EMPLOYMENT AGREEMENT
AGREEMENT by and between Park Place Entertainment Corporation, a
Delaware corporation (the "Company"), and Stephen F. Bollenbach (the
"Executive"), dated as of the Split Date, as defined below.
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to employ the Executive as Chairman of the Board as well as Senior Advisor to
the Board, and the Executive desires to serve in that capacity;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, for the period beginning on the effective date (the "Split
Date") of a transaction whereby the Company acquires the former gaming
operations of Hilton Hotels Corporation (the "Split") and ending on July 1,
2005, which shall automatically renew for periods of one year unless one party
gives written notice to the other, at least 60 days prior to July 1, 2005 or at
least 60 days prior to the end of any one-year renewal period, that the
Agreement shall not be further extended, except as otherwise specifically
provided below, (the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed as Chairman of the Board of the Company as well as
Senior Advisor to the Board and, when applicable, the Company shall cause the
Executive to be elected and reelected as a member of the Board. In his
executive capacities, the Executive shall report to the Board as to the duties
assigned by the Board.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave, the Executive shall devote such attention and time
during normal business hours to the business and affairs of the Company to the
extent necessary to discharge the responsibilities assigned to the Executive
under this Agreement and the Executive shall use the Executive's reasonable best
efforts to carry out such responsibilities faithfully and efficiently.
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
limit the ability of the Executive to provide services to Hilton Hotels
Corporation, which the parties hereto acknowledge is, and may remain, the
Executive's principal business activity. It shall also not be considered a
violation of the foregoing for the Executive to (A) serve on corporate, civic or
charitable boards or committees (excluding those which would create a conflict
of interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") of
$100,000, payable in accordance with the regular payroll practices of the
Company. During the Employment Period, the Annual Base Salary shall be reviewed
for possible increase at least annually, with any increase being at the sole
discretion of the Board (or an appropriate committee thereof). Any increase in
the Annual Base Salary shall not limit or reduce any other obligation of the
Company under this Agreement. The Annual Base Salary shall not be reduced after
any such increase, and the term "Annual Base Salary" shall thereafter refer to
the Annual Base Salary as so increased.
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(b) WAIVER OF OTHER BENEFITS. During the Employment Period, the
Executive acknowledges that he shall not be entitled to participate in any
incentive, savings or retirement plans, practices, policies or programs nor in
any welfare benefit plans, practices, policies or programs otherwise provided by
the Company (including, without limitation, medical, prescription drug, vision,
dental, disability, salary continuance, vacation, employee life insurance, group
life insurance, accidental death and travel accident insurance plans and
programs) and that his execution of this Agreement shall constitute a complete
waiver of any such rights or entitlements.
(c) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement,
provided that the Executive complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
(d) STOCK OPTIONS: (i) If the Split occurs, on the Split Date,
the Executive shall be granted non-statutory stock options (the "Incentive
Options") under the Company's Stock Incentive Plan (the "Stock Plan) covering
3,000,000 shares of the Company's post-Split common stock in tranches of
2,000,000 shares (the "Regular Option") and 1,000,000 shares (the "Special
Option"), respectively. The exercise price of the shares subject to the Regular
Option shall be equal to the closing price of the Company's common shares on the
New York Stock Exchange on the Split Date. The exercise price of the shares
subject to the Special Option shall be equal to the greater of (i) the closing
price of the Company's common shares on the New York Stock Exchange on the Split
Date or (ii) 150% of the closing price of Hilton Hotel Corporation's common
shares on the New York Stock Exchange on July 9, 1998 ratably reduced (in the
manner described on Exhibit A hereto)
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following the Split so as to reflect that revised July 9, 1998 closing price
as if only the Company's post-Split common shares existed on that date. The
grant of the Incentive Options is subject to obtaining the approval of the
Stock Plan by a majority of the shares of common stock of Hilton Hotels
Corporation, the predecessor to the Company, voting at the shareholders
meeting immediately preceding the Split Date. As soon as practicable
thereafter, the Company shall register with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, the shares issuable
upon the exercise of the Incentive Options. The Incentive Options shall be
exercisable for 10 years after the Split Date except as otherwise
specifically provided in this Agreement.
The Regular Option shall vest and become exercisable on a cumulative basis
according to the following schedule if the Executive continues in the employment
of the Company through the applicable vesting date(s):
1. 25%: on the first anniversary of the Split Date.
2. 50%: on the second anniversary of the Split Date.
3. 75%: on the third anniversary of the Split Date.
