EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT by and between Park Place Entertainment Corporation, a
Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxxxx (the
"Executive"), dated as of October __, 1998.
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 the President and Chief Executive
Officer of the Company, and the Executive desires to serve in that capacity;
and
WHEREAS, the Executive and Hilton Hotels Corporation, the Company's
predecessor, entered into an Amended Consulting and Employment Agreement
dated as of November 12, 1996, as amended (the "Prior Employment Agreement")
and a Change of Control Agreement dated as of April 1, 1997 (collectively
with the Prior Employment Agreement, the "Prior Agreements"), which shall be
terminated and of no further force and effect as of the Split Date (as
defined below), except as provided in Section 14 below;
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 January
1, 2004 which shall automatically renew for periods of one year unless one
party gives written notice to the other, at least 60 days prior to January 1,
2004 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"). Notwithstanding the
foregoing, if the Split does not occur on or before December 31, 1999, (i)
this Agreement shall be terminated and thereafter neither party shall have
any continuing obligation to the other hereunder and the (ii) the Prior
Agreements shall continue in full force and effect.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed as the President and Chief Executive Officer of
the Company. In his executive capacities, the Executive shall report to the
Board as appropriate to the duties assigned by the Board.
(b) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, 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 Executive
shall use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. It shall 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; provided, however,
that it shall also not be a violation of the foregoing nor shall it
constitute "material interference" for the Executive to continue to the same
extent those specific outside activities in which he was involved during the
term of the Prior Agreements. The Company hereby acknowledges that the
Executive has (i) substantial investments (including operating businesses of
which he is a substantial owner and for which he serves as a manager, officer
or director) which have required and will continue to require substantial
time and attention by the Executive, (ii) substantial eleemosynary
involvements and (iii) substantial civic involvements.
3. COMPENSATION. (a) BASE SALARY. (1) During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of $2,000,000, payable in accordance with the regular payroll
practices of the Company; provided, however, that the portion of such Annual
Base Salary during any taxable year of the Company which, when added to any
otherwise deductible compensation and benefits paid or provided to the
Executive by the Company during such taxable year, would not be deductible by
the Company in the taxable year such Annual Base Salary is paid or accrued
because of the applicable limitations under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), shall be deferred annually and
paid to the Executive, in a lump sum, on that date (the "Deferral Date")
which is 30 days after the earlier of (i) the last day of the Company's
taxable year in which the Executive ceases to be a "covered employee" within
the meaning of Section 162(m)(3) of the Code or (ii) the date upon which the
Company's deduction with respect to all deferred Annual Base Salary shall no
longer be subject to limitation under Section 162(m) of the Code or any
successor section thereto. 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.
(2) Any amounts of Annual Base Salary deferred as
provided above (plus any Annual Bonus, as defined below, deferred pursuant to
Section 3(b)) shall be credited, from the date it would otherwise have been
paid to the date the deferred amounts are paid, with interest at a floating
rate equal to the rate which Xxxxxx Guaranty announces from time to time as
its prime lending rate, as in effect from time to time, compounded quarterly,
and such accrued interest shall be paid to the Executive on the Deferral Date
(said deferred Annual Base Salary and Annual Bonus plus interest collectively
referred to as the "Deferred Compensation").
(3) The Deferred Compensation shall be paid in accordance
with the following provisions:
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(A) The Company agrees to pay the Deferred Compensation
on the Deferral Date by wire transfer to an account designated by the
Executive prior to the Deferral Date.
(B) The Company agrees to pay the Deferred Compensation
in any and all events on the Deferral Date without setoff or offset for any
claim whatsoever against the Executive or any of his affiliates. The
existence of any claim or cause of action on the part of the Company or any
of its affiliates, whether predicated on this Agreement or otherwise shall
not constitute a defense or entitle the Company to an offset against the
payment of the Deferred Compensation in full on the Deferral Date.
