Exhibit 99.1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
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DATED AS OF DECEMBER 31, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS..................................................................................2
Section 1.01. General..............................................................................2
Section 1.02. Terms Defined Elsewhere in Agreement................................................11
ARTICLE II. TRANSFER OF ASSETS..........................................................................12
Section 2.01. Transfer of Assets to Park Place....................................................12
Section 2.02. Transfers of Assets from Gaming Subsidiaries to Hilton or Retained Business
Subsidiaries........................................................................12
Section 2.03. Transfers Not Effected Prior to the Distribution....................................12
Section 2.04. Cooperation Re: Assets.............................................................13
Section 2.05. No Representations or Warranties; Consents..........................................13
Section 2.06. Conveyancing and Assumption Instruments.............................................14
Section 2.07. Cash Allocation; Cash Management....................................................14
Section 2.08. Allocation of Debt..................................................................16
Section 2.09. Ancillary Agreements Between Hilton and Park Place..................................19
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES..................................................19
Section 3.01. Assumption and Satisfaction of Liabilities..........................................19
ARTICLE IV. THE DISTRIBUTION............................................................................20
Section 4.01. Cooperation Prior to the Distribution...............................................20
Section 4.02. Hilton Board Action; Conditions Precedent to the Distribution.......................20
Section 4.03. The Distribution....................................................................22
ARTICLE V. INDEMNIFICATION.............................................................................22
Section 5.01. Indemnification by Hilton...........................................................22
Section 5.02. Indemnification by Park Place.......................................................23
Section 5.03. Insurance Proceeds..................................................................23
Section 5.04. Procedure for Indemnification.......................................................23
Section 5.05. Remedies Cumulative.................................................................26
Section 5.06. Survival of Indemnities.............................................................26
ARTICLE VI. CERTAIN ADDITIONAL MATTERS..................................................................26
Section 6.01. Park Place Board....................................................................26
Section 6.02. Resignations; Hilton Board..........................................................26
Section 6.03. Park Place Certificate and Bylaws...................................................26
Section 6.04. Certain Post-Distribution Transactions..............................................27
Section 6.05. Sales and Transfer Taxes............................................................27
Section 6.06. Park Place Rights Plan..............................................................27
Section 6.07. Timeshare and Vacation Ownership Facilities.........................................27
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ARTICLE VII. ACCESS TO INFORMATION AND SERVICES..........................................................28
Section 7.01. Provision of Corporate Records......................................................28
Section 7.02. Access to Information...............................................................28
Section 7.03. Production of Witnesses.............................................................29
Section 7.04. Reimbursement.......................................................................29
Section 7.05. Retention of Records................................................................29
Section 7.06. Confidentiality.....................................................................30
Section 7.07. Privileged Matters..................................................................30
ARTICLE VIII. INSURANCE...................................................................................32
Section 8.01. Policies and Rights Included Within the Gaming Group Assets.........................32
Section 8.02. Policies and Rights Included Within the Retained Business Group Assets..............32
Section 8.03. Administration and Reserves.........................................................32
Section 8.04. Agreement for Waiver of Conflict and Shared Defense.................................34
ARTICLE IX. MISCELLANEOUS...............................................................................35
Section 9.01. Entire Agreement; No Third Party Beneficiaries......................................35
Section 9.02. Tax Allocation and Indemnity Agreement; After-Tax Payments..........................35
Section 9.03. Expenses............................................................................35
Section 9.04. Governing Law.......................................................................35
Section 9.05. Notices.............................................................................36
Section 9.06. Amendments..........................................................................37
Section 9.07. Assignments.........................................................................37
Section 9.08. Termination.........................................................................37
Section 9.09. Subsidiaries........................................................................37
Section 9.10. Specific Performance................................................................37
Section 9.11. Headings; References................................................................37
Section 9.12. Counterparts........................................................................38
Section 9.13. Severability; Enforcement...........................................................38
Section 9.14. Arbitration of Disputes.............................................................38
Section 9.15. Prompt Payment......................................................................39
Section 9.16. Approvals, Consent and Waivers......................................................39
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DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "AGREEMENT"), dated as of December 31,
1998, is by and between HILTON HOTELS CORPORATION, a Delaware corporation
("HILTON"), and PARK PLACE ENTERTAINMENT CORPORATION (FORMERLY KNOWN AS GAMING
CO., INC.), a Delaware corporation ("PARK PLACE").
WHEREAS, Hilton, directly and through subsidiaries, owns, operates and
develops certain gaming facilities (as more specifically described herein, the
"GAMING BUSINESS"), and owns, operates and develops lodging properties and
vacation ownership resorts and engages in franchising of lodging properties (as
more specifically described herein, the "RETAINED BUSINESS");
WHEREAS, the Board of Directors of Hilton has determined that it is in the
best interests of Hilton and the stockholders of Hilton to separate the Gaming
Business from the Retained Business through the distribution (the
"DISTRIBUTION") to the holders of Hilton Common Stock (as defined herein) of all
of the outstanding shares of Park Place Common Stock (as defined herein), and to
consummate the Merger (as defined herein) promptly following the Distribution;
WHEREAS, in order to effect such separation, Hilton and the Retained
Business Subsidiaries (as defined herein) will contribute to Park Place and the
Gaming Subsidiaries (as defined herein), prior to the Distribution, all of the
operations, assets and liabilities of Hilton and the Retained Subsidiaries
comprising the Gaming Business and such other assets, liabilities and operations
as are described below;
WHEREAS, in connection with the Distribution, Hilton and Park Place have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution;
WHEREAS, the consummation of the Distribution is a condition to each of
Hilton's and Company's (as defined herein) respective obligations to effect the
Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall qualify as a tax-free distribution within the meaning of
Section 355 of the Internal Revenue Code of 1986, as amended, by Hilton to its
stockholders.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL.
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: With respect to any specified Person, an affiliate of such
Person within the meaning of Rule 145 promulgated under the Securities Act.
Notwithstanding the foregoing, (i) the Affiliates of Hilton shall not include
Park Place, the Gaming Subsidiaries or any other Person which otherwise would be
an Affiliate of Hilton solely by reason of Hilton's ownership of the capital
stock of Park Place or a Gaming Subsidiary prior to the Distribution or the fact
that any officer or director of Hilton or any of the Retained Business
Subsidiaries shall also serve as an officer or director of Park Place or any of
the Gaming Subsidiaries, and (ii) the Affiliates of Park Place shall not include
Hilton, the Retained Business Subsidiaries or any other Person which otherwise
would be an Affiliate of Park Place solely by reason of Hilton's ownership of
the capital stock of Park Place or a Gaming Subsidiary prior to the Distribution
or the fact that any officer or director of Park Place or any of the Gaming
Subsidiaries shall also serve as an officer or director of Hilton or any of the
Retained Business Subsidiaries.
AFFILIATED GROUP: The meaning set forth for such term in the Tax Allocation
and Indemnity Agreement.
AGENT: The distribution agent appointed by Hilton to distribute the Park
Place Common Stock pursuant to the Distribution.
ANCILLARY AGREEMENTS: The Assignment and License Agreement, Corporate
Services Agreements, Employee Benefits Allocation Agreement and Tax Allocation
and Indemnity Agreement.
ASSIGNMENT AND LICENSE AGREEMENT: The Assignment and License Agreement
between Hilton and Park Place, which agreement shall be entered into on or prior
to the Distribution Date in substantially the form attached hereto as Exhibit A.
ASSUMED DEBT: The Debt of Hilton and its Subsidiaries which is to be
assumed by Park Place and/or retained by the Gaming Group Subsidiaries in
connection with the Distribution, as determined pursuant to Section 2.08.
BALLY'S: Bally Entertainment Corporation.
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BALLY'S ACQUISITION: The acquisition of Bally's by Hilton, which was
effected on December 18, 1996.
BALLY'S GOLDBERG AGREEMENT: That certain Agreement, dated as of November
25, 1996, by and between Bally's and Bally's Maryland, Inc., a Maryland
corporation, pursuant to which, among other things, Bally granted to Arthur M.
Goldberg, 40% of Bally's right, title and interest in any gaming venture in
Cancun, Mexico.
CASINO HOTELS: Hotels that are part of or adjacent to a casino or other
gaming facility where the principal focus of the combined facilities is gaming
operations; PROVIDED, that Casino Hotels do not include (i) hotels operated by
the Retained Business (E.G., the Conrad hotel being developed in Cairo, Egypt)
with Hotel Ancillary Facilities or (ii) the entity managing the Casino Windsor.
The Casino Hotels operated by Hilton and its Subsidiaries as of the date hereof
are set forth in Schedule 1.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the taxable year in question.
COMPANY: Grand Casinos, Inc., a Minnesota corporation.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
CORPORATE SERVICES AGREEMENTS: The Hilton Corporate Services Agreement and
the Park Place Corporate Services Agreement.
DEBT: All (i) indebtedness for borrowed money and obligations evidenced by
bonds, notes, debentures or similar instruments, and all accrued interest
relating thereto (ii) obligations issued or assumed as the deferred purchase
price of property or services, (iii) obligations under capital leases and (iv)
all guarantees of the obligations of other Persons described in the foregoing
clauses (i)--(iii).
DEBT ASSUMPTION AGREEMENT: The Debt Assumption Agreement between Park Place
and Hilton which agreement shall be entered into on or prior to the Distribution
Date in substantially the form attached hereto as Exhibit D.
DISTRIBUTION: The distribution to the holders of Hilton Common Stock as of
the Distribution Record Date of all of the outstanding shares of Park Place
Common Stock.
DISTRIBUTION DATE: The date on which the Distribution is effected.
DISTRIBUTION RECORD DATE: December 23, 1998.
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EMPLOYEE BENEFITS ALLOCATION AGREEMENT: The Employee Benefits and Other
Employment Matters Allocation Agreement between Park Place and Hilton, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit C.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FOREIGN GAMING LAWS: The laws, rules and regulations promulgated by the
applicable Governmental Authorities of Australia or Uruguay or any political
subdivisions thereof relating to casino gaming.
FORM 10: The Registration Statement on Form 10 under the Exchange Act with
respect to the Park Place Common Stock.
GAAP: Generally accepted accounting principles.