4. 100%: on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9
years and 9 months following the Split Date if the Executive continues in the
employment of the Company through such date; provided, however, that, if, at any
time prior to the fifth anniversary of the Split Date, the closing price of the
Company's common shares on the New York Stock Exchange equals or exceeds 200% of
the closing price of Hilton Hotels Corporation's common shares on the New York
Stock Exchange on July 9, 1998 ratably reduced (in the manner described on
Exhibit A hereto) following the Split so as to reflect that revised July 9, 1998
closing price as if only the Company's post-Split
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common shares existed on that date on each of any 7 consecutive trading days,
all shares under the Special Option shall be immediately vested and
exercisable if the Executive continues in the employment of the Company
through the date the closing prices of the Company's shares meet that
requirement. Notwithstanding the foregoing, all shares subject to the
Regular Option and the Special Option shall vest and become exercisable upon
the occurrence of any of the following events (each of (A), (B) and (C) below
a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below, or
(ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because of
death or Disability; or
(C) termination of employment by the Executive for Good
Reason, as defined below;
provided that the Special Option shall vest and become (and remain) exercisable
upon a Triggering Event, subject to Section 7(e), only if Executive does not
breach the terms of the covenants contained in Sections 7(a) and (b) below and
such vesting and exercisability shall be part of the consideration for the
Executive's undertakings under Sections 7(a) and (b).
(ii) If a Triggering Event occurs, any portion of the Incentive
Options that have become vested on or before the date of such Event (including
without limitation, any portion that becomes exercisable due to such Triggering
Event) shall remain exercisable until the earlier to occur of (x) the fifth
anniversary of such date of termination or (y) the tenth anniversary of the
Split Date.
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(iii) The Executive may assign the right to exercise the Incentive
Options to his spouse, children, grandchildren, to trusts for the benefit of the
Executive's immediately family, to a family partnership or limited liability
company designated by the Executive in which the Executive's family members are
the only partners or shareholders or to an entity exempt from federal income tax
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Code").
(iv) The Incentive Options shall be subject to the terms of the
Stock Plan in all respects not described herein but only to the extent not
inconsistent wit the terms of this Agreement.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment and the Employment Period shall terminate automatically
upon the Executive's death during the Employment Period. The Company shall be
entitled to terminate the Executive's employment because of the Executive's
Disability during the Employment Period. "Disability" means that (i) the
Executive has been unable, for a period of 180 consecutive business days, to
perform the Executive's duties under this Agreement, as a result of physical or
mental illness or injury, and (ii) a physician selected by the Company or its
insurers, and acceptable to the Executive or the Executive's legal
representative, has determined that the Executive's incapacity is total and
permanent. The Executive agrees to reasonably cooperate with the Company in
order to obtain the physician's evaluation of the Executive. A termination of
the Executive's employment by the Company for Disability shall be communicated
to the Executive by written notice ("Notice of Termination for Disability"),
stating the date, time and place of a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Disability, that takes place not less than five and not more than 25 business
days after the Executive receives the Notice
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of Termination for Disability. The Executive shall be given an opportunity,
together with counsel, to be heard at such special Board meeting. The
Executive's termination for Disability shall be effective, if confirmed at
the meeting, 30 days after the adoption of a resolution at such special Board
meeting, stating that the Executive's employment shall be terminated because
of Disability (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties, as determined by
the Board, before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties;
(B) illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company;
or
(C) a material breach of the covenants or representations
contained in Section 7.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause")
of its intention to terminate the Executive's employment for Cause, setting
forth in reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this Agreement
on which it relies, and stating the date, time and place of the Special Board
Meeting. The "Special Board Meeting" means a meeting of the Board called and
held specifically for the purpose of considering the
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Executive's termination for Cause, that takes place not less than 30 and not
more than 60 days after the Executive receives the Notice of Termination for
Cause. The Executive shall be given an opportunity, together with counsel,
to be heard at the Special Board Meeting. The Executive's termination for
Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting, stating that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in the Notice of Termination
for Cause, and such conduct constitutes Cause under this Agreement and such
conduct has not ceased or been cured between the date the Executive receives
the Notice of Termination for Cause and the date of the meeting.
(c) GOOD REASON. (i) The Executive may terminate employment for
Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, whether or
not material, following a Change of Control) with paragraph (a)
of Section 2 of this Agreement, or any other action by the
Company (other than the Split) that results in a material
diminution in the Executive's position or authority, duty,
titles, responsibilities, or reporting requirements other than an
isolated, insubstantial and inadvertent action that is not taken
in bad faith and is remedied by the Company within 30 days after
receipt of written notice thereof from the Executive;
(B) any material failure (any failure, whether or not
material, following a Change of Control, as defined below) by the
Company to comply with any provision of Section 3 of this
Agreement, other than a failure that is not taken in bad faith
and is remedied by the Company within 30 days after receipt of
written notice thereof from the Executive;
(C) any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly
permitted by this Agreement; or
(D) any failure by the Company to comply with and satisfy
paragraph (c) of Section 8 of this Agreement.
