PARK PLACE ENTERTAINMENT CORPORATION
1998 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Corporation a competitive
advantage in attracting, retaining and motivating officers, employees, and
the CEO and Chairman and to provide the Corporation and its subsidiaries with
a stock plan providing incentives more directly linked 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. "AWARD" means a Stock Appreciation Right or a Stock Option.
c. "BOARD" means the Board of Directors of the Corporation.
d. "CEO" means the Chief Executive Officer of the Corporation.
e. "CHAIRMAN" means the Chairman of the Board.
f. "CHAIRMAN AGREEMENT" means the Employment Agreement by and
between the Corporation and its initial Chairman, which sets forth certain
terms of such Chairman's employment with the Corporation.
g. "CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the
meanings set forth in Sections 7(b) and (c), respectively.
h. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
i. "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
j. "COMMITTEE" means the Committee referred to in Section 2.
k. "COMMON STOCK" means common stock, par value $.01 per share, of
the Corporation.
l. "CORPORATION" means Park Place Entertainment Corporation, a
Delaware corporation.
m. "DISABILITY" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
n. "DISTRIBUTION" means the distribution to the holders of the
outstanding shares of Hilton Common Stock, on a one-for-one basis, of all of
the outstanding shares of Common Stock.
o. "EMPLOYMENT AGREEMENT" means the Employment Agreement by and
between the Corporation and its initial CEO, which sets forth the terms of
such CEO's employment with the Corporation.
p. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
q. "FAIR MARKET VALUE" means, except as provided in Section
6(b)(ii)(2), 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.
r. "HILTON" means Hilton Hotels Corporation, a Delaware corporation.
s. "HILTON COMMON STOCK" means common stock, par value $2.50 per
share, of Hilton.
t. "INCENTIVE STOCK OPTION" means any Stock Option designated as,
and qualified as, an "incentive stock option" within the meaning of Section
422 of the Code.
u. "NONQUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
v. "PLAN" means the Park Place Entertainment Corporation 1998 Stock
Incentive Plan, as set forth herein and as hereinafter amended from time to
time.
w. "RETIREMENT" means retirement from active employment with the
Corporation, a subsidiary or Affiliate at or after age 62.
x. "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.
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y. "SPECIAL OPTION" means a Nonqualified Stock Option granted to the
CEO or Chairman pursuant to Section 13.
z. "STOCK APPRECIATION RIGHT" means a right granted under Section 6.
aa. "STOCK OPTION" means an option granted under the Plan.
bb. "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with the Corporation and any subsidiary or
Affiliate. A participant employed by a subsidiary or an Affiliate shall also
be deemed to incur a Termination of Employment if the subsidiary or Affiliate
ceases to be such a subsidiary or an Affiliate, as the case may be, and the
participant does not immediately thereafter become an employee of the
Corporation or another subsidiary or Affiliate. Temporary absences from
employment because of illness, vacation or leave of absence and transfers
among the Corporation and its subsidiaries and Affiliates 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
Prior to the date of the Distribution, the Plan shall be administered by
the Stock Option Committee of the Board of Directors of Hilton under the
Hilton Hotels Corporation 1996 Stock Incentive Plan. From and after the date
of the Distribution, 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 members of the Board, each of whom shall be an "outside director" for
purposes of Section 162(m)(4) of the Code and a "non-employee director"
within the meaning of Rule 16b-3, and shall be appointed by and serve at the
pleasure of the Board.
The Committee shall have authority to grant Awards pursuant to the terms
of the Plan to officers and employees of the Corporation and its subsidiaries
and Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) To select the officers and employees to whom Awards may from time
to time be granted;
(b) Determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options and Stock Appreciation Rights or any combination
thereof are to be granted hereunder;
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(c) Determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) Determine the terms and conditions of any Award 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 participant, the Corporation or any subsidiary or
Affiliate) and any vesting acceleration or forfeiture waiver regarding any
Award and the shares of Common Stock relating thereto, based on such factors
as the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time; and
(f) Determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award 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 Award 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), (f),
(g), (h) and (i) of Section 5 (provided that no such delegation may be made
that would cause Awards 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 Award
shall be made in the sole discretion of the Committee or such delegate at the
time of the grant of the Award 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 Plan participants.
