DEBT ASSUMPTION AGREEMENT
This Debt Assumption Agreement (the "Agreement") is entered into this
____ day of ______, 1998 between Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), and Park Place Entertainment Corporation, a Delaware
corporation and indirect wholly-owned subsidiary of Hilton ("Park Place").
RECITALS
WHEREAS, Hilton and Park Place have entered into a Distribution
Agreement dated as of _______, 1998, which provides for among other things, (i)
the distribution (the "Distribution") to the holders of Hilton's outstanding
shares of common stock, par value $2.50 per share (the "Common Stock"), on a
one-for-one basis, of all the outstanding shares of common stock, par value $.01
per share, of Park Place (the "Park Place Common Stock"), (ii) the division
between Hilton and Park Place of certain assets and liabilities and (iii)
certain other agreements governing the relationship between Hilton and Park
Place following the Distribution;
WHEREAS, Hilton has entered into an indenture dated as of April 15,
1997 (the "Indenture") with BNY Western Trust Company, as trustee (the
"Trustee"), pursuant to which Hilton may issue debt securities in series from
time to time;
WHEREAS, Hilton has outstanding $300 million aggregate principal
amount of 7.375% Senior Notes due 2002 (the "2002 Notes"), issued pursuant to
the Indenture, as supplemented by terms established pursuant to a Board
Resolution (as defined in the Indenture) adopted on May 28, 1997 and set forth
in an Officer's Certificate (the "2002 Officer's Certificate" and, together with
the Indenture, the "2002 Indenture");
WHEREAS, Hilton has outstanding $325 million aggregate principal
amount of 7% Senior Notes due 2004 (the "2004 Notes" and, together with the 2002
Notes, the "Notes")
issued pursuant to the Indenture, as supplemented by terms established pursuant
to a Board Resolution adopted on July 17, 1997 and set forth in an Officer's
Certificate (the "2004 Officer's Certificate" and, together with the Indenture,
the "2004 Indenture") (the 2002 Indenture and the 2004 Indenture being referred
to collectively herein as the "Indentures"); and
WHEREAS, the Distribution Agreement provides that Park Place shall
enter into this Agreement on or prior to the date on which the Distribution is
effected (the "Distribution Date"), in order to provide for the assumption of
obligations set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants set forth herein, the parties hereby agree as follows:
SECTION 1. CAPITALIZED TERMS.
Capitalized terms used herein, and not defined herein, shall have the
meanings ascribed to such terms in the Indentures.
SECTION 2. EXECUTION OF THE SUPPLEMENTAL INDENTURE.
Park Place and Hilton agree to amend the terms of the Indentures by
executing the First Supplemental Indenture in the form attached hereto as
Exhibit A (the "Supplemental Indenture") on the Distribution Date, which
Supplemental Indenture will serve to amend the 2002 Indenture with respect to
the 2002 Notes and the 2004 Indenture with respect to the 2004 Notes. The
Supplemental Indenture will not amend the Indenture with respect to any other
series of Debt Securities that Hilton has issued or may issue pursuant to the
Indenture. Hilton agrees to deliver to the Trustee an Officer's Certificate and
an Opinion of Counsel, in form and substance satisfactory to the Trustee,
stating that the execution of the Supplemental Indenture is authorized pursuant
to section 11.01 of the Indenture. Park Place and Hilton agree to take all such
other
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action as may be reasonably necessary to cause the Trustee to execute the
Supplemental Indenture.
SECTION 3. PARK PLACE PAYMENT OBLIGATION.
Pursuant to the Supplemental Indenture, Park Place will assume
responsibility for, and agree to pay, one hundred percent (100%) of the amount
of each payment required to be made by Hilton to Holders of Notes pursuant to
the terms of the Indentures and the Notes with respect to the principal of (and
premium, if any) and interest on the Notes (the "Park Place Payment
Obligations"). Under the circumstances set forth below, Park Place shall be
entitled to certain payments from Hilton.
SECTION 4. HILTON OBLIGATIONS.
Any payments by Park Place in satisfaction of the Park Place Payment
Obligations shall be deemed to relieve Hilton of its obligations under the
Indentures to the extent of such payments by Park Place. Subject to the Park
Place Payment Obligations, Hilton shall retain all of its obligations with
respect to payments under the Indentures with respect to the Notes, including,
without limitation, the obligation to make payment of the Park Place Payment
Obligations in the event Park Place fails to make any such payments as provided
in Section 3.