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In addition, following a Change of Control, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Change of Control shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective
on the fifth business day following the date when the Notice of Termination
for Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason, as the case
may be, is effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE COMPANY
OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR GOOD REASON.
If, during the Employment Period, the Company terminates the Executive's
employment, other than for Cause or Disability or by reason of the Executive's
death, or the Executive terminates employment for Good Reason, the Company shall
fulfill its obligations as to Base Salary under Section 3(a) hereof for the
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balance of the Employment Period. Fifty percent of such amounts shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Section 7 below. The Company shall also pay to the
Executive, in a lump sum in cash within 30 days after the Date of Termination,
the Executive's accrued but unpaid cash compensation (the "Accrued
Obligations"), which shall include but not be limited to, (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not yet
been paid and (2) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) that has not yet been
paid; and, provided, however, that the Company's obligation to make any payments
under this Section 5(a) to the extent any such payment shall not have accrued as
of the day before the Date of Termination shall also be conditioned upon the
Executive's execution, and non-revocation, of a written release, substantially
in the form attached hereto as Annex 1, (the "Release"), of any and all claims
against the Company and all related parties with respect to all matters arising
out of the Executive's employment by the Company (other than any entitlements
under the terms of this Agreement or under any other plans or programs of the
Company in which the Executive participated and under which the Executive has
accrued a benefit), or the termination thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Sections 7(a)
and (b) below, the Executive, in lieu of the amounts specified in the first
sentence of the prior paragraph, shall receive in a lump sum in cash within 30
days after the Date of Termination equal to 2.99 multiplied by the sum of the
Executive's Annual Base Salary and Annual Bonus for the year in which the Change
of Control occurs or the immediately preceding year,
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whichever produces the higher sum. Fifty percent of such amount shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Sections 7(a) and (b) below. In addition, the
Executive shall also be entitled in the case of compensation previously
deferred by the Executive, to a lump sum equal to all amounts previously
deferred (together with any accrued interest thereon) and not yet paid by the
Company.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay the Annual Base Salary to the
Executive or the Executive's estate or legal representative, as applicable, for
the remaining portion of the Employment Period (determined without regard to the
fact that the Employment Period otherwise terminates under this Agreement), in a
lump sum in cash within 30 days after the Date of Termination. In such event,
the Company shall have no further obligations under this Agreement.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment Period,
the Company shall pay the Executive the Annual Base Salary through the Date of
Termination, the amount of any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon), in each case to the
extent not yet paid and the Company shall have no further obligations under this
Agreement. If the Executive voluntarily terminates employment during the
Employment Period, other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within 30 days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement.
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6. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
7. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period (the "Section
3 Lump Sum")or fifty percent of the lump sum payment in lieu of Base Salary
provided under Section 5 in the event of Executive's termination of employment
following a Change of Control (the "Section 5 Lump Sum"), the Executive agrees
as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer programs and
software and financial information relating to the Company or any of its
affiliated companies and their respective businesses that the Executive obtains
during the Executive's employment by the Company or any of its affiliated
companies and that is not public knowledge (other than as a result of the
Executive's violation of this paragraph (a) of Section 7) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except in the good faith performance of his duties hereunder,
with the prior written consent of the Company or as otherwise required by law or
legal process. In no event shall an asserted violation
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of the provisions of this paragraph (a) of Section 7 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement except as provided in paragraph (e) below.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive will
not, except with the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Executive
agrees that he will not, for a period of two years after the expiration or
termination of the Executive's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent contractor,
or solicit the employment of, any managerial or higher level person who is or at
any time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
(c) The Executive represents that he is licensed by the gaming
authorities in Nevada and New Jersey and knows of no reason why a license
necessary for him to perform his duties hereunder would not be granted to or
maintained by him by those or similar authorities in the future.
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4. Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties hereunder
conflicts with any contractual commitment on his part to any third party or
violates or interferes with any rights of any third party.
