SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HILTON HOTELS CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
NOTICE OF MEETING OF STOCKHOLDERS
[LOGO]
WORLD HEADQUARTERS
9336 CIVIC CENTER DRIVE
BEVERLY HILLS, CALIFORNIA 90210
The annual meeting of stockholders of Hilton Hotels Corporation, a Delaware
corporation (the "Company"), will be held at the Beverly Hilton, 9876 Wilshire
Boulevard, Beverly Hills, California 90210, on Thursday, May 8, 1997, at 10:00
A.M., for the following purposes, namely:
(1) To elect four directors to the Board of Directors;
(2) To consider and vote on a proposal to amend the Company's Restated
Certificate of Incorporation;
(3) To consider and vote on a proposal to amend the Company's 1996 Stock
Incentive Plan to increase the number of shares of the Company's Common
Stock authorized for issuance thereunder from 6,000,000 to 12,000,000
shares;
(4) To ratify the appointment of Arthur Andersen LLP to serve as
auditors for the Company for fiscal 1997;
(5) To transact any other business which may properly come before the
meeting.
Stockholders are cordially invited to attend the meeting in person.
Stockholders who wish to have their stock voted and do not now intend to attend
the meeting should complete, date and sign the enclosed proxy and return it
promptly by mail in the envelope provided.
Only stockholders of record on the books of the Company at the close of
business on March 13, 1997 will be entitled to notice of and to vote at the
meeting or any adjournments thereof. The stock transfer books will not be
closed.
By Order of the Board of Directors,
CHERYL L. MARSH,
VICE PRESIDENT AND CORPORATE SECRETARY
Beverly Hills, California
April 1, 1997
HILTON HOTELS CORPORATION
9336 CIVIC CENTER DRIVE
BEVERLY HILLS, CALIFORNIA 90210
PROXY STATEMENT
INTRODUCTION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Hilton Hotels Corporation (the "Company") to be used at the annual meeting of
stockholders to be held at the Beverly Hilton, 9876 Wilshire Boulevard, Beverly
Hills, California 90210, on May 8, 1997, and at any adjournments thereof. All
shares represented by proxies will be voted at the meeting in accordance with
the specifications marked thereon or, if no specifications are made, proxies
will be voted FOR Proposals 1, 2, 3, and 4 and in the discretion of the proxy
holder as to any other business which comes before the meeting. Any stockholder
giving a proxy may revoke the same at any time prior to the voting of such proxy
by giving written notice of revocation to the Corporate Secretary of the Company
or by submitting a later dated proxy. No proxy will be used if the stockholder
is personally present at the meeting and informs the Corporate Secretary in
writing prior to the voting of such proxy that he or she wishes to vote his or
her shares in person. This Proxy Statement and the enclosed Proxy are first
being mailed to stockholders on or about April 1, 1997.
VOTING AT THE MEETING
The Board of Directors has fixed the close of business on March 13, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting. As of the close of business on such date, the Company
had outstanding and entitled to vote 250,240,357 shares of common stock, $2.50
par value (the "Common Stock"), excluding 1,557,592 shares which were held in
the Company's treasury, and 14,832,300 shares of Preferred Redeemable Increased
Dividend Equity Securities-SM-, 8% PRIDES-SM-, Convertible Preferred Stock,
$1.00 par value (the "PRIDES"). Each holder of shares of Common Stock is
entitled to one vote per share and each holder of shares of PRIDES is entitled
to four-fifths ( 4/5) of a vote per share on each matter to be voted on at the
meeting. Shares held by the Company will not be considered present or entitled
to vote at the meeting. The holders of shares of Common Stock and the holders of
shares of PRIDES will vote together as one class on each matter to be voted on
at the meeting. Stockholders are not permitted to cumulate votes for the purpose
of electing directors or otherwise.
The presence in person or by proxy of the holders of a majority of the
outstanding shares entitled to vote at the meeting will constitute a quorum for
the transaction of business at the meeting. The affirmative vote of a plurality
of the votes cast in respect of shares represented at the meeting and entitled
to vote is required to elect directors. The affirmative vote of a majority of
the voting power of the shares represented at the meeting and entitled to vote
is required to approve the amendment to the Company's Restated Certificate of
Incorporation, the approval of the amendment to the Company's 1996 Stock
Incentive Plan (the "1996 Plan"), the ratification of the appointment of Arthur
Andersen LLP as independent auditors for 1997 and such other matters as may
properly come before the meeting.
Shares of a stockholder who abstains from voting on any or all proposals
will be included for the purpose of determining the presence of a quorum.
However, an abstention with respect to the election of the Company's directors
will not be counted either in favor of or against the election of the nominees.
In the case of any other proposal which is being submitted for stockholder
approval, an abstention will effectively count as a vote cast AGAINST such
proposal.
Brokers who hold shares for the account of their clients may vote such
shares either as directed by their clients or in their own discretion unless
they are not permitted to do so by the exchange or other organization of which
they are members. Shares held by a broker or nominee which are represented at
the meeting, but with respect to which such broker or nominee is not empowered
to vote on a particular proposal, are referred to as "broker non-votes." Broker
non-votes are included in determining the presence of a quorum, but do not have
the effect of a vote in favor of or against the proposal. However, members of
the New York Stock Exchange ("NYSE") are permitted to vote their clients'
proxies in their own discretion as to each of the Company's proposals.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's reporting officers and directors, and persons who
own more than ten percent of the Company's Common Stock or PRIDES, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "Commission"), the NYSE, the Pacific
Stock Exchange and the Company. Based solely on the Company's review of the
forms filed with the Commission and written representations from reporting
persons that they were not required to file a Form 5, the Company believes that
all of its reporting officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1996, with the exception of Gregory R.
Dillon, Donna F. Tuttle and A. Steven Crown who each filed one Form 4 late,
reflecting one transaction, with the Commission.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND EXECUTIVE OFFICERS
The following table sets forth the names and addresses of all persons who
beneficially owned, to the knowledge of the Company, more than 5% of the
outstanding shares of Common Stock or the outstanding shares of PRIDES on March
13, 1997. The following table also sets forth as of March 13, 1997 the
beneficial ownership of the Company's equity securities by each director and
nominee, the chief executive officer and the four other most highly compensated
executive officers (the "Named Officers") and all directors and executive
officers as a group (see "Summary Compensation Table" on page 10).
APPROXIMATE
PERCENT APPROXIMATE
OF COMMON PERCENT OF
COMMON STOCK PRIDES
NAME AND ADDRESS OF OWNER STOCK PRIDES CLASS CLASS
- - -------------------------------------------------- ---------- ---------- ----------- -----------------
Barron Hilton .................................... 46,955,756 (2) -- 18.8 --
9336 Civic Center Drive
Beverly Hills, California 90210
Conrad N. Hilton Fund ............................ 16,498,736(2) -- 6.6 --
100 West Liberty Street
Reno, Nevada 89501
FMR Corp. ....................................... 16,453,491(3) -- 6.6 --
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Company of America ..... 13,789,787(4) -- 5.5 --
751 Broad Street
Newark, New Jersey 07102
2
APPROXIMATE
PERCENT APPROXIMATE
OF COMMON PERCENT OF
COMMON STOCK PRIDES
NAME AND ADDRESS OF OWNER STOCK PRIDES CLASS CLASS
- - -------------------------------------------------- ---------- ---------- ----------- -----------------
Highbridge Capital Corporation .................. -- 1,220,665(5) -- 8.2
Seven Mile Beach
Grand Cayman, Cayman Islands
British West Indies and
Highbridge Capital Management, Inc.
767 Fifth Avenue
New York, New York 10153
Angelo Gordon & Co. L.P. ........................ -- 883,000(5) -- 6
245 Park Avenue
New York, New York 10167
Stephen F. Bollenbach............................. 1,540,000(6) -- * --
A. Steven Crown................................... 3,669,500(7) -- 1.5 --
Arthur M. Goldberg................................ 2,904,738(6) 1.2 --
Peter M. George................................... -- -- -- --
Eric M. Hilton.................................... 190,800 (6) -- * --
Dieter H. Huckestein.............................. 153,000(6) -- * --
Robert L. Johnson................................. -- -- -- --
Donald R. Knab.................................... 8,000 -- * --
Benjamin V. Lambert............................... 200,000 -- * --
F. M. Celey, Jr. ................................. 109,144(6) -- * --
Matthew J. Hart................................... 54,000(6) -- * --
Donna F. Tuttle................................... 10,897 -- * --
Sam D. Young, Jr. ................................ 30,000 -- * --
All Directors and Executive Officers as a Group
(14 persons).................................... 55,825,835(8) -- 22.3 --
- - ------------
* The securities owned do not exceed 1% of the applicable class.
(1) Of the shares reflected in the above table, 24,000,000 shares are owned by
the Charitable Remainder Unitrust (the "Trust"), of which Barron Hilton is
sole trustee. As trustee, Barron Hilton has the sole voting power with
respect to, and is deemed to be the beneficial owner of, the 24,000,000
shares. The Trust will continue until the later of Barron Hilton's death or
May 8, 2009. By virtue of the foregoing and the other shares beneficially
owned by Mr. Hilton, Mr. Hilton may be deemed to "control" the Company as
such term is defined in the rules and regulations promulgated by the
Commission.
(2) Barron and Eric Hilton are two of the 11 directors of the Conrad N. Hilton
Fund (the "Fund"). They disclaim beneficial ownership of the 16,498,736
shares owned by the Fund.
(3) The amount of the Company's Common Stock beneficially owned by FMR Corp.
("FMR") is reported on the basis of an amended Schedule 13G filed with the
Commission under the 1934 Act on February 14, 1997. As reported in such
Schedule 13G, two wholly-owned subsidiaries of FMR beneficially own an
aggregate of 16,453,491 shares of the Company's Common Stock and members of
the family of Edward C. Johnson 3d, Chairman of FMR, may be deemed, under
the Investment Company Act of 1940, as amended, to form a controlling group
with respect to FMR.
3
(4) The amount of the Company's Common Stock beneficially owned by The
Prudential Insurance Company of America ("Prudential") is reported on the
basis of a Schedule 13G filed with the Commission under the 1934 Act on
February 3, 1997.
(5) The amount of the Company's PRIDES beneficially owned by Highbridge Capital
Corporation is reported on the basis of a Schedule 13G filed with the
Commission under the 1934 Act on February 13, 1997. The amount of the
Company's PRIDES beneficially owned by Angelo Gordon & Co LP ("AGC") is
reported on the basis of a Schedule 13G filed with the Commission under the
1934 Act on February 14, 1997. As reported in such Schedule 13G, John M.
Angelo and Michael L. Gordon may be deemed to share beneficial ownership of
the 833,000 shares of PRIDES reported by AGC above as they are officers of
AGC and general partners of the general partner of AGC.
(6) Includes options to acquire 1,500,000, 600,000, 50,000, 145,500, 75,000 and
88,000 shares of Common Stock, exercisable within the next 60 days, held by
Messrs. Bollenbach, Goldberg, Hart, Huckestein, Celey and Eric Hilton,
respectively.
(7) Mr. Crown is a partner of The Crown Fund, which owns 239,888 shares of
Common Stock. In addition, Arie and Ida Crown Memorial, of which Mr. Crown
is a director, owns 894,272 shares of Common Stock; Pines Trailer Limited
Partnership, of which a corporation of which Mr. Crown is a director,
officer and shareholder and a partnership of which Mr. Crown is a partner,
are partners, owns 600,000 shares of Common Stock; and Areljay, L.P., of
which a corporation of which Mr. Crown is a director, officer and
shareholder and a trust of which Mr. Crown is a beneficiary are partners,
owns 1,935,340 shares of Common Stock. Mr. Crown disclaims beneficial
ownership of the shares held by The Crown Fund, Arie and Ida Crown Memorial,
Pines Trailer Limited Partnership and Areljay, L.P., except to the extent of
his beneficial interest therein.
(8) Includes 2,458,000 shares issuable upon exercise of employee stock options
granted to Named Officers and/or executive officers, exercisable within the
next 60 days, but excludes the shares owned by the Fund (see note 2 above).
PROPOSAL 1
ELECTION OF DIRECTORS
The By-laws of the Company provide for the election of twelve directors to
constitute the Board and, under the terms of the Company's Restated Certificate
of Incorporation and By-laws, as amended, the Board has been divided into three
classes of directors, each of which is elected to serve a term of three years.
