HILTON HOTELS CORP, S-3/A, 1996-05-07

HILTON HOTELS CORP
S-3/A, 1996-05-07
HOTELS & MOTELS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1996

REGISTRATION NO. 333-02321
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------
HILTON HOTELS CORPORATION

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 36-2058176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

--------------------------
9336 Civic Center Drive
Beverly Hills, California 90210
(310) 278-4321
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

William C. Lebo, Jr. Esq.
Senior Vice President and General Counsel
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
(310) 278-4321

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:

<TABLE>
<S> <C>
Brian G. Cartwright Gregg A. Noel
Latham & Watkins Skadden, Arps, Slate, Meagher & Flom
633 West Fifth Street, Suite 4000 300 S. Grand Ave., Suite 3400
Los Angeles, California 90071-2007 Los Angeles, California 90071
(213) 485-1234 (213) 687-5000
</TABLE>

--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plans, check the following box.
/ /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the securities Act
registration statement number of the ealier effective registration statement for
the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

THE PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO A
REGISTRATION STATEMENT PREVIOUSLY FILED WITH THE COMMISSION.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS, DATED MAY 7, 1996

PROSPECTUS
MAY , 1996
$500,000,000

[LOGO]

% CONVERTIBLE SUBORDINATED NOTES DUE 2006

The Convertible Subordinated Notes to be issued by Hilton Hotels Corporation
(the "Company" or "Hilton") will be convertible at the option of the holder into
shares of Common Stock of the Company, at any time at or prior to maturity,
unless previously redeemed, at a conversion price of $ per share (equivalent
to a conversion rate of shares per $1,000 principal amount of Notes), subject
to adjustment in certain events. Interest on the Notes is payable semi-annually
on , and of each year, commencing on , 1996.
On April 23, 1996, the last reported sale price for the Company's Common Stock
on the New York Stock Exchange (where it trades under the symbol "HLT") was
$104 5/8 per share.

The Notes will be redeemable at the option of the Company, in whole or in
part at any time on or after , 1999, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption. In
addition, upon a Change of Control Triggering Event (as defined herein), which
shall include a spin-off to Hilton stockholders of the Hotel Segment (as defined
herein) or the Gaming Segment (as defined herein), the Company will be required
to offer to purchase the Notes at 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.

The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company, and are structurally subordinated to all liabilities
(including trade payables) of the Company's Subsidiaries. The Indenture (as
defined herein) will not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or its Subsidiaries. At December 31, 1995, as
adjusted to give effect to the issuance and sale of the Notes and the
application of the estimated net proceeds therefrom, the Company would have had
approximately $1.1 billion of Senior Indebtedness, and the Company's
Subsidiaries had approximately $160.1 million of trade payables and accrued
liabilities. See "Use of Proceeds," "Capitalization" and "Description of the
Notes."

Application has been made to have the Notes and the Common Stock approved
for listing on the New York Stock Exchange.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE
NEW JERSEY CASINO CONTROL COMMISSION, THE LOUISIANA GAMING ENFORCEMENT DIVISION,
NOR ANY OTHER GAMING AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

<TABLE>
<CAPTION>
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PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
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<S> <C> <C> <C>
Per Note........................................... % % %
Total (4).......................................... $ $ $
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</TABLE>

(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.

(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST, AND TO PROVIDE
CONTRIBUTION WITH RESPECT TO, CERTAIN LIABILITIES, INCLUDING LIABILITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."

(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT
$ .

(4) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
AN ADDITIONAL $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF NOTES ON THE SAME
TERMS AND CONDITIONS AS SET FORTH ABOVE, TO COVER OVER-ALLOTMENTS, IF ANY.
IF THE OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS, AND PROCEEDS TO THE COMPANY WILL BE
$ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITING."

The Notes are being offered by the several Underwriters subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify the Offering and to reject orders in whole or in part. It is
expected that delivery of the Notes will be made in New York, New York on or
about May , 1996 to investors in book-entry form through the facilities of The
Depository Trust Company against payment therefor in immediately available
funds.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY, THE COMMON STOCK OF THE COMPANY, OR BOTH, AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE (AS TO THE COMMON STOCK) OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------------------

The Notes will be available initially in book-entry form and the Company
expects that the Notes sold pursuant hereto will be issued in the form of a
Global Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Notes will be shown on, and transfers thereof will be effected
through, records maintained by the Depositary and its participants. After the
initial issuance of the Global Note, Notes in certificated form will be issued
in exchange for the Global Note on the terms set forth in the Indenture (as
defined). See "Description of the Notes -- Book-Entry, Delivery and Form."

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments, the
"Registration Statement") on Form S-3 under the Securities Act with respect to
the Notes offered hereby. This Prospectus, filed as a part of that Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. In addition, certain documents filed by the
Company with the Commission have been incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." For further information
regarding the Company and the Notes offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto and the
documents incorporated herein by reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy materials and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
materials and other information may be inspected and copies may be obtained at
the principal office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the NYSE under the symbol "HLT." Reports,
proxy materials and other information concerning the Company can also be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005; and the Pacific Stock Exchange, Inc., 618 South Spring
Street, Los Angeles, California 90014, and 301 Pine Street, San Francisco,
California 94104.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company has filed with the Commission, pursuant to Section 13 of the
Exchange Act (file no. 1-3427), (i) an Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the Commission on March 22, 1996 (the
"Company 10-K"); (ii) the portions of the Company's Proxy Statement on Schedule
14A for the Annual Meeting of Stockholders to be held on May 9, 1996, filed with
the Commission on March 26, 1996 that have been incorporated by reference into
the Company's 10-K; (iii) the portions of the Company's 1995 Annual Report to
Stockholders for the year ended December 31, 1995, filed with the Commission on
March 22, 1996 that have been incorporated by reference into the Company 10-K;
(iv) a description of the Common Stock included in a Registration Statement on
Form 8-A filed with the Commission on May 19, 1986; (v) a description of the
Rights included in a Registration Statement on Form 8-A and (vi) a Quarterly
Report on Form 10Q for the quarter ended March 31, 1996 filed with the
Commission on July 22, 1988 which are each hereby incorporated by reference in
and made a part of this Prospectus.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the securities offered by this Prospectus, shall
be deemed to be incorporated by reference in this Prospectus and be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus, or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified,
to constitute a part of this Prospectus.

The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon written or oral request of any
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to:
Cheryl L. Marsh, Vice President and Corporate Secretary, Hilton Hotels
Corporation, 9336 Civic Center Drive, Beverly Hills, California 90210; (310)
278-4321.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA APPEARING
ELSEWHERE IN THIS PROSPECTUS AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION" IN THE COMPANY'S 1995 ANNUAL REPORT TO
STOCKHOLDERS (THE "ANNUAL REPORT") INCORPORATED BY REFERENCE IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 (THE "FORM
10-K"). AS USED IN THIS PROSPECTUS, THE TERMS "COMPANY" OR "HILTON" REFER TO THE
COMPANY AND ITS SUBSIDIARIES, UNLESS OTHERWISE PROVIDED OR THE CONTEXT OTHERWISE
REQUIRES. EXCEPT AS OTHERWISE SPECIFIED, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITER'S OVER-ALLOTMENT OPTION.

THE COMPANY

The Company is a leading owner and operator of full-service hotels and
hotel-casinos in the United States. The Hilton name is one of the best
recognized and most respected lodging brands in the world. The Company owns,
leases and operates major lodging and gaming properties in gateway cities, urban
and suburban centers and resort areas under the Hilton name in the U.S. and
under the Conrad International name abroad. Hilton's strategy is to expand its
core businesses through acquisitions, domestic and international expansion,
leveraging its brand names and exploiting the synergies between its lodging and
gaming operations.

The Company announced in January 1996 it would not pursue a proposed
spin-off of its gaming operations, and will continue to develop the marketing,
operating and financial efficiencies between the two businesses. In February
1996, Stephen Bollenbach joined Hilton as president and chief executive officer.
Mr. Bollenbach, who previously served as a senior executive at such companies as
The Walt Disney Co., Host Marriott Corporation and Holiday Corporation, brings
broad financial and strategic experience to Hilton's management.

For the fiscal year ended December 31, 1995, the Company's consolidated
revenue increased 9% to $1.6 billion from $1.5 billion in 1994, and operating
income rose 24% to $353.6 million from $284.6 million in 1994. Net income rose
42% to $172.8 million, or $3.56 per share, compared to $121.7 million or $2.52
per share in 1994.

HOTELS. At February 1, 1996, the Company operated 18 owned or leased
hotels, and managed 41 properties partially or wholly owned by others. An
additional 164 hotels were operated by others under the Hilton, Hilton Garden
Inn and Hilton Suites brand names under franchise agreements granted by the
Company.

Hilton's hotels are located in the United States, except for six hotels
operated by the Company's Conrad International Hotels Corporation subsidiary.
The Company's owned or partially-owned hotels include such well-known urban and
resort properties as the Waldorf=Astoria in New York, the Palmer House Hilton in
Chicago, the New Orleans Hilton Riverside & Towers and the Hilton Hawaiian
Village in Honolulu.

The domestic lodging business, particularly the full-service sector, is
benefiting from a favorable supply-demand relationship, as well as from an
improved economy and a resurgence in travel. Those factors, along with the
recent streamlining and upgrading of the Company's franchise operations and
other operational improvements, are reflected by substantial gains in the
Company's hotel operating statistics.

Consolidated hotel revenue increased 15% in 1995 to $708.8 million from
$618.3 million in 1994. Revenue per available room ("REVPAR") for owned and
managed hotels increased 10% in 1995, the second consecutive year of
double-digit growth. Hotel operating income, primarily income from hotel
interests and management and franchise fee income, increased 41% in 1995 to
$207.7 million from $147.5 million in 1994.

GAMING. The Company's gaming operations, which are largely concentrated in
Nevada, operate primarily under the Hilton and Flamingo brand names. The
Company's wholly owned Nevada casinos are the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno. The Company has a strong presence in Las Vegas, the largest gaming
market in the world with more than 29 million visitors and gross gaming revenue
of more than $5.7 billion in 1995.

Through its Conrad International brand, the Company manages international
hotel-casinos in Brisbane and the Gold Coast in Queensland, Australia and in
Istanbul, Turkey. The Company also operates a riverboat casino in New Orleans,
Louisiana, next to the New Orleans Hilton Riverside & Towers, and is a minority
partner in a company that manages a casino in Windsor, Ontario, Canada.

3
<PAGE>
The Company's total gaming revenue increased 5% to $940.6 million in 1995
from $895.6 million in 1994. Casino revenue, a component of gaming revenue,
increased 6% to $511.0 million in 1995 from $480.6 million in 1994. Gaming
operating income increased 7% to $177.8 million in 1995 from $165.4 million in
1994.

GROWTH STRATEGY

HOTELS. The Company's five-year strategic growth plan calls for increasing
room count by a significant percentage by year-end 2000. Hilton's lodging growth
strategy focuses on the acquisition and conversion of existing full-service
hotels, the development of its redesigned, mid-market Hilton Garden Inn product
and international expansion.

As a result of limited supply growth and increasing demand for full-service
hotel rooms, the Company believes this segment of the market offers attractive
growth opportunities. Additionally, many desirable full-service hotel properties
are held by inadvertent owners such as banks and insurance companies which are
motivated sellers. Accordingly, the Company believes it can acquire certain
higher-end, full-service properties at significant discounts to replacement
cost. The Company also intends to expand its domestic operations through
conversion of existing mid- and lower- market hotels into management and
franchise properties. The Company believes it can improve the performance of
acquired and converted hotels as these properties can benefit from the strength
of the Hilton brand name, reservation system, marketing programs and worldwide
sales organization.

The Company intends to compete in the mid-market segment through franchising
and management of the Hilton Garden Inn properties. To facilitate the initial
development and promote brand awareness, the properties constructed during the
first phase of the Hilton Garden Inn expansion are expected to be financed by
Hilton, either solely or with partners. The redesigned Hilton Garden Inn concept
offers many full-service amenities at moderate prices. The Company intends to
create a strong presence in the mid-market hotel segment by exploiting the
Hilton name and offering a fresh, attractive product in a segment that includes
several mature brands. The concept is designed for urban and suburban markets,
particularly those that cannot support a standard full-service hotel. Amenities
such as limited food and beverage service, meeting space, exercise facilities,
and a residential atmosphere are designed to differentiate Hilton Garden Inns
from other mid-market hotel competitors.

The Company also believes there are substantial opportunities for
international hotel expansion, and is particularly focused on city-center
business hotels and resort properties. The Company expects that most will be
operated under the Conrad International flag through long-term management
agreements. The Company currently has agreements to manage new Conrad
International hotels in Egypt, Singapore, Indonesia, Jordan and Thailand. The
Company is also exploring a strategic alliance with the owner of the Hilton
International hotel chain, which owns the Hilton name outside the United States.
Hilton believes there could be significant marketing and brand recognition
benefits from such an alliance, if consummated.

GAMING. The Company intends to expand and improve its domestic and
international gaming operations through select acquisitions, new development,
and the enhancement of existing gaming properties. Hilton is pursuing gaming
acquisition and development opportunities that will complement its existing
strengths as a major-market gaming operator. The Company has been granted a
Statement of Compliance by New Jersey gaming regulators, although it does not
currently operate or have an agreement to operate a casino resort in Atlantic
City, N.J.

Hilton is developing a dockside casino complex in Kansas City, Missouri,
which is scheduled to open in summer 1996. A 260-room hotel designed to enhance
the casino's attractiveness to higher-spending overnight visitors is scheduled
to open in summer 1997.

The Star Trek attraction at the Las Vegas Hilton, which will complement a
22,000-square-foot casino expansion at the property, is scheduled to open in
spring 1997. This Star Trek attraction is a joint development with Paramount
Parks Inc. and is designed to attract and retain middle-market gaming customers
to augment the property's high-end gaming business. The Company also is
enhancing the Flamingo Hilton-Las Vegas, Flamingo Hilton-Laughlin, Flamingo
Hilton-Reno and Reno Hilton through various refurbishments of rooms,
restaurants, casino floors and equipment.

The Company will continue to pursue gaming opportunities internationally
through its Conrad International brand. Hilton currently is developing
international hotel-casinos in which it has a minority interest under the Conrad
International flag in Uruguay and Egypt, both scheduled to open in 1997.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Securities Offered........... $500,000,000 principal amount of % Convertible
Subordinated Notes due , 2006.
Interest Payment Dates....... and commencing , 1996.
Conversion Rights............ The Notes are convertible into shares of the Company's
common stock, par value $2.50 per share and the related
Rights (as defined herein) (the "Common Stock"), at any time
at or prior to maturity, unless previously redeemed, at a
conversion price of $ per share, subject to adjustment
under certain circumstances as described herein (the
"Conversion Price"). Accordingly, each $1,000 principal
amount of Notes is convertible into shares of Common
Stock, subject to adjustment, initially for an aggregate of
shares. See "Capitalization."
Mandatory Redemption......... None.
Optional Redemption.......... The Notes are redeemable, in whole or in part, at the option
of the Company at any time on or after , 1999, at
the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption.
Change of Control Triggering Upon a Change of Control Triggering Event, including a
Event....................... spin-off to Hilton stockholders of the Hotel Segment or the
Gaming Segment, the Company will be required to offer to
purchase the Notes at 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of purchase.
Subordination................ The Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all existing
and future Senior Indebtedness of the Company and will be
structurally subordinated to all liabilities (including
trade payables) of the Company's Subsidiaries. At December
31, 1995, as adjusted to give effect to the issuance and
sale of the Notes and the application of the estimated net
proceeds therefrom, the Senior Indebtedness of the Company
would have aggregated approximately $1.1 billion, and the
Company's Subsidiaries had approximately $160.1 million of
trade payables and accrued liabilities. The Indenture will
not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or any of its Subsidiaries.
Use of Proceeds.............. The net proceeds from the Offering will be used to repay
certain outstanding indebtedness of the Company and for
general corporate purposes, including the funding of various
development and construction projects. See "Use of
Proceeds."
Common Stock Traded.......... The Common Stock is traded on the New York Stock Exchange
under the symbol "HLT."
</TABLE>

For a discussion of the terms of the Notes, see "Description of the Notes."
For a description of the Common Stock, see "Description of Capital Stock."

5
<PAGE>
RECENT RESULTS

For the quarter ended March 31, 1996, revenue increased 13% to $429.9
million from $381.9 million in 1995, while operating income increased 7% to
$79.0 million from $74.0 million in 1995. Net income for the quarter ended March
31, 1996 increased 14% to $36.6 million, or $.75 per share, from $32.0 million,
or $.66 per share, in 1995. These results were achieved through strong
performances in the Company's Hotel Segment and at the Flamingo Hilton-Las
Vegas, despite an abnormally low baccarat drop and win percentage at the Las
Vegas Hilton.

SUMMARY HISTORICAL FINANCIAL DATA

The following table presents summary consolidated historical financial data
of the Company for the five fiscal years ended December 31, 1995. The historical
financial data provided herein as of and for the years ended December 31, 1993,
1994 and 1995 are derived from the Consolidated Financial Statements and Notes
thereto of the Company included in the Annual Report incorporated by reference
in the Form 10-K. The historical financial data as of and for the years ended
December 31, 1991 and 1992 are derived from the Company's audited financial
statements. The Summary Historical Financial Data are qualified in their
entirety by and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" included in the Annual Report
incorporated by reference in the Form 10-K.

OTHER DATA:
EBITDA (2).................................................. $ 290 $ 329 $ 359 $ 418 $ 496
Hotels revenue.............................................. 444 471 520 618 709
Gaming revenue.............................................. 669 759 874 896 940
Hotels operating income..................................... 93 92 96 148 208
Gaming operating income..................................... 115 153 171 165 178
Percentage of occupancy
Hotels (owned or managed)................................. 64% 66% 67% 70% 73%
Gaming (Nevada)........................................... 85 87 89 91 88
Ratio of earnings to fixed charges (3)...................... 2.6x 2.9x 2.7x 2.8x 3.2x
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
--------------------------
ACTUAL AS ADJUSTED(4)
--------- ---------------
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and temporary investments.................................... $ 409 $ 683
Total assets........................................................................ 3,060 3,345
Long-term debt, including current maturities........................................ 1,287 1,572
Total stockholders' equity.......................................................... 1,254 1,254
</TABLE>

FOOTNOTES ON FOLLOWING PAGE

6
<PAGE>
- ------------------------------
(1) Fiscal 1993 results include net income of $3.4 million or $.07 per share
resulting from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 106, "Postretirement Benefits Other Than Pensions" and SFAS No.
109, "Accounting for Income Taxes."

(2) "EBITDA" consists of operating income plus consolidated depreciation and
amortization. The Company has presented EBITDA supplementally because the
Company believes it allows for a more complete analysis of its results of
operations. This information should not be considered as an alternative to
any measure of performance or liquidity as promulgated under generally
accepted accounting principles (such as net income or cash provided by or
used in operating, investing and financing activities) nor should it be
considered as an indicator of the Company's overall financial performance.

(3) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and minority
interest, adjusting to exclude gain (loss) from property transactions and
undistributed earnings in less than 50%-owned-affiliates. Fixed charges
consist of interest on borrowings and that portion of rental expense which
represents interest, including Hilton's proportionate share of such items
with respect to 50%-owned-affiliates.

(4) Balance sheet data is as adjusted to reflect the issuance and sale of the
Notes and the application of that portion of the estimated net proceeds
therefrom expected to be used to retire debt.

7
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Notes offered hereby,
after deducting underwriting discounts and commissions and estimated expenses of
this Offering, is estimated to be approximately $ million (approximately
$ million if the Underwriters' over-allotment option is exercised in
full). The Company intends to use the net proceeds from the Offering to
refinance approximately $215.0 million in outstanding Senior Indebtedness of the
Company borrowed at a weighted average interest rate of 8.9% and due in 1996,
and for general corporate purposes, including the funding of development and
construction costs of Hilton Garden Inn properties and additional construction
costs of the dockside casino in Kansas City, Missouri and the Star Trek
attraction at the Las Vegas Hilton. Pending ultimate application, the net
proceeds will be invested in short-term investment grade securities.

PRICE RANGE OF COMMON STOCK

The Common Stock is listed on the New York Stock Exchange, Inc. (the "NYSE")
under the symbol "HLT." The following table sets forth for the periods indicated
the high and low sales prices of the Common Stock as reported on the NYSE.

<TABLE>
<CAPTION>
COMMON STOCK PRICE
-------------------- DIVIDENDS
HIGH LOW PAID
--------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1994
1st Quarter........................... $ 74 $54 1/2 $.30
2nd Quarter........................... 61 1/4 49 3/4 .30
3rd Quarter........................... 66 5/8 53 1/4 .30
4th Quarter........................... 72 56 .30

Year ended December 31, 1995
1st Quarter........................... $ 77 7/8 $64 1/8 $.30
2nd Quarter........................... 79 3/4 65 5/8 .30
3rd Quarter........................... 74 1/8 60 3/8 .30
4th Quarter........................... 68 3/4 60 5/8 .30

Year ended December 31, 1996
1st Quarter........................... $ 99 3/4 $61 1/8 $.30
2nd Quarter (through April 23,
1996)................................ 105 1/2 94
</TABLE>

On April 23, 1996, the reported last sale price of the Common Stock on the
NYSE was $104 5/8 per share. At April 23, 1996, there were approximately 4,000
holders of record of the Common Stock.

