**Exhibit10.12.1**

HILTON HOTELS CORPORATION2004 OMNIBUS EQUITY COMPENSATION PLANSTOCK UNIT GRANT

 

This STOCK UNIT GRANT,dated as of **<date>** (the“Date of Grant”), is delivered by Hilton Hotels Corporation (“Hilton”) to **<name>.**

RECITALS

TheHilton Hotels Corporation 2004 Omnibus Equity Compensation Plan (the “Plan”)provides for the grant of stock units (“Stock Units”) that equate to shares ofHilton common stock on a one-for-one basis. Pursuant to the terms of the Plan, the Compensation Committee of Hilton’sBoard of Directors (the “Committee”) has decided to grant you Stock Units.

NOW,THEREFORE, the parties to this Agreement, intending to be legally bound hereby,agree as follows:

1.             Grant of Stock Units.  Subject to the terms and conditions set forthin this Agreement and in the Plan, Hilton hereby grants to you ** <#Units>** StockUnits.  The Stock Units are granted withDividend Equivalents (as defined below). Hilton will record the number of Stock Units and Dividend Equivalentscredited on your behalf in an Account (as defined below).

2.             Vesting;Time and Form of Distribution.

(a)           Your Stock Units will vest in [25%]increments commencing on January 5, **<year>**and each January 5 thereafter until the Stock Units are fully vested; providedthat you continue to be employed by, or provide service to, the Company (asdefined below) as of each such January 5 (if any applicable January 5 is not abusiness day, then the vesting day will be the next business day).  Unless the Committee determines otherwise, ifyou cease to be employed by, or provide service to, the Company before yourStock Units are fully vested, any Stock Units that are unvested as of the dateyou cease to be employed by, or provide service to, the Company will beimmediately forfeited.

(b)           Subject to withholding under Section5, you will receive a distribution of shares of Stock with respect to yourStock Units as and when your Stock Units become vested in accordance with (a)above, as soon as reasonably practicable following the vesting date; providedthat, if, at the time your Stock Units vest, you are among the top 5 mosthighly compensated executive officers of the Company and you did not make anelection under the Hilton Hotels 2005 Executive Deferred Compensation Plan to deferfor the year in which your Stock Units vest all payments of Base Salary thatwould cause your compensation (that is taken into account for purposes ofsection 162(m) of the Internal Revenue Code) for such year to exceed the$1,000,000 limit on deductible compensation under section 162(m) of theInternal Revenue Code, then all of the shares of Stock attributable to theStock Units that vest in such calendar year will automatically be deferred asof the date distribution would otherwise be made, pursuant to the terms andconditions of the Deferral Program attached hereto as Exhibit A.

 

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3.             DividendEquivalents.  As and when dividendsare declared and paid with respect to Stock during each calendar year, DividendEquivalents attributable to the number of unvested shares of Stock underlyingyour Stock Units will be credited to your Account.  Dividend Equivalents will be accrued as acash obligation and will not accrue interest. As of January 5 (or the next succeeding business day, if January 5 isnot a business day) of each calendar year, the accumulated Dividend Equivalentscredited to your Account with respect to the prior calendar year (lessapplicable withholding taxes), will be converted to shares of Stock (based onthe Fair Market Value (as defined in the Plan) of the shares as of January 5(or the next succeeding business day, if January 5 is not a business day)) anddistributed to you as soon as administratively practicable following such date;provided that to receive a distribution, you must be employed by, or providingservice to, the Company as of the applicable January 5 (or the next succeedingbusiness day, if January 5 is not a business day).  If a fractional share remains after theapplicable withholding taxes are withheld and the accumulated DividendEquivalents are converted into shares, such fractional share will beforfeited.  If your Stock Units aredeferred pursuant to Section 2(b) above, Dividend Equivalents will be creditedin accordance with Section 4 of the Deferral Program attached hereto as ExhibitA.

4.             Changeof Control.  The provisions of thePlan applicable to a Change of Control (as defined in the Plan) will apply toyour Stock Units, and, in the event of a Change of Control, the Committee maytake such actions as it deems appropriate pursuant to the Plan.

5.             Withholding.  Unless the Committee provides otherwise, thenumber of shares of Stock distributed to you with respect to your Stock Unitswill be reduced by a number of shares sufficient to satisfy the amount of anywithholding tax associated with the distribution.  If your Stock Units are deferred pursuant toSection 2(b) above, your Stock Units will be taxed in accordance with Section 8of the Deferral Program attached hereto as Exhibit A.

6.             Definitions.  For purposes of this Agreement, the followingterms will have the meanings set forth below:

(a)           “*Account*” meansa bookkeeping account established on Hilton’s records in your name to recordgrants of Stock Units, as well as Stock Units deferred under the Plan.