With respect to the directors to be elected at the Company's 1997 annual meeting
for the term expiring in 2000, the Company's By-laws provide that nominations
for directors shall be made by the Board of Directors (based on recommendations
made by the Nominating Committee) at a Board meeting, or by written consent in
lieu of a meeting, not less than 30 days prior to the date of the meeting at
which directors are scheduled to be elected and that each nominee shall, at the
request of the Company, provide the Company with certain information for
inclusion in the Company's proxy statement for such meeting. The By-laws further
provide that notice of proposed stockholder nominations for election of
directors must be given to the Nominating Committee of the Company not less than
60 days prior to the meeting at which directors are to be elected and requires
that such notice must contain certain information about each proposed nominee,
including age, business and residence addresses, principal occupation, the
number of shares of capital stock of the Company beneficially owned and such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of such proposed nominee. Provision is also
made for substitution of nominees by the Board of Directors or the proposing
stockholder, as the case may be, in the event that a designated nominee is
unable or unwilling to stand for
4
election at the meeting. If the Chairman of the meeting of stockholders
determines that a nomination was not made in accordance with the foregoing
procedures, such nomination shall be void.
All of the nominees have previously been elected by the Company's
stockholders, except Peter M. George, who is filling a vacancy on the Board.
The Board of Directors has nominated, and it is the intention of the persons
named in the enclosed proxy to vote for the election of, the four nominees named
below, each of whom has consented to serve as a director if elected. The terms
of the remaining directors expire as indicated in the following table.
The information set forth below is submitted with respect to the persons
nominated for election to the Board and the remaining directors. Unless
otherwise indicated in the table or a footnote thereto, each such person has
engaged in his or her principal occupation since at least January 1992. Only
directorships of issuers with a class of securities registered pursuant to
Section 12 of the 1934 Act or subject to the requirements of Section 15(d)
thereof and directorships of issuers registered as investment companies under
the Investment Company Act of 1940 are listed in the table below.
TERM TO
EXPIRE YEAR
AT SERVICE
ANNUAL COMMENCED
NAME, PRINCIPAL OCCUPATION MEETING OR WILL
AND OTHER DIRECTORSHIPS AGE IN COMMENCE
- - -------------------------------------------------- --- ------- ---------
NOMINEES:
PETER M. GEORGE 53 2000 1997
Vice Chairman and Joint Managing Director,
Ladbroke Group PLC until January 1994 and,
thereafter Vice Chairman and Group Chief
Executive, Ladbroke Group PLC. Mr. George is a
citizen of the United Kingdom.(1)
BARRON HILTON 69 2000 1965
Chairman of the Board, President and Chief
Executive Officer, Hilton Hotels Corporation,
until February 1993, Chairman of the Board and
Chief Executive Officer, Hilton Hotels
Corporation until February 1996 and, thereafter,
Chairman of the Board, Hilton Hotels
Corporation.
ROBERT L. JOHNSON 50 2000 1994
Chairman and Chief Executive Officer of Black
Entertainment Television, a cable programming
service, and Chairman, President and Chief
Executive Officer of BET Holdings, Inc., a
diversified media holding company, since August
1991, and Chairman and Chief Executive Officer
of District Cablevision, cable operator in the
District of Columbia.
5
TERM TO
EXPIRE YEAR
AT SERVICE
ANNUAL COMMENCED
NAME, PRINCIPAL OCCUPATION MEETING OR WILL
AND OTHER DIRECTORSHIPS AGE IN COMMENCE
- - -------------------------------------------------- --- ------- ---------
SAM D. YOUNG, JR. 67 2000 1975
Chairman, Trans West Enterprises, Inc., an
investment company, and director, Texas Commerce
Bank-El Paso.
- - ------------
(1) In January 1997, the Company entered into agreements with Ladbroke Group PLC
("Ladbroke"), whose wholly-owned subsidiary, Hilton International Co. owns
the rights to the Hilton name outside the United States. The agreements
provide for, among other things, reunification of the Hilton brand worldwide
through a strategic alliance between the companies. Pursuant to the
alliance, Mr. Bollenbach has joined the Ladbroke Board of Directors and Mr.
George has joined the Company's Board of Directors.
TERM TO
EXPIRE YEAR
AT SERVICE
ANNUAL COMMENCED
NAME, PRINCIPAL OCCUPATION MEETING OR WILL
AND OTHER DIRECTORSHIPS AGE IN COMMENCE
- - -------------------------------------------------- --- ------- ---------
PRESENT DIRECTORS:
STEPHEN F. BOLLENBACH 54 1999 1996
Chief Financial Officer, The Trump Organization,
until March 1992, Chief Financial Officer,
Marriott Corporation, until October 1993,
President and Chief Executive Officer, Host
Marriott Corporation, until April 1995, Senior
Executive Vice President and Chief Financial
Officer, The Walt Disney Co., until February
1996 and, thereafter, President and Chief
Executive Officer, Hilton Hotels Corporation. He
is a director of America West Airlines, Inc.,
Kmart Corporation and Ladbroke Group PLC.
A. STEVEN CROWN 45 1998 1992
General Partner, Henry Crown and Company, a
holding company which includes diversified
manufacturing operations, marine operations and
real estate ventures.
6
TERM TO
EXPIRE YEAR
AT SERVICE
ANNUAL COMMENCED
NAME, PRINCIPAL OCCUPATION MEETING OR WILL
AND OTHER DIRECTORSHIPS AGE IN COMMENCE
- - -------------------------------------------------- --- ------- ---------
ARTHUR M. GOLDBERG 55 1998 1996
Chairman and Chief Executive Officer of Bally
Entertainment Corporation until December 1996
and, thereafter, Executive Vice President,
Hilton Hotels Corporation and President-Gaming
Operations. Mr. Goldberg is a director of Bally
Total Fitness Holding Corporation, First Union
Corporation and Continuecare Corp.
ERIC M. HILTON 63 1998 1989
Senior Vice President-Real Estate Development,
International, Hilton Hotels Corporation, until
May 1992, Executive Vice President-International
Operations, Hilton Hotels Corporation from May
1992 until May 1993 and, thereafter, Vice
Chairman of the Board, Hilton Hotels
Corporation. Mr. Hilton resigned as an officer
of the Company in March 1997.
DIETER H. HUCKESTEIN 53 1999 1995
Senior Vice President-Hawaii/California/Arizona
Region, Hilton Hotels Corporation, until May
1994 and, thereafter, Executive Vice President,
Hilton Hotels Corporation and President-Hotel
Operations. Mr. Huckestein is a citizen of
Germany.
DONALD R. KNAB 74 1999 1989
Chairman and Chief Executive Officer, BPT
Properties, L.P., a commercial real estate
development company, until January 1992 and,
until December 1992, Senior Consultant thereto
and, since January 1988, President, Donald R.
Knab Associates, Inc., an investment advisory
firm, and, since October 1994, Vice Chairman,
Deansbank Investments, Inc.-property
investments.
BENJAMIN V. LAMBERT 58 1999 1976
Chairman and Chief Executive Officer, Eastdil
Realty Company L.L.C., real estate investment
bankers.
7
TERM TO
EXPIRE YEAR
AT SERVICE
ANNUAL COMMENCED
NAME, PRINCIPAL OCCUPATION MEETING OR WILL
AND OTHER DIRECTORSHIPS AGE IN COMMENCE
- - -------------------------------------------------- --- ------- ---------
DONNA F. TUTTLE 49 1998 1992
Chairman and Chief Executive Officer, Ayer
Tuttle, the western division of NW Ayer
Incorporated, an international advertising firm
from 1989 to 1992 and from 1989 to 1995,
President, Donna F. Tuttle, Inc., a travel and
tourism consulting and public relations firm,
and, since 1992, President, Korn Tuttle Capital
Group, a financial consulting and investments
firm. She is a director of Phoenix Duff &
Phelps, Inc., a financial services firm.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES THEREOF
Among the committees created by the Board of Directors are an Audit
Committee, a Personnel and Compensation Committee and a Nominating Committee.
Presently, the members of the Audit Committee are A. Steven Crown, Robert L.
Johnson, Donald R. Knab (Chair), Benjamin V. Lambert, Donna F. Tuttle and Sam D.
Young, Jr.; the members of the Personnel and Compensation Committee are A.
Steven Crown, Robert L. Johnson (Chair), Donald R. Knab, Donna F. Tuttle and Sam
D. Young, Jr.; and the members of the Nominating Committee are Stephen F.
Bollenbach, Barron Hilton, Donald R. Knab, Benjamin V. Lambert and Donna F.
Tuttle (Chair).
The functions of the Audit Committee include reviewing the independence of
the independent auditors, recommending to the Board of Directors the engagement
and discharge of independent auditors, reviewing with the independent auditors
the plan and results of auditing engagements, approving or ratifying each
professional service provided by independent auditors which is estimated by
management to cost more than 10% of the previous year's audit fee, considering
the range of audit and nonaudit fees, reviewing the scope and results of the
Company's procedures for internal auditing and the adequacy of internal
accounting controls and directing and supervising special investigations.
The Personnel and Compensation Committee reviews and establishes the general
employment and compensation practices and policies of the Company and approves
procedures for the administration thereof, including such matters as the total
salary and fringe benefit programs. However, the Stock Option Committees, the
memberships of which are identical to that of the Personnel and Compensation
Committee, administer the Company's 1990 Stock Option and Stock Appreciation
Rights Plan (the "1990 Plan"), the 1996 Plan and the 1996 Chief Executive Stock
Incentive Plan (the "1996 CEO Plan," and together with the 1990 Plan and the
1996 Plan, the "Plans") and the Committees of the 1990 Plan, the 1996 Plan and
the 1996 CEO Plan recommend to the Board of Directors the granting of options
and stock appreciation rights under the respective Plans (see "Executive
Compensation" on page 10).
The functions of the Nominating Committee include recommending nominees to
the Board of Directors to fill vacancies on the Board, reviewing on a continuing
basis, and at least once a year, the structure of the Board to assure its
continuity and to assure that the proper skills and experience are
8
represented on the Board, and reviewing any potential conflicts of Board members
individually whenever a prospective Board member is being considered for
election to the Board. See "Election of Directors" for procedures to be followed
by stockholders in submitting recommendations to the Nominating Committee for
nominees to the Board of Directors.
The Board of Directors, Audit Committee, Personnel and Compensation
Committee and Nominating Committee held a total of nine, six, six and two
meetings during 1996, respectively. Each director attended more than 75% of the
aggregate number of meetings of the Board and the Committees on which each
director served.
Each director who is not also an officer was paid an annual fee of $25,000.
In addition, each director received $900 for each meeting of the Board of
Directors attended and $750 (except the Chair of a Committee received $1,000)
for each meeting of a Committee attended. Such directors also receive, with
certain exceptions, complimentary rooms and 25% discount on food and beverage
when traveling on non-business travel to Company owned or managed properties.
Raymond C. Avansino, Jr., resigned as a director and employee of the Company
in October 1996. Pursuant to an agreement entered into with Mr. Avansino in
connection with his resignation, the Company paid $3,043,912 to Mr. Avansino as
compensation for his unvested stock options and permitted Mr. Avansino to retain
a Company vehicle and certain office equipment.
The Company also maintains an unfunded Directors' Retirement Benefit Plan,
which provides retirement benefits to nonemployee directors of the Company who
retire at or after age 65 with ten years of service as a director. The annual
retirement benefit is equal to 100% of the director's highest average annual
fees during any period of 36 consecutive months, and is payable for ten years or
until the retired director's death, whichever occurs first. The plan also
provides a surviving spouse's benefit equal to one-half of the benefit otherwise
payable to the director.
Except as disclosed in the column entitled "Name, Principal Occupation and
Other Directorships" in the table above, none of the nominees' or directors'
principal occupations have been as an employee of the Company or its
subsidiaries and affiliates. Barron Hilton and Eric M. Hilton are brothers.
Except for such family relationship, none of the nominees and directors are
related to executive officers of the Company.
CERTAIN RELATIONSHIPS AND INTERESTS IN CERTAIN TRANSACTIONS
The Company, its subsidiaries and affiliates have, from time to time,
entered into agreements with Eastdil Realty Company, L.L.C. ("Eastdil") pursuant
to which Eastdil has, among other things, assisted in negotiations for the
acquisition, disposition, financing and refinancing of hotel properties.
Benjamin V. Lambert, a director of the Company, is the Chairman and Chief
Executive Office of Eastdil. In 1996, Eastdil was engaged to provide certain
consulting services to the Company in connection with the Company's purchase of
interests of The Prudential Insurance Company of America ("Prudential") in the
New York, Washington, Capital and Rye Town Hilton hotels. Upon completion of the
assignment, Eastdil was paid a $1,000,000 fee ($500,000 by each of the Company
and Prudential). The fairness and reasonableness of such fee to Eastdil has been
passed upon by the independent directors of the Company, other than Mr. Lambert.
The Company uses, in the ordinary course of business, products and services
of organizations in which Barron Hilton has an interest. The amounts involved
have in no case been material in relation to the business of the Company, of any
such organizations, or Mr. Hilton.
9
Air Finance Corporation ("AFC"), a company controlled by Barron Hilton, owns
a jet aircraft which it charters. AFC utilized the aircraft support services of
the Company, principally pilots, fuel, and other operational support services
for its aircraft. In 1996, AFC reimbursed the Company $241,136 for these
services. Management believes that the rates paid were comparable to those which
would have been paid to unaffiliated parties providing similar services.
