EXHIBIT 10.7
HILTON HOTELS CORPORATION
1996 CHIEF EXECUTIVE STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Corporation a competitive
advantage by attracting, retaining and motivating a Chief Executive Officer
("CEO") and to link the CEO's interests more directly to the profitability of
the Corporation's businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "AFFILIATE" means a corporation or other entity controlled by the
Corporation and designated by the Committee from time to time as such.
b. "BOARD" means the Board of Directors of the Corporation.
c. "CHANGE OF CONTROL" and "CHANGE OF CONTROL PRICE" have the meanings
set forth in Sections 6(b) and (c), respectively.
d. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
e. "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
f. "COMMITTEE" means the Committee referred to in Section 2.
g. "COMMON STOCK" means common stock, par value $2.50 per share, of the
Corporation.
h. "CORPORATION" means Hilton Hotels Corporation, a Delaware
corporation.
i. "DISABILITY" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
j. "DISINTERESTED PERSON" means a member of the Board who qualifies as a
disinterested person as defined in Rule 16b-3(c)(2), as promulgated
by the Commission under the Exchange Act, or any successor definition
adopted by the Commission.
k. "EMPLOYMENT AGREEMENT" means the Employment Agreement by and between
Hilton Hotels Corporation and Stephen F. Bollenbach dated as of the
1st day of February 1996.
l. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. "FAIR MARKET VALUE" means, except as provided in Section 5(g), as of
any given date, the mean between the highest and lowest reported
sales prices of the Common Stock on the New York Stock Exchange Composite
Tape or, if not listed on such exchange, on any other national securities
exchange on which the Common Stock is listed or on NASDAQ. If there is no
regular public trading market for such Common Stock, the Fair Market Value
of the Common Stock shall be determined by the Committee in good faith.
n. "PLAN" means the Hilton Hotels Corporation 1996 Chief Executive Stock
Incentive Plan, as set forth herein and as hereinafter amended from
time to time.
o. "RULE 16B-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
p. "STOCK OPTION" means an option granted under Section 5.
q. "TERMINATION OF EMPLOYMENT" means the termination of the CEO's
employment with the Corporation and any subsidiary or Affiliate.
Temporary absences from employment because of illness, vacation or leave of
absence shall not be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee or such
other committee of the Board as the Board may from time to time designate
(the "Committee"), which shall be composed of not less than two
Disinterested Persons, each of whom shall be an "outside director"
for purposes of Section 162(m)(4) of the Code, and shall be appointed by
and serve at the pleasure of the Board.
The Committee shall have plenary authority to grant Stock Options
pursuant to the terms of the Plan to the CEO.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan, to:
(a) Recommend to the Board of Directors whether and to what extent Stock
Options are to be granted hereunder;
(b) Determine the number of shares of Common Stock to be covered by each
Stock Option granted hereunder;
(c) Determine the terms and conditions of any Stock Option granted
hereunder (including, but not limited to, the option price (subject to
Section 5(a)), any vesting condition, restriction or limitation (which may
be related to the performance of the optionee or the Corporation) and any
vesting acceleration or forfeiture waiver regarding any Stock Option and the
shares of Common Stock relating thereto, based on such factors as the
Committee shall determine;
(d) Modify, amend or adjust the terms and conditions of any Stock
Option, at any time or from time to time; and
(e) Determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to a Stock Option shall be deferred.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as
it shall from time to time deem advisable, to interpret the terms and
provisions of the Plan and any Stock Option issued under the Plan (and
any agreement relating thereto) and to otherwise supervise the administration
of the Plan.
The Committee may act only by a majority of its members then in
office, except that the members thereof may (i) delegate to an
officer of the Corporation the authority to make decisions pursuant to
paragraphs (c) and (f) of Section 5 (provided that no such delegation
may be made that would cause Stock Options or other transactions under the
Plan to cease to be exempt from Section 16(b) of the Exchange Act) and
(ii) authorize any one or more of their number or any officer of the
Corporation to execute and deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Stock Option shall be
made in the sole discretion of the Committee or
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such delegate at the time of the grant of the Stock Option or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately delegated officer pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Corporation and the CEO.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available for
grant under the Plan shall be 1,500,000. The CEO may not be granted
Stock Options covering in excess of 1,500,000 shares of Common Stock in
any calendar year. Shares subject to a Stock Option under the Plan may be
authorized and unissued shares or may be treasury shares.
If any Stock Option terminates without being exercised, shares subject
to such Stock Option shall again be available for distribution in
connection with Stock Options under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes
within the efinition of such term in Section 368 of the Code) or any partial
or complete liquidation of the Corporation, the Committee or Board
may make such substitution or adjustments in the aggregate number and kind
of shares reserved for issuance under the Plan, in the number, kind and
option price of shares subject to outstanding Stock Options, in the
number and kind of shares subject to other outstanding Stock Options
granted under the Plan and/or such other equitable substitution or
adjustments as it may determine to be appropriate in its sole discretion;
PROVIDED, HOWEVER, that the number of shares subject to any Stock Option
shall always be a whole number.