DIVIDEND POLICY

The Company has declared and paid cash dividends on its Common Stock as set
forth above. Any further determination to pay cash dividends will be at the
discretion of the Company's Board of Directors and will depend upon the earnings
of the Company, its financial condition, capital requirements and other factors
as the Company's Board of Directors may deem relevant.

8
<PAGE>
CAPITALIZATION

The following table sets forth (i) the cash, cash equivalents and temporary
investments and capitalization of the Company at December 31, 1995 and (ii) the
cash, cash equivalents and temporary investments and capitalization as adjusted
to reflect the issuance and sale of the Notes and the application of that
portion of the estimated net proceeds therefrom that will be used to retire
indebtedness. The information below should be read in conjunction with and is
qualified by reference to the Company's Consolidated Financial Statements and
Notes thereto and "Management's Discussion and Analysis and Results of
Operations and Financial Condition" included in the Annual Report incorporated
by reference in the Form 10-K.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
CASH, CASH EQUIVALENTS AND TEMPORARY INVESTMENTS:
Cash and equivalents..................................................................... $ 338 $ 612
Temporary investments.................................................................... 71 71
--------- -----------
Total cash, cash equivalents and temporary investments................................... $ 409 $ 683
--------- -----------
--------- -----------
LONG-TERM DEBT, INCLUDING CURRENT MATURITIES:
Industrial development revenue bonds at adjustable rates, due 2015....................... $ 82 $ 82
Senior notes, 7.02% to 9.80%, due 1996 to 2002........................................... 637 422
Mortgage notes, 6.68% to 8.34%, due 1996 to 2011......................................... 104 104
Commercial paper......................................................................... 406 406
Revolving loans, with an average rate of 5.91% at December 31, 1995 (1).................. 51 51
Other.................................................................................... 7 7
Notes offered hereby..................................................................... -- 500
--------- -----------
Total long-term debt................................................................... $ 1,287 $ 1,572
--------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock -- 10.0 million shares authorized at $1.00 par value, none outstanding... $ -- $ --
Common stock -- 90.0 million shares authorized at $2.50 par value, 48.3 million shares
outstanding (2)......................................................................... 128 128
Cumulative translation adjustment........................................................ (1) (1)
Unrealized loss on marketable securities................................................. (5) (5)
Retained earnings........................................................................ 1,275 1,275
Less treasury stock, at cost............................................................. (143) (143)
--------- -----------
Total stockholders' equity............................................................. 1,254 1,254
--------- -----------
Total capitalization................................................................... $ 2,541 $ 2,826
--------- -----------
--------- -----------
</TABLE>

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

(1) At December 31, 1995, Hilton had committed bank lines of credit aggregating
approximately $597.5 million. At such date approximately $51.1 million was
outstanding under such lines.

(2) Does not include approximately 1.8 million shares reserved for issuance upon
exercise of stock options pursuant to stock option plans. Stock options to
purchase approximately 1.7 million shares of Common Stock were outstanding
as of December 31, 1995.

9
<PAGE>
SELECTED FINANCIAL DATA

The selected consolidated financial data as of and for the years ended
December 31, 1993, 1994 and 1995 are derived from the consolidated financial
statements of the Company, which are included in the Annual Report incorporated
by reference in the Form 10-K. The selected consolidated financial data as of
and for the years ended December 31, 1991 and 1992 and historical balance sheet
data at December 31, 1993 are derived from the Company's audited financial
statements. The data presented below are qualified in their entirety by and
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" included in the Annual Report
incorporated by reference in the Form 10-K.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue
Rooms................................................................... $ 345 $ 387 $ 440 $ 510 $ 587
Food and beverage....................................................... 205 216 237 247 266
Casino.................................................................. 392 439 502 481 511
Management and franchise fees........................................... 76 79 85 94 100
Other................................................................... 65 83 94 124 125
Operating income from unconsolidated affiliates......................... 30 26 36 58 60
--------- --------- --------- --------- ---------
1,113 1,230 1,394 1,514 1,649
--------- --------- --------- --------- ---------
Expenses
Rooms................................................................... 120 132 153 172 186
Food and beverage....................................................... 169 180 202 216 229
Casino.................................................................. 200 196 218 216 235
Other costs and expenses................................................ 416 477 554 597 613
Corporate expense....................................................... 23 25 27 28 32
--------- --------- --------- --------- ---------
928 1,010 1,154 1,229 1,295
--------- --------- --------- --------- ---------
Operating income.......................................................... 185 220 240 285 354
Interest and dividend income.............................................. 11 16 22 21 35
Interest expense.......................................................... (58) (67) (80) (86) (93)
Interest expense, net, from unconsolidated affiliates..................... (16) (11) (15) (12) (17)
--------- --------- --------- --------- ---------
Income before property transactions and foreign currency losses........... 122 158 167 208 279
Property transactions, net................................................ 1 1 (5) 1 1
Foreign currency losses................................................... -- -- (1) (1) --
--------- --------- --------- --------- ---------
Income before income taxes and minority interest.......................... 123 159 161 208 280
Provision for income taxes................................................ 39 55 58 85 102
Minority interest, net.................................................... -- -- -- 1 5
--------- --------- --------- --------- ---------
Income before cumulative effect of accounting changes..................... 84 104 103 122 173
Cumulative effect of accounting changes, net(1)........................... -- -- 3 -- --
--------- --------- --------- --------- ---------
Net income................................................................ $ 84 $ 104 $ 106 $ 122 $ 173
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income per share
Before cumulative effect of accounting changes.......................... $ 1.76 $ 2.17 $ 2.14 $ 2.52 $ 3.56
Cumulative effect of accounting changes(1).............................. -- -- .07 -- --
--------- --------- --------- --------- ---------
Net income per share...................................................... $ 1.76 $ 2.17 $ 2.21 $ 2.52 $ 3.56
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average common and equivalent shares...................................... 47.8 47.9 48.0 48.3 48.5
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(2)................................................................. $ 290 $ 329 $ 359 $ 418 $ 496
Hotels revenue............................................................ 444 471 520 618 709
Gaming revenue............................................................ 669 759 874 896 940
Hotels operating income................................................... 93 92 96 148 208
Gaming operating income................................................... 115 153 171 165 178
Percentage of occupancy
Hotels (owned or managed)............................................... 64% 66% 67% 70% 73%
Gaming (Nevada)......................................................... 85 87 89 91 88
Ratio of earnings to fixed charges(3)..................................... 2.6x 2.9x 2.7x 2.8x 3.2x
</TABLE>

FOOTNOTES ON FOLLOWING PAGE

10
<PAGE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and temporary investments.......................... $ 350 $ 511 $ 479 $ 393 $ 409
Total assets.............................................................. 2,187 2,659 2,675 2,926 3,060
Long-term debt, including current maturities.............................. 791 1,133 1,142 1,289 1,287
Total stockholders' equity................................................ 953 1,003 1,057 1,128 1,254
</TABLE>

- ------------------------------
(1) Fiscal 1993 results include net income of $3.4 million or $.07 per share
resulting from the adoption of SFAS No. 106, "Postretirement Benefits Other
Than Pensions" and SFAS No. 109, "Accounting for Income Taxes."

(3) For purposes of this ratio, earnings are calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and minority
interest, adjusting to exclude gain (loss) from property transactions and
undistributed earnings in less than 50%-owned affiliates. Fixed charges
consist of interest on borrowings and that portion of rental expense which
represents interest, including Hilton's proportionate share of such items
with respect to 50%-owned affiliates.

11
<PAGE>
BUSINESS

THE COMPANY

The Company announced in January 1996 it would not pursue a proposed
spin-off of its gaming operations, and will continue to develop the marketing,
operating and financial efficiencies between its two business segments. In
February 1996, Stephen Bollenbach joined Hilton as president and chief executive
officer. Mr. Bollenbach, who previously served as a senior executive at such
companies as The Walt Disney Co., Host Marriott Corporation and Holiday
Corporation, brings broad financial and strategic experience to Hilton's
management.

A summary of the Company's hotels and gaming properties is set forth below:

<TABLE>
<CAPTION>
AT FEBRUARY 1, 1996
------------------------------------------
PROPERTY TYPE NUMBER OF PROPERTIES NUMBER OF ROOMS
- ------------------------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
HOTELS
Owned/Partially Owned Hotels:
Domestic Full-Service.................................................. 24 21,957
Hilton Suites.......................................................... 5 1,095
Hilton Garden Inns..................................................... 2 347
Conrad International................................................... 2 704
--- ------
Total.................................................................. 33 24,103
--- ------
Managed Hotels:
Domestic Full-Service.................................................. 22 14,668
Conrad International................................................... 4 1,100
--- ------
Total.................................................................. 26 15,768
--- ------
Franchise Hotels......................................................... 164 42,155
--- ------
GAMING
Owned/Partially Owned Hotel-Casinos:
Domestic............................................................... 5 11,421
Conrad International................................................... 3 1,361
New Orleans Riverboat.................................................. 1 --
--- ------
Total.................................................................. 9 12,782
--- ------
Managed Casino:
Casino Windsor......................................................... 1 --
--- ------
TOTAL PROPERTIES......................................................... 233 94,808
--- ------
--- ------
</TABLE>

Since the beginning of 1995, the Company has taken advantage of various
opportunities to expand its business, the most significant of which included the
opening of new vacation ownership resorts in Las Vegas, Nevada and Orlando,
Florida; the completion of the third of three new 12,600- to 15,400-square-foot
Sky

12
<PAGE>
Villa luxury suites at the Las Vegas Hilton; the opening of the 136-room Conrad
International Treasury hotel-casino in Brisbane, Australia; chartering a
riverboat to serve as a complementary facility for Casino Windsor in Windsor,
Ontario, Canada; the management of a 294-room hotel in Durango, Colorado, a
260-room hotel in Hurghada, Egypt and a 412-room hotel in Barcelona, Spain; and
the announcement of a major expansion of Hilton Garden Inn properties.

The Company routinely reviews opportunities to enter into project
development agreements and to make acquisitions in the hotel and gaming
businesses and other travel-related businesses. The Company believes that
currently there are available a number of acquisition opportunities that would
be complementary to its current business. The Company currently has no
commitments or understandings to acquire any specific business or other material
assets. There can be no assurance, however, that it will be successful in
pursuing any such acquisition opportunities or the consequences of such
acquisition, if any.

Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210 and its telephone number is (310) 278-4321.

GROWTH STRATEGY -- HOTELS

The Company's five-year strategic growth plan calls for increasing room
count by a significant percentage by year-end 2000. Growth in the Hotel Segment
will occur primarily through acquisition and conversion of existing full-service
hotels, the development of the redesigned mid-market Hilton Garden Inn product
and international expansion.

ACQUISITION AND CONVERSION OF FULL-SERVICE PROPERTIES. As a result of
limited supply growth and increasing demand for full-service hotel rooms, the
Company believes this segment of the market offers attractive growth
opportunities. According to Smith Travel Research, from 1988 to 1990 upscale
full-service room supply increased an average of approximately 5% annually,
which resulted in an oversupply of rooms in the industry. However, this growth
slowed to an average of approximately 1.7% annually from 1990 to 1995. According
to Coopers & Lybrand, hotel supply in the upscale full-service segment is
expected to grow annually at 1.8% to 1.9% through 1998. The Company believes
that the lead time from conception to completion of a new full-service hotel is
generally five or more years in the types of markets the Company is principally
pursuing, with the result that growth in the number of rooms in the full-service
segment should continue to be limited through 2000. Additionally, many desirable
full-service hotel properties are held by inadvertent owners such as banks and
insurance companies which are motivated sellers. Accordingly, the Company
believes it may be able to acquire certain higher-end, full-service properties
at significant discounts to replacement cost. The Company also intends to expand
its domestic operations through conversion of existing mid- and lower- market
hotels into management and franchise properties. The Company believes it can
improve the performance of acquired and converted hotels as these properties can
benefit from the strength of the Hilton brand name, reservation system,
marketing programs and worldwide sales organization.

EXPANSION OF HILTON GARDEN INN PROPERTIES. The Company intends to compete
in the mid-market segment through franchising and management of Hilton Garden
Inn properties. In January 1996, Hilton announced plans for a major expansion of
its redesigned Hilton Garden Inn concept. The hotels have been redesigned to
include 150 to 200 rooms, and offer amenities such as a quality restaurant,
meeting space, exercise room and pool to differentiate them from other
mid-market hotel competitors. Guest rooms will feature refrigerators, coffee
makers, microwave ovens, irons, ironing boards and well-appointed work desks.
This product is designed to offer many full-service amenities at moderate prices
that are lower than those at standard full-service hotels.

Hilton plans to add as many as 100 new Hilton Garden Inns over the next five
years to create a strong presence in the mid-market segment. Approximately 80%
of the additional Hilton Garden Inns are expected to be newly constructed
facilities, with the remainder to be conversions of existing properties. To
facilitate the initial development and promote brand awareness, the properties
constructed during the first phase of the Hilton Garden Inn expansion are
expected to be financed by Hilton, either solely or with partners.

13
<PAGE>
EXPANSION OF INTERNATIONAL HOTEL OPERATIONS. The Company believes there are
substantial opportunities for international hotel expansion, and is particularly
focused on city-center business hotels and resort properties. The Company
expects that most of those properties will be operated under the Conrad
International brand through long-term management agreements. The Company has
entered into management contracts to operate the following new hotels, the
anticipated opening dates of which are indicated parenthetically: the 350-room
Conrad International Sharm El Sheikh in Egypt (fall 1996); the 510-room Conrad
International Singapore (fall 1996); the 700-room Conrad International Jakarta
in Indonesia (1998); the 400-room Conrad International Amman in Jordan (1998);
and the 400-room Conrad International Bangkok in Thailand (1999). Negotiations
relating to the management of other international hotels are in varying stages
and, in certain instances, letters of intent for management contracts have been
executed. However, no assurances can be given that management contracts for such
other hotels will be executed or that such other hotels will be constructed and,
thereafter, operated by the Company.

Hilton also is exploring a strategic alliance with the owner of the Hilton
International hotel chain, which owns the Hilton name outside of the United
States. Hilton believes there could be significant marketing and brand
recognition benefits from such an alliance, if consummated.

GROWTH STRATEGY -- GAMING

The Company is continuing to expand and improve its worldwide gaming
operations through acquisitions, the development of new facilities and the
enhancement of existing gaming properties.

EXPANSION IN EXISTING GAMING MARKETS. The Company is pursuing gaming
acquisitions and development opportunities that will complement its existing
strengths as a major-market casino operator. The New Jersey Casino Control
Commission has granted the Company's request for a Statement of Compliance,
finding that the Company satisfies all non-facility related criteria for a
casino license in Atlantic City, New Jersey. The Company does not own or manage,
and has not entered into any agreement to own or manage, a hotel-casino in
Atlantic City.

DEVELOPMENT OF DOCKSIDE CASINO IN KANSAS CITY, MISSOURI. The Company is
developing a dockside casino in Kansas City, Missouri. The Company will manage
and own a 90% interest in this project, which will include a 30,000-square-foot
casino on a continually docked 130,000-square-foot barge, concessions and
entertainment facilities. Subject to the receipt of all required approvals and
permits, including gaming licenses, this casino is scheduled to open in summer
1996. The Company also plans to build a 260-room hotel next to the dockside
casino, which is scheduled to open in summer 1997.

CONSTRUCTION OF STAR TREK ATTRACTION AT THE LAS VEGAS HILTON. In January
1995, the Company and Paramount Parks Inc. ("Paramount") announced plans to
build a 65,000-square-foot attraction to be called "Star Trek: The Experience at
the Las Vegas Hilton." This attraction is scheduled to open in spring 1997, and
will feature a motion-based simulation ride, interactive video and virtual
reality stations, dining and souvenir shops. The building housing the Star Trek
attractions will be owned by the Company and leased to Paramount. The attraction
also will be managed by Paramount. In conjunction with the Star Trek attraction,
the Company plans to construct a themed 22,000-square-foot casino addition at
the Las Vegas Hilton, which also is scheduled to open in spring 1997. The
project is designed to attract and retain middle-market gaming customers to
augment the property's high-end gaming business.

ENHANCEMENT OF EXISTING HOTEL-CASINOS. In 1996, the Las Vegas Hilton plans
to rebuild its marquee sign and renovate 700 of its guest rooms. The Flamingo
Hilton-Las Vegas plans to complete a new main entrance to the property and
renovate the registration area. The Flamingo Hilton-Laughlin plans to renovate
1,000 of its guest rooms, refinish the exterior facade and continue its slot
machine replacement program. At the Reno Hilton, renovation of restaurants,
meeting rooms and guest rooms is planned. The Flamingo Hilton-Reno plans to
renovate guest rooms and open a Benihana restaurant.

EXPANSION OF INTERNATIONAL HOTEL-CASINO OPERATIONS. The Company believes
the opportunity exists to expand its gaming operations abroad. Hilton is
monitoring gaming operations in Asia, Canada, Latin America, the Middle East and
South Africa with the intention of expanding its Conrad International
properties.

14
<PAGE>
The government of Uruguay has selected Conrad International and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, is
expected to include a 38,000-square-foot casino. Conrad International will
manage, and have an equity interest of approximately 43%, in the hotel-casino.
The casino is scheduled to open in early 1997 and the hotel is expected to
commence operations in late 1997.

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

HOTELS

OWNED, PARTIALLY OWNED AND LEASED

At February 1, 1996, Hilton operated 24 full-service owned, partially owned
or leased hotels with 21,957 rooms (excluding its five hotel-casinos) located
throughout the United States. Thirteen of these hotels with 8,036 rooms are
wholly owned or leased, including the Waldorf=Astoria in New York City, the
Palmer House Hilton and the O'Hare Hilton in Chicago, while 11 hotels with
13,921 rooms are partially owned, including the 50%-owned Hilton Hawaiian
Village, New York Hilton & Towers and San Francisco Hilton & Towers and the
67.4%-owned New Orleans Hilton Riverside & Towers. Hilton also earns management
fee income from its partially owned hotels generally under long-term management
contracts.

Hilton leases the land upon which eight hotels are located. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. Hilton, in all cases, owns
all furniture and equipment, is responsible for repairs, maintenance, operating
expenses and lease rentals, and retains complete managerial discretion over
operations. Generally, Hilton pays a percentage rental based on the gross
revenue of the facility, but in some instances the rental is a fixed amount.

Complementing its standard full-service hotels, Hilton owns four Hilton
Suites and has an ownership interest in a fifth, with a total of 1,095 rooms,
and owns one Hilton Garden Inn and has an ownership interest in a second, with a
total of 347 rooms.

MANAGED

At February 1, 1996, Hilton managed 22 domestic hotels with no ownership
interest. Under its standard management arrangement, Hilton operates a hotel for
the benefit of its owner, which either owns or leases the hotel and the
associated personal property. Hilton's management fee is generally based on a
percentage of each hotel's gross revenue plus, in the majority of properties, an
incentive fee based on operating performance.

Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. The Company has a
right of first refusal to purchase an interest in certain managed hotels.

The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances.

FRANCHISE

Pursuant to franchises granted by the Company, franchise hotels are operated
under the Hilton, Hilton Garden Inn or Hilton Suites names. The franchise hotels
operated under the Hilton name are generally smaller than the full-service
hotels owned, leased or managed by Hilton and average approximately 250 rooms in
size. Franchise hotels bearing the Hilton Garden Inn name are approximately 90
to 250 rooms in size and utilize a modular design constructed around a courtyard
containing an indoor or outdoor swimming pool. In general, Hilton approves the
plan for, and the location of, franchise hotels and assists in their design.

On February 1, 1996, there were 164 franchise hotels operated by others, of
which 160 were operated under the Hilton name, three were operated under the
Hilton Garden Inn name and one was operated under the Hilton Suites name. In
general, franchisees pay Hilton an initial fee based on the number of rooms

15
<PAGE>
in a franchise hotel and a continuing fee based on a percentage of the
facility's room revenue. Although Hilton does not directly participate in the
management or operation of franchise hotels, it conducts periodic inspections to
ensure that Hilton's standards are maintained and renders advice with respect to
hotel operations.

The Company has continued its ongoing program of monitoring and improving
its franchise operations. The Company added six franchises to its system in
1995, while five franchise arrangements were terminated, several due to
noncompliance with the Company's standards.

INTERNATIONAL

The Company's international hotel operations are conducted through Conrad
International. At February 1, 1996, Conrad International operated six hotels
with a total of 1,804 rooms (excluding hotel-casinos) under long-term management
contracts. Two of these hotels are partially owned: the 14.7%-owned Conrad
International Dublin in Ireland and the 30%-owned Conrad International Hong
Kong. Hilton is pursuing opportunities to operate hotels throughout the world
with particular emphasis in city-center business hotels and resort hotels. It is
anticipated that these acquisitions will generally be operated pursuant to
long-term management contracts.

GAMING

NEVADA HOTEL-CASINOS

The Company's gaming operations, which are largely concentrated in Nevada,
operate primarily under the Hilton and Flamingo brand names. The Company's
wholly owned Nevada casinos are the Las Vegas Hilton, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno. The Company has a strong presence in Las Vegas, the largest gaming
market in the world with more than 29 million visitors and gross gaming revenue
of more than $5.7 billion in 1995.

