EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1995, between
Promus Hotel Corporation, a Delaware corporation with its executive
offices at 850 Ridge Lake Boulevard, Memphis, Tennessee (the
"Company"), and Raymond E. Schultz (the "Executive").
The Company and the Executive agree as follows:
1. Introductory Statement.
The Company desires to secure the services of the Executive as
Chief Executive Officer, and the Executive is willing to execute
this Agreement with respect to his employment. This Agreement is
effective on July 1, 1995, and shall expire on December 31, 1999
("the Termination Date"), subject to the terms and conditions
herein.
2. Agreement of Employment.
The Company agrees to, and hereby does, employ the Executive,
and the Executive agrees to, and hereby does accept, employment by
the Company, in a full-time capacity as Chief Executive Officer,
pursuant to the provisions of this Agreement and of the bylaws of
the Company and subject to the control of the Board of Directors.
It is understood that the Executive's position as Chief Executive
Officer is subject to his yearly re-election as Chief Executive
Officer by the Board. See paragraph 6 herein for Executive's
rights if such re-election does not occur during the term of this
Agreement.
3. Executive's Obligations.
During the period of his service under this Agreement, the
Executive shall devote substantially all of his time and energies
during business hours to the supervision and conduct, faithfully
and to the best of his ability, of the business and affairs of the
Company and to the furtherance of its interests, and to such other
duties as directed by the Board.
4. Compensation.
The Company shall pay to Executive a salary at the rate of
$310,000 per year, in equal bi-weekly installments, provided,
however, that the Human Resources Committee of the Board (the
"HRC") shall in good faith review the salary of the Executive, on
an annual basis, with a view to consideration of appropriate merit
increases in such salary. In addition, except as otherwise
provided in this Agreement, during the term of this Agreement the
Executive shall be entitled to participate in incentive
compensation programs and to receive employee benefits and
perquisites at least as favorable to the Executive as those
presently provided to Executive by the Company, and as may be
enhanced for all senior officers. Such benefits include, but are
not limited to, the rabbi trust (provided pursuant to the escrow
agreement dated June 30, 1995 as amended (the "Escrow Agreement"))
and his Severance Agreement dated June 30, 1995, a copy of which is
attached hereto as Exhibit A (the "Severance Agreement") both of
which will continue in force subject to their terms and conditions
including the termination and amendment provisions thereof. There
will be no diminution of the above compensation, perquisites, or
benefits except as provided in this Agreement.
37
The Executive will use the Company's aircraft for security
purposes for himself and his family (with standard charges for
non-employee family members and for non-Company business usage).
The Company will also provide Executive with appropriate security
arrangements at his residence.
If the Executive dies or resigns pursuant to this Agreement or
pursuant to any other agreement between the Company and the
Executive providing for such resignation during the period of this
Agreement, service for any part of the month in which any such
event occurs shall be considered service for the entire month.
5. Termination From Employment on December 31, 1999
5.1 Except as otherwise provided in this Agreement, the date
of Executive's termination from employment shall be December 31,
1999 ("the Termination Date").
5.2 After the date of Executive's termination from employment
at any time (including termination or resignation prior to the
Termination Date, if that should occur), he will be entitled to
participate at the Company's expense for his lifetime in the
Company's group health insurance plans applicable to corporate
executives including family coverage as applicable (medical, dental
and vision coverage). It is understood that the Executive will be
subject to income tax on the cost of the benefits provided to him
after his termination. His group health insurance benefits after
any termination of employment will not be less than those offered
to corporate officers of the Company, and he will be entitled to
any later enhancements in such benefits. His benefits will be the
same as normally provided to other retired management directors
pursuant to the policy adopted by the HRC on May 26, 1995,
including term life insurance of $50,000 (except to the extent he
voluntarily elects not to participate in any plan).
