<PAGE>
FILING MADE PURSUANT TO
RULE 424(b)(2)
FILE NO. 333-38047
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 15, 1997)
[LOGO]
$200,000,000 7.20% SENIOR NOTES DUE 2009
$200,000,000 7.50% SENIOR NOTES DUE 2017
------------------
The 7.20% Senior Notes due 2009 (the "2009 Notes") and the 7.50% Senior
Notes due 2017 (the "2017 Notes" and, together with the 2009 Notes, the "Notes")
are being offered by Hilton Hotels Corporation ("Hilton" or the "Company"), in
aggregate principal amounts of $200,000,000 and $200,000,000, respectively.
Interest on the Notes is payable semiannually in arrears on June 15 and December
15 of each year, beginning June 15, 1998, at the initial rate of 7.20% per annum
with respect to the 2009 Notes and 7.50% per annum with respect to the 2017
Notes. Thereafter, such interest rates shall be subject to adjustment in the
event of an Acquisition Related Rating Change (as defined herein). See
"Description of Notes" herein and "Description of Debt Securities" in the
accompanying Prospectus.
Each series of Notes will be issued in book-entry form and represented by
one or more global notes (each a "Global Note") in fully registered form,
without coupons, which will be deposited with a custodian for, and registered in
the name of a nominee of, The Depository Trust Company ("DTC") in New York, New
York, as Depositary for the accounts of its participants. Beneficial interests
in the Global Notes will be represented, and transfers thereof will be effected,
only through book-entry accounts maintained by DTC and its direct or indirect
participants. Initial settlement for the Notes will be made in immediately
available funds and secondary market trading activity in beneficial interests
therein will therefore settle in such funds. Except in limited circumstances,
definitive Notes will not be issued in exchange for beneficial interests in the
Global Notes. See "Description of Notes--Book-Entry, Delivery and Form."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING 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 NOR ANY OTHER GAMING REGULATORY
AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR THE INVESTMENT MERITS OF
THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)
Per 2009 Note...................... 99.844% .675% 99.169%
Total.............................. $199,688,000 $1,350,000 $198,338,000
Per 2017 Note...................... 99.369% .875% 98.494%
Total.............................. $198,738,000 $1,750,000 $196,988,000
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
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The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued by the Company and delivered to and accepted by the
several Underwriters, subject to approval of certain legal matters by counsel
for the several Underwriters and certain other conditions. The several
Underwriters reserve the right to withdraw, cancel or modify such offer 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 December 22, 1997.
------------------
SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
BANCAMERICA ROBERTSON STEPHENS
------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS DECEMBER 17, 1997.
<PAGE>
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Notes. Such
transactions may include stabilizing, the purchase of Notes to cover syndicate
short positions and the imposition of penalty bids. For a description of those
activities, see "Underwriting."
AS USED IN THIS PROSPECTUS SUPPLEMENT, THE TERMS "COMPANY" OR "HILTON" REFER
TO THE COMPANY AND ITS SUBSIDIARIES, UNLESS OTHERWISE PROVIDED OR THE CONTEXT
OTHERWISE REQUIRES.
THE COMPANY
The Company is a leading owner and operator of full-service hotels and
gaming properties located in gateway cities, urban and suburban centers and
resort areas throughout the United States and in selected international cities.
The Hilton name is one of the best recognized and most respected lodging brands
in the world. The Company's operations include 236 hotel properties representing
approximately 84,000 rooms and 16 gaming properties with approximately 1,038,000
square feet of casino space. The Company believes its portfolio of owned,
franchised and managed hotels and gaming properties provides significant
diversification and a strong base for future growth.
On September 30, 1997, the Company owned or partially owned 23 and managed
21 domestic full-service hotel properties. An additional 177 hotels were
franchised under the Hilton, Hilton Garden Inn and Hilton Suites brand names.
The Company's international hotel operations currently include eight full-
service hotel properties. The Company's owned or partially owned hotels include
such well-known urban and resort properties as the Waldorf=Astoria in New York,
the New York Hilton & Towers, the Palmer House Hilton and the O'Hare Hilton in
Chicago, the Chicago Hilton & Towers, the Washington Hilton & Towers in
Washington, D.C., the New Orleans Hilton Riverside & Towers and the Hilton
Hawaiian Village in Honolulu.
In December 1996, the Company acquired (the "Merger") Bally Entertainment
Corporation ("Bally"), creating the world's largest casino gaming company based
on gaming segment revenue and EBITDA (as defined in "Selected Financial Data"
herein). The Company operates its domestic gaming business under the Hilton,
Bally and Flamingo brand names. The Company has a strong presence in Atlantic
City and in Las Vegas, the largest gaming market in the world with approximately
30 million visitors and gross gaming revenue of more than $5.8 billion in 1996.
The Company's Nevada casino operations include the Las Vegas Hilton, the
Flamingo Hilton-Las Vegas, Bally's Las Vegas, the Flamingo Hilton-Laughlin, the
Reno Hilton and the Flamingo Hilton-Reno. The Company's Atlantic City casinos
are Bally's Park Place Casino - Resort ("Bally's Park Place"), including The
Wild Wild West Casino connected to Bally's Park Place, and the Atlantic City
Hilton, formerly The Grand. Under its Conrad International brand, the Company
also partially owns and manages casinos in Brisbane and the Gold Coast in
Queensland, Australia, Punta del Este, Uruguay and Istanbul, Turkey.
The Company seeks to maintain the diversity and balance of its lodging and
gaming businesses while expanding both domestically and internationally. The
Company intends to improve and expand its core businesses by capitalizing on the
synergies between its hotel and gaming operations, leveraging its strong brand
names, maximizing operating efficiencies, expanding and enhancing properties and
acquiring or developing properties as appropriate. The Company's diversified
hotel and gaming segments offer multiple product lines to a broad range of
customers in many geographic markets. The Company's diversified hotel portfolio
includes large urban hotels, airport hotels, suburban/suite hotels and resorts.
The gaming segment, with its major presence in Las Vegas and Atlantic City,
attracts premium players, convention visitors, mid-market gamblers and
budget-conscious visitors. The Company believes that its recent alliance with
Ladbroke Group PLC ("Ladbroke") (which currently owns the rights to the Hilton
name outside of the U.S.) will improve the performance of the Company's
operations as its properties benefit from the worldwide integration of the
Hilton brand, reservation systems, marketing programs and sales organizations.
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SUMMARY OPERATING DATA
NINE MONTHS ENDED SEPTEMBER 30, 1997
For the nine months ended September 30, 1997, Hilton's consolidated revenue
increased 37% to $4.0 billion from $2.9 billion for the nine months ended
September 30, 1996, with the hotel segment and gaming segment representing
approximately 51% and 49%, respectively, of the revenues for 1997. EBITDA for
the nine months ended September 30, 1997 rose 81% to $785 million from $433
million in 1996; operating income increased 90% to $558 million from $293
million in 1996; and net income increased 70% to $255 million compared to $150
million in 1996.
After giving effect to the Merger on a pro forma basis, the Company's total
revenue, EBITDA and total operating income would have been approximately $3.8
billion, $698 million and $482 million, respectively, for the nine months ended
September 30, 1996.
RECENT DEVELOPMENTS
EXPECTED FOURTH QUARTER EARNINGS
On December 8, 1997, the Company announced that it will record non-recurring
charges in the fourth quarter of 1997 which will result in a net charge to
earnings of approximately $.27 to $.29 per share, including recognition of
impairment losses related to the Flamingo Casino-Kansas City and the closure of
the Flamingo Casino-New Orleans riverboat casino and the write-off of expenses
related to the ITT Offer (as defined below), net of the gain recognized on the
sale of ITT Corporation stock previously purchased by the Company.
In addition, the Company announced that it expects fourth quarter earnings
to be lower than anticipated. The drop in earnings is primarily attributable to
three factors: (i) continued lower than expected growth in the major gaming
markets, (ii) delays in the opening of "Star Trek: The Experience at the Las
Vegas Hilton" and (iii) the closure of the Company's Flamingo Casino-New Orleans
riverboat casino.
DEVELOPMENT PROPERTIES
In July 1997, Hilton opened the Wild Wild West Casino, a new western-themed
casino and entertainment complex connected to Bally's Park Place in Atlantic
City. This complex includes 75,000 square feet of casino space (including space
attributable to the race book).
The Company continues to expand its domestic gaming operations through the
development of the Paris Casino-Resort, a new casino resort adjacent to Bally's
Las Vegas which is expected to feature an 85,000-square-foot casino, including a
50-story replica of the Eiffel Tower, scheduled to be completed in third quarter
1999.
Conrad International's new hotel-casino in Punta del Este, Uruguay, which
includes a 38,000-square-foot casino, commenced its casino operations in January
1997. The hotel opened in stages over the latter half of 1997. Conrad
International manages and has an equity interest of approximately 43% in the
hotel-casino. Additionally, Conrad International will manage and have a 10%
equity interest in a hotel-casino in Cairo, Egypt, which is scheduled to open in
early 1999.
THE ITT OFFER
In January 1997, the Company commenced an offer (the "ITT Offer"), to
acquire ITT Corporation ("ITT") in a combination cash and stock transaction. The
Company subsequently amended the ITT Offer to automatically terminate upon the
election of a majority of the current directors of ITT at the ITT 1997 annual
meeting of shareholders. On November 12, 1997, the shareholders of ITT
re-elected the current directors of ITT at such annual meeting, and on November
13, 1997, the Company terminated the ITT Offer.
S-3
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BUSINESS
A summary of the Company's hotels and gaming properties at September 30,
1997 (excluding properties that are under development) is set forth below:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-----------------------------------------
PROPERTY TYPE NUMBER OF PROPERTIES NUMBER OF ROOMS
- ------------------------------------------------------------------------- ----------------------- ----------------
<S> <C> <C>
HOTELS
Owned/Partially Owned Hotels:
Domestic Full-Service.................................................. 23 21,538
Hilton Suites.......................................................... 5 1,095
Hilton Garden Inns..................................................... 2 349
Conrad International................................................... 2 816
--- -------
Total.................................................................. 32 23,798
--- -------
Managed Hotels:
Domestic Full-Service.................................................. 21 13,680
Conrad International................................................... 6 2,117
--- -------
Total.................................................................. 27 15,797
--- -------
Franchise Hotels......................................................... 177 44,716
--- -------
TOTAL HOTELS......................................................... 236 84,311
GAMING
Owned/Partially Owned Hotel-Casinos:
Domestic Land-Based Properties......................................... 8 16,305
Riverboat Properties................................................... 4 238
Conrad International................................................... 3 745
--- -------
Total.................................................................. 15 17,288
--- -------
Managed Casino:
Casino Windsor......................................................... 1 --
--- -------
TOTAL PROPERTIES..................................................... 252 101,599
--- -------
--- -------
</TABLE>
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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.
HOTELS
OWNED AND PARTIALLY OWNED DOMESTIC HOTELS
At September 30, 1997, Hilton operated 23 full-service owned and partially
owned hotels (excluding its eight hotel-casinos) located throughout the United
States. Eighteen of these hotels are owned (or 99% owned) or leased, including
the Waldorf=Astoria in New York City, the New York Hilton & Towers, the Palmer
House Hilton in Chicago, the Washington Hilton & Towers in Washington, D.C. and
the O'Hare Hilton in Chicago, while five hotels are partially owned, including
the approximately 83%-owned Chicago Hilton & Towers, the 67.4%-owned New Orleans
Hilton Riverside & Towers and the 50%-owned Hilton Hawaiian Village. Hilton also
earns management fee income from its partially owned hotels generally under
long-term management contracts.
Hilton leases the land upon which seven of the owned hotels are located.
Upon the expiration of such leases, the buildings and other leasehold
improvements presently owned by Hilton revert to the landlords.
S-4
<PAGE>
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. The ground leases generally expire between the years
2003 and 2033 and approximately half of such leases contain renewal options in
excess of 30 years.
Complementing its standard full-service hotels, Hilton owns or partially
owns five Hilton Suites and two Hilton Garden Inns.
MANAGED DOMESTIC HOTELS
At September 30, 1997, Hilton managed 21 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. The expiration dates of Hilton's
domestic management arrangements range from 1998 to 2016 and generally contain
renewal options ranging from five to 20 years, subject to certain termination
rights.
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.
FRANCHISE HOTELS
Pursuant to franchises granted by the Company through a subsidiary,
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 operated by the Company, average
approximately 250 rooms in size and target the mid-market segment. Franchise
hotels bearing the Hilton Garden Inn name 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.
At September 30, 1997, there were 177 franchise hotels, of which 170 were
operated under the Hilton name, five were operated under the Hilton Garden Inn
name and two were operated under the Hilton Suites name. The Company has
received commitments for an additional 58 franchise hotels scheduled to commence
operation during the remainder of 1997 and 1998. In general, franchisees pay
Hilton an initial fee based on the number of rooms in a franchise hotel and a
continuing fee based on a percentage of the facility's room 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.
INTERNATIONAL HOTELS
The Company's international hotel operations are presently conducted through
its Conrad International subsidiaries. At September 30, 1997, Conrad
International operated eight hotels (excluding hotel-casinos) under long-term
management contracts. Six of these hotels are owned in their entirety by third
parties, while the 14.7%-owned Conrad International Dublin in Ireland and the
25%-owned Conrad International Istanbul in Turkey are partially owned by Conrad
International.
In addition to the international hotel operations conducted through Conrad
International, the Company has formed a strategic alliance with Ladbroke.
Pursuant to the alliance, which reunifies the Hilton hotel brand worldwide,
Hilton and Ladbroke will cooperate on sales and marketing programs with
S-5
<PAGE>
respect to 400 hotels in 49 countries. Future development of international
hotels by the Company will be subject to agreements entered into between the
Company and Ladbroke in January 1997. Pursuant to such agreements, Ladbroke has
been granted rights to future international development using the Conrad brand
name and the Company and Ladbroke will have the opportunity to participate in
certain of each other's future hotel development focusing primarily upon
management contracts and franchises.
GAMING
NEVADA HOTEL-CASINOS
The Company's gaming facilities operate under the Hilton, Bally and Flamingo
brand names. The Company's wholly owned Nevada hotel-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's approximately 95
percent-owned subsidiary, Bally's Grand, Inc., owns and operates Bally's Las
Vegas. The Company has a strong presence in Las Vegas, the largest gaming market
in the world with approximately 30 million visitors and gross gaming revenue of
more than $5.8 billion in 1996.
Hilton's gaming operations reach diverse markets by offering gaming
alternatives for premium players, convention visitors, mid-market gamblers and
budget-conscious customers. The Las Vegas Hilton is located adjacent to the Las
Vegas Convention Center and focuses on upscale individual leisure guests and
convention groups. Bally's Las Vegas is located at the "Four Corners" on the
Strip in Las Vegas and caters to convention groups and the mid- to upper
mid-market, including the group tour and travel segment. The Flamingo Hilton-Las
Vegas 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. The Reno Hilton focuses primarily on
the mid-market, in particular, convention groups. Each of these 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.