Further, the Company's casinos in Las Vegas and Reno, Nevada, regularly send
and pay for their guests to visit certain conference facilities in Yerington,
Nevada, which are owned by Barron Hilton. In this regard, Mr. Hilton received
payments approximating $81,000 in 1996. Management believes that the rates paid
were comparable to those which would have been paid to unaffiliated parties
providing similar services.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of the Named Officers for services rendered in all
capacities to the Company for the fiscal years ended December 31, 1996, 1995 and
1994.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) COMPENSATION($) (#)(4) COMPENSATION($)(5)
- - -------------------------------------------------- ---- -------- -------- --------------- ------------ ---------------
Barron Hilton(1).................................. 1996 $610,417 -- -- -- $3,000
Chairman and Chief Executive 1995 650,000 $350,000 -- -- 3,000
Officer 1994 650,000 350,000 -- -- 3,000
Stephen F. Bollenbach(1).......................... 1996 490,846 509,154 $58,085(6) 6,000,000 --
President and Chief Executive 1995 -- -- -- -- --
Officer 1994 -- -- -- -- --
Matthew J. Hart(2)................................ 1996 303,462 $292,500 -- 200,000 --
Executive Vice President and Chief 1995 -- -- -- -- --
Financial Officer 1994 -- -- -- -- --
Dieter H. Huckestein.............................. 1996 350,833 250,000 -- 60,000 3,000
Executive Vice President, Hilton 1995 336,917 250,000 -- -- 3,000
Hotels Corporation, and President- 1994 278,167 165,000 -- 25,000 3,000
Hotel Operations
F. M. Celey, Jr................................... 1996 371,917 150,000 -- 60,000 3,000
Executive Vice President, Hilton 1995 336,917 300,000 -- -- 3,000
Hotels Corporation, and President- 1994 246,380 140,000 -- 25,000 3,000
Gaming Operations(7)
- - ------------
(1) Effective February 2, 1996, Mr. Hilton resigned as Chief Executive Officer.
Effective the same date, Stephen F. Bollenbach was elected President and
Chief Executive Officer.
(2) Effective April 29, 1996, Matthew J. Hart was elected Executive Vice
President and Chief Financial Officer.
10
(3) The Personnel and Compensation Committee approved the payment of such
bonuses. Of such bonus amounts, $146,250, $114,400 and $103,125 were accrued
in 1996 for Messrs. Hart, Huckestein and Celey, respectively, pursuant to
the Company's Annual Bonus Plan; the remainder of such bonuses was paid
pursuant to the Personnel and Compensation Committee's discretionary
authority. Pursuant to Mr. Bollenbach's employment agreement, he was
guaranteed in 1996 an annual bonus of $1,000,000, less actual salary paid
(see the "Personnel and Compensation Committee Report on Executive
Compensation" on page 12).
(4) Although the Company's Plans permit grants of stock appreciation rights
(SARs), no grants of SARs have been made.
(5) Represents amounts contributed or accrued for fiscal 1996, 1995 and 1994 for
the Named Officers under the Company's Investment Plan, which provides
benefits to eligible employees, including the Named Officers. Each dollar
contributed by an eligible employee through payroll deductions, which may be
up to 4% of such employee's annual earnings, is matched by a Company
contribution, subject to certain government limitations.
(6) As part of Mr. Bollenbach's compensation arrangement, the Company paid this
amount to be applied to the purchase of a Company vehicle.
(7) In December 1996, upon consummation of the Company's acquisition of Bally
Entertainment Corporation ("Bally") through the merger of Bally with and
into the Company, with the Company surviving the merger (the "Bally
Merger"), Arthur M. Goldberg was elected Executive Vice President, Hilton
Hotels Corporation, and President-Gaming Operations. Prior to December 18,
1996, Mr. Celey held such title. Effective January 16, 1997, Mr. Celey was
elected Executive Vice President-International Operations and Development of
Hilton Gaming Corporation, a wholly-owned subsidiary of the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information on option grants in
fiscal 1996 to the Named Officers.
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL POTENTIAL REALIZED VALUE AT
NUMBER OF OPTIONS/SARS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES OR BASE OPTION TERM (2)
OPTIONS/SARS IN FISCAL PRICE EXPIRATION ----------------------------
NAME GRANTED(#)(1) YEAR ($/SH) DATE 5%($) 10%($)
- - --------------------------- ------------- ------------- ---------- ----------- ------------- -------------
Barron Hilton.............. -- -- -- -- -- --
Stephen F. Bollenbach...... 6,000,000 61.3880 $ 18.6718 1/30/01 $ 30,952,169 $ 68,396,198
Matthew J. Hart............ 200,000 2.0463 25.7812 4/29/06 3,242,738 8,217,735
Dieter H. Huckestein....... 60,000 0.6139 23.0156 3/14/06 868,464 2,200,859
F.M. Celey, Jr............. 60,000 0.6139 23.0156 3/14/06 868,464 2,200,859
- - ------------
(1) The options listed were granted pursuant to the Plans. Option exercise
prices are at fair market value when granted; the options generally have a
ten year term and generally vest over four years.
(2) Potential realizable values are based upon assumed annual rates of return
specified by the Commission.
11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the exercised options and the
unexercised options to purchase the Company's Common Stock granted under the
Company's 1984 Stock Option Plan and the Plans to the Named Officers and held by
them at December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
SHARES ACQUIRED VALUE OPTIONS/SARS AT FY- END(#) AT
ON EXERCISE(#) REALIZED($) FY-END(1)($)
--------------- -------- --------------------------- -----------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE
- - -------------------------------------------------- ----------- ------------- -----------
Barron Hilton..................................... -- -- -- -- --
Stephen F. Bollenbach............................. -- -- -- 6,000,000 --
Matthew J. Hart................................... -- -- -- 200,000 --
Dieter H. Huckestein.............................. -- -- 105,000 110,000 1,406,078
F. M. Celey, Jr................................... 16,000 $220,000 50,000 110,000 486,563
NAME UNEXERCISABLE
- - -------------------------------------------------- -------------
Barron Hilton..................................... --
Stephen F. Bollenbach............................. $44,718,750
Matthew J. Hart................................... 68,750
Dieter H. Huckestein.............................. 753,734
F. M. Celey, Jr................................... 673,125
- - ------------
(1) Based on the fair market value of $26.13, which represents the mean between
the highest and lowest prices at which the Company's Common Stock was traded
on December 31, 1996 on the NYSE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE 1934 ACT,
THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE
OR IN PART, THE FOLLOWING PERSONNEL AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION AND THE STOCKHOLDER RETURN PERFORMANCE GRAPH ON PAGE 17
SHALL NOT BE AND SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
PERSONNEL AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PROGRAMS
The Company's Personnel and Compensation Committee (the "Committee") and the
Stock Option Committees establish and monitor policies and procedures and
approve actions associated with the compensation and stock option programs
affecting the Named Officers and other senior officers of the Company (the
"Executive Group").
The Company's executive compensation program is designed to closely link the
compensation received by participants to the achievement of specific earnings
goals for the Company and its business units, to appreciation in the price of
the Company's Common Stock, and, in certain instances, to the achievement of
individual goals. Through this direct link between pay and Company and
individual performance, it is the intent of the program to focus participants on
factors that drive the Company's financial success and the creation of
incremental stockholder value.
The key components of the Company's executive compensation program include
annual compensation consisting of base salaries and annual performance bonuses,
and long-term incentive compensation consisting exclusively of stock options. It
is the Committee's policy to target total compensation (i.e., the sum of base
salary, annual performance bonus, stock option grants and other benefits) for
the Executive Group approximately at the median (50th percentile) of a
"competitive market" consisting of a combination of large, publicly traded
hotel/gaming companies (publicly held companies that primarily operate
12
land-based casinos) and a randomly selected sample of FORTUNE 500 Service firms
comparable in size to the Company. To the extent possible, the same hotel/gaming
companies used to competitively assess the Company's executive compensation
levels are used to compare the Company's stock performance in the Stockholder
Return Performance Graph.
Actual total compensation paid to the Executive Group as a whole and to
individual executives within the Executive Group may exceed or fall below median
competitive levels both annually and over time based on a variety of factors,
including the Company's financial performance, the performance of the Company's
Common Stock, the performance of the executive's area of responsibility, the
Committee's assessment of an executive's individual performance, the executive's
experience in his or her role, and the executive's length of service with the
Company. The Committee believes that providing a performance-sensitive target
total compensation opportunity approximately equal to the median of the
"competitive market" is required to attract, motivate and retain quality
management talent.
The Committee does not use competitive financial and stockholder value
performance comparisons to determine the compensation of the Company's Executive
Group, due primarily to the limited number of other publicly traded firms with a
mix of business (i.e., hotels and gaming) similar to the Company. Also, it is
the Committee's opinion that because the Company's financial performance and
stockholder value are influenced to a meaningful degree by a unique set of
external factors (i.e., gaming regulations and global economic conditions which
influence travel trends), comparing the Company's financial or stock price
performance across different industries can be misleading.
In establishing target total compensation levels for the Executive Group,
the Company periodically reviews data on market compensation practices prepared
by outside, independent compensation consultants. It is the Committee's belief
that the actual 1996 total compensation provided to the Company's Executive
Group is consistent with the Committee's policy of providing target total pay at
median market levels with meaningful upside and downside leverage based on
performance.
BASE SALARY
During fiscal 1996, the Named Officers, excluding Stephen F. Bollenbach who
joined the Company as President and Chief Executive Officer in February 1996 and
who is covered by a five-year employment agreement, received salary increases
generally averaging approximately 5.0% which was based on the Committee's
understanding of the increase required to maintain salary levels consistent with
reasonable market practices.
ANNUAL BONUS PLAN
Each participant in the Company's executive annual bonus plan is assigned a
maximum formula-based award opportunity expressed as a percentage of the
participant's base salary. The maximum formula-based award opportunity for the
participants in the program ranges from 20% to 50% of base salary, depending on
the participant's role. Mr. Bollenbach, according to the provisions of his
employment agreement, will be eligible for a formula-based bonus of up to 100%
of base salary beginning with the Company's 1997 fiscal year. During 1996, Mr.
Bollenbach's bonus was determined in accordance with the guarantee contained in
his employment agreement. (See "Chief Executive Officer Compensation" below).
The amount of the formula-based award earned under the program depends upon
the Company's level of achievement relative to an objective established by the
Committee for the Company's earnings per share (EPS). In addition to
formula-based awards, the Company may pay discretionary awards based upon
13
the Committee's judgment regarding other performance indicators, including the
Company's EPS performance compared to the maximum formula-based objective, the
Company's and business unit's earnings before interest and taxes (EBIT), market
share growth, achievement of cost containment goals, Company stock price
performance, and individual performance relative to each participant's primary
area of responsibility. The weighting of these factors varies and is subjective.
During fiscal 1996, the Company did not achieve the target EPS objective
established by the Committee for the formula-based award under the annual bonus
plan. However, the Company did achieve a level of performance sufficient to fund
formula-based bonuses at the 10% level for senior officers and the 12.5% level
for executive officers after adjusting for nonrecurring and extraordinary items.
In addition, the Committee paid discretionary awards to certain individuals to
recognize superior individual contributions made during the year.
LONG TERM INCENTIVE PROGRAM
The Company's long term incentive program consists exclusively of periodic
grants of stock options at the discretion of the Stock Option Committee, with an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant. To encourage retention, the ability to exercise options
granted under the program is subject to vesting restrictions determined by the
Committee. Decisions made by the Committee regarding the timing and size of
option grants take into account Company and individual performance, "competitive
market" practices, and the size of option grants made in prior years. The
weighting of these factors varies and is subjective. The Committee does not
consider current option holdings when granting options.
During 1996, stock options totaling 320,000 shares (excluding the grants to
Mr. Bollenbach and Mr. Goldberg, described later in this report) were awarded to
the Named Officers. (See "Option Grants in Last Fiscal Year" on page 11.)
CHIEF EXECUTIVE OFFICER COMPENSATION
In February 1996, the Company hired Mr. Bollenbach as President and Chief
Executive Officer and entered into a five-year employment agreement with Mr.
Bollenbach. The agreement establishes a minimum annual base salary of $540,000
and provides for a target annual bonus opportunity of up to 100% of base salary.
During fiscal year 1996, the agreement provided for a minimum guaranteed bonus
equal to $1,000,000 less the amount of salary earned during 1996. In accordance
with this provision, Mr. Bollenbach received a bonus for fiscal 1996 equal to
$509,154, which, when added to his actual salary received during 1996 of
$490,846, totaled $1,000,000.
