<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
REGISTRATION NO. 333-02321
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HILTON HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-2058176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
--------------------------
9336 Civic Center Drive
Beverly Hills, California 90210
(310) 278-4321
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
William C. Lebo, Jr. Esq.
Senior Vice President and General Counsel
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
(310) 278-4321
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Brian G. Cartwright Gregg A. Noel
Latham & Watkins Skadden, Arps, Slate, Meagher & Flom
633 West Fifth Street, Suite 4000 300 S. Grand Ave., Suite 3400
Los Angeles, California 90071-2007 Los Angeles, California 90071
(213) 485-1234 (213) 687-5000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plans, check the following box.
/ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the securities Act
registration statement number of the ealier effective registration statement for
the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO A
REGISTRATION STATEMENT PREVIOUSLY FILED WITH THE COMMISSION.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED APRIL 30, 1996
PROSPECTUS
MAY , 1996
$500,000,000
[LOGO]
% CONVERTIBLE SUBORDINATED NOTES DUE 2006
The Convertible Subordinated Notes to be issued by Hilton Hotels Corporation
(the "Company" or "Hilton") will be convertible at the option of the holder into
shares of Common Stock of the Company, at any time at or prior to maturity,
unless previously redeemed, at a conversion price of $ per share (equivalent
to a conversion rate of shares per $1,000 principal amount of Notes), subject
to adjustment in certain events. Interest on the Notes is payable semi-annually
on , and of each year, commencing on , 1996.
On April 23, 1996, the last reported sale price for the Company's Common Stock
on the New York Stock Exchange (where it trades under the symbol "HLT") was
$104 5/8 per share.
The Notes will be redeemable at the option of the Company, in whole or in
part at any time on or after , 1999, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption. In
addition, upon a Change of Control Triggering Event (as defined herein), which
shall include a spin-off to Hilton stockholders of the Hotel Segment (as defined
herein) or the Gaming Segment (as defined herein), the Company will be required
to offer to purchase the Notes at 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company, and are structurally subordinated to all liabilities
(including trade payables) of the Company's Subsidiaries. The Indenture (as
defined herein) will not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or its Subsidiaries. At December 31, 1995, as
adjusted to give effect to the issuance and sale of the Notes and the
application of the estimated net proceeds therefrom, the Company would have had
approximately $1.1 billion of Senior Indebtedness, and the Company's
Subsidiaries had approximately $160.1 million of trade payables and accrued
liabilities. See "Use of Proceeds," "Capitalization" and "Description of the
Notes."
Application has been made to have the Notes and the Common Stock approved
for listing on the New York Stock Exchange.
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.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE
NEW JERSEY CASINO CONTROL COMMISSION, THE LOUISIANA GAMING ENFORCEMENT DIVISION,
NOR ANY OTHER GAMING AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL
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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................................... % % %
Total (4).......................................... $ $ $
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST, AND TO PROVIDE
CONTRIBUTION WITH RESPECT TO, CERTAIN LIABILITIES, INCLUDING LIABILITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT
$ .
(4) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
AN ADDITIONAL $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF NOTES ON THE SAME
TERMS AND CONDITIONS AS SET FORTH ABOVE, TO COVER OVER-ALLOTMENTS, IF ANY.
IF THE OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS, AND PROCEEDS TO THE COMPANY WILL BE
$ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITING."
The Notes are being offered by the several Underwriters subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify the Offering and to reject orders in whole or in part. It is
expected that delivery of the Notes will be made in New York, New York on or
about May , 1996 to investors in book-entry form through the facilities of The
Depository Trust Company against payment therefor in immediately available
funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY, THE COMMON STOCK OF THE COMPANY, OR BOTH, AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE (AS TO THE COMMON STOCK) OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------------------
The Notes will be available initially in book-entry form and the Company
expects that the Notes sold pursuant hereto will be issued in the form of a
Global Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Notes will be shown on, and transfers thereof will be effected
through, records maintained by the Depositary and its participants. After the
initial issuance of the Global Note, Notes in certificated form will be issued
in exchange for the Global Note on the terms set forth in the Indenture (as
defined). See "Description of the Notes -- Book-Entry, Delivery and Form."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments, the
"Registration Statement") on Form S-3 under the Securities Act with respect to
the Notes offered hereby. This Prospectus, filed as a part of that Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. In addition, certain documents filed by the
Company with the Commission have been incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." For further information
regarding the Company and the Notes offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto and the
documents incorporated herein by reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy materials and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
materials and other information may be inspected and copies may be obtained at
the principal office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the NYSE under the symbol "HLT." Reports,
proxy materials and other information concerning the Company can also be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005; and the Pacific Stock Exchange, Inc., 618 South Spring
Street, Los Angeles, California 90014, and 301 Pine Street, San Francisco,
California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has filed with the Commission, pursuant to Section 13 of the
Exchange Act (file no. 1-3427), (i) an Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the Commission on March 22, 1996 (the
"Company 10-K"); (ii) the portions of the Company's Proxy Statement on Schedule
14A for the Annual Meeting of Stockholders to be held on May 9, 1996, filed with
the Commission on March 26, 1996 that have been incorporated by reference into
the Company's 10-K; (iii) the portions of the Company's 1995 Annual Report to
Stockholders for the year ended December 31, 1995, filed with the Commission on
March 22, 1996 that have been incorporated by reference into the Company 10-K;
(iv) a description of the Common Stock included in a Registration Statement on
Form 8-A filed with the Commission on May 19, 1986; and (v) a description of the
Rights included in a Registration Statement on Form 8-A filed with the
Commission on July 22, 1988 which are each hereby incorporated by reference in
and made a part of this Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the securities offered by this Prospectus, shall
be deemed to be incorporated by reference in this Prospectus and be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus, or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified,
to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon written or oral request of any
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to:
Cheryl L. Marsh, Vice President and Corporate Secretary, Hilton Hotels
Corporation, 9336 Civic Center Drive, Beverly Hills, California 90210; (310)
278-4321.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA APPEARING
ELSEWHERE IN THIS PROSPECTUS AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION" IN THE COMPANY'S 1995 ANNUAL REPORT TO
STOCKHOLDERS (THE "ANNUAL REPORT") INCORPORATED BY REFERENCE IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 (THE "FORM
10-K"). AS USED IN THIS PROSPECTUS, THE TERMS "COMPANY" OR "HILTON" REFER TO THE
COMPANY AND ITS SUBSIDIARIES, UNLESS OTHERWISE PROVIDED OR THE CONTEXT OTHERWISE
REQUIRES. EXCEPT AS OTHERWISE SPECIFIED, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITER'S OVER-ALLOTMENT OPTION.
THE COMPANY
The Company is a leading owner and operator of full-service hotels and
hotel-casinos in the United States. The Hilton name is one of the best
recognized and most respected lodging brands in the world. The Company owns,
leases and operates major lodging and gaming properties in gateway cities, urban
and suburban centers and resort areas under the Hilton name in the U.S. and
under the Conrad International name abroad. Hilton's strategy is to expand its
core businesses through acquisitions, domestic and international expansion,
leveraging its brand names and exploiting the synergies between its lodging and
gaming operations.
The Company announced in January 1996 it would not pursue a proposed
spin-off of its gaming operations, and will continue to develop the marketing,
operating and financial efficiencies between the two businesses. In February
1996, Stephen Bollenbach joined Hilton as president and chief executive officer.
Mr. Bollenbach, who previously served as a senior executive at such companies as
The Walt Disney Co., Host Marriott Corporation and Holiday Corporation, brings
broad financial and strategic experience to Hilton's management.
For the fiscal year ended December 31, 1995, the Company's consolidated
revenue increased 9% to $1.6 billion from $1.5 billion in 1994, and operating
income rose 24% to $353.6 million from $284.6 million in 1994. Net income rose
42% to $172.8 million, or $3.56 per share, compared to $121.7 million or $2.52
per share in 1994.
HOTELS. At February 1, 1996, the Company operated 18 owned or leased
hotels, and managed 41 properties partially or wholly owned by others. An
additional 164 hotels were operated by others under the Hilton, Hilton Garden
Inn and Hilton Suites brand names under franchise agreements granted by the
Company.
Hilton's hotels are located in the United States, except for six hotels
operated by the Company's Conrad International Hotels Corporation subsidiary.
The Company's owned or partially-owned hotels include such well-known urban and
resort properties as the Waldorf=Astoria in New York, the Palmer House Hilton in
Chicago, the New Orleans Hilton Riverside & Towers and the Hilton Hawaiian
Village in Honolulu.
The domestic lodging business, particularly the full-service sector, is
benefiting from a favorable supply-demand relationship, as well as from an
improved economy and a resurgence in travel. Those factors, along with the
recent streamlining and upgrading of the Company's franchise operations and
other operational improvements, are reflected by substantial gains in the
Company's hotel operating statistics.
Consolidated hotel revenue increased 15% in 1995 to $708.8 million from
$618.3 million in 1994. Revenue per available room ("REVPAR") for owned and
managed hotels increased 10% in 1995, the second consecutive year of
double-digit growth. Hotel operating income, primarily income from hotel
interests and management and franchise fee income, increased 41% in 1995 to
$207.7 million from $147.5 million in 1994.
GAMING. The Company's gaming operations, which are largely concentrated in
Nevada, operate primarily under the Hilton and Flamingo brand names. The
Company's wholly owned Nevada casinos are the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno. The Company has a strong presence in Las Vegas, the largest gaming
market in the world with more than 29 million visitors and gross gaming revenue
of more than $5.7 billion in 1995.
Through its Conrad International brand, the Company manages international
hotel-casinos in Brisbane and the Gold Coast in Queensland, Australia and in
Istanbul, Turkey. The Company also operates a riverboat casino in New Orleans,
Louisiana, next to the New Orleans Hilton Riverside & Towers, and is a minority
partner in a company that manages a casino in Windsor, Ontario, Canada.
3
<PAGE>
The Company's total gaming revenue increased 5% to $940.6 million in 1995
from $895.6 million in 1994. Casino revenue, a component of gaming revenue,
increased 6% to $511.0 million in 1995 from $480.6 million in 1994. Gaming
operating income increased 7% to $177.8 million in 1995 from $165.4 million in
1994.
GROWTH STRATEGY
HOTELS. The Company's five-year strategic growth plan calls for increasing
room count by a significant percentage by year-end 2000. Hilton's lodging growth
strategy focuses on the acquisition and conversion of existing full-service
hotels, the development of its redesigned, mid-market Hilton Garden Inn product
and international expansion.
As a result of limited supply growth and increasing demand for full-service
hotel rooms, the Company believes this segment of the market offers attractive
growth opportunities. Additionally, many desirable full-service hotel properties
are held by inadvertent owners such as banks and insurance companies which are
motivated sellers. Accordingly, the Company believes it can acquire certain
higher-end, full-service properties at significant discounts to replacement
cost. The Company also intends to expand its domestic operations through
conversion of existing mid- and lower- market hotels into management and
franchise properties. The Company believes it can improve the performance of
acquired and converted hotels as these properties can benefit from the strength
of the Hilton brand name, reservation system, marketing programs and worldwide
sales organization.
The Company intends to compete in the mid-market segment through franchising
and management of the Hilton Garden Inn properties. To facilitate the initial
development and promote brand awareness, the properties constructed during the
first phase of the Hilton Garden Inn expansion are expected to be financed by
Hilton, either solely or with partners. The redesigned Hilton Garden Inn concept
offers many full-service amenities at moderate prices. The Company intends to
create a strong presence in the mid-market hotel segment by exploiting the
Hilton name and offering a fresh, attractive product in a segment that includes
several mature brands. The concept is designed for urban and suburban markets,
particularly those that cannot support a standard full-service hotel. Amenities
such as limited food and beverage service, meeting space, exercise facilities,
and a residential atmosphere are designed to differentiate Hilton Garden Inns
from other mid-market hotel competitors.
The Company also believes there are substantial opportunities for
international hotel expansion, and is particularly focused on city-center
business hotels and resort properties. The Company expects that most will be
operated under the Conrad International flag through long-term management
agreements. The Company currently has agreements to manage new Conrad
International hotels in Egypt, Singapore, Indonesia, Jordan and Thailand. The
Company is also exploring a strategic alliance with the owner of the Hilton
International hotel chain, which owns the Hilton name outside the United States.
Hilton believes there could be significant marketing and brand recognition
benefits from such an alliance, if consummated.
GAMING. The Company intends to expand and improve its domestic and
international gaming operations through select acquisitions, new development,
and the enhancement of existing gaming properties. Hilton is pursuing gaming
acquisition and development opportunities that will complement its existing
strengths as a major-market gaming operator. The Company has been granted a
Statement of Compliance by New Jersey gaming regulators, although it does not
currently operate or have an agreement to operate a casino resort in Atlantic
City, N.J.
Hilton is developing a dockside casino complex in Kansas City, Missouri,
which is scheduled to open in summer 1996. A 260-room hotel designed to enhance
the casino's attractiveness to higher-spending overnight visitors is scheduled
to open in summer 1997.
The Star Trek attraction at the Las Vegas Hilton, which will complement a
22,000-square-foot casino expansion at the property, is scheduled to open in
spring 1997. This Star Trek attraction is a joint development with Paramount
Parks Inc. and is designed to attract and retain middle-market gaming customers
to augment the property's high-end gaming business. The Company also is
enhancing the Flamingo Hilton-Las Vegas, Flamingo Hilton-Laughlin, Flamingo
Hilton-Reno and Reno Hilton through various refurbishments of rooms,
restaurants, casino floors and equipment.
The Company will continue to pursue gaming opportunities internationally
through its Conrad International brand. Hilton currently is developing
international hotel-casinos in which it has a minority interest under the Conrad
International flag in Uruguay and Egypt, both scheduled to open in 1997.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........... $500,000,000 principal amount of % Convertible
Subordinated Notes due , 2006.
Interest Payment Dates....... and commencing , 1996.
Conversion Rights............ The Notes are convertible into shares of the Company's
common stock, par value $2.50 per share and the related
Rights (as defined herein) (the "Common Stock"), at any time
at or prior to maturity, unless previously redeemed, at a
conversion price of $ per share, subject to adjustment
under certain circumstances as described herein (the
"Conversion Price"). Accordingly, each $1,000 principal
amount of Notes is convertible into shares of Common
Stock, subject to adjustment, initially for an aggregate of
shares. See "Capitalization."
Mandatory Redemption......... None.
Optional Redemption.......... The Notes are redeemable, in whole or in part, at the option
of the Company at any time on or after , 1999, at
the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption.
Change of Control Triggering Upon a Change of Control Triggering Event, including a
Event....................... spin-off to Hilton stockholders of the Hotel Segment or the
Gaming Segment, the Company will be required to offer to
purchase the Notes at 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of purchase.
Subordination................ The Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all existing
and future Senior Indebtedness of the Company and will be
structurally subordinated to all liabilities (including
trade payables) of the Company's Subsidiaries. At December
31, 1995, as adjusted to give effect to the issuance and
sale of the Notes and the application of the estimated net
proceeds therefrom, the Senior Indebtedness of the Company
would have aggregated approximately $1.1 billion, and the
Company's Subsidiaries had approximately $160.1 million of
trade payables and accrued liabilities. The Indenture will
not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or any of its Subsidiaries.
Use of Proceeds.............. The net proceeds from the Offering will be used to repay
certain outstanding indebtedness of the Company and for
general corporate purposes, including the funding of various
development and construction projects. See "Use of
Proceeds."
Common Stock Traded.......... The Common Stock is traded on the New York Stock Exchange
under the symbol "HLT."
</TABLE>
For a discussion of the terms of the Notes, see "Description of the Notes."
For a description of the Common Stock, see "Description of Capital Stock."
5
<PAGE>
RECENT RESULTS
For the quarter ended March 31, 1996, revenue increased 13% to $429.9
million from $381.9 million in 1995, while operating income increased 7% to
$79.0 million from $74.0 million in 1995. Net income for the quarter ended March
31, 1996 increased 14% to $36.6 million, or $.75 per share, from $32.0 million,
or $.66 per share, in 1995. These results were achieved through strong
performances in the Company's Hotel Segment and at the Flamingo Hilton-Las
Vegas, despite an abnormally low baccarat drop and win percentage at the Las
Vegas Hilton.
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary consolidated historical financial data
of the Company for the five fiscal years ended December 31, 1995. The historical
financial data provided herein as of and for the years ended December 31, 1993,
1994 and 1995 are derived from the Consolidated Financial Statements and Notes
thereto of the Company included in the Annual Report incorporated by reference
in the Form 10-K. The historical financial data as of and for the years ended
December 31, 1991 and 1992 are derived from the Company's audited financial
statements. The Summary Historical Financial Data are qualified in their
entirety by and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" included in the Annual Report
incorporated by reference in the Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue............................................... $ 1,113 $ 1,230 $ 1,394 $ 1,514 $ 1,649
Total operating income...................................... 185 220 240 285 354
Net interest expense........................................ (63) (62) (73) (77) (75)
Net income (1).............................................. 84 104 106 122 173
Net income per share (1).................................... $1.76 $2.17 $2.21 $2.52 $3.56
Average common and equivalent shares........................ 47.8 47.9 48.0 48.3 48.5
OTHER DATA:
EBITDA (2).................................................. $ 290 $ 329 $ 359 $ 418 $ 496
Hotels revenue.............................................. 444 471 520 618 709
Gaming revenue.............................................. 669 759 874 896 940
Hotels operating income..................................... 93 92 96 148 208
Gaming operating income..................................... 115 153 171 165 178
Percentage of occupancy
Hotels (owned or managed)................................. 64% 66% 67% 70% 73%
Gaming (Nevada)........................................... 85 87 89 91 88
Ratio of earnings to fixed charges (3)...................... 2.6x 2.9x 2.7x 2.8x 3.2x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
--------------------------
ACTUAL AS ADJUSTED(4)
--------- ---------------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and temporary investments.................................... $ 409 $ 683
Total assets........................................................................ 3,060 3,345
Long-term debt, including current maturities........................................ 1,287 1,572
Total stockholders' equity.......................................................... 1,254 1,254
</TABLE>
FOOTNOTES ON FOLLOWING PAGE
6
<PAGE>
- ------------------------------
(1) Fiscal 1993 results include net income of $3.4 million or $.07 per share
resulting from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 106, "Postretirement Benefits Other Than Pensions" and SFAS No.
109, "Accounting for Income Taxes."
(2) "EBITDA" consists of operating income plus consolidated depreciation and
amortization. The Company has presented EBITDA supplementally because the
Company believes it allows for a more complete analysis of its results of
operations. This information should not be considered as an alternative to
any measure of performance or liquidity as promulgated under generally
accepted accounting principles (such as net income or cash provided by or
used in operating, investing and financing activities) nor should it be
considered as an indicator of the Company's overall financial performance.
(3) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and minority
interest, adjusting 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.
(4) Balance sheet data is as adjusted to reflect the issuance and sale of the
Notes and the application of that portion of the estimated net proceeds
therefrom expected to be used to retire debt.
7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby,
after deducting underwriting discounts and commissions and estimated expenses of
this Offering, is estimated to be approximately $ million (approximately
$ million if the Underwriters' over-allotment option is exercised in
full). The Company intends to use the net proceeds from the Offering to
refinance approximately $215.0 million in outstanding Senior Indebtedness of the
Company borrowed at a weighted average interest rate of 8.9% and due in 1996,
and for general corporate purposes, including the funding of development and
construction costs of Hilton Garden Inn properties and additional construction
costs of the dockside casino in Kansas City, Missouri and the Star Trek
attraction at the Las Vegas Hilton. Pending ultimate application, the net
proceeds will be invested in short-term investment grade securities.
PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the New York Stock Exchange, Inc. (the "NYSE")
under the symbol "HLT." The following table sets forth for the periods indicated
the high and low sales prices of the Common Stock as reported on the NYSE.
<TABLE>
<CAPTION>
COMMON STOCK PRICE
-------------------- DIVIDENDS
HIGH LOW PAID
--------- --------- -------------
<S> <C> <C> <C>
Year ended December 31, 1994
1st Quarter............................................................. $ 74 $ 54 1/2 $ .30
2nd Quarter............................................................. 61 1/4 49 3/4 .30
3rd Quarter............................................................. 66 5/8 53 1/4 .30
4th Quarter............................................................. 72 56 .30
Year ended December 31, 1995
1st Quarter............................................................. $ 77 7/8 $ 64 1/8 $ .30
2nd Quarter............................................................. 79 3/4 65 5/8 .30
3rd Quarter............................................................. 74 1/8 60 3/8 .30
4th Quarter............................................................. 68 3/4 60 5/8 .30
Year ended December 31, 1996
1st Quarter............................................................. $ 99 3/4 $ 61 1/8 $ .30
2nd Quarter (through April 23, 1996).................................... 105 1/2 94
</TABLE>
On April 23, 1996, the reported last sale price of the Common Stock on the
NYSE was $104 5/8 per share. At April 23, 1996, there were approximately 4,000
holders of record of the Common Stock.
DIVIDEND POLICY
The Company has declared and paid cash dividends on its Common Stock as set
forth above. Any further determination to pay cash dividends will be at the
discretion of the Company's Board of Directors and will depend upon the earnings
of the Company, its financial condition, capital requirements and other factors
as the Company's Board of Directors may deem relevant.
8
<PAGE>
CAPITALIZATION
The following table sets forth (i) the cash, cash equivalents and temporary
investments and capitalization of the Company at December 31, 1995 and (ii) the
cash, cash equivalents and temporary investments and capitalization as adjusted
to reflect the issuance and sale of the Notes and the application of that
portion of the estimated net proceeds therefrom that will be used to retire
indebtedness. The information below should be read in conjunction with and is
qualified by reference to the Company's Consolidated Financial Statements and
Notes thereto and "Management's Discussion and Analysis and Results of
Operations and Financial Condition" included in the Annual Report incorporated
by reference in the Form 10-K.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
CASH, CASH EQUIVALENTS AND TEMPORARY INVESTMENTS:
Cash and equivalents..................................................................... $ 338 $ 612
Temporary investments.................................................................... 71 71
--------- -----------
Total cash, cash equivalents and temporary investments................................... $ 409 $ 683
--------- -----------
--------- -----------
LONG-TERM DEBT, INCLUDING CURRENT MATURITIES:
Industrial development revenue bonds at adjustable rates, due 2015....................... $ 82 $ 82
Senior notes, 7.02% to 9.80%, due 1996 to 2002........................................... 637 422
Mortgage notes, 6.68% to 8.34%, due 1996 to 2011......................................... 104 104
Commercial paper......................................................................... 406 406
Revolving loans, with an average rate of 5.91% at December 31, 1995 (1).................. 51 51
Other.................................................................................... 7 7
Notes offered hereby..................................................................... -- 500
--------- -----------
Total long-term debt................................................................... $ 1,287 $ 1,572
--------- -----------
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, 48.3 million shares
outstanding (2)......................................................................... 128 128
Cumulative translation adjustment........................................................ (1) (1)
Unrealized loss on marketable securities................................................. (5) (5)
Retained earnings........................................................................ 1,275 1,275
Less treasury stock, at cost............................................................. (143) (143)
--------- -----------
Total stockholders' equity............................................................. 1,254 1,254
--------- -----------
Total capitalization................................................................... $ 2,541 $ 2,826
--------- -----------
--------- -----------
</TABLE>
- ------------------------------
(1) At December 31, 1995, Hilton had committed bank lines of credit aggregating
approximately $597.5 million. At such date approximately $51.1 million was
outstanding under such lines.
(2) Does not include approximately 1.8 million shares reserved for issuance upon
exercise of stock options pursuant to stock option plans. Stock options to
purchase approximately 1.7 million shares of Common Stock were outstanding
as of December 31, 1995.