(C) Failure to pay the Deferred Compensation on the
Deferral Date shall constitute a default, without any need for the Executive
to have given notice or demand of any kind to the Company, which notices and
demands of any kind are expressly waived by the Company.
(D) In the event of a default, the Executive shall be
entitled to be paid, upon demand, (i) one hundred twenty (120%) percent of
the Deferred Compensation plus interest on said amount from the Deferral Date
until paid at the rate of eighteen (18%) percent per annum (the "Default
Rate"), plus all reasonable attorneys' fees and other costs of collection
incurred by the Executive in effecting collection of the amounts due
hereunder, whether or not a legal action is instituted or prosecuted to
judgment. All such costs and expenses shall be added to the amount due under
this Section 3, shall be payable on demand, and shall bear interest at the
Default Rate from the date incurred until paid in full.
(E) In the event of a default, notwithstanding the
provisions of Section 11 of this Agreement: (i) the Executive shall be
entitled to xxx the Company to effect collection of the amounts due
hereunder; (ii) the Company hereby consents to personal jurisdiction and
venue and to the exclusive jurisdiction of the Superior Court of the State of
New Jersey, Essex County, and the United States District Court for the
District of New Jersey for purpose of all legal proceedings arising out of or
relating to this Section 3; (iii) the Company agrees that service or delivery
of process of any such lawsuit shall constitute lawful and valid service of
process if made in accordance with any of the methods by which notices may be
given pursuant to Section 13; and (iv) the Company waives any defense based
upon personal jurisdiction, venue, improper service, and the right to assert
a claim of FORUM NON CONVENIENS or the like.
(b) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be eligible to receive, for each fiscal year or portion of a
fiscal year ending during the Employment Period, an annual bonus (the "Annual
Bonus") (either pursuant to the Company's annual incentive plan or otherwise)
provided that the Executive shall not receive an Annual Bonus for any fiscal
year in excess of $1,000,000 (as adjusted pro rata for any fiscal year in
which the Executive is employed for only a portion of such fiscal year).
Each Annual Bonus shall be deferred on the same basis as it if it were
deferred Annual Base Salary under Section 3(a) above and paid to the
Executive on the Deferral Date.
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(c) OTHER BENEFITS. During the Employment Period: (i) the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company to at least
the same extent as other senior executives of the Company, provided that in
determining the Executive's participation in any incentive plans the
Incentive Options, as defined below, shall be taken into account; (ii) the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation, and shall receive all benefits under, all welfare
benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life insurance, group life insurance, accidental
death and travel accident insurance plans and programs) to at least the same
extent as other senior executives of the Company; and (iii) the Executive
shall be entitled to, and the Company shall provide, the Executive with, a
U.S. automobile comparable to the automobile which the Executive currently
uses, and a full-time driver (as selected by the Executive) for such
automobile.
(d) 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.
(e) FRINGE BENEFITS AND AIR TRAVEL. During the Employment
Period, the Executive shall be entitled to fringe benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company as in effect at the time with respect to other senior executives
of the Company, including, without limitation, first-class travel
accommodations on all commercial carriers for travel related to the business
of the Company. The Executive shall also be entitled to unrestricted, but
not exclusive, use of the Company's aircraft (leased or owned); provided,
however, that if the Executive uses the Company's aircraft for his personal
purposes, he shall pay to the Company the cost of such usage, as determined
in accordance with the Company's cost determination methodology applied to
the Company's senior executives with respect to their personal use of the
Company's aircraft.
(f) OFFICE AND SUPPORT SERVICES. During the Employment
Period, the Executive shall be entitled to office space, and to secretarial
and other support services, at least equal to the most favorable of such as
provided with respect to other senior executives of the Company. Without
limiting the generality of the foregoing, the Executive shall at all times
have a personal secretary of his choosing and may continue to maintain, at
the Company's expense, his current office in Chatham, New Jersey.
(g) VACATION. During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation annually.