(b)           *“Company”* meansHilton, any successor corporation and each corporation which is a member of acontrolled group of corporations of which Hilton is a component member.

(c)           “*Disabled*” or “*Disability*” means that you are considered totally andpermanently disabled for purposes of the Company’s long-term disability plan.

(d)           *“Dividend Equivalent”*means an amount determined by multiplying the number of shares subject to StockUnits by the per-share cash dividend, or the per-share fair market value of anydividend in consideration other than cash, paid by Hilton on its common stock.

(e)           *“Employed by, or provideservice to, the Company”* means employment or service with theCompany.

(f)            “*Retirement*”means retirement from active employment or service with the Company at or afterage 62.

 

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(g)           *“Stock Unit”*means a phantom unit representing a share of Stock.

(h)           “*Stock*” means ashare of Hilton common stock.

7.             GrantSubject to Plan Provisions.  Thisgrant is made pursuant to the Plan, the terms of which are incorporated hereinby reference, and in all respects will be interpreted in accordance with thePlan.  The grant and distributionattributable to the Stock Units and Dividend Equivalents are subject to interpretations,regulations and determinations concerning the Plan established from time totime by the Committee in accordance with the provisions of the Plan, including,but not limited to, provisions pertaining to (a) the registration,qualification or listing of the shares issued under the Plan, (b) changes incapitalization, and (c) other requirements of applicable law and all Planprovisions.  The Committee has theauthority to interpret and construe this Agreement pursuant to the terms of thePlan, and its decisions are conclusive as to any questions arising hereunder.

8.             NoEmployment or Other Rights.  Thegrant of Stock Units does not confer upon you any right to be retained by, orin the employ or service of, the Company and will not interfere in any way withthe right of the Company to terminate your employment or service at anytime.  The right of the Company toterminate your employment or service at will at any time for any reason isspecifically reserved.  You will not haveany interest in any fund or specific assets of the Company by reason of thisgrant or the Account established on your behalf.

9.             NoStockholder Rights.  Neither you, norany person entitled to receive distribution in the event of your death, willhave any of the rights and privileges of a Hilton stockholder with respect to ashare of Stock, until that share of Stock has been issued.

10.           Assignmentand Transfers.  Your rights andinterests under this Agreement may not be sold, assigned, encumbered orotherwise transferred, except in the event of your death, by will or by thelaws of descent and distribution.  If youdie, any distributions to be made under this Agreement after your death will bepaid to the personal representative of your estate, or the personalrepresentative under applicable law if you die intestate.  The rights, protections and obligations ofthe Company hereunder extend to any successors or assigns of the Company and tothe Company’s parents, subsidiaries, and affiliates.  This Agreement may be assigned by the Companywithout your consent.

11.           ApplicableLaw.  The validity, construction,interpretation and effect of this instrument will be governed by and construedin accordance with the laws of the State of California, without giving effectto the conflicts of laws provisions thereof.

12.           Notice.  Any notice to Hilton provided for in thisAgreement shall be addressed to Hilton Hotels Corporation in care of theCorporate Secretary at 9336 Civic Center Drive, Beverly Hills, California,90210, and any notice to you will be addressed to you at the current addressshown on the Company’s payroll, or to such other address as you may designateto the Company in writing.  Any noticeshall be delivered by hand, sent by telecopy or enclosed in a properly sealedenvelope addressed as stated above, and deposited, postage prepaid, in a postoffice regularly maintained by the United States Postal Service.

 

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IN WITNESS WHEREOF, Hilton has causedits duly authorized officers to execute and attest this Agreement, and you haveexecuted this Agreement, effective as of the Date of Grant.
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|                                                                                                                                                                                                                                               |   | HILTON HOTELS CORPORATION                      |
| Attest                                                                                                                                                                                                                                             |   |                                           |
|                                                                                                                                                                                                                                               |   |                                           |
|                                                                                                                                                                                                                                               |   |                                           |
|                                                                                                                                                                                                                                               |   | By:                                            |   |
| Corporate  Secretary                                                                                                                                                                                                                               |   | Title:  Senior Vice President, Human Resources |
|                                                                                                                                                                                                                                               |   |                                           |
|                                                                                                                                                                                                                                               |   |                                           |
| I  hereby accept the Stock Units described in this Agreement, and I agree to be  bound by the terms of the Plan and this Agreement. I hereby further agree  that all the decisions and determinations of the Committee will be final and  binding. |
|                                                                                                                                                                                                                                               |   |                                           |
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| Participant                                                                                                                                                                                                                                        |   |                                           |

 

**If you do notnotify us (in accordance with Section 12) that you do not wish to accept theStock Units described in this Agreement, then you will be deemed to haveaccepted the Stock Units described in this Agreement and to have agreed to bebound by the terms of the Plan and this Agreement.**

 

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**EXHIBIT A**

**DEFERRAL PROGRAM**

Exceptto the extent otherwise provided herein, defined terms herein shall have thesame meaning as ascribed to such terms in the Plan.