9
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial data as of and for the years ended
December 31, 1993, 1994 and 1995 are derived from the consolidated financial
statements of the Company, which are included in the Annual Report incorporated
by reference in the Form 10-K. The selected consolidated financial data as of
and for the years ended December 31, 1991 and 1992 and historical balance sheet
data at December 31, 1993 are derived from the Company's audited financial
statements. The data presented below are qualified in their entirety by and
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" included in the Annual Report
incorporated by reference in the Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue
Rooms................................................................... $ 345 $ 387 $ 440 $ 510 $ 587
Food and beverage....................................................... 205 216 237 247 266
Casino.................................................................. 392 439 502 481 511
Management and franchise fees........................................... 76 79 85 94 100
Other................................................................... 65 83 94 124 125
Operating income from unconsolidated affiliates......................... 30 26 36 58 60
--------- --------- --------- --------- ---------
1,113 1,230 1,394 1,514 1,649
--------- --------- --------- --------- ---------
Expenses
Rooms................................................................... 120 132 153 172 186
Food and beverage....................................................... 169 180 202 216 229
Casino.................................................................. 200 196 218 216 235
Other costs and expenses................................................ 416 477 554 597 613
Corporate expense....................................................... 23 25 27 28 32
--------- --------- --------- --------- ---------
928 1,010 1,154 1,229 1,295
--------- --------- --------- --------- ---------
Operating income.......................................................... 185 220 240 285 354
Interest and dividend income.............................................. 11 16 22 21 35
Interest expense.......................................................... (58) (67) (80) (86) (93)
Interest expense, net, from unconsolidated affiliates..................... (16) (11) (15) (12) (17)
--------- --------- --------- --------- ---------
Income before property transactions and foreign currency losses........... 122 158 167 208 279
Property transactions, net................................................ 1 1 (5) 1 1
Foreign currency losses................................................... -- -- (1) (1) --
--------- --------- --------- --------- ---------
Income before income taxes and minority interest.......................... 123 159 161 208 280
Provision for income taxes................................................ 39 55 58 85 102
Minority interest, net.................................................... -- -- -- 1 5
--------- --------- --------- --------- ---------
Income before cumulative effect of accounting changes..................... 84 104 103 122 173
Cumulative effect of accounting changes, net(1)........................... -- -- 3 -- --
--------- --------- --------- --------- ---------
Net income................................................................ $ 84 $ 104 $ 106 $ 122 $ 173
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income per share
Before cumulative effect of accounting changes.......................... $ 1.76 $ 2.17 $ 2.14 $ 2.52 $ 3.56
Cumulative effect of accounting changes(1).............................. -- -- .07 -- --
--------- --------- --------- --------- ---------
Net income per share...................................................... $ 1.76 $ 2.17 $ 2.21 $ 2.52 $ 3.56
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average common and equivalent shares...................................... 47.8 47.9 48.0 48.3 48.5
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(2)................................................................. $ 290 $ 329 $ 359 $ 418 $ 496
Hotels revenue............................................................ 444 471 520 618 709
Gaming revenue............................................................ 669 759 874 896 940
Hotels operating income................................................... 93 92 96 148 208
Gaming operating income................................................... 115 153 171 165 178
Percentage of occupancy
Hotels (owned or managed)............................................... 64% 66% 67% 70% 73%
Gaming (Nevada)......................................................... 85 87 89 91 88
Ratio of earnings to fixed charges(3)..................................... 2.6x 2.9x 2.7x 2.8x 3.2x
</TABLE>
FOOTNOTES ON FOLLOWING PAGE
10
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and temporary investments.......................... $ 350 $ 511 $ 479 $ 393 $ 409
Total assets.............................................................. 2,187 2,659 2,675 2,926 3,060
Long-term debt, including current maturities.............................. 791 1,133 1,142 1,289 1,287
Total stockholders' equity................................................ 953 1,003 1,057 1,128 1,254
</TABLE>
- ------------------------------
(1) Fiscal 1993 results include net income of $3.4 million or $.07 per share
resulting from the adoption of SFAS No. 106, "Postretirement Benefits Other
Than Pensions" and SFAS No. 109, "Accounting for Income Taxes."
(2) "EBITDA" consists of operating income plus consolidated depreciation and
amortization. The Company has presented EBITDA supplementally because the
Company believes it allows for a more complete analysis of its results of
operations. This information should not be considered as an alternative to
any measure of performance or liquidity as promulgated under generally
accepted accounting principles (such as net income or cash provided by or
used in operating, investing and financing activities) nor should it be
considered as an indicator of the Company's overall financial performance.
(3) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and minority
interest, adjusting 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.
11
<PAGE>
BUSINESS
THE COMPANY
The Company is a leading owner and operator of full-service hotels and
hotel-casinos in the United States. The Hilton name is one of the best
recognized and most respected lodging brands in the world. The Company owns,
leases and operates major lodging and gaming properties in gateway cities, urban
and suburban centers and resort areas under the Hilton name in the U.S. and
under the Conrad International name abroad. Hilton's strategy is to expand its
core businesses through acquisitions, domestic and international expansion,
leveraging its brand names and exploiting the synergies between its lodging and
gaming operations.
The Company announced in January 1996 it would not pursue a proposed
spin-off of its gaming operations, and will continue to develop the marketing,
operating and financial efficiencies between its two business segments. In
February 1996, Stephen Bollenbach joined Hilton as president and chief executive
officer. Mr. Bollenbach, who previously served as a senior executive at such
companies as The Walt Disney Co., Host Marriott Corporation and Holiday
Corporation, brings broad financial and strategic experience to Hilton's
management.
For the fiscal year ended December 31, 1995, the Company's consolidated
revenue increased 9% to $1.6 billion from $1.5 billion in 1994, and operating
income rose 24% to $353.6 million from $284.6 million in 1994. Net income rose
42% to $172.8 million, or $3.56 per share, compared to $121.7 million or $2.52
per share in 1994.
A summary of the Company's hotels and gaming properties is set forth below:
<TABLE>
<CAPTION>
AT FEBRUARY 1, 1996
------------------------------------------
PROPERTY TYPE NUMBER OF PROPERTIES NUMBER OF ROOMS
- ------------------------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
HOTELS
Owned/Partially Owned Hotels:
Domestic Full-Service.................................................. 24 21,957
Hilton Suites.......................................................... 5 1,095
Hilton Garden Inns..................................................... 2 347
Conrad International................................................... 2 704
--- ------
Total.................................................................. 33 24,103
--- ------
Managed Hotels:
Domestic Full-Service.................................................. 22 14,668
Conrad International................................................... 4 1,100
--- ------
Total.................................................................. 26 15,768
--- ------
Franchise Hotels......................................................... 164 42,155
--- ------
GAMING
Owned/Partially Owned Hotel-Casinos:
Domestic............................................................... 5 11,421
Conrad International................................................... 3 1,361
New Orleans Riverboat.................................................. 1 --
--- ------
Total.................................................................. 9 12,782
--- ------
Managed Casino:
Casino Windsor......................................................... 1 --
--- ------
TOTAL PROPERTIES......................................................... 233 94,808
--- ------
--- ------
</TABLE>
Since the beginning of 1995, the Company has taken advantage of various
opportunities to expand its business, the most significant of which included the
opening of new vacation ownership resorts in Las Vegas, Nevada and Orlando,
Florida; the completion of the third of three new 12,600- to 15,400-square-foot
Sky
12
<PAGE>
Villa luxury suites at the Las Vegas Hilton; the opening of the 136-room Conrad
International Treasury hotel-casino in Brisbane, Australia; chartering a
riverboat to serve as a complementary facility for Casino Windsor in Windsor,
Ontario, Canada; the management of a 294-room hotel in Durango, Colorado, a
260-room hotel in Hurghada, Egypt and a 412-room hotel in Barcelona, Spain; and
the announcement of a major expansion of Hilton Garden Inn properties.
The Company routinely reviews opportunities to enter into project
development agreements and to make acquisitions in the hotel and gaming
businesses and other travel-related businesses. The Company believes that
currently there are available a number of acquisition opportunities that would
be complementary to its current business. The Company currently has no
commitments or understandings to acquire any specific business or other material
assets. There can be no assurance, however, that it will be successful in
pursuing any such acquisition opportunities or the consequences of such
acquisition, if any.
Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210 and its telephone number is (310) 278-4321.
GROWTH STRATEGY -- HOTELS
The Company's five-year strategic growth plan calls for increasing room
count by a significant percentage by year-end 2000. Growth in the Hotel Segment
will occur primarily through acquisition and conversion of existing full-service
hotels, the development of the redesigned mid-market Hilton Garden Inn product
and international expansion.
ACQUISITION AND CONVERSION OF FULL-SERVICE PROPERTIES. As a result of
limited supply growth and increasing demand for full-service hotel rooms, the
Company believes this segment of the market offers attractive growth
opportunities. According to Smith Travel Research, from 1988 to 1990 upscale
full-service room supply increased an average of approximately 5% annually,
which resulted in an oversupply of rooms in the industry. However, this growth
slowed to an average of approximately 1.7% annually from 1990 to 1995. According
to Coopers & Lybrand, hotel supply in the upscale full-service segment is
expected to grow annually at 1.8% to 1.9% through 1998. The Company believes
that the lead time from conception to completion of a new full-service hotel is
generally five or more years in the types of markets the Company is principally
pursuing, with the result that growth in the number of rooms in the full-service
segment should continue to be limited through 2000. Additionally, many desirable
full-service hotel properties are held by inadvertent owners such as banks and
insurance companies which are motivated sellers. Accordingly, the Company
believes it may be able to acquire certain higher-end, full-service properties
at significant discounts to replacement cost. The Company also intends to expand
its domestic operations through conversion of existing mid- and lower- market
hotels into management and franchise properties. The Company believes it can
improve the performance of acquired and converted hotels as these properties can
benefit from the strength of the Hilton brand name, reservation system,
marketing programs and worldwide sales organization.
EXPANSION OF HILTON GARDEN INN PROPERTIES. The Company intends to compete
in the mid-market segment through franchising and management of Hilton Garden
Inn properties. In January 1996, Hilton announced plans for a major expansion of
its redesigned Hilton Garden Inn concept. The hotels have been redesigned to
include 150 to 200 rooms, and offer amenities such as a quality restaurant,
meeting space, exercise room and pool to differentiate them from other
mid-market hotel competitors. Guest rooms will feature refrigerators, coffee
makers, microwave ovens, irons, ironing boards and well-appointed work desks.
This product is designed to offer many full-service amenities at moderate prices
that are lower than those at standard full-service hotels.
Hilton plans to add as many as 100 new Hilton Garden Inns over the next five
years to create a strong presence in the mid-market segment. Approximately 80%
of the additional Hilton Garden Inns are expected to be newly constructed
facilities, with the remainder to be conversions of existing properties. To
facilitate the initial development and promote brand awareness, the properties
constructed during the first phase of the Hilton Garden Inn expansion are
expected to be financed by Hilton, either solely or with partners.
13
<PAGE>
EXPANSION OF INTERNATIONAL HOTEL OPERATIONS. The Company believes there are
substantial opportunities for international hotel expansion, and is particularly
focused on city-center business hotels and resort properties. The Company
expects that most of those properties will be operated under the Conrad
International brand through long-term management agreements. The Company has
entered into management contracts to operate the following new hotels, the
anticipated opening dates of which are indicated parenthetically: the 350-room
Conrad International Sharm El Sheikh in Egypt (fall 1996); the 510-room Conrad
International Singapore (fall 1996); the 700-room Conrad International Jakarta
in Indonesia (1998); the 400-room Conrad International Amman in Jordan (1998);
and the 400-room Conrad International Bangkok in Thailand (1999). Negotiations
relating to the management of other international hotels are in varying stages
and, in certain instances, letters of intent for management contracts have been
executed. However, no assurances can be given that management contracts for such
other hotels will be executed or that such other hotels will be constructed and,
thereafter, operated by the Company.
Hilton also is exploring a strategic alliance with the owner of the Hilton
International hotel chain, which owns the Hilton name outside of the United
States. Hilton believes there could be significant marketing and brand
recognition benefits from such an alliance, if consummated.
GROWTH STRATEGY -- GAMING
The Company is continuing to expand and improve its worldwide gaming
operations through acquisitions, the development of new facilities and the
enhancement of existing gaming properties.
EXPANSION IN EXISTING GAMING MARKETS. The Company is pursuing gaming
acquisitions and development opportunities that will complement its existing
strengths as a major-market casino operator. The New Jersey Casino Control
Commission has granted the Company's request for a Statement of Compliance,
finding that the Company satisfies all non-facility related criteria for a
casino license in Atlantic City, New Jersey. The Company does not own or manage,
and has not entered into any agreement to own or manage, a hotel-casino in
Atlantic City.
DEVELOPMENT OF DOCKSIDE CASINO IN KANSAS CITY, MISSOURI. The Company is
developing a dockside casino in Kansas City, Missouri. The Company will manage
and own a 90% interest in this project, which will include a 30,000-square-foot
casino on a continually docked 130,000-square-foot barge, concessions and
entertainment facilities. Subject to the receipt of all required approvals and
permits, including gaming licenses, this casino is scheduled to open in summer
1996. The Company also plans to build a 260-room hotel next to the dockside
casino, which is scheduled to open in summer 1997.
CONSTRUCTION OF STAR TREK ATTRACTION AT THE LAS VEGAS HILTON. In January
1995, the Company and Paramount Parks Inc. ("Paramount") announced plans to
build a 65,000-square-foot attraction to be called "Star Trek: The Experience at
the Las Vegas Hilton." This attraction is scheduled to open in spring 1997, and
will feature a motion-based simulation ride, interactive video and virtual
reality stations, dining and souvenir shops. The building housing the Star Trek
attractions will be owned by the Company and leased to Paramount. The attraction
also will be managed by Paramount. In conjunction with the Star Trek attraction,
the Company plans to construct a themed 22,000-square-foot casino addition at
the Las Vegas Hilton, which also is scheduled to open in spring 1997. The
project is designed to attract and retain middle-market gaming customers to
augment the property's high-end gaming business.
ENHANCEMENT OF EXISTING HOTEL-CASINOS. In 1996, the Las Vegas Hilton plans
to rebuild its marquee sign and renovate 700 of its guest rooms. The Flamingo
Hilton-Las Vegas plans to complete a new main entrance to the property and
renovate the registration area. The Flamingo Hilton-Laughlin plans to renovate
1,000 of its guest rooms, refinish the exterior facade and continue its slot
machine replacement program. At the Reno Hilton, renovation of restaurants,
meeting rooms and guest rooms is planned. The Flamingo Hilton-Reno plans to
renovate guest rooms and open a Benihana restaurant.
EXPANSION OF INTERNATIONAL HOTEL-CASINO OPERATIONS. The Company believes
the opportunity exists to expand its gaming operations abroad. Hilton is
monitoring gaming operations in Asia, Canada, Latin America, the Middle East and
South Africa with the intention of expanding its Conrad International
properties.
14
<PAGE>
The government of Uruguay has selected Conrad International 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, is
expected to include a 38,000-square-foot casino. Conrad International will
manage, and have an equity interest of approximately 43%, in the hotel-casino.
The casino is scheduled to open in early 1997 and the hotel is expected to
commence operations in late 1997.
Conrad International has entered into an agreement to develop and operate a
700-room hotel-casino in Cairo, Egypt. Plans for this property feature a
17,000-square-foot European-style casino. Conrad International will manage, and
have a 10% equity interest in, the hotel-casino, which is scheduled to open in
late 1997.
HOTELS
OWNED, PARTIALLY OWNED AND LEASED
At February 1, 1996, Hilton operated 24 full-service owned, partially owned
or leased hotels with 21,957 rooms (excluding its five hotel-casinos) located
throughout the United States. Thirteen of these hotels with 8,036 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
13,921 rooms are partially owned, including the 50%-owned Hilton Hawaiian
Village, New York Hilton & Towers and San Francisco Hilton & Towers and the
67.4%-owned New Orleans Hilton Riverside & Towers. Hilton also earns management
fee income from its partially owned hotels generally under long-term management
contracts.
Hilton leases the land upon which eight hotels are located. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. Hilton, in all cases, owns
all furniture and equipment, is responsible for repairs, maintenance, operating
expenses and lease rentals, and retains complete managerial discretion over
operations. Generally, Hilton pays a percentage rental based on the gross
revenue of the facility, but in some instances the rental is a fixed amount.
Complementing its standard full-service hotels, Hilton owns four Hilton
Suites and has an ownership interest in a fifth, with a total of 1,095 rooms,
and owns one Hilton Garden Inn and has an ownership interest in a second, with a
total of 347 rooms.
MANAGED
At February 1, 1996, Hilton managed 22 domestic hotels with no ownership
interest. Under its standard management arrangement, Hilton operates a hotel for
the benefit of its owner, which either owns or leases the hotel and the
associated personal property. Hilton's management fee is generally based on a
percentage of each hotel's gross revenue plus, in the majority of properties, an
incentive fee based on operating performance.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. The Company has a
right of first refusal to purchase an interest in certain managed hotels.
The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances.
FRANCHISE
Pursuant to franchises granted by the Company, franchise hotels are operated
under the Hilton, Hilton Garden Inn or Hilton Suites names. The 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. Franchise hotels bearing the Hilton Garden Inn name are approximately 90
to 250 rooms in size and utilize a modular design constructed around a courtyard
containing an indoor or outdoor swimming pool. In general, Hilton approves the
plan for, and the location of, franchise hotels and assists in their design.
On February 1, 1996, there were 164 franchise hotels operated by others, of
which 160 were operated under the Hilton name, three were operated under the
Hilton Garden Inn name and one was operated under the Hilton Suites name. In
general, franchisees pay Hilton an initial fee based on the number of rooms
15
<PAGE>
in a franchise hotel and a continuing fee based on a percentage of the
facility's room revenue. Although Hilton does not directly participate in the
management or operation of franchise hotels, it conducts periodic inspections to
ensure that Hilton's standards are maintained and renders advice with respect to
hotel operations.
The Company has continued its ongoing program of monitoring and improving
its franchise operations. The Company added six franchises to its system in
1995, while five franchise arrangements were terminated, several due to
noncompliance with the Company's standards.
INTERNATIONAL
The Company's international hotel operations are conducted through Conrad
International. At February 1, 1996, Conrad International operated six hotels
with a total of 1,804 rooms (excluding hotel-casinos) under long-term management
contracts. Two of these hotels are partially owned: the 14.7%-owned Conrad
International Dublin in Ireland and the 30%-owned Conrad International Hong
Kong. Hilton is pursuing opportunities to operate hotels throughout the world
with particular emphasis in city-center business hotels and resort hotels. It is
anticipated that these acquisitions will generally be operated pursuant to
long-term management contracts.
GAMING
NEVADA HOTEL-CASINOS
The Company's gaming operations, which are largely concentrated in Nevada,
operate primarily under the Hilton and Flamingo brand names. The Company's
wholly owned Nevada casinos are the Las Vegas Hilton, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno. The Company has a strong presence in Las Vegas, the largest gaming
market in the world with more than 29 million visitors and gross gaming revenue
of more than $5.7 billion in 1995.
The Las Vegas Hilton is located adjacent to the Las Vegas Convention Center
and focuses on upscale individual leisure guests and convention groups. The
Flamingo Hilton-Las Vegas, the Reno Hilton and the Flamingo Hilton-Reno focus
primarily on the mid-market, in particular the group tour and travel segment.
The Flamingo Hilton-Laughlin targets the budget and mid-market segments. Each of
the Company'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. The Company also operates a vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. See "-- Other
Operations -- Vacation Ownership."
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1995, the Las
Vegas Hilton completed construction of the third of three new 12,600- to
15,400-square-foot Sky Villa luxury suites for premium players. The Las Vegas
Hilton also completed new VIP baccarat facilities and opened a new
6,800-square-foot luxury European Suite. The Flamingo Hilton-Las Vegas completed
an extensive expansion and renovation project, including a new 600-room tower, a
10,000-square-foot casino expansion, a new 21,000-square-foot ballroom,
remodeling of the race and sports book, new entertainment, recreation, retail
and dining facilities, exterior enhancements and guest room renovations. The
Flamingo Hilton-Laughlin upgraded its guest room bathrooms and continued its
slot machine replacement program. The Reno Hilton completed a renovation of its
casino and the registration, entertainment and retail areas of the property, and
opened a new Johnny Rockets restaurant. The Flamingo Hilton-Reno renovated its
casino and remodeled the Top of the Flamingo Hilton restaurant.
The space utilized by the Company's casinos in Nevada, in terms of
approximate square footage, is as follows: Las Vegas Hilton -- 78,000 square
feet (inclusive of 29,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 74,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 58,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 118,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 46,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).
16
<PAGE>
Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big 6, baccarat, poker, keno and slot and other coin machines. The Las
Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad International, manages three international
hotel-casinos which feature table games and slot machines similar to those
offered at the Company's hotel-casinos in Nevada.
In April 1995, the Company commenced operation of the 136-room Conrad
International Treasury in Brisbane, Australia. This hotel-casino features a
65,000-square-foot casino and has the exclusive right to conduct casino gaming
in Brisbane until 2005. The Company has a 19.9% ownership interest in this
property.
The Company also has a 19.9% ownership interest in the 605-room Hotel Conrad
& Jupiters Casino, which opened in 1985. This hotel-casino is located on the
Gold Coast in Queensland, Australia, and features a 70,000-square-foot casino.
This property had the exclusive right to conduct casino gaming on Queensland's
Gold Coast through 1995.
The Company has a 25% ownership interest in the 620-room Conrad
International Istanbul, which opened in 1992. This hotel-casino includes a
12,000-square-foot casino.
CASINO WINDSOR
The Company and the other two shareholders of Windsor Casino Limited ("WCL")
operate the Casino Windsor, an interim 50,000-square-foot casino in Windsor,
Ontario, Canada. The Company, through Conrad International, owns a 33.3%
interest in WCL, which operates this project for the Ontario provincial
government. The Company anticipates that the interim casino will be replaced by
a permanent facility in early 1998, which will include a hotel of approximately
400 rooms, a 75,000-square-foot casino, entertainment and meeting facilities.
Since December 1995, the Company has chartered a riverboat to the Ontario
provincial government to serve as a complementary facility for Casino Windsor.
This vessel provides an additional 25,000 square feet of casino space for the
property.
NEW ORLEANS RIVERBOAT CASINO
Since February 1994, the Company has operated a riverboat casino located
adjacent to the New Orleans Hilton Riverside & Towers. The Company currently
operates a 1,500-passenger vessel which has a 20,000-square-foot casino
featuring table games and slot machines similar to those offered at the
Company's hotel-casinos in Nevada. This vessel is wholly owned by the Company
and leased to a joint venture, of which the Company owns a 50% interest.
OTHER OPERATIONS
VACATION OWNERSHIP
The Company owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 12 vacation ownership resorts in
Florida and one in Nevada. In January 1995, HGVC commenced operation of a
200-unit vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas. In
August 1995, HGVC also commenced operation of the first phase of a 360-unit
vacation ownership resort adjacent to Sea World in Orlando, Florida.
Development, construction and certain operating costs of HGVC's projects in Las
Vegas and Orlando have been substantially funded by the Company in the form of
revolving loan facilities. HGVC is seeking new development and acquisition
opportunities in other resort locations.
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
and through its hotels division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies to hotels and
hotel-casinos. The revenue from this operation depends primarily on the number
of new hotels operated or franchised by Hilton and on refurbishing and
remodeling of existing Hilton hotels.
17
<PAGE>
COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by Hilton
and the balance by Budget Rent-A-Car, Inc., operates a computerized worldwide
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is managed by Litton Computer Services.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by Hilton
Service Corporation, the operator of a worldwide system of reservation offices
for hotels operated by Hilton, Hilton International Co., their affiliates and
others. Hilton Service Corporation is owned 51% by Hilton and 49% by Hilton
International Co.
OWNED, LEASED AND MANAGED HOTELS
The following charts set forth the Company's owned, leased and managed
hotels.
OWNED HOTELS
At February 1, 1996, the following hotels were owned in fee and operated by
Hilton:
<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1996
- -------------------------------------------------- ------------- --------- -----------------
<S> <C> <C> <C>
Atlanta Airport Hilton & Towers 503 1960 $50,000,000
Atlanta, Georgia(1) (1989)
Palmer House Hilton 1,639 1988 --
Chicago, Illinois(2) (1925; 1945)
Flamingo Hilton-Las Vegas 3,642
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Flamingo Hilton-Laughlin 2,000 1990 --
Laughlin, Nevada (1990)
New Orleans Airport Hilton 317 1959 $32,000,000
New Orleans, Louisiana(1) (1989)
Waldorf=Astoria 1,380 1977 --
New York, New York(3) (1931)
Portland Hilton 455 1963 --
Portland, Oregon (1963)
Flamingo Hilton-Reno 604 1981 --
Reno, Nevada(4) (1978)
Reno Hilton 2,001 1992 --
Reno, Nevada (1978)
Hilton Garden Inn 195 1993 --
Southfield, Michigan(5) (1988)
Hilton Suites 224 1991 --
Auburn Hills, Michigan (1991)
Hilton Suites 203 1989 --
Brentwood, Tennessee (1989)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1996
- -------------------------------------------------- ------------- --------- -----------------
<S> <C> <C> <C>
Hilton Suites 230 1989 --
Orange, California (1989)
Hilton Suites 226 1990 --
Phoenix, Arizona (1990)
</TABLE>
- ------------------------------
(1) The Atlanta Airport Hilton & Towers and the New Orleans Airport Hilton were
closed and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
acquiring the property in February 1988.
