<PAGE> 1
As filed pursuant to Rule 424(b)(2)
under the Securities Act of 1933
Registration No. 33-35951
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 9, 1994)
$200,000,000
HILTON HOTELS CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Hilton Hotels Corporation ("Hilton") may offer from time to time up to
$200,000,000 aggregate principal amount or the equivalent thereof in one or more
foreign or composite currencies, of its Medium-Term Notes, Series B, Due Nine
Months or More from Date of Issue (the "Notes"). Such aggregate principal amount
is subject to reduction as a result of the sale by Hilton of other Debt
Securities described in the accompanying Prospectus. Each Note will mature on
any day nine months or more from the date of issue, as specified in the
applicable pricing supplement hereto (each, a "Pricing Supplement"), and may be
subject to redemption at the option of Hilton or repayment at the option of the
Holder thereof, in each case, in whole or in part, prior to its Stated Maturity
Date, as set forth therein and specified in the applicable Pricing Supplement.
The Notes, other than Foreign Currency Notes, will be issued in minimum
denominations of $1,000 and integral multiples thereof, unless otherwise
specified in the applicable Pricing Supplement, while Foreign Currency Notes
will be issued in the minimum denominations specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the rate of
interest thereon is determined by reference to one or more of the CD Rate, the
CMT Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as adjusted
by any Spread and/or Spread Multiplier. Interest on each Floating Rate Note will
accrue from its date of issue to, but excluding its Maturity, and will be
payable in arrears monthly, quarterly, semiannually or annually, as specified in
the applicable Pricing Supplement, and at Maturity. Unless otherwise specified
in the applicable Pricing Supplement, the rate of interest on each Floating Rate
Note will be reset daily, weekly, monthly, quarterly, semiannually or annually,
as set forth therein and specified in the applicable Pricing Supplement.
Interest on each Fixed Rate Note will accrue from its date of issue to, but
excluding its Maturity, and, unless otherwise specified in the applicable
Pricing Supplement, will be payable semiannually in arrears on June 1 and
December 1 of each year and at Maturity. The Notes may also be issued with
original issue discount, and such Notes may or may not pay any interest. See
"Description of Notes."
The interest rate, or the formula for the determination of any such interest
rate, applicable to each Note and the other variable terms thereof as described
herein will be established by Hilton on the date of issue of such Note and will
be set forth therein and specified in the applicable Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are subject
to change by Hilton, but no change will affect any Note already issued or as to
which an offer to purchase has been accepted by Hilton.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as set forth in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (or such other depositary as
is identified in the applicable Pricing Supplement) (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners). See "Book-Entry Notes."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE
NEW JERSEY CASINO CONTROL COMMISSION, NOR THE LOUISIANA GAMING ENFORCEMENT
DIVISION HAS PASSED UPON THE ACCURACY, ADEQUACY OR INVESTMENT
MERITS OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
===========================================================================================================
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) HILTON (1)(2)(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............. 100% .125% - .750% 99.875% - 99.250%
- -----------------------------------------------------------------------------------------------------------
Total(4).............. $200,000,000 $250,000 - $1,500,000 $199,750,000 - $198,500,000
===========================================================================================================
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Lehman Brothers, Lehman Brothers Inc. (including its affiliate, Lehman
Government Securities Inc.) or Smith Barney Inc. (each, an "Agent" and
collectively, the "Agents"), will purchase the Notes, as principal, from
Hilton, either for resale to investors and other purchasers at varying
prices relating to prevailing market prices at the time of resale as
determined by such Agent, or, if so specified in the applicable Pricing
Supplement, for resale at a fixed public offering price. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage of the principal amount equal to
the commission applicable to an agency sale (as described below) of a Note
of identical maturity. If agreed to by Hilton and the applicable Agent such
Agent may utilize its reasonable efforts on an agency basis to solicit
offers to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable Pricing Supplement. Hilton will pay a
commission to each such Agent, ranging from .125% to .750% of the principal
amount of a Note, depending upon its stated maturity, sold through such
Agent. Commissions with respect to Notes with stated maturities in excess of
30 years that are sold through an Agent will be negotiated between Hilton
and such Agent at the time of such sale. See "Plan of Distribution."
(2) Hilton has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) Before deducting expenses payable by Hilton estimated at $225,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
------------------------
The Notes are being offered on a continuous basis by Hilton through the
Agents. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. Hilton reserves the right to cancel or modify
the offer made hereby without notice. Hilton or an Agent, if it solicits the
offer on an agency basis, may reject any offer to purchase Notes in whole or in
part. See "Plan of Distribution."
------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
SMITH BARNEY INC.
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 9, 1994.
<PAGE> 2
HILTON HOTELS CORPORATION
Hilton Hotels Corporation (hereinafter, together with its wholly-owned and
majority-owned subsidiaries, "Hilton," unless the context otherwise requires) is
engaged primarily in the ownership and management of hotels and hotel-casinos
and is one of the largest lodging companies in the world. At June 30, 1994,
Hilton owned, leased, franchised and/or operated an aggregate of 223 hotels,
five hotel-casinos and one riverboat casino in the United States, one
hotel-casino in each of Australia and Turkey and, together with its partners,
one casino in Canada. Hilton's revenues are derived primarily from hotel
operations and hotel-casino operations.
HOTEL OPERATIONS
OWNED, PARTIALLY OWNED AND LEASED HOTELS
At June 30, 1994, Hilton owned, leased and operated 24 full service hotels
with 21,909 rooms (excluding its five hotel-casinos) located throughout the
United States. Thirteen hotels with 8,082 rooms are wholly-owned or leased,
including the Waldorf-Astoria in New York City, the Palmer House Hilton and the
O'Hare Hilton in Chicago, while 11 hotels with 13,827 rooms are partially owned,
including the 50%-owned Hilton Hawaiian Village, New York Hilton, and San
Francisco Hilton and the 33.3%-owned Chicago Hilton. During 1993, Hilton
expanded its destination resort operations with the acquisition of a 13.3%
interest in the 1,241-room Hilton Waikoloa Village on the Big Island of Hawaii.
In June 1994, Hilton purchased from its partners an additional 20.6% interest in
the 1,602-room New Orleans Hilton Riverside & Towers, increasing its total
equity in that hotel to 67.4%. Hilton also earns management fee income from its
partially owned hotels under long-term management contracts.
Complementing its full service hotels, Hilton also had ownership interests
in five Hilton Suites with a total of 1,095 rooms and two Hilton Garden Inns
with 347 rooms, at June 30, 1994.
MANAGED HOTELS
Through long-term management contracts, Hilton managed 22 hotels with
15,464 rooms in the United States at June 30, 1994. Hilton does not have an
equity interest in these hotels. Under its standard management agreement, Hilton
operates a hotel for the benefit of its owner, which either owns or leases the
hotel and the associated personal property. Hilton's base management fee is
calculated as a percentage of each hotel's gross revenues plus, in the majority
of properties, an incentive fee based on performance. All operating and other
expenses are paid by the owner. Major hotels managed by Hilton without an
ownership interest include the Beverly Hilton, the Fontainebleau Hilton in Miami
Beach, the Hilton at Walt Disney World, the Los Angeles Hilton & Towers and,
beginning in June 1994, the 561-room Millenium Hilton in New York City. Hilton
has also expanded its destination resort operations by entering into long-term
agreements to manage the three Pointe Hilton Resort properties in Phoenix,
Arizona and the 1,000-room Innisbrook Hilton Resort in Tarpon Springs, Florida.
FRANCHISE HOTELS
In addition to its management operations, Hilton had licensed 165 franchise
hotels with 41,322 rooms in the United States at June 30, 1994. Franchise hotels
operated under the Hilton name are generally smaller than the full service
hotels owned, leased or managed by Hilton and average approximately 250 rooms in
size. Hilton also licenses franchise hotels under the Hilton Garden Inn and
Hilton Suites names.
In general, each franchisee pays Hilton an initial fee based on the number
of rooms in a franchise hotel and a continuing fee based on a percentage of the
facility's room revenues. Although Hilton does not directly participate in the
management or operation of franchise hotels, it does periodically inspect them
to ensure that Hilton's standards are maintained and renders advice with respect
to hotel operations.
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<PAGE> 3
INTERNATIONAL
Substantially all of Hilton's international hotel operations are conducted
under the "Conrad" name. As of June 30, 1994, Conrad operated five hotels with a
total of 1,696 rooms (excluding two hotel-casinos) under long-term management
contracts. Two of these hotels are partially owned including the 14.7%-owned
Conrad Dublin in Ireland and the 30%-owned Conrad Hong Kong. Hilton actively
pursues opportunities to operate hotels throughout the world with particular
emphasis in three primary areas: (1) the Pacific Basin from Australia to Japan;
(2) the Caribbean, Mexico and Canada; and (3) Europe. These international
properties will generally be operated pursuant to long-term management
contracts.
EXPANSION
Hilton has taken a reasoned approach to developing new domestic hotel
properties due to the significant overbuilding in the hotel industry. At
present, there are no Hilton owned domestic hotels under construction. Hilton
intends to expand its operation of hotels primarily through conversion of
existing hotels into management and franchise properties in strategically
significant markets. Hilton will invest in new domestic hotel projects or
conversion properties where the return on investment meets Hilton's criteria.
Hilton is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad name
pursuant to long-term management agreements. In certain instances, Hilton may
invest in or make advances to the entity that owns a hotel. Hilton has entered
into a management contract to operate the 321-room Conrad Surabaya in Indonesia,
scheduled to open in late 1996 or early 1997. Hilton is negotiating management
contracts with respect to five new hotels in the Pacific Rim: the 700-room
Conrad Jakarta in Indonesia; the 600-room Conrad Kuala Lumpur in Malaysia; the
500-room Conrad Bangkok in Thailand; the 500-room Conrad Manila in the
Philippines; and the 400 to 500-room Conrad Ho Chi Minh City in Vietnam.
HOTEL-CASINO OPERATIONS
NEVADA
Hilton owns and operates five hotel-casinos in Nevada: the 3,174-room Las
Vegas Hilton, the 3,034-room Flamingo Hilton-Las Vegas, the 2,000-room Flamingo
Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room Flamingo
Hilton-Reno.
The Las Vegas Hilton is located adjacent to the Las Vegas Convention Center
and focuses on up-scale individual leisure guests and convention groups. The
Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the
Flamingo Hilton-Reno focus on the middle market, in particular the group tour
and travel segment. Each of Hilton's hotel-casinos has gaming, convention,
dining, shopping, entertainment and, with the exception of the Flamingo
Hilton-Reno, indoor and outdoor recreational facilities. A variety of popular
entertainment is featured in theaters and lounges at each hotel.
Hilton continues to refurbish and expand existing facilities in Nevada to
maintain their presence as premier properties in the market. In 1993, the Las
Vegas Hilton completed remodeling of the showroom for theater-style seating and
presentation of Andrew Lloyd Webber's "Starlight Express" stage show. The
Flamingo Hilton-Las Vegas renovated the casino and race and sports book. The
Flamingo Hilton-Laughlin also renovated the casino and refurbished the pool and
recreation facilities. At the Reno Hilton, Hilton completed an extensive
renovation of all guest rooms and corridors and replaced windows, exterior
lighting and signage. In addition, the Flamingo Hilton-Reno enlarged its casino
by 3,000 square feet and renovated the parking concourse and hotel entrance.
The space utilized by Hilton's casinos in Nevada, in terms of approximate
square feet, is as follows: Las Vegas Hilton -- 67,000 square feet (inclusive of
33,000 square feet attributable to the race and sports book); Flamingo
Hilton-Las Vegas -- 73,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 65,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 100,000 square feet
(inclusive of
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<PAGE> 4
12,000 square feet attributable to the race and sports book); and Flamingo
Hilton-Reno -- 48,000 square feet (inclusive of 2,500 square feet attributable
to the race and sports book).
