EXHIBIT 10.44
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT by and between Hilton Hotels
Corporation, a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxxxxx
(the "Executive"), dated as of March 9, 2000.
WHEREAS, the Board of Directors of the Company (the "Board")
determined that it was in the best interests of the Company and its shareholders
to continue to employ the Executive as President and Chief Executive Officer,
and the Executive desired to continue to serve in that capacity;
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of the effective date (the "Split Date") of a transaction
whereby the Company separated its gaming operations from its lodging operations
which occurred in December, 1998;
WHEREAS, in light of the significant increase in the size of the
Company and the complexity of its business as a result of the acquisition of
Promus Hotel Corporation and the critical role of the Executive in assuring that
the Company and its shareholders realize the expectations for that acquisition,
the Company wishes to assure that the Executive's compensation is comparable to
the competitive market for talented chief executives;
WHEREAS, the Board desires to amend the Employment Agreement to
increase the Executive's cash compensation and provide the Executive with
retirement and survivor benefits as a further inducement to retain the
Executive;
NOW, THEREFORE, IT IS HEREBY AGREED THAT THE EMPLOYMENT AGREEMENT
SHALL BE AMENDED AND RESTATED, EFFECTIVE AS OF MARCH 9, 2000, TO READ AS
FOLLOWS:
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1. EMPLOYMENT PERIOD. The Company shall continue to employ the
Executive, and the Executive shall serve the Company, on the terms and
conditions set forth in this Agreement, for the period beginning on the Split
Date (the "Commencement Date") and ending on July 1, 2005, which shall
automatically renew for periods of one year unless one party gives written
notice to the other, at least 60 days prior to July 1, 2005 or at least 60 days
prior to the end of any one-year renewal period, that the Agreement shall not be
further extended, except as otherwise specifically provided below (the
"Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall continue to be employed as the President and Chief Executive
Officer of the Company and, when applicable, the Company shall cause the
Executive to be reelected as a member of the Board. In his executive
capacities, the Executive shall report to the Board. During the Employment
Period, the Executive shall have authority to make all executive decisions, plan
the strategic direction of the Company, and hire, promote and terminate the
employment of all personnel, subject to the direction of the Board. During the
Employment Period, the Executive shall have such reasonable and customary powers
as are generally associated with the positions of President and Chief Executive
Officer, including, without limitation, authority to expend capital resources of
the Company and shall have, subject to the direction of the Board, authority to
fill all management positions.
(b) If, during the Employment Period, Xxxxxx Xxxxxx shall
cease to serve as Chairman of the Board for any reason, the Company shall cause
the Executive thereupon to be elected as Chairman of the Board in addition to
the positions of President and Chief Executive Officer and shall, as Chairman,
report directly to the Board.
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(c) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
shall devote principal attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. Notwithstanding the foregoing, nothing in this
Agreement shall be construed to limit the ability of the Executive from
providing services to the entity which holds the Company's gaming operations
following the Split Date. It shall not be considered a violation of the
foregoing for the Executive to (A) serve on corporate, civic or charitable
boards or committees (excluding those which would create a conflict of
interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(d) The Executive's services shall be performed primarily at
the Company's Headquarters in Beverly Hills, California.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") of
$1,000,000, payable in accordance with the regular payroll practices of the
Company.
(b) ANNUAL BONUS.
(1) In addition to the Annual Base Salary, the
Executive shall be eligible to receive, for each fiscal year or portion of a
fiscal year ending during the Employment
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Period, an annual bonus (the "Annual Bonus"), pursuant to the Company's annual
incentive plan, with a target equal to 100% of Annual Base Salary and a maximum
of 200% of Annual Base Salary.
(2) That portion of such Annual Bonus during any
taxable year of the Company which, when added to any otherwise deductible
compensation and benefits paid or provided to the Executive by the Company
during such taxable year, would not be deductible by the Company in the taxable
year such Annual Bonus is paid or accrued because of the applicable limitations
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be deferred annually and paid to the Executive, in a lump sum, on
that date (the "Deferral Date") which is 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 Section 162(m)(3) of the Code or (ii)
the date upon which the Company's deduction with respect to all deferred Annual
Base Salary shall no longer be subject to limitation under Section 162(m) of the
Code or any successor section thereto.
