HILTON HOTELS CORP, 10-K405, 1995-03-24

HILTON HOTELS CORP
10-K405, 1995-03-24
HOTELS & MOTELS

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<PAGE> 1

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 1994

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from ................ to ................

Commission File Number 1-3427
HILTON HOTELS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 36-2058176
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

Registrant's telephone number, including area code: (310) 278-4321

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ----------------------
Common Stock, par value $2.50 per share New York, Pacific

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES /X/ NO / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

Based upon the February 28, 1995 New York Stock Exchange closing price of
$70.25 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.3 billion.
On that date, there were 48,146,691 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1994 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.

===============================================================================
<PAGE> 2

PART I

ITEM 1. BUSINESS

GENERAL INFORMATION

CURRENT OPERATIONS

Hilton Hotels Corporation and its majority and wholly-owned subsidiaries
are collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. All of these properties are located in
the United States, with the exception of four hotels and two hotel-casinos
operated by the Company's wholly-owned subsidiary, Conrad International Hotels
Corporation and its subsidiaries ("Conrad").

On February 1, 1995, Hilton owned or leased and operated 23 hotels and
managed 40 hotels partially or wholly-owned by others. In addition, 160 hotels
were operated under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names
by others pursuant to franchises granted by a subsidiary of Hilton.

Seven of the hotels have substantial gaming operations, five of which are
wholly-owned by the Company and are located in Nevada and the other two hotels
are partially owned by the Company and are located in Australia and Turkey. The
Company also partially owns and manages one river casino in the United States
and owns a minority interest in a company which operates one casino in Canada.
The Company's gaming operations accounted for approximately 70%, 71% and 57% of
its total operating income in 1992, 1993 and 1994, respectively. For additional
information, see the Ten Year Summary on pages 56 and 57 in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1994 (the "1994
Stockholders Report"), which report is included as Exhibit 13 hereto and, to the
extent specific references are made thereto, incorporated herein by such
references.

The Company, and other entities in which the Company has an investment, are
also engaged in various other activities incidental or related to the operation
of hotels and hotel-casinos. See "Additional Information."

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.

RECENT DEVELOPMENTS

Since January 1, 1994, the Company took advantage of various opportunities
to expand its business, the most significant of which included the opening of a
river casino in New Orleans, Louisiana; the opening by Conrad and its partners
of a casino in Windsor, Ontario, Canada; the management of the Millenium Hilton
in New York, New York; the purchase of an additional equity interest in the New
Orleans Hilton Riverside; the opening of a new vacation ownership resort in Las
Vegas, Nevada; and the completion of three new "Sky Villa" luxury suites at the
Las Vegas Hilton. The Company has also engaged the investment banking firm of
Smith Barney Inc. to study strategic alternatives to enhance shareholder value.

In February 1994, the Company commenced operation of a river casino located
adjacent to the New Orleans Hilton Riverside. The initial 1,500 passenger vessel
had a 20,000 square foot casino and was wholly-owned by the Company. This
interim riverboat was leased to a joint venture, of which the Company owns a 50%
interest. In November 1994, the interim riverboat was replaced by the "Flamingo
Casino New Orleans," a permanent vessel owned by the joint venture featuring a
30,000 square foot casino and accommodating 2,400 passengers.

In May 1994, Conrad and the other two shareholders of Windsor Casino
Limited ("WCL") commenced operation of the Casino Windsor, an interim 50,000
square foot casino in Windsor, Ontario, Canada. Hilton, through Conrad, owns a
33.3% interest in WCL, which operates this project for the Ontario provincial
government. The Windsor project will open on a permanent basis in early 1997
with a hotel of at least 300 rooms, a 75,000 square foot casino, entertainment
and meeting facilities.

In June 1994, Hilton became the manager of the 561-room Millenium Hilton in
New York, New York. Also in June 1994, the Company purchased an additional 20.6%
ownership interest in the New Orleans Hilton Riverside, increasing the Company's
ownership interest in the hotel to 67.4%.
<PAGE> 3

In January 1995, the Company, through its 50% owned Hilton Grand Vacations
Company, commenced operation of a 200-unit vacation ownership resort adjacent to
the Flamingo Hilton-Las Vegas. Hilton Grand Vacations Company also anticipates
completion in summer 1995 of the first phase of a 360-unit vacation ownership
resort adjacent to Sea World in Orlando, Florida.

In early 1995, the Company completed construction of three new 12,600 to
15,400 square foot "Sky Villa" luxury suites for premium players at the Las
Vegas Hilton.

In addition, in November 1994, the Company engaged the investment banking
firm of Smith Barney Inc. to undertake a study and make recommendations to the
Company's management and Board of Directors for strategic alternatives to
enhance shareholder value. These alternatives may include the sale of the entire
Company in one or a series of transactions; spin-off of one or more of the
Company's businesses; recapitalization; business combination; share repurchase
program; or similar transaction.

The Company has also continued its ongoing program of monitoring and
improving its franchise operations. The Company added four franchises to its
system in 1994, while 13 franchise arrangements were terminated, many due to
noncompliance with the Company's standards.

For a description of the Company's planned expansion activities, see "Hotel
Operations -- Expansion Program" and "Gaming Operations -- Expansion Program"
below.

INDUSTRY SEGMENTS

Hilton's revenues and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased
hotels, management and franchise fees and operating income from unconsolidated
affiliates and (ii) gaming operations, which include the operation of Hilton's
owned hotel-casinos and management fees and operating income from partially
owned hotel-casinos and river casinos. For financial data relating to the
Company's hotel and gaming operations for the three years ended December 31,
1994, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 53 and 54 in the 1994 Stockholders Report.

The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
England, Ireland, Hong Kong, Turkey and Belgium. To date, the amounts of
revenues, operating profits and identifiable assets attributable to geographic
areas, other than the United States, have not been material.

HOTEL OPERATIONS

OWNED HOTELS

On February 1, 1995, the following hotels were owned in fee and operated by
Hilton:

<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1995
----------------- ------------ --------- -----------------
<S> <C> <C> <C>
Atlanta Airport Hilton 503
Atlanta, Georgia(1) (1989) 1960 $50,000,000

Palmer House Hilton 1,639
Chicago, Illinois(2) (1925; 1945) 1988 --
Flamingo Hilton-Las Vegas 3,284
Las Vegas, Nevada (various dates 1971 --
through 1994)

Las Vegas Hilton 3,174
Las Vegas, Nevada (various dates 1971 --
through 1981)

Flamingo Hilton-Laughlin 2,000
Laughlin, Nevada (1990) 1990 --
</TABLE>

2
<PAGE> 4

<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1995
----------------- ------------ --------- -----------------
<S> <C> <C> <C>
New Orleans Airport Hilton 312
New Orleans, Louisiana(1) (1989) 1959 $32,000,000

Waldorf-Astoria 1,380
New York, New York(3) (1931) 1977 --

Portland Hilton 455
Portland, Oregon (1963) 1963 --

Flamingo Hilton-Reno 604
Reno, Nevada(4) (1978) 1981 --
Reno Hilton 2,001
Reno, Nevada (1978) 1992 --
Hilton Garden Inn 195
Southfield, Michigan(5) (1988) 1993 --

Hilton Suites 224
Auburn Hills, Michigan (1991) 1991 --

Hilton Suites 203
Brentwood, Tennessee (1989) 1989 --

Hilton Suites 230
Orange, California (1989) 1989 --

Hilton Suites 226
Phoenix, Arizona (1990) 1990 --
</TABLE>

------------

(1) The Atlanta Airport Hilton and the New Orleans Airport Hilton were closed
and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.

(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
acquiring the property in February 1988.

(3) The Company operated the Waldorf-Astoria under a lease from February 1950
until acquiring the property in April 1977.

(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.

(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.

LEASED HOTELS

Hilton leases the land upon which eight hotels have been built. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 54 in the 1994
Stockholders Report. 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 revenues of the facility, but in some
instances the rental is a fixed amount.

3
<PAGE> 5

On February 1, 1995, the following hotels were leased and operated by
Hilton:

<TABLE>
<CAPTION>
NUMBER OF
ROOMS (YEAR OF
INITIAL COMPLETION;
YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
----------------- ------------------- ---------------
<S> <C> <C>
Logan Airport Hilton 516 2014, with renewal options aggregating 25
Boston, Massachusetts(1) (1959; 1988) years under specified circumstances

O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)

Oakland Airport Hilton 363 2033
Oakland, California (1970; 1970)

Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30
Pittsburgh, Pennsylvania (1959; 1959) years

San Diego Hilton Beach 354 2019
& Tennis Resort (1962; 1965)
San Diego, California

San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)

Seattle Airport Hilton 173 2004, with renewal options aggregating 30
Seattle, Washington (1961; 1961) years

Tarrytown Hilton 236 2003, with renewal options aggregating 40
Tarrytown, New York(3) (1961; 1993) years
</TABLE>

------------

(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.

(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.

(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.

During the three years ended December 31, 1994, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $9,500,000, $11,300,000 and $13,300,000, respectively. For information
relating to minimum rental commitments in the future, see "Leases" in the Notes
to the Company's Consolidated Financial Statements on page 54 in the 1994
Stockholders Report.

MANAGED HOTELS

On February 1, 1995, Hilton operated 34 domestic hotels and six
international hotels under management agreements. 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 revenues
plus, in the majority of properties, an incentive fee based on operating
performance.

Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an equity
interest. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 45, 46 and 47
in the 1994 Stockholders Report.

4
<PAGE> 6

The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances. See
"Commitments and Contingent Liabilities" in the Notes to the Company's
Consolidated Financial Statements on pages 54 and 55 in the 1994 Stockholders
Report.

On February 1, 1995, the following hotels were operated by Hilton under
management agreements:

<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
------------------ ---------------------- ---------------
<S> <C> <C>
DOMESTIC
Anaheim Hilton & Towers 1,576 2014, with renewal options
Anaheim, California(1) (1984) aggregating 30 years, subject to
certain termination rights
Anchorage Hilton 591 2006, with renewal options
Anchorage, Alaska (various dates aggregating 20 years
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10
Atlanta, Georgia (1976) years
Beverly Hilton 581 2007, with renewal options
Beverly Hills, California (1955; 1967) aggregating 20 years, subject to
certain termination rights
Chicago Hilton & Towers 1,543 2005, with renewal options
Chicago, Illinois(2) (various dates aggregating 20 years
through 1986)
Brunswick Hilton 405 2013, subject to certain termination
East Brunswick, New Jersey(1) (1989) rights
Hilton Hawaiian Village 2,542 1997, with renewal options
Honolulu, Hawaii(3) (various dates aggregating 20 years
through 1988)
Long Beach Hilton 393 2012, with renewal options
Long Beach, California (1992) aggregating 20 years, subject to
certain termination rights
Los Angeles Airport Hilton & Towers 1,234 1999, with renewal options
Los Angeles, California (1983) aggregating 10 years, subject to
certain termination rights
McLean Hilton 458 2007, with renewal options
McLean, Virginia(2) (1987) aggregating 20 years
Fontainebleau Hilton Resort & Spa 1,206 1998, with a renewal option for 10
Miami, Florida (1954) years, subject to certain
termination rights
Miami Airport Hilton & Marina 500 2004, with renewal options
Miami, Florida(2) (1983) aggregating 20 years
Minneapolis Hilton & Towers 814 2012, with renewal options
Minneapolis, Minnesota (1992) aggregating 20 years, subject to
certain termination rights
Newark Airport Hilton 374 2003
Newark, New Jersey(1) (1988)
New Orleans Hilton Riverside 1,600 2007, with a renewal option for 10
& Towers (1977; 1983) years
New Orleans, Louisiana(4)
Millenium Hilton 561 2004, with a renewal option for 10
New York, New York (1992) years, subject to certain
termination rights
New York Hilton & Towers 2,041 1995
New York, New York(3) (1963)
Turtle Bay Hilton & Country Club 485 2004, with a renewal option for 10
Oahu, Hawaii (1972) years
Hilton at Walt Disney World 814 2003, with renewal options
Orlando, Florida(1) (1983) aggregating 20 years, subject to
certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10
Pasadena, California (1970) years, subject to certain
termination rights
</TABLE>

5
<PAGE> 7

<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
----------------- ---------------------- ---------------
<S> <C> <C>
The Pointe Hilton on South Mountain 636 2012, with renewal options
Phoenix, Arizona (1986) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Squaw Peak 563 2012, with renewal options
Phoenix, Arizona (1977) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Tapatio Cliffs 585 2012, with renewal options
Phoenix, Arizona (1982) aggregating 20 years, subject to
certain termination rights
Rye Town Hilton 438 1995
Rye Brook, New York(3) (1973; 1978)
Hilton Palacio del Rio 481 1998, with a renewal option for 10
San Antonio, Texas (1968) years
San Antonio Airport Hilton 387 2001, subject to certain termination
San Antonio, Texas(1) (1982) rights
San Francisco Hilton & Towers 1,895 2005, with a renewal option for 10
San Francisco, California(3) (various dates years
through 1988)
Hilton at Short Hills 300 2007, with renewal options
Short Hills, New Jersey (1988) aggregating 20 years, subject to
certain termination rights
Innisbrook Hilton Resort 857 2013, subject to certain termination
Tarpon Springs, Florida(1) (1972) rights
Hilton Waikoloa Village 1,241 2013, subject to certain termination
Waikoloa, Hawaii(2) (1988) rights
Capital Hilton 543 2005, with a renewal option for 10
Washington, D.C.(3) (1943; 1985) years
Washington Hilton & Towers 1,123 1995
Washington, D.C.(3) (1965)
Hilton Suites 212 2009, with renewal options
Oakbrook Terrace, Illinois(1)(3) (1989) aggregating 20 years
Hilton Garden Inn 152 2012, subject to certain termination
Valencia, California(2) (1991) rights

INTERNATIONAL

Conrad Brussels 269 2013, with renewal options
Brussels, Belgium (1993) aggregating 20 years
Conrad Dublin 191 2010, with renewal options
Dublin, Ireland(1)(2) (1989) aggregating 20 years
Conrad Hong Kong 513 2021
Hong Kong(2) (1990)
Conrad Istanbul 620 2011, with a renewal option for 20
Istanbul, Turkey(1)(2) (1992) years
Conrad London 159 2016, with renewal options
London, England (1990) aggregating 20 years
Hotel Conrad & Jupiters Casino 605 2001
Gold Coast, (1986)
Queensland, Australia(2)
</TABLE>

------------------

(1) Hilton has made loans to the owners of each of the referenced properties.

(2) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 45, 46 and 47 in the
1994 Stockholders Report.

(3) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 2 above.

(4) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Hilton Riverside. See note 2 above.

6
<PAGE> 8

FRANCHISE HOTELS

Pursuant to franchises granted by the Company, franchise hotels are
operated under the "Hilton," "Hilton Garden Inn" or "Hilton Suites" names. The
franchise hotels operated under the "Hilton" name are generally smaller than the
full service hotels owned, leased or managed by Hilton and average approximately
250 rooms in size. Franchise hotels bearing the "Hilton Garden Inn" name are
approximately 150 to 200 rooms in size and utilize a modular design constructed
around a courtyard containing an indoor or outdoor swimming pool. The "Hilton
Suites" properties operated pursuant to franchise agreements utilize an
all-suites design with approximately 200 to 250 suites. In each instance, Hilton
approves the plan for and the location of franchise hotels and assists in their
design.

On February 1, 1995, there were 160 franchise hotels operated by others
under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names. In general,
each franchisee pays Hilton an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the facility's
room revenues. Although Hilton does not directly participate in the management
or operation of franchise hotels, it conducts periodic inspections to ensure
that Hilton's standards are maintained and renders advice with respect to hotel
operations.

EXPANSION PROGRAM

Hilton has taken a reasoned approach to developing new domestic hotel
properties due to prior overbuilding in the hotel industry. At present, there
are no Company owned domestic hotels under construction. Hilton intends to
expand its operation of hotels primarily through conversion of existing hotels
into management and franchise properties in strategically significant markets.
The Company will invest in new domestic hotel projects or conversion properties
where the return on investment meets the Company's criteria.

The Company is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad name
pursuant to long-term management agreements. In certain instances, the Company
may invest in or make advances to the entity that owns a hotel. The Company has
entered into management contracts to operate the following new hotels in the
Pacific Rim, the anticipated opening dates of which are indicated
parenthetically: the 700-room Conrad Jakarta in Indonesia (1998) and the
400-room Conrad Bangkok in Thailand (1999).

Negotiations relating to the management of other international hotels are
in varying stages and, in certain instances, letters of intent for management
contracts have been executed. However, no assurances can be given that
management contracts for such other hotels will be executed or that such other
hotels will be constructed and, thereafter, operated by the Company.

The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally. Certain countries
have also restricted, from time to time, the repatriation of funds. The Company
considers the foregoing factors, among others, when evaluating a management
and/or investment opportunity abroad, but the Company can give no assurances
that changes in law or governmental policy will not adversely affect
international operations in the future.

TERRITORIAL RESTRICTIONS

Hilton has entered into various agreements which restrict its right to
operate hotels in various areas, including those hereinafter described which, in
management's opinion, represent the most significant restrictions to which the
Company is subject. In addition, pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of Hilton International Co., as
subsequently amended, Hilton may not operate facilities outside the United
States identified as "Hilton" hotels and Hilton International Co. may not
operate facilities within the continental United States identified as "Hilton"
hotels. The Company's international hotel and hotel-casino operations are
conducted under the Conrad name. See "Hotel Operations," "Gaming
Operations -- International Hotel-

7
<PAGE> 9

Casinos" and Item 3 below. Subject to the foregoing restrictions as to the use
of the "Hilton" name, Hilton and Hilton International Co. can compete in all,
and do compete in certain, markets. The Compass computerized reservation system
utilized by Hilton and Hilton International Co. provides information as to their
respective hotels, if any, in each market. See "Additional
Information -- Computer Systems" and "Reservation System."

The Company has entered into agreements with The Prudential Insurance
Company of America ("Prudential") which provide (a) that, except for the New
York Hilton & Towers and the Waldorf-Astoria (or the ownership, operation and
management of a substitute hotel having substantially the same number of rooms)
and a hotel with not more than 1,600 rooms, the Company would not own, operate,
manage or otherwise have an interest in any hotel or similar establishment in
the Borough of Manhattan, (b) that, except for the Washington Hilton & Towers
and the Capital Hilton (or the ownership, operation and management of substitute
hotels having substantially the same number of rooms), the Company would not
own, operate, manage or otherwise have an interest in any other hotel or similar
establishment in the District of Columbia, (c) that the Company would not own,
operate, manage or otherwise have an interest in any additional hotels or
similar establishments within a radius of 20 miles of the Rye Town Hilton,
except that certain areas within said 20 mile radius have been excluded from the
territorial restriction, and (d) that, except for the Chicago Hilton & Towers,
the Palmer House Hilton, the O'Hare Hilton and specified other properties, the
Company would not manage or operate, or possess an ownership interest in, or
license or franchise, any hotel in Chicago, except the ownership and/or
management of a hotel with less than 800 rooms at the O'Hare International
Airport and a hotel with not more than 400 rooms at any other location in
Chicago.

PROPERTY TRANSACTIONS

In 1994, the Company recorded a $1,100,000 pretax gain from property
transactions as a result of the sale of land to Hilton Grand Vacations Company
for its vacation ownership project located adjacent to the Flamingo Hilton-Las
Vegas. See "Additional Information -- Vacation Ownership."

Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenues and
a favorable return on stockholders' equity.

FOREIGN CURRENCY TRANSACTIONS

In 1994, the Company recorded a $700,000 loss from foreign currency
transactions due to transaction losses and exchange adjustments arising from the
remeasurement of the Company's operations in highly inflationary economies.
International operations are subject to certain economic and political risks,
including foreign currency fluctuations. The Company monitors its foreign
operations and, where appropriate, adopts hedging strategies to minimize the
impact of changing economic and political environments. See "Financial
Instruments" in the Notes to the Company's Consolidated Financial Statements on
pages 48 and 49 in the 1994 Stockholders Report.

8
<PAGE> 10

GAMING OPERATIONS

NEVADA HOTEL-CASINOS

The Company owns and operates five hotel-casinos in the State of Nevada:
the 3,174-room Las Vegas Hilton, the 3,284-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno.

The Las Vegas Hilton is located adjacent to the Las Vegas Convention Center
and focuses on up-scale individual leisure guests and convention groups. The
Flamingo Hilton-Las Vegas, the Reno Hilton and the Flamingo Hilton-Reno focus
primarily on the middle market, in particular the group tour and travel segment.
The Flamingo Hilton-Laughlin targets the budget and middle market segments. Each
of the Company's hotel-casinos has gaming, convention, dining, shopping,
entertainment and, with the exception of the Flamingo Hilton-Reno, indoor and
outdoor recreational facilities. A variety of popular entertainment is featured
in theaters and lounges at each hotel. The Company also operates a vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. See "Additional
Information -- Vacation Ownership."

The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1994, the Las
Vegas Hilton completed construction of two new 13,200 and 12,600 square foot
"Sky Villa" luxury suites for premium players. The Las Vegas Hilton also
converted its casino lounge into a 450-seat nightclub and completed an exterior
remodeling and landscaping project. The Flamingo Hilton-Las Vegas completed
construction of 250 rooms of a new 600-room tower and new public space and
parking. The Flamingo Hilton-Laughlin added new casino signage and replaced 500
slot machines with new equipment. At the Reno Hilton, the Company completed
renovation of the race and sports book, as well as convention, entertainment and
public areas. The Flamingo Hilton-Reno completed remodeling of the buffet and
coffee shop, relocated the keno pit, built a new sports bar at the race and
sports book and renovated public areas.

The space utilized by the Company's casinos in Nevada, in terms of
approximate square footage, is as follows: Las Vegas Hilton -- 78,000 square
feet (inclusive of 29,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 64,000 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).

Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big "6," baccarat, poker, keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.

It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenues from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.

As in the case of any business extensively involved in the handling of
cash, gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all five Nevada properties are monitored by computers.

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The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Reno and the Reno Hilton invite V.I.P. customers to
their casinos and may pay for or reimburse the cost of their air transportation
and provide them with complimentary rooms, food and beverage. In addition, the
Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton have instituted
special flight programs, pursuant to which free air transportation on Company
owned or chartered aircraft and complimentary rooms, food and beverage are
provided to groups or selected persons. These persons either have established
casino credit limits or cash on deposit in the casinos and have previously
evidenced a willingness to put substantial amounts at risk at the casinos. The
special flight programs are sometimes referred to as junkets. The Las Vegas
Hilton, the Flamingo Hilton-Reno and the Reno Hilton hosted 9, 0 and 27 special
flight programs in 1994, compared to 22, 34 and 17 such programs in 1993,
respectively.

Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations of the State of Nevada and its
agencies. As is customary in the Nevada gaming industry, activities are
conducted on a credit as well as a cash basis, in accordance with procedures
established and supervised by management. Fluctuations in collecting casino
receivables could have a material effect on results of operations of these
properties. An allowance is provided for estimated uncollectible casino
receivables. Casino receivables aggregated $47,000,000, subject to a $14,400,000
(approximately 31%) reserve, at December 31, 1992; $47,900,000, subject to a
$7,600,000 (approximately 16%) reserve, at December 31, 1993, and $69,100,000,
subject to a $16,000,000 (approximately 23%) reserve, at December 31, 1994.

INTERNATIONAL HOTEL-CASINOS

The Company, through Conrad, manages two international hotel-casinos which
feature table games and slot machines similar to those offered at the Company's
hotel-casinos in Nevada.

The Company has a 19.9% ownership interest in the 605-room Hotel Conrad &
Jupiters Casino, which has a 70,000 square foot casino. This property has the
exclusive rights to conduct casino gaming on Queensland's Gold Coast through
1995.

The Company has a 25% ownership interest in the 620-room Conrad Istanbul,
which opened in 1992. This hotel-casino includes a 12,000 square foot casino.

CASINO WINDSOR

In May 1994, the Company and the other two shareholders of Windsor Casino
Limited ("WCL") commenced operation of the Casino Windsor, an interim 50,000
square foot casino in Windsor, Ontario, Canada. The Company, through Conrad,
owns a 33.3% interest in WCL, which operates this project for the Ontario
provincial government. The Windsor project will open on a permanent basis in
early 1997 with a hotel of at least 300 rooms, a 75,000 square foot casino,
entertainment and meeting facilities.

RIVER CASINO

In February 1994, the Company commenced operation of a river casino located
adjacent to the New Orleans Hilton Riverside. The initial 1,500 passenger vessel
had a 20,000 square foot casino featuring table games and slot machines similar
to those offered at the Company's hotel-casinos. This interim riverboat was
wholly-owned by the Company and leased to a joint venture, of which the Company
owns a 50% interest. In November 1994, the interim riverboat was replaced by the
"Flamingo Casino New Orleans," a permanent vessel owned by the joint venture
featuring a 30,000 square foot casino and accommodating 2,400 passengers.

EXPANSION PROGRAM

In January, 1995, the Company and Paramount Parks Inc. ("Paramount")
announced plans to build a 40,000 square foot attraction at the Las Vegas Hilton
to be called "Star Trek: The Experience." This attraction is scheduled to open
in late 1996 and will feature a motion-based simulation ride, interactive video
and virtual reality stations, dining and souvenir shops. The building housing
the Star Trek attraction will be owned by the Company and leased to Paramount.
The attraction will also be managed by Paramount.

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In early 1995, the Las Vegas Hilton completed construction of the third Sky
Villa, a 15,400 square foot luxury suite for premium players. In 1995, the Las
Vegas Hilton also plans to open a Hilton retail gift shop and remodel and
rebuild the 362-foot marquee sign. The Flamingo Hilton-Las Vegas plans to
complete an extensive expansion and renovation project, which will include the
remaining 350 rooms of the new tower, a new race and sports book, a casino
expansion of approximately 3,500 square feet, new entertainment, recreation and
dining facilities, exterior enhancement and new signage. At the Flamingo
Hilton-Laughlin, the Company plans to upgrade the pool, exercise area and
outdoor entertainment venue, and continue its slot machine replacement program.
At the Reno Hilton, the Company plans to continue to renovate the casino,
entertainment and registration areas, and to open a new Johnny Rockets
restaurant.

The government of Queensland, Australia has designated the owner of the
Hotel Conrad & Jupiters Casino to own and develop a new 136-room hotel-casino
project to be known as the Conrad Treasury in Brisbane, Australia. This
property, which will feature a 65,000 square foot casino, will be managed by
Conrad and will have the exclusive right to conduct casino gaming in Brisbane
for a ten year period. Conrad will have a 19.9% equity interest in this project,
which is scheduled to open in spring 1995.

In addition, the government of Uruguay has selected Conrad and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 38,000 square foot casino. Conrad will manage and have an equity
interest of approximately 37% in the hotel-casino. Subject to completing
satisfactory financing, the hotel-casino is scheduled for completion in early
1997.

Conrad has entered into an agreement to develop and operate a 700-room
hotel-casino in Cairo, Egypt. This property will feature a 17,000 square foot
European-style casino. Conrad will manage and have a 10% equity interest in the
hotel-casino, which is scheduled to open in late 1997.

The Company has also been selected to develop a river casino in Kansas
City, Missouri. The Company will manage and own a 90% interest in this project,
which will include a 30,000 square foot casino on a continuously docked 130,000
square foot barge. Subject to the receipt of all required gaming licenses and
permits, this project is scheduled to open in early 1996.

The New Jersey Casino Control Commission has granted the Company's request
for a Statement of Compliance, finding that the Company satisfies all
non-facility related criteria for a casino license in Atlantic City, New Jersey.
At present, the Company does not own, nor has the Company entered into any
agreement to manage, a hotel-casino property in Atlantic City. See "Additional
Information -- Regulation and Licensing -- New Jersey Gaming Laws."

ADDITIONAL INFORMATION

VACATION OWNERSHIP

The Company owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 11 vacation ownership resorts in
Florida. In January 1995, HGVC commenced operation of a 200-unit vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. HGVC also
anticipates completion in summer 1995 of the first phase of a 360-unit vacation
ownership resort adjacent to Sea World in Orlando, Florida. HGVC is actively
seeking new development and acquisition opportunities in other resort locations.

DESIGN AND FURNISHING SERVICES

Hilton, through its wholly-owned subsidiary, Hilton Equipment Corporation,
and through its Hotels Division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies to hotels and
hotel-casinos owned, leased or managed by Hilton and to hotels franchised by
Hilton or owned

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and operated by others. The revenues of this operation depend primarily on the
number of new hotels operated or franchised by Hilton and on refurbishing and
remodeling of existing Hilton hotels.

COMPUTER SYSTEMS

Compass Computer Services, Inc. ("Compass"), 50% of which is owned by
Hilton and the balance by Budget Rent-A-Car, Inc., operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is being managed by Litton Computer Services.

RESERVATION SYSTEM

The Compass computerized reservation system is presently utilized by Hilton
Service Corporation,
the operator of a worldwide system of reservation offices for hotels operated by
Hilton, Hilton International Co., their affiliates and others. Hilton Service
Corporation is owned 51% by Hilton and 49% by Hilton International Co.

MARKETING

Hotel occupancy at Hilton's metropolitan and airport properties is derived
primarily from the convention and meeting market and the business traveler
market (businesspersons traveling as individuals or in small groups). Hotel
occupancy at the Company's resort properties is derived primarily from the tour
and leisure market (tourists traveling either as individuals or in groups) and
the convention and meeting market. Hotel occupancy at the Company's
hotel-casinos is derived primarily from the convention and meeting market, the
tour and leisure market and junket and V.I.P. programs. As indicated under
"Additional Information -- Business Risks" below, these sources of business are
sensitive to general economic and other conditions. In addition, the Company
participates in certain joint marketing programs with business partners in the
airline, car rental and cruise line industries.

STATISTICAL DATA

For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Ten Year
Summary on pages 56 and 57 in the 1994 Stockholders Report.

BUSINESS RISKS

In 1994, the Company was able to increase prices to keep pace with the rate
of inflation for the first year since 1989. The Company's future operating
results could be adversely impacted by industry overcapacity and weak demand.
The Company's business could also be adversely affected by increases in
transportation and fuel costs. The operating results for the Company's
hotel-casinos can be volatile depending upon the table-game play of premium
players.

Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Occupancy ratios at the Company's hotels could also be adversely
impacted by a decrease in travel resulting from fluctuations in the worldwide
economy and by excess industry capacity.

COMPETITION

Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.

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To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Three of the Company's competitors recently opened large new theme
casinos in Las Vegas and several new casino projects are under construction.
Such new capacity additions to the Las Vegas market could adversely impact the
Company's gaming income. In addition, the business of Hilton's Nevada
hotel-casinos might be adversely affected if gaming operations of the type
conducted in Nevada were to be permitted under the laws of other states,
particularly California. The legalization of casino gaming in Atlantic City, New
Jersey has had an impact on the Company's Nevada hotel-casinos. The recent
legalization of riverboat gaming in a number of states and the operation of
casino gaming on Native American tribal lands could also impact the Company's
hotel-casinos in Nevada.

REGULATION AND LICENSING

Each of the Company's casinos is subject to extensive regulation under
laws, rules and supervisory procedures, primarily in the jurisdiction where
located or docked. Some jurisdictions, however, empower their regulators to
investigate participation by licensees in gaming outside their jurisdiction and
require access to and periodic reports respecting such gaming activities.
Violations of laws in one jurisdiction could result in disciplinary action in
other jurisdictions.

Nevada Gaming Laws. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Gaming Commission, the
Control Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."

The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) the provision of a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.

The Company's subsidiaries which operate the casinos (the "Licensees") are
required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable. The
Company is registered by the Gaming Commission as a publicly-traded corporation
("Registered Corporation") and, as such, it is required periodically to submit
detailed financial and operating reports to the Gaming Commission and furnish
any other information which the Gaming Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and the Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Licensees in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of the Licensees must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of

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the Company who are actively and directly involved in gaming activities of the
Licensees may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay for all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada Gaming Authorities
and, in addition to their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Licensees, the companies involved would
have to sever all relationships with such person. In addition, the Gaming
Commission may require the Company or the Licensees to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.

The Company and the Licensees are required to submit detailed financial and
operating reports to the Gaming Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Licensees
must be reported to, or approved by, the Gaming Commission.

If it were determined that the Nevada Act was violated by the Licensees,
the gaming licenses they hold could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Licensees, the Company and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Gaming Commission. Further, a supervisor could be
appointed by the Gaming Commission to operate the Company's gaming properties
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
Company's gaming operations.

Any beneficial holder of the Company's Common Stock, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have such person's suitability as a beneficial holder of the Company's
Common Stock determined if the Gaming Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of the
Company's Common Stock to report the acquisition to the Gaming Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
Common Stock apply to the Gaming Commission for a finding of suitability within
thirty days after the Chairman of the Control Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of the Company's Common Stock may apply to the Gaming Commission for a
waiver of such finding of suitability if such institutional investor holds the
Common Stock for investment purposes only. An institutional investor shall not
be deemed to hold the Common Stock for investment purposes unless the Common
Stock was acquired and is held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Gaming Commission finds to be
inconsistent with holding the Company's Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) such
other activities as the Gaming Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting

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securities who must be found suitable is a corporation, partnership or trust, it
must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of investigation.
Barron Hilton, the Company's largest stockholder, has been found suitable as a
controlling stockholder of the Company.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's Common
Stock beyond such period of time as may be prescribed by the Gaming Commission
may be guilty of a criminal offense. The Company is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company or the Licensees,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company; (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person; (iii) pays
remuneration in any form to that person for services rendered or otherwise; or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities for cash at fair market value. Additionally,
the CCB has taken the position that it has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming license.

The Gaming Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Gaming Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Gaming Commission, it (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.

The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.

The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company was granted approval on
September 29, 1994 to make public offerings of securities for a period of one
year, subject to certain reporting requirements and the authority of the
Chairman of the Control Board to issue an interlocutory stop order for good
cause.

Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.

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The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Gaming
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.

License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.

The Company and its affiliates and Licensees, who propose to become
involved in a gaming venture outside of Nevada, are required to deposit with the
Control Board, and thereafter maintain, a revolving fund in the amount of
$10,000 to pay the expenses of investigation of the Control Board of their
participation in such foreign gaming. The revolving fund is subject to increase
or decrease in the discretion of the Gaming Commission. Thereafter, the Company
and its affiliates and Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. These entities are also subject to
disciplinary action by the Gaming Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.

Louisiana Gaming Laws. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Riverboat Gaming Commission (the "Commission") and the
Louisiana Riverboat Gaming Enforcement Division (the "Division"), a department
within the Louisiana State Police. The Division is responsible for investigating
the background of all applicants seeking a riverboat gaming license, issuing the
license and enforcing the laws, rules and regulations relating to riverboat
gaming activities.

The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Division. This requires the filing of an extensive
application to the Division disclosing personal, financial, criminal, business
and other information. On October 13, 1993, the Division issued a riverboat
gaming license to the Queen of New Orleans, a joint venture of which the Company
owns a 50% interest. The Company's joint venture commenced riverboat gaming
operations in New Orleans, Louisiana on February 10, 1994.

The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Division approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.

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The Commission must approve all security holders of the licensee and may
find any such security holder not qualified to own those securities. Louisiana
law may require that the charter or bylaws of the licensee provide that its
securities are held subject to the condition that, if a holder is found to be
disqualified by the Commission, the holder must dispose of the securities of the
licensee. If a security holder of a licensee is found disqualified, it will be
unlawful for the security holder to (i) receive any dividend or interest with
regard to the securities, (ii) exercise, directly or indirectly, any rights
conferred by the securities or (iii) receive any remuneration from the licensee
for services rendered or otherwise. The Commission may impose similar approval
requirements on holders of securities of any intermediary or holding company of
the licensee, but may waive those requirements with respect to holders of
publicly-traded securities of intermediary and holding companies if such holders
do not have the ability to control the publicly-traded corporation or elect one
or more directors thereof.

New Jersey Gaming Laws. The ownership and operation of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.

The Act permits an applicant to request a Statement of Compliance from the
Commission finding that it satisfies one or more of the eligibility criteria for
licensure. The Statement of Compliance request may be made prior to the
construction or acquisition of a casino in Atlantic City. It is only after all
eligibility criteria are met that a casino license may be issued. On February 4,
1991, the Company and a New Jersey subsidiary filed applications with the
Commission for a casino license under the Act. At the conclusion of the
application investigation, the Company requested a Statement of Compliance
regarding all non-facility related criteria. On June 26, 1991, the Commission
granted the Company's request for a Statement of Compliance. The Company does
not now own, nor has the Company entered into any agreement to manage, a
hotel-casino in Atlantic City. The Company filed the license application in
contemplation of possibly owning and/or operating a hotel-casino in Atlantic
City.

In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."

Queensland Gaming Laws. Queensland, Australia, like Nevada, Louisiana and
New Jersey, has comprehensive laws and regulations governing the conduct of
casino gaming. All persons connected with the ownership and operation of a
casino, including the Company, its subsidiary that manages the Hotel Conrad &
Jupiters Casino and certain of their principal stockholders, directors and
officers, must be found suitable and licensed. A casino license once issued
remains in force until surrendered or cancelled. Queensland law defines the
grounds for cancellation and, in such event, an administrator may be appointed
to assume control of the hotel-casino complex. The Queensland authorities have
conducted an investigation of, and have found suitable, the Company and its
subsidiary.

Ontario Gaming Laws. Ontario, Canada also has laws and regulations
governing the conduct of casino gaming. Ontario law requires that the operator
of a casino must be found suitable and be registered. A registration once issued
remains in force until revoked. Ontario law defines the grounds for
registration, as well as revocation or suspension of such registration. The
Company and two other shareholders formed Windsor Casino Limited ("WCL") to
operate the Casino Windsor. The Ontario authorities have conducted an
investigation of, and have found suitable, the Company and the other two
shareholders of WCL in connection with the Ontario registration of WCL.

Turkey Gaming Laws. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of

17
<PAGE> 19

operations and conducts random inspections of ongoing casino operations. Under
Turkish gaming laws, access to casinos is limited to persons carrying a foreign
passport or to Turkish citizens receiving a permit from the Ministry of Tourism.
The casino located in the Conrad Istanbul has been authorized to conduct casino
operations by the Turkish Ministry of Tourism.

IRS Regulations. The Internal Revenue Service ("IRS") requires operators
of casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain keno, bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.

Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates, or has applied for
licensing to operate, casinos require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of IRS
regulations.

Other Laws and Regulations. Each of the hotels and hotel-casinos operated
by the Company is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. Management believes that the Company has
obtained all required licenses and permits and its businesses are conducted in
substantial compliance with applicable laws.

EMPLOYEES

At February 1, 1995, Hilton employed approximately 44,000 persons, of whom
approximately 22,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel industry
generally. Although strikes of short duration have from time to time occurred at
certain of Hilton's facilities, Hilton believes its employee relations are
satisfactory.

ITEM 2. PROPERTIES

Hilton considers its hotels and casinos to be leading establishments with
respect to desirability of location, size, facilities, physical condition,
quality and variety of services offered in most of the areas in which they are
located. Obsolescence arising from age and condition of facilities is a factor
in the hotel and gaming industries. Accordingly, Hilton expends, and intends to
continue to expend, substantial funds to maintain its facilities in first-class
condition in order to remain competitive.

Hotels and casinos owned and operated, leased and managed by Hilton are
briefly described under Item 1 and, in particular, under the captions "Hotel
Operations" and "Gaming Operations." In addition, contemplated additions to, and
major refurbishing and remodeling of, existing properties and new hotels and
casinos presently under construction that will be operated by Hilton are briefly
described under the captions "Hotel Operations -- Expansion Program" and "Gaming
Operations -- Expansion Program" under Item 1.

ITEM 3. LEGAL PROCEEDINGS

In management's opinion, disposition of pending litigation against the
Company, including the lawsuit described under "Commitments and Contingent
Liabilities" in the Notes to the Company's Consolidated Financial Statements on
pages 54 and 55 in the 1994 Stockholders Report, is not expected to have a
material effect on the Company's financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

18
<PAGE> 20

EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
executive officers of the Company:

<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
---- --------------------- ---
<S> <C> <C>
Barron Hilton Chairman of the Board and Chief 67
Executive Officer and, until February
1993, President
Raymond C. Avansino, Jr. President and Chief Operating Officer 51
since February 1993
Eric M. Hilton Vice Chairman of the Board since May 61
1993, Executive Vice President --
International Operations from May 1992
until May 1993, President, Conrad
International Hotels Corporation from
January 1990 until May 1993, and Senior
Vice President -- Real Estate
Development, International until May
1992

Floyd M. Celey, Jr. Executive Vice President and 55
President -- Gaming Operations since
September 1994, Senior Vice
President -- Global Gaming Operations
from May 1993 until September 1994, and
prior thereto, Senior Vice
President -- Corporate Casino
Operations, Conrad International Hotels
Corporation

Dieter H. Huckestein Executive Vice President and 51
President -- Hotel Operations since May
1994, Senior Vice
President -- Hawaii/California/Arizona
Region from May 1991 until May 1994,
and prior thereto, Senior Vice
President-Hawaiian Region

F. Michael O'Brien Executive Vice President -- Gaming and 54
Hotel Development since September 1994,
Senior Vice President -- Gaming and
Hotel Development from January 1994
until September 1994, and from May 1992
until January 1994, Senior Vice
President -- Corporate Properties

Steve Krithis Senior Vice President -- Finance since 65
November 1994, and prior thereto, Vice
President and Corporate Comptroller

William C. Lebo, Jr. Senior Vice President and General 51
Counsel
</TABLE>

Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1990. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.

Similar information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 11, 1995 (the "Proxy Statement"). The Company expects to file the Proxy
Statement with the Securities and Exchange Commission prior to April 30, 1995,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.

19
<PAGE> 21

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." Information regarding sales
prices, dividend payments and record holders with respect to the Company's
Common Stock is set forth under "Supplementary Financial Information" in the
Notes to the Company's Consolidated Financial Statements on page 55 in the 1994
Stockholders Report, which information is incorporated herein by reference.

On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.

Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.

If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
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 Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.

Prior to the acquisition by a person or group of beneficial ownership of
20% or more of the Company's Common Stock, the Rights are redeemable for one
cent per Right at the option of the Company's Board of Directors.

"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.

The full text of the Plan has been filed as Exhibit 4.5 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.5.

ITEM 6. SELECTED FINANCIAL DATA

See the Company's Ten Year Summary on pages 56 and 57 in the 1994
Stockholders Report and "Segments of Business" in the Notes to the Company's
Consolidated Financial Statements on pages 53 and 54 in the 1994 Stockholders
Report.

The ratio of earnings to fixed charges for the five years ended December
31, 1994 is as follows: 1994 - 2.8 to 1; 1993 - 2.7 to 1; 1992 - 2.9 to 1;
1991 - 2.6 to 1; and 1990 - 2.8 to 1. The computation of the aforesaid ratios is
set forth in Exhibit 12 hereto.

20
<PAGE> 22

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

See pages 34 through 39 in the 1994 Stockholders Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplemental information required
by this Item are contained in the 1994 Stockholders Report on the pages
indicated, which information is incorporated herein by reference.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants.................................... 55
Consolidated statements of income for the three years ended December 31,
1994..................................................................... 40
Consolidated balance sheets as of December 31, 1994 and 1993................ 41
Consolidated statements of cash flows for the three years ended December 31,
1994..................................................................... 42
Consolidated statements of stockholders' equity for the three years ended
December 31, 1994........................................................ 43
Notes to consolidated financial statements.................................. 44
Segment data for the five years ended December 31, 1994 contained in the Ten
Year Summary............................................................. 56
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers" in Part I. Other
information respecting certain executive officers, as well as the required
information for directors, will be contained in the Proxy Statement, and
reference is expressly made thereto for the specific information incorporated
herein by the aforesaid reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item will be set forth under "Common Stock
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item will be set forth under "Election of
Directors -- Certain Relationships and Interests in Certain Transactions" and
"Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement, and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.

21
<PAGE> 23

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) INDEX TO FINANCIAL STATEMENTS

1. Financial Statements:

The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 hereof.

2. Financial Statement Schedules:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants....................................... 23
Schedule II -- Valuation and Qualifying Accounts............................... 24
Supplemental Note to Consolidated Financial Statements......................... 25
</TABLE>

All other schedules are inapplicable or the required information is
included elsewhere herein.

(B) REPORTS ON FORM 8-K

The Company filed a Current Report on Form 8-K, dated November 17,
1994, under the caption "Item 5. Other Events." This filing reported that
the Company had engaged the investment banking firm of Smith Barney Inc. to
undertake a study and make recommendations to the Company's management and
Board of Directors for strategic alternatives to enhance shareholder value.
See "Item 1. Business -- Recent Developments."

Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.

22
<PAGE> 24

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

SUPPLEMENTAL SCHEDULE AND SUPPLEMENTAL NOTE

To Hilton Hotels Corporation:

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
1, 1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II and the supplemental
note to consolidated financial statements as shown on pages 24 and 25 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. The supplemental schedule and
the supplemental note to the consolidated financial statements have been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Los Angeles, California
February 1, 1995

23
<PAGE> 25

HILTON HOTELS CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts
Hotel and other............ $ 11.6 1.7 .5 2.4 -- 11.4
Casino..................... 7.6 13.2 -- 4.8 -- 16.0
Reserve for loss on other
investments................ 12.5 -- -- -- 8.1 (A) 20.6

YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts
Hotel and other............ $ 7.2 1.8 4.5 1.9 -- 11.6
Casino..................... 14.4 10.9 -- 17.7 -- 7.6
Reserve for loss on other
investments................ -- 12.5 -- -- -- 12.5

YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts
Hotel and other............ $ 6.0 1.7 1.5 2.1 .1 (B) 7.2
Casino..................... 12.2 8.0 -- 6.3 .5 (B) 14.4
Reserve for loss on other
investments................ 14.3 -- -- 14.3 -- --
</TABLE>

---------------

(A) Represents unrealized holding losses on certain equity securities.

(B) Represents allowance for doubtful accounts of the Reno Hilton on the date of
acquisition by the Company.

24
<PAGE> 26

HILTON HOTELS CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 1994 AND 1993
(IN MILLIONS)

<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable.............................................. $ 87.2 47.4
Accrued salaries and wages.............................................. 29.5 26.5
Insurance............................................................... 28.7 34.9
Interest................................................................ 20.6 18.9
Other accrued expenses.................................................. 118.0 100.8
------- ------
$ 284.0 228.5
====== =====
</TABLE>

25
<PAGE> 27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 16, 1995.

HILTON HOTELS CORPORATION
(Registrant)

By STEVE KRITHIS
------------------------------------
Steve Krithis
Senior Vice President-Finance

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 16, 1995.