SECTION 4. ELIGIBILITY
Only the CEO is eligible to be granted Stock Options under the Plan.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Committee shall have the authority to grant the CEO Stock
Options, PROVIDED, HOWEVER, that grants hereunder are subject to the
aggregate annual limit on grants set forth in Section 3. Stock Options
shall be evidenced by option agreements, the form, terms and provisions of
which may differ. The grant of a Stock Option shall occur on the date (the
"Grant Date") a majority of the independent directors of the Corporation
ratify by resolution the Committee's recommendation with respect to the
numbers of shares of Common Stock to be subject to such Stock Option and
the terms and provisions of the Stock Option.
Unless the Committee shall determine otherwise, Stock Options granted
under the Plan shall be subject to the following terms and conditions
and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and set
forth in the Employment Agreement.
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(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may determine. In
addition, the Committee may at any time accelerate the exercisability of any
Stock Option.
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject to the
Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Committee
may accept. If approved by the Committee, payment, in full or in part, may
also be made in the form of unrestricted Common Stock already owned by the
optionee of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock
Option is exercised).
Payment for any shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the Corporation, together
with a copy of irrevocable instructions to a broker to deliver promptly to
the Corporation the amount of sale or loan proceeds to pay the purchase
price, and, if requested, by the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Corporation may
enter into agreements for coordinated procedures with one or more brokerage
firms.
No shares of Common Stock shall be issued until full payment therefor
has been made. The optionee shall have all of the rights of a shareholder
of the Corporation holding the class or series of Common Stock that is
subject to such Stock Option (including, if applicable, the right to
vote the shares and the right to receive dividends), when the optionee
has given written notice of exercise and has paid in full for such shares.
(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution; or (ii) pursuant to a qualified domestic relations
order (as defined in the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended. All Stock Options shall be exercisable,
subject to the terms of this Plan, during the optionee's lifetime, only by
the optionee or by the guardian or legal representative of the optionee or
its alternative payee pursuant to such qualified domestic relations order,
it being understood that the terms "holder" and "optionee" include the
guardian and legal representative of the optionee and any person to whom an
option is transferred by will or the laws of descent and distribution or
pursuant to a qualified domestic relations.
(f) TERMINATION. Unless otherwise determined by the Committee and
subject to the terms of the Employment Agreement, if the optionee's
employment terminates for any reason prior to the fifth anniversary of the
Grant Date, any Stock Option held by the optionee, to the extent such option
has become exercisable on or before the date of such termination (including
without limitation, any portion that becomes exercisable because of such
termination) shall remain exercisable until the earlier to occur of (x) the
first anniversary of such date of termination or (y) the fifth anniversary
of the Grant Date.
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(g) CASHING OUT OF STOCK OPTION. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the
portion of the shares of Common Stock for which a Stock Option is being
exercised by paying the optionee an amount, in cash or Common Stock, equal
to the excess of the Fair Market Value of the Common Stock over the option
price times the number of shares of Common Stock for which the Option is
being exercised on the effective date of such cash-out.
Cash-outs pursuant to this Section 5(g) shall comply with the "window
period" provisions of Rule 16b-3, to the extent applicable, and the
Committee may determine Fair Market Value based on the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange or
other national securities exchange on which the shares are listed or on
NASDAQ, as applicable, on any day during such "window period".
(h) CHANGE OF CONTROL CASH-OUT. The Committee may, but need not,
determine at the time of grant that, during the 60-day period from
and after a Change of Control (the "Exercise Period"), the optionee shall
have the right, whether or not the Stock Option is fully exercisable and in
lieu of the payment of the exercise price for the shares of Common Stock
being purchased under the Stock Option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part
of the Stock Option to the Corporation and to receive cash, within 30 days
of such notice, in an amount equal to the amount by which the Change of
Control Price per share of Common Stock on the date of such election shall
exceed the exercise price per share of Common Stock under the Stock Option
(the "Spread") multiplied by the number of shares of Common Stock granted
under the Stock Option as to which the right granted under this Section 5(h)
shall have been exercised; PROVIDED, HOWEVER, that if the Change of Control
is within six months of the date of grant of a particular Stock Option, no
such election shall be made by the optionee with respect to such Stock
Option prior to six months from the date of grant. However, if the end of
such 60-day period from and after a Change of Control is within six months
of the date of grant of a Stock Option, such Stock Option shall be canceled
in exchange for a cash payment to the optionee, effected on the day which is
six months and one day after the date of grant of such Option, equal to the
Spread multiplied by the number of shares of Common Stock granted under the
Stock Option. Notwithstanding the foregoing, if any right granted pursuant
to this Section 5(h) would make a Change of Control transaction ineligible
for pooling of interests accounting under APB No. 16 that but for this
Section 5(h) would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute the cash payable pursuant to
this Section 5(h) with Stock with a Fair Market Value equal to the cash that
would otherwise be payable hereunder.