(3) Except as otherwise provided below, any amounts of
Annual Bonus deferred as provided above shall be credited, from the date it
would otherwise have been paid to the date the deferred amounts are paid, with
interest 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 Deferral Date (said deferred Annual Bonus plus interest collectively
referred to as the "Deferred Compensation"). Notwithstanding the foregoing, the
Executive may elect, prior to the end of each calendar year for which an Annual
Bonus is payable, to have all or any portion of the Deferred Compensation for
that year treated as though invested in shares of the Company's common stock,
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on a book entry account basis. Such Deferred Compensation shall be deemed to be
used to purchase such shares on the date the Annual Bonus would have been paid,
based on the average of the high and low trading prices of the stock on such
day. The number of shares credited to the Executive's account under this
subparagraph (3) shall be adjusted to reflect any changes to the Company's
capital structure in the same manner as if shares were actually issued to the
Executive on the day the Annual Bonus would otherwise have been paid. The
Company shall also credit the Executive's account with additional amounts
equivalent to any and all dividends or distributions paid on its shares of
common stock (on the same basis as though such shares had been outstanding on
the record date for such dividend or distribution), with any such dividends or
distributions deemed invested in additional shares of the Company's common stock
based on the average of the high and low trading prices of the stock on the day
the dividend or distribution is payable to shareholders of the Company.
(4) The Deferred Compensation shall be paid on the
Deferral Date by wire transfer to an account designated by the Executive prior
to the Deferral Date, (or by transfer of shares of common stock to the extent of
the account referred to in subparagraph (3)).
(c) OTHER BENEFITS. During the Employment Period: (i) the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company to at least
the same extent as other senior executives of the Company, provided that in
determining the Executive's participation in any incentive plans the Incentive
Options, as defined below, shall be taken into account; and (ii) the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation, and shall receive all benefits under, all welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life insurance,
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group life insurance, accidental death and travel accident insurance plans and
programs) to at least the same extent as other senior executives of the Company.
(d) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in carrying out the Executive's duties under this
Agreement, provided that the Executive complies with the generally applicable
policies, practices and procedures of the Company for submission of expense
reports, receipts, or similar documentation of such expenses.
(e) FRINGE BENEFITS AND AIR TRAVEL. During the Employment
Period, the Executive shall be entitled to fringe benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company as in effect at the time with respect to other senior executives of
the Company, including, without limitation, the use of an automobile and payment
of related expenses; and first-class travel accommodations on all commercial
carriers for travel related to the business of the Company. The Executive shall
also be entitled to unrestricted, but not exclusive, use of the Company's
aircraft (leased or owned); provided, however, that if the Executive uses the
Company's aircraft for his personal purposes, he shall incur the Federal, state
and local income tax consequences for the value of such usage, as determined in
accordance with the Company's cost determination methodology applied to the
Company's senior executives with respect to their personal use of the Company's
aircraft.
(f) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to his current office at the Company's Xxxxxxx
Hills Headquarters, and to secretarial and other assistance, at least equal to
the most favorable of such as provided with
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respect to other senior executives of the Company. Without limiting the
generality of the foregoing, the Executive shall at all times have a personal
secretary and a personal assistant.
(g) VACATION. During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation annually.
(h) STOCK OPTIONS: (i) On the Split Date, the Executive was
granted non-statutory stock options (the "Incentive Options") under the
Company's 1996 Stock Incentive Plan, as amended (the "Stock Plan) covering
6,000,000 shares of the Company's (but not the gaming company's) post-Split
common stock in tranches of 4,000,000 shares (the "Regular Option") and
2,000,000 shares (the "Special Option"), respectively. The exercise price of
the shares subject to the Regular Option is $13.625. The exercise price of the
shares subject to the Special Option is $27.52676. The Incentive Options shall
be exercisable for 10 years after the Split Date except as otherwise
specifically provided in this Agreement.
The Regular Option shall vest and become exercisable according to the following
schedule if the Executive continues in the employment of the Company through the
applicable vesting date(s), except as otherwise specifically provided herein:
(1) 25%: on the first anniversary of the Split Date.
(2) 50%: on the second anniversary of the Split Date.
(3) 75%: on the third anniversary of the Split Date.