<TABLE>
<S> <C>
RAYMOND C. AVANSINO, JR. ROBERT L. JOHNSON
------------------------------------------ -----------------------------------------
Raymond C. Avansino, Jr. Robert L. Johnson
Director Director

A. STEVEN CROWN DONALD R. KNAB
------------------------------------------ -----------------------------------------
A. Steven Crown Donald R. Knab
Director Director

GREGORY R. DILLON STEVE KRITHIS
------------------------------------------ -----------------------------------------
Gregory R. Dillon Steve Krithis
Director Senior Vice President-Finance
(Chief Financial and
Accounting Officer)

BARRON HILTON BENJAMIN V. LAMBERT
------------------------------------------ -----------------------------------------
Barron Hilton Benjamin V. Lambert
Chairman of the Board Director
and Chief
Executive Officer
(Chief Executive Officer)

ERIC M. HILTON DONNA F. TUTTLE
------------------------------------------ -----------------------------------------
Eric M. Hilton Donna F. Tuttle
Director Director

DIETER H. HUCKESTEIN SAM D. YOUNG, JR.
------------------------------------------ -----------------------------------------
Dieter H. Huckestein Sam D. Young, Jr.
Director Director
</TABLE>

26
<PAGE> 28

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Registrant, as amended
(incorporated herein by reference from Exhibit 3.1 to Registrant's
Annual Report on
Form 10-K for the year ended December 31, 1987)
3.2 By-Laws of Registrant, as amended (incorporated herein by reference
from Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992)
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Citibank, N.A., regarding Registrant's Subordinated Debt Securities
(incorporated herein by reference from Exhibit 4.1 to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form S-3
(File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan
Guaranty Trust Company of New York, regarding Registrant's Senior
Debt Securities (incorporated herein by reference from Exhibit 4.1
to Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (File No. 2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between
Registrant and Morgan Guaranty Trust Company of New York, regarding
Registrant's Senior Debt Securities, relating to Exhibit 4.2 hereto
(incorporated herein by reference from Exhibit 4.3 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992)
4.4 Reimbursement Agreements, dated as of November 15, 1990, among
Regis-
trant, Swiss Bank Corporation and the financial institutions
signatory thereto (incorporated herein by reference from Exhibit 4.7
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990)
4.5 Rights Agreement, dated as of July 14, 1988, between Registrant and
The First National Bank of Chicago (incorporated herein by reference
from Exhibit 1 to Registrant's Current Report on Form 8-K, dated
July 14, 1988)
10.1 1984 Stock Option and Stock Appreciation Rights Plan of Registrant,
together with the Stock Option Agreement relating thereto, both as
amended (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.1 hereto (incorporated herein by reference from Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990)*
10.3 1990 Stock Option and Stock Appreciation Rights Plan of Registrant,
together with the Stock Option Agreement relating thereto, both as
amended (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990)*
10.4 Amendment, dated January 20, 1994, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.3 hereto (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993)*
10.5 Amendment, dated January 19, 1995, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibits
10.3 and 10.4
hereto*.............................................................
</TABLE>

27
<PAGE> 29

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
<C> <S> <C>
10.6 Incentive Compensation Plan of Registrant (incorporated herein by
reference from Exhibit 10.4 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1980)*
10.7 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.6 hereto
(incorporated herein by reference from Exhibit 10.7 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993)*
10.8 Retirement Plan of Registrant, as amended and restated*.............
10.9 Supplemental Executive Retirement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.6 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)*
10.10 Amendment, effective April 1, 1994, to the Supplemental Executive
Retirement Plan of Registrant, relating to Exhibit 10.9 hereto*.....
10.11 Directors' Retirement Benefit Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.7 to Registrant's
Annual Report on
Form 10-K for the year ended December 31, 1991)*
10.12 Retirement Benefit Replacement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.9 to Registrant's
Annual Report on
Form 10-K for the year ended December 31, 1992)*
10.13 Amendment, dated as of January 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibit 10.12 hereto
(incorporated herein by reference from Exhibit 10.12 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993)*
10.14 Amendment, effective April 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibits 10.12 and 10.13
hereto*.............................................................
10.15 Thrift Savings Plan of Registrant, as amended and restated*.........
10.16 Form of Executive Employment Agreement, dated as of November 17,
1994*...............................................................
11 Computation of Earnings Per Share...................................
12 Computation of Ratios of Earnings to Fixed Charges..................
13 Registrant's Annual Report to Stockholders for the year ended
December 31, 1994...................................................
21 List of Registrant's Subsidiaries...................................
23 Consent of Independent Public Accountants...........................
99 Undertakings........................................................
</TABLE>

---------------

* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K,
previously filed where indicated and incorporated herein by reference.

Pursuant to Regulation sec. 229.601, Item 601(b)(4)(iii) of Regulation S-K,
upon request of the Securities and Exchange Commission, the Registrant hereby
undertakes to furnish a copy of any unfiled instrument which defines the rights
of holders of long-term debt of the Registrant and its consolidated subsidiaries
(and for any of its unconsolidated subsidiaries for which financial statements
are required to be filed) wherein the total amount of securities authorized
thereunder does not exceed 10% of the total consolidated assets of the
Registrant.

<PAGE> 1
EXHIBIT 10.5

SUMMARY OF AMENDMENT TO

HILTON HOTELS CORPORATION'S

1990 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN

On January 19, 1995, the Board of Directors of Hilton Hotels
Corporation (the "Company") authorized an amendment to the Company's 1990 Stock
Option and Stock Appreciation Rights Plan (the "Plan"). Section 4 of the Plan
was amended to provide that the aggregate number of shares for which an option
or stock appreciation right or rights may be granted to any one employee during
any one year shall not exceed 150,000 shares. Prior to said amendment, the
Plan provided that the maximum grant to any one employee during any one year
was 10% of the shares reserved for issuance under the Plan (which amount is
currently 150,000 shares).

The above described amendment to the Plan was authorized by the
Company's Board of Directors, subject to approval by the Company's stockholders
at the annual meeting of stockholders scheduled for May 11, 1995 (the "Annual
Meeting"). A copy of the Plan, as amended, along with a more detailed
discussion of the Plan amendment, will be contained in the Company's proxy
statement with respect to the Annual Meeting, which will be distributed to the
Company's stockholders prior to April 30, 1995.

<PAGE> 1
EXHIBIT 10.8

HILTON HOTELS RETIREMENT PLAN

(As Amended and Restated Effective January 1, 1987)
<PAGE> 2
HILTON HOTELS RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1987)

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I TITLE AND DEFINITIONS. . . . . . . . . . . . . . . . . 4
1.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE II PARTICIPATION. . . . . . . . . . . . . . . . . . . . . 35
2.1 Eligibility Requirements . . . . . . . . . . . . . . . . . 35
2.2 Breaks in Service. . . . . . . . . . . . . . . . . . . . . 35
2.3 Designation of Beneficiary . . . . . . . . . . . . . . . . 35

ARTICLE III CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 38
3.1 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 38

ARTICLE IV RETIREMENT AND DEATH BENEFITS. . . . . . . . . . . . . 40
4.1 Normal Retirement Benefit - Unmarried Participant. . . . . 40
4.2 Early Retirement Benefit - Unmarried Participant . . . . . 44
4.3 Disability Retirement Benefit - Unmarried Participant. . . 45
4.4 Late Retirement Benefit - Unmarried Participant. . . . . . 46
4.5 Normal, Early, Disability or Late Retirement Benefit -
Married Participant. . . . . . . . . . . . . . . . . . . 47
4.6 Vesting; Breaks in Service . . . . . . . . . . . . . . . . 50
4.7 Surviving Spouse Benefit . . . . . . . . . . . . . . . . . 52
4.8 Optional Retirement Benefits . . . . . . . . . . . . . . . 55
4.9 Payment of Retirement Benefit. . . . . . . . . . . . . . . 58
4.10 Suspension of Benefits . . . . . . . . . . . . . . . . . . 64
4.11 Inability to Locate Participant. . . . . . . . . . . . . . 65

ARTICLE V LIMITATION ON BENEFITS AND PAYMENTS. . . . . . . . . . 66
5.1 Section 415 Limitations. . . . . . . . . . . . . . . . . . 66
5.2 Top-Heavy Plan Requirement . . . . . . . . . . . . . . . . 67
5.3 Restriction of Benefits and Payments . . . . . . . . . . . 67
5.4 133-1/3 Percent Rule . . . . . . . . . . . . . . . . . . . 67

ARTICLE VI THE COMMITTEE. . . . . . . . . . . . . . . . . . . . . 68
6.1 Members. . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2 Committee Action . . . . . . . . . . . . . . . . . . . . . 68
6.3 Rights and Duties. . . . . . . . . . . . . . . . . . . . . 69
6.4 Procedure for Establishing Funding Policy; Transmittal
of Information . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>

i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.5 Other Information. . . . . . . . . . . . . . . . . . . . . 75
6.6 Compensation, Bonding, Expenses, and Indemnity . . . . . . 76
6.7 Manner of Administering. . . . . . . . . . . . . . . . . . 77
6.8 Duty of Care . . . . . . . . . . . . . . . . . . . . . . . 78
6.9 Committee Report . . . . . . . . . . . . . . . . . . . . . 78

ARTICLE VII TRUST FUND . . . . . . . . . . . . . . . . . . . . . . 79
7.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . 79

ARTICLE VIII AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . 80
8.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 80
8.2 Discontinuance of Plan . . . . . . . . . . . . . . . . . . 81
8.3 Termination of Plan. . . . . . . . . . . . . . . . . . . . 82
8.4 Plan Merger or Consolidation; Transfer of Plan Assets. . . 86

ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 88
9.1 Contributions Not Recoverable. . . . . . . . . . . . . . . 88
9.2 Limitation on Participants' Rights . . . . . . . . . . . . 89
9.3 Receipt or Release . . . . . . . . . . . . . . . . . . . . 90
9.4 Alienation . . . . . . . . . . . . . . . . . . . . . . . . 90
9.5 Persons Under Incapacity . . . . . . . . . . . . . . . . . 91
9.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 92
9.7 Headings, etc., Not Part of Plan . . . . . . . . . . . . . 93
9.8 Instrument in Counterparts . . . . . . . . . . . . . . . . 93
9.9 Reorganization of Participating Employer . . . . . . . . . 94
9.10 Masculine Gender Includes Feminine Gender. . . . . . . . . 94

APPENDIX A ACTUARIAL ASSUMPTIONS. . . . . . . . . . . . . . . . . 1
A.1 Actuarial Equivalent . . . . . . . . . . . . . . . . . . . 1
A.2 Early or Disability Retirement Reduction Factors . . . . . 2

APPENDIX B 415 LIMITATION ON BENEFITS . . . . . . . . . . . . . . 1
B.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
B.2 Adjustments to Basic Limitation. . . . . . . . . . . . . . 5
B.3 Participation in Other Defined Benefit Plans . . . . . . . 7
B.4 Benefits Not in Excess of $10,000. . . . . . . . . . . . . 7
B.5 Less than 10 Years of Participation or Service . . . . . . 7
B.6 Participant in Defined Contribution Plan . . . . . . . . . 8
B.7 Reduction of Benefits and/or Contributions . . . . . . . . 9
B.8 Preservation of Current Accrued Benefit. . . . . . . . . . 9

APPENDIX C TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . 1
C.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 1
C.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
C.3 Top-Heavy Definition . . . . . . . . . . . . . . . . . . . 4
C.4 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . 6
C.5 Minimum Benefits or Contributions, Compensation
Limitations and Section 415 Limitations. . . . . . . . . 8
</TABLE>

ii
<PAGE> 4
<TABLE>
<S> <C> <C>
APPENDIX D RESTRICTION OF BENEFITS . . . . . . . . . . . . . . . Appendix D-1
D.1 Restriction of Benefits Upon Early Termination or Upon
Payments to 25 Highest Paid Employees Before the
Current Benefit Structure Has Been in Effect Ten Years . Appendix D-1

APPENDIX E RESTRICTION OF BENEFITS AND PAYMENTS . . . . . . . . . Appendix E-1
E.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . Appendix E-1
E.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . Appendix E-1
E.3 Restriction of Benefits on Plan Termination. . . . . . . . Appendix E-5
E.4 Restriction on Distributions . . . . . . . . . . . . . . . Appendix E-5
E.5 Limitations on Restrictions. . . . . . . . . . . . . . . . Appendix E-6

APPENDIX F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix F-1
</TABLE>

iii
<PAGE> 5
HILTON HOTELS RETIREMENT PLAN
(Amended and Restated Effective January 1, 1987)

WHEREAS, Hilton Hotels Corporation (the "Company") established
the Hilton Hotels Salaried Employees' Pension Plan (the "Plan"), effective in
1951;

WHEREAS, from time to time, certain other employers have
adopted the Plan;

WHEREAS, the Plan was amended and restated in its entirety,
effective as of January 1, 1976, to comply with the Employee Retirement Income
Security Act of 1974, and to rename the Plan as Hilton Hotels Retirement Plan;

WHEREAS, the Plan has since been amended from time to time;

WHEREAS, as a result of the Tax Reform Act of 1986 and certain
other legislation, the Plan must be substantially amended;

WHEREAS, the Hilton Hotels Pension Committee (the "Committee")
and the Board of Directors of the Company have

<PAGE> 6
granted the Company the authority to adopt any amendments to the Plan required
to maintain the Plan's tax qualified status under the Internal Revenue Code of
1986; and

WHEREAS, nothing in this amendment and restatement increases
the duties of the Committee under the Plan.

NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby
amended and restated as set forth herein effective as of January 1, 1987 except
where otherwise indicated. The provisions of this amended and restated Plan
shall apply with respect to Employees who retire or otherwise terminate
employment on or after January 1, 1987. The rights and benefits of Employees
who retire or otherwise terminate employment prior to January 1, 1987 shall be
determined in accordance with the provisions of the Plan in effect at the time
of their retirement or termination of employment.

Notwithstanding the Effective Date of the Plan or of any
amendment hereto, no Employee shall benefit from the Plan, or any amendment
hereto, unless: (1) the Committee minutes adopting the Plan or amendment
specifically provide for the Employee to be benefited; or (2) the Employee is
employed on or after the date of adoption of the Plan or amendment hereto,
whichever is applicable. Provided that, where the administrator determines
that an amendment must be applicable to former Employees in order for the Plan
to

2
<PAGE> 7
maintain its tax qualified status, such amendment shall apply to such Employees
to the extent required for the Plan to maintain its tax qualified status.

3
<PAGE> 8
ARTICLE I

TITLE AND DEFINITIONS

1.1 Title.

This Plan shall be known as the Hilton Hotels Retirement Plan.

1.2 Definitions.

Whenever the following terms are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.

"Actuarial Equivalent" shall mean a benefit of equivalent
value computed using the interest rate and mortality assumptions contained in
Appendix A.

"Annuity Starting Date" shall mean the first day of the first
period for which an amount is payable as an annuity or any other form.

"Approved Leave of Absence" shall mean the period of absence
with respect to a Participant who incurs a Break in Employment with the Company
for or by reason of any of the causes listed below and who is reemployed by a
Participating Employer within a period of 24 months from such Break in
Employment. Such Participant shall be deemed to have been on an Approved Leave
of Absence during the

4
<PAGE> 9
period intervening between such Break in Employment and reemployment, which
period of Approved Leave of Absence (up to 24 months) shall be included in
determining the Participant's Years of Vesting Service and Years of Benefit
Service. The causes referred to above are as follows:

(a) A major destruction of the facility in which the
Participant's services are customarily rendered;

(b) The closing or discontinuance of the business
conducted therein; or

"Average Monthly Compensation" shall mean the greater of:

(i) the total Compensation paid to a Participant during
the five consecutive Plan Years within the last ten consecutive Plan
Years immediately preceding his Break in Employment in which his total
Compensation is the highest divided by the number of months in which
such Compensation was earned (with the provision that, if the
Participant earned Compensation during less than five consecutive Plan
Years, his Average Monthly Compensation shall be computed by dividing
the total Compensation paid during the consecutive Plan Years he did
work by the number of months in such Plan Years), or

5
<PAGE> 10
(ii) the monthly average of the Compensation paid to the
Participant during the 60 consecutive months immediately preceding his
Break in Employment (with the provision that, if the Participant
earned Compensation for less than 60 consecutive months, the monthly
average shall be based on the actual number of consecutive months in
which he did receive Compensation).

"Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, personal representative or other fiduciary, last
designated in writing by a Participant in accordance with the provisions of
Section 2.3 to receive the benefits specified hereunder in the event of the
Participant's death. If there is no valid Beneficiary designation in effect
that complies with the provisions of Section 2.3, or if there is no surviving
designated Beneficiary, then the Participants' surviving spouse shall be the
Beneficiary. If there is no surviving spouse to receive any benefits payable
in accordance with the preceding sentence, the duly appointed and currently
acting personal representative of the Participant's estate (which shall include
either the Participant's probate estate or living trust) shall be the
Beneficiary. In any case where there is no such personal representative of the
Participant's estate duly appointed and acting in that capacity within 90 days
after the Participant's death, (or such extended period as

6
<PAGE> 11
the Committee determines is reasonably necessary to allow such personal
representative to be appointed, but not to exceed 180 days after the
Participant's death) then Beneficiary or Beneficiaries shall mean the person or
persons who can verify by affidavit or court order to the satisfaction of the
Committee that they are legally entitled to receive the benefits specified
hereunder.

"Board of Directors" or "Board" shall mean the Board of
Directors of the Company.

"Break in Employment" shall mean an Employee's termination of
employment as a result of resignation, discharge, retirement, Disability, or
death. In determining whether and when a Break in Employment has occurred, the
following rules shall apply:

(a) A Break in Employment shall not occur during a leave
of absence authorized by the Participating Employer of such Employee
or a Related Company in accordance with established nondiscriminatory
policies, or during a vacation period, temporary layoff for lack of
work, or military leave.

(b) A Break in Employment shall not occur if an Employee
merely transfers from employment with one Participating Employer to
another Participating Employer.

7
<PAGE> 12
(c) A Break in Employment shall not occur if an Employee
merely transfers from employment with a Participating Employer to a
Hilton Property that is not a Participating Affiliate
("Non-Participating Property"), nor shall a Break in Employment occur
if such Employee subsequently merely transfers from employment with
such Non-Participating Property to another Non-Participating Property.

(d) Continuation on temporary layoff for lack of work for
a period in excess of 12 months shall be considered a discharge
effective as of the expiration of such 12 month period.

(e) Failure to return to work after the expiration of any
leave of absence or after recall from any temporary layoff shall be
considered a resignation effective as of the expiration of such leave
of absence or recall from layoff.

(f) Failure of any Employee on military leave to make
application for reemployment within the period of time during which he
is entitled to retention of reemployment rights under applicable laws
of the United States shall be considered a resignation effective as of
the expiration date of such reemployment rights.

"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

8
<PAGE> 13
"Committee" shall mean the Committee appointed pursuant to
Article VI.

"Company" shall mean Hilton Hotels Corporation, a Delaware
corporation, any predecessor corporation, or any successor corporation
resulting from merger or consolidation.

"Compensation" shall mean an Employee's total Compensation,
including base salary, overtime, cash bonuses, gratuity income paid in
conjunction with or in lieu of base salary, the value of maintenance as
established from time to time by the Committee, and such other amounts as
determined by the Committee under rules adopted and uniformly applied (but
excluding amounts so determined by the Committee) paid to such Employee that is
subject to employer tax under the Federal Insurance Contributions Act in
accordance with Section 3111(a) of the Internal Revenue Code of 1954 as in
effect on March 1, 1978 (without regard to the dollar limitations contained in
Section 3121(a) thereof). An Employee's Compensation shall also include (i)
amounts by which the Employee's compensation is reduced pursuant to Section 125
of the Code under a cafeteria plan maintained by his or her employer, and (ii)
the Compensation which would have been considered during periods of leaves of
absence for which Years of Benefit Service are granted based upon the rate
applicable at the time the leave is granted as

9
<PAGE> 14
determined by rules adopted and uniformly applied by the Committee.
Compensation during any period for which an Employee is entitled to Years of
Benefit Service under subparagraph (c) of the definition of "Years of Benefit
Service" hereunder shall be considered as Compensation; provided, however, that
in no event shall (i) compensation attributable to air or automobile
transportation, (ii) any amounts received pursuant to the provisions of the
Hilton Deferred Compensation Plan, the Hilton Supplemental Executive Retirement
Plan or the Hilton Hotels Retirement Benefit Replacement Plan, or (iii) any
amounts which are attributable to a plan, program or other arrangement based on
or involving capital stock of the Company, be taken into account in calculating
an Employee's Compensation hereunder.

Notwithstanding the foregoing, the maximum amount of an
Employee's Compensation which shall be taken into account under the Plan for
any Plan Year ("Maximum Compensation Limitation") shall be (i) $200,000 for
Plan Years beginning on or after January 1, 1989, and (ii) $150,000 for Plan
Years beginning on or after January 1, 1994, such limitation adjusted
automatically without amendment to the Plan at the same time and in the same
manner as under Sections 401(a)(17) and 415(d) of the Code. For any Plan Year
of fewer than twelve months, the Maximum Compensation Limitation shall be
reduced to the amount obtained by multiplying such limitation by a fraction
having

10
<PAGE> 15
a numerator equal to the number of months in the Plan Year and a denominator
equal to twelve. Notwithstanding the application of the Maximum Compensation
Limitation, (i) the accrued benefit of a Participant determined as of December
31, 1988 shall not be reduced by reason of the $200,000 limitation, and (ii)
the accrued benefit of a Participant determined as of December 31, 1993 shall
not be reduced by reason of the $150,000 limitation. Furthermore, a
Participant's accrued benefit, as calculated after December 31, 1988, shall be
the greater of (i) or (ii), where (i) is his accrued benefit calculated under
the Plan, as amended to comply with the Maximum Compensation Limitation, using
all Years of Benefit Service and Compensation, and (ii) is the greater of (A)
his accrued benefit determined as of December 31, 1988 plus his accrued benefit
calculated under the Plan, as amended to comply with the Maximum Compensation
Limitation, using only Years of Benefit Service and Compensation after December
31, 1988, or (B) his accrued benefit determined as of December 31, 1993 plus
his accrued benefit calculated under the Plan, as amended to comply with the
Maximum Compensation Limitation, using only Years of Benefit Service and
Compensation after December 31, 1993.

For purposes of the Maximum Compensation Limitation, the
Compensation of any Participant who is either a 5% owner (as defined in Section
416(i)(1) of the Code), or one

11
<PAGE> 16
of the ten most highly paid "Highly Compensated Employees" (as defined in
Appendix E) during the Plan Year ("First Participant") shall be aggregated with
the Compensation of any Participant who has not attained age 19 and is a lineal
descendant of the First Participant and any Participant who is the Spouse of
the First Participant. In any case in which such aggregation would produce
Compensation in excess of the Maximum Compensation Limitation, the amount of
the First Participant's Compensation that is considered under the Plan shall be
reduced until the Maximum Compensation Limitation is met.

"Defined Benefit Plan" shall mean a plan described in Section
414(j) of the Code.

"Defined Contribution Plan" shall mean a plan described in
Section 414(i) of the Code.

"Disability" shall mean the total and presumably permanent
incapacity of a Participant to engage in any remunerative occupation or
employment by reason of mental or physical disability, as determined by the
Committee under rules established by the Committee and applied in a uniform and
nondiscriminatory manner.

12
<PAGE> 17
"Disability Retirement Benefit" shall mean the benefit
provided under Sections 4.3 and 4.5 determined pursuant to the factors in
Appendix A.

"Disability Retirement Date" shall mean the first day of any
calendar month coincident with or next following the date on which a
Participant retires from all Participating Employers because of Disability if
he then has at least 15 Years of Vesting Service; provided, however, that such
Participant may elect to defer commencement of his Disability Retirement
Benefit until the first day of any month prior to his Normal Retirement Date,
in which case, solely for purposes of the reduction factors contained in
Appendix A, such reduction factors shall be applied as if the date that his
Disability Retirement Benefit actually commences is his Disability Retirement
Date.

"Early Retirement Benefit" shall mean the benefit provided
under Sections 4.2 and 4.5 determined pursuant to the factors in Appendix A.

"Early Retirement Date" shall mean the first day of any
calendar month coincident with or next following the date on which a
Participant retires from all Participating Employers prior to his Normal
Retirement Date if he then has reached age 55, has at least 10 Years of Vesting
Service and has elected to receive an Early Retirement Benefit;

13
<PAGE> 18
provided, however, that such Participant may elect to defer commencement of his
Early Retirement Benefit until the first day of any month prior to his Normal
Retirement Date, in which case, solely for purposes of the reduction factors
contained in Appendix A, such reduction factors shall be applied as if the date
that his Early Retirement Benefit actually commences is his Early Retirement
Date. A Participant is ineligible for an Early Retirement Date if on such date
he is employed by a Related Company.

"Effective Date" shall mean (i) with respect to the Company,
January 1, 1951, and (ii) with respect to a Participating Affiliate, the
effective date of adoption of the Plan by such Participating Affiliate.

"Eligible Employee" shall mean any Employee of a Participating
Employer who has both attained age 21 and completed one Year of Eligibility
Service; except that there shall be excluded (i) any "leased employee" as
defined in Section 414(n) of the Code, (ii) any Union Employee, unless such
Union Employee is a member of a group of Employees to whom this Plan has been
extended by the collective bargaining agreement covering such Union Employee,
and (iii) any Employee of a Participating Affiliate who is included in a group
or classification of Employees of such Participating Affiliate to which the
Plan is not extended, as provided under the definition of "Participating
Affiliate" hereunder.

14
<PAGE> 19
Notwithstanding the foregoing, no Employee shall be an
Eligible Employee until the Effective Date with respect to his Participating
Employer.

"Eligibility Computation Period" shall mean:

(a) The 12-consecutive month period commencing with the
first day that an Employee completes an Hour of Service for a
Participating Employer or a Related Company;

(b) The first 12-consecutive month period coinciding with
the Plan Year which includes the first anniversary of the first day
that an Employee completes an Hour of Service for a Participating
Employer or a Related Company; and

Notwithstanding the above, if an Employee completes more than 500 Hours of
Service during any such Eligibility Computation Period and then fails to
complete more than 500 Hours of Service during a subsequent Eligibility
Computation Period, then future Eligibility Computation Periods shall be
measured from the first day that the Employee completes an Hour of Service
following the Eligibility Computation Period in which the Employee has been
credited with not more than 500 Hours of Service. In addition, any reemployed
individual described in the preceding sentence who again incurs a Break in
Employment shall measure Eligibility Computation

15
<PAGE> 20
Periods from the date of subsequent reemployment if no Hours of Service are
performed during an Eligibility Computation Period ending subsequent to the
Break in Employment.

"Employee" shall mean every person employed by a Participating
Employer or a Related Company, including any "leased employee" described in
Section 414(n) of the Code and any other individual required to be treated as
employed by the Participating Employer or a Related Company under Section
414(o) of the Code.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

"Fiduciary" shall mean all persons defined in Section 3(21) of
ERISA associated in any manner with the control, management, operation, and
administration of the Plan or the assets of the Plan, and such term shall be
construed as including the term "Named Fiduciary" with respect to those
Fiduciaries named in the Plan or who are identified as Fiduciaries pursuant to
procedures specified in the Plan.

"Hilton Property" shall mean each business entity (including a
Related Company of the Company), as designated from time to time by the
Committee, in which the Company,

16
<PAGE> 21
directly or indirectly, has an interest or with which it has a contractual
relationship for hotel management.

"Hour of Service" shall mean an hour (a) for which an Employee
is paid, or entitled to payment, for performance of duties for a Participating
Employer or a Related Company; (b) for which the Employee is paid or entitled
to payment by a Participating Employer or a Related Company on account of a
period during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty, or leave
of absence; or (c) for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by a Participating Employer or a Related
Company.

The following additional rules shall apply in calculating
Hours of Service: (a) no more than 501 Hours of Service are required to be
credited to an Employee on account of any single period during which the
Employee performs no duties; (b) an hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment compensation, or
disability insurance laws;

17
<PAGE> 22
(c) Hours of Service are not required to be credited for a payment which solely
reimburses an Employee for medical or medically related expenses incurred by
the Employee; (d) a payment shall be deemed to be made by or due from a
Participating Employer or Related Company regardless of whether such payment is
made by or due from a Participating Employer or a Related Company directly, or
indirectly through, among others, a trust fund, or insurer, to which a
Participating Employer or a Related Company contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or on behalf of a
group of Employees in the aggregate; (e) no more than one Hour of Service shall
be credited with respect to any hour of time; (f) an "Hour of Service" shall
include any hour for which an Employee is entitled to payment by a "leasing
organization" (as described in Section 414(n)(2) of the Code) for the
performance of duties for a Participating Employer or a Related Company.

The definition of "Hour of Service" set forth herein shall
also be construed in accordance with, and shall include any additional periods
of service, that may be required by regulations promulgated by the United
States Department of Labor. The hour of service rules stated in the Department
of Labor Regulations Section 2530.200b-2(b) and -2(c) are herein incorporated
by reference.

18
<PAGE> 23
"Integrated Benefits" shall mean the aggregate benefits
payable to a Participant (or over which he has had or has exercised or
released, any power or right of election, designation, appointment or
disposition) under (i) any pension plan qualified as tax exempt under Section
401(a) of the Code, including any such plan established by the New York Hotel
Association or pursuant to any collective bargaining or other agreement, to the
extent that a Participating Employer, any Related Company, or any predecessors
thereto have contributed or paid all or part of the costs thereof as determined
by rules established from time to time by the Committee, and (ii) any federal,
state, or other system now in existence or hereafter created or amended to
which a Participating Employer is required by law to contribute or pay all or
part of the costs, as determined by rules established from time to time by the
Committee, including 50 percent of the Primary Social Security Benefit computed
on the basis of the Social Security Act as in effect at the time at which the
offset for Integrated Benefits is first applied as provided in the definition
of "Primary Social Security Benefit" hereunder. The Committee, by uniform
rules adopted from time to time, shall estimate the amounts of all Integrated
Benefits expected to be payable to any Participant for the purpose of
determining benefits under this Plan prior to the date of determination of the
actual amount of any such Integrated Benefits, and adjustments shall be made,
without interest, in benefit

19
<PAGE> 24
payments due after the Annuity Starting Date if later information so requires.

"Investment Manager" shall mean a Fiduciary designated by the
Committee under this Plan to whom has been delegated the responsibility and
authority to manage, acquire or dispose of Plan assets who (a) (1) is
registered as an investment adviser under the Investment Advisers Act of 1940;
(2) is a bank, as defined in that Act; or (3) is an insurance company qualified
to perform investment advisory services under the laws of more than one state;
and (b) has acknowledged in writing that he is a Fiduciary with respect to the
management, acquisition, and control of Plan assets.

"Late Retirement Benefit" shall mean the benefit provided
under Sections 4.4 and 4.5.

"Late Retirement Date" shall mean, with respect to a
Participant who remains in the employ of a Participating Employer following his
Normal Retirement Date, the first day of any month following his Normal
Retirement Date on which he elects to retire.

"Normal Retirement Age" shall mean the date on which occurs
the later of (a) or (b), where (a) is the date a Participant attains age 65,
and (b) is the earlier of:

20
<PAGE> 25
(i) the date he has completed 5 Years of Vesting Service,
or

(ii) the earlier of (A) the tenth anniversary of the date
he commenced participation in the Plan, or (B) the fifth anniversary
of the first day of the first Plan Year beginning on or after January
1, 1988.

"Normal Retirement Benefit" shall mean the benefit provided
under Sections 4.1 and 4.5.

"Normal Retirement Date" shall mean the first day of the month
coincident with or next following the date the Participant attains his Normal
Retirement Age. A Participant shall retire on his Normal Retirement Date;
provided that, a Participant may elect to continue employment and retire on a
Late Retirement Date subsequent to said Normal Retirement Date, in which event
he shall remain a Participant in the Plan as long as he remains an Eligible
Employee.

"One Year Break in Service Year" shall mean any Vesting
Computation Period during which a Participant has not completed more than 500
Hours of Service. Notwithstanding the preceding sentence and solely for
purposes of this paragraph, if an Employee is credited with less than 501 Hours
of Service during a 12-month period described in the preceding sentence by
reason of an absence

21
<PAGE> 26
that arises because of her pregnancy, the birth or adoption of the Employee's
child (or child care for a period immediately following such birth or
adoption), such Employee shall not incur a One Year Break in Service Year;
rather, the Employee shall be credited for any such 12- month period with (a)
the Hours of Service for which the Employee would have received credit (but for
such absence), if determinable, or (b) eight Hours of Service per day during
such absence. If, absent the preceding sentence, a One Year Break in Service
Year would not occur because of such an absence during the 12-month period that
includes the beginning of such absence, the Employee shall receive credit for
the hours specified under (a) or (b) above in the Vesting Computation Period
immediately following the Vesting Computation Period in which such absence
initially occurs, solely to prevent the occurrence of a One Year Break in
Service Year in any such Vesting Computation Period. Notwithstanding any other
provision of this paragraph, any Employee shall not be credited with more than
501 Hours of Service by reason of such absence.

"Participant" shall mean any Employee or former Employee who
has been admitted to participation in the Plan pursuant to Article II and who
is or may become eligible to receive a benefit from the Plan. A Participant
does not include an Employee who incurs a Break in Employment and

22
<PAGE> 27
either: (a) is not vested; or (b) has been paid the full amount of his
nonforfeitable benefit.

"Participating Affiliate" shall mean any Hilton Property
which, by resolution of its board of directors and with the approval of the
Committee, elects to participate in this Plan. Furthermore, in approving any
Hilton Property as a Participating Affiliate, the Committee may, in its
discretion, determine that the Plan is extended only to a specific group or
classification of Employees of such Participating Affiliate, so long as any
such determination complies with the Code and ERISA. By electing to
participate in this Plan, a Participating Affiliate agrees to (i) be bound by
any Plan or Trust amendment adopted by resolution of the Board of Directors or
by the written instrument of any person to whom the Board of Directors had
delegated its authority to adopt the amendment, and (ii) execute such forms or
documents (e.g., forms or other materials required by the Internal Revenue
Service or Department of Labor) as are deemed necessary or desirable by the
Committee.

"Participating Employer" shall mean the Company and each
Participating Affiliate. Appendix F attached hereto lists all Participating
Employers as of January 1, 1994.

23
<PAGE> 28
"Plan" shall mean the Hilton Hotels Retirement Plan set forth
herein, as now in effect or hereafter amended.

"Plan Year" shall mean each 12-consecutive month period
beginning on January 1 and ending on December 31. The Plan Year shall be the
limitation year for purposes of Section 415 of the Code.

"Primary Social Security Benefit" shall mean the monthly
amount available at the later of (i) the date a Participant attains age 65, or
(ii) the Participant's Early, Normal, Late or Disability Retirement Date or
earlier Break in Employment, excluding amounts available for spouses and
dependents, as an unreduced old-age or disability insurance benefit under the
provisions of Title II of the Social Security Act (or under the provisions of
any similar federal Act or Acts now in existence, or as hereafter created or
amended) as in effect on the Participant's Early, Normal, Late or Disability
Retirement Date or earlier Break in Employment, whether or not payment of such
amount is delayed, suspended or forfeited because of failure to apply, accept
other work, or any other similar reason within the control of the Participant.
Such amount shall be determined on the basis of the Participant's period of
employment with the Participating Employers in accordance with uniform rules
adopted by the Committee, subject to the following

24
<PAGE> 29
paragraph. If a Participant retires or otherwise incurs a Break in Employment
prior to age 65, the amount of his Primary Social Security Benefit shall be
computed by assuming he receives no wages after such retirement or other Break
in Employment.

In computing a Participant's Primary Social Security Benefit,
the Participant's wages for Plan Years ending prior to his Break in Employment
shall be calculated by using either (i) an estimated wage history, or (ii) to
the extent the Committee has records, such Participant's actual wages. The
estimated wage history shall be calculated by projecting backwards the
Participant's wages during the Plan Year in which his Break in Employment
occurs at a 6% annual rate. If the Participant provides evidence to the
Committee of his actual wage history for the years before his Break in
Employment, the actual wages shall be used instead of the estimate. In order
that it be taken into account, a Participant must provide the actual wage
history no later than a reasonable period of time (as determined by the
Committee) after his Break in Employment or, if later, the date he is informed
of the benefit to which he is entitled.

"Qualified Joint and Survivor Annuity" shall mean an annuity
for the life of the Participant with a survivor annuity for the life of the
Spouse of the Participant to

25
<PAGE> 30
whom he is legally married at the time his annuity payments commence which is
50% of the amount of the annuity payable during the life of the Participant.
The amount of the Qualified Joint and Survivor Annuity shall be determined
pursuant to the tables attached as Appendix A to the Plan.

"Related Company" shall be determined separately with respect
to each Participating Employer, and shall mean, with respect to such a
Participating Employer, (i) each corporation which is a member of a controlled
group of corporations (within the meaning of Section 1563(a) of the Code,
determined without regard to Section 1563(a)(4) and (e)(3)(C) thereof) of which
such Participating Employer is a component member, (ii) each entity (whether or
not incorporated) which is under common control with such Participating
Employer, as such common control is defined in Section 414(c) of the Code and
Regulations issued thereunder, (c) any organization which is a member of an
affiliated service group (within the meaning of Section 414(m) of the Code) of
which such Participating Employer or a Related Company is a member and (d) any
organization which is required by regulations issued under Section 414(o) of
the Code to be treated as a Related Company. For purposes of Section 5.1 of
this Plan the phrase "more than 50 percent" shall be substituted for the phrase
"at least 80 percent" each place it appears in Section 1563(a)(1) of the Code.
The term "Related Company" shall also include each

26
<PAGE> 31
predecessor employer to the extent required by Section 414(a) of the Code.
Notwithstanding the foregoing, an organization shall not be considered a
Related Company for any purpose under the Plan prior to the date it is
considered affiliated under clauses (i) through (iv) above.

"Section 203(a)(3)(B) Service" shall mean the employment of an
Employee, subsequent to the time the payment of benefits commenced or would
have commenced if the Employee had not remained in or returned to employment
during a calendar month, if the Employee completes in such month 40 or more
Hours of Service for a Participating Employer as of the time that the payment
of benefits commenced or would have commenced if the Employee had not remained
in or returned to employment. In the case of an Employee for whom records of
Hours of Service are not maintained, an Employee who receives payment for any
such Hours of Service performed on each of 8 or more days in such month shall
also be treated as employed in Section 203(a)(3)(B) Service.

"Senior Officer" shall mean each person who holds the office
of Senior Vice President or higher with the Company.

"Spouse" shall mean the person legally married to the
Participant on the Annuity Starting Date. A "Surviving

27
<PAGE> 32
Spouse" is a Spouse who survives the Participant, provided, however, that for
purposes of the Surviving Spouse Benefit described in Section 4.7, "Surviving
Spouse" shall mean the Spouse to whom the Participant was legally married for
at least one year prior to his date of death.

"Trust" shall mean the Trust which is established to hold and
invest contributions under this Plan.

"Trustee" (or "Trustees," if more than one is appointed and
acting) shall mean the Trustee or Trustees, whether original or successor,
appointed under the Trust.

"Union Employee" shall mean an Employee covered by a
collective bargaining agreement between his Participating Employer and any
collective bargaining representative if retirement benefits were the subject of
good faith bargaining between such representative and such Participating
Employer.

"Vesting Computation Period" shall mean any Plan Year
beginning on or after January 1, 1976 during which the Employee is employed
with a Participating Employer or a Related Company.

"Years of Benefit Service" of a Participant, measured in years
and fractional years, shall mean the

28
<PAGE> 33
aggregate (without counting any period more than once) of the years computed
under (a) through (f) below:

(a) A Participant who was a Participant under the Plan on
December 31, 1975 shall be entitled to a full or fractional Year of
Benefit Service for each full or fractional year of service to which
he was entitled for purposes of determining benefit accruals under the
Plan prior to January 1, 1976, in accordance with the terms of the
Plan in effect prior to January 1, 1976.

(b) Beginning January 1, 1976, a Participant shall be
entitled to 1/12th of a Year of Benefit Service for each calendar
month during which he is both employed by a Participating Employer and
is an Eligible Employee; provided, however, that except for the Plan
Year in which he retires or otherwise incurs a Break in Employment
after becoming vested pursuant to Section 4.6, a Participant shall not
be entitled to any Years or fractional Years of Benefit Service for a
Plan Year during which he completes less than 1,000 Hours of Service.

(c) Beginning July 12, 1990, a Participant shall be
entitled to 1/12th of a Year of Benefit Service for each calendar
month during which he is both credited with Hours of Service and is an
Eligible Employee; provided, however, that except for the Plan Year in
which he retires or otherwise ceases to complete Hours of Service
under the Plan following completion of 5 or

29
<PAGE> 34
more Years of Vesting Service, a Participant shall not be entitled to
any Years or fractional Years of Benefit Service for a Plan Year
during which he completes less than 1,000 Hours of Service.

(d) A Participant shall be entitled to a full or
fractional Year of Benefit Service for each full or fractional Year of
Vesting Service to which he is entitled under subparagraph (d) of the
definition of "Years of Vesting Service" hereunder.

(e) Any period for which a Participant is entitled to
receive a pension under a pension plan of a former employer (other
than a Participating Employer) shall be disregarded in computing his
Years of Benefit Service.

(f) A period of leave of absence because of military
service (or the equivalent of military service as determined by the
Committee under such rules as it shall determine and uniformly apply)
or an "Approved Leave of Absence" (as defined hereunder) shall be
included in computing a Participant's Years of Benefit Service. A
period of leave of absence for other reasons shall be disregarded in
computing a Participant's Years of Benefit Service; provided, however,
that the Committee may, in its sole and absolute discretion under such
conditions and rules as it shall specify or establish and uniformly
apply,

30
<PAGE> 35
allow credit for such leave of absence in computing a Participant's
Years of Benefit Service.

The following additional rules shall apply in determining a
Participant's Years of Benefit Service. If, at the date of a Participant's
retirement or earlier Break in Employment (i) his period of employment (or a
portion thereof) with a Participating Employer is otherwise excluded from his
Years of Benefit Service because he was a Union Employee during such period
("Union Exclusion"), or (ii) his period of employment (or a portion thereof)
with a Hilton Property is otherwise excluded from his Years of Benefit Service
because said Hilton Property was not a Participating Affiliate under the Plan
during such period ("Hilton Property Exclusion"), then:

(a) If the Participant incurs a Break in Employment with
all Participating Employers for any reason before he has both attained
age 55 and completed 20 or more Years of Vesting Service, but the
Participant has completed 10 or more years of continuous participation
in the Plan (measured from his initial date of participation in the
Plan pursuant to Article II) immediately prior to his Break in
Employment, then all periods used in determining his Years of Vesting
Service (in the case of the Union Exclusion), or service with the
Participating Employers and Hilton Properties (in the case of the
Hilton

31
<PAGE> 36
Property Exclusion), shall be included in computing his Years of
Benefit Service hereunder.

(b) If the Participant incurs a Break in Employment with
all Participating Employers for any reason after he has both attained
age 55 and completed 20 or more Years of Vesting Service, and the
Participant has completed 5 or more years of continuous participation
in the Plan (measured from his initial date of participation in the
Plan pursuant to Article II) immediately prior to his Break in
Employment, then all periods used in determining his Years of Vesting
Service (in the case of the Union Exclusion), or service with the
Participating Employers and Hilton Properties (in the case of the
Hilton Property Exclusion), shall be included in computing his Years
of Benefit Service hereunder.

(c) If a Participant incurs a Break in Employment with
all Participating Employers for any reason after he has both attained
age 65 and completed 10 or more Years of Vesting Service, and the
Participant has completed 5 or more years of continuous participation
in the Plan (measured from his initial date of participation in the
Plan pursuant to Article II) immediately prior to his Break in
Employment, then all periods used in determining his Years of Vesting
Service (in the case of the Union Exclusion), or service with the
Participating Employers and Hilton

32
<PAGE> 37
Properties (in the case of the Hilton Property Exclusion) shall be
included in computing his Years of Benefit Service hereunder.

"Year of Eligibility Service" means each Eligibility
Computation Period during which an Employee completes at least 1,000 Hours of
Service.

"Years of Vesting Service" for any Employee, measured in years
and fractional years, shall mean (i) prior to January 1, 1976, service, if any,
described under subparagraph (a) below, and (ii) on or after January 1, 1976,
each Vesting Computation Period during which he completes at least 1,000 Hours
of Service. For purposes of determining Years of Vesting Service, no period
shall be counted more than once, and the following rules shall apply:

(a) An Employee shall be entitled to a full or fractional
Year of Vesting Service for each full or fractional year of service,
if any, to which he was entitled under the Plan, for vesting purposes,
prior to January 1, 1976, in accordance with the terms of the Plan in
effect prior to January 1, 1976.

(b) A period of concurrent employment with two or more
Participating Employers and/or Related Companies shall be considered
as employment with only one such employer during such period.

33
<PAGE> 38
(c) To the extent provided by the Committee, an
Employee's employment with a predecessor employer shall be considered
as employment with the Participating Employers.

(d) If a Participating Employer shall loan or assign an
Employee to a Hilton Property which is not a Participating Affiliate,
and such Employee subsequently resumes employment with such
Participating Employer, then such period of employment with such
Hilton Property shall be included for purposes of determining Years of
Vesting Service.

(e) A period of "Approved Leave of Absence" (as defined
hereunder) shall be included in computing a Participant's Years of
Vesting Service.

34
<PAGE> 39
ARTICLE II

PARTICIPATION

2.1 Eligibility Requirements.

Each Employee who was a Participant on January 1, 1987 shall
continue to participate hereunder. Each other Employee shall become a
Participant on the day he becomes an Eligible Employee.

2.2 Breaks in Service.

(a) A Participant who incurs a Break in Employment and is
later reemployed with a Participating Employer as an Eligible Employee shall be
deemed to have resumed participation immediately upon the date of such
reemployment, provided he completes a Year of Eligibility Service after the
date of such reemployment.

2.3 Designation of Beneficiary.

Upon forms provided by the Committee, each Eligible Employee
who becomes a Participant shall designate in writing the Beneficiary or
Beneficiaries whom such Eligible Employee desires to receive any benefits
payable under this Plan in the event of such Eligible Employee's death. A
Participant may from time to time change his designated Beneficiary or
Beneficiaries without the consent of such Beneficiary or Beneficiaries by
filing a new designation in writing with the Committee. However, if a married
Participant wishes to designate a person other than his

35
<PAGE> 40
Spouse as Beneficiary, such designation shall be consented to in writing by the
Spouse, which consent shall acknowledge the effect of the designation and be
witnessed by a Plan representative or a notary public. The Participant may
change any election designating a Beneficiary or Beneficiaries without any
requirement of further spousal consent if the Spouse's consent so provides.
Notwithstanding the foregoing, spousal consent shall be unnecessary if it is
established (to the satisfaction of a Plan representative) that there is no
Spouse or that the required consent cannot be obtained because the Spouse
cannot be located, or because of other circumstances prescribed by Treasury
Regulations. The Participating Employer, the Committee and the Trustee may
rely upon his designation of Beneficiary or Beneficiaries last filed in
accordance with the terms of this Plan. Upon the dissolution of marriage of a
Participant, any designation of the Participant's former Spouse as a
Beneficiary shall be treated as though the Participant's former Spouse had
predeceased the Participant, unless (i) the Participant executes another
Beneficiary designation that complies with this Section 2.3 and that clearly
names such former Spouse as a Beneficiary, or (ii) a court order presented to
the Committee prior to distribution on behalf of the Participant explicitly
requires the Participant to continue to maintain the former Spouse as the
Beneficiary; provided, however, that this sentence shall not apply if the
former Spouse is

36
<PAGE> 41
Beneficiary by reason of having been named as a joint annuitant under a joint
and survivor form of benefit (including a Qualified Joint and Survivor
Annuity), and any annuity payments have been made to the Participant or the
former Spouse prior to the Plan having been notified of the dissolution of
marriage. In any case in which the Participant's former Spouse is treated
under the Participant's Beneficiary Designation as having predeceased the
Participant, no heirs or other beneficiaries of the former Spouse shall receive
benefits from the Plan as a Beneficiary of the Participant except as provided
otherwise in the Participant's Beneficiary designation.

37
<PAGE> 42
ARTICLE III

CONTRIBUTIONS

3.1 Payment.
(a) Subject to subsection (c) below, the Participating
Employers expect to pay the entire cost of the benefits provided by this Plan.
Such contributions shall be paid from time to time directly to the Trustee, or
may instead be deposited in a depositary or depositaries selected by the
Committee, which depositary may be the Trustee or any other state or national
bank having a capital in excess of $1,000,000. In the event such depositary is
a bank other than the Trustee, all such deposits shall be made in the Trustee's
name and such depositary shall hold any funds so deposited with it subject to
the directions and instructions of the Trustee. The Trustee shall have no
liability or responsibility for (i) the selection of any such depositary, nor
(ii) for any action or non-action taken by such depositary, except to the
extent that such action or non-action is taken in accordance with the
directions of the Trustee. The timing of all contributions shall be entirely
discretionary with the Participating Employer making such contribution except
as otherwise required by the Code or ERISA.

(b) Expenses incurred in the administration of the Plan,
including legal, actuarial, and Trustee's fees and

38
<PAGE> 43
expenses, shall be paid by the Trust except to the extent such amounts are paid
by the Participating Employers in the sole discretion of the Company.

(c) Separate computations shall be made under this Article
with respect to each Participating Employer in the Plan to the end that each
such Participating Employer shall bear the cost of benefits accruing hereunder
for its own Participants.