GAMING BUSINESS: The business conducted by Hilton and its Subsidiaries
relating to (i) the management, ownership, operation and development of Casino
Hotels and gaming facilities other than Hotel Ancillary Facilities (such Casino
Hotels and gaming facilities in existence as of the date hereof are specified in
Schedule 1), (ii) the Gaming Corporate Functions and (iii) any other operations
conducted by Hilton and its Subsidiaries utilizing the Gaming Group Assets.
GAMING CORPORATE FUNCTIONS: The corporate level and support functions of
Hilton which may be conducted by Park Place in connection with the Distribution,
as set forth in Schedule 2.
GAMING GROUP: Park Place and the Gaming Subsidiaries, collectively.
GAMING GROUP ASSETS: (i) All outstanding capital stock of the Gaming
Subsidiaries; (ii) the Gaming Group Books and Records; (iii) the rights of Park
Place and the Gaming Subsidiaries under the Shared Policies; (iv) all of the
assets expressly to be retained by, or assigned or allocated to, Park Place or
any of the Gaming Subsidiaries under this Agreement and the Related Agreements;
(v) the assets specified in Schedule 3, to the extent in existence on the
Distribution Date; (vi) the assets used in connection with the Gaming Corporate
Functions; (vii) all rights and benefits of Hilton arising out of the Merger
Agreement; and (viii) any other assets of Hilton and its Subsidiaries used
principally in the Gaming Business, including, without limitation, (x) all
assets obtained by Hilton or its Subsidiaries as a result of the Bally's
Acquisition, to the extent still held by Hilton or its Subsidiaries; EXCEPT, in
each case, excluding the assets listed on Schedule 6. Notwithstanding anything
to the contrary contained herein, "Gaming Group Assets" shall include, without
limitation, all of the assets used principally in the Gaming Business owned,
directly or indirectly, by any of (A) Paris Casino Corp., a Nevada corporation,
(B) Bally's Grand, Inc., a Delaware corporation, (C) Conrad International
Investments Corporation, a Nevada corporation, (D) Conrad International Hotels
Corporation, a Nevada corporation and (E) Conrad International Royalty
Corporation, a Nevada corporation.
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GAMING GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Park Place and the Gaming Subsidiaries and any other
books and records of Hilton and its Subsidiaries which relate principally to the
Gaming Group, are necessary to conduct the Gaming Business, or are required by
law to be retained by Park Place or a Gaming Subsidiary, including, without
limitation, (i) all such books and records relating to Transferred Employees,
(ii) all files relating to any Action being assumed by Park Place or retained by
a Gaming Subsidiary as part of the Gaming Group Liabilities, and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Park Place, the Gaming
Subsidiaries or the Gaming Business (but not including the Retained Business
Group Books and Records, provided that Park Place shall have access to, and have
the right to obtain duplicate copies of, any of the Retained Business Group
Books and Records which pertain to the Gaming Business in accordance with the
provisions of Article VII).
GAMING GROUP CASH ACCOUNTS: The bank accounts set forth in Schedule 4
hereto.
GAMING GROUP LIABILITIES: (i) All of the Liabilities of the Gaming Group
under, or to be retained or assumed by Park Place or any of the Gaming
Subsidiaries pursuant to this Agreement or any of the Related Agreements; (ii)
the Assumed Debt; (iii) all Liabilities of Park Place and the Gaming
Subsidiaries, other than Liabilities specifically associated with the Retained
Business (which shall be transferred to Hilton or to a Retained Business
Subsidiary in connection with the Distribution); (iv) all Liabilities of Hilton
arising out of the Merger Agreement and (v) all other Liabilities of Hilton and
its Subsidiaries arising out of, or specifically associated with, any of the
Gaming Group Assets or the Gaming Business, including, but not limited to, all
Liabilities assumed or incurred by Hilton or its Subsidiaries as a result of the
Bally's Acquisition (including, without limitation, all Liabilities assumed or
incurred by Hilton under the Bally's Goldberg Agreement), to the extent still
outstanding; PROVIDED, HOWEVER, that the Gaming Group Liabilities shall not
include (x) any Debt of Hilton or its Subsidiaries other than the Assumed Debt,
(y) any claims, losses, damages, demands, costs, expenses or Liabilities for any
Tax (which shall be governed by Sections 6.05 and 9.02 hereof and by the Tax
Allocation and Indemnity Agreement) and (z) any Liabilities under the Conrad
License Agreements (as defined in the Assignment and License Agreement).
GAMING LAWS: Foreign Gaming Laws, Louisiana Gaming Laws, Mississippi Gaming
Laws, Missouri Gaming Laws, New Jersey Gaming Laws, Nevada Gaming Laws and
Ontario Gaming Laws.
GAMING SUBSIDIARIES: The Subsidiaries of Hilton specified in Schedule 5 and
any other Subsidiaries formed after the date hereof to conduct a portion of the
Gaming Business.
GOVERNMENTAL AUTHORITY: Any court, administrative agency or commission or
other governmental authority or instrumentality.
HILTON BOARD: The Board of Directors of Hilton as it is constituted prior
to the Distribution Date.
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HILTON COMMON STOCK: The common stock, par value $2.50 per share, of
Hilton.
HILTON CORPORATE SERVICES AGREEMENT: The agreement between Hilton and Park
Place governing the provision of services by Hilton to Park Place for a period
following the Distribution Date, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form attached hereto as
Exhibit B.
HOLDERS: The holders of record of Hilton Common Stock as of the
Distribution Record Date.
HOTEL ANCILLARY FACILITIES: Small gaming facilities which are included as
an adjunct to hotel operations.
INSURANCE ADMINISTRATION: With respect to each Policy (including Self
Insurance Programs) shall include, but not be limited to, the accounting for
premiums, retrospectively rated premiums, defense costs, adjuster's fees,
indemnity payments, deductibles and retentions as appropriate under the terms
and conditions of each of the Policies; and the reporting to primary and excess
insurance carriers of any losses, claims and/or audit exposure in accordance
with Policy provisions, and the distribution of Insurance Proceeds as
contemplated by this Agreement.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Policies, whether or
not subject to deductibles, co-insurance, uncollectability or retrospectively
rated premium adjustments, but only to the extent that such Liabilities are
within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service or any successor thereto, including but
not limited to its agents, representatives and attorneys.
IRS RULING: The letter ruling issued by the IRS in response to the Ruling
Request.
LAKES: Lakes Gaming, Inc. (formerly known as GCI Lakes, Inc.), a Minnesota
corporation and wholly-owned subsidiary of Company.
LIABILITIES: Any and all debts, liabilities and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
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LOUISIANA GAMING LAWS: The Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder.
MERGER: The merger of Merger Sub with and into Company with Company as the
surviving corporation.
MERGER AGREEMENT: That certain Agreement and Plan of Merger, dated as of
June 30, 1998 by and among Hilton, Gaming Co., Inc., a Delaware corporation
(n/k/a Park Place Entertainment Corporation), Merger Sub, Company and GCI Lakes,
Inc., a Minnesota corporation (n/k/a Lakes Gaming Inc.).
MERGER SUB: Gaming Acquisition Corporation, a Minnesota corporation and
wholly-owned subsidiary of Park Place.
MISSISSIPPI GAMING LAWS: The Mississippi Gaming Control Act and the rules
and regulations promulgated thereunder.
MISSOURI GAMING LAWS: The Missouri Gaming Law and the rules and regulations
promulgated thereunder.
NET CASH: The sum of (i) net cash provided by (used in) financing
activities, (ii) net cash provided by operating activities and (iii) net cash
used in investing activities.
NEVADA GAMING LAWS: The Nevada Gaming Control Act and the rules and
regulations promulgated thereunder, the Clark County, Nevada Code and the rules
and regulations promulgated thereunder, and the City of Reno, Nevada Code and
other applicable local regulations.
NEW JERSEY GAMING LAWS: shall mean the New Jersey Casino Control Act and
the rules and regulations promulgated thereunder.
ONTARIO GAMING LAWS: The Ontario Gaming Control Act, 1992 and the rules and
regulations promulgated thereunder.
PARK PLACE BOARD: The Board of Directors of Park Place.
PARK PLACE BYLAWS: The Amended and Restated Bylaws of Park Place.
PARK PLACE CORPORATE SERVICES AGREEMENT: The agreement between Hilton and
Park Place governing the provision of services by Park Place to Hilton for a
period following the Distribution Date, which agreement shall be entered into on
or prior to the Distribution Date in substantially the form attached hereto as
Exhibit B.
PARK PLACE CERTIFICATE: The Amended and Restated Certificate of
Incorporation of Park Place.
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PARK PLACE COMMON STOCK: The common stock, $.01 par value per share, of
Park Place.
PARK PLACE MEMBERS: The meaning specified in the Tax Allocation and
Indemnity Agreement.
PERSON: Any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organization,
governmental or regulatory body or other entity.
POLICIES: Insurance policies and insurance contracts of any kind relating
to the Gaming Business or the Retained Business as conducted prior to the
Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile, aircraft, workers'
compensation, property insurance, crime insurance and boiler and machinery
insurance policies and self-insurance and captive insurance company
arrangements, together with the rights and benefits thereunder.
POST-DISTRIBUTION MEMBERS: The meaning specified in the Tax Allocation and
Indemnity Agreement.
PRELIMINARY TRANSFERS: The contribution by Hilton and the Retained Business
Subsidiaries to Park Place and the Gaming Subsidiaries, prior to the
Distribution, of all of the assets and liabilities of Hilton and the Retained
Subsidiaries comprising the Gaming Business and such other assets, liabilities
and operations as are described herein.
PRIVILEGED INFORMATION: All information as to which Hilton, Park Place or
any of their Subsidiaries are entitled to assert the protection of a Privilege.
PRIVILEGES: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
RELATED AGREEMENTS: All of the agreements, instruments, understandings,
assignments or other arrangements set forth in writing, which are entered into
in connection with the transactions contemplated hereby, including, without
limitation, the Conveyancing and Assumption Instruments and the Ancillary
Agreements.