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. The Company's
new themed 22,000-square-foot casino addition at the Las Vegas Hilton opened in
November 1997, in conjunction with its venture with Paramount Parks Inc. for an
attraction called "Star Trek: The Experience at the Las Vegas Hilton" which is
expected to open in January 1998. In 1995, the Las Vegas Hilton completed
construction of three new 12,600- to 15,400-square-foot Sky Villa luxury suites
for premium players. The Las Vegas Hilton also completed construction of new VIP
baccarat facilities and opened a new 6,800-square-foot luxury European Suite.
The Las Vegas Hilton continues to renovate 1,200 of its guest rooms. In 1995,
Bally's Las Vegas completed renovation of 800 hotel rooms and a
7,500-square-foot expansion of the main casino floor and, in a joint venture
with the MGM Grand Hotel and Casino, opened a monorail system connecting their
respective casino hotel resort properties. In 1995, 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 approximate square footage of the Company's casinos in Nevada is as
follows: Las Vegas Hilton--78,000 square feet (inclusive of 29,000 square feet
attributable to the race and sports book); Bally's Las Vegas--62,000 square feet
(inclusive of 7,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas--93,000 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).
S-6
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NEW JERSEY HOTEL-CASINOS
The Company's wholly owned New Jersey casinos are Bally's Park Place and the
Atlantic City Hilton, formerly The Grand. Bally's Park Place, currently the
largest four-star hotel in New Jersey, is located at the intersection of Park
Place and the Boardwalk in Atlantic City and focuses on high-end players and the
mid-market segment, including the mid- to upper mid-market slot player segment.
The Atlantic City Hilton is located at the intersection of Boston and Pacific
Avenues at the southern end of the Boardwalk in Atlantic City and focuses on
personalized service for high-end and mid-market patrons. Each hotel-casino has
gaming, convention, dining, shopping, spa, entertainment and indoor and outdoor
recreational facilities, as well as popular entertainment featured at each
hotel.
In July 1997, Hilton opened The Wild Wild West Casino, a new western-themed
casino and entertainment complex connected to Bally's Park Place in Atlantic
City. This complex includes 75,000 square feet of casino space (including space
attributable to the race book).
In 1995, Bally's Park Place completed a slot machine upgrade, including
replacement of a majority of the inventory with state-of-the-art machines and
reconfiguration of its slot machine layout. In July 1997, the Atlantic City
Hilton completed construction of a 300-room hotel tower, including meeting
rooms, restaurants and other related amenities, all on a site adjacent to the
Atlantic City Hilton. In 1995, the Atlantic City Hilton completed a 1,500-seat
temporary theater for headline entertainment, sports events and production
shows.
The approximate square footage of the Company's New Jersey casinos is as
follows: Bally's Park Place--80,000 square feet (inclusive of 8,500 square feet
attributable to the race book) and 75,000 square feet attributable to The Wild
Wild West Casino; and the Atlantic City Hilton--60,000 square feet (inclusive of
1,500 square feet attributable to the race book).
RIVERBOAT CASINOS
From February 1994 through September 1997, the Company operated a 1,500
passenger riverboat casino located adjacent to the New Orleans Hilton Riverside
& Towers with a 20,000-square-foot casino. This vessel is wholly owned by the
Company and leased to a joint venture, of which the Company owns a 50% interest.
In October 1996, the Company was granted general approval by the Louisiana
Gaming Control Board (the "LGCB") to relocate this vessel by October 1, 1997,
from New Orleans to Shreveport, Louisiana where the vessel would operate as a
dockside casino on the Red River. The Company subsequently abandoned its plan to
relocate the facility and on October 1, 1997, the riverboat ceased operations.
See "The Company--Recent Developments--Expected Fourth Quarter Earnings." The
Company is negotiating with the City of New Orleans and its partner with respect
to certain obligations related to the closure of the Flamingo Casino-New
Orleans. Additionally, the Company has an approximately 50% ownership interest
in the entity which owns Bally's Casino*Lakeshore Resort, a 2,500-passenger
riverboat casino facility which features a 30,000-square-foot casino. The
riverboat operates out of South Shore Harbor on Lake Pontchartrain in Orleans
Parish, which is approximately eight miles from the French Quarter of New
Orleans. The Company's riverboat casinos feature table games and slot machines
similar to those offered at the Company's hotel-casinos in Nevada and New
Jersey.
In October 1996, the Company commenced operation of the Flamingo
Casino-Kansas City, a dockside casino complex in Kansas City, Missouri. The
wholly owned complex features 30,000 square feet of gaming space and concessions
and entertainment facilities. An agreement between Hilton and the Port Authority
of Kansas City provides for the Company, subject to certain conditions, to sell
10% of its ownership interest in the complex to locally-based minority
interests. In November 1997, the Missouri Supreme Court ruled that riverboat
casinos operating in man-made basins must meet certain requirements as to
contiguity with the Mississippi or Missouri rivers in order to comply with the
Missouri constitution. The Missouri Supreme Court's ruling, if made applicable
to the Flamingo Casino-Kansas City, could, unless modified by
S-7
<PAGE>
judicial or other governmental action, have a significant adverse effect upon
its operations. See "The Company--Recent Developments--Expected Fourth Quarter
Earnings."
At September 30, 1997, the Company had a 58% ownership interest in the
entity that owns Bally's Saloon*Gambling Hall*Hotel, a dockside casino and hotel
in Robinsonville, Mississippi, near Memphis, Tennessee. In November 1997, the
Company increased its ownership interest to 100%. The property is managed by the
Company and features a 40,000-square-foot dockside casino. A 238-room hotel is
on an adjacent land-based facility.
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 and New Jersey.
In January 1997, Conrad International's new casino in Punta del Este,
Uruguay commenced operations. The facility's hotel opened in stages over the
latter half of 1997. See "The Company--Recent Developments--Development
Properties."
In April 1995, the Company commenced operation of the Conrad International
Treasury Casino, Brisbane in Brisbane, Queensland, 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 Conrad Jupiters, Gold
Coast, which opened in 1985. This hotel-casino is located on the Gold Coast in
Queensland, Australia, and features a 70,000-square-foot casino.
CASINO WINDSOR
The Company and another shareholder 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 50% interest
in WCL, which operates this project for the Ontario provincial government. In
January 1997, WCL redeemed the shareholder interest of its third original
shareholder. The Company anticipates that the interim casino will be replaced by
a permanent facility in spring 1998, which will include a hotel of approximately
400 rooms, a 75,000-square-foot casino and 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.
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OWNED PROPERTIES
At September 30, 1997, the following domestic properties were owned, or
partially owned, and operated by Hilton:
HOTELS*
<TABLE>
<CAPTION>
NUMBER OF
NAME AND LOCATION ROOMS/SUITES
- ---------------------------------------------------------- -------------
<S> <C>
Hilton Hawaiian Village, Honolulu, HI(1).................. 2,545
New York Hilton & Towers, New York, NY(2)................. 2,041
San Francisco Hilton & Towers, San Francisco, CA(2)....... 1,895
Palmer House Hilton, Chicago, IL.......................... 1,639
New Orleans Hilton Riverside & Towers, New Orleans,
LA(3)................................................... 1,600
Chicago Hilton & Towers, Chicago, IL(4)................... 1,543
Waldorf=Astoria, New York, NY............................. 1,380
Hilton Waikoloa Village, Waikoloa, HI(5).................. 1,239
Washington Hilton & Towers, Washington, D.C.(2)........... 1,123
Anchorage Hilton, Anchorage, AK........................... 591
Capital Hilton, Washington, D.C.(2)....................... 543
Atlanta Airport Hilton & Towers, Atlanta, GA.............. 503
McLean Hilton, McLean, VA(5).............................. 458
Portland Hilton, Portland, OR............................. 455
Rye Town Hilton, Rye Brook, NY(2)......................... 436
New Orleans Airport Hilton, New Orleans, LA............... 317
Hilton Suites, Orange, California......................... 230
Hilton Suites, Phoenix, Arizona........................... 226
Hilton Suites, Auburn Hills, Michigan..................... 224
Hilton Suites, Oakbrook Terrace, Illinois(1).............. 212
Hilton Suites, Brentwood, Tennessee....................... 203
Hilton Garden Inn, Southfield, Michigan................... 197
Hilton Garden Inn, Valencia, California(5)................ 152
HOTEL-CASINOS
Flamingo Hilton-Las Vegas, Las Vegas, NV.................. 3,642
Las Vegas Hilton, Las Vegas, NV........................... 3,174
Bally's Las Vegas, Las Vegas, NV(6)....................... 2,814
Reno Hilton, Reno, NV..................................... 2,001
Flamingo Hilton-Laughlin, Laughlin, NV.................... 2,000
Bally's Park Place, Atlantic City, NJ..................... 1,265
Atlantic City Hilton, Atlantic City, NJ................... 805
Flamingo Hilton-Reno, Reno, NV............................ 604
</TABLE>
- ------------------------
* Excludes seven owned Hilton hotels subject to ground leases and one hotel
adjacent to a dockside casino.
(1) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties.
(2) Hilton owned 50% of each of the referenced properties prior to the 1996
acquisition of substantially all of The Prudential Insurance Company of
America's ("Prudential") ownership interests in the properties. Hilton
currently has an equity interest of over 99% in each of the referenced
properties.
(3) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Riverside & Towers.
(4) Hilton owned 33.3% of the Chicago Hilton & Towers prior to the 1996
acquisition of Prudential's ownership interest in 50% of the property.
Hilton currently has an equity interest of approximately 83% of the
property.
S-9
<PAGE>
(5) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties.
(6) Hilton owns approximately 95% of Bally's Grand, Inc. ("BGI"), which owns
and operates Bally's Las Vegas. See "--Legal Proceedings" below.
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.
Bally received notice from the current landowner of a prior Bally facility
in Chicago, Illinois that the landowner may seek to recover past and future
costs of investigating and remediating alleged soil and groundwater
contamination at the facility. The Company does not believe that Bally's prior
operations at the site have contributed to the alleged contamination; as a
result, if the current landowner pursues its claim, the Company expects to
vigorously defend against the claim. The Company cannot at this time estimate
the potential costs of investigation or cleanup, if any, however, based on
currently available information, the Company believes that any such costs would
be shared by several parties and, in any event, the cost estimates provided to
date indicate that any such liability would not have a material adverse effect
on the Company.
LEGAL PROCEEDINGS
On June 13, 1997, BGI, a subsidiary of the Company, announced that it had
reached an agreement to
settle the IN RE: BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION presently pending
in the Delaware Court of Chancery. For a description of the litigation, see the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
incorporated by reference herein. Prior to the settlement, the Company owned
approximately 84% of the common stock of BGI and public stockholders owned the
remaining 16%. Under the terms of the settlement, BGI has repurchased 966,747
shares of its common stock and 102,698 warrants to purchase shares of its common
stock from certain plaintiffs at a price of $52.75 per share in cash for the
common stock and $52.75 less the exercise price per warrant in cash for the
warrants.
On October 9, 1997, the Company received court approval of the settlement
agreement. Following receipt of certain regulatory approvals, BGI would merge
with the Company or a subsidiary of the Company, and the remaining 408,862
outstanding shares of BGI's common stock not currently owned by the Company
would be converted into the right to receive $52.75 (less certain attorneys'
fees) per share in cash, and the 491,784 outstanding warrants to purchase BGI
common stock not currently owned by the Company would be converted into the
right to receive the difference between $52.75 (less certain
S-10
<PAGE>
attorneys' fees) and the exercise price per warrant in cash. Shareholders will
be entitled to appraisal rights under Delaware law in connection with any such
merger.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes,
estimated to be approximately $395 million, are expected to be used to repay a
portion of the Company's outstanding commercial paper. As of September 30, 1997,
the Company had approximately $683 million in commercial paper outstanding, with
an average interest rate of approximately 5.8%.
S-11
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 30, 1997, and (ii) the capitalization of the Company at September
30, 1997 as adjusted to give effect to this offering, after deduction of
estimated expenses and underwriting discounts and commissions. This information
should be read in conjunction with the selected financial data of Hilton
presented elsewhere herein and the Company's consolidated financial statements
and the notes thereto incorporated by reference into the accompanying
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED
------------ ------------
($ IN MILLIONS)
<S> <C> <C>
CURRENT MATURITIES OF LONG-TERM DEBT:
Total current maturities of long-term debt.............. $ 24 $ 24
------ ------
------ ------
LONG-TERM DEBT:
Industrial development revenue bonds at adjustable
rates, due 2015....................................... $ 82 $ 82
Senior notes, with an average rate of 7.54%, due 1997 to
2007.................................................. 1,403 1,403
Mortgage notes, 6.16% to 10.40%, due 1997 to 2011....... 125 125
5% Convertible Subordinated Notes due 2006.............. 491 491
Commercial paper........................................ 683 288
Other................................................... 10 10
2009 Notes offered hereby............................... -- 200
2017 Notes offered hereby............................... -- 200
Less current maturities of long-term debt........... (24) (24 )
------ ------
Total long-term debt, net of current maturities..... $ 2,770 $ 2,775
------ ------
STOCKHOLDERS' EQUITY:
Preferred stock--25 million shares authorized at $1.00
par value:
Preferred Redeemable Increased Dividend Equity
Securities, 8% PRIDES, Convertible Preferred Stock.... 15 15
Common stock--400 million shares authorized at $2.50 par
value................................................. 628 628
Additional paid-in capital.............................. 1,758 1,758
Retained earnings....................................... 1,069 1,069
Less treasury stock, at cost............................ (46) (46 )
Other................................................... 20 20
------ ------
Total stockholders' equity.......................... 3,444 3,444
------ ------
Total capitalization................................ $ 6,214 $ 6,219
------ ------
------ ------
</TABLE>
S-12
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial data for Hilton as of and for each of
the five years in the period ended December 31, 1996 are derived from the
audited consolidated financial statements of Hilton and the unaudited selected
consolidated financial data for Hilton for the nine month periods ended
September 30, 1997 and 1996 are derived from the unaudited consolidated
financial statements of Hilton. The selected consolidated financial data for
Bally as of and for each of the periods ended December 31, 1995 have been
derived from the audited consolidated financial statements of Bally. The data
are qualified in their entirety by, and should be read in conjunction with,
Hilton's and Bally's respective consolidated financial statements and the
related notes thereto and management's discussion and analysis of results of
operations and financial condition, which are set forth in the applicable annual
reports, and by the information incorporated by reference herein.