(d) Forfeitures under this Plan shall not be applied to
increase the benefits any Participant would otherwise receive under this Plan
but shall instead be used to reduce subsequent contributions.

(e) No Participant can make contributions under this Plan.

39
<PAGE> 44
ARTICLE IV

RETIREMENT AND DEATH BENEFITS

4.1 Normal Retirement Benefit - Unmarried Participant.

(a) A Participant may retire and commence receiving his
vested Normal Retirement Benefit on his Normal Retirement Date. A Participant
shall be 100% vested in benefits under this Plan upon attainment of Normal
Retirement Age if he is then an Employee. Except as hereinafter provided, the
amount of the monthly retirement benefit payable each month for the life of a
Participant, commencing on his Normal Retirement Date and ending with the
benefit for the month during which his death occurs, which is his Normal
Retirement Benefit, shall be equal to (1) reduced by (2), as follows:

(1) If the Participant had completed 34 or more Years of
Benefit Service as of December 31, 1983, then (1) is the greater of (A) or (B)
and otherwise is (B):

(A) 1-1/2% of the Participant's Average Monthly
Compensation multiplied by his Years of Benefit Service, but
not more than 60% of such Average Monthly Compensation; or

(B) the sum of:

(i) 2% of the Participant's Average
Monthly Compensation multiplied by his Years

40
<PAGE> 45
of Benefit Service (up to a maximum of 25 years), plus

(ii) 1/2% of his Average Monthly
Compensation multiplied by his Years of Benefit
Service in excess of 25,

but not more than 60% of such Average Monthly
Compensation.

(2) is: the Participant's Integrated Benefits.

(b) Notwithstanding subsection (a) above, the following
minimums shall apply in determining the Normal, Early or Late Retirement
Benefit (as applicable) payable to a Participant who at the date of his
retirement or earlier Break in Employment has either (i) completed 10 or more
Years of Benefit Service, or (ii) both attained age 55 and completed 5 or more
Years of Benefit Service:

(1) The Normal or Late Retirement Benefit payable on or
after January 1, 1986 to such a Participant who retires on or after
that date on a Normal or Late Retirement Date, or who prior to January
1, 1986 had retired on a Normal or Late Retirement Date and is
receiving a Normal or Late Retirement Benefit on January 1, 1986,
shall not be less than $150.

41
<PAGE> 46
(2) The Early Retirement Benefit payable on or after
January 1, 1986 to such a Participant who retires on or after that
date on an Early Retirement Date, or who prior to January 1, 1986 had
retired on an Early Retirement Date and is receiving or is entitled to
receive benefit payments on January 1, 1986, shall not be less than an
amount equal to the product of $150 multiplied by a fraction, the
numerator of which is the Participant's Years of Benefit Service and
the denominator of which is the Years of Vesting Service to which he
would have been entitled had he remained in the employ of the
Participating Employers to his Normal Retirement Date.

(3) The vested Normal Retirement Benefit payable pursuant
to Section 4.6 to such a Participant

(A) who incurred a Break in Employment prior to
his retirement during the period beginning September 1, 1980
and ending December 31, 1985, and who qualified for a vested
Normal Retirement Benefit, or

(B) who incurs a Break in Employment on or after
January 1, 1986 prior to his retirement and who qualifies for
a vested Normal Retirement Benefit,

42
<PAGE> 47
shall not be less than an amount equal to the product of (i)
$100 (if clause (A) above applies), or (ii) $150 (if clause
(B) above applies), multiplied in either case by a fraction,
the numerator of which is the Participant's Years of Benefit
Service and the denominator of which is the Years of Vesting
Service to which he would have been entitled had he remained
in the employ of the Participating Employers to his Normal
Retirement Date. If a Participant referred to in this
subsection 4.1(b) is eligible for and commences an Early
Retirement Benefit, the appropriate reduction for early
commencement shall be made to the minimum benefit.

The Normal Retirement Benefit or vested Normal Retirement Benefit computed
under subparagraphs (1), (2) or (3) above, whichever applies, shall then be
reduced by the aggregate benefits payable to such Participant under any other
pension plan qualified under Section 401(a) of the Code, including any such
plan established pursuant to any collective bargaining or other agreement, to
the extent that the Participating Employers or a Related Company or any
predecessors thereto have contributed or paid all or a part of the costs
thereof as determined by rules established from time to time by the Committee.
The minimum benefits described in this subsection (b) shall be reduced as

43
<PAGE> 48
otherwise specified in this Plan if it is paid in the form of a Qualified Joint
and Survivor Annuity or an optional form of benefit.

(c) In no event shall the Participant's Normal Retirement
Benefit be less than the benefit that would have been payable as of his Early
Retirement Date.

4.2 Early Retirement Benefit - Unmarried Participant.

If the Participant elects to retire on an Early Retirement
Date, his retirement benefit will be a monthly Early Retirement Benefit
beginning on such Early Retirement Date, reduced for early commencement
pursuant to Appendix A, and ending with the benefit for the month during which
his death occurs.

Notwithstanding the foregoing, in the case of a Participant
entitled to a vested benefit pursuant to Section 4.6(b), the early commencement
factors contained in Appendix A shall not apply, and his Early Retirement
Benefit shall instead be the Actuarial Equivalent of his vested Normal
Retirement Benefit.

44
<PAGE> 49
4.3 Disability Retirement Benefit - Unmarried Participant.

(a) If (i) the Committee determines that a Participant's
Break in Employment with the Participating Employers is a result of his
Disability prior to his Normal Retirement Date, and (ii) he is eligible for a
Disability Retirement Date, such Participant shall be entitled to a Disability
Retirement Benefit commencing on his Disability Retirement Date, reduced for
early commencement pursuant to Appendix A, and ending with the benefit for the
month during which his death occurs.

Notwithstanding the foregoing, in the case of a Participant
entitled to a vested benefit pursuant to Section 4.6(b), the early commencement
factors contained in Appendix A shall not apply, and his Disability Retirement
Benefit shall instead be the Actuarial Equivalent of his vested Normal
Retirement Benefit.

(b) In the event that a Participant ceases to be subject
to a Disability after a Disability Retirement Benefit has commenced, Disability
Retirement Benefit payments will be suspended until the Participant's Normal
Retirement Date or applicable Early Retirement Date at which time benefits will
be recalculated on the basis of the Participant's participation as of that
date.

45
<PAGE> 50
4.4 Late Retirement Benefit - Unmarried Participant.

(a) A Participant may retire after his Normal Retirement
Date on his Late Retirement Date. The amount of monthly retirement benefit
payable each month for the life of a Participant who retires on his Late
Retirement Date shall be his Late Retirement Benefit, commencing as of his Late
Retirement Date, but no later than the date set forth in Section 4.9(b)(1), and
ending with the benefit for the month in which his death occurs. Such Late
Retirement Benefit shall equal the sum of the Participant's Normal Retirement
Benefit as determined under Section 4.1 above, plus, for each Plan Year ending
on or after the Participant's Normal Retirement Date, the greater of (1) or
(2). (1) shall be the additional benefit accrued for each such Plan Year,
taking into account Years of Benefit Service accrued (but not to exceed any
limits on such Years of Benefit Service pursuant to Section 4.1) and
Compensation earned in each such year through the Participant's Late Retirement
Date. (2) shall be, with respect to any Participant who during any month is
not employed in Section 203(a)(3)(B) Service, the increase to the Participant's
accrued benefit as of the end of the Plan Year preceding the Plan Year in
question to take into account the nonpayment of benefits during any such month
determined pursuant to the Actuarial Equivalent assumptions in Appendix A.

46
<PAGE> 51
Notwithstanding the foregoing, in the case of a Participant
who attained age 65 on or before February 28, 1978, such Participant's Late
Retirement Benefit shall not be less than the Late Retirement Benefit that
would have been payable to such Participant had the terms of the Plan in effect
on February 28, 1978 continued in effect without change until such
Participant's Late Retirement Date.

(b) Participants who continue employment past Normal
Retirement Date shall be given such notice with respect to suspension of their
retirement benefit payments as is required by applicable Department of Labor
regulations.

4.5 Normal, Early, Disability or Late Retirement Benefit - Married
Participant.

(a) If any vested Participant (i.e., any Participant who
has a nonforfeitable right to a benefit under this Plan) is married and retires
on a Normal, Early, Disability, or Late Retirement Date, the benefit shall be
paid in the form of a Qualified Joint and Survivor Annuity. Monthly retirement
payments under the Qualified Joint and Survivor Annuity shall commence on the
Normal, Early, Disability, or Late Retirement Date, but no later than the date
set forth in Section 4.9(b)(1), as applicable, and end with the benefit for the
month in which the death of the Participant or the Participant's Spouse, as
applicable, occurs. The

47
<PAGE> 52
Qualified Joint and Survivor Annuity shall be the benefit form unless the
Participant, after receiving a written explanation of the terms and conditions
of the Qualified Joint and Survivor Annuity and the effect of not receiving the
same shall have elected not to take such Qualified Joint and Survivor Annuity.
Such election shall not be effective unless the Spouse of the Participant
consents in writing to such election, which consent shall acknowledge the
effect of such election and shall be witnessed by a Plan representative or
notary public, or it is established to the satisfaction of the Plan
representative that the consent required cannot be obtained because there is no
Spouse, because the Spouse cannot be located or because of other circumstances
set forth in Treasury Regulations. The Spouse's consent must specify the form
of benefits to be paid and any Beneficiary or contingent Beneficiary. The form
of benefits and any Beneficiary or contingent Beneficiary may be changed only
if the Spouse consents to such change in the manner provided in this Section.
However, the form of benefits, Beneficiary and contingent Beneficiary may be
changed without subsequent spousal consent if (1) the original consent
acknowledged the right of the Spouse to limit consent to a specific beneficiary
and form of benefits, and (2) the original consent expressly permits changes to
the form of benefits and Beneficiaries without any requirement of further
spousal consent. The Spouse's consent may not be revoked. In the event the
Qualified Joint and Survivor

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<PAGE> 53
Annuity is waived, the benefit shall be paid in the form provided in Sections
4.1, 4.2, 4.3, or 4.4 as applicable for an unmarried Participant or in one of
the alternative forms elected by the Participant as provided in Section 4.8.

(b) Each Participant shall be provided with a written
explanation of (1) the terms and conditions of the Qualified Joint and Survivor
Annuity, (2) the Participant's right to make, and the effect of, an election
not to take a Qualified Joint and Survivor Annuity, (3) the rights of the
Participant's Spouse with regard to such Spouse's required consent to the
Participant's waiver of the Qualified Joint and Survivor Annuity, and (4) the
Participant's right to make, and the effect of, a revocation of an election to
waive the Qualified Joint and Survivor Annuity. This explanation shall be
provided to the Participant no less than 30 and no more than 90 days before the
Annuity Starting Date (and consistent with such regulations as the Secretary of
the Treasury may prescribe). The written explanation shall include an
explanation of the eligibility conditions, other material features, and
relative values of the optional forms of benefits under the Plan, as well as a
general explanation of the relative financial effect on a Participant's benefit
of the waiver of the Qualified Joint and Survivor Annuity.

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<PAGE> 54
(c) Said election may be made (or revoked) only during
the 90 day period ending on the Annuity Starting Date.

4.6 Vesting; Breaks in Service.

(a) Vesting at Normal Retirement Age.

A Participant shall become 100% vested in his Normal
Retirement Benefit upon reaching his Normal Retirement Age if he is then
employed by a Participating Employer or a Related Company.

(b) Vesting Before Normal Retirement Age.

If a Participant incurs a Break in Employment for any reason
other than retirement at his Normal or Late Retirement Date, he shall become
vested in his Normal Retirement Benefit in accordance with the immediately
following schedule:

<TABLE>
<CAPTION>
Years of
Vesting Service Percentage Vested
--------------- -----------------
<S> <C>
less than 10 0%
10 or more 100%

</TABLE>

Notwithstanding the foregoing schedule, a Participant who has completed at
least one Hour of Service on or after January 1, 1989 shall become vested in
his Normal Retirement Benefit in accordance with the immediately following
schedule:

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<PAGE> 55
<TABLE>
<CAPTION>
Years of
Vesting Service Percentage Vested
--------------- -----------------
<S> <C>
less than 5 0%
5 or more 100%

</TABLE>

In determining a Participant's accrued benefit, Years of
Benefit Service and Years of Vesting Service for purposes of the Plan, if the
Participant incurs a One Year Break in Service Year and if he had no
nonforfeitable interest in his benefits under this Plan at the time of his
Break in Employment, his accrued benefit, Years of Benefit Service and Years of
Vesting Service prior to such Break in Employment shall not be taken into
account if the number of consecutive One Year Break in Service Years subsequent
to such Break in Employment equals or exceeds the greater of the Participant's
Years of Vesting Service completed prior to such termination of employment, or
(effective January 1, 1985) five consecutive One Year Break in Service Years.
If the preceding sentence would cause any accrued benefit, Years of Benefit
Service or Years of Vesting Service to be disregarded as of December 31, 1984
if that sentence's reference to five consecutive One Year Break in Service
Years were ignored, such accrued benefit or Years of Vesting Service shall
continue to be disregarded. Years of Benefit Service and Years of Vesting
Service previously eliminated by a prior application of this paragraph shall
not be counted for the purpose of the preceding sentences.

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<PAGE> 56
Participants who experience one or more breaks in service
prior to 1976 shall be treated for all purposes of this Plan as new employees
as of the first time after 1975 that they recommence employment with a
Participating Employer after such breaks and any benefits payable under this
Plan on account of such service prior to a break in service shall be computed
without reference to any service by the Participant subsequent to reemployment.

4.7 Surviving Spouse Benefit.

(a) If a vested Participant dies prior to his Annuity
Starting Date but on or after a date on which he could have retired, his
Surviving Spouse shall receive a Surviving Spouse Benefit. The monthly
Surviving Spouse Benefit shall be an annuity amount payable as if the
Participant had retired and elected a Qualified Joint and Survivor Annuity on
the day before his death. Payment of the Surviving Spouse Benefit shall
commence on the first day of the month coinciding with or next following the
Participant's date of death; provided, however, that if such Participant's
death occurs before what would have been his Normal Retirement Date, his
Surviving Spouse may elect to defer commencement of the Surviving Spouse
Benefit until the first day of any following month, but no later than what
would have been such Participant's Normal Retirement Date.

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<PAGE> 57
(b) If a Participant dies before a date on which he could
have retired, the Surviving Spouse Benefit shall be payable as if the following
events had occurred: (1) the Participant incurred a Break in Employment
because of resignation or discharge on the date of his death or, if earlier,
the date of his actual Break in Employment, (2) the Participant survived to
the earliest date on which he could have retired, (3) the Participant retired
with an immediate Qualified Joint and Survivor Annuity at the earliest date on
which he could have retired, and (4) the Participant died on the day after the
day on which such Participant would have attained the earliest date on which he
could have retired. Payment under this subsection shall begin as of the first
day of the month coinciding with or next following the later of the
Participant's date of death or the date he would have attained age 55;
provided, however, that his Surviving Spouse may elect to defer commencement of
the Surviving Spouse benefit until the first day of any following month, but no
later than what would have been such Participant's Normal Retirement Date.

(c) In addition to the Participant described above, a
Participant who separated from service before August 23, 1984 with at least 10
Years of Vesting Service shall have the opportunity to also elect a Surviving
Spouse Benefit in accordance with regulations issued by the Department of
Treasury.

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<PAGE> 58
(d) (1) Subject to paragraph (2) below, if a vested
Participant who would otherwise be entitled to receive his retirement benefit
under the "Cash Lump Sum" option described in Section 4.8 dies prior to his
Annuity Starting Date, then a single cash lump sum death benefit equal to the
Actuarial Equivalent of such Participant's Normal (or, if applicable, Late)
Retirement Benefit accrued as of his date of death shall be paid to his
designated Beneficiary as soon as administratively feasible following such
Participant's death.

(2) Notwithstanding paragraph (1) above, if the Surviving
Spouse Benefit is payable under this Section with respect to such deceased
Participant, then the cash lump sum death benefit described in paragraph (1)
shall not be payable unless the amount of such cash lump sum death benefit
exceeds the Actuarial Equivalent of the Surviving Spouse Benefit, in which case
such excess shall be paid to such Participant's designated Beneficiary as soon
as administratively feasible following such Participant's death.

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<PAGE> 59
4.8 Optional Retirement Benefits.

(a) A Participant who retires may elect, in lieu of the
retirement annuity otherwise payable to him, one of the following optional
forms of benefits commencing on the Participant's Early, Normal, Late or
Disability Retirement Date, as the case may be:

Single Life Annuit.

A retirement benefit payable as a single life annuity ending
with the benefit for the month during which the Participant's death occurs.
The amount of such benefit shall be determined in accordance with Section 4.1.

Annuity Adjusted for Social Security Payments.

A retirement benefit adjusted to take account of the expected
Social Security Benefit of the Participant. Such adjustment for Social
Security benefits shall be made by providing (1) retirement benefits on a
temporary basis beginning on the Participant's Early or Disability Retirement
Date and terminating with the payment for the month preceding the earliest date
the Participant is entitled to receive an old age insurance benefit under the
Social Security Act or the date of his death, whichever first occurs, and (2)
an additional retirement benefit as chosen by the Participant in the form of a
single life annuity or a joint and survivor annuity. The amount of the

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<PAGE> 60
monthly retirement benefit payable on the temporary basis and the additional
benefit shall be determined in accordance with Appendix A.

Cash Lump Sum

A retirement benefit equal to the Actuarial Equivalent of his
Normal Retirement Benefit (determined in accordance with Appendix A), payable
in the form of a cash lump sum; provided, however, that this option shall be
available only to a Participant who (i) was a Participant on December 31, 1975,
and (ii) was eligible to elect that the Actuarial Equivalent of his Normal
Retirement Benefit be paid to him in accordance with the terms of the Plan in
effect prior to January 1, 1976. This option shall no longer be available
after the retirement of the last of those Participants described in the
preceding sentence.

Other Optional Forms of Payment.

A Participant may elect a monthly retirement income in such
other form as may be authorized by the Committee and offered to all
Participants on a like and nondiscriminatory basis, which is the Actuarial
Equivalent of his Normal Retirement Benefit. Notwithstanding Appendix A,
"Actuarial Equivalent" under this option shall be determined using (i) a 5%
interest factor and (ii) a unisex pension 1984 table for determining mortality.
In any case where a Participant elects such an optional form of

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<PAGE> 61
benefit (other than an option where the joint or contingent annuitant is the
Participant's Spouse), the option shall be structured so that more than 50
percent of the lump sum Actuarial Equivalent required to provide such
Participant's monthly retirement income in the form of a life annuity will be
applied to provide the Participant's monthly benefits under such option during
the period of the Participant's life expectancy.

(b) Election Procedure.

The election of one of the options provided for in this
Section shall become effective on the Annuity Starting Date. In addition, to
be effective, any election made under this Section must be made by the
Participant, must be in writing on a form or forms prescribed by the Committee,
must name the contingent annuitant if a form of joint and survivor annuity or
term certain annuity is chosen, must be signed by the Participant and the
Participant's Spouse, unless it is established to the satisfaction of the Plan
representative that the consent required cannot be obtained because there is no
Spouse or because the Spouse cannot be located, and must be filed with the
Committee at least 30 days prior to the Annuity Starting Date. An election
may be rescinded or changed at any time prior to the Annuity Starting Date, and
may not thereafter be rescinded or changed. Any election hereunder involving a
contingent annuitant shall be treated as revoked in the event of such

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<PAGE> 62
contingent annuitant's death prior to the commencement of retirement payments.

4.9 Payment of Retirement Benefit.

(a) When benefits become distributable, the Committee
shall direct the Trustee to distribute the amount described above promptly, the
payment of such benefits to commence, notwithstanding anything to the contrary
contained herein, no later than 60 days following the close of the later of the
Plan Year in which (1) the Participant reaches Normal Retirement Age, (2) the
Participant incurs a Break in Employment, or (3) occurs the 10th anniversary of
the date the Participant commenced participation in the Plan. If, however, the
amount of the Participant's benefit has not been calculated by the date
specified in (1), (2) or (3) above or the Participant cannot be located,
distribution shall begin no later than 60 days after the payment can be
calculated or the Participant located.

(b)(1) Notwithstanding anything to the contrary contained
herein, the distribution options under the Plan shall comply with Section
401(a)(9) of the Code and regulations promulgated thereunder which are hereby
incorporated by this reference as a part of the Plan. Accordingly, unless
otherwise permitted by law, the entire interest of each Participant shall
commence to be distributed by April 1 of the calendar year following the
calendar year in which

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<PAGE> 63
the Participant reaches age 70-1/2. Except as provided by law, a Participant
who reached age 70-1/2 before January 1, 1988 and who was not a 5% owner of his
Participating Employer at any time during the Plan Year ending with or within
the calendar year in which the Participant attains age 66-1/2 or thereafter, is
not required to receive distribution of his interest until he incurs a Break in
Employment. Furthermore, a Participant who attains age 70-1/2 during 1988 and
who has not retired as of January 1, 1989, is not required to receive a
distribution of his interest until April 1, 1990.

(b)(2) Distribution shall be made over the life of such
Participant (or over the lives of the Participant and his Beneficiary) or over
a period not extending beyond the life expectancy of the Participant (or over a
period not extending beyond the life expectancy of the Participant and his
Beneficiary).

(b)(3) If the Participant designates anyone other than the
Participant's Spouse as Beneficiary under any optional form of benefit, the
optional form of benefit elected by the Participant must provide for
distributions to the Participant which, as of the Participant's required
beginning date as defined in subsection (b)(1), will provide for payments that
satisfy the minimum distribution

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<PAGE> 64
incidental benefit requirements of Section 401(a)(9) of the Code and the
regulations thereunder.

(b)(4) Notwithstanding any other provision of this
subsection (b), benefits under this Plan shall be paid pursuant to a
Participant's election submitted before 1984 if such election choice was a form
of benefit permitted by the Plan and complies with Section 242(b)(2) of the Tax
Equity and Fiscal Responsibility Act of 1982.

(b)(5) If a Participant continues employment past the
required beginning date specified in Section 401(a)(9) of the Code as described
in subsection (b)(1) above, distributions required to be made shall be
appropriately adjusted as of the first day of each Plan Year to reflect
additional accruals during the prior Plan Year in accordance with Treasury
Regulations. Any such additional accruals shall be offset by the Actuarial
Equivalent of the distributions paid during the preceding Plan Year to the
extent permitted by law.

(c)(1) Direct Rollovers.

This subsection (c) applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this subsection (c),
if a Distributee will receive an Eligible Rollover Distribution

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<PAGE> 65
of at least $200, the Distributee may elect, at the time and in the manner
prescribed by the Committee, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover. Notwithstanding the preceding sentence, a
Distributee may not elect to have an Eligible Rollover Distribution of less
than $500 paid directly to an Eligible Retirement Plan unless the Distributee
elects to have his or her entire Eligible Rollover Distribution paid directly
to the Eligible Retirement Plan.

(c)(2) Definitions.

(A) An "Eligible Rollover Distribution" is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or joint life
expectancies) of the Distributee and the Distributee's designated Beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities); and any other type of distribution which the Internal
Revenue Service announces (pursuant to

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<PAGE> 66
regulation, notice or otherwise) is not an Eligible Rollover Distribution.

(B) An "Eligible Retirement Plan" is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described Section 408(b) of the Code, an annuity
plan described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to the
Surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.

(C) A "Distributee" includes an Employee or
former Employee. In addition, the Employee's or former Employee's Surviving
Spouse and the Employee's or former Employee's Spouse or former Spouse who is
the alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest of the
Spouse or former Spouse.

(D) A "Direct Rollover" is a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.

(d) In the event the Actuarial Equivalent of a
Participant's accrued benefit determined as of his Normal, Early, Late, or
Disability Retirement Date, whichever is applicable, or the Surviving Spouse
Benefit, is $3,500 or

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<PAGE> 67
less, the Committee shall pay such Actuarial Equivalent in the form of a single
cash lump sum. For purposes of the preceding sentence, a Participant who
ceases to participate in the Plan and whose nonforfeitable percentage in his
accrued benefit is zero shall be deemed to have received a complete
distribution of the nonforfeitable portion of his accrued benefit at the time
of his Break in Employment, and the forfeitable portion of his accrued benefit
shall be forfeited at the time of his Break in Employment. Upon distribution,
such accrued benefit and service attributable to such accrued benefit shall
thereupon be disregarded for all purposes under this Plan. Notwithstanding the
preceding sentence, if the distribution to a Participant as described above is
less than the Actuarial Equivalent of such Participant's full accrued benefit,
such Participant's full accrued benefit and related service shall be restored
if he subsequently is reemployed by a Participating Employer and repays to the
Plan his distribution under this subsection. Such distribution must be repaid
before the earlier of five years after the date of reemployment or the close of
the fifth One Year Break in Service Year after distribution. In addition, the
repaid amount must equal the distribution plus interest at 120% of the
applicable federal mid-term rate (or such other rate as may be specified under
Section 411(c)(2)(C) of the Code), compounded annually from the date of
distribution to the date of repayment. In the case of a Participant whose
nonforfeitable interest in his accrued

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<PAGE> 68
benefit at the time of his Break in Employment is zero, such Participant shall
be deemed to have repaid his distribution pursuant to the foregoing provisions
as of his date of reemployment.

4.10 Suspension of Benefits.

(a) If a Participant has commenced receiving benefits
hereunder and is subsequently reemployed by a Participating Employer or a
Related Company, his benefits will be discontinued during any month of such
reemployment in which the Participant is employed in Section 203(a)(3)(B)
Service unless the continued payment of benefits is required by Section
4.9(b)(1). The previous sentence shall only apply if the Participant is
delivered a notice that complies with Department of Labor Regulations Section
2530.203-3(b)(4).

(b) A Participant reemployed as described in subsection
(a) shall upon reemployment again become a Participant under this Plan if he
meets the then applicable requirements for participation. Such Participant's
benefit accrued during such reemployment shall be computed for each period of
reemployment and the benefit payable to such Participant shall be increased as
of his subsequently selected Early, Normal or Late Retirement Date, as
applicable, to take into account such additional benefit, if any. Any
additional benefit shall be decreased by the

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<PAGE> 69
Actuarial Equivalent of any benefit payments (other than Disability Retirement
Benefit payments) paid to the Participant prior to his attaining his Normal
Retirement Date.

(c) In the case of a Participant reemployed after
attaining his Normal Retirement Date, any additional accrual during a Plan Year
shall increase the benefits payable to the Participant as of the first day of
the next Plan Year. Any additional accrual during a Plan Year shall be
reduced, however, by the Actuarial Equivalent of any payments during the Plan
Year to the Participant in any month in which the Participant is employed in
Section 203(a)(3)(B) service.

4.11 Inability to Locate Participant.

In the case of any benefit payable under this Plan, if the
Committee is unable, within three years after the later of Normal Retirement
Date or other date on which the benefit becomes payable, to locate the
Participant or Beneficiary to whom payment is due, such benefit shall be
forfeited and the assets of this Plan shall be relieved of the liability for
payment of such benefit. If after such forfeiture, the Participant or
Beneficiary later claims such benefit, such benefit shall be reinstated and
shall be paid retroactive to the date that such benefit first became payable.

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ARTICLE V

LIMITATION ON BENEFITS AND PAYMENTS

5.1 Section 415 Limitations.

Notwithstanding anything else contained herein, the maximum
annual amount of retirement benefit payable with respect to a Participant under
this Plan shall not exceed the lesser of: (a) $90,000 (adjusted automatically
without amendment to the Plan for increases in the cost of living, in
accordance with Regulations issued by the Secretary of the Treasury pursuant to
the provisions of Section 415(d) of the Code) or (b) 100% of the Participant's
average annual compensation for the three consecutive calendar years during
which he was a Participant and had the highest aggregate annual compensation
from his Participating Employer and all Related Companies, in accordance with
the provisions of Appendix B attached hereto.

With respect to Senior Officers only, the dollar limitation
described above shall be the dollar limitation in effect in the Plan Year in
which such Senior Officer attains his Normal Retirement Age and, for Senior
Officers who are Participants and have attained age 65 prior to December 31,
1991, shall be the dollar limitation described above in effect as of January 1,
1991. For Participants other than Senior Officers, benefit payments which had
been limited under the dollar limitation set for the above shall be

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<PAGE> 71
increased (but not above the benefit amount the Participant would have been
entitled to without such limitation) to reflect increases in the dollar
limitation which occur after termination of employment or retirement.

5.2 Top-Heavy Plan Requirement.

Notwithstanding anything else contained herein, for any Plan
Year for which this Plan is a Top-Heavy Plan, as defined in Section C.3 of
Appendix C attached hereto, this Plan will be subject to the provisions of
Appendix C.

5.3 Restriction of Benefits and Payments.

For Plan Years beginning on or after January 1, 1994,
notwithstanding anything else contained herein, upon termination of the Plan or
in the case of a payment to any of the 25 highest paid "Highly Compensated
Employees" (as defined in Appendix E), the restrictions of Appendix E shall
apply. For Plan Years beginning before January 1, 1994, the restrictions of
Appendix D shall apply.

5.4 133-1/3 Percent Rule.

The method of computing a Participant's accrued benefit under
the provisions of Article IV is intended to satisfy the requirements of the
133-1/3 rule provided in Section 411(b)(1)(B) of the Code.

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ARTICLE VI

THE COMMITTEE

6.1 Members.

A Committee shall be appointed by, and shall serve at the
pleasure of, the Board. The number of members comprising the Committee (which
shall, in any event, be a minimum of three) shall be determined by the Board
which may from time to time vary the number of members. A member of the
Committee may resign by delivering a written notice of resignation to the
Board. The Board may remove any member by delivering a certified copy of its
resolution of removal to such member. Vacancies in the membership of the
Committee shall be filled promptly by the Board. Members of the Committee may,
but need not be, Employees of the Company and/or Participants.

6.2 Committee Action.

The Board shall choose a Chairman for the Committee and the
Committee shall choose a Secretary. The Secretary shall keep minutes of the
Committee's proceedings and all records and documents pertaining to the
Committee's administration of the Plan. The Secretary need not be a Committee
member. Any action of the Committee shall be taken pursuant to the vote or
written consent of a majority of its members present, and such action shall
constitute the action of the Committee and be binding upon the same as if

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<PAGE> 73
all members had joined therein. A member of the Committee shall not vote or
act upon any matter which relates solely to himself as a Participant. The
Chairman or any other member or members of the Committee designated by the
Chairman may execute any certificate or other written direction on behalf of
the Committee. The Trustee or any third person dealing with the Committee may
conclusively rely upon any certificate or other written direction so signed.

6.3 Rights and Duties.

(a) The Committee shall appoint a plan administrator (as
defined in Section 3(16)(A) of ERISA). The Committee shall act as the
Fiduciary with respect to control and management of the Plan for purposes of
ERISA on behalf of the Participants and their Beneficiaries, shall enforce the
Plan in accordance with its terms and in full accordance with any and all laws
applicable to the Plan, shall be charged with the general administration of the
Plan, and shall have all powers necessary to accomplish its purposes,
including, but not by way of limitation, the following:

(1) To determine all questions relating to the
eligibility of Employees to participate;

(2) To construe and interpret the terms and provisions of
this Plan;

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<PAGE> 74
(3) To compute, certify to, and direct the Trustee with
regard to the amount and kind of benefits payable to Participants and
their Beneficiaries;

(4) To authorize all disbursements by the Trustee from
the Trust;

(5) To maintain all records that may be necessary for the
administration of the Plan other than those maintained by the Trustee;

(6) To provide for the disclosure of all information and
the filing or provision of all reports and statements to Participants,
Beneficiaries or governmental agencies as shall be required by ERISA
or other law, other than those prepared and filed by the Trustee;

(7) To make and publish such rules for the regulation of
the Plan as are not inconsistent with the terms hereof;

(8) To appoint a plan administrator or any other agent,
and to delegate to them or to the Trustee such powers and duties in
connection with the administration of the Plan as the Committee may
from time to time prescribe, and to designate each such administrator
or agent as Fiduciary with regard to matters delegated to him; and

(9) To establish claims procedures consistent with
regulations of the Secretary of Labor for presentation of claims by
Participants and Beneficiaries for

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<PAGE> 75
Plan benefits, consideration of such claims, review of claim denials
and issuance of a decision on review. Such claims procedures shall at
a minimum consist of the following:

(A) The Committee shall notify Participants and,
where appropriate, Beneficiaries of their right to claim
benefits under the claims procedures, shall make forms
available for filing of such claims, and shall provide the
name of the person or persons with whom such claims should be
filed.

(B) The Committee shall establish procedures for
action upon claims initially made and the communication of a
decision to the claimant promptly and, in any event, not later
than 90 days after the claim is received by the Committee,
unless special circumstances require an extension of time for
processing the claim. If an extension is required, notice of
the extension shall be furnished the claimant prior to the end
of the initial 90-day period, which notice shall indicate the
reasons for the extension and the expected decision date. The
extension shall not exceed 90 days. The claim may be deemed
by the claimant to have been denied for purposes of further
review

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<PAGE> 76
described below in the event a decision is not furnished to
the claimant within the period described in the preceding
three sentences. Every claim for benefits which is denied
shall be denied by written notice setting forth in a manner
calculated to be understood by the claimant (i) the specific
reason or reasons for the denial, (ii) specific reference to
any provisions of this Plan on which denial is based, (iii)
description of any additional material or information
necessary for the claimant to perfect his claim with an
explanation of why such material or information is necessary,
and (iv) an explanation of the procedure for further review of
the denial of the claim under the Plan.

(C) The Committee shall establish a procedure for
review of claim denials, such review to be undertaken by the
Committee. The review given after denial of any claim shall
be a full and fair review with the claimant or his duly
authorized representative having 60 days after receipt of
denial of his claim to request such review, the right to
review all pertinent documents and the right to submit issues
and comments in writing.

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(D) The Committee shall establish a procedure for
issuance of a decision by the Committee not later than 60 days
after the Committee's receipt of a request for review from a
claimant unless special circumstances, such as the need to
hold a hearing, require a longer period of time, in which case
a decision shall be rendered as soon as possible but not later
than 120 days after the Committee's receipt of the claimant's
request for review. The decision on review shall be in
writing and shall include specific reasons for the decision
written in a manner calculated to be understood by the
claimant with specific reference to any provisions of this
Plan on which the decision is based.

(b) The Committee shall have the power to direct the
Trustee in writing with respect to the investment, management and control of
the Trust assets or any part thereof, and may delegate to one or more
individuals such power to direct the Trustee. Where investment authority,
management and control of Trust assets have been delegated to the Trustee by
the Committee, the Trustee shall be the Fiduciary with respect to the
investment, management and control of the Trust assets contributed by the
Participating Employers and Participants with full discretion in the exercise
of such investment, management and control. Except

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as otherwise provided by law, the Committee may appoint one or more Investment
Manager(s), as defined in Section 1.2 to invest the Trust assets or any part
thereof. Where investment authority, management, and control of Trust assets
is not specifically delegated to the Trustee, the Trustee shall be subject to
the direction of the Committee or the Investment Manager(s) appointed by the
Committee, if any, regarding the investment, management and control of such
assets, and in such case the Committee, or the Investment Manager(s), as the
case may be, shall be the Fiduciary with respect to the investment, management
and control of such assets.

(c) Each Fiduciary under the Plan and Trust shall be
solely responsible for its own acts or omissions. Except to the extent
required by ERISA or the Code, no Fiduciary shall have the duty to question
whether any other Fiduciary is fulfilling any or all of the responsibilities
imposed upon such other Fiduciary by ERISA or by any regulations or rulings
issued thereunder. No Fiduciary shall have any liability for a breach of
fiduciary responsibility of another Fiduciary with respect to the Plan or Trust
unless he knowingly participates in such breach, knowingly undertakes to
conceal such breach, has actual knowledge of such breach and fails to take
reasonable remedial action to remedy said breach or, through his negligence in
performing his own specific fiduciary responsibilities, has enabled

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such other Fiduciary to commit a breach of the latter's fiduciary
responsibilities.

6.4 Procedure for Establishing Funding Policy; Transmittal of Information.

In order to enable the Committee to establish a funding policy
and perform its other functions under the Plan, the Company shall supply full
and timely information to the Committee on all matters relating to the
Compensation, employment, retirement, death, or the cause for termination of
employment of each Participant and such other pertinent facts as may be
required. The Committee shall advise the Trustee and the Investment Manager,
as appropriate, of such of the foregoing facts as may be pertinent to the
duties of the Trustee and Investment Manager under the Plan.

6.5 Other Information.

To enable the Committee to perform its functions, the Company
shall supply full and timely information to the Committee on all matters
relating to the Compensation of all Participants, their employment, retirement,
death or other cause for termination of employment, and such other pertinent
facts as the Committee may require; and the Committee shall advise the Trustee
of such of the foregoing facts as may be pertinent to the Trustee's duties
under the Plan.

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6.6 Compensation, Bonding, Expenses, and Indemnity.

(a) The members of the Committee shall serve without
compensation for their services hereunder.

(b) Members of the Committee and any delegates shall be
bonded to the extent required by Section 412(a) of ERISA and the regulations
thereunder. Bond premiums and all expenses of the Committee or of any delegate
who is an Employee of the Company shall be paid by the Company and the Company
shall furnish the Committee and any such delegate with such clerical and other
assistance as is necessary in the performance of their duties.

(c) The Committee is authorized at the expense of the
Company to employ such legal counsel, actuaries and other consultants as it may
deem advisable to assist in the performance of its duties hereunder. Expenses
and fees in connection with the administration of the Plan and the Trust shall
be paid from the Trust assets to the fullest extent permitted by law, unless
the Company determines otherwise.

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liabilities and claims arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct. This indemnity shall not
preclude such further indemnities as may be available under insurance purchased
by the Company or provided by the Company under any by-law, agreement or
otherwise, as such indemnities are permitted under state law. Payments with
respect to any indemnity and payment of any expenses and fees under this
Section shall be made only from assets of the Company and shall not be made
directly or indirectly from Trust assets.

6.7 Manner of Administering.

The Committee shall have full discretion to construe and
interpret the terms and provisions of this Plan, which interpretation or
construction shall be final and binding on all parties, including but not
limited to the Participating Employers and any Participant or Beneficiary,
except as otherwise provided by law. The Committee shall administer such terms
and provisions in a uniform and nondiscriminatory manner and in full accordance
with any and all laws applicable to the Plan.

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6.8 Duty of Care.

In the exercise of the powers and duties of the Committee as
Plan Administrator (if applicable) and Fiduciary with respect to investment,
management and control of the Plan, each member of the Committee shall use the
care, prudence, and diligence under the circumstances then prevailing that a
prudent person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims.

6.9 Committee Report.

The Committee shall keep the Board of Directors apprised of
the investment results of the Plan and shall report any other information
necessary to fully inform the Board of Directors of the status and operation of
the Plan and Trust.

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ARTICLE VII

TRUST FUND

7.1 Trust Fund.

The contributions to fund this Plan described in Section 3.1
shall be held, administered and invested in accordance with the Trust executed
by the Company and the Trustee, who shall be selected by the Company. The
Trust Fund shall be held, administered, invested and reinvested in the manner
provided in the Trust, and the Trustee shall not be required to invest
separately any share of any Participant in the fund. The Trust may provide for
the commingling of the assets held in the Trust Fund with respect to a
particular Participating Employer with (i) assets held with respect to other
Participating Employer(s) (provided that the Plan, with respect to such other
Participating Employer(s), remains tax qualified), and (ii) assets held in
connection with other tax qualified retirement plans.

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ARTICLE VIII

AMENDMENT AND TERMINATION

8.1 Amendments.

The Company shall have the right to amend this Plan from time
to time by resolution of the Board of Directors and to amend further or cancel
any such amendment, and each Participating Affiliate hereby delegates to the
Company such authority to amend the Plan or cancel any amendment. The Board of
Directors may delegate to an officer of the Company the authority to execute
any amendment to the Plan which is necessary to maintain the qualification and
tax exempt status of the Plan under the Code, and any other amendments to the
Plan which (i) do not have the effect of increasing the liability of a
Participating Employer in a manner which would cause a significant detriment to
such Participating Employer, or (ii) do not significantly increase the benefits
payable to such officer, except in his capacity as a member of a broad class of
Employees for whom benefits are being increased. Any amendment shall be stated
in an instrument in writing, executed in the same manner as the Plan. Except
as may be required to permit the Plan and Trust to meet the requirements for
qualification and tax exemption under the Code, or the corresponding provisions
of other or subsequent revenue laws or of ERISA, no amendment may be made which
may:

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<PAGE> 85
(a) Cause any of the assets of the Trust, at any time
prior to the satisfaction of all liabilities with respect to
Participants and their Beneficiaries, to be used for or diverted to
purposes other than for the exclusive benefit of Participants or their
Beneficiaries;

(b) Decrease the accrued benefit of any Participant or
Beneficiary within the meaning of Section 411(d)(6) of the Code;

(c) Create or effect any discrimination in favor of
Participants who are "Highly Compensated Employees" (as defined in
Appendix E); and

(d) Increase the duties or liabilities of the Committee
or the Trustee without the written consent of the Committee or
Trustee, as applicable.

8.2 Discontinuance of Plan.

It is the Company's expectation that this Plan and the payment
of contributions hereunder will be continued indefinitely, but continuance of
the Plan is not assumed as a contractual obligation, and the Company reserves
the right (subject to Section 8.3(e)), by action of the Board of Directors, to
terminate the Plan, in full or in part, or with respect only to a particular
Participating Employer, or

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<PAGE> 86
to reduce, suspend, or discontinue contributions hereunder. No Participating
Employer shall be liable for the payment of any benefits under this Plan and
all benefits hereunder with respect to Participants of a particular
Participating Employer shall be payable solely from the assets of the Trust
with respect to such Participating Employer except as otherwise required by
ERISA.

8.3 Termination of Plan.

(a) In the event of a complete termination of this Plan,
the rights of all affected Participants and Beneficiaries to benefits then
accrued, to the extent then funded, shall thereupon become 100% vested and
nonforfeitable, subject to the order of priority set forth below, and a prompt
determination of the fair market value of the Trust Fund shall be made and it
shall then be applied so as to provide (to the extent not already provided)
benefits in said order of priority. In the event of partial termination of the
Plan or termination with respect only to a particular Participating Employer,
the rights of all affected Participants and Beneficiaries to benefits accrued
to the date of such termination to the extent funded as of such date, shall be
100% vested and nonforfeitable. Benefits for each such person shall be
computed on the basis of employment up to the date of said termination.

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<PAGE> 87
(b) In the case of the Plan's termination, partial
termination (to the extent required by Section 411 of the Code) or termination
with respect only to a particular Participating Employer, the assets thereof
(available to provide benefits) shall be allocated among the affected
Participants and Beneficiaries of the Plan in accordance with Sections
4044(a)(1) through (a)(6) of ERISA.

(c) Any residual assets of the Plan resulting from such
termination shall be distributed to the affected Participating Employer(s), if:

(1) all liabilities of the Plan to affected Participants
and their Beneficiaries have been satisfied; and

(2) the distribution does not contravene any provision of
law.

(d) To the extent permitted by ERISA, the allocations and
provision for retirement benefits described in this Section shall be
accomplished through either continuance of the Trust, the creation of a new
trust, or the purchase of annuity contracts; provided, however, that the
Committee may, upon finding that it is not practicable or desirable under the
circumstances to do any of the foregoing with respect to one or more of the
groups listed above,

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<PAGE> 88
provide some other means, including the offering of immediate single lump sum
cash payments representing the Actuarial Equivalent of the monthly retirement
benefit to which the Participant or Beneficiary would otherwise be entitled
(provided, however, that if the Actuarial Equivalent of such a lump sum cash
payment exceeds $3,500, a monthly annuity commencing as of the time such lump
sum would otherwise be payable must also be offered, in an amount equal to the
Actuarial Equivalent of such lump sum cash payment, and in one of the forms of
annuity and under the rules provided in Sections 4.5 and 4.8, in accordance
with Treasury Regulation Section 1.417(e)-1(b)(1)), but no change shall be
effected in the order of precedence and the basis of allocation established
under ERISA.

(e) The Plan may be terminated in its entirety or in part
on any date specified by the Company (subject to the requirements of the Code
and ERISA and regulations thereunder) if thirty days' advance written notice of
the termination is given to the Committee, the Trustee and each Participating
Affiliate. The Plan will terminate only with respect to a particular
Participating Employer on the first to occur of the following:

(1) The termination date selected by such
Participating Employer if thirty days' advance written

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<PAGE> 89
notice of the termination is given to the Committee, the Trustee and
the other Participating Employers.

(2) The effective date such Participating
Employer is judicially declared bankrupt or insolvent.

(3) The effective date such Participating
Employer completely discontinues its contributions under the Plan (a
mere failure of such Participating Employer to make a contribution for
any Plan Year shall not be considered a discontinuance so long as the
Plan with respect to such Participating Employer does not have an
accumulated funding deficiency under Section 412 of the Code at the
end of such Plan Year).

(4) The effective date of dissolution, merger,
consolidation or reorganization of such Participating Employer, the
effective date of sale by such Participating Employer of all or
substantially all of its assets, or (if such Participating Employer is
a Hilton Property), the date such Participating Employer ceases to be
a Hilton Property, except that:

(A) in any event, arrangements may be
made with the consent of the Company whereby the Plan with
respect to such Participating Employer will be continued by
any successor to such

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<PAGE> 90
Participating Employer or any purchaser of all or
substantially all of its assets, in which case the successor
or purchaser will be substituted for such Participating
Employer under the Plan and the Trust; and

(B) if such Participating Employer is
merged, dissolved or in any other way reorganized into, or
consolidated with, any other Participating Employer, the Plan
with respect to such former Participating Employer will
automatically continue in effect without a termination
thereof.

8.4 Plan Merger or Consolidation; Transfer of Plan Assets.

(a) This Plan shall not be merged or consolidated with,
nor shall its assets or liabilities be transferred to, any other plan unless
each Participant in this Plan (if the Plan then terminated) would receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if this Plan had
been terminated). Where the foregoing requirement is satisfied this Plan and
Trust Fund may be merged or consolidated with another qualified plan and trust.
This subsection shall also apply with respect to the merger, consolidation or
transfer of assets or

86
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liabilities with respect to only a particular Participating Employer.

(b) The Committee may in its discretion authorize a plan
to plan transfer, provided that such a transfer will meet the requirements of
Section 414(l) of the Code and regulations thereunder, and that all other
actions legally required are taken. In the event of a transfer of assets from
the Plan (or from the Plan with respect to a particular Participating Employer
to the Plan with respect to another Participating Employer) pursuant to this
subsection, any corresponding benefit liabilities shall also be transferred.

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ARTICLE IX

MISCELLANEOUS

9.1 Contributions Not Recoverable.

Except where contributions are permitted or required to be
returned to a Participating Employer by the provisions of this Plan as
permitted or required by ERISA or the Code, it shall be impossible at any time
prior to the satisfaction of all liabilities with respect to Participants and
their Beneficiaries for any part of the contributions made under this Plan to
be used for or diverted to purposes other than the exclusive benefit of
Participants or Beneficiaries. Notwithstanding this or any other provision of
the Plan, a particular Participating Employer shall be entitled to recover, and
the Participants of such Participating Employer under this Plan shall have no
interest in (a) any contribution made under this Plan by such Participating
Employer by a mistake of fact, so long as the contribution is returned within
one year after payment; (b) in the event that such Participating Employer
receives an adverse determination from the Internal Revenue Service with
respect to the initial qualification of the Plan with respect to such
Participating Employer with the result that the Trust with respect to such
Participating Employer is not exempt from federal income tax and such
Participating Employer's contributions to the Trust are not deductible in
determining its federal income tax, any contributions made

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<PAGE> 93
prior to that time, so long as the contribution is returned within one year
after such determination and the application for determination was made by the
time prescribed by law for filing such Participating Employer's return for the
taxable year in which the Plan was adopted by such Participating Employer or
such later date as the Secretary of the Treasury may prescribe, and (c) any
contributions for which a deduction is disallowed under Section 404 of the
Code, so long as such contributions are returned to such Participating Employer
within one year following such disallowance or as permitted or required by
ERISA or the Code. In the event of such mistake of fact, determination by the
Commissioner, or disallowance of deductions, contributions shall be returned to
such Participating Employer, subject to the limitations, if any, of Section
403(c) of ERISA.