At the Las Vegas Hilton, Hilton plans to construct three new luxury suites
for premium players which are expected to be completed by late 1994 or early
1995. Hilton has also commenced an exterior rehabilitation and landscaping
project at the Las Vegas Hilton. An extensive renovation project is planned at
the Flamingo Hilton-Las Vegas, which will include construction of a new 600-room
tower, new meeting and ballroom facilities and a themed recreation area,
enhancement of the west side (Strip-facing) frontage, addition of new slot
machines, and additional public space and parking. At the Flamingo
Hilton-Laughlin, Hilton plans to expand the casino to add 300 new slot machines
and to replace exterior signage. At the Reno Hilton, Hilton plans to renovate
the casino, make public space improvements, add a new race and sports book and
enlarge the registration area. The Flamingo Hilton-Reno plans to remodel the
buffet and coffee shop, relocate Keno and build a new sports bar at the race and
sports book.
INTERNATIONAL
Hilton, through its Conrad Hotels operations, owns a 19.9% interest in and
manages the 605-room Conrad & Jupiters Casino in Queensland, Australia. The
70,000 square foot casino features table games and slot machines similar to
those offered at Hilton's hotel-casinos in Nevada. This property has the
exclusive rights to conduct casino gaming on Queensland's Gold Coast through
1995.
Hilton has a 25% ownership interest in the 627-room Conrad Istanbul in
Turkey, which opened in 1992. This hotel-casino includes a 12,000 square foot
casino featuring table games and slot machines similar to those offered at
Hilton's hotel-casinos in Nevada and Australia.
EXPANSION
In December 1993, the Provincial Government of Ontario, Canada awarded a
consortium, of which Conrad owns a 33.3% interest, the exclusive right to
develop and manage the first casino in Windsor, Ontario. The consortium will
develop and operate a 300-room hotel-casino, which will be co-managed by Conrad.
The hotel-casino will contain a 75,000 square foot casino, off-track betting,
entertainment and meeting facilities and is scheduled to open on a permanent
basis in early 1997. Hilton, along with its partners, is currently operating a
60,000 square foot temporary casino facility which opened in May 1994.
The government of Queensland, Australia has designated the owner of the
Conrad & Jupiters Casino to own and develop a new 136-room hotel-casino project
to be known as the Conrad Treasury in Brisbane, Australia. This property, which
will feature a 65,000 square foot casino, will be managed by Conrad and will
have the exclusive right to conduct casino gaming in Brisbane for a ten year
period. Conrad will own a 19.9% equity interest in this project, which is
scheduled to open in early 1995.
In addition, the government of Uruguay has selected Conrad and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 35,000 square foot casino. Conrad will manage and have a 20% equity
interest in the hotel-casino. Subject to obtaining satisfactory financing, the
hotel-casino is scheduled for completion in early 1996.
In October 1993, Conrad entered into an agreement to develop and operate a
700-room hotel-casino in Cairo, Egypt. This property will feature a 17,000
square foot European-style casino. Conrad will manage and own a 10% equity
interest in the hotel-casino, which is scheduled to open in late 1997.
RIVERBOAT GAMING OPERATIONS
In February 1994, Hilton commenced operation of the "Hilton Queen of New
Orleans," a riverboat casino located adjacent to the New Orleans Hilton
Riverside & Towers. The initial 1,500 passenger vessel has a 20,000 square foot
casino featuring table games and slot machines similar to those offered at
Hilton's hotel-casinos. This interim riverboat is wholly-owned by Hilton and is
being leased to a joint venture, of which Hilton owns a 50% interest, until the
permanent riverboat is completed. In late 1994, Hilton anticipates the
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interim riverboat will be replaced with a permanent vessel owned by the joint
venture that will have a 30,000 square foot casino and accommodate 2,400
passengers.
Due to changes in the economic and regulatory environment, Hilton and the
Port Authority of Kansas City, Missouri are currently renegotiating agreements
which would provide for the operation by Hilton of a 50,000 square foot casino
on a continuously docked barge in Kansas City. Hilton would own a 90% interest
in this casino. Subject to voter approval in November 1994 of an initiative
authorizing games of chance in Missouri and the receipt of all required gaming
and other licenses, Hilton could begin operating a temporary 25,000 square foot
floating casino in spring 1995 and a permanent 50,000 square foot casino in
spring 1996, although no assurances can be given in this regard.
PROPERTY SUMMARY
<TABLE>
<CAPTION>
AT JUNE 30, 1994
-----------------------
NUMBER OF NUMBER OF
PROPERTY TYPE PROPERTIES ROOMS
------------------------------------------------------- --------- ---------
<S> <C> <C>
Owned, Partially Owned or Leased Properties:
Full Service Hotels.................................. 24 21,909
Hotel-Casinos........................................ 7 12,045
Casinos (Non-Hotel).................................. 2 N/A
Hilton Suites........................................ 5 1,095
Hilton Garden Inns................................... 2 347
Conrad Hotels........................................ 2 703
--- ---------
Total................................................ 42 36,099
--- ---------
Managed Hotels
Domestic............................................. 22 15,464
Conrad Hotels........................................ 3 993
--- ---------
Total................................................ 25 16,457
--- ---------
Franchise Hotels....................................... 165 41,322
--- ---------
TOTAL PROPERTIES..................................... 232 93,878
======== ========
</TABLE>
OTHER
Hilton owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 11 vacation ownership resorts in
Florida. During 1993, HGVC commenced development of a 200-unit vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas and a 360-unit resort
at Sea World Village in Orlando, Florida. The Las Vegas resort is scheduled for
completion in early 1995 and the first phase of the Orlando project is
anticipated to be completed in summer 1995. HGVC is also actively seeking new
development and acquisition opportunities in other resort locations.
Hilton is also engaged in the sale of furniture, furnishings, equipment and
supplies to hotels, motels and inns throughout the United States and is engaged
in the operation of a computerized reservation system for use by Hilton and
others. Hilton also provides excess general and umbrella liability insurance
coverages for owned and participating managed properties.
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<PAGE> 6
CAPITALIZATION
The following table sets forth the consolidated short-term and long-term
debt and stockholders' equity of Hilton and its subsidiaries at June 30, 1994,
and as adjusted to give effect to the sale of the Notes.
<TABLE>
<CAPTION>
AT JUNE 30, 1994
---------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN MILLIONS)
<S> <C> <C>
SHORT-TERM DEBT:
Current maturities of long-term debt.................................. $ 26.5 $ 26.5
-------- --------
Total short-term debt......................................... 26.5 26.5
======= =======
LONG-TERM DEBT(1):
Commercial paper(2)................................................... $ 327.1 $ 327.1
Industrial development revenue bonds at adjustable rates, due 2015.... 82.0 82.0
Senior notes, 7.70% to 9.95%, due 1994 to 2002........................ 662.5 662.5
First mortgage notes, 4.93% to 8.34%, due 1996 to 2011................ 106.0 106.0
Revolving bank credit lines, 4.43% to 4.69%, due 1996 to 1998......... 81.4 81.4
Capitalized leases, 8.75%, due 2009 to 2019........................... 3.2 3.2
Other................................................................. 3.2 3.2
Notes offered hereby.................................................. -- 200.0
Less current maturities of long-term debt.......................... (26.5) (26.5)
-------- --------
Net long-term debt............................................ $1,238.9 $1,438.9
======= =======
STOCKHOLDERS' EQUITY:
Preferred stock -- 10.0 million shares authorized at $1.00 par value,
none outstanding................................................... $ -- $ --
Common stock -- 90.0 million shares authorized at $2.50 par value,
47.8 million shares outstanding(3)................................. 128.0 128.0
Additional paid-in capital............................................ -- --
Retained earnings..................................................... 1,124.2 1,124.2
Cumulative translation adjustment..................................... (1.5) (1.5)
Less treasury stock, at cost.......................................... (161.7) (161.7)
-------- --------
Total stockholders' equity......................................... $1,089.0 $1,089.0
-------- --------
Total capitalization.......................................... $2,327.9 $2,527.9
======= =======
</TABLE>
- ---------------
(1) Does not include $597.7 million of debt obligations of unconsolidated
affiliates, of which $586.7 million is without recourse to Hilton.
(2) As of June 30, 1994, Hilton had committed bank lines of credit aggregating
$437.5 million, of which $81.4 million is outstanding.
(3) Does not include 2.1 million shares reserved for issuance upon exercise of
stock options pursuant to stock option plans. Stock options to purchase 1.9
million shares of Common Stock were outstanding as of June 30, 1994.
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SELECTED FINANCIAL INFORMATION
The following is a summary of certain consolidated financial information of
Hilton and its subsidiaries and is qualified in its entirety by, and should be
read in conjunction with, the financial statements, including the notes thereto,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the auditor's report incorporated into this Prospectus Supplement
by reference to Hilton's Annual Report on Form 10-K for the year ended December
31, 1993, and the consolidated financial statements, notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated into this Prospectus Supplement by reference to Hilton's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. This
information has been derived from consolidated financial statements of Hilton
which, except for the information for the interim periods, have been audited and
reported upon by Arthur Andersen & Co., independent public accountants. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
necessary to present fairly the information for the interim periods have been
made.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ -------- -------- -------- -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Rooms............................................. $237.9 $212.1 $ 440.2 $ 386.7 $ 345.0 $ 351.3 $335.8
Food and beverage................................. 118.5 117.6 236.8 216.2 204.4 209.8 216.8
Casino............................................ 233.0 246.5 502.1 438.8 392.4 386.0 311.4
Casino promotional allowances(1).................. -- -- -- -- -- -- (42.5)
Management and franchise fees..................... 46.5 40.5 85.1 79.0 76.2 77.5 74.1
Other............................................. 58.3 42.6 93.8 82.5 64.4 62.5 58.5
Operating income from unconsolidated affiliates... 25.8 17.5 35.5 26.4 30.3 37.7 44.1
------ ------ -------- -------- -------- -------- ------
720.0 676.8 1,393.5 1,229.6 1,112.7 1,124.8 998.2
------ ------ -------- -------- -------- -------- ------
Expenses:
Rooms............................................. 82.2 73.7 152.5 131.9 119.9 114.7 106.1
Food and beverage................................. 104.1 99.6 202.4 180.3 168.4 173.9 171.2
Casino............................................ 105.2 107.4 217.5 195.6 200.1 176.4 130.0
Other costs and expenses.......................... 288.8 267.9 554.4 476.9 416.4 408.8 359.0
Corporate expense................................. 10.0 13.4 26.8 25.0 23.1 29.2 25.6
------ ------ -------- -------- -------- -------- ------
590.3 562.0 1,153.6 1,009.7 927.9 903.0 791.9
------ ------ -------- -------- -------- -------- ------
Operating income.................................... 129.7 114.8 239.9 219.9 184.8 221.8 206.3
Interest and dividend income........................ 9.9 11.2 21.8 16.4 11.3 23.6 44.0
Interest expense.................................... (37.3) (40.2) (80.4) (66.9) (58.1) (54.3) (62.0)
Interest expense, net, from unconsolidated
affiliates........................................ (8.2) (6.9) (14.6) (11.2) (15.6) (24.0) (25.8)
------ ------ -------- -------- -------- -------- ------
Income before property transactions and foreign
currency losses................................... 94.1 78.9 166.7 158.2 122.4 167.1 162.5
Property transactions, net.......................... -- -- (4.5) 0.9 0.5 -- (3.7)
Foreign currency losses............................. (0.4) -- (1.3) -- -- -- --
------ ------ -------- -------- -------- -------- ------
Income before income taxes.......................... 93.7 78.9 160.9 159.1 122.9 167.1 158.8
Provision for income taxes.......................... 37.1 29.0 58.2 55.2 38.6 54.6 48.7
------ ------ -------- -------- -------- -------- ------
Income before cumulative effect of accounting
changes........................................... 56.6 49.9 102.7 103.9 84.3 112.5 110.1
Cumulative effect of accounting changes, net........ -- 3.4 3.4 -- -- -- --
------ ------ -------- -------- -------- -------- ------
Net income.......................................... $ 56.6 $ 53.3 $ 106.1 $ 103.9 $ 84.3 $ 112.5 $110.1
====== ====== ======= ======= ======= ======= ======
OTHER DATA:
Hotels revenue...................................... $286.8 $245.4 $ 520.0 $ 470.4 $ 443.9 $ 470.2 $453.2
Gaming revenue...................................... 433.2 431.4 873.5 759.2 668.8 654.6 545.0
Hotels operating income............................. 64.4 42.5 96.2 91.5 92.9 120.6 129.3
Gaming operating income............................. 75.3 85.7 170.5 153.4 115.0 130.4 102.6
Ratio of earnings to fixed charges(2)............... 2.8x 2.6x 2.7x 2.9x 2.6x 2.8x 2.4x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
-------------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $2,850.0 $2,579.7 $2,674.8 $2,659.4 $2,186.8 $1,926.7 $2,216.0
Long-term debt................................. 1,238.9 1,038.6 1,112.6 1,087.1 789.0 526.6 487.1
Total stockholders' equity..................... 1,089.0 1,031.6 1,056.7 1,002.5 952.8 923.3 883.0
</TABLE>
- ---------------
(1) Due to an accounting change, the revenue components included in the
financial statements exclude the retail value of rooms, food and beverage
for years subsequent to 1989.
