EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Park Place Entertainment Corporation, a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxxxxx (the
"Executive"), dated as of the Split Date, as defined below.
WHEREAS, 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 employ the Executive as Chairman of the Board as well as
Senior Advisor to the Board, and the Executive desires to serve in that
capacity;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set
forth in this Agreement, for the period beginning on the effective date (the
"Split Date") of a transaction whereby the Company acquires the former gaming
operations of Hilton Hotels Corporation (the "Split") and ending on July l,
2005, which shall automatically renew for periods of one year unless one
party gives written notice to the other, at least 60 days prior to July l,
2005 or at least 60 days prior to the end of any one-year renewal period,
that the Agreement shall not be further extended, except as otherwise
specifically provided below, (the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed as Chairman of the Board of the Company as well
as Senior Advisor to the Board and, when applicable, the Company shall cause
the Executive to be elected and reelected as a member of the Board. In his
executive capacities, the Executive shall report to the Board as to the
duties assigned by the Board.
(b) During the Employment Period, and excluding any periods
of vacation and sick leave, the Executive shall devote such attention and
time during normal business hours to the business and affairs of the Company
to the extent necessary to discharge the responsibilities assigned to the
Executive under this Agreement and the Executive shall use
the Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. Notwithstanding the foregoing, nothing in this
Agreement shall be construed to limit the ability of the Executive to provide
services to Hilton Hotels Corporation, which the parties hereto acknowledge
is, and may remain, the Executive's principal business activity. It shall
also not be considered a violation of the foregoing for the Executive to (A)
serve on corporate, civic or charitable boards or committees (excluding those
which would create a conflict of interest), (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not materially interfere
with the performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement.
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of $100,000, payable in accordance with the regular payroll
practices of the Company. During the Employment Period, the Annual Base
Salary shall be reviewed for possible increase at least annually, with any
increase being at the sole discretion of the Board (or an appropriate
committee thereof). Any increase in the Annual Base Salary shall not limit
or reduce any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) WAIVER OF OTHER BENEFITS. During the Employment Period,
the Executive acknowledges that he shall not be entitled to participate in
any incentive, savings or retirement plans, practices, policies or programs
nor in any welfare benefit plans, practices, policies or programs otherwise
provided by the Company (including, without limitation, medical, prescription
drug, vision, dental, disability, salary continuance, vacation, employee life
insurance, group life insurance, accidental death and travel accident
insurance plans and programs) and that his execution of this Agreement shall
constitute a complete waiver of any such rights or entitlements.
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(c) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in carrying out the Executive's duties under this
Agreement, provided that the Executive complies with the generally applicable
policies, practices and procedures of the Company for submission of expense
reports, receipts, or similar documentation of such expenses.
(d) STOCK OPTIONS: (i) If the Split occurs, on the Split
Date, the Executive shall be granted non-statutory stock options (the
"Incentive Options") under the Company's Stock Incentive Plan (the "Stock
Plan) covering 3,000,000 shares of the Company's post-Split common stock in
tranches of 2,000,000 shares (the "Regular Option") and 1,000,000 shares (the
"Special Option"), respectively. The exercise price of the shares subject to
the Regular Option shall be equal to the closing price of the Company's
common shares on the New York Stock Exchange on the Split Date. The exercise
price of the shares subject to the Special Option shall be equal to the
greater of (i) the closing price of the Company's common shares on the New
York Stock Exchange on the Split Date or (ii) 150% of the closing price of
Hilton Hotel Corporation's common shares on the New York Stock Exchange on
July 9, 1998 ratably reduced (in the manner described on Exhibit A hereto)
following the Split so as to reflect that revised July 9, 1998 closing price
as if only the Company's post-Split common shares existed on that date. The
grant of the Incentive Options is subject to obtaining the approval of the
Stock Plan by a majority of the shares of common stock of Hilton Hotels
Corporation, the predecessor to the Company, voting at the shareholders
meeting immediately preceding the Split Date. As soon as practicable
thereafter, the Company shall register with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, the shares issuable
upon the exercise of the Incentive Options. The Incentive Options shall be
exercisable for 10 years after the Split Date except as otherwise
specifically provided in this Agreement.
The Regular Option shall vest and become exercisable on a cumulative basis
according to the following schedule if the Executive continues in the
employment of the Company through the applicable vesting date(s):
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(1) 25%: on the first anniversary of the Split Date.
(2) 50%: on the second anniversary of the Split Date.
(3) 75%: on the third anniversary of the Split Date.