RETAINED BUSINESS: The business conducted by Hilton and its Subsidiaries
relating to (i) the sales, marketing, management, ownership, operation,
development and franchising of lodging, timeshare and vacation ownership
facilities (including those timeshare and vacation ownership facilities located
at or associated with the Casino Hotels, and including the ability to sell,
market and franchise any such facilities whether or not located at or associated
with the Casino Hotels), (ii) the Retained Corporate Functions, (iii) Hilton's
strategic alliance with Ladbroke Group PLC and its affiliates (including all
interests in joint ventures owned
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jointly with Ladbroke Group PLC) and (iv) any other operations conducted by
Hilton and its Subsidiaries utilizing the Retained Business Group Assets.
RETAINED BUSINESS GROUP: Hilton and the Retained Business Subsidiaries,
collectively.
RETAINED BUSINESS GROUP ASSETS: (i) All outstanding capital stock of the
Retained Business Subsidiaries and all assets of the Gaming Subsidiaries other
than the Gaming Group Assets; (ii) the Retained Business Group Books and
Records; (iii) the rights of Hilton and the Retained Business Subsidiaries under
the Shared Policies; (iv) all of the assets expressly to be retained by, or
assigned or allotted to, Hilton or any of the Retained Business Subsidiaries
under this Agreement or the Related Agreements; (v) the assets used in
connection with the Retained Corporate Functions; (vi) the assets specified in
Schedule 6, to the extent in existence on the Distribution Date; and (vii) any
other assets of Hilton and its Subsidiaries used principally in the Retained
Business; EXCEPT, in each case, excluding the assets listed in Schedule 3.
RETAINED BUSINESS GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Hilton and the Retained Business Subsidiaries and any
other books and records of Hilton's Subsidiaries which relate principally to the
Retained Business Group, are necessary to conduct the Retained Business or are
required by law to be retained by Hilton or a Retained Business Subsidiary,
including, without limitation, (i) all such books and records relating to
Retained Business Group Employees, (ii) all files relating to any Action being
retained by Hilton as part of the Retained Business Group Liabilities, and (iii)
original corporate minute books, stock ledgers and certificates and corporate
seals, and all licenses, leases, agreements and filings, relating to Hilton, the
Retained Business Subsidiaries or the Retained Business (but not including the
Gaming Group Books and Records, provided that Hilton shall have access to, and
shall have the right to obtain duplicate copies of, the Gaming Group Books and
Records in accordance with the provisions of Article VII).
RETAINED BUSINESS GROUP EMPLOYEES: The meaning specified in the Employee
Benefits Allocation Agreement.
RETAINED BUSINESS GROUP LIABILITIES: (i) All of the Liabilities of the
Retained Business Group under, or to be retained or assumed by Hilton or any of
the Retained Business Subsidiaries pursuant to, this Agreement or any of the
Related Agreements; (ii) all Liabilities for payment of outstanding drafts of
Hilton and its Subsidiaries existing as of the Distribution Date; (iii) the
Retained Debt; (iv) all Liabilities of Hilton and the Retained Business
Subsidiaries, other than Gaming Group Liabilities and (v) all other Liabilities
of Hilton and its Subsidiaries arising out of, or specifically associated with,
any of the Retained Business Group Assets or the Retained Business; PROVIDED,
HOWEVER, that the Retained Business Group Liabilities shall not include (x) any
Debt of Hilton or its Subsidiaries other than the Retained Debt; (y) any claims,
losses, damages, demands, costs, expenses or Liabilities for any Tax (which
shall be governed by Sections 6.05 and 9.02 hereof and by the Tax Allocation and
Indemnity Agreement) and (z) any Liabilities under the Conrad International
Management Agreements (as defined in the Assignment and License Agreement).
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RETAINED BUSINESS SUBSIDIARIES: The Subsidiaries of Hilton specified in
Schedule 7 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Retained Business.
RETAINED CORPORATE FUNCTIONS: The corporate level and support functions of
Hilton to be retained by Hilton in connection with the Distribution, as set
forth in Schedule 8 hereto.
RETAINED DEBT: The Debt of Hilton and its Subsidiaries which is to be
retained by Hilton and/or the Retained Business Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.08.
RULING REQUEST: The private letter ruling request to be filed by Hilton
with the Internal Revenue Service, as supplemented and amended from time to
time, with respect to certain tax matters relating to the Distribution, the
Merger, and other related matters.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELF INSURANCE PROGRAMS: Those self insured programs maintained by Hilton
and/or any of its Subsidiaries prior to the Distribution for the benefit of
employees, properties and operating businesses, including without limitation
such programs that utilize "fronted policies."
SHARED POLICIES: All Policies (including Self Insurance Programs), current
or past, which are owned or maintained by or on behalf of Hilton and/or any of
its Subsidiaries or their respective predecessors which insure both the Retained
Business and the Gaming Business.
SUBSIDIARY: With respect to any Person, (i) each corporation, partnership,
joint venture, limited liability company or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership or limited liability company in which such Person or another
Subsidiary of such Person is the general partner, managing partner or otherwise
controls.
TAX OR TAXES: Any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
TAX ALLOCATION AND INDEMNITY AGREEMENT: The Tax Allocation and Indemnity
Agreement between Hilton and Park Place pursuant to which such parties will
provide for the
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allocation of, and indemnification against, certain tax liabilities, the
preparation and filing of certain tax returns and the payment of taxes related
thereto and certain related matters, which agreement shall be entered into on or
prior to the Distribution Date substantially in the form attached hereto as
Exhibit E.
TAX RETURN(S): With respect to any corporation or Affiliated Group, all
returns, reports, estimates, statements, declarations and other filings relating
to, or required to be filed by any taxpayer in connection with, the payment or
receipt of any refund of any Tax.
TRANSFERRED EMPLOYEES: The meaning specified in the Employee Benefits
Allocation Agreement.
Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT.
Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
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1992 Notes 2.08
1997 Notes 2.08
Agreement Recitals
Committee 9.14
Consents 4.01
Credit Agreement Debt 2.08
Disposition Agreement 2.03
Dispute 9.14
Gaming Field Cash 2.07
Hilton Recitals
Hilton Indemnitees 5.02
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lodging Field Cash 2.07
Park Place Recitals
Park Place Indemnities 5.01
Regulatory Approvals 4.02(g)
Retained Credit Agreement Debt 2.08
Amount
Subordinated Notes 2.08
Third Party Claim 5.04
Transaction Taxes 6.05
11
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO PARK PLACE.
On or prior to the Distribution Date, Hilton shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Park Place and/or the appropriate Gaming Subsidiaries designated
by Park Place of all of Hilton's and its Subsidiaries' right, title and interest
in any Gaming Group Assets held, on or prior to the Distribution Date, by Hilton
or any Retained Business Subsidiary.
Section 2.02. TRANSFERS OF ASSETS FROM GAMING SUBSIDIARIES TO HILTON OR
RETAINED BUSINESS SUBSIDIARIES.
On or prior to the Distribution Date, Park Place shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Hilton and/or the applicable Retained Business Subsidiaries
designated by Hilton of all of Park Place's and the Gaming Subsidiaries' right,
title and interest in any Retained Business Group Assets held, on or prior to
the Distribution Date, by Park Place or any of the Gaming Subsidiaries.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION.
To the extent that any transfers contemplated by this Article II shall not
have been fully effected as of the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer of
any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed including, without limitation,
pursuant to Gaming Laws; PROVIDED, HOWEVER, that Hilton and Park Place and their
respective Subsidiaries and Affiliates shall cooperate in seeking to obtain any
necessary consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Agreement including, without
limitation, pursuant to Gaming Laws. Notwithstanding the foregoing, any
transfers relating to Flamingo Casino Kansas City, Hilton Kansas City
Corporation, HKC Partners, Inc. and HKC Advertising, Inc. shall be governed by
the terms of that certain Disposition Agreement (the "DISPOSITION AGREEMENT")
dated the date hereof, by and among Hilton, Flamingo Hilton Riverboat Casino,
L.P., a Missouri limited partnership and Park Place, and the ancillary
agreements thereto. To the extent that the terms of this Agreement and the terms
of the Disposition Agreement or any ancillary agreement thereto are in conflict,
the Disposition Agreement and the related ancillary agreements thereto shall
govern. In the event that any such transfer of assets or Liabilities has not
been consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had
12
such asset been transferred or such Liability been assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable, such
transfer and assumption shall be effected forthwith. The parties agree that,
except as set forth in this Section 2.03, as of the Distribution Date, each
party hereto shall be deemed to have acquired complete and sole beneficial
ownership over all of the assets, together with all rights, powers and
privileges incidental thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. COOPERATION RE: ASSETS.
In the case that at any time after the Distribution Date, Park Place
reasonably determines that any of the Retained Business Group Assets (other than
the assets set forth in Schedule 6) are essential for the conduct of the Gaming
Business, or Hilton reasonably determines that any of the Gaming Group Assets
(other than the assets set forth in Schedule 3) are essential for the conduct of
the Retained Business, and the nature of such assets makes it impracticable for
Park Place or Hilton, as the case may be, to obtain substitute assets or to make
alternative arrangements on commercially reasonable terms to conduct their
respective businesses, and reasonable provisions for the use thereof are not
already included in the Related Agreements, then Park Place (with respect to the
Gaming Group Assets) and Hilton (with respect to the Retained Business Group
Assets) shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations. However, (i) the usage of such assets by
the other party shall not materially interfere with the use of such assets by
the party holding such assets, and (ii) such assets shall be required to be made
available only until such time as the other party can reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS.
Each of the parties hereto understands and agrees that no party hereto is,
in this Agreement, in any Related Agreement, or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any assets of such party or (ii) as to the legal
sufficiency to convey title to any asset transferred pursuant to this Agreement
or any Related Agreement. IT IS ALSO AGREED AND UNDERSTOOD THAT THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF ANY OF
THE ASSETS EITHER TRANSFERRED TO OR RETAINED BY THE PARTIES, AS THE CASE MAY BE,
AND ALL SUCH ASSETS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS;" PROVIDED,
HOWEVER, that the absence of warranties shall have no effect upon the allocation
of Liabilities under this Agreement. Each party hereto understands and agrees
that no party hereto is, in this Agreement, in any Related Agreement, or
otherwise, representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement,
any Related Agreement,
13
or otherwise, will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets, including
without limitation, the Gaming Laws. Notwithstanding the foregoing, the parties
shall use their good faith efforts to obtain all consents and approvals,
including, without limitation, pursuant to the Gaming Laws, to enter into all
reasonable amendatory agreements and to make all filings and applications which
may be reasonably required for the consummation of the transactions contemplated
by this Agreement and the Related Agreements, and shall take all such further
reasonable actions as shall be necessary to preserve for each of the Gaming
Group and the Retained Business Group, to the greatest extent feasible, the
economic and operational benefits of the allocation of assets and liabilities
provided for in this Agreement. In case at any time after the Distribution Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS.