(2) For the purpose of this ratio, earnings are calculated by adding fixed
charges (excluding capitalized interest) to income before income taxes,
adjusted to exclude gain (loss) from property transactions and undistributed
earnings in less than 50%-owned affiliates. Fixed charges consist of
interest on borrowings and that portion of rental expense which represents
interest, including Hilton's proportionate share of such items with respect
to 50%-owned affiliates.
S-7
<PAGE> 8
DESCRIPTION OF NOTES
The Notes will be issued as a separate series of Debt Securities under an
Indenture, dated as of July 1, 1988, as amended and supplemented (the
"Indenture"), between Hilton and The Bank of New York Trust Company of
California, as trustee (the "Trustee"). The following summary of certain
provisions of the Notes and of the Indenture does not purport to be complete and
is qualified in its entirety by reference to the Indenture, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus constitute a part. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture or the Notes, as the case may be. The term "Debt Securities," as used
in this Prospectus Supplement, refers to all debt securities issued and issuable
from time to time under the Indenture and includes the Notes. The following
description of Notes will apply to each Note offered hereby unless otherwise
specified in the applicable Pricing Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of Hilton and will rank pari
passu with all other unsecured and unsubordinated indebtedness of Hilton from
time to time outstanding. The Indenture does not limit the aggregate principal
amount of Debt Securities which may be issued thereunder and Debt Securities may
be issued thereunder from time to time in one or more series up to the aggregate
principal amount from time to time authorized by Hilton for each series. As of
the date of this Prospectus Supplement, Hilton has approximately $434,000,000
aggregate principal amount of Debt Securities outstanding under the Indenture.
Hilton may, from time to time, without the consent of the Holders of the Notes,
provide for the issuance of Notes or other Debt Securities under the Indenture
in addition to the up to $200,000,000 aggregate principal amount of Notes
offered hereby.
The Notes are currently limited to $200,000,000 aggregate principal amount,
or the equivalent thereof in one or more foreign or composite currencies. The
Notes will be offered on a continuous basis and will mature on any day nine
months or more from their dates of issue, as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
interest-bearing Notes will either be Fixed Rate Notes or Floating Rate Notes as
specified in the applicable Pricing Supplement. The Notes may also be issued
with original issue discount ("Original Issue Discount Notes") and such Notes
may or may not bear any interest. The Notes will be subject to defeasance as set
forth under "Description of Debt Securities -- Defeasance" in the accompanying
Prospectus.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in United States dollars and payments of principal of, and
premium, if any, and interest on, the Notes will be made in United States
dollars. The Notes may also be denominated in currencies or composite currencies
other than United States dollars ("Foreign Currency Notes") (the currency or
composite currency in which a Note is denominated, whether United States dollars
or otherwise, is herein referred to as the "Specified Currency"). See "Special
Provisions and Risks Relating to Foreign Currency Notes -- Payments of Principal
and Premium, if any, and Interest."
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of United States dollars into
foreign currencies or composite currencies and vice versa, and commercial banks
do not generally offer non-United States dollar checking or savings account
facilities in the United States. If requested on or prior to the fifth Business
Day (as defined below) preceding the date of delivery of the Foreign Currency
Notes, or by such other day as determined by the applicable Agent, such Agent is
prepared to arrange for the conversion of United States dollars into the
Specified Currency to enable the purchasers to pay for such Notes. Each such
conversion will be made by the applicable Agent on such terms and subject to
such conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchasers of the Foreign Currency Notes. See
"Special Provisions and Risks Relating to Foreign Currency Notes."
S-8
<PAGE> 9
Interest rates offered by Hilton with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction, and Hilton expects generally to distinguish, with respect to such
offered rates, between purchases which are for less than, and purchases which
are equal to or greater than, $200,000. Interest rates, interest rate formulae
and other variable terms of the Notes are subject to change by Hilton from time
to time, but no such change will affect any Note already issued or as to which
an offer to purchase has been accepted by Hilton.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office of the Paying Agent in the Borough
of Manhattan, The City of New York. Unless otherwise specified in the applicable
Pricing Supplement, The Bank of New York will be the "Paying Agent" and
"Security Registrar" with respect to the Notes. No service charge will be made
by Hilton or the Security Registrar for any such registration of transfer or
exchange of Notes, but Hilton may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection therewith
(other than exchanges pursuant to the Indenture not involving any transfer).
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by Hilton through the Paying Agent to the Depositary. See
"Book-Entry Notes." In the case of Certificated Notes, payment of principal and
premium, if any, due on the Stated Maturity Date or any prior date on which the
principal, or an installment of principal, of a Note becomes due and payable,
whether by the declaration of acceleration, call for redemption at the option of
Hilton, repayment at the option of the Holder or otherwise (the Stated Maturity
Date or such prior date, as the case may be, is herein referred to as a
"Maturity") of each Certificated Note will be made in immediately available
funds upon presentation thereof at the office the Paying Agent in the Borough of
Manhattan, The City of New York (or, in the case of any repayment on an Optional
Repayment Date, upon presentation of such Certificated Note in accordance with
the provisions described below). Payment of interest due on Maturity of each
Certificated Note will be made to the person to whom payment of the principal
and premium, if any, shall be made. Payment of interest due on each Certificated
Note on any Interest Payment Date (as defined below) (other than at Maturity)
will be made at the office or agency of Hilton referred to above maintained for
such purpose or, at the option of Hilton, may be made by check mailed to the
address of the Holder entitled thereto as such address shall appear in the
Security Register of Hilton. Notwithstanding the foregoing, a Holder of
$10,000,000 (or the equivalent thereof with respect to the Specified Currency
applicable to a Foreign Currency Note) or more in aggregate principal amount of
Notes (whether having identical or different terms and provisions) will be
entitled to receive interest payments on any Interest Payment Date (other than
at Maturity) by wire transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the Paying Agent not less
than 15 days prior to such Interest Payment Date. Such wire instructions, upon
receipt by the Paying Agent, shall remain in effect until revoked by such
Holder. For special payment terms applicable to Foreign Currency Notes, see
"Special Provisions and Risks Relating to Foreign Currency Notes -- Payments of
Principal and Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is not a day on which banking institutions are authorized or
required by law or executive order to close in The City of New York; provided,
however, that, with respect to Foreign Currency Notes the payment of which is to
be made in a Specified Currency other than United States dollars, such day is
also not a day on which banking institutions are authorized or required by law
or executive order to close in the principal financial center of the country of
such Specified Currency (or, in the case of the European Currency Unit ("ECU"),
is not a day designated as an ECU Non-Settlement Day by the ECU Banking
Association or otherwise generally regarded in the ECU interbank market as a day
on which payments in ECUs shall not be made); provided, further, that, with
respect to Notes as to which LIBOR is an applicable Interest Rate Basis, such
day is also a London Business Day. "London Business Day" means any day (i) if
the Index Currency (as defined below) is other than ECU,
S-9
<PAGE> 10
on which dealings in such Index Currency are transacted in the London interbank
market or (ii) if the Index Currency is ECU, that is not designated as an ECU
Non-Settlement Day by the ECU Banking Association or otherwise generally
regarded in the ECU interbank market as a day on which payments in ECUs shall
not be made.
REDEMPTION AT THE OPTION OF HILTON
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of Hilton prior to the Stated Maturity Date only if an Initial Redemption
Date is specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to redemption at the option of Hilton on any date on and
after the applicable Initial Redemption Date in whole or from time to time in
part in increments of $1,000 or the minimum denomination specified in such
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination), at the applicable Redemption
Price (as defined below) on notice given not more than 60 nor less than 30 days
prior to the date of redemption and in accordance with the provisions of the
Indenture. "Redemption Price," with respect to a Note, means an amount equal to
the sum of (i) the Initial Redemption Percentage specified in such Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) multiplied by the unpaid principal amount or the portion to be
redeemed plus (ii) accrued interest to, but excluding, the date of redemption.
The Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount thereof or the portion
thereof to be redeemed.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by Hilton in whole or in part at the option of the Holders thereof on
their respective Optional Repayment Dates specified in such Pricing Supplement.
If no Optional Repayment Date is specified with respect to a Note, such Note
will not be repayable at the option of the Holder thereof prior to the Stated
Maturity Date. Any repayment in part will be in increments of $1,000 or the
minimum denomination specified in the applicable Pricing Supplement (provided
that any remaining principal amount thereof shall be at least $1,000 or such
minimum denomination). Unless otherwise specified in the applicable Pricing
Supplement, the repayment price for any Note to be repaid means an amount equal
to the sum of (i) 100% of the unpaid principal amount thereof or the portion
thereof plus (ii) accrued interest to, but excluding, the date of repayment. For
any Note to be repaid, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Paying Agent
at its Corporate Trust Office (or such other address of which Hilton shall from
time to time notify the Holders) not more than 60 nor less than 30 days prior to
the date of repayment. Exercise of such repayment option by the Holder will be
irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable Participant that has an account with the Depositary, on behalf of the
beneficial owners of the Global Security or Securities representing such
Book-Entry Notes, by delivering a written notice substantially similar to the
above mentioned form to the Paying Agent at its Corporate Trust Office (or such
other address of which Hilton shall from time to time notify the Holders), not
more than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of beneficial owners of the Global
Security or Securities representing such Book-Entry Notes to exercise their
option to have such Book-Entry Notes repaid must be received by the Paying Agent
by 5:00 P.M., New York City time, on the last day for giving such notice. In
order to ensure that a notice is received by the Paying Agent on a particular
day, the beneficial owner of the Global Security or Securities representing such
Book-Entry Notes must so direct the applicable Participant before such
participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Security or Securities representing
Book-Entry Notes should consult the Participants through which they own their
interest therein
S-10
<PAGE> 11
for the respective deadlines for such Participants. All notices shall be
executed by a duly authorized officer of such Participant (with signature
guaranteed) and shall be irrevocable. In addition, beneficial owners of the
Global Security or Securities representing Book-Entry Notes shall effect
delivery at the time such notices of election are given to the Depositary by
causing the applicable Participant to transfer such beneficial owner's interest
in the Global Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. See "Book-Entry Notes."
If applicable, Hilton will comply with the requirements of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and any
other securities laws or regulations in connection with any such repayment.
Hilton may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by Hilton may be held or resold or, at
the discretion of Hilton, may be surrendered to the Paying Agent for
cancellation.
INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case of
a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, in each case as specified in the applicable Pricing
Supplement, until, but excluding, the date on which the principal thereof is
paid or duly made available for payment. Interest payments in respect of the
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid with respect to the applicable Note) to but
excluding the related Interest Payment Date or at Maturity, as the case may be.
Interest will be payable in arrears on each Interest Payment Date specified
in the applicable Pricing Supplement on which an installment of interest is due
and payable and at Maturity. Unless otherwise specified in the applicable
Pricing Supplement, the first payment of interest on any Note originally issued
between a Regular Record Date (as defined below) and the related Interest
Payment Date or on an Interest Payment Date will be made on the Interest Payment
Date immediately following the next succeeding Regular Record Date to the Holder
on such next succeeding Regular Record Date. Unless otherwise specified in the
applicable Pricing Supplement, a "Regular Record Date" shall be the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be June 1 and December 1
of each year and at Maturity. Unless otherwise specified in the applicable
Pricing Supplement, interest on the Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Business Day, the required payment of principal, premium, if
any, and/or interest will be made on the next succeeding Business Day as if made
on the date such payment was due, and no interest will accrue on such payment
for the period from and after such Interest Payment Date or at such Maturity, as
the case may be, to the date of such payment on the next succeeding Business
Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note;" Fixed Rate Commencement Date and Fixed Interest Rate, as applicable;
Interest Rate Basis or Bases; Initial Interest
S-11
<PAGE> 12
Rate, Interest Reset Period and Dates; Regular Record Dates; Interest Payment
Period and Dates; Index Maturity; maximum interest rate and minimum interest
rate, if any; Spread and/or Spread Multiplier, if any; if one or more of the
applicable Interest Rate Bases is LIBOR, the Index Currency and the Designated
LIBOR Page, as described below; and, if one or more of the applicable Interest
Rate Bases is the CMT Rate, the Designated CMT Telerate Page and the Designated
CMT Maturity Index, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, bear interest at the rate determined by reference to
the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period from
the date of issue to the first Interest Reset Date will be the Initial
Interest Rate and (z) the interest rate in effect commencing on the Fixed
Rate Commencement Date to Maturity shall be the Fixed Interest Rate, if
such rate is specified in the applicable Pricing Supplement or, if no such
Fixed Interest Rate is so specified, the interest rate in effect thereon on
the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis of Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero. Commencing on the first Interest Reset
Date, the rate at which interest on such Inverse Floating Rate Note is
payable shall be reset as of each Interest Reset Date; provided, however,
that the interest rate in effect for the period from the date of issue to
the first Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below)
S-12
<PAGE> 13
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be set forth in the
applicable Pricing Supplement; provided, however, that with respect to a
Floating Rate/Fixed Rate Note, the interest rate commencing on the Fixed Rate
Commencement Date to Maturity shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement or, if no such Fixed Interest
Rate is so specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date. In addition, a Floating Rate Note
may bear interest in respect of the lowest of two or more Interest Rate Bases.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date to Maturity shall be
the Fixed Interest Rate or, if no such Fixed Interest Rate is specified, the
interest rate in effect on the day immediately preceding the Fixed Rate
Commencement Date, as specified in the applicable Pricing Supplement. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such Interest Reset
Date will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). The "Interest Determination Date" with
respect to the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal
Funds Rate and the Prime Rate will be the second Business Day immediately
preceding the applicable Interest Reset Date; the "Interest Determination Date"
with respect to the Eleventh District Cost of Funds Rate will be the last
working day of the month immediately preceding the applicable Interest Reset
Date on which the Federal Home Loan Bank of San Francisco (the "FHLB of San
Francisco") publishes the Index (as defined below); and the "Interest
Determination Date" with respect to LIBOR will be the second London Business Day
immediately preceding the applicable Interest Reset Date. With respect to the
Treasury Rate, the "Interest Determination Date" will be the day in the week in
which the applicable Interest Reset Date falls on which day Treasury Bills (as
defined below) are normally auctioned (Treasury Bills are normally sold at an
auction held on Monday of each week, unless that day is a legal holiday, in
which case the auction is normally held on the following Tuesday, except that
such auction may be held on the preceding Friday); provided, however, that if an
auction is held on the Friday of the week preceding the applicable Interest
Reset Date, the Interest Determination Date will be such preceding Friday; and
provided, further, that if an auction falls on the applicable Interest Reset
Date, then the Interest Reset Date will instead be the first Business Day
following such auction. The
S-13
<PAGE> 14
"Interest Determination Date" pertaining to a Floating Rate Note the interest
rate of which is determined by reference to two or more Interest Rate Bases will
be the most recent Business Day which is at least two Business Days prior to the
applicable Interest Reset Date for such Floating Rate Note on which each
Interest Rate Basis is determinable. Each Interest Rate Basis will be determined
on such date, and the applicable interest rate will take effect on the
applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Each Floating Rate Note will bear interest from the date of issue at the
rates specified therein until, but excluding, the date on which the principal
thereof is paid or otherwise made available for payment. Except as provided
below or in the applicable Pricing Supplement, interest will be payable, in the
case of Floating Rate Notes which reset: (i) daily, weekly or monthly, on the
third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year, as specified in the applicable Pricing
Supplement; (ii) quarterly, on the third Wednesday of March, June, September and
December of each year, (iii) semiannually, on the third Wednesday of the two
months of each year specified in the applicable Pricing Supplement; and (iv)
annually, on the third Wednesday of the month of each year specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and, in each
case, at Maturity. If any Interest Payment Date for any Floating Rate Note
(other than at Maturity) would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding day that is
a Business Day, except that in the case of a Floating Rate Note as to which
LIBOR is an applicable Interest Rate Basis, if such Business Day falls in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity of a Floating Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest shall accrue on
such payment for the period from and after Maturity to the date of such payment
on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
Specified Currency other than United States dollars, to the nearest unit (with
one-half cent or unit being rounded upward).
Except as otherwise specified in the applicable Pricing Supplement, each
Floating Rate Note will accrue interest on an "Actual/360" basis, an
"Actual/Actual" basis, or a "30/360" basis, in each case as specified in the
applicable Pricing Supplement. For Floating Rate Notes calculated on an
Actual/360 basis and Actual/Actual basis, accrued interest for each Interest
Calculation Period will be calculated by multiplying (i) the face amount of such
Floating Rate Note, (ii) the applicable interest rate, and (iii) the actual
number of days in the related Interest Calculation Period, and dividing the
resulting product by 360 or 365, as applicable (or, with respect to an
Actual/Actual basis Floating Rate Note, if any portion of the related Interest
Calculation Period falls in a leap year, the product of (i) and (ii) above will
be multiplied by the sum of (X) the actual number of days in that portion of the
related Interest Calculation Period falling in a leap year divided by 366 and
(Y) the actual number of days in that portion of such Interest Calculation
Period falling in a nonleap year divided by 365). For Floating Rate Notes
calculated on a 30/360 basis, accrued interest for an Interest Calculation
Period will be computed on the basis of a 360-day year of twelve 30-day months,
irrespective of how many days are actually in such Interest Calculation Period.
Unless otherwise specified in the related Pricing Supplement, with respect to
any Floating Rate Note that accrues interest on a 30/360 basis, if any Interest
Payment Date or the date of Maturity falls on a day that is not a Business Day,
the related payment of principal or interest will be made on the next succeeding
Business Day as if made on
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the date such payment was due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity, as
the case may be. As used herein, "Interest Calculation Period" means with
respect to any period, the period from and including the most recent Interest
Reset Date (or from and including the original issue date in the case of the
first Interest Reset Date) to but excluding the next succeeding Interest Reset
Date for which accrued interest is being calculated. Unless otherwise specified
in an applicable Pricing Supplement, interest with respect to Notes for which
the interest rate is calculated with reference to two or more Interest Rate
Bases will be calculated in the same manner as if only one of the applicable
Interest Rate Bases applied.
Unless otherwise specified in the applicable Pricing Supplement, The Bank
of New York will be the "Calculation Agent." Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate then
in effect and, if determined, the interest rate that will become effective as a
result of a determination made for the next succeeding Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date," if applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date, or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or Maturity, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar certificates
of deposit in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money market banks for negotiable
certificates of deposit with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate determined as of such CD Rate
Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption " . . . Treasury
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Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the week, or the month, as applicable, ended immediately
preceding the week in which the related CMT Rate Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published, or if
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519). If such information is
not provided by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for the CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity, based on
the arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent cannot obtain three
such Treasury Note quotations, the CMT Rate for such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 P.M., New York City time, on the CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the third preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service, for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
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Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the Commercial Paper Rate will be the Money Market Yield on such Commercial
Paper Rate Interest Determination Date of the rate for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
in Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Agents or their
respective affiliates) selected by the Calculation Agent for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Commercial Paper Rate determined as of such Commercial
Paper Rate Interest Determination Date will be the Commercial Paper Rate in
effect on such Commercial Paper Rate Interest Determination Date. "Telerate Page
7058 means the display on the Dow Jones Telerate Service on such page (or such
other page as may replace such page on that service, for the purpose of
displaying the Eleventh District Cost of Funds Rate) for the purpose of
displaying the monthly average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
D x 360
Money Market Yield = ------------- X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date shall
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be the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month immediately preceding the date of such announcement. If the FHLB of San
Francisco fails to announce such rate for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination Date,
then the Eleventh District Cost of Funds Rate determined as of such Eleventh
District Cost of Funds Rate Interest Determination Date will be the Eleventh
District Cost of Funds Rate in effect on such Eleventh District Cost of Funds
Rate Interest Determination Date.
"Telerate Page 7058" means the display on the Dow Jones Telerate Service on
such page (or such other page as may replace such page) in that service
displaying the monthly average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
rates (calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds arranged by
three leading brokers of federal funds transactions in The City of New York
(which may include the Agents or their respective affiliates) selected by the
Calculation Agent prior to 9:00 A.M., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
such LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date, that appear on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 A.M. London time, on such LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a single
rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement
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as of 11:00 A.M., London time, on such LIBOR Interest Determination Date.
If fewer than two such offered rates appear, or if no such rate appears, as
applicable, LIBOR in respect of the related LIBOR Interest Determination
Date will be determined in accordance with the provisions described in
clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as specified in clause (i)
above, the Calculation Agent will request the principal London offices of
each of four major reference banks in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; provided, however, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is specified
in the applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified as the method for calculating LIBOR, the display on the
Dow Jones Telerate Service for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year
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divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of New
York selected by the Calculation Agent. If fewer than two such rates appear on
the Reuters Screen NYMF Page, the Prime Rate will be determined by the
Calculation Agent on the basis of the rates furnished in The City of New York by
three substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, having total equity capital of
at least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate
determined as of such Prime Rate Interest Determination Date will be the Prime
Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or, if
not published by 3:00 P.M., New York City time, on the related Calculation Date,
the auction average rate (expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury Bills having the Index Maturity designated in
the applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
(which may include the Agents or their respective affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Treasury Rate determined as of
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates or any other variable term relating thereto, may be
modified as specified under "Other Provisions" on the face thereof or in an
Addendum relating thereto, if so specified on the face thereof, and in the
applicable Pricing Supplement.
AMORTIZING NOTES
Hilton may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information
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concerning additional terms and provisions of Amortizing Notes will be specified
in the applicable Pricing Supplement. A table setting forth repayment
information in respect of each Amortizing Note will be included in the
applicable Pricing Supplement and set forth in each such Note.
ORIGINAL ISSUE DISCOUNT NOTES
Hilton may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may currently pay no interest or interest at a
rate which at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of maturity in respect of an Original
Issue Discount Note, the amount payable to the holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in the
applicable Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable ) minus 100% multiplied by the Issue Price specified in
such Pricing Supplement (the "Issue Price"), net of any portion of such Issue
Price which has been paid prior to the date of redemption, or the portion of the
Issue Price (or the net amount) proportionate to the portion of the unpaid
principal amount to be redeemed, plus (iii) any accrued interest to the date of
such event the payment of which would constitute qualified stated interest
payments within the meaning of Treasury Regulation 1.1273-1(c) under the Code.
