<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 31, 1998
Park Place Entertainment Corporation
------------------------------------
(Exact Name of Registrant as
Specified in Charter)
Delaware 1-14573 88-0400631
---------------- ------------ --------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Identification
Incorporation) Number) No.)
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
--------------------------------
(Address of Principal
Executive Offices)
(702) 699-5000
----------------------------
(Registrant's telephone
number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1998, following the Hilton Distribution (as defined in
Item 5 below), the Registrant acquired Grand Casinos, Inc. ("Grand") by means
of a merger (the "Merger"). At the time of the Merger, Grand's assets
consisted of Grand's gaming operations located in the State of Mississippi.
Immediately prior to the Merger, Grand separated its Mississippi gaming
business from its non-Mississippi business (comprised primarily of the
management of Indian-owned casinos and certain other assets and liabilities)
through the distribution of all of the common stock of Lakes Gaming, Inc.
("Lakes") to the shareholders of Grand (the "Lakes Distribution"). Following
the Lakes Distribution, a wholly owned subsidiary of the Registrant merged
with and into Grand, with Grand surviving the Merger and becoming a
wholly-owned subsidiary of the Registrant. Grand shareholders received one
share of common stock of the Registrant, plus the associated stockholders'
rights, in exchange for each share of Grand common stock in the Merger.
ITEM 5. OTHER EVENTS
On December 31, 1998, Hilton Hotels Corporation ("Hilton") completed the
distribution of all of the common stock of the Registrant, plus the
associated stockholders' rights, to Hilton stockholders (the "Hilton
Distribution"). Following the Hilton Distribution, the Registrant consummated
the Merger. On January 4, 1999, the Registrant's common stock began regular
way trading on the New York Stock Exchange under the trading symbol "PPE."
In connection with the Hilton Distribution and the Merger, the
Registrant engaged in the following financing transactions:
(a) the Registrant issued $400 million aggregate principal amount of 7
7/8% Senior Subordinated Notes due 2005 to certain institutional investors
pursuant to Rule 144A of the Securities Act of 1933, as amended;
(b) the Registrant entered into revolving credit facility agreements
providing for borrowings of up to $2.15 billion, copies of which are filed as
exhibits hereto, and on December 31, 1998 the Registrant borrowed $810,000,000
under the five-year revolving credit facility to pay its pro rata portion of
Hilton's corporate bank debt balances and to fund the defeasance of $115
million aggregate principal amount of Grand's 9% Senior Notes due 2004;
(c) the Registrant assumed the payment obligations under $625 million
of outstanding public notes of Hilton; and
(d) the Registrant purchased $444,467,000 aggregate principal amount of
the 10-1/8% First Mortgage Notes due 2003 (the "Notes") of Grand pursuant to
the Registrant's Offer to Purchase and Consent Solicitation Statement dated
November 9, 1998. The Notes accepted for purchase represented approximately
99% of the outstanding Notes;
On December 29, 1998, the Board of Directors of the Registrant adopted a
Preferred Share Purchase Rights Plan ("Plan") which is attached hereto as an
exhibit. Additional information concerning the Plan is available in the
Registrant's Form 8-A filed with the Securities and Exchange Commission on
December 30, 1998.
A copy of the Registrant's press release dated December 31, 1998 is
attached hereto as Exhibit 99.14 and incorporated herein by reference.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is impractical for the Registrant to provide at this time the audited
financial statements of Grand following the Lakes Distribution and the unaudited
financial statements for the third quarter of 1998. The Registrant intends to
file such financial information as an amendment to this Form 8-K as soon as
practicable but no later than March 16, 1999.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information with respect to the Hilton Distribution
and the Merger was previously reported by the Registrant in Amendment No. 1 to
its Registration Statement on Form 10 filed with the Commission on December 18,
1998 and in its Registration Statement on Form S-4 (Registration No. 333-65645)
filed with the Commission on October 23, 1998.
(c) EXHIBITS.
<PAGE>
Exhibit
Number Description
- - ------ -----------
2.1 Agreement and Plan of Merger, dated as of June 30, 1998, by and
among Hilton Hotels Corporation, the Registrant, Gaming Acquisition
Corporation, GCI Lakes, Inc. and Grand Casinos, Inc. (incorporated
by reference from Exhibit 2.1 to the Form 10-Q for the quarter
ended June 30, 1998 of HIlton Hotels Corporation).
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference from Exhibit 4.1 to the Registration
Statement on Form S-8 of the Registrant filed with the Commission on
December 22, 1998.)
4.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference from Exhibit 4.2 to the Registration Statement on Form S-8
of the Registrant filed with the Commission on December 22, 1998.)
4.3 Rights Agreement dated as of December 29, 1998 by and among the
Registrant and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (incorporated by reference from Exhibit 1 to the Registrant's
Form 8-A filed with the Commission on December 30, 1998).
4.4 First Supplemental Indenture dated as of December 31, 1998
by and among Hilton Hotels Corporation, BNY Western Trust
Company, as Trustee, and the Registrant, to the Indenture
dated as of April 15, 1997 between the Hilton Hotels
Corporation and BNY Western Trust Company, as Trustee.
4.5 Indenture dated as of December 21, 1998 by and among the
Registrant and First Union National Bank, as trustee, with respect
to $400 million aggregate principal amount of 7 7/8% Senior
Subordinated Notes due 2005.
99.1 Distribution Agreement dated as of December 31, 1998 between
Hilton Hotels Corporation and the Registrant.
99.2 Debt Assumption Agreement dated as of December 31, 1998
between Hilton Hotels Corporation and the Registrant.
99.3 Assignment and License Agreement dated as of December 31,
1998 by and between Hilton Hotels Corporation, Conrad
International Royalty Corporation and the Registrant.
99.4 Hilton Hotels Corporation Corporate Services Agreement dated
as of December 31, 1998 by and between Hilton Hotels
Corporation and the Registrant.
99.5 Park Place Entertainment Corporation Corporate Services
Agreement dated as of December 31, 1998 by and between
Hilton Hotels Corporation and the Registrant.
99.6 Employee Benefits and Other Employment Matters Allocation
Agreement dated as of December 31, 1998 by and between
Hilton Hotels Corporation and the Registrant.
99.7 Tax Allocation and Indemnity Agreement dated as of
December 31, 1998 by and between Hilton Hotels Corporation
and the Registrant.
99.8 Non-Competition Agreements dated as of December 31, 1998
by and between Lyle Berman, Stanley M. Taube, Thomas J. Brosig and
the Registrant.
99.9 Short Term Credit Agreement dated as of December 31, 1998 among the
Registrant, Bank of America National Trust and Savings Association,
as Administrative Agent, and NationsBanc Montgomery Securities,
LLC, as Lead Arranger.
99.10 Five Year Credit Agreement dated as of December 31, 1998 among the
Registrant, Bank of America National Trust and Savings Association,
as Administrative Agent, and NationsBanc Montgomery Securities,
LLC, as Lead Arranger.
99.11 Employment Agreement between the Registrant and Arthur Goldberg.
99.12 Employment Agreement between the Registrant and Stephen Bollenbach.
99.13 Distribution Agreement between Grand and Lakes dated December 31,
1998.
99.14 Press Release of Park Place Entertainment Corporation dated
December 31, 1998.
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
HILTON HOTELS CORPORATION
Dated: January 8, 1999 By: /s/ Scott A. LaPorta
-------------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President
and Chief Financial Officer
3
<PAGE>
Exhibit Index
Exhibit
Number Description
- - ------ -----------
2.1 Agreement and Plan of Merger, dated as of June 30, 1998, by and
among Hilton Hotels Corporation, the Registrant, Gaming Acquisition
Corporation, GCI Lakes, Inc. and Grand Casinos, Inc. (incorporated
by reference from Exhibit 2.1 to the Form 10-Q for the quarter
ended June 30, 1998 of HIlton Hotels Corporation).
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference from Exhibit 4.1 to the Registration
Statement on Form S-8 of the Registrant filed with the Commission on
December 22, 1998.)
4.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference from Exhibit 4.2 to the Registration Statement on Form S-8
of the Registrant filed with the Commission on December 22, 1998.)
4.3 Rights Agreement dated as of December 29, 1998 by and among the
Registrant and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent (incorporated by reference from Exhibit 1 to the Registrant's
Form 8-A filed with the Commission on December 30, 1998).
4.4 First Supplemental Indenture dated as of December 31, 1998
by and among Hilton Hotels Corporation, BNY Western Trust
Company, as Trustee, and the Registrant, to the Indenture
dated as of April 15, 1997 between the Hilton Hotels
Corporation and BNY Western Trust Company, as Trustee.
4.5 Indenture dated as of December 21, 1998 by and among the
Registrant and First Union National Bank, as trustee, with respect
to $400 million aggregate principal amount of 7 7/8% Senior
Subordinated Notes due 2005.
99.1 Distribution Agreement dated as of December 31, 1998 between
Hilton Hotels Corporation and the Registrant.
99.2 Debt Assumption Agreement dated as of December 31, 1998
between Hilton Hotels Corporation and the Registrant.
99.3 Assignment and License Agreement dated as of December 31,
1998 by and between Hilton Hotels Corporation, Conrad
International Royalty Corporation and the Registrant.
99.4 Hilton Hotels Corporation Corporate Services Agreement dated
as of December 31, 1998 by and between Hilton Hotels
Corporation and the Registrant.
99.5 Park Place Entertainment Corporation Corporate Services
Agreement dated as of December 31, 1998 by and between
Hilton Hotels Corporation and the Registrant.
99.6 Employee Benefits and Other Employment Matters Allocation
Agreement dated as of December 31, 1998 by and between
Hilton Hotels Corporation and the Registrant.
99.7 Tax Allocation and Indemnity Agreement dated as of
December 31, 1998 by and between Hilton Hotels Corporation
and the Registrant.
99.8 Non-Competition Agreements dated as of December 31, 1998
by and between Lyle Berman, Thomas J. Brosig, Stanley M.
Taube and the Registrant.
99.9 Short Term Credit Agreement dated as of December 31, 1998 among the
Registrant, Bank of America National Trust and Savings Association,
as Administrative Agent, and NationsBanc Montgomery Securities,
LLC, as Lead Arranger.
99.10 Five Year Credit Agreement dated as of December 31, 1998 among the
Registrant, Bank of America National Trust and Savings Association,
as Administrative Agent, and NationsBanc Montgomery Securities,
LLC, as Lead Arranger.
99.11 Employment Agreement between the Registrant and Arthur Goldberg.
99.12 Employment Agreement between the Registrant and Stephen Bollenbach.
99.13 Distribution Agreement between Grand and Lakes dated December 31,
1998.
99.14 Press Release of Park Place Entertainment Corporation dated
December 31, 1998.
<PAGE>
- - -------------------------------------------------------------------------------
HILTON HOTELS CORPORATION
7.375% Senior Notes due 2002
and
7% Senior Notes due 2004
FIRST SUPPLEMENTAL INDENTURE
to
Indenture dated as of April 15, 1997
BY AND AMONG HILTON HOTELS CORPORATION,
PARK PLACE ENTERTAINMENT CORPORATION AND
BNY WESTERN TRUST COMPANY, TRUSTEE
- - -------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture (the "Supplemental Indenture') to
the Indenture dated as of April 15, 1997 (the "Indenture") between Hilton Hotels
Corporation, a Delaware corporation ("Hilton") and BNY Western Trust Company, as
Trustee (the "Trustee"), is entered into this 31st day of December, 1998, by and
among Hilton, the Trustee and Hilton's indirect wholly-owned subsidiary, Park
Place Entertainment Corporation, a Delaware corporation ("Park Place").
