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Exhibit 10.42    
  

 
 

HILTON HOTELS CORPORATION
  Supplemental Retirement and Retention Plan    
  

 
 
 

ARTICLE 1
  PURPOSE    
  

    In recognition of the valuable services provided to the Hilton Hotels Corporation (the "Company") by its Executive Vice Presidents and Senior Vice Presidents,
and those of its subsidiaries, the Board of Directors of the Company wishes to adopt the Hilton Hotels Corporation Supplemental Retirement and Retention Plan (the "Plan"), effective June 1,
2000, to provide additional retirement benefits to certain individuals. This Plan is intended to be a non-qualified retirement plan which is unfunded and maintained primarily for the
purpose of providing deferred compensation for a "select group of management or highly compensated employees," within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and, as such, to be exempt from the provisions of Parts II, III and IV of Title I of ERISA. 

 
 

ARTICLE 2
  DEFINITIONS    
  

    Account.  "Account" means, with respect to a Participant, the Account established on the books of the Employer pursuant
to Article 4. 

    Administrator.  "Administrator" means the committee that has been appointed to administer the Plan. 

    Affiliate.  "Affiliate" means any firm, partnership, or corporation that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the Company. 

    Base Salary.  "Base Salary" means the rate of base salary paid to each Participant on the date the Employee becomes a
Participant, as determined by the Employer. 

    Beneficiary.  "Beneficiary" means the beneficiary(ies) (or contingent beneficiary(ies) in the event that the primary
beneficiary does not survive the Participant) designated by the Participant, who will receive any portion of the Supplemental Benefit payable upon the death of the Participant. 

    Board.  "Board" means the Board of Directors of the Company. 

    CEO.  "CEO" mean the Chief Executive Officer of the Company. 

    Change of Control.  "Change of Control" means the first to occur of any of the following events: 

    (a) The
acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained
by the Company, or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c); or 

    (b) Individuals
who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority
of the 

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directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or 

    (c) Consummation
of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of, respectively, the
then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the
corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the Business combination and (iii) at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business
Combination; or 

    (d) Approval
by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

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

    Company Stock.  "Company Stock" means the shares of common stock of the Company that may be issued or transferred under
the Plan. 

    Disabled or Disability.  "Disabled or Disability" means that the Participant is disabled due to sickness or injury which
qualifies the Participant for disability under the Employer's long-term disability plan. A Participant shall be considered totally disabled on the date he qualified for such long term
disability payments. 

    Effective Date.  "Effective Date" means June 1, 2000. 

    Employee.  "Employee" means each Executive Vice President or Senior Vice President of the Employer and any other
employee designated as an Employee by the CEO. 

    Employer.  "Employer" means the Company and any Affiliate which is authorized by the Board to adopt the Plan and to
cover its Eligible Employees and whose designation as such has become effective upon acceptance of such status by the board of directors of the Affiliate. An Affiliate may revoke its acceptance of
such designation at any time, but until such acceptance has been revoked, all the provisions of the Plan and amendments thereto shall apply to the Eligible Employees of the Affiliate. In the event the
designation is revoked by the board of directors of an Affiliate, the Plan shall be deemed terminated only with respect to such Affiliate. 

3

 

    Fair Market Value.  "Fair Market Value" means the amount determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the
latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported "bid" and "asked"
prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or "bid" or "asked" quotations
as set forth above, the Fair Market Value per share shall be as determined by the Board. 

    Participant.  "Participant" means any Employee who is selected by the CEO of the Company to participate in the Plan
pursuant to Section 3 and who is a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. In the event
of the death or incompetency of a Participant, the term shall mean the Participant's personal representative or guardian. 

    Plan.  "Plan" means the Hilton Hotels Corporation Supplemental Retirement and Retention Plan as set forth herein and as
it may be amended from time to time. 

    Plan Year.  "Plan Year" means each calendar year during which the Plan is in effect. 

    Retirement.  "Retirement" means (i) the termination of the Participant's employment with the Employer (for
reasons other than death) on or after age 65, or on or after the combination of the Participant's age and Years of Service equals at least 55, or (ii) in the case of a Participant who ceases to
be employed by, or provide services to the Employer, for any reason, prior to Retirement, the date the former Participant would have reached Retirement had he or she not terminated employment with the
Employer but only taking into account the number of Years of Service the Participant had at the time of cessation of employment. 

    Right.  "Right" means a right equivalent to one share of Company Stock. The Company may issue to a Participant a
certificate evidencing his or her Rights awarded under the Plan. 