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 45,000,000. Of that amount, a maximum of
9,000,000 shares of Common Stock are reserved and available for the grant of
Special Options. Except with respect to the Special Options and Adjusted
Park Place Options issued pursuant to the Option Adjustment, no participant
may be granted Awards covering in excess of 2,000,000 shares of Common Stock
in
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any calendar year; PROVIDED, HOWEVER, that Adjusted Park Place Options issued
pursuant to the Option Adjustment under Section 12 hereof shall not count
towards such limit. With respect to the Adjusted Park Place Options, no
participant may be granted Awards in any calendar year covering in excess of
the number of shares of Common Stock required to make the option adjustment
with respect to such participant prescribed by Section 12(a) hereof. With
respect to the Special Options, the CEO may not be granted Special Options
covering in excess of 6,000,000 shares of Common Stock in the aggregate, and
the Chairman may not be granted Special Options covering in excess of
3,000,000 shares of Common Stock in the aggregate. Shares subject to an Award
under the Plan may be authorized and unissued shares or may be treasury
shares.
If any Stock Option (and related Stock Appreciation Right, if any)
terminates without being exercised, shares subject to such Awards shall again
be available for distribution in connection with Awards 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 definition 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 and Stock Appreciation Rights, in
the number and kind of shares subject to other outstanding Awards 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 Award shall always be a whole
number. Such adjusted option price shall also be used to determine the
amount payable by the Corporation upon the exercise of any Stock Appreciation
Right associated with any Stock Option.
SECTION 4. ELIGIBILITY
Except with respect to the Special Options and as provided in Section
12, full-time (30 hours per week) officers and employees of the Corporation,
its subsidiaries and Affiliates who are responsible for or contribute to the
management, growth and profitability of the business of the Corporation, its
subsidiaries and Affiliates are eligible to be granted Awards under the Plan.
Except with respect to the Special Options, no grant shall be made under
this Plan to a director who is not an officer or a salaried employee of the
Corporation, its subsidiaries or Affiliates. Only the CEO and the Chairman
are eligible to be granted Special Options under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and, except with respect to the Special Options, may
be of two types: Incentive Stock
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Options and Nonqualified Stock Options. Special Options may only be
Nonqualified Stock Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
Except with respect to the Special Options, the Committee shall have the
authority to grant any optionee Incentive Stock Options, Nonqualified Stock
Options or both types of Stock Options (in each case with or without Stock
Appreciation Rights); PROVIDED, HOWEVER, that grants hereunder are subject to
the aggregate limit on grants to individual participants set forth in Section
3. Incentive Stock Options may be granted only to employees of the
Corporation and its subsidiaries (within the meaning of Section 424(f) of the
Code). To the extent that any Stock Option is not designated as an Incentive
Stock Option or even if so designated does not qualify as an Incentive Stock
Option, it shall constitute a Nonqualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its
face whether it is intended to be an agreement for an Incentive Stock Option
or a Nonqualified Stock Option. The grant of a Stock Option shall occur on
the date a majority of the independent directors of the Corporation ratify by
resolution the Committee's recommendation with respect to the individuals to
be participants in any grant of a Stock Option, the number of shares of
Common Stock to be subject to such Stock Option to be granted to such
individual and specifies the terms and provisions of the Stock Option. The
Corporation shall notify a participant of any grant of a Stock Option, and a
written option agreement or agreements shall be duly executed and delivered
by the Corporation to the participant. Such agreement or agreements shall
become effective upon execution by the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the optionee affected, to disqualify any Incentive
Stock Option under such Section 422.
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 option agreement, and shall not be less than the Fair Market
Value of the Common Stock subject to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Stock Option is granted and no Nonqualified Stock
Option shall be exercisable more than ten years and
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one day after the date the Stock Option is granted.
(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. 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. An 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, has paid in full for such shares and, if requested, has
given the representation described in Section 11(a).
(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) in the case of a Nonqualified Stock Option,
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,
or the rules thereunder); or (iii) in the case of the Special Options,
subject to such terms as the Committee deems appropriate, pursuant to a
transfer to the optionee's spouse, children, grandchildren or parents
("Family Members"), to trusts for the benefit of Family Members, to
partnerships or limited liability companies in which Family Members are the
only partners or shareholders, or to entities exempt from federal income tax
pursuant to Section 501(c)(3) of the
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Code. 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, in the case of a Nonqualified
Stock Option, 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 named in the
option agreement and any person to whom an option is transferred by will or
the laws of descent and distribution or, in the case of a Nonqualified Stock
Option, pursuant to a qualified domestic relations order.