In addition, Mr. Bollenbach was granted 1,500,000 stock option shares (now
6,000,000 option shares after adjusting for the Company's 4 for 1 stock split)
under the 1996 CEO Plan of the Company that was approved by stockholders at the
Company's 1996 annual stockholders meeting. The options carry a five-year
maximum term, have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant, and vest in four equal annual
installments beginning January 1, 1997, subject to acceleration for a change of
control or qualified transaction (as each are defined in the employment
agreement). Also, in the event that Mr. Bollenbach's employment with the Company
is terminated by the Company at any time without cause or Mr. Bollenbach
voluntarily terminates employment with the Company three or more years after his
initial employment, he shall be entitled to a minimum payment (the "Substitute
Payment") of $20,000,000 (or, if his employment terminates due to death or
disability, $10,000,000) less the amount of any gain received or receivable from
the 6,000,000 option shares, including
14
any appreciation in the price of shares acquired by Mr. Bollenbach by the
exercise of his options. If Mr. Bollenbach receives the Substitute Payment, his
options will cease to be exercisable five trading days thereafter.
The agreement also provides that the Company will lend, and the Company has
lent, Mr. Bollenbach $5,000,000. The loan bears interest, compounded
semi-annually, at 100% of the applicable Federal rate provided under Section
7872 of the Internal Revenue Code of 1986, as amended (the "Code") and must be
repaid in full at the earlier of January 1, 2000 or upon Mr. Bollenbach's
termination of employment from the Company. The loan is on a full recourse basis
and also will be secured by any net shares of the Company acquired by Mr.
Bollenbach through the exercise of his option shares and, if applicable, his
Substitute Payment.
The agreement entered into with Mr. Bollenbach was the result of arms'
length negotiations between the Company and Mr. Bollenbach. It is the
Committee's opinion that the compensation provisions contained in the agreement
were necessary to secure Mr. Bollenbach's employment and are in the best
interests of the Company and its stockholders.
CONSULTING AND EMPLOYMENT AGREEMENT AND DEFERRED COMPENSATION AGREEMENT WITH
ARTHUR M. GOLDBERG
In June 1996, the Company entered into a consulting agreement with Mr.
Goldberg (the former Chairman, President and Chief Executive Officer of Bally),
pursuant to which Mr. Goldberg agreed to render part-time consulting services to
the Company. The agreement was amended in November and December 1996 as a
Consulting and Employment Agreement (as so amended, the "Agreement"), under
which Mr. Goldberg agreed to serve as Executive Vice President of the Company
and President of the Company's Gaming Operations, for a period of three years
from the closing date of the Bally Merger (the "effective date" of the
Agreement). The Agreement provides for an annual base salary during the term of
the agreement of $2,000,000, a grant of 600,000 stock option shares on the
effective date of the Agreement, and subsequent grants of 600,000 stock option
shares on each of the first and second anniversary of the effective date. The
options have an exercise price equal to the average of the high and low prices
of the Company's Common Stock on the date of grant, have a maximum term of five
years from the date of grant, and are fully exercisable on the date of grant. A
substantial portion of the base salary payable to Mr. Goldberg during any
taxable year under the agreement will be deferred and payable to Mr. Goldberg
after he ceases to be one of the Company's Named Officers. The Agreement
provides that such deferred amounts will be credited with interest at prime rate
during the deferral period. The Agreement provides that Mr. Goldberg will serve
as a consultant to the Company until the third anniversary of the Bally Merger
if his employment with the Company is terminated before that date. The Agreement
also provides that if any payments made by the Company to Mr. Goldberg, pursuant
to the Agreement or otherwise, would be subject to the excise tax imposed by
Section 4999 of the Code, Mr. Goldberg will be entitled to receive an additional
payment in an amount such that after payment by Mr. Goldberg of all taxes
(including any interest or penalties imposed with respect to such taxes) imposed
upon the additional payment, Mr. Goldberg would receive the same amount of
compensation which he would have received in the absence of any such taxes.
In January 1997, the Company entered into a Deferred Compensation Agreement
with Mr. Goldberg under which the Company agreed to make a lump sum payment to
Mr. Goldberg of $2,400,000 after he ceases to be one of the Company's Named
Officers. As with deferrals of Mr. Goldberg's base salary, this deferred payment
will be credited with interest at the prime rate during the deferral period. The
deferred payment provided by the Deferred Compensation Agreement was to
recognize (i) Mr. Goldberg's
15
significant contributions in obtaining gaming commission approvals of the Bally
Merger and facilitating the integration of the Company's and Bally's gaming
operations, and (ii) that the compensation provided for under Mr. Goldberg's
Agreement did not provide for any increase in Mr. Goldberg's compensation when
it was amended in connection with Mr. Goldberg's agreement to serve as a
full-time executive officer of the Company.
COMMITTEE POLICY REGARDING COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL
REVENUE CODE
Under Section 162(m) of the Code, Federal income tax deductions of publicly
traded companies may be limited to the extent total compensation (including base
salary, annual bonus, restricted stock awards, stock option exercises, and
nonqualified benefits) for certain executive officers exceeds $1,000,000 in any
one year. Under Section 162(m), the deduction limit does not apply to payments
which qualify as "performance based." To qualify as "performance based,"
compensation payments must be made from a plan that is administered by a
committee of outside directors and be based on achieving objective performance
goals. In addition, the material terms of the plan must be disclosed to and
approved by stockholders, and the committee must certify that the performance
goals were achieved before payments can be awarded.
The Committee intends to design the Company's compensation programs to
conform with Section 162(m) so that the total compensation paid to any employee
will not exceed $1,000,000 in any one year, except for compensation payments in
excess of $1,000,000 which qualify as "performance based" or which are exempt
for other reasons. However, the Company may pay compensation which is not
deductible if sound management of the Company so requires.
The foregoing report has been approved by all of the members of the
Committee:
Robert L. Johnson, Chair
A. Steven Crown
Donald R. Knab
Donna F. Tuttle
Sam D. Young, Jr.
16
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the S&P 500 Stock Index and a hotel/gaming peer group
for the five fiscal years ending December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/91 12/92 12/93 12/94 12/95 12/96
Hilton Hotels Corporation 100 110 158 180 166 286
S&P 500 Index 100 108 118 120 165 203
Peer Group (Weighted Average) 100 154 240 184 165 116
Assumes $100 invested on December 31, 1991 in the Common Stock of Hilton Hotels
Corporation, the S&P 500 Stock Index, and the peer group companies (weighted by
market capitalization). Total return assumes reinvestment of dividends.
(1) The Company-constructed hotel/gaming peer group is weighted annually by
market capitalization and consists of six major publicly-traded companies,
three in the gaming industry and three in the hotel industry. The
composition of the blended, Company-constructed hotel/gaming peer group
produces a composite representative of the major publicly-traded competitors
of the Company. However, it must be recognized that the number of
publicly-traded companies with significant hotel operations is limited.
Hence, the performance of the hotel/gaming peer group is driven to a greater
degree by gaming companies that, as a group, outperformed the hotel industry
during the period represented by the graph. Additionally, the hotel/gaming
peer group has undergone change due to acquisition and divestiture activity
in recent years, as footnoted below. The hotel/gaming peer group includes
Circus Circus Enterprises, Inc., Harrah's Entertainment, Inc., Host Marriott
Corporation, ITT Corporation (which could not be included in the graph
above, see footnote 2 below), Marriott International, Inc. and Mirage
Resorts, Inc.
(2) While no companies have been added to the hotel/gaming peer group from the
group presented in the Company's proxy statement from last year, Bally was
acquired by the Company in December 1996 and, therefore, has been eliminated
from all time periods. It should also be noted that ITT Corporation is
excluded from hotel/gaming peer group during the period represented by the
graph because it was reorganized and began trading as a stand-alone company
in December 1995.
RETIREMENT PLANS
Set forth below is a table with respect to the estimated annual amounts
payable to the Named Officers upon retirement at age 65 from the Company's
Retirement Plan and the Company's two supplementary
17
plans associated with the Retirement Plan, the Benefit Replacement Plan and the
Supplemental Executive Retirement Plan (collectively, the "Retirement Plans").
ESTIMATED ANNUAL RETIREMENT BENEFIT
YEARS OF SERVICE AT RETIREMENT
----------------------------------------------------------
COMPENSATION 15 20 25 30 35
- - ------------------------------------------- ---------- ---------- ---------- ---------- ----------
$ 350,000.................................. $ 210,000 $ 210,000 $ 210,000 $ 210,000 $ 210,000
400,000.................................. 240,000 240,000 240,000 240,000 240,000
450,000.................................. 270,000 270,000 270,000 270,000 270,000
500,000.................................. 300,000 300,000 300,000 300,000 300,000
600,000.................................. 360,000 360,000 360,000 360,000 360,000
800,000.................................. 480,000 480,000 480,000 480,000 480,000
1,000,000................................. 600,000 600,000 600,000 600,000 600,000
1,200,000................................. 720,000 720,000 720,000 720,000 720,000
1,400,000................................. 840,000 840,000 840,000 840,000 840,000
Effective December 31, 1996, the Retirement Plans were amended to provide
that employees earn no further benefits under the Retirement Plans. Thus, the
benefits under the Retirement Plans are based upon compensation and years of
service through December 31, 1996. The compensation covered by the Retirement
Plans includes a participant's salary, bonus (if any) and living allowance (if
any). Benefits under the Retirement Plan and the Benefit Replacement Plan are
determined according to the highest five consecutive years of compensation
(through December 31, 1996), and benefits under the Supplemental Executive
Retirement Plan are based upon the highest three years of compensation including
compensation in the year immediately prior to retirement (but not including
compensation after December 31, 1996). Compensation above $800,000 paid in any
year after 1993 is disregarded, but this limitation is not applied to any year
before 1994. On December 31, 1996, Messrs. Barron Hilton, Bollenbach, Hart,
Huckestein and Celey had 45, 0, 0, 11 and 30 years of service, respectively,
under the Retirement Plans. The benefits set forth on the table assume receipt
of a benefit on a straight life annuity basis and are reduced by 50% of the
primary social security benefit to which a participant is entitled. Until April
1, 1994, the Supplemental Executive Retirement Plan and the Benefit Replacement
Plan provided that the present value of a Named Officer's benefit would be
transferred from time-to-time to a grantor trust established by such officer,
along with additional amounts needed to equalize the trust account to the
after-tax benefits which would have been provided in the absence of the trust.
Such transfers will resume if a change in control occurs.
Effective January 1, 1997, the Company adopted the Executive Deferred
Compensation Plan ("Deferred Compensation Plan") and amended its Investment Plan
to provide for the matching contributions described below. Under the Deferred
Compensation Plan and the Investment Plan, employees may elect to defer
compensation which otherwise would have been paid to them. Executives eligible
to participate in the Executive Deferred Compensation Plan may, based on their
age, defer 25% to 100% of their compensation. Deferred Compensation Plan
participants are eligible to receive a matching contribution of 50% of the first
10% of the executive's deferred compensation. Participants in the Investment
Plan who have five or fewer years of service receive a matching contribution of
50% of the first 6% of the participant's deferred compensation. Investment Plan
participants with more than five years of service receive a matching
contribution of 75% of the first 6% of the participant's deferred compensation.
In 1996 compensation above $150,000 was disregarded for deferrals and matching
contribution credits under the Investment Plan. Effective January 1, 1997, the
Company adopted the Employee Stock Purchase Plan, under which employees may
purchase common shares of the Company at a 5% discount. The maximum
18
investment which may be made by an employee under the Employee Stock Purchase
Plan in any year is $25,000.