In connection with the Preliminary Transfers described in Article II and
Article III hereof, and the assignment of assets and the assumption of
Liabilities contemplated by any Related Agreements, the parties shall execute,
or cause to be executed by the appropriate entities, the Conveyancing and
Assumption Instruments in such forms as the parties shall reasonably agree. The
transfer of capital stock and other equity interests shall be effected by means
of delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporation or other legal entity involved and, to the
extent required by applicable law, by notation on public registries.
Section 2.07. CASH ALLOCATION; CASH MANAGEMENT.
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. Subject to Section 2.07(e),
the allocation between Hilton and Park Place of all domestic and international
cash bank balances, short-term investments and outstanding checks and drafts of
Hilton and its Subsidiaries recorded per the books of Hilton and its
Subsidiaries shall be in accordance with the following:
(i) all deposits of cash, checks, drafts or short-term investments
made to accounts, other than the Gaming Group Cash Accounts, after the
close of business on the Distribution Date shall be remitted to Hilton
and/or the appropriate Retained Business Subsidiary; PROVIDED, HOWEVER,
that any such deposits that (1) are generated from operations of the Gaming
Business shall be remitted to Park Place and/or the appropriate Gaming
Subsidiary as promptly as possible and (2) are erroneously made to such
accounts shall be redeposited to the correct accounts as promptly as
possible;
(ii) all deposits of cash, checks, drafts or short-term investments
made to the Gaming Group Cash Accounts after the close of business on the
Distribution Date shall be remitted to Park Place and/or
14
the appropriate Gaming Subsidiary; PROVIDED, HOWEVER, that any such
deposits that (1) are generated from operations of the Retained Business
shall be remitted to Hilton and/or the appropriate Retained Business
Subsidiary as promptly as possible and (2) are erroneously made to such
accounts shall be redeposited to the correct accounts as promptly as
possible;
(iii) cash held on the Distribution Date in the ordinary course of
business at Casino Hotels or other gaming facilities comprising part of the
Gaming Business in an aggregate amount up to $100 million ("GAMING FIELD
CASH") shall constitute assets of Park Place and/or the appropriate Gaming
Subsidiaries;
(iv) cash held on the Distribution Date by Park Place representing a
corporate cash reserve in an aggregate amount equal to $25 million funded
through a borrowing under the Park Place Credit Facility (as defined below)
("GAMING CORPORATE CASH") shall constitute assets of Park Place and/or the
appropriate Gaming Subsidiaries;
(v) cash held on the Distribution Date in the ordinary course of
business at lodging or timeshare properties comprising part of the Retained
Business in an aggregate amount up to $5 million ("LODGING FIELD CASH")
shall constitute assets of Hilton and/or the appropriate Retained Business
Subsidiaries;
(vi) cash held on the Distribution Date by Hilton representing a
corporate cash reserve in an aggregate amount equal to $25 million funded
through a borrowing under its credit facility ("LODGING CORPORATE CASH")
shall constitute assets of Hilton and/or the appropriate Retained Business
Subsidiaries; and
(vii) all cash based on book balances existing as of the Distribution
Date, except Gaming Field Cash, Gaming Corporate Cash, Lodging Field Cash,
Lodging Corporate Cash and cash unavailable for general corporate purposes
(e.g., cash pledged to secure assets), shall be equally divided between
Hilton and Park Place.
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. All petty cash, depository
and disbursement accounts of Hilton (other than the Gaming Group Cash Accounts)
shall be retained by Hilton. The Gaming Group Cash Accounts shall be transferred
to Park Place, and Park Place shall establish and maintain a separate cash
management system and separate accounting records with respect to the Gaming
Group Business effective as of 12:01 a.m. New York time on the day following the
Distribution Date.
15
(c) ORDINARY COURSE OPERATIONS. The parties contemplate and agree that the
Gaming Business and the Retained Business, including, but not limited to, the
administration, payment and collection of accounts payable and accounts
receivable, will be conducted in the ordinary course of business and consistent
with past practice prior the Distribution Date.
(d) CASH ALLOCATIONS AFTER THE YEAR-END. Notwithstanding anything to the
contrary herein, (i) Net Cash generated after December 31, 1998 from operations
of the Retained Business (regardless of whether the Distribution has occurred)
shall be retained by Hilton, (ii) Net Cash generated after December 31, 1998
from operations of the Gaming Business (regardless of whether the Distribution
has occurred) shall be retained by Gaming Co, and (iii) in the event the
Distribution has not occurred by December 31, 1998, the allocations of cash set
forth in Section 2.07(a) shall be made as of December 31, 1998.
(e) CASH TRUE-UP. In the event that the parties cannot fully and finally
determine the cash allocations set forth in Section 2.07(a) as of the
Distribution Date, the allocation of cash as of such date shall be provisional
(based on the best data available as of such date) and the parties shall make an
appropriate "true up" payment as promptly as practicable (but in no event later
than February 19, 1999) after all the facts necessary for such a payment can be
ascertained.
Section 2.08. ALLOCATION OF DEBT. (1)
Debt will be allocated as follows:
(a) Debt secured by Retained Business Group Assets, or otherwise
specifically associated with the Retained Business, will be assumed or retained
by Hilton and/or the appropriate Retained Business Subsidiaries. As of November
30, 1998, such Debt comprises (v) IRB financings of the Atlanta Airport Hilton
and the New Orleans Airport Hilton (in the amounts of $50 million and $32
million, respectively), (w) two mortgages on the New Orleans Hilton (in the
amounts of $46 million and $52 million, respectively), (x) the unsecured credit
facility relating to the Hilton Hawaiian Village (in the amount of $480
million), (y) one mortgage on the Pointe Tapatio Hilton (in the amount of $48
million) and (z) $3 million of other Debt.
(b) Debt secured by Gaming Group Assets, or otherwise specifically
associated with the Gaming Business, will be assumed or retained by Park Place
and/or the appropriate Gaming Subsidiaries. As of November 30, 1998, such Debt
comprises (i) $11 million of secured Debt relating to the Belle of Orleans
riverboat, and (ii) $3 million of other Debt.
(c) Except as provided by Section 2.08(d), Hilton's public bond Debt will
be Retained Debt. As of November 30, 1998, such Debt consists of (i) $500
million of unsecured 5% convertible subordinated notes due 2006 (the
"SUBORDINATED NOTES"), (ii) $1.4 billion of
- - -------------------
(1) All amounts set forth in this Section 2.08 are approximate and represent
gross principal amounts.
16
unsecured senior notes issued in 1997, with various interest rates and
maturities ranging from 2002 to 2017 (the "1997 NOTES"), (iii) $267.6 million of
unsecured 7.7% notes issued in 1992 and due in 2002 (the "1992 NOTES") and (iv)
unsecured medium-term notes, Series A and Series B, due 1998 through 2001 ($77.6
million currently outstanding).
(d) Debt allocated to Park Place in the Debt Assumption Agreement will be
assumed by Park Place.
(e) Debt under Hilton's credit agreement and related commercial paper
program ("CREDIT AGREEMENT DEBT") will be refinanced, in part, by a new credit
facility obtained by Park Place. Except as provided by Section 2.08(g), Hilton
will retain an amount of the Credit Agreement Debt (the "RETAINED CREDIT
AGREEMENT DEBT AMOUNT") equal to the amount set forth in Schedule 9 PLUS the
amount of option cash-outs attributable to Retained Business Group employees, if
any (which Debt shall constitute a part of the Retained Debt). Park Place will
refinance the remainder of the Credit Agreement Debt (which Debt shall
constitute a part of the Assumed Debt). The parties acknowledge that this
Section 2.08(e) is intended to equalize the Debt (excluding any Debt -- or
reductions thereof -- associated with the items referred to in Sections
2.08(e)(i) through (e)(viii) below (the "SPECIAL ALLOCATIONS")) between Hilton
and Park Place as of December 31, 1998, giving pro forma effect to the
Distribution and the Merger assuming they had occurred on December 31, 1998.
Once equalized, the Debt of each company will then be adjusted according to the
Special Allocations. Any Debt increases or decreases subsequent to December 31,
1998 will be allocated in accordance with Section 2.08(g). If the Merger does
not occur after the Distribution, the parties hereto shall reallocate the Debt
(excluding any Debt -- or reductions thereof -- associated with the Special
Allocations) between Hilton and Park Place to equalize it as of December 31,
1998, giving pro forma effect solely to the Distribution assuming it had
occurred on December 31, 1998. Once re-equalized, the Debt of each company will
then be adjusted according to the Special Allocations. Any Debt increases or
decreases subsequent to such date will be allocated in accordance with Section
2.08(g). The parties intend that all Special Allocations of cash shall be used
to reduce the total Debt allocated to the subject company.