HILTON HOTELS CORPORATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
NINE MONTH PERIODS ENDED
SEPTEMBER 30, (UNAUDITED) YEARS ENDED DECEMBER 31,
--------------------------------- --------------------------------------------
1997 1996 1996 1996 1996(1) 1995 1994
--------- ----------- --------- ----------- --------- --------- ---------
HILTON/BALLY HILTON/BALLY
PRO FORMA PRO FORMA
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue............................... $ 3,977 $ 3,778 $ 2,904 $ 5,041 $ 3,940 $ 3,555 $ 3,301
Total operating income...................... 558 482 293 525 329 355 286
Net income(2)............................... 255 229 150 169 82 173 122
Net income per share........................ .98 .88 .77 .64 .41 .89 .63
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(3)................................... $ 785 $ 698 $ 433 $ 872 $ 577 $ 543 $ 461
Interest expense............................ 131 119 55 170 88 93 87
Interest expense, net, from equity
investments............................... 13 9 9 12 12 17 12
Hotel Segment:
Revenue................................... 2,043 1,859 1,859 2,517 2,517 2,265 2,112
EBITDA(3)................................. 410 280 280 392 392 301 240
Operating income.......................... 338 210 210 272 272 208 148
Gaming Segment:
Revenue................................... 1,934 1,919 1,045 2,524 1,423 1,290 1,189
EBITDA(3)................................. 422 451 186 528 233 267 244
Operating income.......................... 269 309 120 305 109 179 166
Percentage of occupancy
Hotels (owned or managed)................. 76 -- 75 -- 74 73 70
Gaming.................................... 87 -- 90 -- 88 86 87
Ratio of earnings to fixed charges(4)....... 3.8x -- 4.2x -- 3.3x 3.2x 2.8x
Cash dividends declared per share........... $ .24 -- $ .225 -- $ .305 $ .30 $ .30
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenue............................... $ 2,901 $ 2,650
Total operating income...................... 235 221
Net income(2)............................... 106 104
Net income per share........................ .55 .54
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(3)................................... $ 411 $ 370
Interest expense............................ 82 67
Interest expense, net, from equity
investments............................... 15 11
Hotel Segment:
Revenue................................... 1,844 1,720
EBITDA(3)................................. 199 177
Operating income.......................... 96 95
Gaming Segment:
Revenue................................... 1,057 930
EBITDA(3)................................. 234 213
Operating income.......................... 166 151
Percentage of occupancy
Hotels (owned or managed)................. 67 66
Gaming.................................... 86 85
Ratio of earnings to fixed charges(4)....... 2.7x 2.9x
Cash dividends declared per share........... $ .30 $ .30
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30 -----------------------------------------------------
1997 1996(1) 1995 1994 1993 1992
----------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and temporary investments........ $ 371 $ 438 $ 534 $ 510 $ 568 $ 648
Total assets............................................ 7,895 7,617 3,443 3,261 2,952 2,954
Total debt.............................................. 2,794 2,707 1,287 1,289 1,142 1,133
Total stockholders' equity.............................. 3,444 3,211 1,254 1,128 1,057 1,002
</TABLE>
S-13
<PAGE>
BALLY ENTERTAINMENT CORPORATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
PERIOD ENDED ------------- ------------- -------------
DECEMBER 18,
-------------
1996(5)
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:(6)
Total revenue(7)........................................ $ 1,101 $ 1,010 $ 933 $ 622
Total operating income(7)............................... 172 173 116 102
Income (loss) from continuing operations(8)............. 56 77 (2) 10
Net income (loss)(8)(9)................................. 56 66 (68) (46)
Income (loss) from continuing operations per share...... .83 1.34 (.10) .16
Net income (loss) per share............................. .83 1.15 (1.52) (1.06)
OTHER FINANCIAL AND OPERATING DATA:(6)
EBITDA(3)(7)............................................ $ 258 $ 254 $ 208 $ 153
Interest expense........................................ 126 132 131 93
Percentage of occupancy................................. 93 91 90 89
Ratio of earnings to fixed charges(4)(10)............... 1.6x 1.4x 1.0x 1.2x
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:(6)
Cash, cash equivalents and temporary investments....................... $ 304 $ 184 $ 192
Total assets........................................................... 1,889 1,936 1,992
Total debt............................................................. 1,290 1,266 1,186
Total stockholders' equity............................................. 251 294 364
<CAPTION>
1992
-------------
<S> <C>
INCOME STATEMENT DATA:(6)
Total revenue(7)........................................ $ 553
Total operating income(7)............................... 83
Income (loss) from continuing operations(8)............. --
Net income (loss)(8)(9)................................. 12
Income (loss) from continuing operations per share...... (.06)
Net income (loss) per share............................. .22
OTHER FINANCIAL AND OPERATING DATA:(6)
EBITDA(3)(7)............................................ $ 132
Interest expense........................................ 94
Percentage of occupancy................................. 84
Ratio of earnings to fixed charges(4)(10)............... --
1992
-------------
<S> <C>
BALANCE SHEET DATA:(6)
Cash, cash equivalents and temporary investments........ $ 26
Total assets............................................ 1,358
Total debt.............................................. 731
Total stockholders' equity.............................. 410
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-14
<PAGE>
- ------------------------
(1) The 1996 Hilton selected financial data reflects the Merger with Bally
consummated on December 18, 1996 and includes the combined operations of
Hilton and the former Bally properties from December 18, 1996 through
December 31, 1996.
(2) Net income for Hilton in 1996 includes an extraordinary loss on
extinguishment of debt of $74 million ($.38 per share). Net income for
Hilton in 1993 includes a credit of $3 million ($.02 per share) resulting
from the implementation of new accounting standards for income taxes and
post-retirement benefits other than pensions.
(3) Hilton's EBITDA for the nine month periods ended September 30, 1997 and
1996 and the years ended December 31, 1996, 1995, 1994, 1993 and 1992
include unallocated corporate expense of $47 million, $33 million, $48
million, $25 million, $23 million, $22 million and $20 million,
respectively, which has not been included in Hotel Segment--EBITDA or Gaming
Segment--EBITDA. EBITDA consists of operating income plus depreciation,
amortization and noncash items. EBITDA is presented supplementally because
management believes some investors find it useful. 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
overall financial performance of Hilton and Bally. The Company's calculation
of EBITDA may be different from the calculation used by other companies and
therefore comparability may be limited.
(4) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes and minority interests
plus fixed charges (adjusted for capitalized interest) by (ii) fixed
charges. Fixed charges consist of interest incurred (expensed or
capitalized) and the portion of rent expense which is deemed representative
of interest.
(5) The selected financial data for Bally represents the period from January 1,
1996 to December 18, 1996 (the date Bally merged with and into Hilton). This
unaudited data is derived from the accounting records of Bally, as adjusted
for Merger related costs.
(6) Bally's Las Vegas has been consolidated with Bally since December 1, 1993
as a result of Bally's controlling interest in BGI at that date. Prior to
December 1, 1993, Bally's investment in BGI was principally recorded under
the equity method of accounting. In addition, Bally's New Orleans commenced
operation of its riverboat casino in July 1995 and Bally's Mississippi
reopened its dockside casino in December 1995.
(7) Total revenue and total operating income for Bally for the period ended
December 18, 1996 and the years ended December 31, 1995, 1994, 1993 and 1992
exclude interest income of $28 million, $14 million, $9 million, $6 million
and $3 million, respectively, to conform to the financial presentation of
Hilton.
(8) Income from continuing operations and net income for Bally for the year
ended December 31, 1995 include a credit of $41 million ($.76 per share) for
certain adjustments to the prior years' income taxes. Loss from continuing
operations and net loss for the year ended December 31, 1994 include a
charge (net of taxes) of $9 million to write off certain assets which were
abandoned upon the relocation of Bally's Mississippi operations closer to
Memphis, Tennessee.
(9) Net income (loss) for Bally includes losses from discontinued operations of
$11 million ($.20 per share), $46 million ($.98 per share) and $20 million
($.43 per share) for the years ended December 31, 1995, 1994 and 1993,
respectively, and net income for the year ended December 31, 1992 includes
income from discontinued operations of $1 million ($.01 per share). Net
income for the year ended December 31, 1992 includes an extraordinary gain
of $11 million ($.27 per share) and net income (loss) for the years ended
December 31, 1994 and 1993 includes extraordinary losses of $20 million
($.44 per share) and $9 million ($.18 per share), respectively. In addition,
net loss for the year ended December 31, 1993 includes a charge for the
cumulative effect of change in accounting for income taxes of $28 million
($.61 per share).
(10) Bally's earnings were insufficient to cover fixed charges for the year
ended December 31, 1992 by $7 million.
S-15
<PAGE>
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities are subject to
extensive governmental regulation. The Company holds registrations, findings of
suitability, approvals, gaming licenses or permits in each jurisdiction in which
it operates gaming activities (individually, a "Gaming License" and
collectively, "Gaming Licenses"). Under provisions of Nevada, New Jersey,
Mississippi, Missouri, Louisiana and other gaming laws, and the Company's
Restated Certificate of Incorporation, as amended, 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.
The Nevada Gaming Commission (the "Nevada Commission"), the New Jersey
Casino Control Commission (the "New Jersey Commission"), the Mississippi Gaming
Commission, the Louisiana Gaming Control Board and the Missouri Gaming
Commission (collectively, the "Gaming Authorities"), may also, among other
things, limit, condition, suspend or revoke a Gaming License or approval to own
the stock or joint venture interests of any of the Company's operations in such
licensing authority's jurisdiction, for any cause deemed reasonable by such
licensing authority. Substantial fines or forfeiture of assets for violations of
gaming laws or regulations may be levied against the Company, such subsidiaries
and joint ventures and the persons involved. The suspension or revocation of any
of the Company's Gaming Licenses or the levy on the Company of substantial fines
or forfeiture of assets could have a material adverse effect on the business of
the Company.
In certain jurisdictions, the Company may not make a public offering of its
securities without the prior approval of the applicable Gaming Authorities if
the securities or the proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in such jurisdictions, or to retire or
extend obligations incurred for such purposes.
To date, the Company has obtained all Gaming Licenses necessary for the
operation of its gaming activities. Gaming Licenses and related approvals,
however, are deemed to be privileges under the laws of the jurisdictions in
which the Company conducts gaming activities, and no assurances can be given
that any new Gaming Licenses that may be required in the future will be granted
or that existing Gaming Licenses will not be revoked or suspended.
NEVADA GAMING LAWS. The ownership and operation of casino gaming facilities
in Nevada are subject to (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and (ii) various local ordinances and
regulations. Hilton's gaming operations are subject to the licensing and
regulatory control of the Nevada Commission, the Nevada State Gaming Control
Board (the "Nevada Board"), and, depending on the facility's location, the Clark
County Liquor and Gaming Licensing Board (the "CCB") and the City of Reno. The
Nevada Commission, the Nevada Board, the CCB and the City of Reno are
collectively referred to as the "Nevada Gaming Authorities."
Each subsidiary of the Company, including the subsidiaries of Bally acquired
pursuant to the Merger, that operates a casino in Nevada (individually, a
"Corporate Licensee" and collectively, the "Corporate Licensees") is required to
be licensed by the Nevada Gaming Authorities. The Company is required to be
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and as such, it is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information that the Nevada Commission may require.
The Nevada 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 Nevada 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 Nevada Commission, it (i) pays to the unsuitable person any
dividend, interest or any distribution whatsoever; (ii) recognizes any voting
right
S-16
<PAGE>
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.
On September 25, 1997, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions (the "Shelf Approval"). The Shelf Approval also applies to any
affiliated company wholly owned by the Company (a "Gaming Affiliate") which is a
publicly traded corporation pursuant to a public offering. The Shelf Approval
also includes approval for the Company's registered and licensed Nevada
subsidiaries to guarantee any security issued by, or to hypothecate their assets
to secure the payment or performance of any obligations evidenced by a security
issued by, the Company or a Gaming Affiliate under the Shelf Approval. The Shelf
Approval, however, may be rescinded for good cause without prior notice upon the
issuance of an interlocutory stop order by the Chairman of the Nevada Board and
must be renewed bi-annually. The Shelf Approval does not constitute a finding or
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of this prospectus supplement or the investment merits
of the securities offered. Any representation to the contrary is unlawful. The
public offering of the Notes will be made pursuant to the Shelf Approval.
Changes in control of Hilton 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 Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada 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.
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 New Jersey Commission. In November
1996, the New Jersey Commission found the Company qualified to own a casino
licensee. The New Jersey 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. The New
Jersey Commission has jurisdiction similar to that of the Nevada Commission over
the holders and beneficial owners of the debt and equity securities issued by
the Company and may also require their investigation and approval.
Consistent with the foregoing, each holder of a Note, by accepting any Note,
will be deemed to have agreed to be bound by the requirements imposed on holders
of debt securities of the Company by the gaming authority of any jurisdiction in
which the Company or any of its subsidiaries conducts or proposes to conduct
gaming activity. See "Description of Notes--Compliance with Gaming Laws". In
addition, the Indenture governing the Notes provides that each holder and
beneficial owner thereof, by accepting or otherwise acquiring an interest in any
of the Notes, 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 applicable gaming
laws, such holder or beneficial owner shall apply for a license, qualification
or 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
and the date of the finding of unsuitability, which may be less than 30 days
following the
S-17
<PAGE>
notice of redemption if so requested or prescribed by the Gaming Authority. The
Company shall notify the Trustee under the Indenture 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 finding of suitability.
MISSISSIPPI GAMING LAWS. The ownership and operation of casino gaming
facilities in Mississippi are subject to extensive state and local regulation,
but primarily the licensing and regulatory control of the Mississippi Gaming
Commission and the Mississippi State Tax Commission. An owner and operator of
casino gaming facilities in Mississippi and its related holding companies must
register under the Mississippi Gaming Control Act (the "Mississippi Act") and
its gaming operations are subject to the licensing and regulatory control of the
Mississippi Gaming Commission and various local, city and county regulatory
agencies. Although not identical, the Mississippi Act is similar to the Nevada
Act. The adopted regulations of the Mississippi Gaming Commission are also
similar in many respects to the Nevada gaming regulations, including the
requirement that any person or entity who acquired any security of an owner and
operator of casino gaming facilities may be subject to a suitability finding.
MISSOURI GAMING LAWS. The Missouri Gaming Law extensively regulates owning
and operating riverboat gaming facilities in Missouri. Generally, a licensed
company and its officers, directors, employees, related subsidiaries and
significant shareholders are subject to such extensive regulation. The initial
license and first subsequent license renewal for an excursion gambling boat
operator generally is for a period of one year. The Missouri Gaming Commission
(the "MGC"), however, may reopen license hearings and may terminate a license 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, individuals participating in gaming operations are required to obtain
an occupational license from the MGC. Applicants and licensees are responsible
for keeping the application and any requested materials current, and this
responsibility continues throughout any period of licensure. In addition,
Missouri has extensive licensing disclosure requirements. See also
"Business--Gaming--Riverboat Casinos."
The foregoing is only a summary of the regulatory requirements applicable to
the Company. For a more detailed description of the regulatory requirements
applicable to the Company, including under Louisiana and other gaming laws, and
the Company's Restated Certificate of Incorporation, as amended, see "Additional
Information--Regulation and Licensing" in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, incorporated by reference herein and
"Gaming Regulation" in the accompanying Prospectus.