WHEREAS, pursuant to the Indenture, Hilton may issue debt securities
in one or more series from time to time;
WHEREAS, Hilton has outstanding $300 million aggregate principal
amount of 7.375% Senior Notes due 2002 (the "2002 Notes"), issued pursuant to
the Indenture, as supplemented by terms established pursuant to a Board
Resolution (as defined in the Indenture) adopted on May 28, 1997 and set forth
in an Officer's Certificate (the "2002 Officer's Certificate" and, together with
the Indenture, the "2002 Indenture"), and $325 million aggregate principal
amount of 7% Senior Notes due 2004 (the "2004 Notes" and, together with the 2002
Notes, the "Notes"), issued pursuant to the Indenture, as supplemented by terms
established pursuant to a Board Resolution adopted on July 17, 1998 and set
forth in an Officer's Certificate (the "2004 Officer's Certificate" and,
together with the Indenture, the "2004 Indenture") (the 2002 Indenture and the
2004 Indenture being referred to collectively herein as the "Indentures");
WHEREAS, Hilton plans to declare a special dividend consisting of the
distribution (the "Distribution") to holders of its outstanding shares of common
stock, par value $2.50 per share, on a one-for-one basis, of all the outstanding
shares of common stock, par value $.01 per share, of Park Place;
<PAGE>
WHEREAS, in connection with the Distribution, Hilton and Park Place
have entered into a Debt Assumption Agreement of even date herewith (the "Park
Place Debt Assumption Agreement"), pursuant to which Hilton and Park Place have
agreed, among other things, to effect certain amendments to the Indentures that
do not adversely affect the rights of Holders (as defined in the Indentures) of
Notes;
WHEREAS, pursuant to Sections 11.01(2) and (11) of the Indenture,
Hilton and the Trustee may enter into a supplemental indenture without the
consent of any Holder of Notes to add to the covenants of the Company or to make
any change that does not adversely affect the interests of the Holders of Notes
in any material respect;
WHEREAS, pursuant to the Park Place Debt Assumption Agreement, Park
Place has agreed to assume the payment obligations under the Notes (but not
obligations under any other debt securities issued or to be issued pursuant to
the Indentures);
NOW THEREFORE, pursuant to Section 11.01 of the Indentures, the
parties hereby amend the Indentures, but only with respect to the Notes, as
follows:
SECTION 1. CAPITALIZED TERMS.
All capitalized terms used herein, and not defined herein, shall have
the meanings ascribed to them in the Indentures.
SECTION 2. DEFINITIONS.
(a) The following defined terms shall be added to Section 1.01 of the
Indentures:
1.01 of the Indentures:
"PARK PLACE" means Park Place Entertainment Corporation, a Delaware
corporation.
"2002 NOTES" has the meaning set forth in the recitals.
2
<PAGE>
"2004 NOTES" has the meaning set forth in the recitals.
"2002 INDENTURE" has the meaning set forth in the recitals.
"2004 INDENTURE" has the meaning set forth in the recitals.
"INDENTURES" has the meaning set forth in the recitals.
"DISTRIBUTION" has the meaning set forth in the recitals.
"PARK PLACE DEBT ASSUMPTION AGREEMENT" has the meaning set forth in
the recitals.
"PARK PLACE PAYMENT OBLIGATIONS" has the meaning set forth in
Section 3.
SECTION 3. PARK PLACE COVENANTS.
A new Article 12A regarding additional covenants of Park Place and
Hilton shall be added to the Indentures with respect to the Notes immediately
following Article 12 of the Indenture, as follows:
"ARTICLE TWELVE A
ADDITIONAL COVENANTS
Section 12A.01. PARK PLACE PAYMENT OBLIGATIONS.
Park Place assumes responsibility for, and agrees to pay, one
hundred percent (100%) of the amount of each payment required to be made by
Hilton to Holders of Notes pursuant to the terms of the Indentures and the
Notes with respect to the principal of (and premium, if any) and interest
on the Notes (the "Park Place Payment Obligations").
Section 12A.02. HILTON OBLIGATIONS.
Notwithstanding the foregoing assumption by Park Place, Hilton
retains responsibility for all of its obligations under the Indentures and
the Notes including,
3
<PAGE>
without limitation, the obligation to make payment of the Park Place
Payment Obligations in the event Park Place fails to make any such
payments in accordance with Section 12A.01. The assumption by Park
Place of the Park Place Payment Obligations shall not limit or affect
the rights of the Trustee or the Holders of Notes under Article 5 of the
Indentures to take action against Hilton if an Event of Default occurs
under the Indentures.
Section 12A.03. MANNER OF PAYMENT.
Park Place shall satisfy the Park Place Payment Obligations on
the dates and in the manner provided in the Indentures with respect to
Hilton's payment obligations under the Notes.
Section 12A.04. COMPENSATION AND REIMBURSEMENT.
The obligations of Hilton under Section 6.07 of the Indenture
shall apply to Park Place with the same force and effect as such
obligations apply to Hilton with respect to the administration of the
Indentures with respect to the Notes (provided that Park Place's
obligations under this Section 12A.04 shall not include indemnity payments
solely attributable to a breach or alleged breach by Hilton of its
obligations under the Indentures, which payments shall be the sole
responsibility of Hilton)."
SECTION 4. DEFAULTS AND REMEDIES AGAINST PARK PLACE.
A new Article 5A regarding remedies against Park Place shall be added
immediately following Article 5 of the Indenture as follows:
4
<PAGE>
"ARTICLE 5A
REMEDIES AGAINST PARK PLACE
Section 5A.01. LIMITATION ON ACTION. The rights to and
limitations on action against Hilton set forth in Article 5 shall also apply to
any action against Park Place for the enforcement of the Park Place Payment
Obligations; without limiting the generality of the foregoing, the Trustee shall
be permitted to pursue a remedy against Park Place for collection of the Park
Place Payment Obligations only under such circumstances as would enable the
Trustee under Article 5 to pursue such remedy against Hilton."
SECTION 5. MISCELLANEOUS. A new Article 1A shall be added
immediately following Article 1 of the Indenture as follows:
"ARTICLE 1A
MISCELLANEOUS PROVISIONS APPLICABLE
TO PARK PLACE
Section 1A.01 TIA COMPLIANCE. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Supplemental Indenture
by the TIA, the required provision shall control.
Section 1A.02. NOTICES. Copies of any notice that Hilton
delivers to, or receives from, the Paying Agent, the Registrar, the
Trustee, or the Holders of Notes pursuant to the terms of the Indentures
shall, promptly after such notice is delivered or received, be delivered by
Hilton to Park Place. Copies of any notice that the Trustee is required to
deliver to Hilton under the Indentures shall, at the time such notice is
delivered to Hilton, be delivered to Park Place.
5
<PAGE>
Any notice or communication to Park Place shall be delivered to
Park Place in the manner set forth in Section 1.04 of the Indentures. Park
Place's address for any such notice or communication shall be as follows:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, NV 89109
Attn: General Counsel
Telecopy: (702) 699-5179
Section 1A.03. NON-IMPAIRMENT. Nothing in this Supplemental
Indenture shall impair the rights of the Trustee (including, without
limitation, the rights of the Trustee under Section 6.07 of the Indentures)
or Holders of Notes and the obligations of Hilton as such rights and
obligations existed prior to the execution and delivery hereof.
Section 1A.04. SUCCESSORS AND ASSIGNS OF PARK PLACE. All
covenants and agreements in this Supplemental Indenture shall bind Park
Place's successors and assigns and inure to the benefit of its successors
and assigns, whether so expressed or not."
SECTION 6. GOVERNING LAW. This Supplemental Indenture shall be
governed and construed in accordance with the laws of the State of New York
without regard to any applicable conflicts of law, including all matters of
construction, validity and performance.
SECTION 7. COUNTERPARTS. This instrument may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this instrument by
signing such counterpart.
SECTION 8. EFFECTIVENESS. This Supplemental Indenture is effective
as of the date first written above.
[Signature Page Follows]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Supplemental Indenture on behalf of the respective parties hereto
as of the date first written above.
HILTON HOTELS CORPORATION
By: /s/ Matthew J. Hart
------------------------------------
Its: Executive Vice President and Chief
Financial Officer
-----------------------------------
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
------------------------------------
Its: Executive Vice President and Chief
Financial Officer
-----------------------------------
BNY WESTERN TRUST COMPANY, as trustee
By: /s/ Bill Chambers
------------------------------------
Its: ASSISTANT VICE PRESIDENT
-----------------------------------
S-1
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION, AS ISSUER,
AND
FIRST UNION NATIONAL BANK, AS TRUSTEE
-----------------
INDENTURE
DATED AS OF DECEMBER 21, 1998
-----------------
$400,000,000
7 7/8% SENIOR SUBORDINATED NOTES DUE 2005
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939,as amended, and
Indenture, dated as of December 21, 1998
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section
-----------
Section
--------
<S> <C>
Section 310 (a)(1) 6.09
(a)(2) 6.09
(b) 6.07, 6.10
Section 311 (a) 6.13
Section 312 (a) 7.01
(c) 7.02
Section 313 (a) 7.03
(c) 7.03, 10.09
Section 314 (a) 7.04
(c)(1) 1.03
(c)(2) 1.03
(d) 12.1(c)
(e) 1.03
Section 315 (a) 6.01(b)
(b) 6.02
(c) 6.01(a)
(d) 6.01(c), 6.03
(e) 5.14
Section 316 (a)(last sentence) 1.01
(a)(1)(A) 5.02, 5.12
(a)(1)(B) 5.13
(b) 5.08
(c) 1.05
Section 317 (a)(1) 5.03
(a)(2) 5.04
(b) 10.03
Section 318 (a) 1.08
</TABLE>
- - ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE IDEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . .1
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"Additional Interest" . . . . . . . . . . . . . . . . . . . . . . . .2
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Applicable Procedures" . . . . . . . . . . . . . . . . . . . . . . .2
"Attributable Debt" . . . . . . . . . . . . . . . . . . . . . . . . .2
"Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Board of Directors". . . . . . . . . . . . . . . . . . . . . . . . .2
"Board Resolution". . . . . . . . . . . . . . . . . . . . . . . . . .2
"Book-Entry Security" . . . . . . . . . . . . . . . . . . . . . . . .2
"Business Day". . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"Capital Improvements". . . . . . . . . . . . . . . . . . . . . . . .3
"Capital Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Cash Equivalents". . . . . . . . . . . . . . . . . . . . . . . . . .3
"Code". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Commission". . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Common Stock". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Company Order" . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Company Request" . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Consolidated". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"Consolidated Net Tangible Assets". . . . . . . . . . . . . . . . . .4
"Corporate Trust Office". . . . . . . . . . . . . . . . . . . . . . .4
"Credit Facilities" . . . . . . . . . . . . . . . . . . . . . . . . .4
"Debt". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Depositary" . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Designated Senior Debt". . . . . . . . . . . . . . . . . . . . . . .4
"Event of Default". . . . . . . . . . . . . . . . . . . . . . . . . .4
"Exchange Act". . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"Exchange Global Securities". . . . . . . . . . . . . . . . . . . . .5
"Exchange Offer". . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Exchange Offer Registration Statement" . . . . . . . . . . . . . . .5
"Exchange Securities" . . . . . . . . . . . . . . . . . . . . . . . .5
"GAAP". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Global Securities" . . . . . . . . . . . . . . . . . . . . . . . . .5
"Grand" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Grand Distribution . . . . . . . . . . . . . . . . . . . . . . . . .5
"Hedging Obligations" . . . . . . . . . . . . . . . . . . . . . . . .5
"Hilton". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"Hilton Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
<PAGE>
"Hilton Distribution" . . . . . . . . . . . . . . . . . . . . . . . .6
"Holder". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Indenture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Indenture Obligations" . . . . . . . . . . . . . . . . . . . . . . .6
"Initial Securities". . . . . . . . . . . . . . . . . . . . . . . . .6
"Initial Purchasers". . . . . . . . . . . . . . . . . . . . . . . . .6
"Interest Payment Date" . . . . . . . . . . . . . . . . . . . . . . .6
"Issue Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"Joint Venture" . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Lakes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Lien". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Make-Whole Premium". . . . . . . . . . . . . . . . . . . . . . . . .7
"Maturity". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Merger". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Moody's" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Non-Payment Default" . . . . . . . . . . . . . . . . . . . . . . . .7
"Non-recourse Debt" . . . . . . . . . . . . . . . . . . . . . . . . .7
"Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
"Offering Memorandum" . . . . . . . . . . . . . . . . . . . . . . . .8
"Officers' Certificate" . . . . . . . . . . . . . . . . . . . . . . .7
"Opinion of Counsel". . . . . . . . . . . . . . . . . . . . . . . . .8
"Opinion of Independent Counsel". . . . . . . . . . . . . . . . . . .8
"Outstanding" . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
"Pari Passu Debt" . . . . . . . . . . . . . . . . . . . . . . . . . .9
"Paying Agent". . . . . . . . . . . . . . . . . . . . . . . . . . . .9
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . . . .9
"Permitted Lien". . . . . . . . . . . . . . . . . . . . . . . . . . .9
"Person". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Predecessor Security". . . . . . . . . . . . . . . . . . . . . . . 11
"Principal Property". . . . . . . . . . . . . . . . . . . . . . . . 11
"QIB" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Redeemable Capital Stock". . . . . . . . . . . . . . . . . . . . . 11
"Redemption Date" . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Redemption Price". . . . . . . . . . . . . . . . . . . . . . . . . 11
"Registration Rights Agreement" . . . . . . . . . . . . . . . . . . 11
"Regular Record Date" . . . . . . . . . . . . . . . . . . . . . . . 11