(i) Debt equal to $83,274,300, representing the purchase price paid by
Hilton and/or the relevant Retained Business Subsidiary in connection with
the purchase of the Sheraton Torrey Pines, Debt equal to $2,000,000,
representing the deposits paid by Hilton and/or the relevant Retained
Business Subsidiary in connection with the contemplated purchase of the
Radisson Plaza Hotel at Mark Center in Alexandria, Virginia ($1,500,000)
and the Back Bay Hilton in Boston, Massachusetts ($500,000) and Debt equal
to $25 million, representing the Lodging Corporate Cash shall be allocated
to Hilton;
(ii) Debt equal to $620,000, representing the purchase price paid by
Park Place and/or the relevant Gaming Subsidiary in connection with the
purchase of 101 Hemsley in Northfield, New Jersey, Debt equal to $206,597,
representing the expenditures incurred by Park Place and/or
17
the relevant Gaming Subsidiary in 1998 in connection with the construction
of the pedestrian bridge between Caesars Palace and the Flamingo Hilton-Las
Vegas, Debt equal to $1,000,000, representing the deposit paid by Park
Place and/or the relevant Gaming Subsidiary in connection with the
contemplated purchase of the Gulfstream IV, Debt equal to $9,630,000,
representing the expenses paid by Hilton in connection with the offering
and sale of Park Place's $400 million 77/8% Senior Subordinated Notes due
2005 (the "SENIOR SUBORDINATED NOTE OFFERING") and Debt equal to $25
million, representing the Gaming Corporate Cash shall be allocated to Park
Place;
(iii) cash equal to $22,892,054 representing 100% of the cash value
assigned to the Flamingo Casino - Kansas City shall be allocated to Park
Place;
(iv) subject to the true-up provision set forth in Section 2.08(f)
below, cash equal to (A) 50% of the following total (1) the book balances
of Unrestricted Cash of Company (as defined in the Merger Agreement), less
(2) cash unavailable for general corporate purposes (e.g., cash pledged to
secure assets), (3) cash reserved for the payment of trade payables, less
(4) cash generated from the sale of the assets pursuant to the Asset
Purchase Agreement dated October 15, 1998 by and between BL Development
Corp. and the Robinsonville Commerce Utility District, plus (5) cash in an
amount equal to Trade accounts receivable, and (B) 50% of the excess (if
any) of any insurance proceeds received by Company or its affiliates
relating to all damage claims arising from Hurricane Georges in excess of
any related property damage expenditures, shall be allocated to Hilton;
(v) cash equal to $9,010,954, representing 50% of the Tax benefit
expected to be realized by (1) the consolidated group of which Park Place
is the common parent in 1999 resulting from the payment of tender and
defeasance premiums and related expenses in connection with the tender
offer for the First Mortgage Notes (as defined in the Merger Agreement) and
(2) the consolidated group of which Park Place is the common parent in 1999
resulting from the payment of defeasance premiums and related expenses in
connection with the defeasance of the Senior Notes (as defined in the
Merger Agreement), shall be allocated to Hilton;
(vi) cash equal to $1,094,089, representing a portion of the present
value (assuming a discount rate of 12%) of the Tax benefits expected to be
realized by Park Place in the years 1999 through and including 2003
resulting from the payment of fees and expenses in connection with the Five
Year Credit Agreement dated as of the date
18
hereof by and between, among others, Park Place and Bank of America
National Trust and Savings Association, as Administrative Agent ("BOA") and
the Short Term Credit Agreement dated as of December 31, 1998 by and
between, among others, Park Place and BOA (collectively, the "PARK PLACE
CREDIT FACILITY"), shall be allocated to Hilton;
(vii) Debt equal to $3,907,828, representing a portion of the fees and
expenses paid by Park Place in connection with the Park Place Credit
Facility that are included in the calculation of the Total Debt of Company
(as defined in the Merger Agreement) shall be allocated to Hilton; and
(viii) cash equal to $1,250,000, representing 50% of the credit
relating to the Goldman Sachs, shall be allocated to Hilton.
(f) In the event that the parties cannot fully and finally determine the
allocation of Debt as set forth in this Section 2.08 as of the Distribution
Date, the allocation of Debt as of such date shall be provisional (based on the
best data available as of such date) and the parties shall make an appropriate
"true up" adjustment as promptly as practicable (but in no event later than
February 19, 1999) after all facts necessary for a final determination of Debt
can be ascertained.
(g) Notwithstanding anything to the contrary herein, (i) any increases
(decreases) in Debt incurred (repaid) after December 31, 1998 arising out of
operations of the Retained Business (regardless of whether the Distribution has
occurred) shall be attributed to Hilton and (ii) any increases (decreases) in
Debt incurred (repaid) after December 31, 1998 arising out of operations of the
Gaming Business (regardless of whether the Distribution has occurred) shall be
attributed to Park Place; and, to the extent such increases (decreases) are not
already given effect in the definition of Net Cash and the allocations thereof
pursuant to Section 2.07(d), such increases (decreases) shall increase or
decrease (as applicable) the Debt allocated to Hilton or Park Place (as
applicable).
Section 2.09. ANCILLARY AGREEMENTS BETWEEN HILTON AND PARK PLACE.
On or prior to the Distribution Date, Hilton and Park Place shall enter
into the Ancillary Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES.
Except as set forth in one or more of the Related Agreements, from and
after the Distribution Date, (a) Park Place shall, and/or shall cause the Gaming
Subsidiaries to, assume, pay, perform and discharge in due course all of the
Gaming Group Liabilities, and (b) Hilton
19
shall, and/or shall cause the Retained Business Subsidiaries to, assume, pay,
perform and discharge in due course all of the Retained Business Group
Liabilities.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Park Place and Hilton shall cooperate in preparing, filing with the SEC
and causing to become effective any registration statements or amendments
thereof which are appropriate to reflect the establishment of, or amendments to,
any employee benefit plans and other plans contemplated by the Employee Benefits
Allocation Agreement.
(b) Park Place and Hilton shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) Park Place and Hilton shall use all reasonable efforts to obtain any
governmental or third-party consents or approvals necessary or desirable in
connection with the transactions contemplated hereby, including, without
limitation, pursuant to the Gaming Laws ("CONSENTS").
(d) Park Place and Hilton will use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements, including, but not
limited to, actions related to the satisfaction of the conditions indicated in
Section 4.02 below.
Section 4.02. HILTON BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION.
The Hilton Board shall, in its sole discretion, establish the Record Date
and the Distribution Date and any appropriate procedures in connection with the
Distribution. In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated in Article II and Article III shall have
been consummated in all material respects;
(b) the Park Place Board, comprised as contemplated by Section 6.01, shall
have been elected by Hilton Hotels U.S.A., Inc., a Delaware corporation, as sole
stockholder of Park Place, and the Park Place Certificate and Park Place Bylaws
shall have been adopted and shall be in effect;
20
(c) the IRS Ruling shall have been granted in form and substance
satisfactory to the Hilton Board, the IRS Ruling shall not have been withdrawn
by the IRS and the representations made to the IRS therein shall be true in all
material respects;
(d) the Form 10 shall have been declared effective by the SEC;
(e) the Park Place Common Stock shall have been approved for trading on the
New York Stock Exchange (or such other securities exchange comprising the
principal securities exchange or market on which the Park Place Common Stock is
listed), subject to official notice of issuance;
(f) each of Park Place and Hilton shall have executed and delivered the
Related Agreements to which it is a party and each of the transactions
contemplated by the Related Agreements to be consummated on or prior to the
Distribution Date shall have been consummated;
(g) all necessary regulatory approvals, registrations, licenses, finding of
suitability (collectively, the REGULATORY APPROVALS") and consents of third
parties shall have been received, including, without limitation, any required
approvals under the Gaming Laws, except for any such Regulatory Approvals or
consents the failure of which to obtain would not have a material adverse effect
on the business, operations or condition (financial or otherwise) of either
Hilton or Park Place;
(h) the Board of Directors of Hilton shall be satisfied that (i) at the
time of the Distribution and after giving effect to the Distribution and the
transactions contemplated under the Related Agreements, Hilton will not be
insolvent (in that, both before and immediately following the Distribution, (1)
the fair market value of Hilton's assets would exceed Hilton's liabilities, (2)
Hilton would be able to pay its liabilities as they mature and become absolute
and (3) Hilton would not have unreasonably small capital with which to engage in
its business) and (ii) the Distribution would be permitted under Section 170(a)
of the Delaware General Corporation Law; and at the Board of Directors'
discretion, Hilton shall have received the opinion of a financial advisor or
other appraisal or valuation expert selected by Hilton, in form and substance
satisfactory to Hilton, as to the matters set forth above, and such opinion
shall not have been withdrawn;
(i) Park Place shall have obtained, or Hilton shall have obtained for Park
Place, insurance (or binders therefor) providing coverage to Park Place similar
to the coverage provided by insurance in place prior to the Distribution Date;
(j) financing arrangements with respect to Hilton and Park Place
satisfactory to the Hilton Board shall be in place;
(k) Park Place shall have executed and delivered the Debt Assumption
Agreement, which shall be in full force and effect;
21
(l) Hilton shall have received stockholder ratification of the Distribution
at a meeting of stockholders;
(m) the Merger Agreement shall be in full force and effect and no material
breach shall exist thereunder; and
(n) Each condition to the consummation of the Merger, other than the
condition set forth in Section 8.1(g) of the Merger Agreement relating to the
consummation of the Distribution, shall have been fulfilled or waived by the
party for whose benefit such condition exists; PROVIDED, HOWEVER, that (x) any
such condition may be waived by the Hilton Board in its sole discretion, and (y)
the satisfaction of such conditions shall not create any obligation on the part
of Hilton or any other party hereto to effect the Distribution or in any way
limit Hilton's power of termination set forth in Section 9.08 or alter the
consequences of any such termination from those specified in such Section.
Section 4.03. THE DISTRIBUTION.
On the Distribution Date, or as soon thereafter as practicable, subject to
the conditions and rights of termination set forth in this Agreement, Hilton
shall deliver to the Agent, for the benefit of the Holders, a share certificate
representing all of the then outstanding shares of Park Place Common Stock owned
by Hilton, endorsed in blank, and shall instruct the Agent to distribute to each
Holder, on or as soon as practicable following the Distribution Date, a
certification, or if requested by such Holder, a certificate, representing one
share of Park Place Common Stock for each share of Hilton Common Stock so held.
Park Place agrees to provide all share certificates that the Agent shall require
in order to effect the Distribution.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY HILTON.
Except as otherwise expressly set forth in a Related Agreement, Hilton
shall indemnify, defend and hold harmless Park Place and each of the Gaming
Subsidiaries, and each of their respective past or present directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "PARK PLACE INDEMNITEES") from and
against any and all losses, Liabilities, damages and expenses (including,
without limitation, the reasonable costs and expenses, including reasonable
attorneys' fees, in connection with any such investigations, Actions or
threatened Actions) (collectively, "INDEMNIFIABLE LOSSES" and, individually, an
"INDEMNIFIABLE LOSS") incurred or suffered by any of the Park Place Indemnitees
and arising out of or due to the failure or alleged failure of Hilton, any
Retained Business Subsidiary, or any of their respective Affiliates to pay,
perform or otherwise discharge in due course any of the Retained Business Group
Liabilities.
