at the
effective time of the Proposed Merger (the "Effective Time"), 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 Parent, the Purchaser
or any direct or indirect wholly owned subsidiary of Parent) will be converted
into (i) two shares of Hilton Common Stock, $2.50 par value per share ("Hilton
Common Stock"), and (ii) unless the volume-weighted average of the prices per
share of Hilton Common Stock for all trades reported on the NYSE (or such
other exchange on which shares of Hilton Common Stock are then listed) during
the 20 trading days immediately preceding the last business day before the
Effective Time is equal to or greater than $40, two shares of Contingent Value
Preferred Stock ("CVP Shares").
The CVP Shares. As described in Annex I to this Second Supplement, upon the
redemption of the CVP Shares, each CVP Share entitles the holder (a "CVP
Holder") to receive the amount, if any, by which $40 (the "Target Price")
exceeds the per share stock price of the Hilton Common Stock measured, as
described below, during a Valuation Period (as defined below) ending
immediately prior to the first anniversary of the Effective Time, subject to a
maximum amount of $12 per CVP Share (the "Maximum Redemption Amount"). The CVP
Shares will be redeemed for this amount on the first anniversary of the
Effective Time, unless earlier redeemed as a result of a Disposition (as
defined in Annex I to this Second Supplement).
The per share stock price of the Hilton Common Stock for purposes of the
foregoing, defined as the "Current Market Value," will be measured by taking
the volume-weighted average of the prices per share of Hilton Common Stock for
all trades reported on the NYSE (or such other exchange on which shares of
Hilton Common Stock are then listed) of shares of Hilton Common Stock on 20
trading days in the Valuation Period, which 20 trading days will be randomly
chosen on the first business day following the end of the Valuation Period by
the public accounting firm then serving as the auditor of Parent's financial
statements. "Valuation Period" means the 45 trading day period immediately
preceding (but not including) the first anniversary of the Effective Time.
Any amount to be paid to CVP Holders upon redemption of the CVP Shares may
be paid in cash, in the equivalent value of registered Hilton Common Stock, or
in any combination thereof, except amounts payable upon redemption for $0.001
per CVP Share (the "Minimum Redemption Amount") will be paid in cash. The CVP
Shares will be redeemed for the Minimum Redemption Amount if (i) the Current
Market Value equals or exceeds $40, calculated as described above, or (ii) the
volume-weighted average of the prices per share of Hilton Common Stock for all
trades reported on the NYSE (or such other exchange on which shares of Common
Stock are then listed) during any 20 consecutive trading day period prior to
the first anniversary of the Effective Time equals or exceeds $40 per share.
4
<PAGE>
If Parent recapitalizes through a subdivision of its outstanding shares of
Hilton Common Stock into a greater number of shares of Hilton Common Stock, or
a combination of its outstanding shares of Hilton Common Stock into a lesser
number of shares of Hilton Common Stock, or reorganizes, reclassifies or
otherwise changes its outstanding shares of Hilton Common Stock into the same
or a different number of shares of other classes, or declares a dividend on
its outstanding shares of Hilton Common Stock payable in shares of its capital
stock or securities convertible into shares of its capital stock, the CVP
shares will be similarly recapitalized, combined, reorganized, reclassified or
otherwise changed, and the terms thereof will be appropriately adjusted. No
fractional shares or scrip representing fractional shares of Hilton Common
Stock will be issued or paid upon redemption of the CVP Shares. In lieu
thereof, a cash payment will be made in an amount equivalent to the per share
fair market value of the fraction of the share of Hilton Common Stock.
Upon the consummation of a Disposition, each CVP Share will be redeemed for
payment of the lesser of (i) an amount, if any, by which the Discounted Target
Price exceeds the fair market value (as determined by an independent financial
expert) of the consideration received for each share of Hilton Common Stock as
a result of such Disposition and assuming that the holder of such Hilton
Common Stock did not exercise any right of appraisal granted under law with
respect to such Disposition and (ii) the Maximum Redemption Amount.
Parent will use its reasonable best efforts to cause the CVP Shares to be
listed on the NYSE, the American Stock Exchange, or The Nasdaq National
Market. The foregoing summary of the terms of the CVP Shares is qualified in
its entirety by reference to Annex I to this Second Supplement, which provides
a more detailed summary of the terms of the CVP Shares.
This Second Supplement, the revised (green) Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and Rights, and
will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
list of holders of Shares, and the list of holders of Rights, if applicable,
or who are listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial owners of Shares and Rights.
2. PRICE RANGE OF SHARES; DIVIDENDS
The discussion set forth in Section 6 of the Offer to Purchase and Section 2
of the First Supplement is hereby amended and supplemented as follows:
According to publicly available sources, the Company has paid no cash
dividends on the Shares since the date of the First Supplement.
The high and low sales prices per Share on the NYSE as reported by published
financial sources for the third quarter of 1997 were $68.4375 and $60.8750,
respectively, and for the fourth quarter of 1997 (through October 31, 1997)
were $77.5000 and $68.0000, respectively.
On October 31, 1997, the last full trading day prior to the announcement of
the increase in the Offer Price, the last reported sales price of the Shares
on the NYSE was $74.6875. The increased Offer Price represents over an 87%
premium to the last reported sale price ($42.625) of the Shares on the NYSE
prior to the announcement of the Offer. Stockholders are urged to obtain
current market quotations for the Shares.
3. CERTAIN INFORMATION CONCERNING THE COMPANY SINCE AUGUST 7, 1997
The discussion set forth in Section 7 of the Offer to Purchase and Section 3
of the First Supplement is hereby amended and supplemented as follows:
On August 14, 1997, the Compensation and Personnel Committee of the Board of
Directors of the Company voted to provide or modify existing severance
arrangements for certain officers and employees in the event of a
5
<PAGE>
change in control. Under this "golden parachute" plan, Mr. Araskog would
receive $55 million. Company executives overall would receive $165 million.
At a meeting held on August 14, 1997, the Board of Directors of the Company,
without having spoken to Parent or the Purchaser, voted to confirm its
opposition to the Offer and the Proposed Merger.
On October 19, 1997, the Company announced that it had reached an agreement
(the "Starwood Agreement") to be acquired in a merger by Starwood Lodging
Corporation and Starwood Lodging Trust ("Starwood").
Set forth below is a summary of certain consolidated financial information
with respect to the Company, excerpted or derived from the audited financial
information of the Company contained in the Company 1996 10-K and unaudited
information of the Company contained in the Quarterly Report on Form 10-Q of
the Company for the quarterly period ended June 30, 1997. More comprehensive
financial information is included in such reports and other documents filed
with the Commission, and the following summary is qualified in its entirety by
reference to such reports and other documents, including the financial
information and related notes contained therein. Such reports and other
documents may be inspected and copies may be obtained from the offices of the
Commission or the NYSE in the manner set forth in Section 7 of the Offer to
Purchase.
ITT CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
----------------- --------------------
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenues............................... $ 3,215 $ 3,140 $6,597 $6,252 $4,709
Costs and Expenses..................... 2,963 2,798 5,869 5,684 4,417
Operating Income....................... 252 342 728 568 292
Net Income............................. 279 116 249 147 74
Earnings Per Share..................... 2.37 .97 2.11 1.24 .63
Weighted Average Common Equivalent
Shares................................ 118 119 118 118 117
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER
AT JUNE 30, 31,
----------- -------------
1997 1996 1995
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current Assets....................................... $1,216 $1,698 $1,143
Total Assets......................................... 8,463 9,275 8,692
Current Liabilities.................................. 1,384 1,391 1,459
Long-Term Debt....................................... 2,789 3,894 3,575
Total Liabilities.................................... 5,117 6,201 5,756
Stockholders' Equity................................. 3,346 3,074 2,936
</TABLE>
On October 14, 1997, the Company issued a press release which included
certain unaudited financial data with respect to the Company for its third
quarter ended September 30, 1997, and the first nine months of 1997. The
following is excerpted from such press release, and is qualified in its
entirety by reference to such release:
ITT Corporation (NYSE: ITT) today reported third quarter net income,
excluding one-time items and assets held for disposition, of $83 million,
or 69 cents per share, compared with the 1996 third quarter net income on
the same basis of $68 million, or 58 cents per share. Earnings before
interest, taxes, depreciation and amortization (EBITDA) for the 1997
quarter was $262 million versus $228 million in the 1996 third quarter.
Revenues, excluding assets held for sale, of $1.64 billion were 2% above
the $1.61 billion in the 1996 third quarter. Reported third quarter 1997
net income was $61 million, or 51 cents per share compared with $67
million, or 57 cents per share in the 1996 quarter including the following
one-time items:
-- An after-tax provision of $17 million (also $17 million pre-tax), or 14
cents per share, for costs associated with the hostile offer for the
Company by Hilton Hotels Corporation in the 1997 third quarter.
6
<PAGE>
--An after-tax loss of $5 million ($8 million pre-tax), or 4 cents per
share, in the 1997 third quarter at The Desert Inn in Las Vegas and the
Company's riverboat casino in Tunica, Mississippi. ITT has decided to
dispose of these properties and accordingly has reflected them as assets
held for sale. The 1996 third quarter included an after-tax loss of $1
million ($3 million pre-tax), or 1 cent per share from these properties
and for ITT's interest in MSG and WBIS+-TV, which it has also agreed to
sell.
Net income for the first nine months of 1997, excluding all one-time
items and assets held for disposition, was $201 million, or $1.70 per
share, a 14% increase over the comparable $176 million, or $1.49 per share
in the 1996 period. Reported earnings for the first nine months were $340
million or $2.87 per share compared with $183 million, or $1.54 per share
in the 1996 period. Revenues, excluding assets held for sale, of $4.77
billion were 3% above the comparable $4.63 billion in the year ago period.
4. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER SINCE AUGUST 7,
1997
The discussion set forth in Section 8 of the Offer to Purchase and Section 4
of the First Supplement is hereby amended and supplemented as follows:
Set forth below is a summary of certain consolidated financial data with
respect to Parent and its subsidiaries, excerpted or derived from audited
financial information presented in Parent's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (the "Parent 1996 10-K") and the unaudited
financial information contained in Parent's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997 (the "Parent 1997 Second Quarter 10-
Q"). The financial information summary set forth below is qualified in its
entirety by reference to the Parent 1996 10-K, the Parent 1997 Second Quarter
10-Q, and other documents, financial information and related notes contained
therein which have been filed with the Commission, and which are hereby
incorporated herein by reference. Such reports and other documents may be
inspected and copies may be obtained from the Commission, the NYSE or the
Pacific Stock Exchange ("PSE") in the manner set forth in Section 8 of the
Offer to Purchase.
HILTON HOTELS CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEARS ENDED
30, DECEMBER 31,
------------- --------------------
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenues.................................... $2,663 $1,961 $3,940 $3,555 $3,301
Expenses.................................... 2,303 1,769 3,611 3,200 3,015
Operating Income............................ 360 192 329 355 286
Income Before Extraordinary Items........... 161 96 156 173 122
Net Income.................................. 161 96 82 173 122
Net Income Per Share........................ .62 .49 .41 .89 .63
Weighted Average Common Equivalent Shares... 251 195 197 194 193
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER
AT JUNE 30, 31,
----------- -------------
1997 1996 1995
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Current Assets....................................... $ 927 $1,151 $1,100
Total Assets......................................... 7,676 7,577 3,443
Current Liabilities.................................. 862 998 917
Long-Term Debt....................................... 2,745 2,606 1,070
Total Liabilities.................................... 4,322 4,366 2,189
Stockholders' Equity................................. 3,354 3,211 1,254
</TABLE>
7
<PAGE>
Effective December 18, 1996, Parent completed the merger of Bally
Entertainment Corporation ("Bally") with and into Parent pursuant to an
agreement dated June 6, 1996. Parent's consolidated results of operations have
incorporated Bally's activity from the effective date of the merger. The
following unaudited pro forma information has been prepared assuming that this
acquisition had taken place on January 1, 1996. This pro forma information
does not purport to be indicative of future results or what would have
occurred had the acquisition been made as of that date.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------- --------------------
1996 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenue...................... $ 2,536 $ 5,041
Operating Income............. 310 525
Income Before Extraordinary
Item........................ 140 243
Net Income................... 140 169
Net Income Per Share......... .53 .64
</TABLE>
On October 21, 1997, Parent issued a press release reporting unaudited 1997
third quarter net income of $94 million ($.36 per share) compared to $54
million ($.28 per share) for the same period a year ago, an increase of 74%.
For the three months ended June 30, 1997, Parent's consolidated revenue
increased 39% to $1.3 billion from $.9 billion for the same period a year ago.
Operating income for the three months ended September 30, 1997, increased 96%
to $198 million from $101 million in 1996.
5. SOURCE AND AMOUNT OF FUNDS
The discussion set forth in Section 9 of the Offer to Purchase and Section 5
of the First Supplement is hereby amended and supplemented as follows:
As a result of the increase in the Offer Price, the Purchaser estimates that
the total amount of funds required to acquire the outstanding Shares pursuant
to the Offer and the Proposed Merger and to pay related fees and expenses will
be approximately $5.4 billion. The Purchaser expects to obtain the funds
required to consummate the Offer through capital contributions or advances
made by Parent. Parent plans to obtain the funds for such capital
contributions or advances from a combination of its available cash, working
capital, existing credit facilities, borrowings under credit facilities that
Parent will seek to obtain from commercial banks and/or issuance of public
debt. Although there are no commitments by such borrowing sources at this
time, Parent intends to have such credit facility or facilities in effect
prior to the satisfaction or waiver of the conditions to the Offer. It is
anticipated that the indebtedness incurred by Parent in connection with the
Offer and the Proposed Merger will be repaid as described in the Offer to
Purchase. See Section 9 of the Offer to Purchase.
6. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY SINCE AUGUST 7, 1997
The discussion set forth in Section 10 of the Offer to Purchase and Section
6 of the First Supplement is hereby amended and supplemented as follows:
On October 6, 1997, Parent and the Purchaser filed supplementary proxy
materials (the "Supplementary Proxy Materials"). The Supplementary Proxy
Materials set forth, among other things, the collar provisions Parent had
proposed with respect to the Proposed Merger following consummation of the
Offer.
On October 7, 1997, Parent received a letter (the "J.P. Morgan Letter") from
J.P. Morgan Securities Inc. ("J.P. Morgan") indicating that based upon its
knowledge and experience in the loan syndication market, J.P. Morgan is
"highly confident the aggregate amount of the proposed syndication financing"
for the acquisition of the Shares in the Offer "can be raised by Parent."
8
<PAGE>
On October 16, 1997, Mr. Bollenbach sent the following letter to the Board
of Directors of the Company:
October 16, 1997
Board of Directors
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5490
Dear Members of the Board:
Press reports, including this morning's article in USA Today, indicate that
ITT is once again seeking to take action that, in the words of ITT's chairman,
Rand Araskog, would "change the landscape" between now and the November 12
annual meeting. These press reports raise the concern that ITT management will
now propose a new transaction that, like the break-up plan, is designed not to
provide the greatest value to shareholders, but rather to defeat the Hilton
offer and deprive ITT shareholders of a meaningful choice.
As I am sure you are aware, the clear purpose and intent of the Nevada
federal court's decision is to permit the ITT shareholders to make an
unimpeded choice as to whether they wish to accept the Hilton offer by
electing Hilton's nominees to the ITT Board. Accordingly, any action taken by
ITT prior to the annual meeting that would interfere with the ability of the
ITT shareholders to choose to accept the Hilton offer by electing the Hilton
nominees would violate the court's order.
We expect that you, as the directors of ITT, will not again permit ITT to
take such action. In the event ITT does take such action, however, Hilton will
hold ITT, its Board of Directors, and any third party that may be involved,
responsible for violating the court's direction to hold a fair annual meeting
and to give shareholders an unimpeded choice. In addition to injunctive
relief, Hilton would, if appropriate, seek to recover monetary damages arising
from any such action.
The combination of Hilton and ITT represents a tremendous opportunity for
both our companies, and will provide the greatest value to the ITT
shareholders. The interests of both our companies would best be served by your
meeting with us now to reach a prompt completion of the Hilton-ITT
combination. We continue to view your failure to meet with us to constitute an
inexplicable violation of your fiduciary duties to your shareholders.
Sincerely,
/s/ Stephen F. Bollenbach
Stephen F. Bollenbach
On October 17, 1997, Mr. Bollenbach sent the following letter to Mr.
Araskog:
October 17, 1997
Mr. Rand V. Araskog
Chairman and Chief Executive Officer
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5490
Dear Mr. Araskog:
I was heartened by your comment in your interview with Reuters that there is
"always room for negotiation at a particular point in time." I also
appreciated your statement to USA Today that this matter is "not personal"
between us. You are right that this is not personal, nor should it be, and I
have previously apologized for comments that I made in jest.
I disagree, however, with your conclusion that we haven't yet reached the
point in time at which negotiation makes sense. The sooner we can talk, and
get working on putting our two companies together, the greater the benefit not
only for our respective shareholders, but also for our employees and other
constituencies.
9
<PAGE>
In this regard, I would like to suggest that, if you have not yet
implemented the layoffs you announced last Monday, we should talk soon about
the place these employees could have in the combined Hilton-ITT. While the
combination of our companies will produce substantial cost savings through
consolidation of positions and other synergies, I view the combined company as
very much a growth company. There are many positions in the combined company
that could use most of the good and experienced employees now at ITT.
This is only one example of the many reasons why we have reached the time
for negotiation. I honestly hope that we can meet in the next few days,
whether it be the two of us, or a meeting between our representatives and
advisors. This is a combination that makes sense, and it makes sense for all
of us.
I look forward to hearing from you.
Sincerely,
/s/ Stephen F. Bollenbach
Stephen F. Bollenbach
According to the Company, the weekend following delivery of these letters to
the Board of Directors of the Company and Mr. Araskog, the Company provided
information to and engaged in discussions with at least three parties, other
than Parent, that had indicated an interest in acquiring the Company. This
resulted in the Starwood Agreement. Nonetheless, the Company did not provide
any information to, engage in any discussions with, or contact Parent with
respect to the Offer or the Proposed Merger.
On November 3, 1997, Mr. Bollenbach sent the following letter to the Board
of Directors of the Company:
November 3, 1997
Board of Directors
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5490
Dear Members of the Board:
Hilton is announcing this morning a revised offer for all of ITT that is
clearly superior to the proposed Starwood merger that you approved two weeks
ago. Under Hilton's revised offer, Hilton has shifted some of the value from
the Hilton common stock that we were prepared to issue under our previously
announced offer and added that value to the cash portion of our offer. This
allows us to offer $80 per ITT share in cash for 65,000,000 ITT shares,
representing about 55% of the currently outstanding ITT shares. In our second
step merger, each remaining ITT share will be converted into two Hilton
shares.
Based on our confidence in the tremendous operating benefits that the
Hilton-ITT combination will generate, we will also guarantee that the stock
price of the Hilton shares issued in the merger will reach at least $40 per
share (i.e. $80 per ITT share) within one year after the merger. This
guarantee will take the form of contingent value preferred stock that will pay
the holder additional cash or Hilton shares with a value equal to the
difference between $40 and the stock price per Hilton share one year after the
merger, up to a $12 maximum per Hilton share, in the event the Hilton shares
issued in the merger have not reached a stock price of at least $40 per share
within the first year after the merger.
HILTON'S OFFER PROVIDES GREATER AND MORE CERTAIN VALUE
While the Starwood bid, which will be paid 82% in Starwood "paired shares"
and only 18% in real dollars, has a purported value of $82 per ITT share, its
actual value is far lower. Serious issues with respect to the true
10
<PAGE>
value of Starwood's paired shares, the sustainability of Starwood's tax
avoidance structure, the timing of completion of the proposed Starwood merger,
and the question of whether the proposed Starwood merger will close at all,
create substantial risks and uncertainties that greatly reduce the value of
Starwood's bid.
In contrast to the Starwood bid, Hilton's revised offer will provide $80 per
ITT share in real dollars for 55% of the outstanding ITT shares. Hilton's
second step consideration of two Hilton shares per ITT share, even with no
guarantee, would offer more real value than the inflated Starwood shares that
would be issued in the Starwood proposal. The guarantee embodied in the
contingent value preferred stock ensures that this is true.
The value of the Hilton shares to be issued in the merger will be further
enhanced by the extraordinary operating benefits and synergies created by the
combination of our two companies. There can be no debate that the Hilton-ITT
combination creates far greater operating benefits than a combination of
Starwood and ITT. Indeed, the primary synergy of the proposed Starwood-ITT
merger is a tax structure that is both overstated in value and certain to come
under intense scrutiny from the Internal Revenue Service and Congress. We also
think that there can be no debate that the operating track record of Hilton's
management far surpasses that of Starwood's. Speaking personally, with
virtually all my wealth invested in Hilton stock, and on behalf of my fellow
Hilton directors and managers who, with me, own about 28% of the outstanding
Hilton shares, we are tremendously excited by the superb value we see in the
combined Hilton-ITT.
HILTON'S OFFER PROVIDES GREATER SPEED AND CERTAINTY OF COMPLETION
In connection with Hilton's restructured offer, we are extending the
expiration date of our cash tender offer, with its revised $80 per share price
and increased number of shares, to November 17. Other than ITT Board action to
exempt the offer from ITT's poison pill and the Nevada takeover statutes, the
only approvals still pending to close the offer are Nevada gaming approval and
FCC approval. We anticipate receiving these approvals immediately after ITT's
November 12 annual meeting and, accordingly, we expect to close the tender
offer within one to two weeks after the annual meeting. With your cooperation,
we could close the tender offer even sooner. We expect to close the second-
step merger within 90 days thereafter.
In contrast, ITT and Starwood initially stated that the proposed Starwood
merger could not close until March 1998. While ITT has recently tried to claim
that this timetable could be accelerated, based on our experience, even ITT's
original timetable is extremely optimistic. We believe a six to nine-month
time frame is more realistic. In addition, the Starwood proposal is subject to
numerous approvals and has far less certainty of ever closing at all. Together
with the uncertain value of the Starwood "paired shares," the substantial
delay and uncertainty of completion associated with the Starwood merger makes
it even riskier and less valuable.
* * *
Hilton is also announcing today the filing of a new lawsuit against ITT and
its incumbent directors. While we would have preferred not to have to take
this legal action, the conduct of the ITT Board and management over the course
of the last eight months makes this step necessary. The lawsuit seeks to
rescind the Starwood merger agreement, particularly the grossly excessive
break-up fees and expenses that the ITT Board granted to Starwood under that
agreement, and to recover damages from members of the Board individually in
connection with a number of actions taken in clear violation of the Board's
fiduciary duties.
In addition to the Starwood break-up fees and expenses, which were granted
as part of an auction for ITT that expressly excluded Hilton, these unlawful
actions include: unilaterally granting $165 million in golden parachutes to
ITT executives, a violation not only of the Board's duties but also of ITT's
own policy of not granting golden parachutes without shareholder approval;
issuing $550 million of European junk bonds obligating ITT to pay exorbitant
interest rates, in furtherance of ITT's break-up plan, just ten days before
the Nevada federal court enjoined that plan because its primary purpose was to
entrench the incumbent ITT Board; granting $29 million in break-up fees and
expenses to Clayton, Dubilier & Rice in connection with the abandoned plan;
and agreeing to innumerable change-of-control penalty provisions in hotel
management contracts and franchise agreements, which will be triggered if the
incumbent ITT Board is removed from office by the election of the Hilton
nominees.
11
<PAGE>
We hope that, notwithstanding this history, you will now sit down with us to
finalize the Hilton-ITT combination. If you are still unwilling to talk,
however, we have every confidence that the ITT shareholders will elect our
nominees on November 12 so that they can accept the superior Hilton offer.
Sincerely,
/s/ Stephen F. Bollenbach
Stephen F. Bollenbach
7. CERTAIN LEGAL MATTERS SINCE AUGUST 7, 1997; REGULATORY APPROVALS SINCE
AUGUST 7, 1997
The discussion set forth in Section 15 of the Offer to Purchase and Section
7 of the First Supplement is hereby amended and supplemented as follows:
Nevada Gaming Regulations. The Chairman of the Nevada Board has stated that
the Nevada Board will hold a special meeting on November 13, 1997 to consider
the application of Parent and the Purchaser to acquire control of the Company.
Parent has requested that the Nevada Commission schedule a special meeting on
November 13 or 14, 1997 to consider the application of Parent and the
Purchaser to acquire control of the Company.
New Jersey Gaming Regulations. At a hearing on October 22, 1997, the New
Jersey Casino Control Commission (the "CCC") unanimously qualified three of
the nominees of Parent or the Purchaser ("Hilton Nominees") to serve as
members of the Board in the event they are elected at the Annual Meeting. In
addition, at that hearing, the Chairman of the CCC stated that action would be
taken with respect to qualification (either on a plenary or temporary basis)
of the other eight Hilton Nominees at the CCC's next hearing on November 5,
1997. At the October 22, 1997 hearing, the CCC also directed Parent to file
for interim casino authorization immediately following completion of the
Offer.
Federal Communications Act Approvals. On October 15, 1997, the FCC issued an
order approving the insubstantial transfer of control of the Company that
would result upon the election of the Hilton Nominees at the Company's 1997
Annual Meeting.
Certain Litigation. On August 25, 1997, Parent and the Purchaser filed a
motion in the U.S. District Court for the District of Nevada seeking (i) to
preliminarily and permanently enjoin the Company and its directors from
proceeding with their proposed plan to break the Company up by spinning off
the Company's hotel and gaming businesses and the Company's educational
services business (the "Comprehensive Plan"), (ii) declaratory relief that by
adopting the Comprehensive Plan, the Company's directors breached their
fiduciary duties to the Company and its stockholders, (iii) declaratory relief
that the Company may not implement its Comprehensive Plan without obtaining a
stockholder vote, and (iv) to require the Company to conduct its Annual
Meeting no later than November 14, 1997. On September 29, 1997, the Nevada
Court found that the Company's Comprehensive Plan "had as its primary purpose
the entrenchment of the current ITT board," and that the implementation of the
Comprehensive Plan was designed to "impermissibly impede the exercise of the
shareholder franchise." The Nevada Court enjoined the Company from
implementing the Comprehensive Plan, and further ordered that the Company hold
its Annual Meeting on or before November 14, 1997.
On November 3, 1997, Parent and the Purchaser filed a complaint in the
Nevada Court against the Company, Starwood and individual members of the
Board. The complaint alleges that the Company and its directors unlawfully
excluded Hilton from the process that led to the Company entering into the
Starwood Agreement and that the Company and its directors wrongfully agreed to
pay Starwood a grossly excessive "break up" fee of up to $225 million and
expense reimbursement in excess of $25 million. The complaint alleges that the
"break up" fee and expense reimbursement provisions constitute a gross waste
of the Company's corporate assets and unlawfully interfere with the right of
the Company's stockholders to vote for the Hilton Nominees. The complaint
further alleges that the Company's directors have breached their fiduciary
duties to the
12
<PAGE>
Company's stockholders by engaging in corporate waste for the primary purpose
of entrenching and benefiting themselves and others in their positions at the
Company and that they have made materially misleading disclosures with respect
to the transaction contemplated by the Starwood Agreement. The complaint
seeks, among other things, an order invalidating the Starwood Agreement,
particularly the "break up" fee and expense reimbursement provisions thereof,
and seeks over $500 million in damages from the individual directors.
8. MISCELLANEOUS
Parent and the Purchaser have filed with the Commission amendments to the
Schedule 14D-1 furnishing certain additional information with respect to the
Offer, and may file further amendments thereto. The Schedule 14D-1 and any and
all amendments thereto, including exhibits, may be examined and copies may be
obtained from the principal office of the Commission in the same manner as
described in Section 8 of the Offer to Purchase with respect to information
concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS SECOND
SUPPLEMENT, THE FIRST SUPPLEMENT, THE OFFER TO PURCHASE, THE LETTERS OF
TRANSMITTAL, OR THE SCHEDULE 14D-1, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Except as modified by this Second Supplement and any amendments to the
Schedule 14D-1, the terms and conditions set forth in the Offer to Purchase
and the First Supplement remain applicable in all respects to the Offer, and
this Second Supplement should be read in conjunction with the Offer to
Purchase, the First Supplement and the revised (green) Letter of Transmittal.
HLT CORPORATION
November 3, 1997
13
<PAGE>
ANNEX I
CONTINGENT VALUE PREFERRED STOCK ("CVP STOCK")
ISSUER....................... The company surviving the Proposed Merger.
LIQUIDATION PREFERENCE....... The lesser of (i) the amount, if any, by which
the Target Price exceeds the Current Market
Value (determined as if the Valuation Period
were the 45 trading day period immediately
preceding (but not including) the date of
liquidation), and (ii) the Maximum Redemption
Amount, subject to a minimum liquidation
preference of $1 per share.
NO DIVIDENDS OR INTEREST..... No dividends or interest shall accrue on any
amounts payable to holders pursuant to the
terms of the CVP Stock.
MANDATORY REDEMPTION......... On the Redemption Date, each share of CVP Stock
("CVP Share") will be redeemed for payment of
the lesser of (i) the amount, if any, by which
the Target Price exceeds the Current Market
Value, and (ii) the Maximum Redemption Amount.
TARGET PRICE................. $40.
CURRENT MARKET VALUE......... The volume-weighted average of the prices per
share of Hilton Common Stock for all trades
reported on the New York Stock Exchange
("NYSE") (or such other exchange on which
shares of Hilton Common Stock are then listed)
of shares of Hilton Common Stock during 20
trading days in the Valuation Period, randomly
chosen on the first business day following the
end of the Valuation Period by the public
accounting firm then serving as the auditor of
Parent's financial statements.
VALUATION PERIOD............. The 45 trading day period immediately preceding
(but not including) the Redemption Date.
MAXIMUM REDEMPTION AMOUNT.... $12.
REDEMPTION DATE.............. The first anniversary of the effective time of
the Proposed Merger (or if such date is not a
business day, the next business day).
DISPOSITION REDEMPTION....... Upon the consummation of a Disposition, the
Issuer will redeem the CVP Shares and pay to
each holder, for each CVP Share held by such
holder, the lesser of (i) the amount, if any by
which the Discounted Target Price exceeds the
fair market value (as determined by an
independent financial expert) of the
consideration, if any, received for each share
of Hilton Common Stock by the holder thereof as
a result of such Disposition and assuming that
such holder did not exercise any right of
appraisal granted under law with respect to
such Disposition and (ii) the Maximum
Redemption Amount. The Disposition Redemption
will be effected on a date within 30 days after
the Disposition selected by the Issuer (the
"Disposition Redemption Date").