CHANGE OF CONTROL AGREEMENTS
The Company's Board of Directors has adopted a Change of Control Agreement
("Agreement") and, pursuant thereto, Agreements have been entered into with each
of the members of the Company's Executive Group, including the Company's Named
Officers. Mr. Bollenbach's Agreement is written to take into account the terms
of his employment agreement, but is otherwise identical to the Agreements
entered into with the Named Officers. Under the terms of the Agreement, upon the
occurrence of a Change of Control (as hereinafter defined), the Company agrees
to continue the employment of each Named Officer for a three-year period, or
until the Named Officer's retirement if earlier (the "Employment Period"), in a
position which is at least commensurate with the Named Officer's position prior
to the Change of Control and to provide the Named Officer with base salary,
annual bonuses, incentive plan, retirement plan, welfare benefit plan, fringe
benefits and other employment policy coverage which is at least equal to the
coverage in effect prior to the Change of Control. Under the Agreement, each
Named Officer will receive an amount equal to up to three times annual salary
and bonus if, following a Change of Control (as hereinafter defined), such Named
Officer is terminated without cause or if such Named Officer terminates for good
reason (including, but not limited to, the assignment to such Named Officer of
duties inconsistent with such Named Officer's position at the time of the Change
of Control). In addition, upon such a termination of employment, each Named
Officer is entitled to receive a lump sum payment equal to the difference
between the value of the Named Officer's benefits under the Company's Retirement
Plans and the value of the benefits which the Named Officer would have received
under such plans if the Named Officer had continued to be employed by the
Company during the Employment Period and to receive benefits under the Company's
welfare benefit and fringe benefit plans and policies during the remaining
period of the Employment Period. The Agreement continues for renewable
three-year terms or until the Named Officer's normal retirement date, if
earlier. Under the Agreement, a Change of Control with respect to the Company
and the Agreement means (i) the acquisition (other than from the Company) by any
person, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act (excluding, for this purpose, (A) the Company or its subsidiaries,
(B) any employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company or (C) Barron Hilton or
the Fund, collectively, the "Hilton Interests"), of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of
either the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
in the election of directors; or (ii) a majority of the membership of the
present incumbent Board of Directors changes other than in the ordinary course;
or (iii) there is a dissolution or liquidation of the Company, a sale of
substantially all of its assets, or a merger that forces out a majority of the
pre-merger stockholders. If any payment, whether pursuant to the Agreement or
otherwise (i.e., under Retirement or Stock Option Plans), would be subject to
the excise tax imposed by Section 4999 of the Code, then the Named Officer shall
be entitled to receive an additional payment in an amount such that after
payment by the Named Officer of all taxes (including any interest or penalties
imposed with respect to such taxes), including any excise tax, imposed upon the
additional payment, the Named Officer receives the same amount of compensation
pursuant to the Agreement which such Named Officer would have received in the
absence of any such taxes. Under the Agreement, each Named Officer agrees to
maintain the confidentiality of all secret or confidential information relating
to the Company which the Named Officer obtained during the Named Officer's
employment by the Company.
19
LEGAL PROCEEDINGS
A purported class action against Bally, its directors and Hilton, was
commenced in August 1996 under the caption Parnes v. Bally Entertainment
Corporation, et al. in the Court of Chancery of the State of Delaware, New
Castle County, alleges breaches of fiduciary duty in connection with the Bally
Merger, including allegedly illegal payments to Arthur M. Goldberg purportedly
denying Bally shareholders other than Mr. Goldberg an opportunity to sell their
shares to Hilton or any other bidder at the best possible price. In the
complaint, the plaintiff seeks, among other things: (i) an order enjoining the
Bally Merger; (ii) an award of damages in an unspecified amount; (iii) an order
requiring Mr. Goldberg to disgorge his profits; and (iv) an award of attorneys'
fees and expenses. Two other purported class actions relating to the Bally
Merger are pending against Bally and its directors, one commenced in April 1996
under the caption Kinder v. Brunet, et al. and the other commenced in June 1996
under the caption Lord v. Brunet, et al., in the Court of Chancery of the State
of Delaware, New Castle County. These actions are virtually identical, and also
allege breaches of fiduciary duty in connection with the Bally Merger. In the
complaint, the plaintiffs seek, among other things: (i) a declaration that
defendants have breached their fiduciary duties; (ii) an order requiring
defendants to act in accordance with their fiduciary duties in order to maximize
the value obtained for Bally's shareholders; (iii) an award of damages in an
unspecified amount; and (iv) an award of expenses, including attorneys' fees.
Two derivative actions purportedly brought on behalf of Bally's Grand, Inc.
("BGI"), against its directors and Bally, one commenced in October 1995 and the
other in September 1996, have been consolidated under the caption In re: Bally's
Grand Derivative Litigation in the Court of Chancery of the State of Delaware,
New Castle County. The consolidated complaint alleges breaches of fiduciary duty
and waste of corporate assets in connection with certain actions including the
sale by BGI to Bally of the capital stock of BGI's subsidiary that owns the land
and the development rights with respect to the Paris Casino-Resort in Las Vegas
(the "Paris Transaction"), alleged improper delegation of duties by BGI's board
of directors by virtue of a management agreement (the "Management Agreement")
between BGI and Bally's Grand Management Co., Inc., a wholly owned subsidiary of
Bally ("BGM"), BGM's designation pursuant to the Management Agreement of
recipients awarded BGI stock options, stock repurchases by BGI and Bally, and a
consulting agreement entered into by BGI with Arveron Investments L.P. in
connection with BGI's repurchases of securities. The plaintiffs seek, among
other things: (i) rescission of the Paris Transaction; (ii) a declaration that
the Management Agreement is unlawful; (iii) an accounting of damages to BGI and
profits to defendants as a result of the transactions complained of, (iv) an
accounting for purchases of BGI stock by BGI and Bally; and (v) costs and
expenses, including reasonable attorneys' fees. A third derivative action
purportedly brought on behalf of BGI against its directors, Bally, BGM and
Hilton was commenced in November 1996 under the caption Tower Investment Group,
Inc., et al. v. Bally's Grand, Inc., et al. in the Court of Chancery of the
State of Delaware, New Castle County. The complaint alleges breach of fiduciary
duty and waste of corporate assets by BGI's directors and Bally in connection
with the Paris Transaction, aiding and abetting by Hilton of the breaches of
fiduciary duty and waste by BGI's directors and Bally, fraud, willful misconduct
or gross negligence by Bally Manufacturing Corporation and BGM in connection
with the Management Agreement, breach of fiduciary duty by BGI's directors in
connection with stock purchases by Bally while in possession of material inside
information concerning BGI's earnings, breach of fiduciary duty by Bally in
connection with alleged threats to abuse its controlling interest in BGI, and
violation by BGI's directors and Bally of Section 203 of the Delaware General
Corporation Law in connection with the Paris Transaction. The plaintiffs seek,
among other things: (i) rescission of the Paris Transaction; (ii) termination of
the Management Agreement; (iii) appointment of a custodian to manage BGI's
affairs, (iv) compensatory damages; (v) an order enjoining Bally and Hilton
20
from conveying the Paris Casino-Resort, (vi) disgorgement by Bally and Hilton of
the profits of the Paris Casino-Resort; (vii) disgorgement by Arthur M. Goldberg
of all payments, warrants and interests received in connection with the Bally
Merger; and (viii) disgorgement by Bally of profits earned from any transactions
in shares of BGI's stock based upon material inside information. This action has
been consolidated with the original consolidated action under the caption In re:
Bally's Grand, Inc. Shareholders Litigation.
Several purported derivative actions against Bally and certain of its former
directors, including Arthur M. Goldberg, originally filed in December 1990 and
January 1991, have been consolidated under the caption In re: Bally
Entertainment Corporation Shareholders Litigation in the Court of Chancery of
the State of Delaware, New Castle County. The consolidated complaint alleges,
among other things: breach of fiduciary duty, corporate mismanagement and waste
of corporate assets in connection with certain actions including, among other
things, payment of compensation, certain acquisitions by Bally, the
dissemination of allegedly materially false and misleading information, the
restructuring of Bally's debt, and a subsidiary's allegedly discriminatory
practices. The plaintiffs seek, among other things: (i) injunctions against
payment of certain termination compensation benefits and implementation of the
restructuring plan; (ii) rescission of consummated transactions and a
declaration that the complained of transactions are null and void, (iii) an
accounting by individual defendants of damages to Bally and benefits received by
such defendants; (iv) the appointment of a representative to negotiate on behalf
of the former Bally stockholders in connection with any restructuring; and (v)
costs and disbursements, including a reasonable allowance for the fees and
expenses of plaintiffs' attorneys, accountants and experts.
In management's opinion, disposition of the lawsuits described above is not
expected to have a material effect on the Company's financial position or
results of operations.
PROPOSAL 2
PROPOSED AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
The New Jersey Casino Control Commission has required that the Company amend
Article X of its Restated Certificate of Incorporation ("Certificate") to add
the definition of the term "Securities." While Article X previously applied only
to "Voting Securities" (i.e., capital stock entitled to vote generally in the
election of directors), the recommended changes would apply the provisions of
that Article to all "Securities" as that term is proposed to be defined. The
definition of the term "Securities" is from the New Jersey Casino Control Act.
The effect of the amendment will be to subject any instrument evidencing a
beneficial ownership or creditor interest in the Company to repurchase by the
Company upon certain events involving the failure of a holder of any such
security to comply with certain requirements of regulatory authorities having
jurisdiction over the Company's gaming operations. The amendment to Article X of
the Certificate is a condition of the Company's license to operate gaming
properties in New Jersey, granted in November 1996 in connection with the Bally
Merger. The full text of the proposed Article X of the Certificate, marked to
show the proposed changes, is attached as Exhibit A.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote of a majority of the voting power of the shares
represented at the meeting, in person or by proxy, will be necessary for the
adoption of Proposal 2. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 2.
21
PROPOSAL 3
SECOND AMENDMENT TO 1996 STOCK INCENTIVE PLAN
GENERAL
In the opinion of the Board of Directors, the Company and its stockholders
have benefited substantially from having certain officers and key employees
acquire shares of its Common Stock pursuant to options granted under its stock
option and incentive plans. Such options and rights, in the opinion of the
Board, have secured the benefits of the incentive resulting from stock ownership
by such officers and key employees who are largely responsible for the Company's
growth and success.
In 1996, the Company adopted, and its stockholders approved, the Company's
1996 Stock Incentive Plan (the "1996 Plan") and the 1996 Chief Executive Stock
Incentive Plan. The 1996 Plan, as adopted, authorized the grant of options for
1,500,000 shares of the Company's Common Stock (subject to adjustment as
provided in the 1996 Plan). Pursuant to the four-for-one split of the Common
Stock on September 19, 1996, the limit was adjusted to 6,000,000 shares. While
the Board believed that this number of shares would be sufficient to fulfill the
1996 Plan's and the Company's equity incentive objectives, the Company's
acquisition of Bally and its employees in 1996 and the Company's hiring of a
substantial number of executives and key employees in 1996 and 1997 have
required the Company to grant a far greater number of option shares than was
contemplated when the 1996 Plan was adopted. As of March 13, 1997, options for
4,282,540 shares of Common Stock have been granted under the 1996 Plan and only
1,873,260 shares remain available under the 1996 Plan; of these shares, the
Company has reserved 1,200,000 shares for grant to Mr. Goldberg pursuant to the
terms of his Consulting and Employment Agreement (see "Consulting and Employment
Agreement and Deferred Compensation Agreement with Arthur M. Goldberg" on page
15).
In view of the limited number of shares available for grant under the 1996
Plan, the Board adopted in March 1997, subject to stockholder approval, the
Second Amendment to the 1996 Plan, which adds 6,000,000 shares of Common Stock
to the authorized number of shares available under the 1996 Plan. The Second
Amendment also makes several minor changes to the 1996 Plan in order to conform
it to recent amendments to Rule 16b-3. The Board believed it advisable to make
these shares available for the purpose of granting further stock options to
officers and other key employees who have been or are optionees, consistent with
their present responsibilities, and to other and key employees who assume or
who, as a result of promotion, will assume new and important responsibilities.
SUMMARY OF PLAN
The following summary is subject to the full statement of the 1996 Plan, as
amended, a copy of which is attached to this Proxy Statement as Exhibit B.
PURPOSE. The purpose of the Company's 1996 Plan is to provide additional
incentives to officers and key employees, through investment in the Company's
Common Stock. Under the 1996 Plan, either incentive options or non-incentive
options (with or without stock appreciation rights in tandem therewith) are
available for grant.
ADMINISTRATION. The 1996 Plan is administered by a Committee appointed by
the Board of Directors from those of its members not eligible to receive stock
options and stock appreciation rights (the "Committee"). The Committee consists
of at least two members of the Board, each of whom is a "non-employee director"
within the meaning of Rule 16b-3 under the 1934 Act and an "outside director"
within the meaning of Section 162(m) of the Code. The Committee grants stock
options to key employees of the
22
Company and its subsidiaries. Subject to orders or resolutions not inconsistent
with the provisions of the 1996 Plan issued or adopted from time to time by the
Board of Directors, the Committee has the power to administer, construe and
interpret the 1996 Plan and to make rules to implement the provisions thereof.
ELIGIBILITY. Full-time officers and key employees of the Company and its
subsidiaries (whether or not directors) are eligible to receive options under
the 1996 Plan. On March 13, 1997, approximately 435 persons were eligible to
receive options under the 1996 Plan. Directors who are not salaried officers or
key employees are ineligible to receive options or stock appreciation rights
under the 1996 Plan.
SHARES SUBJECT TO THE PLAN. A maximum of 12,000,000 shares of Common Stock
(subject to adjustment), par value $2.50 per share, are subject to the 1996
Plan. At March 13, 1997, the closing price of the Company's Common Stock was
$25. In the event of any merger, consolidation, reorganization,
recapitalization, split-up, stock right distribution, stock dividend (see
"Change in Control Provisions") or other change in corporate structure or
capitalization affecting the Company's Common Stock, the number, exercise price
and kind of shares that are subject to outstanding options will be adjusted in
such manner and to such extent, if any, as the Committee or Board of Directors
in their absolute discretion may deem appropriate in the circumstances. If an
option expires or terminates for any reason during the term of the 1996 Plan and
prior to the exercise thereof in full, the shares of Common Stock subject to,
but not delivered under, such option shall be available for options thereafter
granted under the 1996 Plan. No participant may be granted Awards covering in
excess of 1,200,000 shares of Common Stock in any calendar year.