    Right Agreement.  "Right Agreement" means an agreement provided to each Participant which provides the number of Rights
awarded and the terms and conditions related to the Rights awarded. 

    Right Value.  "Right Value" means, at any time, the value of each Right issued under the Plan, which value shall be
equal to the Fair Market Value of a share of Company Stock. 

    Supplemental Benefit.  "Supplemental Benefit" means a supplemental retirement benefit equal to the balance of the
Participant's Account as determined under Article 4 as of any date of reference. 

    Years of Service.  "Years of Service" means the number of years that the Participant has been employed with the Employer
prior to the Effective Date. 

 
 

ARTICLE 3
  ELIGIBILITY    
  

    3.1 Each
Employee on the Effective Date shall be a Participant in the Plan if designated by the CEO. 

    3.2 An
individual who becomes an Employee after the Effective Date shall become a Participant on the date designated by the CEO. 

4

 
 
 

ARTICLE 4
  SUPPLEMENTAL BENEFIT    
  

    4.1 The
Supplemental Benefit of a Participant shall be an amount equal to the value of the Participant's Account on the date of reference, determined as provided
herein. 

    4.2 The
Employer shall create and maintain an unfunded Account on its books to reflect the number of Rights credited to each Participant hereunder and the Rights Value
of such Rights. The initial credit to a Participant's Account shall be determined by the CEO taking into account such factors as Years of Service (not including service with an Affiliate before it
became an Affiliate, Base Salary and such other factors are the CEO determines to be relevant. Each Participant's initial credit shall be shown on Schedule A opposite the Participant's name. No
Account shall be credited with a fractional Right. The grant of Rights to a Participant shall be evidenced by a Right Agreement. 

    4.3 Notwithstanding
the creation of an Account for each Participant, no Participant or any other person shall under any circumstance shall acquire any property interest
in any specific assets of the Employer. In the event a dividend is declared with respect to shares of the Company's Stock, the amount of the dividend that would have been distributed as to those
Rights had each such Right been a share of Company Stock, shall be converted into additional Rights based upon the Fair Market Value of the Company Stock on the date of the dividend is paid and
credited to the Participant's Account. 

    4.4 The
value of a Participant's Account as of any date shall be determined as if those Rights were shares of Company Stock. The Administrator shall provide to each
Participant, not less frequently than
quarterly, a statement in such form as the Administrator deems desirable setting forth the balance standing to the credit of each Participant in his or her Account. 

 
 

ARTICLE 5
  VESTING    
  

    5.1 A
Participant's entitlement to the Rights credited to the Participant's Account shall vest at a rate of twenty-five percent (25%) of the Rights on each
anniversary of the date as of which the Rights are initially credited to the Participant's Account if the Participant is employed by, or providing service to, the Employer on such date. The vesting of
the Rights is cumulative and all Rights shall be fully vested on the 4th anniversary as of the date as of which the Rights are initially credited to the Participant's Account, if the Participant
continues to be employed by, or provide services to, the Employer through such date. If the vesting percentage produces fractional Rights, the number of Rights which vest shall be rounded down to the
nearest whole Rights. 

    5.2 If
a Participant cease to be employed by, or provide services to the Employer, for any reason except death or Disability, any Rights which have not otherwise vested
shall terminate as of the date on which the Participant ceases to be employed by, or provide services to the Employer, determined without regard to any severance or salary continuation plan or
program. 

    5.3 If
a Participant dies or becomes Disabled while still an Employee any Rights which have not otherwise vested shall vest as of the date of the Participant's death or
Disability. 

    5.4 Upon
a Change of Control any Rights which have not otherwise vested as of the date of the Change of Control shall be fully vested as of such date, if the
Participant continues to be employed by, or provide services to, the Employer through such date. 

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ARTICLE 6
  DISTRIBUTION OF SUPPLEMENTAL BENEFIT    
  

    6.1 A
Participant's Supplemental Benefit shall be distributed in that number of shares of Company Stock which equal the number of Rights credited to the Participant's
Account and being distributed. A Participant does not have the right to receive a cash payment under the Plan. 

    6.2 The
Employer shall distribute the Supplemental Benefit to a Participant (or the Participant's Beneficiary) in a single distribution as soon as reasonably
practicable on the first day of the thirteenth month following the Participant's Retirement. Alternatively, prior to Retirement, the Participant may make a written election in the manner determined by
the Administrator, to delay distribution to the month of January in any of the next four Plan Years and/or to have the distribution commence in the Plan Year it would otherwise have been made or in
January of any of the next four Plan Years in an equal number of shares of Company Stock over a designated period (not to exceed ten years). 