A-1
<PAGE>
DISPOSITION.................. A merger, consolidation or other business
combination involving Parent as a result of
which no shares of Hilton Common Stock shall
remain outstanding and the stockholders of
Hilton immediately prior to the merger,
consolidation or other business combination
shall not own a majority of the voting power of
the common equity securities received in such
merger, consolidation or other business
combination, or a sale, transfer or other
disposition, in one or a series of
transactions, of all or substantially all of
the assets of Parent; provided, however, that a
"Disposition" shall not mean, or occur upon, a
merger of Parent and any wholly owned
subsidiary of Parent, including the Issuer.
DISCOUNTED TARGET PRICE...... $40 discounted from the Redemption Date back to
the Disposition Redemption Date at a per annum
rate of 8%.
PERFORMANCE REDEMPTION....... (a) In the event the volume-weighted average of
the prices per share of Hilton Common Stock
for all trades reported on the NYSE (or
such other exchange on which shares of
Hilton Common Stock are then listed) during
any 20 consecutive trading day period prior
to the Redemption Date equals or exceeds
$40 per share, then the Issuer shall redeem
the CVP Shares for the Minimum Redemption
Amount per CVP Share in cash.
(b) In the event the Issuer determines that no
amount is otherwise payable upon a
redemption of the CVP Shares on the
Redemption Date or the Disposition
Redemption Date, as the case may be, the
Issuer shall redeem the CVP Shares on such
date for the Minimum Redemption Amount per
CVP Share in cash.
MINIMUM REDEMPTION AMOUNT.... $0.001.
FORM OF PAYMENT.............. At Issuer's discretion, (i) cash, (ii) the
equivalent trading value of Hilton Common Stock
(based on the volume-weighted average of the
prices per share of Hilton Common Stock for all
trades reported on the NYSE (or such other
exchange on which shares of Hilton Common Stock
are then listed) during the 20 consecutive
trading day period prior to payment), or (iii)
any combination of the foregoing; provided,
however, that payment of the Minimum Redemption
Amount must be made in cash.
ANTIDILUTION................. If Parent recapitalizes through a subdivision
of its outstanding shares of Hilton Common
Stock into a greater number of shares of Hilton
Common Stock, or a combination of its
outstanding shares of Hilton Common Stock into
a lesser number of shares of Hilton Common
Stock, or reorganizes, reclassifies or
otherwise changes its outstanding shares of
Hilton Common Stock into the same or a
different number of shares of other classes, or
declares a dividend on its outstanding shares
of Hilton Common Stock payable in shares of its
capital stock or securities convertible into
shares of its capital stock, the Issuer will
similarly recapitalize, combine, reorganize,
reclassify or otherwise change the CVP Shares
and will appropriately adjust the Discounted
Target Price, the Target Price, the Liquidation
Preference and the Maximum Redemption Amount.
A-2
<PAGE>
TRADING RESTRICTIONS......... Parent shall not, and shall not permit any of
its subsidiaries or affiliates to, purchase any
shares of Hilton Common Stock in open market
transactions, privately negotiated transactions
or otherwise, on any day during the Valuation
Period, except with respect to employee benefit
plans and other incentive compensation
arrangements.
LISTING...................... Issuer will use its reasonable best efforts to
cause the CVP Stock to be listed on the NYSE,
the American Stock Exchange, or The Nasdaq
National Market.
A-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Shares and, if applicable, the Rights and any other required documents should
be sent by each stockholder of the Company or by such stockholder's broker,
dealer, commercial bank, trust company or other nominee to the Depositary as
follows:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
(212) 858-2103
<TABLE>
<CAPTION>
By Hand or Overnight
By Mail: By Facsimile: Delivery:
<S> <C> <C>
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization New York, New York 10004
New York, New York 10274- Operations Department Attn: Securities
0064 Transfer Window,
Attn: Reorganization Subcellar One
Operations Department
</TABLE>
Confirm Facsimile by Telephone:
(212) 858-2103
Any questions or requests for assistance or additional copies of the Offer
to Purchase, this Second Supplement, the revised (green) Letter of
Transmittal, and the revised (grey) Notice of Guaranteed Delivery may be
directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your
broker, dealer, commercial bank or trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC. APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
2121 Avenue of the Stars
Suite 3000
Los Angeles, California 90067
(310) 282-5059 (Collect)
or
Call Toll-Free (800) 237-5022, ext. 5059
<PAGE>
EXHIBIT (A)(35)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
PURCHASE RIGHTS)
OF
ITT CORPORATION
AT
$80 NET PER SHARE IN CASH
PURSUANT TO THE OFFER TO PURCHASE DATED JANUARY 31, 1997,
THE FIRST SUPPLEMENT THERETO DATED AUGUST 7, 1997, AND
THE SECOND SUPPLEMENT THERETO DATED NOVEMBER 3, 1997
BY
HLT CORPORATION
A WHOLLY OWNED SUBSIDIARY
OF
HILTON HOTELS CORPORATION
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 17, 1997 UNLESS THE OFFER
IS EXTENDED.
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The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
By Hand or
By Mail: By Facsimile Transmission: Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization New York, New York
New York, New York Operations Department 10004
10274-0084 Attn: Securities
Attn: Reorganization Processing Window,
Operations Department Subcellar One
Confirm Facsimile by Telephone:
(212) 858-2103
---------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE
ACCOMPANYING INSTRUCTIONS.
DESCRIPTION OF SHARES TENDERED
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<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S)
(PLEASE
FILL IN, IF SHARE CERTIFICATE(S) TENDERED
BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------
TOTAL NUMBER OF NUMBER
CERTIFICATE SHARES REPRESENTED OF SHARES
NUMBER(S)* BY CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------
------------------------
------------------------
------------------------
------------------------
------------------------
TOTAL SHARES
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being
delivered to the Depositary are being tendered. See Instruction 4.
<PAGE>
DESCRIPTION OF RIGHTS TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S)
(PLEASE
FILL IN, IF RIGHTS CERTIFICATE(S) TENDERED
BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------
TOTAL NUMBER OF NUMBER
CERTIFICATE RIGHTS REPRESENTED OF RIGHTS
NUMBER(S)** BY CERTIFICATE(S) TENDERED***
<S> <C> <C> <C>
-------------------------
-------------------------
-------------------------
-------------------------
-------------------------
-------------------------
TOTAL RIGHTS
</TABLE>
- -------------------------------------------------------------------------------
* If the tendered Rights are represented by separate Rights Certificates,
complete the certificate numbers of such Rights Certificates.
Stockholders tendering Rights which are not represented by separate
certificates will need to submit an additional Letter of Transmittal if
Rights Certificates are distributed.
** Need not be completed by stockholders tendering by book-entry transfer.
*** Unless otherwise indicated, it will be assumed that all Rights being
delivered to the Depositary are being tendered. See Instruction 4.
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Rights tendered hereby. The certificates and number of Rights that the
undersigned wishes to tender should be indicated in the appropriate boxes.
This revised (green) Letter of Transmittal, or the previously circulated
(yellow or blue) Letters of Transmittal, is to be used either if certificates
evidencing Shares and/or Rights (each as defined below) are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase
dated January 31, 1997 (the "Offer to Purchase"), as amended and supplemented
by the Supplement thereto dated August 7, 1997 (the "First Supplement") and
the Second Supplement thereto, dated November 3, 1997 (the "Second
Supplement")) is utilized, if delivery of Shares and/or Rights is to be made
by book-entry transfer to the account maintained by IBJ Schroder Bank & Trust
Company (the "Depositary") at The Depository Trust Company or Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase.
Holders of Shares will be required to tender one Right for each Share
tendered to effect a valid tender of such Share. Until the Distribution Date
(as defined in the Offer to Purchase) occurs, the Rights are represented by
and transferred with the Shares. Accordingly, if the Distribution Date does
not occur prior to the Expiration Date (as defined in the Offer to Purchase),
a tender of Shares will constitute a tender of the associated Rights. If a
Distribution Date has occurred, the Purchaser (as defined below) has waived
that portion of the Rights Condition (as defined in the Offer to Purchase)
requiring that a Distribution Date not have occurred and separate certificates
("Rights Certificates") have been distributed by the Company (as defined
below) to holders of Shares prior to the date of tender pursuant to the Offer
(as defined below), Rights Certificates representing a number of Rights equal
to the number of Shares being tendered must be delivered to the Depositary in
order for such Shares to be validly tendered. If a Distribution Date has
occurred, the Purchaser (as defined below) has waived that portion of the
Rights Condition (as defined in the Offer to Purchase) requiring that a
Distribution Date not have occurred and Rights Certificates have not been
distributed prior to the time Shares are tendered pursuant to the Offer, a
tender of Shares without Rights constitutes an agreement by the tendering
stockholder to deliver Rights Certificates representing a number of Rights
equal to the number of Shares tendered pursuant to the Offer to the Depositary
within three business days after the date Rights Certificates are distributed.
The Purchaser reserves the right to require that it receive such Rights
Certificates prior to accepting Shares for payment. Payment for Shares
tendered and purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of, among other things, Rights Certificates, if such
certificates have been distributed to holders of Shares. The Purchaser will
not pay any additional consideration for the Rights tendered pursuant to the
Offer.
Holders whose certificates for Shares and, if applicable, Rights, are not
immediately available (including, if the Distribution Date has occurred, but
Rights Certificates have not yet been distributed by the Company), or who
cannot deliver
<PAGE>
confirmation of the book-entry transfer of their Shares into the Depositary's
account at a Book-Entry Transfer Facility ("Book-Entry Confirmation") and all
other documents required hereby to the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase), must tender their
Shares and Rights according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2 of this Letter of
Transmittal. Delivery of documents to a Book-Entry Transfer Facility does not
constitute delivery to the Depositary.
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Check Box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Account Number ________________________________________________________________
Transaction Code Number ______________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY (AS DEFINED IN THE OFFER TO PURCHASE) PREVIOUSLY SENT TO
THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to HLT Corporation, a Delaware corporation
(the "Purchaser") and wholly owned subsidiary of Hilton Hotels Corporation, a
Delaware corporation ("Parent"), (i) the above described shares (the "Shares")
of common stock, without par value (the "Common Stock"), of ITT Corporation, a
Nevada corporation (the "Company"), and (ii) unless and until validly redeemed
by the Board of Directors of the Company (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 and The Bank of New York, as Rights
Agent (as previously amended, the "Rights Agreement"), at a price of $80 per
Share (including associated Right), net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, the First Supplement, the
Second Supplement (receipt of each of which is hereby acknowledged), and in
the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer"). Unless the context requires otherwise, all
references to Shares herein shall include the associated Rights, and all
references to the Rights shall include all benefits that may inure to the
holders of the Rights pursuant to the Rights Agreement. Subject to, and
effective upon, acceptance for payment of the Shares and Rights tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
and Rights that are being tendered hereby (and any and all other Shares,
rights or other securities issued or issuable in respect thereof on or after
January 31, 1997) and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and Rights (and any such other shares, rights or securities) with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver certificates for
such Shares and Rights (individually, a "Share Certificate" and a "Rights
Certificate," respectively) (and any such other shares, rights or securities),
or transfer ownership of such Shares and Rights (and any such other shares,
rights or securities) on the account books maintained by a Book-Entry Transfer
Facility, together in either such case with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Purchaser upon receipt
by the Depositary, as the undersigned's agent, of the purchase price
(adjusted, if appropriate, as provided in the Offer to Purchase), (b) present
such Shares and Rights (and any such other Shares, rights or securities) for
transfer on the books of the Company and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares and
Rights (and any other such shares, rights or securities), all in accordance
with the terms of the Offer.
The undersigned understands that, unless the Rights are redeemed prior to
the expiration of the Offer, stockholders will be required to tender one Right
for each Share tendered in order to effect a valid tender of such Share. The
undersigned understands that if the Distribution Date has occurred, the
Purchaser has waived that portion of the Rights Condition requiring that a
Distribution Date not have occurred, and Rights Certificates have been
distributed to holders of Shares prior to the date of tender pursuant to the
Offer, Rights Certificates representing a number of Rights equal to the number
of Shares being tendered herewith must be delivered to the Depositary or, if
available, a Book-Entry Confirmation must be received by the Depositary with
respect thereto. If the Distribution Date has occurred, the Purchaser has
waived that portion of the Rights Condition requiring that a Distribution Date
not have occurred, and Rights Certificates have not been distributed prior to
the time Shares are tendered herewith, the undersigned agrees hereby to
deliver Rights Certificates representing a number of Rights equal to the
number of Shares tendered herewith to the Depositary within three business
days after the date such Rights Certificates are distributed. The Purchaser
reserves the right to require that the Depositary receive such Rights
Certificates, or a Book-Entry Confirmation, if available, with respect to such
Rights prior to accepting Shares for payment. Payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of, among other things, Rights Certificates if such
certificates have been distributed to holders of Shares. The Purchaser will
not pay any additional consideration for the Rights tendered pursuant to the
Offer.
If, on or after January 27, 1997, the Company should declare or pay any cash
or stock dividend or other distribution on or issue any rights (other than the
Rights) with respect to the Shares payable or distributable to stockholders of
record on a date before the transfer to the name of the Purchaser or its
nominee or transferee on the Company's stock transfer records of the Shares
accepted for payment pursuant to the Offer, then, subject to the provisions of
Section 14 of the Offer to Purchase, (i) the purchase price per Share payable
by the Purchaser pursuant to the Offer will be reduced by the amount of any
such cash dividend or cash distribution and (ii) the whole of any such non-
cash dividend, distribution or right will be received and held by the
tendering stockholder for the account of the Purchaser and shall be required
to be promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
<PAGE>
documentation of transfer. Pending such remittance, the Purchaser will be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct
from the purchase price the amount of value thereof, as determined by the
Purchaser in its sole discretion.
The undersigned hereby irrevocably appoints Stephen F. Bollenbach, Matthew
J. Hart, Scott A. LaPorta, Thomas E. Gallagher and each of them, the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution to the full extent of such stockholder's rights with respect to
tendered Shares and Rights (and any and all other Shares, rights or securities
issued or issuable in respect thereof on or after January 31, 1997), to vote
in such manner as each such attorney and proxy or his substitute shall in his
sole discretion deem proper, and otherwise act with respect to all the Shares
and Rights tendered hereby which have been accepted for payment by the
Purchaser prior to the time of such vote which the undersigned is entitled to
vote at any meeting of stockholders (whether annual or special and whether or
not an adjourned meeting) of the Company, or otherwise. This proxy is coupled
with an interest in the Company and in the Shares and Rights and is
irrevocable and is granted in consideration of, and is effective when, if and
to the extent that the Purchaser accepts such Shares and Rights for payment
pursuant to the Offer. Such acceptance for payment shall revoke, without
further action, all prior proxies granted by the undersigned at any time with
respect to such Shares and Rights (and any such other Shares or other
securities) and no subsequent proxies will be given (and if given will be
deemed not to be effective) with respect thereto by the undersigned. The
undersigned acknowledges that in order for Shares and Rights to be deemed
validly tendered, immediately upon the acceptance for payment of such Shares
and Rights, the Purchaser or the Purchaser's designee must be able to exercise
full voting and all other rights which inure to a record and beneficial holder
with respect to such Shares and Rights.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares and Rights
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after January 31, 1997), and that, when the
same are accepted for payment by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete or confirm the sale, assignment and transfer of the
Shares and Rights tendered hereby (and any and all such other Shares, rights
or other securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives of
the undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable, provided that Shares and Rights tendered pursuant to the Offer
may be withdrawn at any time prior to their acceptance for payment.
The undersigned understands that tenders of Shares and Rights pursuant to
any one of the procedures described in Section 3 of the Offer to Purchase and
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept
for payment any of the Shares and Rights tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares or Rights not tendered or accepted for payment in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
certificates for Shares or Rights not tendered or accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature. In the event that both the Special
Delivery Instructions and the Special Payment Instructions are completed,
please issue the check for the purchase price and/or return any certificates
for Shares or Rights not tendered or accepted for payment in the name of, and
deliver such check and/or return such certificates to the person or persons so
indicated. Stockholders delivering Shares or rights by book-entry transfer
may request that any Shares or Rights not accepted for payment be returned by
crediting such account maintained at a Book-Entry Transfer Facility as such
stockholder may designate by making an appropriate entry under "Special
Payment Instructions." The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special
<PAGE>
Payment Instructions to transfer any Shares or Rights from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares or Rights so tendered.
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF
TRANSMITTAL)
To be completed ONLY if certificates for Shares and/or Rights not tendered or
not purchased and/or the check for the purchase price of Shares and/or Rights
purchased are to be issued in the name of someone other than the undersigned,
or if Shares and/or Rights delivered by book-entry transfer which are not
purchased are to be returned by credit to an account maintained at a Book-Entry
Transfer Facility other than that designated above.
Issue [_] Check and/or [_] Certificates to:
Name
------------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
-----------------------------------------------------------
(ZIP CODE)
-----------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
[_] Credit unpurchased Shares and/or Rights delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below:
Check appropriate box:
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
-----------------------------------------------------------
(ACCOUNT NUMBER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER
OF TRANSMITTAL)
To be completed ONLY if certificates for Shares and/or Rights not tendered or
not purchased and/or the check for the purchase price of Shares and/or Rights
purchased are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail [_] Check and/or [_] Certificates to:
Name
------------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
-----------------------------------------------------------
(ZIP CODE)
- --------------------------------------------------------------------------------
<PAGE>
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
...............................................................
...............................................................
(SIGNATURE(S) OF HOLDER(S))
Dated: ................................................... 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. See
Instruction 5 of this Letter of Transmittal.)
Name(s)........................................................................
..........................................................................
(PLEASE PRINT)
Capacity (Full title)..........................................................
Address........................................................................
..........................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number.................................................
Tax Identification or Social Security No.......................................
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)
Authorized Signature...........................................................
Name...........................................................................
(PLEASE PRINT)
Title..........................................................................
Name of Firm...................................................................
Address........................................................................
...............................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number.................................................
Dated: .................................................................., 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares and/or Rights (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares or
Rights) tendered herewith, unless such holder has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the reverse hereof or (ii) if such Shares and/or Rights are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing
of the Securities Transfer Agents Medallion Program (each, an "Eligible
Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5
of this Letter of Transmittal.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by stockholders either if certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in Section 3 of the Offer to
Purchase. Certificates for all physically tendered Shares and/or Rights, or
any Book-Entry Confirmation of Shares and/or Rights, as the case may be, as
well as a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof), with any required signature guarantees, or
an Agent's Message (as defined below), in the case of a book-entry delivery,
and any other documents required by this Letter of Transmittal must be
transmitted to and received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date and, if a Distribution Date has
occurred and the Purchaser has waived that portion of the Rights Condition
requiring that a Distribution Date not have occurred, Rights Certificates, or
Book-Entry Confirmation of a transfer of Rights into the Depositary's account
at a Book-Entry Transfer Facility, if available (together with, if Rights are
forwarded separately from Shares, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) with any required signature
guarantee, or an Agent's Message in the case of a book-entry delivery, and any
other documents required by this Letter of Transmittal), must be received by
the Depositary at one of its addresses set forth herein prior to the
Expiration Date or, if later, within three business days after the date on
which such Rights Certificates are distributed. If a holder's Share
Certificates and, if applicable, Rights Certificates, are not immediately
available (including, if Rights Certificates have not yet been distributed) or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such holder's Shares and/or Rights may
nevertheless be tendered by properly completing and duly executing the Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase. Pursuant to such procedure, (i) such
tender must be made by or through an Eligible Institution, (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by the Purchaser, must be received by the Depositary prior
to the Expiration Date and (iii) in the case of a guarantee of Shares and/or
Rights, the certificates for all tendered Shares and/or Rights, in proper form
for transfer, or a Book-Entry Confirmation, together with a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile thereof)
with any required signature guarantee (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by such Letter
of Transmittal, must be received by the Depositary (a) in the case of Shares,
within three NYSE trading days after the date of execution of such Notice of
Guaranteed Delivery or (b) in the case of Rights, within a period ending on
the later of (i) three NYSE trading days after the date of execution of such
Notice of Guaranteed Delivery or (ii) three business days after Rights
Certificates are distributed to stockholders by the Company. If Share
Certificates and Rights Certificates are forwarded separately to the
Depositary, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) must accompany each such delivery. The term "Agent's
Message" means a message, transmitted by a Book-Entry Transfer Facility to,
and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express instruction from the participant in such Book-Entry Transfer
Facility tendering the Shares or Rights, that such participant has received
and agrees to be bound by the terms of this Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
<PAGE>
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARES CERTIFICATES,
AND, IF APPLICABLE, RIGHTS CERTIFICATES, AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
PROPERLY INSURED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
EXCEPT AS OTHERWISE PROVIDED IN INSTRUCTION 2 OF THIS LETTER OF TRANSMITTAL,
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares or Rights will be purchased. All tendering stockholders, by
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), waive any right to receive any notice of the acceptance of their
Shares or Rights for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and, if applicable, Rights
should be listed on a separate signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares or Rights evidenced by any certificate
submitted are to be tendered, fill in the number of Shares or Rights which are
to be tendered in the box entitled "Description of Shares to be Tendered" and
"Description of Rights to be Tendered" respectively. In such case, new
certificate(s) for the remainder of the Shares or Rights that were evidenced
by your old certificate(s) will be sent to you, unless otherwise provided in
the appropriate box on this Letter of Transmittal, as soon as practicable
after the Expiration Date. All Shares and Rights represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature(s) must correspond exactly to the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares or Rights tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares or Rights are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares or Rights listed and transmitted hereby, no endorsement of certificates
or separate stock powers is required unless payment or certificates for Shares
or Rights not tendered or purchased are to be issued to a person other than
the registered owner(s). Signatures on such certificates or stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares or Rights listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6 of this
Letter of Transmittal, the Purchaser will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of purchased
<PAGE>
Shares and Rights to it or its order pursuant to the Offer. If payment of the
purchase price is to be made, or if certificates for Shares and/or Rights not
tendered or purchased are to be registered in the name of any person other
than the registered holder, or if tendered certificates are registered in the
name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6 OF THIS LETTER OF TRANSMITTAL, IT
WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE
CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or certificates
for unpurchased Shares or Rights are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be
sent and/or such certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be
completed. Stockholders tendering Shares or Rights by book-entry transfer may
request that Shares and Rights not purchased be credited to such account
maintained at a Book-Entry Transfer Facility as such stockholder may designate
hereon. If no such instructions are given, such Shares and Rights not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility designated above.
8. Requests for Assistance or Additional Copies. Requests for assistance may
be directed to the Dealer Manager or the Information Agent (as such terms are
defined in the Offer to Purchase) at the addresses set forth below. Additional
copies of the Offer to Purchase, the First Supplement, the Second Supplement,
this Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 may be obtained from the Dealer Manager or the Information Agent at
the addresses set forth below or from your broker, dealer, commercial bank or
trust company.
9. Waiver of Conditions. The conditions of the Offer may be waived, in whole
or in part, by the Purchaser at any time and from time to time, in the case of
any Shares or Rights tendered.
10. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify, under penalties of perjury, that such number is correct
and that such stockholder is not subject to backup withholding of federal
income tax. If a tendering stockholder has been notified by the Internal
Revenue Service that such stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such stockholder has since been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to 31% federal income tax withholding with
respect to any payments received pursuant to the Offer and Proposed Merger (as
defined in the Offer to Purchase). If the tendering stockholder has not been
issued a TIN and has applied for one or intends to apply for one in the near
future, such stockholder should write "Applied For" in the space provided for
the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute
Form W-9. If "Applied For" is written in Part I and the Depositary is not
provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares or Rights has been lost, destroyed or stolen, the
stockholder should promptly notify the Depositary. The stockholder will then
be instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates
have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS
ADDRESSES SET FORTH HEREIN PRIOR TO THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a stockholder whose tendered
Shares are accepted for payment is required by law to provide the Depositary
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder with respect
to Shares and Rights purchased pursuant to the Offer may be subject to backup
withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies with respect to a stockholder, the Depositary
is required to withhold 31% of any payments made to such stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares or Rights purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of such stockholder's correct
TIN by completing the form below certifying (a) that the TIN provided on the
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN),
and (b) that such stockholder is not subject to backup withholding because (i)
such stockholder is exempt from backup withholding, (ii) such stockholder has
not been notified by the Internal Revenue Service that such stockholder is
subject to backup withholding as a result of a failure to report all interest
or dividends or (iii) such stockholder has been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares
and/or Rights tendered hereby. If the Shares and/or Rights are in more than
one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report. If the tendering
stockholder has not been issued a TIN and has applied for a number or intends
to apply for a number in the near future, the stockholder should write
"Applied For" in the space provided for in the TIN in Part I, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% of all payments of the purchase price to such stockholder until a
TIN is provided to the Depositary.
<PAGE>
- --------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- --------------------------------------------------------------------------------
PART I--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND ----------------------
CERTIFY BY SIGNING AND Social Security Number
DATING BELOW. OR
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY ----------------------
INTERNAL Employer Identification
REVENUE Number (If awaiting TIN
SERVICE write "Applied For")
--------------------------------------------------------
PAYER'S REQUEST PART II--For Payees exempt from backup withholding,
FOR TAXPAYER see the enclosed Guidelines for Certification of
IDENTIFICATION Taxpayer Identification Number on Substitute Form
NUMBER (TIN) W-9 and complete as instructed therein.
CERTIFICATION--Under penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or a Taxpayer
Identification Number has not been issued to
me) and either (a) I have mailed or delivered
an application to receive a Taxpayer
Identification Number to the appropriate
Internal Revenue Service ("IRS") or Social
Security Administration office or (b) I intend
to mail or deliver an application in the near
future. I understand that if I do not provide a
Taxpayer Identification Number within 60 days,
31% of all reportable payments made to me
thereafter will be withheld until I provide a
number, and
(2) I am not subject to backup withholding either
because (a) I am exempt from backup
withholding, (b) I have not been notified by
the IRS that I am subject to backup withholding
as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me
that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE DATE , 1997
------------------------------- --------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, the First Supplement, the Second Supplement, this Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
2121 Avenue of the Stars
Suite 3000
Los Angeles, CA 90067
(310) 282-5059 (Collect)
or
CALL TOLL-FREE (800) 237-5022, EXT. 5059
<PAGE>
EXHIBIT (A)(36)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING
CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS)
OF
ITT CORPORATION
TO
HLT CORPORATION
A WHOLLY OWNED SUBSIDIARY
OF
HILTON HOTELS CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to tender Shares (as defined below) and Rights (as defined below)
pursuant to the Offer (as defined below) if (i) certificates ("Share
Certificates") representing shares (the "Shares") of common stock, without par
value (the "Common Stock"), of ITT Corporation, a Nevada corporation (the
"Company"), or if applicable, certificates ("Rights Certificates") for the
associated Series A Participating Cumulative Preferred Stock Purchase Rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of November
1, 1995, between the Company and The Bank of New York, as Rights Agent (as
previously amended, the "Rights Agreement"), are not immediately available
(including, if a Distribution Date (as defined in the Offer to Purchase, dated
January 31, 1997 (the "Offer to Purchase") as amended and supplemented by the
Supplement thereto dated August 7, 1997 (the "First Supplement") and the
Second Supplement thereto, dated November 3, 1997 (the "Second Supplement"))
has occurred, because Rights Certificates have not yet been distributed); (ii)
time will not permit all required documents to reach the IBJ Schroder Bank &
Trust Company, as Depositary (the "Depositary"), prior to the Expiration Date
(as defined in the Offer to Purchase); or (iii) the procedure for delivery by
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by
telegram or facsimile to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
By Mail: By Facsimile By Hand or
P.O. Box 84 Transmission: Overnight Delivery:
Bowling Green Station (212) 858-2611 One State Street
New York, New York Attn: Reorganization New York, New York 10004
10274-0084 Operations Department Attn: Securities
Attn: Reorganization Processing Window,
Operations Department Subcellar One
Confirm Facsimile by Telephone:
(212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to HLT Corporation, a Delaware corporation
and a wholly owned subsidiary of Hilton Hotels Corporation, a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, the First Supplement, the Second Supplement, and in the
related Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Shares and Rights
indicated below pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Number of Shares: __________________________________________________________
Number of Rights: __________________________________________________________
Name(s) of Record Holder(s) ________________________________________________
____________________________________________________________________________
Please Type or Print
____________________________________________________________________________
Address(es): _______________________________________________________________
Zip Code
Area Code and Tel. No.: ____________________________________________________
Certificate No(s). (if available) __________________________________________
____________________________________________________________________________
Share Certificates: ________________________________________________________
Rights Certificates: _______________________________________________________
Check ONE box if Shares or Rights will be tendered by book-entry transfer:
[_]The Depository Trust Company
[_]Philadelphia Depository Trust Company
Signature(s): ______________________________________________________________
____________________________________________________________________________
Account Number _____________________________________________________________
Dated _________________ , 1997
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of
the Securities Transfer Agents Medallion Program, hereby (a) represents
that the tender of Shares (or Rights, if applicable) effected hereby
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as
amended and (b) guarantees delivery to the Depositary, at one of its
addresses set forth above, of certificates representing the Shares and
Rights tendered hereby in proper form for transfer, or confirmation of
book-entry transfer of such Shares and Rights into the Depositary's
accounts at The Depository Trust Company or Philadelphia Depository Trust
Company, in each case with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), and any other
required documents, within (a) in the case of Shares, three New York Stock
Exchange, Inc. ("NYSE") trading days after the date hereof or (b) in the
case of Rights, a period ending on the later of (i) three NYSE trading days
after the date hereof or (ii) three business days after the date Rights
Certificates are distributed to stockholders.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
the certificates for Shares and Rights to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to
such Eligible Institution.
Name of Firm: ______________________________________________________________
____________________________________________________________________________
Authorized Signature
Address: ___________________________________________________________________
Zip Code
Area Code and Tel. No.: ____________________________________________________
Name: ______________________________________________________________________
Please Type or Print
Title: _____________________________________________________________________
Date __________________ , 1997
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE.
CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE>
EXHIBIT (A)(37)
HLT CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
HILTON HOTELS CORPORATION
HAS AMENDED ITS OFFER AND IS NOW OFFERING TO PURCHASE FOR CASH
65,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
PURCHASE RIGHTS)
OF
ITT CORPORATION
AT
$80 NET PER SHARE IN CASH
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 17, 1997, UNLESS THE OFFER
IS EXTENDED.