"Responsible Officer" . . . . . . . . . . . . . . . . . . . . . . . 11
"Restricted Security" . . . . . . . . . . . . . . . . . . . . . . . 12
"Restricted Subsidiary" . . . . . . . . . . . . . . . . . . . . . . 12
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Rule 144A Global Securities" . . . . . . . . . . . . . . . . . . . 12
"S&P" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Securities". . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Securities Act". . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Security Agreement". . . . . . . . . . . . . . . . . . . . . . . . 12
"Security Intermediary" . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
"Senior Debt". . . . . . . . . . . . . . . . . . . . . . . . . 12
"Series A Securities". . . . . . . . . . . . . . . . . . . . . 13
"Series B Securities". . . . . . . . . . . . . . . . . . . . . 13
"Significant Subsidiary" . . . . . . . . . . . . . . . . . . . 13
"Special Record Date". . . . . . . . . . . . . . . . . . . . . 13
"Special Redemption Date". . . . . . . . . . . . . . . . . . . 13
"Stated Maturity". . . . . . . . . . . . . . . . . . . . . . . 13
"Subordinated Debt". . . . . . . . . . . . . . . . . . . . . . 13
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Successor Security" . . . . . . . . . . . . . . . . . . . . . 13
"Transactions" . . . . . . . . . . . . . . . . . . . . . . . . 13
"Treasury Securities". . . . . . . . . . . . . . . . . . . . . 14
"Treasury Yield" . . . . . . . . . . . . . . . . . . . . . . . 14
"Trustee". . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Trust Indenture Act". . . . . . . . . . . . . . . . . . . . . 14
"wholly-owned" . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.03 Compliance Certificates and Opinions . . . . . . . . . . . . . 15
Section 1.04 Form of Documents Delivered to Trustee . . . . . . . . . . . . 16
Section 1.05 Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.06 Notices, etc., to the Trustee and the Company. . . . . . . . . 18
Section 1.07 Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . 18
Section 1.08 Conflict with Trust Indenture Act. . . . . . . . . . . . . . . 19
Section 1.09 Effect of Headings and Table of Contents . . . . . . . . . . . 19
Section 1.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 19
Section 1.11 Separability Clause. . . . . . . . . . . . . . . . . . . . . . 19
Section 1.12 Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . 19
Section 1.13 No Personal Liability of Directors, Officers,
Employee and Stockholders. . . . . . . . . . . . . . . . . . 20
Section 1.14 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1.15 Legal Holidays; Payment of Securities. . . . . . . . . . . . . 20
Section 1.16 Independence of Covenants. . . . . . . . . . . . . . . . . . . 20
Section 1.17 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . 20
Section 1.18 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1.19 Communications by Holders with other Holders . . . . . . . . . 21
Section 1.20 No Adverse Interpretation of Other Agreements. . . . . . . . . 21
Section 1.21 Qualification of Indenture . . . . . . . . . . . . . . . . . . 21
Section 1.22 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
ARTICLE II
<TABLE>
<S> <C>
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.01 Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.02 Form of Face of Security . . . . . . . . . . . . . . . . . . . 22
<PAGE>
Section 2.03 Form of Reverse of Securities. . . . . . . . . . . . . . . . . 30
ARTICLE III
THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.01 Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.02 Denominations. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.03 Execution, Authentication, Delivery and Dating . . . . . . . . 37
Section 3.04 Temporary Securities . . . . . . . . . . . . . . . . . . . . . 38
Section 3.05 Registration, Registration of Transfer and Exchange. . . . . . 39
Section 3.06 Book Entry Provisions for Global Securities. . . . . . . . . . 40
Section 3.07 Special Transfer and Exchange Provisions . . . . . . . . . . . 42
Section 3.08 Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . 43
Section 3.09 Payment of Interest; Interest Rights Preserved . . . . . . . . 44
Section 3.10 CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.11 Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . 45
Section 3.12 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.13 Computation of Interest. . . . . . . . . . . . . . . . . . . . 46
ARTICLE IV
DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . . . . . . . . . . 46
Section 4.01 Company's Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 46
Section 4.02 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . 46
Section 4.03 Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . 47
Section 4.04 Conditions to Defeasance or Covenant Defeasance. . . . . . . . 47
Section 4.05 Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions . . . . . . . . . . 49
Section 4.06 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.02 Acceleration of Maturity; Rescission and Annulment . . . . . . 51
<PAGE>
Section 5.03 Collection of Debt and Suits for Enforcement
by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.04 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . 53
Section 5.05 Trustee May Enforce Claims without Possession
of Securities. . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.06 Application of Money Collected . . . . . . . . . . . . . . . . 54
Section 5.07 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . 54
Section 5.08 Unconditional Right of Holders to Receive
Principal, Premium and Interest. . . . . . . . . . . . . . . 55
Section 5.09 Restoration of Rights and Remedies . . . . . . . . . . . . . . 55
Section 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . 56
Section 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . 56
Section 5.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.13 Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . 56
Section 5.14 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 57
Section 5.15 Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . 57
Section 5.16 Remedies Subject to Applicable Law . . . . . . . . . . . . . . 57
ARTICLE VI
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 6.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . 58
Section 6.02 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . 59
Section 6.03 Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . 59
Section 6.04 Trustee Not Responsible for Recitals, Dispositions
of Securities or Application of Proceeds Thereof . . . . . . 60
Section 6.05 Trustee and Agents May Hold Securities;
Collections; etc . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.06 Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . 61
Section 6.07 Compensation and Indemnification of Trustee and
Its Prior Claim. . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.08 Conflicting Interests. . . . . . . . . . . . . . . . . . . . . 62
Section 6.09 Trustee Eligibility. . . . . . . . . . . . . . . . . . . . . . 62
Section 6.10 Resignation and Removal; Appointment of Successor Trustee. . . 62
Section 6.11 Acceptance of Appointment by Successor . . . . . . . . . . . . 64
Section 6.12 Merger, Conversion, Consolidation or Succession4
to Business . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.13 Preferential Collection of Claims Against Company. . . . . . . 65
<PAGE>
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE . . . . . . . . . . . . . . . . . . . . 65
Section 7.01 Company to Furnish Trustee Names and Addresses
of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.02 Disclosure of Names and Addresses of Holders . . . . . . . . . 66
Section 7.03 Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
CONSOLIDATION, MERGER, SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . 66
Section 8.01 Company May Consolidate, etc., Only on
Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . 66
Section 8.02 Successor Substituted. . . . . . . . . . . . . . . . . . . . . 67
ARTICLE IX
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.01 Supplemental Indentures and Agreements
without Consent of Holders . . . . . . . . . . . . . . . . . 67
Section 9.02 Supplemental Indentures and Agreements with
Consent of Holders . . . . . . . . . . . . . . . . . . . . . 68
Section 9.03 Execution of Supplemental Indentures or Agreements . . . . . . 69
Section 9.04 Effect of Supplemental Indentures. . . . . . . . . . . . . . . 69
Section 9.05 Conformity with Trust Indenture Act. . . . . . . . . . . . . . 69
Section 9.06 Reference in Securities to Supplemental Indentures . . . . . . 69
Section 9.07 Notice of Supplemental Indentures. . . . . . . . . . . . . . . 70
ARTICLE X
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.01 Payment of Principal, Premium and Interest . . . . . . . . . . 70
Section 10.02 Maintenance of Office or Agency. . . . . . . . . . . . . . . . 71
Section 10.03 Money for Security Payments to Be Held in Trust. . . . . . . . 72
Section 10.04 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . 72
Section 10.05 Payment of Taxes and Other Claims. . . . . . . . . . . . . . . 72
Section 10.06 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . 73
Section 10.07 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . 73
Section 10.08 Limitation on Sale and Leaseback Transactions. . . . . . . . . 73
Section 10.09 Rule 144A Information Requirement. . . . . . . . . . . . . . . 74
Section 10.10 Statement by Officers as to Default. . . . . . . . . . . . . . 74
Section 10.11 Reports by Company . . . . . . . . . . . . . . . . . . . . . . 75
Section 10.12 Waiver of Certain Covenants. . . . . . . . . . . . . . . . . . 76
ARTICLE XI
REDEMPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 11.01 Rights of Redemption . . . . . . . . . . . . . . . . . . . . . 76
Section 11.02 Applicability of Article . . . . . . . . . . . . . . . . . . . 76
Section 11.03 Election to Redeem; Notice to Trustee. . . . . . . . . . . . . 76
Section 11.04 Securities to Be Redeemed In Part. . . . . . . . . . . . . . . 76
Section 11.05 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . 77
<PAGE>
Section 11.06 Deposit of Redemption Price. . . . . . . . . . . . . . . . . . 78
Section 11.07 Securities Payable on Redemption Date. . . . . . . . . . . . . 78
Section 11.08 Securities Redeemed or Purchased in Part . . . . . . . . . . . 78
Section 11.09 Special Redemption . . . . . . . . . . . . . . . . . . . . . . 79
Section 11.10 Mandatory Disposition Pursuant to Gaming Laws. . . . . . . . . 80
Section 11.11 Redemption Procedures. . . . . . . . . . . . . . . . . . . . . 80
ARTICLE XII
SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 12.01 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE XIII
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 13.01 Securities Subordinate to Senior Debt. . . . . . . . . . . . . 82
Section 13.02 Payment over of Proceeds upon Dissolution, etc . . . . . . . . 82
Section 13.03 Suspension of Payment When Designated Senior
Debt in Default. . . . . . . . . . . . . . . . . . . . . . . 83
Section 13.04 Payment Permitted If No Default. . . . . . . . . . . . . . . . 84
Section 13.05 Subrogation to Rights of Holders of Senior Debt. . . . . . . . 84
Section 13.06 Provisions Solely to Define Relative Rights. . . . . . . . . . 85
Section 13.07 Trustee to Effectuate Subordination. . . . . . . . . . . . . . 85
Section 13.08 No Waiver of Subordination Provisions. . . . . . . . . . . . . 85
Section 13.09 Distribution or Notice to Representative . . . . . . . . . . . 86
Section 13.10 Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . 86
Section 13.11 Reliance on Judicial Order or Certificate of
Liquidating Agent. . . . . . . . . . . . . . . . . . . . . . 87
Section 13.12 Rights of Trustee as a Holder of Senior Debt;
Preservation of Trustee's Rights . . . . . . . . . . . . . . 87
Section 13.13 Article Applicable to Paying Agents. . . . . . . . . . . . . . 87
Section 13.14 No Suspension of Remedies. . . . . . . . . . . . . . . . . . . 87
Section 13.15 Trust Moneys Not Subordinated. . . . . . . . . . . . . . . . . 88
Section 13.16 Trustee Not Fiduciary for Holders of Senior Debt . . . . . . . 88
ARTICLE XIV
SATISFACTION AND DISCHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 14.01 Satisfaction and Discharge of Indenture. . . . . . . . . . . . 88
Section 14.02 Application of Trust Money . . . . . . . . . . . . . . . . . . 89
EXHIBIT A Restricted Security Certificate . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Unrestricted Security Certificate . . . . . . . . . . . . . . . . B-1
APPENDIX I Form of Transferee Certificate for Initial Securities . . . . . . I-1
<PAGE>
APPENDIX II Form of Transferee Certificate for Exchange Securities. . . . . . II-1
</TABLE>
<PAGE>
INDENTURE, dated as of December 21, 1998, between Park Place
Entertainment Corporation, a Delaware corporation (the "Company"), and First
Union National Bank, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 7 7/8%
Series A Senior Subordinated Notes due 2005 and an issue of 7 7/8% Series B
Senior Subordinated Notes due 2005 to be exchanged for the 7 7/8% Series A
Senior Subordinated Notes due 2005, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture and the
Securities (as defined herein);
All acts and things necessary have been done to make the
Securities, when duly issued and executed by the Company and authenticated
and delivered hereunder, the valid obligations of the Company and to make
this Indenture a valid agreement of the Company in accordance with the terms
of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Each party hereto agrees for the benefit of the other parties and
for the equal and proportionate benefit of all Holders (as defined herein) of
the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article,
<PAGE>
Section or other subdivision;
(e) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to
this Indenture unless otherwise so indicated.
"Additional Interest" means the additional interest rate borne by the
Securities pursuant to the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the term "controlling,"
"controlled by" and "under common control with") as used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through ownership of voting securities, by
agreement or otherwise.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security to the extent
applicable to such transaction and as in effect at the time of such transfer
or transaction.
"Attributable Debt" with respect to any Sale and Lease-Back
Transaction described in Section 10.08 means the present value of the minimum
rental payments called for during the terms of the lease (including any
period for which such lease has been extended), determined in accordance with
GAAP, discounted at a rate that, at the inception of the lease, the lessee
would have incurred to borrow over a similar term the funds necessary to
purchase the leased assets.