(4) 100%: on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9 years
and 9 months following the Split Date if the Executive continues in the
employment of the Company through such date; provided, however, that, if, at any
time prior to the fifth anniversary of the Split Date, the
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closing price of the Company's common shares on the New York Stock Exchange
equals or exceeds $36.70234, on each of any 7 consecutive trading days, all
shares under the Special Option shall be immediately vested and exercisable if
the Executive continues in the employment of the Company through the applicable
vesting date, except as otherwise specifically provided herein. Notwithstanding
the foregoing, all shares subject to the Regular Option and the Special Option
shall vest and become exercisable upon the occurrence of any of the following
events (each of (A), (B) and (C) below a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below
or (ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because
of death or Disability; or
(C) termination of employment by the Executive for
Good Reason, as defined below;
provided that one-half of the unvested portion of the Regular Option and the
unvested portion of the Special Option shall vest and become (and remain)
exercisable upon a Triggering Event only if Executive does not breach the terms
of the covenants contained in Section 8 below; such vesting and exercisability
shall be part of the consideration for the Executive's undertakings under
Section 8.
(ii) If a Triggering Event occurs, any portion of the
Incentive Options that have become vested on or before the date of such Event
(including without limitation, any portion that becomes exercisable due to such
Triggering Event) shall remain exercisable until the
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earlier to occur of (x) the fifth anniversary of such date of termination or (y)
the tenth anniversary of the Split Date. All non-vested Incentive Options shall
immediately terminate.
(iii) The Executive may assign the right to exercise the
Incentive Options to his spouse, children, grandchildren, or parents of a
recipient, to trusts for the benefit of the Executive's immediately family, to a
family partnership or limited liability company designated by the Executive in
which the Executive's family members are the only partners or shareholders or to
an entity exempt from federal income tax under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
(iv) The Incentive Options shall be subject to the terms of
the Stock Plan in all respects not described herein.
(i) SUPPLEMENTAL RETIREMENT BENEFIT.
(i) JOINT AND SURVIVOR ANNUITY BENEFIT. Subject to the terms
and conditions set forth herein, the Executive shall be entitled to a
supplemental retirement benefit (the "Supplemental Benefit"), in the form of a
100% joint and survivor annuity, which shall provide the Executive and his
spouse with a lifetime annual benefit, commencing on the later of (x) July 1,
2005, and (y) the date of the Executive's termination from the employment of the
Company, (the "Distribution Date") equal to 25% of the Executive's total cash
compensation (Annual Base Salary and Annual Bonus, without regard to the effect
of any deferrals as provided above) for the Executive's service to the Company
through the July 1, 2005. The Executive shall vest in such Supplemental Benefit
in 20% increments on June 30 of each year, beginning June 30, 2001 and be fully
vested on June 30, 2005, provided that the Executive is employed by the Company
on each such June 30 and the Executive shall have a 100% nonforfeitable right in
the Supplemental Benefit
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on and after June 30, 2005; and, provided, further, that, after the occurrence
of a Change of Control, as defined below, and as further consideration for the
Executive's undertaking not to breach the terms of the covenants contained in
Section 8 below, in the event of the involuntary, or Good Reason, termination of
the Executive's employment from the Company, other than on account of death,
disability or Cause, three additional years shall be added to the Executive's
service for the purposes of determining his vesting rights only.
(ii) OPTIONAL CONVERSION. To provide the Executive both with an
additional incentive to enhance the value of the Company's common stock for its
shareholders and the opportunity to increase his retirement income if the value
of the stock is enhanced, and to enable the Company to fix its exposure for the
Supplemental Benefit for financial accounting purposes, the Company has offered
the Executive the opportunity to elect, and the Executive hereby elects, to
convert his right to receive the joint and survivor annuity described in
subparagraph (i) above into a phantom interest in the equivalent value of the
Company's common stock. The parties agree that this conversion results in a
credit to a book entry account for the Executive of 700,000 of its common
shares, which has been derived based on the estimated present value of such
joint and survivor benefits (without regard to whether such benefits are
currently vested), as calculated using as his covered compensation the
Executive's total annual cash compensation to be provided under this Agreement
(whether or not deferred) with the Annual Bonus component calculated solely at
the target level of performance, and the current trading value of the common
stock. By reason of such election, in lieu of the joint and survivor benefits
described in subparagraph (i) above, the Executive shall be entitled to receive
a distribution, on the Distribution Date, of 700,000 shares of common stock
multiplied by his vested percentage in respect of the Supplemental Benefit.