- --------------------------------------------------------------------------------
November 3, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been engaged by HLT Corporation, a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Hilton Hotels Corporation, a
Delaware corporation ("Parent"), to act as Dealer Manager in connection with
the Purchaser's offer to purchase (i) 65,000,000 shares (the "Maximum Number")
of common stock, without par value per share (the "Shares"), of ITT
Corporation, a Nevada corporation (the "Company"), and (ii) unless and until
the Purchaser declares that the Rights Condition (as defined in the Offer to
Purchase dated January 31, 1997 (the "Offer to Purchase"), as amended and
supplemented by the Supplement thereto dated August 7, 1997 (the "First
Supplement") and the Second Supplement thereto, dated November 3, 1997 (the
"Second Supplement")) is satisfied, the associated preferred stock purchase
rights (the "Rights") issued pursuant to the Rights Agreement, dated as of
November 1, 1995, by and between the Company and The Bank of New York, as
Rights Agent (as previously amended, the "Rights Agreement"). The Purchaser is
tendering for 65,000,000 Shares at a purchase price of $80 per Share
(including the associated Right), net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, the First Supplement, the Second Supplement,
and in the Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer").
Unless the Rights are redeemed prior to the Expiration Date, holders of
Shares will be required to tender one associated Right for each Share tendered
in order to effect a valid tender of such Share. Accordingly, stockholders who
sell their Rights separately from their Shares and do not otherwise acquire
Rights may not be able to satisfy the requirements of the Offer for the tender
of Shares. If the Distribution Date (as defined in the Offer to Purchase) has
not occurred prior to the Expiration Date, a tender of Shares will also
constitute a tender of the associated Rights. If the Distribution Date has
occurred, the Purchaser has waived that portion of the Rights Condition
requiring that a Distribution Date not have occurred and Rights Certificates
(as defined in the Offer to Purchase) have been distributed to holders of
Shares prior to the time a holder's Shares are purchased pursuant to the
Offer, in order for Rights (and the corresponding Shares) to be validly
tendered, Rights Certificates representing a number of Rights equal to the
number of Shares tendered must be delivered to the Depositary (as defined in
the Offer to Purchase) or, if available, a Book-Entry Confirmation (as defined
in the Offer to Purchase) must be received by the Depositary with respect
thereto. If the Distribution Date has occurred, the Purchaser has waived that
portion of the Rights Condition requiring that a Distribution Date not have
occurred and Rights Certificates have not been distributed prior to the time
Shares are purchased pursuant to the Offer, Rights may be tendered prior to a
stockholder receiving Rights Certificates by use of
<PAGE>
the guaranteed delivery procedure described in Section 3 of the Offer to
Purchase. In any case, a tender of Shares constitutes an agreement by the
tendering stockholder to deliver Rights Certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary within three business days after the date Rights Certificates are
distributed. The Purchaser reserves the right to require that the Depositary
receive Rights Certificates, or a Book-Entry Confirmation, if available, with
respect to such Rights prior to accepting the related Shares for payment
pursuant to the Offer if the Distribution Date has occurred prior to the
Expiration Date.
If a stockholder desires to tender Shares and Rights pursuant to the Offer
and such stockholder's Share Certificates (as defined in the Offer to
Purchase) or, if applicable, Rights Certificates are not immediately available
(including, if the Distribution Date has occurred and the Purchaser waives
that portion of the Rights Condition requiring that a Distribution Date not
have occurred, because Rights Certificates have not yet been distributed) or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares or Rights may nevertheless be
tendered according to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal.
Delivery of documents to a Book-Entry Transfer Facility (as defined in the
Offer to Purchase) in accordance with the Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
63,500,000 SHARES, INCLUDING THE RIGHTS ASSOCIATED THEREWITH.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. The Second Supplement;
2. The revised (green) Letter of Transmittal to be used by holders of
Shares and Rights in accepting the Offer and tendering Shares and Rights;
3. A revised (yellow) letter which may be sent to your clients for whose
account you hold Shares registered in your name or in the name of your
nominees, with space provided for obtaining such clients' instructions with
regard to the Offer;
4. The revised (grey) Notice of Guaranteed Delivery to be used to accept
the Offer if certificates for Shares and Rights are not immediately
available (including if certificates for Rights have not yet been
distributed) or if time will not permit all required documents to reach the
Depositary by the Expiration Date or if the procedure for book-entry
transfer cannot be completed on a timely basis;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay for the Maximum
Number of Shares (and, if applicable, the Rights) which are validly tendered
prior to the Expiration Date and not theretofore properly withdrawn when, as
and if the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of such Shares and Rights for payment pursuant to the
Offer. Payment for Shares and Rights purchased pursuant to the Offer will in
all cases be made only after timely receipt by the Depositary of certificates
for such Shares, and, if applicable, certificates for the Rights or timely
confirmation of a book-entry transfer of such Shares and Rights into the
Depositary's account at The Depository Trust Company or Philadelphia
Depository Trust Company, pursuant to the procedures described in Section 3 of
the Offer to Purchase, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer,
and all other documents required by the Letter of Transmittal.
<PAGE>
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager and Depositary) in connection
with the solicitation of tenders of Shares and Rights pursuant to the Offer.
The Purchaser will, however, upon request, reimburse you for customary mailing
and handling expenses incurred by you in forwarding the enclosed materials to
your clients.
The Purchaser will pay or cause to be paid any transfer taxes payable on the
transfer of Shares and Rights to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 17, 1997,
UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares and Rights
should be delivered or such Shares and Rights should be tendered by book-entry
transfer, all in accordance with the Instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares and Rights wish to tender, but it is impracticable for
them to forward their certificates or other required documents prior to the
expiration of the Offer, a tender may be effected by following the guaranteed
delivery procedures specified under Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager (as defined in the Offer to Purchase) or the Information
Agent (as defined in the Offer to Purchase) at their respective addresses and
telephone numbers set forth on the back cover page of the Supplement.
Additional copies of the enclosed materials may be obtained from the
undersigned, Donaldson, Lufkin & Jenrette Securities Corporation, by telephone
310-282-5059 (collect) or by calling the Information Agent, MacKenzie
Partners, Inc., at (212) 929-5500 (collect), or Toll-Free 800-322-2885, or
from brokers, dealers, commercial banks or trust companies.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE
ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT (A)(38)
HLT CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
HILTON HOTELS CORPORATION
HAS AMENDED ITS OFFER AND IS NOW OFFERING TO PURCHASE FOR CASH
65,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING
CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS)
OF
ITT CORPORATION
AT
$80 NET PER SHARE IN CASH
November 3, 1997
To Our Clients:
Enclosed for your consideration is a Supplement dated November 3, 1997 (the
"Second Supplement") to the Offer to Purchase, dated January 31, 1997 (the
"Offer to Purchase") and the revised (green) Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") relating to an
offer by HLT Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Hilton Hotels Corporation, a Delaware corporation
("Parent"), to purchase (i) 65,000,000 shares (the "Maximum Number") of common
stock, without par value per share (the "Shares"), of ITT Corporation, a
Nevada corporation (the "Company"), and (ii) (unless and until the Purchaser
declares that the Rights Condition (as defined in the Offer to Purchase) is
satisfied) the associated preferred stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of November 1, 1995, as
previously amended, by and between the Company and The Bank of New York, as
Rights Agent. The Purchaser is tendering for 65,000,000 Shares at a purchase
price of $80 per Share (including the associated Right), net to the seller in
cash, without interest thereon (the "Offer Price") upon the terms and subject
to the conditions set forth in the Offer to Purchase and the Second
Supplement.
Unless the Rights are redeemed prior to the Expiration Date, holders of
Shares will be required to tender one associated Right for each Share tendered
in order to effect a valid tender of such Share. Accordingly, stockholders who
sell their Rights separately from their Shares and do not otherwise acquire
Rights may not be able to satisfy the requirements of the Offer for the tender
of Shares. If the Distribution Date (as defined in the Offer to Purchase) has
not occurred prior to the Expiration Date, a tender of Shares will also
constitute a tender of the associated Rights. If the Distribution Date has
occurred, the Purchaser has waived that portion of the Rights Condition
requiring that a Distribution Date not have occurred and Rights Certificates
(as defined in the Offer to Purchase) have been distributed to holders of
Shares prior to the time a holder's Shares are purchased pursuant to the
Offer, in order for Rights (and the corresponding Shares) to be validly
tendered, Rights Certificates representing a number of Rights equal to the
number of Shares tendered must be delivered to the Depositary (as defined in
the Offer to Purchase) or, if available, a Book-Entry Confirmation (as defined
in the Offer to Purchase) must be received by the Depositary with respect
thereto. If the Distribution Date has occurred, the Purchaser has waived that
portion of the Rights Condition requiring that a Distribution Date not have
occurred and Rights Certificates have not been distributed prior to the time
Shares are purchased pursuant to the Offer, Rights may be tendered prior to a
stockholder receiving Rights Certificates by use of the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase. In any case, a
tender of Shares constitutes an agreement by the tendering stockholder to
deliver Rights Certificates representing a number of Rights equal to the
number of Shares tendered pursuant to the Offer to the Depositary within three
business days after the date Rights Certificates are distributed. The
Purchaser reserves the right to require that the Depositary receive Rights
Certificates, or a Book-Entry Confirmation, if available, with respect to such
Rights prior to accepting the related Shares for payment pursuant to the Offer
if the Distribution Date has occurred prior to the Expiration Date.
<PAGE>
If a stockholder desires to tender Shares and Rights pursuant to the Offer
and such stockholder's Share Certificates (as defined in the Offer to
Purchase) or, if applicable, Rights Certificates are not immediately available
(including, if the Distribution Date has occurred and the Purchaser waives
that portion of the Rights Condition requiring that a Distribution Date not
have occurred, because Rights Certificates have not yet been distributed) or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares or Rights may nevertheless be
tendered according to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal.
Delivery of documents to a Book-Entry Transfer Facility (as defined in the
Offer to Purchase) in accordance with the Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
A tender of such Shares and Rights can be made only by us as the holder of
record and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES OR RIGHTS HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of such
Shares and Rights held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $80 per Share, including the associated Rights,
net to the seller in cash without interest.
2. The Offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Monday, November 17, 1997, unless the
Offer is extended.
3. The Offer is being made for 65,000,000 Shares.
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least
63,500,000 Shares.
5. Stockholders who tender Shares and Rights will not be obligated to pay
brokerage commissions, solicitation fees or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase
of Shares and Rights by the Purchaser pursuant to the Offer.
The Purchaser is not aware of any jurisdiction where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of the Shares or Rights pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with
any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares or Rights in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of the Purchaser by the Dealer Manager (as defined in the
Offer to Purchase) or one or more registered brokers or dealers which are
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares and Rights, please
complete, sign and return to us the form set forth below. An envelope to
return your instructions to us is enclosed. Your instructions to us should be
forwarded in ample time to permit us to submit a tender on your behalf prior
to the expiration of the Offer. If you authorize the tender of your Shares and
Rights, all such Shares and Rights will be tendered unless otherwise specified
on the instruction form set forth below.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH 65,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A PARTICIPATING
CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS)
OF
ITT CORPORATION
The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase
dated January 31, 1997, the Supplement dated August 7, 1997, the enclosed
Second Supplement dated November 3, 1997, and the revised (green) Letter of
Transmittal (which, together as amended from time to time constitute the
"Offer") relating to the offer by HLT Corporation, a Delaware corporation (the
"Purchaser"), to purchase (i) 65,000,000 shares (the "Shares") of common
stock, without par value per share (the "Common Stock"), of ITT Corporation, a
Nevada corporation (the "Company"), and (ii) (unless and until the Purchaser
declares that the Rights Condition (as defined in the Offer to Purchase) is
satisfied) the associated preferred stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of November 1, 1995, between
the Company and The Bank of New York, as Rights Agent (as previously amended,
the "Rights Agreement").
This will instruct you to tender to the Purchaser the number of Shares and
Rights indicated below (or if no number is indicated below, all Shares and
Rights) held by you for the account of the undersigned, on the terms and
subject to the conditions set forth in the Offer.
NUMBER OF SHARES AND RIGHTS TO SIGN HERE
BE TENDERED:*
-------------------------------------
-------------------------------------
SHARES AND RIGHTS: Signature(s)
Account Number: _______________ -------------------------------------
Dated: __________________, 1997 -------------------------------------
Please Print Name(s) and address(es)
here
-------------------------------------
Area Code and Telephone Number
-------------------------------------
Tax Identification or Social
Security Number(s)
- --------
* Unless otherwise indicated, it will be assumed that all of your Shares and
Rights held by us for your account are to be tendered.
<PAGE>
EXHIBIT (A)(39)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares or Rights. The Offer is made solely by the Offer to Purchase
dated January 31, 1997, the First Supplement thereto dated August 7, 1997,
the Second Supplement thereto dated November 3, 1997, and the related
Letters of Transmittal, and is not being made to (nor will tenders
be accepted from or on behalf of) holders of Shares or Rights
in any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the
laws of such jurisdiction. In those jurisdictions
where securities, blue sky or other laws require
the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made
on behalf of HLT Corporation by Donaldson,
Lufkin & Jenrette Securities Corporation
or one or more registered brokers or
dealers licensed under the laws of
such jurisdiction.
HLT Corporation
a wholly owned subsidiary of
Hilton Hotels Corporation
Has Amended its Offer and is Now Offering to Purchase
65,000,000 Shares of Common Stock
(Including the Associated Series A Participating
Cumulative Preferred Stock Purchase Rights)
of
ITT Corporation
at the increased price of
$80 Net Per Share in Cash
HLT Corporation (the "Purchaser"), a Delaware corporation and a wholly owned
subsidiary of Hilton Hotels Corporation, a Delaware corporation ("Parent"), has
amended its offer and is now offering to purchase (i) 65,000,000 shares (the
"Maximum Number") of common stock, no par value per share (the "Shares"), of ITT
Corporation, a Nevada corporation (the "Company"), and (ii) unless and until
validly redeemed by the Board of Directors of the Company, the Series A
Participating Cumulative Preferred Stock Purchase Rights (the "Rights")
associated therewith, at a price of $80 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 dated January 31,
1997 (the "Offer to Purchase"), the Supplement thereto dated August 7, 1997 (the
"First Supplement"), the Second Supplement thereto dated November 3, 1997 (the
"Second Supplement"), and in the related Letters of Transmittal (which, as
amended from time to time, together constitute the "Offer"). Unless the context
requires otherwise, all references to Shares herein shall include the associated
Rights, and all references to the Rights shall include all benefits that may
inure to the holders of the Rights pursuant to the Rights Agreement (as defined
in the Second Supplement). Unless the Rights are redeemed prior to the
Expiration Date (as defined in the Offer to Purchase), holders of Shares will be
required to tender one associated Right for each Share tendered in order to
effect a valid tender of such Share. Accordingly, stockholders who sell their
Rights separately from their Shares and do not otherwise acquire Rights may not
be able to satisfy the requirements of the Offer for the tender of Shares.
Stockholders who have already tendered Shares pursuant to the Offer need not
take any further action in order to receive the increased tender offer price of
$80 per Share.
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, NOVEMBER 17, 1997, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
<PAGE>
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the expiration date at least 63,500,000
Shares, including the Rights associated therewith, (2) the Rights having been
redeemed by the Board of Directors of the Company or the Purchaser being
satisfied that the Rights have been invalidated or are otherwise inapplicable to
the Offer and the Proposed Merger (as defined below), (3) the Purchaser being
satisfied that the Nevada Control Share Acquisition Statute (as defined in the
Offer to Purchase) shall be inapplicable to the Offer and the Proposed Merger,
(4) the Purchaser being satisfied that the Nevada Business Combination Statute
(as defined in the Offer to Purchase) shall be inapplicable to the Offer and the
Proposed Merger, and (5) the Purchaser being satisfied that all material Gaming
Approvals (as defined in the Offer to Purchase) have been obtained on terms
satisfactory to the Purchaser. The Offer is also subject to other terms and
conditions contained in the Offer to Purchase. The Offer is not conditioned on
obtaining financing. See the Introduction and Sections 1, 14 and 15 of the Offer
to Purchase, and the First Supplement and Second Supplement.
Parent and the Purchaser are still seeking to negotiate with the Company with
respect to the acquisition of the Company by Parent or the Purchaser. The
Purchaser reserves the right to amend the Offer (including amending the number
of Shares to be purchased, the purchase price and the proposed second-step
merger consideration) upon entering into a merger agreement with the Company, or
to negotiate a merger agreement with the Company not involving a tender offer
pursuant to which the Purchaser would terminate the Offer and the Shares would,
upon consummation of such merger, be converted into cash, common stock of Parent
and/or other securities in such amounts as are negotiated by Parent, the
Purchaser and the Company.
The purpose of the Offer is to acquire control of, and ultimately the entire
equity interest in, the Company. Parent is seeking to negotiate with the Company
a definitive acquisition agreement (the "Proposed Merger Agreement") pursuant to
which the Company would, as soon as practicable following consummation of the
Offer, consummate a merger (the "Proposed Merger") with Parent or Purchaser or
another direct or indirect wholly owned subsidiary of Parent. In the Proposed
Merger, at the effective time of the Proposed Merger (the "Effective Time"),
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 Parent,
the Purchaser or any direct or indirect wholly owned subsidiary of Parent) would
be converted into (1) two shares of common stock, par value $2.50 per share, of
Parent ("Parent Common Stock"), and (2) unless the volume weighted average of
the prices per share of Parent Common Stock for all trades reported on the New
York Stock Exchange during the 20 trading days immediately preceding the last
business day before the Effective Time is equal to or greater than $40, two
shares of Contingent Value Preferred Stock ("CVP Shares"). The CVP Shares
provide that, if the Parent Common Stock does not reach $40 per share within one
year after the effective time of the Proposed Merger, the holder will receive a
payment in cash or additional shares of Parent Common Stock with a value equal
to the difference between $40 and the per share price of the Parent Common Stock
one year after the effective time of the Proposed Merger, up to a maximum of $12
per CVP Share.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Offer is open, including as a result of the occurrence of any of the
events specified in Section 14 of the Offer to Purchase, by giving oral or
written notice of such extension to the Depositary (as defined in the Offer to
Purchase) and by making a public announcement thereof. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the rights of a tendering stockholder to withdraw any
tendered Shares.
<PAGE>
Upon the terms and subject to the conditions of the Offer, if more than the
Maximum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date in accordance with Section 4 of the Offer to Purchase, the
Purchaser will purchase the Maximum Number of Shares on a pro rata basis (with
adjustments to avoid purchases of fractional Shares) based upon the number of
Shares validly tendered and not withdrawn prior to the Expiration Date. For
purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares if, as and when the Purchaser
gives oral or written notice to the Depositary of the Purchaser's acceptance of
such Shares for payment. Payment for Shares accepted pursuant to the Offer will
be made by deposit of the aggregate purchase price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payment from the Purchaser and transmitting payment to such tendering
stockholders. Under no circumstances will interest be paid by the Purchaser on
the Offer Price (as defined in the Second Supplement) for Shares by reason of
any delay in making such payment. Upon the deposit of funds with the Depositary
for the purpose of making payments to tendering stockholders, the Purchaser's
obligation to make such payment shall be satisfied and tendering stockholders
must thereafter look solely to the Depositary for payment of amounts owed to
them by reason of the acceptance for payment of Shares pursuant to the Offer. In
all cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (1)
certificates evidencing such Shares ("Share Certificates") and, if applicable,
certificates representing the associated Rights (the "Rights Certificates"), or
a timely confirmation of the book-entry transfer of such Shares and, if
applicable, Rights into the Depositary's account at a Book-Entry Transfer
Facility (as defined in the Offer to Purchase), pursuant to the procedures set
forth in Section 3 of the Offer to Purchase, (2) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer, and (3) any other documents
required by the Letter of Transmittal.
If, for any reason whatsoever, acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed, or the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Depositary
may, nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), retain
tendered Shares and such Shares may not be withdrawn except to the extent that
the tendering stockholder is entitled to and duly exercises withdrawal rights as
described in Section 4 of the Offer to Purchase. The Purchaser will pay any
stock transfer taxes incident to the transfer to it of validly tendered Shares,
except as otherwise provided in Instruction 6 of the Letter of Transmittal, as
well as any charges and expenses of the Depositary and the Information Agent (as
defined in the Offer to Purchase). If any tendering Shares are not accepted for
payment for any reason pursuant to the terms and conditions of the Offer
(including proration due to tenders of Shares pursuant to the Offer in excess of
the Maximum Number of Shares) or if Share Certificates are submitted evidencing
more Shares than are tendered, Share Certificates evidencing unpurchased or
untendered Shares will be returned, without expense to the tendering stockholder
(or, in the case of Shares tendered by book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 3 of the Offer to Purchase, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer. In the event separate
Rights Certificates are issued, similar action will be taken with respect to
unpurchased and untendered Rights. Except as otherwise provided in Section 4 of
the Offer to Purchase, tenders of Shares and Rights made pursuant to the Offer
are irrevocable. Shares and Rights tendered pursuant to the Offer may be
withdrawn at any time unless theretofore accepted for payment by the Purchaser
pursuant to the Offer or at such later time as may apply if the Offer is
extended. A withdrawal of Shares will also constitute a withdrawal of the
associated Rights. Rights may not be withdrawn unless the associated Shares are
also withdrawn.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in Section 4 of the
Offer to Purchase. Any such delay will be by an extension of the Offer to the
extent required by law.
<PAGE>
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares or Rights
to be withdrawn, the number of Shares or Rights to be withdrawn and (if Share
Certificates or Rights Certificates have been tendered) the name of the
registered holder, if different from that of the person who tendered such Shares
or Rights. If Share Certificates or Rights Certificates evidencing Shares or
Rights to be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the release of such Share Certificates or Rights
Certificates, the serial numbers shown on the particular Share Certificates or
Rights Certificates to be withdrawn must be submitted to the Depositary, and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in the Offer to Purchase), unless such Shares or Rights
have been tendered for the account of an Eligible Institution. If Shares or
Rights have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares or Rights, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of Shares or Rights may not be rescinded, but the holder thereof may
retender such Shares and Rights pursuant to the procedures set forth in the
Offer to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Exchange Act is contained in the Offer
to Purchase, the First Supplement and the Second Supplement and is incorporated
herein by reference.
The Purchaser has made an election, pursuant to Rule 14d-5(f)(1) under the
Exchange Act, to require the Company to mail copies of the Second Supplement and
related Letter of Transmittal to record holders of Shares or to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the Company's stockholder list and its
list of holders of Rights, if any, or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares and Rights.
The Offer to Purchase, the First Supplement, the Second Supplement, and the
revised Letter of Transmittal contain important information which should be read
carefully before any decision is made with respect to the Offer.
Questions and requests for assistance, and requests for copies of the Offer to
Purchase, the First Supplement, the Second Supplement, the revised Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Holders of Shares may also contact brokers, dealers, commercial
banks and trust companies for additional copies of the Offer to Purchase, the
First Supplement, the Second Supplement, the revised Letter of Transmittal or
other tender offer materials.
The Information Agent for the Offer is:
MacKenzie
Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
Securities Corporation
2121 Avenue of the Stars, Suite 3000
Los Angeles, CA 90067
(310) 282-5059 (Collect)
November 3, 1997
<PAGE>
EXHIBIT (A)(40)
[HILTON HOTELS CORPORATION LOGO]
CORPORATE NEWS
CONTACT: Marc A. Grossman Geoff Davis
Sr. Vice President - Corporate Affairs Director - Investor Relations
212-872-7176 - (on 11/3) 212-872-7176 - (on 11/3)
310-205-4030 310-205-4541
Kathy Shepard Joele Frank
Vice President - Corporate Communications Abernathy MacGregor
212-872-7176 - (on 11/3) 212-371-5999
310-205-7676
HILTON INCREASES OFFER FOR ITT TO $80
Beverly Hills, Calif. November 3, 1997 -- Hilton Hotels Corporation
(NYSE:HLT) announced today that it has increased its cash-and-stock offer for
ITT Corporation (NYSE:ITT) to $80. The new offer provides ITT shareholders
additional cash on the "front end," and guarantees the value of Hilton shares to
be received in the second step merger.
Under the terms of the revised bid, Hilton will tender for 55 percent
of the outstanding ITT shares at $80 in cash. This will be followed by a
second-step merger for the remainder of the ITT shares with ITT shareholders
receiving two shares of Hilton common stock for every share of ITT stock. In
addition, for each Hilton share received in the merger, ITT shareholders will
also receive a contingent value preferred share guaranteeing that the Hilton
stock price will reach $40 per share within one year after the merger, or they
will be paid an additional amount equal to the difference between the Hilton
stock price and $40 per share up to a $12 maximum per Hilton share.
Hilton expects that the cash tender offer would be completed within one
or two weeks following the election of Hilton's Board nominees at the November
12 annual meeting, with the merger expected to close within 90 days after the
election, subject to appropriate regulatory and other approvals.
"Our revised offer is clearly superior in that it brings more value,
more certainty and a number of significant advantages to ITT shareholders," said
Stephen F. Bollenbach, president and chief executive officer of Hilton Hotels
Corporation. "Shareholders receive more cash immediately under our offer as
compared to the Starwood bid, while the share price guarantee further increases
the certainty and value of our offer, especially when compared to the
uncertainty and risks built into the Starwood bid.
-more-
<PAGE>
Increased Offer
November 3, 1997
Page 2
"The fact that we are betting on the strength of our own stock ensures
that both Hilton and ITT shareholders will participate in the more certain
upside potential of a combined Hilton-ITT that will be the world's leading
lodging and gaming company," he said.
Matthew J. Hart, Hilton executive vice president and chief financial
officer, said, "We expect this transaction, as structured, will be non-dilutive
on an earnings per share basis in the first 12 months after closing the
transaction, and accretive thereafter. On a free cash flow (net income plus
depreciation, amortization and goodwill) per share basis, we expect the
transaction will be more than 35 percent accretive in 1993."
Hilton will nominate its slate of Directors at ITT's annual meeting,
scheduled for November 12. Upon election, these Directors will eliminate ITT's
poison pill and vote in favor of the Hilton-ITT merger, subject to their
fiduciary duty to consider any new bid that may be made after their election.
"The benefits of putting Hilton and ITT together continue to be
enormous, and a merger with Hilton brings more short-and long-term advantages to
ITT shareholders than any other combination," Bollenbach said. "A combined
Hilton-ITT will create maximum value through the implementation of identifiable
and achievable cost-savings and synergies, Hilton's operating experience in both
lodging and casino gaming, our commitment and ability to close the transaction
in a short time frame, and our management's long-standing track record of
creating shareholder value.
"The Starwood offer is long on questions and short on answers," he
added. Bollenbach cited as key issues the potential for significant delays and
uncertainty in closing; the prospect that Starwood's thinly traded stock will
experience downside volatility both prior to and after closing; Starwood's
public comments that call into question the future of ITT's gaming operations,
and Congressional concerns about the paired-share REIT structure. "These are
substantial risks and uncertainties that greatly reduce the value of the
Starwood bid," he said.
"The bottom line is that our new offer provides greater and more
certain value, as well as greater speed and certainty of completion," Bollenbach
added. "Creating a company as powerful as a Hilton-ITT combination is a unique
opportunity, and we look forward to bringing this new and superior offer to
ITT's shareholders."
In connection with the increase in the offer price to $80 per share and
the increase in the number of ITT shares to be purchased to 65 million, the
expiration of the offer has been extended to 12:00 midnight, New York City time
on November 17, 1997, unless again extended. To date approximately 27 million
shares have been tendered.
-more-
<PAGE>
Increased Offer
November 3, 1997
Page 3
Note to editors: Full text of Mr. Bollenbach's letter to ITT's Board of
Directors is attached.
Note to editors: There will be a media conference call November 3, 1997 at 11:30
a.m. EST, memorandum is attached.
###
<PAGE>
[HILTON HOTELS CORPORATION LOGO]
Office of the
President and Chief Executive Officer
November 3, 1997
Board of Directors
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5490
Dear Members of the Board:
Hilton is announcing this morning a revised offer for all of ITT that is clearly
superior to the proposed Starwood merger that you approved two weeks ago. Under
Hilton's revised offer, Hilton has shifted some of the value from the Hilton
common stock that we were prepared to issue under our previously announced offer
and added that value to the cash portion of our offer. This allows us to offer
$80 per ITT share in cash for 65,000,000 ITT shares, representing about 55% of
the currently outstanding ITT shares. In our second step merger, each remaining
ITT share will be converted into two Hilton shares.
Based on our confidence in the tremendous operating benefits that the Hilton-ITT
combination will generate, we will also guarantee that the stock price of the
Hilton shares issued in the merger will reach at least $40 per share (i.e. $80
per ITT share) within one year after the merger. This guarantee will take the
form of contingent value preferred stock that will pay the holder additional
cash of Hilton shares with a value equal to the difference between $40 and the
stock price per Hilton share one year after the merger, up to a $12 maximum per
Hilton share, in the event the Hilton shares issued in the merger have not
reached a stock price of at lease $40 per share within the first year after the
merger.
HILTON'S OFFER PROVIDES GREATER AND MORE CERTAIN VALUE
While the Starwood bid, which will be paid 82% in Starwood "paired shares" and
only 18% in real dollars, has a purported value of $82 per ITT share, its actual
value is far lower. Serious issues with respect to the true value of Starwood's
paired shares, the sustainability of Starwood's tax avoidance structure, the
timing of completion of the proposed Starwood merger, and the question of
whether the proposed Starwood merger will close at all, create substantial risks
and uncertainties that greatly reduce the value of Starwood's bid.
<PAGE>
Board of Directors
ITT Corporation
November 3, 1997
Page 2
In contrast to the Starwood bid, Hilton's revised offer will provide $80 per ITT
share in real dollars for 55% of the outstanding ITT shares. Hilton's second
step consideration of two Hilton shares per ITT share, even with no guarantee,
would offer more real value than the inflated Starwood shares that would be
issued in the Starwood proposal. The guarantee embodied in the contingent value
preferred stock ensures that this is true.
The value of the Hilton shares to be issued in the merger will be further
enhanced by the extraordinary operating benefits and synergies created by the
combination of our two companies. There can be no debate that the Hilton-ITT
combination creates far greater operating benefits than a combination of
Starwood and ITT. Indeed, the primary synergy of the proposed Starwood-ITT
merger is a tax structure that is both overstated in value and certain to come
under intense scrutiny from the Internal Revenue Service and Congress. We also
think that there can be no debate that the operating track record of Hilton's
management far surpasses that of Starwood's. Speaking personally, with virtually
all my wealth invested in Hilton stock, and on behalf of my fellow Hilton
directors and managers who, with me, own about 28% of the outstanding Hilton
shares, we are tremendously excited by the superb value we see in the combined
Hilton-ITT.
HILTON'S OFFER PROVIDES GREATER SPEED AND CERTAINTY OF COMPLETION
In connection with Hilton's restructured offer, we are extending the expiration
date of our cash tender offer, with its revised $80 per share price and
increased number of shares, to November 17. Other than ITT Board action to
exempt the offer from ITT's poison pill and the Nevada takeover statutes, the
only approvals still pending to close the offer are Nevada gaming approval and
FCC approval. We anticipate receiving these approvals immediately after ITT's
November 12 annual meeting and, accordingly, we expect to close the tender offer
within one to two weeks after the annual meeting. With your cooperation, we
could close the tender offer even sooner. We expect to close the second-step
merger within 90 days thereafter.