"Bankruptcy Law" means the United States Bankruptcy Code of 1978,
codified in Title 11 of the United States Code, as amended, or any similar
United States federal or state law relating to bankruptcy, insolvency,
receivership, winding up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
<PAGE>
"Book-Entry Security" means any Global Securities bearing the
Global Legend specified in Section 2.02 evidencing all or part of a series of
Securities, authenticated and delivered to the Depositary for such series or
its nominee, and registered in the name of such Depositary or nominee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions or trust companies in
The City of New York or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law, regulation or
executive order to close.
"Capital Improvements" means additions to properties or renovations
or refurbishing of properties which are designed to substantially upgrade
such properties or significantly modernize the operation thereof.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable
for or convertible into such capital stock.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the
United States of America is pledged in support thereof) in each case maturing
within one year after the date of acquisition, (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation
of any domestic commercial bank of recognized standing having capital and
surplus in excess of $500 million and commercial paper issued by others rated
at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's and in each case maturing within one year after
the date of acquisition and (iii) investments in money market funds
substantially all of whose assets comprise securities of the types described
in clauses (i) and (ii) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act then
the body performing such duties at such time.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
<PAGE>
"Company" means Park Place Entertainment Corporation, a corporation
incorporated under the laws of Delaware, until a successor Person shall have
become a successor to the Company pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such successor Person.
"Company Order" or "Company Request" means a written request or
order signed in the name of the Company by any one of its Chairman of the
Board, its President, its Chief Executive Officer, its Chief Financial
Officer or a Vice President (regardless of Vice Presidential designation),
and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consolidated" means, with respect to any Person, the consolidated
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of the Company and its Subsidiaries
(less applicable depreciation, amortization and other valuation reserves)
after deducting therefrom (i) all current liabilities of the Company and its
Subsidiaries (excluding (A) the current portion of long-term indebtedness,
(B) intercompany liabilities and (C) any liabilities which are by their terms
renewable or extendible at the option of the obligor thereon to a time more
than 12 months from the time as of which the amount thereof is being
computed) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and any other like intangibles, all as set forth on
the most recent consolidated balance sheet of the Company and computed in
accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate
trust business for the purposes of this Indenture shall be principally
administered, which office at the date of execution of this Indenture is
located at 40 Broad Street, Suite 550, Fifth Floor, New York, New York 1004.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities or commercial paper facilities, in each case with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time or time.
"Debt" means notes, bonds, debentures, letters of credit or other
similar evidence of Debt for borrowed money or any guarantee of any of the
foregoing.
<PAGE>
"Default" means any event that after notice or lapse of time or
both, would become an Event of Default.
"Depositary" means, with respect to the Securities issued in the
form of one or more Book-Entry Securities, The Depositary Trust Company
("DTC"), its nominees and successors, or another Person designated as
Depositary by the Company, which must be a clearing agency registered under
the Exchange Act.
"Designated Senior Debt" means any Senior Debt permitted under this
Indenture the principal amount of which is $100 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"Exchange Global Securities" means one or more permanent Global
Securities in registered form representing the aggregate principal amount of
Exchange Securities exchanged for Initial Securities pursuant to the Exchange
Offer.
"Exchange Offer" means the Company's offer to exchange the Exchange
Securities for the Initial Securities pursuant to the terms of the
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning specified
in the Registration Rights Agreement.
"Exchange Securities" means the 7 7/8% Series B Senior Subordinated
Notes due 2005, as supplemented from time to time in accordance with the
terms hereof, to be issued pursuant to this Indenture in connection with the
Exchange Offer. The Exchange Securities shall contain the information
referred to in Sections 2.02(b) and 2.03(b) of this Indenture.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principals Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
"Global Securities" means the Rule 144A Global Securities and the
Exchange Global Securities to be issued as Book-Entry Securities issued to
the Depositary in accordance with Section 3.06.
<PAGE>
"Grand" means Grand Casinos, Inc., a Minnesota corporation.
"Grand Distribution" means the separation of Grand's Mississippi
business (which includes the Grand Casino Biloxi, Grand Casino Gulfport and
Grand Casino Tunica properties) from its non-Mississippi business. Grand's
non-Mississippi business is comprised primarily of the management of two
Indian-owned casinos, an interest in the development of the Polo Plaza in Las
Vegas, up to $33 million in cash and certain other assets and liabilities.
Specifically, the Grand distribution consists of (i) the transfer of all of
the assets and liabilities of Grand's non-Mississippi business to Lakes and
(ii) the distribution of all of the outstanding shares of Lakes to the
holders of Grand common stock, all substantially on the terms described in
the Offering Memorandum and in the documentation for the Transactions as
currently in effect on December 14, 1998 (without regard to any material
amendment, supplement or waiver thereto that is (A) entered into after
December 14, 1998 and (B) not contemplated in the Offering Memorandum).
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under: (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements; and (ii)
other arrangements or arrangements designated to protect such Person against
fluctuations in interest rates.
"Hilton" means Hilton Hotels Corporation, a Delaware corporation.
"Hilton Debt" means indebtedness under the Hilton credit facility
as in effect on the date hereof.
"Hilton Distribution" means the separation of Hilton's gaming
business from its lodging business and consists of (i) Hilton's transfer of
all of the assets and liabilities of its gaming business (with certain
exceptions described in the Offering Memorandum) to the Company and (ii) the
distribution of all of the Company's outstanding shares of Common Stock to
the holders of Hilton common stock, all substantially on the terms described
in the Offering Memorandum and in the documentation for the Transactions as
currently in effect on December 14, 1998 (without regard to any material
amendment, supplement or waiver thereto that is (A) entered into after
December 14, 1998 and (B) not contemplated in the Offering Memorandum).
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules thereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
<PAGE>
"Indenture Obligations" means the obligations of the Company and
any other obligor under this Indenture or under the Securities, to pay
principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with this
Indenture, the Securities and the performance of all other obligations to the
Trustee and the holders under this Indenture and the Securities, according to
the respective terms thereof.
"Initial Securities" means the 7 7/8% Series A Senior Subordinated
Notes due 2005, as supplemented from time to time in accordance with the
terms hereof, issued under this Indenture. The Initial Securities shall
contain the information referred to in Sections 2.02(a) and 2.03(a) of this
Indenture.
"Initial Purchasers" means Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBanc Montgomery Securities LLC,
SG Cowen Securities Corporation, Credit Suisse First Boston Corporation, BNY
Capital Markets, Inc., PNC Capital Markets, Inc., First Chicago Capital
Markets, Inc., First Union Capital Markets and Ladenburg Thalmann & Co. Inc.
"Interest Payment Date" means June 15 and December 15 of each year
commencing June 15, 1999.
"Issue Date" means the date on which the Initial Securities are
originally issued under this Indenture.
"Joint Venture" means any partnership, corporation or other entity,
in which up to and including 50% of the partnership interests, outstanding
voting stock or other Capital Stock is owned, directly or indirectly, by the
Company and/or one or more Subsidiaries.
"Lakes" means Lakes Gaming, Inc., a Minnesota corporation,.
"Lien" means, with respect to any assets, any mortgage, pledge,
lien, encumbrance or other security interest to secure payment of Debt.
"Make-Whole Premium" means, with respect to any Security at any
Redemption Date, the excess, if any, of (i) the aggregate present value of
the sum of the principal amount and premium that would be payable on such
Security on December 15, 2005 and all remaining interest payments to and
including December 15, 2005 discounted on a semi-annual bond equivalent basis
from December 15, 2005 to the Redemption Date at a per annum interest rate
equal to the sum of the Treasury Yield (determined on the Business Day
immediately preceding the date of such redemption), plus 50 basis points,
over (ii) the aggregate principal amount of the Security being redeemed. The
Company in consultation with its certified independent accountants shall
determine the Make-Whole Premium.
<PAGE>
"Maturity" means, when used with respect to the Securities, the
date on which the principal of the Securities becomes due and payable as
therein provided or as provided in this Indenture, whether at Stated
Maturity, the Redemption Date and whether by declaration of acceleration,
call for redemption or otherwise.
"Merger" means the Company's acquisition of Grand's Mississippi
business following the Hilton Distribution and immediately after the Grand
Distribution which will be accomplished by the merger of one of the Company's
wholly-owned subsidiaries with and into Grand all substantially on the terms
described in the Offering Memorandum and in the documentation for the
Transactions as currently in effect on December 14, 1998 (without regard to
any material amendment, supplement or waiver thereto that is (A) entered into
after December 14, 1998 and (B) not contemplated in the Offering Memorandum).
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"Non-Payment Default" means any event of default (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Debt.
"Non-recourse Debt" means Debt the terms of which provide that the
lender's claim for repayment of such Debt is limited solely to a claim
against the property which secures such Debt.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Offering Memorandum" means the final Offering Memorandum, dated
December 14, 1998, relating to the sale of the Initial Securities.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, the President, the Chief Executive Officer, the Chief Financial
Officer or a Vice President (regardless of Vice Presidential designation),
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company and in form and substance reasonably satisfactory
to, and delivered to, the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or the Trustee, unless an Opinion of Independent
Counsel is required pursuant to the terms of this Indenture, and who shall be
acceptable to the Trustee, and which opinion shall be in form and substance
reasonably satisfactory to the Trustee.
<PAGE>
"Opinion of Independent Counsel" means a written opinion of
counsel, who may be regular outside counsel for the Company, but which is
issued by a Person who is not an employee or consultant (other than
non-employee legal counsel) of the Company and who shall be reasonably
acceptable to the Trustee, and which opinion shall be in form and substance
reasonably satisfactory to the Trustee.
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; PROVIDED that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor reasonably satisfactory to
the Trustee has been made;
(c) Securities, except to the extent provided in Sections 4.02 and
4.03, with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article IV; and
(d) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there shall have been
presented to the Trustee and the Company proof reasonably satisfactory to
each of them that such Securities are held by a bona fide purchaser in whose
hands the Securities are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the reasonable satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the
<PAGE>
Securities or any Affiliate of the Company or such other obligor.
"Pari Passu Debt" means any Debt of the Company which ranks PARI
PASSU in right of payment to the Securities.
"Paying Agent" means any Person (including the Company) authorized
by the Company to pay the principal of, premium, if any, or interest on, any
Securities on behalf of the Company.
"Payment Default" means any default in payment (whether at Stated
Maturity, upon scheduled installment, by acceleration or otherwise) of
principal of, premium, if any, or interest on Designated Senior Debt.
"Permitted Lien" means:
(a) Liens existing as of the date of the original issuance of the
Initial Securities;
(b) Liens existing (i) on property at the time of acquisition
thereof by the Company or a Restricted Subsidiary (whether such property is
acquired through a merger, a consolidation or otherwise), or (ii) on property
or securing Debt of, or Capital Stock of, any corporation, partnership or
other entity at the time such corporation, partnership or other entity
becomes a Restricted Subsidiary;
(c) Liens to secure Debt with respect to all or any part of the
acquisition cost or the cost of construction or improvement of property,
provided, such Debt is incurred and related Liens are created within 24
months of the acquisition, completion of construction or improvement or
commencement of full operation, whichever is later, and such Debt does not
exceed the aggregate amount of the acquisition cost and/or the construction
cost thereof;
(d) Liens on shares of Capital Stock or property of a Restricted
Subsidiary to secure Debt with respect to all or part of the acquisition cost
of such Restricted Subsidiary provided that such Debt is incurred and related
Liens are created within 24 months of the acquisition of such Restricted
Subsidiary and such Debt does not exceed the acquisition cost of such
Restricted Subsidiary;
(e) Liens to secure Debt incurred to construct additions to, or to
make Capital Improvements to, properties of the Company of any Restricted
Subsidiary, provided such Debt is incurred and related Liens are created
within 24 months of completion of construction or Capital Improvements and
such Debt does not exceed the cost of such construction or Capital
Improvement;
(f) Liens in favor of the Company or another Restricted Subsidiary;
<PAGE>
(g) Liens to secure Debt on which interest payments are exempt
from Federal income tax under Section 103 of the Code;
(h) Liens on the partnership or other Capital Stock of the Company
or any Restricted Subsidiary in any Joint Venture or any Restricted
Subsidiary which owns Capital Stock in such Joint Venture to secure Debt,
provided the amount of such Debt is contributed and/or advanced solely to
such Joint Venture;
(i) Liens securing Senior Debt and Liens on assets of a Subsidiary
securing Debt of that Subsidiary;
(j) any extension, renewal or replacement, in whole or in part, of
any Liens referred to in the foregoing clauses (a) through (i) or any Debt
secured thereby, including premium, if any, provided that the aggregate
principal amount does not exceed (x) the greater of (A) the principal amount
secured thereby at the time of such extension, renewal or replacement, or, as
the case may be, repayment or extinguishment and (B) 80% of the fair market
value (in the opinion of the Board of Directors) of the properties subject to
such extension, renewal or replacement plus (y) any reasonable fees and
expenses associated with such extension, renewal or replacement, and
PROVIDED, FURTHER, in the case of a replacement thereof, such Debt is
incurred and related Liens are created within 24 months of the repayment or
extinguishment of the Debt or Liens referred to in the foregoing clauses (a)
through (i);
(k) purchase money liens on personal property;
(l) Liens to secure payments of workers' compensation or insurance
premiums, or related to tenders, bids or contracts (except contracts for the
payment of money);
(m) Liens in connection with tax assessments or other governmental
charges, or as security required by law or governmental regulation as a
condition to the transaction of any business or the exercise of any privilege
or right;
(n) mechanic's, materialman's, carrier's or other like Liens,
arising in the ordinary course of business; and
(o) Liens in favor of any domestic or foreign government or
governmental body in connection with contractual or statutory obligations.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
estate, unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Predecessor Security" of any particular Security means every
previous
<PAGE>
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.08 in exchange for a
mutilated Security or in lieu of a lost, destroyed or stolen Security shall
be deemed to evidence the same debt as the mutilated, lost, destroyed or
stolen Security.