5.3 After the date of Executive's termination from
employment, his EDCP account and any other deferred compensation
balances will continue to be protected by the Escrow Agreement if
it is then in force subject to the terms and conditions of the
Escrow Agreement including its termination and amendment
provisions.
6. Termination Without Cause or Resignation for Good Reason
6.1 The Board reserves the right to terminate Executive from
his then current position without cause at any time upon at least
three months prior written notice. The failure of the Board to
elect Executive as Chief Executive Officer during the annual
election of officers shall also be deemed termination without cause
for purposes of this Agreement unless, before the election, the
Board has sent the written notice initiating termination for Cause
as provided in paragraph 11.1, and Executive is thereafter
terminated for Cause. Executive reserves the right to resign his
position for Good Reason (as defined in paragraph 11.2 herein) by
giving the Company 30 days written notice which states the reason
for his resignation. For purposes of this Agreement, Good Reason
does not include changes that are expressly permitted by this
Agreement.
6.2 Upon Executive's termination without cause or resignation
from his position with Good Reason as described in paragraph 6.1
above:
38
(a) Executive will continue in employee status as a
consultant-employee for two years beginning on the date of such
termination without cause or resignation with Good Reason (the
"Transition Period"). His stock options and any restricted stock
will continue in force for vesting purposes during the Transition
Period. Any unvested stock options and unvested shares of
restricted stock that do not vest during the Transition Period will
be forfeited.
(b) Executive will become vested at the retirement rate under
the Executive Deferred Compensation Plan ("EDCP") on the date of
such termination without cause or resignation with Good Reason.
(c) Executive will continue to receive his then-current
salary rate and the right to participate in the Company's benefit
plans during the Transition Period but he will no longer be
eligible for bonus, stock option or restricted stock grants or any
other long term incentive awards then in effect.
(d) After the expiration of the Transition Period, Executive
will be entitled to the lifetime group insurance benefits described
in paragraph 5.2.
7. Termination For Cause or Resignation Without Good Reason
7.1 The Board will have the right to terminate Executive at
any time from his then-current position for Cause (as defined in
paragraph 11.1 herein).
7.2 If Executive is terminated for Cause or if he resigns his
position without Good Reason (including if he retires without Good
Reason, except as otherwise provided in Paragraph 7.3 below), then
(a) all of his rights and benefits under this Agreement shall
thereupon terminate and his employment shall be deemed terminated
on the date of such termination or resignation, (b) he shall be
entitled to all accrued rights, payments and benefits vested or
paid on or before such date under the Company's plans and programs,
but unvested stock options and unvested shares of restricted stock,
if any, will be forfeited, (c) his right to exercise vested stock
options will expire at 12:00 p.m. midnight on the date of such
termination or resignation and all stock options not so exercised
will be forfeited, (d) his indemnification agreement will continue
in force, (e) the Escrow Agreement, if then in force, will continue
in force, unless such agreement is thereafter amended or terminated
pursuant to its terms, (f) he will be entitled to the lifetime
group insurance benefits described in paragraph 5.2 above except
that any future amendments to such benefits shall apply to him in
the same manner as such amendments apply to other employees and (g)
his Severance Agreement and all rights thereunder will terminate as
of such termination or resignation date unless a Change in Control
or Potential Change in Control (as such terms are defined in the
Severance Agreement) has occurred prior to such termination or
resignation date.
If Executive's Severance Agreement is in force upon a Change
in Control (as defined in the Severance Agreement), the provisions
of this paragraph 7.2 will not be applicable if he resigns (with or
without Good Reason) within two (2) years after the Change in
39
Control, and in the event of such resignation after a Change in
Control he will be entitled to the payments, rights and benefits as
provided in paragraph 10 below.
7.3 If Executive retires anytime after June 30, 1997, and
prior to the Termination Date, any stock options and shares of
restricted stock scheduled to vest during the two years after the
date of retirement shall vest immediately on the date of
retirement. If Executive retires after the Termination Date, all
unvested stock options and shares of restricted stock shall vest
immediately on the date of retirement. Except as provided in this
paragraph, all other provisions of Paragraph 7.2 shall apply if
Executive retires without Good Reason. This provision shall
survive the termination of the agreement, but shall not apply if
Executive could, at the time of retirement, be discharged for
Cause.