The "Amortized Face Amount" of an Original Issue Discount Note means an amount
equal to (i) the Issue Price thereof plus (ii) the aggregate portions of the
original issue discount (the excess of the amounts considered as part of the
"stated redemption price at maturity" of such Original Issue Discount Note
within the meaning of Section 1273(a)(2) of the Code, whether denominated as
principal or interest, over the Issue Price) which shall theretofore have
accrued pursuant to Section 1272 of the Code (without regard to Section
1272(a)(7) of the Code) from the date of issue of such Original Issue Discount
Note to the date of determination, minus (iii) any amount considered as part of
the "stated redemption price at maturity" of such Original Issue Discount Note
which has been paid from the date of issue to the date of determination. Certain
additional considerations relating to the offering of any Original Issue
Discount Notes may be set forth in the applicable Pricing Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, interest rate indices, interest rate
or exchange rate swap indices, the exchange rate of one or more specified
currencies (including a composite currency such as the ECU) relative to an
indexed currency or such other price or exchange rate or other financial index
or indices as may be specified in such Note ("Indexed Notes"), as set forth in
the applicable Pricing Supplement. In certain cases, Holders of Indexed Notes
may receive a principal amount at Maturity that is greater than or less than the
face amount of the Notes depending upon the relative value on the date specified
in such Indexed Note of the specified indexed item. Information as to the method
for determining the amount of principal, premium, if any, and/or interest
payable in respect of Indexed Notes, and where applicable, certain historical
information with respect to the specified indexed item or items and special tax
considerations associated with an investment in such Indexed Notes will be set
forth in the applicable Pricing Supplement.
Notwithstanding anything to the contrary herein or in the Prospectus, for
purposes of determining the rights of a Holder of a Note indexed as to principal
in respect of voting for or against amendments to the Indenture and
modifications and the waiver of rights thereunder, the principal amount of such
indexed Notes shall be deemed to be equal to the face amount thereof upon
issuance. The method for determining the amount of principal payable at Maturity
will be specified in the applicable Pricing Supplement.
BOOK-ENTRY NOTES
The following provisions assume that Hilton has established a depository
arrangement with The Depository Trust Company (the "Depositary") with respect to
the Book-Entry Notes. Any additional or
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differing terms of the depository arrangements with respect to the Book-Entry
Notes will be described in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $150,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, redemption provisions (if any),
repayment provisions (if any), Stated Maturity Date and other variable terms
will be represented by a single Global Security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary. No Global Security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor of the
Depositary or any nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided in this section, the beneficial
owners of the Global Security or Securities representing Book-Entry Notes will
not be entitled to receive physical delivery of Certificated Notes and will not
be considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest in order to exercise any rights of a Holder under the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes is exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like amount, only if (i) the Depositary notifies Hilton that it is
unwilling or unable to continue as Depositary for the Global Securities, (ii)
the Depositary ceases to be a clearing agency registered under the Exchange Act,
(iii) Hilton in its sole discretion determines that the Global Securities shall
be exchangeable for Certificated Notes or (iv) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes.
Upon any such exchange, the Certificated Notes shall be registered in the names
of the beneficial owners of the Global Security or Securities representing Book-
Entry Notes as provided by the Depositary's relevant participants (as identified
by the Depositary).
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $150,000,000, one Global
Security will be issued with respect to each $150,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities
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Dealers, Inc. Access to the Depositary's system is also available to others
such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participant"). The
rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with the Depositary are registered in
the name of the Depositary's nominee, Cede & Co. The deposit of Global
Securities with the Depositary and their registration in the name of Cede &
Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the Global Securities
representing the Book-Entry Notes; the Depositary's records reflect only
the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
by governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Securities representing the Book-Entry Notes. Under
its usual procedures, the Depositary mails an Omnibus Proxy to Hilton as
soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the
applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and interest payments on the Global
Securities representing the Book-Entry Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason
to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of the Depositary,
the Trustee or Hilton, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal, premium, if
any, and interest to the Depositary is the responsibility of Hilton or the
Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
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A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes repaid by Hilton, through its Participant, to the Trustee, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant
to transfer the Participant's interest in the Global Security or Securities
representing such Book-Entry Notes, on the Depositary's records, to the
Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such
Book-Entry Notes are transferred by Direct Participants on the Depositary's
records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to Hilton or the Trustee. Under such circumstances, in
the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
Hilton may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
COVENANTS
LIMITATION ON LIENS
The Indenture provides that Hilton will not, and will not permit any
Subsidiary to, create or assume any Security Interest (as hereinafter defined)
to secure notes, bonds, debentures or other similar evidences of indebtedness
for borrowed money or any guarantee of any of the foregoing ("Debt") without
effectively providing that the Notes (together with, if Hilton so determines,
any other obligation of Hilton or such Subsidiary that is not subordinate to the
Notes) shall be secured equally and ratably with (or prior to) such Debt, except
that this restriction will not apply to (i) Security Interests existing on the
date of this Prospectus Supplement; (ii) Security Interests existing (a) on
property at the time of acquisition thereof by Hilton or a Subsidiary or (b) on
property or indebtedness of, or an equity interest in, any corporation,
partnership or other entity at the time such corporation, partnership or other
entity becomes a Subsidiary; (iii) Security Interests to secure Debt with
respect to all or part of the purchase price or cost of construction of
property, provided such Debt is incurred and related Security Interests are
created within 24 months of the acquisition, completion of construction or
commencement of full operation, whichever is later, and such Debt does not
exceed the acquisition cost of such property and/or the construction cost
thereof; (iv) Security Interests on property or indebtedness of, or any equity
interest in, a Subsidiary, to secure Debt with respect to all or part of the
acquisition cost of such Subsidiary, provided such Debt is incurred and related
Security Interests are created within 24 months of the acquisition of such
Subsidiary and such Debt does not exceed the acquisition cost of such
Subsidiary; (v) Security Interests to secure Debt incurred to construct
additions or to make Capital Improvements (as hereinafter defined) to properties
of Hilton or any Subsidiary, provided such Debt is incurred and related Security
Interests are created within 24 months of completion of construction or Capital
Improvements and such Debt does not exceed the cost of such construction or
Capital Improvements; (vi) in the case of a Subsidiary, Security Interests in
favor of Hilton or another Subsidiary; (vii) Security Interests to secure Debt
on which interest payments are exempt from Federal income tax under Section 103
of the Internal Revenue Code of 1986, as amended (the "Code"); (viii) Security
Interests on the stock, partnership or other equity interest of Hilton or any
Subsidiary in any Joint Venture (as hereinafter defined) or any Subsidiary which
owns an equity interest in such Joint Venture to secure Debt, provided the
amount of such Debt is contributed and/or advanced solely to such Joint Venture;
and (ix) any extension, renewal or replacement of any Security Interest referred
to in the foregoing clauses (i) through (viii) or any Debt secured thereby,
including premium, if any, provided the amount secured is not increased.
Notwithstanding the foregoing, Hilton and any one or more Subsidiaries may,
without securing the Notes, create or assume Security Interests to secure Debt
which would otherwise be subject to the foregoing restriction and enter into
Sale and Lease-Back Transactions (as defined in the Indenture) which would
otherwise be subject to the restrictions set forth in "Limitation on Sale and
Lease-Back Transactions" in an aggregate principal amount which, together with
(A) all other such Debt of Hilton and its Subsidiaries (not including Debt
permitted to be secured pursuant to clauses (i) through (ix) inclusive of the
foregoing
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paragraph) and (B) the aggregate value of the Sale and Lease-Back Transactions
other than those permitted under "Limitation on Sale and Lease-Back
Transactions," does not exceed the greater of (1) 15% of Consolidated Net
Tangible Assets (as hereinafter defined) and (2) $25,000,000.
"Capital Improvements" means additions to properties or renovations or
refurbishings of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof. "Consolidated Net
Tangible Assets" means the total amount of assets (including investments in
Joint Ventures) of Hilton and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves) except to the extent resulting from
write-ups of capital assets (other than those incident to accounting for
acquisitions in accordance with generally accepted accounting principles), after
deducting therefrom (i) all current liabilities of Hilton and its Subsidiaries
(other than intercompany liabilities), and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the latest consolidated balance sheet of Hilton
prepared in accordance with generally accepted accounting principles. "Joint
Venture" means any partnership, corporation or other entity, in which up to and
including 50% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by Hilton and/or one or more
Subsidiaries. "Principal Property" means any real estate or other physical
facilities or depreciable assets of Hilton or a Subsidiary, the net book value
of which on the date of determination exceeds 2% of Consolidated Net Tangible
Assets or which, in the opinion of Hilton's Board of Directors, is of material
importance to Hilton and its Subsidiaries taken as a whole. Principal Property
will not include any properties owned by Joint Ventures. "Security Interest"
means any mortgage, pledge, lien, encumbrance or other security interest on (i)
any Principal Property of Hilton or any Subsidiary or on (ii) any equity
interest in or indebtedness of any Subsidiary.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
Except as described in the second preceding paragraph, Hilton will not
enter into, and will not permit any Subsidiary to enter into, any Sale and
Lease-Back Transaction for a period of more than three years (including
renewals) with respect to any Principal Property with any Person (as hereinafter
defined) (other than Hilton or a Subsidiary) unless either (A) Hilton or such
Subsidiary would be entitled, pursuant to the provisions described in clauses
(i) through (ix) under "Limitation on Liens" above, to create or assume a
Security Interest on the property to be leased without equally and ratably
securing the Notes or (B) Hilton, within 120 days after the effective date of
such transaction, applies to the retirement or other discharge of the Notes or
Debt secured by Security Interests an amount not less than the greater of (1)
the net proceeds of the sale of the property leased in such transaction or (2),
the fair market value (in the opinion of Hilton) of the property at the time
such transaction was entered into. "Person" includes an individual, partnership,
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity.
CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal amount, premium, if any,
and/or interest, to one or more values of currencies (including exchange rates
between currencies), commodities, interest rate or other indices entails
significant risks that are not associated with similar investments in a
conventional fixed-rate debt security. If the interest rate of such a Note is so
indexed, it may result in an interest rate that is less than that payable on a
conventional fixed-rate debt security issued at the same time, including the
possibility that no interest will be paid, and, if the principal of and/or
premium on such a Note is so indexed, the amount of principal and/or premium
payable in respect thereof may be less than the original purchase price of such
Note if allowed pursuant to the terms thereof, including the possibility that no
such amount will be paid. The secondary market for such Notes will be affected
by a number of factors, independent of the creditworthiness of Hilton and the
value of the applicable currency, commodity or interest rate index, including
the volatility of the applicable currency, commodity or interest rate index, the
time remaining to the maturity of such Notes, the amount outstanding of such
Notes and market interest rates. The value of the applicable currency, commodity
or interest rate index depends on a number of interrelated factors, including
economic, financial and political events, over which Hilton has no control.
Additionally, if the formula used to determine the
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amount of principal amount, premium, if any, or interest payable with respect to
such Notes contains a multiple or leverage factor, the effect of any change in
the applicable currency, commodity or interest rate index will be increased. The
historical experience of the relevant currencies, commodities or interest rate
indices should not be taken as an indication of future performance of such
currencies, commodities or interest rate indices during the term of any Note.