In contrast, ITT and Starwood initially stated that the proposed Starwood merger
could not close until March 1998. While ITT has recently tried to claim that
this timetable could be accelerated, based on our experience, even ITT's
original timetable is extremely optimistic. We believe a six to nine-month time
frame is more realistic. In addition, the
<PAGE>
Board of Directors
ITT Corporation
November 3, 1997
Page 3
Starwood proposal is subject to numerous approvals and has far less certainty
of ever closing at all. Together with the uncertain value of the Starwood
"paired shares," the substantial delay and uncertainly of completion associated
with the Starwood merger makes it even riskier and less valuable.
* * *
Hilton is also announcing today the filing of a new lawsuit against ITT and its
incumbent directors. While we would have preferred not to have to take this
legal action, the conduct of the ITT Board and management over the course of
the last eight months makes this step necessary. The lawsuit seeks to rescind
the Starwood merger agreement, particularly the grossly excessive break-up fees
and expenses that the ITT Board granted to Starwood under that agreement, and to
recover damages from members of the Board individually in connection with a
number of actions taken in clear violation of the Board's fiduciary duties.
In addition to the Starwood break-up fees and expenses, which were granted as
part of an auction for ITT that expressly excluded Hilton, these unlawful
actions include: unilaterally granting $165 million in golden parachutes to ITT
executives, a violation not only of the Board's duties but also of ITT's own
policy of not granting golden parachutes without shareholder approval; issuing
$550 million of European junk bonds obligating ITT to pay exorbitant interest
rates, in furtherance of ITT's break-up plan, just ten days before the Nevada
federal court enjoined that plan because its primary purpose was to entrench the
incumbent ITT Board; granting $29 million in break-up fees and expenses to
Clayton, Dubilier & Rice in connection with the abandoned plan; and agreeing to
innumerable change-of-control penalty provisions in hotel management contracts
and franchise agreements, which will be triggered if the incumbent ITT Board is
removed from office by the election of the Hilton nominees.
We hope that, notwithstanding this history, you will now sit down with us to
finalize the Hilton-ITT combination. If you are still unwilling to talk,
however, we have every confidence that the ITT shareholders will elect our
nominees on November 12 so that they can accept the superior Hilton offer.
Sincerely,
/s/ Stephen F. Bollenbach
Stephen F. Bollenbach
<PAGE>
EXHIBIT (G)(33)
-----------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ITT CORPORATION
HILTON HOTELS CORPORATION
AND
HLT CORPORATION
DATED AS OF
NOVEMBER __, 1997
-----------------------------------------------
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I. THE AMENDED OFFER............................................................................... 2
Section 1.1. The Amended Offer.......................................................................... 2
Section 1.2. ITT Actions................................................................................ 3
Section 1.3. ITT Stockholders' Meeting.................................................................. 4
Section 1.4. Hilton Stockholders' Meeting............................................................... 4
Section 1.5. Directors.................................................................................. 5
ARTICLE II. THE MERGER..................................................................................... 6
Section 2.1. The Merger................................................................................. 6
Section 2.2. Effective Time............................................................................. 6
Section 2.3. Certificate of Incorporation and By-Laws of Surviving Corporation.......................... 6
Section 2.4. Directors and Officers of Surviving Corporation............................................ 6
Section 2.5. Consummation of the Merger................................................................. 7
Section 2.6. Registration on Form S-4................................................................... 7
Section 2.7. Further Assurances......................................................................... 7
Section 2.8. Alternative Merger Structures.............................................................. 8
ARTICLE III. CONVERSION OF SHARES.......................................................................... 8
Section 3.1. Effect on ITT Shares and the Purchaser's Capital Stock..................................... 8
Section 3.2. ITT Option Plans........................................................................... 9
ARTICLE IV. EXCHANGE OF SHARES............................................................................. 11
Section 4.1. No Rights of Appraisal..................................................................... 11
Section 4.2. Exchange of Certificates................................................................... 11
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF ITT........................................................... 14
Section 5.1. Organization............................................................................... 14
Section 5.2. Capitalization............................................................................. 14
Section 5.3. Authority.................................................................................. 15
Section 5.4. No Violations; Consents and Approvals...................................................... 15
Section 5.5. SEC Documents; Financial Statements........................................................ 16
Section 5.6. Absence of Certain Changes................................................................. 17
Section 5.7. Rights Agreement........................................................................... 18
Section 5.8. Information................................................................................ 18
Section 5.9. NGCL....................................................................................... 19
Section 5.10. Broker's Fees.............................................................................. 19
Section 5.11. Third-Party Agreements..................................................................... 19
Section 5.12. ITT Affiliate Agreements................................................................... 20
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF HILTON AND THE PURCHASER..................................... 20
Section 6.1. Organization............................................................................... 20
Section 6.2. Capitalization............................................................................. 21
Section 6.3. Authority.................................................................................. 21
Section 6.4. No Violations; Consents and Approvals...................................................... 22
Section 6.5. SEC Documents; Financial Statements........................................................ 23
Section 6.6. Absence of Certain Changes................................................................. 24
Section 6.7. Information................................................................................ 24
Section 6.8. Financing.................................................................................. 24
Section 6.9. Broker's Fees.............................................................................. 24
ARTICLE VII. ADDITIONAL COVENANTS.......................................................................... 25
Section 7.1 Conduct of Business of ITT................................................................. 25
Section 7.2. Access to Information...................................................................... 26
Section 7.3. Reasonable Best Efforts; Other Actions..................................................... 26
Section 7.4. Public Announcements....................................................................... 26
Section 7.5. Notification of Certain Matters............................................................ 26
Section 7.6. Indemnification............................................................................ 27
Section 7.7. Expenses................................................................................... 27
Section 7.8. ITT Rights Agreement....................................................................... 27
Section 7.9. Takeover Laws and Provisions............................................................... 27
Section 7.10. Registration and Listing................................................................... 27
Section 7.11. Restricted Transactions.................................................................... 28
ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF HILTON, THE PURCHASER AND ITT............................... 28
Section 8.1. Purchase of Shares......................................................................... 28
Section 8.2. Stockholder Approval....................................................................... 28
Section 8.3. No Legal Impediments....................................................................... 28
ARTICLE IX. TERMINATION AND ABANDONMENT.................................................................... 28
Section 9.1. Termination................................................................................ 28
Section 9.2. Termination by Hilton...................................................................... 29
Section 9.3. Procedure for Termination.................................................................. 29
Section 9.4. Effect of Termination and Abandonment...................................................... 29
ARTICLE X. DEFINITIONS..................................................................................... 30
Section 10.1. Terms Defined in the Agreement............................................................. 30
ARTICLE XI. MISCELLANEOUS.................................................................................. 32
Section 11.1. Amendment and Modification................................................................. 32
Section 11.2. Waiver of Compliance; Consents............................................................. 32
Section 11.3. Survivability; Investigations.............................................................. 32
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 11.4. Notices.................................................................................... 32
Section 11.5. Assignment................................................................................. 33
Section 11.6. Governing Law.............................................................................. 34
Section 11.7. Counterparts............................................................................... 34
Section 11.8. Severability............................................................................... 34
Section 11.9. Interpretation............................................................................. 34
Section 11.10. Entire Agreement........................................................................... 34
</TABLE>
ANNEX I - CONDITIONS OF THE AMENDED OFFER
EXHIBIT 3.1 - TERMS OF CONTINGENT VALUE PREFERRED STOCK
EXHIBIT 5.12 - FORM OF ITT AFFILIATE AGREEMENT
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November [__], 1997 (this
"Agreement"), by and among ITT CORPORATION, a Nevada corporation ("ITT"), HILTON
HOTELS CORPORATION, a Delaware corporation ("Hilton"), and HLT CORPORATION, a
Delaware corporation and a wholly owned subsidiary of Hilton (the "Purchaser").
ITT and the Purchaser are hereinafter sometimes collectively referred to as the
"Constituent Corporations." Capitalized terms used in this Agreement shall have
the meanings ascribed to them herein.
RECITALS
WHEREAS, the Boards of Directors of Hilton (the "Hilton Board"), the
Purchaser and ITT (the "ITT Board") have each approved the acquisition of ITT by
Hilton upon the terms and subject to the conditions set forth herein;
WHEREAS, the Purchaser has made an offer, which was commenced on January
31, 1997 and amended on August 7, 1997 and November 3, 1997 (the "Offer"), to
purchase: (i) 65,000,000 shares of Common Stock, without par value, of ITT
("Shares") and (ii) unless and until validly redeemed by the ITT Board, 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, as amended on August 7, 1997 and
November 3, 1997, and in the related Letters of Transmittal, at a purchase price
of $80 per Share (and associated Right), net to the tendering stockholder in
cash, without interest thereon;
WHEREAS, the Boards of Directors of Hilton, the Purchaser and ITT have each
determined that it is in the best interests of their respective stockholders for
the Purchaser to acquire ITT pursuant to the Offer, as amended pursuant to the
terms of this Agreement (the "Amended Offer");
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Hilton, the Purchaser and ITT have each approved the merger of the Purchaser
with and into ITT in accordance with the terms of this Agreement, the General
Corporation Law of the State of Delaware (the "DGCL"), the Nevada Revised
Statutes Sections 92A.010 et. seq. (the "NRS"), and the Nevada General
Corporation Law (the "NGCL") and with any other applicable law; and
WHEREAS, the ITT Board has, in light of and subject to the terms and
conditions set forth herein, (i) determined that the consideration to be paid
for each Share
<PAGE>
in the Amended Offer and the Merger is fair to, and in the best interests of,
the stockholders of ITT and (ii) approved and adopted this Agreement and the
transactions contemplated hereby and to recommend acceptance of the Amended
Offer and approval and adoption by the stockholders of ITT of this Agreement and
the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I.
THE AMENDED OFFER
Section 1.1. The Amended Offer. (a) Hilton and the Purchaser have filed
with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement
on Schedule 14D-1 (as amended, the "Schedule 14D-1") with respect to the Offer
which contains (included as an exhibit) the Purchaser's Offer to Purchase dated
January 31, 1997 together with the Supplement thereto dated August 7, 1997 and
the Second Supplement thereto dated November 3, 1997 (together, the "Offer to
Purchase") and forms of the related letters of transmittal (collectively, the
"Offer Documents"). As promptly as practicable (but no later than the second
business day after the date of this Agreement), Hilton and the Purchaser shall
file with the SEC an amendment to the Schedule 14D-1 (i) to provide that the
obligation of the Purchaser and Hilton to accept for payment and pay for Shares
tendered pursuant to the Amended Offer shall only be subject to the conditions
set forth in Annex I hereto, (ii) to extend the expiration date of the Amended
Offer to 12:00 midnight, New York City time, on _____day, November __, 1997, and
(iii) to make such other amendments as are required to conform the Amended Offer
to this Agreement; it being understood and agreed that, except for the foregoing
amendments or as otherwise provided herein, the Amended Offer shall be on the
same terms and subject to the same conditions as the Offer. Without the prior
written consent of ITT, the Purchaser shall not decrease the price per Share or
change the form of consideration payable in the Amended Offer, decrease the
number of Shares sought, waive the Minimum Condition (as defined in Annex I),
impose additional conditions to the Amended Offer or amend any other term of the
Amended Offer in any manner adverse to the holders of Shares. Upon the terms and
subject to the conditions of the Amended Offer, the Purchaser will accept for
payment and purchase, as soon as practicable after the expiration of the Amended
Offer, all Shares validly tendered and not withdrawn prior to the expiration of
the Amended Offer, provided that if more than the Maximum Number (as defined in
the Offer to Purchase) of Shares is validly tendered and not withdrawn prior to
the expiration of the Amended Offer, the Purchaser will purchase such Shares on
a pro rata
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<PAGE>
basis. ITT agrees that no Shares held by ITT or any of its wholly owned
subsidiaries will be tendered pursuant to the Amended Offer.
(b) Each of Hilton and the Purchaser, on the one hand, and ITT, on
the other hand, agrees promptly to correct any information provided by it for
use in the Schedule 14D-1 if and to the extent that it shall have become false
or misleading in any material respect, and Hilton and the Purchaser further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and, if necessary, to disseminate corrected Offer
Documents to stockholders of ITT, in each case as and to the extent required by
applicable federal securities laws.
(c) Hilton and the Purchaser agree that the Purchaser shall not
terminate or withdraw the Amended Offer or extend the expiration date of the
Amended Offer unless at the expiration date of the Amended Offer the conditions
to the Amended Offer described in Annex I hereto shall not have been satisfied
or earlier waived. Hilton and the Purchaser shall use their reasonable best
efforts to consummate the Amended Offer.
Section 1.2. ITT Actions. (a) ITT hereby approves of and consents to
the Amended Offer and represents that the ITT Board, by vote of all directors at
a meeting duly called and held, has, in light of and subject to the terms and
conditions set forth herein, unanimously (i) determined that each of the Amended
Offer and the Merger is fair to, and in the best interests of, the stockholders
of ITT and (ii) approved and adopted this Agreement and the transactions
contemplated hereby, including the Amended Offer and the Merger, and resolved to
recommend acceptance of the Amended Offer and approval and adoption of this
Agreement and the Merger and the other transactions contemplated hereby by the
stockholders of ITT.
(b) ITT hereby agrees promptly to prepare and, after review by the
Purchaser, to file with the SEC on the date the amendment to the Schedule 14D-1
contemplated by Section 1.1(a) hereof is filed, and to mail to its stockholders,
an amendment to ITT's Solicitation/Recommendation Statement on Schedule 14D-9
with respect to the Amended Offer (together with any amendments or supplements
thereto, the "Amended Schedule 14D-9") containing the recommendation described
in Section 1.2(a) hereof and to disseminate the Amended Schedule 14D-9 as
required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Each of ITT, on the one hand, and Hilton and the
Purchaser, on the other hand, agrees promptly to correct any information
provided by either of them for use in the Amended Schedule 14D-9 if and to the
extent that it shall have become false or misleading in any material respect,
and ITT further agrees to take all steps necessary to cause the Amended Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to the
stockholders of ITT, in each case as and to the extent required by applicable
federal securities laws; provided, however, that such rec-
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<PAGE>
ommendation may be withdrawn, modified or amended to the extent that the ITT
Board deems it necessary to do so in the exercise of its fiduciary and other
legal obligations after being so advised in writing by outside counsel.
(c) In connection with the Amended Offer, ITT will furnish the
Purchaser with such information (which, subject to applicable law, shall be held
in confidence) and assistance as the Purchaser or its agents or representatives
may reasonably request in connection with the preparation of the Amended Offer
and communicating the Amended Offer to the record and beneficial holders of the
Shares.
Section 1.3. ITT Stockholders' Meeting. (a) ITT, acting through the ITT
Board, shall as soon as practicable after the date hereof, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as practicable following the
purchase of and payment for Shares by the Purchaser pursuant to the
Amended Offer for the purpose of considering and taking action upon the
Merger and this Agreement and such other matters as may be necessary to
consummate the transactions contemplated herein;
(ii) use its reasonable best efforts to obtain the necessary
approvals of the Merger, this Agreement and such other matters as may
be necessary to consummate the transactions contemplated hereby by its
stockholders; and
(iii) subject to the fiduciary obligations of the ITT Board
under applicable law as advised by outside counsel, include in the
Prospectus/Joint Proxy Statement the recommendation of the ITT Board
that stockholders of ITT vote in favor of the approval of the Merger,
the adoption of this Agreement and such other matters as may be
necessary to consummate the transactions contemplated hereby.
(b) Hilton agrees that it will vote, or cause to be voted, all of
the Shares then owned by it, the Purchaser or any of its other subsidiaries in
favor of the approval of the Merger, the adoption of this Agreement and such
other matters as may be necessary to consummate the transactions contemplated
hereby.
Section 1.4. Hilton Stockholders' Meeting. (a) Hilton, acting
through the Hilton Board, shall as soon as practicable after the date hereof, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as practicable following the
purchase of and payment for
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<PAGE>
Shares by the Purchaser pursuant to the Amended Offer for the purpose
of considering and taking action upon (A) the amendment of the
Certificate of Incorporation of Hilton (the "Hilton Charter") to
authorize a sufficient number of shares of Hilton Common Stock, $2.50
par value per share ("Hilton Common Stock"), as necessary to complete
the Merger and (B) approval of the issuance of shares of Hilton Common
Stock in the Merger as contemplated by this Agreement, and such other
matters as may be necessary to consummate the transactions contemplated
herein;
(ii) use its reasonable best efforts to obtain the necessary
approval of its stockholders as contemplated above; and
(iii) subject to the fiduciary obligations of the Hilton Board
under applicable law as advised by outside counsel, include in the
Prospectus/Joint Proxy Statement the recommendation of the Hilton Board
that stockholders of Hilton vote in favor of the approval of the
amendment to the Hilton Charter, the issuance of shares of Hilton
Common Stock in the Merger, and such other matters as may be necessary
to consummate the transactions contemplated hereby.
Section 1.5. Directors. (a) Subject to compliance with applicable law,
promptly upon the payment by the Purchaser for Shares purchased pursuant to the
Amended Offer, and from time to time thereafter, ITT shall, upon request of
Hilton, promptly take all actions necessary to cause a majority of the directors
of ITT to be comprised of Hilton's designees, including by accepting the
resignations of those incumbent directors designated by ITT or increasing the
size of the ITT Board and causing Hilton's designees to be elected.
(b) ITT's obligations to appoint Hilton's designees to the ITT Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder,
if applicable. ITT shall promptly take all actions required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.5 and
shall include in the Amended Schedule 14D-9 such information with respect to ITT
and its officers and directors as is required under such Section and Rule in
order to fulfill its obligations under this Section 1.5. Hilton will supply any
information with respect to itself and its officers, directors and affiliates
required by such Section and Rule to ITT.
(c) Following the election or appointment of Hilton's designees
pursuant to this Section 1.5 and prior to the Effective Time, any amendment or
termination of this Agreement by ITT, any extension by ITT of the time for the
performance of any of the obligations or other acts of Hilton or the Purchaser,
and any waiver of ITT's rights hereunder, will require the concurrence of a
majority of the directors of ITT then in office who were not designated by
Hilton pursuant to this Section 1.5.
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<PAGE>
ARTICLE II.
THE MERGER
Section 2.1. The Merger. (a) In accordance with the provisions of this
Agreement, the DGCL, and the NRS, at the Effective Time the Purchaser shall be
merged with and into ITT (the "Merger"), and ITT shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Nevada. At the
Effective Time, the separate existence of the Purchaser shall cease.
(b) The name of the Surviving Corporation shall be "ITT Corporation."
(c) The Merger shall have the effects on ITT and the Purchaser as
Constituent Corporations of the Merger as provided under the DGCL and the NRS.
Section 2.2. Effective Time. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger
(the "Certificate of Merger"), in the form required by and executed in
accordance with the DGCL, filed with the Secretary of State of the State of
Delaware (the "Delaware Secretary of State") in accordance with the provisions
of Sections 103 and 252 of the DGCL, and articles of merger (the "Articles of
Merger"), in the form required by and executed in accordance with the NRS, filed
with the Secretary of State of the State of Nevada (the "Nevada Secretary of
State") in accordance with Sections 92A.200 and 92A.230 of the NRS. The date and
time when the Merger shall become effective is herein referred to as the
"Effective Time".
Section 2.3. Articles of Incorporation and By-Laws of Surviving
Corporation. The Articles of Incorporation of the Surviving Corporation shall be
amended to be in the form attached as an exhibit to the Certificate of Merger
and the Articles of Merger, which form shall be substantially identical to the
Certificate of Incorporation of the Purchaser, with such changes as may be
required to conform to the requirements of the NRS, until thereafter amended as
provided by law, except that such Articles of Incorporation shall provide that
the Surviving Corporation shall retain the name "ITT Corporation" and shall
contain provisions with respect to the CVP Stock as set forth in Exhibit 3.1.
The By-Laws of the Purchaser shall be the By-Laws of the Surviving Corporation,
until thereafter amended as provided by law.
Section 2.4. Directors and Officers of Surviving Corporation. (a)
Subject to applicable law, the directors of the Purchaser immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
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<PAGE>
(b) The officers of ITT immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
Section 2.5. Consummation of the Merger. As soon as practicable after
the satisfaction or waiver of the conditions set forth in Article VIII hereof,
the Surviving Corporation shall execute (i) in the manner required by the DGCL
and file with the Delaware Secretary of State the Certificate of Merger and (ii)
in the manner required by the NRS and file with the Nevada Secretary of State
the Articles of Merger, and the parties shall take such other and further
actions as may be required by law to make the Merger effective as promptly as is
practicable.
Section 2.6. Registration on Form S-4. The Hilton Common Stock and CVP
Stock to be issued in the Merger shall be registered under the Securities Act of
1933, as amended (the "Securities Act"), on Form S-4 registration statements
(the "Forms S-4"). As promptly as practicable after the date of this Agreement,
Hilton and ITT shall prepare and file with the SEC the Forms S-4, together with
the prospectus/joint proxy statement to be included therein (the
"Prospectus/Joint Proxy Statement") and any other documents required by the
Securities Act or the Exchange Act, in connection with the Merger. Each of
Hilton and ITT shall use its reasonable best efforts to respond promptly to any
comments of the SEC and to have the Forms S-4 declared effective under the
Securities Act as promptly as practicable after such filing and to cause the
Prospectus/Joint Proxy Statement to be mailed to each company's stockholders at
the earliest practicable time. Each party shall promptly furnish to the other
party all information concerning such party as may be required in connection
with any action contemplated by this Section 2.6. The Prospectus/Joint Proxy
Statement and Forms S-4 shall comply in all material respects with all
applicable requirements of law. Each of Hilton and ITT will notify the other
promptly of the receipt of any comments from the SEC or its staff and of any
request of the SEC or its staff for amendments or supplements to the Forms S-4
or the Prospectus/Joint Proxy Statement or for additional information and will
supply the other with copies of all correspondence with the SEC or its staff
with respect to the Forms S-4 or the Prospectus/Joint Proxy Statement. Whenever
an event occurs which should be set forth in an amendment or supplement to the
Forms S-4 or the Prospectus/Joint Proxy Statement, Hilton or ITT, as the case
may be, shall promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff, and/or mailing to stockholders of Hilton and
ITT, such amendments or supplements.
Section 2.7. Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title
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<PAGE>
or interest in, to or under any of the rights, properties or assets of either of
the Constituent Corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of the Constituent Corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
Section 2.8. Alternative Merger Structures. Hilton and ITT agree that
they will explore in good faith, between the date of this Agreement and the
Effective Time, the possibility of restructuring the Merger so that some or all
of the consideration to be received by ITT shareholders in the Merger will be
tax-free to such shareholders, so long as such restructuring would not alter the
economic benefits and terms of the Merger to Hilton, ITT or their respective
shareholders or be likely to delay or otherwise interfere with completion of the
Merger.
ARTICLE III.
CONVERSION OF SHARES
Section 3.1. Effect on ITT Shares and the Purchaser's Capital Stock.
(a) As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each Share issued and outstanding immediately
prior to the Effective Time (other than any Shares held by Hilton, the
Purchaser, any wholly owned subsidiary of Hilton or the Purchaser, in the
treasury of ITT or by any wholly owned subsidiary of ITT, which Shares, by
virtue of the Merger and without any action on the part of the holder thereof,
shall be canceled and retired and shall cease to exist with no payment being
made with respect thereto) shall be converted into the right to receive upon the
surrender of the Certificate in accordance with Section 4.2 hereof, (i) two
shares (the "Exchange Ratio") of Hilton Common Stock and (ii) unless the
volume-weighted average of the prices per share of Hilton Common Stock for all
trades reported on the New York Stock Exchange ("NYSE") (or such other exchange
on which shares of Hilton Common Stock are then listed) during the 20 trading
days immediately preceding the last business day before the Effective Time (the
"Average Hilton Share Price") is equal to or greater than $40 per share of
Hilton Common Stock, two shares of Contingent Value Preferred Stock of the
Surviving Corporation ("CVP Stock") having the terms set forth in Exhibit 3.1
hereto.
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(b) No fractional shares of Hilton Common Stock or CVP Stock shall be
issued, but in lieu thereof each holder of Shares who would otherwise be
entitled to receive a fraction of a share of Hilton Common Stock or a fraction
of a share of CVP Stock, shall receive from the Exchange Agent (i) a certificate
representing whole shares of Hilton Common Stock to which such holder is
entitled, (ii) if issued, a certificate representing whole shares of CVP Stock
to which such holder is entitled, and (iii) an amount of cash equal to the sum
of (x) the Average Hilton Share Price multiplied by the fraction of a share of
Hilton Common Stock to which such holder would otherwise be entitled and (y) if
the CVP Stock is issued, the Effective Time Deficiency multiplied by the
fraction of a share of CVP Stock to which such holder would otherwise be
entitled. The "Effective Time Deficiency" shall mean the amount by which $40
exceeds the Average Hilton Share Price. The fractional share interests of each
stockholder of ITT shall be aggregated, so that no ITT stockholder shall receive
cash in an amount equal to or greater than the sum of the Average Hilton Share
Price and, if the CVP Stock is issued, the Effective Time Deficiency.
(c) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each share of capital stock of the
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and become one fully paid and nonassessable share of Common
Stock, par value $1.00 per share, of the Surviving Corporation.
(d) If, prior to the Effective Time, Hilton or ITT recapitalizes
through a subdivision of its outstanding shares into a greater number of shares,
or a combination of its outstanding shares into a lesser number of shares, or
reorganizes, reclassifies or otherwise changes its outstanding shares into the
same or a different number of shares of other classes, or declares a dividend on
its outstanding shares payable in shares of its capital stock or securities
convertible into shares of its capital stock, then the Exchange Ratio and the
terms of the CVP Stock will be adjusted appropriately so as to maintain the
relative proportionate and economic interests of the holders of Shares and the
holders of shares of Hilton Common Stock.
Section 3.2. ITT Option Plans. (a) ITT shall take all actions necessary
to provide that each outstanding option to purchase Shares (the "ITT Options")
granted under either ITT's 1995 Incentive Stock Plan, as amended, or ITT's 1996
Restricted Stock Plan for Non-Employee Directors, as amended (collectively, the
"Option Plans"), and in respect of 1995 substitute options, will by virtue of
the Merger and at the Effective Time, and without any further action on the part
of any holder thereof, be converted into an option to purchase Hilton Common
Stock and CVP Stock (a "Hilton Option"), and such ITT Options shall be so
assumed by Hilton as provided herein. The ITT Options so assumed by Hilton shall
continue to have, and be subject to, the same terms and conditions as set forth
in the Option Plans and agreements pursuant to which such ITT Options were
issued as in effect immediately prior to the Ef-
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<PAGE>
fective Time, except that each such ITT Option shall be exercisable for (i) that
number of whole shares of Hilton Common Stock equal to the product of the number
of Shares covered by such ITT Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounded up to the nearest whole number of
shares of Hilton Common Stock and (ii) if CVP Stock is issued in the Merger, a
number of whole shares of CVP Stock equal to the number of whole shares of
Hilton Common Stock calculated pursuant to the foregoing clause (i); provided
that, if the option holder has not exercised his or her ITT Option prior to the
redemption of the CVP Stock (if issued), then each share of CVP Stock described
in clause (ii) above shall be replaced by that number of shares of Hilton Common
Stock equal in value (based upon the volume-weighted average of the prices per
share of Hilton Common Stock for all trades reported on the NYSE during the 20
consecutive trading days ending on the date of redemption) to the lesser of (A)
the amount, if any, by which $40 exceeds the Current Market Value (as defined in
Exhibit 3.1 hereto) on the date the CVP Stock is redeemed and (B) $12, rounded
down to the nearest whole number of shares of Hilton Common Stock (the
"Additional Amount"). The exercise price of the ITT Options so assumed by Hilton
shall be adjusted so that the exercise price for each unit consisting of one
share of Hilton Common Stock together with one share of CVP Stock (if the CVP
Stock was issued and not redeemed prior to such exercise) or the Additional
Amount, if any, shall equal the exercise price per Share of such ITT Option
immediately prior to the Effective Time divided by the Exchange Ratio. Stock
appreciation rights related to the ITT Options ("SARs") shall also be assumed by
Hilton on terms equivalent to those set forth above with respect to the ITT
Options.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, (i) the Option Plans
shall terminate as of the Effective Time and the provisions in any other plan,
program or arrangement, providing for the issuance or grant of any other
interest in respect of the capital stock of ITT or any of its subsidiaries shall
be terminated as of the Effective Time and (ii) ITT shall use its reasonable
best efforts to ensure that following the Effective Time no holder of ITT
Options or any participant in the Option Plans or any other plans, programs or
arrangements shall have any right thereunder to acquire any equity securities of
ITT, the Surviving Corporation or any subsidiary thereof or any other interest
in respect of such securities.
(c) Hilton will cause the Hilton Common Stock and the CVP Stock
issuable upon exercise of the assumed ITT Options to be registered on Form S-8
promulgated by the SEC as soon as practicable after the Effective Time and will
use its reasonable efforts to maintain the effectiveness of such registration
statement or registration statements for so long as such assumed ITT Options
shall remain outstanding. With respect to those individuals who subsequent to
the Merger will be subject to the reporting requirements under Section 16(a) of
the Exchange Act, Hilton shall adminis-
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<PAGE>
ter the ITT Option Plans assumed pursuant to this Section 3.2 in a manner that
complies with Rule 16b-3 promulgated by the SEC under the Exchange Act. Hilton
will reserve a sufficient number of shares of Hilton Common Stock, and the
Surviving Corporation will reserve a sufficient number of shares of CVP Stock,
for issuance upon exercise of ITT Options assumed by Hilton pursuant to this
Section 3.2.
ARTICLE IV.
EXCHANGE OF SHARES
Section 4.1. No Rights of Appraisal. Holders of Shares will not be
entitled to rights of appraisal under Section 92A.380 of the NRS by virtue of
Section 92A.390 of the NRS.
Section 4.2. Exchange of Certificates. (a) From and after the Effective
Time, a bank or trust company to be designated by Hilton shall act as exchange
agent (the "Exchange Agent") in effecting the exchange of shares of Hilton
Common Stock and CVP Stock, if applicable, for certificates (the "Certificates")
formerly representing Shares and entitled to exchange of the Certificates for
shares of Hilton Common Stock and CVP Stock, if applicable, pursuant to Section
3.1 hereof. At the Effective Time, Hilton and, if applicable, the Surviving
Corporation shall deposit, or cause to be deposited, in trust with the Exchange
Agent, for the benefit of the holders of Shares, for exchange in accordance with
this Agreement, (i) certificates representing the shares of Hilton Common Stock
and, if applicable, shares of CVP Stock (such shares of Hilton Common Stock and
CVP Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to this
Agreement in exchange for outstanding Shares, and (ii) cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 3.1(b).