22
Section 5.02. INDEMNIFICATION BY PARK PLACE.
Except as otherwise expressly set forth in a Related Agreement, Park Place
shall indemnify, defend and hold harmless Hilton and each of the Retained
Business Subsidiaries, and each of their respective past or present directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "HILTON INDEMNITEES") from
and against any and all Indemnifiable Losses incurred or suffered by any of the
Hilton Indemnitees and arising out of or due to the failure or alleged failure
of Park Place, any Gaming Subsidiaries, or any of their respective Affiliates to
pay, perform or otherwise discharge in due course any of the Gaming Group
Liabilities.
Section 5.03. INSURANCE PROCEEDS.
The amount which any party (an "INDEMNIFYING PARTY") is or may be required
to pay to or on behalf of any other Person (an "INDEMNIFIED PERSON") pursuant to
Section 5.01 or Section 5.02 shall be reduced (including, without limitation,
retroactively) by any Insurance Proceeds or other amounts actually recovered by
or on behalf of such Indemnified Person in reduction of the related
Indemnifiable Loss. If an Indemnified Person shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnified Person shall pay to such Indemnifying Party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION.
(a) Except as may be set forth in a Related Agreement, if an Indemnified
Person shall receive written notice of the assertion by a Person (including,
without limitation, any Governmental Authority) who is not a party to this
Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person of any Action with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to this
Agreement (a "THIRD-PARTY CLAIM"), such Indemnified Person shall give the
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; PROVIDED, that the failure of any Indemnified Person to give
notice as required by this Section 5.04 shall not relieve the Indemnifying Party
of its obligations under this Article V, except to the extent that such
Indemnifying Party is materially prejudiced by such failure to give notice. Such
notice shall describe the Third-Party Claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the Indemnifiable Loss that has
been claimed against or may be sustained by such Indemnified Person.
(b) Within 15 days of the receipt of notice from an Indemnified Person in
accordance with Section 5.04(a) (or sooner, if the nature of such Third-Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Person
of its election whether to assume responsibility for such Third-Party Claim
(provided that if the Indemnifying Party does not so notify the Indemnified
Person of its election within 15 days after receipt of such notice from the
23
Indemnified Person, the Indemnifying Party shall be deemed to have elected not
to assume responsibility for such Third-Party Claim). An election not to assume
responsibility for such Third-Party Claim may only be made in the event of a
good faith dispute that a Third-Party Claim is not covered as an Indemnifiable
Loss under the grounds specified in Section 5.01 or 5.02, as the case may be.
Subject to Section 5.04(e) hereof, an Indemnifying Party may elect to defend or
to seek to settle or compromise, at such Indemnifying Party's own expense and by
counsel reasonably satisfactory to the Indemnified Person, any Third-Party
Claim, PROVIDED that (i) the Indemnifying Party must confirm in writing that it
agrees that the Indemnified Person is entitled to indemnification hereunder in
respect of such Third-Party Claim and (ii) no compromise or settlement shall be
made without the prior written consent of the Indemnified Person, which consent
shall not be unreasonably withheld.
(c) In the event that the Indemnifying Party elects to assume
responsibility for the Third-Party Claim, pursuant to Section 5.04(b) above, (i)
the Indemnified Person shall cooperate in the defense or settlement or
compromise of such Third-Party Claim, including making available to the
Indemnifying Party any personnel and any books, records or other documents
within the Indemnified Person's control or which it otherwise has the ability to
make available that are necessary or appropriate for the defense of the
Third-Party Claim, (ii) the Indemnifying Party shall keep the Indemnified Person
reasonably informed regarding the strategy, status and progress of the defense
of the Third-Party Claim, and (iii) the Indemnifying Party shall consider, in
good faith, the opinions and suggestions of the Indemnified Person with respect
the Third-Party Claim. After notice from an Indemnifying Party to an Indemnified
Person of its election to assume responsibility for a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnified Person under this
Article V for any legal or other costs or expenses (except costs or expenses
approved in advance by the Indemnifying Party) subsequently incurred by such
Indemnified Person in connection with the defense thereof; PROVIDED, that if the
defendants in any such claim include both the Indemnifying Party and one or more
Indemnified Persons and in such Indemnified Persons' reasonable judgment a
conflict of interest between such Indemnified Persons and such Indemnifying
Party exists in respect of such claim, such Indemnified Persons shall have the
right to employ separate counsel and in that event the reasonable fees, costs
and expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(d) If an Indemnifying Party elects not to assume responsibility for a
Third-Party Claim, the Indemnified Person may defend or (subject to the
following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnified Person may not settle or
compromise any claim without prior written notice to the Indemnifying Party,
which shall have the option within ten days following the receipt of such notice
(i) to disapprove the settlement and to then assume all past and future
responsibility for the claim, including immediately reimbursing the Indemnified
Person for prior expenditures in connection with the claim, (ii) to disapprove
the settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnified Person may, in its sole discretion,
proceed with the settlement and the Indemnifying Party shall have no further
right to contest the amount
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or reasonableness of the settlement, (iii) to approve and pay the amount of the
settlement, reserving the Indemnifying Party's right to contest the Indemnified
Person's right to indemnity, or (iv) to approve and pay the settlement. In the
event the Indemnifying Party makes no response to such written notice, the
Indemnifying Party shall be deemed to have elected option (ii). When the
Indemnifying Party chooses, or is deemed to have chosen, option (ii) or (iii),
the issue of whether the Indemnified Person has a right to indemnity under this
Article V shall be resolved by arbitration pursuant to the provisions of Section
9.14 hereof. If the Indemnifying Party does not prevail at such arbitration, the
Indemnifying Party shall promptly reimburse the Indemnified Person for all
Indemnifiable Losses, plus interest on such amounts at the lower of (i) 10 % or
(ii) the highest legal interest rate, accruing from the date of payment by the
Indemnified Person.
(e) Notwithstanding the foregoing, if an Indemnified Person reasonably and
in good faith determines that (i) the Indemnifying Party is not financially
capable to defend a Third-Party Claim and to provide full indemnification with
respect to any settlement thereof or (ii) the Indemnifying Party or such
Indemnifying Party's attorney is not adequately representing the Indemnified
Person's interests with respect to such Third-Party Claim, the Indemnified
Person may, by notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle such Third-Party Claim and the Indemnifying Party
shall remain responsible for, and be bound by the resolution of, such
Third-Party Claim.
(f) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnified Person to the applicable Indemnifying Party. Such Indemnifying Party
shall have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnified Person shall be free to pursue such remedies as may be available to
such party under applicable law or under this Agreement.
(g) In addition to any adjustments required pursuant to Section 5.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Person to the
Indemnifying Party.
(h) In the event of payment by an Indemnifying Party to any Indemnified
Person in connection with any Third-Party Claim, such Indemnifying Party shall
be subrogated to and shall stand in the place of such Indemnified Person as to
any events or circumstances in respect of which such Indemnified Person may have
any right or claim relating to such Third-Party Claim against any claimant or
plaintiff asserting such Third-Party Claim or against any other party that may
be liable. Such Indemnified Person shall cooperate with such Indemnifying Party
in a reasonable manner, and at the cost and expense of such Indemnifying Party,
in prosecuting any subrogated right or claim.
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Section 5.05. REMEDIES CUMULATIVE.
The remedies provided in this Article V shall be cumulative and shall not
preclude assertion by any Indemnified Person of any other rights or the seeking
of any and all other remedies against any Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES.
The obligations of each of Park Place and Hilton under this Article V shall
survive the sale or other transfer by it of any assets or businesses or the
assignment by it of any Liabilities, with respect to any Indemnifiable Loss of
the other related to such assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. PARK PLACE BOARD.
Park Place and Hilton shall take all actions which may be required to
appoint as officers and directors of Park Place those persons named in the Form
10 (as may be altered or supplemented prior to the date hereof by the Hilton
Board and the Park Place Board) to constitute, effective as of the Distribution
Date, the officers and the directors of Park Place.
Section 6.02. RESIGNATIONS; HILTON BOARD.
(a) Park Place shall cause all of its directors and the Transferred
Employees to resign, effective as of the Distribution Date, from all boards of
directors or similar governing bodies of Hilton or any of the Retained Business
Subsidiaries on which they serve, and from all positions as officers or
employees of Hilton or any of the Retained Business Subsidiaries in which they
serve, except that (i) Steven Bollenbach will be President, Chief Executive
Officer and a Director of Hilton and will be Chairman of the Board of Directors
of Park Place and (ii) Arthur Goldberg will be a Director of both Hilton and
Park Place and Chief Executive Officer of Park Place. Hilton shall cause all of
its directors and the Retained Business Group Employees to resign from all
boards of directors or similar governing bodies of Park Place or any of the
Gaming Subsidiaries on which they serve, and from all positions as officers or
employees of Park Place or any of the Gaming Subsidiaries in which they serve,
except as set forth in Schedule 10.
Section 6.03. PARK PLACE CERTIFICATE AND BYLAWS.
On or prior to the Distribution Date, Park Place shall adopt the Park Place
Certificate and the Park Place Bylaws, and shall file the Park Place Certificate
with the Secretary of State of the State of Delaware. Hilton shall provide all
necessary shareholder approvals for
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the Park Place Certificate prior to the filing of the Park Place Certificate
with the Secretary of State of the State of Delaware.
Section 6.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
Each of Hilton and Park Place shall, and shall cause each of their
respective Subsidiaries to, comply in all material respects with each
representation, covenant and statement made, or to be made, to any taxing
authority in connection with the IRS Ruling or any other ruling obtained, or to
be obtained, by Hilton and Park Place acting together, from any such taxing
authority with respect to any transaction contemplated by this Agreement.
Section 6.05. SALES AND TRANSFER TAXES.