The credit ratings assigned to Hilton's medium-term note program are a
reflection of Hilton's credit status and, in no way, are a reflection of the
potential impact of the factors discussed above, or any other factors, on the
market value of the Notes. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risks entailed by an investment
in such Notes and the suitability of such Notes in light of their particular
circumstances.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in, or
to residents of, the country issuing the Specified Currency in which the
particular Notes are denominated. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States residents
and, with respect to Foreign Currency Notes, is by necessity incomplete. Hilton
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of and premium,
if any, and interest on the Notes. Such persons should consult their own
financial and legal advisors with regard to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES DOLLARS, EITHER AS SUCH RISKS
EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM
TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY
NOTES. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated in
United States dollars. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the United States dollar
and the applicable Specified Currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or foreign
governments. Such risks generally depend on events over which Hilton has no
control, such as economic and political events and the supply and demand for the
relevant currencies. In recent years, rates of exchange between the United
States dollar and certain foreign currencies have been highly volatile and such
volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any
Foreign Currency Note. Depreciation of the Specified Currency applicable to a
Foreign Currency Note against the United States dollar would result in a
decrease in the United States dollar-equivalent yield of such Note, in the
United States dollar-equivalent value of the principal and premium, if any,
payable on Maturity of such Note, and, generally, in the United States
dollar-equivalent market value of such Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to the date on which any
payment of principal of or premium, if any, or interest on a Foreign Currency
Note is due, which could affect exchange rates as well as the availability of
the Specified Currency on such date. Even if there are no exchange controls, it
is possible that the Specified
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Currency for any particular Foreign Currency Note would not be available on the
applicable payment date due to other circumstances beyond the control of Hilton.
In that event, Hilton will make the required payment in respect of such Foreign
Currency Note in United States dollars on the basis of the Market Exchange Rate
(as defined below). See "Payment Currency."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States dollars would be determined with reference to the date of default,
the date judgment is rendered or some other date. Under current New York law, a
state court in the State of New York rendering a judgment on a Foreign Currency
Note would be required to render such judgment in the Specified Currency in
which such Foreign Currency Note is denominated, and such judgment would be
converted into United States dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the amount of the
judgment is calculated and the time such amount is converted from United States
dollars into the applicable Specified Currency.
PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
Hilton is obligated to make payments of principal of and premium, if any,
and interest on Foreign Currency Notes in the applicable Specified Currency (or,
if such Specified Currency is not at the time of such payment legal tender for
the payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts paid by Hilton
will, unless otherwise specified in the applicable Pricing Supplement, be
converted by the exchange rate agent named in the applicable Pricing Supplement
(the "Exchange Rate Agent") into United States dollars for payment to Holders.
However, unless otherwise specified in the applicable Pricing Supplement, the
Holder of a Foreign Currency Note may elect to receive such payments in the
applicable Specified Currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by Hilton for the
purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Foreign Currency Notes scheduled to
receive United States dollar payments and at which the applicable dealer commits
to execute a contract. All currency exchange costs will be borne by the Holder
of such Foreign Currency Note by deductions from such payments. If three such
bid quotations are not available, payments will be made in the Specified
Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Trustee at its Corporate
Trust Office in The City of New York on or prior to the applicable Regular
Record Date or at least fifteen calendar days prior to Maturity, as the case may
be. Such written request may be mailed or hand delivered or sent by cable, telex
or other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive payment in the applicable Specified Currency for all such
principal, premium, if any, and interest payments and need not file a separate
election for each payment. Such election will remain in effect until revoked by
written notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the applicable Regular Record Date or at
least fifteen calendar days prior to Maturity, as the case may be. Holders of
Foreign Currency Notes whose Notes are to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the applicable Specified Currency may be made.
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Payments of the principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in United States dollars will be made in the
manner specified herein with respect to Notes denominated in United States
dollars. See "Description of Notes -- General." Payments of interest on Foreign
Currency Notes which are to be made in the applicable Specified Currency on an
Interest Payment Date (other than at Maturity) will be made by check mailed to
the address of the Persons entitled thereto as they appear in the Security
Register. Payments of principal of and premium, if any, and interest on Foreign
Currency Notes which are to be made in the applicable Specified Currency at
Maturity will be made by wire transfer of immediately available funds to an
account with a bank designated at least fifteen calendar days prior to Maturity
by the applicable Holder, provided that such bank has appropriate facilities
therefor and that the applicable Note is presented at the principal Corporate
Trust Office of the Trustee in time for the Trustee to make such payments in
such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of a Global Security or Securities representing Book-Entry
Notes denominated in a Specified Currency other than United States dollars which
elects to receive payments of principal, premium, if any, and interest in such
Specified Currency must notify the Participant through which its interest is
held on or prior to the applicable Regular Record Date or at least fifteen
calendar days prior to Maturity, as the case may be, of such Beneficial Owner's
election to receive all or a portion of such payment in such Specified Currency.
Such Participant must notify the Depositary of such election on or prior to the
third Business Day after such Regular Record Date or at least 12 Business Days
prior to Maturity, as the case may be, and the Depositary will notify the
Trustee of such election on or prior to the fifth Business Day after such
Regular Record Date or at least ten Business Days prior to Maturity, as the case
may be. If complete instructions are received by the Participant and forwarded
by the Participant to the Depositary, and by the Depositary to the Trustee, on
or prior to such dates, then the Beneficial Owner will receive payments in such
Specified Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for the payment of
principal, premium, if any, or interest with respect to a Foreign Currency Note
due to the imposition of exchange controls or other circumstances beyond the
control of Hilton, Hilton will be entitled to satisfy its obligations to the
Holder of such Foreign Currency Note by making such payment in United States
dollars on the basis of the Market Exchange Rate on the second Business Day
prior to such payment or, if such Market Exchange Rate is not then available, on
the basis of the most recently available Market Exchange Rate or as otherwise
specified in the applicable Pricing Supplement. The "Market Exchange Rate" for a
Specified Currency other than United States dollars means the noon dollar buying
rate in The City of New York for cable transfer for such Specified Currency as
certified for customs purposes by (or if not so certified, as otherwise
determined by) the Federal Reserve Bank of New York. Any payment made under such
circumstances in United States dollars where the required payment is in a
Specified Currency other than United States dollars will not constitute an Event
of Default under the Indenture with respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to the
imposition of exchange controls or other circumstances beyond Hilton's control,
then Hilton will be entitled, but not required, to make any payments in respect
of such Note in United States dollars until such currency unit is again
available. The amount of each payment in United States dollars shall be computed
on the basis of the equivalent of the currency unit in United States dollars,
which shall be determined by Hilton or its agent on the following basis. The
component currencies of the currency unit for this purpose (collectively, the
"Component Currencies" and each, a "Component Currency") shall be the currency
amounts that were components of the currency unit as of the last day on which
the currency unit was used. The equivalent of the currency unit in United States
dollars shall be calculated by aggregating the United States dollar equivalents
of the Component Currencies. The United States dollar equivalent of each of the
Component Currencies shall be determined by Hilton or such agent on the basis of
the most recently available Market Exchange Rate for each such Component
Currency, or as otherwise specified in the applicable Pricing Supplement.
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If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
All determinations referred to above made by Hilton or its agent (including
the Exchange Rate Agent) shall be at its sole discretion and shall, in the
absence of manifest error, be conclusive for all purposes and binding on the
Holders of the Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") issued by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date). The issue price of an issue
of Notes equals the first price at which a substantial amount of such Notes has
been sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is
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unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under
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the OID Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Variable Note (e.g., two or more qualified floating rates with values within 25
basis points of each other as determined on the Variable Note's issue date) will
be treated as a single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations. An "objective rate" is a rate that is not itself a
qualified floating rate but which is determined using a single fixed formula and
which is based upon (i) one or more qualified floating rates, (ii) one or more
rates where each rate would be a qualified floating rate for a debt instrument
denominated in a currency other than the currency in which the Variable Note is
denominated, (iii) either the yield or changes in the price of one or more items
of actively traded personal property (other than stock or debt of the issuer or
a related party) or (iv) a combination of objective rates. The OID Regulations
also provide that other variable interest rates may be treated as objective
rates if so designated by the IRS in the future. Despite the foregoing, a
variable rate of interest on a Variable Note will not constitute an objective
rate if it is reasonably expected that the average value of such rate during the
first half of the Variable Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Note's term. A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Variable Note provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Note's issue date is
intended to approximate the fixed rate (e.g., the value of the variable rate on
the issue date does not differ from the value of the fixed rate by more than 25
basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of a
qualified floating rate or qualified inverse floating rate, the value as of the
issue date, of the qualified floating rate or qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be
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such that the fair market value of the Variable Note as of the Variable Note's
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating rate
or qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of Hilton prior to
their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election is only available for debt instruments
acquired on or after April 4, 1994.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount.
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Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
its earlier disposition in a taxable transaction, because a current deduction is
only allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than its stated redemption price at maturity, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount included
in income (and accrued market discount, if any, if the U.S. Holder has included
such market discount in income) and decreased by the amount of any payments,
other than qualified stated interest payments, received and amortizable bond
premium taken with respect to such Note. Such gain or loss generally will be
long-term capital gain or loss if the Note was held for more than one year.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange
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for the accrual period or, with respect to an accrual period that spans two
taxable years, at the average rate for the partial period within the taxable
year. A U.S. Holder may elect, however, to translate such accrued interest
income using the rate of exchange on the last day of the accrual period or, with
respect to an accrual period that spans two taxable years, using the rate of
exchange on the last day of the taxable year. If the last day of an accrual
period is within five business days of the date of receipt of the accrued
interest, a U.S. Holder may translate such interest using the rate of exchange
on the date of receipt. The above election will apply to other debt obligations
held by the U.S. Holder and may not be changed without the consent of the IRS. A
U.S. Holder should consult a tax advisor before making the above election. A
U.S. Holder will recognize exchange gain or loss (which will be treated as
ordinary income or loss) with respect to accrued interest income on the date
such income is received. The amount of ordinary income or loss recognized will
equal the difference, if any, between the U.S. dollar value of the Foreign
Currency payment received (determined on the date such payment is received) in
respect of such accrual period and the U.S. dollar value of interest income that
has accrued during such accrual period (as determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on (i) the date of receipt of such Foreign Currency in the case
of a cash basis U.S. Holder and (ii) the date of disposition in the case of an
accrual basis U.S. Holder. In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized acquisition or other premium and any principal payments
received by the holder. A U.S. Holder's tax basis in a Note, and the amount of
any subsequent adjustments to such holder's tax basis, will be the U.S. dollar
value of the Foreign Currency amount paid for such Note, or of the Foreign
Currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount. In the case of a Discount Note or Short-Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency -- Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
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disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
Premium and Market Discount. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency -- Accrual
Method" above with respect to computation of exchange gain or loss on accrued
interest.
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest on, or on the sale, exchange or retirement
of, a Note equal to the U.S. dollar value of such Foreign Currency, determined
at the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of Hilton, a controlled foreign corporation related
to Hilton or a bank receiving interest described in section 881(c)(3)(A) of the
Code. To qualify for the exemption from taxation, the last United States payor
in the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the beneficial owner of the Note under penalties of
perjury, (ii) certifies that such owner is not a U.S. Holder and (iii) provides
the name and address of the beneficial owner. The statement may be made on an
IRS Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of Hilton or,
at the time of such individual's death, payments in respect of the Notes would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
S-35
<PAGE> 36
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by Hilton,
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Lehman Brothers, Lehman Brothers Inc. (including its affiliate, Lehman
Government Securities Inc.) and Smith Barney Inc. (each, an "Agent" and
collectively, the "Agents"), who will purchase the Notes, as principal, from
Hilton from time to time, either for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by such Agent, or, if so specified in the applicable Pricing
Supplement, for resale at a fixed public offering price. Hilton also reserves
the right to sell Notes directly on its own behalf or through additional agents,
acting either as agent or principal, on substantially identical terms as those
applicable to the Agents. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a percentage
of the principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by Hilton and the
applicable Agent, such Agent may utilize its reasonable efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the principal amount
thereof, unless otherwise specified in the applicable Pricing Supplement. Hilton
will pay a commission to each such Agent, ranging from .125% to .750% of the
principal amount of each Note, depending upon its Stated Maturity Date, sold
through such Agent. Commissions with respect to Notes with Stated Maturities in
excess of 30 years that are sold through an Agent will be negotiated between
Hilton and such Agent at the time of such sale.