Such distribution
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shall be made as soon as practicable after the Distribution Date (or such later
date(s) as the Executive shall elect at least 13 months prior to the
Distribution Date but in no more than 10 annual installments). The number of
shares credited to the Executive's account under this subparagraph shall be
adjusted to reflect any changes to the Company's capital structure in the same
manner as if shares were actually issued to the Executive on March 9, 2000. The
Company shall also credit the Executive's account with additinal amounts
equivalent to any and all dividends or distributions paid on its shares of
common stock (on the same basis as though such shares had been outstanding on
the record date for such dividend or distribution), with any such dividends or
distributions deemed invested in additional shares of the Company's common stock
based on the average of the high and low trading prices of the stock on the day
the dividend or distribution is payable to shareholders of the Company.
(j) DEATH BENEFIT AND LIFE INSURANCE. During the Employment
Period, the Executive shall be entitled to a Company-provided death benefit in
the following amounts:
Date of Death Amount of Benefit
------------- -----------------
On or before June 30, 2001 $5.0 million
After June 30, 2001 and before
July 1, 2002 $4.0 million
After June 30, 2002 and before
July 1, 2003 $3.0 million
After June 30, 2003 and before
July 1, 2004 $2.0 million
After June 30, 2004 and before
July 1, 2005 $1.0 million
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In addition, the Company shall purchase for the Executive a $10.0 million face
amount, last to die, variable life insurance policy on the lives of the
Executive and the Executive's spouse (the "Supplemental Policy"). The Company
shall pay the full annual premium, determined at standard underwriting rates, on
the Supplemental Policy, up to a maximum annual payment by the Company of
$226,000 for each year from 2000 to 2005. Such maximum payment is intended to
be in an amount sufficient to carry the Supplemental Policy until the Executive
attains age 100, assuming a 10% crediting rate. The Executive may hold his
interest in the Supplemental Policy directly or may cause the Supplemental
Policy to be held by a trust, but shall assign an interest in such Policy to the
Company to assure its recovery of premium, as provided herein. The Executive
shall take all actions necessary so as to permit the Company to withdraw from
the Supplemental Policy, at the earlier of (i) the death of the last to die of
the Executive and his spouse, or (ii) July 1, 2015, the full amount of premiums
paid by the Company to carry the Supplemental Policy (or, if the withdrawal
occurs prior to the death of the last insured, the Supplemental Policy's cash
surrender value, if less than the premiums paid). To the extent, if any, that
the actual interest credited under the Supplemental Policy is less than 10% or
the Executive terminates employment for any reason other than death prior to
July 1, 2005, the Company shall have no obligation to make any further premium
payments, and the Executive shall have all options under the Supplemental
Policy, not in derogation of the Company's right to withdraw the premiums paid,
to decrease the death benefit or to continue the Supplemental Policy (by
additional personal contributions or otherwise) with the full death benefit of
$10.0 million. Other than as specifically provided herein, with respect to the
payment, and the recovery, of premiums paid by the Company, all economic
consequences (including taxes of the purchase of
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the Supplemental Policy shall be borne or inure to the benefit of the Executive,
or any trust or other vehicle that owns or acquires the Supplemental Policy.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment and the
Employment Period shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means that (i) the Executive has been unable,
for a period of 180 consecutive business days, to perform the Executive's duties
under this Agreement, as a result of physical or mental illness or injury, and
(ii) a physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. The Executive agrees to
reasonably cooperate with the Company in order to obtain its physician's
evaluation of the Executive. A termination of the Executive's employment by the
Company for Disability shall be communicated to the Executive by written notice,
and shall be effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), unless the Executive returns to
full-time performance of the Executive's duties, as determined by the Board,
before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically
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identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties;
(B) illegal conduct or gross misconduct by the
Executive, in either case that is willful and results in material
and demonstrable damage to the business or reputation of the
Company; or
(C) a breach of the covenants or representations
contained in Section 8.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause") of
its intention to terminate the Executive's employment for Cause, setting forth
in reasonable detail the specific conduct of the Executive that it considers to
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Board Meeting. The
"Special Board Meeting" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than five and not more than fifteen business
days after the Executive receives the Notice of Termination for Cause. The
Executive shall be given an opportunity, together with counsel, to be heard at
the Special Board Meeting. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board Meeting,
stating that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in the Notice of Termination for Cause, and such conduct
constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
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A. the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, following a
Change of Control) with paragraph (a) or, if applicable, (b) of
Section 2 of this Agreement, or any other action by the Company
(other than the Split) that results in a material diminution in
the Executive's position or authority, duty, titles,
responsibilities, or reporting requirements other than an action
that is not taken in bad faith and is remedied by the Company
within 30 days after receipt of written notice thereof from the
Executive;
B. any material failure (any failure, following a
Change of Control) by the Company to comply with any provision of
Section 3 of this Agreement, other than a failure that is not
taken in bad faith and is remedied by the Company within 30 days
after receipt of written notice thereof from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a location or
locations other than that provided for in paragraph (d) of
Section 2 of this Agreement, other than normal business travel;
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement; or
E. any failure by the Company to comply with
paragraph (c) of Section 9 of this Agreement.