    6.3 If
a Participant dies after beginning to receive a Supplemental Benefit in installments, any further payments shall cease and the balance of the distribution shall
be made to the Participant's Beneficiary in a single distribution as soon as reasonably practicable following the Participant's death in accordance with procedures established by the Administrator. 

    6.4 If
a Participant dies prior to beginning to receive a Supplemental Benefit, the Participant's Beneficiary shall be entitled to receive the Supplemental Benefit in a
single distribution, as soon as administratively feasible in accordance with procedures established by the Administrator. 

    6.5 In
the event a Participant attains eligibility for Retirement while employed by the Employer, such Participant may make a written election, in the manner determined
by the Administrator, to receive distribution on the first day of the thirteenth month following such election, or in any of the next four Plan Years, in either a single distribution or in a
distribution of an equal number of shares of Company Stock over a designated period (not to exceed five years) a number of shares of Company Stock equal to up to 50% of the Participant's Supplemental
Benefit. 

 
 

ARTICLE 7
  FUNDING AND SHARES    
  

    7.1 The
Board may, but shall not be required to, authorize the establishment of a trust by the Employer to serve as the funding vehicle for the benefits described
herein. In any event, the Employer's
obligations hereunder shall constitute a general, unsecured obligation, payable solely out of its general assets, and no Participant shall have any right to any specific assets of the Employer. 

    7.2 Subject
to adjustment as described below, the aggregate number of shares of Company Stock that may be issued or transferred under the Plan is 3,500,000 shares. The
shares issued under the Plan will be treasury shares that have been reacquired by the Company. If any Rights are forfeited, the shares of Company Stock represented by such Rights shall again be
available for purposes of the Plan. 

    7.3 If
there is any change in the number or kind of shares of Common Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split,
or combination or exchange of shares, (ii) by reason of a merger, reorganization (including a change in the Company's business structure from a corporation to a limited liability company) or
consolidation in which the Company is the surviving corporation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual
event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of
a spinoff or the Company's payment of an extraordinary dividend or distribution the maximum number of shares of Company Stock available for Rights, the number of shares covered by outstanding Rights,
the kind of shares issued under the Plan, and the price per share of such Rights may be appropriately adjusted by the Administrator acting on behalf of the Company to 

6

 

reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock; provided, however, that any fractional shares resulting from such adjustment shall
be eliminated. Any adjustments determined by the Administrator shall be final, binding and conclusive. 

 
 

ARTICLE 8
  ADMINISTRATION OF THE PLAN AND DISCRETION    
  

    8.1 The
Administrator shall have full power and authority to interpret the Plan, to prescribe, amend and rescind any rules, forms and procedures as it deems necessary
or appropriate for the proper administration of the Plan and to make any other determinations, including factual determinations, and to take any other such actions as it deems necessary or advisable
in carrying out its duties under the Plan. All action taken by the Administrator arising out of, or in connection with, the administration of the Plan or any rules adopted thereunder, shall, in each
case, lie within its sole discretion, and shall be final, conclusive and binding upon the Company, the Employer, the Board, all Employees, all Beneficiaries and all other persons and entities having
an interest therein. 

    8.2 The
Administrator shall serve without compensation for services unless otherwise determined by the Board. The Employer shall pay all expenses of administering the
Plan except as otherwise determined by the Administrator. 

    8.3 The
Employer shall indemnify and hold harmless the Administrator from any and all claims, losses, damages, expenses (including counsel fees) and liability
(including any amounts paid in settlement of any claim or any other matter with the consent of the Board) arising from any act or omission of such member, except when the same is due to gross
negligence or willful misconduct. 

    8.4 Any
decisions, actions or interpretations to be made under the Plan by the Company, the Employer, the Board, or the Administrator acting on behalf of the Company,
shall be made in its respective sole discretion, not as a fiduciary and need not be uniformly applied to similarly situated individuals and shall be final, binding and conclusive on all persons
interested in the Plan. 

    8.5 Nothing
contained in this Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company, the Employer
or the Board and any Participant or any other person. To the extent that any person acquires a right to receive payment from the Employer hereunder, such right shall be no greater than the right of
any unsecured general creditor of the Employer. 

 
 

ARTICLE 9
  MISCELLANEOUS    
  

    9.1  Amendment and Termination.  The Plan may be amended, suspended, discontinued or terminated at any
time by the Board; provided, however, that no such amendment, suspension, discontinuance or termination shall reduce or in any manner adversely affect the rights of any Participant with respect to
benefits that are payable or may become payable under the Plan based upon the balance of the Participant's vested benefit as of the effective date of such amendment, suspension, discontinuance or
termination. 