DESCRIPTION OF NOTES
The Notes offered hereby constitute a series of Debt Securities (which are
more fully described in the accompanying Prospectus) to be issued pursuant to an
indenture (the "Indenture") between the Company and BNY Western Trust Company,
as trustee (the "Trustee"). The following description of the particular terms of
the Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which description reference is hereby made. The terms of
the Notes include those provisions contained in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). The Notes are subject to all such terms, and holders of
Notes are referred to the Indenture and the TIA for a statement thereof. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Indenture, including the definitions therein of certain defined terms used below
and not otherwise defined below. Copies of the Indenture and the Notes are
available for inspection at the office of the Trustee located at 700 South
Flower Street, 2nd Floor, Corporate Trust Department, Los Angeles, California
90071. As used in this section "Description of Notes," the "Company" refers to
Hilton Hotels Corporation, exclusive of its subsidiaries.
S-18
<PAGE>
GENERAL
The Notes will be direct, senior unsecured obligations of the Company and
will rank equally with all other senior unsecured indebtedness of the Company
from time to time outstanding. The Notes will be effectively subordinated to
mortgage and other secured indebtedness of the Company and to indebtedness and
other liabilities of the Company's Subsidiaries; such indebtedness was
approximately $128 million as of September 30, 1997.
As of September 30, 1997, after giving effect to the sale of the Notes
offered hereby and the application of the net proceeds therefrom, the total
outstanding indebtedness of the Company and its Subsidiaries would have been
approximately $2.8 billion. Subject to the limitations set forth in the Notes as
described below under "--Additional Covenants of the Company," the Indenture
will permit the Company and its Subsidiaries to incur additional secured and
unsecured indebtedness.
The Notes will be issued only in fully registered book-entry form without
coupons in denominations of $1,000 and integral multiples thereof, except under
the limited circumstances described below under
"--Book-Entry, Delivery and Form."
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus and "--Additional Covenants of the Company" below
for a description of the covenants applicable to the Notes. Compliance with such
covenants generally may not be waived by the Trustee unless the holders of at
least a majority in principal amount of all outstanding Notes consent to such
waiver; PROVIDED, HOWEVER, that the Company need not comply with such covenants
in the event it elects to comply with the defeasance or covenant defeasance
provisions of the Indenture described under "Description of Debt
Securities--Defeasance of Debt Securities or Certain Covenants in Certain
Circumstances" in the accompanying Prospectus. The Company and the Trustee may
amend the terms of the covenants set forth below under "--Additional Covenants
of the Company" with the written consent of the holders of not less than a
majority in principal amount of the outstanding Notes.
Except as described under "Description of Debt Securities--Merger,
Consolidation or Sale of Assets" in the accompanying Prospectus, "--Interest
Rate and Maturity" or "--Additional Covenants of the Company" below, the
Indenture does not contain any other provisions that would afford holders of the
Notes protection in the event of (i) a highly leveraged or similar transaction
involving the Company, (ii) a change of control or (iii) a reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect the holders of the Notes. In addition, subject to the
limitations set forth under "Description of Debt Securities--Merger,
Consolidation or Sale of Assets" in the accompanying Prospectus, the Company
may, in the future, enter into certain transactions such as the sale of all or
substantially all of its assets or the merger or consolidation of the Company
with another entity that would increase the amount of the Company's indebtedness
or substantially reduce or eliminate the Company's assets, which may have an
adverse effect on the Company's ability to service its indebtedness, including
the Notes.
INTEREST RATE AND MATURITY
The Company's current senior unsecured debt rating by Moody's is Baa1 and by
S&P is BBB.
The interest rate payable on the Notes shall be subject to adjustment in the
event of an Acquisition Related Rating Change. The "Initial Interest Rate" means
7.20% per annum (with respect to the 2009 Notes) and 7.50% per annum (with
respect to the 2017 Notes). The Notes shall bear interest at the applicable
Initial Interest Rate from the date of issuance of the Notes to but excluding
the calendar day, if any, on which the first Acquisition Related Rating Change
occurs. Each calendar day on which an Acquisition Related Rating Change occurs
is a "Reset Date." Beginning with each Reset Date, if any (unless such Reset
Date occurs between a record date and an Interest Payment Date (as defined
herein) in which case beginning on such Interest Payment Date), the Notes shall
bear interest at the rate per annum
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equal to the Adjusted Coupon as set forth in the applicable column of the table
below (if only one rating is available) or the average of the Moody's and S&P
Adjusted Coupons (if both ratings are available) shown in the table below,
according to the applicable ratings of Moody's and S&P in effect at the close of
business on that Reset Date; PROVIDED, HOWEVER, that if either such rating is B1
or below by Moody's or B+ or below by S&P, independent of the other rating, then
the Notes shall bear interest at a rate per annum equal to 9.35% (with respect
to the 2009 Notes) and 9.65% (with respect to the 2017 Notes), subject to change
on the next Reset Date, if any. In the event (i) there has been an Acquisition
Related Rating Change relating to an Acquisition Event, and (ii) either (a) the
consummation of such Acquisition Event has not occurred and as a result the
Company's senior unsecured debt rating is increased by either S&P or Moody's, or
(b) within 365 days following the consummation of such Acquisition Event the
Company's senior unsecured debt rating is changed by either S&P or Moody's, then
the interest rate on the Notes will be reset based on the methodology set forth
above (with such change in rating taking the place of an Acquisition Related
Rating Change in such methodology).
<TABLE>
<CAPTION>
RATING CATEGORY ADJUSTED COUPON
- ------------------------------------ ------------------------
MOODY'S S&P 2009 NOTES 2017 NOTES
- ---------------- ------------------ ----------- -----------
<S> <C> <C> <C>
Baa3 or above BBB- or above 7.20% 7.50%
Ba1 BB+ 7.85% 8.15%
Ba2 BB 8.20% 8.50%
Ba3 BB- 8.60% 8.90%
B1 or below B+ or below 9.35% 9.65%
</TABLE>
When any change in the interest rate on the Notes occurs during any interest
payment period, the amount of interest to be paid with respect to such period
shall be calculated at a rate per annum equal to the weighted average of the
interest rate in effect immediately prior to such change and the Adjusted Coupon
or Initial Interest Rate, as applicable, in effect during such interest payment
period, calculated by multiplying each such rate by the number of days such rate
is in effect during each month of such interest payment period, determining the
sum of such products and dividing such sum by the number of days in such
interest payment period. All calculations pursuant to the preceding sentence and
of interest on the Notes will be computed on the basis of a year of twelve
30-day months, and all such changes shall be announced promptly by the Company
in a written press release detailing the days during which any such interest
rate has been (and assuming no further change in interest rate prior to the next
applicable record date, will be) in effect during such interest payment period
and the amount of the interest payment due on the next Interest Payment Date (as
defined herein) (assuming no further change in interest rate prior to the next
applicable record date).
In the event the Company elects to defease the Notes pursuant to the
defeasance provisions of the Indenture as described in the accompanying
prospectus under "Defeasance of Debt Securities or Certain Covenants in Certain
Circumstances," the interest rate in effect for the Notes on the date of the
irrevocable deposit of the money and/or U.S. Government Obligations as trust
funds in trust for the benefit of the holders of the Notes shall be the rate
used by the Company in calculating the requisite interest and principal payments
necessary to defease the Notes (the "Defeasance Coupon"). The Adjusted Coupon
and the Defeasance Coupon shall not thereafter be affected by any change in
rating.
Interest on the Notes shall be payable semiannually in arrears on June 15
and December 15 of each year, commencing on June 15, 1998 (each, an "Interest
Payment Date"), to the person in whose name a Note (or any predecessor Note) is
registered at the close of business on June 1 or December 1, as the case may be,
next preceding such Interest Payment Date.
The 2009 Notes will mature on December 15, 2009. The 2017 Notes will mature
on December 15, 2017. The Notes are not subject to any redemption or sinking
fund provisions.
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ADDITIONAL COVENANTS OF THE COMPANY
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of certain covenants applicable
to the Notes. In addition to the foregoing, the following covenants of the
Company will apply to the Notes for the benefit of the holders of the Notes:
LIMITATION ON LIENS. Other than as set forth below under "--Exempted Liens
and Sale and Lease-Back Transactions," neither the Company nor any Restricted
Subsidiary will create, assume or suffer to exist any Lien (i) upon any
Principal Property, (ii) upon any shares of capital stock of any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary or (iii) securing
Debt of any Restricted Subsidiary, without equally and ratably securing the
Notes with (or prior to) the Debt secured by such Lien, for so long as such Debt
shall be so secured, PROVIDED, HOWEVER, that this limitation will not apply to
(a) Liens existing on the date of issuance of the Notes; (b) Liens existing (i)
on property at the time of acquisition thereof by the Company or a Restricted
Subsidiary (whether such property is acquired through a merger, a consolidation
or otherwise), or (ii) on property or securing Debt of, or an equity interest
in, any corporation, partnership or other entity at the time such corporation,
partnership or other entity becomes a Restricted Subsidiary; (c) Liens to secure
Debt with respect to all or any part of the acquisition cost or the cost of
construction or improvement of property, PROVIDED, such Debt is incurred and
related Liens are created within 24 months of the acquisition, completion of
construction or improvement or commencement of full operation, whichever is
later, and such Debt does not exceed the aggregate amount of the acquisition
cost and/or the construction cost thereof; (d) Liens on shares of capital stock
or property of a Restricted Subsidiary to secure Debt with respect to all or
part of the acquisition cost of such Restricted Subsidiary, PROVIDED that such
Debt is incurred and related Liens are created within 24 months of the
acquisition of such Restricted Subsidiary and such Debt does not exceed the
acquisition cost of such Restricted Subsidiary; (e) Liens to secure Debt
incurred to construct additions to, or to make Capital Improvements to,
properties of the Company or any Restricted Subsidiary, PROVIDED such Debt is
incurred and related Liens are created within 24 months of completion of
construction or Capital Improvements and such indebtedness does not exceed the
cost of such construction or Capital Improvements; (f) Liens in favor of the
Company or another Restricted Subsidiary; (g) Liens to secure Debt on which
interest payments are exempt from Federal income tax under Section 103 of the
Internal Revenue Code of 1986, as amended; (h) Liens on the capital stock,
partnership or other equity interests of the Company or any Restricted
Subsidiary in any Joint Venture or any Restricted Subsidiary which owns an
equity interest in such Joint Venture to secure Debt, PROVIDED the amount of
such Debt is contributed and/or advanced solely to such Joint Venture; (i) any
extension, renewal or replacement, in whole or in part, of any Liens referred to
in the foregoing clauses (a) through (h) or of any Debt secured thereby,
including premium, if any, PROVIDED that the aggregate principal amount secured
does not exceed (x) the greater of (i) the principal amount secured thereby at
the time of such extension, renewal or replacement, or, as the case may be,
repayment or extinguishment and (ii) 80% of the fair market value (in the
opinion of the Company's board of directors) of the properties subject to such
extension, renewal or replacement plus (y) any reasonable fees and expenses
associated with such extension, renewal or replacement, and PROVIDED, FURTHER,
that in the case of a replacement thereof, such Debt is incurred and related
Liens are created within 24 months of the repayment or extinguishment of the
Debt or Liens referred to in the foregoing clauses (a) through (h); (j) purchase
money liens on personal property; (k) Liens to secure payment of workers'
compensation or insurance premiums, or relating to tenders, bids or contracts
(except contracts for the payment of money); (l) Liens in connection with tax
assessments or other governmental charges, or as security required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege or right; (m) mechanic's, materialman's, carrier's or
other like Liens, arising in the ordinary course of business; and (n) Liens in
favor of any domestic or foreign government or governmental body in connection
with contractual or statutory obligations.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as provided
below under "--Exempted Liens and Sale and Lease-Back Transactions," neither the
Company nor any Restricted Subsidiary will
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<PAGE>
enter into any arrangement with any lessor (other than the Company or a
Restricted Subsidiary), providing for the lease to the Company or a Restricted
Subsidiary for a period of more than three years (including renewals at the
option of the lessee) of any Principal Property that has been or is to be sold
or transferred by the Company or such Restricted Subsidiary to such lessor or to
any other Person, and for which funds have been or are to be advanced by such
lessor or other Person on the security of the leased property ("Sale and
Lease-Back Transaction"), unless either (a) the Company or such Restricted
Subsidiary would be entitled, pursuant to the provisions described in clauses
(a) through (n) under "--Limitation on Liens" above, to create, assume or suffer
to exist a Lien on the property to be leased without equally and ratably
securing the Notes, or (b) an amount equal to (i) the greater of the net cash
proceeds of such sale or the fair market value of such property (in the opinion
of the Company's board of directors) less (ii) the fair market value (in the
opinion of the Company's board of directors) of any noncash proceeds of the sale
of such property (PROVIDED such noncash proceeds constitute "Principal
Property," acquired on the date the property sold in the Sale and Lease-Back
Transaction was acquired by the Company or any of its Restricted Subsidiaries),
is applied within 180 days to the retirement or other discharge of the Notes or
Debt ranking on a parity with the Notes.
EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS. Notwithstanding the
restrictions set forth in "--Limitation on Liens" and "--Limitation on Sale and
Lease-Back Transactions," the Company or any Restricted Subsidiary may create,
assume or suffer to exist Liens or enter into Sale and Lease-Back Transactions
not otherwise permitted as described above, PROVIDED that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted under "--Limitation on Liens" above)
plus all Attributable Debt in respect of such Sale and Lease-Back Transactions
entered into (not including Sale and Lease-Back Transactions permitted under
"Limitation on Sale and Lease-Back Transactions"), measured, in each case, at
the time any such Lien is incurred or any such Sale and Lease-Back Transaction
is entered into, by the Company and Restricted Subsidiaries does not exceed 15%
of Consolidated Net Tangible Assets.
COMPLIANCE WITH GAMING LAWS
Each holder of a Note, by accepting any Note, shall be deemed to have agreed
to be bound by the requirements imposed on holders of debt securities of the
Company by the gaming authority of any jurisdiction of which the Company or any
of its subsidiaries conducts or proposes to conduct gaming activities. For a
description of the regulatory requirements applicable to the Company, see
"Regulation and Licensing" herein, "Gaming Regulation" in the accompanying
Prospectus and "Additional Information--Regulation and Licensing" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
incorporated by reference herein.
CERTAIN DEFINITIONS
"Acquisition Event" means a transaction or series of transactions that
constitute related steps that are part of a single transaction, with respect to
which a Public Notice has been given at any time on or before July 22, 2000, the
aggregate consideration of which exceeds $1,000,000,000, and which involves a
merger or consolidation, whether direct or indirect, of any Person, with or into
the Company or of the Company with or into any Person, or any sale, transfer or
other conveyance, whether direct or indirect, of any assets of any Person to the
Company or of substantially all of the assets of the Company to any Person.
"Acquisition Related Rating Change" means the occurrence on or within 90
days after the date of a Public Notice (which period shall be extended so long
as the rating of the Company's senior unsecured debt is (i) under review by
Moody's, other than for possible upgrade or (ii) on CreditWatch by S&P, other
than with positive implications) of a decrease in the rating of the Company's
senior unsecured debt by Moody's or S&P attributable in whole or in part,
directly or indirectly, to an Acquisition Event.
