Exhibit 10.31
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Hilton Hotels Corporation, a Delaware
corporation (the "Company") and Xxxxxxx X. Xxxxxxxxxx (the "Employee"), dated as
of the 30th day of January, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Employee by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control, to
encourage the Employee's full attention and dedication to the Company currently
and in the event of any threatened or pending Change of Control, and to provide
the Employee with compensation arrangements upon a Change of Control which
provide the Employee with individual financial security and which are
competitive with those of other corporations and, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
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NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first
date during the "Change of Control Period" (as defined in Section 1(b)) on which
a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (1) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or
(2) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the earlier to occur of (i) the third anniversary of
such date or (ii) the first day of the month next following the Employee's
normal retirement date ("Normal Retirement Date") under Hilton Hotels Retirement
Plan or any successor retirement plan (the "Retirement Plan"); PROVIDED,
HOWEVER, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate on the earlier of (x) three
years from such Renewal Date or (y) the first day of the month coinciding with
or next following the Employee's Normal
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Retirement Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(i) The acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), (excluding, for this purpose, (A) the Company or its
subsidiaries, (B) any employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company or (C)
Xxxxxx Xxxxxx, the Charitable Remainder Unitrust created by Xxxxxx Xxxxxx to
receive shares from the Estate of Xxxxxx X. Xxxxxx, or the Xxxxxx X. Xxxxxx
Foundation, collectively the "Hilton Interests"), of beneficial ownership,
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then outstanding shares of common stock or the combined
voting power of the Company's then outstanding voting securities entitled to
vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
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election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or (B) a liquidation or dissolution of the
Company or (C) the sale of all or substantially all of the assets of the
Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the earlier to occur of (a) the third anniversary of such date or (b) the first
day of the month coinciding with or next following the Employee's
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Normal Retirement Date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Employee's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Employee's services shall be performed at the location where the Employee
was employed immediately preceding the Effective Date or any office or location
less than thirty-five (35) miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, (C) manage personal investments and (D)
participate as a member or consultant to professional
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associations and to otherwise participate in the activities of associations in
such manner as has been historically conducted by the Employee, so long as such
activities do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Employee shall receive an annual base salary ("Base Salary") at a monthly
rate at least equal to the highest monthly base salary paid or payable to the
Employee by the Company during the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Base Salary shall be reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially consistent with increases
in base salary awarded in the ordinary course of business to other key employees
of the Company and its subsidiaries. Any increase in Base Salary shall not
serve to limit or reduce any other obligation to the Employee under this
Agreement. Base Salary shall not be reduced after any such increase.
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(ii) ANNUAL BONUS. In addition to Base Salary,
the Employee shall be awarded, for each fiscal year during the Employment
Period, an annual bonus (an "Annual Bonus") (either pursuant to the incentive
compensation plan of the Company or otherwise) in cash at least equal to the
average bonus payable to the Employee from the Company and its subsidiaries in
respect of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to
Base Salary and Annual Bonus payable as hereinabove provided, the Employee shall
be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs applicable to
other key employees of the Company and its subsidiaries (including Company's
employee benefit plans, in each case providing benefits which are the economic
equivalent to those in effect or as subsequently amended). Such plans,
practices, policies and programs, in the aggregate, shall provide the Employee
with compensation, benefits and reward opportunities at least as favorable as
the most favorable of such compensation, benefits and reward opportunities
provided by the Company for the Employee under such plans, practices, policies
and programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as provided
at any time thereafter with respect to other key employees of the Company and
its subsidiaries.
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(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(v) EXPENSES. During the Employment Period, the Employee shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries.
(vi) FRINGE BENEFITS. During the Employment Period, the
Employee shall be entitled to fringe benefits, including use of an automobile
and payment of related expenses,
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in accordance with the most favorable plans, practices, programs and policies of
the Company and its subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter with respect to other key employees of the
Company and its subsidiaries.
(c) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Employee by
the Company and its subsidiaries at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Employee,
as provided at any time thereafter with respect to other key employees of the
Company and its subsidiaries.