(3) The Company operated the Waldorf=Astoria under a lease from February 1950
until acquiring the property in April 1977.
(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
LEASED HOTELS
At February 1, 1996, the following hotels were leased and operated by
Hilton:
<TABLE>
<CAPTION>
NUMBER OF
ROOMS (YEAR OF
INITIAL COMPLETION;
YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
- -------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
Logan Airport Hilton 516 2014, with renewal options aggregating 25 years
Boston, Massachusetts(1) (1959; 1988) under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 363 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30 years
Pittsburgh, Pennsylvania (1959; 1959)
San Diego Hilton Beach & Tennis Resort 357 2019
San Diego, California (1962; 1965)
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30 years
Seattle, Washington (1961; 1961)
Tarrytown Hilton 236 2003, with renewal options aggregating 40 years
Tarrytown, New York(3) (1961; 1993)
</TABLE>
- ------------------------------
(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the remaining
equity interest in the joint venture leasing the land underlying the hotel.
19
<PAGE>
MANAGED HOTELS
At February 1, 1996, the following hotels were operated by Hilton under
management agreements:
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC
Anaheim Hilton & Towers 1,576 2014, with renewal options aggregating 30 years,
Anaheim, California(1) (1984) subject to certain termination rights
Anchorage Hilton 591 2006, with renewal options aggregating 20 years
Anchorage, Alaska (various dates
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10 years
Atlanta, Georgia (1976)
Beverly Hilton 581 2007, with renewal options aggregating 20 years,
Beverly Hills, California (1955; 1967) subject to certain termination rights
Chicago Hilton & Towers 1,543 2005, with renewal options aggregating 20 years
Chicago, Illinois(2) (various dates
through 1986)
Tamarron Hilton Resort 294 2015, subject to certain termination rights
Durango, Colorado (1975)
Brunswick Hilton & Towers 405 2013, subject to certain termination rights
East Brunswick, New Jersey(1) (1989)
Hilton Hawaiian Village 2,542 1997, with renewal options aggregating 20 years
Honolulu, Hawaii(3) (various dates
through 1988)
Long Beach Hilton 393 2012, with renewal options aggregating 20 years,
Long Beach, California (1992) subject to certain termination rights
Los Angeles Airport Hilton & Towers 1,234 1999, with renewal options aggregating 10 years,
Los Angeles, California (1983) subject to certain termination rights
McLean Hilton 458 2007, with renewal options aggregating 20 years
McLean, Virginia(2) (1987)
Fontainebleau Hilton Resort & Towers 1,206 1998, with a renewal option for 10 years, subject
Miami, Florida (1954) to certain termination rights
Miami Airport Hilton & Towers 500 2004, with renewal options aggregating 20 years
Miami, Florida(2) (1983)
Minneapolis Hilton & Towers 814 2012, with renewal options aggregating 20 years,
Minneapolis, Minnesota (1992) subject to certain termination rights
Newark Airport Hilton 374 2003
Newark, New Jersey (1988)
New Orleans Hilton Riverside & Towers 1,600 2007, with a renewal option for 10 years
New Orleans, Louisiana(4) (1977; 1983)
Millenium Hilton 561 2004, with a renewal option for 10 years, subject
New York, New York (1992) to certain termination rights
New York Hilton & Towers 2,041 (5)
New York, New York(3) (1963)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
Turtle Bay Hilton Golf & Tennis Resort 485 2004, with a renewal option for 10 years
Oahu, Hawaii (1972)
Hilton at Walt Disney World 814 2003, with renewal options aggregating 20 years,
Orlando, Florida(1) (1983) subject to certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10 years, subject
Pasadena, California (1970) to certain termination rights
The Pointe Hilton Resort on 636 2012, with renewal options aggregating 20 years,
South Mountain (1986) subject to certain termination rights
Phoenix, Arizona
The Pointe Hilton Resort at Squaw Peak 563 2012, with renewal options aggregating 20 years,
Phoenix, Arizona (1977) subject to certain termination rights
The Pointe Hilton Resort at 585 2012, with renewal options aggregating 20 years,
Tapatio Cliffs (1982) subject to certain termination rights
Phoenix, Arizona
Rye Town Hilton 438 (5)
Rye Brook, New York(3) (1973; 1978)
Hilton Palacio del Rio 481 1998, with a renewal option for 10 years
San Antonio, Texas (1968)
San Antonio Airport Hilton 387 2001, subject to certain termination rights
San Antonio, Texas(1) (1982)
San Francisco Hilton & Towers 1,895 2005, with a renewal option for 10 years
San Francisco, California(3) (various dates
through 1988)
Hilton at Short Hills 300 2000, with a renewal option for 5 years, subject
Short Hills, New Jersey (1988) to certain termination rights
Innisbrook Hilton Resort 873 2013, subject to certain termination rights
Tarpon Springs, Florida(1) (1972)
Hilton Waikoloa Village 1,238 2013, subject to certain termination rights
Waikoloa, Hawaii(2) (1988)
Capital Hilton 543 2005, with a renewal option for 10 years
Washington, D.C.(3) (1943; 1985)
Washington Hilton & Towers 1,123 (5)
Washington, D.C.(3) (1965)
Hilton Suites 212 2009, with renewal options aggregating 20 years
Oakbrook Terrace, Illinois(1)(3) (1989)
Hilton Garden Inn 152 2012, subject to certain termination rights
Valencia, California(2) (1991)
INTERNATIONAL
Conrad International Barcelona 412 2007, with a renewal option for 5 years
Barcelona, Spain(1) (1992)
Conrad International Treasury 136 2010
Brisbane, Australia(2) (1995)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
Conrad International Brussels 269 2013, with renewal options aggregating 20 years
Brussels, Belgium (1993)
Conrad International Dublin 191 2010, with renewal options aggregating 20 years
Dublin, Ireland(1)(2) (1989)
Conrad International Hong Kong 513 2021
Hong Kong(2) (1990)
Conrad International Hurghada 260 2015, with renewal options aggregating 20 years,
Hurghada, Egypt (1994) subject to certain termination rights
Conrad International Istanbul 620 2011, with a renewal option for 20 years
Istanbul, Turkey(1)(2) (1992)
Conrad International London 159 2016, with renewal options aggregating 20 years
London, England (1990)
Hotel Conrad & Jupiters Casino 605 2010
Gold Coast, (1986)
Queensland, Australia(2)
</TABLE>
- ------------------------------
(1) Hilton has made loans to the owners of each of the referenced properties.
(2) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 48 and 49 in the Annual
Report.
(3) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 2 above.
(4) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Hilton Riverside & Towers. See note 2 above.
(5) The management agreements with respect to each of the referenced properties
expired on December 31, 1995, but Hilton continues to manage each of the
properties for the fees specified in the expired agreements.
ENVIRONMENTAL MATTERS
The Company, like others in its industry, is subject to various federal,
state, local and, in some cases, foreign laws, ordinances and regulations that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous or toxic wastes, or (ii) may impose liability for the
costs of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous or toxic substances or wastes
(together, "Environmental Laws").
The Company endeavors to maintain compliance with Environmental Laws, but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including uncertainty whether a
Company facility in fact shipped any wastes to one such site, the number of
potentially responsible parties at such sites and, where available, the volume
and type of waste sent to each such site, the Company believes that any
liability arising from such disposals under Environmental Laws would not have a
material adverse effect on its results of operation or financial condition.
22
<PAGE>
REGULATION AND LICENSING
Under provisions of Nevada, Louisiana and New Jersey and other gaming laws,
and the Company's certificate of incorporation, certain securities of the
Company are subject to restrictions on ownership which may be imposed by
specified governmental authorities. Such restrictions may require the holder to
dispose of the securities or, if the holder refuses to make such disposition,
the Company may be obligated to repurchase the securities.
NEVADA GAMING LAWS. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Gaming Commission, the
Control Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) to provide a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations. The
Company is required to be registered by the Gaming Commission as a publicly
traded corporation ("Registered Corporation") and as such, it is required
periodically to submit detailed financial and operating reports to the Gaming
Commission and furnish any other information that the Gaming Commission may
require.
Any beneficial holder of the Common Stock, regardless of the number of
shares owned, may be required to file an application, be investigated, and have
such person's suitability as a beneficial holder of the Common Stock determined
if the Gaming Commission has reason to believe that such ownership would
otherwise be inconsistent with the declared policies of the State of Nevada. The
applicant must pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the Common
Stock to report the acquisition to the Gaming Commission. Ownership of the Notes
may constitute ownership of the Common Stock for this purpose. The Nevada Act
requires that beneficial owners of more than 10% of the Common Stock apply to
the Gaming Commission for a finding of suitability within thirty days after the
Chairman of the Control Board mails the written notice requiring such filing.
Under certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%, of the Common
Stock may apply to the Gaming Commission for a waiver of such finding of
suitability if such institutional investor holds the Common Stock for investment
purposes only. An institutional investor shall not be deemed to hold the Common
Stock for investment purposes unless the Common Stock was acquired and is held
in the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the Board of Directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company, or
any of its gaming affiliates, or any other action which the Gaming Commission
finds to be inconsistent with holding the Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type
23
<PAGE>
normally made by securities analysts for informational purposes and not to cause
a change in its management, policies or operations; and (iii) such other
activities as the Gaming Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation. Barron Hilton, the
Company's largest stockholder, has been found suitable as a controlling
stockholder of the Company.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Common Stock
beyond such period of time as may be prescribed by the Gaming Commission may be
guilty of a criminal offense. The Company is subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company or the licensees, the Company (i)
pays that person any dividend or interest upon voting securities of the Company;
(ii) allows that person to exercise, directly or indirectly, any voting right
conferred through securities held by that person; (iii) pays remuneration in any
form to that person for services rendered or otherwise; or (iv) fails to pursue
all lawful efforts to require such unsuitable person to relinquish the voting
securities for cash at fair market value. Additionally, the CCB has taken the
position that it has the authority to approve all persons owning or controlling
the stock of any corporation controlling a gaming license.
The Gaming Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation, such as the Notes, to file applications,
be investigated and be found suitable to own such debt security of a Registered
Corporation. If the Gaming Commission determines that a person is unsuitable to
own such security, then pursuant to the Nevada Act, the Registered Corporation
can be sanctioned, including the loss of its approvals, if without the prior
approval of the Gaming Commission, it (i) pays to the unsuitable person any
dividend, interest or any distribution whatsoever; (ii) recognizes any voting
right by such unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. On September 28, 1995, the Gaming
Commission granted the Company prior approval to make public offerings for a
period of one year, subject to certain conditions (the "Shelf Approval").
However, the Shelf Approval may be rescinded for good cause without prior notice
upon the issuance of an interlocutory stop order by the Chairman of the Control
Board. This Offering is made pursuant to such Shelf Approval. The Shelf Approval
does not constitute a finding, recommendation or approval by the Gaming
Commission or the Control Board as to the accuracy or adequacy of the Prospectus
or the investment merits of the securities offered. Any representation to the
contrary is unlawful.
24
<PAGE>
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licenses, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Gaming
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.
LOUISIANA GAMING LAWS. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). As of May 1, 1996, gaming
activities will be regulated by the Louisiana Gaming Control Board (the
"Board"). The Board is responsible for investigating the background of all
applicants seeking a riverboat gaming license, issuing the license and enforcing
the laws, rules and regulations relating to riverboat gaming activities.
The applicant, its officers, directors, key personnel, partners and person
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Board. This requires the filing of an extensive
application to the Board disclosing personal, financial, criminal, business and
other information. On October 13, 1993, the Board's predecessor issued a
riverboat gaming license to the Queen of New Orleans, a joint venture of which
the Company owns a 50% interest. The Company's joint venture commenced riverboat
gaming operations in New Orleans, Louisiana on February 10, 1994.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Board approval and the transferee must be found suitable. Ownership
of the Notes may constitute ownership of the Common Stock for this purpose. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
The Board must approve all security holders of the licenses and may find any
such security holder not qualified to own those securities. Louisiana law may
require that the charter or bylaws of the licensee provide that securities are
held subject to the condition that, if a holder is found to be disqualified by
the Board, the holder must dispose of the securities of the licensee. If a
security holder of a licensee is found disqualified, it will be unlawful for the
security holder to (i) receive any dividend or interest with regard to the
securities; (ii) exercise, directly or indirectly, any rights conferred by the
securities; or (iii) receive any remuneration from the licensee for services
rendered or otherwise. The Board may impose similar approval requirements on
holders of securities of any intermediary or holding company of the licensee,
but may waive those requirements with respect to holders of publicly-traded
securities of intermediary and holding companies if such holders do not have the
ability to control the publicly-traded corporation or elect one or more
directors thereof.
25
<PAGE>
On April 19, 1996, the Louisiana legislature approved legislation mandating
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual types of gaming. The referendum
will be brought before the Louisiana voters at the time of the 1996 presidential
election and will determine whether each of the following types of gaming will
be prohibited or permitted in the following described Louisiana parishes: (i)
the operation of video draw poker devices in each parish; (ii) the conduct of
riverboat gaming in each parish that is contiguous to a statutorily designated
river or waterway or (iii) the conduct of land-based casino gaming operations in
Orleans Parish. If a majority of the voters in a parish elect to prohibit one or
more of the above-described gaming activities in such parish, then no license or
permit shall be issued to conduct such prohibited gaming activity in such parish
and no such gaming activity may be permitted in that parish. If, however,
riverboat gaming was previously permitted in such parish, the legislation
permits the current gaming operator to continue riverboat gaming in that parish
until the expiration of its gaming license. The Company's current riverboat
gaming license expires on February 10, 1999. Further, in parishes where
riverboat gaming is currently authorized and voters elect to prohibit riverboat
gaming, the legislation provides that the gaming license shall not be reissued
or transferred to any parish other than a parish in which a riverboat upon which
gaming is conducted is berthed. The current legislation, however, does not
provide for any moratorium on future local elections on gaming. Further, the
current legislation does not provide for any moratorium that must expire before
future local elections on gaming could be mandated or allowed.
NEW JERSEY GAMING LAWS. The ownership and operations of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.
In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."
For a more complete description of the various applicable gaming regulatory
requirements under the Nevada, Louisiana and New Jersey Gaming Laws, see
"Additional Information -- Regulation and Licensing" in the Form 10-K.
MISSOURI GAMING LAWS. In 1993, Missouri enacted the Missouri Gaming Law
(the "MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for the licensing and regulation of riverboat gaming in Missouri.
The number of licenses which may be granted is not specifically limited by
statute or regulation but may be subject to limitations imposed by the MGC. The
MGL grants specific powers and duties to the MGC to supervise riverboat gaming
and implement the MGL and take any other action as may be reasonable or
appropriate to enforce the MGL. The MGC may approve permanently moored
("dockside") riverboat casinos subject to specific criteria that includes the
economic interest of Missouri and the safety of the general public.
Under the MGL, the ownership and operation of riverboat gaming facilities in
Missouri are subject to extensive state and local regulation. If a company is
granted a gaming license in Missouri, such company, any related subsidiaries and
its officers, directors, significant shareholders and employees will be subject
to regulation. The initial license and first subsequent license renewal of an
excursion gambling boat operator generally is for a period of one year. The MGC,
however, may reopen license hearings at any time and may terminate or impose
additional regulations upon a licensee at any time during the term of a license.
In addition to the owner's license and operator's license for the riverboat,
most individuals participating in gaming operations are required to have an
occupational license from the MGC. Applicants and licensees are
26
<PAGE>
responsible to keep the application and any requested materials current at all
times, and this responsibility shall continue throughout any period of licensure
granted by the MGC. In addition, Missouri has extensive licensing disclosure
requirements.
Pursuant to its rulemaking authority, the MGC has adopted certain
regulations which provide, among other things, that: (i) no gaming licensee or
occupational licensee may pledge, hypothecate or transfer in any way any
license, or any interest in a license, issued by the MGC; (ii) without first
notifying the MGC at least 60 days prior to such consummation of any of the
following transactions (and during such period the MGC may disapprove the
transaction or require the transaction to be delayed pending further
investigation) (a) a gaming licensee or a holding company affiliated with a
gaming licensee may not make a public issuance of debt, (b) a publicly held
gaming licensee or a publicly held holding company may not make any issuance of
an ownership interest equaling 5% or greater of the gaming licensee or holding
company (ownership of the Notes may constitute ownership of the Common Stock for
this purpose) or (c) a person or entity may not pledge or hypothecate an
ownership interest in a gaming licensee that is not a publicly held company or a
holding company that is not a publicly held company; provided that no such
ownership interest may be transferred voluntarily or involuntarily pursuant to
any pledge without separate notice to the MGC as required by the regulations;
(iii) not later than 7 days after the consummation of any transfer of ownership
interest in a publicly held gaming licensee, if such transfer would result in an
entity or group of entities acting in concert owning, directly or indirectly, a
total amount of ownership interest equaling 5% or greater of the ownership
interest in the gaming licensee, the transferee must report such consummation to
the MGC; (iv) no withdrawals of capital, loans, advances or distribution of any
type of assets in excess of 5% of accumulated earnings of a licensee to anyone
with an ownership interest in the licensee may occur without prior MGC approval;
and (v) the MGC may take action against a licensee or other person who has been
disciplined in another jurisdiction for gaming related activity.
DESCRIPTION OF THE NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
will be issued pursuant to an indenture (the "Indenture") to be dated as of
, 1996, by and between Hilton Hotels Corporation and The Bank of New
York, as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The terms of the
Indenture are also governed by certain provisions contained in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of the Notes and the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by, reference to all of the
provisions of the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this Prospectus and those terms made a part
of the Indenture by reference to the Trust Indenture Act as in effect on the
date of the Indenture. Capitalized terms used herein without definition have the
meanings ascribed to them in the Indenture. As used in this section "Description
of the Notes", the "Company" refers to Hilton Hotels Corporation, exclusive of
its subsidiaries. Wherever particular provisions of the Indenture are referred
to in this summary, such provisions are incorporated by reference as a part of
the statements made and such statements are qualified in their entirety by such
reference.
GENERAL
The Notes will be unsecured, subordinated, general obligations of the
Company, limited in aggregate principal amount to $ ($ if the
Underwriters' over-allotment option is exercised in full). The Notes will be
subordinated in right of payment to all Senior Indebtedness of the Company, as
described under "Subordination" below. The Notes will be issued only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes will mature on , 2006. The Notes will bear interest at
the rate per annum stated on the cover page of this Prospectus from the date of
issuance or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually on and of
each year, commencing , 1996, to the persons in whose names such Notes
are registered at the close of business on or immediately
preceding such Interest Payment Date. Principal of,
27
<PAGE>
premium, if any, and interest on, the Notes will be payable, the Notes will be
convertible and the Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The City
of New York. Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
At the option of the Company, payment of interest may be made by check
mailed to the Holders of the Notes at the addresses set forth upon the registry
books of the Registrar. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Until otherwise designated by the Company, the Company's office or
agency will be the corporate trust office of the Trustee presently located at
101 Barclay Street, 21 West, New York, New York 10286.
CONVERSION RIGHTS
The Holder of any Notes will have the right, at the Holder's option, to
convert any portion of the principal amount thereof that is an integral multiple
of $1,000 into shares of Common Stock which includes the related Series A Junior
Participating Preferred Stock Purchase Rights (the "Rights"), at any time prior
to the second Business Day prior to the Stated Maturity of the Notes (unless
earlier redeemed or repurchased) at the Conversion Price set forth on the cover
page of this Prospectus (subject to adjustment as described below). The right to
convert a Note called for redemption or delivered for repurchase will terminate
at the close of business on the Business Day prior to the Redemption Date or
Repurchase Date for such Note, unless the Company subsequently fails to pay the
applicable Redemption Price or Repurchase Price, as the case may be.
In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest the stated due date of
which is on such Interest Payment Date shall be payable on such Interest Payment
Date notwithstanding such conversion, and such interest shall be paid to the
Holder of such Note who is a Holder on such Record Date. Any Note so converted
must be accompanied by payment of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of Notes being surrendered
for conversion (unless such Note shall have been called for redemption, in which
case no such payment shall be required). No fractional shares will be issued
upon conversion but, in lieu thereof, an appropriate amount will be paid in cash
by the Company based on the market price of Common Stock (as determined in
accordance with the Indenture) at the close of business on the day of
conversion.
The Conversion Price will be subject to adjustment upon the occurrence of
certain events, including: (a) any payment of a dividend (or other distribution)
payable in Common Stock on any class of Capital Stock of the Company, (b) any
issuance to all holders of Common Stock of rights, options or warrants entitling
them to subscribe for or purchase Common Stock at less than the then current
market price (as determined in accordance with the Indenture) of Common Stock;
provided, however, that if such options or warrants are only exercisable upon
the occurrence of certain triggering events, then the Conversion Price will not
be adjusted until such triggering events occur, (c) any subdivision, combination
or reclassification of Common Stock, (d) any distribution to all holders of
Common Stock of evidences of indebtedness, shares of Capital Stock other than
Common Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding dividends and distributions paid exclusively in cash), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the second succeeding paragraph applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) all
other such all-cash distributions made within the then preceding 12 months in
respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its Subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 15% of the Company's market capitalization (defined as being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of a tender or exchange offer made by the Company or any of
its
28
<PAGE>
Subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and other consideration payable in a tender or
exchange offer by the Company or any of its Subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange offer in respect of which no adjustment has been made and (ii) the
aggregate amount of any such all-cash distributions referred to in (e) above to
all holders of Common Stock within the 12 months preceding the expiration of
such tender or exchange offer in respect of which no adjustments have been made,
exceeds 15% of the Company's market capitalization on the expiration of such
tender offer. No adjustment of the Conversion Price will be required to be made
until the cumulative adjustments amount to 1.0% or more of the Conversion Price
as last adjusted. The Company reserves the right to make such reductions in the
Conversion Price in addition to those required in the foregoing provisions as it
considers to be advisable. In the event the Company elects to make such a
reduction in the conversion price, the Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder if and to the extent that such laws and regulations are
applicable in connection with the reduction of the Conversion Price.
In the event that the Company distributes rights or warrants (other than
those referred to in (b) in the preceding paragraph) PRO RATA to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Holder of any Note surrendered for conversion will
be entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
rights or warrants to be determined as follows: (i) if such conversion occurs on
or prior to the date for the distribution to the holders of rights or warrants
of separate certificates evidencing such rights or warrants (the "Distribution
Date"), the same number of rights or warrants to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and provisions of and
applicable to the rights or warrants, and (ii) if such conversion occurs after
such Distribution Date, the same number of rights or warrants to which a holder
of the number of shares of Common Stock into which such Note was convertible
immediately prior to such Distribution Date would have been entitled on such
Distribution Date in accordance with the terms and provisions of and applicable
to the rights or warrants. The conversion price of the Notes will not be subject
to adjustment on account of any declaration, distribution or exercise of such
rights or warrants.
In case of any reclassification, consolidation or merger of the Company with
or into another person or any merger of another person with or into the Company
(with certain exceptions), or in case of any sale, transfer or conveyance of all
or substantially all of the assets of the Company (computed on a consolidated
basis), each Note then outstanding will, without the consent of any Holder of
Notes, become convertible only into the kind and amount of securities, cash and
other property receivable upon such reclassification, consolidation, merger,
sale, transfer or conveyance by a holder of the number of shares of Common Stock
into which such Note was convertible immediately prior thereto, after giving
effect to any adjustment event, who failed to exercise any rights of election
and received per share the kind and amount received per share by a plurality of
non-electing shares.
SUBORDINATION
The Notes will be general, unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. At December 31, 1995, as adjusted to give effect to the issuance
and sale of the Notes and the application of the net proceeds therefrom, the
Company would have had approximately $1.1 billion of Senior Indebtedness
outstanding. The Notes are structurally subordinated in right of payment to all
liabilities (including trade payables) of the Company's Subsidiaries. The
Company's Subsidiaries had approximately $160.1 million of trade payables and
accrued liabilities outstanding at December 31, 1995. The Indenture will not
restrict the incurrence of Senior Indebtedness or other indebtedness by the
Company or its Subsidiaries.