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

The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1995, the Las
Vegas Hilton completed construction of the third of three new 12,600- to
15,400-square-foot Sky Villa luxury suites for premium players. The Las Vegas
Hilton also completed new VIP baccarat facilities and opened a new
6,800-square-foot luxury European Suite. The Flamingo Hilton-Las Vegas completed
an extensive expansion and renovation project, including a new 600-room tower, a
10,000-square-foot casino expansion, a new 21,000-square-foot ballroom,
remodeling of the race and sports book, new entertainment, recreation, retail
and dining facilities, exterior enhancements and guest room renovations. The
Flamingo Hilton-Laughlin upgraded its guest room bathrooms and continued its
slot machine replacement program. The Reno Hilton completed a renovation of its
casino and the registration, entertainment and retail areas of the property, and
opened a new Johnny Rockets restaurant. The Flamingo Hilton-Reno renovated its
casino and remodeled the Top of the Flamingo Hilton restaurant.

The space utilized by the Company's casinos in Nevada, in terms of
approximate square footage, is as follows: Las Vegas Hilton -- 78,000 square
feet (inclusive of 29,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 74,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 58,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 118,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 46,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).

16
<PAGE>
Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big 6, baccarat, poker, keno and slot and other coin machines. The Las
Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.

INTERNATIONAL HOTEL-CASINOS

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

In April 1995, the Company commenced operation of the 136-room Conrad
International Treasury in Brisbane, Australia. This hotel-casino features a
65,000-square-foot casino and has the exclusive right to conduct casino gaming
in Brisbane until 2005. The Company has a 19.9% ownership interest in this
property.

The Company also has a 19.9% ownership interest in the 605-room Hotel Conrad
& Jupiters Casino, which opened in 1985. This hotel-casino is located on the
Gold Coast in Queensland, Australia, and features a 70,000-square-foot casino.
This property had the exclusive right to conduct casino gaming on Queensland's
Gold Coast through 1995.

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

CASINO WINDSOR

The Company and the other two shareholders of Windsor Casino Limited ("WCL")
operate the Casino Windsor, an interim 50,000-square-foot casino in Windsor,
Ontario, Canada. The Company, through Conrad International, owns a 33.3%
interest in WCL, which operates this project for the Ontario provincial
government. The Company anticipates that the interim casino will be replaced by
a permanent facility in early 1998, which will include a hotel of approximately
400 rooms, a 75,000-square-foot casino, entertainment and meeting facilities.

Since December 1995, the Company has chartered a riverboat to the Ontario
provincial government to serve as a complementary facility for Casino Windsor.
This vessel provides an additional 25,000 square feet of casino space for the
property.

NEW ORLEANS RIVERBOAT CASINO

Since February 1994, the Company has operated a riverboat casino located
adjacent to the New Orleans Hilton Riverside & Towers. The Company currently
operates a 1,500-passenger vessel which has a 20,000-square-foot casino
featuring table games and slot machines similar to those offered at the
Company's hotel-casinos in Nevada. This vessel is wholly owned by the Company
and leased to a joint venture, of which the Company owns a 50% interest.

OTHER OPERATIONS

VACATION OWNERSHIP

The Company owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 12 vacation ownership resorts in
Florida and one in Nevada. In January 1995, HGVC commenced operation of a
200-unit vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas. In
August 1995, HGVC also commenced operation of the first phase of a 360-unit
vacation ownership resort adjacent to Sea World in Orlando, Florida.
Development, construction and certain operating costs of HGVC's projects in Las
Vegas and Orlando have been substantially funded by the Company in the form of
revolving loan facilities. HGVC is seeking new development and acquisition
opportunities in other resort locations.

DESIGN AND FURNISHING SERVICES

Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
and through its hotels division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies to hotels and
hotel-casinos. The revenue from this operation depends primarily on the number
of new hotels operated or franchised by Hilton and on refurbishing and
remodeling of existing Hilton hotels.

17
<PAGE>
COMPUTER SYSTEMS

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

RESERVATION SYSTEM

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

OWNED, LEASED AND MANAGED HOTELS

The following charts set forth the Company's owned, leased and managed
hotels.

OWNED HOTELS

At February 1, 1996, the following hotels were owned in fee and operated by
Hilton:

<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1996
- -------------------------------------------------- ------------- --------- -----------------
<S> <C> <C> <C>
Atlanta Airport Hilton & Towers 503 1960 $50,000,000
Atlanta, Georgia(1) (1989)
Palmer House Hilton 1,639 1988 --
Chicago, Illinois(2) (1925; 1945)
Flamingo Hilton-Las Vegas 3,642
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Flamingo Hilton-Laughlin 2,000 1990 --
Laughlin, Nevada (1990)
New Orleans Airport Hilton 317 1959 $32,000,000
New Orleans, Louisiana(1) (1989)
Waldorf=Astoria 1,380 1977 --
New York, New York(3) (1931)
Portland Hilton 455 1963 --
Portland, Oregon (1963)
Flamingo Hilton-Reno 604 1981 --
Reno, Nevada(4) (1978)
Reno Hilton 2,001 1992 --
Reno, Nevada (1978)
Hilton Garden Inn 195 1993 --
Southfield, Michigan(5) (1988)
Hilton Suites 224 1991 --
Auburn Hills, Michigan (1991)
Hilton Suites 203 1989 --
Brentwood, Tennessee (1989)
</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1996
- -------------------------------------------------- ------------- --------- -----------------
<S> <C> <C> <C>
Hilton Suites 230 1989 --
Orange, California (1989)
Hilton Suites 226 1990 --
Phoenix, Arizona (1990)
</TABLE>

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

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

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

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

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

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

LEASED HOTELS

At February 1, 1996, the following hotels were leased and operated by
Hilton:

<TABLE>
<CAPTION>
NUMBER OF
ROOMS (YEAR OF
INITIAL COMPLETION;
YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
- -------------------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
Logan Airport Hilton 516 2014, with renewal options aggregating 25 years
Boston, Massachusetts(1) (1959; 1988) under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 363 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30 years
Pittsburgh, Pennsylvania (1959; 1959)
San Diego Hilton Beach & Tennis Resort 357 2019
San Diego, California (1962; 1965)
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30 years
Seattle, Washington (1961; 1961)
Tarrytown Hilton 236 2003, with renewal options aggregating 40 years
Tarrytown, New York(3) (1961; 1993)
</TABLE>

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

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

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

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

19
<PAGE>
MANAGED HOTELS

At February 1, 1996, the following hotels were operated by Hilton under
management agreements:

<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
DOMESTIC
Anaheim Hilton & Towers 1,576 2014, with renewal options aggregating 30 years,
Anaheim, California(1) (1984) subject to certain termination rights
Anchorage Hilton 591 2006, with renewal options aggregating 20 years
Anchorage, Alaska (various dates
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10 years
Atlanta, Georgia (1976)
Beverly Hilton 581 2007, with renewal options aggregating 20 years,
Beverly Hills, California (1955; 1967) subject to certain termination rights
Chicago Hilton & Towers 1,543 2005, with renewal options aggregating 20 years
Chicago, Illinois(2) (various dates
through 1986)
Tamarron Hilton Resort 294 2015, subject to certain termination rights
Durango, Colorado (1975)
Brunswick Hilton & Towers 405 2013, subject to certain termination rights
East Brunswick, New Jersey(1) (1989)
Hilton Hawaiian Village 2,542 1997, with renewal options aggregating 20 years
Honolulu, Hawaii(3) (various dates
through 1988)
Long Beach Hilton 393 2012, with renewal options aggregating 20 years,
Long Beach, California (1992) subject to certain termination rights
Los Angeles Airport Hilton & Towers 1,234 1999, with renewal options aggregating 10 years,
Los Angeles, California (1983) subject to certain termination rights
McLean Hilton 458 2007, with renewal options aggregating 20 years
McLean, Virginia(2) (1987)
Fontainebleau Hilton Resort & Towers 1,206 1998, with a renewal option for 10 years, subject
Miami, Florida (1954) to certain termination rights
Miami Airport Hilton & Towers 500 2004, with renewal options aggregating 20 years
Miami, Florida(2) (1983)
Minneapolis Hilton & Towers 814 2012, with renewal options aggregating 20 years,
Minneapolis, Minnesota (1992) subject to certain termination rights
Newark Airport Hilton 374 2003
Newark, New Jersey (1988)
New Orleans Hilton Riverside & Towers 1,600 2007, with a renewal option for 10 years
New Orleans, Louisiana(4) (1977; 1983)
Millenium Hilton 561 2004, with a renewal option for 10 years, subject
New York, New York (1992) to certain termination rights
New York Hilton & Towers 2,041 (5)
New York, New York(3) (1963)
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
Turtle Bay Hilton Golf & Tennis Resort 485 2004, with a renewal option for 10 years
Oahu, Hawaii (1972)
Hilton at Walt Disney World 814 2003, with renewal options aggregating 20 years,
Orlando, Florida(1) (1983) subject to certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10 years, subject
Pasadena, California (1970) to certain termination rights
The Pointe Hilton Resort on 636 2012, with renewal options aggregating 20 years,
South Mountain (1986) subject to certain termination rights
Phoenix, Arizona
The Pointe Hilton Resort at Squaw Peak 563 2012, with renewal options aggregating 20 years,
Phoenix, Arizona (1977) subject to certain termination rights
The Pointe Hilton Resort at 585 2012, with renewal options aggregating 20 years,
Tapatio Cliffs (1982) subject to certain termination rights
Phoenix, Arizona
Rye Town Hilton 438 (5)
Rye Brook, New York(3) (1973; 1978)
Hilton Palacio del Rio 481 1998, with a renewal option for 10 years
San Antonio, Texas (1968)
San Antonio Airport Hilton 387 2001, subject to certain termination rights
San Antonio, Texas(1) (1982)
San Francisco Hilton & Towers 1,895 2005, with a renewal option for 10 years
San Francisco, California(3) (various dates
through 1988)
Hilton at Short Hills 300 2000, with a renewal option for 5 years, subject
Short Hills, New Jersey (1988) to certain termination rights
Innisbrook Hilton Resort 873 2013, subject to certain termination rights
Tarpon Springs, Florida(1) (1972)
Hilton Waikoloa Village 1,238 2013, subject to certain termination rights
Waikoloa, Hawaii(2) (1988)
Capital Hilton 543 2005, with a renewal option for 10 years
Washington, D.C.(3) (1943; 1985)
Washington Hilton & Towers 1,123 (5)
Washington, D.C.(3) (1965)
Hilton Suites 212 2009, with renewal options aggregating 20 years
Oakbrook Terrace, Illinois(1)(3) (1989)
Hilton Garden Inn 152 2012, subject to certain termination rights
Valencia, California(2) (1991)

INTERNATIONAL
Conrad International Barcelona 412 2007, with a renewal option for 5 years
Barcelona, Spain(1) (1992)
Conrad International Treasury 136 2010
Brisbane, Australia(2) (1995)
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- -------------------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
Conrad International Brussels 269 2013, with renewal options aggregating 20 years
Brussels, Belgium (1993)
Conrad International Dublin 191 2010, with renewal options aggregating 20 years
Dublin, Ireland(1)(2) (1989)
Conrad International Hong Kong 513 2021
Hong Kong(2) (1990)
Conrad International Hurghada 260 2015, with renewal options aggregating 20 years,
Hurghada, Egypt (1994) subject to certain termination rights
Conrad International Istanbul 620 2011, with a renewal option for 20 years
Istanbul, Turkey(1)(2) (1992)
Conrad International London 159 2016, with renewal options aggregating 20 years
London, England (1990)
Hotel Conrad & Jupiters Casino 605 2010
Gold Coast, (1986)
Queensland, Australia(2)
</TABLE>

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

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

(2) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 48 and 49 in the Annual
Report.

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

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

(5) The management agreements with respect to each of the referenced properties
expired on December 31, 1995, but Hilton continues to manage each of the
properties for the fees specified in the expired agreements.

ENVIRONMENTAL MATTERS

The Company, like others in its industry, is subject to various federal,
state, local and, in some cases, foreign laws, ordinances and regulations that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous or toxic wastes, or (ii) may impose liability for the
costs of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous or toxic substances or wastes
(together, "Environmental Laws").

The Company endeavors to maintain compliance with Environmental Laws, but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including uncertainty whether a
Company facility in fact shipped any wastes to one such site, the number of
potentially responsible parties at such sites and, where available, the volume
and type of waste sent to each such site, the Company believes that any
liability arising from such disposals under Environmental Laws would not have a
material adverse effect on its results of operation or financial condition.

22
<PAGE>
REGULATION AND LICENSING

Under provisions of Nevada, Louisiana and New Jersey and other gaming laws,
and the Company's certificate of incorporation, certain securities of the
Company are subject to restrictions on ownership which may be imposed by
specified governmental authorities. Such restrictions may require the holder to
dispose of the securities or, if the holder refuses to make such disposition,
the Company may be obligated to repurchase the securities.

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

The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) to provide a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations. The
Company is required to be registered by the Gaming Commission as a publicly
traded corporation ("Registered Corporation") and as such, it is required
periodically to submit detailed financial and operating reports to the Gaming
Commission and furnish any other information that the Gaming Commission may
require.

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

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

23
<PAGE>
normally made by securities analysts for informational purposes and not to cause
a change in its management, policies or operations; and (iii) such other
activities as the Gaming Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation. Barron Hilton, the
Company's largest stockholder, has been found suitable as a controlling
stockholder of the Company.

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

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

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

The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. On September 28, 1995, the Gaming
Commission granted the Company prior approval to make public offerings for a
period of one year, subject to certain conditions (the "Shelf Approval").
However, the Shelf Approval may be rescinded for good cause without prior notice
upon the issuance of an interlocutory stop order by the Chairman of the Control
Board. This Offering is made pursuant to such Shelf Approval. The Shelf Approval
does not constitute a finding, recommendation or approval by the Gaming
Commission or the Control Board as to the accuracy or adequacy of the Prospectus
or the investment merits of the securities offered. Any representation to the
contrary is unlawful.

24
<PAGE>
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.

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

LOUISIANA GAMING LAWS. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). As of May 1, 1996, gaming
activities will be regulated by the Louisiana Gaming Control Board (the
"Board"). The Board is responsible for investigating the background of all
applicants seeking a riverboat gaming license, issuing the license and enforcing
the laws, rules and regulations relating to riverboat gaming activities.

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

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

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

25
<PAGE>
On April 19, 1996, the Louisiana legislature approved legislation mandating
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual types of gaming. The referendum
will be brought before the Louisiana voters at the time of the 1996 presidential
election and will determine whether each of the following types of gaming will
be prohibited or permitted in the following described Louisiana parishes: (i)
the operation of video draw poker devices in each parish; (ii) the conduct of
riverboat gaming in each parish that is contiguous to a statutorily designated
river or waterway or (iii) the conduct of land-based casino gaming operations in
Orleans Parish. If a majority of the voters in a parish elect to prohibit one or
more of the above-described gaming activities in such parish, then no license or
permit shall be issued to conduct such prohibited gaming activity in such parish
and no such gaming activity may be permitted in that parish. If, however,
riverboat gaming was previously permitted in such parish, the legislation
permits the current gaming operator to continue riverboat gaming in that parish
until the expiration of its gaming license. The Company's current riverboat
gaming license expires on February 10, 1999. Further, in parishes where
riverboat gaming is currently authorized and voters elect to prohibit riverboat
gaming, the legislation provides that the gaming license shall not be reissued
or transferred to any parish other than a parish in which a riverboat upon which
gaming is conducted is berthed. The current legislation, however, does not
provide for any moratorium on future local elections on gaming. Further, the
current legislation does not provide for any moratorium that must expire before
future local elections on gaming could be mandated or allowed.

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

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

For a more complete description of the various applicable gaming regulatory
requirements under the Nevada, Louisiana and New Jersey Gaming Laws, see
"Additional Information -- Regulation and Licensing" in the Form 10-K.

MISSOURI GAMING LAWS. In 1993, Missouri enacted the Missouri Gaming Law
(the "MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for the licensing and regulation of riverboat gaming in Missouri.
The number of licenses which may be granted is not specifically limited by
statute or regulation but may be subject to limitations imposed by the MGC. The
MGL grants specific powers and duties to the MGC to supervise riverboat gaming
and implement the MGL and take any other action as may be reasonable or
appropriate to enforce the MGL. The MGC may approve permanently moored
("dockside") riverboat casinos subject to specific criteria that includes the
economic interest of Missouri and the safety of the general public.

Under the MGL, the ownership and operation of riverboat gaming facilities in
Missouri are subject to extensive state and local regulation. If a company is
granted a gaming license in Missouri, such company, any related subsidiaries and
its officers, directors, significant shareholders and employees will be subject
to regulation. The initial license and first subsequent license renewal of an
excursion gambling boat operator generally is for a period of one year. The MGC,
however, may reopen license hearings at any time and may terminate or impose
additional regulations upon a licensee at any time during the term of a license.
In addition to the owner's license and operator's license for the riverboat,
most individuals participating in gaming operations are required to have an
occupational license from the MGC. Applicants and licensees are

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<PAGE>
responsible to keep the application and any requested materials current at all
times, and this responsibility shall continue throughout any period of licensure
granted by the MGC. In addition, Missouri has extensive licensing disclosure
requirements.

Pursuant to its rulemaking authority, the MGC has adopted certain
regulations which provide, among other things, that: (i) no gaming licensee or
occupational licensee may pledge, hypothecate or transfer in any way any
license, or any interest in a license, issued by the MGC; (ii) without first
notifying the MGC at least 60 days prior to such consummation of any of the
following transactions (and during such period the MGC may disapprove the
transaction or require the transaction to be delayed pending further
investigation) (a) a gaming licensee or a holding company affiliated with a
gaming licensee may not make a public issuance of debt, (b) a publicly held
gaming licensee or a publicly held holding company may not make any issuance of
an ownership interest equaling 5% or greater of the gaming licensee or holding
company (ownership of the Notes may constitute ownership of the Common Stock for
this purpose) or (c) a person or entity may not pledge or hypothecate an
ownership interest in a gaming licensee that is not a publicly held company or a
holding company that is not a publicly held company; provided that no such
ownership interest may be transferred voluntarily or involuntarily pursuant to
any pledge without separate notice to the MGC as required by the regulations;
(iii) not later than 7 days after the consummation of any transfer of ownership
interest in a publicly held gaming licensee, if such transfer would result in an
entity or group of entities acting in concert owning, directly or indirectly, a
total amount of ownership interest equaling 5% or greater of the ownership
interest in the gaming licensee, the transferee must report such consummation to
the MGC; (iv) no withdrawals of capital, loans, advances or distribution of any
type of assets in excess of 5% of accumulated earnings of a licensee to anyone
with an ownership interest in the licensee may occur without prior MGC approval;
and (v) the MGC may take action against a licensee or other person who has been
disciplined in another jurisdiction for gaming related activity.

DESCRIPTION OF THE NOTES

Set forth below is a summary of certain provisions of the Notes. The Notes
will be issued pursuant to an indenture (the "Indenture") to be dated as of
, 1996, by and between Hilton Hotels Corporation and The Bank of New
York, as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The terms of the
Indenture are also governed by certain provisions contained in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of the Notes and the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by, reference to all of the
provisions of the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this Prospectus and those terms made a part
of the Indenture by reference to the Trust Indenture Act as in effect on the
date of the Indenture. Capitalized terms used herein without definition have the
meanings ascribed to them in the Indenture. As used in this section "Description
of the Notes", the "Company" refers to Hilton Hotels Corporation, exclusive of
its subsidiaries. Wherever particular provisions of the Indenture are referred
to in this summary, such provisions are incorporated by reference as a part of
the statements made and such statements are qualified in their entirety by such
reference.

GENERAL

The Notes will be unsecured, subordinated, general obligations of the
Company, limited in aggregate principal amount to $ ($ if the
Underwriters' over-allotment option is exercised in full). The Notes will be
subordinated in right of payment to all Senior Indebtedness of the Company, as
described under "Subordination" below. The Notes will be issued only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.

The Notes will mature on , 2006. The Notes will bear interest at
the rate per annum stated on the cover page of this Prospectus from the date of
issuance or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually on and of
each year, commencing , 1996, to the persons in whose names such Notes
are registered at the close of business on or immediately
preceding such Interest Payment Date. Principal of,

27
<PAGE>
premium, if any, and interest on, the Notes will be payable, the Notes will be
convertible and the Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The City
of New York. Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.

At the option of the Company, payment of interest may be made by check
mailed to the Holders of the Notes at the addresses set forth upon the registry
books of the Registrar. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Until otherwise designated by the Company, the Company's office or
agency will be the corporate trust office of the Trustee presently located at
101 Barclay Street, 21 West, New York, New York 10286.

CONVERSION RIGHTS

The Holder of any Notes will have the right, at the Holder's option, to
convert any portion of the principal amount thereof that is an integral multiple
of $1,000 into shares of Common Stock which includes the related Series A Junior
Participating Preferred Stock Purchase Rights (the "Rights"), at any time prior
to the second Business Day prior to the Stated Maturity of the Notes (unless
earlier redeemed or repurchased) at the Conversion Price set forth on the cover
page of this Prospectus (subject to adjustment as described below). The right to
convert a Note called for redemption or delivered for repurchase will terminate
at the close of business on the Business Day prior to the Redemption Date or
Repurchase Date for such Note, unless the Company subsequently fails to pay the
applicable Redemption Price or Repurchase Price, as the case may be.

In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest the stated due date of
which is on such Interest Payment Date shall be payable on such Interest Payment
Date notwithstanding such conversion, and such interest shall be paid to the
Holder of such Note who is a Holder on such Record Date. Any Note so converted
must be accompanied by payment of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of Notes being surrendered
for conversion (unless such Note shall have been called for redemption, in which
case no such payment shall be required). No fractional shares will be issued
upon conversion but, in lieu thereof, an appropriate amount will be paid in cash
by the Company based on the market price of Common Stock (as determined in
accordance with the Indenture) at the close of business on the day of
conversion.