    9.2  Claims Procedure.  

    (a)  Claim.  A person who believes that he is being denied a benefit to which he is entitled under the
Plan (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Administrator, setting forth the claim. 

    (b)  Claim Decision.  Upon receipt of a claim, the Administrator shall advise the Claimant that a reply
will be forthcoming within ninety days and shall, in fact, deliver such reply within such 

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period. The Administrator may, however, extend the reply period for an additional ninety days for reasonable cause. 

    If
the claim is denied in whole or in part, the Claimant shall be provided a written opinion, using language calculated to be understood by the Claimant, setting forth: 

     (i) The
specific reason or reasons for such denial; 

    (ii) The
specific reference to pertinent provisions of this Agreement on which such denial is based; 

    (iii) A
description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information
is necessary; 

    (iv) Appropriate
information as to the steps to be taken if the Claimant wishes to submit the claim for review; and 

    (v) The
time limits for requesting a review under subsection (c) and for review under subsection (d) hereof. 

    (c)  Request for Review.  Within sixty days after the receipt by the Claimant of the written opinion
described above, the Claimant may request in writing that the Administrator review the determination of the Administrator. The Claimant or his duly authorized representative may, but need not, review
the
pertinent documents and submit issues and comment in writing for consideration by the Administrator. If the Claimant does not request a review of the initial determination within such
sixty-day period, the Claimant shall be barred and estopped from challenging the determination. 

    (d)  Review of Decision.  Within sixty days after the Administrator's receipt of a request for review, it
will review the initial determination. After considering all materials presented by the Claimant, the Administrator will render a written opinion, written in a manner calculated to be understood by
the Claimant, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special
circumstances require that the sixty day time period be extended, the Administrator will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review. 

    9.3  Designation of Beneficiary.  Each Participant may designate a Beneficiary or Beneficiaries (which
Beneficiary may be an entity other than a natural person), and a contingent Beneficiary or contingent Beneficiaries, to receive any payments which may be made following the Participant's death. Such
designation may be changed or canceled at any time without the consent of any such Beneficiary. Any such designation, change or cancellation must be made in a form approved by the Administrator and
shall not be effective until received by the Administrator, or its designee. If no Beneficiary has been named, or the designated Beneficiary or Beneficiaries shall have predeceased the Participant,
the Beneficiary shall be the Participant's estate. If a Participant designates more than one Beneficiary, the interests of such Beneficiaries shall be paid in equal shares, unless the Participant has
specifically designated otherwise. 

    9.4  Limitation of Participant's Right.  Nothing in this Plan shall be construed as conferring upon any
Participant any right to continue in the employment of the Employer, nor shall it interfere with the rights of the Employer to terminate the employment of any Participant and/or to take any personnel
action affecting any Participant without regard to the effect which such action may have upon such Participant as a recipient or prospective recipient of benefits under the Plan. Any amounts payable
hereunder shall not be deemed salary or other compensation to a Participant for the purposes of computing benefits to which the Participant may be entitled under any other arrangement established by
the Employer for the benefit of its employees. 

8

 

    9.5  No Limitation on Company Actions.  Nothing contained in the Plan shall be construed to prevent the
Company from taking any action that is deemed by it to be appropriate or in its best interest. No Participant, Beneficiary, or other person shall have any claim against the Company or the Employer as
a result of such action. 

    9.6  Nonalienation of Benefits.  Except as expressly provided herein, no Participant or Beneficiary shall
have the power or right to transfer (otherwise than by will or the laws of descent and distribution), alienate, or otherwise encumber the Participant's interest under the Plan. The Employer's
obligations under this Plan are not assignable or transferable except to (a) any corporation or partnership which acquires all or substantially all of the Employer's assets or (b) any
corporation or partnership into which the Employer may be merged or consolidated. The provisions of the Plan shall inure to the benefit of each Participant and the Participant's Beneficiaries, heirs,
executors, administrators or successors in interest. 

    9.7  Withholding Taxes.  The Employer may make such provisions and take such action as it may deem
necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation of any governmental authority, whether Federal, state or local, at the minimum
required level, to withhold in connection with any benefits under the Plan, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Participant (or
his Beneficiary). Each Participant, however, shall be responsible for the payment of all individual tax liabilities relating to any such benefits. 