"Principal Property" means any real estate or other physical
facility or depreciable asset, the net book value of which on the date of
determination exceeds the greater of $25 million or 2% of Consolidated Net
Tangible Assets of the Company.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A under
the Securities Act.
"Redeemable Capital Stock" means any class or series of Capital
Stock that, either by its terms or by the terms of any security into which it
is convertible or exchangeable by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed
prior to the Stated Maturity of the Securities or is redeemable at the option
of the holder thereof at any time prior to any such Stated Maturity of the
Securities, or is convertible into or exchangeable for debt securities at any
time prior to any such Stated Maturity of the Securities.
"Redemption Date" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture, other than the Special
Redemption Date.
"Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which
it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 21, 1998, among the Company and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from
time to time in accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 1 or December 1 (whether or not a Business Day)
next preceding such Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means
any officer or employee assigned to the Corporate Trust Office or any agent
of the Trustee appointed hereunder, including any vice president, assistant
vice president, secretary, assistant secretary, or any other officer or
assistant officer of the Trustee or any agent of the Trustee appointed
hereunder to whom any
<PAGE>
corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Security" means Securities that are required to bear
the Private Placement Legend.
"Restricted Subsidiary" means any Subsidiary of the Company
organized and existing under the laws of the United States of America and the
principal business of which is carried on within the United States of America
(i) which owns, or is a lessee pursuant to a capital lease of, any Principal
Property or (ii) in which the investment of the Company and all of its
Subsidiaries exceeds 5% of Consolidated Net Tangible Assets as of the date of
such determination other than, in the case of either clause (i) or (ii), (A)
each Subsidiary whose business primarily consists of finance, banking,
credit, leasing, insurance, financial services or other similar operations,
or any combination thereof, and (B) each Subsidiary formed or acquired after
the date hereof for the purpose of developing new assets or acquiring the
business or assets of another Person and which does not acquire any part of
the business or assets of the Company or any Restricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act, as amended
from time to time.
"Rule 144A Global Securities" means one or more permanent Global
Securities in registered form representing the aggregate principal amount of
Initial Securities sold in reliance on Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Rating Group, a division of McGraw
Hill, Inc. or any successor rating agency.
"Securities" means, collectively, the Initial Securities and, when
and if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute.
"Security Agreement" means the Security Agreement dated as of
December 21, 1998 by and among the Company, the Trustee and the Securities
Intermediary, as such agreement may be amended, modified or supplemented from
time to time in accordance with the terms thereof.
"Securities Intermediary" means First Union National Bank, as
securities intermediary.
"Senior Debt" means
<PAGE>
(a) all Debt outstanding under Credit Facilities and all Hedging
Obligations with respect thereto;
(b) any other Debt, unless the instrument under which such Debt is
incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Securities or to other Debt which ranks equally with,
or is subordinated to, the Securities; and
(c) all Obligations with respect to the items listed in the preceding
clauses (a) and (b).
Notwithstanding anything to the contrary in the preceding, Senior
Debt will not include:
(1) any liability for Federal, state, local and other taxes owed or
owing by the Company;
(2) any Debt of the Company to any of its Subsidiaries or other
Affiliates; or
(3) any trade payables.
"Series A Securities" means the Initial Securities.
"Series B Securities" means the Exchange Securities.
"Significant Subsidiary" of the Company means any Restricted
Subsidiary of the Company that is a "significant subsidiary" as defined in
Rule 1.02(v) of Regulation S-X under the Securities Act.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.09.
"Special Redemption Date" means the 30th calendar day after the
Issue Date.
"Stated Maturity" means, when used with respect to any Debt or any
installment of interest thereon, the dates specified in such Debt as the
fixed date on which the principal of such Debt or such installment of
interest, as the case may be, is due and payable.
"Subordinated Debt" means any Debt of the Company (whether
outstanding on the date of the Indenture or thereafter incurred) which is
subordinate or junior in right of payment to the Securities.
"Subsidiary" means any corporation of which at least a majority of the
<PAGE>
outstanding Capital Stock having by the terms thereof ordinary voting power
to elect a majority of the directors of such corporation is, at the time
directly or indirectly, owned by the Company or by one or more Subsidiaries
thereof, or by the Company and one or more Subsidiaries.
"Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the same debt as
that evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.08 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Security.
"Transactions" means the Hilton Distribution, the Grand
Distribution and the Merger.
"Treasury Securities" means any investment in obligations issued or
guaranteed by the United States government or any agency thereof.
"Treasury Yield" means the yield to maturity at the time of
computation of Treasury Securities with a constant maturity (as compiled by
and published in the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two business days prior to
the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal
to the then remaining average life of the Securities, provided that if the
average life of the Securities is not equal to the constant maturity of the
Treasury Security for which a weekly average yield is given, the Treasury
Yield shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of Treasury Securities
for which such yields are given, except that if the average life of the
Securities is less than one year, the weekly average yield on actually traded
Treasury Securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture, until a successor trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, or any successor statute.
"wholly-owned," with respect to any Subsidiary , means any
Subsidiary of a Person of which at least 99% of the outstanding Capital Stock
is owned by the Person or another wholly owned Subsidiary of such Person.
For purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
<PAGE>
Section 1.02 OTHER DEFINITIONS.
<TABLE>
<S> <C>
TERM DEFINED IN SECTION
"Act" 1.05
"Agent Members" 3.06
"covenant defeasance" 4.03
"Defaulted Interest" 3.09
"defeasance" 4.02
"Defeased Securities" 4.01
"Payment Blockage Notice" 13.03
"Payment Blockage Period" 13.03
"Private Placement Legend" 2.02
"Representative" 13.09
"Restricted Period" 2.01
"Sale and Leaseback Transaction" 10.08
"Securities" Recitals
"Security Register" 3.05
"Security Registrar" 3.05
"Special Redemption" 11.09
"Special Payment Date" 3.09
"Special Redemption Account" 11.09
"Surviving Entity" 8.01
"U.S. Government Obligations" 4.04
</TABLE>
Section 1.03 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company and any other obligor
on the Securities (if applicable) shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture (including any covenant compliance which constitutes a condition
<PAGE>
precedent) relating to the proposed action have been complied with, and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the
case of any such application or request as to which the furnishing of such
certificates or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with
a condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read and understands such
covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual or such
firm, he or it has made such examination or investigation as is necessary to
enable him or it to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual
or such firm, such condition or covenant has been complied with.
Section 1.04 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate of an officer of the Company or other obligor on
the Securities may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such
certificate or opinion may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer
or officers of the Company or other obligor on the Securities stating that
the information with respect to such factual matters is in the possession of
the Company or other obligor on the Securities, unless such officer or
counsel
<PAGE>
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous. Opinions of Counsel required to be delivered to the Trustee may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company
or government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that
various financial covenants have been complied with.
Any certificate or opinion of an officer of the Company or other
obligor on the Securities may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of, or representations by, an
accountant or firm of accountants in the employ of the Company, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting
matters upon which his certificate or opinion may be based are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with the Trustee shall contain a statement that such firm is
independent with respect to the Company.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.05 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and conclusive in favor
of the Trustee and the Company, if made in the manner provided in this
Section 1.05.
(b) The ownership of Securities shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act by the Holder of any Security shall bind every future
Holder of the same Security or the Holder of every Security issued upon the
transfer
<PAGE>
thereof or in exchange therefor or in lieu thereof, in respect of anything
done, suffered or omitted to be done by the Trustee, any Paying Agent or the
Company or any other obligor of the Securities in reliance thereon, whether
or not notation of such action is made upon such Security.
(d) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems
sufficient.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company
may, at its option, by or pursuant to a Board Resolution, fix in advance a
record date for the determination of such Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. Notwithstanding
Trust Indenture Act Section 316(c), any such record date shall be the record
date specified in or pursuant to such Board Resolution, which shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such first solicitation is
completed.
If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for purposes of
determining whether Holders of the requisite proportion of Securities then
Outstanding have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for this
purpose the Securities then Outstanding shall be computed as of such record
date; PROVIDED that no such request, demand, authorization, direction,
notice, consent, waiver or other Act by the Holders on such record date shall
be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after such record date.
(f) For purposes of this Indenture, any action by the Holders which may
be taken in writing may be taken by electronic means or as otherwise
reasonably acceptable to the Trustee.
Section 1.06 NOTICES, ETC., TO THE TRUSTEE AND THE COMPANY.
<PAGE>
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any other obligor on
the Securities shall be sufficient for every purpose (except as provided in
Section 5.01(c)) hereunder if in writing and mailed, first-class postage
prepaid, or delivered by recognized overnight courier, to or with the Trustee
at its Corporate Trust Office, Attention: Corporate Trust Administration, or
at any other address previously furnished in writing to the Holders or the
Company or any other obligor on the Securities by the Trustee, in any event,
with a copy to the Trustee at 230 South Tryon Street, 9th Floor, Charlotte,
North Carolina 28288-1179, Attention: Corporate Trust Administration; or
(b) the Company by the Trustee or any Holder shall be sufficient for
every purpose (except as provided in Section 5.01(c)) hereunder if in writing
and mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to the Company at 3930 Howard Hughes Parkway, Las Vegas, Nevada
89109, Attention: Chief Financial Officer or at any other address previously
furnished in writing to the Trustee by the Company.
Section 1.07 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, or delivered
by recognized overnight courier, to each Holder affected by such event, at
its address as it appears in the Security Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of
such notice. In any case where notice to Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to
any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by
the Person entitled to receive such notice, either before or after the event,
and such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to
be a sufficient giving of such notice.
<PAGE>
Section 1.08 CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required
or deemed to be included in this Indenture by any of the provisions of the
Trust Indenture Act, the provision or requirement of the Trust Indenture Act
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
to be excluded, as the case may be.
Section 1.09 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.10 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
their respective successors and assigns, whether so expressed or not.
Section 1.11 SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.12 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 1.13 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEE
AND STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company or any successor Person or any of the Company's
Affiliates under the Securities, the Indenture, the Security Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration issuance of the Securities. The waiver may not be effective to
waive liabilities under the Federal securities laws.
<PAGE>
Section 1.14 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 1.15 LEGAL HOLIDAYS; PAYMENT OF SECURITIES.
In any case where any Interest Payment Date, Special Redemption Date or
Redemption Date, Maturity or Stated Maturity of any Security shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or
of the Securities) payment of interest or principal or premium, if any, need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on such Interest Payment Date,
Special Redemption Date or Redemption Date, or at the Maturity or Stated
Maturity and no interest shall accrue with respect to such payment for the
period from and after such Interest Payment Date, Special Redemption Date or
Redemption Date, Maturity or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 1.16 INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not
permitted by any such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
Section 1.17 SCHEDULES AND EXHIBITS.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
Section 1.18 COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of
which shall be deemed an original; but all such counterparts shall together
constitute but one and the same instrument.
Section 1.19 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
<PAGE>
Holders of Securities may communicate pursuant to TIA Section 312(b)
with other Holders of Securities with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the Paying Agent and
any other Person shall have the protection of TIA Section 312(c).
Section 1.20 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 1.21 QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall
pay all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith, including, but not limited to,
costs and expenses of qualification of this Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel
or other documentation as it may reasonably request in connection with any
such qualification of this Indenture under the TIA.
Section 1.22 REGISTRATION RIGHTS.
Certain Holders of Securities may be entitled to certain registration
rights with respect to such Securities pursuant to, and subject to the terms
of, the Registration Rights Agreement.
ARTICLE II
SECURITY FORMS
Section 2.01 FORMS GENERALLY.