The Conversion Price will be subject to adjustment upon the occurrence of
certain events, including: (a) any payment of a dividend (or other distribution)
payable in Common Stock on any class of Capital Stock of the Company, (b) any
issuance to all holders of Common Stock of rights, options or warrants entitling
them to subscribe for or purchase Common Stock at less than the then current
market price (as determined in accordance with the Indenture) of Common Stock;
provided, however, that if such options or warrants are only exercisable upon
the occurrence of certain triggering events, then the Conversion Price will not
be adjusted until such triggering events occur, (c) any subdivision, combination
or reclassification of Common Stock, (d) any distribution to all holders of
Common Stock of evidences of indebtedness, shares of Capital Stock other than
Common Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding dividends and distributions paid exclusively in cash), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the second succeeding paragraph applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) all
other such all-cash distributions made within the then preceding 12 months in
respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its Subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 15% of the Company's market capitalization (defined as being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of a tender or exchange offer made by the Company or any of
its

28
<PAGE>
Subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and other consideration payable in a tender or
exchange offer by the Company or any of its Subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange offer in respect of which no adjustment has been made and (ii) the
aggregate amount of any such all-cash distributions referred to in (e) above to
all holders of Common Stock within the 12 months preceding the expiration of
such tender or exchange offer in respect of which no adjustments have been made,
exceeds 15% of the Company's market capitalization on the expiration of such
tender offer. No adjustment of the Conversion Price will be required to be made
until the cumulative adjustments amount to 1.0% or more of the Conversion Price
as last adjusted. The Company reserves the right to make such reductions in the
Conversion Price in addition to those required in the foregoing provisions as it
considers to be advisable. In the event the Company elects to make such a
reduction in the conversion price, the Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder if and to the extent that such laws and regulations are
applicable in connection with the reduction of the Conversion Price.

In the event that the Company distributes rights or warrants (other than
those referred to in (b) in the preceding paragraph) PRO RATA to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Holder of any Note surrendered for conversion will
be entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
rights or warrants to be determined as follows: (i) if such conversion occurs on
or prior to the date for the distribution to the holders of rights or warrants
of separate certificates evidencing such rights or warrants (the "Distribution
Date"), the same number of rights or warrants to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and provisions of and
applicable to the rights or warrants, and (ii) if such conversion occurs after
such Distribution Date, the same number of rights or warrants to which a holder
of the number of shares of Common Stock into which such Note was convertible
immediately prior to such Distribution Date would have been entitled on such
Distribution Date in accordance with the terms and provisions of and applicable
to the rights or warrants. The conversion price of the Notes will not be subject
to adjustment on account of any declaration, distribution or exercise of such
rights or warrants.

In case of any reclassification, consolidation or merger of the Company with
or into another person or any merger of another person with or into the Company
(with certain exceptions), or in case of any sale, transfer or conveyance of all
or substantially all of the assets of the Company (computed on a consolidated
basis), each Note then outstanding will, without the consent of any Holder of
Notes, become convertible only into the kind and amount of securities, cash and
other property receivable upon such reclassification, consolidation, merger,
sale, transfer or conveyance by a holder of the number of shares of Common Stock
into which such Note was convertible immediately prior thereto, after giving
effect to any adjustment event, who failed to exercise any rights of election
and received per share the kind and amount received per share by a plurality of
non-electing shares.

SUBORDINATION

The Notes will be general, unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. At December 31, 1995, as adjusted to give effect to the issuance
and sale of the Notes and the application of the net proceeds therefrom, the
Company would have had approximately $1.1 billion of Senior Indebtedness
outstanding. The Notes are structurally subordinated in right of payment to all
liabilities (including trade payables) of the Company's Subsidiaries. The
Company's Subsidiaries had approximately $160.1 million of trade payables and
accrued liabilities outstanding at December 31, 1995. The Indenture will not
restrict the incurrence of Senior Indebtedness or other indebtedness by the
Company or its Subsidiaries.

The Indenture will provide that no payment may be made by the Company on
account of the principal of, premium, if any, and interest on the Notes, or to
acquire any of the Notes (including repurchases of Notes at the option of the
Holder) for cash or property (other than Junior Securities), or on account of
the

29
<PAGE>
redemption provisions of the Notes, (i) upon the maturity of any Senior
Indebtedness of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on
such Senior Indebtedness are first paid in full (or such payment is duly
provided for), or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on any Senior Indebtedness of the Company when
it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise (a "Payment Default"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist.

Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Senior Indebtedness or their representative
immediately to accelerate its maturity and (ii) written notice of such event of
default given to the Company and the Trustee by the holders of an aggregate of
at least $50,000,000 principal amount outstanding of such Senior Indebtedness or
their representative (a "Payment Notice"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
(by setoff or otherwise) may be made by or on behalf of the Company on account
of the principal of, premium, if any, interest on the Notes, or to acquire or
repurchase any of the Notes for cash or property, or on account of the
redemption provisions of the Notes, in any such case other than payments made
with Junior Securities of the Company. Notwithstanding the foregoing, unless (i)
the Senior Indebtedness in respect of which such event of default exists has
been declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii)
such declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Notes during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Notes. Any
number of Payment Notices may be given; PROVIDED, HOWEVER, that (i) not more
than one Payment Notice shall be given within a period of any 360 consecutive
days, and (ii) no default that existed upon the date of such Payment Notice or
the commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Senior Indebtedness) shall be made the basis for
the commencement of any other Payment Blockage Period.

In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.

Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshalling of
assets or liabilities, (i) the holders of all Senior Indebtedness of the Company
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, interest on, with respect to, the Notes
(other than Junior Securities) and (ii) any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on behalf of
the Holders would be entitled (by setoff or otherwise), except for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company or
their representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.

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<PAGE>
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Notes. The subordination
provisions of the Indenture and the Notes will not prevent the occurrence of any
Default or Event of Default under the Indenture or limit the rights of the
Trustee or any Holder, subject to the two preceding previous paragraphs, to
pursue any other rights or remedies with respect to the Notes.

The Company conducts certain of its operations through its Subsidiaries.
Accordingly, the Company's ability to meet its cash obligations is dependent
upon the ability of its Subsidiaries to make cash distributions to the Company.
The ability of its Subsidiaries to make distributions to the Company is and will
continue to be restricted by, among other limitations, applicable provisions of
the laws of national and state governments and contractual provisions. The
Indenture will not limit the ability of the Company's Subsidiaries to incur such
restrictions in the future. The right of the Company to participate in the
assets of any Subsidiary (and thus the ability of Holders of the Notes to
benefit indirectly from such assets) is generally subject to the prior claims of
creditors, including trade creditors, of that Subsidiary except to the extent
that the Company is recognized as a creditor of such Subsidiary, in which case
the Company's claims would still be subject to any security interest of other
creditors of such Subsidiary. The Notes, therefore, will be structurally
subordinated to creditors, including trade creditors, of Subsidiaries of the
Company with respect to the assets of the Subsidiaries against which such
creditors have a claim.

As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshalling of assets or liabilities of the Company
and its Subsidiaries, Holders of the Notes may receive ratably less than other
creditors.

REDEMPTION AT THE COMPANY'S OPTION

The Notes will not be subject to redemption prior to , 1999.
Thereafter, the Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 1999 upon not less than 30 nor
more than 60 days notice to each Holder of Notes, at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
12-month period commencing of the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
2000.......................................................... %
2001.......................................................... %
2002.......................................................... %
2003 and thereafter........................................... 100.00%
</TABLE>

in each case (subject to the right of Holders of record on a Record Date to
receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest, if any, to the
Redemption Date.

In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption by lot or in such other manner it deems
appropriate and fair. The Notes may be redeemed in part in multiples of $1,000
only.

The Notes will not have the benefit of any sinking fund.

Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the Holder
of each Note to be redeemed to such Holder's last address as then shown upon the
registry books of the Registrar. The notice of redemption must state the
Redemption Date, the Redemption Price and the amount of accrued interest to be
paid. Any notice that relates to a Note to be redeemed in part only must state
the portion of the principal amount to be redeemed and must state that on and
after the Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued. On and
after the Redemption Date, interest will cease to accrue on the Notes or
portions thereof called for redemption, unless the Company defaults in its
obligations with respect thereto.

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<PAGE>
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS

The Indenture will provide that each Holder, by accepting any of the Notes,
shall be deemed to have agreed that if the gaming authority of any jurisdiction
of which the Company or any of its subsidiaries conducts or proposes to conduct
gaming requires that a person who is a Holder must be licensed, qualified or
found suitable under applicable gaming laws, such Holder shall apply for a
license, qualification or a finding of suitability within the required time
period. If such person fails to apply or become licensed or qualified or is
found unsuitable, the Company shall have the right, at its option, (i) to
require such person to dispose of its Notes or beneficial interest therein
within 30 days of receipt of notice of the Company's election or such earlier
date as may be requested or prescribed by such gaming authority or (ii) to
redeem such Notes at a redemption price equal to the lesser of (A) such person's
cost or (B) 100% of the principal amount thereof, plus accrued and unpaid
interest to the earlier of the redemption date or the date of the finding of
unsuitability, which may be less than 30 days following the notice of redemption
if so requested or prescribed by the applicable gaming authority. The Company
shall notify the Trustee in writing of any such redemption as soon as
practicable. The Company shall not be responsible for any costs or expenses any
such Holder may incur in connection with its application for a license,
qualification or a finding of suitability.

REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL

The Indenture will provide that in the event that a Change of Control (as
defined) has occurred, each Holder of Notes will have the right, at such
Holder's option, pursuant to an irrevocable and unconditional offer by the
Company (the "Repurchase Offer"), to require the Company to repurchase all or
any part of such Holder's Notes (PROVIDED, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 40 Business Days after the occurrence
of such Change of Control at a cash price (the "Repurchase Price") equal to 100%
of the principal amount thereof, together with accrued and unpaid interest to
the Repurchase Date. The Repurchase Offer shall be made within 15 Business Days
following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Repurchase Offer Period"). Upon expiration of
the Repurchase Offer Period, the Company shall purchase all Notes tendered in
response to the Repurchase Offer. If required by applicable law, the Repurchase
Date and the Repurchase Offer Period may be extended as so required; however, if
so extended, it shall nevertheless constitute an Event of Default if the
Repurchase Date does not occur within 60 Business Days of the Change of Control.

The Indenture will provide that a "Change of Control" occurs upon the
occurrence of a Rating Decline in connection with any of the following events;
(i) upon any merger or consolidation of the Company with or into any person or
any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after giving
effect to such transaction, any "person" or "group" is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any "person" or "group" is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate
normally entitled to vote in the election of directors of the Company, (iii)
when, during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office, (iv) a sale or disposition, whether directly or indirectly, by the
Company of all or substantially all of the assets relating to the Hotel Segment
or the Gaming Segment (as segment is used in Regulation S-K and Regulation S-X
under the Securities Act), or (v) the PRO RATA distribution by the Company to
its stockholders of the Hotel Segment or the Gaming Segment.

For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange Act
as in effect on the Issue Date, whether or not applicable; and (ii) the term
"beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5 under

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<PAGE>
the Exchange Act as in effect on the Issue Date, whether or not applicable,
except that a "person" shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time or upon the occurrence
of certain events.

On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted, together with an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to the Holders of Notes so accepted payment in an
amount equal to the Repurchase Price (together with accrued and unpaid
interest), and the Trustee will promptly authenticate and mail or deliver to
such Holders a new Note or Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date.

The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time, and
will be dependent on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of "all or substantially all" of the assets of the Company, or the
Gaming Segment or the Hotel Segment has occurred.

The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Underwriters.

The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control, as set forth above. In addition, the Company may not have sufficient
financial resources available to fulfill its obligation to repurchase the Notes
upon a Change of Control or to repurchase other debt securities of the Company
or its Subsidiaries providing similar rights to the Holders thereof.

To the extent applicable, the Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other securities laws, rules and
regulations that may then be applicable to any offer by the Company to purchase
the Notes at the option of Holders upon a Change of Control.

LIMITATION ON MERGER, SALE OR CONSOLIDATION

The Indenture will provide that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another person or group of affiliated persons, unless (i) either (a) in the case
of a merger or consolidation, the Company is the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; (ii) no Default or Event
of Default shall exist or shall occur immediately after giving effect on a PRO
FORMA basis to such transaction; and (iii) the resulting, surviving or
transferee entity holds all gaming licenses necessary to conduct the business of
such resulting, surviving or transferee entity.

Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor

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corporation had been named therein as the Company, and the Company will be
released from its obligations under the Indenture and the Notes, except as to
any obligations that arise from or as a result of such transaction.

REPORTS

Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the SEC if the Company was subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
SEC and, in each case, together with a management's discussion and analysis of
results of operations and financial condition as such would be so required.

EVENTS OF DEFAULT AND REMEDIES

The Indenture will define an Event of Default as (i) the failure by the
Company to pay any installment of interest on the Notes as and when due and
payable and the continuance of any such failure for 30 days, (ii) the failure by
the Company to pay all or any part of the principal of, or premium, if any, on
the Notes when and as the same become due and payable at maturity, redemption,
by acceleration or otherwise, including, without limitation, pursuant to any
Repurchase Offer or otherwise, (iii) the failure of the Company to perform any
conversion of Notes required under the Indenture and the continuance of any such
failure for 30 days, (iv) the failure by the Company to observe or perform any
other covenant or agreement contained in the Notes or the Indenture and, subject
to certain exceptions, the continuance of such failure for a period of 60 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes outstanding, (v) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Subsidiaries,
(vi) a default in the payment of principal, premium or interest when due that
extends beyond any stated period of grace applicable thereto or an acceleration
for any other reason of the maturity of any Indebtedness of the Company or any
of its Subsidiaries with an aggregate principal amount in excess of $50.0
million, and (vii) final unsatisfied judgments not covered by insurance
aggregating in excess of $50.0 million, at any one time rendered against the
Company or any of its Subsidiaries and not stayed, bonded or discharged within
30 days. The Indenture will provide that if a Default occurs and is continuing,
the Trustee must, within 90 days after the occurrence of such default, give to
the Holders notice of such default.

The Indenture will provide that if an Event of Default occurs and is
continuing (other than an Event of Default specified in clause (v) above), then
in every such case, unless the principal of all of the Notes shall have already
become due and payable, either the Trustee or the Holders of 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal and accrued interest thereon to be due and payable
immediately. If an Event of Default specified in clause (v) above occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the nonpayment of the principal
of, premium, if any, and interest on, the Notes that have become due solely by
such acceleration, have been cured or waived.

Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a default
in the payment of principal of, premium, if any, or interest on any Note not yet
cured, or a default with respect to any covenant or provision that cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers

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under the Indenture at the request, order or direction of any of the Holders,
unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee.

AMENDMENTS AND SUPPLEMENTS

The Indenture will contain provisions permitting the Company and the Trustee
to enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; PROVIDED,
FURTHER, that no such modification may, without the consent of each Holder
affected thereby: (i) change the Stated Maturity of any Note or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment or the conversion of any Note on or
after the due date thereof (including, in the case of redemption, on or after
the Redemption Date), or reduce the Repurchase Price, or alter the change of
control provisions or redemption provisions in a manner adverse to the Holders,
(ii) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, (iii) adversely affect the
right of such Holder to convert Notes, or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.

NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES

The Indenture will provide that no stockholder, employee, officer or
director, as such, past, present or future of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the Notes by reason of his, her or its status
as such stockholder, employee, officer or director.

TRANSFER AND EXCHANGE

A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Notes selected for redemption. Also, the Company is not
required to transfer or exchange any Notes for a period of 15 days before a
selection of Notes to be redeemed.

The registered Holder of a Note may be treated as the owner of it for all
purposes.

BOOK-ENTRY, DELIVERY AND FORM

Except as set forth below, the Notes will initially be issued in the form of
one or more registered Notes in global form (the "Global Notes"). Each Global
Note will be deposited on the date of the closing of the sale of the Notes (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of

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<PAGE>
its Direct Participants and by the NYSE, the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the SEC.

The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Underwriters with an interest in the
Global Note and (ii) ownership of the Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own and that security interests in negotiable instruments
can only be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes evidenced by the Global Note will be
limited to such extent.

So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
a Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge such interest to persons or entities that
do not participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.

Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.

Payments with respect to the principal of, premium, if any, interest on, any
Note represented by a Global Note registered in the name of the Depositary or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if any
or interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interests in the Global Note as shown on the
records of the Depositary. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.

CERTIFICATED NOTES

If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Notes, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by Global
Notes. In addition, subject to certain conditions, any person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon any
such issuance, the Trustee is required to register such Certificated Notes in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.

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<PAGE>
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).

The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company will have no responsibility for the
performance by the Depositary or its Participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.

SAME-DAY FUNDS SETTLEMENT AND PAYMENT

The Indenture will require that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
Depositary. With respect to Notes represented by Certificated Notes, the Company
will make all payments of principal, premium, if any, and interest, by mailing a
check to each such Holder's registered address. The Notes will trade in the
Depositary's Same-Day Funds Settlement System until maturity, or until the Notes
are issued in certificated form, and secondary market trading activity in the
Notes will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Notes.

CERTAIN DEFINITIONS

"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law or executive order to
close.

"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.

"INDEBTEDNESS" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities of others of the kind described in the
preceding clauses (a) or (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or acquire
any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of any liability of the
kind described in any of the preceding clauses (a), (b) or (c), or this clause
(d), whether or not between or among the same parties.

"ISSUE DATE" means the date of first issuance of the Notes under the
Indenture.

"JUNIOR SECURITIES" of any person means any Qualified Capital Stock and any
Indebtedness of such person that is subordinated in right of payment to the
Notes and has no scheduled installment of principal due, by redemption, sinking
fund payment or otherwise, on or prior to the Stated Maturity of the Notes.

"RATING DECLINE" means the occurrence on or within 90 days after the date of
the first public notice of (i) the occurrence of a Change of Control or (ii) the
intention by the Company to effect a Change of Control, (which 90-day period
shall be extended so long as the rating of Senior Indebtedness of the Company is
under publicly announced consideration for possible downgrade by any of (x)
Moody's Investors Service, Inc. ("Moody's"), (y) Standard & Poor's Corporation
("S&P") or (z) Duff & Phelps ("D&P")), of a decrease in

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the rating of Senior Indebtedness of the Company by any of Moody's, S&P or D&P
to a rating that is below "Investment Grade." Investment Grade means a rating in
the top four rating categories by Moody's, S&P, D&P or any other nationally
recognized securities rating agency or agencies, as the case may be, selected by
the Company.

"SENIOR INDEBTEDNESS OF THE COMPANY" means any Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior in right of payment to the Notes or to
other Indebtedness which is PARI PASSU with, or subordinated to, the Notes;
PROVIDED that in no event shall Senior Indebtedness include (a) Indebtedness of
the Company owed or owing to any Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness to trade creditors or (c) any liability for taxes owed or owing by
the Company.

"STATED MATURITY" when used with respect to any Note means ,
2006.

"SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the SEC as in effect as of the date of the Indenture.

"SUBSIDIARY," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.

DESCRIPTION OF CAPITAL STOCK

GENERAL. As of December 31, 1995, the Company was authorized to issue 90.0
million shares of Common Stock, par value $2.50 per share, of which 51.0 million
shares were issued, including Treasury Shares of 2.7 million, and 10.0 million
shares of preferred stock, par value $1.00 per share (the "Preferred Stock"), of
which no shares have been issued.

COMMON STOCK

Each share of Common Stock entitles the holder to one vote on matters
submitted to a vote of the stockholders, and, subject to the prior preferences
of the Company's Preferred Stock, if issued, a PRO RATA share of assets
remaining available for distribution to stockholders upon a liquidation of the
Company. Dividends may be paid to the holders of the Common Stock when and if
declared by the Board of Directors of the Company out of funds legally available
therefor. The Company has paid cash dividends on its Common Stock. Any further
determination to pay cash dividends will be at the discretion of the Company's
Board of Directors and will depend upon the earnings of the Company, its
financial condition, capital requirements and other factors as the Company's
Board of Directors may deem relevant. The Common Stock is not convertible and
has no preemptive rights. There are no redemption provisions with respect to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock issuable upon conversion of the Notes will be, fully paid and
non-assessable.

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PREFERRED STOCK

The Company's Certificate of Incorporation provides that Preferred Stock may
be issued from time-to-time in one or more series. The Company's Board of
Directors has authority to fix or alter the dividend rights, dividends rates,
conversion rights, voting rights and terms of redemption (including sinking fund
provisions), redemption prices, and liquidation preferences of any wholly
unissued series of Preferred Stock, as well as the number of shares constituting
any such unissued series and the designation thereof, and to increase or
decrease the number of shares of any outstanding series (but not below the
number of shares of such series then outstanding), without any further vote or
action by the Company's stockholders.

PREFERRED STOCK RIGHTS AGREEMENT

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

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

If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Common Stock
having a market value of twice the Right's exercise price.

Following the acquisition by a person or group of beneficial ownership of
30% or more of the Common Stock and prior to an acquisition of 50% or more of
the Common Stock, Hilton's Board of Directors may exchange the Rights (other
than Rights owned by such person or group), in whole or in part, at an exchange
ratio of one share of Common Stock (or one one-hundredth of a share of the new
series of junior participating preferred stock) per Right.