Hilton and Park Place agree to cooperate to determine the amount of sales,
transfer or other Taxes, including, without limitation, all real estate, patent,
trademark and transfer taxes and recording fees, but excluding any Income Taxes,
as defined in the Tax Allocation and Indemnity Agreement) incurred in connection
with the Distribution and other transactions contemplated by the Agreement (the
"TRANSACTION TAXES"). Hilton agrees to file promptly and timely the Tax Returns
for such Transaction Taxes and Park Place will join in the execution of any such
Tax Returns or other documentation. Financial responsibility for payment of all
such Transaction Taxes shall be shared equally between Hilton and Park Place.
Section 6.06. PARK PLACE RIGHTS PLAN.
Effective as of the Distribution Date, Park Place shall adopt a shareholder
rights plan which shall be substantially similar to the shareholder rights plan
of Hilton in effect as of the Distribution Date.
Section 6.07. TIMESHARE AND VACATION OWNERSHIP FACILITIES.
Subject to the terms set forth on Schedule 11 hereto, Hilton shall have the
exclusive right for 15 years to sell and market timeshare and vacation ownership
interests from sites located within any now or future existing Casino Hotel
operated by any member of the Gaming Group; PROVIDED, HOWEVER, that Hilton shall
not be entitled to exercise such right with respect to any particular Casino
Hotel if and only if (i) Hilton is not selling or marketing timeshare and
vacation ownership interests at such Casino Hotel, (ii) Park Place receives a
bona fide offer from an unaffiliated third party to (1) commence timeshare and
vacation ownership sales at such Casino Hotel and (2) pay a fee to Park Place
for such marketing and sales on a basis comparable to the fees being paid by
Hilton to Park Place at the other Casino Hotels where Hilton is selling and
marketing timeshare and vacation ownership interests, and (iii) Hilton elects,
for a period of 90 days, not to commence timeshare and vacation ownership sales
at such Casino Hotel. In addition, Park Place shall, prior to developing any
timeshare or vacation ownership facilities at any Casino Hotel or at any other
location during such 15 year term, offer to Hilton the right to proceed with any
such development (the "FIRST OFFER"). If Hilton (a) does
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not accept the First Offer and commence development of such timeshare or
vacation ownership facility within a period of 120 days or (b) notifies Park
Place in writing that it does not accept such First Refusal Option, then, (i)
Park Place shall be entitled to develop the subject timeshare and vacation
ownership facility (the "NEW FACILITY") and (ii) Hilton shall not be entitled to
sell and market timeshare and vacation ownership interests in the New Facility;
PROVIDED, that Hilton shall be entitled to sell and market timeshare and
vacation ownership interests in other facilities from the Casino Hotel located
next to the New Facility.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement, Hilton
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Park Place's cost) to Park Place of
the Gaming Group Books and Records in its possession, except to the extent such
items are already in the possession of Park Place or a Gaming Subsidiary. The
Gaming Group Books and Records shall be the property of Park Place, but the
Gaming Group Books and Records that reasonably relate to Hilton or the Retained
Business shall be available to Hilton for review and duplication until Hilton
shall notify Park Place in writing that such records are no longer of use to
Hilton.
(b) Except as may otherwise be provided in a Related Agreement, Park Place
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Hilton's cost) to Hilton of the
Retained Business Group Books and Records in its possession, except to the
extent such items are already in the possession of Hilton or a Retained Business
Subsidiary. The Retained Business Group Books and Records shall be the property
of Hilton, but the Retained Business Group Books and Records that reasonably
relate to Park Place or the Gaming Business shall be available to Park Place for
review and duplication until Park Place shall notify Hilton in writing that such
records are no longer of use to Park Place.
Section 7.02. ACCESS TO INFORMATION.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, Hilton shall afford to Park Place and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"INFORMATION") within Hilton's possession or control, insofar as such access is
reasonably required by Park Place for the conduct of its business, subject to
appropriate restrictions for classified or Privileged Information. Similarly,
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except as otherwise provided in a Related Agreement, Park Place shall afford to
Hilton and its authorized accountants, counsel, and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within Park Place's possession or control,
insofar as such access is reasonably required by Hilton for the conduct of its
business, subject to appropriate restrictions for classified or Privileged
Information. Information may be requested under this Article VII for the
legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. PRODUCTION OF WITNESSES.
At all times from and after the Distribution Date, each of Park Place and
Hilton shall use reasonable efforts to make available to the other, upon written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that such persons may reasonably be required in
connection with any Action.
Section 7.04. REIMBURSEMENT.
Except to the extent otherwise contemplated in any Related Agreement, a
party providing Information or witnesses to the other party under this Article
VII shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments of such amounts, relating to supplies, disbursements
and other out-of-pocket expenses (at cost) of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witnesses. Notwithstanding the foregoing, the
parties acknowledge that a party providing Information or witnesses shall not be
entitled to receive reimbursement of salary or other compensation expenses
relating to any employees providing such Information or acting as such
witnesses.
Section 7.05. RETENTION OF RECORDS.
Except as otherwise required by law or agreed to in a Related Agreement or
otherwise in writing, each of Park Place and Hilton may destroy or otherwise
dispose of any of the Information which is material Information and is not
contained in other Information retained by the other, only after the later to
occur of (i) all applicable statutes of limitations (including any waivers or
extensions thereof) with respect to Tax Returns which Hilton or Park Place, as
the case may be, may be obligated to file on behalf of Park Place Members or
Post-Distribution Members, as the case may be, and (ii) any retention period
required by law or pursuant to any record retention agreement, provided that,
prior to such destruction or disposal, (a) it shall provide no less than 90 or
more than 120 days advance written notice to the other, specifying in reasonable
detail the Information proposed to be destroyed or disposed of and (b) if a
recipient of such notice shall request in writing prior to the scheduled date
for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the
29
delivery of such of the Information as was requested at the expense of the party
requesting such Information.
Section 7.06. CONFIDENTIALITY.
Each of Hilton and its Subsidiaries on the one hand, and Park Place and its
Subsidiaries on the other hand, shall hold, and shall cause its consultants and
advisors to hold, in strict confidence, all Information concerning the other in
its possession or furnished by the other or the other's representatives pursuant
to this Agreement (except to the extent that such Information has been (i) in
the public domain through no fault of such party or (ii) later lawfully acquired
from other sources by such party), and each party shall not release or disclose
such Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors, unless
compelled to disclose by judicial or administrative process or, as reasonably
advised by its counsel, by other requirements of law, or unless such Information
is reasonably required to be disclosed in connection with (x) any litigation
with any third-parties or litigation between the Retained Business Group and the
Gaming Group, (y) any contractual agreement to which members of the Retained
Business Group or the Gaming Group are currently parties, or (z) in exercise of
either party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS.
Park Place and Hilton recognize that certain legal and other professional
services that have been and will be provided prior to the Distribution Date have
been and will be rendered for the benefit of both the Retained Business Group
and the Gaming Group and that both the Retained Business Group and the Gaming
Group should be deemed to be the client for the purposes of asserting all
Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) Hilton shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Retained Business Group, whether or not the Privileged Information
is in the possession of or under the control of Hilton or Park Place. Hilton
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting Retained Business Group Liabilities,
now pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Hilton or a Retained Business Subsidiary,
whether or not the Privileged Information is in the possession of or under the
control of Hilton or Park Place.
(b) Park Place shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Gaming Group, whether or not the Privileged Information is
in the possession of or under the control of Hilton or Park Place. Park Place
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information which relates solely to the
subject matter of any claims constituting Gaming Group Liabilities, now pending
or
30
which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Park Place or a Gaming Subsidiary, whether or not the
Privileged Information is in the possession of or under the control of Hilton or
Park Place.
(c) Park Place and Hilton agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Park Place and Hilton,
or in respect of which both Park Place and Hilton retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member of the
Retained Business Group and a member of the Gaming Group, either party may waive
a Privilege in which the other party has a shared Privilege, without obtaining
the consent of the other party, provided that such waiver of a shared Privilege
shall be effective only as to the use of Information with respect to the
litigation or dispute between the Retained Business Group and the Gaming Group,
and shall not operate as a waiver of the shared Privilege with respect to
third-parties.
(f) If a dispute arises between the parties regarding whether a Privilege
should be waived to protect or advance the interest of either party, each party
agrees that it shall negotiate in good faith, shall endeavor to minimize any
prejudice to the rights of the other party, and shall not unreasonably withhold
consent to any request for waiver by the other party. Each party specifically
agrees that it will not withhold consent to waiver for any purpose except to
protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other request
which arguably calls for the production or disclosure of Information subject to
a shared Privilege or as to which the other party has the sole right hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Gaming Group Books and Records and the Retained
Business Group Books and Records and other Information between Hilton and its
Subsidiaries
31
and Park Place and its Subsidiaries is made in reliance on the agreement of Park
Place and Hilton, as set forth in Sections 7.06 and 7.07, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to Information being granted pursuant to
Sections 7.01 and 7.02 hereof, the agreement to provide witnesses and
individuals pursuant to Section 7.03 hereof and the transfer of Privileged
Information between Hilton and its Subsidiaries and Park Place and its
Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE GAMING GROUP ASSETS.
Without limiting the generality of the definition of the Gaming Group
Assets or the effect of Section 2.01, the Gaming Group Assets shall include any
and all rights of an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, where applicable, with respect to all injuries,
losses, liabilities, damages and expenses incurred or claimed to have been
incurred on or prior to the Distribution Date by any party in or in connection
with the conduct of the Gaming Business or, to the extent any claim is made
against Park Place or any of its Subsidiaries, the Retained Businesses, and
which injuries, losses, liabilities, damages and expenses may arise out of
insured or insurable occurrences or events under one or more of the Shared
Policies.
Section 8.02. POLICIES AND RIGHTS INCLUDED WITHIN THE RETAINED BUSINESS
GROUP ASSETS.
Without limiting the generality of the definition of the Retained Business
Group Assets or the effect of Section 2.01, the Retained Business Group Assets
shall include any and all rights of an insured party under each of the Shared
Policies, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, where applicable, with respect to
all injuries, losses, liabilities, damages and expenses incurred or claimed to
have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Retained Business or, to the extent any claim
is made against Hilton or any of the Retained Business Subsidiaries, the Gaming
Business, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.03. ADMINISTRATION AND RESERVES.