An Agent may sell Notes it has purchased from Hilton as principal to other
dealers for resale to investors and other purchasers, and may allow any portion
of the discount received in connection with such purchase from Hilton to such
dealers. After the initial public offering of Notes, the public offering price
(in the case of Notes to be resold at a fixed public offering price), the
concession and the discount may be changed.
Hilton reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part (whether placed
directly with Hilton or through the Agents). The Agents will have the right, in
their discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by them on an agency basis.
S-36
<PAGE> 37
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the applicable Specified Currency in The City of New York on
the date of settlement. See "Description of Notes -- General."
Upon issuance, the Notes will not have an established trading market.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be listed on any securities exchange. Each of the Agents may from time to
time purchase and sell Notes in the secondary market, but no Agent is obligated
to do so, and there can be no assurance that there will be a secondary market
for the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes, but no Agent is
obligated to do so and may discontinue any market-making activity at any time.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). Hilton has agreed to
indemnify each of the Agents against certain liabilities (including liabilities
under the Securities Act), or to contribute to payments an Agent may be required
to make in respect thereof. Hilton has agreed to reimburse each of the Agents
for certain other expenses.
Concurrently with the offering of Notes described herein, Hilton may issue
other Debt Securities described in the accompanying Prospectus pursuant to the
Indenture.
S-37
<PAGE> 38
PROSPECTUS
[LOGO]
SENIOR DEBT SECURITIES
Hilton Hotels Corporation ("Hilton") may offer, from time to time, its
unsecured, senior debt securities (the "Debt Securities") up to an aggregate
principal amount of $565,000,000. Debt Securities may be offered in separate
series in amounts, at prices and on terms to be determined at the time of sale.
The specific designation, aggregate principal amount, denominations, purchase
price, maturity, rate and time of payment of interest, any redemption terms, and
any listing on a securities exchange of Debt Securities in respect of which this
Prospectus is being delivered ("Offered Debt Securities") are set forth in the
accompanying Prospectus Supplement (the "Prospectus Supplement"), together with
the terms of offering of the Offered Debt Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE
NEW JERSEY CASINO CONTROL COMMISSION, NOR THE LOUISIANA GAMING ENFORCEMENT
DIVISION HAS PASSED UPON THE ACCURACY, ADEQUACY OR INVESTMENT MERITS OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The Debt Securities may be sold directly, through agents designated from time to
time or through underwriters or dealers, which may include Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers, Lehman
Brothers Inc. and Smith Barney Inc., or which may be a group of underwriters
represented by any or all of the foregoing firms. If any agents of Hilton or any
underwriters are involved in the sale of the Offered Debt Securities, the names
of such agents or underwriters and any applicable commissions or discounts are
set forth in the Prospectus Supplement. The net proceeds to Hilton from such
sale are also set forth in the Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS AUGUST 9, 1994.
<PAGE> 39
IN CONNECTION WITH THE OFFERING OF DEBT SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE DEBT SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
AVAILABLE INFORMATION
Hilton is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission by Hilton may be inspected at,
and upon payment of the Commission's customary charges, copies may be obtained
from, the Public Reference Room of the Commission, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549. Such reports, proxy statements and other
information are also available for inspection and copying at prescribed rates at
the Commission's regional offices at 7 World Trade Center, New York, New York
10048 and Northwestern Atrium Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511; and at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York and the Pacific Stock Exchange, 115 Sansome
Street, Suite 1104, San Francisco, California. Copies of such material may also
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by Hilton with the Commission
(File No. 1-3427) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1993;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1994;
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1994;
and
(d) Current Report on Form 8-K, dated August 9, 1994.
All documents filed by Hilton pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the Debt Securities offered hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, in the accompanying Prospectus Supplement or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
HILTON WILL FURNISH WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (NOT INCLUDING EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS). REQUESTS SHOULD BE ADDRESSED TO: CHERYL L. MARSH, CORPORATE
SECRETARY, AT THE PRINCIPAL EXECUTIVE OFFICES OF HILTON LOCATED AT 9336 CIVIC
CENTER DRIVE, BEVERLY HILLS, CALIFORNIA 90210 (TELEPHONE: 310-278-4321).
USE OF PROCEEDS
Unless otherwise specified in the accompanying Prospectus Supplement, the
net proceeds to be received by Hilton from the sale of the Debt Securities
offered hereby will be added to the general funds of the Company and will
augment working capital. Such net proceeds will be available for general
corporate purposes, such as the acquisition of, or investment in, new or
existing hotels and hotel-casinos, financing the construction of new hotels and
hotel-casinos and additions to and renovation of existing hotels and hotel-
casinos, and reductions in revolving bank loans and in other borrowings. Pending
ultimate application, the net proceeds will be invested in short-term investment
grade securities.
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<PAGE> 40
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
Hilton for each of the five years ended December 31, 1993 and for the six months
ended June 30, 1994:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
- ----------------------------------------------------------------- JUNE 30,
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
2.4 2.8 2.6 2.9 2.7 2.8
</TABLE>
For the purpose of this ratio, earnings are calculated by adding fixed
charges (excluding capitalized interest) to income before income taxes, adjusted
to exclude gain (loss) from property transactions and undistributed earnings in
less than 50%-owned affiliates. Fixed charges consist of interest on borrowings
and that portion of rental expense which represents interest, including Hilton's
proportionate share of such items with respect to 50%-owned affiliates.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued in one or more series under an
indenture, dated as of July 1, 1988, as heretofore amended and supplemented, as
further amended by the First Supplemental Indenture, dated as of June 30, 1992,
and as such indenture may be amended from time to time (the "Indenture"),
between Hilton and The Bank of New York Trust Company of California, as
successor trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement. References to the Indenture, and to
specific provisions of the Indenture, are incorporated by reference as part of
the statements made, and the statements are qualified in their entirety by such
references.
GENERAL
The Debt Securities are unsecured and unsubordinated obligations of Hilton.
The Indenture does not limit the amount of debt which Hilton may incur under the
Indenture or otherwise or the amount of dividends or other distributions which
Hilton may declare or pay.
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the Debt Securities being offered thereby,
including: (1) the designation, aggregate principal amount and denominations of
such Debt Securities; (2) the percentage of the principal amount thereof at
which such Debt Securities will be sold; (3) the date or dates on which such
Debt Securities will mature; (4) the rate or rates per annum (which may be fixed
or variable), if any, at which such Debt Securities will bear interest; (5) the
times at which such interest, if any, will be payable; (6) the terms for
redemption or early repayment, if any; (7) the terms for defeasance, if any; (8)
whether such Debt Securities are to be issued in whole or in part in the form of
one or more global securities (each, a "Global Security"), and, if so, the
identity of the Depositary for such Global Security or Securities; (9) any
additional restrictive covenants included for the benefit of holders of such
Debt Securities; (10) any additional Events of Default provided with respect to
such Debt Securities; and (11) any other terms of the Offered Debt Securities,
none of which shall be inconsistent with the provisions of the Indenture but
which may modify or delete any provision of the Indenture insofar as it applies
to such series. Unless otherwise indicated in the Prospectus Supplement, the
Debt Securities will be issued only in fully registered form without coupons.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. One or more series of Debt
Securities may be floating rate debt securities, exchangeable for fixed rate
debt securities. Federal income tax consequences and special considerations
applicable to any such series will be described in the Prospectus Supplement
relating thereto.
Unless the Prospectus Supplement relating thereto specifies otherwise, the
Debt Securities will be issued only in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
Debt Securities, but Hilton may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Sections 3.01
and 3.05)
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<PAGE> 41
Debt Securities may be presented for exchange, and Debt Securities (other
than a Global Security) may be presented for transfer (with the form of transfer
endorsed thereon duly executed), at the office of any transfer agent or at the
office of the Security Registrar, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected by the transfer agent or the Security
Registrar, as the case may be, being satisfied with the documents of title and
identity of the person making the request. (Section 3.05)
Debt Securities of a series may be issuable in whole or in part in the form
of one or more Global Securities, as described below under "Global Securities."
One or more Global Securities will be issued in a denomination or aggregate
denominations equal to the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities will be issued in fully registered
form and in either temporary or definitive form. Unless and until it is
exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor. (Sections 3.03 and 3.05)
If any Debt Securities of a series are issuable in global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such global Debt Security may
exchange such interests for definitive Debt Securities of such series and of
like tenor and principal amount in any authorized denomination, the manner of
payment of principal of, premium and interest, if any, on any such Global
Security and the material terms of the depositary arrangement with respect to
any such Global Security.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, on the Debt Securities will be
made in U.S. dollars against surrender of such Debt Securities at the office or
agency maintained by the Trustee in The City of New York. Unless otherwise
indicated in the Prospectus Supplement, payment of any installment of interest
on a Debt Security will be made to the person in whose name such Debt Security
is registered at the close of business on the Regular Record Date for such
interest at the office or agency maintained by the Trustee in The City of New
York, or, at Hilton's option, by a check mailed to the Holder at such Holder's
registered address or by transfer to an account maintained by the payee.
(Sections 3.07 and 5.01)
All moneys paid by Hilton to a paying agent for the payment of principal of
or premium, if any, or interest on any Debt Security that remain unclaimed at
the end of two years after such principal, premium or interest shall have become
due and payable will be repaid to Hilton and the Holder of such Debt Security
will thereafter look only to Hilton for payment thereof. (Section 5.03)
CERTAIN TERMS OF THE INDENTURE
Consolidation, Merger or Transfer of Assets. The Indenture provides that
Hilton shall not consolidate with or merge into any other corporation or trust
or convey or transfer its assets substantially as an entirety to any Person
(such successor corporation, trust or Person being the "Successor" to Hilton),
unless (1) the Successor is organized (or if an individual, domiciled) in the
United States, and expressly assumes (subject to certain limitations set forth
in "Limited Liability of Certain Persons") the due and punctual payment of the
principal of, and premium, if any, and interest on, and sinking fund payments
(or analogous obligations), if any, with respect to the Debt Securities, and the
performance of every covenant of the Indenture on the part of Hilton, and (2)
immediately after giving effect to such transaction, no Event of Default, and no
event that, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be
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<PAGE> 42
continuing. Upon the consummation of any such consolidation, merger, conveyance
or transfer, the Successor shall succeed to, and be substituted for Hilton
under, the Indenture. (Article Ten) The term "Person" is defined to include an
individual, partnership, corporation (including a business trust), joint stock
company, trust, unincorporated association, joint venture or other entity.
(Section 1.01)
In the event of a consolidation, merger, conveyance or transfer as
described above, certain institutional investors may have to reevaluate the
extent to which the Debt Securities remain legal investments.