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

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

DELAWARE GENERAL CORPORATION LAW SECTION 203

As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law, which
restricts certain business combinations between the Company and an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) or such stockholder's affiliates or associates for a
period of three years following the date on which the stockholder becomes an
"interested stockholder." The restrictions do not apply if (i) prior to an
interested stockholder becoming such, the Board of Directors approves either the
business combination or the transaction in which the stockholder becomes an
interested stockholder, (ii) upon consummation of the transaction in which such
stockholder becomes an interested stockholder, such interested stockholder owns
at least 85% of the voting stock of the Company outstanding at the time the
transaction commenced (excluding shares owned by certain employee stock
ownership plans and persons who are both directors and officers of the Company),
or (iii) on or subsequent to the date an interested stockholder becomes such,
the business combination is both approved by the Board of Directors and

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<PAGE>
authorized at an annual or special meeting of the Company's stockholders (and
not by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Under the Company's Certificate of Incorporation, upon consummation of the
Offering (and the ultimate conversion of the Notes into shares of Common
Stock) there will be shares of Common Stock authorized but unissued,
and 10,000,000 shares of Preferred Stock authorized but unissued, for future
issuance without additional stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future offerings to
raise additional capital or to facilitate corporate acquisitions.

The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock.

One of the effects of the existence of unissued Common Stock or preferred
stock may be to enable the Company's Board of Directors to issue shares to
persons friendly to current management which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Company.

The Company does not currently have any plans to issue additional shares of
Common Stock or Preferred Stock other than shares of Common Stock which may be
issued upon the exercise of options which have been granted or which may be
granted in the future to directors, officers and employees of the Company. In
connection with the Offering, shares of Series A Preferred Stock will
be reserved for issuance pursuant to the Rights Plan. See "-- Preferred Stock
Rights Agreement."

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for the Common Stock is Chemical Mellon
Shareholder Services LLC.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of certain United States Federal
income tax considerations relevant to holders of the Notes. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in the Offering and hold the Notes as
a "capital asset" within the meaning of Section 1221 of the Code.

PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK

CONVERSION OF NOTES INTO COMMON STOCK

In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Notes into shares of Common Stock. However, cash paid in lieu
of a fractional share of Common Stock will result in taxable gain (or loss),
which will be capital gain (or loss) to the extent that the amount of such cash
exceeds (or is exceeded by) the portion of the adjusted basis of the Note
allocable to such fractional share. The adjusted basis of shares of Common Stock
received on conversion will equal the adjusted basis of the Note converted,
reduced by the portion of adjusted basis allocated to any fractional share of
Common Stock exchanged for cash. The holding period of an investor in the Common
Stock received on conversion will include the period during which the converted
Notes were held.

The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Rights." Section 305 of
the Code and the Treasury Regulations issued thereunder may treat the holders of
the Notes as having received a constructive distribution, resulting in ordinary
income to the extent of the Company's current earnings and profits if and to the
extent that certain adjustments in the conversion price that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock) increase the proportionate interest of a holder of
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege. Moreover, if there is not a full adjustment
to the conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Common Stock
in the assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the Common Stock generally will be
treated as a distribution to such holders, taxable as ordinary income to the
extent of the Company's earnings and profits.

MARKET DISCOUNT

Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Note purchases it at market discount (i.e., at a price
below its stated redemption price at maturity) in excess of a
statutorily-defined DE MINIMIS amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a ratable basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount on
a Note may be taxable to an investor to the extent of appreciation at the time
of certain otherwise non-taxable transactions (e.g., gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, should (under Treasury Regulations not yet issued) carry over to the
Common Stock received on conversion and be treated as ordinary income upon a
subsequent disposition of such Common Stock to the extent of any gain recognized
on such disposition. In addition, absent an election to include market discount
in income as it accrues, a holder of a market discount debt instrument may be
required to

41
<PAGE>
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction.

SALE, EXCHANGE OR RETIREMENT OF NOTES

Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement, or other disposition of those
Notes measured by the difference (if any) between (i) the amount of cash and the
fair market value of any property received (except to the extent that such cash
or other property is attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary income)
and (ii) the holder's adjusted tax basis in those Notes (including any market
discount previously included in income by the holder). Each holder of Common
Stock into which the Notes are converted, in general, will recognize gain or
loss upon the sale, exchange, or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the Notes.
Any such gain or loss recognized on the sale, exchange, repurchase, retirement,
or other disposition of a Note or share of Common Stock should be capital gain
or loss (except as discussed under "-- Market Discount" above), and would be
long-term capital gain or loss if the Note or the Common Stock had been held for
more than one year at the time of the sale or exchange. An investor's initial
basis in a Note will be the cash price paid therefor.

BACKUP WITHHOLDING

A holder of Notes or Common Stock may be subject to "back-up withholding" at
a rate of 31% with respect to certain "reportable payments," including interest
payments, dividend payments and, under certain circumstances, principal payments
on the Notes. These back-up withholding rules apply if the holder, among other
things, (i) fails to furnish a social security number or other taxpayer
identification number ("TIN") certified under penalties of perjury within a
reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) fails to report properly interest or dividends, or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such holder is
not subject to back-up withholding. A holder who does not provide the Company
with its correct TIN also may be subject to penalties imposed by the IRS. Any
amount withheld from a payment to a holder under the back-up withholding rules
is creditable against the holder's federal income tax liability, provided the
required information is furnished to the IRS. Back-up withholding will not
apply, however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemption from back-up withholding is properly established.

The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

GENERAL. The following is a general discussion of certain United States
Federal income and estate tax consequences of the acquisition, ownership and
disposition of Notes by a "Non-United States Holder" and does not deal with tax
consequences arising under the laws of any foreign, state, or local
jurisdiction. As used herein, a "Non-United States Holder" is a person or entity
that, for United States Federal income tax purposes, is not a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized under the laws of the United States or a political
subdivision thereof, or an estate or trust, the income of which is subject to
United States Federal income taxation regardless of its source. The tax
treatment of the holders of the Notes may vary depending upon their particular
situations. Certain holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. Prospective investors who are Non-United
States Holders are urged to consult their tax advisors regarding the United
States Federal tax consequences of acquiring, holding and disposing of Notes, as
well as any tax consequences that may arise under the laws of any foreign,
state, local or other taxing jurisdiction.

42
<PAGE>
INTEREST ON NOTES. Interest paid by the Company to a Non-United States
Holder will not be subject to United States Federal income or withholding tax if
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-United States Holder and (i) the
Non-United States Holder does not actually or constructively own 10% or more of
the total voting power of all voting stock of the Company and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code and (ii) the beneficial owner of the
Notes certifies, under penalties of perjury, that the beneficial owner is not a
United States person and provides the beneficial owner's name and address.

GAIN ON DISPOSITION OF NOTES. Subject to the discussion below concerning
gain on disposition of Common Stock of "USRPHCs" as defined below, a Non-United
States Holder will generally not be subject to United States Federal income tax
on gain recognized on a sale, redemption or other disposition of a Note unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder, (ii) in the case of a
Non-United States Holder who is a nonresident alien individual and holds the
Note as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year and certain other requirements are met. For
purposes of applying the exclusion from "FIRPTA tax" (as defined below) for the
holders of less than 5% of the Company's Common Stock, a holder of a Note will
be treated as owning the Common Stock into which the Notes are convertible.

DIVIDENDS ON COMMON STOCK. Dividends paid on shares of Common Stock, except
as described below, will be subject to withholding of United States Federal
income tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty, unless the dividends are effectively connected with the
conduct of a trade or business of the Non-United States Holder within the United
States. If the dividend is effectively connected with the conduct of a trade or
business of the Non-United States Holder within the United States, the dividend
would be subject to United States Federal income tax on a net income basis at
applicable graduated individual or corporate rates and would be exempt from the
30% withholding tax described above. Any such effectively connected dividends
received by a foreign corporation may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Under current United States Treasury Regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above, and, under the current
interpretation of United States Treasury Regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury Regulations, not currently in effect, however, a Non-United States
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy applicable certification and other
requirements. Certain certification and disclosure requirements must be complied
with in order to be exempt from withholding under the effectively connected
income exemption discussed above.

A Non-United States Holder of Common Stock that is eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the United States IRS.

GAIN ON DISPOSITION OF COMMON STOCK. A Non-United States Holder generally
will not be subject to United States Federal income tax on any gain recognized
on a disposition of a share of Common Stock unless (i) subject to the exception
discussed below, the Company is or has been a "United States real property
holding corporation" (a "USRPHC") within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such Non-United States Holder's holding period (the "Required
Holding Period"), (ii) the gain is effectively connected with the conduct of a
trade or business within the United States of the Non-United States Holder and,
if a tax treaty applies, attributable to a permanent establishment maintained by
the Non-United States Holder, or (iii) the Non-United States Holder is an
individual who holds the share of Common Stock as a capital asset and is present
in the United States for 183 days or more in the taxable year of the disposition
and certain other requirements are met. If an individual Non-United States
Holder falls under clause (ii) above, he or she will be taxed on his or her net
gain derived from the sale under regular United States Federal income tax rates.
If

43
<PAGE>
the individual Non-United States Holder falls under clause ( iii ) above, he or
she will be subject to a flat 30% tax on the gain derived from the sale which
may be offset by United States capital losses (notwithstanding the fact that he
or she is not considered a resident of the United States). If a Non-United
States Holder that is a foreign corporation falls under clause (ii) above, it
will be taxed on its gain under regular graduated United States Federal income
tax rates and, in addition, will under certain circumstances be subject to the
branch profits tax.

A corporation is generally a USRPHC if the fair market value of its United
States real property interests equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used
or held for use in a trade or business. While not free from doubt, the Company
believes that it currently is a USRPHC. However, a Non-United States Holder
would generally not be subject to tax or withholding in respect of such tax on
gain from a sale or other disposition of Common Stock by reason of the Company's
USRPHC status if the Common Stock is regularly traded on an established
securities market ("regularly traded") during the calendar year in which such
sale or disposition occurs provided that such holder does not own, actually or
constructively, Common Stock with a fair market value in excess of 5% of the
fair market value of all Common Stock outstanding at any time during the
Required Holding Period. The Company believes that the Common Stock will be
treated as regularly traded.

If the Company is or has been a USRPHC within the Required Holding Period,
and if a Non-United States Holder owns in excess of 5% of the fair market value
of Common Stock (as described in the preceding paragraph), such Non-United
States Holder of Common Stock will be subject to United States Federal income
tax at regular graduated rates under certain rules ("FIRPTA tax") on gain
recognized on a sale or other disposition of such Common Stock. In addition, a
Non-United States Holder (without regard to its ownership percentage) is subject
to withholding in respect of FIRPTA tax at a rate of 10% of the amount realized
on a sale or other disposition of Common Stock in USRPHCs and will be further
subject to FIRPTA tax in excess of the amounts withheld. Any amount withheld
pursuant to such withholding tax will be creditable against such Non-United
States Holder's United States Federal income tax liability. Non-United States
Holders are urged to consult their tax advisors concerning the potential
applicability of these provisions.

FEDERAL ESTATE TAXES. If interest on the Notes is exempt from withholding
of United States Federal income tax under the rules described above, the Notes
will not be included in the estate of a deceased non-resident alien individual
holder for United States Federal estate tax purposes. Common Stock owned, or
treated as owned, by a non-resident alien individual (as specifically determined
for United States Federal estate tax purposes) at the time of death will be
included in such holder's gross estate for United States Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING. The Company must report
annually to the IRS and to each Non-United States Holder the amount of interest
and dividends paid to such holder and the amount of any tax withheld. These
information reporting requirements apply regardless of whether withholding is
required. Copies of the information returns reporting such interest and
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-United States Holder resides under the provisions
of an applicable income tax treaty.

In the case of payments of interest to Non-United States Holders, temporary
Treasury Regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company nor
its payment agent has actual knowledge that the holder is a United States person
or that the conditions of any other exemption are not in fact satisfied. Under
temporary Treasury Regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Notes by or through a United
States office of a United States or foreign broker, unless the holder certifies
to the broker under penalties of perjury as to its name, address and status as a
foreign person or the holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a

44
<PAGE>
foreign office of a United States broker or foreign brokers with certain types
of relationships to the United States. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the Notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.

United States backup withholding tax generally will not apply to (a) the
payment of dividends paid on Common Stock to a Non-United States Holder at an
address outside the United States or (b) the payment of the proceeds of the sale
of Common Stock to or through the foreign office of a broker. In the case of the
payment of proceeds from such a sale of Common Stock through a foreign office of
a broker that is a United States person or a foreign person with certain
relationships to the United States, however, information reporting (but not
backup withholding) is required with respect to the payment unless the broker
has documentary evidence in its files that the owner is a Non-United States
Holder and certain other requirements are met or the holder otherwise
establishes an exemption. The payment of the proceeds of a sale of shares of
Common Stock to or through a United States office of a broker is subject to
information reporting and possible backup withholding unless the owner certifies
its non-United States status under penalties of perjury or otherwise establishes
an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the IRS.

These information and backup withholding rules are under review by the
United States Treasury and their application to the Notes could be changed by
future regulations. On April 15, 1996, the IRS issued proposed Treasury
Regulations concerning the withholding of tax and reporting for certain amounts
paid to non-resident individuals and foreign corporations. The proposed
regulations would, among other changes, eliminate the presumption under current
regulations with respect to dividends paid to addresses outside the United
States. See "Dividends on Common Stock." The proposed Treasury Regulations, if
adopted in their present form, would be effective for payments made after
December 31, 1997. Prospective Note purchasers should consult their tax advisors
concerning the potential adoption of such Treasury Regulations and the potential
effect on the Notes and Common Stock.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") the Underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Montgomery Securities, Salomon Brothers Inc ("Salomon Brothers") and
Schroder Wertheim & Co. Incorporated ("Schroder") are acting as representatives
(the "Representatives"), have severally agreed to purchase from the Company and
the Company has agreed to sell to each of the Underwriters, the respective
principal amounts of Notes set forth opposite its name below, at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount:

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ------------------------------------------------------------------------------ --------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation..................................................... $
Montgomery Securities.........................................................
Salomon Brothers Inc .........................................................
Schroder Wertheim & Co. Incorporated..........................................
--------------
$ 500,000,000
--------------
--------------
</TABLE>

45
<PAGE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent including
the delivery of certain legal opinions by its counsel. The Company has agreed in
the Underwriting Agreement to indemnify the Underwriters and their controlling
persons against certain liabilities in connection with the offer and sale of the
Notes, including liabilities under the Securities Act, and to contribute to
payments that the Underwriters may be required to make in respect thereof. The
nature of the Underwriters' obligations is such that the Underwriters are
committed to purchase all of the Notes if any of the Notes are purchased by
them.

The Representatives have advised the Company that the Underwriters propose
to offer the Notes directly to the public initially at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
offering price less a concession not to exceed % of the principal amount of
the Notes. The Underwriters may reallow discounts not in excess of % of the
principal amount of the Notes to certain other dealers. After the initial public
offering of the Notes, the offering price and other selling terms may be changed
by the Underwriters.

Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days, to purchase an additional $75.0
million aggregate principal amount of Notes, on the same terms and conditions as
are set forth on the cover page hereof. The Underwriters may exercise such
option to purchase additional Notes solely for the purpose of covering
over-allotments, if any, made in connection with the sale of the Notes offered
hereby. To the extent that the Underwriters exercise such option, the
Underwriters will be committed, subject to certain conditions, to purchase the
principal amounts of Notes proportionate to such Underwriter's initial
commitments as indicated in the preceding table.

Application has been made to list the Notes and the Common Stock on the
NYSE. Nevertheless, the Notes are new issues of securities, have no established
trading market and may not be widely distributed. The Company has been advised
by the Underwriters that, following the completion of this Offering, the
Underwriters presently intend to make a market in the Notes as permitted by
applicable laws and regulations. The Underwriters, however, are under no
obligation to do so and may discontinue any market-making activities at any time
at the sole discretion of the Underwriters. No assurance can be given as to the
liquidity of any trading market for the Notes.

DLJ, Salomon Brothers and Schroder have provided certain investment banking
services to the Company for which they have received usual and customary fees.

Directors and certain officers and stockholders of the Company, who
collectively are the beneficial owners of an aggregate of 12,334,800 shares of
Common Stock as of March 15, 1996, have agreed with the Underwriters, subject to
certain exceptions, not to, directly or indirectly, offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, without the prior
written consent of DLJ, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for, or warrants, options or rights to
purchase or acquire, Common Stock or in any other manner transfer all or a
portion of the economic consequences associated with the ownership of any Common
Stock, or enter into any agreement to do any of the foregoing, for a period of
90 days after the date of this Prospectus.

LEGAL MATTERS

Certain legal matters relating to the issuance and sale of the Notes and the
validity of the Common Stock issuable upon conversion of the Notes will be
passed upon for the Company by Latham & Watkins, Los Angeles, California.
Certain legal matters relating to the offering will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California.

EXPERTS

The consolidated financial statements and schedules included (incorporated
by reference) in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.

46
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Summary Historical Financial Data.............. 6
Use of Proceeds................................ 8
Price Range of Common Stock.................... 8
Dividend Policy................................ 8
Capitalization................................. 9
Selected Financial Data........................ 10
Business....................................... 12
Regulation and Licensing....................... 23
Description of the Notes....................... 27
Description of Capital Stock................... 38
Certain Federal Income Tax Considerations...... 41
Underwriting................................... 45
Legal Matters.................................. 46
Experts........................................ 46
</TABLE>

$500,000,000

[LOGO]

% CONVERTIBLE SUBORDINATED NOTES
DUE 2006

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

PROSPECTUS

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

DONALDSON, LUFKIN & JENRETTE
Securities Corporation

MONTGOMERY SECURITIES

SALOMON BROTHERS INC

SCHRODER WERTHEIM & CO.

MAY , 1996

ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.

Set forth below is an estimate of the fees and expenses, other than
underwriting discounts and commissions, payable or reimbursable by the Company
in connection with the issuance and distribution of the Notes.

<TABLE>
<S> <C>
SEC registration fee.............................. $175,862(1)
Fees and expenses of the Trustee.................. 25,000
Printing and engraving expenses................... 250,000
Rating agency fees................................ 20,000
Legal fees and expenses........................... 150,000
Blue Sky fees and expenses........................ 20,000
Accounting fees and expenses...................... 80,000
Miscellaneous..................................... 79,138
--------
$800,000
--------
--------
</TABLE>

- ------------------------
(1) The aggregate registration fee for this offering is $198,276, $22,414 of
which has previously been paid in connection with a registration statement
on Form S-3 (33-35951). Accordingly, pursuant to Rule 429, the actual amount
to be paid to the SEC in connection with the issuance and distribution of
the Notes is set forth above.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law, Article XI of Hilton's
Restated Certificate of Incorporation, as amended, and Paragraph 35 of Hilton's
By-Laws as amended, authorize and empower Hilton to indemnify its directors,
officers, employees and agents, and agreements with each of Hilton's directors
and executive officers provide for indemnification against liabilities incurred
in connection with, and related expenses resulting from, any claim, action or
suit brought against any such person as a result of such person's relationship
with Hilton, provided that such persons acted in accordance with a stated
standard of conduct in connection with the acts or events on which such claim,
action or suit is based. The finding of either civil or criminal liability on
the part of such persons in connection with such acts or events is not
necessarily determinative of the question of whether such persons have met the
required standard of conduct and are, accordingly, entitled to be indemnified.

Hilton has purchased for the benefit of its officers and directors and those
of certain subsidiaries insurance policies whereby the insurance companies
agree, among other things, that in the event any such officer or director
becomes legally obligated to make a payment (including legal fees and expenses)
in connection with an alleged wrongful act, such insurance companies will pay
Hilton up to $100,000,000. Wrongful act means any breach of duty, neglect,
error, misstatement, misleading statement or other act done by an officer or
director of Hilton or any subsidiary.

Reference is made to Section 6 of the form of Underwriting Agreement to be
filed as an exhibit hereto, for provisions regarding indenmnification of Hilton
and its officers, directors and controlling persons against certain liabilities.

II-1
<PAGE>
ITEM 16 EXHIBITS.

This Registration Statement includes the following exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- --------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
**4.1 Form of Indenture dated as of May , 1996 between
Hilton and The Bank of New York, as Trustee.
**4.2 Form of Note (included in Exhibit 4.1).
5.1 Opinion of Latham & Watkins as to the legality of
the securities being registered.
**8 Opinion of Latham & Watkins regarding certain tax
matters with respect to the securities being
registered.
**12 Computation of Ratios of Earnings to Fixed
Charges.
23.1 Consent of Latham & Watkins (included in Exhibits
5.1 and 8).
23.2 Consent of Arthur Andersen LLP.
**24 Powers of Attorney of certain directors and
officers of the Company.
25 Statement of Eligibility of Trustee on Form T-1.
</TABLE>

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

** Previously filed.

ITEM 17. UNDERTAKINGS.

(b) Hilton hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, as amended (the "Securities Act"), each filing
of Hilton's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(h) Certain arrangements indemnifying the Company and officers, directors
and controlling persons of the Company are set forth in the Prospectus and in
Item 15 above. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

(i) Hilton hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Hilton pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements on Form S-3 and has duly caused this Registration Statement be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Beverly Hills, State of California on May 7, 1996.

HILTON HOTELS CORPORATION
(Registrant)

By: ROBERT M. LA FORGIA

-----------------------------------
Robert M. La Forgia
VICE PRESIDENT AND CORPORATE
COMPTROLLER

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on May 7, 1996.

