of the holders into common stock of the Company at a conversion
ratio of 1.42 shares of preferred for each share of common (150,404
common shares have been reserved for this purpose), and, at the
option of the Company, such Series "A" shares are redeemable at
$26.25 plus accrued dividends to the date fixed for redemption.
450,000 shares of common stock of the Company have been reserved for the exercise of warrants which were originally attached
to the $30,000,000. issue in 1959 of 6% subordinated sinking fund
debentures of the Company. Each $1,000. debenture unit carried
a warrant to purchase 15 shares of common stock. The warrants
provide that this stock may be purchased at $42. per share until
October 15, 1963; $46. per share thereafter to October 15, 1967;
and, $50. per share thereafter to October 15, 1971, the expiration
date of the warrants.
AND CONTINGENT LIABILITIES
The Company and its subsidiaries were committed to approximately $23,000,000. in connection with contracts for the construction of hotels.
A subsidiary entered into a first mortgage construction loan
in the amount of $5,000,000. of which the first $1,666,667. is guaranteed by the Company. At December 31, 1961 the subsidiary had
drawn $890,000. of the funds available under the loan. The Company is also guarantor to the extent of the first $1,000,000. under a
$3,000,000. long-term obligation of this subsidiary and has agreed
to purchase from time to time, as the subsidiary shall request, but
not later than December 31, 1962, a 4% twenty-five year subordinated note of the subsidiary, in the principal amount of $1,500,000.
at a price equal to the principal amount. Other guarantees of loans
to subsidiaries or 50% owned companies were: First Mortgage loan
of $2,024,000. on the Hilton Inn, New Orleans and the first
$7,500,000. of a $15,000,000. First Mortgage loan of Hilton-Burns
Hotel Company, Inc.
The subsidiary, Hilton Hotels International, Inc. has subscribed
for a 50% interest ($250,000.) in the share capital of Kahala Hilton
Hotel Company, Inc. (hotel to be constructed) and had paid
$50,000. of the subscription price. In addition, International has
agreed to purchase $750,000. of 5% debenture notes of Kahala.
In connection with two hotels under construction in The Netherlands, Hilton Hotels International, Inc. (to be lessee) subscribed to
1,000,000 guilders in the share capital of each company and made
50% payments amounting in the aggregate to $275,820. The total
balance payable under the subscription is $278,500. at the current
exchange rate. In accordance with lease terms for the London Hilton,
International is required to furnish the hotel at an estimated cost
of $4,000,000. A loan in the amount of $900,000. maturing November 15, 1966 entered into by lessor companies of the Acapulco
Hilton and the Continental Hilton has been guaranteed by International and another person. Securities of two Mexican companies
have been pledged to secure the loan.
The Company is contingently liable as guarantor respecting two
second mortgage notes aggregating $8,964,929. which were sold in
the transaction of the sale and leaseback of the Beverly Hilton Hotel
under which sale the Company has the option to repurchase the
hotel in 1966 or 1967 at a price of $13,400,000., the original sale
price attributable to the land and buildings comprising the hotel.
The Company has purchased $500,000. of 6}4% notes, maturing
January 1, 1971, of the 50% owned Hilton-Uris, Inc. (hotel under
construction) and is committed to purchase an additional $2,500,000.
of such notes. An agreement has been made with Rock-Hil-Uris, Inc.
(hotel under construction) in which the Company has a $500,000.
investment, representing 25% of the capital stock, whereby the
Company will purchase up to $3,750,000. principal amount of
Series "A" notes of the affiliate. Both hotels when completed
will be operated by Hilton Hotels Corporation under management
Hilton Inns, Inc., a subsidiary, has received a First Mortgage
loan commitment in an amount up to $18,000,000. The Company
has received a $16,000,000. loan commitment in connection with
the construction of a Hilton Hotel in San Francisco. No funds have
been drawn down under either commitment.
The Company is obligated to make an additional capital contribution of $225,000. to the partnership in which it now has a majority
interest, (Hawaiian Village Development Company), and is to
further purchase $2,025,000. of subordinated notes of the partnership unless such additional capital contribution and purchase of
subordinated notes are made by other persons.
On December 20, 1961, Hilton Hotels Corporation made an
offer to the stockholders of the affiliated Statler Hotels Delaware
Corporation to purchase their shares for $6.00 per share subject to
certain conditions. As of February 28, 1962 there had been tendered
to the designated depositories, 1,339,221 shares costing
(8) LONG-TERM LEASES
The Company and its subsidiaries operate or will operate certain
properties under leases ranging from one month to thirty-seven years
five and one-half months from December 31, 1961 with options to
renew 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: 1962, $5,557,611.; 1963, $5,544,633.;
and, 1964, 1965 and 1966, $5,548,383. per year.
Rental based on a percentage of gross operating profit and other
lease obligations of a Canadian subsidiary of Hilton Hotels International, Inc., are guaranteed by both International and by the
Company. Under the terms of the assignment of the Caribe Hilton
lease to Caribe Hilton Hotel Corporation of Delaware, International
and the Company continued liable for the tenant's obligations under
the lease which, among other things, requires payment of a small
fixed rental and additional rental based on gross operating profit.
International remained contingently liable for performance under all
other leases entered into by or assigned to its foreign subsidiaries.
The Company has not been released from its obligations under a
ground lease which was assigned to Hilton Inns, Inc.
The subsidiary, Hilton Hotels International, Inc., has negotiated
preliminary contracts or agreements for the operation of hotels
under construction, or under consideration, on sites outside the
Continental United States, subject to fulfillment of certain conditions and execution of final leases. In general, International or
its subsidiaries is required to furnish initial operating inventories
and maintain sufficient working capital. Leases basically provide
for a rental based on a percentage of gross operating profit with
certain specific rental obligations.
(9) LIMITATIONS AND RESTRICTIONS
Indentures of the Company and an affiliate, as amended, contain
certain restrictive provisions providing for the Company and its
subsidiaries, on a consolidated basis, to maintain working capital
of not less than $5,000,000., and include limitations upon the
declaration and payment of cash dividends and the payment for
purchase, redemption or retirement of shares of any class of capital
stock. In accordance with the indentures, as amended, earned surplus in the amount of $64,160,304. was restricted at December