1.             DeferralElection.  If, at the time your StockUnits vest, you are among the top 5 most highly compensated executive officersof the Company and you did not make an election under the Hilton Hotels 2005Executive Deferred Compensation Plan to defer for the year in which your StockUnits vest all payments of Base Salary that would cause your compensation (thatis taken into account for purposes of section 162(m) of the Internal RevenueCode) for such year to exceed the $1,000,000 limit on deductible compensationunder section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), then all of the shares of Stock attributable to theStock Units that vest in such calendar year will automatically be deferred asof the date distribution would otherwise be made until after your separation fromservice with the Company pursuant to the terms and conditions hereof.

2.             Account.  If your Stock Units are deferred, a number ofphantom shares equal to the number of units deferred will be credited to anAccount as of the date the Stock Units would have otherwise beendistributable.  No actual shares or otherassets will be held in your Account for your benefit.  As of the date the phantom shares arecredited to your Account, the shares of Stock attributable to your Stock Unitsare considered earned and are non-forfeitable.

3.             Valueof Account.  The value of yourAccount will be based upon the Fair Market Value of a share of Stock.  As the Fair Market Value of a share of Stockincreases or decreases, the value of your Account will increase or decreaseaccordingly.

4.             DividendEquivalents.  When dividends aredeclared and paid on Stock, your Account (as established pursuant to paragraph2 above) will be credited with Dividend Equivalents.  Dividend Equivalents will be reinvested inadditional phantom shares.  Your Accountwill not be credited with interest.

5.             Distributionof Deferred Amounts.  You will beentitled to receive a distribution of your Account in Stock upon yourseparation from service with the Company. Distribution of your Account will be made in a lump sum as soon aspracticable following your separation date. Notwithstanding any provision of the Deferral Program to the contrary,if you are a Key Employee (as defined below), distributions shall be postponedto the first day of the seventh month following your date of separation fromservice (or, if earlier, date of death).

Forpurposes of the Deferral Program, you are a Key Employee if: you are (i) anofficer of the Company having annual compensation greater than $130,000(adjusted for inflation and limited to 50 employees), (ii) a five percentowner, or (iii) a one percent owner having annual compensation from the Companygreater than $150,000.  The Committeewill determine whether you are a “Key Employee” in a manner consistent with theregulations issued under section 409A of the Code.

6.             HardshipDistributions.  At any time prior todistribution, if you incur an unforeseeable emergency, you may submit a writtenrequest to the Committee for a hardship distribution of all

 

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or part of the amount then creditedto your Account as a result of deferrals under the Deferral Program.

Forpurposes of the Deferral Program, an unforeseeable emergency means severefinancial hardship resulting from a sudden and unexpected illness or accidentinvolving you, your spouse or a member of your immediate family, loss of yourproperty due to casualty, or other similar extraordinary and unforeseeablecircumstance arising as a result of events beyond your control.  The amounts distributed with respect to anemergency will not exceed the amounts necessary to satisfy such emergency plusamounts necessary to pay taxes reasonably anticipated as a result of thedistribution, after taking into account the extent to which such hardship is ormay be relieved through reimbursement or compensation by insurance orotherwise, or by liquidation of your assets (to the extent such liquidationwould not itself cause severe financial hardship).  The Committee will determine whether anunforeseeable emergency has occurred based on the regulations set forth inTreasury Regulation section 1.457-2(h)(4), in its sole discretion.

7.             Formof Distribution.  All distributionsfrom your Account will be made in shares of Stock.  The value of all phantom shares credited toyour Account, including any reinvested Dividend Equivalents, will be convertedto shares of Stock on or immediately before the date of distribution.  If a fractional share remains after theapplicable withholding taxes are withheld and the accumulated DividendEquivalents are converted into shares, such fractional share will be forfeited.

8.             Taxation.

(a)           If your Stock Units are deferred, youwill not be subject to income tax on the deferred amounts until distribution ismade to you.  However, as of the vestingdate specified in your Stock Unit Grant Agreement, you will be required to payFICA and Medicare tax on the value of all of the shares, including the sharesdeferred.  Your FICA and Medicare taxobligation will be satisfied by reducing the number of units deferred by anumber of units sufficient to satisfy your FICA and Medicare taxobligation.  The units withheld to coveryour FICA and Medicare tax obligation (in addition to being subject to FICA andMedicare tax) will also be taxable to you as ordinary income at the supplementaltax rate.  Additional units will bewithheld to cover the ordinary income tax.

(b)           When you receive a distribution, theamount distributed to you will be taxable as ordinary income and will besubject to tax withholding.  A number ofshares will be withheld from your distribution amount to satisfy the applicableincome tax withholding obligation.