SECTION 5. DIRECT PAYMENT BY HILTON.
Upon a default by Park Place in the Park Place Payment Obligations,
Hilton shall have the right to pay all or any portion of the Park Place Payment
Obligations directly to the Paying Agent or the Trustee. In such event, Park
Place shall be required to pay to Hilton upon demand any amounts paid by Hilton
in satisfaction of the Park Place Payment Obligations, together with interest on
any such amounts at the rate per annum borne by the applicable Notes
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plus 2% per annum, calculated from the date such payment was due from Park Place
under the applicable Indenture to the date such payment is made by Park Place to
Hilton.
SECTION 6. HILTON REIMBURSEMENT OBLIGATION.
In the event of an Acquisition Related Rating Change, Hilton shall be
required to pay to Park Place, as such amounts become due under the applicable
Notes, the increase in the interest rate on the Notes attributable to such
Acquisition Related Rating Change.
SECTION 7. EVENT OF DEFAULT BY HILTON.
If Hilton creates an Event of Default under the Indentures and the
Notes are accelerated in accordance with the terms of the applicable Indenture
as a result thereof, Park Place will have the option to require Hilton to loan
it an amount sufficient to make such payments. In such event, Park Place will
repay such loan to Hilton on the schedule it would have adhered to for payments
on the Notes if no acceleration had occurred.
SECTION 8. COVENANTS.
Park Place agrees with Hilton to comply with the following covenants
for the sole benefit of Hilton and for so long as it is obligated to make the
Park Place Payment Obligations. Hilton's remedies upon a breach of the
following covenants by Park Place are set forth in Section 8(e) below. Certain
defined terms used below are set forth on Exhibit B hereto.
(a) LIMITATIONS ON LIENS. Other than as set forth in Section 8(c)
below, neither Park Place nor any Restricted Subsidiary will create, assume or
suffer to exist any Lien (i) upon any Principal Property, (ii) upon any shares
of capital stock of any Restricted Subsidiary owned by Park Place or any
Restricted Subsidiary or (iii) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the Notes with (or prior to) the Debt
secured by such Lien, for so long as such Debt shall be so secured, PROVIDED,
HOWEVER, that this limitation will not
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apply to (a) Liens existing on the date of issuance of the Notes or on the date
of the assumption by Park Place of the payment obligations under the Indentures
governing the Notes; (b) Liens existing (i) on property at the time of
acquisition thereof by Park Place or a Restricted Subsidiary (whether such
property is acquired through a merger, a consolidation or otherwise), or (ii) on
property or securing Debt of, or an equity interest in, any corporation,
partnership or other entity at the time such corporation, partnership or other
entity becomes a Restricted Subsidiary; (c) Liens to secure Debt with respect to
all or any part of the acquisition cost or the cost of construction or
improvement of property, PROVIDED, such Debt is incurred and related Liens are
created within 24 months of the acquisition, completion of construction or
improvement or commencement of full operation, whichever is later, and such Debt
does not exceed the aggregate amount of the acquisition cost and/or the
construction cost thereof; (d) Liens on shares of capital stock or property of a
Restricted Subsidiary to secure Debt with respect to all or part of the
acquisition cost of such Restricted Subsidiary, PROVIDED that such Debt is
incurred and related Liens are created within 24 months of the acquisition of
such Restricted Subsidiary and such Debt does not exceed the acquisition cost of
such Restricted Subsidiary; (e) Liens to secure Debt incurred to construct
additions to, or to make Capital Improvements to, properties of Park Place or
any Restricted Subsidiary, PROVIDED such Debt is incurred and related Liens are
created within 24 months of completion of construction or Capital Improvements
and such indebtedness does not exceed the cost of such construction or Capital
Improvements; (f) Liens in favor of Park Place or another Restricted Subsidiary;
(g) Liens to secure Debt on which interest payments are exempt from Federal
income tax under Section 103 of the Internal Revenue Code of 1986, as amended;
(h) Liens on the capital stock, partnership or other equity interests of Park
Place or any
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Restricted Subsidiary in any Joint Venture or any Restricted Subsidiary which
owns an equity interest in such Joint Venture to secure Debt, PROVIDED the
amount of such Debt is contributed and/or advanced solely to such Joint Venture;
(i) any extension, renewal or replacement, in whole or in part, of any Liens
referred to in the foregoing clauses (a) through (h) or of any Debt secured
thereby, including premium, if any, PROVIDED that the aggregate principal amount
secured does not exceed (x) the greater of (i) the principal amount secured
thereby at the time of such extension, renewal or replacement, or, as the case
may be, repayment or extinguishment and (ii) 80% of the fair market value (in
the opinion of Park Place's board of directors) of the properties subject to
such extension, renewal or replacement plus (y) any reasonable fees and expenses
associated with such extension, renewal or replacement, and PROVIDED, FURTHER,
that in the case of a replacement thereof, such Debt is incurred and related
Liens are created within 24 months of the repayment or extinguishment of the
Debt or Liens referred to in the foregoing clauses (a) through (h); (j) purchase
money liens on personal property; (k) Liens to secure payment of workers'
compensation or insurance premiums, or relating to tenders, bids or contracts
(except contracts for the payment of money); (l) Liens in connection with tax
assessments or other governmental charges, or as security required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege or right; (m) mechanic's, materialman's, carrier's or
other like Liens, arising in the ordinary course of business; and (n) Liens in
favor of any domestic or foreign government or governmental body in connection
with contractual or statutory obligations.