OPTION PRICE. The purchase price of the stock subject to an option granted
under the 1996 Plan shall be not less than 100% of the fair market value of such
stock at the time the option is granted.
TERM AND EXERCISE OF OPTIONS. All options granted under the 1996 Plan
expire ten years after the grant thereof, except that such term may be reduced
with respect to any option and/or stock appreciation right in the event of
termination of employment, retirement or death of an optionee. All options
granted under the 1996 Plan are exercisable by the holders thereof in such
installments as the Committee shall determine; provided, however, that no option
may be exercised prior to six months from the date of grant thereof, regardless
of any other provision of the 1996 Plan.
Each stock option agreement evidencing options granted under the 1996 Plan
shall contain an explicit reference as to whether any or all of the options
granted thereunder are intended to be incentive stock options.
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SARs") may be
granted, in the sole discretion of the Committee, in connection with options
granted under the 1996 Plan. Each SAR relates to the same shares of Common Stock
covered by the companion option (or such lesser number of shares as the
Committee may determine) and is subject to the same terms and conditions
contained in the option except for such additional limitations as are required
by the 1996 Plan or as may be included by the Committee in SARs granted. Each
SAR entitles an optionee to surrender to the Company the unexercised related
option, or any portion thereof, and to receive in exchange cash or shares of the
Company's Common Stock, or a combination thereof, as the Committee shall
determine, with a value equal to the fair market value on the exercise date of
the Company's Common Stock over the option exercise price for the number of
shares covered by the option, or portion thereof, which is surrendered.
Notwithstanding any other provision of the 1996 Plan, no SAR may be exercised
within a period of six months after the date of grant of the SAR. The 1996 Plan
requires the Committee to impose a requirement that an optionee partially
exercise an option concurrently with the exercise of the related SAR. Each
optionee is required to pay to the Company any
23
amount the Company is obligated to withhold for income taxes as a result of the
exercise of a stock option or an SAR.
NONTRANSFERABILITY OF STOCK OPTIONS. Neither stock options nor stock
appreciation rights are transferable otherwise than by will or by the laws of
descent and distribution, or in the case of a non-qualified stock option,
pursuant to a qualified domestic relations order. During the lifetime of an
optionee, a stock option and/or stock appreciation right is exercisable only by
the optionee.
DEATH, DISABILITY, RETIREMENT OR TERMINATION OF EMPLOYMENT. Unless
otherwise determined by the Committee, if an optionee dies while employed by the
Company or a subsidiary or a disabled optionee dies within six months from the
termination of employment, options may thereafter be exercised only to the
extent they were exercisable at the time of death and may only be exercised
within 12 months from the date of death, but in no event after the date of
expiration of the option.
Unless otherwise determined by the Committee, if, after one year of
continuous employment, an optionee ceases to be an employee of the Company or a
subsidiary due to disability, options may thereafter be exercised only to the
extent they were exercisable at the time of such cessation of employment and
only within six months from the date of cessation of employment, but in no event
after the date of expiration of the option.
Unless otherwise determined by the Committee, if, after one year of
continuous employment, an optionee ceases to be an employee of the Company or a
subsidiary due to retirement, options may thereafter be exercised only to the
extent they were exercisable at the time of such cessation of employment and
only within 24 months from the date of cessation of employment, but in no event
after the date of expiration of the option.
Unless otherwise determined by the Committee, if, after one year of
continuous employment, an optionee resigns or is discharged, options may
thereafter be exercised only to the extent they were exercisable at the time of
cessation of employment, and only within three months from the date of cessation
of employment, but in no event after the date of expiration of the option.
Stock appreciation rights shall terminate concurrently with termination of
employment for any reason whatsoever, unless otherwise approved by the
Committee.
LEAVES OF ABSENCE. Leaves of absence for those periods and purposes
conforming to the personnel policies of the Company and as may be approved by
the Committee, shall not be deemed terminations or interruptions of employment.
CHANGE IN CONTROL PROVISIONS.
(a) In the event of any recapitalization, merger, reorganization,
consolidation, split-up, stock dividend or stock right distribution, the number,
exercise price and kind of shares, etc. that are subject to outstanding options
and stock appreciation rights will be adjusted (but without regard to fractions)
in a fair and equitable manner by the Board of Directors of the Company, whose
determination in each case shall be conclusive and binding on the Company and
the optionee and optionee's legal representatives. In the event that provision
is not made, in connection with any such merger, reorganization, consolidation
or other change in corporate structure, for the continuation of the Plan and
assumption of the options and stock appreciation rights theretofore granted (or
the substitution of substantially identical options and stock appreciation
rights of the surviving corporation or successor employer or a parent thereof),
then each holder of an option and stock appreciation right shall be entitled,
prior to the effective date of any such
24
transaction, to exercise the option and stock appreciation right for the full
number of shares covered thereby which the holder would otherwise have been
entitled to acquire during the remaining term of such option and stock
appreciation right.
(b) The 1996 Plan provides that unless the Committee determines otherwise at
the time of grant, each outstanding option granted thereunder shall become
exercisable in full for the aggregate number of shares covered thereby, in the
event:
(i) of (a) any consolidation or merger of the Company in which the
Company is not the surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property,
other than a merger or consolidation of the Company in which the holders of
Common Stock immediately prior to the merger or consolidation have the same
proportionate ownership of Common Stock of the surviving or newly-formed
corporation immediately after the merger or consolidation and provision is
made in connection with any such merger or consolidation for the
continuation of the 1996 Plan and assumption of the stock options and stock
appreciation rights theretofore granted (or substitution of substantially
identical options and stock appreciation rights of the successor corporation
or a parent thereof), or (b) any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (c) the adoption of any
plan or proposal for the liquidation or dissolution of the Company (each of
the foregoing hereinafter referred to as a "Corporate Transaction"); or
(ii) (a) any person (as such term is defined in Sections 13(d) (3) and
14 (d) (2) of the 1934 Act), other than the Hilton Interests, corporation or
other entity shall purchase any Common Stock of the Company (or securities
convertible into the Company's Common Stock) for cash, securities or any
other consideration pursuant to a tender offer or exchange offer, or (b) any
person, corporation or other entity (other than (y) the Company or any
benefit plan sponsored by the Company or (z) any transferee acting as
executor or trustee by will or the laws of descent and distribution) shall
after the date options are first issued under the 1996 Plan become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the then outstanding securities of
the Company ordinarily having the right to vote in the election of directors
(each of the foregoing hereinafter referred to as a "Control Purchase"); or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board shall cease for any
reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period (a "Board Change").
TERMINATION. The term during which options and stock appreciation rights
may be granted under the 1996 Plan expires on January 17, 2006, unless sooner
terminated by the Board of Directors. Such termination has no effect on options
or stock appreciation rights then in effect.
TAX CONSEQUENCES
The Federal income tax consequences of an employee's participation in the
1996 Plan is complex and subject to change. The following discussion is only a
summary of the general rules applicable to remuneration-related options.
25
INCENTIVE STOCK OPTIONS. If an option granted under the 1996 Plan is
treated as an incentive stock option, the optionee will not recognize any income
upon either the grant or the exercise of the option and the Company will not be
allowed a deduction for Federal income tax purposes. Upon a sale of the shares,
the tax treatment to the optionee and the Company will depend primarily upon
whether the optionee has met certain holding period requirements at the time he
or she sells the shares. In addition, as discussed below, the exercise of an
incentive stock option may subject the optionee to alternative minimum tax
liability.
If the optionee disposes of the shares either within two years after the
date the option is granted or within one year after the transfer of the shares
to the optionee, such disposition will be treated as a disqualifying disposition
and an amount equal to the lesser of (i) the fair market value of the shares on
the date of exercise minus the purchase price, or (ii) the amount realized on
the disposition minus the purchase price, will be taxed as ordinary income to
the optionee in the taxable year in which the disposition occurs. The excess, if
any, of the amount realized upon disposition over the fair market value at the
time of the exercise of the option will be treated as long-term capital gain if
the shares have been held for more than one year following the exercise of the
option. In the event of a disqualifying disposition, the Company may withhold
income taxes from the optionee's compensation with respect to the ordinary
income realized by the optionee as a result of the disqualifying disposition.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability because the excess of the fair market value of
the shares at the time an incentive stock option is exercised over the purchase
price of the shares is included in income for purposes of the alternative
minimum tax. Consequently, an optionee may be obligated to pay alternative
minimum tax in the year he or she exercises an incentive stock option.
In general, there will be no Federal income tax consequences to the Company
upon the grant, exercise or termination of an incentive stock option. However,
in the event an optionee sells or disposes of stock received upon the exercise
of an incentive stock option in a disqualifying disposition, the Company will be
entitled to a deduction for Federal income tax purposes in an amount equal to
the ordinary income, if any, recognized by the optionee upon disposition of the
shares.
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options granted under the
1996 Plan do not qualify as "incentive stock options" and will not qualify for
any special tax benefits to the optionee. An optionee generally will not
recognize any taxable income at the time he or she is granted a nonqualified
option. However, upon exercise, the optionee will recognize ordinary income for
Federal and State, if any, income tax purposes measured by the excess of the
then fair market value of the shares over the option price. The income realized
by the optionee will be subject to income tax withholding.
The optionee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of a nonqualified stock option
will be the amount paid for such shares plus any ordinary income recognized as a
result of the exercise of such option. Upon disposition of any shares acquired
pursuant to the exercise of a nonqualified stock option, the difference between
the sale price and the optionee's basis in the shares will be treated as a
capital gain or loss and will be characterized as long-term capital gain or loss
if the shares have been held for more than one year at the date of their
disposition.
In general, there will be no Federal income tax consequences to the Company
upon the grant or termination of a nonqualified stock option or a sale or
disposition of the shares acquired upon the exercise of a nonqualified stock
option. However, upon the exercise of a nonqualified stock option, the Company
26
will be entitled to a deduction for Federal income tax purposes equal to the
amount of ordinary income that an optionee is required to recognize as a result
of the exercise.
TAXATION OF STOCK APPRECIATION RIGHTS. No income will be realized by an
optionee upon the granting of a stock appreciation right. Upon the exercise of a
stock appreciation right, an optionee will recognize income in an amount equal
to the fair market value on the exercise date of the Common Stock or cash, or
both, received, less any amount paid by the optionee for such rights, and the
Company will be entitled to a deduction in an equal amount.
The foregoing does not purport to be a complete description of the Federal
income tax aspects of the options. The descriptions of the computation of the
alternative minimum tax and determination of basis and holding period in the
event of an option exercise with previously acquired shares are very general in
nature and omit certain items that may affect the tax computations of certain
optionees.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote of a majority of the voting power of the shares
represented at the meeting, in person or by proxy, will be necessary for the
approval of Proposal 3. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL 3.
PROPOSAL 4
RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP ("Andersen") was the Company's auditor for the year
ended December 31, 1996. A representative of Andersen is expected to attend the
annual meeting where the representative will have the opportunity to make a
statement and will be available to respond to appropriate questions. Although
the Board is not required to submit its selection of auditors for stockholder
approval, the Board has elected to seek ratification by stockholders at the
annual meeting of its appointment of Andersen to serve as the Company's auditor
for fiscal 1997.
1998 ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders is presently scheduled to be held on
May 7, 1998. Any proposals of stockholders intended to be presented at such
meeting must be received by the Corporate Secretary of the Company for inclusion
in the Company's Proxy Statement and form of proxy no later than December 1,
1997.
GENERAL
The cost of preparing and mailing the notice of meeting, Proxy Statement and
form of proxy will be paid by the Company. In addition to mailing copies of this
material to all stockholders, the Company has retained D.F. King & Co., Inc. to
request banks and brokers to forward copies of such material to persons for whom
they hold stock of the Company and to request authority for execution of the
proxies. The Company will pay D.F. King & Co., Inc. a fee of $8,000 plus
out-of-pocket expenses and disbursements.
The only other business to be presented to the meeting, of which the
directors and executive officers have knowledge, will be the approval of the
minutes of the last meeting of stockholders, but it is not intended that action
taken under the proxies will constitute approval of the matters referred to in
such minutes. Although all nominees have indicated their readiness to serve if
elected, if at the time of the meeting any of said nominees should be unable to
serve as directors, the persons named in the proxies or their substitute(s)
will, in their discretion, vote for other nominees, and if matters other than
those for which authority is herein sought should arise at the meeting, the
shares represented by the proxies will be voted in the discretion of the persons
named therein.
