Exhibit 10(1)
PROMUS HOTEL CORPORATION
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of __________________, 19___, between Promus Hotel
Corporation, a Delaware corporation (the "Company"), and ____________________,
(the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors, officers and key employees the most capable persons available;
WHEREAS, Indemnitee is a director, officer, or key employee of the
Company or one of its subsidiaries;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors, officers and key
employees of public companies in today's environment;
WHEREAS, basic protection against undue risk of personal liability of
directors and officers heretofore has been provided through insurance coverage
providing reasonable protection at reasonable costs, but as a result of
substantial changes in the marketplace for such insurance it has become
increasingly more difficult to obtain such insurance on terms providing
reasonable protection at reasonable cost;
WHEREAS, except in the case of litigation in which Indemnitee is
successful, Indemnification of Indemnitee is discretionary rather than mandatory
under the Company's Certificate of Incorporation;
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner, the inadequacy of the Company's directors
and officers liability insurance coverage and the uncertainty of indemnification
inherent in the indemnity provisions contained in the Company's Certificate of
Incorporation, the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, if Indemnitee is a director or officer of the Company or any
subsidiary of the Company, and to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies;
NOW, THEREFORE, in consideration of the above premises and of Indemnitee
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions:
(a) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the total voting power represented by
the Company's then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in
the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(b) Claim: any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes might
lead to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
(c) Expenses: attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with investigating, defending,
being a witness in or participating in (including on appeal), or preparing
to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the
Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity.
(e) Potential Change in Control: shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a Change in
Control; (iii) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then
2
outstanding Voting Securities (before giving effect to the reduction in
votes prescribed in Section D of Article FOURTH of the Company's
Certificate of Incorporation) or (iv) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential Change in Control
has occurred.
(f) Reviewing Party: any appropriate person or body consisting
of a member or members of the Company's Board of Directors or any other
person or body appointed by the Board (including the special,
independent counsel referred to in Section 3) who is not a party to the
particular Claim for which Indemnitee is seeking indemnification.
(g) Voting Securities: with respect to the Company or any other
corporation, any securities of the Company or such other corporation
which vote generally in the election of directors.
2. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness
or other participant in, a Claim by reason of (or arising in part out of)
an Indemnifiable Event, the Company shall indemnify Indemnitee to the
fullest extent permitted by law as soon as practicable but in any event no
later than thirty days after written demand is presented to the Company by
Indemnitee, against any and all Expenses, judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses,
judgments, fines, penalties or amounts paid in settlement) of such Claim.
Notwithstanding anything in this Agreement to the contrary, prior to a
Change in Control, Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by
Indemnitee against the Company or any director or officer of the Company
unless the Company has joined in or consented to the initiation of such
Claim. If so requested by Indemnitee, the Company shall advance (within
two business days of such request) any and all Expenses to Indemnitee (an
"Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 2(a) shall be subject to the condition that the
Reviewing Party shall not have determined (in a written opinion, in any
case in which the special, independent counsel referred to in Section 3 is
involved) that indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance pursuant to Section 2(a) shall be subject to the condition that,
if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all such amounts theretofore
paid; provided, that if Indemnitee has commenced legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). If there has
not been a Change in Control, the Reviewing Party shall be selected by the
Board of Directors, and if there has been a Change in Control, the
3
Reviewing Party shall be the special, independent counsel referred to in
Section 3. If there has been no determination by the Reviewing Party or if
the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation in any court in the states of
Tennessee or Delaware having subject matter jurisdiction thereof and in
which venue is proper seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect
thereof, and the Company hereby consents to service of process and to
appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
3. Change in Control.
The Company agrees that if there is a Change in Control (other than
a Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control) then with respect to all matters thereafter arising concerning
the rights of Indemnitee to indemnity payments and Expense Advances under
this Agreement or any other agreement or Company Bylaw or the Company's
Certificate of Incorporation now or hereafter in effect relating to Claims
for Indemnifiable Events, the Company shall seek legal advice only from
special, independent counsel selected by Indemnitee and approved by the
Company (which approval shall not be unreasonably withheld). Such counsel,
among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee would be
permitted to be indemnified under applicable law. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to
above and to fully indemnify such counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out
of or relating to this Agreement or its engagement pursuant hereto.