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of Certificates that immediately prior to the Effective Time
represented Shares (other than Certificates representing Shares held by Hilton
or the Purchaser, any wholly owned subsidiary of Hilton or the Purchaser, in the
treasury of ITT or by any wholly owned subsidiary of ITT) (i) a form of letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and (ii) instructions for use in surrendering
such Certificates in exchange for certificates representing Hilton Common Stock
and, if applicable, CVP Stock and cash in lieu of fractional shares. Upon the
surrender of each such Certificate, the Exchange Agent shall deliver to the
holder of such Certificate (i) a certificate representing that number of whole
shares of Hilton Common Stock which such holder has the right to receive
pur-
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<PAGE>
suant to the provisions of this Agreement, (ii) a certificate representing that
number of whole shares of CVP Stock, if any, which such holder has the right to
receive pursuant to the provisions of this Agreement, and (iii) the amount of
any cash payable in lieu of a fractional share of Hilton Common Stock and a
fractional share of CVP Stock to which such holder is entitled pursuant to
Section 3.1(b), and such Certificate shall immediately be canceled. Until so
surrendered, each such Certificate (other than Certificates representing Shares
held by Hilton or the Purchaser, any wholly owned subsidiary of Hilton or the
Purchaser, in the treasury of ITT or by any wholly owned subsidiary of ITT)
shall represent solely the right to receive a certificate representing that
number of whole shares of Hilton Common Stock, and a certificate representing
that number of whole shares of CVP Stock which such holder has the right to
receive pursuant to the provisions of this Agreement, and cash in lieu of any
fractional shares of Hilton Common Stock and CVP Stock as contemplated by
Section 3.1(b).
(c) Promptly following the date which is one year after the Effective
Time, the Exchange Agent shall deliver to Hilton any portion of the Exchange
Fund which remains undistributed to the stockholders of ITT, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Certificate
formerly representing a Share (other than Certificates representing Shares held
by Hilton or the Purchaser, any wholly owned subsidiary of Hilton or the
Purchaser, in the treasury of ITT or by any wholly owned subsidiary of ITT) may
surrender such Certificate to Hilton and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the
payment of their claim for Hilton Common Stock, CVP Stock, any cash in lieu of
fractional shares of Hilton Common Stock and CVP Stock and any dividends or
distributions with respect to Hilton Common Stock and CVP Stock to which such
holder may be entitled.
(d) No dividends or other distributions declared or made after the
Effective Time with respect to Hilton Common Stock with a record date after the
Effective Time, and no redemption payment made with respect to CVP Stock, shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Hilton Common Stock or CVP Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 3.1(b), until the holder of record of such Certificate shall
surrender such Certificate.
(e) If exchange for shares of Hilton Common Stock and CVP Stock or
payment in lieu of fractional shares of Hilton Common Stock and CVP Stock in
respect of any Certificate is to be made to a person other than the person in
whose name such Certificate is registered, it shall be a condition to such
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of such
exchange or payment in a name other than that of the registered holder of the
Certificate surrendered or shall have established to the satis-
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faction of Hilton or the Exchange Agent that such tax either has been paid or is
not payable.
(f) All Hilton Common Stock and CVP Stock delivered upon surrender for
exchange of Shares in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such Shares.
After the Effective Time, there shall be no transfers on the stock transfer
books of the Surviving Corporation of any Shares which were outstanding
immediately prior to the Effective Time.
(g) In the event any Certificates shall have been lost, stolen or
destroyed, the Exchange Agent shall make payment in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, of such shares of Hilton Common Stock and CVP Stock and
cash in lieu of fractional shares, if any, as may be required pursuant to
Section 3.1(b), provided, however, that Hilton may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as Hilton may
reasonably direct as indemnity against any claim that may be made against
Hilton, the Exchange Agent or the Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed.
(h) Notwithstanding anything to the contrary in this Article IV, none
of the Exchange Agent, the Surviving Corporation or any party hereto shall be
liable to a holder of Shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(i) Hilton, or if applicable the Surviving Corporation, or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as
Hilton, or if applicable the Surviving Corporation, or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Hilton, or if applicable the Surviving Corporation, or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Hilton, or if applicable the Surviving
Corporation, or the Exchange Agent.
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<PAGE>
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ITT
ITT represents and warrants to Hilton and the Purchaser as follows:
Section 5.1. Organization. ITT and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation and ITT and each of its
subsidiaries has all requisite corporate power and authority to own, lease and
operate their respective properties and to carry on their respective businesses
as now being conducted. ITT and each of its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, assets, financial condition or results of operations of
ITT and its subsidiaries taken as a whole (an "ITT Material Adverse Effect").
The disclosure letter previously delivered by ITT to Hilton (the "ITT Disclosure
Letter") contains a complete and correct description of the shares of stock or
other equity interests that are authorized, issued and outstanding of each of
ITT's subsidiaries. Except as set forth in the ITT Disclosure Letter, ITT owns
directly or indirectly all of the outstanding capital stock of each of its
subsidiaries free and clear of all liens. Except as set forth in the ITT
Disclosure Letter, ITT has no equity interests in any person other than the
subsidiaries.
Section 5.2. Capitalization. The authorized capital stock of ITT
consists of 200,000,000 Shares and 50,000,000 shares of preferred stock, without
par value ("ITT Preferred Stock"). As of the close of business on October 17,
1997, there were (i) 118,259,684 Shares issued and outstanding, (ii) 1,123,526
Shares held in the treasury of ITT or by its wholly owned subsidiaries, (iii)
133,399 Shares reserved for issuance pursuant to ITT's 1996 Restricted Stock
Plan for Non-Employee Directors, as amended, and ITT's 1995 Incentive Stock
Plan, as amended, (iv) not in excess of 8,718,231 Shares covered by ITT Options,
and (v) no shares of ITT Preferred Stock issued and outstanding or held in ITT's
treasury or by its subsidiaries. As of October 17, 1997, 200,000 shares of ITT
Preferred Stock, all denominated as Series A Participating Cumulative Preferred
Stock (subject to increase and adjustment as set forth in the Rights Agreement,
dated November 1, 1995, between ITT and The Bank of New York (as amended, the
"Rights Agreement") and the Certificate of Designation attached as an exhibit
thereto) were reserved for issuance in connection with the Rights. Except for
the rights granted pursuant to the Rights Agreement (which agreement has been
amended as described in Section 5.7 hereof), and ITT Options as set forth above
(which shall be canceled pursuant to Section 3.2(a) hereof), there were not as
of October 17, 1997, any existing options, warrants, calls, subscriptions, or
other rights or
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other agreements or commitments obligating ITT or any of its subsidiaries to
issue, transfer or sell any shares of capital stock of ITT or any of its
subsidiaries or any other securities convertible into or evidencing the right to
subscribe for any such shares. Except pursuant to the exercise of ITT Options
outstanding as of October 17, 1997, in accordance with the terms thereof, since
October 17, 1997, ITT has not issued any Shares or any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating ITT
or any of its subsidiaries to issue, transfer or sell any shares of capital
stock of ITT or any of its subsidiaries or any other securities convertible into
or evidencing the right to subscribe for any such shares. Except for SARs issued
in tandem with the ITT Options as set forth above (and which substitute for the
rights to acquire Shares under such ITT Options) there are no obligations of or
rights granted by ITT or any of its subsidiaries that require payment of cash or
other property based on the value of any shares of capital stock of ITT or any
of its subsidiaries. All issued and outstanding Shares are duly authorized and
validly issued, fully paid, non-assessable and free of preemptive rights with
respect thereto.
Section 5.3. Authority. ITT has full corporate power and authority to
execute and deliver this Agreement and, subject to the approval of its
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
ITT Board, and other than the approval by its stockholders, no other corporate
proceedings are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by ITT and, assuming this Agreement constitutes a legal,
valid and binding agreement of the other parties hereto, it constitutes a legal,
valid and binding agreement of ITT, enforceable against it in accordance with
its terms.
Section 5.4. No Violations; Consents and Approvals. (a) Except as set
forth on the ITT Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by ITT with any of the provisions hereof will (i) violate any
provision of its Articles of Incorporation or Bylaws, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default, or give rise to any right of termination, cancellation or
acceleration or any right which becomes effective upon the occurrence of a
merger, consolidation or change in control, under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture or other instrument of
indebtedness for money borrowed to which ITT or any of its subsidiaries is a
party, or by which ITT or any of its subsidiaries or any of their respective
properties is bound, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default, or give rise to
any right of termination, cancellation or acceleration or any right which
becomes effective upon the occurrence of a merger,
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<PAGE>
consolidation or change in control, under, any of the terms, conditions or
provisions of any license, franchise, permit or agreement (other than those
covered by the preceding clause (ii)) to which ITT or any of its subsidiaries is
a party, or by which ITT or any of its subsidiaries or any of their respective
properties is bound, or (iv) violate any statute, rule, regulation, order or
decree of any public body or authority by which ITT or any of its subsidiaries
or any of their respective properties is bound, excluding from the foregoing
clauses (ii), (iii) and (iv) violations, breaches, defaults or rights under the
laws of any jurisdiction outside the United States or which, either individually
or in the aggregate, would not have an ITT Material Adverse Effect or materially
impair ITT's ability to consummate the transactions contemplated hereby or for
which ITT has received or, prior to the consummation of the Amended Offer, shall
have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity") is required in connection with the execution and delivery
of this Agreement by ITT, or the consummation by ITT of the transactions
contemplated hereby, except (i) expiration of the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
which waiting period has expired, (ii) in connection, or in compliance, with the
provisions of the Exchange Act, (iii) the filing of the Certificate of Merger
with the Delaware Secretary of State and the Articles of Merger with the Nevada
Secretary of State, (iv) such filings and consents as may be required under any
environmental law pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement, (v) filing with, and approval of, the NYSE and the SEC with respect
to the de-listing and de-registration of the Shares, (vi) such consents,
approvals, orders, authorizations, notifications, registrations, declarations
and filings as may be required under the corporation, takeover or blue sky laws
of various states or non-U.S. changes in control laws or regulations, (vii) such
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings as may be required under gaming laws, rules and
regulations, and (viii) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings not obtained prior to the
consummation of the Amended Offer the failure of which to be obtained or made
would not, individually or in the aggregate, have a ITT Material Adverse Effect,
or materially impair ITT's ability to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Section 5.5. SEC Documents; Financial Statements. (a) ITT has made
available to Hilton and the Purchaser copies of each registration statement,
report, proxy statement, information statement or schedule filed with the SEC by
ITT since October 15, 1995 (the "ITT SEC Documents"). As of their respective
dates, the ITT
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<PAGE>
SEC Documents complied in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and none of such
ITT SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Neither ITT nor any of its subsidiaries, nor any of their
respective assets, businesses, or operations, is as of the date of this
Agreement a party to, or is bound or affected by, or receives benefits under any
contract or agreement or amendment thereto, that in each case would be required
to be filed as an exhibit to a Form 10-K as of the date of this Agreement that
has not been filed as an exhibit to an ITT SEC Document filed prior to the date
of this Agreement.
(c) As of their respective dates, the consolidated financial statements
included in the ITT SEC Documents complied as to form in all material respects
with then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented ITT's consolidated financial position and that of
its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and statements of cash flows for the periods then
ended (subject, in the case of unaudited statements, to the lack of footnotes
thereto, to normal year-end audit adjustments and to any other adjustments
described therein).
Section 5.6. Absence of Certain Changes. Except as disclosed in the ITT
SEC Documents or the ITT Disclosure Letter, since December 31, 1996, ITT and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been (i) any change having an ITT Material Adverse
Effect, (ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock or any redemption, purchase or
other acquisition of any of its capital stock, (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) (w) any granting by ITT
or any of its subsidiaries to any officer of ITT or any of its subsidiaries of
any increase in compensation, except in the ordinary course of business
(including in connection with promotions) consistent with prior practice or as
was required under employment agreements in effect as of the date of the most
recent audited financial statements included in ITT SEC Documents, (x) any
granting by ITT or any of its subsidiaries to any such officer of any increase
in severance or termination pay, except as part of a standard employment package
to any person promoted or hired (but not including the five most senior
officers), or as was required under employment, severance or termination
agreements in effect as of the date of the most recent audited
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financial statements included in ITT SEC Documents, (y) except termination
arrangements in the ordinary course of business consistent with past practice
with employees other than any executive officer of ITT, any entry by ITT or any
of its subsidiaries into any employment, severance or termination agreement with
any such officer or (z) any increase in benefits available under or
establishment of any benefit plan (including the granting of stock options,
stock appreciation rights, performance awards or restricted stock awards or the
amendment or acceleration of vesting of any existing stock options, stock
appreciation rights, performance awards or restricted stock awards but excluding
any amendment accelerating vesting of existing stock options), except in the
ordinary course of business consistent with past practice, (v) any damage,
destruction or loss to physical properties owned or used by ITT, whether or not
covered by insurance, that has or reasonably could be expected to have an ITT
Material Adverse Effect, (vi) any revaluation by ITT of any of its material
assets, or (vii) any material change in accounting methods, principles or
practices by ITT.
Section 5.7. Rights Agreement. The Rights Agreement has been duly
amended to provide that neither Hilton nor the Purchaser will become an
"Acquiring Person" or "Principal Party," that no "Business Combination," or
"Distribution Date" (as such terms are defined in the Rights Agreement) will
occur and that Section 11 of the Rights Agreement will not be triggered, in each
case as a result of the announcement, commencement or consummation of the Offer
or the Amended Offer, the execution or delivery of this Agreement or any
amendment hereto or the consummation of the transactions contemplated hereby
(including, without limitation, the Merger), with the effect that none of such
events will trigger the exercisability of the Rights, the separation of the
Rights from the stock certificates to which they are attached or any other
provision of the Rights Agreement. ITT has provided Hilton and the Purchaser a
complete and correct copy of the Rights Agreement, as so amended.
Section 5.8. Information. None of the Amended Schedule 14D-9, the
Prospectus/Joint Proxy Statement, or any other document filed or to be filed by
or on behalf of ITT with the SEC or any other Governmental Entity in connection
with the transactions contemplated by this Agreement contained when filed or
will, at the respective times filed with the SEC or other Governmental Entity,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading; provided that the foregoing shall not apply to information supplied
by Hilton or the Purchaser specifically for inclusion or incorporation by
reference in any such document. The Amended Schedule 14D-9 will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. None of the information supplied by ITT
specifically for inclusion or incorporation by reference in the Schedule 14D-1,
the Prospectus/Joint Proxy Statement or in any other document filed or to be
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filed by or on behalf of Hilton or the Purchaser with the SEC or any other
Governmental Entity in connection with the transactions contemplated by this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Section 5.9. NGCL. (a) The ITT Board has previously taken all
appropriate action to amend the Bylaws of ITT such that the Bylaws of ITT in
effect as of the date hereof provide that the provisions of NGCL Sections 78.378
to 78.3793, inclusive (the "Control Share Statute"), do not apply to ITT, with
the effect that the Control Share Statute shall not apply to the Amended Offer,
the Merger, or any other transaction contemplated by this Agreement.
(b) The ITT Board has previously taken all appropriate action to
approve (in accordance with NGCL Section 78.438 and otherwise) for purposes of
NGCL Sections 78.411 to 78.444, inclusive (the "Business Combination Statute"),
the consummation of each of the Amended Offer and the Merger, with the effect
that the restrictions and requirements of the Business Combination Statute shall
not apply to the Amended Offer, the Merger, or any other transaction
contemplated by this Agreement.
Section 5.10. Broker's Fees. Except for fees and expenses specifically
described in ITT's Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer payable in connection with the engagement of Goldman, Sachs
& Co. and Lazard Freres & Co. LLC by ITT, neither ITT nor any of its
subsidiaries or any of its directors or officers has incurred any liability for
any broker's fees, commissions, or financial advisory or finder's fees in
connection with any of the transactions contemplated by this Agreement, and
neither ITT nor any of its subsidiaries or any of its directors or officers has
employed any other broker, finder or financial advisor in connection with any of
the transactions contemplated by this Agreement.
Section 5.11. Third-Party Agreements. (a) The ITT Board has taken all
appropriate action to approve the consummation of each of the Amended Offer and
the Merger, with the effect that the consummation of the Amended Offer, the
Merger or any other actions contemplated hereby (including the actions required
to be take under Section 1.5) shall not constitute a "Change of Control" (or any
such similar event referred to by another term) for purposes of each of the
hotel management, franchise or similar agreements to which ITT or any of its
subsidiaries is a party (other than those agreements listed on the ITT
Disclosure Letter). The ITT Disclosure Letter shall set forth, next to each
agreement listed on the ITT Disclosure Letter pursuant to this Section 5.11, the
amounts payable annually thereunder to ITT and each of its subsidiaries.
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(b) ITT has not paid CDRV Acquisition, L.L.C. ("CDRV") any amounts in
connection with the Investment Agreement between ITT and CDRV, dated as of July
15, 1997 (the "CDRV Agreement"), or under any other agreement or understanding
between ITT and CDRV or otherwise.
(c) ITT has not paid Starwood Lodging Corporation or Starwood Lodging
Trust (collectively, "Starwood") any amounts in connection with the Agreement
and Plan of Merger between ITT and Starwood, dated as of October 19, 1997 (the
"Starwood Agreement"), or under any other agreement or understanding between ITT
and Starwood or otherwise.
Section 5.12. ITT Affiliate Agreements. To ensure compliance with Rule
145 of the rules and regulations promulgated by the SEC under the Securities Act
("Rule 145"), ITT's Affiliates have signed, and delivered to Hilton, ITT
Affiliates Agreements in the form of Exhibit 5.12 (the "ITT Affiliate
Agreements") agreeing to certain restrictions as set forth in such ITT Affiliate
Agreements. An "Affiliate" shall have the meaning referred to in Rule 145.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF
HILTON AND THE PURCHASER
Hilton and the Purchaser represent and warrant to ITT as follows:
Section 6.1. Organization. Hilton and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation and Hilton and each of its
subsidiaries has all requisite corporate power and authority to own, lease and
operate their respective properties and to carry on their respective businesses
as now being conducted. Hilton and each of its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, assets, financial condition or results of operations of
Hilton and its subsidiaries taken as a whole (a "Hilton Material Adverse
Effect"). The disclosure letter previously delivered by Hilton to ITT (the
"Hilton Disclosure Letter") contains a complete and correct description of the
shares of stock or other equity interests that are authorized, issued and
outstanding, of each of Hilton's subsidiaries. Except as set forth in the Hilton
Disclosure Letter, Hilton owns directly or indirectly all of the outstanding
capital stock of each of its
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subsidiaries free and clear of all liens. Except as indicated in the Hilton
Disclosure Letter, Hilton has no equity interests in any person other than the
subsidiaries.
Section 6.2. Capitalization. The authorized capital stock of Hilton
consists of 400,000,000 shares of Hilton Common Stock and 24,832,700 shares of
preferred stock, par value $1.00 per share ("Hilton Preferred Stock"). As of
October 1, 1997, there were 251,635,541 shares of Hilton Common Stock and
14,832,300 shares of Hilton Preferred Stock, designated as "Preferred Redeemable
Increased Dividend Equity Securities(SM), 8% PRIDES(SM), Convertible Preferred
Stock" (the "Hilton PRIDES(SM)") issued and outstanding, and there are 903,597
shares of Hilton Common Stock or Hilton Preferred Stock held in Hilton's
treasury. As of October 1, 1997, 550,000 shares of Hilton Preferred Stock,
denominated as Series A Junior Participating Preferred Stock (subject to
increase and adjustment as set forth in the Rights Agreement, dated as of July
14, 1988, between Hilton and The First National Bank of Chicago (the "Hilton
Rights Agreement") and the Certificate of Designation attached as an exhibit
thereto) were reserved for issuance in connection with the rights issued
pursuant to the Hilton Rights Agreement. As of October 1, 1997, there were
outstanding options to purchase 14,321,035 shares of Hilton Common Stock under
Hilton's 1990 Stock Option and Stock Appreciation Rights Plan, 1984 Stock Option
and Stock Appreciation Rights Plan, 1996 Chief Executive Stock Incentive Plan,
and 1996 Stock Incentive Plan (collectively, the "Hilton Option Plans"). Except
for the rights granted pursuant to the Hilton Rights Agreement, the Hilton
PRIDES(SM), and the options as set forth above to purchase shares of Hilton
Common Stock under Hilton Option Plans, there were not as of October 1, 1997,
any existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating Hilton or any of its subsidiaries to issue,
transfer or sell any shares of capital stock of Hilton or any of its
subsidiaries or any other securities convertible into or evidencing the right to
subscribe for any such shares. All issued and outstanding shares of Hilton
Common Stock are duly authorized and validly issued, fully paid, non-assessable
and free of preemptive rights with respect thereto.
Section 6.3. Authority. Each of Hilton and the Purchaser has full
corporate power and authority to execute and deliver this Agreement and, subject
to the approval of Hilton's stockholders, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of each of Hilton and the
Purchaser and by Hilton as the sole stockholder of the Purchaser and, other than
the approval of Hilton's stockholders, no other corporate proceedings are
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Hilton and the Purchaser and, assuming this Agreement
constitutes a legal, valid and binding agreement of ITT, it constitutes
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a legal, valid and binding agreement of each of Hilton and the Purchaser,
enforceable against them in accordance with its terms.
Section 6.4. No Violations; Consents and Approvals. (a) Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by Hilton or the Purchaser with
any of the provisions hereof will (i) violate any provision of their respective
Certificates of Incorporation or Bylaws, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default, or give rise to any right of termination, cancellation or acceleration
or any right which becomes effective upon the occurrence of a merger,
consolidation or change in control, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture or other instrument of
indebtedness for money borrowed to which Hilton or any of its subsidiaries is a
party, or by which Hilton or any of its subsidiaries or any of their respective
properties is bound, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default, or give rise to
any right of termination, cancellation or acceleration or any right which
becomes effective upon the occurrence of a merger, consolidation or change in
control, under, any of the terms, conditions or provisions of any license,
franchise, permit or agreement (other than those covered by the preceding clause
(ii)) to which Hilton or any of its subsidiaries is a party, or by which Hilton
or any of its subsidiaries or any of their respective properties is bound, or
(iv) violate any statute, rule, regulation, order or decree of any public body
or authority by which Hilton or any of its subsidiaries or any of their
respective properties is bound, excluding from the foregoing clauses (ii), (iii)
and (iv) violations, breaches, defaults or rights under the laws of any
jurisdiction outside the United States or which, either individually or in the
aggregate, would not have a Hilton Material Adverse Effect or materially impair
Hilton's ability to consummate the transactions contemplated hereby or for which
Hilton has received or, prior to the consummation of the Amended Offer, shall
have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of any Governmental Entity is required in connection with
the execution and delivery of this Agreement by Hilton or the Purchaser, or the
consummation by Hilton or the Purchaser of the transactions contemplated hereby,
except (i) expiration of the waiting period under the HSR Act, which waiting
period has expired, (ii) in connection, or in compliance, with the provisions of
the Exchange Act, (iii) the filing of the Certificate of Merger with the
Delaware Secretary of State and the Articles of Merger with the Nevada Secretary
of State, (iv) such filings and consents as may be required under any
environmental law pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement, (v) filing with, and approval of, the NYSE (or in the case of the CVP
Stock, the American Stock Exchange or The Nasdaq National Market) and the SEC
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with respect to the listing and registration of the shares of Hilton Common
Stock and CVP Stock to be issued pursuant to this Agreement, (vi) such consents,
approvals, orders, authorizations, notifications, registrations, declarations
and filings as may be required under the corporation, takeover or blue sky laws
of various states or non-U.S. changes in control laws or regulations, (vii) such
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings as may be required under gaming laws, rules and
regulations, and (viii) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings not obtained prior to the
consummation of the Amended Offer the failure of which to be obtained or made
would not, individually or in the aggregate, have a Hilton Material Adverse
Effect, or materially impair Hilton's ability to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 6.5. SEC Documents; Financial Statements. (a) Hilton and the
Purchaser have made available to ITT copies of each registration statement,
report, proxy statement, information statement or schedule filed with the SEC by
Hilton or the Purchaser since October 15, 1995 (the "Hilton SEC Documents"). As
of their respective dates, the Hilton SEC Documents complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and none of such Hilton SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) Neither Hilton, nor Purchaser, nor any of Hilton's subsidiaries,
nor any of their respective assets, businesses, or operations, is as of the date
of this Agreement a party to, or is bound or affected by, or receives benefits
under any contract or agreement or amendment thereto, that in each case would be
required to be filed as an exhibit to a Form 10-K as of the date of this
Agreement that has not been filed as an exhibit to a Hilton SEC Document filed
prior to the date of this Agreement.
(c) As of their respective dates, the consolidated financial statements
included in the Hilton SEC Documents complied as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented Hilton's and Purchaser's consolidated financial
positions and that of Hilton's consolidated subsidiaries as at the dates thereof
and the consolidated results of their operations and statements of cash flows
for the periods then ended (subject, in the case of unaudited statements, to the
lack of footnotes thereto, to normal year-end audit adjustments and to any other
adjustments described therein).
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Section 6.6. Absence of Certain Changes. Except as disclosed in the
Hilton SEC Documents or the Hilton Disclosure Letter, since December 31, 1996,
Hilton and its subsidiaries have conducted their respective businesses only in
the ordinary course, and there has not been any change having a Hilton Material
Adverse Effect.
Section 6.7. Information. None of the Schedule 14D-1, the
Prospectus/Joint Proxy Statement, or any other document filed or to be filed by
or on behalf of Hilton or the Purchaser with the SEC or any other Governmental
Entity in connection with the transactions contemplated by this Agreement
contained when filed or will, at the respective times filed with the SEC or
other Governmental Entity, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; provided that the foregoing shall not
apply to information supplied by ITT specifically for inclusion or incorporation
by reference in any such document. None of the information supplied by Hilton or
the Purchaser specifically for inclusion or incorporation by reference in the
Amended Schedule 14D-9, the Prospectus/Joint Proxy Statement, or any other
document filed or to be filed by or on behalf of ITT with the SEC or any other
Governmental Entity in connection with the transactions contemplated by this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Section 6.8. Financing. Hilton or the Purchaser has access to, and will
have at the time of acceptance for payment and purchase of Shares under the
Amended Offer and at the Effective Time, the funds necessary to consummate the
Amended Offer and the Merger and the transactions contemplated thereby and to
pay related fees and expenses.
Section 6.9. Broker's Fees. Except for fees and expenses specifically
described in Hilton's Tender Offer Statement on Schedule 14D-1 with respect to
the Offer payable in connection with the engagement of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") by Hilton, neither Hilton nor any of its
subsidiaries or any of its directors or officers has incurred any liability for
any broker's fees, commissions, or financial advisory or finder's fees in
connection with any of the transactions contemplated by this Agreement, and
neither Hilton nor any of its subsidiaries or any of its directors or officers
has employed any other broker, finder or financial advisor in connection with
any of the transactions contemplated by this Agreement.
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ARTICLE VII.
ADDITIONAL COVENANTS
Section 7.1. Conduct of Business of ITT. Except as contemplated by this
Agreement or as expressly agreed to in writing by Hilton, during the period from
the date of this Agreement to the Effective Time:
(a) Each of ITT and its subsidiaries will conduct its operations
according to its ordinary course of business consistent with past practice, and
will use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement.
(b) ITT shall not, and it shall not permit any of its subsidiaries to,
(i) declare or pay any dividends on or make other distributions in respect of
any of its capital stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) repurchase, redeem or otherwise acquire, or permit any subsidiary to
repurchase, redeem or otherwise acquire, any shares of capital stock.
(c) ITT shall not, and it shall not permit any of its subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class or any securities convertible
into, or any rights, warrants, calls, subscriptions or options to acquire, any
such shares or convertible securities, or any other ownership interest
(including but not limited to stock appreciation rights or phantom stock) other
than (i) the issuance of Shares upon the exercise of stock options or stock
appreciation rights or warrants granted under the Option Plans and outstanding
on the date of this Agreement and in accordance with the present terms of such
options or stock appreciation rights and (ii) issuances by a wholly owned
subsidiary of ITT of its capital stock to ITT.
(d) ITT shall not amend or propose to amend its Articles of
Incorporation or Bylaws.
(e) ITT shall not, and it shall not permit any of its subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof.
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(f) ITT shall not, and it shall not permit any of its subsidiaries to,
make any payments (i) to CDRV and its Affiliates under the CDRV Agreement or
otherwise, or (ii) to Starwood and its Affiliates under the Starwood Agreement
or otherwise.
Section 7.2. Access to Information. From the date of this Agreement
until the Effective Time, ITT will give Hilton and its authorized
representatives (including counsel, environmental and other consultants,
accountants and auditors) full access during normal business hours to all
facilities, personnel and operations and to all books and records of ITT and its
subsidiaries, will permit Hilton to make such inspections as it may reasonably
require and will cause its officers and those of its subsidiaries to furnish
Hilton with such financial and operating data and other information with respect
to its business and properties as Hilton may from time to time reasonably
request. Other than as required by applicable law, Hilton agrees that any
information furnished to it, its subsidiaries or its authorized representatives
pursuant to this Section 7.2 will be kept confidential for a period of three
years from the date hereof.
Section 7.3. Reasonable Best Efforts; Other Actions. Subject to the
terms and conditions herein provided and applicable law, each of ITT, Hilton and
the Purchaser shall use its reasonable best efforts promptly to take, or cause
to be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) the obtaining of all necessary consents,
approvals or waivers under its material contracts and (ii) the lifting of any
legal bar to the Amended Offer or the Merger.
Section 7.4. Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Amended Offer or the Merger, Hilton, the Purchaser and ITT will consult with
each other as to its form and substance and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law.
Section 7.5. Notification of Certain Matters. Each of ITT and Hilton
shall give prompt notice to the other party of (i) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
be likely to cause either (x) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the acceptance for payment of Shares pursuant to the Amended
Offer, (y) any condition set forth in Annex I to be unsatisfied in any material
respect at any time from the date hereof to the date the Purchaser purchases
Shares pursuant to the Amended Offer or (z) any condition set forth in Article
VIII hereof to be unsatisfied in any material respect at any time from the date
hereof to the Effective Time, and (ii) any material failure of ITT or Hilton, as
the case may be, or any officer, director, employee or agent thereof, to comply
with or
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satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 7.6. Indemnification. From and after the Effective Time, the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of ITT and its subsidiaries
against all losses, claims, damages, expenses or liabilities arising out of
actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time to the same extent, on the same terms and conditions, and
subject to the same limitations provided for in ITT's Articles of Incorporation
and Bylaws and agreements in effect at the date hereof (to the extent consistent
with applicable law).