(f) TERMINATION BY DEATH. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the
extent then exercisable, or on such accelerated basis as the Committee may
determine, for a period of one year (or such other period as the Committee
may specify in the option agreement) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine, for
a period of six months (or such other period as the Committee may specify in
the option agreement) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter; PROVIDED, HOWEVER, that if the optionee dies within
such period, any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such period, continue to be exercisable to
the extent to which it was exercisable at the time of death for a period of
12 months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined
by the Committee, if an optionee's employment terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may determine,
for a period of two years (or such other period as the Committee may specify
in the option agreement) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter; PROVIDED, HOWEVER, that if the optionee dies within
such period any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such period, continue to be exercisable to
the extent to which it was exercisable at the time of death for a period of
12 months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the
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Code, such Stock Option will thereafter be treated as a Nonqualified Stock
Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee:
(A) if an optionee incurs a Termination of Employment, all Stock Options held
by such optionee shall thereupon terminate; and (B) if an optionee incurs a
Termination of Employment for any reason other than death, Disability or
Retirement, any Stock Option held by such optionee, to the extent then
exercisable, or on such accelerated basis as the Committee may determine, may
be exercised for the lesser of three months from the date of such Termination
of Employment or the balance of such Stock Option's term; PROVIDED, HOWEVER,
that if the optionee dies within such three-month period, any unexercised
Stock Option held by such optionee shall, notwithstanding the expiration of
such three-month period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date
of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. Notwithstanding the foregoing, if
an optionee incurs a Termination of Employment at or after a Change in
Control (as defined Section 7(b)), other than by reason of death, Disability
or Retirement, any Stock Option held by such optionee shall be exercisable
for the lesser of (1) six months and one day from the date of such
Termination of Employment, and (2) the balance of such Stock Option's term.
In the event of Termination of Employment, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
(j) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision
of the Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the
time of grant, an 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 in 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(j) shall have been exercised; PROVIDED, HOWEVER, that if the Change
in Control is within six months of the date of grant of a particular Stock
Option held by an optionee who is an officer or director of the Corporation
and is subject to Section 16(b) of the Exchange Act no such election shall be
made by such 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 in Control is within six months of the date of grant of a
Stock Option held by an optionee who is an officer or director of the
Corporation and is subject to Section 16(b) of the Exchange Act, such Stock
Option shall be cancelled 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(j) would make a Change in
Control transaction ineligible for
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pooling of interests accounting under APB No. 16 that but for this Section
5(j) would otherwise be eligible for such accounting treatment, the Committee
shall have the ability to substitute the cash payable pursuant to this
Section 5(j) with Stock with a Fair Market Value equal to the cash that would
otherwise be payable hereunder.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Nonqualified Stock Option, such rights may be granted either at
or after the time of grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of grant of such
Stock Option. A Stock Appreciation Right shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee,
including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate are exercisable in accordance with the provisions of Section
5 and this Section 6; PROVIDED, HOWEVER, that a Stock Appreciation Right
shall not be exercisable during the first six months of its term by an
optionee who is actually or potentially subject to Section 16(b) of the
Exchange Act, except that this limitation shall not apply in the event
of death or Disability of the optionee prior to the expiration of the
six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, shares of
Common Stock or both, equal in value to the excess of the Fair Market
Value of one share of Common Stock over the option price per share
specified in the related Stock Option multiplied by the number of shares
in respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of
payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part
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thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set
forth in Section 3 on the number of shares of Common Stock to be issued
under the Plan, but only to the extent of the number of shares covered
by the Stock Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
SECTION 7. CHANGE IN CONTROL PROVISIONS
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control, any Stock Options and Stock
Appreciation Rights outstanding as of the date such Change in 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; PROVIDED, HOWEVER, that in the case of the holder of Stock Appreciation
Rights who is actually subject to Section 16(b) of the Exchange Act, such Stock
Appreciation Rights shall have been outstanding for at least six months at the
date such Change in control is determined to have occurred.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a
"Change in 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 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 7(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; 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 hereinafter 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 7(b), that any
individual who becomes a member of the Board subsequent to the effective
date of the
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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 60% 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 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
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 IN CONTROL PRICE. For purposes of the Plan, "Change in
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
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including the date of a Change in Control or (ii) if the Change in 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 (x) 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 in Control, then the Change in 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 and (y)
in the case of Incentive Stock Options and Stock Appreciation Rights relating
to Incentive Stock Options, the Change in Control Price shall be in all cases
the Fair Market Value of the Common Stock on the date such Incentive Stock
Option or Stock Appreciation Right is 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 8. TERM, AMENDMENT AND TERMINATION
The Plan will terminate ten years after the effective date of the Plan.
Under the Plan, Awards 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 an optionee under a Stock Option or a recipient of a Stock Appreciation
Right theretofore granted without the optionee's or recipient'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 or other Award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holder's consent except
such an amendment made to cause the Plan or Award 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 Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 9. 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 arrange-
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ments 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.
SECTION 10. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Corporation in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer.
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 any employee 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
any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any Award under the Plan, the participant 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 Award
that gives rise to the withholding requirement. The obligations of
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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 participant. 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 a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid or by whom any
rights of the participant, after the participant's death, may be exercised.