The Indenture will provide that no payment may be made by the Company on
account of the principal of, premium, if any, and interest on the Notes, or to
acquire any of the Notes (including repurchases of Notes at the option of the
Holder) for cash or property (other than Junior Securities), or on account of
the
29
<PAGE>
redemption provisions of the Notes, (i) upon the maturity of any Senior
Indebtedness of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on
such Senior Indebtedness are first paid in full (or such payment is duly
provided for), or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on any Senior Indebtedness of the Company when
it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise (a "Payment Default"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Senior Indebtedness or their representative
immediately to accelerate its maturity and (ii) written notice of such event of
default given to the Company and the Trustee by the holders of an aggregate of
at least $50,000,000 principal amount outstanding of such Senior Indebtedness or
their representative (a "Payment Notice"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
(by setoff or otherwise) may be made by or on behalf of the Company on account
of the principal of, premium, if any, interest on the Notes, or to acquire or
repurchase any of the Notes for cash or property, or on account of the
redemption provisions of the Notes, in any such case other than payments made
with Junior Securities of the Company. Notwithstanding the foregoing, unless (i)
the Senior Indebtedness in respect of which such event of default exists has
been declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii)
such declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Notes during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Notes. Any
number of Payment Notices may be given; PROVIDED, HOWEVER, that (i) not more
than one Payment Notice shall be given within a period of any 360 consecutive
days, and (ii) no default that existed upon the date of such Payment Notice or
the commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Senior Indebtedness) shall be made the basis for
the commencement of any other Payment Blockage Period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshalling of
assets or liabilities, (i) the holders of all Senior Indebtedness of the Company
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, interest on, with respect to, the Notes
(other than Junior Securities) and (ii) any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on behalf of
the Holders would be entitled (by setoff or otherwise), except for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company or
their representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
30
<PAGE>
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Notes. The subordination
provisions of the Indenture and the Notes will not prevent the occurrence of any
Default or Event of Default under the Indenture or limit the rights of the
Trustee or any Holder, subject to the two preceding previous paragraphs, to
pursue any other rights or remedies with respect to the Notes.
The Company conducts certain of its operations through its Subsidiaries.
Accordingly, the Company's ability to meet its cash obligations is dependent
upon the ability of its Subsidiaries to make cash distributions to the Company.
The ability of its Subsidiaries to make distributions to the Company is and will
continue to be restricted by, among other limitations, applicable provisions of
the laws of national and state governments and contractual provisions. The
Indenture will not limit the ability of the Company's Subsidiaries to incur such
restrictions in the future. The right of the Company to participate in the
assets of any Subsidiary (and thus the ability of Holders of the Notes to
benefit indirectly from such assets) is generally subject to the prior claims of
creditors, including trade creditors, of that Subsidiary except to the extent
that the Company is recognized as a creditor of such Subsidiary, in which case
the Company's claims would still be subject to any security interest of other
creditors of such Subsidiary. The Notes, therefore, will be structurally
subordinated to creditors, including trade creditors, of Subsidiaries of the
Company with respect to the assets of the Subsidiaries against which such
creditors have a claim.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshalling of assets or liabilities of the Company
and its Subsidiaries, Holders of the Notes may receive ratably less than other
creditors.
REDEMPTION AT THE COMPANY'S OPTION
The Notes will not be subject to redemption prior to , 1999.
Thereafter, the Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 1999 upon not less than 30 nor
more than 60 days notice to each Holder of Notes, at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
12-month period commencing of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
2000.......................................................... %
2001.......................................................... %
2002.......................................................... %
2003 and thereafter........................................... 100.00%
</TABLE>
in each case (subject to the right of Holders of record on a Record Date to
receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest, if any, to the
Redemption Date.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption by lot or in such other manner it deems
appropriate and fair. The Notes may be redeemed in part in multiples of $1,000
only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the Holder
of each Note to be redeemed to such Holder's last address as then shown upon the
registry books of the Registrar. The notice of redemption must state the
Redemption Date, the Redemption Price and the amount of accrued interest to be
paid. Any notice that relates to a Note to be redeemed in part only must state
the portion of the principal amount to be redeemed and must state that on and
after the Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued. On and
after the Redemption Date, interest will cease to accrue on the Notes or
portions thereof called for redemption, unless the Company defaults in its
obligations with respect thereto.
31
<PAGE>
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The Indenture will provide that each Holder, by accepting any of the Notes,
shall be deemed to have agreed that if the gaming authority of any jurisdiction
of which the Company or any of its subsidiaries conducts or proposes to conduct
gaming requires that a person who is a Holder must be licensed, qualified or
found suitable under applicable gaming laws, such Holder shall apply for a
license, qualification or a finding of suitability within the required time
period. If such person fails to apply or become licensed or qualified or is
found unsuitable, the Company shall have the right, at its option, (i) to
require such person to dispose of its Notes or beneficial interest therein
within 30 days of receipt of notice of the Company's election or such earlier
date as may be requested or prescribed by such gaming authority or (ii) to
redeem such Notes at a redemption price equal to the lesser of (A) such person's
cost or (B) 100% of the principal amount thereof, plus accrued and unpaid
interest to the earlier of the redemption date or the date of the finding of
unsuitability, which may be less than 30 days following the notice of redemption
if so requested or prescribed by the applicable gaming authority. The Company
shall notify the Trustee in writing of any such redemption as soon as
practicable. The Company shall not be responsible for any costs or expenses any
such Holder may incur in connection with its application for a license,
qualification or a finding of suitability.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture will provide that in the event that a Change of Control (as
defined) has occurred, each Holder of Notes will have the right, at such
Holder's option, pursuant to an irrevocable and unconditional offer by the
Company (the "Repurchase Offer"), to require the Company to repurchase all or
any part of such Holder's Notes (PROVIDED, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 40 Business Days after the occurrence
of such Change of Control at a cash price (the "Repurchase Price") equal to 100%
of the principal amount thereof, together with accrued and unpaid interest to
the Repurchase Date. The Repurchase Offer shall be made within 15 Business Days
following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Repurchase Offer Period"). Upon expiration of
the Repurchase Offer Period, the Company shall purchase all Notes tendered in
response to the Repurchase Offer. If required by applicable law, the Repurchase
Date and the Repurchase Offer Period may be extended as so required; however, if
so extended, it shall nevertheless constitute an Event of Default if the
Repurchase Date does not occur within 60 Business Days of the Change of Control.
The Indenture will provide that a "Change of Control" occurs upon the
occurrence of a Rating Decline in connection with any of the following events;
(i) upon any merger or consolidation of the Company with or into any person or
any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after giving
effect to such transaction, any "person" or "group" is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any "person" or "group" is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate
normally entitled to vote in the election of directors of the Company, (iii)
when, during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office, (iv) a sale or disposition, whether directly or indirectly, by the
Company of all or substantially all of the assets relating to the Hotel Segment
or the Gaming Segment (as segment is used in Regulation S-K and Regulation S-X
under the Securities Act), or (v) the PRO RATA distribution by the Company to
its stockholders of the Hotel Segment or the Gaming Segment.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange Act
as in effect on the Issue Date, whether or not applicable; and (ii) the term
"beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5 under
32
<PAGE>
the Exchange Act as in effect on the Issue Date, whether or not applicable,
except that a "person" shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time or upon the occurrence
of certain events.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted, together with an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to the Holders of Notes so accepted payment in an
amount equal to the Repurchase Price (together with accrued and unpaid
interest), and the Trustee will promptly authenticate and mail or deliver to
such Holders a new Note or Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time, and
will be dependent on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of "all or substantially all" of the assets of the Company, or the
Gaming Segment or the Hotel Segment has occurred.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Underwriters.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control, as set forth above. In addition, the Company may not have sufficient
financial resources available to fulfill its obligation to repurchase the Notes
upon a Change of Control or to repurchase other debt securities of the Company
or its Subsidiaries providing similar rights to the Holders thereof.
To the extent applicable, the Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other securities laws, rules and
regulations that may then be applicable to any offer by the Company to purchase
the Notes at the option of Holders upon a Change of Control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture will provide that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another person or group of affiliated persons, unless (i) either (a) in the case
of a merger or consolidation, the Company is the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; (ii) no Default or Event
of Default shall exist or shall occur immediately after giving effect on a PRO
FORMA basis to such transaction; and (iii) the resulting, surviving or
transferee entity holds all gaming licenses necessary to conduct the business of
such resulting, surviving or transferee entity.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor
33
<PAGE>
corporation had been named therein as the Company, and the Company will be
released from its obligations under the Indenture and the Notes, except as to
any obligations that arise from or as a result of such transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the SEC if the Company was subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
SEC and, in each case, together with a management's discussion and analysis of
results of operations and financial condition as such would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will define an Event of Default as (i) the failure by the
Company to pay any installment of interest on the Notes as and when due and
payable and the continuance of any such failure for 30 days, (ii) the failure by
the Company to pay all or any part of the principal of, or premium, if any, on
the Notes when and as the same become due and payable at maturity, redemption,
by acceleration or otherwise, including, without limitation, pursuant to any
Repurchase Offer or otherwise, (iii) the failure of the Company to perform any
conversion of Notes required under the Indenture and the continuance of any such
failure for 30 days, (iv) the failure by the Company to observe or perform any
other covenant or agreement contained in the Notes or the Indenture and, subject
to certain exceptions, the continuance of such failure for a period of 60 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes outstanding, (v) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Subsidiaries,
(vi) a default in the payment of principal, premium or interest when due that
extends beyond any stated period of grace applicable thereto or an acceleration
for any other reason of the maturity of any Indebtedness of the Company or any
of its Subsidiaries with an aggregate principal amount in excess of $50.0
million, and (vii) final unsatisfied judgments not covered by insurance
aggregating in excess of $50.0 million, at any one time rendered against the
Company or any of its Subsidiaries and not stayed, bonded or discharged within
30 days. The Indenture will provide that if a Default occurs and is continuing,
the Trustee must, within 90 days after the occurrence of such default, give to
the Holders notice of such default.
The Indenture will provide that if an Event of Default occurs and is
continuing (other than an Event of Default specified in clause (v) above), then
in every such case, unless the principal of all of the Notes shall have already
become due and payable, either the Trustee or the Holders of 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal and accrued interest thereon to be due and payable
immediately. If an Event of Default specified in clause (v) above occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the nonpayment of the principal
of, premium, if any, and interest on, the Notes that have become due solely by
such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a default
in the payment of principal of, premium, if any, or interest on any Note not yet
cured, or a default with respect to any covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers
34
<PAGE>
under the Indenture at the request, order or direction of any of the Holders,
unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee.
AMENDMENTS AND SUPPLEMENTS
The Indenture will contain provisions permitting the Company and the Trustee
to enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; PROVIDED,
FURTHER, that no such modification may, without the consent of each Holder
affected thereby: (i) change the Stated Maturity of any Note or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment or the conversion of any Note on or
after the due date thereof (including, in the case of redemption, on or after
the Redemption Date), or reduce the Repurchase Price, or alter the change of
control provisions or redemption provisions in a manner adverse to the Holders,
(ii) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, (iii) adversely affect the
right of such Holder to convert Notes, or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture will provide that no stockholder, employee, officer or
director, as such, past, present or future of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the Notes by reason of his, her or its status
as such stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Notes selected for redemption. Also, the Company is not
required to transfer or exchange any Notes for a period of 15 days before a
selection of Notes to be redeemed.
The registered Holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form of
one or more registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.
DTC 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. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
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 ("Direct Participants"). DTC is
owned by a number of
35
<PAGE>
its Direct Participants and by the NYSE, the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC 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 Participants"). The rules
applicable to DTC and its Participants are on file with the SEC.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with an interest in the
Global Note and (ii) ownership of the Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own and that security interests in negotiable instruments
can only be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes evidenced by the Global Note will be
limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
a Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge such interest to persons or entities that
do not participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on, any
Note represented by a Global Note registered in the name of the Depositary or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if any
or interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interests in the Global Note as shown on the
records of the Depositary. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Notes, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by Global
Notes. In addition, subject to certain conditions, any person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon any
such issuance, the Trustee is required to register such Certificated Notes in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
36
<PAGE>
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company will have no responsibility for the
performance by the Depositary or its Participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
Depositary. With respect to Notes represented by Certificated Notes, the Company
will make all payments of principal, premium, if any, and interest, by mailing a
check to each such Holder's registered address. The Notes will trade in the
Depositary's Same-Day Funds Settlement System until maturity, or until the Notes
are issued in certificated form, and secondary market trading activity in the
Notes will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Notes.
CERTAIN DEFINITIONS
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law or executive order to
close.
"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"INDEBTEDNESS" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities of others of the kind described in the
preceding clauses (a) or (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or acquire
any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of any liability of the
kind described in any of the preceding clauses (a), (b) or (c), or this clause
(d), whether or not between or among the same parties.
"ISSUE DATE" means the date of first issuance of the Notes under the
Indenture.
"JUNIOR SECURITIES" of any person means any Qualified Capital Stock and any
Indebtedness of such person that is subordinated in right of payment to the
Notes and has no scheduled installment of principal due, by redemption, sinking
fund payment or otherwise, on or prior to the Stated Maturity of the Notes.
"RATING DECLINE" means the occurrence on or within 90 days after the date of
the first public notice of (i) the occurrence of a Change of Control or (ii) the
intention by the Company to effect a Change of Control, (which 90-day period
shall be extended so long as the rating of Senior Indebtedness of the Company is
under publicly announced consideration for possible downgrade by any of (x)
Moody's Investors Service, Inc. ("Moody's"), (y) Standard & Poor's Corporation
("S&P") or (z) Duff & Phelps ("D&P")), of a decrease in
37
<PAGE>
the rating of Senior Indebtedness of the Company by any of Moody's, S&P or D&P
to a rating that is below "Investment Grade." Investment Grade means a rating in
the top four rating categories by Moody's, S&P, D&P or any other nationally
recognized securities rating agency or agencies, as the case may be, selected by
the Company.
"SENIOR INDEBTEDNESS OF THE COMPANY" means any Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior in right of payment to the Notes or to
other Indebtedness which is PARI PASSU with, or subordinated to, the Notes;
PROVIDED that in no event shall Senior Indebtedness include (a) Indebtedness of
the Company owed or owing to any Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness to trade creditors or (c) any liability for taxes owed or owing by
the Company.
"STATED MATURITY" when used with respect to any Note means ,
2006.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the SEC as in effect as of the date of the Indenture.
"SUBSIDIARY," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
DESCRIPTION OF CAPITAL STOCK
GENERAL. As of December 31, 1995, the Company was authorized to issue 90.0
million shares of Common Stock, par value $2.50 per share, of which 51.0 million
shares were issued, including Treasury Shares of 2.7 million, and 10.0 million
shares of preferred stock, par value $1.00 per share (the "Preferred Stock"), of
which no shares have been issued.
COMMON STOCK
Each share of Common Stock entitles the holder to one vote on matters
submitted to a vote of the stockholders, and, subject to the prior preferences
of the Company's Preferred Stock, if issued, a PRO RATA share of assets
remaining available for distribution to stockholders upon a liquidation of the
Company. Dividends may be paid to the holders of the Common Stock when and if
declared by the Board of Directors of the Company out of funds legally available
therefor. The Company has paid cash dividends on its Common Stock. Any further
determination to pay cash dividends will be at the discretion of the Company's
Board of Directors and will depend upon the earnings of the Company, its
financial condition, capital requirements and other factors as the Company's
Board of Directors may deem relevant. The Common Stock is not convertible and
has no preemptive rights. There are no redemption provisions with respect to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock issuable upon conversion of the Notes will be, fully paid and
non-assessable.
38
<PAGE>
PREFERRED STOCK
The Company's Certificate of Incorporation provides that Preferred Stock may
be issued from time-to-time in one or more series. The Company's Board of
Directors has authority to fix or alter the dividend rights, dividends rates,
conversion rights, voting rights and terms of redemption (including sinking fund
provisions), redemption prices, and liquidation preferences of any wholly
unissued series of Preferred Stock, as well as the number of shares constituting
any such unissued series and the designation thereof, and to increase or
decrease the number of shares of any outstanding series (but not below the
number of shares of such series then outstanding), without any further vote or
action by the Company's stockholders.
PREFERRED STOCK RIGHTS AGREEMENT
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Rights Plan") and declared a dividend distribution of one Preferred Share
Purchase Right ("Rights") on each outstanding share of Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of the
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Common Stock
having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Common Stock and prior to an acquisition of 50% or more of
the Common Stock, Hilton's Board of Directors may exchange the Rights (other
than Rights owned by such person or group), in whole or in part, at an exchange
ratio of one share of Common Stock (or one one-hundredth of a share of the new
series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of 20%
or more of the Common Stock, the Rights are redeemable for one cent per Right at
the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law, which
restricts certain business combinations between the Company and an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) or such stockholder's affiliates or associates for a
period of three years following the date on which the stockholder becomes an
"interested stockholder." The restrictions do not apply if (i) prior to an
interested stockholder becoming such, the Board of Directors approves either the
business combination or the transaction in which the stockholder becomes an
interested stockholder, (ii) upon consummation of the transaction in which such
stockholder becomes an interested stockholder, such interested stockholder owns
at least 85% of the voting stock of the Company outstanding at the time the
transaction commenced (excluding shares owned by certain employee stock
ownership plans and persons who are both directors and officers of the Company),
or (iii) on or subsequent to the date an interested stockholder becomes such,
the business combination is both approved by the Board of Directors and
39
<PAGE>
authorized at an annual or special meeting of the Company's stockholders (and
not by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under the Company's Certificate of Incorporation, upon consummation of the
Offering (and the ultimate conversion of the Notes into shares of Common
Stock) there will be shares of Common Stock authorized but unissued,
and 10,000,000 shares of Preferred Stock authorized but unissued, for future
issuance without additional stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future offerings to
raise additional capital or to facilitate corporate acquisitions.
The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock.
One of the effects of the existence of unissued Common Stock or preferred
stock may be to enable the Company's Board of Directors to issue shares to
persons friendly to current management which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Company.
The Company does not currently have any plans to issue additional shares of
Common Stock or Preferred Stock other than shares of Common Stock which may be
issued upon the exercise of options which have been granted or which may be
granted in the future to directors, officers and employees of the Company. In
connection with the Offering, shares of Series A Preferred Stock will
be reserved for issuance pursuant to the Rights Plan. See "-- Preferred Stock
Rights Agreement."
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is Chemical Mellon
Shareholder Services LLC.
40
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States Federal
income tax considerations relevant to holders of the Notes. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in the Offering and hold the Notes as
a "capital asset" within the meaning of Section 1221 of the Code.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK
CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Notes into shares of Common Stock. However, cash paid in lieu
of a fractional share of Common Stock will result in taxable gain (or loss),
which will be capital gain (or loss) to the extent that the amount of such cash
exceeds (or is exceeded by) the portion of the adjusted basis of the Note
allocable to such fractional share. The adjusted basis of shares of Common Stock
received on conversion will equal the adjusted basis of the Note converted,
reduced by the portion of adjusted basis allocated to any fractional share of
Common Stock exchanged for cash. The holding period of an investor in the Common
Stock received on conversion will include the period during which the converted
Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Rights." Section 305 of
the Code and the Treasury Regulations issued thereunder may treat the holders of
the Notes as having received a constructive distribution, resulting in ordinary
income to the extent of the Company's current earnings and profits if and to the
extent that certain adjustments in the conversion price that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock) increase the proportionate interest of a holder of
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege. Moreover, if there is not a full adjustment
to the conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Common Stock
in the assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the Common Stock generally will be
treated as a distribution to such holders, taxable as ordinary income to the
extent of the Company's earnings and profits.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Note purchases it at market discount (i.e., at a price
below its stated redemption price at maturity) in excess of a
statutorily-defined DE MINIMIS amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a ratable basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount on
a Note may be taxable to an investor to the extent of appreciation at the time
of certain otherwise non-taxable transactions (e.g., gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, should (under Treasury Regulations not yet issued) carry over to the
Common Stock received on conversion and be treated as ordinary income upon a
subsequent disposition of such Common Stock to the extent of any gain recognized
on such disposition. In addition, absent an election to include market discount
in income as it accrues, a holder of a market discount debt instrument may be
required to
41
<PAGE>
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement, or other disposition of those
Notes measured by the difference (if any) between (i) the amount of cash and the
fair market value of any property received (except to the extent that such cash
or other property is attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary income)
and (ii) the holder's adjusted tax basis in those Notes (including any market
discount previously included in income by the holder). Each holder of Common
Stock into which the Notes are converted, in general, will recognize gain or
loss upon the sale, exchange, or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the Notes.
Any such gain or loss recognized on the sale, exchange, repurchase, retirement,
or other disposition of a Note or share of Common Stock should be capital gain
or loss (except as discussed under "-- Market Discount" above), and would be
long-term capital gain or loss if the Note or the Common Stock had been held for
more than one year at the time of the sale or exchange. An investor's initial
basis in a Note will be the cash price paid therefor.
BACKUP WITHHOLDING
A holder of Notes or Common Stock may be subject to "back-up withholding" at
a rate of 31% with respect to certain "reportable payments," including interest
payments, dividend payments and, under certain circumstances, principal payments
on the Notes. These back-up withholding rules apply if the holder, among other
things, (i) fails to furnish a social security number or other taxpayer
identification number ("TIN") certified under penalties of perjury within a
reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) fails to report properly interest or dividends, or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such holder is
not subject to back-up withholding. A holder who does not provide the Company
with its correct TIN also may be subject to penalties imposed by the IRS. Any
amount withheld from a payment to a holder under the back-up withholding rules
is creditable against the holder's federal income tax liability, provided the
required information is furnished to the IRS. Back-up withholding will not
apply, however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemption from back-up withholding is properly established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
GENERAL. The following is a general discussion of certain United States
Federal income and estate tax consequences of the acquisition, ownership and
disposition of Notes by a "Non-United States Holder" and does not deal with tax
consequences arising under the laws of any foreign, state, or local
jurisdiction. As used herein, a "Non-United States Holder" is a person or entity
that, for United States Federal income tax purposes, is not a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized under the laws of the United States or a political
subdivision thereof, or an estate or trust, the income of which is subject to
United States Federal income taxation regardless of its source. The tax
treatment of the holders of the Notes may vary depending upon their particular
situations. Certain holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. Prospective investors who are Non-United
States Holders are urged to consult their tax advisors regarding the United
States Federal tax consequences of acquiring, holding and disposing of Notes, as
well as any tax consequences that may arise under the laws of any foreign,
state, local or other taxing jurisdiction.
42
<PAGE>
INTEREST ON NOTES. Interest paid by the Company to a Non-United States
Holder will not be subject to United States Federal income or withholding tax if
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-United States Holder and (i) the
Non-United States Holder does not actually or constructively own 10% or more of
the total voting power of all voting stock of the Company and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code and (ii) the beneficial owner of the
Notes certifies, under penalties of perjury, that the beneficial owner is not a
United States person and provides the beneficial owner's name and address.
GAIN ON DISPOSITION OF NOTES. Subject to the discussion below concerning
gain on disposition of Common Stock of "USRPHCs" as defined below, a Non-United
States Holder will generally not be subject to United States Federal income tax
on gain recognized on a sale, redemption or other disposition of a Note unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder, (ii) in the case of a
Non-United States Holder who is a nonresident alien individual and holds the
Note as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year and certain other requirements are met. For
purposes of applying the exclusion from "FIRPTA tax" (as defined below) for the
holders of less than 5% of the Company's Common Stock, a holder of a Note will
be treated as owning the Common Stock into which the Notes are convertible.
DIVIDENDS ON COMMON STOCK. Dividends paid on shares of Common Stock, except
as described below, will be subject to withholding of United States Federal
income tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty, unless the dividends are effectively connected with the
conduct of a trade or business of the Non-United States Holder within the United
States. If the dividend is effectively connected with the conduct of a trade or
business of the Non-United States Holder within the United States, the dividend
would be subject to United States Federal income tax on a net income basis at
applicable graduated individual or corporate rates and would be exempt from the
30% withholding tax described above. Any such effectively connected dividends
received by a foreign corporation may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under current United States Treasury Regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above, and, under the current
interpretation of United States Treasury Regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury Regulations, not currently in effect, however, a Non-United States
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy applicable certification and other
requirements. Certain certification and disclosure requirements must be complied
with in order to be exempt from withholding under the effectively connected
income exemption discussed above.
A Non-United States Holder of Common Stock that is eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the United States IRS.