Section 7.7. Expenses. Hilton and ITT shall bear their respective
expenses incurred in connection with this Agreement, the Amended Offer and the
Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants.
Section 7.8. ITT Rights Agreement. Except as contemplated by Section
5.7 hereof or the last sentence of this Section 7.8, ITT shall not redeem the
Rights or amend or terminate the Rights Agreement prior to the consummation of
the Merger unless required to do so by order of a court of competent
jurisdiction or fiduciary obligations. If requested to do so by Hilton or the
Purchaser, ITT shall redeem all outstanding Rights at a redemption price of
$0.01 per Right effective immediately prior to the acceptance for payment of any
Shares by the Purchaser pursuant to the Amended Offer.
Section 7.9. Takeover Laws and Provisions. ITT shall, upon the request
of Hilton or the Purchaser, take all reasonable steps to assist in any challenge
by Hilton or the Purchaser to the validity or applicability to the transactions
contemplated by this Agreement, including the Offer, the Amended Offer and the
Merger, of (i) any state takeover law, and (ii) any termination provision in any
hotel management, franchise or similar agreement triggered by the occurrence of
a "Change of Control" (as defined in any such agreement).
Section 7.10. Registration and Listing. Hilton and Purchaser shall use
their reasonable best efforts to cause the Hilton Common Stock that may be
issued to redeem the CVP Stock to be registered under the Securities Act, and to
be listed for trading, subject to official notice of issuance, on the NYSE.
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Section 7.11. Restricted Transactions. If the CVP Stock is issued in
the Merger, until the first anniversary of the Merger, Hilton shall not, and
shall not permit any of its controlled Affiliates to, purchase any shares of
Hilton Common Stock in open market transactions, privately negotiated
transactions or otherwise, on any day during the Valuation Period (as defined in
Exhibit 3.1), except with respect to employee benefit plans and other incentive
compensation arrangements.
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF HILTON,
THE PURCHASER AND ITT
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment of each of the following conditions:
Section 8.1. Purchase of Shares. The Purchaser shall have accepted for
payment and paid for Shares pursuant to the Amended Offer in accordance with the
terms thereof; provided that this condition shall be deemed to have been
satisfied with respect to Hilton and the Purchaser if the Purchaser fails to
accept for payment or pay for Shares pursuant to the Amended Offer in violation
of the terms of the Amended Offer.
Section 8.2. Stockholder Approval. The vote of the stockholders of each
of ITT and Hilton necessary to consummate the transactions contemplated by this
Agreement shall have been obtained.
Section 8.3. No Legal Impediments. No statute, rule, regulation,
judgment, writ, decree, order or injunction shall have been promulgated,
enacted, entered, enforced or deemed applicable to this Agreement or the Merger,
and no other action shall have been taken, by any domestic, foreign or
supranational Governmental Entity that has the effect of making illegal or
directly or indirectly restraining, prohibiting or restricting the consummation
of the Merger; and the approval of all Governmental Entities necessary for
consummation of the Merger shall have been obtained.
ARTICLE IX.
TERMINATION AND ABANDONMENT
Section 9.1. Termination. Subject to Section 1.5(c), this Agreement may
be terminated at any time prior to the Effective Time:
(a) by mutual consent of the ITT Board and the Hilton Board;
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(b) by either Hilton or ITT if, without fault of such terminating
party, the purchase of Shares pursuant to the Amended Offer shall not have
occurred on or before December 31, 1997, which date may be extended by mutual
written consent of the parties hereto;
(c) by Hilton or ITT if the Amended Offer expires or is terminated or
withdrawn pursuant to its terms without any Shares being purchased thereunder;
provided, however, that Hilton may not terminate this Agreement pursuant to this
Section 9.1(c) if Hilton's or the Purchaser's termination of, or failure to
accept for payment or pay for any Shares tendered pursuant to, the Amended Offer
does not follow the occurrence, or failure to occur, as the case may be, of any
condition set forth in Annex I hereto or is otherwise in violation of the terms
of the Amended Offer; or
(d) by either Hilton or ITT if any court of competent jurisdiction in
the United States or other Governmental Entity in the United States shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
purchase of Shares pursuant to the Amended Offer or the Merger, and such order,
decree, ruling or other action shall have become final and nonappealable;
provided that the party seeking to terminate this Agreement shall have used its
reasonable best efforts to remove or lift such order, decree or ruling.
Section 9.2. Termination by Hilton. This Agreement may be terminated
and the Amended Offer and the Merger may be abandoned by action of the Hilton
Board, at any time prior to the purchase of Shares pursuant to the Amended
Offer, if the ITT Board shall (a) withdraw, modify or change its recommendation
or approval in respect of this Agreement or the Amended Offer in a manner
adverse to Hilton, (b) have recommended any proposal in respect of any merger,
consolidation or other business combination involving ITT or its subsidiaries,
or (c) fail to reaffirm its recommendation and approval in respect of this
Agreement and the Amended Offer promptly after any request therefor by Hilton.
Section 9.3. Procedure for Termination. In the event of termination and
abandonment of the Merger and the Amended Offer by Hilton or the Merger by ITT
pursuant to this Article IX, written notice thereof shall forthwith be given to
the other.
Section 9.4. Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except
that nothing herein shall relieve any party from liability for any breach of
this Agreement.
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ARTICLE X.
DEFINITIONS
Section 10.1. Terms Defined in the Agreement. The following terms used
herein shall have the meanings ascribed in the indicated Sections.
<TABLE>
<S> <C>
Additional Amount..............................................3.2(a)
Affiliate........................................................5.12
Agreement....................................................Preamble
Amended Offer................................................Recitals
Amended Schedule 14D-9.........................................1.2(b)
Articles of Merger................................................2.2
Average Hilton Share Price.....................................3.1(a)
Business Combination Statute...................................5.9(b)
CDRV..........................................................5.11(b)
CDRV Agreement................................................5.11(b)
CVP Stock........................................................7.10
Certificate of Merger.............................................2.2
Certificates...................................................4.2(a)
Code...........................................................4.2(i)
Constituent Corporations.....................................Preamble
Control Share Statute..........................................5.9(a)
Delaware Secretary of State.......................................2.2
DGCL.........................................................Recitals
DLJ...............................................................6.9
Effective Time....................................................2.2
Effective Time Deficiency......................................3.1(b)
Exchange Act...................................................1.2(b)
Exchange Agent.................................................4.2(a)
Exchange Fund..................................................4.2(a)
Exchange Ratio.................................................3.1(a)
Form S-4..........................................................2.6
Governmental Entity............................................5.4(b)
HSR Act........................................................5.4(b)
Hilton.......................................................Preamble
Hilton Board.................................................Recitals
Hilton Charter.................................................1.4(a)
Hilton Common Stock............................................1.4(a)
Hilton Disclosure Letter..........................................6.1
Hilton Material Adverse Effect....................................6.1
Hilton Option..................................................3.2(a)
Hilton Option Plans...............................................6.2
</TABLE>
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<TABLE>
<S> <C>
Hilton PRIDES(SM).................................................6.2
Hilton Preferred Stock............................................6.2
Hilton Rights Agreement...........................................6.2
Hilton SEC Documents...........................................6.5(a)
ITT..........................................................Preamble
ITT Affiliate Agreements.........................................5.12
ITT Board....................................................Recitals
ITT Disclosure Letter.............................................5.1
ITT Material Adverse Effect.......................................5.1
ITT Options....................................................3.2(a)
ITT Preferred Stock...............................................5.2
ITT SEC Documents..............................................5.5(a)
Merger.........................................................2.1(a)
Nevada Secretary of State.........................................2.2
NGCL.........................................................Recitals
NRS..........................................................Recitals
NYSE...........................................................3.1(a)
Offer........................................................Recitals
Offer Documents................................................1.1(a)
Offer to Purchase..............................................1.1(a)
Option Plans...................................................3.2(a)
person...........................................................11.9
Purchaser....................................................Preamble
Prospectus/Joint Proxy Statement..................................2.6
Rights.......................................................Recitals
Rights Agreement..................................................5.2
Rule 145.........................................................5.12
Schedule 14D-1.................................................1.1(a)
SEC............................................................1.1(a)
Securities Act....................................................2.6
Shares.......................................................Recitals
Starwood......................................................5.11(c)
Starwood Agreement............................................5.11(c)
SARs...........................................................3.2(a)
subsidiary.......................................................11.9
Surviving Corporation..........................................2.1(a)
</TABLE>
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<PAGE>
ARTICLE XI.
MISCELLANEOUS
Section 11.1. Amendment and Modification. Subject to applicable law and
the provisions of Section 1.5(c), this Agreement may be amended, modified or
supplemented only by written agreement of Hilton, the Purchaser and ITT at any
time prior to the Effective Time with respect to any of the terms contained
herein.
Section 11.2. Waiver of Compliance; Consents. Subject to the provisions
of Section 1.5(c), any failure of Hilton, the Purchaser or ITT to comply with
any obligation, covenant, agreement or condition herein may be waived by ITT,
the Purchaser or Hilton, respectively, only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.2.
Section 11.3. Survivability; Investigations. The respective
representations and warranties of Hilton, the Purchaser and ITT contained herein
or in any certificates or other documents delivered prior to or as of the
Effective Time shall not be deemed waived or otherwise affected by any
investigation made by any party hereto and shall not survive the Merger. The
covenants and agreements of the Surviving Corporation and Hilton and the
Purchaser shall survive the Effective Time without limitation.
Section 11.4. Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage prepaid, or telecopied with confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first class postage prepaid.
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<PAGE>
(a) if to ITT, to
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019-5490
Telecopy: ( ) -
Attention:
with a copy to
(b) if to Hilton or the Purchaser, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Telecopy: (310) 205-7677
Attention: Thomas E. Gallagher, Esq.
Executive Vice President and General Counsel
with a copy to:
Latham & Watkins
1001 Pennsylvania, N.W.
Suite 1300
Washington, D.C. 20004
Telecopy: (202) 637-2201
Attention: Bruce E. Rosenblum, Esq.
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Steven A. Rosenblum, Esq.
Section 11.5. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties.
-33-
<PAGE>
Section 11.6. Governing Law. Except as the laws of the State of
Delaware or Nevada are by their terms applicable, this Agreement shall be
governed by the laws of the State of New York (regardless of the laws that might
otherwise govern under applicable New York principles of conflicts of law) as to
all matters, including but not limited to matters of validity, construction,
effect, performance and remedies.
Section 11.7. Counterparts. This Agreement may be executed by
facsimile and in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 11.8. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 11.9. Interpretation. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; and (ii) the term "subsidiary" of any specified
corporation shall mean any corporation of which a majority of the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by such specified corporation or any
other person of which a majority of the equity interests therein are, directly
or indirectly, owned by such specified corporation.
Section 11.10. Entire Agreement. This Agreement, including the Annexes
and Exhibits hereto and the documents and instruments referred to herein and
therein, embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein, supersedes all
prior agreements and understandings between the parties with respect to such
subject matter, and is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. There are no representations,
promises, warranties, covenants, or undertakings in respect of such subject
matter, other than those expressly set forth or referred to herein and therein.
* * *
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<PAGE>
IN WITNESS WHEREOF, Hilton, the Purchaser and ITT have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
HILTON HOTELS CORPORATION
By:
------------------------------------
Name:
Title:
HLT CORPORATION
By:
------------------------------------
Name:
Title:
ITT CORPORATION
By:
------------------------------------
Name:
Title:
-35-
<PAGE>
ANNEX I
CONDITIONS OF THE AMENDED OFFER
Notwithstanding any other term of the Offer or the Agreement and Plan
of Merger by and among ITT Corporation, a Nevada corporation, Hilton Hotels
Corporation, a Delaware corporation, and HLT Corporation, a Delaware
corporation, dated as of November __, 1997 (the "Merger Agreement"), the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer), to pay for
any Shares tendered pursuant to the Offer unless there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer at least
63,500,000 Shares (the "Minimum Condition"). Furthermore, notwithstanding any
other term of the Offer or the Merger Agreement, the Purchaser shall not be
required to accept for payment or, subject as aforesaid, to pay for any Shares
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of the Merger Agreement and before the
acceptance of such shares for payment or the payment therefor, any of the
following conditions exists (other than as a result of any action or inaction of
Parent or any of its subsidiaries that constitutes a breach of the Merger
Agreement):
(a) there shall be instituted or pending by any governmental
authority or agency any suit, action or proceeding, (i) challenging the
acquisition by Parent or the Purchaser of any Shares under the Offer or
seeking to restrain or prohibit the making or consummation of the Offer
or the Merger, (ii) seeking to prohibit or materially limit the
ownership or operation by the Company, Parent or any of their
respective subsidiaries of a material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or Parent and
its subsidiaries, taken as a whole, or to compel the Company or Parent
to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, as a result of the Offer or any
of the other transactions contemplated by the Merger Agreement, (iii)
seeking to impose material limitations on the ability of Parent or the
Purchaser to acquire or hold, or exercise full rights of ownership of,
any Shares accepted for payment pursuant to the Offer including,
without limitation, the right to vote such Shares on all matters
properly presented to the stockholders of the Company or (iv) seeking
to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the
business or operations of the Company and its subsidiaries;
<PAGE>
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be
taken by any governmental authority or agency or court that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) Parent or the Purchaser shall not have obtained any
waiver, consent, extension, approval, action or non-action from any
governmental authority or agency which is necessary to consummate the
Offer; or
(d) any material adverse change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result
in any material adverse change) in the financial condition (other than
attributable to a change in results of operations) or business of the
Company and its subsidiaries, taken as a whole;
(e) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or the Purchaser its approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any proposal
in respect of any merger, consolidation or other business combination
involving the Company or its subsidiaries, or (ii) the Board of
Directors of the Company or any committee thereof shall have resolved
to take any of the foregoing actions;
(f) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified as to materiality
shall not be true and correct or any such representations and
warranties that are not so qualified shall not be true and correct in
any material respect, in each case at the date of the Merger Agreement
and at the Expiration Date;
(g) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it under the Merger Agreement;
(h) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on a national
securities exchange in the U.S. (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market
index), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
(whether or not mandatory) by any governmental authority or agency on,
or other event that materially adversely affects, the extension of
<PAGE>
credit by banks or other lending institutions or (iv) in case of any of
the foregoing existing on the date of the Merger Agreement, material
acceleration or worsening thereof; or
(i) the Merger Agreement shall have been terminated in
accordance with its terms.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may, subject to the terms of the Merger Agreement, be waived by the
Purchaser and Parent in whole or in part at any time and from time to time in
their sole discretion. The failure by Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
EXHIBIT (G)(34)
SCHRECK MORRIS
STEVE MORRIS
KRISTINA PICKERING
MATTHEW McCAUGHEY
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
(702) 474-9400
WACHTELL, LIPTON, ROSEN & KATZ
BERNARD W. NUSSBAUM
ERIC M. ROTH
MARC WOLINSKY
SCOTT L. BLACK
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, )
) CV
Plaintiffs, ) -------------
)
-vs- ) VERIFIED COMPLAINT
) FOR DAMAGES, RESCISSION
BETTE B. ANDERSON, RAND V. ) AND INJUNCTIVE AND
ARASKOG, NOLAN D. ARCHIBALD, ) DECLARATORY RELIEF
ROBERT A. BOWMAN, ROBERT A. )
BURNETT, PAUL G. KIRK, JR., )
EDWARD C. MEYER, BENJAMIN F. )
PAYTON, VIN WEBER, MARGITA E. )
WHITE, ITT CORPORATION, STARWOOD )
LODGING CORPORATION, STARWOOD )
LODGING TRUST, and CHESS )
ACQUISITION CORP., )
)
Defendants. )
)
-----------------------------------
Plaintiffs Hilton Hotels Corporation ("Hilton") and
HLT Corporation ("HLT"), for their complaint against defendants
Bette B. Anderson, Rand V. Araskog, Nolan D. Archibald, Robert
A. Bowman, Robert A. Burnett, Paul G. Kirk, Jr., Edward C.
<PAGE>
Meyer, Benjamin F. Payton, Vin Weber, Margita E. White (col-
lectively, the "Director Defendants"); ITT Corporation ("ITT");
and Starwood Lodging Corporation ("Starwood Corp."), Starwood
Lodging Trust ("Starwood Trust") and Chess Acquisition Corp.
(collectively, the "Starwood Defendants"), allege upon knowl-
edge with respect to their own acts and upon information and
belief as to all other matters, as follows:
NATURE OF THE ACTION
1. Plaintiffs Hilton and HLT bring this action
directly and derivatively to redress the illegal conduct of the
Director Defendants and ITT designed to frustrate any Hilton
offer to acquire ITT. As this Court has already ruled, the
Director Defendants have, in order to entrench themselves in
office, sought to impede the voting rights of ITT shareholders.
Since this Court's decision, the Director Defendants have con-
tinued their wrongful conduct and violated their duties of loy-
alty and care to the ITT shareholders by agreeing to sell ITT
after a sales "process" that unlawfully excluded Hilton and by
agreeing to pay the victors in that process, the Starwood De-
fendants, an unnecessary, excessive and unreasonable "break-up"
fee of up to $225 million plus other "expenses." That break-up
fee would be payable if, among other circumstances, Hilton's
slate of nominees is elected to the ITT board at the 1997 an-
nual meeting and goes forward with the Hilton acquisition of
ITT rather than the Starwood transaction. The unlawful
break-up fee constitutes a gross waste of corporate assets of
ITT as well as a "poll tax" upon ITT shareholders should they
choose to vote the incumbent directors out of office. As
-2-
<PAGE>
further alleged herein, since Hilton first announced its bid in
January 1997, the Director Defendants, in breach of their fidu-
ciary duties, have engaged in a number of acts of corporate
waste for the primary purpose of entrenching themselves and
others in positions at ITT and must account to ITT for the
damages caused by this misconduct.
2. This action also seeks injunctive and declara-
tory relief by virtue of violations by ITT and the Director
Defendants of disclosure obligations under the federal securi-
ties laws. Among other things, while trumpeting the supposed
benefits of the Starwood transaction, ITT and the Director
Defendants have deliberately obscured significant tax and
economic ramifications and risks of that transaction. These
include: (i) tax considerations relating to a $1.5 billion
"dividend" that will be paid to the Starwood shareholders prior
to the merger; (ii) the exaggerated emphasis on the purported
tax advantages of the Starwood "grandfathered" paired share
structure, which in fact offers little benefit on the facts of
this transaction; and (iii) the significant risk that
Starwood's "grandfathered" tax structure will be eroded or
eliminated by legislative, administrative, or judicial action
as the result of the proposed transaction. ITT has also failed
to disclose that members of ITT management holding stock op-
tions, including defendants Araskog and Bowman, are receiving
preferential treatment over other ITT shareholders by virtue of
the way in which such options are being treated in the Starwood
transaction.
-3-
<PAGE>
3. In addition to the damages and declaratory and
injunctive relief sought herein, plaintiffs seek an order re-
scinding ITT's merger agreement with the Starwood Defendants,
particularly including the unlawful break-up fee and expense
reimbursement provisions contained therein. Plaintiffs further
seek an order declaring that the Director Defendants may not be
indemnified by ITT for any judgments, settlements, or attor-
neys' fees in this action and cannot avail themselves of the
exculpatory provision in Article Seventh of the ITT Restated
Articles of Incorporation.
JURISDICTION AND VENUE
4. This Court has jurisdiction over this action
pursuant to 28 U.S.C. (S)(S) 1331, 1332(a) and 1337 and 15 U.S.C.
(S) 78aa. The amount in controversy is in excess of $75,000,
exclusive of interest and costs.
5. Venue is proper in the unofficial Southern Divi-
sion of this District pursuant to 28 U.S.C. 1331, 15 U.S.C.
(S) 78aa and LR IA 8-1.
6. Acts and transactions complained of herein have
taken place and/or are threatened to occur in this District.
The wrongful conduct alleged herein was committed through the
use of the means and instrumentalities of interstate commerce
and of the mails.
THE PARTIES
7. Hilton is a Delaware corporation with its prin-
cipal place of business in Beverly Hills, California. Hilton
is a leading owner and operator of full-service hotels and gam-
ing properties located in gateway cities, urban and suburban
-4-
<PAGE>
centers and resort areas throughout the United States and in
selected international cities. Hilton is and at the time of
the transactions complained of was the beneficial owner of over
315,000 ITT shares.
8. HLT is a Delaware corporation with its principal
place of business in Beverly Hills, California. HLT, a wholly-
owned subsidiary of Hilton organized in connection with Hil-
ton's tender offer and the proposed merger, is and at the time
of the transactions complained of was, the record and benefi-
cial owner of 100 shares of ITT stock.
9. Defendants Bette B. Anderson, Rand V. Araskog,
Nolan D. Archibald, Robert A. Bowman, Robert A. Burnett, Paul
G. Kirk, Jr., Edward C. Meyer, Benjamin F. Payton, Vin Weber
and Margita E. White, are directors of ITT. Defendants Araskog
and Bowman are also officers of ITT; Araskog is the Chairman of
the Board and Chief Executive Officer of ITT and Bowman is
ITT's President and Chief Operating Officer. None of the Di-
rector Defendants is a citizen of the State of Delaware or the
State of California.
10. Defendant ITT is a Nevada corporation with its
principal place of business in New York, New York. ITT is en-
gaged, through subsidiaries, in the hospitality, gaming, tele-
phone directories publishing and post-secondary technical edu-
cation businesses.
11. Defendant Starwood Corp. is a Maryland corpora-
tion with its principal place of business in Phoenix, Arizona.
Starwood Corp. indirectly operates and manages hotels. Defen-
dant Starwood Trust is a Maryland real estate investment trust
-5-
<PAGE>
with its principal place of business in Phoenix, Arizona.
Shares of Starwood Corp. and Starwood Trust are paired and
trade together on the New York Stock Exchange.
12. Defendant Chess Acquisition Corp. ("Chess") is a
Nevada corporation with its principal place of business in
Phoenix, Arizona. Defendant Chess is a controlled subsidiary
of Starwood Corp. formed for the purpose of effecting the ac-
quisition of ITT.
DERIVATIVE ACTION ALLEGATIONS
13. Plaintiffs fairly and adequately represent the
interests of the shareholders of ITT in enforcing the right of
the corporation.
14. This Court in Hilton Hotels Corp. v. ITT Corp.,
CV-5-97-095-PMP (RLH) ("Hilton I") (order entered September 10,
1997) found that Hilton was not required to make a demand upon
the ITT board to cause ITT to bring suit against the Director
Defendants for breach of fiduciary duty because any such demand
would be futile. Demand would be futile and should be excused
in this action because:
(a) The Director Defendants have already been adju-
dicated as having acted for the primary purpose
of entrenching themselves in office and are,
therefore, self-interested directors and cannot
exercise the requisite independence to decide to
commence an action to redress the corporate
waste and breaches of duty alleged herein. The
-6-
<PAGE>
Director Defendants expected to derive a per-
sonal financial benefit from transactions chal-
lenged herein, including transactions that were
adopted in furtherance of a scheme to extend
their terms in office without a shareholder
vote.
(b) Both the nature of the transactions approved by
the Director Defendants, and the process by
which the directors approved them, make clear
that the Director Defendants' actions are not
the product of a valid exercise of business
judgment. For example, the Director Defendants
authorized a sale of ITT to the Starwood Defen-
dants and an unnecessary, excessive and unrea-
sonable break-up fee without even contacting
Hilton, the most logical buyer who had already
pursued ITT for over eight months, to determine
if Hilton would increase or amend its offer.
Nor did the Director Defendants offer during the
sales process to provide Hilton access to non-
public information that might justify such an
increase or amendment. The Director Defendants
acted in this manner because -- as has been con-
sistently demonstrated -- they and the senior
members of ITT management are adamantly opposed
to any Hilton takeover of ITT, regardless of the
price and regardless of the desires or interests
of ITT shareholders. No director exercising
-7-
<PAGE>
reasonable business judgment in the circumstanc-
es presented here would conduct a sales process
that excluded Hilton or would agree to pay a
break-up fee and expense reimbursements of $250
million to the chosen merger partner. Moreover,
as alleged herein, the Director Defendants'
agreement to the break-up fee impedes the exer-
cise of ITT shareholders' voting rights at the
1997 ITT annual meeting.
(c) The Director Defendants have engaged in acts of
corporate waste. For example, the Director De-
fendants authorized ITT to sell $550 million in
junk bonds at exorbitant interest rates to fi-
nance ITT's now-defunct Comprehensive Plan,
which sale was held on September 19, 1997 --
just 10 days before this Court was scheduled to
hear argument as to the legality of that Plan.
No director exercising reasonable business judg-
ment would have caused the corporation to incur
this expense with an adjudication on the Plan
only days away. No director exercising reason-
able business judgment would cause an investment
grade company to issue massive amounts of junk
debt or agree, as the Director Defendants have,
to change-in-control provisions that allow valu-
able management contracts and franchise agree-
ments to be terminated in the event the incum-
bent ITT directors are replaced without their
-8-
<PAGE>
approval. Nor would any reasonable board, in
the face of an acquisition proposal, award mas-
sive "golden parachutes" as have been awarded at
ITT. The Director Defendants have, in essence,
given away ITT's assets for no consideration.
(d) The Director Defendants have knowledge of and
participated in and/or approved the wrongs al-
leged herein, did so in violation of their du-
ties to ITT and its shareholders, and failed to
take action to protect ITT or recover amounts
due to ITT by virtue of the misconduct alleged
herein.
(e) The Director Defendants have irreconcilable con-
flicts of interests regarding the prosecution of
this action as against themselves and cannot
exercise the requisite independence to make a
good faith business judgment whether to pros-
ecute the claims herein in the name of ITT.
15. This action is not a collusive one to confer
jurisdiction on a court of the United States which it would not
otherwise have.
HILTON'S TENDER OFFER AND PROXY CONTEST
16. On January 27, 1997, Hilton announced its inten-
tion to commence a tender offer pursuant to which Hilton sought
to acquire 50.1% of the outstanding shares of ITT stock at $55
per share. Hilton formally commenced its tender offer on Janu-
ary 31. Hilton also stated its intention, upon consummation of
the tender offer, to acquire the remaining shares of ITT in a
-9-
<PAGE>
second-step merger in which ITT shareholders would receive $55
in Hilton stock for each ITT share that they own.
17. The Hilton tender offer and second-step merger
cannot be consummated unless the ITT board removes or makes
inapplicable ITT's various anti-takeover devices, including its
"poison pill" and the provisions of the Nevada Control Share
Acquisition Statute and Business Combination Statute. Accord-
ingly, Hilton conditioned its tender offer upon these takeover
defenses being removed or otherwise rendered inapplicable to
the Hilton offer by the ITT board.
18. Because the ITT board of directors has the power
to remove these impediments and permit ITT's shareholders to
decide for themselves whether they want to accept Hilton's ten-
der offer, Hilton coupled its tender offer with a proxy contest
to replace ITT's incumbent board. On February 11, 1997, in
accordance with the requirements of Section 2.2 of ITT's by-
laws, Hilton gave notice to ITT of its intention to nominate a
slate of candidates for election as directors to the ITT board
at the 1997 annual meeting and its intention to present a reso-
lution urging the Board to arrange a sale of the company to
Hilton or any higher bidder. On March 21, 1997, Hilton cleared
its proxy materials with the SEC and began soliciting proxies
from ITT's shareholders. The Hilton slate is committed, sub-
ject to its fiduciary duties, to remove the obstacles to con-
summation of Hilton's tender offer and proposed merger.
19. On August 6, 1997, Hilton announced an increase
in its offering price to $70 per share. Hilton offered ITT
shareholders $70 per share in cash for 50.1% of their shares to
-10-
<PAGE>
be followed by a second-step merger in which ITT shareholders
would receive $70 in Hilton common stock for each share of ITT
stock. On November 3, 1997, Hilton is announcing a further
increase in its bid for ITT. Hilton will now offer $80 cash
per ITT share for 65,000,000 shares, or approximately 55% of
the currently outstanding shares, of ITT common stock. In the
second-step merger, Hilton will offer two Hilton shares for
each remaining ITT share. In addition, in the merger, each ITT
shareholder will receive two shares of Contingent Value Pre-
ferred Stock ("CVPS") designed to guarantee that the Hilton
stock being received by ITT shareholders will be worth at least
$40 per share (or $80 total per ITT share) within one year
after the merger. If Hilton common stock does not reach $40
per share within one year after the merger, the holders of the
CVPS will receive the difference, in cash or Hilton stock,
between $40 and the Hilton stock trading price, up to a $12
maximum per share of CVPS.
UNLAWFUL CONDUCT IN RESPONSE TO HILTON'S BID
20. The Director Defendants have responded to the
Hilton offer by fiercely opposing the offer; refusing to meet
with Hilton representatives; attempting to deprive shareholders
of the ability to exercise voting rights to elect Hilton's
slate of nominees to the ITT board; engaging in gross corporate
waste; and causing ITT to make materially false and misleading
public statements.
21. Among other things, the Director Defendants
sought to implement a "Comprehensive Plan" -- involving a
-11-
<PAGE>
three-way break up of the company and imposition of a "stag-
gered board" -- before shareholders would have the opportunity
to elect directors at the 1997 Annual Meeting. In Hilton I,
this Court enjoined ITT and its directors from proceeding with
that Plan prior to the Annual Meeting. In so ruling, the Court
stated:
This Court concludes that the structure and tim-
ing of ITT's Comprehensive Plan with its classified
board provision for ITT Destinations, is preclusive
and leaves no doubt that the primary purpose for
ITT's proposed implementation of the Comprehensive
Plan before the 1997 annual meeting is to impermis-
sibly impede the exercise of the shareholder fran-
chise by depriving shareholders of the opportunity to
vote to re-elect or to oust all or as many of the
incumbent ITT directors as they may choose at the
upcoming annual meeting. It has as its primary pur-
pose the entrenchment of the incumbent ITT board. As
a result, the Court concludes that Hilton has pre-
vailed on the merits of its claim for permanent in-
junctive relief. (Emphasis added.)
22. As alleged in detail below, in opposing Hilton's
offer, the Director Defendants have authorized the improper
expenditure of hundreds of millions of dollars of corporate
funds and have committed ITT to enter into disadvantageous con-
tractual arrangements with third parties. These actions have
had the purpose and effect of frustrating any Hilton bid for
ITT and impairing the ability of ITT shareholders to vote their
shares against the re-election of the Director Defendants.
These actions were taken in furtherance of the Director Defen-
dants' plan to defeat Hilton at all costs and were not moti-
vated by any legitimate corporate business purpose.
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Unlawful Conduct Concerning the
Proposed Starwood Transaction
23. Despite the entry of this Court's injunction in
Hilton I, the Director Defendants made it clear that they were
still determined to oppose an acquisition of ITT by Hilton,
regardless of the merits of any offer that Hilton might make.