(b) LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as
provided in Section 8(c) below, neither Park Place nor any Restricted Subsidiary
will enter into any arrangement with any lessor (other than Park Place or a
Restricted Subsidiary), providing for the
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lease to Park Place or a Restricted Subsidiary for a period of more than three
years (including renewals at the option of the lessee) of any Principal Property
that has been or is to be sold or transferred by Park Place or such Restricted
Subsidiary to such lessor or to any other Person, and for which funds have been
or are to be advanced by such lessor or other Person on the security of the
leased property ("Sale and Lease-Back Transaction"), unless either (a) Park
Place or such Restricted Subsidiary would be entitled, pursuant to the
provisions described in clauses (a) through (n) in Exhibit B, to create, assume
or suffer to exist a Lien on the property to be leased without equally and
ratably securing the Notes, or (b) an amount equal to (i) the greater of the net
cash proceeds of such sale or the fair market value of such property (in the
opinion of Park Place's board of directors) less (ii) the fair market value (in
the opinion of Park Place's board of directors) of any noncash proceeds of the
sale of such property (PROVIDED such noncash proceeds constitute "Principal
Property," acquired on the date the property sold in the Sale and Lease-Back
Transaction was acquired by Park Place or any of its Restricted Subsidiaries),
is applied within 180 days to the retirement or other discharge of the Notes or
Debt ranking on a parity with the Notes.
(c) EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS.
Notwithstanding the restrictions set forth in Sections 8(a) and 8(b) above, Park
Place or any Restricted Subsidiary may create, assume or suffer to exist Liens
or enter into Sale and Lease-Back Transactions not otherwise permitted as
described in Sections 8(a) and 8(b) above, PROVIDED that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted in Section 8(a)) plus all Attributable
Debt in respect of such Sale and Lease-Back Transactions entered into (not
including Sale and Lease-Back Transactions permitted in Section 8(b)), measured,
in each case, at the time any such Lien is incurred or any
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such Sale and Lease-Back Transaction is entered into, by Park Place and
Restricted Subsidiaries does not exceed 15% of Consolidated Net Tangible Assets.
(d) LIMITATION ON MERGER, CONSOLIDATION AND TRANSFER OF ASSETS. Park
Place shall not consolidate with, merge with or into, or sell, assign, convey,
transfer or lease its properties and assets substantially in their entirety
(computed on a consolidated basis) to any Person unless:
(1) either (A) Park Place is the surviving entity or (B) the
successor or transferee (the "Successor Corporation") is a corporation organized
and existing under the laws of the United States, any State thereof or the
District of Columbia and shall expressly assume all of the obligations of Park
Place in this Agreement and the Supplemental Indenture; and
(2) immediately after giving effect to such transaction, Park
Place or the Successor Corporation, as the case may be, is not in default on its
obligations under the Agreement or the Supplemental Indenture.
Upon any consolidation with or merger with or into any other
corporation, or any sale, assignment, conveyance, transfer or lease of the
properties and assets of Park Place substantially in their entirety in
accordance with this Section 8(d), the Successor Corporation formed by such
consolidation or into which Park Place is merged or to which such sale,
assignment, conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, Park Place under
this Agreement with the same effect as if such Successor Corporation had been
named as Park Place herein.