8. Death
In the event of Executive's death prior to the Termination
Date, during his employment under this Agreement, his salary and
all rights and benefits under this Agreement will terminate, and
his estate and beneficiary(ies) will receive the benefits they are
entitled to under the terms of the Company's benefit plans and
programs by reason of a participant's death during active
employment including the death benefits provided by the EDCP and
the applicable rights and benefits under the Company's stock plans.
The Escrow Agreement if then in force will continue in force
(subject to its amendment or termination in accordance with its
terms) for the benefit of Executive's beneficiaries until his
deferred compensation accounts are paid in full, and Executive's
indemnification agreement will continue in force for the benefit of
his estate.
9. Disability
In the event of Executive's disability prior to the
Termination Date, during his employment, he will be entitled to
apply at his option for the Company's long term disability
benefits. If he is accepted for such benefits, then the terms and
provisions of the Company's benefit plans and programs (including
the EDCP and the Company's Stock Option and Restricted Stock Plans)
that are applicable in the event of such disability of an employee
shall apply in lieu of the salary and benefits under this
Agreement, except that (a) the Escrow Agreement (if then in force)
and his indemnification agreement will continue in force (the
Escrow Agreement will be subject to amendment or termination in
accordance with its terms), and (b) he will be entitled to the
lifetime group insurance benefits described in paragraph 5.2. If
Executive is disabled so that he cannot perform his duties (as
determined by the HRC), and if he does not apply for long term
disability benefits or is not accepted for such benefits, then the
Board may terminate his duties under this Agreement and, in such
event, he will receive two years salary continuation together with
all other benefits, and during such period of salary continuation
any stock options and restricted stock grants then in existence
will continue in force for vesting purposes. However, during such
period of salary continuation for disability, Executive will not be
eligible to participate in the annual bonus plan nor will he be
eligible to receive stock option or restricted stock grants or any
other long term incentive awards except to the extent approved by
the HRC.
40
10. Change in Control
If a Change in Control as defined in Executive's Severance
Agreement occurs prior to Executive's termination of employment and
if the Severance Agreement is in force when the Change in Control
occurs, then, upon his termination or voluntary or involuntary
resignation within two years after the Change in Control (including
termination on December 31, 1999 due to expiration of this
Agreement), except if his termination of employment is for "Cause,"
"Disability" or "Retirement" as set forth in the Severance
Agreement, he will be entitled to all the rights, payments and
benefits provided under his Severance Agreement including the
benefits that the Severance Agreement provides with respect to the
benefit plans and programs of the Company resulting from his
termination or voluntary resignation, in lieu of the rights and
benefits that would otherwise apply under this Agreement by virtue
of his termination or resignation, provided that (a) the Escrow
Agreement (if then in force) and his indemnification agreement will
continue in force (the Escrow Agreement will be subject to
amendment or termination in accordance with its terms) and (b) he
will be entitled to the lifetime group insurance benefits described
in paragraph 5.2.
11. Definitions of Cause and Good Reason.
11.1 Cause. Termination by the Company of this Agreement
for "Cause" shall mean termination upon the Executive's engaging in
willful and continued misconduct, or the Executive's willful and
continued failure to substantially perform his duties with the
Company (other than due to physical or mental illness), if such
failure or misconduct is materially damaging or materially
detrimental to the business and operations of the Company; provided
that Executive shall have received written notice of such failure
or misconduct and shall have continued to engage in such failure or
misconduct after 30 days following receipt of such notice from the
Board, which notice specifically identifies the manner in which the
Board believes that Executive has engaged in such failure or
misconduct. For purposes of this Paragraph, no act, or failure to
act, on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission
was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purposes (after reasonable notice to the Executive and an
opportunity for him, together with his counsel, to be heard before
the Board), finding that in the good faith opinion of the Board the
Executive was guilty of failure to substantially perform his duties
or of misconduct in accordance with the first sentence of this
paragraph, and of continuing such failure to substantially perform
his duties or misconduct as aforesaid after notice from the Board,
and specifying the particulars thereof in detail.
