December 31, 1958. These shares will be convertible into
common stock of the Company at the rate of one share
of common for each one and one-half shares of this series,
and, at the option of the Company, such Series "A"
shares will be redeemable at $26.25 plus accrued dividends on and after January 1, 1961 to the date fixed
AND CONTINGENT LIABILITIES
Contract commitments in connection with the construction of new hotel projects approximated $8,732,116 at
December 31, 1958.
The Company has subscribed for and agreed to purchase from its wholly-owned subsidiary Hilton Hotels
International, Inc., at par, $2,000,000 aggregate principal
amount of 5% subordinated (sinking fund) debentures
and 400,000 shares of $5.00 par value common stock to
be issued from time to time at the option of the subsidiary.
The commitment is irrevocable for a period of four
years from November 27, 1956, but shall expire prior
thereto if and when such securities in these amounts have
been purchased by the Company. At December 31, 1958,
Hilton Hotels Corporation, in connection with the subscription commitment, had purchased, 320,000 shares of
common stock and $200,000 face amount of debentures.
During 1957 the Company, in connection with a lease
and the construction of a hotel in Pittsburgh, Pennsylvania, entered into an Indenture of Mortgage and Deed
of Trust pertaining to a $12,000,000 issue of Leasehold
Mortgage 4 — 4^% Sinking Fund Bonds due June 1,
1987. The Company has not issued any bonds nor drawn
down any of the funds available under the mortgage at
December 31, 1958.
A subsidiary entered into an agreement providing for
a first mortgage construction loan in the amount of
$5,000,000 of which $1,666,667 is to be guaranteed by the
Company. At December 31, 1958 the subsidiary had not
drawn any of the funds available under this agreement.
The Company is guarantor to the extent of $1,000,000
under a $3,000,000 long-term obligation of a subsidiary.
The Company has agreed to purchase all of the
authorized capital stock of Hilton Inns, Inc., in the
amount of $5,000,000.
The Company was contingently liable to the extent of
approximately $5,000,000 as it did not receive releases
from mortgagees under certain mortgages assumed by
buyers of properties who, however, agreed to hold the
Company harmless against any liability thereon.
The Company and its subsidiaries operate or will operate
certain properties under leases ranging from one year
and three months to forty years from December 31, 1958,
with option to renew for various periods in some instances. The total minimum annual fixed or basic rentals
payable (exclusive of real estate taxes, insurance and
other occupancy charges) under such leases for each of
the next five years ending December 31, follows: 1959,
$11,076,600; 1960, $9,905,100; 1961, $9,268,700; 1962,
$8,868,700; and 1963, $8,535,300.
The wholly-owned Subsidiary, Hilton Hotels International, Inc., has entered into leases and contracts ranging from fifteen to twenty-one years, subject to certain
conditions, for the operation of hotels under construction
or to be constructed in eight cities outside the continental
United States. In general, "International" or its Subsidiaries is required to furnish initial inventories and to
maintain sufficient working capital, except in the case
of one lease, which specifies that not less than $250,000
shall be furnished for these purposes, to be maintained
for the first five years of the lease. In connection with the
hotels to be constructed in the Netherlands, "International" is required to subscribe to 5% of the total cost
or approximately $500,000, and is committed to invest
500,000 pounds in an English Company to be formed
for purposes of constructing a hotel in London. The
terms of the leases commence either on actual occupancy
or within ten days of receipt of architect's certificate of
occupancy. The leases basically provide for a rental
based on a percentage of gross operating profit, with
certain specific rental obligations.
9—LIMITATIONS AND RESTRICTIONS
Under the most restrictive covenants of certain indentures relating to long-term debt of the Company and an
affiliate as of December 31, 1958, the Company and certain Subsidiaries on a consolidated basis was (a) required
to maintain working capital of not less than $7,000,000
and a ratio of current assets to current liabilities of not
less than 125%; and, (b) prohibited from declaring cash
dividends on its capital stock, purchasing, redeeming or
otherwise retiring any shares of its capital stock unless the
sum of $2,500,000 and 80% of the consolidated net income from January 1, 1957 to date of declaration shall
be greater than the aggregate of all such dividends and
payments. The maximum amount of earned surplus so
restricted was $50,292,529 at December 31, 1958.
Under the most restrictive covenants of certain long-
term obligations of the wholly-owned Subsidiary, Hilton
Hotels International, Inc., the Subsidiary is obligated to
(a) maintain consolidated working capital -of not less
than $1,250,000, one-half thereof to be represented by
assets located in the United States, its territories and
possessions, or in countries whose currencies are readily
and favorably convertible into dollars; and, (b) prohibited
from declaring dividends, other than in its own stock,
and from reacquiring its own stock for consideration.