(d) VACATION. During the Employment Period, the Employee shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its subsidiaries as in effect at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees of the Company and its subsidiaries.
(e) INDEMNIFICATION. During the term of the Employee's employment
with the Company and for a period of not less than three years after the Date of
Termination, the Employee
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shall be entitled to indemnification and, to the extent available on
commercially reasonable terms, insurance coverage therefor, with respect to the
various liabilities as to which the Employee has been customarily indemnified
during the Change of Control Period.
5. TERMINATION. (a) DEATH OR DISABILITY. This Agreement shall
terminate automatically upon the Employee's death. If the Company determines in
good faith that the Disability of the Employee has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the
Employee written notice of its intention to terminate the Employee's employment.
In such event, the Employee's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" means
disability which, at least 26 weeks after its commencement, is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Employee or the Employee's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Employee's employment for
"Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal
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enrichment of the Employee at the expense of the Company, (ii) repeated
violations by the Employee of the Employee's obligations under Section 4(a) of
this Agreement which are demonstrably willful and deliberate on the Employee's
part and which are not remedied in a reasonable period of time after receipt of
written notice from the Company, (iii) the conviction of the Employee of a
felony, (iv) any refusal by the Employee to provide appropriate information or
to otherwise participate and cooperate in connection with the obtaining by the
Company or any of its subsidiaries of all licenses, permits and approvals
necessary to the conduct of their gaming business, or (v) the inability of the
Employee to obtain any license, permit or other authorization required to be
obtained by the Employee as a condition to the conduct by the Company or its
subsidiaries of gaming related activities.
(c) GOOD REASON. The Employee's employment may be terminated by the
Employee for Good Reason. For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for
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this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof, except for travel reasonably required in the performance of
the Employee's responsibilities;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Employee shall be conclusive.
Anything in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period immediately following
the first anniversary of the
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Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure by the Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; PROVIDED, HOWEVER, that (i) if the Employee's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Employee
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of such termination and (ii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Employee or the Disability Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Employee's employment is terminated by reason of
the Employee's death, this Agreement shall terminate without further obligations
to the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest rate in effect at any time from the
start of the 90-day period preceding the Effective Date through the Date of
Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus
paid to the Employee for the last full fiscal year and a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (iii) any compensation
previously deferred by the Employee (together with any accrued interest thereon)
and not yet paid by the Company and any accrued vacation pay not yet paid by the
Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter
referred to as "Accrued Obligations"). All such Accrued Obligations shall be
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paid to the Employee's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the Company
and any of its subsidiaries to surviving families of employees of the Company
and such subsidiaries under such plans, programs, practices and policies
relating to family death benefits, if any, in accordance with the most favorable
plans, programs, practices and policies of the Company and its subsidiaries in
effect at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee and/or the Employee's family, as in
effect on the date of the Employee's death with respect to other key employees
of the Company and its subsidiaries and their families.
(b) DISABILITY. If the Employee's employment is terminated by reason
of the Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including
for this purpose, all Accrued Obligations. All such Accrued Obligations shall
be paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Employee shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most
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favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Employee's employment
shall be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the Employee the
Highest Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Employee (together with accrued interest
thereon). If the Employee terminates employment other than for Good Reason,
this Agreement shall terminate without further obligations to the Employee,
other than those obligations accrued or earned and vested (if applicable) by the
Employee through the Date of Termination, including for this purpose, all
Accrued Obligations. All such Accrued Obligations shall be paid to the Employee
in a lump sum in cash within 30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the
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Employee's employment other than for Cause, Disability, or death or if the
Employee shall terminate his employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. to the extent not theretofore paid, the Employee's Highest
Base Salary through the Date of Termination; and
B. the product of (x) the Annual Bonus paid to the Employee for
the last full fiscal year (if any) ending during the Employment Period
or, if higher, the Annual Bonus paid to the Employee for the last full
fiscal year prior to the Effective Date (as applicable, the "Recent
Bonus") and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination and
the denominator of which is 365; and
C. the product of (x) 2.99 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred by the
Employee, all amounts previously deferred (together with any accrued
interest thereon) and not yet paid by the Company, and any accrued
vacation pay not yet paid by the Company; and
E. the Employee shall be entitled to receive a
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lump-sum retirement benefit equal to the difference between (a) the
actuarial equivalent of the benefit under the Retirement Plan, the
Hilton Supplemental Executive Retirement Plan and the Hilton Hotels
Retirement Benefit Replacement Plan the Employee would receive if he
remained employed by the Company at the compensation level provided
for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the
remainder of the Employment Period and (b) the actuarial equivalent,
as of the Date of Termination, of his benefit, if any, under the
Retirement Plan and the Hilton Supplemental Executive Retirement Plan
and the Hilton Hotels Retirement Benefit Replacement Plan; and
(ii) for the remainder of the Employment Period, or
such longer period as any plan, program, practice or policy may provide,
the Company shall continue benefits to the Employee and/or the Employee's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Sections 4(b)(iv) and (vi) of this Agreement if the Employee's employment
had not been terminated, including health insurance and life insurance, in
accordance with the most favorable plans, practices, programs or policies
of the Company and its subsidiaries during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in
effect at any time
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thereafter with respect to other key employees and their families and for
purposes of eligibility for retiree benefits pursuant to such plans,
practices, programs and policies, the Employee shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period.