<TABLE>
<S> <C>
* *
- ------------------------------------------- -------------------------------------------
Raymond C. Avansino, Jr. Robert L. Johnson
Director Director

* *
- ------------------------------------------- -------------------------------------------
Stephen F. Bollenbach Donald R. Knab
President and Chief Executive Officer Director
(Chief Executive Officer)

* *
- ------------------------------------------- -------------------------------------------
A. Steven Crown Steve Krithis
Director Senior Vice President--Finance
(Chief Financial and Accounting Officer)

* *
- ------------------------------------------- -------------------------------------------
Gregory R. Dillon Benjamin V. Lambert
Director Director

* *
- ------------------------------------------- -------------------------------------------
Barron Hilton Donna F. Tuttle
Chairman of the Board Director

* *
- ------------------------------------------- -------------------------------------------
Eric M. Hilton Sam D. Young, Jr.
Director Director

* *By: ROBERT M. LA FORGIA
- ------------------------------------------- ------------------------------------------
Dieter H. Huckestein Robert M. La Forgia
Director Attorney-in-Fact
</TABLE>

II-3
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED
NUMBER DESCRIPTION PAGE
- -------- -------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement....................
**4.1 Form of Indenture dated as of May , 1996 between
Hilton and The Bank of New York, as Trustee......
**4.2 Form of Note (included in Exhibit 4.1)............
5.1 Opinion of Latham & Watkins as to the legality of
the securities being registered..................
**8 Opinion of Latham & Watkins regarding certain tax
matters with respect to the securities being
registered.......................................
**12 Computation of Ratios of Earnings to Fixed
Charges.
23.1 Consent of Latham & Watkins (included in Exhibits
5.1 and 8).......................................
23.2 Consent of Arthur Andersen LLP....................
**24 Powers of Attorney of certain directors and
officers of the Company.
25 Statement of Eligibility of Trustee on Form T-1...
</TABLE>

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

** Previously filed.

<PAGE>

HILTON HOTELS CORPORATION

__% Convertible Subordinated Notes
Due 2006

UNDERWRITING AGREEMENT

May __, 1996

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO.
INCORPORATED
As representatives of the
several underwriters named in
Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172

Ladies and Gentlemen:

Subject to the terms and conditions herein contained, Hilton Hotels
Corporation, a Delaware corporation (the "Company"), proposes to issue and sell
to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Montgomery
Securities, Salomon Brothers Inc and Schroder Wertheim & Co. Incorporated (the
"Representatives") and the several underwriters listed on Schedule I hereto
(collectively with the Representatives, the "Underwriters") an aggregate of
$500,000,000 principal amount of its ___% Convertible Subordinated Notes due
2006 (the "Firm Securities"). The Company also proposes to sell to the
Underwriters not more than $75,000,000 aggregate principal amount of additional
__% Convertible Subordinated Notes due 2006, of the Company (the "Additional
Securities" and, together with the Firm Securities, the "Securities"), if
requested by the Underwriters as provided in Sections 2 and 3 hereof. The
Securities are to be issued pursuant to the provisions of an Indenture to be
dated as of May __, 1996, by and between

<PAGE>

the Company and the Bank of New York, as Trustee (the "Trustee") (the
"Indenture"), pursuant to which the Securities will be convertible at the option
of the holders thereof, into shares of the Company's common stock, par value
$2.50 per share (the "Common Stock").

1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission promulgated pursuant
thereto (collectively, the "Act"), a registration statement on Form S-3 (No.
333-02321), with respect to the Securities including the Common Stock issuable
upon conversion thereof, including a preliminary prospectus, subject to
completion, relating to the Securities including the Common Stock issuable upon
conversion thereof. The registration statement, as amended at the time it
becomes effective or, if a post-effective amendment is filed with respect
thereto, as amended by such post-effective amendment at the time of its
effectiveness (including in each case all documents incorporated or deemed
incorporated by reference therein, if any, all financial statements and
exhibits, and the information, if any, contained in a prospectus or term sheet
subsequently filed with the Commission pursuant to Rule 424(b) under the Act and
deemed to be a part of the registration statement at the time of its
effectiveness pursuant to Rule 430A or Rule 434 under the Act (as applicable),
and any additional registration statement relating to the issuance of additional
Securities filed pursuant to Rule 462(b) under the Act, is hereinafter referred
to as the "Registration Statement"; and the prospectus, constituting a part of
the Registration Statement at the time it became effective, or such revised
prospectus as shall be provided to the Underwriters for use in connection with
the offering of the Securities including the Common Stock issuable upon
conversion thereof that differs from the prospectus on file with the Commission
at the time the Registration Statement became effective including, in each case,
all documents incorporated or deemed incorporated by reference therein, if any,
and including any prospectus subject to completion and any term sheet meeting
the requirements of Rule 434(c), filed pursuant to Rule 424(b), in the form used
to confirm sales of the Securities, whether or not filed

2
<PAGE>

with the Commission pursuant to Rule 424(b) under the Act, is hereinafter
referred to as the "Prospectus."

2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and each Underwriter
agrees, severally and not jointly, to purchase from the Company, the Firm
Securities in the respective amounts set forth opposite their names on Schedule
I hereto, plus such amount as they may individually become obligated to purchase
pursuant to Section 8 hereof, at a purchase price equal to ___% of the principal
amount thereof (the "Purchase Price").

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell to the Underwriters, and the Underwriters shall have a right to
purchase, severally and not jointly, up to all of the Additional Securities
from the Company at the Purchase Price. Additional Securities may be purchased,
from time to time, as provided in Section 3 hereof solely for the purpose of
covering over-allotments made in connection with the offering of the Firm
Securities. Each Underwriter, severally and not jointly, agrees to purchase the
principal amount of Additional Securities (subject to such adjustment to
eliminate partial Securities as the Representatives may determine) which bears
the same proportion to the total principal amount of Additional Securities to be
purchased as the principal amount of Firm Securities set forth opposite the name
of such Underwriter in Schedule I hereto bears to the total principal amount of
Firm Securities.

The Company hereby agrees, and, concurrently with the execution of
this Agreement, shall deliver an agreement executed by (i) each of the Company's
directors, officers and stockholders listed on Schedule II hereto, pursuant to
which each such person agrees, not to, directly or indirectly, offer, sell,
contract to sell, grant any warrant, right, or option to purchase or sell or
otherwise dispose of (whether directly or synthetically), without the prior
written consent of DLJ, any shares of Common Stock owned by such person or with
respect to which such person has the power of disposition, or any securities
convertible into or exercisable

3
<PAGE>

or exchangeable for, or warrants, options, or rights to purchase or acquire,
Common Stock owned by such person or with respect to which such person has the
power of disposition, or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any Common Stock, or
enter into any agreement to do any of the foregoing or file a registration
statement with respect to any of the foregoing (whether directly or
synthetically), for a period of 90 days after the date of the Prospectus, except
pursuant to this Agreement.

3. DELIVERY AND PAYMENT. Delivery to the Underwriters of and
payment for the Firm Securities shall be made at 10:00 A.M., New York City time,
on the third or fourth business day, unless otherwise permitted by the
Commission pursuant to Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended, including the rules and regulations thereunder (collectively, the
"Exchange Act") (such time and date being referred to as the "Closing Date"),
following the date of the initial public offering of the Firm Securities
including the Common Stock issuable upon conversion thereof as advised by you to
the Company, at the Office of the DLJ at 277 Park Avenue, New York, New York
10172, or such other place as you shall reasonably designate. The Closing Date
and the location of delivery of, and the form of payment for, the Securities may
be varied by agreement between the Representatives and the Company.

Delivery to the Underwriters of and payment for any Additional
Securities to be purchased by the Underwriters shall be made at such place as
DLJ shall designate, from time to time, at 10:00 A.M., New York City time, on
such date or dates (each, an "Option Closing Date"), which may be the same as
the Closing Date but shall in no event be earlier than the Closing Date, as
shall be specified in a written notice from DLJ to the Company of the
Underwriters' determination to purchase a certain principal amount, specified in
said notice, of Additional Securities. Such notice may be given at any time and
from time to time not later than 30 days after the date of this Agreement,
PROVIDED that no Option Closing Date shall be earlier than two business days
nor later than ten business days after such notice. Any Option Closing Date and
the location of delivery of and payment for any Additional Securities may be
varied by agreement between you and the Company.

4
<PAGE>

The Securities in definitive form shall be registered in such names
and issued in such denominations as you shall request in writing not later than
two full business days prior to the Closing Date, or, if applicable, each Option
Closing Date, and shall be made available to you at the offices of DLJ (or at
such other place as shall be acceptable to you) for inspection not later than
10:00 A.M., New York City time, on the business day next preceding the Closing
Date or, if applicable, such Option Closing Date. The Securities shall be
delivered to you on the Closing Date or, if applicable, such Option Closing
Date, with any transfer taxes payable upon initial issuance thereof duly paid by
the Company, for your account against payment of the Purchase Price in currently
available funds to the order of the Company.

4. AGREEMENTS OF THE COMPANY. The Company agrees with each of
you that:

(a) It will, if the Registration Statement has not heretofore
become effective under the Act, and if otherwise necessary or required by law,
file an amendment to the Registration Statement or, if necessary pursuant to
Rule 430A of the Act, a post-effective amendment to the Registration Statement,
in each case as soon as practicable after the execution and delivery of this
Agreement, and it will use its best efforts to cause the Registration Statement
or such post-effective amendment to become effective at the earliest possible
time. If the Registration Statement has become effective and the Company,
omitting from the Prospectus certain information in reliance upon Rule 430A of
the Act, elects not to file a post-effective amendment pursuant to Rule 430A of
the Act, it will file the form of Prospectus required by Rule 424(b) of the Act
within the time period specified by Rule 430A and Rule 424(b) of the Act. The
Company will comply fully and in a timely manner with the applicable provisions
of Rule 424 and Rule 430A, and if applicable, Rule 462, of the Act.

(b) It will advise you promptly and, if requested by any of
you, confirm such advice in writing, (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing pursuant to Rule
424 of the Act and when any post-effective amendment to the Registration
Statement becomes effective, (ii) of the receipt of any comments from the
Commission or any

5
<PAGE>

state securities commission or any other regulatory authority that relate to the
Registration Statement or requests by the Commission or any state securities
commission or any other regulatory authority for any amendment or supplement to
the Registration Statement or any amendment or supplements to the Prospectus or
for additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Securities, including the Common Stock
issuable upon conversion thereof, for offering or sale in any jurisdiction, or
the initiation of any proceeding for such purpose by the Commission or any state
securities commission or any other regulatory authority and (iv) of the
happening of any event during the period referred to in paragraph (d), below,
which makes any statement of a material fact made in the Registration Statement
untrue or which requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not misleading or
that makes any statement of a material fact made in the Prospectus untrue or
which requires the making of any addition to or change in the Prospectus in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company shall use every reasonable effort to obtain the withdrawal or lifting of
such order at the earliest possible time.

(c) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period in your reasonable
judgment as a prospectus is required to be delivered in connection with sales of
the Securities by an Underwriter or a dealer, it will furnish to each
Underwriter and each dealer, without charge, as many copies of the Prospectus
(and of any amendment or supplement to the Prospectus) as you may reasonably
request for the purposes contemplated by the Act and the Exchange Act.

(d) If during such period as in your judgment you are
required to deliver a prospectus in connection with offers or sales of the
Securities including the Common Stock issuable upon conversion thereof by you
any event shall occur as a result of which it becomes

6
<PAGE>

necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing as of the date the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with applicable law, it will
promptly prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not, in the light of the circumstances existing as
of the date the Prospectus is so delivered, be misleading, and will comply with
applicable law, and will furnish to you without charge such number of copies
thereof as you may reasonably request.

(e) It will make generally available to its security holders,
as soon as reasonably practicable and for the time period specified by Rule 158
under the Act, a consolidated earnings statement which shall satisfy the
provisions of Section 11(a) and Rule 158 of the Act and to advise you in writing
when such statement has been made available.

(f) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, it will pay and be responsible for
all costs, charges, liabilities, expenses, fees and taxes incurred in connection
with or incident to (i) the printing, filing, distribution and delivery under
the Act or the Exchange Act of the Registration Statement (including financial
statements and exhibits), each preliminary prospectus, the Prospectus and all
amendments and supplements thereto, (ii) the registration with the Commission
and the issuance and delivery of the Securities, including the Common Stock
issuable upon conversion thereof, (iii) the preparation, printing, execution,
distribution and delivery of this Agreement, the Indenture, any memoranda
describing state securities or Blue Sky Laws and all other agreements,
memoranda, reports, correspondence and other documents printed, distributed and
delivered in connection with the offering of the Securities including the Common
Stock issuable upon conversion thereof, (iv) the registration or qualification
of the Securities including the Common Stock issuable upon conversion thereof,
for offer and sale under the securities or Blue Sky laws of the jurisdictions
referred to in paragraph (i), below (including, in each case, the fees and dis-

<PAGE>

bursements of counsel relating to such registration or qualification and
memoranda relating thereto and any filing fees in connection therewith), (v)
furnishing such copies of the Registration Statement (including exhibits),
Prospectus and preliminary prospectuses, and all amendments and supplements to
any of them, including any document incorporated by reference therein, as may be
requested by the Underwriters or by dealers, (vi) the listing of the Securities
including the Common Stock issuable upon conversion thereof, if any, on the New
York Stock Exchange and the Pacific Stock Exchange, (vii) the rating of the
Securities by investment rating agencies, (viii) any "qualified independent
underwriter" as required by Schedule E of the Bylaws of the National Association
of Securities Dealers, Inc. (the "NASD")(including fees and disbursements of
counsel for such qualified independent underwriter) (if required) and (ix) the
performance by the Company of its other obligations under this Agreement,
including (without limitation) the fees of the Trustee, the cost of its
personnel and other internal costs, the cost of printing and engraving the
certificates representing the Securities and any shares of Common Stock issuable
upon conversion of the Securities, and all expenses and taxes incident to the
sale and delivery of the Securities to the Underwriters.

(g) It will furnish to each of the Representatives, without
charge, two (2) signed copies (plus one additional signed copy to your legal
counsel) of the Registration Statement as first filed with the Commission and of
each amendment or supplement to it, including each post-effective amendment and
all exhibits filed therewith, and will furnish to each of the Representatives
such number of conformed copies of the Registration Statement as so filed and of
each amendment to it, including each post-effective amendment, but without
exhibits, as you may reasonably request.

(h) It will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus, of which you
shall not previously have been advised and provided a copy within a reasonable
period of time prior to the filing thereof or to which you shall reasonably
object in writing; and it will prepare and file with the Commission, promptly
upon your reasonable request, any amend-

<PAGE>

ment or supplement to the Registration Statement or amendment or supplement to
the Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and will use its best efforts to cause
any amendment to the Registration Statement to become effective as promptly as
possible.

(i) Prior to any public offering of the Securities, it will
cooperate with you and your counsel in connection with the registration or
qualification of the Securities for offer and sale by the Underwriters under the
state securities or Blue Sky laws of such jurisdictions as you may request. The
Company will continue such qualification in effect so long as required by law
for distribution of the Securities and will file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification (PROVIDED that the Company shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which it is
not so qualified nor to take any action that would subject it to general consent
to service of process in any jurisdiction in which it is not now so subject).

(j) It will timely complete all required filings and
otherwise fully comply in a timely manner with all provisions of the Exchange
Act to effect the registration of the Securities pursuant thereto, and will file
promptly all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in connection with
the offer or sale of Securities.

(k) It will cause the Securities to be listed on the New York
Stock Exchange (the "NYSE") and will use its best efforts to maintain such
listing while any of the Securities are outstanding.

(l) It will cause the Common Stock issuable upon conversion
of the Securities to be listed on the NYSE and will use its best efforts to
maintain such listing while any of the Common Stock is outstanding.

<PAGE>

(m) So long as any of the Securities are outstanding, it will
mail to each of the Underwriters, without charge, a copy of each report or such
other publicly available information furnished to holders of the Securities, or
filed with the Commission, whether or not required by law or pursuant to the
Indenture, and such other publicly available information concerning the Company
and its subsidiaries as you may reasonably request, at the same time as such
reports or other information are furnished to such holders.

(n) During the period beginning on the date of this Agreement
and continuing to and including the later of the Closing Date or the last Option
Closing Date, if any, to occur, there shall not have been any transactions
entered into by the Company or any of its subsidiaries, which are material with
respect to the Company and its subsidiaries, taken individually or as a whole,
other than those undertaken in the ordinary course of business, and, except for
regular dividends declared and paid consistently with past practices, there
shall not have been any dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock.

(o) It will not voluntarily claim, and will actively resist
any attempts to claim, the benefit of any usury laws against the holders of the
Securities.

(p) It will use the proceeds from the sale of the Securities
in the manner described in the Prospectus under the caption "Use of Proceeds."

(q) During the period referred to in paragraph (n), it will
not offer, sell, contract to sell or otherwise dispose of any debt securities of
the Company or warrants, rights, or options to purchase debt securities of the
Company (other than (i) the Securities and (ii) commercial paper issued in the
ordinary course of business), without your prior written consent.

(r) It will use its reasonable best efforts to do and perform
all things required to be done and performed under this Agreement by it prior to
or after the Closing Date and each Option Closing Date, as the case may be, and
to satisfy all conditions precedent on its part to the delivery of the
Securities.

<PAGE>

5. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to each Underwriter that:

(a) When the Registration Statement becomes effective,
including on the date of any post-effective amendment, at the date of the
Prospectus (if different), at the Closing Date and at each Option Closing Date,
as the case may be, the Registration Statement will comply in all material
respects with the provisions of the Act, and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; the
Prospectus and each supplement or amendment thereto will not at the date of the
Prospectus, at the date of any such supplement or amendment, at the Closing Date
and at each Option Closing Date, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements in or
omissions from the Registration Statement or the Prospectus (or any supplement
or amendment to them) made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by or on behalf
of any Underwriter through DLJ expressly for use therein or the Form T-1. The
Company acknowledges for all purposes under this Agreement (including this
paragraph and Section 6 hereof) that the statements with respect to price and
discount and the last paragraph on the cover page of the Prospectus and the
statements set forth in the third paragraph and the third and fourth sentence of
the fifth paragraph under the caption "Underwriting" in the Prospectus
constitute the only written information furnished to the Company by or on behalf
of any Underwriter through DLJ expressly for use in the Registration Statement,
the preliminary prospectus, or the Prospectus (or any amendment or supplement to
any of them) pertaining to any arrangement or agreement with respect to any
party other than the Underwriters, and that the Underwriters shall not be deemed
to have provided any other information (and therefore are not responsible for
any statements or omissions). When the Registration Statement becomes
effective, including at the date of any post-effective amendment, at the date of
the Prospectus and any amendment or

<PAGE>

supplement thereto (if different), at the Closing Date and at each Option
Closing Date, as the case may be, the Indenture will have been qualified under
and will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended, and the rules and regulations promulgated
pursuant thereto (collectively, the "TIA"). No contract or document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement has not
been described and filed as required.

(b) Incorporated Documents. The documents incorporated by
reference into the Prospectus, at the time they were or hereafter are filed with
the Commission, complied or when so filed will comply, as the case may be, in
all material respects with the requirements of the Exchange Act, and, when read
together with the other information in the Prospectus, did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were or are made,
not misleading.

(c) Each preliminary prospectus and the Prospectus, filed as
part of the Registration Statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to Rule 424 or Rule 430A
under the Act, and each Registration Statement filed pursuant to Rule 462(b)
under the Act, if any, complied when so filed in all material respects with the
Act.

(d) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental body, agency or
official which prevents the issuance of the Securities or the Common Stock
issuable upon the conversion thereof, suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any preliminary
prospectus or suspends the sale of the Securities or the Common Stock issuable
upon the conversion thereof in any jurisdiction referred to in Section 4(i)
hereof; no injunction, restraining order, or order of any nature by any Federal
or state court has been issued with respect to the Company or any of its
subsidiaries (each, a "Subsidiary" and, collectively, the "Subsidiaries") which
would

12
<PAGE>

prevent or suspend the issuance or sale of the Securities or the Common Stock
issuable upon the conversion thereof, the effectiveness of the Registration
Statement, or the use of any preliminary prospectus or Prospectus in any
jurisdiction referred to in Section 4(i) hereof; no action, suit or proceeding
before any court or arbitrator or any governmental body, agency or official,
domestic or foreign, is pending against or, to the best of the Company's
knowledge, after due inquiry, threatened against, the Company or any of the
Subsidiaries which, if adversely determined, could interfere with or adversely
affect the issuance of the Securities or the Common Stock issuable upon the
conversion thereof or in any manner draw into question the validity of this
Agreement, the Indenture or the Securities or the Common Stock issuable upon the
conversion thereof; and the Company has complied with every request of the
Commission or any securities authority or agency of any jurisdiction for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) in all material respects.

(e) The Indenture has been duly authorized by the Company
and, when duly executed and delivered in accordance with its terms (assuming the
due execution and delivery thereof by the Trustee), will be a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that a waiver of rights under any usury laws may be unenforceable.

(f) The Securities have been duly authorized by the Company
and, on the Closing Date and the Option Closing Date, if any, will have been
duly executed by the Company and will, when issued, executed, authenticated and
delivered in accordance with the Indenture and paid for in accordance with the
terms of this Agreement, constitute legal, valid and binding obligations of the
Company, enforceable against the Company according to their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless

13
<PAGE>

of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that a waiver of rights under any usury laws may be unenforceable,
will be entitled to the benefits of the Indenture and will conform in all
material respects to the description thereof in the Prospectus.