(e) The Executive acknowledges and agrees that the
restrictions contained in this Section are reasonable and necessary to
protect and preserve the legitimate interests, properties, goodwill and
business of the Company, that the Company would not have entered into this
Agreement in the absence of such restrictions and that irreparable injury
will be suffered by the Company should the Executive breach any of those
provisions. Executive represents and acknowledges that (i) the Executive has
been advised by the Company to consult Executive's own legal counsel in
respect of this Agreement, and (ii) that the Executive has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with the Executive's counsel. The Executive further acknowledges
and agrees that a breach of any of the restrictions in this Section cannot be
adequately compensated by monetary damages. The Company agrees to give the
Executive written notice of any action taken by the Executive that it
believes in good faith to constitute a violation of the Executive's
undertakings under Sections 7(a) and (b) and to give the Executive at least
60 days thereafter to cease any such action which, if he complies with such
request, will preclude any further action or any recovery by the Company. In
the event that the Executive fails to do so, the Executive agrees that agrees
that the Executive's right to the Section 3 Lump Sum or the Section 5 Lump
Sum, as the case may be, shall be forfeited (but only to the extent of those
portions not previously received) and the Executive's right to exercise the
Special Option (but not to any shares already obtained upon a prior exercise
of the Special Option or any cash received upon a prior cashless exercise of
the Special Option, if available) shall cease. In addition,
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in the case of any violation of the provisions of this Section 7, the Company
shall be entitled to preliminary and permanent injunctive relief, without the
necessity of proving actual damages, as well as provable damages and an
equitable accounting of all earnings, profits and other benefits arising from
any violation of this Section (with appropriate credit for the amounts
forfeited by the Executive and the non-exercisability of the Special Option),
which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled. In the event that any of the
provisions of this Section should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, it is the intention of the parties that the provision shall be
amended to the extent of the maximum time, geographic, service, or other
limitations permitted by applicable law, that such amendment shall apply only
within the jurisdiction of the court that made such adjudication and that the
provision otherwise be enforced to the maximum extent permitted by law. and
other equitable relief, may be brought in the United States District Court
for the Southern District of California, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Los Angeles, California, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and
(iii) waives any objection which the Executive may have to the laying of
venue of any such suit, action or proceeding in any such court. The
Executive also irrevocably and unconditionally consents to the service of any
process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 11 hereof.
8. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by
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will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall 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 expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
9. CHANGE OF CONTROL.
(a) For the purpose of this Agreement, a "Change of Control" shall
mean:
(i) The acquisition by any person, entity or "group", within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934
(the "Exchange Act"). (excluding, for this purpose, (A) the Company or its
subsidiaries, (B) any employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company or (C)
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
Foundation, collectively the "Hilton Interests"), of beneficial ownership,
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then outstanding shares of common stock or
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the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the Split Date, constitute the
Board (as of the Split Date, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the Split Date whose election, or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such
terms are used in Rule 14 a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of
the Company or (C) the sale of all or substantially all of the assets of the
Company;
provided, however, that the Split shall not be deemed a "Change of Control" for
any purpose under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that
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with respect to the Special Option, such immediate vesting and exercisability
shall be conditioned upon the Executive not breaching the terms of the
covenants contained in Sections 7(a) and (b).
(c) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the Executive shall be paid an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive after deduction of any excise tax imposed under Section 4999 of
the Code, and any federal, state and local income and employment tax and excise
tax imposed upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income tax and employment taxes at the highest marginal
rate of federal income and employment 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 Termination Date, net of the maximum reduction in federal income taxes
that may be obtained from the deduction of such state and local taxes.
(d) All determinations to be made under this Section 9 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. Within five days after the
Accounting Firm's determination, the Company shall pay (or cause to be
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paid) or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement.
(e) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax, including
interest and penalties, with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a termination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Executive to pay such claim and sue for a refund the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
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(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to this Section, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of subsection (d)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(g) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or wilful misconduct of the Accounting Firm.
10. ARBITRATION. The Company and the Executive mutually consent to
the resolution by arbitration, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association, of
all claims or controversies arising out of the Executive's employment (or its
termination) that the Company may have against the Executive or that the
Executive may have against the Company or against its officers, directors,
shareholders,
21
employees or agents in their capacity as such other than a claim which is
primarily for an injunction or other equitable relief. The Company and the
Executive shall equally share the fees and costs of the arbitrator, and each
party shall bear its own costs in connection with any arbitration, unless the
Executive shall prevail in an arbitration proceeding as to any material
issue, in which case the Company shall reimburse the Executive for all
reasonable costs, expenses and fees incurred in connection with such
arbitration.
11. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO THE EXECUTIVE:
c/o Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence Cagney
IF TO THE COMPANY:
3930 Howard Hughes Parkway
Las Vegas, NV 89109
Attention: General Counsel
WITH A REQUIRED COPY TO:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
22
Attention: Robert J. Lichtenstein
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 5 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
12. The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment or arrangements to
the extent necessary to the
23
intended preservation of such rights and obligations, including, but not by
way of limitation, those rights and obligations set forth in Sections 3, 5
and 9.
13. The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, references in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HILTON GAMING CORPORATION
By /s/ Arthur M. Goldberg /s/ Stephen F. Bollenbach
------------------------------- -----------------------------------
Stephen F. Bollenbach
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EXHIBIT A
Pursuant to Section 3(d) of the Agreement, the exercise price of shares subject
to the Special Option shall be equal to 150% of the amount determined under the
following formula:
The closing price of Hilton Common Stock on July 9, 1998, ($26.9375 per share)
divided by the combined market price of the Lodging Company and the Gaming
Company on the date of the split multiplied by the market price of the Gaming
Company on the date of the split, all as determined by the Personnel and
Compensation Committee of the Board of Directors.