7. NON-EXCLUSIVITY OF RIGHTS. The Employee and the Company are
parties to an employment agreement dated February 1, 1996, pursuant to which
the Employee serves as the Chief Executive Officer of the Company (the
"Employment Agreement"). This Agreement is intended to afford the Employee
rights and compensation following a Change of Control which are in addition
to those provided under the Employment Agreement (the "Contract Rights"), in
recognition of the additional efforts expected to be required of the Employee
in such circumstances. Nothing in this Agreement shall be construed to limit
the Employee's Contract Rights. Following a Change of Control, the Contract
Rights shall be deemed to constitute part of this Agreement, PROVIDED THAT, to
the extent any benefit otherwise provided hereunder is directly duplicative
of any Contract Right, the benefit which is least favorable to the Employee
should be reduced or eliminated to the extent required to avoid such
duplication. Nothing this Agreement shall prevent or limit the Employee's
continuing or future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices, provided by the Company or any of its
subsidiaries and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under
any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its subsidiaries at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice
or program.
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8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Employee, the Company or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 9 of this
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Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Employee, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any payments required under this Section 9 (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that, after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether a Gross-Up Payment is
required and the amount
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of such Gross-Up Payment, shall be made by Xxxxxx Xxxxxxxx & Co. (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the Date of Termination,
if applicable, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax on the
Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder.
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In the event that the Company exhausts its remedies pursuant to Section 9(c) and
the Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Employee knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Employee shall not pay such claim
prior to the expiration of the thirty-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company
notifies the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with
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respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order to effectively
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, however, that if the Company directs the Employee
to pay such claim and xxx for a refund, the Company shall advance the amount
24
of such payment to the Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and provided further that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 9(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its intent
to contest such denial of refund prior to
25
the expiration of thirty days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. CONFIDENTIAL INFORMATION. The Employee shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its subsidiaries, and their respective businesses, which shall have been
obtained by the Employee during the Employee's employment by the Company or any
of its subsidiaries and which shall not be or become public knowledge (other
than by acts by the Employee or his representatives in violation of this
Agreement). After termination of the Employee's employment with the Company,
the Employee shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure
26
to the benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt
27
requested, postage prepaid, addressed as follows:
IF TO THE EMPLOYEE:
Xx. Xxxxxxx X. Xxxxxxxxxx
President and Chief Executive Officer
Hilton Hotels Corporation
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
IF TO THE COMPANY:
Hilton Hotels Corporation
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
28
(f) Upon a termination of the Employee's employment or upon the
Employee's ceasing to be an officer of the Company, in each case, prior to the
Effective Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
EMPLOYEE
/s/ XXXXXXX X. XXXXXXXXXX
-----------------------------------
HILTON HOTELS CORPORATION
By /s/ XXXXXXX X. XXXX, XX.
---------------------------------
Attest: /s/ XXXXXX X. XXXXX
----------------------------
Secretary
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