9.2 Limitation on Participants' Rights.

Participation in this Plan shall not give any Employee the
right to be retained as an Employee of any Participating Employer or any right
or interest under the Plan or Trust other than as herein provided. Each
Participating Employer reserves the right to dismiss any Employee without any
liability for any claim against the Trustee, the Trust except to the extent
provided in the Trust, the Committee or any Participating Employer. All
benefits under the Plan with respect to Participants of a

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<PAGE> 94
particular Participating Employer shall be provided solely from the assets of
the Trust with respect to such Participating Employer and a Participant shall
not have any recourse towards satisfaction of such benefit becoming fixed under
the terms of the Plan from other than assets of the Plan attributable to his
Participating Employer's contributions to the Trust or guarantee of benefits
hereunder by the Pension Benefit Guaranty Corporation.

9.3 Receipt or Release.

Any payment to any Participant or Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Trustee, the Committee and all
Participating Employers. The Trustee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a receipt and
release to such effect.

9.4 Alienation.

(a) None of the benefits, payments, proceeds or claims of
any Participant or Beneficiary shall be subject to any claim of any creditor
and, in particular, the same shall not be subject to attachment or garnishment
or other legal process by any creditor, nor shall any such Participant or
Beneficiary have any right to alienate, anticipate, commute, pledge, encumber
or assign any of the benefits or payments

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<PAGE> 95
or proceeds which he may expect to receive, contingently or otherwise, under
this Plan or the Trust.

(b) The provisions of this Section shall also apply to
the creation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless (1)
such order is determined to be a "qualified domestic relations order," as
defined in Section 414(p) of the Code, or (2) the Committee determines in its
discretion to treat any domestic relations order entered before January 1, 1985
as a qualified domestic relations order. The Committee shall establish
reasonable procedures to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders. In the
event a qualified domestic relations order exists with respect to a benefit
payable under the Plan, the benefits otherwise payable to the affected
Participant or Beneficiary shall be payable to the alternate payee specified in
the qualified domestic relations order.

9.5 Persons Under Incapacity.

(a) In the event any amount is payable under the Plan to
a person for whom a conservator has been legally appointed, the payment shall
be distributed to the duly appointed and currently acting conservator, without
any duty

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<PAGE> 96
on the part of the Committee to supervise or inquire into the application of
any funds so paid.

(b) In the event any amount is payable under the Plan to
a minor, payment shall not be made to the minor, but instead shall be paid (1)
to that person's then living parent(s) to act as custodian, (2) if that
person's parents are then divorced, and one parent is the sole custodial
parent, to such custodial parent, or (3) if no parent of that person is then
living, to a custodian selected by the Committee to hold the funds for the
minor under the Uniform Transfers or Gifts to Minors Act in effect in the
jurisdiction in which the minor resides. If no parent is living and the
Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within 60 days after the date the
amount becomes payable, payment shall be deposited with the court having
jurisdiction over the estate of the minor.

9.6 Governing Law.

This Plan shall be construed, administered, and governed in
all respects under applicable federal law, and to the extent that federal law
is inapplicable, under the laws of the State of California; provided, however,
that if

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any provision is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with this Plan's
remaining qualified within the meaning of Section 401(a) of the Code. If any
provision of this instrument shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.

9.7 Headings, etc., Not Part of Plan.

Headings and subheadings in this Plan are inserted for
convenience of reference only and are not to be considered in the construction
of the provisions hereof.

9.8 Instrument in Counterparts.

This Plan may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument, which may be sufficiently evidenced by any one
counterpart.

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9.9 Reorganization of Participating Employer.

This Plan shall inure to the benefit of, and be binding upon
the parties hereto and their successors and assigns. Subject to Section
8.3(e), if a Participating Employer merges or consolidates with or into a
successor, this Plan shall continue in effect with respect to such
Participating Employer unless the successor terminates this Plan with respect
to such Participating Employer.

9.10 Masculine Gender Includes Feminine Gender.

As used in this Plan, the masculine gender shall include the
feminine gender.

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<PAGE> 99
IN WITNESS WHEREOF, the undersigned has caused this document
to be executed by its duly authorized officers on this ______ day of
____________________, 19____.

HILTON HOTELS CORPORATION

By__________________________

Its_________________________

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APPENDIX A

ACTUARIAL ASSUMPTIONS

A.1 Actuarial Equivalent

"Actuarial Equivalent," as defined in Section 1.2, shall mean
an amount of equivalent value when calculated, using as actuarial assumptions,
(i) for purposes other than a Qualified Joint and Survivor Annuity or Surviving
Spouse Benefit, a unisex rate based on the 1951 Group Annuity Mortality Table
for males projected to 1965 pursuant to Scale C and a 5% interest rate, and
(ii) for purposes of a Qualified Joint and Survivor Annuity or Surviving Spouse
Benefit, retiree mortality based on the preceding clause (i), but with joint
annuitant mortality determined using a unisex rate based on the 1951 Group
Annuity Mortality Table for females projected to 1965 pursuant to Scale C and a
5% interest rate; provided, however, that for cash lump sum calculation
purposes, "Actuarial Equivalent" shall mean an amount of equivalent value when
computed using the average of the weekly bond yield on the Standard & Poor's
AAA Industrial Bond Index for the four weeks preceding the Annuity Starting
Date, but no greater than (i) 120% of the "Applicable Interest Rate" if the
present value of the vested accrued benefit exceeds $25,000 (determined using
the "Applicable Interest Rate") and provided that the use of 120% of such rate
does not reduce the present value of the benefit below $25,000, or (ii) the
"Applicable Interest

Appendix A-1
<PAGE> 101
Rate." For purposes of this Section A.1, "Applicable Interest Rate" shall mean
the interest rate or rates which the Pension Benefit Guaranty Corporation (the
"PBGC") would use, as of the first day of the month in which falls the Annuity
Starting Date, to determine the present value of a lump sum distribution on
plan termination if the Plan had terminated as of the first day of the month in
which such distribution occurs with insufficient assets to provide benefits
guaranteed by the PBGC.

A.2 Early or Disability Retirement Reduction Factors

The amount of a Participant's Early or Disability Retirement
Benefit shall equal his Normal Retirement Benefit accrued to his Early or
Disability Retirement Date, reduced by 0.25 for each of the first 60 months
that his Early or Disability Retirement Date precedes his Normal Retirement
Date; and shall be further reduced for each additional month that his Early or
Disability Retirement Date precedes his Normal Retirement Date, using the
Actuarial Equivalent assumptions contained in Section A.1.

Appendix A-2
<PAGE> 102
APPENDIX B

415 LIMITATION ON BENEFITS

Section 5.1 of the Plan shall be construed in accordance with
this Appendix B, and both Section 5.1 and this Appendix B shall be construed
separately with respect to each Participating Employer. Unless the context
clearly requires otherwise, words and phrases used in this Appendix B shall
have the same meanings that are assigned to them under the Plan.

B.1 Definitions.

As used in this Appendix B, the following terms shall have the
meanings specified below.

"Defined Benefit Plan Fraction" shall mean a fraction, the
numerator of which is the projected annual benefit (determined as of the close
of the relevant Plan Year) of the Participant under all Defined Benefit Plans
maintained by one or more Related Companies, and the denominator of which is
the lesser of (a) the product of 1.25 multiplied by the dollar limitation in
effect under Section 415(b)(1)(A) of the Code for the Plan Year, or (b) the
product of 1.4 multiplied by the amount which may be taken into account under
Section 415(b)(1)(B) of the Code with respect to the Participant for the Plan
Year.

Appendix B-1
<PAGE> 103
"Defined Contribution Plan Fraction" shall mean a fraction,
the numerator of which is the sum of the annual additions to a Participant's
accounts under all Defined Contribution Plans maintained by one or more Related
Companies, and the denominator of which is the sum of the lesser of (a) or (b)
for such Plan Year and for each prior Plan Year of service with one or more
Related Companies, where (a) is the product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A) of the Code for the Plan Year
(determined without regard to Section 415(c)(6) of the Code), and (b) is the
product of 1.4 multiplied by the amount which may be taken into account under
Section 415(c)(1)(B) of the Code (or Section 415(c)(7) of the Code, if
applicable) with respect to the Participant for the Plan Year. Solely for
purposes of this definition, contributions made directly by an Employee to a
Defined Benefit Plan which maintains a qualified cost-of-living arrangement as
such term is defined in Section 415(k)(2) of the Code shall be treated as
annual additions. Notwithstanding the foregoing, the numerator of the Defined
Contribution Plan Fraction shall be adjusted pursuant to Treas. Reg. Section
1.415-7(d)(1), Questions T-6 and T-7 of Internal Revenue Service Notice 83-10,
and Questions Q-3 and Q-14 of Internal Revenue Service Notice 87-21.

"Section 415 Compensation" shall mean a Participant's earned
income, wages, salaries, and fees for profes-

Appendix B-2
<PAGE> 104
sional services, and other amounts received for personal services actually
rendered in the course of employment with an employer maintaining a plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:

(a) Employer contributions to a plan of deferred
compensation which are not included in the Employee's gross income for
the taxable year in which contributed or employer contributions under
a simplified employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from a plan of
deferred compensation;

(b) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture;

Appendix B-3
<PAGE> 105
(d) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in
Section 403(b) of the Code (whether or not the amounts are actually
excludible from the gross income of the Employee).

Compensation for any limitation year is the compensation actually paid or
includible in gross income during such year.

"Social Security Retirement Age" shall mean the age used as
the retirement age for the Participant under Section 216(l) of the Social
Security Act, except that such section shall be applied without regard to the
age increase factor and as if the early retirement age under Section 216(l)(2)
of such Act were 62.

"Year of Service" shall be calculated using the Plan rules
that normally apply for determining vesting service.

Appendix B-4
<PAGE> 106
B.2 Adjustments to Basic Limitation.

(a) The basic limitation set forth in section 5.1 of the
Plan is subject to the adjustments hereinafter set forth in the following
subsections. For purposes of applying the basic limitation, benefits payable
in any form other than a straight life annuity with no ancillary benefits shall
be adjusted, as provided by Treasury Regulations, so that such benefits are the
Actuarial Equivalent of a straight life annuity.

(b) For purposes of applying the basic limitation, the
following benefits shall not be taken into account:

(1) any ancillary benefit which is not directly related
to retirement income benefits,

(2) the death benefit provided under section 4.5; and

(3) any other benefit not required under Section
415(b)(2) of the Code and Regulations thereunder to be taken into
account for purposes of the limitation in Section 415(b)(1) of the
Code.

(c) Payment Before Age 62. In the event the
Participant's retirement benefits become payable before age 62, the $90,000
limitation shall be the Actuarial Equivalent of the limitation for benefits
commencing at age 62 in accordance with Section 415(b)(2)(C) of the Code; for

Appendix B-5
<PAGE> 107
purposes of this decrease, the interest rate assumption shall be the greater of
5% or the interest rate specified in the definition of Actuarial Equivalent
under this Plan and mortality decrements shall be ignored to the extent a
forfeiture does not occur at the date of death.

(d) Payment After Age 62 And Before Social Security
Retirement Age. In the event the Participant's retirement benefits become
payable after age 62 and before Social Security Retirement Age, the $90,000
limitation shall be decreased by 5/9ths of 1% for each of the first 36 months
and by 5/12ths of 1% for each of the additional months by which benefits
commence before the month of the Participant's Social Security Retirement Age,
unless the Secretary of the Treasury prescribes a different method of reduction
pursuant to Section 415(b)(2)(C) of the Code.

(e) Payment After Social Security Retirement Age. In the
event the Participant's retirement benefits become payable after the
Participant's Social Security Retirement Age, the $90,000 limitation shall be
increased to provide the Actuarial Equivalent of an annual benefit equal to
such limitation beginning at the Participant's Social Security Retirement Age,
in accordance with Section 415(b)(2)(D) of the Code; for purposes of this
increase, the interest rate assumption shall be the lesser of 5% or the
interest rate specified in the definition of Actuarial Equivalent under

Appendix B-6
<PAGE> 108
this Plan and mortality decrements shall be ignored to the extent a forfeiture
does not occur at the date of death.

B.3 Participation in Other Defined Benefit Plans.

The limitation of this Appendix with respect to any
Participant who at any time has been a Participant in any other Defined Benefit
Plan maintained by his Participating Employer or a Related Company shall apply
as if the total benefits payable under all Defined Benefit Plans in which the
Participant has been a participant were payable from one plan.

B.4 Benefits Not in Excess of $10,000.

The provisions of sections B.2 and B.3 shall not apply to any
Participant who has not at any time participated in any Defined Contribution
Plan maintained by his Participating Employer or any Related Company if the
Participant's total annual retirement benefit computed without regard to such
sections in any year is not in excess of $10,000.

B.5 Less than 10 Years of Participation or Service.

(a) If a Participant has completed less than 10 years of
participation in the Plan with respect to his Participating Employer, the
dollar limitation in section 5.1(a) shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of the

Appendix B-7
<PAGE> 109
Participant's years of participation (or part thereof) in the Plan and the
denominator of which is 10.

(b) If a Participant has completed less than 10
Years of Service with his Participating Employer, the compensation limitation
of section 5.1(b), the limitation of section B.4, and the limitation of section
B.6 shall be adjusted by multiplying such amounts by a fraction, the numerator
of which is the Participant's Years of Service (or part thereof) with his
Participating Employer and the denominator of which is 10.

(c) In no event shall subsection (a) or (b) of this
section B.5 reduce the dollar or compensation limitations of section 5.1, or
the limitation of section B.4, to an amount less than 1/10 of such limitation
(determined without regard to this section B.5).

B.6 Participant in Defined Contribution Plan.

In any case where a Participant under this Plan is also a
Participant in a Defined Contribution Plan maintained by his Participating
Employer or any Related Company, the sum of the Defined Benefit Plan Fraction
and the Defined Contribution Plan Fraction shall not exceed 1.0.

Appendix B-8
<PAGE> 110
B.7 Reduction of Benefits and/or Contributions.

Reduction of benefits under and/or contributions to all plans,
where required, shall be accomplished by first reducing the Participant's
benefit under this Plan or any other Defined Benefit Plan in which the
Participant participates (in such priority as shall be determined by the
Company and the administrators of such other plans) and, next, by reducing
contributions or allocating excess forfeitures for Defined Contribution Plans
in the manner and priority set forth in such plans, or if not set forth
therein, in the manner and priority established by the Company and the
administrators of such plans; provided, however, that necessary reductions may
be made in a different manner and priority pursuant to the agreement of the
Company and the administrators of all other plans covering such Participant.

B.8 Preservation of Current Accrued Benefit.

If the Current Accrued Benefit of an individual who is a
Participant as of January 1, 1987 exceeds the benefit limitations under Section
415(b) of the Code, then for purposes of Section 415(b) and (e) of the Code,
the limitation of Section 415(b)(1)(A) of the Code with respect to such
individual shall be equal to such Current Accrued Benefit. For purposes of
this section, "Current Accrued Benefit" shall mean a Participant's accrued
benefit under the Plan, determined as if the Participant had separated

Appendix B-9
<PAGE> 111
from service as of December 31, 1986, expressed as annual benefit within the
meaning of Section 415(b)(2) of the Code. The amount of a Participant's
Current Accrued Benefit shall be determined by disregarding any change in the
limits provided in Section 415 of the Code to the extent such change is made
inapplicable to the prior accrued benefit of a Participant.

Appendix B-10
<PAGE> 112
APPENDIX C

TOP-HEAVY PROVISIONS

Section 5.2 of the Plan shall be construed in accordance with
this Appendix C, and both Section 5.2 and this Appendix C shall be construed
separately with respect to each Participating Employer. Definitions in this
Appendix C shall govern for the purposes of this Appendix C. Any other words
or phrases used in this Appendix C, however, shall have the same meanings that
are assigned to them under the Plan, unless the context clearly requires
otherwise.

C.1 General.

This Appendix C shall be interpreted in accordance with
Section 416 of the Code and the regulations thereunder.

C.2 Definitions.

(a) The "Benefit Amount" for any Employee means (1) in
the case of any defined benefit plan, the present value of the Employee's
normal retirement benefit, determined on the Valuation Date as if the Employee
terminated on such Valuation Date, plus the aggregate amount of distributions
made to such Employee within the five-year period ending on the Determination
Date (except to the extent already included on the Valuation Date) and (2) in
the case of any defined contribution plan, the sum of the amounts credited, on
the Determination Date, to each of the

Appendix C-1
<PAGE> 113
accounts maintained on behalf of such Employee (including accounts reflecting
any nondeductible employee contributions) under such plan plus the aggregate
amount of distributions made to such Employee within the five-year period
ending on the Determination Date. For purposes of this section, the present
value shall be computed using a 5% interest assumption and the mortality
assumptions contained in the defined benefit plan for benefit equivalence
purposes, provided that, if more than one defined benefit plan is being
aggregated for top-heavy purposes, the actuarial assumptions which shall be
used for testing top-heaviness are those of the plan with the lowest interest
assumption, provided further that if the lowest interest assumption is the same
for two or more plans, the actuarial assumptions used shall be that of the plan
with the greatest value of assets on the applicable date.

(b) "Company" means any company (including unincorporated
organizations) participating in the Plan or plans included in the "aggregation
group" as defined in this Appendix C.

(c) "Determination Date" means the last day of the
preceding Plan Year or, in the case of the first Plan Year of the Plan, the
last day of the Plan Year.

(d) "Employees" means employees, former employees,
beneficiaries, and former beneficiaries who have a Benefit Amount greater than
zero on the Determination Date.

Appendix C-2
<PAGE> 114
(e) "Key Employee" means any Employee who, during the
Plan Year containing the Determination Date or during the four preceding Plan
Years, is:

(1) one of the 10 Employees of a Company having annual
compensation from such Company of more than the limitation in effect
under Section 415(c)(1)(A) of the Code and owning (or considered as
owning within the meaning of Section 318 of the Code) both more than a
1/2% interest and the largest interests in such Company (if two
Employees have equal interests, the Employee having the greater annual
compensation from the Company shall be treated as having a larger
interest);

(2) a 5% owner of a Company;

(3) a 1% owner of a Company who has an annual
compensation above $150,000; or

(4) an officer of a Company having an annual compensation
greater than 50% of the amount in effect under Section 415(b)(1)(A) of
the Code for any such Plan Year (however, no more than the lesser of
(A) 50 employees or (B) the greater of 3 employees or 10% of the
Company's employees shall be treated as officers). For purposes of
determining the number of employees taken into account under this
paragraph 4, employees described in Section 414(q)(8) of the Code
shall be excluded.

Appendix C-3
<PAGE> 115
This definition shall be interpreted in accordance with
Section 416(i) of the Code and the regulations thereunder and such rules are
hereby incorporated by reference. The term "Key Employee" shall not include
any officer or employee of an entity referred to in Section 414(d) of the Code.
For the purpose of this subsection, "compensation" shall mean compensation as
defined in Section 414(q)(7) of the Code and shall be determined without regard
to Sections 125, 402(a)(8), 402(h)(1)(B) of the Code or, in the case of
employer contributions made pursuant to a salary reduction agreement, 403(b).

(f) A "Non-Key Employee" means an Employee who is not a
Key Employee.

(g) "Valuation Date" means the first day (or such other
date which is used for computing plan costs for minimum funding purposes) of
the 12-month period ending on the Determination Date.

(h) A "Year of Service" shall be calculated using the Plan
rules that normally apply for determining vesting service.

C.3 Top-Heavy Definition.

This Plan shall be top-heavy for any Plan Year if, as of the
Determination Date, the "top-heavy ratio" exceeds 60%. The top- heavy ratio is
the sum of

Appendix C-4
<PAGE> 116
the Benefit Amounts of all Employees who are Key Employees divided by the sum
of the Benefit Amounts for all Employees. For purposes of this calculation
only, the following rules shall apply:

(a) The Benefit Amounts of all Non-Key Employees who were
Key Employees during any prior Plan Year shall be disregarded.

(b) The Benefit Amounts of all Employees who have not
performed any services for any Company at any time during the five-
year period ending on the Determination Date shall be disregarded;
provided, however, if an Employee performs no services for five years
and then again performs services, such Employee's Benefit Amount shall
be taken into account.

This calculation shall be made by aggregating any
plans, of the Company or a Related Company, qualified under
Section 401(a) of the Code in which a Key Employee
participates or which enables this Plan to meet the
requirements of Section 401(a)(4) or 410 of the Code; all
plans so aggregated constitute the "aggregation group."

(2) Permissive Aggregation.

The Company may also aggregate any such plan to the
extent that such plan, when aggregated with this aggregation
group, continues to meet the requirements of Sections
401(a)(4) and 410 of the Code.

Appendix C-5
<PAGE> 117
If an aggregation group includes two or more defined benefit
plans, the actuarial assumptions used in determining an Employee's
Benefit Amount shall be the same under each defined benefit plan and
shall be specified in such plans. The aggregation group shall also
include any terminated plan which covered a Key-Employee and which
was maintained within the five-year period ending on the Determination
Date.

(d) This calculation shall be made in accordance with Section
416 of the Code (including 416(g)(4)(A)) and the regulations
thereunder and such rules are hereby incorporated by reference. For
purposes of determining the accrued benefit of a Non-Key Employee who
is a participant in a defined benefit plan, this calculation shall be
made using the method which is used for accrual purposes for all
defined benefit plans of the Company, or if there is no such method,
as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under Section 411(b)(1)(C) of the Code.

C.4 Vesting.

Notwithstanding the vesting provisions of this Plan, if the
Plan is top-heavy for any Plan Year, any Participant who completes one Hour of
Service during any day of such Plan Year or any subsequent Plan Year and who
has a Break in Employment during any day of such Plan Year or any

Appendix C-6
<PAGE> 118
subsequent Plan Year shall be entitled to a vested benefit which is the greater
of the Participant's vested interest pursuant to section 4.6(b) of the Plan or
a vested interest at least equal to the product of (a) the benefit such
Participant would receive under this Plan if such Participant was 100% vested
on the date of such Break in Employment times (b) the percentage shown below:

<TABLE>
<CAPTION>
Number of Completed
Years of Service Percentage
------------------- ----------
<S> <C>
2 20%
3 40%
4 60%
5 80%
6 100%

</TABLE>

Notwithstanding the foregoing, the nonforfeitable percentage of a Participant's
benefit under the Plan shall not be less than that determined under the Plan
without regard to the preceding vesting schedule. Such benefit shall be
payable in accordance with the provisions of this Plan regarding payments to
terminated Participants.

Appendix C-7
<PAGE> 119
shall a Participant's vested percentage in his or her accrued benefit be
reduced. In addition, a Participant shall have the option of remaining under
the vesting schedule set forth in this section if the Participant has completed
three Years of Service. The period for exercising such option shall begin on
the first day of the Plan Year for which the Plan is no longer top-heavy and
shall end 60 days after the later of such first day or the day the Participant
is issued written notice of such option by the Company or the Committee.

C.5 Minimum Benefits or Contributions, Compensation Limitations and
Section 415 Limitations.

If the Plan is top-heavy for any Plan Year, the following
provisions shall apply to such Plan Year:

(a) (1) Except to the extent not required by Section
416 of the Code or any other provision of law, notwithstanding any
other provision of this Plan, if the Plan and all other plans which
are part of the aggregation group are defined contribution plans, each
Participant (and any other employee required by Section 416 of the
Code) other than Key Employees shall receive an allocation of employer
contributions and forfeitures from a plan which is part of the
aggregation group at least equal to 3% (or, if lesser, the largest
percentage allocated to any Key Employee for the Plan Year) of

Appendix C-8
<PAGE> 120
such Participant's compensation for such Plan Year (the "defined
contribution minimum"). For purposes of this subsection, salary
reduction contributions on behalf of a Key Employee must be taken into
account. For purposes of this subsection, a Non-Key Employee shall be
entitled to a contribution if the Non-Key Employee is employed on the
last day of the Plan Year (A) regardless of his or her level of
compensation, (B) regardless of whether he or she has made any
mandatory contributions required under the Plan, and (C) regardless of
whether he or she has less 1000 Hours of Service (or the equivalent)
for the accrual computation period.

(2) Except to the extent not required by Section
416 of the Code or any other provision of law, notwithstanding any
other provisions of this Plan, if this Plan or any other plan which is
part of the aggregation group is a defined benefit plan each
Participant who is a participant in any such defined benefit plan (who
is not a Key Employee) who accrues a full Year of Service during such
Plan Year shall be entitled to an annual normal retirement benefit
from a defined benefit plan which is part of the aggregation group
which shall not be less than the product of (A) the Employee's average
compensation for the five consecutive years when the Employee had the
highest aggregate compensation and (B) the lesser of 2% per

Appendix C-9
<PAGE> 121
Year of Service or 20% (the "defined benefit minimum"). A Non-Key
Employee shall not fail to accrue a benefit merely because the Non-
Key Employee is not employed on a specified date or is excluded from
participation because (A) his or her compensation is less than a
stated minimum or (B) he or she fails to make mandatory employee
contributions. For purposes of calculating the defined benefit
minimum, (A) compensation shall not include compensation in Plan Years
after the last Plan Year in which the Plan is top-heavy and (B) a
Participant shall not receive a Year of Service in any Plan Year
before January 1, 1984 or in any Plan Year in which the Plan is not
top-heavy. This defined benefit minimum shall be expressed as a life
annuity (with no ancillary benefits) commencing at Normal Retirement
Age. Benefits paid in any other form or time shall be the Actuarial
Equivalent (as provided in the plan for retirement benefit equivalence
purposes) of such life annuity. Except to the extent not required by
Section 416 of the Code or any other provisions of law, each
Participant (other than a Key Employee) who is not a participant in
any such defined benefit plan shall receive the defined contribution
minimum (as defined in paragraph (a)(1) above).

(3) If a Non-Key Employee is covered by plans
described in both paragraphs (1) and (2) above, the Non-Key Employee
shall only be entitled to the

Appendix C-10
<PAGE> 122
minimum described in paragraph (1), except that for the purpose of
paragraph (1) "3%, or if less the largest percentage allocated to any
Key Employee for the Plan Year," shall be replaced by 5%.
Notwithstanding the preceding sentence, if the accrual rate under the
plan described in paragraph (2) would comply with this section C.5
absent the modifications required by this section, the minimum
described in paragraph (1) above shall not be applicable.

(b) For purposes of this section, "compensation" shall
mean all earnings included in the Employee's Form W-2 for the calendar
year that ends within the Plan Year, not in excess of $200,000,
adjusted at the same time and in the same manner as under Section
415(d) of the Code. With respect to Plan Years commencing on or after
January 1, 1989, the $200,000 limitation in the preceding sentence
shall not apply; instead, the limitations described in the Plan's
definition of "Compensation" under Section 1.2 shall apply with
respect to such Plan Years.

(c) (1) Unless the Plan qualifies for an exception
under paragraph (2) below, "1.0" shall be substituted for "1.25" in
the definitions of Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction used in Appendix B to the Plan.

(2) A plan qualifies for an exception from the
rule of paragraph (1) above if the Benefit Amount

Appendix C-11
<PAGE> 123
of all Employees who are Key Employees does not exceed 90% of the sum
of the Benefit Amounts for all Employees and one of the following
requirements is met:

(A) A defined benefit minimum of 3% per Year of
Service (up to 30%) is provided;

(B) For Participants covered only by a defined
contribution plan, a defined contribution minimum of 4% is
provided;

(C) For Participants covered by both types of
plans, benefits from the defined contribution minimum are
comparable to the 3% defined benefit minimum;

(D) The plan provides a floor offset where the
floor is a 3% defined benefit minimum; or

(E) A defined contribution minimum of 7-1/2% of
compensation is provided for any Non-Key Employee who is
covered under both a defined benefit plan and a defined
contribution plan (each of which is top-heavy) of a Company.

Appendix C-12
<PAGE> 124
APPENDIX D

RESTRICTION OF BENEFITS

D.1 Restriction of Benefits Upon Early Termination or Upon Payments to 25
Highest Paid Employees Before the Current Benefit Structure Has Been
in Effect Ten Year.

(a) This Appendix D shall be effective for Plan Years
beginning before January 1, 1994, shall be construed separately with respect to
each Participating Employer, and shall apply only if:

(1) the Plan is terminated with respect to a
particular Participating Employer prior to 10 years after it is
established with respect to such Participating Employer (the
"Establishment Date"), or

(2) benefits become payable within such 10 year
period to an Employee of such Participating Employer who is one of the
25 highest paid Employees of such Participating Employer (as of the
Establishment Date) and whose annual retirement income exceeds $1500
(defined, for purposes of this Appendix D, as a "Restricted
Employee").

Either of the above events shall be referred to as a
"Triggering Event."

Appendix D-1
<PAGE> 125
(b) In addition, if the Plan is amended to increase the
benefits actually payable in the event of the subsequent termination of the
Plan, the provisions of this Appendix shall be applied to the Plan as so
amended as if it were a new plan established on the date of the amendment.

(c) If a Triggering Event occurs, the amount of the
employer contributions which may be used for any Restricted Employee shall not
exceed the largest of the following amounts:

(1) $20,000,

(2) 20% of the first $50,000 of such
Participant's average annual compensation paid to him between the
Establishment Date and the date of the Triggering Event, multiplied by
the number of full years between such dates;

(3) In the case of a "substantial owner" (as
defined in Section 4022(b)(5) of ERISA), the present value of the
benefit guaranteed for such Participant under Section 4022 of ERISA,
or if the Plan has not terminated, the present value of the benefit
that would be guaranteed if the Plan terminated on the date the
benefit commences, determined in accordance with regulations of the
Pension Benefit Guaranty Corporation ("PBGC"); and

Appendix D-2
<PAGE> 126
(4) In the case of a Restricted Employee who is
not a substantial owner, the present value of the maximum benefit
described in Section 4022(b)(3)(B) of ERISA (determined on the earlier
of the date the Plan terminates or the date benefits commence, and
determined in accordance with PBGC regulations) without regard to any
other limitations in Section 4022 of ERISA.

(d) If the Plan is amended to increase the benefit
actually payable in the event of the subsequent termination of the Plan, then
the above limitations shall be applied to the Plan as so changed as if it were
a new plan established on the date of the change. The original group of 25
employees will continue to have the above limitations apply as if the Plan had
not been changed. The restrictions relating to the change shall apply to
benefits for each of the 25 highest paid employees on the effective date of the
change (excluding, however, employees whose annual retirement income provided
by employer contributions prior to that date and during the ensuing 10 years,
based on such employee's rate of compensation on that date, would not exceed
$1,500); any such employee shall be a Restricted Employee for purposes of the
succeeding paragraphs of this Appendix.

Appendix D-3
<PAGE> 127
If a Triggering Event occurs, the employer contributions which
may be used for the benefit of the new group of 25 employees will be limited to
the greater of:

(1) As of the date of the Triggering Event, the
employer contributions which would have been applied to provide the
benefits for the employee if the Plan had been continued without
change;

(2) $20,000; or

(3) The sum of (A) and (B). (A) equals the
employer contributions which would have been applied to provide
benefits for the employee under the Plan if it had been terminated the
day before the effective date of change. (B) equals the greater of
(i) the amount computed by multiplying the number of years between the
effective date of change and the Triggering Event by 20 percent of the
employee's annual compensation (or, if smaller, $10,000), or (ii) the
employer contributions that could be provided to pay benefits under
paragraph (c)(3) or (c)(4) of this Appendix if a new plan had been
established on the effective date of the change containing the revised
benefit structure.

(e) This Appendix shall not restrict the full payment of
periodic retirement benefits in an amount no

Appendix D-4
<PAGE> 128
greater than the basic benefit under the Plan to any Restricted Employee while
the Plan continues in full effect and its full current costs continue to be
met. In addition, if and when the contributions of the Participating Employer
are sufficient at a later date to meet its full current costs under the Plan,
the excess of the benefits, otherwise payable, over the actual benefits paid to
a Restricted Employee during the period that such full current costs had not
been met, shall be paid in a lump sum to such Restricted Employee, or, if the
Restricted Employee has died in the meantime, to the Restricted Employee's
Beneficiary.

(f) Any funds becoming available by reason of the
application of this Appendix to Restricted Employees shall, in the event of
termination of the Plan, be applied to increase proportionately the benefits of
all other Participants and former Participants then in the Plan. If funds so
becoming available exceed the amount necessary to provide full benefits accrued
to the date in question for such other Participants and former Participants,
the excess shall be applied for the benefit of the Restricted Employees.

(g) The restrictions contained in this Appendix shall not
apply if, as of the date this Plan terminates, the value of Plan assets is not
less than the present value of all accrued benefits (whether or not
nonforfeitable), distributions of assets are made to each Participant equal

Appendix D-5
<PAGE> 129
to the present value of that Participant's accrued benefit and the formula for
computing benefits as of the date of termination is not discriminatory. All
present values and the value of Plan assets will be computed using assumptions
satisfying Section 4044 of ERISA.

(h) If the Plan otherwise allows a lump sum distribution,
this Appendix shall not restrict the payment in one lump sum of the entire
amount to which a terminating Participant is entitled, provided the following
conditions are met: The Participant must enter into a written agreement with
the Committee and the Trustee, binding on the Participant's estate, in which
the Participant agrees to repay to the Trust a sum equal to the Actuarial
Equivalent of the amounts by which the Participant's monthly retirement
benefits herein would have been decreased during the Participant's then
remaining lifetime pursuant to the provisions set forth in this Appendix if a
Triggering Event described in paragraph (a)(1) of this Appendix occurs. At the
time of the lump-sum payment, the Participant must also guarantee payment of
any amount required to be repaid by the agreement by depositing with a
depository acceptable to the Trustee property having a fair market value equal
to 125% of the amount repayable if the Plan had been terminated on the date of
payment of the lump sum or posting bond consistent with the provision of
adequate security. Said property shall be held by the depository or such bond
shall remain in effect

Appendix D-6
<PAGE> 130
until receipt of the Trustee's certification that the Participant (or the
Participant's estate) is no longer obligated to repay any amount under the
agreement. The Participant must further agree that if the market value of the
property held by a depository falls below 110% of the amount which would then
be repayable if the Plan were then to be terminated, he or she will deposit
additional property necessary to bring the value of the property held by the
depository up to 125% of such amount.

(i) Neither the cost of any pre-retirement death benefits
nor pre-retirement death benefit payments are subject to the restrictions of
this Appendix. The cost of any post-retirement death benefit shall be subject
to the restrictions of this Appendix, but not the actual payment of
post-retirement death benefits.

Appendix D-7
<PAGE> 131
APPENDIX E

RESTRICTION OF BENEFITS AND PAYMENTS

E.1 General.

This Appendix E shall be construed separately with respect to
each Participating Employer, and shall be effective for (a) distributions
(whether before or after Plan termination) to the top 25 highest paid Highly
Compensated Employees made on or after January 1, 1994, and (b) Plan
terminations occurring on or after January 1, 1994. This Appendix shall be
interpreted in accordance with Section 401(a)(4) of the Code and the
regulations thereunder. Regardless of how the terms defined in this Appendix
are otherwise defined in the Plan, the definitions in this Appendix shall
govern for the purposes of this Appendix.

E.2 Definitions

(a) "Benefits" for any Employee include, among other
benefits, loans in excess of the amounts set forth in Section 72(p)(2)(A) of
the Code, any periodic income, any withdrawal values payable to a living
Employee, and any death benefits not provided for by insurance on the
Employee's life.

(b) "Current Liabilities" means the value of current
liabilities as defined in Section 412(l)(7) of the Code.

Appendix E-1
<PAGE> 132
For this purpose, the applicable Participating Employer may use the value as
reported on Schedule B of such Participating Employer's most recent, timely
filed Form 5500 or Form 5500 C/R with respect to the Plan, or may use the value
as of any subsequent date.

(1) Any Employee who performs services for his
Participating Employer or any Related Company during the "determination year"
and who, during the "look-back year" (A) was a 5% owner of such Participating
Employer or any Related Company; (B) received compensation from such
Participating Employer or any Related Company in excess of $75,000 (as adjusted
pursuant to Section 415(d) of the Code); (C) received compensation from such
Participating Employer or any Related Company in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the "top-paid
group" for such year; or (D) was an officer of such Participating Employer or
any Related Company and received compensation during such year that is greater
than 50% of the dollar limitation in effect under Section 415(b)(1)(A) of the
Code;

(2) Any Employee who performs services for such
Participating Employer or any Related Company during the determination year and
who, with respect to the determination year, is either described in
subparagraph

Appendix E-2
<PAGE> 133
(1)(A) above or is both one of the 100 Employees who received the most
compensation from such Participating Employer or any Related Company during the
determination year and is described in subparagraphs (1)(B), (1)(C) or (1)(D);
or

(3) Any Employee who separated from service (or was
deemed to have separated) prior to the determination year, performs no services
for such Participating Employer or any Related Company during the determination
year, and met the description in Paragraphs (1) or (2) above for either the
separation year or any determination year ending on or after the Employee's
55th birthday.

(4) If no officer of such Participating Employer or any
Related Company has compensation in excess of 50% of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code during a determination year or a
look-back year, the highest paid officer for such year shall be treated as a
Highly Compensated Employee.

(5) If an Employee is, during a determination year or
look-back year, a "family member" of either a 5% owner who is an Employee or of
a Highly Compensated Employee in the group consisting of the 10 most highly
compensated Employees ranked on the basis of compensation paid by or any
Related Company during the determination year or the look-back year, then the
family member and 5% owner or top-ten Highly Compensated Employee shall be
treated as a single Employee, and their compensation and contributions or

Appendix E-3
<PAGE> 134
benefits under this Plan shall be aggregated. Except as otherwise provided
under Section 401(a)(17) of the Code, "family member" includes the spouse,
lineal ascendants and descendants of the Employee or former Employee and the
spouses of such lineal ascendants and descendants.

(6) The "determination year" shall be the Plan Year for
which compliance is being tested, and the "look-back year" shall be the
12-month period immediately preceding the determination year.

(7) The top-paid group for a determination year or a
look-back year shall consist of the top 20% of Employees ranked on the basis of
compensation received during the year excluding Employees described in Section
414(q)(8) of the Code and Treasury Regulations thereunder. The number of
Employees treated as officers shall be limited to 50 (or, if less, the greater
of 3 Employees or 10% of the Employees). For purposes of this definition of
"Highly Compensated Employee", "compensation" means compensation within the
meaning of Section 415(c)(3) of the Code, but including elective or salary
reduction contributions to a cafeteria plan, cash or deferred arrangement or
tax- sheltered annuity.

(8) If the Participating Employer makes an election for
any year under this Paragraph (8), in determining whether an Employee is a
Highly Compensated Employee for such year, subparagraph (1)(B) shall be applied
by substituting "$50,000" for "$75,000," and subparagraph (1)(C) shall not
apply.

Appendix E-4
<PAGE> 135
(d) "Restricted Employee," for purposes of this Appendix
E, means an Employee who is one of the 25 Highly Compensated Employees who
received the highest Compensation from the Participating Employer during the
current calendar year or any prior calendar year. Accordingly, the group of
Restricted Employees may change from year to year, or within a single year.

E.3 Restriction of Benefits on Plan Termination.

In the event of a Plan termination, the benefit of any Highly
Compensated Employee shall be limited to a benefit that is nondiscriminatory
under Section 401(a)(4) of the Code.

E.4 Restriction on Distributions.

The annual payments to a Restricted Employee shall be limited
to an amount equal in each year to the payments that would be made on behalf of
the employee under -

(a) a straight life annuity that is the Actuarial
Equivalent of the accrued benefit and other Benefits to which the
Employee is entitled under the Plan (other than a social security
supplement), and

(b) the amount of the payments that the Employee is
entitled to receive under a social security supplement.

Appendix E-5
<PAGE> 136
E.5 Limitations on Restrictions.

(a) The restrictions of Section E.4 shall not apply if
any of the following requirements is satisfied:

(1) after payment to a Restricted Employee of all
Benefits payable to the Restricted Employee under the Plan, the value
of Plan assets (determined as of the same date the Current Liabilities
are determined) equals or exceeds 110 percent of the value of Current
Liabilities;

(2) the value of the Benefits payable to the Restricted
Employee is less than 1 percent of the value of Current Liabilities
before distribution; or

(3) the value of the Benefits payable to the Restricted
Employee does not exceed $3500.

(b) The restrictions of Section E.4 shall not apply if,
as of the date this Plan terminates, the value of Plan assets is not less than
the present value of all accrued benefits (whether or not forfeitable),
distributions of assets are made to each Participant equal to the present value
of that Participant's accrued benefit, and the formula for computing benefits
as of the date of termination is not discriminatory. All present values and
the value of Plan assets will be computed using assumptions satisfying Section
4044 of ERISA.

Appendix E-6
<PAGE> 137
lump sum of the entire amount to which a terminating Participant is entitled,
provided that the Employee enters into such written agreements and makes any
other arrangements (including, for example, providing adequate security for
repayment) necessary or desirable, as determined solely by the Committee, to
comply with revenue rulings or other pronouncements of the Internal Revenue
Service permitting lump sum distributions to Restricted Employees.

(d) If permitted by the Committee, the restrictions in
Section E.4 shall not apply to the extent the conditions set forth in any
revenue ruling or other pronouncements of the Internal Revenue Service are met.
The Committee shall have sole discretion to determine whether such conditions
are met.

Appendix E-7
<PAGE> 138
APPENDIX F

PARTICIPATING EMPLOYERS AS OF JANUARY 1, 1994

<TABLE>
<CAPTION>
Special Employee
Classification
Name of Employer Limitation
---------------- ----------
<S> <C>
Plan Sponsor:

Hilton Hotels Corporation None

Controlled Group Members:

Palmer House Company None

Hotel Waldorf Astoria Corp. None

Hilton Washington Corporation None

Hotel Equipment Corporation None

Hilton Casinos, Inc. None

Hilton San Diego Corporation None

Hilton Inns, Inc. None

Hilton New Jersey Corp. None

Benco, Inc. None

Conrad International Investment Corp. None

Conrad International Hotel Corp. None

Non-Controlled Group Subsidiaries:

Hilton Hawaiian Village Joint Venture None

Hilton Service Corporation None

Managed Properties:

Palacio Del Rio, Inc. (Hilton Palacio Del Rio) None
</TABLE>

Appendix F-1
<PAGE> 139
<TABLE>
<CAPTION>
Special Employee
Classification
Name of Employer Limitation
---------------- ----------
<S> <C>
S.A. Hotel, Inc. None

Bristol Corporation (Anchorage Westward Hilton) None

International Rivercenter (New Orleans Hilton) None

Koar-Pasadena Investment Partnership, G.P.
(Pasadena Hilton) None

Hotelerama Associates Limited (Fontainebleu Hilton) None

Fortuna Ent. LP (Los Angeles Airport Hilton) None

Kuilima Resort Company (Turtle Bay Hilton) None

Anaheim Hotel Partnership None
</TABLE>

Appendix F-2

<PAGE> 1
EXHIBIT 10.10

AMENDMENT TO HILTON HOTELS CORPORATION'S
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The Supplemental Executive Retirement Plan (the "SERP") of Hilton
Hotels Corporation (the "company") is hereby amended effective April 1, 1994,
in the following particulars:

1. Section 2.1 of the SERP is deleted in its entirety and there
is substituted therefor the following:

"2.1 "Vested Participant" means:

(a) With respect to an individual who became a
participant prior to April 1, 1994, either (i) completion of five
years of service with the employers; or (ii) employment with the
employers at the time a Change in Control occurs, even if the
participant has not then completed five years of service with the
employers.

(b) For an individual who became a participant on or
after April 1, 1994, either (i) the later of the date the participant
attains age 55 while employed by the employers or the date the
participant completes ten years of service with the employers; or (ii)
employment with the employers at the time a Change in Control occurs,
even if the participant had not then satisfied the requirements of
clause (i) above."

2. Section 2.4 of the SERP is amended by adding the following to
the end of the section:

"Earnings in any calendar year, commencing with 1994, in excess of
$800,000 shall be disregarded in determining an individual's Average
Earnings. This limitation shall be applied after any annualization or
adjustments referred to above. This $800,000 limitation shall not be
applied to earnings in any year prior to 1994."

1
<PAGE> 2
3. Section 4.2 of the SERP is deleted in its entirety and there
is substituted therefor the following:

"A Vested Participant who has completed ten years of service and who
retires at or after attaining age 55 years but before attaining age 65
years will be entitled to apply to the company for a Monthly
Retirement Income, reduced by one-quarter of one percent thereof for
each month by which the date of his retirement precedes his 65th
birthday. Such Monthly Retirement Income shall be paid if and only if
the company approves such payment. If the company does not approve
such payment, then such Vested Participant will be entitled to a
Monthly Retirement Income payable as provided in subsection 6.3. Any
termination of employment with the employers at or after age 55 for a
reason other than death is a "retirement" for all purposes hereof."

4. The following new Section 10.13 is hereby added to the SERP:

"10.13 Suspension of Distributions. Effective April 1, 1994, the
initial distributions described in subsection 10.1, the subsequent
distributions described in subsection 10.2, the guaranteed rate
distributions described in subsection 10.7 and the tax gross up
distributions described in Section 10.9 shall not be made unless and
until there is a Change in Control. Following a Change in Control,
any such distributions which were not made because of the adoption of
this subsection 10.13 shall be made as soon as administratively
feasible according to the provisions of this Section 10."

<PAGE> 1
EXHIBIT 10.14

AMENDMENT TO HILTON HOTELS CORPORATION'S
RETIREMENT BENEFIT REPLACEMENT PLAN

The Retirement Benefit Replacement Plan (the "Replacement Plan") of
Hilton Hotels Corporation (the "company") is hereby amended effective April 1,
1994, in the following particulars:

1. Section 2.2 of the Replacement Plan is amended by adding the
following to the end of the section:

"Earnings in any calendar year, commencing with 1994, in excess of
$800,000 shall be disregarded in determining an individual's
"earnings." This limitation shall be applied after any adjustments
referred to above or in the retirement plan. This $800,000 limitation
shall not be applied to earnings in any year prior to 1994."

2. The following new Section 5.11 is hereby added to the
Replacement Plan:

"5.11 Suspension of Distributions. Effective April 1, 1994, the
initial distributions described in subsection 5.1, the subsequent
distributions described in subsection 5.2, the guaranteed rate
distributions described in subsection 5.7 and the tax gross up
distributions described in Section 5.9 shall not be made unless and
until there is a Change in Control. Following a Change in Control,
any such distributions which were not made because of the adoption of
this subsection 5.11 shall be made as soon as administratively
feasible according to the provisions of this Section 5."

