EXHIBIT 10.35
DEFERRED COMPENSATION AGREEMENT
This DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made and
entered into as of the 16th day of January, 1997 by and between HILTON HOTELS
CORPORATION, a Delaware corporation (together with its successors and assigns
permitted under this Agreement, the "Company"), and XXXXXX X. XXXXXXXX (the
"Executive").
WHEREAS, the Executive is an Executive Vice President of the Company and
President of the Company's Gaming Division;
WHEREAS, the Company, the Executive and Bally Entertainment Corporation,
a Delaware corporation ("Bally"), have entered into an Amended Consulting and
Employment Agreement dated as of November 12, 1996 as amended by a First
Amendment thereto dated as of December 14, 1996 (collectively, the
"Employment Agreement"), which Employment Agreement constitutes an amendment
and restatement of a Consulting Agreement dated as of June 6, 1996 (the
"Consulting Agreement") between the Company and the Executive;
WHEREAS, the Company desires to provide the Executive with certain
deferred compensation payments in recognition of (i) the valuable services
provided by the Executive to the Company in assisting the Company in
obtaining gaming commission approvals of the Company's acquisition of Bally
and facilitating a smooth integration of the Company's and Bally's gaming
operations, (ii) the valuable services which the Executive is now providing
and will provide in the future to the Company and (iii) the fact that
the compensation provided by the Company to the Executive under the
Employment Agreement was established in the Consulting Agreement, was
intended to compensate the Executive for less than full-time services for the
Company and has not been increased to reflect the Executive's full-time
employment by the Company under the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Executive (individually a "Party" and
together the "Parties") agree as follows:
1. DEFINITIONS. Capitalized terms which are not defined in this
Agreement shall have the meanings assigned to them in the Employment
Agreement.
2. DEFERRED COMPENSATION.
(a) The Company shall pay the Executive $2,400,000, in a lump sum,
on that date (the "Payment Date") which is thirty (30) days after the earlier
of (i) the last day of the Company's taxable year in which the Executive
ceases to be a "covered employee" within the meaning of Code Section
162(m)(3) or (ii) the date upon which the Company's deduction with respect to
all of such deferred salary shall no longer be subject to limitation under
Code Section 162(m) or any successor section thereto. Such amount shall be
credited with interest from the date of this Agreement to the day immediately
preceding the
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Payment Date at a floating rate equal to the rate which Xxxxxx Guaranty
announces from time to time as its prime lending rate, as in effect from time
to time, compounded quarterly, and such accrued interest shall be paid to the
Executive on the Payment Date (said payment plus interest collectively
referred to as the "Deferred Compensation").
(b) The Deferred Compensation shall be paid in accordance with the
following provisions:
(1) The Company agrees to pay the Deferred Compensation on the
Payment Date by wire transfer to an account designated by
the Executive prior to the Payment Date.
(2) The Company agrees to pay the Deferred Compensation in any
and all events on the Payment Date without setoff or offset
for any claim whatsoever against the Executive or any of
his affiliates. The existence of any claim or cause of
action on the part of the Company or any of its affiliates
against the Executive or his affiliates, whether predicated
on this Agreement or otherwise shall not constitute a
defense or entitle the Company to an offset against the
payment
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of the Deferred Compensation in full on the Payment Date.
(3) Failure to pay the Deferred Compensation on the Payment
Date shall constitute a default, without any need for the
Executive to have given notice or demand of any kind to
the Company, which notices and demands of any kind are
expressly waived by the Company.
(4) In the event of a default, the Executive shall be entitled
to be paid, upon demand, (i) one hundred twenty (120%)
percent of the Deferred Compensation plus interest on
said amount from the Payment Date until paid at the rate of
eighteen (18%) percent per annum (the "Default Rate"); plus
all reasonable attorneys' fees and other costs of
collection incurred by the Executive in effecting
collection of the amounts due hereunder, whether or not a
legal action is instituted or prosecuted to judgment.
All such costs and expenses shall be added to the amount
due under this Section 2, shall be payable on demand,
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and shall bear interest at the Default Rate from the date
incurred until paid in full.
(5) In the event of a default, notwithstanding the provisions
of Section 13 of this Agreement: (i) the Executive shall be
entitled to xxx the Company to effect collection of the
amounts due hereunder; (ii) the Company hereby consents to
personal jurisdiction and venue and to the exclusive
jurisdiction of the Superior Court of the State of New
Jersey, Essex County, and the United States District Court
for the District of New Jersey for the purpose of all legal
proceedings arising out of or relating to this Section 2;
(iii) the Company agrees that the service or delivery of
process of any such lawsuit shall constitute lawful and
valid service of process if made in accordance with any
of the methods by which notices may be given pursuant to
Section 14; and (iv) the Company waives any defense based
upon personal jurisdiction, venue, improper service,
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and the right to assert a claim of FORUM NON CONVENIENS
or the like.