(g) This Agreement has been duly authorized and validly
executed and delivered by the Company and constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that indemnification from liability in connection with the Federal
securities laws may be unenforceable.

(h) The execution and delivery of this Agreement, the
Indenture and the Securities by the Company, the issuance and sale of the
Securities, the performance of this Agreement and the Indenture and the
consummation of the transactions contemplated by this Agreement and the
Indenture will not (1) conflict with or result in a breach or violation of any
of the respective charters or bylaws of the Company or any of the Significant
Subsidiaries or any of the terms or provisions of, or (2) constitute a default
or cause an acceleration of any obligation under or result in the imposition or
creation of (or the obligation to create or impose) any security interest,
mortgage, pledge, claim, lien, encumbrance or adverse interest of any nature
(each, a "Lien") with respect to, any obligation, bond, agreement, note,
debenture, or other evidence of indebtedness, or any indenture, mortgage, deed
of trust or other agreement, lease or instrument to which the Company or any of
the Significant Subsidiaries is a party or by which it or any of them is bound,
or to which any properties of the Company or any of the Subsidiaries is or may
be subject, or (3) contravene any order of any court or governmental agency,
body or official having jurisdiction over the Company or any of the Subsidiaries
or any of their properties, or violate or conflict with any statute, rule or
regulation or administrative regulation or decree or court decree applicable to
the Company or any of the

14
<PAGE>

Subsidiaries, or any of their respective assets or properties except, in the
case of clause (3) above, for such conflicts or violations which would not have
a Material Adverse Effect.

(i) No authorization, approval or consent or order of, or
filing with, any court or governmental body, agency or official is necessary in
connection with the transactions contemplated by this Agreement, including the
Nevada Gaming Commission (the "NGC"), the Nevada State Gaming Control Board
("NGCB"), the Clark County Liquor and Gaming Licensing Board ("CCLB"), the City
of Reno ("Reno"), the Louisiana Gaming Control Board ("LGCB"), the Missouri
Gaming Commission ("MGC") and the Ontario Casino Commission ("OCC"), the NGC,
NGCB, CCLB, Reno LGCB, MGC and OCC are hereinafter collectively referred to as
the "Gaming Authorities") except (i) such as may be required by the NASD or have
been obtained and made under the Act, the TIA or state securities or Blue Sky
laws or regulations and (ii) for such approval under the Nevada Control Act and
the regulations promulgated thereunder and the Louisiana Riverboat Economic
Development and Gaming Control Act (together with the Nevada Control Act, the
"Gaming Laws") which have been obtained.

(j) Neither the Company nor any of its affiliates is
presently doing business with the government of Cuba or with any person or
affiliate located in Cuba.

(k) The Securities, including the Common Stock issuable upon
the conversion thereof, have been approved for listing on the NYSE, subject to
official notice of issuance.

(l) The Company and each of the Significant Subsidiaries has
been duly organized, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the requisite power and
authority to carry on its business as it is currently being conducted, to own,
lease and operate its properties, and the Company has the requisite power and
authority to authorize the offering of the Securities, including the Common
Stock issuable upon conversion thereof, to execute, deliver and perform this
Agreement and to issue, sell and deliver the Securities, including the Common
Stock issuable upon conversion thereof, and

15
<PAGE>

each of the Company and the Significant Subsidiaries is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction where the operation, ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure so
to be qualified would not, singly or in the aggregate, have a material adverse
effect on the business, results of operations, condition (financial or
otherwise), prospects, or business affairs of the Company or the Subsidiaries,
taken as a whole (a "Material Adverse Effect").

(m) There is no action, suit, or proceeding before or by any
court or governmental agency or body, domestic or foreign, pending against or
affecting the Company or any of the Subsidiaries, or any of their respective
assets or properties, which is required to be disclosed in the Registration
Statement or the Prospectus, or which have, or which would result in, singly or
in the aggregate, a Material Adverse Effect, or which could reasonably be
expected to materially and adversely affect the Company's performance of its
obligations pursuant to this Agreement or the transactions contemplated hereby,
and to the best of the Company's knowledge, after due inquiry, no such action,
suit, or proceeding is contemplated or threatened.

(n) The firm of accountants that has certified or shall
certify the applicable consolidated financial statements and supporting
schedules and the notes thereto of the Company filed or to be filed with the
Commission as part of the Registration Statement and the Prospectus are
independent public accountants with respect to the Company and the Subsidiaries,
as required by the Act. The consolidated financial statements, together with
related schedules and notes, set forth or incorporated by reference in the
Prospectus and the Registration Statement, comply as to form in all material
respects with the requirements of the Act and fairly present the consolidated
financial position of the Company and the Subsidiaries at the respective dates
indicated and the results of their operations and their cash flows for the
respective periods indicated, in accordance with GAAP consistently applied
throughout such periods (except as may be indicated in the notes thereto).

16
<PAGE>

(o) Subsequent to the respective dates as of which
information is presented in the Registration Statement and the Prospectus and up
to the Closing Date and any Option Closing Date, (i) neither the Company nor any
of the Subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material to the Company and the Subsidiaries, taken as a
whole, nor entered into any transaction not in the ordinary course of business,
(ii) there has been no decision or judgment in the nature of litigation or
arbitration that would have, singly or in the aggregate, a Material Adverse
Effect, (iii) there has not been, singly or in the aggregate, any material
adverse change that would have a Material Adverse Effect (a "Material Adverse
Change").

(p) (i) Each of the Company and the Subsidiaries and each of
the persons listed under the caption "Summary Compensation Table" in the
Company's Proxy Statement for the 1996 Annual Meeting of stockholders (the
"Management") has all certificates, consents, exemptions, orders, permits,
licenses, authorizations, or other approvals or rights (each, an
"Authorization") of and from, and has made all declarations and filings with,
all Federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, including,
without limitation, all such Authorizations with respect to engaging in gaming
operations in the States of Nevada, Louisiana, Missouri or Ontario, Canada,
necessary or required to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Prospectus, except as
would not have, singly or in the aggregate, a Material Adverse Effect, (ii) all
such Authorizations are valid and in full force and effect, except as would not
have, singly or in the aggregate, a Material Adverse Effect, (iii) the Company
and the Subsidiaries and each of the Management are in compliance in all
material respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities and governing
bodies having jurisdiction with respect thereto and (iv) neither the Company nor
any Subsidiary nor any of the Management has received any notice of proceedings
relating to the revocation or modification of any such Authorization and no such
Authorization contains any restrictions that are materially burdensome to any of
them. Neither the Company nor any of the Subsidiaries has any reason to believe
that any

17
<PAGE>

Gaming Authorities are considering modifying, limiting, conditioning,
suspending, revoking or not renewing any such Authorizations of the Company, any
of the Subsidiaries or any of the Management or that either the Gaming
Authorities or any other governmental agencies are investigating the Company or
any of the Subsidiaries or related parties (other than normal overseeing reviews
of the Gaming Authorities incident to the gaming, riverboat or casino
activities, as the case may be, of the Company and the Subsidiaries). Neither
the Company nor any of the Subsidiaries has any reason to believe that there is
an existing basis for the Gaming Authorities to deny the renewal of the current
casino and gaming licenses held by the Company or any of the Subsidiaries, or
the Statement of Compliance held by the Company to operate in New Jersey, nor to
fail to grant the Company a riverboat owners' license to operate a dockside
casino complex in Kansas City, Missouri by any proposed commencement date of
operations thereof.

(q) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to
Section 7 hereof shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.

6. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless (i)
each of the Underwriters and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any of the
Underwriters (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person"), and (iii) the respective
officers, directors, partners, employees, representatives and agents of any of
the Underwriters or any controlling person (any person referred to in clause
(i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Person") to
the fullest extent lawful, from and against any and all losses, claims, damages,
judgments, actions and expenses (collectively, "Liabilities"), including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced

18
<PAGE>

or threatened, including the reasonable fees and expenses of counsel to any
Indemnified Person, directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
supplement or amendment thereto), or the Prospectus (including any amendment or
supplement thereto) or any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, except
insofar as such Liabilities are caused by an untrue statement or omission or
alleged untrue statement or omission that is (x) made in reliance upon and in
conformity with information relating to any of the Underwriters furnished in
writing to the Company by or on behalf of the Underwriter through DLJ expressly
for use in the Registration Statement (or any amendment or supplement thereto)
or the Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus or (y) with respect to the Underwriter from whom the person asserting
the Liabilities purchased Securities, made in any preliminary prospectus if a
copy of the Prospectus (as amended or supplemented, if the Company shall have
furnished the Underwriters with such amendments or supplements thereto on a
timely basis) was not delivered by or on behalf of such Underwriter to the
person asserting the Liabilities, if required by law to have been so delivered
by the Underwriter seeking indemnification, at or prior to the written
confirmation of the sale of the Securities, and it shall be finally determined
by a court of competent jurisdiction, in a judgment not subject to appeal or
review, that the Prospectus (as so amended or supplemented) would have corrected
such untrue statement or omission. The Company shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Company or an Indemnified Person.

(b) In case any action or proceeding (including any
governmental investigation) shall be brought or asserted against any of the
Indemnified Persons with respect to which indemnity may be sought against the
Company, such Underwriter (or the Underwriter

19
<PAGE>

controlled by such controlling person) promptly shall notify the Company in
writing; PROVIDED that the failure to give such notice shall not relieve the
Company of its obligations pursuant to this Agreement unless and only to the
extent that such omission results in the loss or compromise of any material
rights or defenses by the Company, as determined by a court of competent
jurisdiction by final judgment. Upon receiving such notice, the Company shall
be entitled to participate in any such action or proceeding and to assume, at
its sole expense, the defense thereof, with counsel reasonably satisfactory to
such Indemnified Person (who shall not, except with the consent of the
Indemnified Person, be counsel to the Company) and, after written notice from
the Company to such Indemnified Person of its election so to assume the defense
thereof within five business days after receipt of the notice from the
Indemnified Person of such action or proceeding, the Company shall not be liable
to such Indemnified Person hereunder for legal expenses of other counsel
subsequently incurred by such Indemnified Person in connection with the defense
thereof, other than costs of investigation, unless (i) the Company agrees to pay
such fees and expenses, or (ii) the Company fails promptly to assume such
defense or fails to employ counsel reasonably satisfactory to such Indemnified
Person, or (iii) the named parties to any such action or proceeding (including
any impleaded parties) include both such Indemnified Person and the Company or
an affiliate of the Company, and either (x) there may be one or more legal
defenses available to such Indemnified Person that are different from or
additional to those available to the Company or such affiliate or (y) a conflict
may exist between such Indemnified Person and the Company or such affiliate.
Upon the occurrence of any event in any of clause (ii) or (iii) of the
immediately preceding sentence, if such Indemnified Person notifies the Company
in writing, the Company shall not have the right to assume the defense thereof
and such Indemnified Person shall have the right to employ its own counsel in
any such action and the fees and expenses of such counsel shall be paid, as
incurred, by the Company, regardless of whether it is ultimately determined that
an Indemnified Party is not entitled to indemnification hereunder, it being
understood, however, that the Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations

20
<PAGE>

or circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) at any time for all such
Indemnified Persons. The Company shall be liable for any settlement of any such
action or proceeding effected with the Company's prior written consent, which
consent will not be unreasonably withheld, and the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any Liabilities by
reason of any settlement of any action effected with the written consent of the
Company. The Company agrees to be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into more
than 10 business days after receipt by the Company of the aforesaid request for
payment in respect of an indemnification obligation pursuant hereto and (ii) the
Company shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. The Company shall not, without
the prior written consent of each Indemnified Person, settle or compromise or
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, litigation or proceeding in respect of
which indemnification or contribution may be sought pursuant hereto (whether or
not any Indemnified Person is a party thereto), unless such settlement,
compromise, consent or termination includes an unconditional release of each
Indemnified Person from all Liabilities arising out of such action, claim,
litigation or proceeding.

(c) Each of the Underwriters agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement, and any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
to the same extent as the foregoing indemnity from the Company to each of the
Indemnified Persons, but only with respect to claims and actions based on
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through DLJ expressly for use in the Registration Statement,
Prospectus or preliminary prospectus, as applicable. In case any action or
proceeding (including any governmental investigation) shall be brought or
asserted against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
any preliminary

21
<PAGE>

prospectus in respect of which indemnity is sought against any Underwriter
pursuant to the foregoing sentence, the Underwriter shall have the rights and
duties given to the Company (except that if the Company shall have assumed the
defense thereof, such Underwriters shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter),
and the Company, its directors, any such officers and each such controlling
person shall have the rights and duties given to the Indemnified Person by
Section 6(b) above.

(d) If the indemnification provided for in this Section 6 is
finally determined by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any Liabilities referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other hand from the offering of the Securities or (ii),
if the allocation provided by clause (i), above, is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i), above, but also the relative fault of the
indemnifying parties and the indemnified party, as well as any other relevant
equitable considerations. The relative benefits received by the Company and its
Subsidiaries, on the one hand, and the Underwriters (and its related Indemnified
Persons), on the other hand, shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and its Subsidiaries bear
to the total underwriting discounts and commissions received by such
Underwriter, in each case as set forth in the Prospectus. The relative fault of
the Company and the Underwriter shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such

22
<PAGE>

statement or omission. The indemnity and contribution obligations of the
Company and the Subsidiaries set forth herein shall be in addition to any
liability or obligation the Company and the Subsidiaries may otherwise have to
any Indemnified Person.

The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by PRO
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the
Liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6, none of the Underwriters (and its related
Indemnified Persons) shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total underwriting discount
applicable to the Securities purchased by such Underwriter exceeds the amount of
any damages or liabilities which such Underwriter (and its related Indemnified
Persons) has otherwise been required to pay or incur by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute to
this Section 6(d) are several in proportion to the respective aggregate
principal amount of Securities purchased by each of the Underwriters hereunder
and not joint.

7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of
the several Underwriters to purchase any Securities under this Agreement are
subject to the satisfaction of each of the following conditions on the Closing
Date and, as applicable, each Option Closing Date:

(a) All the representations and warranties of the Company
contained in this Agreement shall be

23
<PAGE>

true and correct on the Closing Date and each Option Closing Date, if
applicable, with the same force and effect as if made on and as of the Closing
Date and each such Option Closing Date, if applicable, as well as the date
hereof. The Company shall have performed or complied with all obligations and
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date and such Option Closing Date, if applicable.

(b) (i) The Registration Statement shall have become
effective (or, if a post-effective amendment is required to be filed pursuant to
Rule 430A of the Act, such post-effective amendment shall have become effective
(or, if any Securities are sold in reliance upon Rule 430A of the Act and no
post-effective amendment is so required to be filed, the Prospectus shall have
been timely filed with the Commission in accordance with Section 4(a) hereof))
not later than 5:00 p.m. (and in the case of a Registration Statement filed
under 462(b) of the Act, not later than 10:00 p.m.) New York City time, on the
date of this Agreement or at such later date and time as you may approve in
writing, (ii) at the Closing Date, and each Option Closing Date, if applicable,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been commenced
or shall be pending before or contemplated by the Commission and every request
for additional information on the part of the Commission shall have been
complied with in all material respects, and (iii) no stop order suspending the
sale of the Securities in any jurisdiction referred to in Section 4(i) shall
have been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.

(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency, body or official which would, as of the Closing Date and
each Option Closing Date, if applicable, prevent the issuance of the Securities;
and no injunction, restraining order or order of any nature by any Federal or
state court of competent jurisdiction shall have been issued as of the Closing
Date or any Option Closing Date, if applicable, which would prevent the issuance
of the Securities. Subsequent to the execution and delivery of this

24
<PAGE>

Agreement and prior to the Closing Date, and each Option Closing Date, if
applicable, there shall not have been any downgrading, nor shall any notice have
been given of any intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the possible change, in
the rating accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) of the Act.

(d) (i) Since the earlier of the date hereof or the dates as
of which information is given in the Registration Statement and the Prospectus,
there shall not have been any Material Adverse Change, (ii) since the date of
the latest balance sheet included in the Registration Statement and the
Prospectus, there shall not have been any material adverse change, or
development involving a prospective material adverse change, in the capital
stock or debt, of the Company or any of the Subsidiaries and (iii) the Company
and the Subsidiaries shall have no liability or obligation, direct or
contingent, that is material to the Company and the Subsidiaries, taken as a
whole, and which is not disclosed in the Registration Statement and the
Prospectus.

(e) You shall have received a certificate of the Company,
dated the Closing Date and each Option Closing Date, if applicable, executed on
behalf of the Company, by the executive vice president of Finance and the chief
financial officer of the Company confirming, as of the Closing Date and each
such Option Closing Date, if applicable, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 7.

(f) On the Closing Date and each Option Closing Date, if
applicable, you shall have received an opinion (satisfactory to you and your
counsel), dated the Closing Date, and each Option Closing Date, if applicable,
of Latham & Watkins, counsel for the Company, to the effect that:

(i) the Company has full power and authority to
execute, deliver and perform this Agreement and to authorize, issue and
sell the Securities as contemplated by this Agreement;

25
<PAGE>

(ii) the Company has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus;

(iii) the indenture dated as of _____, 1996 (the
"Indenture") between the Company and The Bank of New York, as Trustee (the
"Trustee") has been duly authorized, executed and delivered by the
Company;

(iv) the shares of common stock, par value $2.50 per
share, initially issuable upon conversion of the Securities have been duly
authorized and reserved for issuance upon conversion of the Securities,
are free of preemptive rights and, when issued upon conversion of the
Securities in accordance with the terms of the Indenture, will be validly
issued, fully paid and non-assessable;

(v) the Securities, when executed and authenticated in
accordance with the terms of the Indenture and delivered to and paid for
by you and the other Underwriters in accordance with the terms of this
Agreement, will be legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture;

(vi) at the time it became effective and on the Closing
Date and on each Option Closing Date, if applicable, the Registration
Statement, including all documents incorporated by reference therein
(except for financial statements, the notes thereto and related schedules
and other financial and statistical data included therein and the
Statement of Eligibility and Qualification of the Trustee on Form T-1 (the
"Form T-1"), as to which no opinion need be expressed), complied as to
form in all material respects with the Act, the Exchange Act and the TIA;

26
<PAGE>

(vii) the Indenture, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid and
legally binding agreement of the Company, enforceable against the Company
in accordance with its terms;

(viii) the Securities, including the description of
Common Stock into which the Securities are convertible, and the Indenture
conform in all material respects to the descriptions thereof contained in
the Prospectus;

(ix) the Underwriting Agreement has been duly
authorized, executed and delivered by the Company;

(x) the Indenture has been duly qualified under the
Trust Indenture Act.

(xi) the Underwriting Agreement has been duly
authorized, executed and delivered by the Company;

(xii) the Registration Statement has become effective
under the Act and, to the best of our knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued under the
Act and no proceedings therefor have been initiated by the Commission; and
any required filing of the Prospectus pursuant to Rule 424(b) under the
Act has been made in accordance with Rule 424(b) and 430A under the Act;

(xiii) the statements set forth in the Prospectus under
the heading "Certain Federal Income Tax Considerations," insofar as such
statements constitute a summary of legal matters, are accurate in all
material respects.

(g) On the Closing Date and each Option Closing Date, if
applicable, you shall have received an opinion (satisfactory to you and your
counsel), dated the Closing Date, and each Option Closing Date, if applicable,
of William C. Lebo, Jr., General Counsel for the Company, to the effect that:

27
<PAGE>

(i) each document filed pursuant to the Exchange Act
and incorporated by reference in the Prospectus, at the time it was filed
or last amended (except for financial statements, the notes thereto and
related schedules and other financial, numerical, statistical or
accounting data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion), complied as
to form to the applicable requirements of the Exchange Act;

(ii) (a) the authorized capital stock of the Company
conforms to the description thereof contained in the Registration
Statement and the Prospectus under the caption, "Description of Capital
Stock"; and (b) the shares of issued and outstanding Common Stock have
been duly authorized and are validly issued and are fully paid and
nonassessable and not subject to any preemptive or similar rights pursuant
to the Delaware General Corporation Law or the Company's charter or
bylaws;

(iii) the Company and each of the Significant
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of organization, has the
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and, as applicable, to execute, deliver and
perform its obligations pursuant to the Indenture and this Agreement, and
is duly qualified as a foreign corporation and in good standing in each
jurisdiction where the ownership, leasing or operation of property or the
conduct of its business requires such qualification, except where the
failure so to be qualified would not have, singly or in the aggregate, a
Material Adverse Effect;

(iv) the execution and delivery of this Agreement and
the Indenture, the issuance and sale of the Securities, the performance of
the Company's obligations pursuant to

28
<PAGE>

this Agreement and the Indenture and the consummation of the transactions
contemplated by this Agreement and the Indenture will not conflict with or
result in a breach or violation of any of the respective charters or
bylaws of the Company or any of the Significant Subsidiaries or the terms
or provisions of, or constitute a default under, any statute, rule or
regulation or to the best of such counsel's knowledge any material
agreement or instrument to which the Company or any of the Significant
Subsidiaries is a party or by which any of them is bound, or to which any
of the assets or properties of the Company or any of the Subsidiaries is
subject, or to the best of such counsel's knowledge any order of any court
or governmental agency, body or official having jurisdiction over the
Company or any of the Subsidiaries or any of their properties;

(v) to the best of such counsel's knowledge, there is
no current, pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator
involving the Company or any Subsidiary or to which any of their
respective property is subject of a character required to be disclosed in
the Registration Statement which is not adequately disclosed in the
Prospectus;

(vi) to the best of such counsel's knowledge, no holder
of any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company;

(vii) each of the Company and its Subsidiaries has such
Authorizations from all regulatory or governmental officials, bodies and
tribunals as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in the
Prospectus;

(viii) all of the issued and outstanding shares of
capital stock of, or other

29
<PAGE>

ownership interests in, each Significant Subsidiary have been duly and
validly authorized and issued, and, except as disclosed in the Prospectus,
the shares of capital stock of, or other ownership interests in, each
Significant Subsidiary are owned, directly or through Subsidiaries, by the
Company, are fully paid and nonassessable, and are owned free and clear of
any Lien;

(ix) the descriptions in the Registration Statement and
the Prospectus of statutes, tax matters, legal and governmental
proceedings and contracts and other documents are accurate in all material
respects and fairly present the information required to be shown; and such
counsel does not know of any legal or governmental proceedings required to
be described in the Registration Statement or Prospectus which are not
described as required or of any contracts or documents of a character
required to be described in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement which are not described
and filed as required; it being understood that such counsel need express
no opinion as to the financial statements, notes or schedules or other
financial data included therein or that part of the Registration Statement
that constitutes Form T-1;

(x) no consent, approval, authorization or order of
any court or governmental agency or body is required for the consummation
of the transactions contemplated herein by the Company, except such as
have been obtained under the Act, the Trust Indenture Act of 1939, as
amended, and except such as may be required under the blue sky laws and
any applicable gaming laws (and any applicable real estate syndication
laws) of any jurisdiction in connection with the offer, issuance and sale
of the Notes and such other approvals (specified in such opinion) as have
been obtained;

(xi) to the best knowledge of such counsel, no default
exists and no event

30
<PAGE>

has occurred that with notice, lapse of time, or both, would constitute a
default in the due performance and observance of any term, covenant or
condition of any agreement to which the Company or the Subsidiaries are a
party or by which any of them is bound, which default is or would be
material to the financial condition, earnings, prospects, business or
properties of the Company and its consolidated subsidiaries taken as a
whole;

(xii) to the best of such counsel's knowledge, there are
no contracts or documents to which the Company or any Significant
Subsidiary is a party or by which any of them may be bound of a character
required to be described in the Registration Statement (or required to be
filed under the Exchange Act, if upon such filing they would be
incorporated by reference therein) or to be filed as exhibits to the
Registration Statement other than those discussed therein or filed or
incorporated by reference as exhibits thereto that are not described and
filed as required, and the descriptions thereof or references thereto are
materially correct.