<PAGE> 1
EXHIBIT 10.15

HILTON HOTELS THRIFT SAVINGS PLAN
(1991 RESTATEMENT)
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.1 Requirements for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.2 Notice of Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.3 Application to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.4 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.5 Date of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE III PARTICIPANT'S CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.1 Participant Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.2 Change in Participant's Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.3 Cessation of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4 Change in Investment Fund Designation . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5 Section 401(m) Limitations on Participant Matched and Supplementary Contributions and
Matching Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE IV COMPANY CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.1 Matching Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.2 Investment of Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.3 Contribution Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.4 Limit of Deductible Contributions By The Company . . . . . . . . . . . . . . . . . . . . 34

ARTICLE V PARTICIPANT'S ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1 Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2 Allocation of Earnings, Losses and Changes in Fair Market Value of the Net Assets
of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.3 Vesting of Participant's Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE VI DISTRIBUTION FROM TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.1 When Interests Become Distributable and Effect Thereof . . . . . . . . . . . . . . . . . 38
Section 6.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.3 Disposition of Forfeitable Interest - Effect of Rehiring . . . . . . . . . . . . . . . . 43
Section 6.4 Spendthrift Trust Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.5 Withdrawal of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.6 Missing Participant or Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.7 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>

i
<PAGE> 3
TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE VII COMMITTEE, INVESTMENT AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.1 Appointment of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.2 General Duties and Powers of Committee . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.3 Investment Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.4 Organization of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.5 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.6 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.7 Manner of Administering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.8 Compensation, Bonding, Expenses and Indemnity . . . . . . . . . . . . . . . . . . . . . 60

ARTICLE VIII CONTINUANCE AND AMENDMENT OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.1 Continuance of Plan Not a Contractual Obligation of Company - Impossibility of Diversion 62
Section 8.2 Consolidation or Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.4 Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

ARTICLE IX ADMINISTRATION OF THE TRUST FUND - THE TRUST AGREEMENT - EXPENSES . . . . . . . . . . . . . . . 66

ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.1 Loans to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.2 Limits on Employees' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.3 Transfers of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.4 Context to Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.5 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.6 Qualified Domestic Relations Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.7 Action by Participant or Other Person . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.8 Receipt or Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.9 Persons Under Incapacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.10 Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

ARTICLE XI LAW GOVERNING AND SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

APPENDIX A ANNUAL ADDITION LIMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

ii
<PAGE> 4
HILTON HOTELS THRIFT SAVINGS PLAN
(1991 Restatement)

HILTON HOTELS CORPORATION, pursuant to action of its Board of
Directors taken at a duly called meeting, has adopted and does institute the
following as an amendment and restatement in toto of the Hilton Hotels Thrift
Savings Plan:

ARTICLE I
DEFINITIONS

When used herein and in the Trust Agreement, the following
words have the following meanings unless the context clearly indicates
otherwise.

"Account" or "Accounts" shall mean the accounts established to
record a Participant's interest in the Trust Fund established in accordance
with this Plan.

"Affiliated Employer" shall mean, with respect to the Company
and each Participating Employer;

(a) Each corporation which is a member of a controlled group
of corporations (within the meaning of Section 1563(a) of the Code, determined
without regard to Section 1563(a)(4) and (e)(3)(C) thereof) of which the
Company or Participating Employer is a component member,

(b) each entity (whether or not incorporated) which is under
common control with the Company or Participating Employer, as such common
control is defined in

1
<PAGE> 5
Section 414(c) of the Code and Regulations issued thereunder,

(c) any organization which is a member of an affiliated
service group (within the meaning of Section 414(m) of the Code) of which the
Company or a Participating Employer is a member, and

(d) any organization which is required by regulations issued
under Section 414(o) of the Code to be treated as an Affiliated Employer. For
the purposes of Section 4.3 of this Plan the phrase "more than 50 percent"
shall be substituted for the phrase "at least 80 percent" each place it appears
in Section 1563(a)(1) of the Code. The term "Affiliated Employer" shall also
include each predecessor employer to the extent required by Section 414(a) of
the Code or to the extent designated by the Board of Directors.
Notwithstanding the foregoing, an organization shall not be considered an
Affiliated Employer for any purpose under the Plan prior to the date it is
considered affiliated under clauses (a) through (d) above.

2
<PAGE> 6
designated Beneficiary, then the Participant's surviving spouse shall be the
Beneficiary. If there is no surviving spouse to receive any benefits payable
in accordance with the preceding sentence, the duly appointed and currently
acting personal representative of the Participant's estate (which shall include
either the Participant's probate estate or living trust) shall be the
Beneficiary. In any case where there is no such personal representative of the
Participant's estate duly appointed and acting in that capacity within 90 days
after the Participant's death (or such extended period as the Committee
determines is reasonably necessary to allow such personal representative to be
appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary or Beneficiaries shall mean the person or persons who can verify by
affidavit or court order to the satisfaction of the Committee that they are
legally entitled to receive the benefits specified hereunder.

In the event any amount is payable under the Plan to a minor,
payment shall not be made to the minor, but instead shall be paid (i) to that
person's then living parent(s) to act as custodian, (ii) if that person's
parents are then divorced, and one parent is the sole custodial parent, to such
custodial parent, or (iii) if no parent of that person is then living, to a
custodian selected by the Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in the

3
<PAGE> 7
jurisdiction in which the minor resides. If no parent is living and the
Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within 60 days after the date the
amount becomes payable, payment shall be deposited with the court having
jurisdiction over the estate of the minor.

"Board of Directors" shall mean the Board of Directors of
HILTON HOTELS CORPORATION.

"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

"Committee" shall mean the Administrative Committee appointed
in accordance with Article VII.

"Company" shall mean HILTON HOTELS CORPORATION, any
predecessor corporation, or any successor corporation resulting from merger,
consolidation, or transfer of assets substantially as a whole which shall
expressly agree in writing to continue this Plan and, where the context so
warrants, any Participating Employer.

"Company Contribution Account" shall mean the account
established to hold matching Company contributions contributed in accordance
with Article IV on behalf of each Participant, together with the allocations
thereto as required by the Plan.

4
<PAGE> 8
"Compensation" shall mean compensation paid or accrued, to or
on behalf of a Participant, subject to Employer FICA Taxes under the Code
provisions in effect on March 1, 1978 (without regard to the dollar
limitation). Such Compensation shall include overtime, bonuses, gratuities
subject to Employer FICA Taxes, vacation pay and holiday pay. Such
Compensation shall not include tips, tokens, gratuities or other forms of extra
Compensation not subject to Employer FICA Taxes, relocation, maintenance or
severance allowances, retirement plan contributions or benefits, fees, or
insurance premiums or benefits, and shall also exclude any amounts attributable
to a plan, program or other arrangement based on or involving Hilton Hotels
Corporation capital stock which otherwise would be treated as Compensation.
Compensation shall include amounts by which a Participant's Compensation is
reduced pursuant to a cafeteria plan, in accordance with Section 125 of the
Code. Effective January 1, 1994, Compensation shall include tips, tokens and
gratuities, but only to the extent that such tips, tokens and gratuities are
actually reported as income subject to income tax withholding on form W-2 for
the Employee.

Notwithstanding the foregoing, for purposes of Section 3.5 of
this Plan, Compensation shall mean the compensation of a Participant as defined
in Section 414(s) of the Code.

5
<PAGE> 9
For Plan years beginning on or after January 1, 1989, the
maximum amount of an Employee's Compensation which shall be taken into account
under the Plan for any Plan Year shall be $200,000 adjusted at the same time
and in the same manner as under Section 415(d) of the Code. For any Plan Year
of fewer than twelve months, the $200,000 limit shall be reduced to the amount
obtained by multiplying the $200,000 limit (as adjusted under Code Section
415(d)) by a fraction having a numerator equal to the number of full months in
the Plan Year and a denominator equal to twelve. For purposes of the $200,000
limitation referred to above, the Compensation of any Participant who is either
a 5% owner (as defined in Section 416(i)(1) of the Code), or one of the ten
most highly paid Highly Compensated Employees during the Plan Year ("First
Participant") shall be aggregated with the Compensation of any Participant who
has not attained age 19 and is a lineal descendant of the First Participant and
any Participant who is the spouse of the First Participant. In any case in
which such aggregation would produce Compensation in excess of the $200,000
limitation, the amount of the First Participant's Compensation that is
considered under the Plan shall be reduced until the $200,000 limitation is
met.

Notwithstanding the foregoing, for Plan Years beginning on or
after January 1, 1994, the $200,000 limit referred to above shall be reduced to
$150,000 adjusted in accordance with Section 401(a)(17)(B) of the Code. For

6
<PAGE> 10
purposes of applying the $150,000 limit, the rules set forth in the preceding
paragraph shall continue to apply, except that "$150,000" shall replace
"$200,000" each place it appears.

"Disability Retirement Date" shall mean the date of retirement
prior to the Normal Retirement Date fixed by the Company for a Participant who
is found by the Committee, in its sole discretion, after consideration of such
evidence as it may require, including reports of such physicians as it may
designate, to have become totally and permanently unable to discharge his
assigned duties as a result of mental or physical disease or condition.

"Effective Date" of this Plan is the 1st day of January, 1979.

"Eligible Employee" shall mean each Employee of the Company
and Participating Employers except that there shall be excluded all leased
employees described in Section 4.14(n) of the Code and those employees covered
by a collective bargaining agreement between the Company or Participating
Employers and any collective bargaining representative if retirement benefits
were the subject of good faith bargaining between such representative and the
Company or Affiliated Employer unless the Employee is a member of a group of
employees to whom this Plan has been extended by such a collective bargaining
agreement.

"Employee" shall mean every person employed by the Company or
an Affiliated Employer, including any leased

7
<PAGE> 11
employee described in Section 414(n) of the Code and any other individual
required to be treated as employed by the Company or an Affiliated Employer
under Section 414(o) of the Code.

"Equity Fund" shall mean a fund which the Trustee shall invest
in common or capital stocks, secured or unsecured bonds, debentures or notes,
or preferred stocks, whether or not convertible into common or capital stocks,
trust certificates, or real property or interests therein. Up to ten percent
(10%) of the fair market value of the Plan assets may be held in securities of
Hilton Hotels Corporation so long as overall investment diversification is
maintained, other investment provisions hereof are followed, and an amount in
excess of the Company's contribution to the Plan is not allocated to the
purchase of securities of Hilton Hotels Corporation or any other adopting
company.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

8
<PAGE> 12
"Fiscal Year" shall mean the fiscal year of the HILTON HOTELS
CORPORATION. At present, that Fiscal Year commences the first day of January
and ends the last day of December, and this shall be the Plan Year, limitation
year, and the taxable year of the Trust established pursuant to this Plan.

"Fixed Income Fund" shall mean a fund which the Trustee shall
invest in bonds, debentures, notes, commercial paper, savings bank deposits,
mortgages, preferred stocks, other fixed income securities or group annuity or
other contracts guaranteed by an insurance company. Up to ten percent (10%) of
the fair market value of the Plan assets may be held in securities of Hilton
Hotels Corporation so long as overall investment diversification is maintained,
other investment provisions hereof are followed, and an amount in excess of the
Company's contribution to the Plan is not allocated to the purchase of
securities of Hilton Hotels Corporation or any other adopting company.

"Highly Compensated Employee" shall with respect to the
Company and each Participating Employer mean

(a) Any Employee who performs services for the Company or
any Affiliated Employer during the "determination year" and who, during the
"look-back year" (1) was a 5% owner of the Company or any Affiliated Employer;
(2) received compensation from the Company or any Affiliated Employer in excess
of $75,000 (as adjusted pursuant to Section 415(d) of the Code); (3) received
compensation from

9
<PAGE> 13
the Company or any Affiliated Employer in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the "top- paid
group" for such year; or (4) was an officer of the Company or any Affiliated
Employer and received compensation during such year that is greater than 50% of
the dollar limitation in effect under Section 415(b)(1)(A) of the Code;

(b) Any Employee who performs services for the Company or
any Affiliated Employer during the determination year and who, with respect to
the determination year, is either described in (a)(1) above or is both one of
the 100 Employees who received the most compensation from the Company or any
Affiliated Employer during the determination year and is described in (a)(2),
(a)(3) or (a)(4); or

(c) Any Employee who separated from service (or was
deemed to have separated) prior to the determination year, performs no services
for the Company or any Affiliated Employer during the determination year, and
met the description in (a) or (b) above for either the separation year or any
determination year ending on or after the Employee's 55th birthday.

(d) If no officer of the Company or any Affiliated
Employer has compensation in excess of 50% of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code during a determination year or a
look-back year, the highest paid officer for such year shall be treated as a
Highly Compensated Employee.

10
<PAGE> 14
(e) If an Employee is, during a determination year or
look-back year, a "family member" of either a 5% owner who is an Employee or of
a Highly Compensated Employee in the group consisting of the 10 most highly
compensated Employees ranked on the basis of compensation paid by the Company
or any Affiliated Employer during the determination year or the look-back year,
then the family member and 5% owner or top-ten Highly Compensated Employee
shall be treated as a single Employee, and their compensation and contributions
or benefits under this Plan shall be aggregated. Except as otherwise provided
under Section 401(a)(17) of the Code, "family member' includes the spouse,
lineal ascendants and descendants of the Employee or former Employee and the
spouses of such lineal ascendants and descendants.

(f) The "determination year" shall be the Plan Year for
which compliance is being tested, and the "look-back year" shall be the
12-month period immediately preceding the determination year.

(g) The top-paid group for a determination year or a
look-back year shall consist of the top 20% of Employees ranked on the basis of
compensation received during the year excluding Employees described in Section
414(q)(8) of the Code and Treasury Regulations thereunder. The number of
Employees treated as officers shall be limited to 50 (or, if less, the greater
of 3 Employees or 10% of the Employees). For purposes of this definition of
"Highly

11
<PAGE> 15
Compensated Employee", "compensation" means compensation within the meaning of
Section 415(c)(3) of the Code, but including elective or salary reduction
contributions to a cafeteria plan, cash or deferred arrangement or
tax-sheltered annuity.

(h) If the Company or Participating Employer makes an
election for any year under this Paragraph (h), in determining whether an
Employee is a Highly Compensated Employee for such year, Paragraph (a)(2) shall
be applied by substituting "$50,000" for "$75,000," and Paragraph (a)(3) shall
not apply.

"Hour of Service" shall be defined as each hour

(a) for which an Employee is paid, or entitled to payment, for
the performance of duties for the Company or an Affiliated Employer;

(b) for which the Employee is paid or entitled to payment by
the Company or an Affiliated Employer on account of a period during which no
duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence; or

(c) for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Company or an Affiliated Employer.

The following additional rules shall apply in calculating
Hours of Service: (1) no more than 501 Hours of

12
<PAGE> 16
Service are required to be credited to an Employee on account of any single
period during which the Employee performs no duties; (2) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of
a period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, unemployment
compensation, or disability insurance laws; (3) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee; (4) a payment
shall be deemed to be made by or due from a Company or an Affiliated Employer
regardless of whether such payment is made by or due from the Company or an
Affiliated Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Company or an Affiliated Employer contributes or
pays premiums and regardless of whether contributions made or due to the trust
fund, insurer, or other entity are for the benefit of particular Employees or
on behalf of a group of Employees in the aggregate; (5) no more than one Hour
of Service shall be credited with respect to any hour of time; (6) an "Hour of
Service" shall include any hour for which an Employee is entitled to payment by
a "leasing organization" (as described in Section 414(n)(2) of the Code) for
the performance of duties for the Company or an Affiliated Employer.

13
<PAGE> 17
The definition of "Hour of Service" set forth herein shall
also be construed in accordance with, and shall include any additional periods
of service, that may be required by regulations promulgated by the United
States Department of Labor. The hour of service rules stated in the Department
of Labor Regulations Section 2530.200b-2(b) and -2(c) are herein incorporated
by reference.

"Investment Fund" shall mean one of the funds established by
the Committee for the investment of the assets of the Plan pursuant to Sections
2.3(b) and 3.4.

"Investment Manager" shall mean a Fiduciary designated by the
Committee under this Plan to whom has been delegated the responsibility and
authority to manage, acquire or dispose of Plan assets (a) who (1) is
registered as an investment adviser under the Investment Advisers Act of 1940;
(2) is a bank, as defined in that Act; or (3) is an insurance company qualified
to perform investment advisory services under the laws of more than one state;
and (b) who has acknowledged in writing that he is a Fiduciary with respect to
the management, acquisition, and control of Plan assets.

"Matching Company Contributions" shall mean the contributions
made by the Company or a Participating Employer pursuant to Section 4.1.

"Normal Retirement Age" shall mean a Participant's
sixty-fifth birthday. A Participant may retire at any time after attaining
Normal Retirement Age.

14
<PAGE> 18
Until actual retirement, a Participant shall continue to participate in this
Plan.

"One Year Break in Service" or "Break in Service" shall mean a
computation period during which an individual completes not more than 500 Hours
of Service. The computation period for purposes of Section 2.1 shall be the
twelve-month period commencing on the date the Employee first becomes an
Employee and anniversaries thereof and for all other purposes shall be the
Fiscal Year.

(a) Solely for purposes of determining whether an
Employee sustains a Break in Service, an Employee shall be eligible to receive
credit for absence (i) by reason of pregnancy of the Employee, (ii) by reason
of the birth of a child of the Employee, (iii) by reason of the placement of a
child with the Employee in connection with the adoption of the child by the
Employee, or (iv) for purposes of caring for the child for a period beginning
immediately following the birth or placement.

(b) The number of Hours of Service which shall credited
to an Employee for a period of absence described in subsection (a) above shall
be (i) the number which otherwise would normally have been credited to the
Employee but for the absence, or (ii) if the Committee determines that such
number can not be determined, eight (8) Hours of Service per day of such
absence; provided, however, that the total number of hours treated as Hours of
Service under this subsection (b) shall not exceed five hundred one (501) and

15
<PAGE> 19
that these Hours of Service shall be taken into account solely for purposes of
determining whether or not the Employee has incurred a Break in Service.

(c) The Hours of Service described in subsection (b)
above shall be credited to the computation period (i) in which the absence from
work begins, if the Employee would be prevented from incurring a Break in
Service in that computation period solely because of such crediting, or (ii) in
any other case, in the immediately following computation period.

(d) Subsections (a)-(c) above shall not apply unless the
Employee provides such timely information as the Committee may reasonably
require to establish (i) that the absence is for reasons described in
subsection (a), and (ii) the number of days for which there was such an
absence.

"Participant" shall mean any Eligible Employee included in the
Plan as provided in Article II.

"Participant Contribution Account" shall mean the account to
which Participant Matched Contributions and Participant Supplementary
Contributions are allocated pursuant to Section 5.1 on behalf of such
Participant, together with the allocations thereto as required by the Plan.

"Participant Matched Contributions" shall mean contributions
of 1% or 2% or 3% or 4% of Compensation made by a Participant which shall be
matched 50% by Matching Company Contributions.

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<PAGE> 20
"Participant Supplementary Contributions" shall mean
contributions in excess of the Participant's Matched Contributions which shall
not be matched by Company contributions.

"Participating Employer" shall mean the Company and any
Affiliated Employer with respect to the Company which, by resolution of its
board of directors and with the approval of the Board of Directors, elects to
participate in this Plan. In addition, "Participating Employer" shall mean
other business entities in which the Company, directly or indirectly, has an
interest or with which it has a contractual relationship designated from time
to time by the Committee as being eligible to be included in the Plan, and
which adopts the Plan by appropriate action; but any such designation or
adoption may be terminated or withdrawn at any time by filing with the Company
a resolution, respectively of the Committee or of the adopting business entity,
and such termination or withdrawal the entity whose designation or adoption was
so terminated or withdrawn shall not thereafter be considered a Participating
Employer under this Plan. By electing to participate in this Plan, a
Participating Employer agrees to be bound by any Plan or Trust amendment
adopted by resolution of the Board of Directors or by the written instrument of
any person to whom the Board of Directors has delegated its authority to adopt
the amendment. Each Participating Employer shall also be bound by the
investment and administrative control of the

17
<PAGE> 21
Plan by delegates properly appointed by the Company and Committee. Appendix C
hereto sets forth the names of all Participating Employers as of November 1,
1991 and shall be revised from time to time by the Committee or its delegate.

"Plan" means the Hilton Hotels Thrift Savings Plan set forth
in this document and all subsequent amendments thereto.

"Short-Term Money Market Income Fund" shall mean a fund which
the Trustee shall invest in short term high quality commercial paper,
certificates of deposit, U.S. government and agency securities and other short
term instruments with average maturities of thirty to sixty days.

"Trust" shall mean that Trust established pursuant to the
Trust Agreement.

"Trust Agreement" shall mean that certain agreement between
the Company and the Trustee providing for the investment and administration of
the Trust Fund.

"Trust Fund" shall mean the fund established under the Trust
Agreement by contributions made by the Company and Participants and from which
any amounts payable under the Plan are to be paid.

"Trustee" shall mean the Trustee under the Trust Agreement.

"Valuation Date" shall mean the last day of each calendar
month as of which the Trust Fund shall be valued under this Plan.

18
<PAGE> 22
"Year of Service" shall mean a computation period during which
the Employee completes one thousand (1,000) or more Hours of Service for the
Company or an Affiliated Employer. The computation period referred to in the
preceding sentence shall be the Fiscal Year except for purposes of Section 2.1,
in which case the computation period shall be the twelve (12) month period
commencing on the date the Employee first becomes an Employee (or any
anniversary thereof). In no instance will an Employee be credited with more
than one (1) Year of Service with respect to service performed in a single
computation period. Notwithstanding any provision to the contrary in this
Plan, an Employee shall be credited with Years of Service only with respect to
periods of "covered service" and "contiguous noncovered service." For purposes
of determining an Employee's Years of Service, "covered service" shall mean an
Employee's service as an Eligible Employee and "contiguous noncovered service"
shall mean an Employee's noncovered service as a non-Eligible Employee which
immediately precedes or follows such Employee's covered service and no quit,
discharge or retirement occurs between such covered service and uncovered
service; provided, however, that any transfer of an Employee between (a) a
corporation or trade or business included within the definition of "Company"
and (b) an Affiliated Employer not included within the definition of "Company"
shall result in such Employee's period of noncovered service which immediately
precedes or

19
<PAGE> 23
follows such transfer being deemed "noncontiguous" for purposes of this
definition of Year of Service.

A Participant's employment is not considered terminated for
purposes of the Plan if the Employee has been on leave of absence with the
consent of the Company or an Affiliated Employer, provided that he returns to
the employ of the Company or an Affiliated Employer at the expiration of such
leave or such longer period as may be prescribed by law in the case of a
Participant who is a member of the armed forces of the United States. A leave
of absence shall mean leaves granted by the Company or an Affiliated Employer,
in accordance with rules uniformly applied to all Employees, for reasons of
health, military or public service or for reasons determined by the Company or
an Affiliated Employer to be in its best interests. Participants who do not
return to the employ of the Company or an Affiliated Employer within ten days
following the end of the leave of absence, or within the required time in case
of service with the armed forces, shall be deemed to have terminated their
employment as of the date when their leave began, unless such failure to return
was the result of their death, total disability or normal retirement.

20
<PAGE> 24
ARTICLE II
ELIGIBILITY

Section 2.1 Requirements for Participation. Participation in
the Plan on the part of each Employee is voluntary. An Eligible Employee who
on the Effective Date of this Plan, or the first day of any calendar month
thereafter, has completed at least one Year of Service shall be eligible to
participate as of the first day of the first calendar month coinciding with or
next following the date the Eligible Employee satisfies the aforesaid service
requirement.

Section 2.2 Notice of Eligibility. The Committee shall give
reasonable advance written notice to Employees of their prospective eligibility
to become Participants, and shall state therein the conditions of
participation.

Section 2.3 Application to Participate. An Eligible Employee
eligible to become a Participant may become a Participant by filing, at least
thirty (30) days before the first day of the month as of which participation is
to commence, in such form and with such persons as the Committee shall
designate, an application which shall:

(a) Specify the amount of contribution to be deducted
from his Compensation by the Company and paid to the Trustee on his behalf;

(b) Specify the manner in which such contribution shall
be invested, provided that such investment must be in accordance with one of
the following investment options:

21
<PAGE> 25
(1) 100% in the Equity Fund,

(2) 100% in the Fixed Income Fund,

(3) 50% in each of the two above Funds,

(4) 25% in the Equity Fund and 75% in the Fixed
Income Fund, or

(5) 75% in the Equity Fund and 25% in the Fixed
Income Fund;

(d) Contain such other or additional information as in
the opinion of the Committee is desirable or necessary in the operation of the
Plan.

(e) Notwithstanding anything herein to the contrary, an
Employee shall not be entitled to make contributions for any calendar month
which commenced prior to the Employee's specification of the amount of
contribution to be deducted from his Compensation, nor shall he be entitled to
retroactively increase his specified contributions.

Section 2.4 Designation of Beneficiary. Upon forms provided
by the Committee, each Employee who becomes a Participant shall designate in
writing the Beneficiary or Beneficiaries whom such Employee desires to receive
any benefits payable under this Plan in the event of such Employee's death. A
Participant may from time to time change his designated Beneficiary or
Beneficiaries without

22
<PAGE> 26
the consent of such Beneficiary or Beneficiaries by filing a new designation in
writing with the Committee. However, if a married Participant wishes to
designate a person other than his spouse as Beneficiary, such designation shall
be consented to in writing by the spouse, which consent shall acknowledge the
effect of the designation and be witnessed by a Plan representative or a notary
public. The Participant may change any election designating a Beneficiary or
Beneficiaries without any requirement of further spousal consent if the
spouse's consent so provides. Notwithstanding the foregoing, spousal consent
shall be unnecessary if it is established (to the satisfaction of a Plan
representative) that there is no spouse or that the required consent cannot be
obtained because the spouse cannot be located, or because of other
circumstances prescribed by Treasury Regulations. The Company, the Committee
and the Trustee may rely upon his designation of Beneficiary or Beneficiaries
last filed in accordance with the terms of this Plan. Upon the dissolution of
marriage of a Participant, any designation of the Participant's former spouse
as a Beneficiary shall be treated as though the Participant's former spouse had
predeceased the Participant, unless (i) the Participant executes another
Beneficiary designation that complies with this Section 2.4 and that clearly
names such former spouse as a Beneficiary, or (ii) a court order presented to
the Committee prior to distribution on behalf of the Participant explicitly
requires the

23
<PAGE> 27
Participant to continue to maintain the former spouse as the Beneficiary. In
any case in which the Participant's former spouse is treated under the
Participant's Beneficiary designation as having predeceased the Participant, no
heirs or other beneficiaries of the former spouse shall receive benefits from
the Plan as a Beneficiary of the Participant except as provided otherwise in
the Participant's Beneficiary designation.

Section 2.5 Date of Participation. Once the application for
participation is completed, participation shall become effective on the date of
eligibility specified in Section 2.1 and shall continue during the
Participant's employment with the Company or Participating Employer.

ARTICLE III
PARTICIPANT'S CONTRIBUTIONS

Section 3.1 Participant Contributions.

(a) A Participant shall make contributions which shall be
made solely by payroll deductions from his Compensation and the amounts so
deducted shall be paid to the Trustee on or before ninety days following the
time when the deduction is made. The amount, which shall be specified under
Section 2.3(a) and deducted under this Section, shall be either one percent
(1%) or two percent (2%) or three percent (3%) or four percent (4%) or five
percent (5%) or six percent (6%) or seven percent (7%) or eight percent (8%) or
nine percent (9%) or ten percent (10%) or eleven percent

24
<PAGE> 28
(11%) or twelve percent (12%) or thirteen percent (13%) or fourteen percent
(14%) of his Compensation as specified by the Participant.

(b) Contributions of 1% or 2% or 3% or 4% of Compensation
shall be considered the Participant Matched Contributions.

(c) The amount of contributions made in excess of the
maximum Participant's Matched Contributions (i.e., in excess of 4% of
Compensation) which may total to a maximum of an additional 10% of Compensation
shall be considered the Participant Supplementary Contributions.

(d) Notwithstanding any provision in this Plan to the
contrary, if, due to federal or state tax withholding requirements the net
amount of after-tax Compensation payable to a Participant by the Company for a
pay period is less than the Compensation percentage specified by the
Participant in accordance with Section 2.3(a), the Participant may make a cash
contribution to the Plan equal to the difference between the Participant's
contribution for the payroll period by payroll deduction, if any, and the
Compensation percentage specified by the Participant. Any direct cash
contribution by a Participant with respect to a payroll period in accordance
with this Section 3.1(d) shall be made within thirty (30) days following the
last day of such payroll period.

Section 3.2 Change in Participant's Contributions. A
Participant may as of the first day of any

25
<PAGE> 29
calendar month change the specifications with respect to payroll deductions
made under Section 2.3(a) and 3.1(a) to another specification permitted under
such Sections by filing an application to change such specification in such
form and with such person as the Committee shall designate. Such change in
specification shall not become effective until the first day of the calendar
month which is at least thirty days after the filing of such application.

Section 3.3 Cessation of Participation. A Participant who
changes his specification to direct that no contributions shall be deducted
from his Compensation shall have such change effective as of the next regular
payroll period and need not wait until the beginning of the next calendar
month; provided, however, that such Participant may not again change such
specification to begin further contributions sooner than the beginning of the
payroll period in the calendar month coinciding with or next following three
(3) months after the first payroll date for which no contribution is made by
that Participant.

Section 3.4 Change in Investment Fund Designation. The
specification required in Section 2.3(b) by a Participant shall be deemed to be
a continuing direction to the Trustee unless and until changed under the
following provisions of this Section 3.4.

(a) A Participant may change such specification as to
future contributions by application in such form and with such person as the
Committee shall designate, effective

26
<PAGE> 30
as of the first day of any calendar month if such application is filed within
the same time period provided in Section 3.2.

(b) A Participant may change his investment specification
as to his entire Account balances as follows:

(i) As of the first day of any Plan Year, a
Participant may make such change in investment specification to another
specification permitted under Section 2.3(b), pursuant to application approved
by the Committee and submitted on or prior to November 30 preceding such date.
Such investment specification shall also govern future contributions as of the
first day of the payroll period following the beginning of such Plan Year.

(ii) As of any July 1, by application approved by
the Committee submitted on or prior to the preceding May 31, a Participant may
direct that the Participant's entire Account balance then invested in the
Equity Fund be transferred to the Short-Term Money Market Income Fund. If no
further investment specification is directed by the Participant, the balance so
transferred into the Short-Term Money Market Income Fund will be transferred to
the Fixed Income Fund on the first day of the Plan Year following such July 1
transfer. Such direction by the Participant will not affect investment of
future contributions unless and until separate specification is made with
respect to such future contributions under this Section 3.4.

27
<PAGE> 31
(c) Notwithstanding the preceding provisions of this
Section 3.4, if distribution of a Participant's interest in the Trust Fund is
to be deferred following such Participant's termination of employment, pursuant
to Section 6.2(a) or (c), the Participant's interest in the Trust Fund shall be
transferred to the account described in Section 6.2(d), and the Participant
shall have no further right to specify the manner in which such interest shall
be invested. A transfer required under this paragraph shall be effective as of
the first Valuation Date that occurs at least ninety (90) days after the
Participant's employment terminates. The foregoing provisions of this
paragraph requiring a transfer of a Participant's interest in the Trust Fund to
such separate account shall also apply to any portion of such interest that the
Committee determines must be segregated pursuant to a qualified domestic
relations order, within the meaning of Section 414(p) of the Internal Revenue
Code. Such transfer shall be effective as of the first Valuation Date that
occurs at least 120 days after the Committee makes the determination to
segregate.

Section 3.5 Section 401(m) Limitations on Participant Matched
and Supplementary Contributions and Matching Company Contributions.

(a) The Committee will estimate, as soon as practicable,
before the close of the Plan Year and at such other times as the Committee in
its discretion determines, the extent to which Participant Matched and
Supplementary

28
<PAGE> 32
Contributions ("Participant Contributions") and/or Matching Company
Contributions may not be available to any Participant or class of Participants
under Code Section 401(m). In accordance with any such estimate, the Committee
may modify the limits in Section 3.1 or set initial or interim limits, for
Participant Contributions and/or Matching Company Contributions relating to any
Participant or class of Participants. The tests of this Section 3.5 shall be
performed separately with respect to the Company and Participating Employers
together with their respective Affiliated Employers.

(b) For each Plan Year, a contribution percentage will be
determined for each Eligible Employee equal to the ratio of the total amount of
the Participant Contributions and Matching Company Contributions allocated
under Sections 3.1 and 4.1 for the Plan Year divided by the Eligible Employee's
Compensation in the Plan Year during which the Eligible Employee was eligible
to participate in the Plan. In the case of family members treated as a single
Highly Compensated Employee under Paragraph (e) of the definition of "Highly
Compensated Employee," in accordance with the family aggregation rules of
Section 414(q)(6) of the Code, the contribution percentage shall be determined
by combining the Participant Contributions, Matching Company Contributions and
Compensation of all eligible family members. Except to the extent taken into
account in the preceding sentence, the Participant Contributions, Matching

29
<PAGE> 33
Company Contributions, and Compensation of such family members shall be
disregarded for purposes of determining the average of the contribution
percentages for the group of non-Highly Compensated Employees under this
Section 3.5(b). Except as otherwise provided in this Section 3.5(b), with
respect to Eligible Employees who have made no Participant Contributions and
for whom there were no Company Matching Contributions under this Plan, such
contribution percentage will be zero.

(c) The average of the contribution percentages for
Highly Compensated Employees ("High Average") when compared with the average of
the contribution percentages for non-Highly Compensated Employees ("Low
Average") must meet one of the following requirements:

(1) The High Average is no greater than 1.25 times the
Low Average; or

(2) The High Average is no greater than two times the Low
Average, and the High Average is no greater than the Low Average plus
two percentage points.

(d) If, at the end of a Plan Year, a Participant or class
of Participants has excess contributions, then the Committee may elect, at its
discretion, to pursue any of the following courses of action or any combination
thereof:

(i) Matching Company Contributions (and any
earnings attributable thereto through the end of the Plan Year) that are not
vested may be forfeited.

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<PAGE> 34
(ii) Excess Participant Contributions and excess
Matching Company Contributions (and any earnings attributable to such excess
amounts through the end of the Plan Year) may be distributed to the Participant
within the 2-1/2 month period following the close of the Plan Year to the
extent feasible, and in all events no later than 12 months after the close of
the Plan Year. The Company may distribute the Participant Supplementary
Contributions before distributing any Participant Matched Contributions or may
distribute (or forfeit pursuant to clause i above) Matching Company
Contributions prior to distributing any Participant Matched Contributions.

(e) The amount of excess Participant Contributions and
Matching Company Contributions shall be determined by the Committee by reducing
the contribution percentage of the Highly Compensated Employees with the
highest contribution percentage to the extent required to enable the Plan to
meet the limits in (c) above or to cause the contribution percentage of such
Participants to equal the contribution percentage of the Highly Compensated
Employees with the next-highest contribution percentage. The process in the
preceding sentence shall be repeated until the Plan satisfies the limits in (c)
above. The earnings attributable to excess contributions will be determined in
accordance with Treasury Regulations. The Company and Committee will not be
liable to any Participant (or to his Beneficiary, if applicable) for any losses
caused

31
<PAGE> 35
by inaccurately estimating or calculating the amount of any Participant's
excess contributions and earnings attributable to such contributions.

ARTICLE IV
COMPANY CONTRIBUTIONS

Section 4.1 Matching Company Contributions. At the time each
Participant's contributions are paid to the Trustee, the Company will pay to
the Trustee a corresponding contribution equal to fifty percent (50%) of the
Participant's Matched Contribution amount as defined in Section 3.1(b) and then
being paid to the Trustee. The Company will not pay a corresponding
contribution based on the Participant's Supplementary Contributions as defined
in Section 3.1(c) that are paid to the Trustee. Notwithstanding the foregoing,
to the extent determined by the Company, the Company may at its sole discretion
make an additional Matching Contribution for any Plan Year on behalf of
Participants whose Compensation does not exceed a specified dollar amount
("Eligible Participants"). Such additional Matching Company Contribution for a
Plan Year shall be allocated among Eligible Participants who are Employees as
of the last day of such Plan Year in the proportion that each such Eligible
Participant's Matched Contributions for the Plan Year bears to the total of
Matched Contributions by all such Eligible Participants for such Plan Year.
Any additional Matching Company

32
<PAGE> 36
Contribution shall be made within the time prescribed under Section 404 of the
Code.

Contributions by the Company shall be made without regard to
current and accumulated profits for the year; provided, however, that the Plan
shall continue to be designed to qualify as a profit sharing plan for purposes
of Sections 401(a) et seq. of the Code.

Section 4.2 Investment of Company Contributions. Contributions
made by the Company shall be invested by the Trustee in the Equity Fund and the
Fixed Income Fund in the same proportion as the contributions made by
Participants to which such contributions by the Company correspond. No part of
the contributions paid by the Company to the Trustee shall be recoverable by
the Company, and it is intended that the contributions not be used for or
diverted to purposes other than for the exclusive benefit of the Participants.

Section 4.3 Contribution Limits. Notwithstanding anything
else contained herein, the Annual Additions, to all the Accounts of a
Participant shall not exceed the lesser of $30,000 (or, if greater, 1/4 of the
defined benefit dollar limitation in effect under Section 415(b)(1) of the Code
for the limitation year) or 25% of the Participant's Section 415 Compensation
from the Company or Affiliated Employers during the Plan Year, in accordance
with the provisions of Appendix A attached hereto.

Section 4.4 Limit of Deductible Contributions By The Company.
The amount of the contribution made by the

33
<PAGE> 37
Company or a Participating Employer for any fiscal year shall not exceed the
amount deductible by such Company or Participating Employer for federal income
tax purposes, including any amounts which may be carried forward.

ARTICLE V
PARTICIPANT'S ACCOUNTS

Section 5.1 Account Balances. There shall be maintained for
each Participant a Participant Contribution Account and a Company Contribution
Account which shall show the dollar value of his current interest in the Trust
Fund as of the most recent Valuation Date, including the Participant Matched
Contributions made during the calendar month ending on such Valuation Date, the
Matching Company Contributions made during such calendar month on behalf of
each such Participant, the Participant Supplementary Contributions made during
such calendar month, all forfeitures allocated to such Participant under this
Plan and an allocation of earnings, losses and changes in fair market value of
the assets of the Investment Fund for such calendar month. For purposes of
determining a Participant's basis in his Account under Section 72(e) of the
Code, his interest in the Participant Contribution Account attributable to any
pre-1987 Supplementary Contributions and pre-1987 Matched Contributions shall
be separately accounted for.

34
<PAGE> 38
Section 5.2 Allocation of Earnings, Losses and Changes in
Fair Market Value of the Net Assets of the Funds. Earnings, losses and changes
in fair market value of the net assets of each fund comprising the Investment
Fund shall be allocated each as of the last day of each calendar month to the
Participant's Accounts in the ratio which the dollar value of the interest of
each such Participant in the respective fund bears to the dollar value of the
interests in such fund of all such Participants as of the current Valuation
Date.

Section 5.3 Vesting of Participant's Interests.

(a) Participant Contribution Account. The interest of a
Participant in his Participant Contribution Account shall be fully vested and
non-forfeitable when allocated.

(b) Company Contribution Account. A Participant's
interest allocated to his Company Contribution Account shall become vested to
the extent of twenty-five percent (25%) upon completion of two Years of Service
and twenty-five percent (25%) for each additional Year of Service. Therefore,
a Participant shall be fully vested in his Company Contribution Account balance
after five Years of Service. Any portion of the interest of a Participant
which shall not have become vested as herein provided shall be a forfeitable
interest.

(i) With respect to an Employee who has a
One-Year Break in Service, such Employee's pre-break and

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<PAGE> 39
post-break service will be aggregated for vesting purposes only after the
Employee's post-break service is at least one year.

(ii) If any Employee has five (5) or more
consecutive One Year Breaks in Service and the number of such consecutive
Breaks in Service is greater than the number of Years of Service he had prior
to such break, and if such Employee has no vested benefits under this Plan
derived from contributions by the Company at the time of said break, then Years
of Service prior to such break shall not be added to the Years of Service after
such break for vesting purposes.

(c) Discontinuance of Contributions. If the Company
shall, for any reason, completely discontinue its contributions to the Trust
Fund, the entire interest of each Participant in his Company Contribution
Account shall be one hundred percent (100%) vested.

(d) Valuation of Amounts Distributable. The value of
Participant Account balances shall be determined as of the Valuation Date
immediately preceding the date of distribution.

(e) Vesting on Death or Normal Retirement. When any
Participant shall reach his Normal Retirement Age or shall die, or shall suffer
total disability while an Employee, his entire interest in the Trust Fund shall
become one hundred percent (100%) vested without regard to his period of
employment.

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<PAGE> 40
(f) Plan Provisions Govern Distribution. Any interest in
the Trust Fund, whether forfeitable or vested, shall be and become payable to
such Participant or his Beneficiaries only as and to the extent provided in
this Plan, and a Participant or a former Participant who dies having designated
a Beneficiary shall cease to have any interest hereunder or in his separate
Account, and his Beneficiary shall become entitled to payment thereof solely as
provided by the terms of this Plan.

(g) Amendment of Vesting Schedule. If the vesting
schedule under the Plan is amended or if the Plan is amended in any way that
directly or indirectly affects the computation of a Participant's vested
interest in the Trust Fund, each Participant who has completed at least three
(3) Years of Service may elect, within a reasonable time after the adoption of
the amendment, to continue to have such vested interest computed under the Plan
without regard to such amendment. The period during which the election may be
made shall commence with the date the amendment is adopted and shall end on the
latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the
amendment is effective; or (iii) 60 days after the Participant is issued
written notice of the amendment.

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ARTICLE VI
DISTRIBUTION FROM TRUST FUND

Section 6.1 When Interests Become Distributable and Effect
Thereof.

(a) Upon Death, Disability or Retirement. When a
Participant dies, suffers total disability or retires, his entire interest in
the Trust Fund as defined in this Plan, which shall have become one hundred
percent (100%) vested as provided in Article V hereof, shall thereupon become
distributable as hereinafter provided.

(b) Upon Termination of Employment. When a Participant's
employment is terminated for any reason other than death, total disability or
retirement, such portion of his interest in the Trust Fund as shall have become
vested as provided in Article V hereof shall thereupon become distributable as
hereinafter provided.

(c) Effect of Interest Becoming Distributable. When a
Participant's vested interest shall become distributable upon termination of
employment for any reason, as provided in this Section 6.1, such Participant,
or his designated Beneficiary, shall cease to have any further interest or
participation in the Trust Fund, or any subsequent accrual or contributions
thereto, except the right to receive, in accordance with this Plan, payment of
the value of his vested Account balance.

Section 6.2 Payment.

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<PAGE> 42
(a) Distribution Upon Retirement or Disability. A
Participant whose termination of employment occurs on or after attaining Normal
Retirement Age or Disability Retirement Date shall, prior to the commencement
of benefits, make an election with respect to the method of payment of his
interest in the Trust Fund. The Committee shall then institute one of the
following methods of payment, as elected by the Participant, normally within
ninety (90) days of said election to the extent administratively feasible:

(i) Payment of the entire interest in cash in a
lump sum.

(ii) Transfer of the entire interest to a separate
account for the Participant as described in Section 6.2(d), and payment
thereof, including earnings to the Participant or Beneficiary, in substantially
equal monthly installments not to exceed 120.

Notwithstanding the preceding provisions of this Section
6.2(a), no payment period shall extend beyond the maximum period prescribed
under Section 401(a)(9)(A) of the Internal Revenue Code. In the event a
Participant or Beneficiary shall fail to make a timely election with respect to
the method of payment, payment shall be made in a cash lump sum and shall be
made as soon as practicable following attainment of Normal Retirement Age or
Disability Retirement Date.

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<PAGE> 43
(b) Distribution Upon Death.

If such Participant's interest is to be distributed because of
his death, his Beneficiary or Beneficiaries shall be paid the entire amount of
his interest in a lump sum within ninety (90) days after the Valuation Date
coinciding with or immediately following receipt of notice of death and any
other documents deemed appropriate by the Committee to the extent
administratively feasible; provided, however, if an election for payment other
than lump sum is in effect under Section 6.2(a), the selected mode of payment
shall continue, and the method of distribution shall be at least as rapid as in
effect on the date of the Participant's death. However, a Beneficiary may make
an election to have the Participant's interest payable in installments, as
provided in Section 6.2(a). Neither the Trustee nor the Company shall in any
way be responsible for payment of death taxes attributable to payment of
benefits hereunder. Notwithstanding the preceding provisions of this Section
6.2(b), no payment period shall extend beyond the maximum period described by
Code Section 401(a)(9), and, if payment is to be made in a lump sum, the
Participant's interest shall be distributed within five (5) years of the
Participant's death.

(c) Distribution Upon Termination of Employment. If a
Participant's employment terminates prior to his Normal Retirement Age for any
reason other than death or total disability, his vested interest in the Trust
Fund shall be

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<PAGE> 44
distributable in cash in a lump sum after receipt by the Committee of all
required documentation, as follows:

(i) In the case of a Participant whose vested
interest does not exceed $3,500, distribution shall be made within ninety (90)
days after the Valuation Date coinciding with or next following the
Participant's termination of employment to the extent administratively
feasible, whether or not the Participant consents to such distribution.

(ii) In the case of a Participant whose vested
interest exceeds $3,500 distribution shall be made, to the extent
administratively feasible, within ninety (90) days after the Valuation Date
coinciding with or next following the Participant's termination of employment,
but only after the receipt by the Committee of the properly completed
application of the Participant and any other required documentation to request
distribution, including the Participant's consent to the distribution.

(iii) If a Participant described in (ii) above
fails to consent to distribution of his vested interest prior to the first
Valuation Date that occurs at least ninety (90) days following the
Participant's termination of employment, the provisions of Section 6.2(d) shall
apply. Such a Participant shall be deemed to have made an election to defer
distribution to his Normal Retirement Age, unless prior to Normal Retirement
Age and in accordance with (ii)

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<PAGE> 45
above the Participant submits a request for an earlier distribution.

(d) Transfer for Deferred Payments. A terminated
Participant's forfeitable interest in the Trust Fund, if any, and any vested
interest of the Participant that is not distributed prior to the first
Valuation Date that occurs at least ninety (90) days following the
Participant's termination of employment, pursuant to (i) an election of an
installment distribution under Section 6.2(a) or (ii) the deferral of the
distribution under Section 6.2(c), shall be transferred to and held in the
Short-Term Money Market Income Fund or equivalent fund as designated by the
Committee.

(e) Required Distribution Date.

(i) Unless a Participant elects otherwise in
writing, payment of benefits hereunder shall commence, notwithstanding anything
to the contrary contained herein, no later than sixty days following the close
of the later of the Plan Year in which (1) the Participant reaches Normal
Retirement Age, (2) the Participant terminates employment, or (3) in which
occurs the tenth anniversary of the year in which the Participant commenced
participation in the Plan (unless the amount of the Participant's benefit has
not been calculated by that date or the Participant cannot be located, in which
case distribution shall begin no later than sixty days after the payment can be
calculated or the Participant located).

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<PAGE> 46
(ii) Notwithstanding anything to the contrary
contained herein, the distribution options under the Plan shall comply with
Section 401(a)(9) of the Code and regulations promulgated thereunder, which are
hereby incorporated by this reference as a part of the Plan. Accordingly,
unless otherwise permitted by law, the entire interest of each Participant
shall be distributed, by April 1 of the calendar year following the calendar
year in which the Participant reaches age 70-1/2. Except as provided by law, a
Participant who reached age 70-1/2 before January 1, 1988 and who was not a
five percent owner of the Company at any time during the Plan Year ending with
or within the calendar year in which the Participant attains age 66-1/2 or
thereafter, is not required to receive distribution of his interest until he
separates from service.

Section 6.3 Disposition of Forfeitable Interest - Effect of
Rehiring.

(a) Subject to the provisions of (c) below, any
forfeitable portion of a Participant's interest in the Trust Fund shall be
forfeited as of the earlier of the date the Participant's vested interest is
distributed to him, as provided in Section 6.2(c), or the date the Participant
incurs five (5) consecutive Breaks in Service.

(b) Effective as of January 1, 1989, as of the last day
of each Plan year, any and all amounts forfeited by Participants under the
provisions of (a) above or Section 6.6 shall be reallocated among the Accounts
of the Par-

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<PAGE> 47
ticipants remaining in the ratio which the Matching Company Contributions made
on behalf of each Participant for that Plan Year bears to the aggregate
Matching Company Contributions made on behalf of all Participants for that Plan
Year. Any Matching Company Contributions and earnings allocable thereto which
are forfeited under the provisions of Section 3.5 shall not be reallocated as
provided above, but shall be applied to reduce future Matching Company
Contributions by the Company or Participating Employer that made such
contribution on behalf of the Participant, as provided in Section 3.5.