    9.8  Unfunded Status of Plan.  The Plan is intended to constitute an "unfunded" plan of deferred
compensation for Participants. Benefits payable hereunder shall be payable out of the general assets of the Employer, and no segregation of any assets whatsoever for such benefits shall be made.
Notwithstanding any segregation of assets or transfer to a grantor trust, with respect to any payments not yet made to a Participant, nothing contained herein shall give any such Participant any
rights to assets that are greater than those of a general creditor of the Employer. In the event that the Board determines that a Change of Control is imminent, the Board shall cause the Company to
create and fund a grantor trust of the Company that shall serve as the vehicle for paying all benefits due under the Plan and the number of shares of Company Stock contributed by the Company shall be
that number of shares the Board determines would then due if the Plan were to terminate and all benefits were then to be paid in a single distribution. If a Change of Control shall not have occurred
within six months of such contribution by the Company, the Board may adopt a resolution to the effect that a Change of Control is not imminent and, in that event, up to all shares contributed to the
Trust and all earnings thereon, shall be redistributed to the Company at the direction of the Board. 

    9.9  Severability.  If any provision of this Plan is held unenforceable, the remainder of the Plan shall
continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan. 

    9.10  Governing Law.  The Plan shall be construed in accordance with and governed by the laws of the
State of California, without reference to the principles of conflict of laws. 

    9.12  Headings.  Headings are inserted in this Plan for convenience of reference only and are to be
ignored in the construction of the provisions of the Plan. 

    9.13  Gender, Singular and Plural.  All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may read as the plural and the plural as the singular. 

    9.14  Notice.  Any notice or filing required or permitted to be given to the Administrator under the Plan
shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Human Resources Department, or to such other entity as the Administrator may designate from time
to time. Such notice shall be deemed given as to the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 

9

 
 
 

SCHEDULE A    
  

	Participant
 
	 	Initial Credit

	 	 	 
	 	 	 
	

 	
 	

 

10

 
 
 

SCHEDULE B    
  

11

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Exhibit 10.42

HILTON HOTELS CORPORATION Supplemental Retirement and Retention Plan

ARTICLE 1 PURPOSE

ARTICLE 2 DEFINITIONS

ARTICLE 3 ELIGIBILITY

ARTICLE 4 SUPPLEMENTAL BENEFIT

ARTICLE 5 VESTING

ARTICLE 6 DISTRIBUTION OF SUPPLEMENTAL BENEFIT

ARTICLE 7 FUNDING AND SHARES

ARTICLE 8 ADMINISTRATION OF THE PLAN AND DISCRETION

ARTICLE 9 MISCELLANEOUS

SCHEDULE A

SCHEDULE BPrepared by MERRILL CORPORATION www.edgaradvantage.com

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EXHIBIT 10.45    
  

   

 Office of the

President and Chief Executive Officer  

December 28, 2000 

Mr.
Thomas Gallagher

Park Place Entertainment Company

3930 Howard Hughes Parkway

Las Vegas, NV 89109 

Dear
Tom: 

In
light of your new position, your employment will terminate from Hilton Hotels Corporation ("Hilton") on December 31, 2000. In consideration for all of the valuable services you rendered to
Hilton during your career, and in full satisfaction of any rights that you may have accrued under the Company's 1996 Stock Incentive Plan (the "Option Plan") and the Company's Supplemental Retirement
and Retention Plan (the "SRRP"), the Company will agree to provide you with the exit arrangement summarized below. If this is acceptable to you, please so indicate in the space provided below. This
letter will then serve as our agreement as to your continuing entitlements under the Option Plan and the SRRP and confirm that there are no other benefits or rights due to you under either such plan.
You and Hilton hereby agree as follows: 

1.  Hilton
will take all steps necessary to cause the stock options granted to you under the Option Plan on January 13, 2000 (for 200,000 shares) to be fully vested and
exercisable (at $9.21875 per share) until January 12, 2006. All other options granted to you under the Option Plan will terminate with your termination of employment on December 31,
2000. 

2.  You
were originally credited with an interest in 279,065 shares under the SRRP. Hilton will also take all stops necessary to cause 48% of your entitlement under the SRRP
(133,951 shares) to vest and be distributable to you in accordance with the terms of the SRRP. The balance of your interest under the SRRP (145,114 shares) will be forfeited with your
termination of employment on December 31, 2000. 

Mr. Thomas Gallagher

December 28, 2000

Page Two 

If
the foregoing accurately sets forth your understanding of the agreement between Hilton and you, please so indicate in the space provided below in the copy of this letter attached and return the
same to me for our files. This letter will then constitute a binding obligation of both you and Hilton as to the matters described above. 

Sincerely
yours,

   

Hilton Hotels Corporation

By: Stephen F. Bollenbach 

This
letter accurately sets forth my agreement with

Hilton Hotels Corporation as to the matters described. 

   

Thomas Gallagher 

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EXHIBIT 10.45

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