GAIN ON DISPOSITION OF COMMON STOCK. A Non-United States Holder generally
will not be subject to United States Federal income tax on any gain recognized
on a disposition of a share of Common Stock unless (i) subject to the exception
discussed below, the Company is or has been a "United States real property
holding corporation" (a "USRPHC") within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such Non-United States Holder's holding period (the "Required
Holding Period"), (ii) the gain is effectively connected with the conduct of a
trade or business within the United States of the Non-United States Holder and,
if a tax treaty applies, attributable to a permanent establishment maintained by
the Non-United States Holder, or (iii) the Non-United States Holder is an
individual who holds the share of Common Stock as a capital asset and is present
in the United States for 183 days or more in the taxable year of the disposition
and certain other requirements are met. If an individual Non-United States
Holder falls under clause (ii) above, he or she will be taxed on his or her net
gain derived from the sale under regular United States Federal income tax rates.
If
43
<PAGE>
the individual Non-United States Holder falls under clause ( iii ) above, he or
she will be subject to a flat 30% tax on the gain derived from the sale which
may be offset by United States capital losses (notwithstanding the fact that he
or she is not considered a resident of the United States). If a Non-United
States Holder that is a foreign corporation falls under clause (ii) above, it
will be taxed on its gain under regular graduated United States Federal income
tax rates and, in addition, will under certain circumstances be subject to the
branch profits tax.
A corporation is generally a USRPHC if the fair market value of its United
States real property interests equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used
or held for use in a trade or business. While not free from doubt, the Company
believes that it currently is a USRPHC. However, a Non-United States Holder
would generally not be subject to tax or withholding in respect of such tax on
gain from a sale or other disposition of Common Stock by reason of the Company's
USRPHC status if the Common Stock is regularly traded on an established
securities market ("regularly traded") during the calendar year in which such
sale or disposition occurs provided that such holder does not own, actually or
constructively, Common Stock with a fair market value in excess of 5% of the
fair market value of all Common Stock outstanding at any time during the
Required Holding Period. The Company believes that the Common Stock will be
treated as regularly traded.
If the Company is or has been a USRPHC within the Required Holding Period,
and if a Non-United States Holder owns in excess of 5% of the fair market value
of Common Stock (as described in the preceding paragraph), such Non-United
States Holder of Common Stock will be subject to United States Federal
income tax at regular graduated rates under certain rules ("FIRPTA tax") on gain
recognized on a sale or other disposition of such Common Stock. In addition, a
Non-United States Holder (without regard to its ownership percentage) is subject
to withholding in respect of FIRPTA tax at a rate of 10% of the amount realized
on a sale or other disposition of Common Stock in USRPHCs and will be further
subject to FIRPTA tax in excess of the amounts withheld. Any amount withheld
pursuant to such withholding tax will be creditable against such Non-United
States Holder's United States Federal income tax liability. Non-United States
Holders are urged to consult their tax advisors concerning the potential
applicability of these provisions.
FEDERAL ESTATE TAXES. If interest on the Notes is exempt from withholding
of United States Federal income tax under the rules described above, the Notes
will not be included in the estate of a deceased non-resident alien individual
holder for United States Federal estate tax purposes. Common Stock owned, or
treated as owned, by a non-resident alien individual (as specifically determined
for United States Federal estate tax purposes) at the time of death will be
included in such holder's gross estate for United States Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Company must report
annually to the IRS and to each Non-United States Holder the amount of interest
and dividends paid to such holder and the amount of any tax withheld. These
information reporting requirements apply regardless of whether withholding is
required. Copies of the information returns reporting such interest and
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-United States Holder resides under the provisions
of an applicable income tax treaty.
In the case of payments of interest to Non-United States Holders, temporary
Treasury Regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company nor
its payment agent has actual knowledge that the holder is a United States person
or that the conditions of any other exemption are not in fact satisfied. Under
temporary Treasury Regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Notes by or through a United
States office of a United States or foreign broker, unless the holder certifies
to the broker under penalties of perjury as to its name, address and status as a
foreign person or the holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a
44
<PAGE>
foreign office of a United States broker or foreign brokers with certain types
of relationships to the United States. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the Notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
United States backup withholding tax generally will not apply to (a) the
payment of dividends paid on Common Stock to a Non-United States Holder at an
address outside the United States or (b) the payment of the proceeds of the sale
of Common Stock to or through the foreign office of a broker. In the case of the
payment of proceeds from such a sale of Common Stock through a foreign office of
a broker that is a United States person or a foreign person with certain
relationships to the United States, however, information reporting (but not
backup withholding) is required with respect to the payment unless the broker
has documentary evidence in its files that the owner is a Non-United States
Holder and certain other requirements are met or the holder otherwise
establishes an exemption. The payment of the proceeds of a sale of shares of
Common Stock to or through a United States office of a broker is subject to
information reporting and possible backup withholding unless the owner certifies
its non-United States status under penalties of perjury or otherwise establishes
an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the IRS.
These information and backup withholding rules are under review by the
United States Treasury and their application to the Notes could be changed by
future regulations. On April 15, 1996, the IRS issued proposed Treasury
Regulations concerning the withholding of tax and reporting for certain amounts
paid to non-resident individuals and foreign corporations. The proposed
regulations would, among other changes, eliminate the presumption under current
regulations with respect to dividends paid to addresses outside the United
States. See "Dividends on Common Stock." The proposed Treasury Regulations, if
adopted in their present form, would be effective for payments made after
December 31, 1997. Prospective Note purchasers should consult their tax advisors
concerning the potential adoption of such Treasury Regulations and the potential
effect on the Notes and Common Stock.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") the Underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Montgomery Securities, Salomon Brothers Inc ("Salomon Brothers") and
Schroder Wertheim & Co. Incorporated ("Schroder") are acting as representatives
(the "Representatives"), have severally agreed to purchase from the Company and
the Company has agreed to sell to each of the Underwriters, the respective
principal amounts of Notes set forth opposite its name below, at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ------------------------------------------------------------------------------ --------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation..................................................... $
Montgomery Securities.........................................................
Salomon Brothers Inc .........................................................
Schroder Wertheim & Co. Incorporated..........................................
--------------
$ 500,000,000
--------------
--------------
</TABLE>
45
<PAGE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent including
the delivery of certain legal opinions by its counsel. The Company has agreed in
the Underwriting Agreement to indemnify the Underwriters and their controlling
persons against certain liabilities in connection with the offer and sale of the
Notes, including liabilities under the Securities Act, and to contribute to
payments that the Underwriters may be required to make in respect thereof. The
nature of the Underwriters' obligations is such that the Underwriters are
committed to purchase all of the Notes if any of the Notes are purchased by
them.
The Representatives have advised the Company that the Underwriters propose
to offer the Notes directly to the public initially at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
offering price less a concession not to exceed % of the principal amount of
the Notes. The Underwriters may reallow discounts not in excess of % of the
principal amount of the Notes to certain other dealers. After the initial public
offering of the Notes, the offering price and other selling terms may be changed
by the Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days, to purchase an additional $75.0
million aggregate principal amount of Notes, on the same terms and conditions as
are set forth on the cover page hereof. The Underwriters may exercise such
option to purchase additional Notes solely for the purpose of covering
over-allotments, if any, made in connection with the sale of the Notes offered
hereby. To the extent that the Underwriters exercise such option, the
Underwriters will be committed, subject to certain conditions, to purchase the
principal amounts of Notes proportionate to such Underwriter's initial
commitments as indicated in the preceding table.
Application has been made to list the Notes and the Common Stock on the
NYSE. Nevertheless, the Notes are new issues of securities, have no established
trading market and may not be widely distributed. The Company has been advised
by the Underwriters that, following the completion of this Offering, the
Underwriters presently intend to make a market in the Notes as permitted by
applicable laws and regulations. The Underwriters, however, are under no
obligation to do so and may discontinue any market-making activities at any time
at the sole discretion of the Underwriters. No assurance can be given as to the
liquidity of any trading market for the Notes.
DLJ, Salomon Brothers and Schroder have provided certain investment banking
services to the Company for which they have received usual and customary fees.
Directors and certain officers and stockholders of the Company, who
collectively are the beneficial owners of an aggregate of 12,334,800 shares of
Common Stock as of March 15, 1996, have agreed with the Underwriters, subject to
certain exceptions, not to, directly or indirectly, offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, without the prior
written consent of DLJ, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for, or warrants, options or rights to
purchase or acquire, Common Stock or in any other manner transfer all or a
portion of the economic consequences associated with the ownership of any Common
Stock, or enter into any agreement to do any of the foregoing, for a period of
90 days after the date of this Prospectus.
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Notes and the
validity of the Common Stock issuable upon conversion of the Notes will be
passed upon for the Company by Latham & Watkins, Los Angeles, California.
Certain legal matters relating to the offering will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California.
EXPERTS
The consolidated financial statements and schedules included (incorporated
by reference) in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
46
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Summary Historical Financial Data.............. 6
Use of Proceeds................................ 8
Price Range of Common Stock.................... 8
Dividend Policy................................ 8
Capitalization................................. 9
Selected Financial Data........................ 10
Business....................................... 12
Regulation and Licensing....................... 23
Description of the Notes....................... 27
Description of Capital Stock................... 38
Certain Federal Income Tax Considerations...... 41
Underwriting................................... 45
Legal Matters.................................. 46
Experts........................................ 46
</TABLE>
$500,000,000
[LOGO]
% CONVERTIBLE SUBORDINATED NOTES
DUE 2006
------------
PROSPECTUS
------------
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO.
MAY , 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses, other than
underwriting discounts and commissions, payable or reimbursable by the Company
in connection with the issuance and distribution of the Notes.
<TABLE>
<S> <C>
SEC registration fee.............................. $175,862(1)
Fees and expenses of the Trustee.................. 25,000
Printing and engraving expenses................... 250,000
Rating agency fees................................ 20,000
Legal fees and expenses........................... 150,000
Blue Sky fees and expenses........................ 20,000
Accounting fees and expenses...................... 80,000
Miscellaneous..................................... 79,138
--------
$800,000
--------
--------
</TABLE>
- ------------------------
(1) The aggregate registration fee for this offering is $198,276, $22,414 of
which has previously been paid in connection with a registration statement
on Form S-3 (33-35951). Accordingly, pursuant to Rule 429, the actual amount
to be paid to the SEC in connection with the issuance and distribution of
the Notes is set forth above.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, Article XI of Hilton's
Restated Certificate of Incorporation, as amended, and Paragraph 35 of Hilton's
By-Laws as amended, authorize and empower Hilton to indemnify its directors,
officers, employees and agents, and agreements with each of Hilton's directors
and executive officers provide for indemnification against liabilities incurred
in connection with, and related expenses resulting from, any claim, action or
suit brought against any such person as a result of such person's relationship
with Hilton, provided that such persons acted in accordance with a stated
standard of conduct in connection with the acts or events on which such claim,
action or suit is based. The finding of either civil or criminal liability on
the part of such persons in connection with such acts or events is not
necessarily determinative of the question of whether such persons have met the
required standard of conduct and are, accordingly, entitled to be indemnified.
Hilton has purchased for the benefit of its officers and directors and those
of certain subsidiaries insurance policies whereby the insurance companies
agree, among other things, that in the event any such officer or director
becomes legally obligated to make a payment (including legal fees and expenses)
in connection with an alleged wrongful act, such insurance companies will pay
Hilton up to $100,000,000. Wrongful act means any breach of duty, neglect,
error, misstatement, misleading statement or other act done by an officer or
director of Hilton or any subsidiary.
Reference is made to Section 6 of the form of Underwriting Agreement to be
filed as an exhibit hereto, for provisions regarding indenmnification of Hilton
and its officers, directors and controlling persons against certain liabilities.
II-1
<PAGE>
ITEM 16 EXHIBITS.
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- --------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
4.1 Form of Indenture dated as of May , 1996 between
Hilton and The Bank of New York, as Trustee.
4.2 Form of Note (included in Exhibit 4.1).
*5.1 Opinion of Latham & Watkins as to the legality of
the securities being registered.
8 Opinion of Latham & Watkins regarding certain tax
matters with respect to the securities being
registered.
**12 Computation of Ratios of Earnings to Fixed
Charges.
*23.1 Consent of Latham & Watkins (included in Exhibits
5.1 and 8).
23.2 Consent of Arthur Andersen LLP.
**24 Powers of Attorney of certain directors and
officers of the Company.
*25 Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(b) Hilton hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, as amended (the "Securities Act"), each filing
of Hilton's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Certain arrangements indemnifying the Company and officers, directors
and controlling persons of the Company are set forth in the Prospectus and in
Item 15 above. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(i) Hilton hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Hilton pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements on Form S-3 and has duly caused this Registration Statement be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Beverly Hills, State of California on April 29, 1996.
HILTON HOTELS CORPORATION
(Registrant)
By: ROBERT M. LA FORGIA
-----------------------------------
Robert M. La Forgia
VICE PRESIDENT AND CORPORATE
COMPTROLLER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on April 29, 1996.
<TABLE>
<S> <C>
* *
- ------------------------------------------- -------------------------------------------
Raymond C. Avansino, Jr. Robert L. Johnson
Director Director
* *
- ------------------------------------------- -------------------------------------------
Stephen F. Bollenbach Donald R. Knab
President and Chief Executive Officer Director
(Chief Executive Officer)
* *
- ------------------------------------------- -------------------------------------------
A. Steven Crown Steve Krithis
Director Senior Vice President--Finance
(Chief Financial and Accounting Officer)
* *
- ------------------------------------------- -------------------------------------------
Gregory R. Dillon Benjamin V. Lambert
Director Director
* *
- ------------------------------------------- -------------------------------------------
Barron Hilton Donna F. Tuttle
Chairman of the Board Director
* *
- ------------------------------------------- -------------------------------------------
Eric M. Hilton Sam D. Young, Jr.
Director Director
* *By: ROBERT M. LA FORGIA
- ------------------------------------------- ------------------------------------------
Dieter H. Huckestein Robert M. La Forgia
Director Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED
NUMBER DESCRIPTION PAGE
- -------- -------------------------------------------------- ------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement....................
4.1 Form of Indenture dated as of May , 1996 between
Hilton and The Bank of New York, as Trustee......
4.2 Form of Note (included in Exhibit 4.1)............
*5.1 Opinion of Latham & Watkins as to the legality of
the securities being registered..................
8 Opinion of Latham & Watkins regarding certain tax
matters with respect to the securities being
registered.......................................
**12 Computation of Ratios of Earnings to Fixed
Charges.
*23.1 Consent of Latham & Watkins (included in Exhibits
5.1 and 8).......................................
23.2 Consent of Arthur Andersen LLP....................
**24 Powers of Attorney of certain directors and
officers of the Company.
*25 Statement of Eligibility of Trustee on Form T-1...
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HILTON HOTELS CORPORATION,
ISSUER,
AND
THE BANK OF NEW YORK,
TRUSTEE
----------------------------------
INDENTURE
Dated as of [ ], 1996
----------------------------------
$500,000,000
__% Convertible Subordinated Notes due 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Incorporation by Reference of TIA. . . . . . . . . . . . . . . 11
SECTION 1.3. Rules of Construction. . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . 13
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . 14
SECTION 2.4. Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . 15
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.9. Treasury Securities. . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.13. Mandatory Disposition of Securities Pursuant to Gaming Laws. . 23
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.1. Right of Redemption. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.2. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.3. Selection of Securities to Be Redeemed . . . . . . . . . . . . 24
SECTION 3.4. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.5. Effect of Notice of Redemption . . . . . . . . . . . . . . . . 26
SECTION 3.6. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . 26
SECTION 3.7. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . 27
ARTICLE IV
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.1. Payment of Securities. . . . . . . . . . . . . . . . . . . . . 27
i
<PAGE>
SECTION 4.2. Maintenance of Office or Agency. . . . . . . . . . . . . . . . 28
SECTION 4.3. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . .28
SECTION 4.4. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . 29
SECTION 4.5. Maintenance of Properties and
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.6. Compliance Certificate; Notice of
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.7. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.8. Limitation on Status as Investment
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.9. Waiver of Stay, Extension or Usury
Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
SUCCESSOR CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.1. Limitation on Merger, Sale or
Consolidation . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.2. Successor Corporation Substituted. . . . . . . . . . . . . . . 33
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.2. Acceleration of Maturity Date;
Rescission and Annulment. . . . . . . . . . . . . . . . . . . 36
SECTION 6.3. Collection of Indebtedness and
Suits for Enforcement by Trustee. . . . . . . . . . . . . . . 37
SECTION 6.4. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . 38
SECTION 6.5. Trustee May Enforce Claims
Without Possession of Securities. . . . . . . . . . . . . . . 39
SECTION 6.6. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.7. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.9. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . 41
SECTION 6.10. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . 41
SECTION 6.11. Control by Holders . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.12. Waiver of Past Default . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.13. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.14. Restoration of Rights and Remedies . . . . . . . . . . . . . . 43
ii
<PAGE>
ARTICLE VII
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . 46
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.5. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.6. Reports by Trustee to Holders. . . . . . . . . . . . . . . . . 47
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . 48
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.9. Successor Trustee by Merger, Etc.. . . . . . . . . . . . . . . 50
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . 50
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.1. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.2. Repayment to the Company . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.1. Supplemental Indentures Without
Consent of Holders. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.2. Amendments, Supplemental Indentures
and Waivers with Consent of Holders . . . . . . . . . . . . . 52
SECTION 9.3. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.4. Revocation and Effect of Consents. . . . . . . . . . . . . . . 54
SECTION 9.5. Notation on or Exchange of Securities. . . . . . . . . . . . . 55
SECTION 9.6. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . 56
iii
<PAGE>
ARTICLE X
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE IN CONTROL . . . . . . . . . . . . .56
SECTION 10.1. Repurchase of Securities at Option
of the Holder Upon a Change of
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
ARTICLE XI
SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.1. Securities Subordinated to Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.2. No Payment on Securities in
Certain Circumstances . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.3. Securities Subordinated to Prior
Payment of All Senior Indebtedness
on Dissolution, Liquidation or
Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.4. Securityholders to Be Subrogated
to Rights of Holders of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.5. Obligations of the Company
Unconditional . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.6. Trustee Entitled to Assume Payments
Not Prohibited in Absence of
Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.7. Application by Trustee of Assets
Deposited with It . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.8. Subordination Rights Not Impaired
by Acts or Omissions of the
Company or Holders of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.9. Securityholders Authorize Trustee
to Effectuate Subordination of
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.10. Right of Trustee to Hold Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.11. Article XI Not to Prevent Events
of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 11.12. No Fiduciary Duty of Trustee to
Holders of Senior Indebtedness. . . . . . . . . . . . . . . . 67
iv
<PAGE>
ARTICLE XII
CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.1. Conversion Privilege. . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.2. Exercise of Conversion Privilege. . . . . . . . . . . . . . . 68
SECTION 12.3. Fractional Interests. . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.4. Conversion Price. . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.5. Adjustment of Conversion Price. . . . . . . . . . . . . . . . 70
SECTION 12.6. Continuation of Conversion
Privilege in Case of Reclass-
ification, Change, Merger,
Consolidation or Sale of Assets . . . . . . . . . . . . . . . 76
SECTION 12.7. Notice of Certain Events. . . . . . . . . . . . . . . . . . . 78
SECTION 12.8. Taxes on Conversion . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.9. Company to Provide Stock. . . . . . . . . . . . . . . . . . . 80
SECTION 12.10. Disclaimer of Responsibility for
Certain Matters . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.11. Return of Funds Deposited for
Redemption of Converted
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.1. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.3. Communications by Holders with
Other Holders . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.4. Certificate and Opinion as to
Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.5. Statements Required in Certificate
or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.6. Rules by Trustee, Paying Agent,
Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.7. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.9. No Adverse Interpretation of
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 13.10. No Recourse Against Others. . . . . . . . . . . . . . . . . . 85
SECTION 13.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 13.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . 85
SECTION 13.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 86
v
<PAGE>
SECTION 13.14. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . 86
SECTION 13.15. Qualification of Indenture. . . . . . . . . . . . . . . . . . 86
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBIT A - FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - FORM OF CONVERSION NOTICE. . . . . . . . . . . . . . . . . . . . B-1
vi
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
- ------- ---------
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4).. . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5).. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8;
7.10;
14.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6;
14.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6;
13.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2;
7.2;
14.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2;
14.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5;
7.6;
14.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
vii
<PAGE>
TIA INDENTURE
SECTION SECTION
- ------- ---------
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8;
6.11;
7.1(b)(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.14
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12;
6.7
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
__________
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
viii
<PAGE>
INDENTURE, dated as of [ ], 1996, between HILTON HOTELS CORPORATION,
a Delaware corporation (the "Company"), and The Bank of New York, a national
banking association, as Trustee.
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Company's _% Convertible
Subordinated Notes due 2006:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"ACCELERATION NOTICE" shall have the meaning specified in Section 6.2.
"AFFILIATE" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, (ii)
any spouse, immediate family member, or other relative who has the same
principal residence of any person described in clause (i) above, and (iii) any
trust in which any person described in clause (i) or (ii) above has a beneficial
interest. For purposes of this definition, the term "control" means the power
to direct the management and policies of a person, directly or through one or
more intermediaries, whether through the ownership of voting securities, by
contract, or otherwise.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"BENEFICIAL OWNER" for purposes of the definition of Change of Control
has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act
(as in effect on the Issue Date), whether or not applicable, except that a
"person" shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire,
<PAGE>
whether such right is exercisable immediately or only after the passage of time
or upon the occurrence of certain events.
"BOARD OF DIRECTORS" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"BOARD RESOLUTION" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York or
Los Angeles, California are authorized or obligated by law or executive order to
close.
"CAPITALIZED LEASE OBLIGATION" means rental obligations under a lease
that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"CASH" means such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts.
"CHANGE OF CONTROL" occurs upon the occurrence of a Rating Decline in
connection with any of the following events: (i) upon any merger or
consolidation of the Company with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company, on a consolidated basis, in one transaction or a series
of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
2
<PAGE>
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee or surviving
entity, (ii) when any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is
or becomes the "beneficial owner," directly or indirectly, of more than 50% of
the total voting power in the aggregate normally entitled to vote in the
election of directors of the Company, (iii) when, during any period of 12
consecutive months after the Issue Date, individuals who at the beginning of any
such 12-month period constituted the Board of Directors of the Company (together
with any new directors whose election by such Board or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office, (iv) a sale or disposition by the
Company of all or substantially all of the assets relating to the Hotel Segment
or Gaming Segment (as segment is used in Regulation S-K and Regulation S-X under
the Securities Act), or (v) the PRO RATA distribution by the Company to its
stockholders of the Hotel Segment or the Gaming Segment.
For purposes of this definition, (i) the terms "person" and "group"
shall have the meanings used for purposes of Rules 13d-3 and 13d-5 of the
Exchange Act as in effect on the Issue Date, whether or not applicable; and (ii)
the term "beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5
under the Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time or upon
the occurrence of certain events.
"CODE" means the Internal Revenue Code of 1986, as amended.
3
<PAGE>
"COMMON STOCK" means the Company's common stock, par value $2.50 per
share, or as such stock may be reconstituted from time to time.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"CONVERSION PRICE" shall have the meaning specified in Section 12.5.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DAMAGES PAYMENT DATE" shall have the meaning specified in the
Registration Rights Agreement.
"DATE OF CONVERSION" shall have the meaning specified in Section 12.2.
"DEFAULT" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"DEFAULTED INTEREST" shall have the meaning specified in Section 2.12.
"DEFINITIVE SECURITIES" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 2 thereof.
"DEPOSITARY" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b),
with respect to any person, Capital Stock of such person that, by its terms or
by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repur-
4
<PAGE>
chased (including at the option of the holder thereof) by such person or any of
its Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the
Securities and (b) with respect to any Subsidiary of such person (including with
respect to any Subsidiary of the Company), any Capital Stock other than any
common stock with no preference, privileges, or redemption or repayment
provisions.
"DTC" shall have the meaning specified in Section 2.3.
"EVENT OF DEFAULT" shall have the meaning specified in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXPIRATION TIME" shall have the meaning specified in Section 12.5.
"GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board ("FASB") or in such
other statements by such other entity as approved by a significant segment of
the accounting profession which are in effect in the United States; PROVIDED,
HOWEVER, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles which are
in effect as of the Issue Date.
"GAMING AUTHORITY" means the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Louisiana Gaming Control Board, the New
Jersey Casino Control Commission or any similar commission or agency which
has, or may at any time after the date of this Indenture have, jurisdiction
over the gaming activities of the Company or a Subsidiary of the Company or
any successor thereto.