(a) GENERAL. Notwithstanding the provisions of Article III, but subject to
any contrary provisions of any Related Agreement, from and after the
Distribution Date:
32
(i) Hilton shall be responsible for the Insurance Administration of
the Shared Policies; PROVIDED, that the administration of the Shared
Policies by Hilton is in no way intended to limit, inhibit, or preclude any
right to insurance coverage for any Insured Claim of a named insured under
the Shared Policies including, but not limited to, Park Place or any of its
Subsidiaries or Affiliates;
(ii) Park Place shall be entitled to any reserves established by
Hilton or any of its Subsidiaries (other than reserves established by
Hilton Insurance Company, which reserves shall remain with such entity), or
the benefit of reserves held by any insurance carrier, with respect to the
Gaming Group Liabilities; and
(iii) Hilton shall be entitled to any reserves established by Hilton
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Retained Business Group Liabilities.
(b) INSURANCE PREMIUMS.
(i) Park Place shall have the right but not the obligation to pay the
premiums, to the extent that Hilton does not pay premiums with respect to
Retained Business Group Liabilities (retrospectively-rated or otherwise),
with respect to Shared Policies as required under the terms and conditions
of the respective Policies, whereupon Hilton shall forthwith reimburse Park
Place for that portion of such premiums paid by Park Place as are
attributable to the Retained Business Group Liabilities.
(ii) Hilton shall have the right but not the obligation to pay the
premiums, to the extent that Park Place does not pay premiums with respect
to Gaming Group Liabilities (retrospectively-rated or otherwise), with
respect to Shared Policies as required under the terms and conditions of
the respective Policies, whereupon Park Place shall forthwith reimburse
Hilton for that portion of such premiums paid by Hilton as are attributable
to the Gaming Group Liabilities.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received with
respect to claims, costs and expenses under the Policies shall be paid to Park
Place with respect to the Gaming Group Liabilities and to Hilton with respect to
the Retained Business Group Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from the liability policies will
be made to the appropriate party upon receipt from the insurance carrier. In the
event that the aggregate limits on any Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims taking into
account their relative contributions towards premiums and the Insurance Proceeds
used by each party to satisfy Insured Claims. The parties agree to use their
reasonable best efforts to cooperate with respect to insurance matters.
33
(d) INSURANCE CHARGES.
(i) Notwithstanding anything to the contrary contained herein, Park
Place or an appropriate Gaming Subsidiary assumes responsibility for and
shall pay to the appropriate insurance carriers or otherwise any premiums,
retrospectively rated premiums, defense costs, indemnity payments,
deductibles, retentions or other charges as appropriate (collectively
"INSURANCE CHARGES"), whenever arising, which become due and payable upon
the terms and conditions of any applicable Policy in respect of any Insured
Claims against Park Place or a Gaming Subsidiary for charges which relate
to the period before the Distribution Date. In the event that Park Place or
a Gaming Subsidiary fails to pay any insurance charges when due and
payable, whether at the request of the party entitled to payment or upon
demand by Hilton or a Retained Business Subsidiary, Hilton or a Retained
Business Subsidiary may (but shall not be required to) pay such Insurance
Charges for and on behalf of Park Place or a Gaming Subsidiary and
thereafter Park Place shall forthwith reimburse Hilton or such Retained
Business Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary contained herein, Hilton
or an appropriate Retained Business Subsidiary assumes responsibility for
and shall pay to the appropriate insurance carriers or otherwise any
Insurance Charges, whenever arising, which become due and payable upon the
terms and conditions of any applicable Policy in respect of any Insured
Claims against Hilton or a Retained Business Subsidiary for charges which
relate to the period before the Distribution Date. In the event that Hilton
or a Retained Business Subsidiary fails to pay any Insurance Charges when
due and payable, whether at the request of the party entitled to payment or
upon demand by Park Place or a Gaming Subsidiary, Park Place or a Gaming
Subsidiary may (but shall not be required to) pay such Insurance Charges
for and on behalf of Hilton or a Retained Business Subsidiary and
thereafter Hilton shall forthwith reimburse Park Place or such Gaming
Subsidiary for such payment.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE.
In the event that Insured Claims of both Park Place and Hilton exist
relating to the same occurrence, Park Place and Hilton agree to jointly defend
and to waive any conflict of interest necessary to the conduct of that joint
defense. Nothing in this paragraph shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.
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ARTICLE IX.
MISCELLANEOUS
Section 9.01. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement and all documents and instruments referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and are not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
Section 9.02. TAX ALLOCATION AND INDEMNITY AGREEMENT; AFTER-TAX PAYMENTS.
(a) Other than as provided in this Section 9.02 and Section 6.05, this
Agreement shall not govern any Tax matter, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax
Allocation and Indemnity Agreement or the Hilton Corporate Services Agreement.
(b) If, at the time Park Place is required to make any payment to Hilton
under this Agreement, Hilton owes Park Place any amount under the Tax Allocation
and Indemnity Agreement, then such amounts shall be offset and the excess shall
be paid by the party liable for such excess. Similarly, if, at the time Hilton
is required to make any payment to Park Place under this Agreement, Park Place
owes Hilton any amount under the Tax Allocation and Indemnity Agreement, then
such amounts shall be offset and the excess shall be paid by the party liable
for such excess.
Section 9.03. EXPENSES.
Except as specifically provided in this Agreement or in a Related
Agreement, for the sake of administrative ease, all fees and expenses incurred
in connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, however, with respect to any such fees and expenses incurred by or
allocated to such party that constitute Transaction Costs (as defined in the
Merger Agreement), the parties hereto agree to share such fees and expenses
equally; provided further however, that Park Place shall pay all of the fees and
expenses associated with the Senior Subordinated Note Offering; and provided
further however, that Park Place shall pay all of the fees and expenses
associated with the Park Place Credit Facility to the extent such fees and
expenses are not included in the calculation of the Total Debt of Company.
Section 9.04. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without regard to any applicable conflicts of laws,
except to the extent that the Gaming Laws shall be mandatorily applicable.
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Section 9.05. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: General Counsel
Telecopy: (310) 205-7677
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004-2505
Attn: Bruce Rosenblum, Esq.
Telecopy: (202) 637-2201
(b) if to Park Place, to
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President and Chief Financial Officer and
Executive Vice President - Law and Corporate Affairs
Telecopy: (702) 699-5190
(702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: (973) 643-6500
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Section 9.06. AMENDMENTS.
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 9.07. ASSIGNMENTS.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 9.08. TERMINATION.
This Agreement may be terminated and the Distribution abandoned at any time
prior to the Distribution Date by and in the sole discretion of the Hilton Board
without the approval of Park Place's or of Hilton's stockholders. In the event
of such termination, no party shall have any liability to any other party
pursuant to this Agreement.
Section 9.09. SUBSIDIARIES.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.10. SPECIFIC PERFORMANCE.
The parties hereto agree that the remedy at law for any breach of this
Agreement will be inadequate and that any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable laws, each party waives any objection to the imposition of such
relief.
Section 9.11. HEADINGS; REFERENCES.
The article, section and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to "Article", "Sections"
or "Exhibits" shall be deemed to be references to Articles or Sections hereof or
Exhibits hereto unless otherwise indicated.
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Section 9.12. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 9.13. SEVERABILITY; ENFORCEMENT.
The invalidity of any portion hereof shall not affect the validity, force
or effect of the remaining portions hereof. If it is ever held that any covenant
hereunder is too broad to permit enforcement of such covenant to its fullest
extent, each party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such covenant.
Section 9.14. ARBITRATION OF DISPUTES.
(a) Any dispute, controversy or disagreement ("DISPUTE") between the
Parties related to the obligations of the parties under this Agreement in
respect of which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("COMMITTEE"). If the parties are unable to
reach an amicable resolution of a Dispute within thirty days after submission to
the Committee, then, to the maximum extent allowed by law, the Dispute shall be
submitted and resolved by final and binding arbitration in Los Angeles,
California administered by JAMS-Endispute in accordance with JAMS-Endispute's
rules of practice then in effect or such other procedures as the parties may
agree upon; PROVIDED, HOWEVER, that any party may seek injunctive relief and
enforcement of any award rendered pursuant to the arbitration provisions of this
Section 9.14 by bringing a suit in any court of competent jurisdiction. Any
award issued as a result of such arbitration shall be final and binding between
the parties thereto and shall be enforceable by any court having jurisdiction
over the party against whom enforcement was sought and application may be made
to such court for judicial acceptance of the award and order of enforcement. The
fees, costs and expenses of arbitration (including reasonable attorneys' fees)
shall be paid by the party that does not prevail in such arbitration.
(b) ATTORNEYS' FEES. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(c) SPECIFIC PERFORMANCE. Nothing contained in this Section 9.14 shall
limit or restrict in any way the right or power of a party at any time to seek
injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other party
from breaching this Agreement or (ii) for specific enforcement of this Section
9.14 or any other provision of this Agreement or any Ancillary Agreement. The
parties
38
agree that any legal remedy available to a party with respect to a
breach of this Section 9.14 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.14.
(d) CONSENT TO JURISDICTION. The Parties hereby consent to the jurisdiction
of the federal and state courts located in the State of California for all
purposes under this Agreement.
(e) CONFIDENTIALITY. Neither party nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of both parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
Section 9.15. PROMPT PAYMENT.
Where the terms of this Agreement require payment of an amount "as promptly
as possible," "as soon as practicable," or "as soon as possible," following a
specified event, occurrences or date, such payment shall be made no later than
five (5) business days after such event, occurrence or date.
Section 9.16. APPROVALS, CONSENT AND WAIVERS.
Any approval, consent or waiver required or authorized by any provision of
this Agreement to be given or made by any of the parties hereto shall only be
valid to the extent such approval, consent or waiver is in writing and signed by
the Executive Vice President & Chief Financial Officer, the Executive Vice
President & General Counsel, the Senior Vice President & Treasurer and the
Senior Vice President & Controller of the party to be bound by such approval,
consent or waiver.
[Signature Page to Follow]
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IN WITNESS WHEREOF, Hilton and Park Place have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
-------------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT
CORPORATION,
A DELAWARE CORPORATION
By: /s/ Scott A. LaPorta
-------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
S-1