(4) 100%: on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9
years and 9 months following the Split Date if the Executive continues in the
employment of the Company through such date; provided, however, that, if, at
any time prior to the fifth anniversary of the Split Date, the closing price
of the Company's common shares on the New York Stock Exchange equals or
exceeds 200% of the closing price of Hilton Hotels Corporation's common
shares on the New York Stock Exchange on July 9, 1998 ratably reduced (in the
manner described on Exhibit A hereto) following the Split so as to reflect
that revised July 9, 1998 closing price as if only the Company's post-Split
common shares existed on that date on each of any 7 consecutive trading days,
all shares under the Special Option shall be immediately vested and
exercisable if the Executive continues in the employment of the Company
through the date the closing prices of the Company's shares meet that
requirement. Notwithstanding the foregoing, all shares subject to the
Regular Option and the Special Option shall vest and become exercisable upon
the occurrence of any of the following events (each of (A), (B) and (C) below
a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below, or
(ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because of
death or Disability; or
(C) termination of employment by the Executive for Good
Reason, as defined below;
provided that the Special Option shall vest and become (and remain)
exercisable upon a Triggering Event, subject to Section 7(e), only if
Executive does not breach the terms of the
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covenants contained in Sections 7(a) and (b) below and such vesting and
exercisability shall be part of the consideration for the Executive's
undertakings under Sections 7(a) and (b).
(ii) If a Triggering Event occurs, any portion of the
Incentive Options that have become vested on or before the date of such Event
(including without limitation, any portion that becomes exercisable due to
such Triggering Event) shall remain exercisable until the earlier to occur of
(x) the fifth anniversary of such date of termination or (y) the tenth
anniversary of the Split Date.
(iii) The Executive may assign the right to exercise
the Incentive Options to his spouse, children, grandchildren, to trusts for the
benefit of the Executive's immediately family, to a family partnership or
limited liability company designated by the Executive in which the Executive's
family members are the only partners or shareholders or to an entity exempt
from federal income tax under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code").
(iv) The Incentive Options shall be subject to the
terms of the Stock Plan in all respects not described herein but only to the
extent not inconsistent with the terms of this Agreement.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment and the Employment Period shall terminate
automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means
that (i) the Executive has been unable, for a period of 180 consecutive
business days, to perform the Executive's duties under this Agreement, as a
result of physical or mental illness or injury, and (ii) a physician selected
by the Company or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the Executive's
incapacity is total and permanent. The Executive agrees to reasonably
cooperate with the Company in order to obtain the physician's evaluation of
the Executive. A termination of the Executive's employment by the Company
for Disability shall be communicated to the
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Executive by written notice ("Notice of Termination for Disability"), stating
the date, time and place of a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Disability, that takes place not less than five and not more than 25 business
days after the Executive receives the Notice of Termination for Disability.
The Executive shall be given an opportunity, together with counsel, to be
heard at such special Board meeting. The Executive's termination for
Disability shall be effective, if confirmed at the meeting, 30 days after the
adoption of a resolution at such special Board meeting, stating that the
Executive's employment shall be terminated because of Disability (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties, as determined by the Board, before the
Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without
Cause. "Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically identifies
the manner in which the Board believes that the Executive has
not substantially performed the Executive's duties;
(B) illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the
Company; or
(C) a materiel breach of the covenants or representations
contained in Section 7.
(ii) A termination of the Executive's employment for
Cause shall be effected in accordance with the following procedures. The
Company shall give the
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Executive written notice ("Notice of Termination for Cause") of its intention
to terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it considers to
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Board Meeting.
The "Special Board Meeting" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than 30 and not more than 60 days after the
Executive receives the Notice of Termination for Cause. The Executive shall
be given an opportunity, together with counsel, to be heard at the Special
Board Meeting. The Executive's termination for Cause shall be effective when
and if a resolution is duly adopted at the Special Board Meeting, stating
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in the Notice of Termination for Cause, and such conduct
constitutes Cause under this Agreement and such conduct has not ceased or
been cured between the date the Executive receives the Notice of Termination
for Cause and the date of the meeting.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, whether
or not material, following a Change of Control) with paragraph
(a) of Section 2 of this Agreement, or any other action by the
Company (other than the Split) that results in a material
diminution in the Executive's position or authority, duty,
titles, responsibilities, or reporting requirements other than
an isolated, insubstantial and inadvertent action that is not
taken in bad faith and is remedied by the Company within 30
days after receipt of written notice thereof from the Executive;
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B. any material failure (any failure, whether or not
material, following a Change of Control, as defined below) by
the Company to comply with any provision of Section 3 of this
Agreement, other than a failure that is not taken in bad faith
and is remedied by the Company within 30 days after receipt of
written notice thereof from the Executive;
C. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement; or
D. any failure by the Company to comply with and satisfy
paragraph (c) of Section 8 of this Agreement.