In addition, following a Change of Control, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Change of Control shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given,
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unless the notice sets forth a later date (which date shall in no event be later
than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at least
10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason or without Good Reason, as the case may be, is
effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE COMPANY
OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR GOOD REASON.
If, during the Employment Period, the Company terminates the Executive's
employment, other than for Cause or Disability or by reason of the Executive's
death, or the Executive terminates employment for Good Reason, the Company shall
fulfill its obligations as to Base Salary under Section 3(a) hereof for the
balance of the Employment Period. Fifty percent of such amounts shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Section 8 below. The Company shall also provide the
Executive with all benefits due in accordance with the terms of any applicable
plans and programs of the Company and shall also pay to the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the Executive's
accrued but unpaid cash compensation (the "Accrued Obligations"), which shall
equal the sum of (1) any portion of the Executive's Annual Base Salary through
the Date of Termination that has not yet been paid, (2) an amount representing
the Annual Bonus for the year of termination based on target, and multiplying
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that amount by a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of
which is 365 (the "Annual Bonus Amount"); (3) the Deferred Compensation and any
other compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid; and (4) any
accrued but unpaid Annual Bonuses and vacation pay; provided, however, that the
Company's obligation to make any payments under this Section to the extent any
such payment shall not have accrued as of the day before the Date of Termination
shall also be conditioned upon the Executive's execution, and non-revocation, of
a written release, substantially in the form attached hereto as Annex 1, (the
"Release"), of any and all claims against the Company and all related parties
with respect to all matters arising out of the Executive's employment by the
Company (other than any entitlements under the terms of this Agreement or under
any other plans or programs of the Company in which the Executive participated
and under which the Executive has accrued a benefit), or the termination
thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Section 8 below,
the Executive, in lieu of the amounts specified in the first sentence above,
shall receive in a lump sum in cash within 30 days after the Date of Termination
equal to 3 multiplied by the sum of the Executive's Base Salary and the Annual
bonus paid to the Employee for the last full fiscal year (if any) ending during
the Employment Period or, if higher, the Annual Bonus paid to the Employee for
the last full fiscal year prior to the Change of Control. Fifty percent of such
amount shall be consideration for the Executive's undertaking not to breach the
terms of the
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covenants contained in Section 8 below. In addition, the Executive shall also
be entitled in the case of the Deferred Compensation and any other compensation
previously deferred by the Executive, to a lump sum equal to all amounts
previously deferred (together with any accrued interest thereon) and not yet
paid by the Company, and any accrued vacation pay not yet paid by the Company.