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<PAGE>
"Attributable Debt" with respect to any Sale and Lease-Back Transaction that
is subject to the restrictions described under "--Limitation on Sale and
Lease-Back Transactions" means the present value of the minimum rental payments
called for during the term of the lease (including any period for which such
lease has been extended), determined in accordance with generally accepted
accounting principles, discounted at a rate that, at the inception of the lease,
the lessee would have incurred to borrow over a similar term the funds necessary
to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
"Debt" means notes, bonds, debentures or other similar evidences of Debt for
borrowed money or any guarantee of any of the foregoing.
"Joint Venture" means any partnership, corporation or other entity, in which
up to and including 50% of the partnership interests, outstanding voting stock
or other equity interest is owned, directly or indirectly, by the Company and/or
one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Moody's" means Moody's Investors Service, Inc.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets of
the Company.
"Public Notice" means a written press release, governmental filing or
statement of a representative of the Company reported in the media announcing
that the Company has engaged, will engage, intends or seeks to engage in an
Acquisition Event.
"Restricted Subsidiary" means any Subsidiary of the Company organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property or
(y) in which the investment of the Company and all its Subsidiaries exceeds 5%
of Consolidated Net Tangible Assets as of the date of such determination other
than, in the case of either clause (x) or (y), (i) each Subsidiary whose
business primarily consists of finance, banking, credit, leasing, insurance,
financial services or other similar operations, or any combination thereof, (ii)
each Subsidiary formed or acquired after the date hereof for the purpose of
developing new assets or acquiring the business or assets of another Person and
which does not acquire any part of the business or assets of the Company or any
Restricted Subsidiary and (iii) Subsidiaries whose principal business is
conducting the Company's timeshare businesses.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation is, at the time, directly or
indirectly, owned by the Company or by one or more Subsidiaries thereof, or by
the Company and one or more Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, each series of 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.
S-23
<PAGE>
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 its Direct Participants and by the New York Stock Exchange,
Inc., 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 Securities and Exchange Commission.
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
applicable Global Notes and (ii) ownership of the Notes evidenced by the Global
Notes 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 Notes 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 Notes 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 Notes in certificated form ("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, and 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
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<PAGE>
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
certificated form under the Indenture, then, upon surrender by the Depositary of
the applicable Global Notes, Certificated Notes will be issued to each person
that the Depositary identifies as the beneficial owner of the Notes represented
by such Global Notes. In addition, subject to the conditions set forth in the
Indenture, 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.
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
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. Payments in respect of the Notes
represented by the Global Notes (including principal, premium, if any, and
interest) will be made in 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 the registered address of each holder of such Notes. 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 FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
consequences expected to result from the purchase, ownership and disposition of
the Notes by holders acquiring the Notes on original issue for cash. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury regulations, judicial authority and
administrative rulings and practice, any of which may be altered with
retroactive effect thereby changing the Federal income tax consequences
discussed below. There can be no assurance that the Internal Revenue Service
(the "IRS") will not take a contrary view, and no ruling from the IRS has been
or will be sought.
The tax treatment of a holder of Notes may vary depending upon such holder's
particular situation. Certain holders (including, but not limited to, certain
financial institutions, insurance companies, broker-dealers, foreign
corporations, nonresident alien individuals and persons holding the Notes as
part of a "straddle," "hedge" or "conversion transaction") may be subject to
special rules not discussed below. This discussion is limited to holders who
will hold the Notes as "capital assets" (generally, property held for
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investment) within the meaning of Section 1221 of the Code. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
RECOGNITION OF INTEREST INCOME
Although not free from doubt, the Company intends to take the position that
the Notes are not subject to the contingent payment obligation rules of Section
1271 ET SEQ. of the Code and accordingly, a holder of Notes will recognize
interest income with respect to the Notes in accordance with the holder's normal
method of accounting.
ALTERNATIVE TREATMENT. The IRS may instead assert that the Notes be treated
as "contingent payment obligations" under the Code and the Treasury Regulations
promulgated thereunder. In this event, the Company would be required to
construct a projected payment schedule for the Notes (which would be delivered
to holders) and holders generally would be required to recognize interest income
on a constant yield basis based on the projected payment schedule, with certain
adjustments if actual payments differ from projected payments. Under this
characterization, holders of Notes could be required to include amounts in
income prior to the receipt of cash payments attributable to such income.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION
In general, a holder of a Note will recognize gain or loss upon the sale,
retirement or other taxable disposition of such Note in an amount equal to the
difference between (i) the amount of cash and the fair market value of property
received in exchange therefor (except to the extent attributable to the payment
of accrued interest, which generally will be taxable to a holder as ordinary
income) and (ii) the holder's adjusted tax basis in such Note. A holder's tax
basis in a Note generally will be equal to the price paid for such Note. Under
the recently enacted Taxpayer Relief Act of 1997, net capital gain (I.E.,
generally, capital gain in excess of capital loss) recognized by an individual
from the sale of a capital asset that has been held for more than 18 months will
be subject to tax at a rate not to exceed 20%, capital gain from the sale of an
asset held for more than 12 months but not more than 18 months will continue to
be subject to tax at a rate not to exceed 28%, and capital gain recognized from
the sale of a capital asset that has been held for 12 months or less will
continue to be subject to tax at ordinary income tax rates. In addition, capital
gain recognized by a corporate taxpayer will continue to be subject to tax at
the ordinary income tax rates applicable to corporations.
BACKUP WITHHOLDING
A holder of Notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, and gross proceeds from a sale of, the Notes
unless (i) such holder is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder of Notes who does not provide the Company with his
or her correct taxpayer identification number may be subject to penalties
imposed by the IRS.
The Company will report to the holders of the Notes and the IRS the amount
of any "reportable payments" (including any interest paid or accrued on the
Notes) and any amount withheld with respect to the Notes during the calendar
year.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "Underwriters"), severally, and each of the
Underwriters has severally agreed to purchase, the principal amount of Notes set
forth opposite its name below, at the public offering price set forth on the
cover page of this Prospectus Supplement, less the underwriting discount:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2009 NOTES OF 2017 NOTES
- ------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Salomon Brothers Inc......................................... $ 74,000,000 $ 74,000,000
Donaldson, Lufkin & Jenrette Securities Corporation.......... 48,000,000 48,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ...................................... 48,000,000 48,000,000
BancAmerica Robertson Stephens .............................. 30,000,000 30,000,000
---------------- ----------------
Total........................................................ $200,000,000 $200,000,000
---------------- ----------------
---------------- ----------------
</TABLE>
The Purchase Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the delivery of certain legal opinions by their counsel. The Company has agreed
in the Purchase 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 Underwriters have agreed to pay the expenses of the Company in
connection with the sale of the Notes, estimated at approximately $350,000.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of 0.4% (in the case of the 2009 Notes) and 0.5%
(in the case of the 2017 Notes) of the principal amount. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of 0.25% of the
principal amount of the Notes to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company does not intend to list the Notes on any securities exchange.
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.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase the Notes. As an exception to
these rules, the Underwriters are permitted to engage in certain transactions
that stabilize the price of the Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Notes.
If the Underwriters create a short position in the Notes in connection with
this offering (i.e., if they sell more Notes than are set forth on the cover
page of this Prospectus Supplement), the Underwriters may reduce that short
position by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on selling group members.
This means that if the Underwriters purchase Notes in the open market to reduce
the Underwriters' short position or to stabilize
S-27
<PAGE>
the price of the Notes, they may reclaim the amount of the selling concession
from the selling group members who sold those Notes as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Certain of the Underwriters and their respective affiliates have, from time
to time, performed various investment banking and commercial banking services
for the Company, for which they have received usual and customary fees. An
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated is a commercial
paper placement agent under the Company's commercial paper program. The Company
intends to use the net proceeds from the sale of the Notes to repay commercial
paper outstanding. See "Use of Proceeds." As a result, the offering of the Notes
is being made pursuant to the provisions of Rule 2710(c)(8) of the Conduct Rules
of The National Association of Securities Dealers, Inc. Donaldson, Lufkin &
Jenrette Securities Corporation acted as dealer manager in connection with the
ITT Offer and as financial advisor to the Company in connection with its effort
to acquire ITT. See "The Company--Recent Developments-- The ITT Offer."
LEGAL MATTERS
Certain legal matters relating to the issuance and sale 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 LLP, Los Angeles,
California.
S-28
<PAGE>
PROSPECTUS
$2,500,000,000
[LOGO]
DEBT SECURITIES, PREFERRED STOCK
DEPOSITARY SHARES, COMMON STOCK AND WARRANTS
------------------
Hilton Hotels Corporation, a Delaware Corporation (the "Company" or
"Hilton"), may offer from time to time in one or more series (i) its debt
securities consisting of debentures, notes or other evidences of indebtedness
(the "Debt Securities"), (ii) shares or fractional shares of its preferred
stock, par value $1.00 per share (the "Preferred Stock"), (iii) shares of its
Preferred Stock represented by depositary shares (the "Depositary Shares"), (iv)
shares of its common stock, par value $2.50 per share (the "Common Stock"), or
(iv) warrants to purchase Common Stock, Preferred Stock, Depositary Shares or
Debt Securities (the "Warrants"), with an aggregate public offering price of up
to $2,500,000,000 (or the equivalent if the securities are denominated in
foreign currency or foreign currency units). The Debt Securities, Preferred
Stock, Depositary Shares, Common Stock and Warrants (collectively, the "Offered
Securities") may be offered, separately or together, in one or more separate
classes or series and in amounts, at prices and on terms to be determined at the
time of offering and to be set forth in one or more supplements to this
Prospectus (each, a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, designated
currency (or currency unit), purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), terms (if any)
for the subordination, redemption or conversion thereof, and any other specific
terms of the Debt Securities; (ii) in the case of Preferred Stock, the specific
designation, number of shares, liquidation preference, purchase price, dividend,
voting, redemption and conversion provisions and any other specific terms of the
Preferred Stock; (iii) in the case of Depositary Shares, the aggregate number of
shares offered, the fractional share of Preferred Stock represented by each such
Depositary Share and the purchase price; (iv) in the case of Common Stock, the
number of shares, purchase price and terms of the offering and sale thereof; and
(v) in the case of Warrants, the specific designation, number, duration,
purchase price, exercise price, detachability and any other terms in connection
with the offering, sale and exercise of the Warrants, as well as the terms on
which and the securities for which such Warrants may be exercised.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain material United States Federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement.
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 NOR THE REGULATORY AUTHORITY OF
ANY OTHER STATE 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 Offered Securities may be offered to or through underwriters, dealers or
agents designated from time to time, as set forth in the applicable Prospectus
Supplement, and may be offered to other purchasers directly by the Company.
Certain terms of the offering and sale of Offered Securities, including, where
applicable, the names of any underwriters, dealers or agents, any applicable
commissions, discounts and other items constituting compensation of such
underwriters, dealers or agents, and the proceeds to the Company from such sale,
will be set forth in the accompanying Prospectus Supplement. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers and agents.
No Offered Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of the
Offered Securities.
------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 15, 1997
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained or
incorporated by reference in this Prospectus and any accompanying Prospectus
Supplement in connection with the offering described herein and therein, and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or by any underwriter, dealer or agent.
Neither this Prospectus nor any Prospectus Supplement shall constitute an offer
to sell or a solicitation of an offer to buy Offered Securities in any
jurisdiction in which it is unlawful for such person to make such an offering or
solicitation. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder shall under any circumstances imply that
the information contained or incorporated by reference herein or in any
Prospectus Supplement is correct as of any date subsequent to the date hereof or
of such Prospectus Supplement.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (including all amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus and any Prospectus Supplement do not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Offered Securities, reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such 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 reports, proxy statements, registration statements and other
information with the Commission. Such reports, proxy statements, registration
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048, and at 500 West Madison Street, Room 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a site on the World Wide
Web at http://www.sec.gov which contains reports and other information regarding
registrants that file electronically with the Commission. Certain securities of
the Company are listed on the New York Stock Exchange and the Pacific Exchange.
Reports, proxy statements and other information concerning the Company can also
be inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and the Pacific Exchange, 301 Pine Street, San
Francisco, California 94104, and 618 South Spring Street, Los Angeles,
California 90014.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which the Company has filed with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference in, and shall
be deemed to be a part of, this Prospectus.
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "Form 10-K");
(b) Current Reports on Form 8-K dated December 18, 1996, January 21,
1997, April 14, 1997, April 15, 1997, June 4, 1997, July 17, 1997 and July
22, 1997;
(c) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997 and Quarterly Report on Form
10-Q/A for the quarter ended September 30, 1997 filed with the Commission on
November 13, 1997;
(d) Description of the Company's Common Stock included in a Registration
Statement on Form 8-A filed with the Commission on May 18, 1986;
(e) Description of the Rights included in a Registration Statement on
Form 8-A filed with the Commission on July 22, 1988; and
(f) Description of the Company's Preferred Redeemable Increased Dividend
Equity Securities, 8% PRIDES, Convertible Preferred Stock included in a
Registration Statement on Form 8-A filed with the Commission on November 25,
1996.
The Company also hereby incorporates by reference in this Prospectus pages
S-17 to S-21 of the Company's filing with the Commission under Rule 424(b) of
the Securities Act on July 21, 1997. All documents filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering made hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part thereof from the respective dates of filing of such documents. Any
statement contained in this Prospectus or in any Prospectus Supplement or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus and any
Prospectus Supplement to the extent that a statement contained herein or in any
Prospectus Supplement (or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference in this Prospectus)
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus or any
Prospectus Supplement except as so modified or superseded.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to any
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the foregoing documents incorporated herein
by reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference therein). Requests should be directed to
the attention of Cheryl L. Marsh, Vice President and Corporate Secretary, Hilton
Hotels Corporation, 9336 Civic Center Drive, Beverly Hills, California 90210
(telephone number (310) 278-4321).
3
<PAGE>
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.
On December 18, 1996, Hilton consummated a merger with Bally Entertainment
Corporation ("Bally"), pursuant to which Bally was merged with and into Hilton
(the "Merger"), with Hilton surviving the Merger. Pursuant to the Merger, Hilton
acquired Bally's interests in casinos and casino hotel resorts, including
Bally's Park Place Casino - Resort and The Grand casino hotel resort in Atlantic
City, New Jersey; Bally's Las Vegas casino hotel resort in Las Vegas, Nevada;
Bally's Casino -STAR- Lakeshore Resort, a riverboat casino on Lake Pontchartrain
in New Orleans, Louisiana; and Bally's Saloon -STAR-Gambling Hall -STAR- Hotel,
a dockside casino and hotel in Robinsonville, Mississippi near Memphis,
Tennessee.
The Company's executive offices are located at 9336 Civic Center Drive,
Beverly Hills, California 90210, and its telephone number is (310) 278-4321.