Limited Liability of Certain Persons. The Indenture provides that no
recourse under or upon any obligation, covenant or agreement thereunder or with
respect to the Debt Securities may be obtained against any past, present or
future incorporator, stockholder, partner (including any general partner),
officer, trustee, director (or any person customarily performing the functions
of any officer, trustee or director) of, or other holder of an ownership
interest in Hilton or the Successor, as the case may be. (Article Thirteen)
Additional Terms. Certain additional terms and provisions of the Indenture
with respect to the Debt Securities of any series will be set forth in the
Prospectus Supplement relating to the Debt Securities of such series. Such
additional terms and provisions may include certain events of default and
covenants, if any, with respect to the Offered Debt Securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that if an Event of Default specified therein in
respect of any series of Debt Securities shall have happened and be continuing,
either the Trustee or the holders of 25% in principal amount of the outstanding
Debt Securities of such series may declare the principal (or, if the Debt
Securities of such series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of the Debt Securities
of such series) of and all accrued but unpaid interest on all of the Debt
Securities of such series to be due and payable. (Section 7.02)
Events of Default in respect of any series are defined in the Indenture as
being: default for 30 days in payment of any interest installment when due, and
default in payment of principal of, or premium, if any, on, Debt Securities of
such series when due; default in making or satisfaction of any sinking fund
payment (or analogous obligation) when the same becomes due with respect to Debt
Securities of such series; default for 90 days, after notice to Hilton by the
Trustee or by the Holders of 25% in principal amount of the outstanding Debt
Securities of such series, in the performance of any covenant in the Indenture
in respect of such series; certain events of bankruptcy, insolvency and
reorganization with respect to Hilton or a Significant Subsidiary (as
hereinafter defined); and acceleration of any Debt (other than Non-recourse Debt
(as hereinafter defined)) of Hilton or any subsidiary, aggregating at any one
time an amount in excess of the greater of (1) $15,000,000 and (2) 5% of
Consolidated Net Tangible Assets, under the terms of the instrument (including,
without limitation, the Indenture to the extent it refers to Debt Securities of
any other series) under which such Debt is or may be outstanding, if such
acceleration is not annulled within 10 days after notice to Hilton by the
Trustee or the Holders of 25% in principal amount of the Debt Securities of such
series then outstanding. (Section 7.01) The term "Non-recourse Debt" is defined
to mean any Debt the terms of which provide that the lender's claim for
repayment of such Debt is limited solely to a claim against the property which
secures such Debt. The term "Significant Subsidiary" is defined to mean any
subsidiary of Hilton which is a "significant subsidiary" within the meaning of
Rule 1-02(v) of Regulation S-X promulgated by the Commission, as in effect as of
the date of the Indenture. (Section 1.01)
The Indenture provides that the Trustee will, under specified
circumstances, within 90 days after the occurrence of a default in respect of
any series of Debt Securities, give to the Holders of Debt Securities of such
series notice of all uncured and unwaived defaults known to it; provided that,
except in the case of default in the payment of principal of, or premium, if
any, or interest on, or any sinking fund installment (or analogous obligation)
with respect to, any of the Debt Securities of such series, the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders of Debt Securities
of such series. The term "default" for the purpose of this provision means the
occurrence of any of the Events of Default specified above, except that any
grace period or notice requirement is eliminated. (Section 8.02)
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<PAGE> 43
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect of any series of Debt
Securities to act with the required standard or care, to be indemnified by the
Holders of the Debt Securities of such series, before proceeding to exercise any
right or power under the Indenture at the request of Holders of Debt Securities
of such series. (Article Eight)
The Indenture provides that the Holders of a majority in principal amount
of the outstanding Debt Securities of any series may direct the time, method and
place of conducting proceedings for remedies available to the Trustee, or
exercising any trust or power conferred on the Trustee, in respect of such
series. However, the Trustee may refuse to follow any direction that conflicts
with any law or the Indenture or which would be prejudicial to the Holders not
joining therein. (Section 7.12)
The Indenture includes a covenant that Hilton will file annually with the
Trustee a certificate of no default, or specifying any default that exists.
(Section 5.04)
In certain cases, the Holders of a majority of the principal amount of the
outstanding Debt Securities of a series may on behalf of the Holders of all Debt
Securities of such series waive any past default or Event of Default, or
compliance with certain provisions of the Indenture except, among other things,
a default not theretofore cured in payment of the principal of, or premium, if
any, or interest on, or any sinking fund installment (or analogous obligation)
with respect to, any of the Debt Securities of such series. (Sections 7.02 and
7.13)
DEFEASANCE
If so specified in the Prospectus Supplement and established in or pursuant
to a Board Resolution or a supplemental indenture with respect to Debt
Securities of any series, Hilton, at its option, (i) will be Discharged (as
hereinafter defined) from any and all obligations in respect of the Debt
Securities of such series on the 91st day after satisfaction of the conditions
described below or (ii) will not be subject to the obligation to comply with
certain restrictive covenants set forth in the Indenture with respect to the
Debt Securities of such series, in each case if Hilton deposits irrevocably with
the Trustee, in trust, specifically for the benefit of the holders of Debt
Securities of such series, money or U.S. Government Obligations (as hereinafter
defined), or a combination of both, which through the payment of interest
thereon and principal thereof in accordance with their terms will provide money
in an amount sufficient (in the written opinion of a nationally recognized firm
of independent accountants in the case of U.S. Government Obligations or a
combination of money and U.S. Government Obligations) to pay all the principal
(including any sinking fund payments or analogous obligations) of, and interest
on, the Debt Securities of such series on the dates such payments are due in
accordance with the terms of such Debt Securities. To exercise any such option,
Hilton is required to deliver to the Trustee an opinion of counsel to the effect
that (1) the deposit and related defeasance would not cause the Holders of the
Debt Securities of such series to recognize income, gain or loss for Federal
income tax purposes (and, in the case of a Discharge pursuant to clause (i),
accompanied by a ruling to such effect received from or published by the United
States Internal Revenue Service) and (2) if the Debt Securities of such series
are then listed on the New York Stock Exchange, such Debt Securities would not
be delisted from the New York Stock Exchange.
The term "Discharged" with respect to the Debt Securities of any series is
defined to mean that Hilton is deemed to have paid and discharged the entire
indebtedness represented by, and obligations under, the Debt Securities of such
series and to have satisfied all the obligations under the Indenture relating to
the Debt Securities of such series, except (A) the rights of Holders of Debt
Securities of such series to receive, from the trust fund described above,
payment of the principal of and the interest on such Debt Securities when such
payments are due, (B) Hilton's obligations with respect to the Debt Securities
of such series with respect to registration, transfer, exchange, maintenance of
a paying office and holding of money in trust and (C) the rights, powers,
trusts, duties and immunities of the Trustee under the Indenture.
If the Trustee or any paying agent is unable to apply any money and/or U.S.
Government Obligation deposited in trust by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application (including any
such order or judgment requiring the payment of money and/or U.S. Government
Obligations to Hilton), Hilton's
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<PAGE> 44
obligations under the Indenture and the Debt Securities will be revived and
reinstated as though no such deposit had occurred, until such time as the
Trustee or any paying agent is permitted to apply all such money and/or U.S.
Government Obligations. If Hilton makes any payment of interest on or principal
of any Debt Securities because of any such reinstatement of its obligations,
Hilton will be subrogated to the rights of the Holders of such Debt Securities
to receive such payment from the money and/or U.S. Government Obligations held
by the Trustee or any paying agent.
The term "U.S. Government Obligations" is defined to mean securities that
are (i) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America, the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, which, in
either case under clause (i) or (ii) are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank or trust company as custodian with respect to any such U.S. Government
Obligation or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligations evidenced by such depository
receipt. (Article Fifteen)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting Hilton and the Trustee, with
the consent of the Holders of a majority of the principal amount of the
outstanding Debt Securities of the affected series, to execute supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of the Indenture or modifying the rights of the Holders of Debt
Securities of such series, except that no such supplemental indenture may,
without the consent of the Holders of all of the affected Debt Securities, among
other things, change the maturity of any Debt Securities, or reduce the
principal amount thereof, or any premium thereon or reduce the rate or change
the time of payment of interest thereon or change any Place of Payment or change
the coin or currency in which a Debt Security is payable or affect the right of
any Holder to institute suit for the enforcement of payment in accordance with
the foregoing, or change the method of computing the amount of principal thereof
on any date or reduce the aforesaid percentage of Debt Securities, the consent
of the Holders of which is required for any such supplemental indenture.
(Section 9.02)
REGULATORY REQUIREMENTS
The Company is subject to a wide range of laws, rules and regulations
respecting the conduct of its actual or potential gaming operations in the
States of Nevada, New Jersey and Louisiana and in the State of Queensland,
Australia and the Province of Ontario, Canada (collectively "gaming laws").
These gaming laws also require that, under certain circumstances, the holders of
the Company's securities, including the Debt Securities, may be required to
apply for a finding of suitability or be qualified. Accordingly, each subsidiary
holding a gaming license and Hilton has provided, or will provide, in its
certificate of incorporation and/or by-laws that its securities are held subject
to the condition that if a holder is found unsuitable or disqualified under
applicable gaming laws, it will be unlawful for such holder to, among other
things, receive any interest on, or exercise any rights conferred by, the Debt
Securities. Should any gaming law or any governmental agency, board, commission
or official regulating gaming (collectively, "gaming commission") so require,
Hilton will endorse an appropriate legend on the Debt Securities respecting the
authority of such gaming commission to determine the qualifications of the
Holders thereof. If a Holder or a beneficial owner of a Debt Security is
required to qualify or be found suitable under the gaming laws of any
jurisdiction to which the Company or any of its subsidiaries is subject and does
not so qualify or is not found suitable, such Holder must dispose of its
interest in the Debt Security within the time period ordered by the gaming
commission. The Company may be required to disclose to the Nevada Gaming
Commission upon request the identities of the Holders of Debt Securities.
7
<PAGE> 45
Additional regulatory requirements affecting the Company's gaming
operations are set forth in the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, incorporated herein by reference.
CONCERNING THE TRUSTEE
The Bank of New York Trust Company of California is the Trustee under the
Indenture.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of institutional
purchasers or to a single purchaser; or (iii) through agents. The Prospectus
Supplement with respect to the Offered Debt Securities sets forth the terms of
the offering of the Offered Debt Securities, including the name or names of any
underwriters or agents, the purchase price of the Offered Debt Securities and
the proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which the Offered Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Debt
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters which may include Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers, Lehman
Brothers Inc. and Smith Barney Inc., or any or all of them or directly by such
firms. Unless otherwise set forth in the Prospectus Supplement, the obligations
of the underwriters to purchase the Offered Debt Securities will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all the Offered Debt Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Offered Debt Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Debt Securities in respect of which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
reasonable efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Debt Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
Hilton to indemnification by Hilton against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribution
with respect to payments which the agents or underwriters may be required to
make in respect thereof. Agents and underwriters may engage in transactions
with, or perform services for, Hilton in the ordinary course of business.
EXPERTS
The consolidated financial statements, supplemental schedules and
supplemental note appearing or incorporated by reference in Hilton's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, have been
audited by Arthur Andersen & Co., independent public accountants, as indicated
in their reports with respect thereto, and are included or incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
8
<PAGE> 46
LEGAL OPINIONS
The legality of the Debt Securities offered hereby has been passed upon for
Hilton by Neal Gerber & Eisenberg, 2 North LaSalle Street, Chicago, Illinois
60602. Unless otherwise indicated in the Prospectus Supplement, if the Offered
Debt Securities are being distributed in an underwritten offering or through
agents, Brown & Wood, 10900 Wilshire Boulevard, Los Angeles, California 90024
will act as counsel for such underwriters or agents.
9
<PAGE> 47
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY HILTON OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE AFFAIRS OF HILTON SINCE THE DATE HEREOF. THIS PROSPECTUS
SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Hilton Hotels Corporation............. S-2
Capitalization........................ S-6
Selected Financial Information........ S-7
Description of Notes.................. S-8
Certain Investment Considerations..... S-25
Special Provisions and Risks Relating
to Foreign Currency Notes........... S-26
Certain United States Federal Income
Tax Considerations.................. S-29
Plan of Distribution.................. S-36
PROSPECTUS
Available Information................. 2
Documents Incorporated By Reference... 2
Use of Proceeds....................... 2
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 3
Plan of Distribution.................. 8
Experts............................... 8
Legal Opinions........................ 9
</TABLE>
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$200,000,000
LOGO
MEDIUM-TERM NOTES, SERIES B
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
LEHMAN BROTHERS
SMITH BARNEY INC.
AUGUST 9, 1994
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