SECTION 6. CHANGE OF CONTROL PROVISIONS
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, unless the Committee shall determine otherwise, in the
event of a Change of Control, any Stock Options outstanding as of the date
such Change of Control is determined to have occurred, and which are not
then exercisable and vested, shall become fully exercisable and vested to
the full extent of the original grant.
(b) DEFINITION OF CHANGE OF CONTROL. For purposes of the Plan, a "Change
of Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (1) the then outstanding
shares of
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common stock of the Corporation (the "Outstanding Corporation Common Stock")
or (2) the combined voting power of the then outstanding voting securities
of the Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities")(a "Control Purchase");
excluding, however, the following:(1) Any acquisition directly from the
Corporation, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Corporation, (2) Any acquisition by the
Corporation, (3) Any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, (4) Any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subsection (iii) of this Section 6(b), or (5) Any acquisition by Barron
Hilton, the Charitable Remainder Unitrust created by Barron Hilton to
receive shares from the Estate of Conrad N. Hilton, or the Conrad N. Hilton
Fund (together, the "Hilton Interests"); or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be herein after referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; PROVIDED, HOWEVER,
for purposes of this Section 6(b), that any individual who becomes a member
of the Board subsequent to the effective date of the Plan, whose election,
or nomination for election by the Corporation's shareholders, was approved
by a vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, PROVIDED FURTHER, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member of the
Incumbent Board (a "Board Change"); or
(iii) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation ("Corporate
Transaction"); excluding however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or indirectly,
more than 50% of, respectively, the outstanding shares of common stock, and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (2) no Person (other than
the Hilton Interests, the Corporation, any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from such Corporate
Transaction) will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of
the outstanding voting securities of such corporation entitled to vote
generally in the election of directors except to the extent that such
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ownership existed prior to the Corporate Transaction, and (3) individuals
who were members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(iv) The approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(c) CHANGE OF CONTROL PRICE. For purposes of the Plan, "Change of
Control Price" means the higher of (i) the highest reported sales
price, regular way, of a share of Common Stock in any transaction reported
on the New York Stock Exchange Composite Tape or other national exchange
on which such shares are listed or on NASDAQ during the 60-day period prior
to and including the date of a Change of Control or (ii) if the Change of
Control is the result of a tender or exchange offer or a Corporate
Transaction, the highest price per share of Common Stock paid in such tender
or exchange offer or Corporate Transaction; PROVIDED, HOWEVER, that in the
case of a Stock Option which (A) is held by an optionee who is an officer
or director of the Corporation and is subject to Section 16(b) of the Exchange
Act and (B) was granted within 240 days of the Change of Control, then the
Change of Control Price for such Stock Option shall be the Fair Market Value of
the Common Stock on the date such Stock Option is exercised or deemed
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
SECTION 7. TERM, AMENDMENT AND TERMINATION
The Plan will terminate five years after the effective date of the Plan.
Under the Plan, Stock Options outstanding as of such date shall not be affected
or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
the optionee under a Stock Option theretofore granted without the optionee's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment shall be made without the
approval of the Corporation's shareholders to the extent such approval is
required by law or agreement.
The Committee may amend the terms of any Stock Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair
the rights of the holder without the holder's consent except such an
amendment made to cause the Plan or Stock Option to qualify for the exemption
provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Stock Options which qualify for
beneficial treatment under such rules without stockholder approval.
SECTION 8. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the
Plan to deliver Common Stock or make payments; PROVIDED, HOWEVER, that unless
the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
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SECTION 9. GENERAL PROVISIONS
(a) Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Corporation shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock under
the Plan prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or the maintaining
in effect of any such registration or other qualification which the
Committee shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon the CEO any right to
continued employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the employment of the
CEO at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the CEO for federal income tax purposes with respect
to any Stock Option under the Plan, the CEO shall pay to the Corporation, or
make arrangements satisfactory to the Committee regarding the payment of,
any federal, state, local or foreign taxes of any kind required by law to
be withheld with respect to such amount. Unless otherwise determined by
the Corporation, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Stock Option that gives rise to
the withholding requirement. The obligations of the Corporation under the
Plan shall be conditional on such payment or arrangements, and the
Corporation and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
optionee. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.
(e) The Committee shall establish such procedures as it deems
appropriate for the CEO to designate a beneficiary to whom any amounts
payable in the event of the CEO's death are to be paid or by whom any
rights of the CEO, after the CEO's death, may be exercised.
(f) The Plan and all Stock Options made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of laws.
SECTION 10. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of February 1, 1996, provided that it
is approved and adopted by at least a majority of the shares of Common Stock
of the Corporation voting at its annual meeting scheduled to be held on May
9, 1996.
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