USE OF PROCEEDS
Except as otherwise set forth in the accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include the repayment, redemption or
repurchase of existing indebtedness, additions to working capital, the
acquisition of, or investment in, new or existing properties and the financing
of capital expenditures. Funds not required immediately for such purposes may be
invested temporarily in short-term investment grade securities.
4
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the nine months ended
September 30, 1997 and September 30, 1996 and for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 was 3.8, 4.2, 3.3, 3.2, 2.8, 2.7 and 2.9,
respectively. The Company's ratio of earnings to combined fixed charges and
preferred stock dividends for the nine months ended September 30, 1997 and
September 30, 1996 and for the years ended December 31, 1996, 1995, 1994, 1993
and 1992 was 3.4, 4.2, 3.2, 3.2, 2.8, 2.7 and 2.9, respectively. Prior to
December 18, 1996, the Company had not issued any preferred stock and therefore
the ratios of earnings to combined fixed charges and preferred stock dividends
for prior periods are unchanged from the ratios of earnings to fixed charges for
such periods.
These ratios have been calculated by dividing (i) income before income taxes
and minority interest plus fixed charges (adjusted for capitalized interest) by
(ii) fixed charges and, in the case of the ratio of earnings to combined fixed
charges and preferred stock dividends, fixed charges plus total preferred stock
dividend requirements. Fixed charges consist of interest incurred (expensed or
capitalized) and the portion of rent expense which is deemed representative of
interest.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the
Indenture (as defined below) under which the Debt Securities are to be issued.
The particular terms of the Debt Securities will be set forth in a Prospectus
Supplement relating to such Debt Securities.
The Debt Securities offered hereby will be issued under an indenture, dated
as of April 15, 1997, between the Company and BNY Western Trust Company, as
trustee (the "Trustee"), as it may be amended or supplemented from time to time
(the "Indenture"). The following summary of certain provisions of the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all provisions of the Indenture, including the
definitions therein of certain terms which are not otherwise defined in this
Prospectus. The terms of the Indenture are also governed by certain provisions
contained in the TIA. Certain capitalized terms used below but not defined
herein have the meanings ascribed to them in the Indenture.
GENERAL
The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be senior or subordinated indebtedness of
the Company. The Indenture provides that the Debt Securities may be issued
without limit as to aggregate principal amount, in one or more series, in each
case as established from time to time in or pursuant to authority granted by a
Board Resolution or as established in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuances of additional
Debt Securities of such series.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustees with
respect to different series of Debt Securities, each such Trustee shall be a
Trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee thereunder, and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) The title of such Debt Securities;
5
<PAGE>
(2) The aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity or upon redemption thereof and the rate or
rates at which original issue discount ("OID") will accrue;
(4) The date or dates on which the principal of such Debt Securities
will be payable (or the method by which such date or dates will be
determined);
(5) The rate or rates (which may be fixed or variable) and, if
applicable, the method used to determine the rate, at which such Debt
Securities will bear interest, if any, the date or dates from which such
interest will accrue, and the circumstances, if any, in which the Company
may defer interest payments, the dates on which such interest shall be
payable and the record date for the interest payable on any interest payment
date;
(6) The place or places where principal of, premium, if any, and
interest on such Debt Securities will be payable (or the method of such
payment), and such Debt Securities may be surrendered for conversion or
registration of transfer or exchange;
(7) The obligation, if any, of the Company to redeem or purchase such
Debt Securities pursuant to any sinking fund or analogous provisions or at
the option of a holder thereof and the right, if any, of the Company to
redeem such Debt Securities and the period or periods within which, the
price or prices at which, and the terms and conditions upon which, such Debt
Securities may be redeemed;
(8) The denominations in which such Debt Securities are issuable, if
other than denominations of $1,000 and any integral multiple thereof;
(9) Whether such Debt Securities are to be issued at a discount and
the portion of the principal amount of such Debt Securities that shall be
payable upon acceleration, if other than the principal amount thereof;
(10) Provisions, if any, for the defeasance or discharge of certain of
the Company's obligations with respect to such Debt Securities, which
provisions may be in addition to, in substitution for, or in modification of
(or any combination of the foregoing), the provisions of the Indenture;
(11) Whether such Debt Securities will be in registered or bearer form;
(12) The currency or currencies in which payment of principal of and
interest on such Debt Securities will be made;
(13) If payments of principal of, premium, if any, or interest on the
Debt Securities are to be made in currency other than the denominated
currency, the manner in which the exchange rate with respect to such
payments will be determined;
(14) The manner in which the amounts of payment of principal of,
premium, if any, or interest on such Debt Securities will be determined, if
such amounts may be determined by reference to an index based on a currency
or currencies other than that in which such Debt Securities are denominated
or designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index;
(15) Any addition to, or modification or deletion of, any Events of
Default or covenants set forth in the Indenture;
(16) A discussion of any material and/or special United States Federal
income tax considerations applicable to such Debt Securities;
6
<PAGE>
(17) Any depositaries, trustees, interest rate calculation agents,
exchange rate calculation agents or other agents with respect to the Debt
Securities other than those originally appointed;
(18) Whether such Debt Securities will be issued in the form of one or
more global securities and whether such global securities are to be issuable
in a temporary global form or permanent global form;
(19) Any rights of the holders of Debt Securities to convert the Debt
Securities into Common Stock or other securities or property of the Company
and, if so, the terms and conditions, which may be in addition to or in lieu
of the provisions contained in the Indenture, upon which such Debt
Securities will be convertible;
(20) The terms, if any, on which such Debt Securities will be
subordinate to other debt of the Company;
(21) Any listing of the Debt Securities on a securities exchange;
(22) The provisions, if any, relating to any security provided for such
Debt Securities; and
(23) Any other terms of such Debt Securities, which other terms will
not be inconsistent with the provisions of the Indenture.
The Debt Securities may be sold at a discount below their principal amount.
Even if the Debt Securities are not issued at a discount below their principal
amount, such securities may, for United States Federal income tax purposes, be
deemed to have been issued with OID because of certain interest payment
characteristics. Special United States Federal income tax considerations
applicable to Debt Securities issued with OID will be described in more detail
in any applicable Prospectus Supplement. In addition, special United States
Federal tax considerations or other restrictions or terms applicable to any Debt
Securities issuable in bearer form, offered exclusively to foreigners, or
denominated in a currency other than United States dollars will be set forth in
a Prospectus Supplement relating thereto.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into, or sell, assign, convey, transfer or lease its properties and assets
substantially in their entirety (computed on a consolidated basis) to, another
corporation, person or entity unless (i) either (a) in the case of a merger or
consolidation, the Company is the surviving person or (b) the successor or
transferee 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 the obligations of the Company under the Debt Securities and the
Indenture, and (ii) immediately after such transaction no Default or Event of
Default shall exist.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless specified in the Prospectus Supplement, the Debt Securities of any
series shall be issuable only as Registered Securities in denominations of
$1,000, and any integral multiple thereof, and shall be payable only in U.S.
dollars. The Indenture also provides that Debt Securities of a series may be
issuable in global form. See "Global Securities."
Unless otherwise indicated in the Prospectus Supplement, Bearer Securities
(other than in global form) will have Coupons attached.
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of like aggregate principal amount and
of like Stated Maturity and with like terms and conditions. If so specified in
the applicable Prospectus Supplement, at the option of the holder thereof, to
the extent permitted by law, any Bearer Security of any series which by its
terms is registrable as to principal and interest may be exchanged for a
Registered Security of such series of like aggregate principal amount and
7
<PAGE>
of a like Stated Maturity and with like terms and conditions, upon surrender of
such Bearer Security at the corporate trust office of the applicable Trustee or
at any other office or agency of the Company designated for the purpose of
making any such exchanges. Subject to certain exceptions, any Bearer Security
issued with Coupons surrendered for exchange must be surrendered with all
unmatured Coupons and any matured Coupons in default attached thereto.
Notwithstanding the foregoing, the exchange of Bearer Securities for
Registered Securities will be subject to the provisions of United States Federal
income tax laws and regulations applicable to Debt Securities in effect at the
time of such exchange.
Except as otherwise specified in the Prospectus Supplement, in no event may
Registered Securities including Registered Securities received in exchange for
Bearer Securities, be exchanged for Bearer Securities.
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall deliver, in the name of the designated transferee, one or more
new Registered Securities of the same series of like aggregate principal amount
of such denominations as are authorized for Registered Securities of such series
and of a like Stated Maturity and with like terms and conditions. No service
charge will be made for any transfer or exchange of Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Company shall not be required (i) to register, transfer or exchange Debt
Securities of any series during a period beginning at the opening of business 15
days before the day of the transmission of a notice of redemption of Debt
Securities of such series selected for redemption and ending at the close of
business on the day of such transmission, or (ii) to register, transfer or
exchange any Debt Security so selected for redemption in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part.
EVENTS OF DEFAULT
Events of Default defined in the Indenture with respect to Debt Securities
of any series are: (a) default in the payment of any interest upon any Debt
Security of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; (b) default in the payment of principal of or
premium, if any, on any Debt Security of that series when due; (c) default in
the deposit of any sinking fund payment, when and as due in respect of any Debt
Security of that series; (d) default in the performance, or breach, of any
covenant or warranty of the Company in the Indenture (other than a covenant or
warranty that has been included in the Indenture solely for the benefit of a
series of Debt Securities other than that series), which default continues
uncured for a period of 60 days after written notice to the Company by the
applicable Trustee or to the Company and the applicable Trustee by the holders
of at least 25% in principal amount of the outstanding Debt Securities of that
series as provided in the Indenture; (e) the acceleration of the maturity of any
indebtedness of the Company (other than Non-recourse Indebtedness (as defined
below)), at any one time, in an amount in excess of the greater of (i) $25
million and (ii) 5% of Consolidated Net Tangible Assets (as defined below), if
such acceleration is not annulled within 30 days after written notice to the
Company by the Trustee and the holders of at least 25% in principal amount of
the outstanding Debt Securities of that series; and (f) certain events of
bankruptcy, insolvency or reorganization in respect of the Company. The
Prospectus Supplement may provide for any other Event of Default with respect to
Debt Securities of that particular series.
"Non-recourse Indebtedness" means indebtedness the terms of which provide
that the lender's claim for repayment of such indebtedness is limited solely to
a claim against the property which secures such indebtedness.
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"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of the Company and its subsidiaries
(less applicable depreciation, amortization and other valuation reserves) after
deducting therefrom (a) all current liabilities of the Company and its
subsidiaries (excluding (i) the current portion of long-term indebtedness, (ii)
intercompany liabilities and (iii) any liabilities which are by their terms
renewable or extendible at the option of the obligor thereon to a time more than
12 months from the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt discount
and any other like intangibles, all as set forth on the most recent consolidated
balance sheet of the Company and computed in accordance with generally accepted
accounting principles.
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every such case the
applicable Trustee or the holders of not less than 25% in principal amount of
the outstanding Debt Securities of that series may, by a notice in writing to
the Company (and to the applicable Trustee if given by the holders), declare to
be due and payable immediately the principal (or, if the Debt Securities of that
series are Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) and premium, if any, of all Debt
Securities of that series. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of a majority in principal amount of the outstanding Debt Securities
of that series may, subject to the Company having paid or deposited with such
Trustee a sum sufficient to pay overdue interest and principal which has become
due other than by acceleration and certain other conditions, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal and premium, if any, with respect to Debt Securities of
that series, have been cured or waived as provided in the Indenture. For
information as to waiver of defaults see the discussion set forth below under
"--Modification and Waiver." Reference is made to the Prospectus Supplement
relating to any series of Debt Securities that are Discount Securities for the
particular provisions relating to acceleration of a portion of the principal
amount of such Discount Securities upon the occurrence of an Event of Default
and the continuation thereof.
The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of outstanding Debt Securities, unless the Trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the Trustee, the holders of a majority in principal amount of the
outstanding Debt Securities of any series shall 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 with
respect to the Debt Securities of that series.
No holder of any Debt Security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the Indenture
or for the appointment of a receiver or trustee, or for any remedy under the
Indenture, unless such holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default with respect to Debt
Securities of that series and the holders of at least 25% in principal amount of
the outstanding Debt Securities of that series shall have made written request,
and offered reasonable indemnity, to such Trustee to institute such proceeding
as trustee, and the Trustee shall not have received from the holders of a
majority in principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. Notwithstanding the foregoing, the holder of any Debt
Security will have an absolute and unconditional right to receive payment of the
principal of, premium, if any, and any interest on such Debt Security on or
after the due dates expressed in such Debt Security and to institute suit for
the enforcement of any such payment.
The Indenture requires the Company, within 120 days after the end of each
fiscal year, to furnish to the Trustee a statement as to compliance with the
Indenture. The Indenture provides that the Trustee may withhold notice to the
holders of Debt Securities of any series of any Default or Event of Default
(except
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in payment on any Debt Securities of such series) with respect to Debt
Securities of such series if it in good faith determines that withholding such
notice is in the interest of the holders of Debt Securities.
MODIFICATION AND WAIVER
Without prior notice to or consent of any holders, the Company and the
applicable Trustee, at any time and from time to time, may modify the Indenture
for any of the following purposes: (1) to evidence the succession of another
corporation to the rights of the Company and the assumption by such successor of
the covenants and obligations of the Company in the Indenture and in the Debt
Securities in accordance with the terms of the Indenture; (2) to add to the
covenants of the Company for the benefit of the holders of all or any series of
Debt Securities (and if such covenants are to be for the benefit of less than
all series, stating that such covenants are expressly being included solely for
the benefit of such series), or to surrender any right or power conferred in the
Indenture upon the Company; (3) to add any additional Events of Default (and if
such Events of Default are to be applicable to less than all series, stating
that such Events of Default are expressly being included solely to be applicable
to such series); (4) to add or change any of the provisions of the Indenture to
such extent as shall be necessary to permit or facilitate the issuance
thereunder of Debt Securities of any series in bearer form, registrable or not
registrable, and with or without Coupons, to permit Bearer Securities to be
issued in exchange for Registered Securities, to permit Bearer Securities to be
issued in exchange for Bearer Securities of other authorized denominations or to
permit the issuance of Debt Securities of any series in uncertificated form,
provided that any such action shall not adversely affect the interests of the
holders of Debt Securities of any series or any related Coupons in any material
respect; (5) to change or eliminate any of the provisions of the Indenture,
provided that any such change or elimination will become effective only when
there is no outstanding Debt Security issued thereunder or Coupon of any series
created prior to such modification which is entitled to the benefit of such
provision and as to which such modification would apply; (6) to secure the Debt
Securities issued thereunder or to provide that any of the Company's obligations
under the Debt Securities or the Indenture shall be guaranteed and the terms and
conditions for the release or substitution of such security or guarantee; (7) to
supplement any of the provisions of the Indenture to such extent as is necessary
to permit or facilitate the defeasance and discharge of any series of Debt
Securities, provided that any such action will not adversely affect the
interests of the holders of Debt Securities of such series or any other series
of Debt Securities issued under the Indenture or any related Coupons in any
material respect; (8) to establish the form or terms of Debt Securities and
Coupons, if any, as permitted by the Indenture; (9) to evidence and provide for
the acceptance of appointment thereunder by a successor Trustee with respect to
one or more series of Debt Securities and to add to or change any of the
provisions of the Indenture as is necessary to provide for or facilitate the
administration of the trusts thereunder by more than one Trustee; or (10) to
cure any ambiguity, to correct or supplement any provision in the Indenture
which may be defective or inconsistent with any other provision therein, to
eliminate any conflict between the terms of the Indenture and the Debt
Securities issued thereunder and the Trust Indenture Act or to make any other
provisions with respect to matters or questions arising under the Indenture
which will not be inconsistent with any provision of the Indenture; PROVIDED
such other provisions shall not adversely affect the interests of the holders of
outstanding Debt Securities or Coupons, if any, of any series created thereunder
prior to such modification in any material respect.