(e) BREACH OF COVENANTS BY PARK PLACE. If Park Place breaches any of
the covenants set forth in this Section 8 after written notice by Hilton and the
continuance of such default for 60 days, Hilton shall have the right to require
that Park Place or the Successor
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Corporation, as the case may be, set aside the remaining payments due on the
Notes in an escrow account for the benefit of Hilton. Park Place will make
scheduled payments to Holders of Notes from such escrow account. If Park Place
fails to make such payments from the escrow account, Hilton shall be entitled to
direct the Trustee to make scheduled payments due from Park Place to Holders of
Notes from such escrow account. If Park Place cures such default and is
otherwise in compliance with the Park Place Payment Obligations, Park Place
shall be entitled to the repayment of the amount remaining in such escrow
account.
SECTION 9. DEFEASANCE AND TENDER OFFERS.
(a) In the event Hilton wishes to tender for or defease any or all of
the Notes at its option, Hilton will loan Park Place the funds sufficient to
permit Park Place to effect such tender or defeasance. In such event, Park
Place will repay such loan, but the amount of such repayment shall not exceed,
and will be made on the same schedule as, the payments Park Place would have
made on the Notes if no tender or defeasance had occurred.
(b) In the event Park Place wishes to tender for or defease any or
all of the Notes at its option, it may do so and shall be responsible for any
payments required thereunder. Hilton agrees to provide the necessary
cooperation required from it as the original obligor on the Notes to effect such
tender or defeasance.
SECTION 10. NOTICE TO HOLDERS OF NOTES.
Hilton shall deliver a notice to Holders of Notes, reasonably
satisfactory in form and substance to Park Place, within 30 days following the
Distribution Date that describes the matters set forth in the Supplemental
Indenture.
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SECTION 11. CERTAIN REPRESENTATIONS.
Each party hereto represents to the other party hereto that this
Agreement is enforceable against such party in accordance with its terms.
SECTION 12. COMPLIANCE WITH INDENTURES.
(a) Hilton agrees to comply with all of its obligations under the
Indentures and the Supplemental Indentures, and not to take any action that
would cause an Event of Default under the Indentures.
(b) Park Place agrees to comply with all of its obligations under the
Indentures and the Supplemental Indenture, and not to take any action that would
cause an Event of Default under the Indentures.
SECTION 13. AMENDMENT OF INDENTURES AND SUPPLEMENTAL INDENTURE.
Hilton agrees that it will not amend the Supplemental Indenture or
either of the Indentures with respect to the Notes without the prior written
consent of Park Place (which consent shall not be unreasonably withheld) except
to (i) evidence the succession of another entity in place of Hilton as permitted
by the Indentures or (ii) in the event Hilton is required to secure the Notes
under applicable provisions of the Indentures. Hilton may amend the Indenture
without the consent of Park Place with respect to any Debt Securities other than
the Notes.
SECTION 14. REMEDIES.
Hilton and Park Place acknowledge and agree that money damages would
be inadequate relief for any breach or threatened breach of their obligations
hereunder, and that either party shall be entitled to injunctive or other
equitable relief for any breach or threatened breach.
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SECTION 15. SEVERABILITY.
The invalidity or partial invalidity or unenforcability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions.
SECTION 16. CHOICE OF LAW.
THIS AGREEMENT SHALL BE CONSTRUED UNDER AND ENFORCED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS.
SECTION 17. ATTORNEY'S FEES.
If either party commences an action against the other with respect to
this Agreement, the prevailing party in such action shall be entitled to an
award of reasonable costs and expenses of litigation, including reasonable
attorneys' fees, to be paid by the non-prevailing party.
SECTION 18. ENTIRE AGREEMENT.
This Agreement and the Supplemental Indenture constitute the entire
agreement and understanding between the parties with respect to its subject
matter, are intended as a complete and exclusive statement of the terms of their
agreement with respect to the Notes and supersede any prior or contemporaneous
agreement or understanding related to the subject matter hereof. To the extent
that there is any conflict between the terms of the Indentures and the
Supplemental Indenture and the terms of this Agreement, the terms of the
Indentures and the Supplemental Indenture shall control.
SECTION 19. AMENDMENTS.
This Agreement may not be amended, supplemented or modified in any
respect except by written agreement between the parties, duly signed by their
respective authorized
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representatives, PROVIDED, that a Successor Corporation may assume the
obligations of Park Place hereunder in accordance with the terms set forth in
Section 8(d) and a successor corporation (as defined in the Indenture) may
assume the obligations of Hilton hereunder so long as in connection therewith
Hilton has complied with the provisions of Section 10.01 of the Indentures.
SECTION 20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all such counterparts together shall
constitute but one and the same instrument.