9.             ClaimsProcedure.

(a)           Claim for Benefits.  The Committee will advise you or yourbeneficiary of any benefits to which you or your beneficiary are entitled underthe Deferral Program.  If you or yourbeneficiary believe that the Committee has failed to provide you with anybenefit to which you believe you are entitled, you or your beneficiary may filea written claim for benefits with the Pension and Thrift Committee.  The claim will be reviewed, and a responseprovided, within a reasonable time after receiving the claim.  Any claimant who is denied a claim forbenefits will be provided with written notice setting forth:

•                                          the specific reason orreasons for the denial;

 

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•                                          specific reference topertinent Deferral Program provisions on which the denial is based;

•                                          a description of anyadditional material or information necessary for the claimant to perfect theclaim;

•                                          an explanation of theclaim review procedure; and

•                                          an explanation of theclaimant’s right to bring an action under section 502(a) of the EmployeeRetirement Income Security Act of 1974, as amended (“ERISA”), after an adversebenefit determination on review.

(b)           Appeal.  Within 60 days after receipt by a claimant ofa notice denying a claim under the Deferral Program, the claimant or a dulyauthorized representative may request in writing a full and fair review of theclaim by the Compensation Committee.  TheCompensation Committee may extend the 60-day period where the nature of thebenefit involved or other attendant circumstances make such extensionappropriate.  In connection with suchreview, the claimant or a duly authorized representative may review pertinentdocuments and may submit issues and comments in writing.  The Compensation Committee will make adecision promptly, and not later than 60 days after the Compensation Committee’sreceipt of a request for review, unless special circumstances (such as the needto hold a hearing, if the Compensation Committee deems one necessary) requirean extension of time for processing, in which case a decision will be renderedas soon as possible, but not later than 120 days after receipt of a request forreview.  The decision on review will bein writing and will include specific reasons for the decision, written in amanner calculated to be understood by the claimant, specific references to thepertinent Deferral Program provisions on which the decision is based, and anexplanation of the claimant’s right to bring an action under section 502(a) ofERISA.

 

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10.           Amendmentand Termination.  This DeferralProgram may be amended, suspended or terminated at any time by the Committee;provided, however that no amendment, suspension or termination that occursafter phantom shares have been credited to your Account with respect todeferred Stock Units will adversely affect your rights in such phantom shareswithout your consent.  Notwithstandingthe foregoing, the Committee may amend or terminate the Deferral Programimmediately at any time if the Committee deems such amendment or terminationappropriate to complywith applicable law, to avoid adverse accountingor tax consequences in connection with the Deferral Program or should thefinancial accounting rules or tax laws applicable to the Deferral Program berevised so as to subject Hilton to adverse accounting consequences or tosubject Hilton or Deferral Program participants to adverse tax consequences, inconnection with the Deferral Program, as determined by Hilton in its solediscretion.  In addition, the Committeereserves the right to freeze the Deferral Program at any time and to cease allelections then in place to defer additional Stock Units.  Upon such an election, the Committee willcommunicate to you that the Deferral Program has been frozen and that no StockUnits will be deferred under the Deferral Program, regardless of any thencurrent election to the contrary. Deferrals of Stock Units will thereafter not be permitted until suchtime, if any, as the Company elects to re-institute the Deferral Program.  Upon the occurrence of any of the eventsdescribed in this paragraph, distributions of phantom shares will continue tobe made in accordance with the terms of this Deferral Program, unless analternative method of distribution is permitted under applicable law.

11.           Miscellaneous.

(a)   Funding.  The Deferral Program is intended to bemaintained at all times as an unfunded program for federal income taxpurposes.  The Deferral Program is intendedto be a “top hat” plan, exempt from the substantive requirements of ERISA.  Your sole interest under the Deferral Programis to receive the benefits provided under the Deferral Program as and when theybecome due and payable in accordance with the terms of this DeferralProgram.  The Company need not maintainany separate fund or account to provide any benefits provided under theDeferral Program.  Neither you nor anyperson claiming under or through you will have any right, title, or interest inor to any of the assets of the Company and will have only general unsecuredcreditor status with respect to benefits under the Deferral Program.

(b)   Nonalienation of Benefits.  No benefit or distribution under thisDeferral Program will be subject to alienation, anticipation, commutation,pledge, encumbrance, or assignment, whether voluntarily or involuntarily,contingently, or otherwise, except that you have the right to designate abeneficiary to receive any amounts payable after your death.  The Company will not be in any way liable foror subject to the debts, contracts, liabilities, engagements or torts of anyperson entitled to benefits or distributions under the Deferral Program.

(c)   Beneficiary.  If distributions are to be made under theDeferral Program after your death, such distributions will be made to personalrepresentative of your estate.

 

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