3. PARACHUTE PAYMENTS.
(a) If it shall be determined that any payment, distribution, or
benefit received or to be received by the Executive under this Agreement (the
"Payments") would be subject to the excise tax imposed by Code Section 4999
(the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment from the Company (the "Excise Tax Gross-Up Payment") in an
amount such that the net amount retained by the Executive, after the
calculation and deduction of any Excise Tax (together with any penalties and
interest that have been or will be imposed on the Executive in connection
therewith) on the Payments and any federal, state, and local income taxes,
excise tax, and payroll taxes (including the tax imposed by Code Section
3101(b)) on the Excise Tax Gross-Up Payment provided for in this subsection
3(a), shall be equal to the Payments. In determining this amount, the amount
of the Excise Tax Gross-Up Payment attributable to federal income taxes shall
be reduced by the maximum reduction in federal income taxes that could be
obtained by the deduction of the portion of the Excise Tax Gross-Up Payment
attributable to state and local income taxes. Finally, the Excise Tax
Gross-Up Payment shall be subject to income, excise, or payroll tax
withholding to the extent required by applicable law.
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(b) All determinations required to be made under this Section 3,
including whether and when an Excise Tax Gross-Up Payment is required and the
amount of such Excise Tax Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, except as specified in subsection 3(a)
above, shall be made by the Company's independent auditors (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days after the Company makes any
Payments to the Executive. The determination of tax liability and the
assumptions made by the Accounting Firm shall be subject to review by the
Executive's tax advisors, and, if the Executive's tax advisors do not agree
with the determination reached by the Accounting Firm, then the Accounting
Firm and the Executive's tax advisors shall jointly designate a
nationally-recognized public accounting firm, which shall make the
determination. All fees and expenses of the accountants and tax advisors
retained by either the Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this
subsection 3(b), shall be paid by the Company to the Executive within five
days after the receipt of the determination. Any determination by a
jointly-designated public accounting firm shall be binding upon the Company
and the Executive.
(c) As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial
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determination by the Company, it is possible that the Executive may be
required to make one or more payments of Excise Tax to the Internal Revenue
Service, together with interest and/or penalties that have been imposed upon
the Executive in connection therewith, whether upon the Executive's filing of
his original or amended tax returns or upon a subsequent audit,
administrative appeal or judicial determination, which exceed the amounts
taken into account in determining the initial Excise Tax Gross-Up Payment
made pursuant to Section 3(a) (such excess payments referred to as the
"Deficiency"). In such an event, there shall be an additional Excise Tax
Gross-Up Payment computed on the Deficiency in the same manner as the Excise
Tax Gross-Up Payment in Section 3(a) above, and the same shall be promptly
paid by the Company to or for the benefit of the Executive. In the event that
any Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to the
Executive payable on the fifth day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(d) Notwithstanding anything herein to the contrary, no Excise
Tax Gross-Up Payment shall be made pursuant to this Section 3 if, and to the
extent that, such Excise Tax Gross-Up Payment has already been paid by the
Company pursuant to the Employment Agreement.
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4. EFFECT OF AGREEMENT.
Except as specifically provided in this Agreement, this Agreement shall
not affect nor have any force or effect upon any other agreement to which the
Executive is a party and/or beneficiary.
5. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the
Executive), and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale
or liquidation of all or substantially all of the assets of the Company;
PROVIDED, HOWEVER, that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or
transferee assumes the liabilities, obligations, and duties of the Company,
as contained in this Agreement, either contractually or as a matter of law.
The Company further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it shall take whatever
action it legally can in order to cause such assignee or transferee to
expressly assume the liabilities, obligations, and duties of the Company
hereunder. No rights or
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obligations of the Executive under this Agreement may be assigned or
transferred by the Executive, except that all of his rights may be
transferred by will or operation of law.
6. REPRESENTATION.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it
and any other person, firm, or organization.
7. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement among the
Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations, and undertakings,
whether written or oral, among the Parties with respect thereto.
8. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by the
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other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of the Company.
9. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
10. SURVIVORSHIP.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment by, or consulting
arrangements with, the Company to the extent necessary to the intended
preservation of such rights and obligations.
11. BENEFICIARIES/REFERENCES.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the
Executive's death by
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giving the Company written notice thereof. In the event of the Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate, or other legal representative.
12. GOVERNING LAW / JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New Jersey without reference to principles of
conflict of laws.
13. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in Trenton, New Jersey in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Costs of the arbitration or litigation, including,
without limitation, reasonable attorneys' fees of all Parties, shall be borne
by the Company. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts due the
Executive under this Agreement and all benefits to which the Executive is
entitled at the time the dispute arises.
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14. NOTICES.
Any notice given to a Party shall be in writing and shall be deemed to
have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company, to:
Hilton Hotels Corporation
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
with a copy to:
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
and:
If to the Executive, to:
Xx. Xxxxxx X. Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
with a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Orloff, Lowenbach, Xxxxxxxxx & Xxxxxx, P.A.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
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15. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
16. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
HILTON HOTELS CORPORATION
By: /s/ XXXXXXX X. XXXXXXXXXX
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XXXXXXX X. XXXXXXXXXX
President and
Chief Executive Officer
/s/ XXXXXX X. XXXXXXXX
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XXXXXX X. XXXXXXXX
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