With the written consent of the holders of not less than a majority in
principal amount of the outstanding Debt Securities of each series affected by
such modification voting separately, the Company and the applicable Trustee may
modify the Indenture for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Indenture or of modifying
in any manner the rights of the holders of Debt Securities and Coupons, if any,
under the Indenture; PROVIDED, HOWEVER, that such modifications may not, without
the consent of the holder of each outstanding Debt Security of each series
affected thereby: (i) change the Stated Maturity of any Debt 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 Stated Maturity of or reduce the amount of any
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payment to be made with respect to any Coupon, or change the coin or currency in
which, any Debt Security or any premium or the interest thereon is payable, or
reduce the amount of the principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof or impair the
right to institute suit for the enforcement of any such payment on or after the
due date thereof (including, in the case of redemption, on or after the
Redemption Date), or alter any redemption provisions in a manner adverse to the
holders of such Debt Securities; (ii) reduce the percentage in principal amount
of the outstanding Debt Securities, the consent of whose holders of such Debt
Securities 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 any Debt Security; (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 Debt Security affected thereby; or (v) modify any provision
described in the applicable Prospectus Supplement as requiring the consent of
each affected holder of Debt Securities.
A modification which changes or eliminates any covenant or other provision
of the Indenture with respect to one or more particular series of Debt
Securities and Coupons, if any, or which modifies the rights of the holders of
Debt Securities and Coupons of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under the Indenture of
the holders of Debt Securities and Coupons, if any, of any other series.
The Indenture provides that the holders of not less than a majority in
aggregate principal amount of the then outstanding Debt Securities of any
series, by notice to the relevant Trustee, may on behalf of the holders of the
Debt Securities of such series waive any default and its consequences under the
Indenture, except (1) a continuing default in the payment of interest on,
premium, if any, or the principal of, any such Debt Security held by a
nonconsenting holder or (2) a default in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the holder of
each outstanding Debt Security of each series affected.
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
DEFEASANCE AND DISCHARGE. The Indenture provides that the Company may be
discharged from any and all obligations in respect of the Debt Securities of any
series (except for certain obligations to pay additional amounts, if any, upon
the occurrence of certain tax, assessment or governmental charge events with
respect to payments on such Debt Securities, to register the transfer or
exchange of Debt Securities of such series, to replace stolen, lost or mutilated
Debt Securities of such series, to maintain paying agencies and to hold money
for payment in trust) upon the irrevocable deposit with the Trustee, in trust,
of money and/or government obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will provide money
in an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each installment of
principal (and premium, if any) and interest on, and any mandatory sinking fund
payments in respect of, the Debt Securities of such series on the dates such
payments are due. Such discharge may occur only if, among other things, (a) the
Company shall have delivered to the Trustee an opinion of counsel or a ruling
from the United States Internal Revenue Service (an "IRS Ruling"), in either
case to the effect that holders of the Debt Securities of such series will not
recognize income, gain or loss for United States Federal income tax purposes as
a result of such deposit, defeasance and discharge; and (b) if the Debt
Securities of such series are then listed on any national securities exchange,
the Company shall have delivered to the Trustee an opinion of counsel or other
instrument from such exchange to the effect that such discharge would not cause
said Debt Securities to be delisted.
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DEFEASANCE OF CERTAIN COVENANTS. Upon compliance with certain conditions,
the Company may omit to comply with certain restrictive covenants contained in
the Indenture (or, if provided for in the applicable Prospectus Supplement, any
other restrictive covenant relating to any series of Debt Securities provided
for in a Board Resolution or supplemental indenture which, by its terms may be
defeased pursuant to the terms of such series of Debt Securities) and any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to any Debt Securities. The conditions include, among
others: the deposit with the Trustee of money and/or government obligations
that, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide money in an amount sufficient in the
opinion of a nationally recognized firm of independent public accountants to pay
principal, premium, if any, and interest on and any mandatory sinking fund
payments in respect of the Debt Securities of such series on the dates such
payments are due; and the delivery to the Trustee of an opinion of counsel or an
IRS Ruling to the effect that the holders of the Debt Securities of such series
will not recognize income, gain or loss for United States Federal income tax
purposes as a result of such deposit and related covenant defeasance.
LIMITED LIABILITY OF CERTAIN PERSONS
The Indenture provides that no stockholder, incorporator, employee officer
or director, as such, past, present or future of the Company or any successor
corporation or any of the Company's Affiliates shall have any personal liability
in respect of the obligations of the Company under the Indenture or the Debt
Securities by reason of his, her or its status as such stockholder,
incorporator, employee officer or director.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
The Indenture provides that each holder, by accepting any of the Debt
Securities subject thereto, 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 or
the beneficial owner of the Debt Securities of a holder must be licensed,
qualified or found suitable under applicable gaming laws, such holder or
beneficial owner, as the case may be, 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 Debt 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 Debt
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,
if any, 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.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
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PAYMENT AND PAYING AGENTS
The Indenture contains the Company's covenant and agreement for the benefit
of each series of Debt Securities that it will duly and punctually pay the
principal of (and premium, if any) and interest on the Debt Securities in
accordance with the terms of the Debt Securities and the Indenture.
If Debt Securities of a series are issuable only as Registered Securities,
the Company will maintain in each Place of Payment for such series an office or
agency where Debt Securities of that series may be presented or surrendered for
payment, where Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities of that series and the Indenture
may be served.
If Debt Securities of a series are issuable as Bearer Securities, the
Company will maintain or cause to be maintained (A) in the Borough of Manhattan,
the City and State of New York, an office or agency where any Registered
Securities of that series may be presented or surrendered for payment, where any
Registered Securities of that series may be surrendered for registration of
transfer, where Debt Securities of that series may be surrendered for exchange
or redemption, where notices and demands to or upon the Company in respect of
the Debt Securities of that series and the Indenture may be served and where
Bearer Securities of that series and related Coupons may be presented or
surrendered for payment in the circumstances described in the following
paragraph (and not otherwise), (B) subject to any laws or registration
applicable thereto, in a Place of Payment for that series which is located
outside the United States, an office or agency where Debt Securities of that
series and related Coupons may be presented and surrendered for payment
(including payment of any additional amounts payable on Debt Securities of that
series, if so provided in such series); provided, however, that if the Debt
Securities of that series are listed on The Stock Exchange of the United Kingdom
and the Republic of Ireland, the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent for the Debt Securities of
that series in London, Luxembourg or any other required city located outside the
United States, as the case may be, so long as the Debt Securities of that series
are listed on such exchange, and (C) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series located outside the
United States an office or agency where any Registered Securities of that series
may be surrendered for registration of transfer, where Debt Securities of that
series may be surrendered for exchange or redemption and where notices and
demands to or upon the Company in respect of the Debt Securities of that series
and the applicable Indenture may be served. The Company will give prompt written
notice to the applicable Trustee of the locations, and any change in the
locations, of such offices or agencies. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
applicable Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the corporate trust office of the
applicable Trustee, except that Bearer Securities of that series and the related
coupons may be presented and surrendered for payment at the offices specified in
the applicable Debt Security and the Company has appointed the applicable
Trustee (or in the case of Bearer Securities, may appoint such other agent as
may be specified in the applicable Prospectus Supplement) as its agent to
receive all presentations surrenders, notices and demands.
No payment of principal, premium or interest on Bearer Securities shall be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that, if
the Debt Securities of a series are denominated and payable in U.S. dollars,
payment of principal of and any premium and interest on Debt Securities
(including any additional amounts payable on Securities of such series) of such
series, if specified in the applicable Prospectus Supplement, shall be made at
the office of the Company's Paying Agent in the Borough of Manhattan, the City
and State of New York, if (but only if) payment in U.S. dollars of the full
amount of such principal, premium, interest or additional amounts, as the case
may be, at all offices or agencies outside the United States maintained for the
purpose by the
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Company in accordance with the Indenture is illegal or effectively precluded by
exchange controls or other similar restrictions.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
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DESCRIPTION OF CAPITAL STOCK
As of November 15, 1997, the Company was authorized to issue 400,000,000
shares of Common Stock, $2.50 par value, of which 251,922,810 shares were issued
and outstanding, and 24,832,700 shares of Preferred Stock, $1.00 par value, of
which 14,832,300 shares designated as the "Preferred Redeemable Increased
Dividend Equity Securities, 8% PRIDES, Convertible Preferred Stock" (the
"PRIDES") were issued and outstanding.
The following summary does not purport to be complete and is qualified in
its entirety by reference to the applicable provisions of Delaware law and the
Company's Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation").
COMMON STOCK
Subject to such preferential rights as may be granted by the Board of
Directors of the Company (the "Board of Directors") in connection with the
future issuance of Preferred Stock, holders of shares of Common Stock are
entitled to one vote per share on all matters to be voted on by stockholders and
are entitled to receive ratably such dividends as may be declared on the Common
Stock by the Board of Directors in its discretion from funds legally available
therefor. In the event of the liquidation, dissolution or winding up of the
Company, after payment of all debts and other liabilities and any liquidation
preference of the holders of Preferred Stock, each holder of shares of Common
Stock is entitled to receive, ratably with each other holder of Common Stock,
$2.50 per share out of the net assets of the Company available for distribution
to its stockholders, and after such payment, holders of shares of Common Stock
are entitled to share ratably in all remaining assets of the Company available
for distribution. Holders of Common Stock have no subscription, redemption,
conversion or preemptive rights. Matters submitted for stockholder approval
generally require a majority vote of the shares of Common Stock present and
voting thereon. The outstanding shares of Common Stock are, and any shares of
Common Stock offered hereby will, when issued, be fully paid and nonassessable.
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 General Corporation Law of the State of
Delaware (the "DGCL"), 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 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.
PREFERRED STOCK
Under the Certificate of Incorporation, shares of Preferred Stock may be
issued from time to time, in one or more classes or series, as authorized by the
Board of Directors, generally without the approval of the stockholders. Prior to
issuance of shares of each series, the Board of Directors is required by the
DGCL and the Certificate of Incorporation to adopt resolutions and file a
Certificate of Designation (the "Certificate of Designation") with the Secretary
of State of the State of Delaware, fixing for each such
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class or series the designations, powers, preferences and rights of the shares
of such class or series and the qualifications, limitations or restrictions
thereon, including, but not limited to, dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences as are permitted by the DGCL. The Board of Directors could authorize
the issuance of shares of Preferred Stock with terms and conditions which could
have the effect of discouraging a takeover or other transaction which holders of
some, or a majority, of such shares might believe to be in their best interests
or in which holders of some, or a majority, of such shares might receive a
premium for their shares over the then-market price of such shares.
Subject to limitations prescribed by the DGCL, the Certificate of
Incorporation and Bylaws, the Board of Directors is authorized to fix the number
of shares constituting each class or series of Preferred Stock and the
designations and powers, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof,
including such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other subjects or matters as may be fixed by resolution of the Board of
Directors or duly authorized committee thereof. The Preferred Stock offered
hereby will, when issued, be fully paid and nonassessable and will not have, or
be subject to, any preemptive or similar rights.
Reference is made to the Prospectus Supplement relating to the class or
series of Preferred Stock being offered for the specific terms thereof,
including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the purchase price of such Preferred
Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;
(4) Whether dividends shall be cumulative or non-cumulative and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provisions for a sinking fund, if any, for such Preferred
Stock;
(7) The provisions for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into shares of Common Stock, including the
conversion price (or manner of calculation thereof) and conversion period;
(10) Voting rights, if any, of such Preferred Stock;
(11) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(12) A discussion of any material and/or special United States Federal
income tax considerations applicable to such Preferred Stock;
(13) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(14) Any limitations on issuance of any class or series of Preferred
Stock ranking senior to or on a parity with such series of Preferred Stock
as to dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(15) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank: (i) senior to
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all classes or series of Common Stock of the Company, and to all equity
securities ranking junior to such Preferred Stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company. As used in the Certificate of Incorporation for these purposes, the
term "equity securities" does not include convertible debt securities.
PREFERRED STOCK RIGHTS AGREEMENT
On July 14, 1988, the Company adopted a Preferred Share Purchase Rights Plan
("Rights Plan") and declared a dividend distribution of one Right on each
outstanding share of Common Stock and one Right on each share of Common Stock
issued between July 14, 1988 and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are defined in the
Rights Plan). 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 then
outstanding shares of 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
then outstanding shares of 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 then
outstanding shares of Common Stock, other 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 (other than the Hilton Interests) and prior to
an acquisition of 50% or more of the Common Stock, the Company'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 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.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is ChaseMellon
Shareholder Services LLC.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate Deposit Agreement (each, a "Deposit
Agreement") among the Company and the depositary named therein (the "Preferred
Stock Depositary"). Subject to the terms of the Deposit Agreement, each owner of
a Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of a particular series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the Preferred Stock represented by such Depositary Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Stock
Depositary, the Company will cause the Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to the Deposit Agreement and
the Depositary Receipts to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and
qualified in their entirety by reference to, all of the provisions of the
applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Receipts evidencing the related Depositary Shares in
proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the Preferred Stock
Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into other securities.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted into other securities), the
holders thereof will be entitled to delivery at such office, to or upon such
holder's order, of the number of whole or fractional shares of the Preferred
Stock and any money or other property represented by the Depositary Shares
evidenced by such Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related Preferred Stock on
the basis of the proportion of Preferred Stock represented by such Depositary
Share as specified in the applicable Prospectus Supplement, but holders of such
shares of Preferred Stock will not thereafter be entitled to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of shares of
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Preferred Stock to be withdrawn, the Preferred Stock Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the Preferred
Stock Depositary, the Preferred Stock Depositary will redeem, as of the same
redemption date, the number of Depositary Shares representing shares of the
Preferred Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to the
date fixed for redemption. The redemption price per Depositary Share will be
equal to the corresponding proportion of the redemption price and any other
amounts per share payable with respect to the Preferred Stock. If fewer than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected pro rata (as nearly as may be practicable without creating
fractional Depositary Shares) or by any other equitable method determined by the
Company.