In addition, following a Change of Control, a termination by the Executive
for any reason during the 30-day period immediately following the first
anniversary of the Change of Control shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(ii) A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company written notice
("Notice of Termination for Good Reason") of the termination, setting forth
in reasonable detail the specific conduct of the Company that constitutes
Good Reason and the specific provision(s) of this Agreement on which the
Executive relies. A termination of employment by the Executive for Good
Reason shall be effective on the fifth business day following the date when
the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than 30 days after
the notice is given).
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(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason, as the case
may be, is effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE
COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR
GOOD REASON. If, during the Employment Period, the Company terminates the
Executive's employment, other than for Cause or Disability or by reason of
the Executive's death, or the Executive terminates employment for Good
Reason, the Company shall fulfill its obligations as to Base Salary under
Section 3(a) hereof for the balance of the Employment Period. Fifty percent
of such amounts shall be consideration for the Executive's undertaking not to
breach the terms of the covenants contained in Section 7 below. The Company
shall also pay to the Executive, in a lump sum in cash within 30 days after
the Date of Termination, the Executive's accrued but unpaid cash compensation
(the "Accrued Obligations"), which shall include but not be limited to, (1)
any portion of the Executive's Annual Base Salary through the Date of
Termination that has not yet been paid and (2) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) that has not yet been paid; and, provided, however, that the
Company's obligation to make any payments under this Section 5(a) to the
extent any such payment shall not have accrued as of the day before the Date
of Termination shall also be conditioned upon the Executive's execution, and
non-revocation, of a written release, substantially in the form attached
hereto as Annex 1, (the "Release"), of any and all claims against the Company
and all related parties with respect to all matters arising out of the
Executive's employment by the Company (other than any entitlements under the
terms of this Agreement or under any other plans or
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programs of the Company in which the Executive participated and under which
the Executive has accrued a benefit), or the termination thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Sections 7(a)
and (b) below, the Executive, in lieu of the amounts specified in the first
sentence of the prior paragraph, shall receive in a lump sum in cash within
30 days after the Date of Termination equal to 2.99 multiplied by the sum of
the Executive's Annual Base Salary and Annual Bonus for the year in which the
Change of Control occurs or the immediately preceding year, whichever
produces the higher sum. Fifty percent of such amount shall be consideration
for the Executive's undertaking not to breach the terms of the covenants
contained in Sections 7(a) and (b) below. In addition, the Executive shall
also be entitled in the case of compensation previously deferred by the
Executive, to a lump sum equal to all amounts previously deferred (together
with any accrued interest thereon) and not yet paid by the Company.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay the Annual Base Salary to the
Executive or the Executive's estate or legal representative, as applicable,
for the remaining portion of the Employment Period (determined without regard
to the fact that the Employment Period otherwise terminates under this
Agreement), in a lump sum in cash within 30 days after the Date of
Termination. In such event, the Company shall have no further obligations
under this Agreement.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment
Period, the Company shall pay the Executive the Annual Base Salary through
the Date of Termination, the amount of any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon), in
each case to the extent not yet paid and the Company shall have
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no further obligations under this Agreement. If the Executive voluntarily
terminates employment during the Employment Period, other than for Good
Reason, the Company shall pay the Accrued Obligations to the Executive in a
lump sum in cash within 30 days of the Date of Termination, and the Company
shall have no further obligations under this Agreement.
6. NO MITIGATION. In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.
6.1. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION:
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period (the
"Section 3 Lump Sum")or fifty percent of the lump sum payment in lieu of Base
Salary provided under Section 5 in the event of Executive's termination of
employment following a Change of Control (the "Section 5 Lump Sum"), the
Executive agrees as follows:
(a) The Executive 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 Executive obtains during the Executive's employment by the Company
or any of its affiliated companies and that is not public knowledge (other
than as a result of the Executive's violation of this paragraph (a) of
Section 7) ("Confidential Information"). The Executive shall not
communicate, divulge or disseminate Confidential Information at any time
during or after the Executive'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 7 constitute a basis
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for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement except as provided in paragraph (e) below.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive
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 Executive'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 Executive agrees that he will not,
for a period of two years after the expiration or termination of the
Executive'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 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 Executive represents that he is licensed by the
gaming authorities in Nevada and New Jersey and knows of no reason why a
license necessary for him to perform his duties hereunder would not be
granted to or maintained by him by those or similar authorities in the future.
(d) Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any rights of any third party.