11.2 Good Reason. "Good Reason" shall mean, without
Executive's express written consent, the occurrence of any of the
following circumstances unless, in the case of paragraphs (a), (e),
(f) or (g), such circumstances are fully corrected prior to the
date of termination specified in the written notice given by
Executive notifying the Company of his resignation for Good Reason:
41
(a) The assignment to Executive of any duties inconsistent
with his status as Chief Executive Officer of the Company or a
substantial adverse alteration in the nature or status of his
responsibilities;
(b) A reduction by the Company in his annual base salary of
$310,000 or as the same may be increased from time to time pursuant
to paragraph 4 hereof;
(c) The relocation of the Company's principal executive
offices where Executive is working to a location more than 50 miles
from the location of such offices on the date of this Agreement, or
the Company's requiring Executive to be based anywhere other than
the location of the Company's principal offices where Executive is
working on the date of this Agreement except for required travel on
the Company's business to an extent substantially consistent with
Executive's present business travel obligations;
(d) The failure by the Company, without Executive's consent,
to pay to him any portion of his current compensation except
pursuant to a compensation deferral elected by the Executive, or to
pay to Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company
within thirty days of the date such compensation is due;
(e) Except as permitted by this Agreement, the failure by the
Company to continue in effect any compensation plan in which
Executive is participating on the date of this Agreement which is
material to Executive's total compensation, including, but not
limited to, the Company's annual bonus plan, the EDCP (which may be
modified or terminated as to further deferrals after 1995), the
Restricted Stock Plan, or the Stock Option Plan or any substitute
plans unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue Executive's
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of Executive's
participation relative to other participants at Executive's grade
level;
(f) The failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
him under the S&RP, except as required by law, and the life
insurance, medical, health and accident, and disability plans in
which Executive is participating on the date of this Agreement, the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive
Executive of any material fringe benefit enjoyed by Executive on
the date of this Agreement except as permitted by this Agreement,
or the failure by the Company to provide Executive with the number
of paid vacation days to which Executive is entitled; or
(g) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 14 hereof.
Executive's right to terminate his employment pursuant to this
Agreement for Good Reason shall not be affected by Executive's
incapacity due to physical or mental illness. Executive's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good
Reason hereunder.
42
12. Non-Competition Agreement.
12.1 For a period of two years after Executive's full-time,
active employment (which period, for purposes of this paragraph
12.1, shall not include employee status as a consultant-employee in
paragraph 6.2(a)) with the Company (or with a direct or indirect
subsidiary of the Company) ends, he will not, directly or
indirectly, solicit or recruit any employee of the Company or of
any of its direct or indirect subsidiaries, and he will not engage
(as an employee, consultant, director, investor, contractor, or
otherwise) directly or indirectly in any business in the United
States, Canada or Mexico that is competitive with any business that
the Company or its direct or indirect subsidiaries are engaged (as
owner, manager, consultant, licensor, partner, or otherwise) in at
the time such employment ends except with the prior specific
approval of the Board.
12.2 If Executive breaches any of the above covenants in
12.1, then the Board may terminate any of his rights under this
Agreement upon thirty days written notice whereupon all of the
Company's obligations under this Agreement shall terminate
(including, without limitation, the right to lifetime group
insurance) without further obligation to him except for obligations
that have been paid, accrued or are vested as of or prior to such
termination date. In addition the Company shall be entitled to
enforce any such covenants including obtaining monetary damages,
specific performance and injunctive relief.