From and after the date fixed for redemption, all dividends in respect of
the shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption and surrender thereof to the Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Stock. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock Depositary
as to the exercise of the voting rights pertaining to the amount of Preferred
Stock represented by such holder's Depositary Shares. The Preferred Stock
Depositary will vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action which may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting the amount of
Preferred Stock represented by such Depositary Shares to the extent it does not
receive specific instructions from the holders of Depositary Receipts evidencing
such Depositary Shares. The Preferred Stock Depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the manner or
effect of any such vote made, as long as such action or non-action is in good
faith and does not result from negligence or wilful misconduct of the Preferred
Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, are not convertible into Common Stock or any
other securities or property of the Company. Nevertheless, if so specified in
the applicable Prospectus Supplement relating to
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an offering of Depositary Shares, the Depositary Receipts may be surrendered by
holders thereof to the Preferred Stock Depositary with written instructions to
the Preferred Stock Depositary to instruct the Company to cause conversion of
the Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other shares of Preferred
Stock of the Company or other shares of stock, and the Company has agreed that
upon receipt of such instructions and any amounts payable in respect thereof, it
will cause the conversion thereof utilizing the same procedures as those
provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a new Depositary Receipt or Receipts will be issued for any Depositary
Shares not to be converted. No fractional shares of Common Stock will be issued
upon conversion, and if such conversion would result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of the
fractional interest based upon the closing price of the Common Stock on the last
business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Stock
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
Preferred Stock will not be effective unless such amendment has been approved by
the existing holders of at least 66 2/3% of the Depositary Shares evidenced by
the Depositary Receipts then outstanding. No amendment shall impair the right,
subject to certain exceptions in the Depositary Agreement, of any holder of
Depositary Receipts to surrender any Depositary Receipt with instructions to
deliver to the holder the related Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with law. Every
holder of an outstanding Depositary Receipt at the time any such amendment
becomes effective shall be deemed, by continuing to hold such Receipt, to
consent and agree to such amendment and to be bound by the Deposit Agreement as
amended thereby.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Stock Depositary if a majority of
each series of Preferred Stock affected by such termination consents to such
termination, whereupon the Preferred Stock Depositary shall deliver or make
available to each holder of Depositary Receipts, upon surrender of the
Depositary Receipts held by such holder, such number of whole or fractional
shares of Preferred Stock as are represented by the Depositary Shares evidenced
by such Depositary Receipts together with any other property held by the
Preferred Stock Depositary with respect to such Depositary Receipt. In addition,
the Deposit Agreement will automatically terminate if (i) all outstanding
Depositary Shares shall have been redeemed, (ii) there shall have been a final
distribution in respect of the related Preferred Stock in connection with any
liquidation, dissolution or winding up of the Company and such distribution
shall have been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares representing such Preferred Stock or (iii) each share of the
related Preferred Stock shall have been converted into securities of the Company
not so represented by Depositary Shares.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However holders of Depositary Receipts will pay the fees and expenses of the
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
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RESIGNATION AND REMOVAL OF DEPOSITORY
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary. A successor
Preferred Stock Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the Depositary Shares), gross negligence or willful
misconduct, and the Company and the Preferred Stock Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares or shares of Preferred Stock represented
thereby unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on written advice of counsel or accountants,
or information provided by persons presenting shares of Preferred Stock
represented thereby for deposit, holders of Depositary Receipts or other persons
believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event the Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received from
the Company.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Stock Warrants"), Depositary Shares
(the "Depositary Shares Warrants") or Common Stock (the "Common Stock Warrants,"
collectively with the Debt Warrants, the Preferred Stock Warrants and the
Depositary Shares Warrants (the "Warrants"). Warrants may be issued
independently or together with any other Offered Securities and may be attached
to or separate from such other Offered Securities. The Warrants are to be issued
under warrant agreements (each a "Warrant Agreement") to be entered into between
the Company and a bank or trust company, as warrant agent (the "Warrant Agent"),
all as shall be set forth in the Prospectus Supplement relating to the Warrants
being offered pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the Debt Warrant certificates representing such Debt Warrants, including the
following: (i) the title of such Debt Warrants; (ii) the aggregate number of
such Debt Warrants; (iii) the price or prices at which such Debt Warrants will
be issued; (iv) the designation, aggregate principal amount and terms of the
Debt Securities purchasable upon exercise of such Debt Warrants, and the
procedures and conditions relating to the exercise of such Debt Warrants; (v)
the designation and terms of any related Debt Securities with which such Debt
Warrants are issued, and the number of such Debt Warrants issued with each such
security; (vi) the date, if any, on and after which
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such Debt Warrants and the related Debt Securities will be separately
transferable; (vii) the principal amount of Debt Securities purchasable upon
exercise of each Debt Warrant, and the price at which such principal amount of
Debt Securities may be purchased upon such exercise; (viii) the date on which
the right to exercise such Debt Warrants shall commence, and the date on which
such right shall expire; (ix) the maximum or minimum number of such Debt
Warrants which may be exercised at any time; (x) a discussion of the material
United States Federal income tax considerations applicable to the exercise of
such Debt Warrants; and (xi) any other terms of such Debt Warrants and terms,
procedures and limitations relating to the exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of holders of
the securities purchasable upon such exercise and will not be entitled to
payments of principal of (or premium, if any) or interest, if any, on the
securities purchasable upon such exercise.
OTHER WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants, Depositary Shares Warrants and Common Stock Warrants
in respect of which this Prospectus is being delivered: (i) the title of such
Warrants; (ii) the Securities for which such Warrants are exercisable; (iii) the
price or prices at which such Warrants will be issued; (iv) the number of such
Warrants issued with each share of Preferred Stock, Common Stock or Depositary
Share; (v) any provisions for adjustment of the number or amount of shares of
Preferred Stock, Common Stock or Depositary Share receivable upon exercise of
such Warrants or the exercise price of such Warrants; (vi) if applicable, the
date on and after which such Warrants and the related Preferred Stock, Common
Stock or Depositary Share will be separately transferable; (vii) if applicable,
a discussion of the material United States Federal income tax considerations
applicable to the exercise of such Warrants; (viii) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants; (ix) the date on which the right to exercise such
Warrants shall commence, and the date on which such right shall expire; and (x)
the maximum or minimum number of such Warrants which may be exercised at any
time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount of Debt Securities or shares of Preferred Stock, Common Stock
or Depositary Share at such exercise price as shall in each case be set forth
in, or be determinable as set forth in, the Prospectus Supplement relating to
the Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the Prospectus Supplement
relating to the Warrants offered thereby. After the close of business on the
expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered
thereby. Upon receipt of payment and the Warrant certificate properly completed
and duly executed at the corporate trust office of the Warrant Agent or any
other office indicated in the Prospectus Supplement, the Company will, as soon
as practicable, forward the Debt Securities, Depositary Share or shares of
Preferred Stock or Common Stock purchasable upon such exercise. If less than all
of the Warrants represented by such Warrant certificate are exercised, a new
Warrant certificate will be issued for the remaining Warrants.
GAMING REGULATION
The ownership and operation of casino gaming facilities are the subject of
exclusive state and local regulation. The states of Louisiana, Missouri,
Mississippi, New Jersey and Nevada and the applicable local authorities, and the
Province of Ontario, Canada, the Province of Queensland, Australia, and the
countries
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of Turkey and Uruguay require various licenses, findings of suitability,
registrations, permits and approvals (individually a "Gaming License" and
collectively "Gaming Licenses") to be held by the Company and its subsidiaries
and joint ventures that are engaged in gaming operations. The Louisiana Gaming
Control Board, the Missouri Gaming Commission, the Mississippi Gaming
Commission, the New Jersey Casino Control Commission, the Nevada Gaming
Commission, the Ontario Gaming Control Commission and the gaming authorities in
Queensland, Australia, Turkey and Uruguay (collectively the "Gaming
Authorities"), may, among other things, limit, condition, suspend or revoke a
Gaming License or approval to own the stock or joint venture interest of any of
the Company's Louisiana, Missouri, Mississippi, New Jersey, Nevada, Ontario,
Queensland, Turkey and Uruguay operations, respectively, for any cause deemed
reasonable by such licensing authority. Substantial fines or forfeiture of
assets for violations of gaming laws or regulations may be levied against the
Company, such subsidiaries and joint ventures and the persons involved. The
suspension or revocation of any of the Company's Gaming Licenses or the levy on
the company of substantial fines or forfeiture of assets could have a material
adverse effect on the business of the Company.
To date, the Company has obtained all Gaming Licenses necessary for the
operation of its gaming activities. However, Gaming Licenses and related
approvals are deemed to be privileges under the laws of Louisiana, Missouri,
Mississippi, New Jersey, Nevada, Ontario, Queensland, Turkey and Uruguay, and no
assurances can be given that any new Gaming Licenses that may be required in the
future will be granted or that existing Gaming Licenses will not be revoked or
suspended.
The Nevada Gaming Control Act (the "Nevada Act") requires any person who
acquires a beneficial ownership of more than 5% of the Company's voting
securities to report the acquisition to the Nevada Gaming Commission. The Nevada
Act requires that beneficial owners of more than 10% of the Company's voting
securities apply to the Nevada Gaming Commission for a finding of suitability
within 30 days after the Chairman of the Nevada Gaming Control Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires
beneficial ownership of more than 10%, but not more than 15%, of the Company's
voting securities may apply to the Nevada Gaming Commission for a waiver of such
finding of suitability if such institutional investor holds such voting
securities for investment purposes only.
The Nevada Gaming Commission may, in its discretion, require the holder of
any debt security issued by the Company to file applications, be investigated
and be found suitable to own such debt security. If the Nevada Gaming Commission
determines that a person is unsuitable to own such debt security, then pursuant
to the Nevada Act, the Company can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada 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 applicable Gaming Authorities in Missouri, Mississippi, New Jersey,
Ontario, Queensland, Turkey and Uruguay also have jurisdiction over the
beneficial holders of debt securities and voting securities issued by the
Company and may require their investigation and approval.
In certain jurisdictions, the Company may not make a public offering of its
securities without the prior approval of the applicable Gaming Authorities if
the securities or proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in such jurisdictions, or to retire or
extend obligations incurred for such purposes or for similar transactions. On
September 25, 1997 the Nevada Gaming Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions ("Shelf Approval"). The Shelf Approval also applies to any affiliated
company wholly owned by the Company (a "Gaming Affiliate") which is a publicly
traded corporation or would thereby become a publicly traded corporation
pursuant to a public offering. The Shelf Approval also
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includes approval for the Company's registered and licensed Nevada subsidiaries
to guarantee any security issued by, or to hypothecate their assets to secure
the payment or performance of any obligations evidenced by a security issued by,
the Company or a Gaming Affiliate in a public offering under 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 Nevada
State Gaming Control Board and must be renewed bi-annually. The Shelf Approval
does not constitute a finding, recommendation or approval by the Nevada Gaming
Commission or the Nevada State Gaming 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. The public offering of the
Offered Securities will be made pursuant to the Shelf Approval.
In November 1997, the Missouri Supreme Court ruled in a lawsuit that
riverboat casinos operating in man-made basins must meet certain requirements as
to contiguity with the Mississippi or Missouri rivers in order to comply with
the Missouri constitution. The Company is not a party to this lawsuit, but if it
is determined that the ruling is applicable to the Company's Kansas City
Missouri riverboat casino, as well as other similarly situated riverboat casino
operators, the Company's Kansas City gaming operations could be significantly
adversely affected.
The foregoing is only a summary of the regulatory requirements applicable to
the Company. For a more detailed description of the regulatory requirements
applicable to the Company, see "Regulation and Licensing" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
incorporated by reference herein.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities being offered hereby: (i)
directly to purchasers; (ii) through agents; (iii) through dealers; (iv) through
underwriters; or (v) through a combination of any such methods of sale.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions either: (i) at a fixed price or prices, which may be
changed; (ii) at market prices prevailing at the time of sale; (iii) at prices
related to such prevailing market prices; or (iv) at negotiated prices.
Offers to purchase Offered Securities may be solicited directly by the
Company. Offers to purchase Offered Securities may also be solicited by agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an "underwriter" as that term is defined in the Securities Act, involved
in the offer or sale of the Offered Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Company will sell such Offered
Securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such Offered Securities to the public at varying prices to be determined by such
dealer at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale, the Company
will execute an underwriting agreement with such underwriters at the time of
sale to them and the names of the underwriters will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
the Offered Securities in respect of which this Prospectus is delivered to the
public. In connection with the sale of Offered Securities, such underwriters may
be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Offered Securities for whom they may act as agents. Underwriters
may also sell Offered Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they
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may act as agents. Any underwriting compensation paid by the Company to
underwriters in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with the Company, to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which they may be
required to make in respect thereof. Underwriters and agents may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase Offered Securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. The obligations of any purchaser under any such contract will not be
subject to any conditions except that (a) the purchase of the Offered Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (b) if the Offered
Securities are also being sold to underwriters, the Company shall have sold to
such underwriters the Offered Securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility in
respect to the validity or performance of such contracts. The Prospectus
Supplement relating to such contracts will set forth the price to be paid for
Offered Securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for delivery
of Offered Securities pursuant to such contracts.
The anticipated date of delivery of Offered Securities will be set forth in
the applicable Prospectus Supplement relating to each offer.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by Latham & Watkins, Los Angeles, California. Unless otherwise indicated in the
Prospectus Supplement, if the Offered Securities are being distributed in an
underwritten offering or through agents, Skadden, Arps, Slate, Meagher & Flom,
LLP, Los Angeles, California, will act as counsel for such underwriters or
agents.
EXPERTS
The consolidated financial statements and schedules in the Company's Annual
Report on Form 10-K incorporated by reference into this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of Bally Entertainment Corporation
appearing in Bally Entertainment Corporation's Annual Report (Form 10-K) for the
year ended December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein, and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
25
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
The Company............................................................... S-2
Business.................................................................. S-4
Use of Proceeds........................................................... S-11
Capitalization............................................................ S-12
Selected Financial Data................................................... S-13
Regulation and Licensing.................................................. S-16
Description of Notes...................................................... S-18
Certain Federal Income Tax Considerations................................. S-25
Underwriting.............................................................. S-27
Legal Matters............................................................. S-28
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 3
The Company............................................................... 4
Use of Proceeds........................................................... 4
Ratios of Earnings to Fixed Charges....................................... 5
Description of Debt Securities............................................ 5
Description of Capital Stock.............................................. 15
Description of Depositary Shares.......................................... 18
Description of Warrants................................................... 21
Gaming Regulation......................................................... 22
Plan of Distribution...................................................... 24
Legal Matters............................................................. 25
Experts................................................................... 25
</TABLE>
HILTON HOTELS
CORPORATION
$200,000,000
7.20% SENIOR NOTES DUE 2009
$200,000,000
7.50% SENIOR NOTES DUE 2017
[LOGO]
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PROSPECTUS SUPPLEMENT
DECEMBER 17, 1997
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SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
SECURITIESCORPORATION
MERRILL LYNCH & CO.
BANCAMERICA ROBERTSON STEPHENS
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