(h) 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 6,000,000 shares of the Company's
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post-Split common stock in tranches of 4,000,000 shares (the "Regular
Option") and 2,000,000 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 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. 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. If such approval is not obtained, the Executive shall have the right,
upon written notice to the Company delivered not later than 10 business days
after the date of the shareholders meeting referred to in the preceding
sentence, to terminate this Agreement, in which event neither party shall
have any continuing obligation to the other hereunder and the Prior
Agreements shall continue in full force and effect. If such approval is
obtained, as soon as practicable after the Split Date the Company shall use
its best efforts to 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):
(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
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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 8(e), only if
Executive does not breach the terms of the covenants contained in Sections
8(a) and (b) below and such vesting and exercisability shall be part of the
consideration for the Executive's undertakings under Sections 8(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, or parents of a
recipient, 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 Code. The Executive may assign the right to exercise the
Converted Options (as defined below) but only to the extent, if any, that the
Converted Options were assignable under the terms of the Hilton Hotels
Corporation option plan(s) under which the Converted Options were granted.
(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.
(v) If the Split occurs, as soon as practicable after the
Split Date, the Company shall ensure that all unexercised options previously
issued to the Executive by Hilton Hotels Corporation shall be converted into
options to purchase shares of the Company (in the manner described on Exhibit
B hereto) (the "Converted Options") and shall use its best efforts to
register with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, the shares issuable upon the exercise of the Converted
Options. It is acknowledged and understood that the Converted Options are in
addition to the Incentive Options and shall not be subject to any of the
vesting requirements or other provisions applicable to the Incentive Options
set forth in the preceding provisions of this Section 3(h); provided,
however, that the
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Converted Options shall be subject to the terms of the Stock Plan applicable
to "Adjusted Park Place Options" (as defined in the Stock Plan) to the extent
not inconsistent with the provisions of this Section 3(h)(v).
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 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. Subject to clause (ii) below, "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 material breach of the covenants or
representations contained in Section 8.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive
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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, 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) or, if applicable, (b) 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;
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 an
isolated, insubstantial and inadvertent 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 9 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
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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).
(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 8 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, (2) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) that has not yet been paid; (3) any accrued but unpaid vacation pay
and (4) similar unpaid items that have accrued as of the Date of Termination,
including declared but unpaid bonuses and unreimbursed employee business
expenses; 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 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 Section 8(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
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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 8(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, and any accrued vacation pay 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 (i) 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) and (ii) pay the Accrued Obligations to the Executive or the
Executive's estate or legal representative, as applicable, 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 other than for
any entitlements under the terms of any other plans or programs of the
Company in which the Executive participated and under which the Executive has
accrued a benefit.
(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 amount of any earned but unpaid
Annual Bonuses and vacation pay, and the Company shall have no further
obligations under this Agreement other than for any entitlements under the
terms of any other plans or programs of the Company in which the Executive
participated and under which the Executive has accrued a benefit. 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 other than for any entitlements under the terms of any other plans
or programs of the Company in which the Executive participated and under
which the Executive has accrued a benefit.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor shall anything
in this Agreement limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its
affiliated companies. Vested benefits and other amounts that the Executive is
otherwise entitled to receive under any plan, policy, practice or program of,
or any contract or agreement with, the Company or any of its affiliated
companies on or after the Date of Termination shall be payable in accordance
with such plan, policy, practice, program, contract or agreement, as the case
may be, except as explicitly modified by this Agreement.
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7. 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.
8. 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 8) ("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 8 constitute a basis 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
11
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 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 8(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 8, 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
jurisdiction of the court that made such adjudication and that the provision
otherwise be enforced to the maximum extent permitted by law. The Executive
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 District of Nevada, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Las Vegas, Nevada, (ii) consents to the non-exclusive
12
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 13 hereof.
9. 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.
10. 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 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
13
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of
the Company or (C) the sale of all or substantially all of the assets of the
Company; provided, however, that the Split shall not be deemed a "Change of
Control" for any purpose under this Agreement.