SECTION 21. WAIVER.
Either party may specifically waive any breach of this Agreement by
the other party, but no such waiver shall be deemed effective unless in writing,
signed by the waiving party, and specifically designating the breach waived. No
waiver shall constitute a continuing waiver of similar or other breaches.
SECTION 22. NOTICES.
Any notice required or permitted hereunder shall be delivered in the
manner set forth in Section 1.05 of the Indentures.
SECTION 23. HEADINGS.
The descriptive headings of the several Sections of this Agreement are
for convenience only and do not constitute a part of the Agreement or affect its
meaning or interpretation.
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SECTION 24. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement by the parties hereto
shall bind their respective successors and assigns and inure to the benefit of
their permitted successors and assigns.
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IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this Agreement as of the date first written above.
HILTON HOTELS CORPORATION
By: _____________________________
Its: _____________________________
PARK PLACE ENTERTAINMENT CORPORATION
By: _____________________________
Its: _____________________________
S-1
Exhibit A
[First Supplemental Indenture]
A-1
Exhibit B
DEFINED TERMS
"Acquisition Event" means a transaction or series of transactions that
constitute related steps that are part of a single transaction, with respect to
which a Public Notice has been given at any time on or before July 22, 2000,(1)
the aggregate consideration of which exceeds $1,000,000,000, and which involves
a merger or consolidation, whether direct or indirect, of any Person, with or
into Hilton or of Hilton with or into any Person, or any sale, transfer or other
conveyance, whether direct or indirect, of any assets of any Person to Hilton or
of substantially all of the assets of Hilton to any Person.
"Acquisition Related Rating Change" means the occurrence on or within 90
days after the date of a Public Notice (which period shall be extended so long
as the rating of Hilton's senior unsecured debt is (i) under review by Xxxxx'x
Investors Service, Inc., other than for possible upgrade or (ii) on CreditWatch
by Standard & Poor's Ratings Group, other than with positive implications) of a
decrease in the rating of Hilton's senior unsecured debt by Xxxxx'x Investors
Service, Inc. or Standard & Poor's Ratings Group attributable in whole or in
part, directly or indirectly, to an Acquisition Event.
"Attributable Debt" with respect to any Sale and Lease-Back Transaction
that is subject to the restrictions described in Exhibit C means the present
value of the minimum rental payments called for during the term of the lease
(including any period for which such lease has been extended), determined in
accordance with generally accepted accounting principles, discounted at a rate
that, at the inception of the lease, the lessee would have incurred to borrow
over a similar term the funds necessary to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of Park Place and its subsidiaries
(less applicable depreciation, amortization and other valuation reserves) after
deducting therefrom (a) all current liabilities of Park Place and its
subsidiaries (excluding (i) the current portion of long-term indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their terms
renewable or extendible at the option of the obligor thereon to a time more than
12 months from the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt discount
and any other like intangibles, all as set forth on the most
-------------------------
(1) This date applies to the 7% Senior Notes due 2004. In the case of the
7.375% Senior Notes due 2002, such date is June 2, 2000.
B-1
recent consolidated balance sheet of Park Place and computed in accordance with
generally accepted accounting principles.
"Debt" means notes, bonds, debentures or other similar evidences of Debt
for borrowed money or any guarantee of any of the foregoing.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interest, outstanding voting
stock or other equity interest is owned, directly or indirectly, by Park Place
and/or one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets of
Park Place.
"Public Notice" means a written press release, governmental filing or
statement of a representative of Hilton reported in the media announcing that
Hilton has engaged, will engage, intends or seeks to engage in an Acquisition
Event.
"Restricted Subsidiary" means any Subsidiary of Park Place organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property or
(y) in which the investment of Park Place and all its Subsidiaries exceeds 5% of
Consolidated Net Tangible Assets as of the date of such determination other
than, in the case of either clause (x) or (y), (i) each Subsidiary whose
business primarily consists of finance, banking, credit, leasing, insurance,
financial services or other similar operations, or any combination thereof, (ii)
each Subsidiary formed or acquired after the date hereof for the purpose of
developing new assets or acquiring the business or assets of another Person and
which does not acquire any part of the business or assets of Park Place or any
Restricted Subsidiary and (iii) Subsidiaries whose principal business is
conducting any Park Place timeshare business.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation is, at the time, directly or
indirectly, owned by Park Place or by one or more Subsidiaries thereof, or by
Park Place and one or more Subsidiaries.
B-2