For the remainder of the Employment Period, or such longer period as any plan,
program, practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices and
policies described in Section 3 of this Agreement if the Employee's employment
had not been terminated, including health insurance and life insurance, in
accordance with the most favorable plans, practices, programs or policies of the
Company and its subsidiaries during the 90-day period immediately preceding the
date on which the Change of Control occurs or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families and for purposes of eligibility for retiree
benefits pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company, in addition to fulfilling its obligations under
Section 3(a) hereof, shall pay the Accrued Obligations to the Executive or the
Executive's estate or legal representative, as applicable, in a lump sum in cash
within 30 days after the Date of Termination, and the Company shall have no
further obligations under this Agreement other than for any entitlements under
the terms any other plans or programs
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of the Company in which the Executive participated and under which the Executive
has accrued a benefit.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment Period,
the Company shall pay the Executive the Annual Base Salary through the Date of
Termination, the amount of the Deferred compensation and any other compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon), in each case to the extent not yet paid, and the amount of
any earned but unpaid Annual Bonuses and vacation pay, and the Company shall
have no further obligations under this Agreement other than for any entitlements
under the terms any other plans or programs of the Company in which the
Executive participated and under which the Executive has accrued a benefit. If
the Executive voluntarily terminates employment during the Employment Period,
other than for Good Reason, the Company shall pay the Accrued Obligations to the
Executive in a lump sum in cash within 30 days of the Date of Termination, and
the Company shall have no further obligations under this Agreement other than
for any entitlements under the terms any other plans or programs of the Company
in which the Executive participated and under which the Executive has accrued a
benefit.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to Section 13, shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Vested benefits and other amounts that the Executive
is otherwise entitled to receive under any plan,
19
policy, practice or program of, or any contract or agreement with, the Company
or any of its affiliated companies on or after the Date of Termination shall be
payable in accordance with such plan, policy, practice, program, contract or
agreement, as the case may be, except as explicitly modified by this Agreement.
7. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
8. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period or fifty
percent of the lump sum payment in lieu of Base Salary provided under Section 5
in the event of Executive's termination of employment following a Change of
Control, the Executive agrees as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer programs and
software and financial information relating to the Company or any of its
affiliated companies and their respective businesses that the Executive obtains
during the Executive's employment by the Company or any of its affiliated
companies and that is not public knowledge (other than as a result of the
Executive's violation of this paragraph (a) of Section 8)
20
("Confidential Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Executive's
employment with the Company, except in the good faith performance of his duties
hereunder, with the prior written consent of the Company or as otherwise
required by law or legal process. In no event shall an asserted violation of
the provisions of this paragraph (a) of Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive will
not, except with the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Executive
agrees that he will not, for a period of two years after the expiration or
termination of the Executive's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent contractor,
or solicit the employment of, any managerial or higher level person who is or at
any time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
(c) The Executive represents that he is licensed by the
gaming authorities in Nevada and New Jersey and knows of no reason why a license
necessary for him to perform his
21
duties hereunder would not be granted to or maintained by him by those or
similar authorities in the future.
(d) Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties hereunder
conflicts with any contractual commitment on his part to any third party or
violates or interferes with any rights of any third party.
(e) The Executive acknowledges and agrees that the
restrictions contained in this Section are reasonable and necessary to protect
and preserve the legitimate interests, properties, goodwill and business of the
Company, that the Company would not have entered into this Agreement in the
absence of such restrictions and that irreparable injury will be suffered by the
Company should the Executive breach any of those provisions. Executive
represents and acknowledges that (i) the Executive has been advised by the
Company to consult Executive's own legal counsel in respect of this Agreement,
and (ii) that the Executive has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with the Executive's counsel.
The Executive further acknowledges and agrees that a breach of any of the
restrictions in this Section cannot be adequately compensated by monetary
damages. The Executive agrees that the Executive's right to the payments
specified above in consideration for his undertakings under this Section shall
be forfeited, the Executive's right to exercise the Special Option and a portion
of the Regular Option shall cease and Company shall be entitled to preliminary
and permanent injunctive relief, without the necessity of proving actual
damages, as well as an equitable accounting of all earnings, profits and other
benefits in the event of any violation of this Section, which rights shall be
cumulative and in addition to any other rights or remedies to which the Company
may be entitled; provided, however, that the foregoing remedies
22
shall be conditioned upon the Company providing the Executive with at least 30
days written notice of its good faith belief that a violation of the Executive's
undertakings hereunder has occurred and Executive failing to cease any such
prohibited activity within 30 days after such written notice is given. In the
event that any of the provisions of this Section should ever be adjudicated to
exceed the time, geographic, service, or other limitations permitted by
applicable law in any jurisdiction, it is the intention of the parties that the
provision shall be amended to the extent of the maximum time, geographic,
service, or other limitations permitted by applicable law, that such amendment
shall apply only within the jurisdiction of the court that made such
adjudication and that the provision otherwise be enforced to the maximum extent
permitted by law. The Executive irrevocably and unconditionally (i) agrees that
any suit, action or other legal proceeding arising out of this Section,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief and other equitable relief, may be
brought in the United States District Court for the Southern District of
California, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Los Angeles, California,
(ii) consents to the non-exclusive jurisdiction of any such court in any such
suit, action or proceeding, and (iii) waives any objection which the Executive
may have to the laying of venue of any such suit, action or proceeding in any
such court. The Executive also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 13 hereof.
9. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by
23
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
10. CHANGE OF CONTROL.
(a) For the purpose of this Agreement, a "Change of Control" shall
mean:
(i) The acquisition by any person, entity or "group", within
the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
0000 (xxx "Xxxxxxxx Xxx"). (excluding, for this purpose, (A) the Company or its
subsidiaries, (B) any employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company or (C)
Xxxxxx Xxxxxx, the Charitable Remainder Unitrust created by Xxxxxx Xxxxxx to
receive shares from the Estate of Xxxxxx X. Xxxxxx, or the Xxxxxx X. Xxxxxx
Foundation, collectively the "Hilton Interests"), of beneficial ownership,
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% (or
the higher threshold percentage contained in any shareholder rights plan of the
Company) or more of either the then outstanding shares of common stock or the
24
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14 a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or (B) a liquidation or dissolution of the
Company or (C) the sale of all or substantially all of the assets of the
Company;
provided, however, that the Split was not a "Change of Control" for any purpose
under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that
25
with respect to the Special Option, such immediate vesting and exercisability
shall be conditioned upon the Executive not breaching the terms of the covenants
contained in Section 8.
(c) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the Executive shall be paid an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive after deduction of any excise tax imposed under Section 4999 of
the Code, and any federal, state and local income and employment tax and excise
tax imposed upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income tax and employment taxes at the highest marginal
rate of federal income and employment taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Termination Date, net of the maximum reduction in federal income taxes
that may be obtained from the deduction of such state and local taxes.
(d) All determinations to be made under this Section 10 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive.
26
Within five days after the Accounting Firm's determination, the Company shall
pay (or cause to be paid) or distribute (or cause to be distributed) to or for
the benefit of the Executive such amounts as are then due to the Executive under
this Agreement.
(e) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
27
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax, including
interest and penalties, with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 10, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a termination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Executive to pay such claim and xxx for a refund the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
28
(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to this Section, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of subsection (d)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(g) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or wilful misconduct of the Accounting Firm.
(h) Following a Change of Control and for a period of not less than
three years after the Date of Termination, the Executive be entitled to
indemnification and, to the extent available on commercially reasonable terms,
insurance coverage therefor, with respect to the various liabilities as to which
the Executive has been customarily indemnified prior to the Change of Control.
29
11 ARBITRATION. The Company and the Executive mutually consent to
the resolution by arbitration, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association, of
all claims or controversies arising out of the Executive's employment (or its
termination) that the Company may have against the Executive or that the
Executive may have against the Company or against its officers, directors,
shareholders, employees or agents in their capacity as such other than a claim
which is primarily for an injunction or other equitable relief. The Company and
the Executive shall equally share the fees and costs of the arbitrator, and each
party shall bear its own costs in connection with any arbitration, unless the
Executive shall prevail in an arbitration proceeding as to any material issue,
in which case the Company shall reimburse the Executive for all reasonable
costs, expenses and fees incurred in connection with such arbitration.
12. LEGAL FEES. The Company agrees to pay all legal fees incurred by
the Executive in connection with the negotiation and preparation of this
Agreement, up to a maximum of $15,000.
13. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
30
IF TO THE EXECUTIVE:
x/x Xxxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
IF TO THE COMPANY:
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
WITH A REQUIRED COPY TO:
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxxxxx
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 13. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
31
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 5 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
14. PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements, except for the provisions of Section 14 of this Agreement prior to
amendment and restatement until the rights under that Section have expired, and
otherwise sets forth the entire understanding among the parties hereto with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HILTON HOTELS CORPORATION
By
-------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxxxxxx
00