(c) In accordance with such rules as the Committee may
prescribe, there shall be restored to the Participant's credit in his Account
the dollar value of any portion of a Participant's interest in the Trust Fund
which was forfeited upon distribution of the Participant's vested interest in
accordance with Section 6.2(c); provided, however, that such restoration shall
be made only in the case of the Participant's reemployment as an Eligible
Employee prior to sustaining five (5) consecutive one year Breaks in Service,
and only if the Participant repays to the Plan in cash no later than the fifth
anniversary of his reemployment as an Eligible Employee, the amount of the
distribution attributable to Company Matching Contributions and earnings
thereon received at termination. The determination of the amount the
Participant is required to repay in cash under this Subsection (c), and the
determination of the dollar

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<PAGE> 48
value of the forfeited amount required to be restored shall be made as of the
Valuation Date the Participant's Account was valued for purposes of determining
the amount of his distribution from the Trust Fund. No adjustment in the
dollar value of the forfeited amount shall be made for any gains or losses of
the Trust Fund between the applicable Valuation Date and the restoration of the
dollar value of the forfeited portion of Participant's interest in the Trust
Fund. The repaid amount and the Participant's restored interest in the Trust
Fund shall upon repayment become a part of the Participant's new Account
balance. Said forfeited interest shall be restored from forfeitures in the
Plan Year of repayment, or as soon as available.

Section 6.4 Spendthrift Trust Provisions. Except as
otherwise provided hereunder, all amounts payable hereunder by the Trustee
shall be paid only to the person or persons entitled thereto, and all such
payments shall be made directly into the hands of such person or persons and
not into the hands of any other person or corporation whatsoever. The
interests of any Participant or Beneficiary in the Trust Fund and/or any of the
benefits, payments, proceeds or avails therefrom and under this Plan shall not
be subject to claims of his creditors, or others, or subject to attachment,
garnishment, execution or other process of law, and no Participant or
Beneficiary shall have any right to alienate, assign, anticipate, commute,
pledge or encumber his interest in the Trust Fund and/or any of the benefits,

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<PAGE> 49
payments, proceeds or avails therefrom or under this Plan in any manner.

Section 6.5 Withdrawal of Contributions. Effective on the
last day of any given calendar month, a Participant may, upon giving prior
written notice to the Committee, withdraw a part of the dollar value of his
Account subject to the following conditions and limitations:

(a) Such withdrawal must first be made from the
Participant's pre-1987 Supplementary Contributions, if any, but exclusive of
earnings thereon. A Participant who elects to make a withdrawal of his
pre-1987 Supplementary Contributions under the provisions of this subsection
(a) shall not be permitted to make further Matched or Supplementary
Contributions until the beginning of the calendar month following a period of
three months from the last day of the calendar month in which such withdrawal
request is made.

(b) Upon exhaustion of the Participant's pre-1987
Supplementary Contributions, any further withdrawal must then be made from the
Participant's pre-1987 Matched Contributions, if any, also exclusive of
earnings thereon; provided, however, that any Participant withdrawing pre-1987
Matched Contributions shall not be permitted to make further Supplementary or
Matched Contributions until the beginning of the calendar month following a
period of three months from the last day of the calendar month in which such
withdrawal request is made.

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<PAGE> 50
(c) Upon exhaustion of the Participant's pre-1987 Matched
Contributions, if any, exclusive of earnings thereof, any further withdrawal
must be then made from the Participant's post-1986 Supplementary Contributions
and Matched Contributions and earnings allocable to his aggregate Participant
contributions under the Plan. Any such withdrawal shall be treated as an
allocable withdrawal of his Supplementary and Matched Contributions and of the
earnings thereon in accordance with Section 72(e); provided, however, any
withdrawal treated under Section 72(e) of the Code as a withdrawal of amounts
contributed by the Participant shall be first allocable to the Participant's
Supplementary Contributions and then to his Matched Contributions. A
Participant who elects to make a withdrawal of any or all of his post- 1986
Supplementary and Matched Contributions and earnings on his aggregate
contributions under the provisions of this subsection (c) shall not be
permitted to make further Matched or Supplementary Contributions until the
beginning of the calendar month following a period of three months from the
last day of the calendar month in which such withdrawal request is made.

(d) Notwithstanding subparagraphs (a), (b) and (c)
hereof, in the case of a Participant who has withdrawn the total dollar value
of his Supplementary Contributions and his Matched Contributions, and earnings
allocable to such contributions, withdrawals may be made from the Company's
Matching Contributions made on behalf of said

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<PAGE> 51
Participant, and any earnings thereon, up to the full amount thereof; provided,
however, that such Participant must be fully vested (100%) in Company
contributions at the date of such a withdrawal, and must be determined, by the
Committee, to have a hardship need. A Participant who makes a hardship
withdrawal shall make no further Supplementary or Matched Contributions until
the beginning of the calendar month following a period of three months from the
last day of the calendar month in which such withdrawal is made.

Hardship determinations shall be made in a uniform and
non-discriminatory manner. By way of example, and not limitation, hardship
would be a financial hardship occurring in the personal affairs of a
Participant because of:

(i) A financial need of long-range proportion,
such as a need for Participant's purchase of a primary home or residence or for
the post-secondary education of Participant's children; or

(ii) A financial need of large proportion, such as
a need due to major destruction of Participant's residence when not covered by
insurance; major loss of income caused by accident, sickness, or temporary
disability of Participant; major loss of income caused by extended layoff of at
least 90 days of Participant; major financial burden caused by death occurring
in the immediate family of Participant; foreclosure on the mortgage of
Participant's residence; and medical expenses of Participants who are eligible
to participate in the Hilton Hotels Group Health

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<PAGE> 52
Plans to the extent such expenses are not otherwise covered under those plans.
Such election shall be effective as of the first day of the calendar month
which is at least 30 days following the date the election is filed.

(e) If a Participant's Supplementary and Matched
Contributions are suspended in the event of a withdrawal under this Section,
such contributions shall not be resumed unless the Participant files a written
election with the Committee to that effect.

(f) Withdrawals under this Section may not be in an
amount less than the lesser of the amount contributed to the Plan by the
Participant, or $500.00, and a period of 12 months must have elapsed since the
last withdrawal, except for hardship withdrawals under subparagraph (d) hereof.

Section 6.6 Missing Participant or Beneficiary. If a
Participant's vested interest cannot be distributed because such Participant or
his Beneficiary or Beneficiaries cannot be located, the Trustee shall transfer
the value of the Participant's interest in the Trust Fund to the fund described
in Section 6.2(d) for the benefit of such Participant or Beneficiary.
Thereafter, if the Committee fails to locate the Participant or Beneficiary
entitled to a distribution, the entire amount set aside with respect to such
payee, plus earnings, shall be forfeited as of the beginning of the calendar
month coinciding with or next following the fifth anniversary of the date
distribution of said vested interest was first attempted. Said forfeited

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<PAGE> 53
amount shall be disposed of as provided in Section 6.3 hereof.

Should a Participant or Beneficiary to whom payment is due
make a claim for his vested interest in the Trust Fund, the vested interest so
forfeited will be reinstated on behalf of such claimant. Said reinstated
vested interest shall be paid from forfeitures arising in the Plan Year during
which the claim is settled, or as soon as available from forfeitures.

Section 6.7 Direct Rollovers.

(a) This Section 6.7 applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this Section
6.7, a Distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.

(b) Eligible Rollover Distributions: For purposes of
this Section 6.7, an "Eligible Rollover Distribution" is any distribution of
all or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include:

(1) any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and

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<PAGE> 54
(2) the portion of any distribution that
is not includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).

(c) Eligible Retirement Plan: For purposes of this
Section 6.7, an "Eligible Retirement Plan" is an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover Distribution. However,
in the case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.

(d) Distributee: For purposes of this Section 6.7, a
"Distributee" includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code, are
Distributees with regard to the interest of the spouse or former spouse.

(e) Direct Rollover: For purposes of this Section 6.7, a
"Direct Rollover" is a payment by the Plan to the Eligible Retirement Plan
specified by the Distributee."

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ARTICLE VII
COMMITTEE, INVESTMENT AND ADMINISTRATION

Section 7.1 Appointment of Committee. The Committee shall
consist of three or more members appointed by the Board of Directors of the
Company. The Board of Directors shall by resolution appoint the original
members of such Committee, and such members shall hold office until
resignation, death or removal by the Board of Directors. The Committee may
then select a Plan Administrator under the Plan.

Section 7.2 General Duties and Powers of Committee. The
Committee shall be charged with the administration of this Plan and shall
decide, subject to the terms of the Trust Agreement, all questions arising in
the administration, interpretation and application of this Plan, including all
questions of eligibility.

The Committee shall, from time to time, direct the Trustee
concerning the payments to be made out of the Trust Fund pursuant to this Plan
and shall have such other powers respecting the administration of the Trust
Fund as may be conferred upon it hereunder or under the Trust Agreement.

Within a reasonable time after the last day of a calendar
month, the Company shall certify to the Committee in writing the total amount
of the Company's contribution to the Trust Fund for such month and such
information from the Company's records with respect to Employees as the
Committee may require in order to determine the identity and interests

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<PAGE> 56
of the Participants and otherwise to perform its duties hereunder.

Any certification by the Company of information to the
Committee pursuant to this Plan shall, for all purposes of this Plan, be
binding on all parties, provided that whenever any Employee proves to the
satisfaction of the Company that his period of employment or his Compensation
as so certified is incorrect, the Company shall correct such certification, all
in accordance with the claims procedure provided herein.

The determination of the Committee as to the identity of the
respective Participants and as to their respective interests shall be binding
upon the Company, the Trustee, the Employees, the Participants and all the
Beneficiaries.

In any matter affecting any member of the Committee in his
individual capacity as a Participant hereunder, separate and apart from his
status as a member of the group of Participants, such interested member shall
have no authority or vote in the determination of such matter as a member of
the Committee, but said Committee shall determine such matter as if said
interested member were not a member of the Committee; provided, however, that
this shall not be deemed to take from said interested member any of his rights
hereunder as a Participant. In the event that the remaining members of the
Committee should be unable to agree on any matter so affecting an interested
member

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<PAGE> 57
because of an equal division of voting, the Board of Directors shall appoint a
temporary member of the Committee in order to create an odd number of voting
members.

Section 7.3 Investment Powers and Duties. The Committee may
direct the Trustee with respect to the investment and reinvestment of the Trust
Fund, and to the extent it exercises its power to direct the Trustee, shall be
the Fiduciary with respect to investment, management and control of Trust
assets.

The Committee may transfer to the Trustee or an Investment
Manager the authority and duty to direct the investment and management of all
or a portion of the Trust assets. Upon such transfer the Trustee or the
Investment Manager, as the case may be, shall be the Fiduciary with respect to
the investment and management of such Trust assets and the Committee shall have
no responsibility therefor. Any transfer of investment and management to the
Trustee or to an Investment Manager may be revoked upon receipt by the Trustee
and the Investment Manager, if applicable, of a notice to that effect by the
Committee. The appointment, selection and retention of a qualified Investment
Manager shall be solely the responsibility of the Committee. The Trustee is
authorized and entitled to rely upon the fact that said Investment Manager is
at all times a qualified Investment Manager until such time as the Trustee has
received a written notice from the Committee to the contrary, as well as to
rely upon the fact that said

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<PAGE> 58
Investment Manager is authorized to direct the investment and management of the
assets of the aforesaid Trust until such time as the Committee shall notify the
Trustee in writing that another Investment Manager has been named or, in the
alternative, that the Investment Manager named has been removed and the
responsibility for the investment and management of the Trust assets has been
assumed by the Committee or has been transferred back to the Trustee, as the
case may be.

To the extent the Committee exercises its power to direct the
Trustee with respect to the investment and management of all or a portion of
the assets of the Trust Fund, the Trustee shall not be liable nor responsible
for losses or unfavorable results arising from the Trustee's compliance with
proper directions of the Committee which are made in accordance with the terms
of the Plan and Trust and which are not contrary to the provisions of any
applicable Federal or State statute regulating such investment and management
of the assets of an employee benefit trust. To the extent authority and
responsibility with respect to the investment and management of all or a
portion of the Trust assets are transferred to an Investment Manager, the
Trustee shall not be liable nor responsible in any way for any losses or other
unfavorable results arising from the Trustee's compliance with investment or
management directions received by the Trustee from the Investment Manager. Any
directions by the Committee shall be in accordance with the Trust Agreement.

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<PAGE> 59
Any directions by an Investment Manager shall be in accordance with an
agreement between said Manager, the Committee and the Trustee; provided,
however, the Trustee shall be under no duty to question any directions of the
Investment Manager nor to review any securities or other property of the Trust
constituting assets thereof with respect to which an Investment Manager has
investment responsibility, nor to make any suggestions to such Investment
Manager in connection therewith. The Trustee shall, as promptly as possible,
comply with any written directions given by the Committee or an Investment
Management hereunder.

The Trustee shall not be liable, in any manner nor for any
reason, for the making or retention of any investment pursuant to such
directions of the Investment Manager, nor shall the Trustee be liable for its
failure to invest any or all of the Trust Funds in the absence of such written
directions. In any event, neither the Committee nor any Investment Manager
referred to above shall direct the purchase, sale or retention of any assets of
the Trust Fund if such directions are not in compliance with the applicable
provisions of the Act and any Regulations or Rulings issued thereunder. No
Fiduciary shall permit the indicia of ownership of any of the Trust assets to
be maintained at a location outside the jurisdiction of the District Courts of
the United States, except as authorized by the Secretary of Labor.

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<PAGE> 60
During such period or periods of time, if any, as the
Committee or an Investment Manager is authorized to direct the investment and
management of the Trust assets, the Trustee shall have no obligation to
determine the existence of any conversion, redemption, exchange, subscription
or other right relating to any of said securities purchased of which notice was
given prior to the purchase of such securities, and shall have no obligation to
exercise any such right unless the Trustee is informed of the existence of the
right and is instructed to exercise such right, in writing, by the Committee or
the Investment Manager, as the case may be, within a reasonable time prior to
the expiration of such right.

In the event the Committee or Investment Manager has the power
to direct the Trustee in the investment of the Trust Fund, they shall have the
power to direct the Trustee to invest and/or reinvest any and all money or
property of any description at any time held by it and constituting a part of
the Trust Fund in accordance with the investment powers enumerated in the Trust
Agreement; providing investments are prudently made, with diversity to minimize
risk of loss, and are not in conflict with other fiduciary rules hereunder and
under the Trust Agreement.

Section 7.4 Organization of Committee. The Committee may
adopt such by-laws and regulations as it deems desirable for the conduct of its
affairs and appoint one of its own members chairman and appoint a secretary and
one or

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assistant secretaries and one or more other agents, none of whom need be a
member of the Committee, but any of whom may, but need not be, an officer or
employee of the Company. It may delegate to any agent such duties and powers,
both ministerial and discretionary, as it deems appropriate, excepting only
that all matters involving investment of funds, if applicable, interpretation
of this Plan and settlement of disputes shall be determined by the Committee.

Any member of the Committee may resign at any time by giving
written notice to the other members and to the Secretary of the Company,
effective as therein stated, otherwise upon receipt. Any member who leaves the
employ of the Company shall be deemed to have resigned as a member on the date
of his termination of employment. Any member of the Committee may, at any
time, be removed by the Board of Directors.

Upon the death, resignation or removal of any member, the
Board of Directors shall at its next regular meeting, or at a special meeting
if so desired, appoint by resolution a successor. Notice of appointment of a
successor member shall be made by the Secretary of the Company in writing to
the Trustee and to the Committee.

Section 7.5 Records and Reports. The Committee shall keep
accurate records of all of its proceedings, as well as such books of account,
records and other data as may be necessary for the proper administration of the
Plan. The Plan Administrator, unless the Plan is otherwise exempted by

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law, shall, within the time prescribed by law, prepare and submit to the
Internal Revenue Service and the Company an Annual Report conforming with the
requirements of the Employee Retirement Income Security Act of 1974, as
amended, and any Regulations or Rulings thereunder. Notwithstanding anything
herein to the contrary, the Plan Administrator shall fully comply with all
reporting and disclosure requirements provided by law.

Section 7.6 Claims Procedure. Claims for benefits or
hardship withdrawal shall be filed with the Plan Administrator, who shall be
required to give written notice to any Participant or Beneficiary who makes a
claim under the Plan which claim is denied by the Committee. Unless additional
time is required, such notice shall be given within ninety (90) days of receipt
of the claim, and shall be sent to the Participant's or Beneficiary's last
known address and shall set forth the specific reasons for denial of the
benefit claimed, specify the pertinent Plan provisions on which the denial is
based, describe any additional material or information necessary for the
claimant to perfect the claim and explain why such material is necessary. The
notice must also explain the Plan's claim review procedure. The Participant,
Beneficiary or a duly authorized representative, shall have sixty (60) days
from the date such notice was given to submit a written request for review of
his claims denial. He shall be entitled to review pertinent documents and
submit issues and comments in

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<PAGE> 63
writing, whereupon the entire Committee shall, unless additional time is
required, within thirty (30) days of receipt of the request, hear such appeal
and shall render a written decision within sixty (60) days thereafter.

Section 7.7 Manner of Administering. The Committee shall
have full discretion to construe and interpret the terms and provisions of this
Plan, which interpretation or construction shall be final and binding on all
parties, including but not limited to the Company and any Participant or
Beneficiary, except as otherwise provided by law. The Committee shall
administer such terms and provisions in a uniform and nondiscriminatory manner
and in full accordance with any and all laws applicable to the Plan.

Section 7.8 Compensation, Bonding, Expenses and Indemnity.

(a) The members of the Committee shall serve without
compensation for their services hereunder.

(b) Members of the Committee and any delegates shall be
bonded to the extent required by Section 412(a) of ERISA and the regulations
thereunder. Bond premiums and all expenses of the Committee or of any delegate
who is an employee of the Company shall be paid by the Company and the Company
shall furnish the Committee and any such delegate with such clerical and other
assistance as is necessary in the performance of their duties.

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<PAGE> 64
(c) The Committee is authorized at the expense of the
Company to employ such legal counsel as it may deem advisable to assist in the
performance of its duties hereunder. Expenses and fees in connection with the
administration of the Plan and the Trust shall be paid from the Trust assets as
provided in Article IX to the fullest extent permitted by law, unless the
Company determines otherwise.

(d) To the extent permitted by applicable state law, the
Company shall indemnify and save harmless the Committee and each member
thereof, the Board of Directors and any delegate of the Committee who is an
employee of the Company against any and all expenses, liabilities and claims,
including legal fees to defend against such liabilities and claims arising out
of their discharge in good faith of responsibilities under or incident to the
Plan, other than expenses and liabilities arising out of willful misconduct.
This indemnity shall not preclude such further indemnities as may be available
under insurance purchased by the Company or provided by the Company under any
by-law, agreement or otherwise, as such indemnities are permitted under state
law. Payments with respect to any indemnity and payment of any expenses and
fees under this Section shall be made only from assets of the Company and shall
not be made directly or indirectly from Trust assets.

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<PAGE> 65
ARTICLE VIII
CONTINUANCE AND AMENDMENT OF PLAN

Section 8.1 Continuance of Plan Not a Contractual Obligation
of Company - Impossibility of Diversion. It is the expectation of the Company
that it will continue this Plan indefinitely, but the continuance of this Plan
is not assumed as a contractual obligation by the Company, and the right is
reserved to the Company by action of its Board of Directors at any time to
discontinue this Plan. The discontinuance of this Plan by the Company shall
not have the effect of revesting in the Company any part of the Trust Fund,
except as specifically provided hereinafter. Upon the complete discontinuance
of contributions by any Company, affected Participants shall be one hundred
percent (100%) vested in their Account balances, and the Committee shall direct
the Trustee to distribute the net amount available, after payment of any fees
and expenses, in cash to the Participants entitled thereto according to their
Account balances, in accordance with Section 6.2.

In the event that the initial determination of the
Commissioner of Internal Revenue as to the qualification of this Plan and the
Trust hereunder under Sections 401 and 501(a) of the Federal Internal Revenue
Code of 1954 or any amendments thereto effective prior to said initial
determination, or the corresponding provisions of any later statute effective
prior to said determination, shall be that this Plan and the Trust hereunder do
not initially qualify

62
<PAGE> 66
under said sections, then the Company, by action of its Board of Directors,
shall have the right to discontinue this Plan and the Trust hereunder and to
cause all contributions made to the Trust hereunder by the Company to be
returned to the Company, and Participants shall have their contributions
returned as well.

Under no circumstances, other than those of the preceding
paragraph, shall any contributions by the Company to the Trust or any part of
the Trust Fund be recoverable by the Company from the Trustee or from any
Participant or former Participant, his Beneficiaries or other persons, or be
used for or diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries and defraying the reasonable expenses of
the Plan.

Section 8.2 Consolidation or Merger. In the event of the
consolidation or merger of the Company with or into any other business
enterprise, or the sale by the Company of its assets or stock, the resulting
successor enterprise may continue the Plan by formally adopting the same and by
executing a proper supplemental agreement to the Trust Agreement with the
Trustee; provided, however, that such continuation shall be allowed only with
the express written authorization of the Board of Directors of the Company; and
provided, further, that in the case of any merger or consolidation with or
transfer of assets or liabilities to any other plan, each Participant in the
Plan must, if the Plan is then terminated, receive a benefit

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<PAGE> 67
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer. If, within ninety (90) days from
the effective date of such consolidation, merger or sale of assets, the Board
of Directors of the Company does not authorize continuation or such successor
does not adopt the Plan, the Plan shall be terminated in accordance with
Section 8.4.

Section 8.3 Amendments. The Company, by action of the Board
of Directors, may at any time and from time to time amend this Plan; provided,
however, that no amendment shall be made at any time pursuant to which the
Trust Fund may be diverted to purposes other than for the exclusive benefit of
the Participants and their Beneficiaries, and provided further that no
amendment shall decrease the percentage of the interest of any Participant
which shall theretofore have become vested, nor shall any amendment
discriminate in favor of employees who are officers, shareholders, or highly
compensated employees, and further that no amendment shall be made which
affects the rights, duties or responsibilities of the Trustee without the
Trustees approval, and further if any amendment changes the vesting schedule,
any Participant with three or more Years of Service may, by filing a written
request thereto with the Company within sixty (60) days after he has received
notice of such amendment, elect to have his vested percentage

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<PAGE> 68
computed under the vesting schedule in effect prior to the amendment. Notice
and disclosure of amendments shall be given by the Plan Administrator in
accordance with law.

Notwithstanding anything herein to the contrary, however, this
Plan may be amended at any time if necessary to conform to the provisions and
requirements of the Federal Internal Revenue Code, the provisions and
requirements of the Revenue and Taxation Code of the State of California with
respect to employee benefit trusts or any amendments thereto, or regulations
issued pursuant thereto, or any similar act, and the Employee Retirement Income
Security Act of 1974 or any amendments thereto, or regulations, orders or
rulings issued pursuant thereto; and no such amendment shall be considered
prejudicial to any interest of any Participant or Beneficiary.

Amendments made by the Board of Directors as above shall bind
all adopting corporations without further action on their part, unless the
Board of Directors is otherwise notified within thirty (30) days of such
amendment.

Section 8.4 Termination of Plan. While the Plan is intended
as a permanent program, the Board of Directors reserves the right to terminate
the Plan at any time. In the event of such termination or a partial
termination, all affected Participants shall be one hundred percent (100%)
vested, to the extent required by applicable law. To the extent permissible
under Code Section 411(a)(11), the Committee shall direct the Trustee to
distribute the net amount

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<PAGE> 69
available, after payment of any fees and expenses, in cash to the Participants
entitled thereto according to their Account Balances. Any payments shall be
made within a reasonable time following the effective date of the termination
or a determination of the occurrence of a partial termination.

ARTICLE IX
ADMINISTRATION OF THE TRUST FUND -
THE TRUST AGREEMENT - EXPENSES

Concurrently with the adoption of this Plan, the Company has
executed a Trust Agreement providing for the administration of the Trust Fund
by the Trustee hereunder and containing such provisions as the Company has
deemed appropriate with respect to the following: (a) powers and authority of
the Trustee as to the investment and reinvestment of the Trust Fund, the income
therefrom, and the general administration thereof, subject to an election by
the Company regarding the right of the Committee or an Investment Manager to
direct the Trustee with respect to investment of the Trust Fund; (b) the
limitations on the liability of the Trustee; (c) authority of the Committee to
settle the Accounts of the Trustee on behalf of all persons having any interest
in the Trust Fund and from time to time to appoint a new Trustee in place of
any then acting Trustee of the Trust Fund.

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<PAGE> 70
ARTICLE X
MISCELLANEOUS

Section 10.1 Loans to Participants. Notwithstanding any
other provision of this Plan, the Committee shall have no right or authority to
authorize or direct the Trustee to make any loan or advance to any Participant
under this Plan or to make any distributions except as provided in this Plan.

Section 10.2 Limits on Employees' Rights. Neither the action
of the Company in establishing this Plan, nor any action taken by it or the
Committee under the provisions hereof, nor any provision of this Plan shall be
construed as giving to any Employee of the Company the right to be retained in
its employ or any right to any payment whatsoever, except to the extent of the
benefits provided for by this Plan to be paid from the Trust Fund. The Company
expressly reserves its rights at any time to dismiss any Employee without any
liability for any claim against the Trust Fund for any payment whatsoever
except to the extent provided for in this Plan, or against the Company. This
Plan is strictly a voluntary undertaking on the part of the Company and shall
not be deemed to constitute a contract between the Company and any Employee, or
to be a consideration for, or an inducement or condition of, the employment of
any Employee.

Section 10.3 Transfers of Participants. A Participant who
leaves the employment of a Company or entity

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<PAGE> 71
participating in the Plan and forthwith is employed by transfer to another
Company or entity participating in the Plan, shall continue to be a
Participant, and his vesting and benefit accumulation shall continue without
interruption.

A Participant who leaves the employment of a Company or entity
participating in the Plan, and forthwith is employed by transfer (not an
authorized leave of absence) to an Affiliated Employer or entity or property
not participating in the Plan, may continue to be a Participant, and, subject
to the provisions of the definition of Year of Service contained in Article I,
his vesting shall continue without interruption, but he may no longer continue
to contribute to the Plan.

Section 10.4 Context to Control. The headings of articles
and sections are included solely for convenience of reference, and if there be
any conflict between such headings and the text of this Plan, the text shall
control.

Section 10.5 Construction. The masculine gender shall be
deemed to include the feminine, and the singular the plural, unless the context
clearly indicates to the contrary.

Section 10.6 Qualified Domestic Relations Orders.
Notwithstanding any other provision of this Plan to the contrary, the Committee
may comply with the terms of a qualified domestic relations order (within the
meaning of such term under Section 414(p) of the Internal Revenue

68
<PAGE> 72
Code). Consistent with the preceding sentence, payments to an alternate payee
pursuant to a qualified domestic relations order may be made prior to the time
the Participant attains "earliest retirement age" (as defined in Section
414(p)(4)(B) of the Internal Revenue Code).

Section 10.7 Action by Participant or Other Person. Whenever
an election or consent or similar action is authorized by a Participant or
other person, such election, consent or action shall be taken in such form and
manner as is satisfactory to the Committee, in addition to satisfying
applicable requirements of the Plan.

Section 10.8 Receipt or Release. Any payment to any
Participant or Beneficiary in accordance with the provisions of the Plan shall,
to the extent thereof, be in full satisfaction of all claims against the
Trustee, the Committee, and the Company. The Trustee may require such
Participant or Beneficiary, as a condition precedent to such payment, to
execute a receipt and release to such effect.

Section 10.9 Persons Under Incapacity. In the event any
amount is payable under the Plan to a person for whom a conservator has been
legally appointed, the payment shall be distributed to the duly appointed and
currently acting conservator, without any duty on the part of the Committee to
supervise or inquire into the application of any funds so paid.

Section 10.10 Top-Heavy Plan Requirements. For any Plan Year
for which this Plan is a top-heavy plan as

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<PAGE> 73
defined in Section B.3 of Appendix B, attached hereto, and despite any other
provisions of this Plan to the contrary, this Plan will be subject to the
provisions of Appendix B.

ARTICLE XI
LAW GOVERNING AND SEVERABILITY

This Plan shall be construed, regulated and administered under
ERISA, and to the extent federal law is inapplicable, under the laws of the
State of California, and the Committee and the Trustee shall be liable to
account only in the courts of that State. All contributions received by the
Trustee hereunder shall be deemed to have been received in that State.

In the event any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan, which shall be fully severable, and this
Plan shall be construed and enforced as if said illegal or invalid provisions
had never been inserted.

DATE: _____________, 1993

HILTON HOTELS CORPORATION

By _______________________

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<PAGE> 74
APPENDIX A
ANNUAL ADDITION LIMITS

Section 4.3 of the Plan shall be construed in accordance with
this Appendix A. Unless the context clearly requires otherwise, words and
phrases used in this Appendix A shall have the same meanings that are assigned
to them under the Plan.

A.1 - Definitions.

As used in this Appendix A, the following terms shall have the
meanings specified below.

"Annual Additions" shall mean the sum credited to a
Participant's Accounts for any Plan Year of (a) Company contributions, (b)
voluntary contributions, (c) forfeitures, (d) amounts credited after March 31,
1984 to an individual medical account, as defined in Section 415(l)(2) of the
Code which is part of a Defined Benefit Plan maintained by the Company, and (e)
amounts derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to post-retirement
medical benefits allocated to the separate account required with respect to a
key employee (as defined in Section B.2(e) of Appendix B to the Plan) under a
welfare benefit plan (as defined in Section 419(e) of the Code) maintained by
the Company.

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"Defined Benefit Plan" means a plan described in Section
414(j) of the Code.

"Defined Contribution Plan" means a plan described in Section
414(i) of the Code.

"Defined Contribution Plan Fraction" shall mean a fraction,
the numerator of which is the sum of the annual additions to a Participant's
accounts under all Defined Contribution Plans maintained by one or more Related
Companies, and the denominator of which is the sum of the lesser of (a) or (b)
for such Plan Year and for each prior Plan Year of service with one or more
Related Companies, where (a) is the product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A) of the Code for the Plan Year
(determined without regard to Section 415(c)(6) of the Code), and (b) is the
product of 1.4 multiplied by the amount which may be taken into account under

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<PAGE> 76
Section 415(c)(1)(B) of the Code (or Section 415(c)(7) of the Code, if
applicable) with respect to the Participant for the Plan Year. Solely for
purposes of this definition, contributions made directly by an Employee to a
Defined Benefit Plan which maintains a qualified cost-of- living arrangement as
such term is defined in Section 415(k)(2) shall be treated as Annual Additions.
Notwithstanding the foregoing, the numerator of the Defined Contribution Plan
Fraction shall be adjusted pursuant to Treasury Regulations 1.415-7(d)(1),
Questions T-6 and T-7 of Internal Revenue Service Notice 83-10, and Questions
Q-3 and Q-14 of Internal Revenue Service Notice 87-21.

"Section 415 Compensation" shall mean a Participant's earned
income, wages, salaries, and fees for professional services, and other amounts
received for personal services actually rendered in the course of employment
with an employer maintaining a plan (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses), and excluding
the following:

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<PAGE> 77
deductible by the Employee, or any distributions from a plan of
deferred compensation;

(d) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in
section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).

Compensation for any limitation year is the compensation actually paid or
includable in gross income during such year.

A.2 - Annual Addition Limitations.

(a) The compensation limitation of Section 4.3 of the Plan
shall not apply to any contribution for medical benefits (within the meaning of
Section 419A(f)(2)) after separation from service which is treated as an Annual
Addition. In the event that Annual Additions to all the

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<PAGE> 78
accounts of a Participant would exceed the limitations of Section 4.3 of the
Plan, they shall be reduced in the following priority: (1) return of voluntary
contributions to the Participant; (2) reduction of Company contributions.

(b) If any Company or any Affiliated Employer contributes
amounts, on behalf of Participants covered by the Plan, to other Defined
Contribution Plans, the limitation on Annual Additions provided in Article IV
of the Plan shall be applied to Annual Additions in the aggregate to the Plan
and such other plans. Reduction of Annual Additions, where required, shall be
accomplished by first refunding any voluntary contributions to Participants,
then by reducing contributions under such other plans pursuant to the
directions of the fiduciary for administration of such other plans or under
priorities, if any, established by the terms of such other plans, and then, if
necessary, by reducing contributions under the Plan.

(c) In any case where a Participant under the Plan is also a
participant under a Defined Benefit Plan or a Defined Benefit Plan and other
Defined Contribution Plans maintained by the Company or an Affiliated Employer,
the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction shall not exceed 1.0. Reduction of contributions to or benefits from
all plans, where required, shall be accomplished by first reducing benefits
under such other Defined Benefit Plan or plans, then by allocating any excess
in the manner set out above with

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<PAGE> 79
respect to the Plan, and finally by reducing contributions or allocating any
excess contributions with respect to other Defined Contribution Plans, if any;
provided, however, that adjustments necessary under this or the next preceding
paragraph may be made in a different manner and priority pursuant to the
agreement of the Committee and the administrators of all other plans covering
such Participant, provided such adjustments are consistent with procedures and
priorities prescribed by Treasury Regulations under Section 415 of the Code.

(d) In the event the limitations of Section 4.3 of the
Plan or this Appendix A are exceeded and the conditions specified in Treasury
Regulations Section 1.415-6(b)(6) are met, the Committee may elect to apply the
procedures set forth in Treasury Regulations Section 1.415-6(b)(6).

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<PAGE> 80
APPENDIX B
TOP-HEAVY PROVISIONS

Section 10.10 of the Plan shall be construed in accordance
with this Appendix B. Definitions in this Appendix B shall govern for the
purposes of this Appendix B. Any other words and phrases used in this Appendix
B, however, shall have the same meanings that are assigned to them under the
Plan, unless the context clearly requires otherwise.

B.1 - General.

This Appendix B shall be effective for Plan Years beginning on
or after January 1, 1984. This Appendix B shall be interpreted in accordance
with Section 416 of the Code and the regulations thereunder.

B.2 - Definitions.

(a) The "Benefit Amount" for any Employee means (1) in
the case of any defined benefit plan, the present value of his normal
retirement benefit, determined on the Valuation Date as if the Employee
terminated on such Valuation Date, plus the aggregate amount of distributions
made to such Employee within the five-year period ending on the Determination
Date (except to the extent already included on the Valuation Date) and (2) in
the case of any defined contribution plan, the sum of the amounts credited,

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<PAGE> 81
on the Determination Date, to each of the accounts maintained on behalf of such
Employee (including accounts reflecting any nondeductible employee
contributions) under such plan plus the aggregate amount of distributions made
to such Employee within the five-year period ending on the Determination Date.
For purposes of this Section, the present value shall be computed using a 5%
interest assumption and the mortality assumptions contained in the defined
benefit plan for benefit equivalence purposes, provided that, if more than one
defined benefit plan is being aggregated for top-heavy purposes, the actuarial
assumptions which shall be used for testing top-heaviness are those of the plan
with the lowest interest assumption, provided further that if the lowest
interest assumption is the same for two or more plans, the actuarial
assumptions used shall be that of the plan with the greatest value of assets on
the applicable date.

(b) "Company" means any company (including unincorporated
organizations) participating in the Plan or plans included in the "aggregation
group" as defined in this Appendix B.

(c) "Determination Date" means the last day of the
preceding Plan Year or, in the case of the first Plan Year of the Plan, the
last day of the Plan Year.

(d) "Employees" means employees, former employees,
beneficiaries, and former beneficiaries who have

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<PAGE> 82
a Benefit Amount greater than zero on the Determination Date.

(e) "Key Employee" means any Employee who, during the
Plan Year containing the Determination Date or during the four preceding Plan
Years, is:

(1) one of the ten Employees of a Company having annual
compensation from such Company of more than the limitation in effect
under Section 415(c)(1)(A) of the Code and owning (or considered as
owning within the meaning of Section 318 of the Code) both more than a
1/2% interest and the largest interest in such Company (if two
Employees have the same interest the Employee having the greater
annual compensation from the Company shall be treated as having a
larger interest);

(2) a 5% owner of a Company;

(3) a 1% owner of a Company who has an annual compensation
above $150,000; or

(4) an officer of a Company having an annual compensation
greater than 50% of the amount in effect under Section 415(b)(1)(A) of
the Code for any such Plan Year (however, no more than the lesser of
(A) 50 employees or (B) the greater of 3 employees or 10% of the
Company's employees shall be treated as officers). For purposes of
determining the number of employees taken into account under this
Section B.2(e)(4), employees described in Section 414(q)(8) of the
Code shall be excluded.

B-3
<PAGE> 83
(f) A "Non-Key Employee" means an Employee who is not a
Key Employee.

(g) "Valuation Date" means the first day (or such other date
which is used for computing plan costs for minimum funding purposes) of the
12-month period ending on the Determination Date.

(h) A "Year of Service" shall be calculated using the Plan
rules that normally apply for determining vesting service.

These definitions shall be interpreted in accordance with
Section 416(i) of the Code and the regulations thereunder and such rules are
hereby incorporated by reference. The term "Key Employee" shall not include
any officer or employee of an entity referred to in Section 414(d) of the Code.
For the purpose of this subsection, "compensation" shall mean compensation as
defined in Section 414(q)(7) of the Code and shall be determined without regard
to Sections 125, 402(a)(8), 402(h)(1)(B) or, in the case of employer
contributions made pursuant to a salary reduction agreement, Section 403(b).

B.3 - Top-Heavy Definition.

The Plan shall be top-heavy for any Plan Year if, as of the
Determination Date, the "top-heavy ratio" exceeds 60%. The top- heavy ratio is
the sum of the Benefit Amounts for all employees who are Key Employees divided
by the sum

B-4
<PAGE> 84
of the Benefit Amounts for all Employees. For purposes of this calculation
only, the following rules shall apply:

(a) The Benefit Amounts of all Non-Key Employees who were
Key Employees during any prior Plan Year shall be disregarded.

(b) The Benefit Amounts of all employees who have not
performed any services for any Company at any time during the five-
year period ending on the Determination Date shall be disregarded;
provided, however, if an Employee performs no services for five years
and then again performs services, such Employee's Benefit Amount shall
be taken into account.

(c)(1) Required Aggregation. This calculation shall be made
by aggregating any plans, of the Company or an Affiliated
Employer, qualified under Section 401(a) of the Code in which
a Key Employee participates or which enables this Plan to meet
the requirements of Section 401(a)(4) or 410 of the Code; all
plans so aggregated constitute the "aggregation group."

(2) Permissive Aggregation. The Company may also
aggregate any such plan to the extent that such plan, when
aggregated with this aggregation group, continues to meet the
requirements of Section 401(a)(4) and Section 410 of the Code.

If an aggregation group includes two or more defined benefit plans,
the actuarial assumptions used in

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<PAGE> 85
determining an Employee's Benefit Amount shall be the same under each
defined benefit plan and shall be specified in such plans. The
aggregation group shall also include any terminated plan which covered
a Key-Employee and which was maintained within the five-year period
ending on the Determination Date.

(d) This calculation shall be made in accordance with Section
416 of the Code (including 416(g)(3)(B) and (g)(4)(A)) and the
regulations thereunder and such rules are hereby incorporated by
reference. For purposes of determining the accrued benefit of a Non-
Key Employee who is a Participant in a defined benefit plan, this
calculation shall be made using the method which is used for accrual
purposes for all defined benefit plans of the Company, or if there is
no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under Section 411(b)(1)(C) of the Code.

B.4 - Vesting.

Notwithstanding the vesting provisions of the Plan, if the
Plan is top-heavy for any Plan Year, any Participant who completes one Hour of
Service during any day of such Plan Year or any subsequent Plan Year and who
terminates during any day of such Plan Year or any subsequent Plan Year shall
be entitled to a vested benefit which is the greater of his vested interest
pursuant to

B-6
<PAGE> 86
Section 5.2 of the Plan, or a vested interest at least equal to the product of
(x) the benefit such Participant would receive under the Plan if he was 100%
vested on the date of such termination times (y) the percentage shown below:

<TABLE>
<CAPTION>
Number of Completed
Years of Service Percentage
------------------- ----------
<S> <C>
2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>

Notwithstanding the foregoing, the nonforfeitable percentage of a Participant's
benefit under the Plan shall not be less than that determined under the Plan
without regard to the preceding vesting schedule. Such benefit shall be
payable in accordance with the provisions of the Plan regarding payments to
terminated Participants.

Notwithstanding the preceding paragraph, if the Plan is no
longer top-heavy in a Plan Year following a Plan Year in which it was
top-heavy, a Participant's vesting percentage shall be computed under the
vesting schedule that otherwise exists under the Plan. However, in no event
shall a Participant's vested percentage in his accrued benefit be reduced. In
addition, a Participant shall have the option of remaining under the vesting
schedule set forth in this

B-7
<PAGE> 87
Section if he has completed three years of Vesting Service. The period for
exercising such option shall begin on the first day of the Plan Year for which
the Plan is no longer top-heavy and shall end 60 days after the later of such
first day or the day the Participant is issued written notice of such option by
the Company or the Committee.

B.5 - Minimum Benefits or Contributions, Compensation Limitations and Section
415 Limitations.

If the Plan is top-heavy for any Plan Year, the following
provisions shall apply to such Plan Year:

(a)(1) Except to the extent not required by Section 416 of
the Code or any other provision of law, notwithstanding any other
provision of this Plan, if the Plan and all other plans which are part
of the aggregation group are defined contribution plans, each
Participant (and any other Employee required by Section 416 of the
Code) other than Key employees shall receive an allocation of employer
contributions and forfeitures from a plan which is part of the
aggregation group at least equal to 3% (or, if lesser, the largest
percentage allocated to any Key Employee for the Plan Year) of such
Participant's compensation for such Plan Year (the "defined
contribution minimum"). For purposes of this subsection, salary
reduction contributions on behalf of a Key Employee must be taken into
account. For purposes of this subsection, a non-

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Key Employee shall be entitled to a contribution if he is employed on
the last day of the Plan Year (1) regardless of his level of
compensation, (2) without regard to whether he has made any mandatory
contributions required under the Plan, and (3) regardless of whether
he has less than 1,000 Hours of Service (or the equivalent) for the
accrual computation period.

(2) Except to the extent not required by Section 416 of the
Code or any other provision of law, notwithstanding any other
provisions of the Plan, if the Plan or any other plan which is part of
the aggregation group is a defined benefit plan each Participant who
is a participant in any such defined benefit plan (who is not a Key
Employee) who accrues a full Year of Service during such Plan Year
shall be entitled to an annual normal retirement benefit from a
defined benefit plan which is part of the aggregation group which
shall not be less than the product of (1) the employee's average
compensation for the five consecutive years when the employee had the
highest aggregate compensation and (2) the lesser of 2% per Year of
Service or 20% (the "defined benefit minimum"). A Non-Key Employee
shall not fail to accrue a benefit merely because he is not employed
on a specified date or is excluded from participation because (1) his
compensation is less than a stated minimum or (2) he

B-9
<PAGE> 89
fails to make mandatory employee contributions. For purposes of
calculating the defined benefit minimum, (1) compensation shall not
include compensation in Plan Years after the last Plan Year in which
the Plan is top-heavy and (2) a Participant shall not receive a Year
of Service in any Plan Year before January 1, 1984 or in any Plan Year
in which the Plan is not top-heavy. This defined benefit minimum
shall be expressed as a life annuity (with no ancillary benefits)
commencing at normal retirement age. Benefits paid in any other form
or time shall be the actuarial equivalent (as provided in the plan for
retirement benefit equivalence purposes) of such life annuity. Except
to the extent not required by Section 416 of the Code or any other
provisions of law, each Participant (other than Key Employees) who is
not a participant in any such defined benefit plan shall receive the
defined contribution minimum (as defined in paragraph (a)(1) above).

(3) If a non-Key Employee is covered by plans described in
both paragraphs (1) and (2) above, he shall be entitled only to the
minimum described in paragraph (1), except that for the purpose of
paragraph (1) "3% (or, if lesser, the largest percentage allocated to
any key employee for the Plan Year)" shall be replaced by "5%".
Notwithstanding the preceding sentence, if the accrual rate under the
plan described in (2) would comply with this Section B.5 absent the

B-10
<PAGE> 90
modifications required by this Section, the minimum described in
paragraph (1) above shall not be applicable.

(b) For purposes of this Section, "compensation" shall mean
all earnings included in the Employee's Form W-2 for the calendar year
that ends within the Plan Year, not in excess of $200,000, adjusted at
the same time and in the same manner as under Section 415(d) of the
Code.

(c)(1) Unless the Plan qualifies for an exception under
Section B.5(c)(2), "1.0" shall be substituted for "1.25" in the
definitions of Defined Benefit Plan Fraction and Defined Contribution
Plan Fraction used in Appendix A to the Plan.

(2) A Plan qualifies for an exception from the rule of
Section B.5(c)(1) if the Benefit Amount of all Employees who are Key
Employees does not exceed 90% of the sum of the Benefit Amounts for
all Employees and one of the following requirements is met:

(A) A defined benefit minimum of 3% per Year of
Service (up to 30%) is provided;

(B) For Participants covered only by a defined
contribution plan, a defined contribution minimum of 4% is
provided;

B-11
<PAGE> 91
of plans, benefits from the defined contribution minimum are
comparable to the 3% defined benefit minimum;

(D) The plan provides a floor offset where the
floor is a 3% defined benefit minimum; or

(E) A defined contribution minimum of 7-1/2% of
compensation is provided for any non-Key Employee who is
covered under both a defined benefit plan and a defined
contribution plan (each of which is top-heavy) of a Company.

B-12
<PAGE> 92
APPENDIX C

<TABLE>
<CAPTION>
Special Employee
Classification
Name of Employer Limitation
---------------- ----------
<S> <C>
Plan Sponsor:

Hilton Hotels Corporation None

Controlled Group Members:

Palmer House Company None

Hotel Waldorf Astoria Corp. None

Hilton Washington Corporation None

Hotel Equipment Corporation None

Hilton Casinos, Inc. None

Hilton San Diego Corporation None

Hilton Inns, Inc. None

Hilton New Jersey Corp. None

Benco, Inc. None

Conrad International Investment Corp. None

Conrad International Hotel Corp. None

Non-Controlled Group Subsidiaries:

Hilton Hawaiian Village Joint Venture None

Hilton Service Corporation None

Managed Properties:

Palacio Del Rio, Inc. (Hilton Palacio Del Rio) None

S.A. Hotel, Inc. None

Bristol Corporation (Anchorage Westward Hilton) None
</TABLE>

C-1
<PAGE> 93
<TABLE>
Special Employee
Classification
Name of Employer Limitation
---------------- ----------
<S> <C>
International Rivercenter (New Orleans Hilton) None

Koar-Pasadena Investment Partnership, G.P.
(Pasadena Hilton) None

Hotelerama Associates Limited (Fontainebleu Hilton) None

Fortuna Ent. LP (Los Angeles Airport Hilton) None

Kuilima Resort Company (Turtle Bay Hilton) None

Anaheim Hotel Partnership None
</TABLE>

C-2

<PAGE> 1
EXHIBIT 10.16

CHANGE OF CONTROL AGREEMENT

AGREEMENT by and between Hilton Hotels Corporation, a Delaware
corporation (the "Company") and _____________ (the "Employee"), dated as of the
17th day of November, 1994.

The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Employee by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control,
to encourage the Employee's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Employee with compensation arrangements upon a Change of Control
which provide the Employee with individual financial security and which are
competitive with those of other corporations and, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.

1
<PAGE> 2
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Certain Definitions. (a) The "Effective Date" shall
be the first date during the "Change of Control Period" (as defined in Section
1(b)) on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs, and it is
reasonably demonstrated that such termination (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (2) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination.

(b) The "Change of Control Period" is the period commencing
on the date hereof and ending on the earlier to occur of (i) the third
anniversary of such date or (ii) the first day of the month next following the
Employee's normal retirement date ("Normal Retirement Date") under Hilton
Hotels Retirement Plan or any successor retirement plan (the "Retirement
Plan"); provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended so as to terminate on
the earlier of (x) three years from such Renewal Date or (y) the first day of
the month coinciding with or next following the Employee's Normal

2
<PAGE> 3
Retirement Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice that the Change of Control Period shall not be so extended.

2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:

(i) The acquisition by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, (A)
the Company or its subsidiaries, (B) any employee benefit plan of the Company
or its subsidiaries which acquires beneficial ownership of voting securities of
the Company or (C) Barron Hilton, the Charitable Remainder Unitrust created by
Barron Hilton to receive shares from the Estate of Conrad N. Hilton, or the
Conrad N. Hilton Foundation, collectively the "Hilton Interests"), of
beneficial ownership, (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of common
stock or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors; or

(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for

3
<PAGE> 4
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or

(iii) Approval by the stockholders of the Company of
(A) a reorganization, merger, consolidation, in each case, with respect to
which persons who were the stockholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of the
Company or (C) the sale of all or substantially all of the assets of the
Company.