The Securities and the Trustee's certificate of authentication thereon
shall be in substantially the forms set forth in this Article II, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted hereby and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. Any portion
of the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
<PAGE>
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more Rule 144A Global Securities,
substantially in the form set forth in Section 2.02, deposited upon issuance
with the Trustee, as custodian for the Depositary, registered in the name of
the Depositary, or its nominee, in each case for credit to an account of a
direct or indirect participant of the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Rule 144A Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Exchange Securities exchanged for Initial Securities shall be issued
initially in the form of one or more Exchange Global Securities,
substantially in the form set forth in Section 2.02, deposited upon issuance
with the Trustee, as custodian for the Depositary, registered in the name of
the Depositary or its nominee, in each case for credit to an account of a
direct or indirect participant of the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Exchange Global Securities may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Section 2.02 FORM OF FACE OF SECURITY.
(a) The form of the face of any Initial Securities authenticated and
delivered hereunder shall be substantially as follows:
Unless and until (i) an Initial Security is sold under an effective
registration statement under the Securities Act or (ii) an Initial Security
is exchanged for an Exchange Security in connection with an effective
registration statement under the Securities Act, in each case pursuant to the
Registration Rights Agreement, then such Initial Security shall bear the
legend set forth below (the "Private Placement Legend") on the face thereof:
THE SERIES A SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SERIES A SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
<PAGE>
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SERIES A SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THIS SERIES A SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SERIES A SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SERIES A SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
In addition, unless and until an Initial Security is issued in a form
other than global form, such Initial Security shall bear the legend set
forth below (the "Global Legend") on the face thereof:
THIS SERIES A SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.06
AND 3.07 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED
<PAGE>
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
PARK PLACE ENTERTAINMENT CORPORATION
------------------------
7 7/8% SERIES A SENIOR SUBORDINATED NOTE DUE 2005
CUSIP NO. 700690AA8
No. __________ $_______________________
Park Place Entertainment Corporation, a Delaware corporation (herein
called the "Company," which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to
pay to _____________ or registered assigns, the principal sum of ___________
United States dollars on December 15, 2005, at the office or agency of the
Company referred to below, and to pay interest thereon from December 21,
1998, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semiannually on June 15 and December 15 in
each year, commencing June 15, 1999 at the rate of 7 7/8% per annum, subject
to adjustments as described in the second following paragraph, in United
States dollars, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.
If all the Transactions have not been consummated on or before the
Special Redemption Date, the Company shall, on the Special Redemption Date,
redeem and retire all of the Securities for a price equal to 100% of their
principal amount plus accrued and unpaid interest thereon through the Special
Redemption Date.
Until the earlier to occur of the Hilton Distribution or the Special
Redemption Date, the Securities will be secured by the Special Redemption
Account as set forth in the Indenture. The Securities will not be
subordinated prior to the consummation of the Hilton Distribution.
The Holder of this Series A Security is entitled to the benefits of the
Registration Rights Agreement. Under the Registration Rights Agreement, subject
to the terms and conditions thereof, the Company is obligated to consummate the
Exchange Offer pursuant to which the Holder of this Series A
<PAGE>
Security shall have the right to exchange this Series A Security for a like
principal amount of the Series B Securities as provided therein. The Series
A Securities and the Series B Securities are together referred to as the
"Securities." The Series A Securities rank PARI PASSU in right of payment
with the Series B Securities.
In the event that (a) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 30th calendar day following the
date of original issue of the Series A Securities, (b) the Exchange Offer
Registration Statement has not been declared effective on or prior to the
120th calendar day following the date of original issue of the Series A
Securities or (c) the Exchange Offer is not consummated or, if the Company is
prohibited from doing an Exchange Offer, a Shelf Registration Statement is
not declared effective, in either case, on or prior to the 150th calendar day
following the date of original issue of the Series A Securities (each such
event referred to in clauses (a) through (c) above, a "Registration
Default"), the interest rate borne by the Series A Securities shall be
increased by an absolute amount of 0.25% per annum upon the occurrence of any
Registration Default, which rate (as increased as aforesaid) will increase by
an additional absolute amount of 0.25% each 90-day period that such
additional interest continues to accrue under any such circumstance;
provided, that the maximum aggregate increase in the interest rate will in no
event exceed an absolute amount of one percent (1%) per annum. Following the
cure of all Registration Defaults, the accrual of additional interest will
cease and the interest rate will revert to the original rate PROVIDED,
HOWEVER, that, if after any such reduction in interest rate, a different
event specified in clause (a), (b) or (c) above occurs, the interest rate
shall again be increased pursuant to the foregoing provisions.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the June 1 or December 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any
such interest not so punctually paid, or duly provided for, and interest on
such defaulted interest at the interest rate borne by the Securities, to the
extent lawful, shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may either be paid to the Person in whose name this
Security (or any Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by this Indenture not
inconsistent with the requirements of such exchange, all as more fully
provided in this Indenture.
<PAGE>
Payment of the principal of, premium, if any, and interest on, the
Securities, and exchange or transfer of the Securities, will be made at the
office or agency of the Company in The City of New York maintained for that
purpose (which initially will be a corporate trust office of the Trustee
located at 40 Broad Street, Suite 550, Fifth Floor, New York, New York 1004,
or at such other office or agency as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; PROVIDED,
HOWEVER, that payment of interest may be made at the option of the Company by
check mailed to the address of the Person entitled thereto as such address
shall appear on the Security Register.
Reference is hereby made to the further provisions of this Series A
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating
agent appointed as provided in the Indenture by manual signature of an
authorized signer, this Series A Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
PARK PLACE ENTERTAINMENT CORPORATION
By:
Name:
Title:
Attest:
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 7 7/8% Series A Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
<PAGE>
as Trustee
By:
------------------------------------
Authorized Signer
Dated:
---------------
(b) The form of the face of any Exchange Securities authenticated and
delivered hereunder shall be substantially as follows:
Unless and until an Exchange Security is issued in a form other than
global form, such Exchange Security shall bear the Global Legend set forth
below on the face thereof:
THIS SERIES B SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.06
AND 3.07 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PARK PLACE ENTERTAINMENT CORPORATION
----------------------
7 7/8% SERIES B SENIOR SUBORDINATED NOTE DUE 2005
CUSIP NO. 700690AB6
<PAGE>
No. __________ $_______________________
Park Place Entertainment Corporation, a Delaware corporation (herein
called the "Company," which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to
pay to _____________ or registered assigns, the principal sum of ___________
United States dollars on December 15, 2005, at the office or agency of the
Company referred to below, and to pay interest thereon from December 21,
1998, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semiannually on June 15 and December 15 in
each year, commencing June 15, 1999 at the rate of 7 7/8% per annum, subject
to adjustments as described in the second following paragraph, in United
States dollars, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.
If all the Transactions have not been consummated on or before the
Special Redemption Date, the Company shall, on the Special Redemption Date,
redeem and retire all of the Securities for a price equal to 100% of their
principal amount plus accrued and unpaid interest thereon through the Special
Redemption Date.
Until the earlier to occur of the Hilton Distribution or the Special
Redemption Date, the Securities will be secured by the Special Redemption
Account as set forth in the Indenture. The Securities will not be
subordinated prior to the consummation of the Hilton Distribution.
This Series B Security was issued pursuant to the Exchange Offer
pursuant to which the Series A Securities were exchanged for a like principal
amount of the Series B Securities. The Series B Securities rank PARI PASSU
in right of payment with the Series A Securities. The Series A Securities
and the Series B Securities are together referred to as the "Securities."
For any period in which the Series A Security exchanged for this Series
B Security was outstanding, in the event that (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the
30th calendar day following the date of original issue of the Series A
Securities, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 120th calendar day following the date
of original issue of the Series A Securities or (c) the Exchange Offer is not
consummated or, if the Company is prohibited from doing an Exchange Offer, a
Shelf Registration Statement is not declared effective, in either case, on or
prior to the 150th calendar day following the date of original issue of the
Series A Securities (each such event referred to in clauses (a) through (c)
above, a "Registration Default"), the interest rate borne by the Series A
Securities shall be increased by an absolute amount of 0.25% per annum upon
the occurrence of any Registration Default, which rate (as
<PAGE>
increased as aforesaid) will increase by an additional absolute amount of
0.25% each 90-day period that such additional interest continues to accrue
under any such circumstance; provided, that the maximum aggregate increase in
the interest rate will in no event exceed an absolute amount of one percent
(1%) per annum. Following the cure of all Registration Defaults the accrual
of additional interest will cease and the interest rate will revert to the
original rate; PROVIDED that, to the extent interest at such increased
interest rate has been paid or duly provided for with respect to the Series A
Securities, interest at such increased interest rate, if any, on the Series B
Securities shall accrue from the most recent Interest Payment Date to which
such interest on the Series A Security has been paid or duly provided for;
PROVIDED, HOWEVER, that, if after any such reduction in interest rate, a
different event specified in clause (a), (b) or (c) above occurs, the
interest rate shall again be increased pursuant to the foregoing provisions.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the June 1 or December 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any
such interest not so punctually paid, or duly provided for, and interest on
such defaulted interest at the interest rate borne by the Securities, to the
extent lawful, shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may either be paid to the Person in whose name this
Security (or any Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by this Indenture not
inconsistent with the requirements of such exchange, all as more fully
provided in this Indenture.
Payment of the principal of, premium, if any, and interest on, the
Securities, and exchange or transfer of the Securities, will be made at the
office or agency of the Company in The City of New York maintained for that
purpose (which initially will be a corporate trust office of the Trustee
located at 40 Broad Street, Suite 550, Fifth Floor, New York, New York 1004),
or at such other office or agency as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; PROVIDED,
HOWEVER, that payment of interest may be made at the option of the Company by
check mailed to the address of the Person entitled thereto as such address
shall appear on the Security Register.
Reference is hereby made to the further provisions of this Series B
Security set forth on the reverse hereof, which further provisions shall for all
<PAGE>
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating
agent appointed as provided in the Indenture by manual signature of an
authorized signer, this Series B Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
PARK PLACE ENTERTAINMENT CORPORATION
By:
Name:
Title:
Attest:
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 7 7/8% Series B Senior Subordinated Notes due 2005
referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By:
--------------------------------
Authorized Signer
Dated:
-------------
Section 2.03 FORM OF REVERSE OF SECURITIES.
(a) The form of the reverse of the Initial Securities shall be
substantially as follows:
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION
7 7/8% Series A Senior Subordinated Notes due 2005
This Series A Security is one of a duly authorized issue of securities
of the Company designated as its 7 7/8% Series A Senior Subordinated Notes
due 2005 (herein called the "Series A Securities"), limited (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $400,000,000, issued under and subject to the terms of an indenture
(herein called the "Indenture") dated as of December 21, 1998, between the
Company and First Union National Bank, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a) the
entire Debt on the Securities and (b) certain restrictive covenants and
related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Securities are subject to redemption at any time, at the option of
the Company, in whole but not in part, on not less than 30 nor more than 60
days' prior notice, in amounts of $1,000 or an integral multiple thereof, at
a Redemption Price equal to 100% of the principal amount thereof plus the
Make-Whole Premium, together with accrued and unpaid interest thereon, if
any, to the Redemption Date (subject to the rights of Holders of record on
relevant record dates to receive interest due on an Interest Payment Date).
In the case of any redemption or repurchase of Securities in accordance
with the Indenture, interest installments whose Stated Maturity is on or
prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular
Record Date or Special Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision
is made in accordance with the Indenture shall cease to bear interest from
and after the Redemption Date.
Each Holder, by accepting a Security, shall be deemed to have agreed that
if the gaming authority of any jurisdiction in which the Company or any of its
subsidiaries conducts or proposes to conduct gaming requires that a Person who
is a Holder or the beneficial owner of Securities be licensed, qualified or
found suitable under applicable gaming laws, such Holder or beneficial owner, as
the case may be, shall apply for a license, qualification or a finding of
suitability within the required time period. If such Person fails to apply or
become licensed
<PAGE>
or qualified or is found unsuitable, the Company shall have the right, at its
option to (a) require such Person to dispose of its Securities or beneficial
interest therein within 30 days of receipt of notice of the Company's
election or such earlier date as may be requested or prescribed by such
gaming authority; or (b) redeem such Securities at a redemption price equal
to the lesser of (i) such Person's cost or (ii) 100% of the principal amount
of the Securities plus accrued and unpaid interest thereon, if any, to the
earlier of the Redemption Date or the date of the finding of unsuitablility
which may be less than 30 days following the notice of redemption if so
requested or prescribed by the applicable gaming authority.
In the event of redemption or repurchase of the Securities in accordance
with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain
amendments which require the consent of all the Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders under the Indenture and the
Securities at any time by the Company and the Trustee with the consent of the
Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of at least a majority in aggregate principal amount
of the Securities (100% of the Holders in certain circumstances) at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and the
Securities and certain past Defaults under the Indenture and the Securities
and their consequences. Any such consent or waiver by or on behalf of the
Holder of a Security shall be conclusive and binding upon such Holder and
upon all future Holders of such Security and of any Security issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof
whether or not notation of such consent or waiver is made upon such Security.
