1
EXHIBIT 10.23
LONG-TERM RETENTION AGREEMENT
THIS LONG-TERM RETENTION AGREEMENT (this "Agreement") is made as of
this 15th day of March , 1999, between PROMUS HOTEL CORPORATION (the "Company")
and Thomas L. Keltner (the "Executive").
RECITALS
WHEREAS, the Company desires to provide incentives under this Agreement
for the retention of the Executive through January 1, 2001 and beyond;
NOW, THEREFORE, in consideration of the mutual promises set forth
below, and for other good and valuable consideration, the sufficiency of which
is acknowledged, the Company and the Executive hereby agree as follows:
AGREEMENT
1. DEFINITIONS
Capitalized terms used herein shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "CAPE Plan" shall mean the Promus Hotel Corporation
Capital Accumulation Plan for Executives, as amended from time to time, or any
successor deferred compensation plan for executives of the Company that is
substantially similar to such plan.
(c) "Cause" for termination of the Executive's employment
shall mean:
(A) the Executive's engaging in willful gross neglect of
his duties with the Company, or the Executive's fraud or dishonesty in
connection with his performance of duties to the Company, in either case which
has a materially detrimental effect on the business or operations of the
Company; or
(B) the Executive's conviction by a court of competent
jurisdiction of any crime (or upon entering a plea of guilty or nolo contendere
to a charge of any crime) constituting a felony.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Company" shall mean Promus Hotel Corporation, or any
successor corporation that assumes this Agreement under Section 5 hereof or
otherwise becomes bound by this Agreement.
(f) "Effective Date" shall mean the date this Agreement is
executed by
2
the Company and the Executive, as first noted at the top of this Agreement.
(g) "Good Reason" for the Executive's voluntary termination of
employment shall mean the occurrence of any of the following events without the
Executive's prior written consent:
(A) any reduction in the Executive's annual base salary as
in effect on the Effective Date of this Agreement; or
(B) any reduction in the Executive's target or maximum
bonus percentage under the Company's annual bonus plan from the percentage in
effect at the Effective Date of this Agreement; or
(C) a relocation by more than 50 miles from the
Executive's principal place of business as of the Effective Date of this
Agreement, or the Company's requiring the Executive to locate anywhere that is
more than 50 miles from the Executive's principal place of business as of the
Effective Date of this Agreement.
The Executive shall provide the Company with 30-day advance written
notice of a termination for Good Reason setting forth in reasonable detail the
facts and circumstances claimed to provide a basis for the termination. Such
notice may be given at any time following the occurrence of the events that
provide the basis for the termination; provided, however, that (a) where a
termination for Good Reason is on account of relocation, as provided in item (C)
above, such notice shall be provided within one (1) year of the effective date
of such relocation. If within the thirty (30) day notice period, the Company
takes actions reasonably satisfactory to the Executive to remedy the basis for
the Good Reason termination, such notice of termination shall be considered null
and void; provided, however that the Company shall not have the right to remedy
a Good Reason termination occurring on the basis of a relocation as described in
item (C) above. The date of termination for a termination for Good Reason shall
be the expiration of the 30-day notice period provided for above.
(h) "Retention Period" means the period beginning on the
Effective Date and ending on January 1, 2001.
2. RETENTION BENEFIT; CREDIT TO CAPE PLAN
(a) Credit to CAPE Plan. In consideration for the Executive's
services to be rendered during the Retention Period and as an inducement for
Executive to remain in the employ of the Company and devote his best efforts to
the success of the Company during the Retention Period, the Company agrees,
subject to the provisions of this Section 2, to credit to the account of the
Executive under the CAPE Plan the aggregate amount of 1,050,000 dollars (U.S.
$1,050,000) (the "Retention Payment"). Amounts credited to the Executive's CAPE
Plan account shall thereafter be governed exclusively by the terms and
conditions of the CAPE Plan.
(b) Normal Timing of Credits; No Interest. Except as provided
in Sections 2(c) and 2(d) below, the Retention Payment shall be credited to the
Executive's
-2-
3
account under the CAPE Plan in two equal installments. The first such
installment shall be credited as of January 1, 2000, and the second installment
shall be credited as of January 1, 2001. No interest will be earned on the
installments prior to being credited to the Executive's CAPE Plan account.
(c) Early Crediting. In the event that the Executive's
employment with the Company is terminated by the Company without Cause or by the
Executive for Good Reason or in the event of the Executive's Death or total and
permanent Disability, then any portion of the Retention Payment that has not
already been credited to the Executive's account under the CAPE Plan shall be so
credited as of the date immediately prior to such termination of employment.
(d) Forfeiture of Right to Future Credits. If the Executive's
employment terminates for any reason other than as described in Section 2(c)
above, then the Executive shall lose all rights to that portion of the Retention
Payment (if any) that has not yet been credited to Executive's CAPE Plan Account
as of the date of such termination. The Executive shall not receive partial or
pro-rata credit for the year in which the termination occurred. All amounts
previously credited to the Executive's CAPE Plan account shall be governed by
the terms and conditions of the CAPE Plan.