(e) The Executive 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
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entered into this Agreement in the absence of such restrictions and that
irreparable injury will be suffered by the Company should the Executive
breach any of those provisions. Executive represents and acknowledges that
(i) the Executive has been advised by the Company to consult Executive's own
legal counsel in respect of this Agreement, and (ii) that the Executive has
had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with the Executive's counsel. The Executive
further acknowledges and agrees that a breach of any of the restrictions in
this Section cannot be adequately compensated by monetary damages. The
Company agrees to give the Executive written notice of any action taken by
the Executive that it believes in good faith to constitute a violation of the
Executive's undertakings under Sections 7(a) and (b) and to give the
Executive at least 60 days thereafter to cease any such action which, if he
complies with such request, will preclude any further action or any recovery
by the Company. In the event that the Executive fails to do so, the Executive
agrees that the Executive's right to the Section 3 Lump Sum or the Section 5
Lump Sum, as the case may be, shall be forfeited (but only to the extent of
those portions not previously received) and the Executive's right to exercise
the Special Option (but not to any shares already obtained upon a prior
exercise of the Special Option or any cash received upon a prior cashless
exercise of the Special Option, if available) shall cease. In addition, in
the case of any violation of the provisions of this Section 7, the Company
shall be entitled to preliminary and permanent injunctive relief, without the
necessity of proving actual damages, as well as provable damages and an
equitable accounting of all earnings, profits and other benefits arising from
any violation of this Section (with appropriate credit for the amounts
forfeited by the Executive and the non-exercisability of the Special Option),
which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled. 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
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jurisdiction of the court that made such adjudication and that the provision
otherwise be enforced to the maximum extent permitted by law 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 Executive may have to the laying of venue of any such
suit, action or proceeding in any such court. The Executive 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 11 hereof.
7. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive'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 shall 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 expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.
8. CHANGE OF CONTROL.
(a) 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
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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 Split Date, constitute
the Board (as of the Split Date, 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 Split Date 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 14 a-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;
provided, however, that the Split shall not be deemed a "Change of Control"
for any purpose under this Agreement.
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(b) Upon a Change of Control, the right to purchase all
shares subject to the Regular Option and the Special Option shall vest and
become exercisable; provided, however, that with respect to the Special
Option, such immediate vesting and exercisability shall be conditioned upon
the Executive not breaching the terms of the covenants contained in Sections
7(a) and (b).
(c) 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 Executive, 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 Executive shall
be paid an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive 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 Executive 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 Executive's residence 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.
(d) 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
Executive within 10 days of the Termination Date. Any such determination by
the Accounting Firm shall be binding upon the Company and the Executive.
Within five days after the Accounting Firm's determination, the Company shall
pay
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(or cause to be paid) or distribute (or cause to be distributed) to or for
the benefit of the Executive such amounts as are then due to the Executive
under this Agreement.
(e) The Executive 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
Executive 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
Executive 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 Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive 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 Executive 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
17
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, hearing
and conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a termination 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 Executive to pay such claim and xxx
for a refund the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive 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 Executive 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 Executive 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.
(f) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to this Section, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of subsection
(d)) 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 Executive of an amount advanced by the Company pursuant to
this Section, a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such
18
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.
(g) 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 willful misconduct of the Accounting
Firm.
9. ARBITRATION. The Company and the Executive mutually consent
to the resolution by arbitration, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration
Association, of all claims or controversies arising out of the Executive's
employment (or its termination) that the Company may have against the
Executive or that the Executive may have against the Company or against its
officers, directors, shareholders, employees or agents in their capacity as
such other than a claim which is primarily for an injunction or other
equitable relief. The Company and the Executive shall equally share the fees
and costs of the arbitrator, and each party shall bear its own costs in
connection with any arbitration, unless the Executive shall prevail in an
arbitration proceeding as to any material issue, in which case the Company
shall reimburse the Executive for all reasonable costs, expenses and fees
incurred in connection with such arbitration.
10. 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 except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
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(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
-------------------
x/x Xxxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
If to the Company:
-----------------
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
With a required copy to:
-----------------------
Xxxxxx, Xxxxx & Bockius
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxxxxx
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices 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. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
(d) Notwithstanding any other provision of this Agreement,
the Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement (including,
20
without limitation, the right of the Executive to terminate employment for
Good Reason pursuant to paragraph (c) of Section 5 of this Agreement) shall
not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(f) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
11. The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment or arrangements
to the extent necessary to the intended preservation of such rights and
obligations, including, but not by way of limitation, those rights and
obligations set forth in Sections 3, 5 and 9.
12. The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the
Executive's death by giving the Company written notice thereof. In the event
of the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative.
21
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the
Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written. HILTON GAMING CORPORATION
By
--------------------------- ---------------------------
Xxxxxxx X. Xxxxxxxxxx
00