3. Employment Period. The Company hereby agrees to
continue the Employee in its employ, and the Employee hereby agrees to remain
in the employ of the Company, for the period commencing on the Effective Date
and ending on the earlier to occur of (a) the third anniversary of such date or
(b) the first day of the month coinciding with or next following the
Employee's

4
<PAGE> 5
Normal Retirement Date (the "Employment Period").

4. Terms of Employment. (a) Position and Duties.

(i) During the Employment Period, (A) the Employee's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 90-day period immediately preceding the
Effective Date and (B) the Employee's services shall be performed at the
location where the Employee was employed immediately preceding the Effective
Date or any office or location less than thirty-five (35) miles from such
location.

(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the Employee hereunder, to use
the Employee's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Employee to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (C) manage personal
investments and (D) participate as a member or consultant to professional

5
<PAGE> 6
associations and to otherwise participate in the activities of associations in
such manner as has been historically conducted by the Employee, so long as such
activities do not significantly interfere with the performance of the
Employee's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Employee prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.

(b) Compensation. (i) Base Salary. During the Employment
Period, the Employee shall receive an annual base salary ("Base Salary") at a
monthly rate at least equal to the highest monthly base salary paid or payable
to the Employee by the Company during the twelve- month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary awarded in the ordinary course of
business to other key employees of the Company and its subsidiaries. Any
increase in Base Salary shall not serve to limit or reduce any other obligation
to the Employee under this Agreement. Base Salary shall not be reduced after
any such increase.

6
<PAGE> 7
(ii) Annual Bonus. In addition to Base Salary, the
Employee shall be awarded, for each fiscal year during the Employment Period,
an annual bonus (an "Annual Bonus") (either pursuant to the incentive
compensation plan of the Company or otherwise) in cash at least equal to the
average bonus payable to the Employee from the Company and its subsidiaries in
respect of the three fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.

(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable as hereinabove provided, the
Employee shall be entitled to participate during the Employment Period in all
incentive, savings and retirement plans, practices, policies and programs
applicable to other key employees of the Company and its subsidiaries
(including Company's employee benefit plans, in each case providing benefits
which are the economic equivalent to those in effect or as subsequently
amended). Such plans, practices, policies and programs, in the aggregate,
shall provide the Employee with compensation, benefits and reward opportunities
at least as favorable as the most favorable of such compensation, benefits and
reward opportunities provided by the Company for the Employee under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter with respect to other key
employees of the Company and its subsidiaries.

7
<PAGE> 8
(iv) Welfare Benefit Plans. During the Employ- ment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
subsidi- aries (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs), at least as favorable as the
most favorable of such plans, practices, policies and programs in effect at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee and/or the Employee's family, as in effect at
any time thereafter with respect to other key employees of the Company and its
subsidiaries.

(v) Expenses. During the Employment Period, the
Employee shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Employee in accordance with the most favorable
policies, practices and procedures of the Company and its subsidiaries in
effect at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee, as in effect at any time thereafter
with respect to other key employees of the Company and its subsidiaries.

(vi) Fringe Benefits. During the Employment Period,
the Employee shall be entitled to fringe benefits, including use of an
automobile and payment of related expenses,

8
<PAGE> 9
in accordance with the most favorable plans, practices, programs and policies
of the Company and its subsidiaries in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries.

(c) Office and Support Staff. During the Employment Period,
the Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Employee by
the Company and its subsidiaries at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Employee,
as provided at any time thereafter with respect to other key employees of the
Company and its subsidiaries.

(d) Vacation. During the Employment Period, the Employee
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its subsidiaries as in
effect at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee, as in effect at any time thereafter
with respect to other key employees of the Company and its subsidiaries.

(e) Indemnification. During the term of the Employee's
employment with the Company and for a period of not less than three years after
the Date of Termination, the Employee

9
<PAGE> 10
shall be entitled to indemnification and, to the extent available on
commercially reasonable terms, insurance coverage therefor, with respect to the
various liabilities as to which the Employee has been customarily indemnified
during the Change of Control Period.

5. Termination. (a) Death or Disability. This Agreement
shall terminate automatically upon the Employee's death. If the Company
determines in good faith that the Disability of the Employee has occurred
(pursuant to the definition of "Disability" set forth below), it may give to
the Employee written notice of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Employee (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement,
"Disability" means disability which, at least 26 weeks after its commencement,
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).

(b) Cause. The Company may terminate the Employee's
employment for "Cause." For purposes of this Agreement, "Cause" means (i) an
act or acts of personal dishonesty taken by the Employee and intended to result
in substantial personal

10
<PAGE> 11
enrichment of the Employee at the expense of the Company, (ii) repeated
violations by the Employee of the Employee's obligations under Section 4(a) of
this Agreement which are demonstrably willful and deliberate on the Employee's
part and which are not remedied in a reasonable period of time after receipt of
written notice from the Company, (iii) the conviction of the Employee of a
felony, (iv) any refusal by the Employee to provide appropriate information or
to otherwise participate and cooperate in connection with the obtaining by the
Company or any of its subsidiaries of all licenses, permits and approvals
necessary to the conduct of their gaming business, or (v) the inability of the
Employee to obtain any license, permit or other authorization required to be
obtained by the Employee as a condition to the conduct by the Company or its
subsidiaries of gaming related activities.

(c) Good Reason. The Employee's employment may be terminated
by the Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means

(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for

11
<PAGE> 12
this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Employee;

(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Employee;

(iii) the Company's requiring the Employee to be
based at any office or location other than that described in
Section 4(a)(i)(B) hereof, except for travel reasonably
required in the performance of the Employee's
responsibilities;

(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by
this Agreement; or

(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Employee shall be conclusive.

Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the 30-day period
immediately following the first anniversary of the

12
<PAGE> 13
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.

(d) Notice of Termination. Any termination by the Company
for Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.

(e) Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be; provided, however, that (i) if the Employee's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termina- tion shall be the date on which the Company notifies the
Employee

13
<PAGE> 14
of such termination and (ii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Employee or the Disability Effective Date, as the case may be.

6. Obligations of the Company upon Termination.

(a) Death. If the Employee's employment is terminated by
reason of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representa- tives under this Agreement,
other than those obligations accrued or earned and vested (if applicable) by
the Employee as of the Date of Termination, including, for this purpose (i) the
Employee's full Base Salary through the Date of Termination at the rate in
effect on the Date of Termination or, if higher, at the highest rate in effect
at any time from the start of the 90-day period preceding the Effective Date
through the Date of Termination (the "Highest Base Salary"), (ii) the product
of the Annual Bonus paid to the Employee for the last full fiscal year and a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365 and
(iii) any compensation previously deferred by the Employee (together with any
accrued interest thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (such amounts specified in clauses
(i), (ii) and (iii) are hereinafter referred to as "Accrued Obligations"). All
such Accrued Obligations shall be

14
<PAGE> 15
paid to the Employee's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee's family shall be entitled to
receive benefits at least equal to the most favorable benefits provided by the
Company and any of its subsidiaries to surviving families of employees of the
Company and such subsidiaries under such plans, programs, practices and
policies relating to family death benefits, if any, in accordance with the most
favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect on the date of the Employee's death with
respect to other key employees of the Company and its subsidiaries and their
families.

(b) Disability. If the Employee's employment is terminated
by reason of the Employee's Disability, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash within
30 days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability Effective
Date to receive disability and other benefits at least equal to the most

15
<PAGE> 16
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other
key employees of the Company and its subsidiaries and their families.

(c) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated for Cause, this Agreement shall terminate
without further obligations to the Employee other than the obligation to pay to
the Employee the Highest Base Salary through the Date of Termination plus the
amount of any compensation previously deferred by the Employee (together with
accrued interest thereon). If the Employee terminates employment other than
for Good Reason, this Agreement shall terminate without further obligations to
the Employee, other than those obligations accrued or earned and vested (if
applicable) by the Employee through the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations shall be paid
to the Employee in a lump sum in cash within 30 days of the Date of
Termination.

(d) Good Reason; Other Than for Cause or Disability. If,
during the Employment Period, the Company shall terminate the

16
<PAGE> 17
Employee's employment other than for Cause, Disability, or death or if the
Employee shall terminate his employment for Good Reason:

(i) the Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:

A. to the extent not theretofore paid, the
Employee's Highest Base Salary through the Date of
Termination; and

B. the product of (x) the Annual Bonus paid to the
Employee for the last full fiscal year (if any) ending during
the Employment Period or, if higher, the Annual Bonus paid to
the Employee for the last full fiscal year prior to the
Effective Date (as applicable, the "Recent Bonus") and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination and the
denominator of which is 365; and

C. the product of (x) 2.99 and (y) the sum of (i)
the Highest Base Salary and (ii) the Recent Bonus; and

D. in the case of compensation previously deferred
by the Employee, all amounts previously deferred (together
with any accrued interest thereon) and not yet paid by the
Company, and any accrued vacation pay not yet paid by the
Company; and

E. the Employee shall be entitled to receive a

17
<PAGE> 18
lump-sum retirement benefit equal to the difference between
(a) the actuarial equivalent of the benefit under the
Retirement Plan, the Hilton Supplemental Executive Retirement
Plan and the Hilton Hotels Retirement Benefit Replacement Plan
the Employee would receive if he remained employed by the
Company at the compensation level provided for in Sections
4(b)(i) and 4(b)(ii) of this Agreement for the remainder of
the Employment Period and (b) the actuarial equivalent, as of
the Date of Termination, of his benefit, if any, under the
Retirement Plan and the Hilton Supplemental Executive
Retirement Plan and the Hilton Hotels Retirement Benefit
Replacement Plan; and

(ii) for the remainder of the Employment Period, or such
longer period as any plan, program, practice or policy may provide,
the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Sections 4(b)(iv) and (vi) of this Agreement if
the Employee's employment had not been terminated, including health
insurance and life insurance, in accordance with the most favorable
plans, practices, programs or policies of the Company and its
subsidiaries during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Employee, as in effect at
any time

18
<PAGE> 19
thereafter with respect to other key employees and their families and
for purposes of eligibility for retiree benefits pursuant to such
plans, practices, programs and policies, the Employee shall be
considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.

7. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by the company or any of its subsidiaries and for which the Employee
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Employee may have under any stock option or other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
the Employee is otherwise entitled to receive under any plan, policy, practice
or program of the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program.

8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Employee or

19
<PAGE> 20
others. In no event shall the Employee be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. The Company agrees to
pay, to the full extent permitted by law, all legal fees and expenses which the
Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Employee, the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.

9. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwith- standing, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any payments required under this
Section 9 (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to

20
<PAGE> 21
as the "Excise Tax"), then the Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that, after payment
by the Employee of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.

(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross- Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Arthur
Andersen & Co. (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Employee within 15 business days of
the Date of Termination, if applicable, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Employee shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to the
Employee within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Employee, it

21
<PAGE> 22
shall furnish the Employee with a written opinion that failure to report the
Excise Tax on the Employee's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Employee. As
a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm here- under, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee.

(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty-day period following the date
on which it gives such notice to

22
<PAGE> 23
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Employee
in writing prior to the expiration of such period that it desires to contest
such claim, the Employee shall:

(i) give the Company any information reasonably requested
by the Company relating to such claim,

(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,

(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and

(iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with

23
<PAGE> 24
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Employee agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall advance the amount of
such payment to the Employee, on an interest-free basis and shall indemnify and
hold the Employee harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and provided further that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

(d) If, after the receipt by the Employee of an amount

24
<PAGE> 25
advanced by the Company pursuant to Section 9(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of thirty days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.

10. Confidential Information. The Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
subsidiaries, and their respective businesses, which shall have been obtained
by the Employee during the Employee's employment by the Company or any of its
subsidiaries and which shall not be or become public knowledge (other than by
acts by the Employee or his representatives in violation of this Agreement).
After termination of the Employee's employment with the Company, the Employee
shall not,

25
<PAGE> 26
without the prior written consent of the Company, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.

11. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.

(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

26
<PAGE> 27
12. Miscellaneous. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to the Employee:

__________________________
__________________________
__________________________
__________________________
__________________________

If to the Company:

Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

27
<PAGE> 28
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

(e) The Employee's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.

(f) The Employee and the Company acknowledge that the
employment of the Employee by the Company is "at will", and, prior to the
Effective Date, may be terminated by either the Employee or the Company at any
time. Upon a termination of the Employee's employment or upon the Employee's
ceasing to be an officer of the Company, in each case, prior to the Effective
Date, there shall be no further rights under this Agreement.

28
<PAGE> 29
IN WITNESS WHEREOF, the Employee has hereunto set his hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

EMPLOYEE

______________________________

HILTON HOTELS CORPORATION

By ___________________________

Attest: ______________________
Secretary

<PAGE> 1
EXHIBIT 11
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS

Net income per share is based on net income divided by the total of the
weighted average number of common shares outstanding during the year,
plus the equivalent shares relating to the assumed exercise of stock
options. The calculation of common shares is as follows:

<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Shares outstanding January 1 47,846,854 47,677,922 47,549,892
Stock option-weighted average
exercises 22,484 14,078 10,923
Outstanding when market price
exceeds exercise price at
end of periods 1,220,560 999,033 1,055,849
Less shares assumed purchased
with proceeds (805,555) (709,285) (736,744)
---------- ---------- ----------
COMMON AND COMMON EQUIVALENT
SHARES 48,284,343 47,981,748 47,879,920
========== ========== ==========
Net Income (in millions) $121.7 106.1 103.9
========== ========== ==========
Earnings per share $2.52 2.21 2.17
========== ========== ==========
</TABLE>

<PAGE> 1
EXHIBIT 12
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pre-tax income including
50% owned companies $168.0 $121.3 $156.8 $156.2 $183.6
Add: Interest expense
from
Wholly owned 54.3 58.1 66.9 80.4 85.7
50% owned 18.9 10.8 7.3 9.5 9.5
Distributions from
less than 50% owned 5.5 5.2 4.8 6.4 12.1
------ ------ ------ ------ ------
SUB-TOTAL(A) 246.7 195.4 235.8 252.5 290.9

Add: Rent expense
(interest factor)
Wholly owned 1.8 1.7 1.8 2.1 2.2
50% owned 0.6 0.6 0.9 0.8 0.8
------ ------ ------ ------ ------
TOTAL(B) 249.1 197.7 238.5 255.4 293.9
====== ====== ====== ====== ======

Interest expense
Wholly owned 54.3 58.1 66.9 80.4 85.7
50% owned 18.9 10.8 7.3 9.5 9.5
Capitalized interest 14.6 5.2 4.9 2.1 8.4
------ ------ ------ ------ ------
SUB-TOTAL(C) 87.8 74.1 79.1 92.0 103.6

Add: Rent expense
(interest factor)
Wholly owned 1.8 1.7 1.8 2.1 2.2
50% owned 0.6 0.6 0.9 0.8 0.8
------ ------ ------ ------ ------
TOTAL(D) $90.2 $76.4 $81.8 $94.9 $106.6
====== ====== ====== ====== ======

RATIOS
Interest (A/C) 2.8 2.6 3.0 2.7 2.8
Fixed charges (B/D) 2.8 2.6 2.9 2.7 2.8
</TABLE>

<PAGE> 1
EXHIBIT 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

Strategic and Financial Objectives

Management's primary objective is to maximize shareholder value. This commitment
is evident in the continued growth and success of the gaming and hotel business
segments, the Company's superior earnings and its strong financial condition.
The Company will continue to pursue this objective by capitalizing on the
resurgent hotel industry, investing to enhance the Company's leadership in the
gaming industry, exploring new businesses with significant profit potential and
developing new strategic alternatives.

RESULTS OF OPERATIONS

Fiscal 1994 Compared with Fiscal 1993

Overview

The Company's net income increased 18 percent to $121.7 million or $2.52 per
share, compared to $102.7 million or $2.14 per share (excluding the cumulative
effect of accounting changes totaling $.07 per share) in 1993. Total operating
income increased 15 percent to $276.9 million in 1994 compared to $239.9 million
in 1993.

Hotels

The hotel segment includes the consolidated results of the Company's owned
and leased full service and all-suite properties. The segment also includes
equity income from unconsolidated affiliates, management fees from both domestic
and international hotel properties and franchise fees. At December 31, 1994 the
Company owned, partially owned, managed and franchised 18, 15, 24 and 162
properties, respectively, totaling 80,000 rooms worldwide.

Hotel segment results are primarily affected by volume (as measured by
occupancy), pricing (as measured by average room rate) and the Company's ability
to manage costs. Results were positively impacted in 1994 as both business and
leisure travel increased due to improving economic conditions and growth in
international travel to the United States. Occupancy for hotels owned or managed
increased to 70 percent in 1994 compared to 67 percent in 1993. Average room
rates increased seven percent over 1993.

Consolidated hotel revenue increased 19 percent in 1994 to $617.0 million.
Adjusting for the increase in revenue due to the consolidation of the New
Orleans Hilton Riverside in 1994, hotel revenue increased 10 percent over 1993.
Revenue per available room (RPAR) is a measure of hotel revenue generation. RPAR
for domestic hotels increased 11 percent in 1994, outpacing inflation for the
first time in five years.

Hotel operating income, primarily income from hotel interests and management
and franchise fee income, increased 52 percent in 1994 to $146.2 million.
Adjusting for the increase in operating income due to the consolidation of the
New Orleans Hilton Riverside in 1994 and the adverse impact of a $12.5 million
loan reserve in 1993, operating income increased 24 percent over the prior year.

Hotel operating income is significantly influenced by fluctuations in the
operating results of the Company's principal downtown/convention, resort and
airport locations where it has large equity interests. During 1994 many of the
Company's airport locations showed significant improvements over last year's
results, including double-digit growth in both occupancy and operating income at
the Logan Airport Hilton, O'Hare Hilton and the San Francisco Airport Hilton.
Combined income for the Company's wholly-owned and partially owned airport
properties increased $6.2 million over the prior year.

Significant increases in domestic and international travel have contributed
to a resurgence in operating results at the Company's major market
downtown/convention properties. Combined operating income from the
Waldorf=Astoria and the 50% owned New York Hilton and Towers increased $5.2
million, or 38 percent over the prior year. International room nights at these
two properties were up a combined 61 percent over 1993 levels. Combined results
from the Palmer House Hilton and the one-third owned Chicago Hilton and Towers
increased $5.4 million on improved occupancy and average rates. The operating
performance of the New Orleans Hilton Riverside improved dramatically over 1993
due to increased convention and leisure travel room nights and the opening of
the adjacent river casino. Both occupancy and average rate increased at this
property, resulting in RPAR growth of 14 percent in 1994.

Results at the Company's resort properties also benefitted from increased
leisure travel. Operating income from the 50% owned Hilton Hawaiian Village
increased $4.6 million over 1993 as tourism

THIRTY-FOUR
<PAGE> 2

from the key California and Japanese markets increased. International room
nights at this property increased 21 percent over 1993.
Operating income from the 30% owned Conrad Hong Kong increased $1.2 million
in 1994. Increases in occupancy and average rate resulted in a 24 percent
increase in RPAR.
Management and franchise fee revenue increased $4.3 million to $83.0 million.
Fee revenue is based primarily on operating revenues at managed properties and
rooms revenue at franchised properties.
The Company has an ongoing program of actively monitoring and improving its
franchise hotels. In 1994, 13 franchise contracts, representing 3,178 rooms,
were terminated by the Hilton Inns franchise system, many due to noncompliance
with the Company's standards. Four properties and 975 rooms were added to the
franchise system in 1994.
In 1994 the Company assumed management of the 561-room Millenium Hilton in
New York City and signed a management agreement for a new 400-room luxury hotel
in Bangkok, Thailand. The Conrad Bangkok is scheduled to open in 1999.
Although the supply-demand imbalance continues to improve, future operating
results could be adversely impacted by overcapacity and weak demand. Such
conditions could limit the Company's ability to pass through inflationary
increases in operating costs in the form of higher rates. Increases in
transportation and fuel costs could also unfavorably impact future results. The
Company believes that its financial strength, market presence and diverse
product line will enable it to remain extremely competitive.

Gaming

The gaming segment includes five wholly-owned Nevada hotel-casinos, equity
income and management fees from partially owned hotel-casinos in Queensland,
Australia and Istanbul, Turkey and equity income and management fees from gaming
operations in New Orleans, Louisiana and Windsor, Ontario, Canada.
The Company's Nevada gaming operations offer a diversified product and
service mix which appeals to a broad spectrum of customers. The Flamingo
Hilton-Las Vegas caters to the broad Las Vegas middle market, while the Las
Vegas Hilton caters to premium players and the convention market. The Flamingo
Hilton-Reno focuses on middle market activity, while the Reno Hilton targets
both convention and middle market activity. The Flamingo Hilton-Laughlin targets
the budget market segment.
Total gaming revenue increased two percent to $889.2 million in 1994 compared
to $873.5 million in 1993. Casino revenue, a component of gaming revenue, was
$480.6 million in 1994 compared to $502.1 million in 1993. Gaming operating
income was $159.0 million in 1994, a seven percent decline from $170.5 million
in 1993. Excluding the results of the Company's gaming facilities in New Orleans
and Windsor, both of which commenced operations in 1994, revenue increased one
percent and operating income decreased 12 percent from the prior year.
Operating income at the Flamingo Hilton-Las Vegas decreased $9.9 million due
to the impact of construction activity and the resultant temporary reduction in
available room capacity. Operating income at the Flamingo Hilton-Laughlin
decreased $2.6 million, reflecting increased room capacity in Laughlin and
competition from Las Vegas. Operating income from the Flamingo Hilton-Reno
increased 20 percent, primarily due to increases in casino win percentage and
slot revenue. Adjusting for a $3.9 million write-off of costs related to
abandoned construction plans, operating income at the Reno Hilton was comparable
with 1993.
Results at the Las Vegas Hilton are more volatile than those at the Company's
other casinos because this property targets the premium play segment of the
market. Operating income at the Las Vegas Hilton declined $12.1 million from
1993. A decline in premium play volume, partially offset by a one percent
increase in casino win percentage, resulted in a decrease of $10.2 million in
table game win.
In February 1994 a joint venture of which the Company is a 50% owner opened
the Queen of New Orleans river casino adjacent to the New Orleans Hilton
Riverside. This interim vessel was replaced with a permanent vessel, the
Flamingo Casino-New Orleans, in November 1994. In May 1994 a consortium of which
the Company has a one-third interest opened the Casino Windsor. The consortium
operates and manages the Casino Windsor for the Ontario provincial government.
Combined operating income from these two ventures, including equity and fee
income, totaled $9.0 million.
Equity income and management fees from the 19.9% owned Hotel Conrad and
Jupiters Casino in Australia increased $5.0 million over the prior year. Results
from the 25% owned Conrad Istanbul were not significant.
Occupancy for the Nevada hotel-casinos was 91 percent and 89 percent in 1994
and 1993, respectively. Average room rates increased three percent in 1994.

THIRTY-FIVE

<PAGE> 3

The gaming industry continues to experience growth in both new jurisdictions
and existing markets. The Las Vegas market is becoming increasingly competitive,
with per-capita casino spending declining. Competitors have announced new
projects which, if completed, will add significant casino space and hotel rooms
to the market. In addition, the expansion of casino gaming into many new
jurisdictions is continuing as gaming becomes an accepted form of entertainment
and a source of tax revenue for states and municipalities. The Las Vegas Hilton
recently added three luxury suites which cater to upscale casino customers.
Increases in premium play volume could result in greater volatility in casino
revenue at that property.

Interest and Dividend Income/Expense

Interest and dividend income decreased $.3 million in 1994 to $21.5 million
due to lower investable balances. Interest expense, net of amounts capitalized,
increased $5.3 million due to higher average debt levels and higher interest
rates; capitalized interest increased $5.0 million over 1993. Net interest
expense from unconsolidated affiliates decreased $2.4 million in 1994 to $12.2
million.

Income Taxes

The effective income tax rate in 1994 was 38.6% compared to 36.2% in 1993.
The Company's effective income tax rate is determined by the level and
composition of pretax income and the mix of income subject to varying foreign,
state and local taxes. The 1993 effective income tax rate benefitted from $9.0
million in credits resulting from the favorable resolution of Federal and state
income taxes for prior years. These credits were partially offset by a $5.0
million increase in the provision for income taxes due to the increase in the
Federal income tax rate for corporations from 34 percent to 35 percent. Of the
$5.0 million increase, $3.3 million was attributable to the measurement of
deferred income tax assets and liabilities at the new higher rate as required by
current accounting standards.

Property Transactions

The gain from property transactions in 1994 reflects a pretax gain on the
sale of land to the 50% owned Hilton Grand Vacations Company for a vacation
ownership project at the Flamingo Hilton-Las Vegas. Gains on this transaction
are being recognized on an installment basis.

Foreign Currency Losses

International operations are subject to certain economic and political risks,
including foreign currency fluctuations. The Company monitors its foreign
operations and, where appropriate, adopts hedging strategies to minimize the
impact of changing economic and political environments. The foreign currency
losses of $.7 million are due to transaction losses and exchange adjustments
arising from the remeasurement of operations in highly inflationary economies.

Minority Interest

The minority interest results from the consolidation of the New Orleans
Hilton Riverside. The Company increased its ownership interest in the property
from 46.8% to 67.4% in June 1994.

Fiscal 1993 Compared with Fiscal 1992

Overview

The Company's net income decreased one percent, before the cumulative effect
of accounting changes, to $102.7 million or $2.14 per share, compared to $103.9
million or $2.17 per share in 1992. The accounting changes are related to the
January 1, 1993 implementation of new accounting standards for income taxes and
postretirement benefits and resulted in additional net income of $3.4 million or
$.07 per share. Total operating income increased nine percent to $239.9 million
in 1993 compared to $219.9 million in 1992.

Hotels

Consolidated hotel revenue increased 11 percent in 1993 to $520.0 million.
Hotel operating income increased five percent in 1993 to $96.2 million.
Operating income in 1993 was adversely impacted by a $12.5 million reserve for a
loan made to a managed property. Excluding this charge, operating income
increased 19 percent over the prior year.
During 1993 many of the Company's airport and secondary market locations
posted income gains over the prior year. Combined results from the Company's
wholly-owned and partially owned airport properties increased $6.5 million over
the prior year, including a $3.4 million increase in operating income at the
O'Hare Hilton. The O'Hare Hilton reopened as a wholly-owned property in July
1992. The 1993 period also benefitted from improved results at the 50% owned San
Francisco Hilton and Towers and the New Orleans Hilton Riverside as well as
lower expenses for the Company's self-insurance and frequent traveler programs.
Operating income from the Company's hotels in New York City improved slightly
over the prior year, while results from the Hilton Hawaiian Village declined
$5.1 million from 1992. Recessionary conditions in California and Japan
adversely impacted leisure travel to Hawaii. Management and franchise fee
revenue increased $6.3 million in 1993 to $78.7 million.
Occupancy for hotels owned or managed increased to 67 percent in 1993
compared to 66 per-

THIRTY-SIX

<PAGE> 4

cent in 1992. Average room rates increased less than one percent over 1992.
RPAR for hotels owned or managed increased two percent in 1993.

Gaming

Total gaming revenue increased 15 percent to $873.5 million in 1993 compared
to $759.2 million in 1992. Casino revenue, a component of gaming revenue, was
$502.1 million in 1993 compared to $438.8 million in 1992. Operating income was
$170.5 million in 1993, an 11 percent increase from $153.4 million in 1992.
Operating income at the Flamingo Hilton-Las Vegas increased $7.3 million in
1993, while the Reno Hilton, benefitting from its first full year of operation,
increased $5.4 million over the prior year. Operating income at the Flamingo
Hilton properties in Laughlin and Reno also improved over the prior year.
Operating income at the Las Vegas Hilton remained consistent with 1992 levels,
while equity income and management fees from the Hotel Conrad and Jupiters
Casino in Australia increased $2.7 million over the prior year.
Occupancy for the Nevada hotel-casinos was 89 percent and 87 percent in 1993
and 1992, respectively. Average room rates increased three percent in 1993.

Interest and Dividend Income/Expense

Interest and dividend income increased $5.4 million in 1993 to $21.8 million
due to higher investable balances. Interest expense, net of amounts capitalized,
increased $13.5 million to $80.4 million due to higher average debt levels and
lower amounts of capitalized interest on construction projects. Net interest
expense from unconsolidated affiliates increased $3.4 million in 1993 to $14.6
million.

Income Taxes

The effective income tax rate in 1993 was 36.2% compared to 34.7% in 1992.
This increase was primarily due to the increase in the corporate Federal income
tax rate from 34 percent to 35 percent.

Property Transactions

The loss from property transactions in 1993 includes a pretax write-off of
$4.3 million resulting from the demolition of certain facilities at the Flamingo
Hilton-Las Vegas to permit further expansion at that property.

Foreign Currency Losses

The foreign currency losses of $1.3 million are primarily due to exchange
adjustments arising from the remeasurement of the Company's operations in Turkey
into U.S. dollars.

New Accounting Standards

In February 1992 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, which superseded previously issued standards. The Company adopted
SFAS No. 109 effective January 1, 1993. As permissible under the new standard,
the Company reflected the impact as a cumulative adjustment in the 1993 first
quarter and did not restate prior periods. The new standard had a favorable
impact on net income of $8.0 million.
In December 1990 the FASB issued SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. The Company adopted SFAS No. 106
effective January 1, 1993. As permissible under the new standard, the Company
reflected the impact as a cumulative adjustment in the 1993 first quarter and
did not restate prior periods. The new standard resulted in a charge to net
income of $4.6 million, net of a $2.3 million deferred tax benefit.

FINANCIAL CONDITION

Liquidity and Capital Spending

Net cash provided by operating activities increased to $230.9 million in 1994
from $226.9 million in 1993 and $226.7 million in 1992. In 1994 the Company's
working capital decreased $103.7 million to $345.4 million.
Capital expenditures, including those financed with construction payables,
were $265.9 million in 1994, while new investments totaled $156.7 million,
including $80.9 million in contributions to three hotel joint ventures to retire
long-term debt. Capital expenditures and new investments totaled $157.0 million
and $104.7 million, respectively, in 1993, and $222.2 million and $53.6 million,
respectively, in 1992.
The Company continues to be deliberate in its approach to developing new
hotel properties. Because of prior overbuilding in the industry, no new
construction of domestic hotels is currently underway. Growth in the hotel
segment will primarily occur through conversions of existing domestic
properties to the Hilton brand in strategically significant markets, expansion
of the Conrad system internationally and the development and management of
vacation ownership resorts.
In June 1994 the Company purchased an additional 20% interest in the
partnership that owns the 1,600-room New Orleans Hilton Riverside, increasing
Hilton's interest to a total of 67.4%. Accord-

THIRTY-SEVEN

<PAGE> 5

ingly, that entity's balance sheet and operating results (from June 16, 1994)
are included in the consolidated financial statements of the Company.
In December 1994 the Company's 50% owned Hilton Grand Vacations Company
affiliate completed development of a 200-unit vacation ownership resort adjacent
to the Flamingo Hilton-Las Vegas. The affiliate is also developing a 360-unit
resort adjacent to Sea World in Orlando, Florida. The first phase of the Orlando
project is anticipated to be completed in August 1995. Project costs for both
developments are being funded by the Company in the form of revolving loan
facilities aggregating approximately $100 million.
Major renovation projects are currently underway at the wholly-owned San
Diego Hilton Beach & Tennis Resort and the Portland Hilton. These renovations,
totaling $33.0 million, are scheduled for completion in 1995.
The Company is continuing to expand and improve its worldwide gaming
operations. In December 1994 the Las Vegas Hilton opened two newly constructed
luxury suites; a third suite opened in early 1995. Built at a cost of $40
million, the suites cater to select premium casino customers. The opening of the
"Star Trek" interactive attraction is scheduled for late 1996. This project will
occupy 40,000 square feet at the Las Vegas Hilton. The Flamingo Hilton-Las Vegas
is in the final stages of development of a 600-room tower addition and
renovation project including a new race and sports book and casino expansion.
This $123 million project is scheduled for completion in the summer of 1995.
Casino renovations totaling $10 million are scheduled for completion at the Reno
Hilton in mid-1995.
In November 1994 the Company commenced operations of the 50% owned Flamingo
Casino-New Orleans, a 2,400-passenger, 30,000 square-foot river casino, which is
docked adjacent to the New Orleans Hilton Riverside. This project was financed
with $44.8 million in bank debt and $19.2 million in partner contributions.
In Missouri, Hilton reached agreement with the City and Port Authority of
Kansas City, Missouri, on a revised plan that calls for a 30,000 square-foot
casino and related facilities on a continuously docked barge on the Missouri
River near downtown Kansas City. The development will include food service,
concessions and entertainment. The cost of this development is estimated at
$71.5 million, to be funded primarily through general corporate funds. The
Company will have a 90% ownership in the project. Subject to receipt of all
required gaming licenses and permits, the Company anticipates that the casino
could be in operation by the first quarter of 1996.
Internationally, 1994 marked the opening of Casino Windsor, a temporary
50,000 square-foot facility located directly across from Detroit, Michigan in
Windsor, Ontario, Canada. The Company has a one-third interest in the consortium
which operates and manages the casino for the Ontario provincial government. The
opening is the first step in the development of a $300 million permanent
facility scheduled to open in early 1997. The permanent facility will include a
75,000 square-foot casino, a hotel with at least 300 rooms, dining facilities
and recreational amenities. The consortium will finance the project with a
combination of long-term debt and equity.
Construction is proceeding on the Conrad Treasury, a hotel-casino in
Brisbane, Australia. This $185 million project, scheduled to open in the second
quarter of 1995, will include a 65,000 square-foot casino and a 136-room luxury
hotel. The Conrad Treasury is owned by Jupiters Limited, a 19.9% owned
affiliate, and will be operated by Conrad Hotels, the Company's international
subsidiary.
The opening of a new hotel-casino resort in Punta del Este, Uruguay is
planned for early 1997. This facility will feature a 300-room hotel and a 38,000
square-foot casino at an estimated cost of up to $150 million. It is anticipated
that this approximately 37% owned project will be financed with a combination of
long-term debt and equity.
The Company is committed to keeping its properties in first-class condition.
Refurbishment programs are continually underway at the Company's hotel and
casino properties. Capital expenditures and investments in 1995, including
funding requirements associated with the aforementioned projects, will
approximate $350 million. The Company intends to fund its portion of these
capital expenditures and new investments through internal cash flows and
available debt capacity or new borrowings.

THIRTY-EIGHT

<PAGE> 6

Long-Term Debt

Long-term debt at December 31, 1994 totaled $1.3 billion, 48 percent of the
Company's total capital. As a result of consolidating the New Orleans Hilton
Riverside beginning in 1994, $108.4 million of long-term debt of this property
is included in the consolidated balance sheet of the Company at December 31,
1994.
The Company has an effective shelf registration with the Securities and
Exchange Commission for up to $65 million of new debt securities. The terms and
conditions of these debt securities will be determined by market conditions at
the time of issuance.
During 1994 the Company partially completed a public offering of its $200
million Series B Medium Term Note program. Through December 31, 1994, $170
million of these notes had been issued at an average coupon rate of 7.52%.
Proceeds from this offering were used to finance capital improvements,
investments in affiliates and for general corporate purposes. At December 31,
1994, $30 million in financing under this program was still available.
The Company had $210.7 million in commercial paper and private notes
outstanding at December 31, 1994. The Company has entered into various long-term
revolving credit facilities with an aggregate commitment at December 31, 1994 of
$482.5 million, of which $50.0 million expires in 1996, $67.5 million expires in
1997, $40.0 million expires in 1998 and the remaining $325.0 million expires in
1999. At December 31, 1994, $210.7 million of the aggregate commitment supported
the issuance of commercial paper. Excluding the portion of the commitment which
supports the issuance of commercial paper, $214.5 million of revolving bank debt
financing was available to the Company at December 31, 1994.

Stockholders' Equity

Stockholders' equity totaled $1.1 billion or $23.45 per share at December 31,
1994. Book value per share was $22.11 in 1993 and $21.02 in 1992. Dividends paid
on common shares were $1.20 per share in 1994, 1993 and 1992.
During 1994 the Company adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. At December 31, 1994 the Company had
investments in bond mutual funds, the aggregate fair value of which was $8.1
million below cost. Application of SFAS No. 115 resulted in an unrealized loss,
net of the related deferred tax benefit, of $5.3 million which was deducted from
stockholders' equity at December 31, 1994.

Other Matters

In October 1991 a lawsuit was initiated by Hilton International Co. (HI)
against the Company. In this action, HI alleges generally that the development
and marketing by the Company of its hotels outside of the United States under
the Conrad name violate the terms of certain agreements between HI and the
Company. In 1964 the Company spun off its Hilton International operations to the
Company's stockholders and entered into an agreement with HI, as subsequently
amended, generally granting the Company certain rights with respect to the
Hilton service mark in the United States and HI certain rights to the Hilton
service mark outside the United States. The complaint seeks, among other things,
injunctive relief against use by the Company of the Conrad name for its hotels
outside the United States and damages in excess of $100 million. The Company
believes that this action is without merit. The trial in this action has
concluded, but a decision has not yet been rendered by the court.
In management's opinion, disposition of the HI lawsuit, and various other
lawsuits pending against the Company, is not expected to have a material effect
on the Company's financial position or results of operations.

THIRTY-NINE
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME Hilton Hotels Corporation and Subsidiaries

<TABLE>
<CAPTION>
(In millions,
except per share amounts) Year Ended December 31, 1994 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C>
Revenue Rooms $ 509.6 440.2 386.7
Food and beverage 247.2 236.8 216.2
Casino 480.6 502.1 438.8
Management and franchise fees 94.5 85.1 79.0
Other 124.2 93.8 82.5
Operating income from unconsolidated affiliates 50.1 35.5 26.4
--------- ------- -------
1,506.2 1,393.5 1,229.6
--------- ------- -------
Expenses Rooms 171.8 152.5 131.9
Food and beverage 216.4 202.4 180.3
Casino 216.3 217.5 195.6
Other costs and expenses 596.5 554.4 476.9
Corporate expense 28.3 26.8 25.0
--------- ------- -------
1,229.3 1,153.6 1,009.7
--------- ------- -------
Operating Income 276.9 239.9 219.9
Interest and dividend income 21.5 21.8 16.4
Interest expense (85.7) (80.4) (66.9)
Interest expense, net, from unconsolidated affiliates (12.2) (14.6) (11.2)
Property transactions, net 1.1 (4.5) .9
Foreign currency losses (.7) (1.3) --
--------- ------- -------
Income Before Income Taxes
and Minority Interest 200.9 160.9 159.1
Provision for income taxes 77.6 58.2 55.2
Minority interest, net 1.6 -- --
--------- ------- -------
Income Before Cumulative
Effect of Accounting Changes 121.7 102.7 103.9
Cumulative effect of accounting changes, net -- 3.4 --
--------- ------- -------
Net Income $ 121.7 106.1 103.9
========= ======= =======
Income Per Share Before cumulative effect of accounting changes $ 2.52 2.14 2.17
Cumulative effect of accounting changes, net -- .07 --
--------- ------- -------
Net Income Per Share $ 2.52 2.21 2.17
========= ======= =======
</TABLE>

See notes to consolidated financial statements

FORTY
<PAGE> 8
CONSOLIDATED BALANCE SHEETS Hilton Hotels Corporation and Subsidiaries

<TABLE>
<CAPTION>
(In millions) December 31, 1994 1993
=============================================================================================================================
<S> <C> <C> <C>
ASSETS

Current Assets Cash and equivalents $ 184.4 380.4
Temporary investments 208.8 98.1
Deferred income taxes 26.0 21.5
Other current assets 254.5 227.0
-------- -------
Total current assets 673.7 727.0
-------- -------
Investments, Property and Investments in and notes from
Other Assets unconsolidated affiliates 528.3 410.4
Other investments 8.4 71.7
Property and equipment, net 1,664.8 1,417.5
Other assets 50.7 48.2
-------- -------
Total investments, property and other assets 2,252.2 1,947.8
-------- -------
Total Assets $2,925.9 2,674.8
======== =======

<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY

<S> <C> <C> <C>
Liabilities Current liabilities $ 328.3 277.9
Long-term debt 1,251.9 1,112.6
Deferred income taxes 124.3 140.6
Insurance reserves and other 93.6 87.0
-------- -------
Total liabilities 1,798.1 1,618.1
-------- -------
Stockholders' Equity Preferred stock, none outstanding -- --
Common stock, 48.1 million and 47.8 million
shares outstanding, respectively 127.6 127.6
Additional paid-in capital -- 1.9
Cumulative translation adjustment (.7) (1.5)
Unrealized loss on marketable securities (5.3) --
Retained earnings 1,160.7 1,097.8
-------- -------
1,282.3 1,225.8
Less treasury shares, at cost 154.5 169.1
-------- -------
Total stockholders' equity 1,127.8 1,056.7
-------- -------
Total Liabilities and
Stockholders' Equity $2,925.9 2,674.8
======== =======
</TABLE>

See notes to consolidated financial statements

FORTY-ONE
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS Hilton Hotels Corporation and
Subsidiaries

<TABLE>
<CAPTION>
(In millions) Year Ended December 31, 1994 1993 1992
===============================================================================================================================
<S> <C> <C> <C> <C>
Operating Activities Net income $ 121.7 106.1 103.9
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 133.3 118.9 109.3
Change in working capital components:
Inventories .7 .7 (2.3)
Accounts receivable (54.7) (17.9) (2.6)
Other current assets (5.5) (19.9) (10.0)
Accounts payable and accrued expenses 35.9 (8.2) 53.1
Income taxes payable (1.2) (9.2) (1.0)
Decrease in deferred income taxes (20.8) (6.6) (14.4)
Change in other liabilities 7.8 29.4 (11.8)
Unconsolidated affiliates' distributions
in excess of earnings 5.9 20.1 11.2
(Gain) loss from property transactions (1.1) 4.5 (.9)
Other 8.9 9.0 (7.8)
------- ------ ------
Net cash provided by operating activities 230.9 226.9 226.7
------- ------ ------
Investing Activities Capital expenditures (254.4) (156.8) (220.9)
Additional investments (156.7) (104.7) (53.6)
Change in long-term marketable securities 62.6 91.2 (154.8)
Change in temporary investments (118.8) 64.3 (127.4)
Payments on notes and other 60.9 5.9 11.5
------- ------ ------
Net cash used in investing activities (406.4) (100.1) (545.2)
------- ------ ------
Financing Activities Change in short-term borrowings (10.8) (54.2) 65.0
Long-term borrowings 204.9 56.0 373.5
Reduction of long-term debt (168.5) (46.3) (32.2)
Issuance of common stock 11.5 6.9 2.9
Cash dividends (57.6) (57.3) (57.1)
------- ------ ------
Net cash (used in) provided by financing activities (20.5) (94.9) 352.1
------- ------ ------
(Decrease) Increase in Cash and Equivalents (196.0) 31.9 33.6
Cash and Equivalents at Beginning of Year 380.4 348.5 314.9
------- ------ ------
Cash and Equivalents at End of Year $ 184.4 380.4 348.5
======= ====== ======
</TABLE>

See notes to consolidated financial statements

FORTY-TWO

<PAGE> 10
CONSOLIDATED STATEMENTS OF Hilton Hotels Corporation and Subsidiaries
STOCKHOLDERS EQUITY

<TABLE>
<CAPTION>
Number of Additional Cumulative
Shares Common Paid-In Translation Unrealized Retained
(In millions, except per share amounts) Outstanding Stock Capital Adjustment Loss Earnings
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 47.5 $127.6 8.6 -- -- 1,002.2
Exercise of stock options .2 -- (4.2) -- -- --
Net income -- -- -- -- -- 103.9
Dividends ($1.20 per share) -- -- -- -- -- (57.1)
---- ------ ---- ---- ---- -------

Balance, December 31, 1992 47.7 127.6 4.4 -- -- 1,049.0
Exercise of stock options .1 -- (2.5) -- -- --
Cumulative translation adjustment,
net of deferred tax benefit
of $.8 million -- -- -- (1.5) -- --
Net income -- -- -- -- -- 106.1
Dividends ($1.20 per share) -- -- -- -- -- (57.3)
---- ------ ---- ---- ---- -------

Balance, December 31, 1993 47.8 127.6 1.9 (1.5) -- 1,097.8
Exercise of stock options .3 -- (1.9) -- -- (1.2)
Cumulative translation adjustment,
net of deferred tax of $.4 million -- -- -- .8 -- --
Unrealized loss on marketable
securities, net of deferred tax
benefit of $2.8 million -- -- -- -- (5.3) --
Net income -- -- -- -- -- 121.7
Dividends ($1.20 per share) -- -- -- -- -- (57.6)
---- ------ ---- ---- ---- -------

Balance, December 31, 1994 48.1 $127.6 -- (.7) (5.3) 1,160.7
==== ====== ==== ==== ==== =======
</TABLE>

<TABLE>
<CAPTION>
Total
Treasury Stockholders'
(In millions, except per share amounts) Shares Equity
====================================================================
<S> <C> <C>
Balance, December 31, 1991 (185.6) 952.8
Exercise of stock options 7.1 2.9
Net income -- 103.9
Dividends ($1.20 per share) -- (57.1)
------ -------

Balance, December 31, 1992 (178.5) 1,002.5
Exercise of stock options 9.4 6.9
Cumulative translation adjustment,
net of deferred tax benefit
of $.8 million -- (1.5)
Net income -- 106.1
Dividends ($1.20 per share) -- (57.3)
------ -------

Balance, December 31, 1993 (169.1) 1,056.7
Exercise of stock options 14.6 11.5
Cumulative translation adjustment,
net of deferred tax of $.4 million -- .8
Unrealized loss on marketable
securities, net of deferred tax
benefit of $2.8 million -- (5.3)
Net income -- 121.7
Dividends ($1.20 per share) -- (57.6)
------ -------

Balance, December 31, 1994 (154.5) 1,127.8
====== =======
</TABLE>

See notes to consolidated financial statements

FORTY-THREE
<PAGE> 11
NOTES TO CONSOLIDATED Hilton Hotels Corporation and Subsidiaries
FINANCIAL STATEMENTS

December 31, 1994

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Hilton Hotels
Corporation and its majority-owned subsidiaries (the Company). All material
intercompany transactions are eliminated and net earnings are reduced by the
portion of the earnings of affiliates applicable to minority shareowners. There
are no significant restrictions on the transfer of funds from the Company's
majority-owned subsidiaries to Hilton Hotels Corporation.

Investments in 50% or less owned affiliates over which the Company has the
ability to exercise significant influence are accounted for using the equity
method.

CASH AND EQUIVALENTS

Cash and equivalents include investments with initial maturities of three months
or less.

CASINO REVENUE AND PROMOTIONAL ALLOWANCES

Casino revenue is the aggregate of gaming wins and losses. The revenue
components presented in the consolidated financial statements and the notes
thereto exclude the retail value of rooms, food and beverage provided to
customers on a complimentary basis. The estimated cost of providing these
promotional allowances is as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Rooms $ 8.5 8.9 8.0
Food and beverage 28.3 27.6 21.7
------ ---- ----
Total cost of promotional allowances $ 36.8 36.5 29.7
====== ==== ====
</TABLE>

The cost of promotional allowances has been allocated to expense as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Casino $ 29.6 27.6 22.4
Other costs and expenses 7.2 8.9 7.3
------ ---- ----
</TABLE>

CURRENCY TRANSISTION

Assets and liabilities denominated in most foreign currencies are translated
into U.S. dollars at year- end exchange rates and related gains and losses, net
of applicable deferred income taxes, are reflected in stockholders' equity.
Gains and losses from foreign currency transactions and translation of balance
sheets in highly inflationary economies are included in earnings.

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment are stated at cost. Interest incurred during construction
of facilities is capitalized and amortized over the life of the asset.