"GAMING LAWS" means the gaming laws of a jurisdiction or
jurisdictions to which the Company or a Subsidiary of the Company is, or may
at any time after the date of this Indenture be, subject.
"GLOBAL SECURITY" means a Security that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
or the form of Security attached hereto as Exhibit A.
"HOLDER" or "SECURITYHOLDER" means the person in whose name a Security
is registered on the Registrar's books.
"INDEBTEDNESS" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
5
<PAGE>
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except such as would constitute trade payables to trade creditors in the
ordinary course of business that are not more than ninety (90) days past their
original due date, (iv) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (v) for the payment of money relating to a
Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities of others of the kind described in the
preceding clause (a) or (b) that such person has guaranteed or that is otherwise
its legal liability and all obligations to purchase, redeem or acquire any
Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings, refundings (whether direct or indirect) of any liability of the
kind described in any of the preceding clauses (a), (b) or (c), or this clause
(d), whether or not between or among the same parties.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any
person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"ISSUE DATE" means the date of first issuance of the Securities under
this Indenture.
6
<PAGE>
"JUNIOR SECURITY" of any person means any Qualified Capital Stock and
any Indebtedness of such person that is subordinated in right of payment to the
Securities and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Securities.
"LAST SALE PRICE" shall have the meaning specified in Section 12.3.
"LEGAL HOLIDAY" shall have the meaning specified in Section 13.7.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"NON-ELECTING SHARE" shall have the meaning specified in Section 12.6.
"NOTICE OF DEFAULT" shall have the meaning specified in Section
6.1(3).
"OFFER" shall have the meaning specified in Section 12.5.
"OFFICER" means, with respect to the Company, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means, with respect to the Company, a
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 13.4
and 13.5.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee and which complies with the requirements of
Sections 13.4 and 13.5.
7
<PAGE>
"PAYING AGENT" shall have the meaning specified in Section 2.3.
"PAYMENT BLOCKAGE PERIOD" shall have the meaning specified in Section
11.2.
"PAYMENT DEFAULT" shall have the meaning specified in Section 11.2.
"PAYMENT NOTICE" shall have the meaning specified in Section 11.2.
"PERSON" or "PERSON" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipality or other entity.
"PRINCIPAL" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, any applicable premium, if any, on such
Indebtedness.
"PROPERTY" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PURCHASED SHARES" shall have the meaning specified in Section 12.5.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"RATING DECLINE" means the occurrence on or within 90 days after the
date of the first public notice of (i) the occurrence of a Change of Control or
(ii) the intention by the Company to effect a Change of Control (which 90-day
period shall be extended so long as the rating of Senior Indebtedness of the
Company is under publicly announced consideration for possible downgrade by any
of (x) Moody's Investors Service, Inc. ("Moody's"), (y) Standard & Poor's
Corporation ("S&P") or (z) Duff & Phelps ("D&P")) of a decrease in the rating of
Senior Indebtedness of the Company by any of Moody's, S&P or D&P to a rating
that is below "Investment Grade." Investment Grade means a rating in the top
four rating categories by Moody's, S&P, D&P or any other nationally recognized
securities rating agency or agencies, as the case may be, selected by the
Company.
8
<PAGE>
"RECORD DATE" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Security, which shall include, without duplication, in each case,
accrued and unpaid interest and Liquidated Damages, if any, to and including the
Redemption Date.
"REGISTRAR" shall have the meaning specified in Section 2.3.
"REPURCHASE DATE" shall have the meaning specified in Section 10.1.
"REPURCHASE OFFER" shall have the meaning specified in Section 10.1.
"REPURCHASE PRICE" shall have the meaning specified in Section 10.1.
"REPURCHASE PUT DATE" shall have the meaning specified in Section
10.1.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the [ ]% Convertible Subordinated
Notes due 2006, as supplemented from time to time in accordance with the terms
hereof, issued under this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SECURITIES CUSTODIAN" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
9
<PAGE>
"SENIOR INDEBTEDNESS OF THE COMPANY" means any Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior, in right of payment, to the Securities
or to other Indebtedness which is PARI PASSU with, or subordinated to, the
Securities; PROVIDED, that in no event shall Senior Indebtedness include (a)
Indebtedness of the Company owed or owing to any Subsidiary of the Company or
any officer, director or employee of the Company or any Subsidiary of the
Company, (b) Indebtedness to trade creditors, or (c) any liability for taxes
owed or owing by the Company.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the SEC as in effect on the date of the Indenture.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"STATED MATURITY," when used with respect to any Security, means
[ ], 2006.
"SUBSIDIARY" with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power normally entitled to vote in
the election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with the Company a majority of the partnership interests, or (iii) any
other person (other than a corporation) in which such person, one or more
Subsidiaries of such person, or such person and one or more Subsidiaries of such
person, directly or indirectly, at the date of determination thereof has at
least majority ownership interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
10
<PAGE>
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the New York
Stock Exchange.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TRUST OFFICER" means any officer within the corporate trust division
(or any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"UNDERWRITER" means Donaldson, Lufkin & Jenrette Securities
Corporation and PaineWebber Incorporated.
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement,
dated [ ], 1996, by and between the Company and the Underwriter, as such
agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
SECTION 1.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder or a Securityholder.
11
<PAGE>
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
12
<PAGE>
ARTICLE II
THE SECURITIES
SECTION 2.1. FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in respect
thereof, shall be substantially in the form of Exhibit A hereto, which Exhibit
is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Security for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security but such
signature shall be conclusive evidence that the Security has been authenticated
pursuant to the terms of this Indenture.
13
<PAGE>
The Trustee shall authenticate the Securities for original issue in the
aggregate principal amount of up to $575,000,000 upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $575,000,000, except as
provided in Section 2.7; PROVIDED, that Securities in excess of $500,000,000
shall not be issued other than pursuant to the over-allotment option granted by
the Company to the Purchasers as provided in the Underwriting Agreement. Upon
the written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Securities in substitution of Securities originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless otherwise provided in the appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company, any Affiliate of the Company, or any of their
respective Subsidiaries.
Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Securities may be presented for payment ("Paying Agent") and where notices
and demands to or upon the Company in respect of the Securities may be served.
The Company may act as Registrar or Paying Agent, except that, for the purposes
of Articles III, VIII and X and as otherwise specified in the Indenture, neither
the Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Paying Agent" includes
14
<PAGE>
any additional Paying Agent. The Company hereby initially appoints the Trustee
as Registrar and Paying Agent, and the Trustee hereby initially agrees so to
act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
SECTION 2.4. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, interest on or Liquidated Damages with respect
to, the Securities (whether such assets have been distributed to it by the
Company or any other obligor on the Securities), and shall notify the Trustee in
writing of any Default in making any such payment. If either of the Company or
a Subsidiary of the Company acts as Paying Agent, it shall segregate such assets
and hold them as a separate trust fund for the benefit of the Holders or the
Trustee. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered by
the Company to the Paying Agent, the Paying Agent (if other than the Company or
an Affiliate of the Company) shall have no further liability for such assets.
15
<PAGE>
SECTION 2.5. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders.
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES.
When Definitive Securities are presented to the Registrar or a co-Registrar with
a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other authorized
denominations;
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar or co-
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with
written instructions directing the Trustee to make, or to direct the Securities
Custodian to make, an endorsement on the Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by the Global
Security, then the
16
<PAGE>
Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depositary therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
(i) Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Security and upon receipt by the Trustee of a written
order or such other form of instructions as is customary for the Depositary
or the Person designated by the Depositary as having such a beneficial
interest in a Transfer Restricted Security only, the following additional
information and documents (all of which may be submitted by facsimile) if
such beneficial interest is being transferred to the Person designated by
the Depositary as being the beneficial owner, a certification from such
person to that effect (in substantially the form set forth on the reverse
of the Security) then the Trustee or the Securities Custodian, at the
direction of the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of the Global Security
to be reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate, the Trustee will authenticate and deliver to the transferee a
Definitive Security.
17
<PAGE>
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the persons in whose names such
Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF
DEPOSITARY. If at any time:
(i) the Depositary for the Securities notifies the Company
and the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to continue as Depositary for the Global Securities
and a successor Depositary for the Global Securities is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Securities under this Indenture;
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will authenticate and deliver Definitive Securities, in an aggregate principal
amount equal to the principal amount of the Global Securities, in exchange for
such Global Securities.
18
<PAGE>
(g) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, such Global
Security shall be returned to or retained and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global Security
is exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(h) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
DEFINITIVE SECURITIES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments, or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.2 (fourth paragraph), 2.10, 3.7, 9.5, or
10.1 (final paragraph)).
(iii) The Registrar or co-Registrar shall not be required
to register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article III, except
the unredeemed portion of any Definitive Security being redeemed in part,
or (b) any Security for a period beginning 15 days before the mailing of a
notice of an offer to repurchase pursuant to Article XI hereof or the
mailing of a notice of redemption of Securities pursuant to Article III
hereof and ending at the close of business on the day of such mailing.
SECTION 2.7. REPLACEMENT SECURITIES.
19
<PAGE>
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date the Paying Agent (other than the Company or an
Affiliate of the Company) holds Cash or U.S. Government Obligations sufficient
to pay all of the principal and interest due on the Securities payable on that
date in accordance with Section 3.6 hereof and payment of the Securities called
for redemption is not otherwise prohibited pursuant to Article XI hereof or
otherwise, then on
20
<PAGE>
and after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.9. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that the Trustee knows are so owned shall be
disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel and, at the written direction of the Company, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation. Subject
to Section 2.7, the Company may not issue new Securities to replace Securities
that have been paid or delivered to the Trustee for cancellation. No Securities
shall be authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section 2.11, except as
21
<PAGE>
expressly permitted in the form of Securities and as permitted by this
Indenture.
SECTION 2.12. DEFAULTED INTEREST.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security (or one or more predecessor Securities) is registered
at the close of business on the Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of Cash equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such Cash when deposited to be
held in trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
22
<PAGE>
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security register not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the persons in whose names the
Securities (or their respective predecessor Securities) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each
Security delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
SECTION 2.13. MANDATORY DISPOSITION OF SECURITIES PURSUANT TO
GAMING LAWS.
Each Holder and beneficial owner, by accepting or otherwise
acquiring an interest in the Securities, shall be deemed to have agreed that
if the Gaming Authority of any jurisdiction in which the Company or any of
its subsidiaries conducts or proposes to conduct gaming requires that a
person who is a Holder or beneficial owner must be licensed, qualified or
found suitable under the applicable Gaming Laws, such Holder or beneficial
owner shall apply for a license, qualification or a finding of suitability
within the required time period. If such person fails to apply or become
licensed or qualified or is found unsuitable, the Company shall have the
right, at its option, (i) to require such person to dispose of its Securities
or beneficial interest therein within 30 days of receipt of notice of the
Company's election or such earlier date as may be requested or prescribed by
such Gaming Authority or (ii) to redeem such Securities at a redemption price
equal to the lesser of (A) such person's cost or (B) 100% of the principal
amount thereof, plus accrued and unpaid interest to the earlier of the
redemption date and the date of the finding of unsuitability, which may be
less than 30 days following the notice of redemption if so requested or
prescribed by the Gaming Authority. The Company shall notify the Trustee in
writing of any such redemption as soon as practicable. The Company shall not
be responsible for any costs or expenses any such Holder or beneficial owner
may incur in connection with its application for a license, qualification or
a finding of suitability.
ARTICLE III
REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION.
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with Paragraph 5 of the Securities and
this Article III. The Company will not have the right to redeem any Securities
prior to [ ], 1999. At any time on or after , 1999, upon
not less than 30 nor more than 60 days notice to each Holder of Notes,
23
<PAGE>
the Company will have the right to redeem all or any part of the
Securities at the Redemption Prices specified in Paragraph 5 therein under the
caption "Redemption," in each case including accrued and unpaid interest to the
Redemption Date.
SECTION 3.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee in writing of the Redemption Date
and the principal amount of Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee). Any such notice may be cancelled at any
time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a
PRO RATA basis, by lot or by such other method as the Trustee shall determine to
be fair and appropriate and in such manner as complies with any applicable
depositary, legal and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may
24
<PAGE>
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Securities that have denominations larger than
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.4. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed. At
the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date, and that the Securities called for
redemption may not be converted after the fifth Business Day prior to the
Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest, if any, to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such notice to
collect the Redemption Price;
(5) that, unless (a) the Company defaults in its obligation
to deposit Cash with the Paying Agent in accordance with Section 3.6 hereof
or (b) such redemption payment is prohibited pursuant to Article XII hereof
or otherwise, interest on, and Liquidated Damages with respect to,
Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including accrued
and unpaid interest and Liquidated Damages, if any, to the Redemption Date,
upon
25
<PAGE>
surrender to the Paying Agent of the Securities called for redemption and
to be redeemed;
(6) if any Security is being redeemed in part, the portion
of the principal amount, equal to $1,000 or any integral multiple thereof,
of such Security to be redeemed and that, after the Redemption Date, and
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the redemption provisions of Paragraph 5 of the
Securities.
SECTION 3.5. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date. Upon surrender to the
Trustee or Paying Agent, such Securities called for redemption shall be paid at
the Redemption Price, including accrued and unpaid interest, if any, to the
Redemption Date; PROVIDED that if the Redemption Date is after a regular Record
Date and on or prior to the corresponding Interest Payment Date or Damage
Payment Date, the accrued interest, if any, shall be payable to the Holder of
the redeemed Securities registered on the relevant Record Date; and PROVIDED,
FURTHER, that if a Redemption Date is a Legal Holiday, payment shall be made on
the next succeeding Business Day and no interest shall accrue for the period
from such Redemption Date to such succeeding Business Day.
SECTION 3.6. DEPOSIT OF REDEMPTION PRICE.
26
<PAGE>
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) Cash
sufficient to pay the Redemption Price of, including accrued and unpaid interest
on, all Securities to be redeemed on such Redemption Date (other than Securities
or portions thereof called for redemption on that date that have been delivered
by the Company to the Trustee for cancellation). The Paying Agent shall
promptly return to the Company any Cash so deposited which is not required for
that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not prohibited under Article XII or otherwise, and interest on the
Securities to be redeemed will cease to accrue on the applicable Redemption
Date, whether or not such Securities are presented for payment. Notwithstanding
anything herein to the contrary, if any Security surrendered for redemption in
the manner provided in the Securities shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, Liquidated Damages shall continue to accrue and be paid from the
Redemption Date in accordance with Section 3 of the Registration Rights
Agreement and interest shall continue to accrue and be paid from the Redemption
Date until such payment is made on the unpaid principal, and, to the extent
lawful, on any interest not paid on such unpaid principal, in each case at the
rate and in the manner provided in Section 4.1 hereof and the Security.
SECTION 3.7. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
27
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent (other than the Company or an Affiliate
of the Company) holds for the benefit of the Holders, on or before 10:00 a.m.
New York City time on that date, Cash deposited and designated for and
sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and for conversion and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
28
<PAGE>
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the corporate trust office of the
Trustee as such office.
SECTION 4.3. CORPORATE EXISTENCE.
Subject to Article V, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or other existence of each of its Subsidiaries in
accordance with the respective organizational documents of each of them and the
rights (charter and statutory) and corporate franchises of the Company and each
of its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required
to preserve, with respect to itself, any right or franchise, and with respect to
any of its Subsidiaries, any such existence, right or franchise, if (a) the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of such entity and (b) the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 4.4. PAYMENT OF TAXES AND OTHER CLAIMS.
Except with respect to immaterial items, the Company shall, and shall
cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon the Company or any of
its Subsidiaries or any of their respective properties and assets and (ii) all
lawful claims, whether for labor, materials, supplies, services or anything
else, which have become due and payable and which by law have or may become a
Lien upon the property and assets of the Company or any of its Subsidiaries;
PROVIDED, HOWEVER, that neither the Company nor any Subsidiary shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
29
<PAGE>
SECTION 4.5. MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company shall cause all material properties used or useful to the
conduct of its business and the business of each of its Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in their reasonable judgment may be necessary, so
that the business carried on in connection therewith may be properly conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section 4.5 shall prevent
the Company or any Subsidiary from discontinuing any operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is (a), in the judgment of the Company, desirable in the conduct of the
business of such entity and (b) not disadvantageous in any material respect to
the Holders.
The Company shall provide, or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company is adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with (except for self-
insurance) reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the reasonable, good
faith opinion of the Company and adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries in a prudent manner for entities
similarly situated in the industry, unless failure to provide such insurance
(together with all other such failures) would not have a material adverse effect
on the financial condition or results of operations of the Company or such
Subsidiary.
SECTION 4.6. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee within 120 days
after the end of its fiscal year an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of its activities and the
30
<PAGE>
activities of its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture and further stating, as to each such Officer signing such
certificate, whether or not the signer knows of any failure by the Company or
any Subsidiary of the Company to comply with any conditions or covenants in this
Indenture and, if such signor does know of such a failure to comply, the
certificate shall describe such failure with particularity. The Officers'
Certificate shall also notify the Trustee should the relevant fiscal year end on
any date other than the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any
Default, Event of Default or fact which would prohibit the making of any payment
to or by the Trustee in respect of the Securities, an Officers' Certificate
specifying such Default, Event of Default or fact and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be
deemed to have knowledge of any Default, any Event of Default or any such fact
unless one of its Trust Officers receives notice thereof from the Company or any
of the Holders.
SECTION 4.7. REPORTS.
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the SEC if the Company was subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
SEC and, in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required.
31
<PAGE>
SECTION 4.8. LIMITATION ON STATUS AS INVESTMENT COMPANY.
Neither the Company nor any of its Subsidiaries shall become an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
SECTION 4.9. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium of, interest on, or Liquidated Damages with
respect to, the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another Person or sell, lease, convey or transfer all
or substantially all of its assets (computed on a consolidated basis), whether
in a single transaction or a series of related transactions, to another Person
or group of affiliated Persons, unless (i) either (a) in the case of a merger or
consolidation, the Company is the surviving entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any
32
<PAGE>
state thereof or the District of Columbia and expressly assumes by supplemental
indenture all of the obligations of the Company in connection with the
Securities and the Indenture; (ii) no Default or Event of Default shall exist or
shall occur immediately before or after giving effect on a PRO FORMA basis to
such transaction; (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and, if a supplemental indenture is required, such
supplemental indenture comply with the Indenture and that all conditions
precedent relating to such transactions have been satisfied; and (iv) the
resulting, surviving or transferee entity holds all gaming licenses necessary to
conduct the business of such resulting, surviving or transferee entity.
(b) For purposes of clause (a) of this Section 5.1, the sale,
lease, conveyance, assignment, transfer, or other disposition of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of such
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of
the Company.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any sale, lease, conveyance or
transfer of all or substantially all of the assets of the Company in accordance
with the foregoing, the successor corporation formed by such consolidation or
into which the Company is merged or to which such sale, lease, conveyance or
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named therein as the Company, and when
a successor corporation duly assumes all of the obligations of the Company
pursuant hereto and pursuant to the Securities, the predecessor shall be
released from such obligations (except with respect to any obligations that
arise from or as a result of such transaction).
33
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest on the Securities
as and when the same becomes due and payable, or to perform any conversion
of the Securities required under this Indenture, and the continuance of
such default for a period of 30 days, whether or not such payment is
prohibited by Article XI;
(2) failure to pay all or any part of the principal of, or
premium, if any on the Securities when and as the same become due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, default in the payment of the Repurchase Price on the
Repurchase Date in accordance with Article X, whether or not such payment
is prohibited by Article XI;
(3) failure by the Company to observe or perform any covenant,
agreement or warranty contained in the Securities or this Indenture (other
than a default in the performance of any covenant, agreement or warranty
which is specifically dealt with elsewhere in this Section 6.1), and
continuance of such failure for a period of 60 days after there has been
given, by registered or certified mail, to the Company by the Trustee, or
to the Company and the Trustee by Holders of at least 25% in aggregate
principal amount of the then outstanding Securities, a written notice
specifying such default or breach, requesting it to be remedied and stating
that such notice is a "Notice of Default" hereunder;
(4) a default under Indebtedness of the Company or any of its
Subsidiaries with an aggregate
34
<PAGE>
principal amount in excess of $50,000,000 (a) resulting from the failure to
pay principal, premium or interest when due that extends beyond any stated
period of grace applicable thereto or (b) as a result of which the maturity
of such Indebtedness has been accelerated prior to its stated maturity;
(5) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Company or any of its
Significant Subsidiaries as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of the Company or any of its
Significant Subsidiaries under any bankruptcy or similar law, and such
decree or order shall have continued undischarged and unstayed for a period
of 75 days; or a decree or order of a court of competent jurisdiction over
the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company, any of its Significant
Subsidiaries, or of the property of any such Person, or for the winding up
or liquidation of the affairs of any such Person, shall have been entered,
and such decree, judgment, or order shall have remained in force
undischarged and unstayed for a period of 60 days;
(6) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file
a petition or answer or consent seeking reorganization under any bankruptcy
or similar law or similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a Custodian,
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of
it or any of its assets or property, or shall make a general assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as they
become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing; or
(7) final unsatisfied judgments not covered by insurance
aggregating in excess of $50,000,000 at any one time shall have been
rendered against the Comp-
35
<PAGE>
any or any of its Subsidiaries and not have been stayed, bonded or
discharged for a period (during which execution shall not be effectively
stayed) of 30 days (or, in the case of any such final judgment which
provides for payment over time, which shall so remain unstayed, unbonded or
undischarged beyond any applicable payment date provided therein).
Notwithstanding the 60-day period and notice requirement contained in
Section 6.1(3) above, with respect to a default under Article X the 60-day
period referred to in Section 6.1(3) shall be deemed to have begun as of the
date the Change of Control notice is required to be sent in the event that the
Company has not complied with the provisions of Section 11.1 and the Trustee or
Holders of at least 25% in principal amount of the outstanding Securities
thereafter give the Notice of Default referred to in Section 6.1(3) to the
Company and, if applicable, the Trustee; PROVIDED, HOWEVER, that if the breach
or default is a result of a default in the payment when due of the Repurchase
Price on the Repurchase Date, such Event of Default shall be deemed, for
purposes of this Section 6.1, to arise no later than on the Final Repurchase
Payment Date.
If a Default occurs and is continuing, the Trustee shall, within 90
days after the occurrence of such default, give to the Holders notice of such
default.
SECTION 6.2. ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 6.1(5) or (6) relating to the Company or any of its Subsidiaries) occurs
and is continuing, then, and in every such case, unless the principal of all of
the Securities shall have already become due and payable, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of then
outstanding Securities, by a notice in writing to the Company (and to the
Trustee if given by Holders) (an "Acceleration Notice"), may declare all of the
principal of the Securities (or the Repurchase Price if the Event of Default
includes failure to pay the Repurchase Price, determined as set forth below),
including in each case accrued interest thereon, to be due and payable
immediately. If an Event of Default specified in Section 6.1(5) or (6) relating
to the Company or any
36
<PAGE>
Significant Subsidiary occurs, all principal, accrued interest thereon will be
immediately due and payable on all outstanding Securities without any
declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of no less
than a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(A) all overdue interest on all
Securities,
(B) the principal of (and premium, if
any, applicable to) any Securities which would then be due
otherwise than by such declaration of acceleration, and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such
interest is lawful, interest upon overdue interest and
Liquidated Damages at the rate borne by the Securities,
(D) all sums paid or advanced by the
Trustee hereunder and the compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities that have become
due solely by such declaration of acceleration, have been cured or waived
as provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 10.1.
37
<PAGE>
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event. No such waiver shall cure or waive any subsequent Default or Event of
Default or impair any right consequent thereon.
SECTION 6.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any), interest and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest, at
the rate borne by the Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or
38
<PAGE>
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including
(1) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize
39
<PAGE>
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 6.6. PRIORITIES.
Any money collected by the Trustee pursuant to this Article VI shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium
(if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7;
SECOND: To the holders of Senior Indebtedness of the Company to the
extent provided in Article XI;
THIRD: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any), and interest on, the Securities in respect
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal, premium (if any) and interest, respectively; and
FOURTH: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
40
<PAGE>
SECTION 6.7. LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of
then outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of then outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
41
<PAGE>
SECTION 6.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any), interest on, such
Security when due (including, in the case of redemption, the Redemption Price on
the applicable Redemption Date, and in the case of the Repurchase Price, on the
applicable Repurchase Date) and to institute suit for the enforcement of any
such payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.10. DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article VI or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 6.11. CONTROL BY HOLDERS.