3. EXCISE TAX REIMBURSEMENT
(a) Gross-Up Payment. In the event it shall be determined that
any payment, benefit or distribution by the Company or any other person or
entity to or for the Executive's benefit, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, or
whether prior to or following the Effective Date, in connection with, or arising
out of, the Executive's employment with the Company (a "Payment") will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code, the
Company shall pay to the Executive at the time specified in Section 3(c) below,
an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the payments and any
federal (and state and local) income tax, employment tax, and Excise Tax upon
the payment provided for by this paragraph, shall be equal to the amount of the
Payments.
(b) Calculation of Gross-Up Payment. For purposes of
determining whether any of the Payments will be subject to the Excise Tax and
the amount of such Excise Tax the following will apply:
(i) any payments or benefits received or to be received by
the Executive in connection with this Agreement or a Reorganization Event shall
be treated as "parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors and acceptable to
the Executive such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the
-3-
4
base amount within the meaning of Section 28OG(b)(3) of the Code, or are
otherwise not subject to the Excise Tax; and
(ii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with proposed, temporary or final regulations under Sections
280G(d)(3) and (4) of the Code or, in the absence of such regulations, in
accordance with the principles of Section 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the date the Payments were
made, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event that the
amount of Excise Tax attributable to Payments is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, he shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax, employment tax and federal (and
state and local) income tax imposed on the Gross-Up Payment being repaid by the
Executive if such repayment results in a reduction in Excise Tax and/or a
federal (and state and local) income tax deduction) plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2) (B) of the Code. In
the event that the Excise Tax attributable to Payments is determined to exceed
the amount taken into account hereunder at the time of the termination of the
Executive's employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(c) Method of Payment. The Gross-Up Payment applicable with
each payment made under this agreement shall be made in a cash lump-sum payment,
net of any required tax withholding, upon the fifth (5th) business day following
the date of termination of the Executive's employment or by the last day of the
calendar year in which the payment is made whichever occurs first; provided,
however, that if the amounts of the Gross-Up Payment cannot be finally
determined on or before such day, the Company shall pay on such day an estimate,
as determined in good faith by the Company, of the minimum amount of such
payment. Any portion of the Gross-Up Payment that is not made in a timely manner
shall bear interest at a rate equal to one-hundred twenty (120) percent of the
monthly compounded applicable federal rate, as in effect under Section 1274(d)
of the Code for the month in which the payment is required to be made. In the
event that the amount of the estimated Gross-Up Payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the Company payable on the fifth day after demand by the Company with interest
at the rate provided under Section 1274(d) of the Code until paid.
-4-
5
4. NO MITIGATION OR OFFSET
The amount of any payment or benefit to which the Executive becomes
entitled herein shall not be reduced by any compensation earned by the Executive
as the result of retirement benefits, nor by offset against any amount claimed
to be owed to the Company by reason of a claimed breach by the Executive of his
obligations to the Company.
5. SUCCESSORS, BINDING AGREEMENT
(a) The Company will 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 to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
6. NOTICE
Any notice required or permitted to be given by this Agreement shall be
effective only if in writing, delivered personally against receipt therefor or
mailed by certified or registered mail, return receipt requested, to the parties
at the addresses hereinafter set forth, or at such other places that either
party may designate by notice to the other.
Notice to the Company shall be addressed to:
Promus Hotel Corporation
755 Crossover Lane
Memphis, Tennessee 38117
Attention: General Counsel
Notice to the Executive shall be addressed to him at the business
address of the Company where the Executive is employed, with a copy to him at
his home address as follows:
3480 Windgardner Cove
Memphis, TN 38125
All such notices shall be deemed effectively given five (5) days after
the same has been deposited in a post box under the exclusive control of the
United States Postal Service.
-5-
6
7. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Executive and such officer of the Company as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
9. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Memphis, Tennessee
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
10. PAYMENT OF LEGAL FEES
Each party shall pay its own legal fees and expenses incurred in
connection with any arbitration (or other proceeding whether or not instituted
by the Company or the Executive), relating to the interpretation or enforcement
of any provision of this Agreement (including any action seeking to obtain or
enforce any right or benefit provided by this Agreement) or in connection with
any tax audit or proceeding relating to the application of Section 4999 of the
Code to any payment or benefit provided by the Company.
11. NO RESTRICTIONS ON EMPLOYMENT RIGHTS
This contract is in relation to certain benefits and compensation only
and is not to be construed as an employment contract for a definite term.
Nothing in this Agreement shall confer on the Executive any right to continue in
the employ of the Company or shall interfere with or restrict the rights of the
Company, which are expressly reserved, to discharge the Executive at any time
for any reason whatsoever, with or without Cause. Nothing in this Agreement
shall restrict the right of the Executive to terminate his employment with the
Company at any time for any reason whatsoever, with or without Good Reason.
-6-
7
IN WITNESS WHEREOF, the parties have executed these presents as of the
day and year first above written.
PROMUS HOTEL CORPORATION
/s/ Kelly Jenkins
-------------------------------------
Name:
Title:
Date: 3/15/99
THE EXECUTIVE
/s/ Thomas L. Keltner
-------------------------------------
Name:
Date: 3/15/99
-7-