Costs of improvements are capitalized. Costs of normal repairs and
maintenance are charged to expense as incurred. Upon the sale or retirement of
property and equipment, the cost and related accumulated depreciation are
removed from the respective accounts, and the resulting gain or loss, if any, is
included in income.

Depreciation is provided on a straight-line basis over the estimated useful
life of the assets. Leasehold improvements are amortized over the shorter of the
asset life or lease term. The service lives of assets are generally 40 years for
buildings, 30 years for riverboats and 8 years for building improvements and
furniture and equipment.

PRE-OPENING COSTS

Costs associated with the opening of new properties or major additions to
properties placed in service through December 31, 1994 are deferred and charged
to income over a three year period after the opening date. Commencing January 1,
1995, for projects not placed in service as of December 31, 1994, pre-opening
costs will be deferred and amortized over the shorter of the period benefitted
or one year.

UNAMORTIZED LOAN COSTS

Debt discount and issuance costs incurred in connection with long-term debt are
capitalized and amortized to expense, principally on the bonds outstanding
method.

SELF-INSURANCE

The Company is self-insured for various levels of general liability, workers'
compensation and employee medical and life insurance coverage. Insurance
reserves include the present values of projected settlements for claims.

FORTY-FOUR
<PAGE> 12

ACCOUNTING CHANGES

Effective January 1, 1993 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The new standard requires the cost of postretirement
benefits to be accrued during the period up to the date covered employees are
eligible to retire. Prior to the adoption of SFAS No. 106, the cost of these
benefits was charged to expense as incurred. The Company elected to immediately
recognize the prior periods' obligation as a cumulative adjustment in the first
quarter of 1993.

Also effective January 1, 1993 the Company adopted SFAS No. 109, "Accounting
for Income Taxes", which requires, among other things, that deferred tax
balances be determined using the enacted income tax rates for the years in which
the taxes are actually paid or refunds received. The Company elected to adopt
the new standard through a cumulative adjustment in the first quarter of 1993.

NET INCOME PER SHARE

Net income per share is based on the weighted average number of common shares
outstanding plus the common share equivalents which arise from the assumed
exercise of stock options.

RECLASSIFICATIONS

The consolidated financial statements for prior years reflect certain
reclassifications to conform with classifications adopted in 1994. These
classifications have no effect on net income.

ACCOUNTS AND NOTES RECEIVABLE

Included in other current assets at December 31, 1994 and 1993 are accounts and
notes receivable as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Hotel accounts and notes receivable $ 157.6 110.0
Less allowance for doubtful accounts 11.4 11.6
------- -----
146.2 98.4
------- -----
Casino accounts receivable 69.1 47.9
Less allowance for doubtful accounts 16.0 7.6
------- -----
53.1 40.3
------- -----
Federal tax refund receivable 12.8 --
------- -----
Total $ 212.1 138.7
======= =====
</TABLE>

The allowance provided for estimated uncollectible casino receivables, net of
recoveries, is included in casino expenses in the amount of $12.3 million, $9.5
million and $7.3 million in 1994, 1993 and 1992, respectively.

INVENTORIES

Included in other current assets at December 31, 1994 and 1993 are inventories
of $13.2 million and $13.4 million, respectively, determined on a first-in,
first-out basis.

INVESTMENTS

The composition of the Company's total investments in and notes from
unconsolidated affiliates at December 31, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Investments
50% owned affiliates
Hotels (seven in 1994 and 1993) $ 229.0 189.5
Riverboat casino 8.4 8.3
Other 13.8 14.7

Less than 50% owned affiliates
Hotels (seven in 1994, eight in 1993) 87.4 65.6
Hotel-casinos (five in 1994 and 1993) 78.9 65.6
Other 20.6 18.5
------- -----
438.1 362.2
Notes receivable 90.2 48.2
------- -----
Total $ 528.3 410.4
======= =====
</TABLE>

FORTY-FIVE
<PAGE> 13

The changes in the Company's investments in such affiliates are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Investments, January 1 $ 362.2 365.3
Earnings 37.9 20.9
Distributions received (43.8) (41.0)
Additional investments 94.3 70.1
Transfer of assets (13.3) --
Other, net .8 (6.4)
------- -----
438.1 408.9
Less amount included in other current assets -- 46.7
------- -----
Investments, December 31 $ 438.1 362.2
======= =====
</TABLE>

Management fees totaling $34.7 million, $30.2 million and $27.7 million were
charged by the Company to its unconsolidated affiliates in 1994, 1993 and 1992,
respectively. Other group services were provided to unconsolidated affiliates
with no significant element of profit.

Summarized balance sheet information of the 50% owned affiliates at December
31, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Current assets $ 189.7 129.7
Property and other assets, net 749.2 706.3
Current liabilities 89.3 145.0
Long-term debt and other 326.9 245.4
Equity 522.7 445.6
------- -----
</TABLE>

Summarized balance sheet information of the less than 50% owned affiliates at
December 31, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Current assets $ 162.5 134.8
Property and other assets, net 1,075.5 1,133.0
Current liabilities 136.7 241.4
Long-term debt and other 244.1 339.5
Equity 857.2 686.9
-------- -------
</TABLE>

Of long-term unconsolidated affiliate obligations totaling $571.0 million at
December 31, 1994, $560.0 million is secured solely by venture assets or is
guaranteed by other venture partners without recourse to the Company.

The Company's proportionate shares of capital expenditures and depreciation
expense of unconsolidated affiliates were $66.6 million and $40.4 million,
respectively, in 1994, $59.8 million and $40.1 million, respectively, in 1993,
and $44.3 million and $37.4 million, respectively, in 1992.

Summarized results of operations of the 50% owned affiliates for the three
years ended December 31, 1994 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 643.2 516.2 509.6
Expenses 601.2 491.8 482.4
Net income 40.7 23.1 25.3
------- ----- -----
</TABLE>

Summarized results of operations of the less than 50% owned affiliates for
the three years ended December 31, 1994 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 641.6 487.8 423.1
Expenses 535.4 432.0 402.6
Gain on extinguishment of debt -- 18.3 --
Net income 75.1 56.3 20.5
------- ----- -----
</TABLE>

FORTY-SIX
<PAGE> 14

Other investments at December 31, 1994 and 1993 consist of:

<TABLE>
<CAPTION>
(In millions) 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Long-term marketable securities $ 1.0 63.6
Other notes, net of $12.5 million reserve in 1994 and 1993 7.4 8.1
----- ----
Total $ 8.4 71.7
===== ====
</TABLE>

PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Land $ 158.1 145.2
Buildings and leasehold improvements 1,617.1 1,366.9
Furniture and equipment 490.7 457.1
Property held for sale or development 57.2 13.6
Construction in progress 85.6 60.0
--------- -------
2,408.7 2,042.8
Less accumulated depreciation 743.9 625.3
--------- -------
Total $ 1,664.8 1,417.5
========= =======
</TABLE>

Purchases of property and equipment financed with construction payables totaled
$14.4 million, $2.9 million and $2.7 million at December 31, 1994, 1993 and
1992, respectively.

CURRENT LIABILITIES

Current liabilities at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable and accrued expenses $ 284.0 228.5
Short-term borrowings -- 10.8
Current maturities of long-term debt 36.7 29.8
Income taxes payable 7.6 8.8
------- -----
Total $ 328.3 277.9
======= =====
</TABLE>

LONG-TERM DEBT

Long-term debt at December 31, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Industrial development revenue bonds
at adjustable rates, due 2015 $ 82.0 82.0
Senior notes, 4.93% to 9.80%, due 1995 to 2002 827.2 687.4
Mortgage notes, 6.74% to 8.75%, due 1996 to 2011 105.2 --
Commercial paper 210.7 347.6
Revolving loans, with an average rate of 6.29%
at December 31, 1994 57.3 22.4
Other 6.2 3.0
--------- -------
1,288.6 1,142.4
Less current maturities 36.7 29.8
--------- -------
Net long-term debt $ 1,251.9 1,112.6
========= =======
</TABLE>

Of the $827.2 million in senior notes, $94.1 million is redeemable by the
Company at par plus accrued interest on June 1, 1995.

Interest paid, net of amounts capitalized, was $88.3 million, $79.8 million
and $63.0 million in 1994, 1993 and 1992, respectively. Capitalized interest
amounted to $7.0 million, $2.0 million and $4.9 million, respectively.

FORTY-SEVEN
<PAGE> 15

Debt maturities during the next five years are as follows:

<TABLE>
<CAPTION>
(In millions)
--------------------------------------------------------------------------------
<S> <C>
1995 $ 36.7
1996 266.3
1997 22.0
1998 213.1
1999 293.1
-------
</TABLE>

Secured debt obligations of $82.0 million at December 31, 1994 are
collateralized by property with a net book value of $61.6 million and are
payable over remaining terms ranging to 20 years.

During 1994 the Company partially completed a public offering of its $200
million Series B Medium Term Note program. Through December 31, 1994, $170
million of these notes with maturities from three to seven years have been
issued at an average coupon rate of 7.52%. Available financing under the Series
B Medium Term Note program totaled $30 million at December 31, 1994.

The Company has an effective shelf registration with the Securities and
Exchange Commission for up to $65 million of new debt securities. The terms and
conditions of these debt securities will be determined by market conditions at
the time of issuance.

During 1994, 1993 and 1992 the Company issued and renewed commercial paper
and private notes for varying periods with interest at market rates. The Company
had $210.7 million, $358.4 million and $380.0 million in commercial paper and
private notes outstanding at December 31, 1994, 1993 and 1992, respectively. In
1994, 1993 and 1992 average amounts of commercial paper and private notes
outstanding were $231.3 million, $273.1 million and $210.7 million,
respectively, with the largest amounts outstanding at any one time being $327.1
million, $358.4 million and $391.4 million, respectively. Weighted average
interest rates were 4.33%, 3.16% and 3.71%, respectively.

The Company has entered into various long-term revolving credit facilities
with an aggregate commitment at December 31, 1994 of $482.5 million, of which
$50.0 million expires in 1996, $67.5 million expires in 1997, $40.0 million
expires in 1998 and the remaining $325.0 million expires in 1999. At December
31, 1994, $210.7 million of the aggregate commitment supported the issuance of
commercial paper. Excluding the portion of the commitment which supports the
issuance of commercial paper, $214.5 million of revolving bank debt financing
was available to the Company at December 31, 1994.

Provisions under various loan agreements require the Company to comply with
certain financial covenants which include maintaining a minimum consolidated
tangible net worth and limiting the amount of outstanding indebtedness.

FINANCIAL INSTRUMENTS

CASH EQUIVALENTS, TEMPORARY INVESTMENTS AND LONG-TERM MARKETABLE SECURITIES

The fair value of cash equivalents, temporary investments and long-term
marketable securities is estimated based on the quoted market price of the
investments.

OTHER FINANCIAL INSTRUMENTS

It is not practicable to estimate the fair value of notes receivable and a cost
basis investment, the carrying values of which totaled $114.7 million in 1994
and $69.4 million in 1993. The Company received cash payments of $29.1 million
and $4.5 million with respect to such investments in 1994 and 1993,
respectively.

SHORT-TERM BORROWINGS

The carrying amount of short-term borrowings in 1993, principally commercial
paper, approximates fair value.

LONG-TERM DEBT

The estimated fair value of long-term debt is based on the quoted market prices
for the same or similar issues or on the current rates offered to the Company
for debt of the same remaining maturities.

INTEREST RATE SWAP AGREEMENTS

The Company enters into interest rate swap agreements to decrease its exposure
to interest rate fluctuation on its floating rate debt. At December 31, 1994 the
Company was party to 15 interest rate swap agreements having a total notional
principal amount of $110.0 million. These swap agreements have a weighted
average fixed rate of 8.52% and an average remaining life of .8 years. The
Company is exposed to a potential financial loss in the event of nonperformance
by the other parties to the swap agreements. However, the Company does not
anticipate nonperformance by the counterparties.

The fair value of interest rate swap agreements is the estimated amount that
the Company would pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the current creditworthiness of
the swap counterparties.

FOREIGN CURRENCY EXCHANGE CONTRACTS

The Company enters into foreign currency exchange contracts to hedge certain
transactions and investments denominated in foreign currencies. The purpose of
the Company's foreign currency hedge activities is to protect the Company from
the risk that cash inflows from and investments in foreign

FORTY-EIGHT
<PAGE> 16

operations will be affected by changes in exchange rates. The Company does not
hold these contracts for trading purposes.

At December 31, 1994 the Company held no foreign currency exchange contracts.
The fair value of foreign currency exchange contracts in 1993 is estimated based
on the quoted market prices of these instruments.

The estimated fair values of the Company's financial instruments at December 31,
1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994 1993
---------------------- -----------------------
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents and
temporary investments $ 393.2 392.8 478.5 478.5
Long-term marketable securities 1.0 1.0 63.6 63.6
Short-term borrowings -- -- 10.8 10.8
Long-term debt (including current maturities) 1,288.6 1,261.7 1,142.4 1,203.5
Unrecognized financial instruments:
Interest rate swaps in net
payable position -- 1.3 -- 9.2
Foreign currency exchange contracts -- -- -- 3.2
-------- ------- ------- -------
</TABLE>

During 1994 the Company adopted SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." The Company invests primarily in debt securities
which are held to maturity and valued at amortized cost. The aggregate fair
value of debt securities at December 31, 1994 was $234.1 million.

The Company also has investments in bond mutual funds. As these funds are
open-ended and have no fixed maturities, the Company has classified this form of
investment as a marketable equity security. At December 31, 1993 the value of
the Company's bond fund investments approximated cost. At December 31, 1994 the
aggregate fair value of these investments totaled $131.9 million, or $8.1
million below cost. Application of SFAS No. 115 resulted in an unrealized loss,
net of the related deferred tax benefit, of $5.3 million which was deducted from
stockholders' equity at December 31, 1994.

INCOME TAXES

Effective January 1, 1993 the Company adopted SFAS No. 109, "Accounting for
Income Taxes." As permissible under the new standard, the Company reflected the
impact as a cumulative adjustment in the 1993 first quarter and did not restate
prior periods. The cumulative adjustment had a favorable impact on net income of
$8.0 million.

The provisions for income taxes for the three years ended December 31, 1994
are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 83.9 65.9 57.6
State, foreign and local 12.0 1.5 4.0
------ ---- ----
95.9 67.4 61.6
Deferred (18.3) (9.2) (6.4)
------ ---- ----
Total $ 77.6 58.2 55.2
====== ==== ====
</TABLE>

The components of deferred income tax expense were as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed assets, primarily depreciation $ -- -- 3.3
Investments in unconsolidated affiliates (9.3) -- --
Bad debt reserves (3.4) -- --
Self-insurance reserves 1.1 (2.1) (4.3)
Benefit plans (4.1) (2.4) --
Other asset reserves -- (5.0) --
Other, net (2.6) (3.0) (5.4)
------- ----- ----
(18.3) (12.5) (6.4)
Effect of the increase in the Federal statutory
rate on deferred income tax balances -- 3.3 --
------- ----- ----
Total $ (18.3) (9.2) (6.4)
======= ===== ====
</TABLE>

FORTY-NINE
<PAGE> 17

During 1994, 1993 and 1992 the Company paid income taxes of $103.8 million,
$74.1 million and $70.8 million, respectively.

The income tax effects of temporary differences between financial and income
tax reporting that gave rise to deferred income tax assets and liabilities at
December 31, 1994 and 1993, under the provisions of SFAS No. 109, are as
follows:

<TABLE>
<CAPTION>
(in millions) 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Accrued expenses $ 14.4 12.5
Bad debt reserves 13.4 8.1
Self-insurance reserves 25.3 26.5
Benefit plans 3.8 2.7
Other asset reserves 5.5 5.5
Foreign tax credit carryovers (expire beginning 1997) 7.5 --
Other 15.8 13.1
-------- ------
85.7 68.4
Valuation allowance (7.5) --
-------- ------
78.2 68.4
-------- ------
Deferred tax liabilities
Fixed assets, primarily depreciation (98.9) (98.4)
Investments in unconsolidated affiliates (53.1) (63.7)
Benefit plans -- (5.8)
Other (24.5) (19.6)
-------- ------
(176.5) (187.5)
-------- ------
Net deferred tax liability $ (98.3) (119.1)
======== ======
</TABLE>

Reconciliation of the Federal income tax rate and the Company's effective tax
rate is as follows:

<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0 34.0
Increase (reduction) in taxes:
Adjustment to deferred tax balances due
to increase in Federal statutory rate -- 2.0 --
State and local income
taxes, net of Federal tax benefits 3.1 (.2) 2.9
Foreign taxes, net (1.3) .9 (1.2)
Benefit of dividend and municipal bond income (.3) (.3) (.6)
Other 2.1 (1.2) (.4)
---- ---- ----
Effective tax rate 38.6% 36.2 34.7
==== ==== ====
</TABLE>

CAPITAL STOCK

Ninety million shares of common stock with a par value of $2.50 per share are
authorized, of which 51.0 million were issued at December 31, 1994 and 1993,
including treasury shares of 2.9 million and 3.2 million in 1994 and 1993,
respectively.

Ten million shares of preferred stock with a par value of $1.00 per share are
authorized. The shares are issuable in series. No shares were outstanding in
1994 or 1993.

The Company has a Share Purchase Rights Plan, under which a right is attached
to each share of the Company's common stock. The rights may only become
exercisable under certain circumstances involving actual or potential
acquisitions of the Company's common stock by a specified person or affiliated
group. Depending on the circumstances, if the rights become exercisable, the
holder may be entitled to purchase units of the Company's junior participating
preferred stock, shares of the Company's common stock or shares of common stock
of the acquiror. The rights remain in existence until July 25, 1998 unless they
are terminated, exercised or redeemed.

At December 31, 1994, 2.0 million shares of common stock were reserved for
the exercise of options under the Company's stock option plans. Options may be
granted to salaried officers and other key employees of the Company to purchase
common stock at not less than fair market value at the date of grant.

FIFTY
<PAGE> 18
Options may be exercised in installments commencing one year after the date
of grant. The plan also permits the granting of Stock Appreciation Rights
(SARs). No SARs have been granted as of December 31, 1994.
<TABLE>
<CAPTION>

Options
Price Range Options Available
(Per Share) Outstanding for Grant
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1991 $18.03- 111.63 1,347,675 749,810
Granted 45.94- 52.06 305,250 (305,250)
Exercised 18.03- 44.38 (131,072) --
Cancelled 28.34- 111.63 (29,979) 29,779
--------------- --------- -------
Balance at December 31, 1992 21.31- 111.63 1,491,874 474,339
Granted 46.94- 49.00 89,000 (89,000)
Exercised 21.31- 52.06 (174,010) --
Cancelled 29.63- 111.63 (54,438) 54,438
--------------- --------- -------
Balance at December 31, 1993 28.34- 53.19 1,352,426 439,777
Authorized -- 500,000
Granted 55.19- 69.63 753,300 (753,300)
Exercised 28.34- 53.19 (269,810) --
Cancelled 29.63- 69.63 (64,851) 59,474
--------------- --------- -------
Balance at December 31, 1994 28.38- 69.63 1,771,065 245,951
--------------- ========= =======
Exercisable at December 31, 1994 28.38- 53.19 855,294
--------------- ---------
</TABLE>

Under provisions of Nevada, New Jersey and other gaming laws, and the Company's
certificate of incorporation, certain securities of the Company are subject to
restrictions on ownership which may be imposed by specified governmental
authorities. Such restrictions may require the holder to dispose of the
securities or, if the holder refuses to make such disposition, the Company may
be obligated to repurchase the securities.

EMPLOYEE BENEFIT PLANS

The Company has a noncontributory retirement plan (Basic Plan) covering
substantially all regular full-time, nonunion employees. The Company also has
plans covering qualifying officers and non-officer directors (Supplemental
Plans). Benefits for all plans are based upon years of service and compensation,
as defined.

The Company's funding policy is to contribute not less than the minimum
amount required under Federal law, but not more than the maximum deductible for
Federal income tax purposes. Contributions are intended to provide not only for
benefits attributed to service to date, but also for benefits expected to be
earned in the future.

The following sets forth the funded status for the Basic Plan as of December
31, 1994 and 1993:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$(145.7) and $(133.8), respectively $ (151.4) (136.8)
========= ======
Projected benefit obligation for service rendered to date $ (192.1) (181.0)
Plan assets at fair value, primarily
listed securities and temporary investments 150.5 150.3
--------- ------
Projected benefit obligation in excess of plan assets (41.6) (30.7)
Unrecognized net loss from changes in assumptions 43.7 40.2
Unrecognized net asset as of January 1, 1986 (8.0) (9.3)
--------- ------
(Accrued) prepaid pension cost $ (5.9) .2
========= ======
Pension cost includes the following components:
Service cost $ 9.5 8.7
Interest cost on projected benefit obligation 13.6 12.5
Actual return on assets (1.4) (15.1)
Net amortization (11.7) 2.8
--------- ------
Net periodic cost before allocation 10.0 8.9
Cost allocated to managed properties 2.3 1.9
--------- ------
Net periodic pension cost $ 7.7 7.0
========= ======
</TABLE>

FIFTY-ONE
<PAGE> 19

Included in plan assets at fair value are securities of the Company of $19.7
million and $17.6 million at December 31, 1994 and 1993, respectively.

The following sets forth the funded status for the Supplemental Plans as of
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$(13.9) and $(16.3), respectively $ (13.9) (16.3)
========= =====
Projected benefit obligation for service rendered to date $ (15.8) (17.3)
Plan assets at fair value 13.1 15.4
--------- -----
Projected benefit obligation in excess of plan assets (2.7) (1.9)
Unrecognized net loss from changes in assumptions 4.7 8.7
Unrecognized obligation as of January 1, 1986 2.1 2.5
--------- -----
Prepaid pension cost $ 4.1 9.3
========= =====
Pension cost includes the following components:
Service cost $ 1.1 .9
Interest cost on projected benefit obligation 1.0 1.0
Actual return on assets (increase) decrease 1.0 (1.7)
Net amortization (.6) 2.5
--------- -----
Net periodic pension cost $ 2.5 2.7
========= =====
</TABLE>

The discount rates used in determining the actuarial present values of the
projected benefit obligations were eight percent in 1994 and seven and one-half
percent in 1993, with the rate of increase in future compensation projected at
five and one-half percent in 1994 and 1993. The expected long--term rate of
return on assets is nine percent. The unrecognized net (asset) obligation is
being amortized over a 15 year period. Unrecognized net gains and losses on plan
assets are amortized over a five year period.

A significant number of the Company's employees are covered by union
sponsored, collectively bargained multi-employer pension plans. The Company
contributed and charged to expense $9.2 million, $9.3 million and $8.4 million
in 1994, 1993 and 1992, respectively, for such plans. Information from the
plans' administrators is not sufficient to permit the Company to determine its
share, if any, of unfunded vested benefits.

The Company also has an employee investment plan whereby the Company
contributes certain percentages of employee contributions. The cost of the plan
is not significant.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides life insurance benefits to certain retired employees. Under
terms of the plan covering such life insurance benefits, the Company reserves
the right to change, modify or discontinue these benefits. The Company does not
provide postretirement health care benefits to its employees.

Effective January 1, 1993 the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." As permissible
under the new standard, the Company reflected the impact as a cumulative
adjustment in the 1993 first quarter and did not restate prior periods. The
cumulative adjustment resulted in a charge to net income of $4.6 million, net of
a $2.3 million deferred tax benefit. The incremental effect on 1993 results of
adopting SFAS No. 106 was a pretax charge of $.9 million.

The Company's unfunded accumulated postretirement benefit obligations as of
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ (2.5) (2.5)
Active employees - fully eligible (2.4) (2.9)
Active employees - not fully eligible (3.1) (2.8)
--------- ----
(8.0) (8.2)
Unrecognized net loss .7 .7
--------- ----
Accumulated postretirement benefit obligation $ (7.3) (7.5)
========= ====

Postretirement cost includes the following components:
Service cost $ .5 .3
Interest cost on projected benefit obligation .7 .6
--------- ----
Total postretirement benefit cost $ 1.2 .9
========= ====
</TABLE>
FIFTY-TWO

<PAGE> 20

The discount rate used in determining the actuarial present value of the
accumulated postretirement benefit obligation was eight percent in 1994 and
seven and one-half percent in 1993, with the annual rate of increase in future
compensation projected at five and one-half percent in 1994 and 1993.

SEGMENTS OF BUSINESS

Financial data of the Company's business segments for the years ended December
31, 1994, 1993 and 1992 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation (1)
Hotels $ 90.8 83.4 79.5
Gaming 72.9 65.1 54.8
Corporate 3.5 3.4 3.3
--------- ------- -------
Total $ 167.2 151.9 137.6
========= ======= =======
Capital expenditures (1)
Hotels $ 93.3 70.6 76.1
Gaming 236.4 144.2 188.9
Corporate 2.6 1.9 1.5
--------- ------- -------
Total $ 332.3 216.7 266.5
========= ======= =======
Assets
Hotels (2) $ 1,270.7 940.7 917.4
Gaming (2) 1,172.5 1,085.7 987.7
Corporate 482.7 648.4 754.3
--------- ------- -------
Total $ 2,925.9 2,674.8 2,659.4
========= ======= =======
</TABLE>

(1) Includes proportionate share of unconsolidated affiliates.
(2) Includes investments in unconsolidated affiliates.

Supplemental hotels segment operating data for the three years ended December
31, 1994 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue

Rooms $ 313.9 252.9 226.7
Food and beverage 127.7 113.5 104.2
Management and franchise fees 83.0 78.7 72.4
Other products and services 51.5 44.5 42.4
Operating income from unconsolidated affiliates 40.9 30.4 24.7
-------- ----- -----
617.0 520.0 470.4
-------- ----- -----
Expenses

Rooms 98.3 83.9 74.4
Food and beverage 107.5 93.7 86.8
Other costs and expenses 265.0 246.2 217.7
-------- ----- -----
470.8 423.8 378.9
-------- ----- -----
Hotels operating income $ 146.2 96.2 91.5
======== ===== =====
</TABLE>

FIFTY-THREE
<PAGE> 21
Supplemental gaming segment operating data for the three years ended December
31, 1994 are as follows:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Rooms $ 195.7 187.3 160.0
Food and beverage 119.5 123.3 112.0
Casino 480.6 502.1 438.8
Other products and services 72.7 49.3 40.0
Management fees 11.5 6.4 6.7
Operating income from unconsolidated affiliates 9.2 5.1 1.7
------- ----- -----
889.2 873.5 759.2
------- ----- -----
Expenses
Rooms 73.5 68.6 57.5
Food and beverage 108.9 108.7 93.5
Casino 216.3 217.5 195.6
Other costs and expenses 331.5 308.2 259.2
------- ----- -----
730.2 703.0 605.8
------- ----- -----
Gaming operating income $ 159.0 170.5 153.4
======= ===== =====
</TABLE>

LEASES

The Company operates eight properties under noncancellable operating leases, all
of which are for land only, having remaining terms up to 39 years. Upon
expiration of four of the leases, the Company has renewal options of 25, 30,
30 and 50 years. Seven leases require the payment of additional rentals based
on varying percentages of revenue or income.

Minimum lease commitments under all noncancellable operating leases are
as follows:

<TABLE>
<CAPTION>
Year ending December 31, (In millions)
-------------------------------------------------------------------------------
<S> <C>
1995 $ 5.2
1996 3.9
1997 3.6
1998 3.2
1999 2.9
2000 to 2033 49.6
------
Total $ 68.4
======
</TABLE>

Total lease rental expense for all operating leases is composed of:

<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 6.5 6.4 5.5
Additional rentals 6.8 4.9 4.O
----- ---- ---
Total $13.3 11.3 9.5
===== ==== ===
</TABLE>

COMMITMENTS AND CONTINGENT LIABILITIES

At December 31, 1994 the Company had contractual commitments at its wholly-owned
or leased properties for major expansion and rehabilitation projects of
approximately $63.1 million. Additionally, the Company is committed, under
certain conditions, to invest or loan up to $173.1 million to entities
developing hotel, gaming and vacation ownership properties.

The Company has entered into a hotel management agreement whereby it guarantees
certain payments and loans to the hotel owners if agreed upon levels of
financial performance are not maintained. The Company does not believe it is
likely that material payments will be required under this agreement. In
addition, in the event the Company terminates this agreement, it may be
obligated to pay $11.4 million to the hotel owners.

FIFTY-FOUR

<PAGE> 22

relief against use by the Company of the Conrad name for its hotels outside the
United States and damages in excess of $100 million. The Company believes that
this action is without merit. The trial in this action has concluded, but a
decision has not yet been rendered by the court.

In management's opinion, disposition of the HI lawsuit, and various other
lawsuits pending against the Company, is not expected to have a material effect
on the Company's financial position or results of operations.

SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)

(In millions, except per share amounts, stock prices and percentages)

Quarterly Financial Data

<TABLE>
<CAPTION>
Income Net
Before Income
Occupancy (1) Operating Income Net Per Dividends High/Low
Hotels Gaming Revenue Income Taxes Income Share Per Share Stock Price
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1st Quarter 66% 85 $ 338.8 55.7 37.7 22.7 .47 .30 74.00/54.50
2nd Quarter 72 90 381.2 74.0 56.0 33.9 .70 .30 61.25/49.75
3rd Quarter 72 90 380.9 62.4 46.4 27.0 .56 .30 66.63/53.25
4th Quarter 68 84 405.3 84.8 60.8 38.1 .79 .30 72.00/56.00
-- -- -------- ----- ----- ----- ---- ---- -----------
Year 70% 87 $1,506.2 276.9 200.9 121.7 2.52 1.20 74.00/49.75
== == ======== ===== ===== ===== ==== ==== ===========

1993 1st Quarter(2) 66% 81 $ 331.6 54.6 36.4 26.5 .55 .30 53.25/41.75
2nd Quarter 70 87 345.2 60.2 42.5 26.8 .56 .30 53.38/42.88
3rd Quarter 68 90 346.7 66.1 40.0 20.5 .43 .30 50.00/41.50
4th Quarter 64 84 370.0 59.0 42.0 32.3 .67 .30 61.00/44.38
-- -- -------- ----- ----- ----- ---- ---- -----------
Year 67% 86 $1,393.5 239.9 160.9 106.1 2.21 1.20 61.00/41.50
== == ======== ===== ===== ===== ==== ==== ===========
</TABLE>

(1) Properties owned or managed
(2) The 1993 1st quarter included additional net income of $3.4 million or $.07
per share resulting from the implementation of new accounting standards.

As of December 31, 1994 there were approximately 4,600 stockholders of record.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Hilton Hotels Corporation:

We have audited the accompanying consolidated balance sheets of Hilton Hotels
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hilton Hotels Corporation and
subsidiaries as of December 31, 1994 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.

As discussed in the Accounting Changes note to the consolidated financial
statements, in 1993 the Company changed its methods of accounting for income
taxes and postretirement benefits other than pensions.

ARTHUR ANDERSEN LLP

Los Angeles, California
February 1, 1995

FIFTY-FIVE
<PAGE> 23
HILTON HOTELS CORPORATION AND SUBSIDIARIES TEN YEAR SUMMARY

<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1994 1993
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Data for Years Revenue
Ended December 31 Hotels (1) $ 2,133.7 1,826.2
Management fees 45.7 42.7
Franchise fees 37.3 36.0
----------- -------
Total hotels 2,216.7 1,904.9
Gaming (1) 1,445.3 1,062.0
----------- -------
Total 3,662.0 2,966.9
Less nonconsolidated managed 2,205.9 1,608.9
----------- -------
Total revenue from consolidated operations $ 1,456.1 1,358.0
=========== =======
Operating income
Hotels (2) $ 146.2 96.2
Gaming (2) 159.0 170.5
Corporate expense (28.3) (26.8)
----------- -------
Total 276.9 239.9
Net interest expense (2) (76.4) (73.2)
Property transactions, net 1.1 (4.5)
Foreign currency losses (.7) (1.3)
Provision for income taxes (77.6) (58.2)
Minority interest, net (1.6) --
----------- -------
Net income before cumulative effect of accounting changes 121.7 102.7
Cumulative effect of accounting changes, net -- 3.4
----------- -------
Net income $ 121.7 106.1
=========== =======

Depreciation (2) 167.2 151.9
Capital expenditures (2) 332.3 216.7
----------- -------
Stockholder Data Net income per share $ 2.52 2.21
Average common and equivalent shares 48.3 48.0
Stockholders equity $ 1,127.8 1,056.7
Stockholders equity per share 23.45 22.11
Return on average stockholders equity 11.1% 10.3
Dividends per share $ 1.20 1.20
Market price per share - high/low 74/50 61/42
----------- -------
Financial Position at Year End Working capital $ 345.4 449.1
Assets 2,925.9 2,674.8
Long-term debt 1,251.9 1,112.6
Ratio of long-term debt to total capital (3) .48 .46
----------- -------
General Information Percentage of occupancy (1)
Hotels 70 67
Gaming 87 86
Number of properties at year end
Wholly-owned or leased hotels 18 18
Partially owned hotels 15 15
Managed hotels 24 26
Franchised hotels 162 171
Wholly or partially owned hotel-casinos 7 7
----------- -------
Total 226 237
=========== =======

Available rooms at year end
Wholly-owned or leased hotels 9,106 9,160
Partially owned hotels 14,992 14,991
Managed hotels 15,686 15,940
Franchised hotels 40,588 42,816
Wholly or partially owned hotel-casinos 12,080 12,045
----------- -------
Total 92,452 94,952
=========== =======
</TABLE>

(1) Includes properties owned or managed.
(2) Includes proportionate share of unconsolidated affiliates.
(3) Total capital represents total assets less current liabilities.

FIFTY-SIX

<PAGE> 24
HILTON HOTELS CORPORATION AND SUBSIDIARIES TEN YEAR SUMMARY

<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1992 1991 1990 1989
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data for Years Revenue
Ended December 31 Hotels (1) 1,678.0 1,526.5 1,558.4 1,500.6
Management fees 37.0 35.4 36.9 34.4
Franchise fees 35.4 34.0 34.6 34.2
------- ------- ------- -------
Total hotels 1,750.4 1,595.9 1,629.9 1,569.2
Gaming (1) 932.4 839.3 824.6 694.3
------- ------- ------- -------
Total 2,682.8 2,435.2 2,454.5 2,263.5
Less nonconsolidated managed 1,479.6 1,352.8 1,367.4 1,309.4
------- ------- ------- -------
Total revenue from consolidated operations 1,203.2 1,082.4 1,087.1 954.1
======= ======= ======= =======

Operating income
Hotels (2) 91.5 92.9 120.6 129.3
Gaming (2) 153.4 115.0 130.4 102.6
Corporate expense (25.0) (23.1) (29.2) (25.6)
------- ------- ------- -------
Total 219.9 184.8 221.8 206.3
Net interest expense (2) (61.7) (62.4) (54.7) (43.8)
Property transactions, net .9 .5 -- (3.7)
Foreign currency losses -- -- -- --
Provision for income taxes (55.2) (38.6) (54.6) (48.7)
Minority interest, net -- -- -- --
------- ------- ------- -------
Net income before cumulative effect of accounting
changes 103.9 84.3 112.5 110.1
Cumulative effect of accounting changes, net -- -- -- --
------- ------- ------- -------
Net income 103.9 84.3 112.5 110.1
======= ======= ======= =======
Depreciation (2) 137.6 128.8 119.4 104.8
Capital expenditures (2) 266.5 102.2 262.4 367.1
------- ------- ------- -------
Stockholder Data Net income per share 2.17 1.76 2.34 2.27
Average common and equivalent shares 47.9 47.8 48.1 48.5
Stockholders equity 1,002.5 952.8 923.3 883.0
Stockholders equity per share 21.02 20.06 19.44 18.40
Return on average stockholders equity 10.6 9.0 12.5 13.0
Dividends per share 1.20 1.20 1.15 1.00
Market price per share - high/low 53/40 50/34 84/26 116/48
------- ------- ------- -------
Financial Position at Year End Working capital 310.6 306.6 43.8 22.9
Assets 2,659.4 2,186.8 1,926.7 2,216.0
Long-term debt 1,087.1 789.0 526.6 487.1
Ratio of long-term debt to total capital (3) .47 .40 .31 .30
------- ------- ------- -------
General Information Percentage of occupancy (1)
Hotels 66 64 68 69
Gaming 85 84 84 86
Number of properties at year end
Wholly-owned or leased hotels 16 16 14 13
Partially owned hotels 15 15 15 14
Managed hotels 25 23 21 22
Franchised hotels 180 199 208 214
Wholly or partially owned hotel-casinos 7 5 5 4
------- ------- ------- -------
Total 243 258 263 267
======= ======= ======= =======

Available rooms at year end
Wholly-owned or leased hotels 8,729 8,756 7,696 7,739
Partially owned hotels 13,982 13,938 14,311 13,750
Managed hotels 14,908 13,788 12,888 13,518
Franchised hotels 45,002 49,131 51,559 52,612
Wholly or partially owned hotel-casinos 12,557 9,929 9,929 7,411
------- ------- ------- -------
Total 95,178 95,542 96,383 95,030
======= ======= ======= =======
</TABLE>

(1) Includes properties owned or managed.
(2) Includes proportionate share of unconsolidated affiliates.
(3) Total capital represents total assets less current liabilities.

HILTON HOTELS CORPORATION AND SUBSIDIARIES TEN YEAR SUMMARY

<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1988 1987 1986 1985
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data for Years Revenue
Ended December 31 Hotels (1) 1,395.2 1,279.4 1,228.3 1,138.8
Management fees 33.3 31.3 28.8 28.2
Franchise fees 33.5 31.9 30.7 28.2
------- ------- ------- -------
Total hotels 1,462.0 1,342.6 1,287.8 1,195.2
Gaming (1) 695.3 589.7 483.7 366.7
------- ------- ------- -------
Total 2,157.3 1,932.3 1,771.5 1,561.9
Less nonconsolidated managed 1,241.9 1,116.9 1,052.5 877.5
------- ------- ------- -------
Total revenue from consolidated operations 915.4 815.4 719.0 684.4
======= ======= ======= =======

Operating income
Hotels (2) 115.1 100.7 83.6 90.5
Gaming (2) 128.6 107.7 88.1 76.4
Corporate expense (20.8) (18.3) (17.6) (15.0)
------- ------- ------- -------
Total 222.9 190.1 154.1 151.9
Net interest expense (2) (38.1) (22.0) (22.1) (11.7)
Property transactions, net -- 43.8 (2.5) 3.1
Foreign currency losses -- -- -- --
Provision for income taxes (53.9) (72.0) (31.7) (43.1)
Minority interest, net -- -- -- --
------- ------- ------- -------
Net income before cumulative effect of accounting
changes 130.9 139.9 97.8 100.2
Cumulative effect of accounting changes, net -- -- -- --
------- ------- ------- -------
Net income 130.9 139.9 97.8 100.2
======= ======= ======= =======
Depreciation (2) 89.5 80.5 71.3 65.4
Capital expenditures (2) 386.8 205.6 240.7 293.1
------- ------- ------- -------
Stockholder Data Net income per share 2.72 2.80 1.96 2.01
Average common and equivalent shares 48.1 50.0 49.9 49.8
Stockholders equity 814.1 772.8 707.3 651.4
Stockholders equity per share 17.03 15.80 14.23 13.16
Return on average stockholders equity 16.5 18.9 14.4 16.1
Dividends per share .95 .90 .90 .90
Market price per share - high/low 55/34 46/28 40/30 37/28
------- ------- ------- -------
Financial Position at Year End Working capital 279.5 206.9 173.4 259.3
Assets 1,892.5 1,423.6 1,302.3 1,225.6
Long-term debt 568.5 283.7 280.9 284.3
Ratio of long-term debt to total capital (3) .36 .22 .24 .26
------- ------- ------- -------
General Information Percentage of occupancy (1)
Hotels 70 68 65 64
Gaming 87 84 84 86
Number of properties at year end
Wholly-owned or leased hotels 9 8 8 11
Partially owned hotels 12 13 14 14
Managed hotels 21 22 22 23
Franchised hotels 225 224 223 218
Wholly or partially owned hotel-casinos 4 4 4 4
------- ------- ------- -------
Total 271 271 271 270
======= ======= ======= =======

Available rooms at year end
Wholly-owned or leased hotels 6,494 6,027 6,085 7,399
Partially owned hotels 13,409 13,528 14,350 14,123
Managed hotels 13,383 14,183 13,425 13,692
Franchised hotels 54,876 55,641 55,602 54,285
Wholly or partially owned hotel-casinos 7,326 7,318 7,318 6,602
------- ------- ------- -------
Total 95,488 96,697 96,780 96,101
======= ======= ======= =======
</TABLE>

(1) Includes properties owned or managed.
(2) Includes proportionate share of unconsolidated affiliates.
(3) Total capital represents total assets less current liabilities.

FIFTY-SEVEN

<PAGE> 1
EXHIBIT 21

SUBSIDIARIES
OF
HILTON HOTELS CORPORATION

State or Country
A. Wholly-owned Subsidiaries of Incorporation
------------------------- ----------------
<S> <C>
BAC 1-11 Corporation Nevada
Benco, Inc. Nevada
Conrad (Indonesia) Corporation (2) (5) Nevada
Conrad International Hotels Corporation (3) Nevada
Conrad International Hotels (HK) Ltd. (5) Hong Kong
Conrad International Hotels Limited (2) (6) Ireland
Conrad International Investment Corporation (3) Nevada
Conrad (New Zealand) Corporation (5) Nevada
Conrad Royalty Corporation (3) Nevada
Conrad (Thailand) Corporation (2) (5) Nevada
Destination Resorts, Inc. Arizona
Flamingo Hilton Corporation (4) Nevada
Flamingo Hilton-Laughlin, Inc. (7) Nevada
Flamingo Hilton - Reno, Inc. (4) Nevada
Hapeville Investors, Inc. Delaware
Hilton Employee Relief Fund California
Hilton Equipment Corporation Delaware
Hilton Gaming Corporation Nevada
Hilton Hawaii Corporation Delaware
Hilton Hotels Partners I, Inc. Delaware
Hilton Hotels Partners II, Inc. Delaware
Hilton Hotels U.S.A., Inc. Delaware
Hilton Inns, Inc. Delaware
Hilton Insurance Corporation Vermont
Hilton Kansas City Corporation (4) Missouri
Hilton Michigan City Corporation (4) Indiana
Hilton New Jersey Corporation (2) New Jersey
Hilton New Orleans Corporation (4) Louisiana
Hilton Pennsylvania Hotel Corporation Delaware
Hilton Recreation, Inc. Delaware
Hilton Resorts Corporation Delaware
Hilton RPS, Inc. Illinois
Hilton San Diego Corporation California
Hilton Suites, Inc. Delaware
Hilton Supersports, Inc. (4) Nevada
Hilton Systems, Inc. Nevada
Hilton Washington Corporation New York
Hotels Statler Company, Inc. Delaware
Kenner Investors, Inc. Delaware
Las Vegas Hilton Corporation (4) Nevada
</TABLE>

<PAGE> 2

State or
Country of
A. Wholly-owned Subsidiaries Incorporation
------------------------- -------------
(Continued)
<S> <C>
Lebanco, Inc. (1) Nevada
Main & Holcombe Corporation Texas
Reno Hilton Resort Corporation (4) Nevada
Stevens Hotel Corporation (2) Illinois
The Beverly Hilton Corporation (2) California
The Hotel Waldorf-Astoria Corporation (2) New York
The New Yorker Hotel Corporation (2) New York
The Palmer House Hilton Hotel Company Illinois
</TABLE>

------------------

(1) Indirect ownership. Wholly-owned by Benco, Inc., which is wholly-owned by
Hilton Hotels Corporation.

(2) Nameholding companies.

(3) Indirect ownership. Wholly-owned by Hilton Hotels U.S.A., Inc., which is
wholly-owned by Hilton Hotels Corporation.

(4) Indirect ownership. Wholly-owned by Hilton Gaming Corporation, which is
wholly-owned by Hilton Hotels Corporation.

(5) Indirect ownership. Wholly-owned by Conrad International Hotels
Corporation, which is wholly-owned by Hilton Hotels U.S.A., Inc., which
is wholly-owned by Hilton Hotels Corporation.

(6) Indirect ownership. Wholly-owned by Conrad Royalty Corporation, which is
wholly-owned by Hilton Hotels U.S.A., Inc., which is wholly-owned by
Hilton Hotels Corporation.

(7) Indirect ownership. Wholly-owned by Flamingo Hilton Corporation, which is
wholly-owned by Hilton Gaming Corporation, which is wholly-owned by
Hilton Hotels Corporation.

<PAGE> 3

State or
% Country of
B. Partially-owned Subsidiaries Ownership Incorporation
---------------------------- --------- -------------
<S> <C> <C>
Attiki Casinos, H.S.A. 50% Greece
Baluma Holdings S.A. 36.9% The Bahamas
Casino Investments Limited 50% New Zealand
Compass Computer Services, Inc. 50% Delaware
Earlsfort Centre Hotel Proprietors
Limited 14.7% Ireland
Grand Vacations Realty, Inc. 50% Delaware
Greenroll Limited 30% Hong Kong
Hilton Service Corporation 51% Delaware
International Company for
Touristic Investments, S.A.E. 20% Egypt
Jupiters Management Limited 66.6% Australia
Jupiters Limited 19.9% Australia
Windsor Casino, Limited 33.3% Ontario, Canada
Yeditepe Beynelmilel Otelcilik
Turizm Ve Ticaret Anonim Sirketi
(Seven Hills International Hotel,
Tourism and Trade, A.S.) 25% Turkey
</TABLE>

C. Affiliates
----------

The following are special purpose corporations formed in connection with the
operation of beverage service at particular hotels. Hilton Hotels Corporation
does not directly own the shares of these corporations.

State of
Name of Corporation Incorporation
------------------- -------------
<S> <C>
Hilton Beverage Corporation Louisiana
New Orleans Hilton Beverage Corporation Louisiana
</TABLE>

D. Wholly-owned Partnerships
-------------------------

CONRAD INTERNATIONAL (BRUSSELS) S.N.C.

This Belgium general partnership was converted from a Belgium corporation
[CONRAD INTERNATIONAL (BRUSSELS) SA/NV] effective January 1, 1994. The partners
are CONRAD INTERNATIONAL HOTELS CORPORATION (50% ownership interest) and CONRAD
INTERNATIONAL INVESTMENT CORPORATION (50% ownership interest). Both partners are
wholly-owned subsidiaries of Hilton Hotels U.S.A., Inc., which is wholly-owned
by Hilton Hotels Corporation.

<PAGE> 1
EXHIBIT 23

(ARTHUR ANDERSEN LLP LETTERHEAD)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation of our reports dated February 1, 1995, included (or incorporated
by reference) in this Form 10-K, for the year ended December 31, 1994, into the
Company's previously filed Registration Statements (File Nos. 2-90922, 2-95746,
33-26112, 33-35883 and 33-35951).

/s/ ARTHUR ANDERSEN LLP
-----------------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
March 24, 1995

<ARTICLE> 5 EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 184,400
<SECURITIES> 208,800
<RECEIVABLES> 226,700
<ALLOWANCES> 27,400
<INVENTORY> 13,200
<CURRENT-ASSETS> 673,700
<PP&E> 2,408,700
<DEPRECIATION> 743,900
<TOTAL-ASSETS> 2,925,900
<CURRENT-LIABILITIES> 328,300
<BONDS> 1,251,900
<COMMON> 127,600
0
0
<OTHER-SE> 1,000,200
<TOTAL-LIABILITY-AND-EQUITY> 2,925,900
<SALES> 1,506,200
<TOTAL-REVENUES> 1,506,200
<CGS> 0
<TOTAL-COSTS> 1,186,100
<OTHER-EXPENSES> 28,300
<LOSS-PROVISION> 14,900
<INTEREST-EXPENSE> 76,400
<INCOME-PRETAX> 200,900
<INCOME-TAX> 77,600
<INCOME-CONTINUING> 121,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,700
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 2.52

</TABLE>

<PAGE> 1
EXHIBIT 99

UNDERTAKINGS

For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933 (the
"Securities Act"), the Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's Statement on
Form S-8 No. 2-90922 (filed May 2, 1990):

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.