27
EXHIBIT A
ARTICLE X
(a) If any person (as hereinafter defined) which beneficially owns Voting
Stock SECURITIES (as hereinafter defined) of the Corporation (i) is requested or
required pursuant to any Gaming Regulation (as hereinafter defined) to appear
before, or submit to the jurisdiction of, or provide information to, any Gaming
Authority (as hereinafter defined) and either refuses to do so or otherwise
fails to comply with such request or requirement within a reasonable period of
time or (ii) is determined or shall have been determined by any Gaming Authority
not to be suitable or qualified with respect to the beneficial ownership of
Voting Stock SECURITIES of the Corporation, each such person by owning shares
SECURITIES in the Corporation hereby agrees to sell to the Corporation and the
Corporation shall have the absolute right in its sole discretion to repurchase,
any or all of the Voting Stock SECURITIES of the Corporation beneficially owned
by such person at a price determined pursuant to Section (c) hereof. The
operation of this Article X shall not be stayed by an appeal from a
determination of any Gaming Authority.
(b) If the Corporation intends to repurchase Voting Stock SECURITIES
beneficially owned by any person referred to in clause (i) or (ii) of Section
(a) hereof, it shall notify the person in writing of such intention, specifying
the Voting Stock SECURITIES to be repurchased, the date, time and place when
such repurchase will be consummated (the "Repurchase Date"), which date in no
event will be earlier than three business days after the date of such notice and
the price at which such Voting Stock SECURITIES will be repurchased (it being
sufficient for purposes of this Article X for the Corporation to indicate
generally that the price will be determined in accordance with Section (c)
hereof). If the Corporation gives the notice provided for by the preceding
sentence (the "Repurchase Notice"), such notice shall be deemed to constitute a
binding agreement on the part of the Corporation to repurchase, and on the part
of the person notified to sell, the Voting Stock SECURITIES referred to in such
REPURCHASE Notice in accordance with this Article X. Following the Repurchase
Date, no dividends OR INTEREST, AS THE CASE MAY BE, will be payable on and no
voting rights will be available to the holders of any Voting Stock SECURITIES
covered by such Repurchase Notice which has not been duly delivered by the
holder thereof for repurchase by the Corporation. If, following such Repurchase
Date, any Stock SECURITIES with respect to which a Repurchase Notice has been
given HAVE not been duly delivered by the holder thereof for repurchase by the
Corporation, the Corporation shall deposit in escrow or otherwise hold in trust
for the benefit of such holder an amount equal to the aggregate Market Price (as
hereinafter defined) of the Stock SECURITIES to be repurchased except that to
the extent New Shares SECURITIES (as hereinafter defined) are to be repurchased
and the Purchase Price (as hereinafter defined) thereof shall have been publicly
disclosed or otherwise made available to the Corporation, the amount deposited
in escrow or otherwise segregated with respect to such New Shares SECURITIES may
be the lesser of the Market Price thereof on the date of the Repurchase Notice
and the Purchase Price thereof. The establishment of such an account shall in no
way alter the amount otherwise payable to any person pursuant to this Article X.
No interest shall be paid on or accrue with respect to any amount so deposited
or held.
(c) (i) In the event that the person to whom A Repurchase Notice is directed
pursuant to Section (b) hereof has acquired beneficial ownership of Shares of
Voting Stock SECURITIES within the twenty-four month period terminating on the
date of such REPURCHASE Notice ("New Shares SECURITIES"), the price at which the
Corporation shall repurchase such New Shares SECURITIES as are covered by the
Repurchase
A-1
Notice shall be the lesser of the Market Price thereof on the date of such
Notice and the Purchase Price thereof.
(ii) In the event that the person to whom a Repurchase Notice is directed
pursuant to Section (b) hereof has acquired beneficial ownership of any or all
of his shares of Voting Stock SECURITIES prior to the twenty-four month period
terminating on the date of such REPURCHASE Notice ("Old Shares SECURITIES"), the
price at which the Corporation shall repurchase such Old Shares SECURITIES as
are covered by the Repurchase Notice shall be the Market Price thereof on the
date of the Repurchase Notice.
(iii) The Corporation shall have the option in its sole discretion of
designating which shares SECURITIES of the shares SECURITIES beneficially owned
by any person referred to in clause (i) or (ii) of Section (a) hereof are
subject to the Repurchase Notice and, for purposes hereof, it shall be
sufficient for the Corporation to indicate generally that shares SECURITIES
shall be repurchased based on the order in which they were purchased or based on
the reverse of such order.
(iv) Any person to whom a Repurchase Notice is given pursuant to the
provisions of this Article shall have the burden of establishing to the
satisfaction of the Corporation the dates on which and prices at which such
person acquired the stock SECURITIES subject to such REPURCHASE Notice.
(d) For purposes of this Article X:
1. A "person" shall mean any individual, firm, corporation or other entity.
2. "Voting Stock" "SECURITIES" OR A "SECURITY" shall mean the shares of
capital stock of the Corporation entitled to vote generally in the
election of directors ANY INSTRUMENT EVIDENCING A DIRECT OR INDIRECT
BENEFICIAL OWNERSHIP OR CREDITOR INTEREST IN THE CORPORATION, INCLUDING,
BUT NOT LIMITED TO, STOCK, COMMON AND PREFERRED; BONDS; MORTGAGES;
DEBENTURES; SECURITY AGREEMENTS; NOTES; WARRANTS; OPTIONS AND RIGHTS.
3. A person shall be a "beneficial owner" of any Voting Stock" SECURITIES:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (b) the right to vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock SECURITIES.
4. "Affiliate" or "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on March 8, 1985.
5. A "Gaming Regulation" shall mean any statute, rule, regulation, order,
ordinance or interpretation of a Gaming Authority.
A-2
6. A "Gaming Authority" shall mean any government, court, or governmental,
administrative or regulatory agency or authority, Federal, state, local
or foreign, which regulates or otherwise asserts jurisdiction over gaming
operations or facilities conducted by the Corporation or any of its
subsidiaries or Affiliates.
7. "Market Price" means the average of the last sale prices of a share of
such Voting Stock SECURITY on the Composite Tape for New York Stock
Exchange-Listed Stocks for each of the 15 consecutive trading days (the
"Valuation Period") commencing 16 trading days prior to the date in
question; provided that if such Stock is SECURITIES ARE not quoted on the
Composite Tape, such average last sale price shall be derived from the
average last sale prices on the New York Stock Exchange, or, if such
Stock is SECURITIES ARE not listed on such Exchange, on the principal
United States securities exchange registered under the Securities
Exchange Act of 1934 on which such Stock is SECURITIES are listed, or, if
such STOCK IS SECURITIES ARE not listed on any such exchange, the average
of the closing bid quotations with respect to a SHARE OF SUCH STOCK
SECURITY during the Valuation Period on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then
in use, or if no such quotations are available, the fair market value on
the date in question of a share of such Stock SECURITY as determined by
the Board of Directors in good faith.
8. "Purchase Price" means the price paid to acquire a share of the Voting
Stock SECURITY, exclusive of commissions, taxes and other fees and
expenses, adjusted for any stock split, stock dividend, combination of
shares or similar event.
(e) A majority of the Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article X on the basis of information
known to them after reasonable inquiry, whether clause (i) or (ii) of Section
(a) hereof applies to any person who beneficially owns Voting Stock SECURITIES
of the Corporation such that the Corporation shall have the right to repurchase
shares of Voting Stock SECURITIES held by such person pursuant to this Article
X.
A-3
EXHIBIT B
HILTON HOTELS CORPORATION
1996 STOCK INCENTIVE PLAN, AS AMENDED
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Corporation a competitive advantage
in attracting, retaining and motivating officers and employees and to provide
the Corporation and its subsidiaries with a stock plan providing incentives more
directly linked to the profitability of the Corporation's businesses and
increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "AFFILIATE" means a corporation or other entity controlled by the
Corporation and designated by the Committee from time to time as
such.
b. "AWARD" means a Stock Appreciation Right or a Stock Option.
c. "BOARD" means the Board of Directors of the Corporation.
d. "CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the meanings
set forth in Sections 7(b) and (c), respectively.
e. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
f. "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
g. "COMMITTEE" means the Committee referred to in Section 2.
h. "COMMON STOCK" means common stock, par value $2.50 per share, of the
Corporation.
i. "CORPORATION" means Hilton Hotels Corporation, a Delaware
corporation.
j. "DISABILITY" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
k. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
l. "FAIR MARKET VALUE" means, except as provided in Section 6(b)(ii)(2),
as of any given date, the mean between the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or on NASDAQ. If
there is no regular public trading market for such Common Stock, the Fair
Market Value of the Common Stock shall be determined by the Committee in
good faith.
m. "INCENTIVE STOCK OPTION" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of
Section 422 of the Code.
n. "NONQUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
o. "PLAN" means the Hilton Hotels Corporation 1996 Stock Incentive Plan,
as set forth herein and as hereinafter amended from time to time.
B-1
p. "RETIREMENT" means retirement from active employment with the
Corporation, a subsidiary or Affiliate at or after age 62.
q. "RULE 16B-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
r. "STOCK APPRECIATION RIGHT" means a right granted under Section 6.
s. "STOCK OPTION" means an option granted under Section 5.
t. "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with the Corporation and any subsidiary or
Affiliate. A participant employed by a subsidiary or an Affiliate shall also
be deemed to incur a Termination of Employment if the subsidiary or
Affiliate ceases to be such a subsidiary or an Affiliate, as the case may
be, and the participant does not immediately thereafter become an employee
of the Corporation or another subsidiary or Affiliate. Temporary absences
from employment because of illness, vacation or leave of absence and
transfers among the Corporation and its subsidiaries and Affiliates shall
not be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee or such other
committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two members of the Board,
each of whom shall be an "outside director" for purposes of Section 162(m)(4) of
the Code and a "non-employee director" within the meaning of Rule 16b-3, and
shall be appointed by and serve at the pleasure of the Board.
The Committee shall have authority to grant Awards pursuant to the terms of
the Plan to officers and employees of the Corporation and its subsidiaries and
Affiliates.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) To select the officers and employees to whom Awards may from time to
time be granted;
(b) Determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options and Stock Appreciation Rights or any combination
thereof are to be granted hereunder;
(c) Determine the number of shares of Common Stock to be covered by each
Award granted hereunder;
(d) Determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)),
any vesting condition, restriction or limitation (which may be related to
the performance of the participant, the Corporation or any subsidiary or
Affiliate) and any vesting acceleration or forfeiture waiver regarding any
Award and the shares of Common Stock relating thereto, based on such factors
as the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time; and
(f) Determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to an Award shall be deferred.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the
B-2
terms and provisions of the Plan and any Award issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of the
Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may (i) delegate to an officer of the
Corporation the authority to make decisions pursuant to paragraphs (c), (f),
(g), (h) and (i) of Section 5 (provided that no such delegation may be made that
would cause Awards or other transactions under the Plan to cease to be exempt
from Section 16(b) of the Exchange Act) and (ii) authorize any one or more of
their number or any officer of the Corporation to execute and deliver documents
on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Corporation and Plan participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available for grant
under the Plan shall be 12,000,000. No participant may be granted Awards
covering in excess of 1,200,000 shares of Common Stock in any calendar year.
Shares subject to an Award under the Plan may be authorized and unissued shares
or may be treasury shares.
If any Stock Option (and related Stock Appreciation Right, if any)
terminates without being exercised, shares subject to such Awards shall again be
available for distribution in connection with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Corporation, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price of shares
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; PROVIDED, HOWEVER, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Corporation upon
the exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY
Full-time (30 hours per week) officers and employees of the Corporation, its
subsidiaries and Affiliates who are responsible for or contribute to the
management, growth and profitability of the business of the Corporation, its
subsidiaries and Affiliates are eligible to be granted Awards under the Plan. No
grant shall be made under this Plan to a director who is not an officer or a
salaried employee of the Corporation, its subsidiaries or Affiliates.
B-3
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and Nonqualified
Stock Options. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Nonqualified Stock Options or both types of Stock Options (in each case
with or without Stock Appreciation Rights); PROVIDED, HOWEVER, that grants
hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Nonqualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option shall occur on the date a
majority of the independent directors of the Corporation ratify by resolution
the Committee's recommendation with respect to the individuals to be
participants in any grant of a Stock Option, the number of shares of Common
Stock to be subject to such Stock Option to be granted to such individual and
specifies the terms and provisions of the Stock Option. The Corporation shall
notify a participant of any grant of a Stock Option, and a written option
agreement or agreements shall be duly executed and delivered by the Corporation
to the participant. Such agreement or agreements shall become effective upon
execution by the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.
Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and set
forth in the option agreement, and shall not be less than the Fair Market
Value of the Common Stock subject to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than ten years after the date the Stock Option is granted.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may determine. In
addition, the Committee may at any time accelerate the exercisability of any
Stock Option.