4. Establishment of Trust.
In the event of a Potential Change in Control, the Company shall,
upon written request by Indemnitee, create a Trust for the benefit of the
Indemnitee and from time to time upon written request of Indemnitee shall
fund such Trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for and defending any Claim
relating to an Indemnifiable Event, and any and all judgments, fines,
penalties and settlement amounts of any and all Claims relating to an
Indemnifiable Event from time to time actually paid or claimed, reasonably
anticipated or proposed to be paid. The amount or amounts to be deposited
in the Trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party. The Trust shall provide that upon a
Change in Control (i) the Trust shall not be revoked or the principal
thereof invaded without the written consent of the Indemnitee, (ii) the
Trustee shall advance, within two business days of a request by the
Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee
hereby agrees to reimburse the Trust under the circumstances under which
the Indemnitee would be required to reimburse the Company under Section
2(b)), (iii) the Trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the Trustee
shall promptly pay to the Indemnitee all amounts for which the Indemnitee
4
shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such Trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that the Indemnitee has been
fully indemnified under the terms of this Agreement. The Trustee shall be
chosen by the Indemnitee. Nothing in this Section 4 shall relieve the
Company of any of its obligations under this Agreement.
5. Indemnification for Additional Expenses.
The Company shall indemnify Indemnitee against any and all expenses
(including attorneys' fees) and, if requested by Indemnitee, shall (within
two business days of such request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any claim asserted
against or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other
agreement or Company Bylaw or the Company's Certificate of Incorporation
now or hereafter in effect relating to Claims for Indemnifiable Events, or
(ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be.
6. Partial Indemnity, Etc.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of a Claim but
not for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in
defense of any Claim relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection therewith. In connection with any determination by
the Reviewing Party or otherwise as to whether Indemnitee is entitled to
be indemnified hereunder the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
7. No Presumption.
For purposes of this Agreement, the termination of any claim,
action, suit or proceeding, by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is
not permitted by applicable law.
5
8. Non-exclusivity, Etc.
The rights of the Indemnitee hereunder shall be in addition to any
other rights Indemnitee may have under the Company's Certificate of
Incorporation and the Delaware General Corporation Law or otherwise. To
the extent that a change in the Delaware General Corporation Law (whether
by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company's Certificate
of Incorporation and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by virtue of this Agreement the greater
benefits so afforded by such change.
9. Liability Insurance.
If Indemnitee is a director or officer of the Company or any
subsidiary of the Company, then to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any company director or officer.
10. Period of Limitations.
No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company or any affiliates of the Company
against Indemnitee, Indemnitee's spouse, heirs, executors or personal or
legal representatives after the expiration of two years from the date of
accrual of such cause of action, and any claim or cause of action of the
Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year
period; provided that if any shorter period of limitations is otherwise
applicable to any such cause of action such shorter period shall govern.
11. Amendments, Etc.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
12. Subrogation.
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery
of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents as may be necessary to enable the Company
effectively to bring suit to enforce such rights.
13. No Duplication of Payments.
The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has
6
otherwise actually received payment (under any insurance policy, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
14. Binding Effect, Etc.
This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors,
assigns (including any direct or indirect successor or assign by purchase,
merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company), spouses, heirs, and personal and
legal representatives. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as an officer, director or
employee of the Company or of any other enterprise at the Company's
request.
15. Severability.
The provisions of this Agreement shall be severable in the event
that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent
permitted by law.
16. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in such state without giving effect to Delaware
principles of conflicts of laws.
Executed as of this _________ day of ______________, 19____.
PROMUS HOTEL CORPORATION
By: ________________________________
Name: Ralph B. Lake
Title: Senior Vice President
____________________________________
7