13. Binding Arbitration.
Any and all claims, disputes or controversies arising out of
or related to this Agreement or the breach thereof shall be
resolved by arbitration in accordance with the rules of the
American Arbitration Association (the "AAA") then in existence,
subject to this paragraph 13. Such arbitration shall be conducted
by a panel of three arbitrators. The Executive shall appoint one
arbitrator, the Company shall appoint one arbitrator, and the third
shall be appointed by the two arbitrators appointed by the parties.
The third arbitrator shall serve as chairman of the panel. The
parties shall appoint their arbitrators within 30 days after the
demand for arbitration is served, failing which the AAA promptly
shall appoint a defaulting party's arbitrator, and the two
arbitrators shall select the third arbitrator within 15 days after
their appointment, or if they cannot agree or fail to so appoint,
then the AAA promptly shall appoint the third arbitrator. The
arbitrators shall render their decision in writing within 60 days
after the close of evidence or other termination of the proceedings
by the panel. The determination or award rendered in such
arbitration shall be binding and conclusive upon the parties and
shall not be appealable, and judgment may be entered thereon in
accordance with applicable law in any court of competent
jurisdiction. Any hearings in the arbitration shall be held in
Memphis, Tennessee, and shall be private and not open to the
public. Each party shall bear the fees and expenses of its
arbitrator, counsel and witnesses, and the fees and expenses of the
third arbitrator shall be shared equally by the parties. Other
costs of the arbitration, including the fees of AAA, shall be
shared equally by the parties.
43
14. Assumption of Agreement on Merger, Consolidation or Sale of
Assets.
The Company agrees that until the termination of this
Agreement as above provided, it will not enter into any merger or
consolidation with another company in which the Company is not the
surviving company, or sell or dispose of all or substantially all
of its assets, unless the company which is to survive such merger
or consolidation or the prospective purchaser of such assets first
makes a written agreement with the Executive either (1) assuming
the Company's financial obligations to the Executive under this
Agreement, or (2) making such other provision for the Executive as
is satisfactory to the Executive and approved by him in writing in
lieu of assuming the Company's financial obligations to him under
this Agreement.
15. Assurances on Liquidation.
The Company agrees that until the termination of this
Agreement as above provided, it will not voluntarily liquidate or
dissolve without first making a full settlement or, at the
discretion of the Executive, a written agreement with the Executive
satisfactory to and approved by him in writing, in fulfillment of
or in lieu of its obligations to him under this Agreement.
16. Amendments.
This Agreement may not be amended or modified orally, and no
provision hereof may be waived, except in a writing signed by the
parties hereto.
17. Assignment.
17.1 Except as otherwise provided in paragraph 17.2, this
Agreement cannot be assigned by either party hereto except with the
written consent of the other. Any assignment of this Agreement by
either party hereto shall not relieve such party of its or his
obligations hereunder.
17.2 The Company may elect to perform any or all of its
obligations under this Agreement through its wholly-owned
subsidiary, Promus Hotels, Inc., or another subsidiary, and if the
Company so elects, Executive will be an employee of Promus Hotels,
Inc., or such other subsidiary. Notwithstanding any such election,
the Company's obligations to Executive under this Agreement will
continue in full force and effect as obligations of the Company,
and the Company shall retain primary liability for their
performance.
18. Binding Effect.
This Agreement shall be binding upon and inure to the benefit
of the personal representatives and successors in interest of the
Company.
19. Choice of Law.
This Agreement shall be governed by the law of the State of
Tennessee as to all matters, including but not limited to matters
of validity, construction, effect and performance.
44
20. Severability of Provisions.
In case any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby, and this Agreement shall be interpreted as if
such invalid, illegal or unenforceable provision was not contained
herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Company has caused this Agreement to be executed in its
name and on its behalf and its corporate seal to be hereunto
affixed and attested by its corporate officers thereunto duly
authorized.