B-4
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject to the
Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Committee
may accept. Payment, in full or in part, may also be made in the form of
unrestricted Common Stock already owned by the optionee of the same class as
the Common Stock subject to the Stock Option (based on the Fair Market Value
of the Common Stock on the date the Stock Option is exercised).
Payment for any shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the Corporation, together
with a copy of irrevocable instructions to a broker to deliver promptly to
the Corporation the amount of sale or loan proceeds to pay the purchase
price, and, if requested, by the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Corporation may
enter into agreements for coordinated procedures with one or more brokerage
firms.
No shares of Common Stock shall be issued until full payment therefor
has been made. An optionee shall have all of the rights of a shareholder of
the Corporation holding the class or series of Common Stock that is subject
to such Stock Option (including, if applicable, the right to vote the shares
and the right to receive dividends), when the optionee has given written
notice of exercise, has paid in full for such shares and, if requested, has
given the representation described in Section 11(a).
(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution; or (ii) in the case of a Nonqualified Stock
Option, pursuant to a qualified domestic relations order (as defined in the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder) whether directly or indirectly or by means
of a trust or partnership or otherwise, under the applicable option
agreement. All Stock Options shall be exercisable, subject to the terms of
this Plan, during the optionee's lifetime, only by the optionee or by the
guardian or legal representative of the optionee or, in the case of a
Nonqualified Stock Option, its alternative payee pursuant to such qualified
domestic relations order, it being understood that the terms "holder" and
"optionee" include the guardian and legal representative of the optionee
named in the option agreement and any person to whom an option is
transferred by will or the laws of descent and distribution or, in the case
of a Nonqualified Stock Option, pursuant to a qualified domestic relations
order.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee,
if an optionee's employment terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent then
exercisable, or on such accelerated basis as the Committee may determine,
for a period of one year (or such other period as the Committee may specify
in the option agreement) from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine,
for a period of six months(or such other period as the Committee may specify
in the option agreement) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever
B-5
period is the shorter; provided, however, that if the optionee dies within
such period, any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such period, continue to be exercisable to
the extent to which it was exercisable at the time of death for a period of
12 months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option will thereafter
be treated as a Nonqualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may
determine, for a period of two years (or such other period as the Committee
may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee
dies within such period any unexercised Stock Option held by such optionee
shall, notwithstanding the expiration of such period, continue to be
exercisable to the extent to which it was exercisable at the time of death
for a period of 12 months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Retirement,
if an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee: (A)
if an optionee incurs a Termination of Employment, all Stock Options
held by such optionee shall thereupon terminate; and (B) if an optionee
incurs a Termination of Employment for any reason other than death,
Disability or Retirement, any Stock Option held by such optionee, to the
extent then exercisable, or on such accelerated basis as the Committee may
determine, may be exercised, for the lesser of three months from the date of
such Termination of Employment or the balance of such Stock Option's term;
PROVIDED, HOWEVER, that if the optionee dies within such three-month period,
any unexercised Stock Option held by such optionee shall, notwithstanding
the expiration of such three-month period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. Notwithstanding
the foregoing, if an optionee incurs a Termination of Employment at or after
a Change in Control (as defined Section 7(b)), other than by reason of
death, Disability or Retirement, any Stock Option held by such optionee
shall be exercisable for the lesser of (1) six months and one day from the
date of such Termination of Employment, and (2) the balance of such Stock
Option's term. In the event of Termination of Employment, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Nonqualified Stock Option.
(j) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control
(the "Exercise Period"), unless the Committee shall determine otherwise at
the time of grant, an optionee shall have the right, whether or not the
Stock Option is fully exercisable and in lieu of the payment of the exercise
price for the shares of Common
B-6
Stock being purchased under the Stock Option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part
of the Stock Option to the Corporation and to receive cash, within 30 days
of such notice, in an amount equal to the amount by which the Change in
Control Price per share of Common Stock on the date of such election shall
exceed the exercise price per share of Common Stock under the Stock Option
(the "Spread") multiplied by the number of shares of Common Stock granted
under the Stock Option as to which the right granted under this Section 5(j)
shall have been exercised; PROVIDED, HOWEVER, that if the Change in Control
is within six months of the date of grant of a particular Stock Option held
by an optionee who is an officer or director of the Corporation and is
subject to Section 16(b) of the Exchange Act no such election shall be made
by such optionee with respect to such Stock Option prior to six months from
the date of grant. However, if the end of such 60-day period from and after
a Change in Control is within six months of the date of grant of a Stock
Option held by an optionee who is an officer or director of the Corporation
and is subject to Section 16(b) of the Exchange Act, such Stock Option shall
be cancelled in exchange for a cash payment to the optionee, effected on the
day which is six months and one day after the date of grant of such Option,
equal to the Spread multiplied by the number of shares of Common Stock
granted under the Stock Option. Notwithstanding the foregoing, if any right
granted pursuant to this Section 5(j) would make a Change in Control
transaction ineligible for pooling of interests accounting under APB No. 16
that but for this Section 5(j) would otherwise be eligible for such
accounting treatment, the Committee shall have the ability to substitute the
cash payable pursuant to this Section 5(j) with Stock with a Fair Market
Value equal to the cash that would otherwise be payable hereunder.
SECTION 6. STOCK APPRECIATION RIGHTS
(a)GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan.
In the case of a Nonqualified Stock Option, such rights may be granted either at
or after the time of grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b)TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this Section
6; PROVIDED, HOWEVER, that a Stock Appreciation Right shall not be
exercisable during the first six months of its term by an optionee who is
actually or potentially subject to Section 16(b) of the Exchange Act, except
that this limitation shall not apply in the event of death or Disability of
the optionee prior to the expiration of the six-month period.
B-7
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive an amount in cash, shares of Common Stock or both,
equal in value to the excess of the Fair Market Value of one share of Common
Stock over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth in
Section 3 on the number of shares of Common Stock to be issued under the
Plan, but only to the extent of the number of shares covered by the Stock
Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.
SECTION 7. CHANGE IN CONTROL PROVISIONS
(a)IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control, any Stock Options and
Stock Appreciation Rights outstanding as of the date such Change in Control is
determined to have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of the original
grant; PROVIDED, HOWEVER, that in the case of the holder of Stock Appreciation
Rights who is actually subject to Section 16(b) of the Exchange Act, such Stock
Appreciation Rights shall have been outstanding for at least six months at the
date such Change in control is determined to have occurred.
(b)DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a "Change in
Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation Common Stock")
or (2) the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities")(a "Control Purchase");
excluding, however, the following: (1) Any acquisition directly from the
Corporation, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Corporation, (2) Any acquisition by the
Corporation, (3) Any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, (4) Any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subsection (iii) of this Section 7(b), or (5) Any acquisition by Barron
Hilton, the Charitable Remainder Unitrust created by Barron Hilton to
receive shares from the Estate of Conrad N. Hilton, or the Conrad N. Hilton
Fund; or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; PROVIDED, HOWEVER,
for purposes of this Section 7(b), that any individual who becomes a member
of the Board subsequent to the effective date of the Plan, whose election,
or nomination for election by the Corporation's shareholders, was approved
by a vote of at least a majority of those individuals who are members of
B-8
the Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, PROVIDED FURTHER, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member of the
Incumbent Board (a "Board Change"); or
(iii) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation ("Corporate
Transaction"); excluding however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock, and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (2) no Person (other than
the Corporation, any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate Transaction)
will beneficially own, directly or indirectly, 20% or more of, respectively,
the outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the outstanding
voting securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(c)CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Common Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such shares
are listed or on NASDAQ during the 60-day period prior to and including the date
of a Change in Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Corporate Transaction, the highest price per share
of Common Stock paid in such tender or exchange offer or Corporate Transaction;
PROVIDED, HOWEVER, that (x) in the case of a Stock Option which (A) is held by
an optionee who is an officer or director of the Corporation and is subject to
Section 16(b) of the Exchange Act and (B) was granted within 240 days of the
Change in Control, then the Change in Control Price for such Stock Option shall
be the Fair Market Value of the Common Stock on the date such Stock Option is
exercised or deemed exercised and (y) in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, the Change in
Control Price shall be in all cases the Fair Market Value of the Common Stock on
the date such Incentive Stock Option or Stock Appreciation Right is exercised.
To the extent that the consideration paid in any such transaction described
above consists all or in part of
B-9
securities or other noncash consideration, the value of such securities or other
noncash consideration shall be determined in the sole discretion of the Board.
SECTION 8. TERM, AMENDMENT AND TERMINATION
The Plan will terminate ten years after the effective date of the Plan.
Under the Plan, Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right
theretofore granted without the optionee's or recipient's consent, except such
an amendment made to cause the Plan to qualify for the exemption provided by
Rule 16b-3, or (ii) disqualify the Plan from the exemption provided by Rule
16b-3. In addition, no such amendment shall be made without the approval of the
Corporation's shareholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting rules as well as
other developments, and to grant Awards which qualify for beneficial treatment
under such rules without stockholder approval.
SECTION 9. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; PROVIDED, HOWEVER, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 10. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Corporation in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Corporation shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or the maintaining
in effect of any such registration or other qualification which the
Committee shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
B-10
(3) Obtaining any other consent, approval, or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for federal income tax purposes with respect
to any Award under the Plan, the participant shall pay to the Corporation, or
make arrangements satisfactory to the Committee regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Corporation, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Corporation under the Plan shall be
conditional on such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including making irrevocable
elections, for the settlement of withholding obligations with Common Stock.
(e) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(f) In the case of a grant of an Award to any employee of a subsidiary of
the Corporation, the Corporation may, if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
subsidiary, for such lawful consideration as the Committee may specify, upon the
condition or understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the Award specified
by the Committee pursuant to the provisions of the Plan.
(g) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
SECTION 11. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of January 18, 1996, provided that it is
approved and adopted by at least a majority of the shares voted of Common Stock
of the Corporation within 12 months after such date.
B-11
Preliminary Copy, Materials Dated March 10, 1997
HILTON HOTELS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Stephen F. Bollenbach and Cheryl L. Marth, or either of them, are hereby
constituted and appointed the lawful attorneys and proxies of the
undersigned, with full power of substitution, to vote and act as proxy with
respect to all shares of Common Stock and all shares of PRIDES of Hilton
Hotels Corporation standing in the name of the undersigned on the books of
the Company at the close of business on March 13, 1997, at the Annual
Stockholders Meeting to be held at 10:00 A.M., on May 8, 1997, at the Beverly
Hilton, 9876 Wilshire Boulevard, Beverly Hills, California 90210, or any
adjournment thereof.
THE POWERS HEREBY GRANTED MAY BE EXERCISED BY BOTH OF SAID ATTORNEYS OR
PROXIES OR THEIR SUBSTITUTES PRESENT AND ACTING AT THE ANNUAL STOCKHOLDERS
MEETING OR ANY ADJOURNMENTS THEREOF OR, IF ONLY ONE BE PRESENT AND ACTING,
THEN BY THAT ONE. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES
HERETOFORE GIVEN BY THE UNDERSIGNED TO VOTE AT SAID MEETING.
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __
COMMENTS/ADDRESS CHANGE: PLEASE MARK |
COMMENT/ADDRESS BOX ON REVERSE SIDE |
| (Coninued and to be
| signed on other side)
|
|
|
This Proxy when properly executed will be voted in the Please mark
manner directed herein. If no direction is made, this your votes as / X /
Proxy will be voted FOR items 1, 2, 3, 4 and 5. indicated in
this example
FOR WITHHELD
ALL FOR ALL FOR AGAINST ABSTAIN
1. Election of the 2. Proposal to
following nominees / / / / amend the / / / / / /
as Directors: Company's
Peter M. George, Restated Certificate
Barron Hilton, of Incorporation.
Robert L. Johnson,
Sam D. Young, Jr. FOR AGAINST ABSTAIN
3. PROPOSAL to
amend the / / / / / /
Withheld for the following only Company's 1996
(Write the name of the nominees(s) Stock Incentive Plan
in the space below). to increase the number
of shares of the
Company's Common Stock
____________________________________ authorized for issuance
thereunder from 6,000,000
to 12,000,000 shares.
FOR AGAINST ABSTAIN
4. PROPOSAL to
ratify the / / / / / /
the appointment
of Arthur Andersen LLP
as auditors for the
Company for fiscal 1997.
FOR AGAINST ABSTAIN
5. In their
discretion, / / / / / /
the Proxies are
authorized to vote
upon such other business
as may properly come
before the meeting or at
any adjournments thereof.
__ __ __
|
|
| I plan to attend meeting / /
COMMENTS/ADDRESS CHANGE
Please mark this box if
you have written comments/ / /
address change on the
reverse side.
Signature(s)______________________________________ Dated _______________, 1997
IMPORTANT: Please sign proxy as name appears. Joint owners should each sign
personally. Trustees and others signing in a representative capacity should
indicate the capacity in which they sign.