(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 Section
8(a) and 8(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 (or, if
greater, the state and locality in which the Executive 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.
(d) All determinations to be made under this Section 10
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 (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.
14
(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 such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 10, 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
15
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 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.
11. 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, to be held in Las Vegas, Nevada, 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.
12. LEGAL FEES. The Company agrees to pay all legal fees incurred
by the Executive in connection with the negotiation and preparation of this
Agreement, up to a maximum of $15,000.
13. 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.
16
(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 Xxxxxx, Xxxxxxxxx, Xxxxxxxxx & Xxxxxx, P.A.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
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 13. 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, 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.
17
(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.
14. PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements, including the provisions of the Prior Agreements, except to the
extent specifically provided in this Section.
(a) Whether or not the Executive is then serving as a
consultant to or an employee of the Company and notwithstanding anything
herein to the contrary: (i) the Company shall provide the Executive and/or
the Executive's family with health insurance benefits equal or comparable to
the health insurance benefits he was entitled to receive under the Prior
Employment Agreement, until the date of the Executive's 62nd birthday; and
(ii) the Company shall assume the obligations of Hilton Hotels Corporation
under the Split Dollar Agreement dated September 6, 1991 between Bally
Entertainment Corporation and the Xxxxxx X. Xxxxxxxx 1989 Irrevocable Trust,
as such obligations are further set forth in Section 5(b)(ii) of the Prior
Employment Agreement.
(b) The Company shall assume the obligations of Hilton Hotels
Corporation under Sections 3(a) and 3(b) of the Prior Employment Agreement to
pay to the Executive all amounts previously deferred for periods ending on or
before the Split Date, plus interest as provided therein. For purposes of
determining the "Deferral Date" (as such term is defined in Section 3(a) of
the Prior Employment Agreement), references to the "Company" in clauses (i)
and (ii) of Section 3(a) of the Prior Employment Agreement shall be deemed to
refer to Park Place Entertainment Corporation.
(c) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 10 of the Prior Employment
Agreement (relating to certain excise tax gross-up payments).
(d) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 11 of the Prior Employment
Agreement (relating to certain indemnification obligations).
(e) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 25(b)(6) of the Prior Employment
Agreement (relating to certain income tax indemnities). It is acknowledged
and understood, notwithstanding the Company's assumption of these obligations
and notwithstanding the termination of the Prior Employment Agreement, that
Hilton Hotels Corporation shall remain liable to the Executive for all
obligations under Section 25(b)(6) of the Prior Employment Agreement, if and
to the extent that the Company fails to satisfy its obligations pursuant to
this Section 14(e).
(f) The Company shall assume all obligations of Hilton Hotels
Corporation to the Executive under the Deferred Compensation Agreement
("Deferred
18
Compensation Agreement") between the Executive and Hilton Hotels Corporation,
entered into as of January 16, 1997. For purposes of determining the
"Payment Date" (as such term is defined in Section 2(a) of the Deferred
Compensation Agreement), references to the "Company" in clauses (i) and (iii)
of Section 2(a) of the Deferred Compensation Agreement shall be deemed to
refer to Park Place Entertainment Corporation.
(g) The Company shall assume all obligations of Hilton Hotels
Corporation to the Executive under the Hilton Executive Deferred Compensation
Plan.
(h) Except as specifically provided in this Agreement, this
Agreement contains the entire understanding and agreement among the parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations, and undertakings, whether written
or oral, among the parties with respect thereto.
(i) Except as specifically provided in this Agreement, this
Agreement shall not affect nor have any force or effect upon any other
agreement to which the Executive is a party and/or beneficiary.
15. 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, 6, 10 and 14.
16. 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.
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.
PARK PLACE ENTERTAINMENT CORPORATION
By
--------------------------------- --------------------------------
Xxxxxx X. Xxxxxxxx
19