The Holder or Holders of no less than a majority in aggregate
principal amount of then outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the
42
<PAGE>
Trustee or exercising any trust or power conferred upon the Trustee, PROVIDED,
that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. WAIVER OF PAST DEFAULT.
Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of then outstanding Securities may, on
behalf of all Holders, prior to the declaration of acceleration of the maturity
of the Securities, waive any past default hereunder and its consequences, except
a default
(A) in the payment of the principal of, premium, if any,
interest on, any Security not yet cured as specified in clauses (1) and (2)
of Section 6.1, or
(B) in respect of a covenant or provision hereof which,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the
43
<PAGE>
Trustee for any action taken, suffered or omitted to be taken by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 6.13 shall not apply to
any suit instituted by the Company, to any suit instituted by the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in aggregate principal amount of then outstanding Securities, or
to any suit instituted by any Holder for enforcement of the payment of principal
of, premium (if any), or interest on, any Security on or after the respective
Stated Maturity of such Security (including, in the case of redemption, on or
after the Redemption Date).
SECTION 6.14. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a
44
<PAGE>
prudent Person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity
45
<PAGE>
against such risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
46
<PAGE>
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's covenants in Article IV hereof. In addition, the
Trustee shall not be deemed to have knowledge of any Default or Event of Default
except (i) any Event of Default occurring pursuant to Sections 6.1(1), 6.1(2) or
5.1, or (ii) any Default or Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any of
its Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication, or the use or application of any funds received
by a Paying Agent other than the Trustee.
SECTION 7.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee
47
<PAGE>
shall mail to each Securityholder notice of the uncured Default or Event of
Default within 90 days after such Default or Event of Default occurs. Except in
the case of a Default or an Event of Default in payment of principal (or
premium, if any) of, or interest on, any Security (including the payment of the
Repurchase Price on the Repurchase Date and the payment of the Redemption Price
on the Redemption Date), the Trustee may withhold the notice if and so long as a
Trust Officer in good faith determines that withholding the notice is in the
interest of the Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each [ ] beginning with the [ ]
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such July 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
The Company agrees to indemnify the Trustee (in its capacity as
Trustee) and each of its officers, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liabil-
48
<PAGE>
ity incurred by it without negligence or bad faith on its part, arising out of
or in connection with the administration of this trust and its rights or duties
hereunder including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's expense in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel; PROVIDED, that the Company will not be required to pay such
fees and expenses if it assumes the Trustee's defense and there is no conflict
of interest between the Company and the Trustee in connection with such defense.
The Company need not pay for any settlement made without its written consent.
The Company need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of then outstanding
Securities may remove the
49
<PAGE>
Trustee by so notifying the Company and the Trustee in writing and may appoint a
successor trustee with the Company's consent. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder
or Holders of a majority in principal amount of then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the lien provided in Section
7.7, the resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
50
<PAGE>
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA Section
310(a)(1), (2) and (5). The Trustee shall have a combined capital and surplus
of at least $100,000,000 as set forth in its most recent published annual report
of condition. The Trustee shall comply with TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. SATISFACTION AND DISCHARGE OF INDENTURE.
The Company may terminate its obligations under this Indenture
(subject to the provisions of this Article VIII) when it shall have delivered to
the Trustee for cancellation all Securities theretofore authenticated (other
than any Securities which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as
51
<PAGE>
provided in Article II hereof) and the following conditions shall be satisfied:
(1) The Company has paid all sums payable under the Indenture;
and
(2) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating that
all conditions precedent have been complied with as contemplated by this Section
8.1.
SECTION 8.2. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, for the payment of the principal of, premium, if any, interest
on or Liquidated Damages with respect to any Security and remaining unclaimed
for two years after such principal, premium, if any, interest or Liquidated
Damages has become due and payable shall be paid to the Company on its request;
and the Holder of such Security shall thereafter look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
PROVIDED, that such action pursuant to this clause (1) does not adversely affect
the interests of any Holder in any respect;
52
<PAGE>
(2) to create additional covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein conferred upon
the Company or to make any other change that does not adversely affect the
rights of any Holder, PROVIDED, that the Company has delivered to the Trustee an
Opinion of Counsel stating that such change pursuant to this clause (2) does not
adversely affect the rights of any Holder;
(3) to provide for collateral for or guarantors of the
Securities;
(4) to evidence the succession of another Person to the Company
and the assumption by any such successor of the obligations of the Company
herein and in the Securities in accordance with Article V; or
(5) to comply with the TIA.
SECTION 9.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH
CONSENT OF HOLDERS.
Subject to Section 6.8 and the last sentence of this paragraph, with
the consent of the Holders of not less than a majority in aggregate principal
amount of then outstanding Securities, by written act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Securities or of modifying in any
manner the rights of the Holders under this Indenture or the Securities.
Subject to Section 6.8 and the last sentence of this paragraph, the Holder or
Holders of not less than a majority in aggregate principal amount of then
outstanding Securities may, in writing, waive compliance by the Company with any
provision of this Indenture or the Securities. Notwithstanding any of the
above, however, no such amendment, supplemental indenture or waiver shall,
without the consent of the Holder of each outstanding Security affected thereby:
(1) change the Stated Maturity of any Security or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the
53
<PAGE>
place of payment where, or the coin or currency in which, any Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment or the conversion of any Security
on or after the due date thereof (including, in the case of redemption, on or
after the Redemption Date), or reduce the Repurchase Price, or alter the
Repurchase Offer or redemption provisions in a manner adverse to the Holders;
(2) reduce the percentage in principal amount of the outstanding
Securities, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture;
(3) adversely affect the right of such Holder to convert
Securities; or
(4) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or (at the option of the
54
<PAGE>
Company) to all Holders, consideration for consent to such amendment, supplement
or waiver.
SECTION 9.. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the Company as the Person to whom consents
should be sent if such revocation is received by the Company or such Person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (4) of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has
55
<PAGE>
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
PROVIDED, that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal and premium of and interest on and
Liquidated Damages with respect to a Security, on or after the respective dates
set for such amounts to become due and payable expressed in such Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; PROVIDED, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
56
<PAGE>
ARTICLE X
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL
SECTION 10.1. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A
CHANGE OF CONTROL.
(a) In the event that a Change of Control occurs, each Holder
shall have the right, at such Holder's option, subject to the terms and
conditions of this Indenture, to require the Company to repurchase all or any
part of such Holder's Securities (PROVIDED, that the principal amount of such
Securities must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 40 Business Days after the occurrence
of such Change of Control, at a cash price (the "Repurchase Price") equal to
100% of the principal amount thereof, together with accrued and unpaid interest
to the Repurchase Date.
(b) In the event that, pursuant to this Section 11.1, the
Company shall be required to commence an irrevocable and unconditional offer to
purchase Securities (a "Repurchase Offer"), the Company shall follow the
procedures set forth in this Section 10.1 as follows:
(1) the Repurchase Offer shall commence within 15 Business Days
following a Change of Control;
(2) the Repurchase Offer shall remain open for 20 Business Days
following its commencement, except to the extent that a longer period is
required by applicable law, but in any case not more than 60 Business Days
following the Change of Control (the "Repurchase Offer Period");
(3) upon the expiration of a Repurchase Offer, the Company shall
purchase all Securities tendered in response to the Repurchase Offer;
(4) if the Repurchase Date is on or after an interest payment
record date and on or before the related Interest Payment Date and Damage
Payment Date, and any accrued interest will be paid to the Person in whose
name a Security is registered at the close of business on such record date,
and no additional inter-
57
<PAGE>
est will be payable to Securityholders who tender Securities pursuant to
the Repurchase Offer;
(5) the Company shall provide the Trustee with notice of the
Repurchase Offer at least 5 Business Days before the commencement of any
Repurchase Offer; and
(6) on or before the commencement of any Repurchase Offer, the
Company or the Trustee (upon the request and at the expense of the Company)
shall send, by first-class mail, a notice to each of the Securityholders,
which (to the extent consistent with this Indenture) shall govern the terms
of the Repurchase Offer and shall state:
(i) that the Repurchase Offer is being made pursuant to
such notice and this Section 10.1 and that all Securities, or portions
thereof, tendered will be accepted for payment;
(ii) the Repurchase Price (including the amount of accrued
and unpaid interest, if any), the Repurchase Date and the Repurchase Put
Date;
(iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest, if any;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of this clause
(b) or such payment is prevented pursuant to Article XI, any Security, or
portion thereof, accepted for payment pursuant to the Repurchase Offer
shall cease to accrue interest after the Repurchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Repurchase Offer will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent
(which may not for purposes of this Section 10.1, notwithstanding anything
in this Indenture to the contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the close of
business on the earlier of
58
<PAGE>
(a) the third Business Day prior to the Repurchase Date and (b) the third
Business Day following the expiration of the Repurchase Offer (such earlier
date being the "Repurchase Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not for
purposes of this Section 11.1, notwithstanding anything in this Indenture
to the contrary, be the Company or any Affiliate of the Company) receives,
up to the close of business on the Repurchase Put Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder is withdrawing and a
statement that such Holder is withdrawing his election to have such
principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such
Change of Control.
Any such Repurchase Offer shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture which conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before the Repurchase Date, the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the
Repurchase Offer on or before the Repurchase Put Date, (ii) deposit with the
Paying Agent Cash sufficient to pay the Repurchase Price (together with accrued
and unpaid interest, if any) of all Securities or portions thereof so tendered
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate listing the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to Holders of Securities
so accepted payment in an amount equal to the Repurchase Price (together with
accrued and unpaid interest, if any), and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company
59
<PAGE>
will publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date.
ARTICLE XI
SUBORDINATION
SECTION 11.1. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company and each Holder, by its acceptance of Securities, agree
that (a) the payment of the principal of and interest on the Securities and (b)
any other payment in respect of the Securities, including on account of the
acquisition or redemption of the Securities by the Company (including, without
limitation, pursuant to Article X) is subordinated, to the extent and in the
manner provided in this Article XI, to the prior payment in full of all Senior
Indebtedness of the Company, whether outstanding at the date of this Indenture
or thereafter created, incurred, assumed or guaranteed, and that these
subordination provisions are for the benefit of the holders of Senior
Indebtedness.
This Article XI shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and any one
or more of them may enforce such provisions.
SECTION 11.2. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No payment may be made by the Company on account of the
principal of, premium, if any, or interest on, the Securities, or to acquire any
of the Securities (including repurchases of Securities at the option of the
Holder) for cash or property (other than Junior Securities), or on account of
the redemption provisions of the Securities, (i) upon the maturity of any Senior
Indebtedness of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on
such Senior Indebtedness are first paid in full (or such payment is duly
provided for), or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on any Senior Indebtedness of
60
<PAGE>
the Company when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Senior Indebtedness or their
representative immediately to accelerate its maturity and (ii) written notice of
such event of default given to the Company and the Trustee by the holders of an
aggregate of at least $50,000,000 principal amount outstanding of such Senior
Indebtedness or their representative (a "Payment Notice"), then, unless and
until such event of default has been cured or waived or otherwise has ceased to
exist, no payment (by set-off or otherwise) may be made by or on behalf of the
Company on account of the principal of, premium, if any, or interest on, the
Securities, or to acquire or repurchase any of the Securities for cash or
property, or on account of the redemption provisions of the Securities, in any
such case other than payments made with Junior Securities of the Company.
Notwithstanding the foregoing, unless (i) the Senior Indebtedness in respect of
which such event of default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is delivered as set forth
above (the "Payment Blockage Period"), and (ii) such declaration has not been
rescinded or waived, at the end of the Payment Blockage Period, the Company
shall be required to pay all sums not paid to the Holders of the Securities
during the Payment Blockage Period due to the foregoing prohibitions and to
resume all other payments as and when due on the Securities. Any number of
Payment Notices may be given; PROVIDED, HOWEVER, that (i) not more than one
Payment Notice shall be given within a period of any 360 consecutive days, and
(ii) no default that existed upon the date of such Payment Notice or the
commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Senior Indebtedness) shall be made the basis for
the commencement of any other Payment Blockage Period.
(c) In furtherance of the provisions of Section 11.1, in the
event that, notwithstanding the foregoing provisions of this Section 11.2, any
payment or distribution of assets of the Company (other than Junior Securities)
shall be received by the Trustee or the Holders at a time
61
<PAGE>
when such payment or distribution is prohibited by the provisions of this
Section 11.2, then such payment or distribution (subject to the provisions of
Section 11.7) shall be received and held in trust by the Trustee or such Holder
or Paying Agent for the benefit of the holders of Senior Indebtedness of the
Company, and shall be paid or delivered by the Trustee or such Holders or such
Paying Agent, as the case may be, to the holders of Senior Indebtedness of the
Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company in full after giving effect to any concurrent payment and distribution
to the holders of such Senior Indebtedness.
SECTION 11.3. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company shall
first be entitled to receive payments in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, and interest on, the Securities (other
than Junior Securities);
(b) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by setoff or otherwise), except for the provisions of this Article
XI, shall be paid by the liquidating trustee or agent or other Person making
such a payment or distribution directly to the holders of Senior Indebtedness of
the Company or their representative to the extent necessary to make payment in
full of all such Senior
62
<PAGE>
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than Junior Securities), shall be
received by the Trustee or the Holders or any Paying Agent (or, if the Company
or any Affiliate of the Company is acting as its own Paying Agent, money for any
such payment or distribution shall be segregated or held in trust) on account of
the principal of or interest on the Securities before all Senior Indebtedness of
the Company is paid in full, such payment or distribution (subject to the
provisions of Section 11.7) shall be received and held in trust by the Trustee
or such Holder or Paying Agent for the benefit of the holders of such Senior
Indebtedness, or their respective representative, ratably according to the
respective amounts of such Senior Indebtedness held or represented by each, to
the extent necessary to make payment as provided herein of all such Senior
Indebtedness remaining unpaid after giving effect to all concurrent payments and
distributions and all provisions therefor to or for the holders of such Senior
Indebtedness, but only to the extent that as to any holder of such Senior
Indebtedness, as promptly as practical following notice from the Trustee to the
holders of such Senior Indebtedness that such prohibited payment has been
received by the Trustee, Holder(s) or Paying Agent (or has been segregated as
provided above), such holder (or a representative therefor) notifies the Trustee
of the amounts then due and owing on such Senior Indebtedness, if any, held by
such holder and only the amounts specified in such notices to the Trustee shall
be paid to the holders of such Senior Indebtedness.
SECTION 11.4. SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS
OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness of the
Company as provided herein, the Holders of Securities shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders
63
<PAGE>
of such Senior Indebtedness by the Company, or by or on behalf of the Holders by
virtue of this Article XI, which otherwise would have been made to the Holders
shall, as between the Company and the Holders, be deemed to be payment by the
Company or on account of such Senior Indebtedness, it being understood that the
provisions of this Article XI are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article XI shall have been
applied, pursuant to the provisions of this Article XI, to the payment of
amounts payable under Senior Indebtedness of the Company, then the Holders shall
be entitled to receive from the holders of such Senior Indebtedness any payments
or distributions received by such holders of Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Indebtedness in full.
SECTION 11.5. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article XI or elsewhere in this Indenture or
in the Securities is intended to or shall impair as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on, the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XI, of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Notwithstanding anything to the contrary in this Article XI or elsewhere in this
Indenture or in the Securities, upon any distribution of assets of the Company
referred to in this Article XI, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquida-
64
<PAGE>
tion or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XI so long as such court has been apprised of the
provisions of, or the order, decree or certificate makes reference to, the
provisions of this Article XI. Nothing in this Section 11.5 shall apply to the
claims of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION 11.6. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.1
and 7.2, shall be entitled in all respects conclusively to assume that no such
fact exists.
SECTION 11.7. APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent allocated for the payment of Securities, shall not be subject
to the subordination provisions of this Article XI. Otherwise, any deposit of
assets with the Trustee or the Agent (whether or not in trust) for the payment
of principal of or interest on any Securities shall be subject to the provisions
of Sections 11.1, 11.2, 11.3 and 11.4; PROVIDED THAT, if prior to one Business
Day preceding the date on which by the terms of this Indenture any such assets
may become distributable for any purpose (including, without limitation, the
payment of either principal of or interest on any Security) the Trustee or such
Paying Agent shall not have received with respect to
65
<PAGE>
such assets the written notice provided for in Section 11.6, then the Trustee or
such Paying Agent shall have full power and authority to receive such assets and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such date.
SECTION 11.8. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination provisions contained in this Article XI shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
this Indenture or the Holders.
SECTION 11.9. SECURITYHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article XI and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the immediate filing of a claim for the unpaid balance of his Securities in the
form required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of the Senior Indebtedness or their
representative are or is hereby authorized to have
66
<PAGE>
the right to file and are or is hereby authorized to file an appropriate claim
for and on behalf of the Holders of said Securities. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Senior Indebtedness
or their representative to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 11.10. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all of the rights set forth in this
Article XI in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
SECTION 11.11. ARTICLE XI NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if
any, or interest on, the Securities by reason of any provision of this Article
XI shall not be construed as preventing the occurrence of a Default or an Event
of Default under Section 6.1 or in any way prevent the Holders from exercising
any right hereunder other than the right to receive payment on the Securities.
SECTION 11.12. NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR
INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company or
any other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article XI or otherwise.
Nothing in this Section 11.12 shall affect the obligation of any other such
Person to hold such payment for the benefit
67
<PAGE>
of, and to pay such payment over to, the holders of Senior Indebtedness or their
representative.
ARTICLE XII
CONVERSION OF SECURITIES
SECTION 12.1. CONVERSION PRIVILEGE.
Subject to and upon compliance with the provisions of this Article
XII, at the option of the Holder thereof, any Security may at any time be
converted, in whole, or in part in multiples of $1,000 principal amount, into
fully paid and non-assessable shares of Common Stock issuable upon conversion of
the Securities, at the conversion price in effect at the Date of Conversion,
until and including, but not after the close of business on the second Business
Day prior to Stated Maturity, or unless such Security or some portion thereof
shall have been called for redemption or delivered for repurchase prior to such
date and no default is made in making due provision for the payment of the
redemption price in accordance with the terms of this Indenture, in which case,
with respect to such Security or portion thereof as has been so called for
redemption or delivered for repurchase, such Security or portion thereof may be
so converted until and including, but not after, the close of business on the
Business Day prior to the Redemption Date or Repurchase Date, as applicable, for
such Security, unless the Company subsequently fails to pay the applicable
Redemption Price or Repurchase Price, as the case may be.
SECTION 12.2. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security to the Company at any
time during usual business hours at its office or agency maintained for the
purpose as provided in this Indenture, accompanied by a fully executed written
notice, in substantially the form set forth on the reverse of the Security, that
the Holder elects to convert such Security or a stated portion thereof
constituting a multiple of $1,000 principal amount, and, if such Security is
surrendered for conversion during the period between the close of business on
any Record Date and the opening of business on the next following Interest
Payment Date and has not been called for redemption on a Redemption Date which
occurs within such period, accompanied also by payment of an
68
<PAGE>
amount equal to the interest payable on such Interest Payment Date on the
principal amount of the Security being surrendered for conversion,
notwithstanding such conversion. The Holder of any Security at the close of
business on a Record Date will be entitled to receive the interest payable on
such Security on the corresponding Interest Payment Date notwithstanding the
conversion thereof after such Record Date. Such notice of conversion shall also
state the name or names (with address) in which the certificate or certificates
for shares of Common Stock shall be issued. Securities surrendered for
conversion shall (if reasonably required by the Company or the Trustee) be duly
endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company duly executed by, the Holder or his
attorney duly authorized in writing. As promptly as practicable after the
receipt of such notice and the surrender of such Security as aforesaid, the
Company shall, subject to the provisions of Section 12.8 hereof, issue and
deliver at such office or agency to such Holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion of Securities in accordance with the provisions of
this Article XII and Cash, as provided in Section 12.3 hereof, in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
Such conversion shall be deemed to have been effected immediately prior to the
close of business on the date (herein called the "Date of Conversion") on which
such Security shall have been surrendered as aforesaid, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on the Date of Conversion the holder or holders of record of the shares
represented thereby; PROVIDED, HOWEVER, that any such surrender on any date when
the stock transfer books of the Company shall be closed shall cause the person
or persons in whose name or names the certificate or certificates for such
shares are to be issued to be deemed to have become the recordholder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open but such conversion shall
nevertheless be at the conversion price in effect at the close of business on
the date when such Security shall have been so surrendered with the conversion
notice. In the case of conversion of a portion, but less than all, of a
Security, the Company shall as promptly as practicable execute, and the Trustee
shall authenticate and deliver to the Holder thereof, at the expense
69
<PAGE>
of the Company, a Security or Securities in the aggregate principal amount of
the unconverted portion of the Security surrendered. Except as otherwise
expressly provided in this Indenture, no payment or adjustment shall be made for
interest accrued on any Security (or portion thereof) converted or for dividends
or distributions on any Common Stock issued upon conversion of any Security.
SECTION 12.3. FRACTIONAL INTERESTS.
No fractions of shares or scrip representing fractions of shares shall
be issued upon conversion of Securities. If more than one Security shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Securities so surrendered. If
any fraction of a share of Common Stock would, except for the foregoing
provisions of this Section 12.3, be issuable on the conversion of any Security
or Securities, the Company shall make payment in lieu thereof in an amount of
Cash equal to the value of such fraction computed on the basis of the last sale
price of the Common Stock as reported on the New York Stock Exchange (or if not
listed for trading thereon, then on the principal national securities exchange
on which the Common Stock is listed or admitted to trading) at the close of
business on the Date of Conversion or if no such sale takes place on such day,
the last sale price for such day shall be the average of the closing bid and
asked prices regular way on the New York Stock Exchange (or if not listed for
trading thereon, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading) for such day (any such last sale
price being hereinafter referred to as the "Last Sale Price"). If on such
Trading Day the Common Stock is not quoted by any such organization, the fair
value of such Common Stock on such day, as reasonably determined in good faith
by the Board of Directors of the Company, shall be used.
SECTION 12.4. CONVERSION PRICE.
The conversion price per share of Common Stock issuable upon
conversion of the Securities shall initially be $[ ] (or $[ ] in
principal amount of Securities for each such share of Common Stock).
70
<PAGE>
SECTION 12.5. ADJUSTMENT OF CONVERSION PRICE.
The conversion price (herein called the "Conversion Price") shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall (1) make or pay a dividend (or
other distribution) in shares of Common Stock on any class of Capital Stock of
the Company, (2) subdivide its outstanding shares of Common Stock into a greater
number of shares or (3) combine or reclassify its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Security thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock that he would have owned immediately following
such action had such Security been converted immediately prior thereto. An
adjustment made pursuant to this subsection (a) shall become effective
immediately, except as provided in subsection (h) below, after the record date
in the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights, options or warrants
to all holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the then current market
price per share of the Common Stock (as determined pursuant to subsection (f)
below) on the record date mentioned below, the Conversion Price shall be
adjusted to a price, computed to the nearest cent, so that the same shall equal
the price determined by multiplying:
(i) the Conversion Price in effect immediately prior to the
date of issuance of such rights or warrants by a fraction, of which
(ii) the numerator shall be (A) the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants, immediately prior to such issuance, plus (B) the number of shares
which the aggregate offering price of the total number of shares so offered
for subscription or purchase would purchase at such current market price
(determined by multiplying such total number of shares
71
<PAGE>
by the exercise price of such rights, options or warrants and dividing the
product so obtained by such current market price), and of which
(iii) the denominator shall be (A) the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants, immediately prior to such issuance, plus (B) the number of
additional shares of Common Stock which are so offered for subscription or
purchase.
Such adjustment shall become effective immediately, except as provided
in subsection (h) below, after the record date for the determination of holders
entitled to receive such rights, options or warrants; PROVIDED, HOWEVER, that if
any such rights, options or warrants issued by the Company as described in this
subsection (b) are only exercisable upon the occurrence of certain triggering
events relating to control and provided for in shareholder rights plans, then
the Conversion Price will not be adjusted as provided in this subsection (b)
until such triggering events occur.
(c) In case the Company or any subsidiary of the Company shall
distribute to all holders of Common Stock, any of its assets, evidences of
indebtedness, cash or other assets or shares of Capital Stock other than Common
Stock (including securities, but other than (x) dividends or distributions
exclusively in cash or (y) any dividend or distribution for which an adjustment
is required to be made in accordance with subsection (a) or (b) above) then in
each such case the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the then current market price per share of the Common Stock
(determined as provided in subsection (f) below) on the record date mentioned
below less the then fair market value (as reasonably determined in good faith by
the Board of Directors of the Company) of the portion of the assets so
distributed applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of the Common Stock.
