EXHIBIT 10.43
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Hilton Hotels Corporation, a Delaware corporation
(the "Company"), and __________________ (the "Employee"), dated as of the ____
day of ________, ____.
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.
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 by Employee 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.
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(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 attainment
of age 65; 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 attainment of age 65,
unless at least 60 days prior to the Renewal Date the Company shall give the
Employee written 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:
(a) 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 or the Xxxxxx X. Xxxxxx Fund, 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
(b) 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 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-
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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
(c) Approval by the stockholders of the Company of (A) a reorganization,
merger or 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. If there is a Change of Control, 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 attainment of age 65 (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
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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 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.
(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
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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 the 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.
(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
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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, 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 (or, if applicable, such
longer period as the Company then provides coverage for its executives
generally) after the Date of Termination (as defined below) the Employee 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
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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. During the Employment Period, 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 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 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 of business by the Company or its subsidiaries.
(c) GOOD REASON. During the Employment Period, 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
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action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for 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
of employment by the Executive for any reason during the 30-day period
immediately following the first anniversary of the Effective Date shall be
deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) NOTICE OF TERMINATION. During the Employment Period, 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
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employment under the provision so indicated and (iii) if the Date of Termination
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. During the Employment Period, "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 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 during the
Employment Period 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 specifically provided for in
this Agreement (which shall be paid in accordance with their terms) and
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, which shall include 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
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Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter
referred to as "Accrued Obligations"). All such Accrued Obligations shall be
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
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
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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 Employee's employment other
than for Cause, Disability, or death or if the Employee shall terminate his
employment for Good Reason and the Employee executes, and does not revoke, a
written release, substantially in the form then used by the Company for its
executives generally, of any and all claims against the Company and all related
parties with respect to all matters arising out of the Employee's employment by
the Company (other than any entitlements under the terms of this Agreement or
under any other plans or programs of the Company in which the Employee
participated and under which the Employee has accrued a benefit), or the
termination thereof,
(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) 1.49 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
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(D) in exchange for the Employee's obligations under Section 10
of this Agreement, the product of (x) 1.5 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
(E) 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
(F) the Employee shall be entitled to receive a lump-sum cash
payment equal to the amount which the Company would have credited to the
Employees Company Contribution Account under the Company's Executive Deferred
Compensation Plan (the "Deferred Compensation Plan") during the remainder of the
Employment Period if during the remainder of the Employment Period the Employee
had deferred under the Deferred Compensation Plan the average amount of deferral
the Employee had elected with respect to the Employee's Compensation for the 12
months immediately preceding the Date of Termination and if the Employee's
annual Compensation during the Employment Period were equal to the sum of the
Employee's Highest Base Salary and Recent Bonus. For the purposes of determining
the amount of this cash payment, no adjustment shall be made for any amounts
which the Company would have contributed to the Employee's account in the Hilton
Hotels Corporation Thrift Savings Plan during the Employment Period.
(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 thereafter with respect to other key
employees and their families and for purposes of eligibility for retiree
benefits pursuant
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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. During and after the Employment
Period, nothing in 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 for 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.
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 except as specifically provided herein. 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 Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the Code).
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the
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Employee, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (the "Payment"), would constitute an
"excess parachute payment" within the meaning of Section 280G of the Code, the
Employee shall be paid an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Employee after deduction of any excise tax
imposed under Section 4999 of the Code, and any federal, state and local income
and employment tax and excise tax imposed upon the Gross-Up Payment shall be
equal to the Payment. For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to pay federal income tax and employment
taxes at the highest marginal rate of federal income and employment taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Employee's residence (or, if greater, the state and locality in
which the Employee is required to file a nonresident income tax return with
respect to the Payment) on the Termination Date, net of the maximum reduction in
federal income taxes that may be obtained from the deduction of such state and
local taxes.
(b) All determinations to be made under this Section 9 shall be made by
the Company's independent public accountant immediately prior to the Change of
Control (the "Accounting Firm"), which firm shall provide its determinations and
any supporting calculations both to the Company and the Employee within 10 days
of the Termination Date. Any such determination by the Accounting Firm shall be
binding upon the Company and the Employee. Within five days after the Accounting
Firm's determination, the Company shall pay (or cause to be paid) or distribute
(or cause to be distributed) to or for the benefit of the Employee such amounts
as are then due to the Employee under this Agreement.
(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 (taking into account any amounts theretofore
already paid by the Company). 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
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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 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, income tax or employment 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, 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
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to pay such claim and xxx for a refund the Company shall advance the amount 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, income
tax or employment 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 this Section, 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 subsection (b)) 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 this Section, 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 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.