In response to Hilton's statement following the ruling that it
wanted to engage in merger discussions with ITT, ITT represen-
tatives stated that it would "be a cold day in hell" before the
Hilton and ITT chief executives would meet to discuss a merger
and that ITT had "nothing to discuss" with Hilton. ITT's of-
ficial press spokesman referred to ITT's ongoing efforts to
defeat Hilton as a "war" and stated, "we have no intention of
losing this war." The Director Defendants and ITT senior man-
agement were not motivated by any good faith business judgment
or by the best interests of ITT or its shareholders, but rather
by a desire to assure that the company that had initiated a
hostile takeover would not succeed.
24. Consistent with this bad faith desire to assure
that Hilton would not prevail, ITT initiated an effort to find
a suitor to acquire ITT. Upon initiating this effort, the
Director Defendants had a duty to proceed in a manner genuinely
designed to obtain the maximum value for ITT shareholders. In
breach of this duty, the Director Defendants excluded Hilton
from their process even though they knew that Hilton was and is
a highly logical, indeed the most logical, bidder for ITT and
had already pursued ITT for over eight months. In connection
with this effort, ITT selectively initiated negotiations with
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certain potential acquirors and offered to provide and, in
fact, provided non-public information to one or more bidders.
25. In an interview given to USA Today published on
October 16, defendant Araskog hinted that such negotiations
were underway. In response, Hilton wrote to the Director De-
fendants on October 16 to urge them to cause ITT to engage in
merger discussions with Hilton and not to take any action that
would interfere with the upcoming election of directors. This
request was repeated in an October 17 letter to defendant
Araskog. ITT and the Director Defendants did not respond to
either letter.
26. Instead, ITT proceeded to negotiate and execute
a merger agreement with the Starwood Defendants (the "Starwood
Agreement"). The Starwood Agreement is dated as of and was
approved by the Director Defendants on October 19, 1997, and
was announced on October 20, 1997. The Agreement provides for
Starwood Corp. to acquire ITT for $15 in cash per ITT share and
newly issued paired shares in Starwood Corp. and Starwood Trust
with a purported value of $67 per ITT share, for a purported
total value to ITT shareholders of $82 per share. Because the
consideration to be paid in the acquisition consists overwhelm-
ingly of Starwood securities whose value is uncertain, among
other reasons, the marketplace has substantially discounted the
claim that the value of the transaction to ITT shareholders is
$82 per ITT share. For the week prior to the announcement of
Hilton's increased $80 per share offer, the average closing
market price of ITT shares was $73.29 per share. The Starwood
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transaction is taxable and is subject to shareholder, gaming,
and antitrust approvals.
27. As part of the Starwood Agreement, the Director
Defendants agreed that ITT would pay the Starwood Defendants a
break-up fee of up to $225 million under certain circumstances.
Moreover, in the event of any termination of the Agreement
(other than by a Starwood breach), ITT would be required to pay
the Starwood Defendants' expenses of up to $25 million, plus
unlimited financing and litigation expenses. The payment of
the break-up fee would be required if, for example, the Direc-
tor Defendants determined to recommend or accept a superior
acquisition proposal from another acquiror or if (under most
circumstances) the ITT shareholders do not vote to approve the
acquisition of ITT by the Starwood Defendants. In addition,
the Starwood Agreement provides that if "nominees of Hilton
Hotels Corporation are elected as a majority of the members of
the Board of Directors of the Company at the Company's 1997
annual meeting of stockholders" then, should such new directors
determine to terminate the agreement with Starwood, the fee of
up to $225,000,000 must first be paid. The effect of this pro-
vision is to impose a massive "poll tax" on ITT shareholders
should they decide to elect the slate committed to the Hilton
(rather than the Starwood) transaction. The imposition of this
poll tax is at odds with this Court's ruling in Hilton I, en-
joining ITT and the Director Defendants from impeding the exer-
cise of the shareholder franchise at the 1997 annual meeting.
28. There is no valid business purpose for these
unreasonable break-up fees and expenses. As reported in the
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October 21, 1997 Wall Street Journal, Starwood was the aggres-
sor in pursuing the acquisition of ITT and Starwood's CEO,
Barry S. Sternlicht, was "dogged" in that pursuit. A Starwood
board member was quoted as saying that Sternlicht "did every-
thing to try to get to [ITT] and convince them of the merits of
working together." Under these circumstances, the break-up fee
and expense provisions were entirely unnecessary and did not
serve as an "inducement" to obtain a bid from a third-party.
Indeed, that third-party, Starwood, was aggressively seeking to
bid. The real reasons for these excessive and unreasonable
break-up fee and expense provisions were to create a signifi-
cant financial impediment to any Hilton bid, to penalize ITT
shareholders for voting in favor of a Hilton-nominated slate
and to coerce ITT shareholders to vote in favor of an acquisi-
tion of ITT by the Starwood Defendants. The break-up fee and
expense provisions were intended to and in fact will impede the
ITT shareholders' exercise of their voting franchise at the
1997 annual meeting at which the contested election of direc-
tors between ITT's slate and Hilton's slate will be held.
29. ITT and the Director Defendants have made false
and misleading public statements seeking to portray the Star-
wood Agreement as beneficial to ITT shareholders and superior
to Hilton's proposal. One reason for such statements is to
attempt to defeat Hilton's slate of nominees at the upcoming
ITT annual meeting. An example of such a statement was made by
defendant Araskog as part of a joint press release issued by
the Starwood Defendants and ITT on October 20, 1997. In that
press release, defendant Araskog was quoted as stating that
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"[t]his is a superb transaction for ITT shareholders, combining
the benefits of Starwood's paired share REIT structure, the ex-
traordinary fit between Sheraton and Westin [which Starwood has
also agreed to acquire], Starwood Lodging's substantial quar-
terly cash dividends, and enormous growth potential under Star-
wood's leadership." ITT's statement -- particularly its em-
phasis on the supposed benefits of Starwood's "paired share
REIT structure" -- was materially false and misleading, and
failed to disclose material adverse facts concerning the pro-
posed transaction, as more fully described below.
30. The Starwood Agreement provides for a $1.5 bil-
lion dividend of non-cash property by Starwood Trust to Star-
wood's shareholders before consummation of the merger. Star-
wood Corp. will then have the right -- which it intends to
exercise -- to acquire that $1.5 billion of property from the
shareholders in exchange for stock. The net effect of these
transactions is the transfer of the $1.5 billion in property
from Starwood Trust to Starwood Corp., a transaction that would
normally result in capital gains tax. This scheme -- as ITT's
own tax counsel has conceded -- is designed to transfer the
$1.5 billion in assets from Starwood Trust to Starwood Corp.
without incurring "hefty" capital gains taxes.
31. Under well-known tax law doctrine pertaining to
so-called "step transactions," if this proposed tax avoidance
scheme is implemented, the IRS could assert that the Starwood
Defendants cannot evade capital gains taxes through this indi-
rect transfer of $1.5 billion of assets from Starwood Trust to
Starwood Corp. The IRS would have a substantial argument that
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such taxes should be imposed. ITT and the Director Defendants
have failed to disclose the substantial contingent liability
that the combined company will have should the planned tax
avoidance scheme be implemented.
32. ITT's public statements about the advantages of
Starwood's paired share REIT structure are also misleading be-
cause the tax advantages that normally accrue to such a struc-
ture would be largely inapplicable to Starwood/ITT. Thus,
ITT's takeover tax counsel has stated that the bulk of ITT's
assets will be held by Starwood Corp., a taxable entity, rather
than Starwood Trust, a tax-advantaged real estate investment
trust. Accordingly, as ITT has failed to disclose, significant
tax benefits will not arise from the transaction unless devices
are implemented to shift taxable income from Starwood Corp. to
Starwood Trust.
33. The IRS has ample authority to challenge tax-
motivated value shifting and income shifting devices. Any IRS
attack could substantially reduce, or even eliminate, the tax
benefits of Starwood's "grandfathered" parent-share structure.
Indeed, given the high profile of the proposed transaction and
its tax manipulations, it can be anticipated that the IRS or
Congress could take the position that Starwood has so altered
its historic character, and has so abused its grandfathered tax
status, that such status should be considered abrogated. This
risk and the dire economic consequences of any of these devel-
opments for Starwood and its current and future shareholders
have not been disclosed by ITT.
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34. ITT's public statements also fail to disclose
that members of ITT management (including directors Araskog and
Bowman) holding stock options would receive consideration in
excess of the consideration being paid to ITT's public share-
holders in the Starwood merger. The Starwood Agreement ((P) 5.8)
sets forth a formula to be used, upon the merger, in converting
outstanding ITT stock options into options to purchase Starwood
stock. By operation of that formula, holders of options to buy
ITT shares would receive options to buy a corresponding number
of Starwood shares as determined by the exchange ratio appli-
cable in the merger. In determining the exercise price for the
options in Starwood, however, the formula operates to give mem-
bers of ITT management holding ITT stock options a benefit be-
yond the $15 in cash per ITT share being received by the public
shareholders of ITT. In effect, these option holders will re-
ceive $15 for every Starwood share they will be entitled to buy
by virtue of the conversion of their options, whereas the pub-
lic shareholders will receive $15 per share only for the (smal-
ler) number of ITT shares being exchanged in the merger.
Nowhere does ITT disclose that, by operation of the formula in
the merger agreement, holders of options are receiving this
benefit which (depending upon the ultimate exchange ratio)
would equal $1.40 to $3.87 per ITT share or $12.2 million to
$33.7 million in the aggregate.
35. By virtue of this inequitable benefit being re-
ceived by defendants Araskog and Bowman as holders of ITT stock
options, such Director Defendants have an additional self-
interest in the proposed Starwood Transactions, and they have
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violated fiduciary obligations of loyalty to the public share-
holders in agreeing to the Starwood Agreement. The $12.2 mil-
lion to $33.7 million of additional consideration to ITT insid-
ers constitutes another instance of corporate waste authorized
by all the Director Defendants in their ongoing effort to de-
feat Hilton's offer.
Golden Parachutes
36. The Director Defendants have also granted
grossly excessive "golden parachute" agreements to ITT execu-
tives. Prior to February 1997, ITT had a policy of not autho-
rizing "golden parachute" contracts without a shareholder vote.
On February 11, 1997, however, in violation of this policy, the
Director Defendants approved an amendment to the employment
contract of defendant Araskog to provide for payments upon a
change of control (the "Araskog Parachute") as well as new
change in control severance agreements for nine senior execu-
tives and other employees (the "Other Parachutes"). By ap-
proving these amendments, the Director Defendants committed
ITT, following a change of control, to make severance payments
to ITT employees of up to three times their annual compensation
and, if the ITT stock price equals or exceeds $70.93 per share
for five consecutive trading days prior to the change of con-
trol, to make "gross-up" payments reimbursing the ITT employees
for the federal excise tax that they would owe on the amounts
received as severance.
37. As approved on February 11, the cost of the
Araskog Parachute to ITT upon a change of control would be ap-
proximately $19.8 million, and if the ITT stock price were to
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reach the $70.93 trigger, the cost (inclusive of the gross-up
payment) would exceed $35 million. This severance payment,
coupled with other payments already due Araskog upon a change
of control, would compensate him in the amount of $54.9 mil-
lion. The cost of the Other Parachutes would approximate $110
million.
38. On August 14, 1997, the Director Defendants
sweetened the terms of the "golden parachute" contracts they
had adopted in February by, among other things, providing that
the excise tax gross-up payments contained in such contracts
would be made in all events following a change of control
(i.e., even if ITT's stock did not trade at $70.93 for five
trading days following a change of control). Also on August
14, the Director Defendants approved amendment of the "golden
parachute" contracts to provide that, if disputes regarding
ITT's obligation to pay any amounts thereunder go to arbitra-
tion or litigation: the tribunal must presume that the em-
ployee is entitled to the disputed benefits; ITT may overcome
this presumption only upon a showing of "clear and convincing"
evidence; ITT is precluded from asserting that rights and ben-
efits are not valid, binding or enforceable, and must stipulate
that it is bound by the "golden parachute" provisions; and the
tribunal has discretion to award punitive damages. Finally, on
August 14, the Director Defendants agreed to fund those golden
parachute payments through various ITT employment plans (in
order to seek to assure that if Hilton acquires ITT, it could
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not prevent ITT from making severance payments to employees
following a change of control).
Change In Control Penalty Provisions
39. Another series of improper actions constituting
corporate waste by the Director Defendants was their authoriza-
tion of the grant by ITT of change-in-control penalty provi-
sions in management contracts and franchise agreements. Ac-
cording to a September 24, 1997 filing by ITT with the Secu-
rities and Exchange Commission, as of that date, ITT and its
subsidiaries had entered into 37 new hotel management and fran-
chise agreements that contain provisions permitting the other
party to terminate such agreement upon a change of control re-
sulting from an unsolicited acquisition proposal that was not
approved by the Director Defendants. ITT estimated in the fil-
ing that it would generate aggregate EBITDA of approximately
$30 million in 1998 under these 37 agreements.
40. The Director Defendants approved these provi-
sions to entrench themselves in office and any management and/
or licensing fees lost by virtue of such provisions constitute
a gross waste of ITT's corporate assets.
The CD&R Transaction
41. At a board of directors meeting held July 15,
1997, the Director Defendants voted to approve ITT's "Compre-
hensive Plan." That Plan involved, among other things, the
break-up of ITT into three separate corporations and the spin-
off to ITT shareholders of ITT's hotel and gaming business and
its technical school business, leaving ITT's European telephone
directories operation as the sole business of the corporate
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"stub" ("ISI"). As part of ITT's Plan, the Director Defendants
approved an agreement under which an affiliate of Clayton,
Dubilier & Rice ("CD&R") agreed to purchase approximately 32.9%
of the outstanding common stock of ISI plus warrants to pur-
chase an additional 13.7% of ISI's stock for aggregate con-
sideration of $225 million (the "CD&R Agreement").
42. The CD&R Agreement provides for the payment by
ITT to CD&R of grossly excessive termination fees and expenses
upon termination of the CD&R Agreement. Now that the Compre-
hensive Plan has indeed been enjoined and abandoned and ITT has
agreed to a merger with the Starwood Defendants, CD&R can be
expected to contend that it is entitled to a $25 million termi-
nation fee plus $4 million in expense reimbursements to CD&R,
equalling a total of 12.9% of CD&R's aggregate purchase price
(had the transaction been effectuated) of $225 million.
The $550 Million Junk Bond Sale
43. One element of the Comprehensive Plan was an ITT
self-tender offer for 25.7% of the company's outstanding shares
at $70 cash per share. To finance that transaction, the Direc-
tor Defendants approved the incurrence of $4.2 billion of debt
at the hotel and gaming subsidiary to be spun off as part of
the Plan and over $1 billion of debt at the European phone book
business that would serve as the "stub" company. By virtue of
that debt, upon consummation of the Comprehensive Plan, ITT
would no longer be an investment grade credit, but would in-
stead be a "junk bond" credit.
44. On September 19, 1997, ITT took steps toward
consummation of the Comprehensive Plan by selling $550 million
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of debt securities in Europe and the United States. A subsid-
iary of ITT, ITT Promedia, issued $325 million of high-yield
notes -- the largest European junk bond offering in history --
at an interest rate of 9 1/8%. Another subsidiary, ITT Publi-
media, sold $225 million of junk bonds at 9.375%. While ITT
today remains (and was at the time of the issuance) an invest-
ment grade credit, it sold this debt to finance the Comprehen-
sive Plan at junk bond interest rates well in excess of the
rates available to an investment grade company.
45. At the time of the sale, this Court had sched-
uled for September 29, 1997 its hearing on Hilton's motion for
injunctive and declaratory relief in which Hilton sought to
have the Comprehensive Plan, as structured, enjoined. The Di-
rector Defendants knew of that Court hearing date and of the
possibility that the Plan might then be enjoined. Yet, just 10
days before the hearing, ITT proceeded with the junk bond sale
and sold the $550 million of high-yield debt to the public.
46. Had the Director Defendants waited for the Court
hearing -- at which an injunction against the Plan was granted
-- they would have known that the Plan could not proceed as
planned. Rather than doing so, the Director Defendants saddled
ITT, an investment grade issuer, with massive high-yield debt
to finance an entrenchment scheme that has now been enjoined
and abandoned.
47. In addition to their junk-bond interest rates,
the $550 million of junk bonds (including both the Promedia and
Publimedia Offerings) have other terms that are highly favor-
able to the purchasers (and detrimental to ITT). Among other
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things, the bonds contain change-in-control provisions that
give the bondholders a "put," enabling the bondholders to re-
quire ITT to redeem the bonds, at a premium to the bonds' face
value, if ITT is acquired. Similarly, ITT has a "special re-
demption option" to redeem all the bonds within 90 days follow-
ing their issuance, but again at a premium price. These highly
favorable terms were granted to ensure the success of the junk
bond offerings which were to be used to finance the Director
Defendants' Comprehensive Plan entrenchment scheme.
48. The terms of the junk bonds would cause ITT to
expend over $100 million dollars more in interest payments over
the life of the bonds than ITT would normally be required to
pay on $550 million of debt at investment grade rates. By vir-
tue of the terms of the bonds, ITT will have to pay a premium
over face value should the change in control "puts" or "special
redemption option" be exercised. These expenditures have been
authorized by the Director Defendants in furtherance of a plan,
now enjoined and abandoned, to entrench themselves in office,
and constitutes a gross waste of corporate assets for which the
Director Defendants should be held liable.
49. In connection with all of the foregoing acts of
corporate waste and breaches of fiduciary duty as alleged here-
in, the Director Defendants engaged in acts involving inten-
tional misconduct, fraud or knowing violations of law and have,
further, not acted in good faith or in a manner reasonably be-
lieved to be in or not opposed to the best interests of the
corporation.
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FIRST CLAIM FOR RELIEF
(Derivative Claim for Breach of Fiduciary Duty)
50. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49 hereof.
51. As hereinabove alleged, the Director Defendants
have caused ITT to: (a) agree to sell ITT after a sales pro-
cess that unfairly and without justification excluded the sin-
gle most logical bidder for the company; (b) agree to pay an
unnecessary, excessive and unreasonable break-up fee to the
Starwood Defendants of up to $225 million, plus expenses of up
to $25 million and unlimited financing and litigation expenses;
(c) agree to a merger with the Starwood Defendants that pro-
vides inequitable, additional consideration to holders of ITT
stock options over and above the consideration offered to ITT's
public shareholders; (d) award excessive "golden parachute"
contracts to ITT officers and employees, including ITT's CEO
Rand V. Araskog; (e) agree to change-of-control penalty pro-
visions in hotel management contracts and franchise agreements,
allowing such ITT management contracts and franchise agreements
to be terminated upon a change of control of ITT not approved
by the Director Defendants; (f) sell in September 1997 $550
million, of high-yield "junk" bonds, including the largest junk
bond sale in the history of the European market, and incur
excess interest and other costs potentially in excess of $100
million, to help finance ITT's now enjoined and abandoned Com-
prehensive Plan entrenchment scheme; and (g) agree to pay CD&R
grossly excessive termination fees and expense reimbursements
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in connection with the Comprehensive Plan, amounting to $29
million.
52. These actions were not taken for any legitimate
corporate purposes of ITT, but rather were taken for the pri-
mary purpose of defeating a Hilton offer at all costs, inter-
fering with the shareholders' electoral franchise, and/or en-
trenching the Director Defendants and others in their positions
at ITT. A number of these actions were taken even after this
Court issued an injunction against the Director Defendants'
efforts, through their Comprehensive Plan, to entrench them-
selves in office by impeding shareholder voting rights. Ac-
cordingly, the Director Defendants have breached, and are con-
tinuing to breach, their fiduciary duties to ITT shareholders.
53. By virtue of such wrongful conduct, ITT and its
shareholders, including plaintiffs, have suffered damages in an
amount in excess of $500,000,000.
SECOND CLAIM FOR RELIEF
(Derivative Claim for Corporate Waste)
54. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49 and 51 through
52 hereof.
55. By causing ITT to enter into the transactions
referred to in paragraph 51 above, the Director Defendants have
caused the gross waste of corporate assets of ITT.
56. By virtue of such wrongful conduct, ITT and its
shareholders, including plaintiffs, have suffered damages in an
amount in excess of $500,000,000.
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THIRD CLAIM FOR RELIEF
(Rescission, Declaratory Judgment and Injunction)
57. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49, 51 through 52
and 55 hereof.
58. As hereinabove alleged, the Director Defendants
deliberately conducted a bad faith and biased sales process for
ITT that excluded Hilton. This bad faith "auction" resulted in
ITT entering into a merger agreement with the Starwood Defen-
dants that includes unnecessary, excessive and unreasonable
break-up fee and expense reimbursement provisions that have the
purpose and effect of creating a substantial impediment to any
Hilton acquisition of ITT and interfering with the right of ITT
shareholders to vote the Director Defendants out of office at
ITT's 1997 annual meeting.
59. The above alleged actions of the Director Defen-
dants were illegal and ultra vires.
60. By virtue of the foregoing, plaintiffs are en-
titled to a judgment rescinding ITT's merger agreement with the
Starwood Defendants and, in particular, the break-up fee provi-
sions in Section 5.7 thereof. Plaintiffs are further entitled
to a declaration that the Starwood Agreement is illegal and
ultra vires, and to an injunction against defendants taking any
action in furtherance of such agreement.
61. Plaintiffs have no adequate remedy at law.
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FOURTH CLAIM FOR RELIEF
(Injunction and Declaratory Judgment
under Federal Securities Laws)
62. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49 hereof.
63. As hereinabove alleged, ITT and the Director
Defendants have knowingly and intentionally made false and mis-
leading public statements concerning the Starwood Agreement
designed to misleadingly portray that Agreement as beneficial
to ITT shareholders and superior to the Hilton proposal for
ITT. Among other things, ITT's public statements:
(a) emphasize the "benefits of Starwood's paired
share REIT structure," but fail to disclose that
(i) the $1.5 billion dividend in the transaction
is part of a tax avoidance scheme that is sub-
ject to potential challenge by the IRS and may
well result in substantial capital gain taxes
payable by Starwood/ITT; (ii) since Starwood
Corp., rather than Starwood Trust, will hold
most of the assets of the combined enterprise,
the tax benefits of the paired share REIT struc-
ture are largely unavailable here; and (iii) by
virtue of this potential acquisition and the
$1.5 billion tax avoidance scheme, there is a
real risk that Starwood's grandfathered tax sta-
tus would be challenged by the IRS or Congress;
and
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(b) fail to disclose the preferential treatment that
members of ITT management owning ITT stock op-
tions are receiving in the merger, resulting in
aggregate additional consideration to those in-
siders of $12.2 million to $33.7 million.
64. These materially misleading statements were made
in connection with Hilton's tender offer for ITT shares and
ITT's solicitation of proxies for the election of directors at
ITT's 1997 annual meeting. ITT and the Director Defendants
made these material misstatements and omissions with the delib-
erate intent to mislead its shareholders and the investing pub-
lic generally about the nature and impact of the Starwood
Agreement.
65. By reason of the foregoing, ITT has violated
Sections 10(b), 14(a) and 14(e) of the Securities Exchange Act
of 1934 and the rules and regulations thereunder. The members
of ITT's board of directors are controlling persons of ITT un-
der Section 20(a) of the Securities Exchange Act and are liable
for ITT's violations thereof.
66. Plaintiffs are entitled to injunctive relief and
a declaration that ITT and the Director Defendants have vio-
lated the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
67. Plaintiffs have no adequate remedy at law.
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FIFTH CLAIM FOR RELIEF
(Declaratory Judgment)
68. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49, 51 through 53,
55 through 56, 58 through 59 and 63 through 65 hereof.
69. Under Nevada law and the ITT By-Laws, ITT is
permitted to indemnify a director or officer of ITT against
certain expenses incurred in an action, but only on the
condition that such individual acted in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation. Further, should such
individual be adjudged by a court of competent jurisdiction to
be liable to the corporation, he or she may only be indemnified
to the extent a court of competent jurisdiction determines
that, in view of all the circumstances of the case, he or she
is fairly and reasonably entitled to indemnification.
70. The Director Defendants' actions alleged herein
were not made in good faith or in a manner reasonably believed
to be in or not opposed to the best interests of the corpora-
tion and, in view of all the circumstances of the case, the
defendants are not fairly and reasonable entitled to indemnifi-
cation. Accordingly, plaintiffs are entitled to a declaration
that the defendants may not be indemnified by ITT for any judg-
ments, settlements, or attorneys' fees, costs or expenses they
incur in this action.
SIXTH CLAIM FOR RELIEF
(Declaratory Judgment)
71. Plaintiffs repeat and reallege each of the al-
legations set forth in paragraphs 1 through 49, 51 through 53,
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55 through 56, 58 through 59, 63 through 65 and 69 through 70
hereof.
72. Article Seventh of ITT's Restated Articles of
Incorporation, provides, in pertinent part, that "[t]o the ful-
lest extent permitted by applicable law as then in effect, no
director or officer shall be personally liable to the Corpora-
tion or any of its stockholders for damages for breach of fidu-
ciary duty as a director or officer, except for liability . . .
for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law. . . ."
73. The Director Defendants' actions alleged herein
involve intentional misconduct, fraud or a knowing violation of
law. Accordingly, plaintiffs are entitled to a declaration
that the Director Defendants cannot avail themselves of the ex-
culpatory provision in Article Seventh of the ITT Restated Ar-
ticles of Incorporation.
WHEREFORE, plaintiffs Hilton and HLT seek judgment
against defendants:
(a) Requiring the Director Defendants to pay compensatory
damages to ITT Corporation in an amount not less than
$500,000,000, plus interest and costs;
(b) Rescinding the merger agreement between ITT and the
Starwood Defendants, including the break-up fee and
expense reimbursement provisions thereof;
(c) Declaring that the Starwood Agreement, including its
break-up fee and expense reimbursement provisions, is
illegal and ultra vires and enjoining the defendants
or any of them or their representatives from taking
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any steps in furtherance of or to implement that
Agreement;
(d) Declaring that ITT and the Director Defendants have
violated the Securities Exchange Act of 1934 and the
rules and regulations thereunder, ordering them to
make corrective disclosure and enjoining them from
making or disseminating further false and misleading
public statements;
(e) Invalidating any proxies obtained by or voted in
favor of the Director Defendants;
(f) Declaring that the Director Defendants are not en-
titled to be indemnified by ITT Corporation or any
affiliate or subsidiary thereof for any judgments,
settlements, attorneys' fees, costs or expenses in-
curred in this action;
(g) Declaring that the Director Defendants are not en-
titled to exculpation under Article Seventh of ITT's
Restated Articles of Incorporation or any other pro-
vision;
(h) Awarding plaintiffs their reasonable costs and ex-
penses in prosecuting this action, including attor-
neys' fees; and
-33-
<PAGE>
(i) For such other relief as may be just and proper.
Dated: November 3, 1997
WACHTELL, LIPTON, ROSEN & KATZ
By: /s/ Bernard W. Nussbaum
--------------------------------
BERNARD W. NUSSBAUM
ERIC M. ROTH
MARC WOLINSKY
SCOTT L. BLACK
51 West 52nd Street
New York, New York 10019
(212) 403-1000
SCHRECK MORRIS
STEVE MORRIS
KRISTINA PICKERING
MATTHEW McCAUGHEY
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
(702) 474-9400
Attorneys for Plaintiffs HILTON
HOTELS CORPORATION and HLT
CORPORATION
-34-
<PAGE>
VERIFICATION
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
STEPHEN BOLLENBACH, being duly sworn, states that he
is the President and Chief Executive Office of plaintiff Hilton
Hotels Corporation and that the allegations of the foregoing
Verified Complaint For Damages, Rescission and Injunctive and
Declaratory Relief are true as to his own knowledge, except as
to matters therein alleged on information and belief and that
as to those matters he believes such allegation to be true.
/s/ Stephen Bollenbach
-----------------------------
STEPHEN BOLLENBACH
Sworn to before me this
day of November, 1997
/s/ Marva Richard
--------------------------
Notary Public
Marva Richard
Notary Public, State of New York
No. 4692107
Qualified in New York County
Commission Expires February 28, 1998
<PAGE>
Exhibit (G)(35)
[HILTON HOTELS CORPORATION LOGO]
November 3, 1997
Dear ITT Shareholder:
We are pleased to announce that today we significantly improved the terms of
our offer to acquire ITT Corporation.
EFFECTIVE IMMEDIATELY WE HAVE RAISED THE PRICE OF OUR CASH TENDER OFFER TO
$80 PER SHARE AND SIMULTANEOUSLY INCREASED THE NUMBER OF SHARES WE ARE
OFFERING TO PURCHASE TO 65 MILLION -- REPRESENTING 55% OF ITT'S CURRENT
OUTSTANDING COMMON STOCK. Each share of the remaining 45% of ITT's outstanding
stock will then be converted into two shares of Hilton Common Stock and two
Contingent Value Preferred Shares in the proposed second-step merger. This
package is designed to ensure that you receive at least $80 in value per ITT
share converted in the second-step merger within one year.
By voting your WHITE proxy, you will elect a new Board of Directors
committed to creating the world's largest and strongest lodging and gaming
company for the benefit of ITT's and Hilton's shareholders, customers and
employees.
YOU NOW HAVE A REAL CHOICE -- VOTE FOR
A REAL DEAL THAT PROVIDES REAL VALUE!
VOTE TODAY TO REPLACE RAND ARASKOG AND HIS BOARD BY SIGNING, DATING AND
MAILING YOUR WHITE PROXY!
WE CONTINUE TO BELIEVE THAT A HILTON-ITT COMBINATION PROVIDES SUPERIOR SHORT
TERM AND LONG TERM VALUE FOR ALL SHAREHOLDERS OF ITT CORPORATION. IN OUR VIEW,
HILTON'S REVISED OFFER IS CLEARLY SUPERIOR TO THE STARWOOD-ITT PROPOSAL, WHOSE
NOMINAL VALUE HINGES ON QUESTIONABLE TAX BREAKS AND OVERSTATED SYNERGY
BENEFITS.
We believe ITT shareholders want and have the right to demand from a new
Board of Directors the best real offer for the future of their investment --
one that provides:
. GREATER CERTAINTY AND REAL LONG TERM VALUE WITH PROTECTION FROM DOWNSIDE
RISK IN A ROLLER COASTER STOCK MARKET.
<PAGE>
. A prompt completion date WITHOUT SIGNIFICANT REGULATORY DELAY.
. THREE TIMES THE CASH UP FRONT -- payable to all shareholders in an $80 per
share cash tender offer that is expected to close within 10 days after a
new Board of Directors is elected.