/s/ Raymond E. Schultz
Raymond E. Schultz
(Corporate Seal) PROMUS HOTEL CORPORATION
By:
ATTEST:
Secretary
45
Summary of Employment Agreement
of
Raymond E. Schultz
1. Term: Four and one-half (4 1/2) years from July 1, 1995 to
December 31, 1999.
2. Duties: Chief Executive Officer, or as otherwise
determined by the Board.
3. Compensation and Benefits: He receives an annual salary
of $310,000, plus merit increases as determined by the Human
Resource Committee, incentive compensation, and benefits including
use of company aircraft for business, family and personal use and
appropriate security arrangements. Following any termination of
employment, he will receive lifetime health and life insurance
benefits at Company expense as provided to retired management
directors.
4. Termination without Cause or Resignation For Good Reason:
The Board can terminate him without cause, or he can resign for
"Good Reason." If either occurs, he will receive two years salary
continuation as a employee-consultant plus benefits (except for new
stock grants and annual bonus). His unvested stock options and
restricted stock continue in force for vesting purposes during the
two year period, and any that do not vest during that period will
be forfeited. His EDCP will vest at the retirement rate on the
date of termination of active employment.
Note: "Good Reason" includes such events as an adverse change
in his duties, salary reduction, decreased benefits, or a
relocation of his office by more than 50 miles.
5. Termination for Cause; Resignation Without Good Reason;
Retirement: The Board can terminate him for "Cause." If so, or if
he resigns without Good Reason, any unvested options and restricted
stock are forfeited. However, if he retires after June 30, 1997
but before December 31, 1999, any stock options and restricted
stock scheduled to vest during the next two years vest immediately;
if he retires after December 31, 1999, all unvested options and
shares of restricted stock vest immediately. He can exercise
vested stock options up to 12:00 p.m. on the termination date.
Benefits cease except for lifetime health insurance.
6. Expiration of Agreement: Upon expiration of the
agreement, all salary and benefits will cease (except for lifetime
health insurance).
7. Change in Control: If he resigns or is terminated (except
due to death, disability or retirement) within two years after a
change in control, he receives benefits under his severance
agreement in lieu of salary continuation or other rights under his
employment agreement.
46
8. Death: Upon his death, the employment agreement
terminates, and his beneficiary/estate will receive the benefits
normally provided to the beneficiaries of a deceased employee.
9. Disability: Upon disability, he can apply for standard
long-term disability benefits. If he does not apply or does not
qualify, and if the Human Resources Committee nevertheless
determines he is unable to perform his job, the Board can terminate
his agreement. If this occurs, he will receive two years salary
continuation and all benefits (except for new stock grants and
annual bonus), and his unvested options and restricted stock will
continue in force for vesting purposes during the salary
continuation period. He will receive lifetime insurance benefits.
If he does qualify for long-term disability, then the terms of the
applicable plans and programs will apply in lieu of salary and
benefits under this agreement.
10. Escrow Agreement (Rabbi Trust) and Indemnification
Agreement: If his employment terminates for any reason, his
indemnification agreement will continue in effect, and the Escrow
Agreement will continue in effect subject to amendment or
termination under its own terms.
11. Covenant Not to Compete: For two years after his
termination of employment status or consultancy, he agrees not to
engage directly or indirectly in any business in the U.S., Mexico,
or Canada that is competitive with any business of the Company and
not to solicit or recruit Promus Hotel employees without prior
specific Board approval.
12. Arbitration: All disputes under the agreement are to be
settled by binding arbitration with each party bearing its own cost
and expenses.
13. Merger/Liquidation: The Company cannot liquidate or
merge into another company unless the new company assumes the
financial obligation of the employment agreement or unless a
settlement agreement is entered into that is satisfactory to him.
14. Employment by Subsidiary: He may legally be an employee
of Promus Hotels, Inc., or another Promus Hotel Corporation
subsidiary, but Promus Hotel Corporation will remain primarily
obligated for the obligations under this agreement.
47