In addition, Latham & Watkins and William Lebo shall state that
although such counsel has not undertaken to investigate or verify independently,
and is not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus included therein (except to the extent expressly
referred to in clause (vii) and (ix), respectively, above), during the course of
such counsel's participation in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and you, at which the contents of the Registration
Statement and the Prospectus were discussed (relying as to materiality to a
large extent upon the statements of officers and other representatives of the
Company), no facts have come to the attention of such counsel which cause it to
(1) believe that (except for financial statements, financial and statistical
data and schedules included therein or omitted therefrom as to which such
counsel need not express any belief) the

31
<PAGE>

Registration Statement (as amended or supplemented, if applicable) at the time
the Registration Statement or any post-effective amendment became effective
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (2) believe that (except for financial statements, financial
and statistical data and schedules included therein or omitted therefrom as to
which such counsel need not express any belief) the Prospectus (as amended or
supplemented) as of its date or the Closing Date contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.

In rendering such opinions, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers and other representatives of the Company, certificates of public
officials, and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its Subsidiaries,
provided that copies of any such statements or certificates shall be delivered
or otherwise made available to your counsel.

(h) You shall have received an opinion of
___________________________, counsel for the Company, dated as of the Closing
Date and each Option Closing Date, if applicable, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:

(i) (a) the statements in the Prospectus under the
caption "Regulation and Licensing" and the Statements in the Company's
Form 10-K for the Fiscal year ended December 31, 1995 under the caption
"Gaming Operations - Regulation and Licensing," insofar as such statements
constitute a summary of state statutes, international laws, regulations,
legal and governmental proceedings, have been reviewed by such counsel and
are accurate in all material respects (except for financial data included
therein or omitted therefrom, as to which counsel need express no
opinion); and

32
<PAGE>

such counsel does not know of any legal or governmental proceedings in any
state or country where the Company conducts, or proposes to conduct,
gaming operations required to be described in the Registration Statement
or Prospectus which are not described as required; and (b) no facts have
come to the attention of such counsel that would lead such counsel to
believe that the statements listed in clause (a) of this paragraph (i)
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make such
statements, in light of the circumstances under which they are made, not
misleading, or that the statements listed in clause (a) of this paragraph
(i), as contained in the Prospectus at the time of filing thereof or on
the date of such counsel's opinion, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make such statements, in light of the
circumstances under which they were made, not misleading;

(ii) no authorization, approval, consent or license
issued by any Gaming Authority or any other governmental body, agency or
official of any state or country where the Company conducts, or proposes
to conduct, gaming operations is necessary in connection with the issuance
of the Securities and the due authorization, execution, delivery and
performance by the Company of this Agreement.

(i) You shall have received an opinion, dated the Closing
Date, of Skadden, Arps, Slate, Meagher & Flom ("Skadden Arps"), counsel for the
Underwriters, in form and substance reasonably satisfactory to you.

(j) You shall have received letters on and as of the date
hereof as well as on and as of the Closing Date and each Option Closing Date, if
any (in the latter cases constituting an affirmation of the statements set forth
in the former), in form and substance satisfactory to you, from Arthur Andersen
LLP, independent public accountants complying with Rule 2-01 of

33
<PAGE>

Regulation S-X of the Commission, with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus as you shall reasonably require.

(k) Skadden Arps shall have been furnished with such
documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 7, in order to evidence the accuracy,
completeness and satisfaction in all material respects of any of the
representations, warranties or conditions herein contained and to render the
opinion referred to in Section 7(i).

(l) Prior to the Closing Date, the Company shall have
furnished to you such further information, certificates and documents as you may
reasonably request.

(m) The Company shall not have failed at or prior to the
Closing Date, and each Option Closing Date, if applicable, to perform or comply
with any of the agreements herein contained and required to be performed or
complied with by the Company at or prior to the Closing Date, and such Option
Closing Date, if applicable.

The several obligations of the Underwriters to purchase Additional
Securities hereunder are subject to satisfaction on and as of each Option
Closing Date of the conditions set forth in paragraphs (a) through (e), above,
except that the opinions called for and the letters referred to shall be revised
to reflect the sale of the Additional Securities.

8. DEFAULTS. If on the Closing Date or any Option Closing Date,
as the case may be, any of the Underwriters shall fail or refuse to purchase
Firm Securities or Additional Securities, as the case may be, which it has
agreed to purchase hereunder on such date, and the aggregate amount of Firm
Securities or Additional Securities, as the case may be, that such defaulting
Underwriter(s) agreed but failed or refused to purchase does not exceed 10% of
the total number of Securities to be purchased on such date by all of the
Underwriters, each non-defaulting Underwriter shall be obligated severally, in
the proportion which the number of Firm Securities set forth opposite its name
in Schedule I hereto

34
<PAGE>

bears to the total number of Firm Securities which all the non-defaulting
Underwriters, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Firm Securities or Additional
Securities, as the case may be, that such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; PROVIDED that in no event shall the number of Firm Securities or
Additional Securities, as the case may be, that any Underwriter has agreed to
purchase pursuant to Section 3 hereof be increased pursuant to this Section 8 by
an amount in excess of one-ninth of such number of Firm Securities or Additional
Securities, as the case may be, without the written consent of such Underwriter.
If, on the Closing Date or on the Option Closing Date, as the case may be, any
of the Underwriters shall fail or refuse to purchase the Firm Securities or the
Additional Securities, as the case may be, with respect to which such default
exceeds 10% of such total number of the Securities to be purchased on such date
by all Underwriter(s) and arrangements satisfactory to the other Underwriter(s)
and the Company for the purchase of such Securities are not made within 48 hours
after such default, this Agreement shall terminate without liability on the part
of the non-defaulting Underwriter(s) or the Company, except as otherwise
provided in Section 9. In any such case that does not result in termination of
this Agreement, the Underwriters or the Company may postpone the Closing Date or
the Option Closing Date, as the case may be, for not longer than seven (7) days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve a defaulting Underwriter
from liability in respect of any default by any such Underwriter under this
Agreement.

9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the later of (i) the execution and delivery of this
Agreement by the parties hereto, (ii) unless the Company intends to rely on Rule
430A of the Act, the effectiveness of the Registration Statement, and (iii) if
the Company intends to rely on Rule 430A of the Act, the earlier of the
effectiveness of a post-effective amendment filed in compliance with Rule 430A
of the Act or the filing of a final prospectus pursuant to Rule 424(b).

35
<PAGE>

This Agreement may be terminated at any time on or prior to the
Closing Date by the Representatives by notice to the Company if any of the
following has occurred: (i) subsequent to the date the Registration Statement is
declared effective or the date of this Agreement, any Material Adverse Change
which makes it impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or material adverse change in the financial markets of the United States or
elsewhere, or any other substantial national or international calamity or
emergency if the effect of such outbreak, escalation, calamity, crisis or
emergency would, in the Representatives' judgment make it impracticable or
inadvisable to market the Securities or to enforce contracts for the sale of the
Securities, (iii) any suspension or limitation of trading generally in
securities on the New York, American or Pacific Stock Exchanges, the National
Association of Securities Dealers Automated Quotation National Market, or the
over-the-counter markets or any setting of minimum prices for trading on such
exchanges or markets, (iv) any declaration of a general banking moratorium by
either Federal, California or New York authorities, (v) the taking of any action
by any Federal, state or local government or agency in respect of its monetary
or fiscal affairs that in the Representatives' judgment has a material adverse
effect on the financial markets in the United States, and would, in the
Representatives' judgment, make it impracticable or inadvisable to market the
Securities or to enforce contracts for the sale of the Securities, (vi) any
securities of the Company or any of the Subsidiaries shall have been downgraded
or placed on any "watch list" for possible downgrading or reviewed for a
possible change that does not indicate the direction of the possible change by
any "nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) of the Act, (vii) the delisting of the
Common Stock from the NYSE, (viii) the enactment, publication, decree or other
promulgation of any Federal or state statute, regulation, or rule or order of
any court or other governmental authority which in the judgment of the
Representatives' would be expected to have a Material Adverse Effect, or (ix)
the commencement or any development with respect to any proposed, pending,
threatened or contemplated investigation or inquest by a

36
<PAGE>

court or other governmental authority in respect of the Company, the Significant
Subsidiaries or any person required to be licensed therewith which could in the
judgment of the Underwriters make it impracticable or inadvisable to market the
Securities.

If this Agreement shall be terminated by the Underwriters pursuant
to clause (i), (v) (vi), (vii), (viii) or (ix) of the second paragraph of this
Section 8 or because of the failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, the
Company agrees to reimburse you for all reasonable out-of-pocket expenses
(including the reasonable fees and disbursements of counsel) incurred by you.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 4(f) hereof.

10. NOTICES. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to it at Hilton
Hotels Corporation, 9336 Civic Center Drive, Beverly Hills, California 90210,
Attention: William C. Lebo, Jr., General Counsel, with a copy to Latham &
Watkins, 633 West 5th Street, Suite 400, Los Angeles, California 90071,
Attention: Brian Cartwright, Esq., and (b) if to any Underwriter, to Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, and, in each case, with a copy to
Skadden, Arps, Slate, Meagher & Flom, 300 South Grand Avenue, Suite 3400, Los
Angeles, California 90071, Attention: Gregg A. Noel, Esq., or in any case to
such other address as the person to be notified may have requested in writing.

11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

12. SEVERABILITY. Any determination that any provision of this
Agreement may be, or is, unenforceable shall not affect the enforceability of
the remainder of this Agreement.

37
<PAGE>

13. SUCCESSORS. Except as otherwise provided, this Agreement has
been and is made solely for the benefit of and shall be binding upon the
Company, the Underwriter, any Indemnified Person referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors and assigns" shall not include
a purchaser of any of the Securities from the Underwriter merely because of such
purchase.

14. CERTAIN DEFINITIONS. For purposes of this Agreement, (a)
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) "subsidiary" has the meaning set forth in Rule 405 of the Act
and (c) "Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company as defined under Regulation S-X promulgated by the
Commission.

15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in one or more counterpart, the executed
counterparts shall each be deemed to be an original, and all such counterparts
shall together constitute one and the same instrument.

16. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to effect the meaning
or interpretation of, this Agreement.

17. SURVIVAL. The indemnities and contribution provisions and
the other agreements, representations and warranties of the Company, its
officers and directors and of the Underwriters set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Securities, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Underwriters or by or on behalf of the Company, the officers or
directors of the Company or any controlling person of the Company, (ii)
acceptance of the Securities and payment for them hereunder and (iii)
termination of this Agreement.

This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among the Company and you.

38
<PAGE>

Very truly yours,

HILTON HOTELS CORPORATION

By: ________________________
Name:
Title:

The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO. INCORPORATED
Acting severally on behalf of themselves
and as representatives of the several Underwriters
named in Schedule I hereto

By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By: _______________________
Name:
Title:

39
<PAGE>

SCHEDULE I

Underwriters Number of
- ------------ Securities
to be Purchased
---------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
SCHRODER WERTHEIM & CO.
INCORPORATED

Total: _______________

<PAGE>

EXHIBIT 5.1

[LATHAM & WATKINS LETTERHEAD]

May 7, 1996

Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210

Re: Registration Statement No. 333-02321; $575,000,000 Aggregate
Principal Amount of Convertible Subordinated Notes due 2006

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

Ladies and Gentlemen:

In connection with the registration of $575,000,000 aggregate principal
amount of Convertible Subordinated Notes due 2006 (the "Securities") and the
common stock, par value $2.50 per share, issuable upon conversion of such
Securities (the "Common Stock") by Hilton Hotels Corporation, a Delaware
corporation (the "Company"), under the Securities Act of 1933, as amended (the
"Act"), on Form S-3 filed with the Securities and Exchange Commission (the
"Commission") on April 8, 1996 (File No. 333-02321), as amended by Amendment No.
1 filed with the Commission on April 30, 1996 and as amended by Amendment No. 2
filed with the Commission on the date hereof (collectively, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.

In our capacity as your counsel in connection with such registration, we are
familiar with the proceedings taken and proposed to be taken by the Company in
connection with the authorization and issuance of the Securities and the Common
Stock, and for the purposes of this opinion, have assumed such proceedings will
be timely completed in the manner presently proposed. In addition, we have made
such legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for purposes of this opinion.

In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.

We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of New York, and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or as to any matters of municipal law or the laws of any
other local agencies within the State of New York.

Capitalized terms used herein without definition have the meanings ascribed
to them in the Registration Statement.

<PAGE>

Subject to the foregoing and the other matters set forth herein, it is our
opinion that as of the date hereof:

1. The Securities have been duly authorized by all necessary corporate
action of the Company, and when authenticated by the Trustee and executed and
delivered by or on behalf of the Company against payment therefor in accordance
with the terms of the Indenture, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms.

2. The Common Stock to be issued upon the conversion of the Securities has
been duly authorized, and when issued in accordance with the terms of the
Indenture, will be validly issued, fully paid and non-assessable.

The opinion rendered in paragraph 1 above relating to the enforceability of
the Securities is subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or law, and the discretion of the court before which any proceeding
therefor may be brought; and (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy.

To the extent that the obligations of the Company under the Indenture may be
dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legal, valid and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms; that the Trustee is in compliance,
generally and with respect to acting as a trustee under the Indenture, with all
applicable laws and regulations; and that the Trustee has the requisite
organizational and legal power and authority to perform its obligations under
the Indenture.

We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters."

Very truly yours,

LATHAM & WATKINS

<PAGE>
EXHIBIT 23.2

As independent public accountants, we hereby consent to the incorporation by
reference in the Preliminary Prospectus on Form S-3 registration statement of
our report dated Februrary 1, 1996 incorporated by reference in Hilton Hotels
Corporation Form 10-K for the year ended December 31, 1995 and to all references
to our Firm included in this registration statement.

ARTHUR ANDERSEN LLP

Los Angeles, California
May 7, 1996

<PAGE>

EXHIBIT 25

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM T-1

STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)
---------

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

THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)

New York 13-5160382
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)

48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip Code)

HILTON HOTELS CORPORATION
(Exact name of obligor as specified in its charter)

Delaware 36-2058176
(State of other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

9336 Civic Center Drive
Beverly Hills, California 90210
(Address of principal executive offices) (Zip Code)

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

_____% Convertible Subordinated Notes due 2006
(Title of the indenture securities)

<PAGE>

GENERAL

ITEM 1. General Information.

Furnish the following information as to the Trustee:

(a) Name and address of each examining or supervising authority to which it
is subject.

Name Address
---- -------
Superintendent of Banks of the State 2 Rector Street., New York, N.Y. 10006,
of New York and Albany, N.Y. 12203

Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y.
10045

Federal Deposit Insurance Corporation Washington, D.C. 20549

(b) Whether it is authorized to exercise corporate trust powers:

Yes.

ITEM 2. Affiliation with Obligor

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None. (See Note on page 3)

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

ITEM 16. List of Exhibits:

Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-
29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.

1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust powers.
(See Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with
Registration Statement No. 33-29637.)

4. A copy of the existing By-laws of the Trustee. (See Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)

<PAGE>

6. The consent of the Trustee required by Section 321(b) of the Act. (See
Exhibit 6 to Form T-1, Registration Statement No. 33-44051.)

7. See Exhibit 7 attached hereto.

NOTE

Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base responsive answer to Item 2, the answer to
said Item is based on incomplete information.

Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Los Angeles, and
State of California on the 7th day of May, 1996.

THE BANK OF NEW YORK

By: /S/ JAMES L. BIRDWELL
-------------------------------------------
James L. Birdwell
Vice President

<PAGE>
EXHIBIT 7

CONSOLIDATED REPORT OF CONDITION OF

THE BANK OF NEW YORK
OF 48 WALL STREET, NEW YORK, N.Y. 10286
AND FOREIGN AND DOMESTIC SUBSIDIARIES,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.

DOLLAR AMOUNTS
ASSETS IN THOUSANDS

Cash and balances due from depos-
istory institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . $4,500,312
Interest-bearing balances . . . . . . . . . . . . . . . . 643,938
Securities:
Held-to-maturity securities . . . . . . . . . . . . . . . 806,221
Available-for-sale securities . . . . . . . . . . . . . . 2,036,768
Federal funds sold and securities
purchased under agreements
to resell in domestic offices of
the bank:
Federal funds sold. . . . . . . . . . . . . . . . . . . . 4,166,720
Securities purchased under
agreements to resell. . . . . . . . . . . . . . . . . 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income. . . . . . . . . . . . . . . . . . 27,068,635
LESS: Allowance for loan and
lease losses. . . . . . . . . . . . . . . . . 520,024
LESS: Allocated transfer risk
reserve . . . . . . . . . . . . . . . . . . . . 1,000
Loans and leases, net of unearned
income and allowance, and
reserve 26,547,511
Assets held in trading accounts . . . . . . . . . . . . . 758,462
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . . . . . . 615,330
Other real estate owned . . . . . . . . . . . . . . . . . 63,769
Investments in unconsolidated sub-
sidiaries and associated com-
panies. . . . . . . . . . . . . . . . . . . . . . . . 223,174
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . . . . . . 900,795
Intangible assets . . . . . . . . . . . . . . . . . . . . 212,220
Other assets. . . . . . . . . . . . . . . . . . . . . . . 1,186,274
-----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . $42,711,907
-----------
-----------
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . $21,248,127
Noninterest-bearing . . . . . . . . . . . . . . 9,172,079
Interest-bearing. . . . . . . . . . . . . . . .12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs. . . . . . . . . . . . . 9,535,088
Noninterest-bearing . . . . . . . . . . . . . . . .64,417
Interest-bearing. . . . . . . . . . . . . . . . 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased . . . . . . . . . . . . . . . . . 2,095,668
Securities sold under agreements
to repurchase . . . . . . . . . . . . . . . . . . . . 69,212
Demand notes issued to the U.S.
Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 107,340
Trading liabilities. . . . . . . . . . . . . . . . . . . . . 615,718
Other borrowed money:
With original maturity of one year
or less . . . . . . . . . . . . . . . . . . . . . . . 1,638,744
With original maturity of more than
one year. . . . . . . . . . . . . . . . . . . . . . . 120,863
Bank's liability on acceptances exe-
cuted and outstanding . . . . . . . . . . . . . . . . . . 909,527
Subordinated notes and debentures. . . . . . . . . . . . . . 1,047,860
Other liabilities. . . . . . . . . . . . . . . . . . . . . . 1,836,573
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 39,224,720
-----------

EQUITY CAPITAL
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 942,284
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . 525,666
Undivided profits and capital
reserves. . . . . . . . . . . . . . . . . . . . . . . . . 1,995,316
Net unrealized holding gains
(losses) on available-for-sale se-
curities. . . . . . . . . . . . . . . . . . . . . . . . . 29,668
Cumulative foreign currency transla-
tion adjustments. . . . . . . . . . . . . . . . . . . . . ( 5,747)
-----------
Total equity capital . . . . . . . . . . . . . . . . . . . . 3,487,187
-----------
Total liabilities and equity capital . . . . . . . . . . . . $42,711,907
-----------
-----------

I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the Instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.

Robert E. Keilman

We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.

J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )

Reprinted from AMERICAN BANKER
February 22, 1996