(f) In the case of a grant of an Award to any employee of a
subsidiary of the Corporation, the Corporation may, if the Committee so
directs, issue or transfer the shares of Common Stock, if any, covered by the
Award to the subsidiary, for such lawful consideration as the Committee may
specify, upon the condition or understanding that the subsidiary will
transfer the shares of Common Stock to the employee in accordance with the
terms of the Award specified by the Committee pursuant to the provisions of
the Plan.
(g) The Plan and all Awards 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 11. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of July 9, 1998, provided that it is
approved by at least a majority of the shares voted of Hilton Common Stock at
the special meeting of Hilton stockholders with respect to the Distribution
and other related matters.
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SECTION 12. PROVISIONS REGARDING THE DISTRIBUTION
(a) Concurrently with the Distribution, the Corporation and Hilton
are entering into that certain Employee Benefits and Other Employment Matters
Allocation Agreement, dated as of the date of the Distribution (the "Benefits
Allocation Agreement"), which provides for the Corporation and Hilton to
allocate the responsibilities with respect to certain matters relating to
employees and employee compensation, benefits, labor and other employment
matters. Concurrently with the Distribution and pursuant to the terms of the
Benefits Allocation Agreement, all outstanding options to purchase Hilton
Common Stock (each, a "Hilton Option"), other than Hilton Options held by
Arthur M. Goldberg, shall be adjusted (the "Option Adjustment") to represent
options to purchase an equivalent number of shares of Hilton Common Stock
(each adjusted option to purchase Hilton Common Stock, an "Adjusted Hilton
Option") and shares of the Corporation's Common Stock (each adjusted option
to purchase the Corporation's Common Stock, an "Adjusted Park Place Option").
Pursuant to the Option Adjustment, the intrinsic value of the Hilton Options
immediately prior to the Distribution shall be preserved immediately after
the Distribution, and the exercise price of the Hilton Options shall be
allocated between the Adjusted Hilton Options and the Adjusted Park Place
Options based upon the relative values of Hilton Common Stock and the
Corporation's Common Stock on the date of the Distribution, all as determined
by Hilton. Concurrently with the Distribution and pursuant to the terms of
the Benefits Allocation Agreement, all outstanding Hilton Options held by
Arthur M. Goldberg shall be adjusted to represent Adjusted Park Place
Options. Pursuant to such adjustment, the intrinsic value of Mr. Goldberg's
outstanding Hilton Options immediately prior to the Distribution shall be
preserved immediately after the Distribution, and the number of shares
subject to and the exercise price of such options shall be adjusted based on
the relative values of the Hilton Common Stock and the Corporation's Common
Stock on the date of the Distribution, all as determined by Hilton.
(b) Following the date of the Option Adjustment, all Adjusted Park
Place Options which are issued as a result of Hilton Options granted under
any of the Hilton 1984 Stock Option and Stock Appreciation Rights Plan, the
Hilton 1990 Stock Option and Stock Appreciation Rights Plan, the Hilton 1996
Stock Incentive Plan, or the Hilton 1996 Chief Executive Stock Incentive Plan
shall be subject to the terms of this Plan and the applicable option
agreement, and all Adjusted Hilton Options shall be subject to the terms of
the applicable Hilton stock option plan and any applicable option agreement.
(c) For purposes of this Plan, with respect to Adjusted Park Place
Options held by Hilton Individuals (as defined in the Benefits Allocation
Agreement) as a result of the Option Adjustment, references to employment or
termination of employment in this Plan and in the applicable option agreement
shall be deemed to refer to employment by or termination of employment with
Hilton and its subsidiaries or affiliates. Notwithstanding the foregoing,
with respect to Adjusted Park Place Options held by the Chairman as a result
of the Option Adjustment, references to employment or termination of
employment in this Plan and in the applicable option agreement shall be
deemed to refer to employment by or termination of
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employment with the Corporation and Hilton and their subsidiaries or
affiliates. For purposes of this Plan, no termination of the Chairman's
employment shall be deemed to have occurred until such time as the Chairman's
employment with both the Corporation and Hilton (and their subsidiaries or
affiliates) has been terminated.
SECTION 13. SPECIAL OPTIONS
The Committee shall have the authority to grant Special Options to the
CEO and/or the Chairman on such terms and conditions as it shall determine in
its sole discretion. The terms and conditions of such Special Options
granted to the Corporation's initial CEO shall be set forth in the Employment
Agreement, and the terms and conditions of such Special Options granted to
the Corporation's initial Chairman shall be set forth in the Chairman
Agreement. To the extent that certain terms and conditions of the Special
Options are not set forth in the Employment Agreement or the Chairman
Agreement, as the case may be, the terms of the Plan shall apply to the
Special Options.
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