No reference herein to the Indenture and no provision of the Securities
or of the Indenture shall alter or impair the obligation of the Company or
any other obligor on the Securities (in the event such other obligor is
obligated to make payments in respect of the Securities), which is absolute
and unconditional, to pay the principal of, premium, if any, and interest on,
the Securities at the times, place, and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set
<PAGE>
forth, the transfer of a Security is registrable in the Security Register,
upon surrender of such Security for registration of transfer at the office or
agency of the Company in the Borough of Manhattan, The City of New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or its attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
Certificated securities shall be transferred to all beneficial holders
in exchange for their beneficial interests in the Rule 144A Global Securities
if (x) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security and a successor Depositary is
not appointed by the Company within 90 days or (y) there shall have occurred
and be continuing an Event of Default and the Security Registrar has received
a request from the Depositary. Upon any such issuance, the Trustee is
required to register such certificated Securities in the name of, and cause
the same to be delivered to, such Person or Persons (or the nominee of any
thereof). All such certificated Series A Securities would be required to
include the Private Placement Legend.
Securities in certificated form are issuable only in registered form
without coupons in a minimum amount of $100,000 and in denominations of
$1,000 and any integral multiple thereof that is above the minimum amount of
$100,000. As provided in the Indenture and subject to certain limitations
therein set forth, the Securities are exchangeable for a like aggregate
principal amount of Securities of a differing authorized denomination, as
requested by the Holder surrendering the same.
At any time when the Company is not subject to Sections 13 or 15(d) of
the Exchange Act, upon the written request of a Holder of a Series A
Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Series A Security who such Holder informs the Company is
reasonably believed to be a "Qualified Institutional Buyer" within the
meaning of Rule 144A under the Securities Act, as the case may be, in order
to permit compliance by such Holder with Rule 144A under the Securities Act.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
<PAGE>
the Person in whose name such Security is registered as the owner hereof for
all purposes, whether or not such Security is overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.
All terms used in this Series A Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
The Transferee Certificate, in the form of Appendix I hereto, will be
attached to the Initial Security.
Unless and until (i) an Initial Security is sold under an effective
registration statement under the Securities Act or (ii) an Initial Security
is exchanged for an Exchange Security in connection with an effective
registration statement under the Securities Act, in each case pursuant to the
Registration Rights Agreement, then the Restricted Security Certificate, in
the form of Exhibit A hereto, will be attached to the Initial Security.
After such Initial Security is sold under an effective registration statement
under the Securities Act or exchanged for an Exchange Security, then the
Unrestricted Security Certificate, in the form of Exhibit B hereto, will be
attached to the Exchange Security.
(b) The form of the reverse of the Exchange Securities shall be
substantially as follows:
PARK PLACE ENTERTAINMENT CORPORATION
7 7/8% Series B Senior Subordinated Notes due 2005
This Series B Security is one of a duly authorized issue of securities
of the Company designated as its 7 7/8% Series B Senior Subordinated Notes
due 2005 (herein called the "Series B Securities"), limited (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $400,000,000, issued under and subject to the terms of an indenture
(herein called the "Indenture") dated as of December 21, 1998, between the
Company and First Union National Bank, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
<PAGE>
The Indenture contains provisions for defeasance at any time of (a) the
entire Debt on the Securities and (b) certain restrictive covenants and
related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Securities are subject to redemption at any time, at the option of
the Company, in whole or but not in part, on not less than 30 nor more than
60 days' prior notice, in amounts of $1,000 or an integral multiple thereof,
at a Redemption Price equal to 100% of the principal amount thereof plus the
Make-Whole Premium, together with accrued and unpaid interest thereon, if
any, to the Redemption Date (subject to the rights of Holders of record on
relevant record dates to receive interest due on an Interest Payment Date).
In the case of any redemption or repurchase of Securities in accordance
with the Indenture, interest installments whose Stated Maturity is on or
prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular
Record Date or Special Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision
is made in accordance with the Indenture shall cease to bear interest from
and after the Redemption Date.
Each Holder, by accepting a Security, shall be deemed to have agreed
that if the gaming authority of any jurisdiction in which the Company or any
of its subsidiaries conducts or proposes to conduct gaming requires that a
Person who is a Holder or the beneficial owner of Securities be licensed,
qualified or found suitable under applicable gaming laws, such Holder or
beneficial owner, as the case may be, shall apply for a license,
qualification or a finding of suitability within the required time period.
If such Person fails to apply or become licensed or qualified or is found
unsuitable, the Company shall have the right, at its option to (a) require
such Person to dispose of its Securities or beneficial interest therein
within 30 days of receipt of notice of the Company's election or such earlier
date as may be requested or prescribed by such gaming authority; or (b)
redeem such Securities at a redemption price equal to the lesser of (i) such
Person's cost or (ii) 100% of the principal amount of the Securities plus
accrued and unpaid interest thereon, if any, to the earlier of the Redemption
Date or the date of the finding of unsuitability which may be less than 30
days following the notice of redemption if so requested or prescribed by the
applicable gaming authority.
In the event of redemption or repurchase of the Securities in accordance
with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner
and with
<PAGE>
the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain
amendments which require the consent of all the Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders under the Indenture and the
Securities at any time by the Company and the Trustee with the consent of the
Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of at least a majority in aggregate principal amount
of the Securities (100% of the Holders in certain circumstances) at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and the
Securities and certain past Defaults under the Indenture and the Securities
and their consequences. Any such consent or waiver by or on behalf of the
Holder of a Security shall be conclusive and binding upon such Holder and
upon all future Holders of such Security and of any Security issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof
whether or not notation of such consent or waiver is made upon such Security.
No reference herein to the Indenture and no provision of the Securities
or of the Indenture shall alter or impair the obligation of the Company or
any other obligor on the Securities (in the event such other obligor is
obligated to make payments in respect of the Securities), which is absolute
and unconditional, to pay the principal of, premium, if any, and interest on,
the Securities at the times, place, and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of a Security is registrable in the Security
Register, upon surrender of such Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or its attorney duly authorized in writing, and thereupon
one or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
Certificated securities shall be transferred to all beneficial holders in
exchange for their beneficial interests in the Global Securities if (x) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Exchange Global Security and a successor Depositary is not
appointed by the Company within 90 days or (y) there shall have occurred and be
continuing an Event of Default and the Security Registrar has received a request
from the Depositary. Upon any such issuance, the Trustee is required to
register such certificated Securities in the name of, and cause the same to be
<PAGE>
delivered to, such Person or Persons (or the nominee of any thereof).
Securities in certificated form are issuable only in registered form
without coupons in a minimum amount of $100,000 and in denominations of
$1,000 and any integral multiple thereof that is above the minimum amount of
$100,000. As provided in the Indenture and subject to certain limitations
therein set forth, the Securities are exchangeable for a like aggregate
principal amount of Securities of a differing authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner hereof for
all purposes, whether or not such Security is overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK,, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.
All terms used in this Series B Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
The Unrestricted Security Certificate, in the form of Exhibit B hereto,
and the Transferee Certificate, in the form of Appendix II hereto, will be
attached to the Exchange Security.
ARTICLE III
THE SECURITIES
Section 3.01 TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $400,000,000 in principal
amount of Securities, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities pursuant to Section 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 9.06 or
11.08.
<PAGE>
The Initial Securities shall be known and designated as the "7 7/8%
Series A Senior Subordinated Securities due 2005" of the Company. The
Exchange Securities shall be known and designated as the "7 7/8% Series B
Senior Subordinated Securities due 2005" of the Company. The Stated Maturity
of the Securities shall be December 15, 2005, and the Securities shall each
bear interest at the rate of 7 7/8% per annum, as such interest rate may be
adjusted as set forth in the Securities and the Registration Rights
Agreement, from December 21, 1998 or from the most recent Interest Payment
Date to which interest has been paid, as applicable, payable semiannually on
June 15 and December 15 in each year, commencing June 15, 1999, until the
principal thereof is paid or duly provided for. Interest on any overdue
principal, interest (to the extent lawful) or premium, if any, shall be
payable on demand.
The principal of, premium, if any, and interest on, the Securities shall
be payable and the Securities shall be exchangeable and transferable at an
office or agency of the Company in The City of New York maintained for such
purposes (which initially will be a corporate trust office of the trustee
located at 40 Broad Street, Suite 550, Fifth Floor, New York, New York 1004);
PROVIDED, HOWEVER, that payment of interest may be made at the option of the
Company by check mailed to addresses of the Persons entitled thereto as shown
on the Security Register.
For all purposes hereunder, the Initial Securities and the Exchange
Securities will be treated as one class and are together referred to as the
"Securities." The Initial Securities rank PARI PASSU in right of payment
with the Exchange Securities.
The Securities shall be redeemable as provided in Article XI and in the
Securities.
At the election of the Company, the entire Debt on the Securities or
certain of the Company's obligations and covenants and certain Events of
Default thereunder may be defeased as provided in Article IV.
Section 3.02 DENOMINATIONS.
The Securities shall be issuable only in fully registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 3.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by one of its
Chairman of the Board, its President, its Chief Executive Officer, its Chief
Financial Officer or one of its Vice Presidents attested by its Secretary or
one of its Assistant Secretaries. The signatures of any of these officers on
the Securities may be manual or facsimile.
<PAGE>
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did
not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee (with or without Guarantees endorsed thereon) for authentication,
together with a Company Order for the authentication and delivery of such
Securities; and the Trustee in accordance with such Company Order shall
authenticate and make available for delivery such Securities as provided in
this Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security endorsed thereon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein duly executed by the Trustee by manual signature of an
authorized officer, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.
In case the Company, pursuant to Article VIII, shall, in a single
transaction or through a series of related transactions, be consolidated or
merged with or into any other Person or shall sell, assign, convey or transfer
its properties and assets substantially in their entirety to any Person, and the
successor Person resulting from such consolidation or surviving such merger, or
into which the Company shall have been merged, or the successor Person which
shall have participated in the sale, assignment, conveyance or transfer, as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article VIII, any of the Securities authenticated or delivered prior
to such consolidation, merger, sale, assignment, conveyance or transfer may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and
delivered in any new name of a successor Person pursuant to this Section 3.03 in
exchange or substitution for or upon registration of transfer of any Securities,
such successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
<PAGE>
Securities authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities on behalf of the Trustee. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates such Security such Security
shall be valid nevertheless.
Section 3.04 TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation
of definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the
office or agency of the Company designated for such purpose pursuant to
Section 10.02, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities, the Company shall execute and the
Trustee (in accordance with a Company Order for the authentication of such
Securities) shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
Section 3.05 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause the Trustee to keep, so long as it is the Security
Registrar, at the Corporate Trust Office of the Trustee, or such other office as
the Trustee may designate, a register (the register maintained in such office or
in any other office or agency designated pursuant to Section 10.02 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as the Security Registrar may prescribe, the
<PAGE>
Company shall provide for the registration of Securities and of transfers of
Securities. Such transfers of Securities must be in a minimum amount of
$100,000. The Trustee shall initially be the "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided. The Company may change the Security Registrar or appoint one or
more co-Security Registrars without notice.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 10.02, the
Company shall execute, and the Trustee shall (in accordance with a Company
Order for the authentication of such Securities) authenticate and make
available for delivery, in the name of the designated transferee or
transferees, one or more new Securities of the same series of any authorized
denomination or denominations, of a like aggregate principal amount.
Furthermore, any Holder of the Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained
by the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in a Security shall be required to be reflected in a book
entry. Transfers of beneficial interests must be in a minimum amount of
$100,000.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like
aggregate principal amount, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall (in accordance
with a Company Order for the authentication of such Securities) authenticate
and make available for delivery, Securities of the same series which the
Holder making the exchange is entitled to receive; PROVIDED that no exchange
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission and the Initial Securities exchanged for the Exchange Securities
have been canceled.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer, or
for exchange, repurchase or redemption, shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made to a Holder for any registration of
<PAGE>
transfer, exchange or redemption of Securities, except for any tax or other
governmental charge that may be imposed in connection therewith, other than
exchanges pursuant to Sections 3.03, 3.04, 3.05, 9.06 or 11.08 not involving
any transfer.
The Company shall not be required (a) to issue, register the transfer of
or exchange any Security during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of the Securities
selected for redemption under Section 11.04 and ending at the close of
business on the day of such mailing or (b) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of Securities being redeemed in part.
Every Security shall be subject to the restrictions on transfer provided
in the legend required to be set forth on the face of each Security pursuant
to Section 2.02, and the restrictions set forth in this Section 3.05, and the
Holder of each Security, by such Holder's acceptance thereof (or interest
therein), agrees to be bound by such restrictions on transfer.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Security, whether pursuant to this Section
3.05, Section 3.04, 3.08, 9.06 or 11.08 or otherwise, shall also be a Global
Security and bear the legend specified in Section 2.02.