. Common Stock in a company with a strong management team that has A PROVEN
SUCCESSFUL TRACK RECORD in both the lodging and gaming industries.
. Real cost savings and synergies CONSERVATIVELY ESTIMATED TO BE WORTH $115
MILLION ANNUALLY, with upside potential from an experienced management
team. This same team successfully exceeded projections for cost savings
and synergies in integrating the Bally and Hilton gaming operations in
less than a year.
. A once in a lifetime opportunity to assemble in a single transaction
gaming properties that are UNIQUELY SITUATED IN BOTH ATLANTIC CITY AND LAS
VEGAS -- far and away the nation's two largest and most vibrant gaming
markets.
. A Hilton Board and management dedicated to building shareholder value --
whose management compensation is linked to Hilton's stock performance --
AND WHO SHARE A COMMITMENT TO THE FUTURE THROUGH THEIR INVESTMENT IN 28%
OF HILTON'S OUTSTANDING SHARES.
. Upside potential and downside protection in the form of Contingent Value
Preferred Shares and a sound stock valuation based on real earnings, solid
cash flow and excellent growth prospects -- COMPARED TO STARWOOD'S THINLY
TRADED, HIGHLY VOLATILE STOCK WITH RISKS OF MARKET DECLINE AND NO DOWNSIDE
PROTECTION.
. A SOUND TRANSACTION STRUCTURE, UNLIKE STARWOOD'S QUESTIONABLE TAX
AVOIDANCE STRUCTURE WHICH IS BOTH OVERSTATED IN VALUE AND LIKELY TO COME
UNDER INTENSE SCRUTINY FROM THE IRS AND CONGRESS.
DON'T GET BURNED BY STARWOOD'S HIGHLY SPECULATIVE OFFER.
VOTE YOUR WHITE PROXY TODAY!
The Hilton offer is superior -- we offer more cash for more of your shares
and we provide substantial upside potential and downside protection. The
Contingent Value Preferred Shares that you will receive are designed to ensure
at least $80 in value within one year for each share of ITT stock you exchange
in the Hilton merger.
WE BELIEVE WE OFFER THE BEST MANAGEMENT TEAM IN THE GAMING AND LODGING
BUSINESSES. WE OFFER THE REAL ABILITY TO DELIVER SIGNIFICANT COST SAVINGS AND
SYNERGIES THAT WILL ENHANCE THE VALUE OF YOUR INVESTMENT IN A POWERFUL GROWTH
COMPANY.
<PAGE>
Remember -- upon the election of Hilton's nominees, under the revised terms
of Hilton's proposal, you will benefit from:
. Hilton's tender offer of $80 in cash for 55% of ITT's outstanding shares
(scheduled to close within ten days after the Hilton nominees are
elected).
. A second step merger giving you two shares of Hilton common stock for each
share of ITT common stock (scheduled to close within 90 days after the
Hilton nominees are elected).
. Contingent Value Preferred Shares that will pay you up to $24 per ITT
share exchanged if the trading value of the two shares of Hilton common
stock you receive for each ITT share in the merger does not reach at least
$80 within one year after the merger. We plan to list this additional
freely tradeable security on a national securities exchange.
If you elect our nominees at the November 12, 1997 Annual Meeting, the new
board will remove the incumbent board's poison pill impediment and take all
other necessary steps to accept and consummate Hilton's revised offer, subject
to its fiduciary duty to accept any superior offer that may be made after the
election. The tender offer is anticipated to close within 10 days thereafter.
The second-step merger will be scheduled to close within 90 days of the
election.
DON'T FORGET THE FOLLOWING FACTS!
The fact is that Rand Araskog and his board were nearly able to hide behind
the poison pill when they tried to cram down their inferior "comprehensive
plan" on shareholders. That plan was enjoined by the Nevada federal court,
which found that the ITT board's primary purpose in adopting the
"comprehensive plan" was to entrench itself in office.
The fact is that now, unless Rand Araskog and his fellow incumbent directors
are replaced, they will continue to use their poison pill as a roadblock to
prevent shareholders from choosing the superior benefits provided by Hilton's
acquisition offer.
DON'T LET ITT FOOL YOU:
Do you really believe Starwood will obtain the numerous regulatory approvals
and licenses necessary to close their transaction before the second quarter of
1998? Do you really believe the Starwood deal will happen if you reelect Rand
Araskog and his board, or will it be dropped -- just like the "comprehensive
plan" and the announced "deals" for the Desert Inn, Planet Hollywood and
others?
<PAGE>
DON'T GAMBLE WITH THE VALUE OF YOUR INVESTMENT!
REJECT ITT'S ATTEMPT TO DENY YOU THE RIGHT TO CHOOSE HILTON'S SUPERIOR
ACQUISITION OFFER. VOTE YOUR WHITE PROXY TO ELECT NOMINEES COMMITTED TO
BRINGING YOU THE BENEFITS OF A HILTON-ITT MERGER.
We urge you to act promptly. The Annual Meeting is scheduled for next
Wednesday, November 12, at 11:30 A.M.
REMEMBER -- Tuesday the 11th of November is a U.S. post office holiday with
no regularly scheduled mail deliveries. IF YOU WANT TO BE SURE YOUR PROXY IS
RECEIVED IN TIME ACT TODAY BY EXPRESS MAIL, FEDEX, OR UPS NEXT DAY MAIL.
You won the right to vote for the Hilton nominees and therefore also won the
right to choose between the value driven Hilton-ITT combination or the
speculative Starwood proposal. DO NOT MISS THIS RARE OPPORTUNITY TO TAKE
MATTERS OF SUCH IMPORTANCE INTO YOUR OWN HANDS.
Now, after six months of delay, the opportunity to vote for the Hilton
nominees is finally here. Don't waste your vote.
PLEASE SIGN, DATE AND MAIL YOUR WHITE PROXY TODAY!
DO NOT SIGN OR RETURN ANY BLUE ITT PROXY CARDS.
DO NOT DELAY -- TIME IS SHORT!
If you have any questions or need assistance to be sure your vote is
received in time please call MacKenzie Partners at (800) 322-2885 Toll-Free or
at (212) 929-5500 collect.
We appreciate your support and careful consideration of all the information
you have received over the past nine months.
Sincerely,
/s/ Stephen F. Bollenbach
Stephen F. Bollenbach
President and Chief Executive
Officer
<PAGE>
SECOND
SUPPLEMENT
TO
PROXY STATEMENT
OF
[HILTON HOTELS CORPORATION LOGO]
HOTELS CORPORATION
AND
HLT CORPORATION
----------------
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
ITT CORPORATION
TO BE HELD
WEDNESDAY, NOVEMBER 12, 1997
- --------------------------------------------------------------------------------
HILTON HOTELS CORPORATION AND HLT CORPORATION BELIEVE THAT
HILTON'S $80 OFFER AND THE PROPOSED HILTON MERGER ARE IN THE BEST
INTERESTS OF ITT'S STOCKHOLDERS AND URGE YOU TO VOTE FOR THE
HILTON NOMINEES AND THE OTHER PROPOSALS DESCRIBED BELOW.
WE URGE YOU TO ACT PROMPTLY. THE ANNUAL MEETING IS SCHEDULED FOR
NEXT WEDNESDAY, NOVEMBER 12, AT 11:30 A.M. REMEMBER -- TUESDAY,
NOVEMBER 11, IS A U.S. POST OFFICE HOLIDAY WITH NO REGULARLY
SCHEDULED MAIL DELIVERIES. IF YOU WANT TO BE SURE YOUR PROXY IS
RECEIVED IN TIME, ACT TODAY BY EXPRESS MAIL, FEDEX, OR UPS NEXT
DAY MAIL.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD
- --------------------------------------------------------------------------------
This Supplement (the "Second Supplement") is being furnished to stockholders
of ITT 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 11 persons nominated by Hilton and
HLT (the "Hilton Nominees") to the Board of Directors of the Company (the
"Board"), who will take all actions as may be necessary to facilitate the
Offer (as defined below) and the Proposed Hilton Merger (as defined below),
subject to their fiduciary duty to accept any superior offer for the Company
that may be made after their election; (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"). According to the Company, the Annual Meeting is
scheduled to take place on November 12, 1997, and the Record Date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting has been fixed as the close of business on October 1, 1997.
This Second Supplement and the enclosed WHITE proxy card are first being
furnished to the Company's stockholders on or about November 3, 1997. This
Second Supplement supplements and amends the original
<PAGE>
Proxy Statement dated March 21, 1997 (the "Proxy Statement") and the
Supplement to the Proxy Statement dated October 6, 1997 (the "First
Supplement") with information and a summary of developments since the First
Supplement was mailed to the Company's stockholders on October 6, 1997, and
should be read in conjunction with the Proxy Statement and First Supplement.
Unless defined in this Second Supplement, capitalized terms used in this
Second Supplement shall have their respective meanings as set forth in the
Proxy Statement and First Supplement.
THE AMENDED OFFER AND THE PROPOSED STARWOOD TRANSACTION
On October 19, 1997, the Board approved a merger agreement (the "Starwood
Merger Agreement") with Starwood Lodging Corporation and Starwood Lodging
Trust ("Starwood"), under which Starwood would acquire the Company in exchange
for $15 in cash and between 1.094 and 1.258 paired shares of Starwood for each
Share. The Board approved the Starwood Merger Agreement without ever having
talked to Hilton, despite repeated requests by Hilton to meet to discuss
Hilton's proposal to acquire the Company. In Hilton's view, the proposed
acquisition of the Company by Starwood involves numerous risks. These include
risks as to the inherent value of Starwood and the volatility of the Starwood
paired shares, risks as to the level of purported tax benefits afforded by the
Starwood paired share structure and the possibility that any tax benefits will
be rescinded by the Internal Revenue Service or Congress, risks as to the
timing of the closing of the proposed Starwood acquisition and whether the
acquisition will in fact be completed, risks of failure to successfully
integrate the massive amount of assets proposed to be acquired by Starwood
(including the proposed Westin Hotels & Resorts and ITT acquisitions), risks
associated with the lack of operating history and management experience of
Starwood management, risks as to the future of the Company's gaming and other
operations, and risks associated with Starwood's inability to maintain its
growth strategy over an asset base several times the size of its current asset
base. For these reasons, Hilton believes that the actual value of the proposed
Starwood acquisition to the Company's shareholders is far less than the
nominal value placed on the transaction by Starwood and the incumbent Board.
The average closing price per Share for the week prior to the announcement of
Hilton's amended $80 offer was only $73.29.
On November 3, 1997, Hilton amended its proposal to acquire the Company.
Pursuant to this amended proposal, Hilton is offering $80 per Share in cash
for 65,000,000 Shares, constituting about 55% of the outstanding Shares. This
offer is made 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"), and, unless and
until validly redeemed by the Board, includes the Series A Participating
Cumulative Preferred Stock Purchase Rights (the "Rights") associated with the
Shares and issued pursuant to the Rights Agreement, dated as of November 1,
1995, between the Company and The Bank of New York, as Rights Agent (as
previously amended, the "Rights Agreement"). 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 Monday, November 17, 1997, unless extended (as such date
may be extended, the "Expiration Date").
Under the terms of Hilton's amended proposal, following consummation of the
Offer, the Company would complete a second-step merger with Hilton or HLT or
another subsidiary of Hilton (the "Proposed Hilton Merger"), in which each
remaining Share (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 two shares of Hilton Common Stock. In
addition, with each share of Hilton Common Stock issued in the Proposed Hilton
Merger, shareholders of the Company would receive one share of Contingent
Value Preferred Stock (the "CVP Shares"). The CVP Shares would provide that,
if the stock price of the Hilton Common Stock does not reach $40 per share
within one year following the date when the Proposed Hilton Merger shall
become effective (the "Effective Time"), the holder will receive an additional
payment for each CVP Share, in cash or additional shares of Hilton Common
Stock, equal to the difference between $40 and the per share price of the
Hilton Common Stock one year following the Effective Time, up to a maximum of
$12. Of course, if the Hilton Common Stock is already trading at or above $40
per share at the Effective Time, no CVP Shares will be issued in the Proposed
Hilton Merger.
2
<PAGE>
Thus, under Hilton's proposal, shareholders of the Company will receive $80
per Share in cash for 65,000,000 Shares, and will exchange their remaining
Shares for an interest in the combined company that is certain to be worth $80
for each Share within one year (so long as the price of one share of Hilton
Common Stock remains above $28). Hilton believes that its amended proposal
offers a clearly superior deal for the Company's shareholders, offering
greater value, more speed, more certainty, and less risk than the proposed
Starwood transaction.
REGULATORY AND LITIGATION DEVELOPMENTS
Nevada Gaming Regulation. The Chairman of the Nevada Board has stated that
the Nevada Board will hold a special meeting on November 13, 1997 to consider
the application of Hilton and HLT to acquire control of the Company. Hilton
has requested that the Nevada Commission schedule a special meeting on
November 13 or 14, 1997 to consider the application of Hilton and HLT to
acquire control of the Company.
New Jersey Gaming Regulation. At a hearing on October 22, 1997, the New
Jersey Casino Control Commission (the "CCC") unanimously qualified three of
the Hilton Nominees, Messrs. Aronoff, Kingsley, and Brunet, to serve as
members of the Board in the event they are elected at the Annual Meeting. In
addition, at that hearing, the Chairman of the CCC stated that action would be
taken with respect to qualification (either on a plenary or temporary basis)
of the other eight Hilton Nominees at the CCC's next hearing on November 5,
1997. At the October 22, 1997 hearing, the CCC also directed Hilton to file
for interim casino authorization immediately following completion of the
Offer.
FCC Regulation. On October 15, 1997, the FCC issued an order approving the
insubstantial transfer of control of the Company that would result upon the
election of the Hilton Nominees to the Board at the Company's 1997 Annual
Meeting.
Litigation. On August 25, 1997, Hilton and HLT filed a motion in the U.S.
District Court for the District of Nevada seeking (i) to preliminarily and
permanently enjoin the Company and its directors from proceeding with their
proposed plan to break the Company up by spinning off the Company's hotel and
gaming businesses and the Company's educational services business (the
"Comprehensive Plan"), (ii) declaratory relief that by adopting the
Comprehensive Plan, the Company's directors breached their fiduciary duties to
the Company and its stockholders, (iii) declaratory relief that the Company
may not implement its Comprehensive Plan without obtaining a stockholder vote,
and (iv) to require the Company to conduct its Annual Meeting no later than
November 14, 1997. On September 29, 1997, the Nevada Court found that the
Company's Comprehensive Plan "had as its primary purpose the entrenchment of
the current ITT board," and that the implementation of the Comprehensive Plan
was designed to "impermissibly impede the exercise of the shareholder
franchise." The Nevada Court enjoined the Company from implementing the
Comprehensive Plan, and further ordered that the Company hold its Annual
Meeting on or before November 14, 1997.
On November 3, 1997, Hilton and HLT filed a complaint in the Nevada Court
against the Company, Starwood and individual members of the Board. The
complaint alleges that the Company and its directors unlawfully excluded
Hilton from the process that led to the Company entering into the Starwood
Merger Agreement and that the Company and its directors wrongfully agreed to
pay Starwood a grossly excessive "break up" fee of up to $225 million and
expense reimbursement in excess of $25 million. The complaint alleges that the
"break up" fee and expense reimbursement provisions constitute a gross waste
of the Company's corporate assets and unlawfully interfere with the right of
the Company's stockholders to vote for the Hilton Nominees. The complaint
further alleges that the Company's directors have breached their fiduciary
duties to the Company's stockholders by engaging in corporate waste for the
primary purpose of entrenching and benefiting themselves and others in their
positions at the Company and that they have made materially misleading
disclosures with respect to the transaction contemplated by the Starwood
Merger Agreement. The complaint seeks, among other things, an order
invalidating the Starwood Merger Agreement, particularly the "break up" fee
and expense reimbursement provisions thereof, and seeks over $500 million in
damages from the individual directors.
3
<PAGE>
ITEM NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, 11 directors will be elected to the Board. The 11
Hilton Nominees will take prompt action to facilitate completion of the Hilton
Offer and the Proposed Hilton Merger (subject to their fiduciary duty to
accept any superior offer for the Company that may be made after their
election). To date, the incumbent Board has opposed the Hilton Offer and has
refused even to meet with Hilton. IN ORDER TO ACCEPT THE HILTON OFFER, HILTON
URGES YOU TO VOTE FOR THE HILTON NOMINEES.
Set forth below is a summary of the principal business affiliations and
other information with respect to the 11 Hilton Nominees who will be nominated
to replace the incumbent Board. In the event the Company increases the size of
the Company's Board of Directors or any of the nominees set forth below is
unable to serve, Hilton also intends to nominate one or more of the other
individuals listed in the Proxy Statement and First Supplement. For more
complete information, please see the Proxy Statement and First Supplement.
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS (OR PRINCIPAL OCCUPATION OR EMPLOYMENT
RESIDENCE) ADDRESS DURING THE LAST FIVE YEARS; CURRENT DIRECTORSHIPS
- -------------------------- -------------------------------------------------
<S> <C>
Daniel J. Altobello (56)......... Chairman, ONEX Food Services, Inc. (airline catering),
ONEX Food Services, Inc. since September 1995. Prior thereto, Chairman, Chief
550 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 (64)........... Partner, Benesch, Friedlander, Coplan & Aronoff LLP
Benesch, Friedlander, Coplan & (law firm), since before 1992. Mr. Aronoff is also a
Aronoff LLP director of Specialty Chemical Resources, Inc.
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Scott H. Bice (54)............... Dean of the University of Southern California Law
University of Southern California School, since before 1992. Mr. Bice is also a director
Law School of Jenny Craig, Inc.
University Park
Los Angeles, California 90089
Barrie K. Brunet (72)............ Retired since March 1990. Mr. Brunet is also a director
1510 Patrick Avenue of Reno Air, Inc.
Reno, Nevada 89509
James J. Florio (59)............. Partner, Florio & Perrucci, P.C. (law firm), since
Florio & Perrucci, P.C. 1995. Prior thereto, Partner, Mudge, Rose, Guthrie,
371 Hoes Lane Alexander & Ferdon (law firm), from January 1994 until
Piscataway, New Jersey 08854 October 1995; Governor of the State of New Jersey, from
January 1990 until January 1994.
Fred D. Gibson, Jr. (70)......... Chairman of American Pacific Corporation (specialty
American Pacific Corporation chemicals production), since before 1992. President and
3770 Howard Hughes Parkway Chief Executive Officer of American Pacific Corporation
Suite 300 from before 1992. Mr. Gibson is also a director of
Las Vegas, Nevada 89109 American Pacific Corporation
and Nevada Power Company.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
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 (51).......... 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 (61).......... 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.
</TABLE>
HILTON STRONGLY RECOMMENDS THAT YOU VOTE FOR THE HILTON NOMINEES.
ITEM NO. 2 -- THE SALE RESOLUTION
The Sale Resolution urges the Board to sell the Company to Hilton or any
higher bidder. Because Hilton believes its proposal is clearly superior to the
Starwood proposal, Hilton believes that a vote in favor of this resolution
would have the effect of urging the Board to sell the Company to Hilton and to
take all necessary action to permit the Offer and the Proposed Hilton Merger
to proceed. Of course, the Hilton Nominees, if elected would be subject to
fiduciary duties to accept any offer made after their election that is
superior to Hilton's proposal.
HILTON STRONGLY RECOMMENDS THAT YOU VOTE FOR THE SALE RESOLUTION.
ITEM NO. 3 -- THE BYLAWS RESOLUTION
The Bylaws Resolution would repeal any Bylaws adopted by the incumbent Board
on or after July 23, 1996 and prior to the adoption of the resolution. The
Bylaws Resolution is a preventive measure, intended to ensure that any actions
voted on by shareholders, including any actions meant to facilitate the
acceptance of Hilton's Offer, are not nullified by action of the incumbent
Board. While the Company has stated that no Bylaws have been adopted since
July 23, 1996, Hilton believes that the actions of the incumbent Board to date
in resisting and attempting to defeat the Hilton Offer (which were found by a
Nevada Court to have been taken for the primary purpose of entrenchment) make
this preventive measure advisable.
HILTON STRONGLY RECOMMENDS THAT YOU VOTE FOR THE BYLAWS RESOLUTION.
***
5
<PAGE>
IMPORTANT
Your vote is important, regardless of how many Shares you own. Please sign
and date the accompanying WHITE proxy card and mail it in the enclosed self-
addressed envelope (which is postage prepaid for stockholders in the United
States, Canada and the United Kingdom) as promptly as possible, whether or not
you expect to attend the meeting.
Whether or not you have previously signed a blue proxy card sent by ITT
management, we urge you to show your support for the Offer by signing, dating
and promptly mailing the enclosed WHITE proxy card. By signing and dating the
WHITE proxy card, you will revoke any earlier dated blue proxy card solicited
by ITT management which you may have signed. DO NOT RETURN ANY BLUE PROXY CARD
SENT TO YOU BY ITT MANAGEMENT.
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE
URGE YOU TO CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR
HER TO VOTE "FOR" HILTON'S NOMINEES AND "FOR" THE SALE RESOLUTION AND BYLAWS
RESOLUTION ON THE WHITE PROXY CARD.
HILTON HOTELS CORPORATION
HLT CORPORATION
November 3, 1997
6
<PAGE>
IMPORTANT
Take control of your Company! 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 four 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, Canada and the United Kingdom) or FAXING BOTH SIDES
of the enclosed WHITE proxy card TODAY to MacKenzie Partners,
Inc. at the number provided below.
4. AFTER signing the enclosed WHITE proxy card, do not sign any
other cards. Do not even vote "withheld" on the ITT blue
proxy card; rather, discard any blue proxy cards sent to you
by ITT.
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.
If you have any questions about voting your shares or require
assistance, 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
<PAGE>
Presentation to ITT Shareholders
[HILTON HOTELS CORPORATION LOGO]
<PAGE>
THE $80 HILTON OFFER
================================================================================
. $80 per ITT Share
=================
. $44 per ITT Share in Cash
- Payable within 10 days after November 12 election results
. $36 per ITT Share in Stock and Contingent Value Preferred Shares (CVP)
---
$80 per ITT Share
===
<TABLE>
-------------------------------------------------------------------------
Cash Hilton Stock CVP Share
------ -------------- -----------
<S> <C> <C>
$80 2 Shares 2 Shares
x 55% x 45% x 45%
----- ----- ------
$44 + X + Up to $12 = $80+ per Share
==============
=========================================================================
</TABLE>
[HILTON HOTELS CORPORATION LOGO]
2
<PAGE>
HILTON OFFERS MORE VALUE, MORE CERTAINTY
AND A LOT LESS RISK
================================================================================
<TABLE>
<CAPTION>
A HILTON/ITT COMBINATION ITT/STARWOOD RECAP
<S> <C> <C>
Value: . $80 per Share Guaranteed . ?????????????
% in Cash: . 55%; $44 per Share . 18%; $15 per Share
Guarantee on Value: . CVPs Guarantee a $40 Hilton Share Price . None
Maximum Payment of $12
Securities Offered: . Stock in Largest Gaming/Lodging . Stock in Small Hotel REIT
Company . Tax Advantages Overstated
. Tax Status Uncertain
Stock Characteristics: . Liquid, Steady . Illiquid, Volatile
. Stock Issued Represents 5 Months of . Stock Issued Represents Over 2 Years
Hilton Trading Volume of Starwood Trading Volume
Timing: . Cash in 10 Days; Stock & CVP Shares . 6 to 9 Months for Regulatory Approval;
within 90 Days Volatile Stock
Closing: . Certain . Uncertain...... ITT Factor
Synergies: . At Least $115 million . 100 million ????
Bally - $30 million Expected; 5 People at Starwood
$65 million Achieved No Gaming Operations
</TABLE>
[HILTON HOTELS CORPORATION LOGO]
3
<PAGE>
================================================================================
The ITT/Starwood Recap ...
Uncertain Value
================================================================================
[HILTON HOTELS CORPORATION LOGO]
<PAGE>
ITT IS REALLY ACQUIRING STARWOOD
================================================================================
Total Assets
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Westin 15.0%
Starwood 15.4%
ITT 69.6%
</TABLE>
. Will ITT's Assets Be Valued at Starwood's Astronomical Multiple?
- Most of the ITT assets do not qualify for REIT status
- Caesars may not fit into Starwood's strategic plans
. This is Just Another Recap
- This recap plan pays you even less cash than the "Comprehensive Plan"
. Expect to See ITT Executives in Senior Management Positions
[HILTON HOTELS CORPORATION LOGO]
5
<PAGE>
ALMOST ALL OF THE CONSIDERATION IS IN
ILLIQUID & VOLATILE STARWOOD LODGING TRUST STOCK
================================================================================
Current Market Price of ITT Reflects Substantial Discount to Stated Value of
Starwood Offer BECAUSE ...
. Starwood Lodging Trust Stock is at Historical Highs
[LINE GRAPH REFLECTING STARWOOD STOCK PRICE AT HISTORIC HIGHS (WITH STEEP
RISE OVER LAST THREE MONTHS) APPEARS HERE]
. 6-9 Months to Receive Merger Consideration
- Starwood is likely to face many long and complicated regulatory delays
. Starwood May Not Keep Its Astronomical Multiple Post-Acquisition
- Sheer size and change in asset mix will lower growth rate
. ITT Shareholders Will Have Difficulty Monetizing Starwood Lodging Trust Stock
- Starwood Lodging Trust stock issued represents over 2 years of trading
volume and 6.5 years trading volume above their "collar"
[HILTON HOTELS CORPORATION LOGO]
6
<PAGE>
REIT STRUCTURE BRINGS UNCERTAINTY
================================================================================
. Most of ITT's Assets Do Not Qualify for REIT Status
. Assets Transferred to the REIT Will Immediately Trigger Substantial
Tax Liability
. Paired-Share REIT Status of Starwood Certain to Come Under Further
Congressional & IRS Scrutiny
- May erase any benefits that exist
[HILTON HOTELS CORPORATION LOGO]
7
<PAGE>
STARWOOD IS NOT IN THE GAMING BUSINESS
---
================================================================================
[PHOTOGRAPHS APPEAR HERE]
[TWO PHOTOGRAPHS OF STARWOOD'S "STOREFRONT" KING 8 GAMBLING HALL HOTEL & CAFE
(STARWOOD'S SINGLE GAMING BUSINESS)]
[HILTON HOTELS CORPORATION LOGO]
8
<PAGE>
COMBINING WESTIN AND SHERATON MAKES NO SENSE
================================================================================
. Sheraton and Westin Don't Complement One Another, They Compete With One
Another
- They're in the same markets
- Rates and occupancies are similar
. There Will Be Conflicts Between Owners
. The Logical Extension of This Strategy Will Be to Push Sheraton Downmarket
... Lower-Rated Business, Margin Contraction
[HILTON HOTELS CORPORATION LOGO]
9
<PAGE>
WESTIN AND SHERATON ARE IN THE SAME MARKETS
================================================================================
[MAP OF UNITED STATES APPEARS HERE MARKING LOCATIONS OF
WESTIN HOTELS IN SAME GEOGRAPHIC MARKETS AS SHERATON HOTELS]
... and compete for the same customer
<TABLE>
<CAPTION>
Westin Sheraton
---------- ------------
<S> <C> <C>
1996 Occupancy \\(1)\\ 72.0% 71.0%
Average Rate \\(1)\\ $125 $137
</TABLE>
- ---------------------
(1) Estimated U.S. owned and managed properties.
[HILTON HOTELS CORPORATION LOGO]
10
<PAGE>
================================================================================
The Hilton/ITT Combination...
A Unique Opportunity
================================================================================
[HILTON HOTELS CORPORATION LOGO]
<PAGE>
ITT FITS PERFECTLY INTO HILTON'S STRATEGIC PLAN
================================================================================
<TABLE>
<CAPTION>
USE HILTON'S STRONG
BALANCE SHEET WHILE CONTINUE
MAINTAINING INVESTING IN BUY/OWN HIGH-END
INVESTMENT GRADE CONSOLIDATING FULL-SERVICE MAXIMIZE USE OF
RATING GAMING INDUSTRY HOTELS HILTON BRANDS
- -------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C>
. Cash/stock . Strengthens Hilton's . ITT owns 72 . Expand network of
structure competitive position properties, 22 of domestic and
maintains in Las Vegas and which are domestic international hotels
investment grade Atlantic City with full-service hotels
rating addition of premier . Potential to
brand names . Nearly 75% of monetize Sheraton
ITT's Lodging brand
. Over 80% of ITT's EBITDA is from
Gaming EBITDA is Owned Hotels
from Las Vegas and Segment
Atlantic City
</TABLE>
[HILTON HOTELS CORPORATION LOGO]
12
<PAGE>
THE WORLD'S PREMIER LODGING/GAMING COMPANY
================================================================================
LTM EBITDA (As of 6/30/97)
[BAR GRAPH APPEARS HERE]
<TABLE>
($ in millions)
<S> <C>
Pro Forma
Hilton/ITT /(1)/ $2,100.0
Hilton $1,106.0
ITT $994.0
Accor $915.9
Marriott Int'l $829.0
Host Marriott $499.0
Harrah's $423.4
Mirage $416.1
Circus Circus $376.1
MGM Grand $269.7
Starwood/(2)/ $253.0
Westin/(2)/ $134.9
</TABLE>
- ------------------
(1) Before application of estimated cost savings and synergies in excess of $115
million.
(2) Estimated.
[HILTON HOTELS CORPORATION LOGO]
13
<PAGE>
HILTON SYNERGIES
================================================================================
($ in millions)
<TABLE>
<CAPTION>
COSTS TO OPERATE
--------------------- --------- ----------- -------
Operational Savings By ITT By Hilton Savings Synergies Total
- --------------------- -------- ----------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Corporate/General $60 $20 $40 $28 $68
Lodging Operations 55 40 15 + 13 = 28
Gaming Operations 15 5 10 9 19
-- - -- - --
Total $130 $65 $65 $50 $115
</TABLE>
[HILTON HOTELS CORPORATION LOGO]
14
<PAGE>
EXPECTED TIMING
================================================================================
. Shareholder Vote at November 12th Annual Meeting
. Sign Definitive Merger Agreement and Close Cash Offer for 55% of ITT Shares
One to Two Weeks After Shareholder Vote
. Close Back-End Merger Within 90 Days After Annual Meeting
- Clear proxy materials and obtain regulatory approvals
- Obtain ITT and Hilton shareholder approval
[HILTON HOTELS CORPORATION LOGO]
15
<PAGE>
THE HILTON/ITT COMBINATION
================================================================================
. More Value
. More Certainty
. And a Lot Less Risk
- --------------------------------------------------------------------------------
The Choice is Yours...
And the Choice is Clear...
Vote Your White Proxy Now!!!
- --------------------------------------------------------------------------------
[HILTON HOTELS CORPORATION LOGO]
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