(e) All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or wilful misconduct of the Accounting Firm.
16
10. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION. In
exchange for the Company agreeing to the payment to the Employee provided under
subsection (d)(i)(D) of Section 6, the Employee agrees as follows:
(a) The Employee shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data, customer
information, supplier information, cost and pricing information, marketing and
sales techniques, strategies and programs, computer programs and software and
financial information relating to the Company or any of its affiliated companies
and their respective businesses that the Employee obtains during the Employee's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Employee's violation of this
subsection (a) of Section 10) ("Confidential Information"). The Employee shall
not communicate, divulge or disseminate Confidential Information at any time
during or after the Employee's employment with the Company, except in the good
faith performance of his duties hereunder, with the prior written consent of the
Company or as otherwise required by law or legal process. In no event shall an
asserted violation of the provisions of this paragraph (a) of Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Employee under this Agreement.
(b) For a period of one year after the expiration or termination of the
Employee's employment with the Company, the Employee will not, except with the
prior written consent of the Board, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise
with, or use or permit Employee's name to be used in connection with, any
business or enterprise which is engaged in any business that is competitive with
any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Employee
agrees that he will not, for a period of two years after the expiration or
termination of the Employee's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent
17
contractor, or solicit the employment of, any managerial or higher level person
who is or at any time during the previous twelve months was an employee,
representative, officer or director of the Company or any of its subsidiaries.
(c) The Employee acknowledges and agrees that the restrictions
contained in this Section are reasonable and necessary to protect and preserve
the legitimate interests, properties, goodwill and business of the Company, that
the Company would not have entered into this Agreement in the absence of such
restrictions and that irreparable injury will be suffered by the Company should
the Employee breach any of those provisions. Employee represents and
acknowledges that (i) the Employee has been advised by the Company to consult
Employee's own legal counsel in respect of this Agreement, and (ii) that the
Employee has had full opportunity, prior to execution of this Agreement, to
review thoroughly this Agreement with the Employee's counsel. The Employee
further acknowledges and agrees that a breach of any of the restrictions in this
Section cannot be adequately compensated by monetary damages. The Employee
agrees that the Employee's right to the payments specified above in
consideration for his undertakings under this Section shall be forfeited and
Company shall be entitled to preliminary and permanent injunctive relief,
without the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits in the event of any
violation of this Section, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled; provided,
however, that the foregoing remedies shall be conditioned upon the Company
providing the Employee with at least 30 days written notice of its good faith
belief that a violation of the Employee's undertakings hereunder has occurred
and Employee failing to cease any such prohibited activity within 30 days after
such written notice is given. In the event that any of the provisions of this
Section should ever be adjudicated to exceed the time, geographic, service, or
other limitations permitted by applicable law in any jurisdiction, it is the
intention of the parties that the provision shall be amended to the extent of
the maximum time, geographic, service, or other limitations permitted by
applicable law, that such amendment shall apply only within the jurisdiction of
the court that made such adjudication and that the provision otherwise be
enforced to the maximum
18
extent permitted by law. The Employee irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of this Section,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief and other equitable relief, may be
brought in the United States District Court for the Southern District of
California, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Los Angeles, California,
(ii) consents to the non-exclusive jurisdiction of any such court in any such
suit, action or proceeding, and (iii) waives any objection which the Employee
may have to the laying of venue of any such suit, action or proceeding in any
such court. The Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 12 hereof.
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
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
19
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 requested, postage prepaid, addressed as follows:
IF TO THE EMPLOYEE:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
IF TO THE COMPANY:
Hilton Hotels Corporation
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
WITH A REQUIRED COPY TO:
Xxxxxx, Xxxxx & Xxxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxxxxx
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.
20
(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.
(f) The Employee and the Company acknowledge that the employment of the
Employee by the Company is "at will", and, prior to the Effective Date, may be
terminated by either the Employee or the Company at any time. 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.
(g) The Company represents and warrants that: (i) it is fully authorized
and empowered to enter into this Agreement, (ii) its Board of Directors has
approved this Agreement and (iii) the performance of its obligations under this
Agreement will not violate any agreement between it and any other person, firm
or organization.
(h) This Agreement may be executed in two or more counterparts and by
facsimile, all of which when taken together shall constitute a signed 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
-----------------------------
HILTON HOTELS CORPORATION
By
--------------------------
Attest:
-----------------------------
-----------------------------
Secretary
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