Such adjustment shall become effective immediately, except as provided in
subsection (h) below, after the record date for the determination of
stockholders entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the fair market
72
<PAGE>
value of the assets, evidences of indebtedness or other securities so
distributed applicable to one share of Common Stock equals or exceeds such
current market price per share of Common Stock, or such current market price
exceeds such fair market value by less than $0.10 per share, the Conversion
Price shall not be adjusted pursuant to this subsection (c) and, to the extent
applicable, the provisions of subsection (k) shall apply to such distribution.
(d) In case the Company or any subsidiary of the Company shall
make any distribution consisting exclusively of cash (excluding any cash portion
of distributions for which an adjustment is required to be made in accordance
with (c) above, or cash distributed upon a merger or consolidation to which
Section 12.6 applies) to all holders of Common Stock in an aggregate amount
that, combined together with (i) all other such all-cash distributions made
within the then preceding 12 months in respect of which no adjustment has been
made and (ii) any cash and the fair market value of other consideration paid or
payable in respect of any tender offer by the Company or any of its Subsidiaries
for Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 15% of the Company's market capitalization
(defined as being the product of the then current market price of the Common
Stock (determined as provided in subsection (f) below) times the number of
shares of Common Stock then outstanding) on the record date of such
distribution, in each such case the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of such distribution by a fraction of which
the numerator shall be the then current market price per share of the Common
Stock on such record date less the amount of the cash so distributed applicable
to one share of Common Stock, and of which the denominator shall be such current
market price per share of the Common Stock. Such adjustment shall become
effective immediately, except as provided in subsection (h) below, after the
record date for the determination of stockholders entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the cash so
distributed applicable to one share of Common Stock equals or exceeds such
current market price per share of Common Stock, or such current market price
exceeds such amount of cash by less than $0.10 per share, the Conversion Price
shall not be adjusted pursuant to this subsection (d).
73
<PAGE>
(e) In case there shall be completed a tender or exchange offer
made by the Company or any Subsidiary of the Company for all or any portion of
the Common Stock (any such tender or exchange offer being referred to as an
"Offer") that involves an aggregate consideration having a fair market value as
of the expiration of such Offer (the "Expiration Time") that, together with
(i) any cash and the fair market value of any other consideration payable in
respect of any other Offer, as of the expiration of such other Offer, expiring
within the 12 months preceding the expiration of such Offer and in respect for
which no Conversion Price adjustment pursuant to this subsection (e) has been
made and (ii) the aggregate amount of any all-cash distributions referred to in
subsection (d) of this Section 12.5 to all holders of Common Stock within the 12
months preceding the expiration of such Offer for which no conversion price
adjustment pursuant to such subsection (d) has been made, exceeds 15% of the
product of the then current market price per share (determined as provided in
subsection (f) below) of the Common Stock on the Expiration Time times the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time, the Conversion Price shall be reduced by multiplying such
Conversion Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be (i) the product of the then current
market price per share (determined as provided in subsection (f) below) of the
Common Stock on the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time minus (ii)
the fair market value of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the Offer)
of all shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted being referred to as the "Purchased Shares") and the
denominator shall be the product of (i) such current market price per share on
the Expiration Time times (ii) such number of outstanding shares on the
Expiration Time less the number of Purchased Shares, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time.
For purposes of this subsection (e), the fair market value of any
consideration with respect to an Offer shall be reasonably determined in good
faith by the Board of Directors of the Company and described in a Board
Resolution.
74
<PAGE>
(f) For the purpose of any computation under subsections (b),
(c), (d) and (e) above, the current market price per share of Common Stock on
any date shall be deemed to be the average of the Last Sale Prices of a share of
Common Stock for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
earlier of the date in question and the date before the "`ex' date," with
respect to the issuance, distribution or Offer requiring such computation. If
on any such Trading Day the Common Stock is not quoted by any organization
referred to in the definition of Last Sale Price in Section 12.3 hereof, the
fair value of the Common Stock on such day, as reasonably determined in good
faith by the Board of Directors of the Company, shall be used. For purposes of
this paragraph, the term "`ex' date," when used with respect to any issuance,
distribution or payments with respect to an Offer, means the first date on which
the Common Stock trades regular way on the New York Stock Exchange (or if not
listed or admitted to trading thereon, then on the principal national securities
exchange on which the Common Stock is listed or admitted to trading) without the
right to receive such issuance, distribution or Offer.
(g) In addition the foregoing adjustments in subsections (a),
(b), (c), (d) and (e) above, the Company will be permitted to make such
reductions in the Conversion Price as it considers to be advisable.
In the event the Company elects to make such a reduction in the
conversion price, the Company will comply with the requirements of Rule 14e-1 of
the Exchange Act and any other Federal and state laws and regulations thereunder
if and to the extent that such laws and regulations are applicable in connection
with the reduction of the price of the Notes; PROVIDED that any provisions of
this Indenture which conflict with such laws shall be deemed to be superseded by
the provisions of such laws.
(h) In any case in which this Section 12.5 shall require that an
adjustment (including by reason of the last sentence of subsection (a) or (c)
above) be made immediately following a record date, the Company may elect to
defer the effectiveness of such adjustment (but in no event until a date later
than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Security converted after such
75
<PAGE>
record date and on and before such adjustment shall have become effective (i)
defer paying any Cash payment pursuant to Section 12.3 hereof or issuing to the
Holder of such Security the number of shares of Common Stock and other capital
stock of the Company (or other assets or securities) issuable upon such
conversion in excess of the number of shares of Common Stock and other Capital
Stock of the Company issuable thereupon only on the basis of the Conversion
Price prior to adjustment, and (ii) not later than five Business Days after such
adjustment shall have become effective, pay to such Holder the appropriate Cash
payment pursuant to Section 12.3 hereof and issue to such Holder the additional
shares of Common Stock and other Capital Stock of the Company issuable on such
conversion.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1.0% of
the Conversion Price; PROVIDED, that any adjustments which by reason of this
subsection (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
XII shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(j) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly (i) file with the Trustee and each
conversion agent an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment, and (ii) mail or cause to be mailed a notice of
such adjustment to each holder of Securities at his address as the same appears
on the registry books of the Company.
(k) In the event that the Company distributes rights or warrants
(other than those referred to in subsection (b) above) pro rata to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Company shall make proper provision so that the
Holder of any Note surrendered for conversion will be entitled to receive upon
such conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of rights or warrants to be
determined as follows: (i) if such conversion occurs on or prior to the date
for the distribution to
76
<PAGE>
the holders of rights or warrants of separate certificates evidencing such
rights or warrants (the "Distribution Date"), the same number of rights or
warrants to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the rights or
warrants, and (ii) if such conversion occurs after such Distribution Date, the
same number of rights or warrants to which a holder of the number of shares of
Common Stock into which the principal amount of such Note so converted was
convertible immediately prior to such Distribution Date would have been entitled
on such Distribution Date in accordance with the terms and provisions of and
applicable to the rights or warrants.
SECTION 12.6. CONTINUATION OF CONVERSION PRIVILEGE IN CASE OF
RECLASSIFICATION, CHANGE, MERGER, CONSOLIDATION OR SALE OF ASSETS.
If any of the following shall occur, namely: (a) any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of the
Securities (other than a change in par value, or from par value to no par value,
or from no par value, to par value, or as a result of a subdivision or
combination), (b) any consolidation or merger of the Company with or into any
other Person, or the merger of any other Person with or into the Company (other
than a merger which does not result in any reclassification, change, conversion,
exchange or cancellation of outstanding shares of Common Stock) or (c) any sale,
transfer or conveyance of all or substantially all of the assets of the Company
(computed on a consolidated basis), then the Company, or such successor or
purchasing entity, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Security then outstanding shall have the right to convert such Security
only into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale, transfer or conveyance by a holder of the number of
shares of Common Stock issuable upon conversion of such Security immediately
prior to such reclassification, change, consolidation, merger, sale, transfer or
conveyance assuming such holder of Common Stock of the Company failed to
exercise his rights of an election, if any, as to the kind or amount of
securities,
77
<PAGE>
cash and other property receivable upon such reclassification, change,
consolidation, merger, sale, transfer or conveyance (PROVIDED that if the kind
or amount of securities, cash, and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance is
not the same for each share of Common Stock of the Company held immediately
prior to such reclassification, change, consolidation, merger, sale, transfer or
conveyance in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this Section 12.6 the
kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance by
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article XII. If, in
the case of any such consolidation, merger, sale or conveyance, the stock or
other securities and property (including cash) receivable thereupon by a holder
of shares of Common Stock includes shares of stock or other securities and
property (including cash) of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger, sale
or conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the Holders of the Securities as the Board of Directors of the
Company shall reasonably consider necessary by reason of the foregoing. The
provisions of this Section 12.6 shall similarly apply to successive
consolidations, mergers, sales or conveyances.
Notice of the execution of each such supplemental indenture shall be
mailed to each Holder of Securities at his address as the same appears on the
registry books of the Company.
Neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by Holders of
Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance or to any
adjustment to be made
78
<PAGE>
with respect thereto, but, subject to the provisions of Article VIII hereof, may
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, the Officers' Certificate (which the Company
shall be obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
SECTION 12.7. NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall declare a dividend (or any other
distribution) payable to the holders of Common Stock (other than cash
dividends);
(b) the Company shall authorize the granting to the holders of
Common Stock of rights, warrants or options to subscribe for or purchase any
shares of stock of any class or of any other rights;
(c) the Company shall authorize any reclassification or change
of the Common Stock (including a subdivision or combination of its outstanding
shares of Common Stock), or any consolidation or merger to which the Company is
a party and for which approval of any stockholders of the Company is required,
or the sale or conveyance of all or substantially all the property or business
of the Company;
(d) there shall be proposed any voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(e) the Company or any of its Subsidiaries shall complete an
Offer;
then, the Company shall cause to be filed at the office or agency maintained for
the purpose of conversion of the Securities as provided in Section 3.2 hereof,
and shall cause to be mailed to each Holder of Securities, at his address as it
shall appear on the registry books of the Company, at least 20 days before the
date hereinafter specified (or the earlier of the dates hereinafter specified,
in the event that more than one date is specified), a notice stating the date on
which (1) a record is expected to be taken for the purpose of such dividend,
distribution, rights, warrants or options or Offer, or if a record is not
79
<PAGE>
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, warrants or options or to
participate in such Offer are to be determined, or (2) such reclassification,
change, consolidation, merger, sale, conveyance, dissolution, liquidation or
winding-up is expected to become effective and the date, if any is to be fixed,
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, change, consolidation, merger,
sale, conveyance, dissolution, liquidation or winding-up.
SECTION 12.8. TAXES ON CONVERSION.
The Company will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of shares of
Common Stock on conversion of Securities pursuant thereto; PROVIDED, HOWEVER,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the Holder of the Securities to be converted
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Company the amount of any such
tax or has established, to the satisfaction of the Company, that such tax has
been paid. The Company extends no protection with respect to any other taxes
imposed in connection with conversion of Securities.
SECTION 12.9. COMPANY TO PROVIDE STOCK.
The Company shall reserve, free from pre-emptive rights, out of its
authorized but unissued shares, sufficient shares to provide for the conversion
of the Securities from time to time as such Securities are presented for
conversion, PROVIDED, that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of Securities by delivery of repurchased shares of Common Stock which
are held in the treasury of the Company.
If any shares of Common Stock to be reserved for the purpose of
conversion of Securities hereunder require registration with or approval of any
governmental authority
80
<PAGE>
under any Federal or state law before such shares may be validly issued or
delivered upon conversion, then the Company covenants that it will in good faith
and as expeditiously as possible use its best efforts to secure such
registration or approval, as the case may be, PROVIDED, HOWEVER, that nothing in
this Section 12.9 shall be deemed to limit in any way the obligations of the
Company provided in this Article XII.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, the
Company will take all corporate action which may, in the Opinion of Counsel, be
necessary in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be fully paid and
non-assessable by the Company and free of preemptive rights.
SECTION 12.10. DISCLAIMER OF RESPONSIBILITY FOR CERTAIN MATTERS.
Neither the Trustee nor any agent of the Trustee shall at any time be
under any duty or responsibility to any Holder of Securities to determine
whether any facts exist which may require any adjustment of the Conversion
Price, or with respect to the Officers' Certificate referred to in Section 12.5
hereof, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither the Trustee nor
any agent of the Trustee shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property (including cash), which may at any time be issued or
delivered upon the conversion of any Security; and neither the Trustee nor any
conversion agent makes any representation with respect thereto. Neither the
Trustee nor any agent of the Trustee shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common Stock
or stock certificates or other securities or property (including cash) upon the
surrender of any Security for the purpose of conversion or, subject to Article
VIII hereof, to comply with any of the covenants of the Company contained in
this Article XII.
81
<PAGE>
SECTION 12.11. RETURN OF FUNDS DEPOSITED FOR REDEMPTION OF CONVERTED
SECURITIES.
Any funds which at any time shall have been deposited by the Company
or on its behalf with the Trustee or any other Paying Agent for the purpose of
paying the principal of and interest on any of the Securities and which shall
not be required for such purposes because of the conversion of such Securities,
as provided in this Article XII, shall after such conversion be repaid to the
Company by the Trustee or such other Paying Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 13.2. NOTICES.
Any notices or other communications to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company:
Hilton Hotels Corporation
9336 Civic Center
Beverly Hills, California 91210
Attention: Chief Financial Officer
Telecopy:
if to the Trustee:
The Bank of New York
(Address)
Attention: Corporate Trust Division,
Telecopy:
82
<PAGE>
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA Section 312(c).
SECTION 13.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
83
<PAGE>
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may rely on
an Officers' Certificate or certificates of public officials.
SECTION 13.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 13.7. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York or Los Angeles, California are authorized or
obligated by
84
<PAGE>
law or executive order to close. If a payment date is a Legal Holiday at such
place, payment may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 13.8. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
SECTION 13.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. NO RECOURSE AGAINST OTHERS.
No direct or indirect partner, employee, stockholder, director or
officer, as such, past, present or future of the Company or any successor
corporation, shall
85
<PAGE>
have any personal liability in respect of the obligations of the Company under
the Securities or this Indenture by reason of his, her or its status as such
partner, stockholder, employee, director or officer. Each Securityholder by
accepting a Security waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Securities.
SECTION 13.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 13.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 13.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 13.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15. QUALIFICATION OF INDENTURE.
86
<PAGE>
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of the Indenture and the Securities and printing
this Indenture and the Securities. The Trustee shall be entitled to receive
from the Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
87
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
HILTON HOTELS CORPORATION,
a Delaware corporation
[Seal]
By:
Name: _______________________
Title: ______________________
Attest:
-----------
Secretary
THE BANK OF NEW YORK,
a national banking association
as Trustee
By:
Name: ________________________
Title: _______________________
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
HILTON HOTELS CORPORATION
_% CONVERTIBLE SUBORDINATED NOTE
DUE 2006
No. CUSIP No. ____________
$ _______
Hilton Hotels Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to _____,
or registered assigns, the principal sum of _____ Dollars, on [ ],
2006.
Interest Payment Dates: [ ] and [ ]; commencing [ ],
1996.
Record Dates:
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: [ ], 1996
HILTON HOTELS CORPORATION,
a Delaware corporation
[Seal]
By:
------------------------------------------
Name:
Title:
Attest:
-----------
Secretary
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
________________________________,
as Trustee
By
-----------------------------------------
Authorized Signatory
Dated:
A-2
<PAGE>
HILTON HOTELS CORPORATION
_% CONVERTIBLE SUBORDINATED NOTE
DUE 2006
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.(1)
1. INTEREST.
Hilton Hotels Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of [ ]% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at a rate of [ ]% per annum compounded semi-annually.
The Company will pay interest semi-annually on [ ] and [ ]
of each year (each, an "Interest Payment Date"), commencing [ ], 1996.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Securities, from
[ ], 1996. Interest will be computed
- --------------------
(1) This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
on the basis of a 360-day year consisting of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders
must surrender Securities to a Paying Agent to collect principal payments. Any
such interest not so punctually paid, and defaulted interest relating thereto,
may be paid to the Persons who are registered Holders at the close of business
on a Special Record Date for the payment of such defaulted interest, as more
fully provided in the Indenture referred to below. Except as provided below,
the Company shall pay principal and interest in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
payment of public and private debts ("U.S. Legal Tender"). The Securities will
be payable as to principal, premium and interest at the office or agency of the
Company maintained for such purpose within or without the City and State of New
York, or at the option of the Company, payment of principal, premium and
interest may be made by check mailed to the Holders at their addresses set forth
in the registry of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of,
premium and interest on Global Securities and all other Securities the Holders
of which shall have provided wire transfer instructions to the Company or the
Paying Agent.
3. PAYING AGENT AND REGISTRAR.
Initially, The Bank of New York (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Paying Agent, Registrar or co-
Registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of [
], 1996 (the "Indenture"), between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
A-4
<PAGE>
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act, as in
effect on the date of the Indenture. The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and said Act for
a statement of them. The Securities are general unsecured obligations of the
Company limited in aggregate principal amount to $575,000,000.
5. REDEMPTION.
The Securities will not be subject to redemption prior to ,
1999. On or after , 1999 the Securities will be redeemable at the
option of the Company, in whole or in part, at the following Redemption
Prices (expressed as a percentage of principal amount) set forth below with
respect to the indicated Redemption Date, in each case, plus any accrued but
unpaid interest to the Redemption Date. The Securities may not be so
redeemed prior to [ ], 1999.
IF REDEEMED DURING
THE 12-MONTH PERIOD
BEGINNING [ ] REDEMPTION PRICE
------------------- ----------------
2000 [ ]
2001 [ ]
2002 [ ]
2003 and thereafter 100%
Any such redemption will comply with Article III of the Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the
A-5
<PAGE>
registry books of the Registrar. Securities may be redeemed in part in
multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent on such Redemption Date and payment of
the Securities called for redemption is not prohibited under Article XI of the
Indenture, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price, plus any accrued and unpaid interest to the Redemption
Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, interest or Liquidated Damages
remains unclaimed for two years, the Trustee and the Paying Agent(s) will pay
the money back to the Company at its written request. After that, all liability
of the Trustee and such Paying Agent(s) with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented, and any existing Default or Event of Default or
compliance with any provision may be waived, with the written consent of the
Holders of a majority in aggregate principal amount of the
A-6
<PAGE>
Securities then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, or make any
other change that does not adversely affect the rights of any Holder of a
Security.
11. CONVERSION RIGHTS.
Subject to the provisions of the Indenture, the Holders have the right
to convert the principal amount of the Securities into fully paid and
nonassessable shares of Common Stock of the Company at the initial conversion
price per share of Common Stock of $[ ] (or $[ ] in principal amount of
Securities for each such share of Common Stock), or at the adjusted conversion
price then in effect, if adjustment has been made as provided in the Indenture,
upon surrender of the Security to the Company, together with a fully executed
notice in substantially the form attached hereto and, if required by the
Indenture, an amount equal to accrued interest payable on such Security.
12. RANKING.
Payment of principal, premium, if any, and interest on the Securities
is subordinated, in the manner and to the extent set forth in the Indenture, to
the prior payment in full of all Senior Indebtedness.
13. REPURCHASE AT OPTION OF HOLDER UPON A CHANGE OF CONTROL.
If there is a Change of Control, the Company shall be required to
offer to purchase on the Repurchase Date all outstanding Securities at a
purchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the Repurchase Date. Holders of Securities will
receive a Repurchase Offer from the Company prior to any related Repurchase Date
and may elect to have such Securities purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
14. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
A-7
<PAGE>
15. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing (other than as Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing Default or Event of
Default (except a Default in payment of principal, interest or Liquidated
Damages), if it determines that withholding notice is in their interest.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, as such, past, present
or future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Securities or
the Indenture by reason of his, her or its status as such stockholder, director,
officer or employee. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
A-8
<PAGE>
18. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
21. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
A-9
<PAGE>
[FORM OF] ASSIGNMENT
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_________________________
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
- --------------------------------------------------------------------------------
(Sign exactly as name appears on
the other side of this Security)
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Article X of the Indenture, check the box: / /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Article X of the Indenture, state the amount you want to
be purchased: $________
Date: ________________ Signature: ________________________
(Sign exactly as your
name appears on the
other side of this
Security)
A-11
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(2)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer
Principal Amount Principal Amount Security following of Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
--------------------
(2) This schedule should only be added if the Security is issued in global
form.
A-12
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SECURITIES
Re: _% CONVERTIBLE SUBORDINATED NOTES DUE 2006 OF UNITED STATES FILTER
CORPORATION.
This Certificate relates to $______ principal amount of Securities held in
*_____ book-entry or ______ definitive form by _____ (the "Transferor").
1. The Transferor:*
/ / (a) has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a Security
or Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
/ / (b) has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
2. In connection with any such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act because such Security is being acquired
for the Transferor's own account, without transfer (in satisfaction of Section
2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of the Indenture).
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
Date:
----------
- ----------------
"Check applicable box.
A-13
<PAGE>
3. Affiliation with the Company [check if applicable]
[ ] (a) The undersigned represents and warrants that it is, or at some time
during which it held this Security was, an Affiliate of the Company.
(b) If 3(a) above is checked AND if the undersigned was not an Affiliate
of the Company at all times during which it held this Security,
indicate the periods during which the undersigned was an Affiliate of
the Company:
________________________________.
(c) If 3(a) above is checked AND if the Transferee will not pay the full
purchase price for the transfer of this Security on or prior to the
date of transfer indicate when such purchase price will be paid:
________________________________.
If any of the above representations required to be made by the Transferee is not
made, the Registrar shall not be obligated to register this Security in the name
of any person other than the Holder hereof.
Dated:
--------------- --------------------------------
NOTICE: The signature of the Holder to this
assignment must correspond with the name as
written upon the face of this Security particular,
without alteration or enlargement or any change
whatsoever.
A-14
<PAGE>
EXHIBIT B
FORM OF CONVERSION NOTICE
To: Hilton Hotels Corporation
The undersigned owner of this Security hereby: (i) irrevocably exercises
the option to convert this Security, or the portion hereof below designated, for
shares of Common Stock of Hilton Hotels Corporation in accordance with the terms
of this Indenture referred to in this Security and (ii) directs that such shares
of Common Stock deliverable upon the conversion, together with any check in
payment for fractional shares and any Security(ies) representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares are to be delivered
registered in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required
to be paid by the undersigned on account of interest accompanies this Security.
Dated ___________________
------------------------------------------
Signature
Fill in for registration of shares if to be delivered, and of Securities if
to be issued, otherwise than to and in the name of the registered holder.
------------------------------------------
Social Security or other
Taxpayer Identifying Number
- -------------------------------------
(Name)
- -------------------------------------
(Street Address)
- -------------------------------------
(City, State and Zip Code)
(Please print name and address)
Principal amount to be
converted: (if less than all)
$________________________________________
B-1
<PAGE>
EXHIBIT 8
[LATHAM & WATKINS LETTERHEAD]
April 30, 1996
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Re: Hilton Hotels Corporation Registration
Statement on Form S-3 (File Number 333-02321)
-------------------------------------------------------------
Ladies/Gentlemen:
You have requested our opinion concerning the material federal income tax
consequences expected to result to holders from the purchase, ownership,
exchange and disposition of the % Convertible Subordinated Notes due 2006
(the "Notes") and the Common Stock of Hilton Hotels Corporation into which the
Notes may be converted, in connection with the Registration Statement on Form
S-3 filed with the Securities and Exchange Commission (the "Commission") on
April 8, 1996 (File No. 333-02321), as amended by Amendment No. 1 filed with the
Commission on the date hereof (collectively, the "Registration Statement").
The facts, as we understand them, and upon which with your permission we
rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the material
federal income tax consequences are accurately set forth under the heading
"Certain Federal Income Tax Considerations" in the Registration Statement. No
opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusion stated herein.
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference of our firm under the heading
"Certain Federal Income Tax Considerations."
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 23.2
As independent public accountants, we hereby consent to the incorporation by
reference in the Preliminary Prospectus on Form S-3 registration statement of
our report dated Februrary 1, 1996 incorporated by reference in Hilton Hotels
Corporation Form 10-K for the year ended December 31, 1995 and to all references
to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 24, 1996