Section 3.06 BOOK ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) Each Global Security initially shall (i) be registered in the name
of the Depositary for such Global Security or the nominee of such Depositary,
(ii) be deposited with, or on behalf of, the Depositary or with the Trustee
as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.02.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held
on their behalf by the Depositary, or the Trustee as its custodian, or under
such Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent
of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of
any Security.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
<PAGE>
transfer of a Global Security in whole or in part may be registered, in the
name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) the Company notifies the Trustee in writing that
such Depositary (A) has notified the Company that it is unwilling or unable
to continue as Depositary for such Global Security or (B) has ceased to be a
clearing agency registered as such under the Exchange Act, and in either case
the Company fails to appoint a successor Depositary within 90 days, (ii) the
Company, at its option, executes and delivers to the Trustee a Company Order
stating that it elects to cause the issuance of the Securities in
certificated form and that all Global Securities shall be exchanged in whole
for Securities that are not Global Securities (in which case such exchange
shall be effected by the Trustee) or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default with respect to such Global
Security.
(c) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Depositary
or its nominee to the Trustee, as Security Registrar, for exchange or
cancellation as provided in this Article III. If any Global Security is to
be exchanged for other Securities or canceled in part, or if another Security
is to be exchanged in whole or in part for a beneficial interest in any
Global Security, then either (i) such Global Security shall be so surrendered
for exchange or cancellation as provided in this Article III or (ii) the
principal amount thereof shall be reduced or increased by an amount equal to
the portion thereof to be so exchanged or canceled, or equal to the principal
amount of such other Security to be so exchanged for a beneficial interest
therein, as the case may be, by means of an appropriate adjustment made on
the records of the Trustee, as Security Registrar, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the Depositary or
its authorized representative to make a corresponding adjustment to its
records. Upon any such surrender or adjustment of a Global Security, the
Trustee shall, subject to this Section 3.06(c) and as otherwise provided in
this Article III, authenticate and deliver any Securities issuable in
exchange for such Global Security (or any portion thereof) to or upon the
order of, and registered in such names as may be directed by, the Depositary
or its authorized representative. Upon the request of the Trustee in
connection with the occurrence of any of the events specified in the
preceding paragraph, the Company shall promptly make available to the Trustee
a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction
or request of the Depositary or its authorized representative which is given
or made pursuant to this Article III if such order, direction or request is
given or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III or otherwise, shall be
authenticated
<PAGE>
and delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the Depositary for
such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable
Procedures. Accordingly, any such owner's beneficial interest in a Global
Security will be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members.
Section 3.07 SPECIAL TRANSFER AND EXCHANGE PROVISIONS.
(a) CERTAIN TRANSFERS AND EXCHANGES. Transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds
specified in this Section 3.07 shall be made only in accordance with this
Section 3.07.
(i) EXCHANGES BETWEEN GLOBAL SECURITY AND NON-GLOBAL SECURITY.
A beneficial interest in a Global Security may be exchanged for a Security
that is not a Global Security as provided in Section 3.06(b).
(b) PRIVATE PLACEMENT LEGENDS. Rule 144A Securities and their
Successor Securities shall bear a Private Placement Legend, subject to the
following:
(i) subject to the following clauses of this Section 3.07(b), a
Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Private Placement Legend borne by such Global Security while represented
thereby;
(ii) subject to the following clauses of this Section 3.07(b), a
new Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof, upon
transfer or otherwise, shall bear the Private Placement Legend borne by such
other Security;
(iii) Exchange Securities, and all other Securities sold or
otherwise disposed of pursuant to an effective registration statement under
the Securities Act, together with their respective Successor Securities,
shall not bear a Private Placement Legend;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which
does not bear a Private Placement Legend may be issued in exchange for or in
lieu of a Security
<PAGE>
(other than a Global Security) or any portion thereof which bears such a
legend if the Trustee has received an Unrestricted Securities Certificate
substantially in the form of Exhibit C hereto, satisfactory to the Trustee
and duly executed by the Holder of such legended Security or his attorney
duly authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new Security
in exchange for or in lieu of such other Security as provided in this Article
III;
(v) a new Security which does not bear a Private Placement
Legend may be issued in exchange for or in lieu of a Security (other than a
Global Security) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Security is not
necessary to ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the direction of the Company, shall
authenticate and deliver such a new Security as provided in this Article III;
and
(vi) notwithstanding the foregoing provisions of this Section
3.07(b), a Successor Security of a Security that does not bear a particular
form of Private Placement Legend shall not bear such form of legend unless
the Company has reasonable cause to believe that such Successor Security is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and deliver a
new Security bearing a Private Placement Legend in exchange for such
Successor Security as provided in this Article III.
By its acceptance of any Security bearing the Private Placement Legend,
each Holder of such a Security acknowledges the restrictions on transfer of
such Security set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Security only as provided in this
Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.06 or this
Section 3.07. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Security Registrar.
Section 3.08 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (i) any mutilated Security is surrendered to the Trustee, or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, and the Trustee, such security or indemnity, in each case, as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company, or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon a Company Request the Trustee
shall authenticate and make available for delivery, in exchange for any
<PAGE>
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a replacement Security of like tenor and principal amount, bearing
a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section, the
Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.09 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on the Stated Maturity of such interest shall be paid to
the Person in whose name the Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest payment.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on the Stated Maturity of such interest, and
interest on such defaulted interest at the then applicable interest rate
borne by the Securities, to the extent lawful (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest"), shall
forthwith cease to be payable to the Holder on the Regular Record Date; and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or any relevant Predecessor Securities)
are registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the
<PAGE>
amount of Defaulted Interest proposed to be paid on each Security and the
date (not less than 30 days after such notice) of the proposed payment (the
"Special Payment Date"), and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the Special Payment
Date, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Subsection provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than 10
days prior to the date of the Special Payment Date and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company in writing of such Special Record
Date. In the name and at the expense of the Company, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at its address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date and Special Payment Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities are registered on such Special Record
Date and shall no longer be payable pursuant to the following Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by this Indenture not inconsistent with the requirements of such
exchange, if, after written notice given by the Company to the Trustee of the
proposed payment pursuant to this Subsection, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.09, each
Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 3.10 CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Company, or the Trustee on behalf of the Company,
shall use CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; PROVIDED, HOWEVER, that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Securities; and PROVIDED FURTHER, HOWEVER, that failure to
<PAGE>
use CUSIP numbers in any notice of redemption or exchange shall not affect
the validity or sufficiency of such notice.
Section 3.11 PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of, premium, if
any, and (subject to Section 3.09) interest on, such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 3.12 CANCELLATION.
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and,
if not already canceled, shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and all Securities so delivered shall be promptly
canceled by the Trustee. No Securities shall be authenticated in lieu of or
in exchange for any Securities canceled as provided in this Section 3.12,
except as expressly permitted by this Indenture. All canceled Securities
held by the Trustee shall be returned to the Company. The Trustee shall
provide the Company a list of all Securities that have been canceled from
time to time as requested by the Company.
Section 3.13 COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE IV
DEFEASANCE AND COVENANT DEFEASANCE
Section 4.01 COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at its option by Board Resolution, at any time after the
Special Redemption Date, with respect to the Securities, elect to have either
Section 4.02 or Section 4.03 be applied to all of the Outstanding Securities
(the "Defeased Securities"), upon compliance with the conditions set forth below
in
<PAGE>
this Article Four.
Section 4.02 DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 4.01 of the option applicable
to this Section 4.02, the Company and any other obligor upon the Securities,
if any, shall be deemed to have been discharged from its obligations with
respect to the Defeased Securities on the date the conditions set forth in
Section 4.04 below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company and any other obligor upon
the Securities shall be deemed to have paid and discharged the entire Debt
represented by the Defeased Securities, which shall thereafter be deemed to
be "Outstanding" only for the purposes of Section 4.05 and the other Sections
of this Indenture referred to in (a) and (b) below, and to have satisfied all
its other obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of the Company
and upon Company Request, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of Defeased
Securities to receive, solely from the trust fund described in Section 4.04
and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on, such Securities, when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 3.04, 3.05, 3.08, 10.02 and 10.03, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder, including,
without limitation, the Trustee's rights under Section 6.07, and (d) this
Article IV. Subject to compliance with this Article IV, the Company may
exercise its option under this Section 4.02 notwithstanding the prior
exercise of its option under Section 4.03 with respect to the Securities.
Section 4.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 4.01 of the option applicable to
this Section 4.03, the Company shall be released from its obligations under any
covenant or provision contained or referred to in Sections 10.05 through 10.11,
inclusive, and Article VIII hereof, with respect to the Defeased Securities on
and after the date the conditions set forth in Section 4.04 below are satisfied
(hereinafter, "covenant defeasance"), and the Defeased Securities shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Defeased Securities, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section, whether directly or
indirectly, by reason of any reference elsewhere herein to any such Section or
by reason of any reference in any such Section to any other provision herein or
in any other
<PAGE>
document and such omission to comply shall not constitute a Default or an
Event of Default under Section 5.01(c) but, except as specified above, the
remainder of this Indenture and such Defeased Securities shall be unaffected
thereby.
Section 4.04 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
4.02 or Section 4.03 to the Defeased Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities, (i) cash in United
States dollars, (ii) U.S. Government Obligations, or (iii) a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants or a nationally
recognized investment banking firm expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee to pay and discharge, the principal of, premium, if
any, and interest (which shall include Additional Interest, if any) on, the
Defeased Securities, on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal, premium,
if any, or interest (which shall include Additional Interest, if any) on such
Defeased Securities if at or prior to electing to exercise either its option
applicable to Section 4.02 or its option applicable to Section 4.03, the
Company has delivered to the Trustee an irrevocable notice of such
defeasance, including the date that such defeasance is to occur. For this
purpose, "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which
its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option
of the issuer thereof, and shall also include a depositary receipt issued by
a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depositary receipt, PROVIDED
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depositary receipt;
(b) In the case of an election under Section 4.02, the Company shall have
delivered to the Trustee an Opinion of Independent Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
<PAGE>
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and
based thereon such Opinion of Independent Counsel in the United States shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance had not occurred;
(c) In the case of an election under Section 4.03, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States reasonably acceptable to such Trustee to the effect that the Holders
of the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance had
not occurred;
(d) No Default or Event of Default (other than a Default or Event of
Default under this Indenture resulting from the borrowing of funds to be
applied to such deposit) shall have occurred and be continuing on the date of
such deposit, and with respect to an election under Section 4.02 insofar as
Section 5.01(e) or (f) is concerned, at any time during the period ending on
the 91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(e) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a Default under, this Indenture or any other
material agreement or instrument to which the Company or any Restricted
Subsidiary is a party or by which it is bound;
(f) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Securities over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others;
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section shall be in form and substance reasonably
satisfactory to the Trustee and may have qualifications customary for
opinions of the type required and counsel delivering such opinions may rely
on certificates of the Company or government or other officials customary for
opinions of the type required, which certificates shall be limited as to
matters of fact, including that various financial covenants have been
complied with.
Section 4.05 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
<PAGE>
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 10.03, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 4.04 in respect of
the Defeased Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (excluding the Company
or any of its Affiliates acting as Paying Agent), as the Trustee may
determine, to the Holders of such Securities of all sums due and to become
due thereon in respect of principal, premium, if any, and interest, but such
money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 4.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
imposed, assessed or for the account of the Holders of the Defeased
Securities.
Anything in this Article IV to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request
any United States dollars or U.S. Government Obligations held by it as
provided in Section 4.04 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect defeasance or covenant
defeasance.
Section 4.06 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 4.02 or
4.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated, with present and prospective
effect, as though no deposit had occurred pursuant to Section 4.02 or 4.03,
as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such United States dollars or U.S. Government
Obligations in accordance with Section 4.02 or 4.03, as the case may be;
PROVIDED, HOWEVER, that if the Company makes any payment to the Trustee or
Paying Agent of principal of, premium, if any, or interest on any Security
following the reinstatement of its obligations, the Trustee or Paying Agent
shall promptly pay any such amount to the Holders of the Securities and the
Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the United States dollars and U.S. Government
Obligations held by the Trustee or Paying Agent.
<PAGE>
ARTICLE V
REMEDIES
Section 5.01 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) a default in the payment of any interest on any Security when it
becomes due and payable, and such default shall continue for a period of 30
days;
(b) a default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity (upon acceleration, optional or mandatory
redemption or otherwise);
(c) a default in the performance, or breach, of any covenant or
warranty of the Company in the Indenture which default continues uncured for
a period of 60 days after written notice has been given, by certified mail,
(i) to the Company by the Trustee or (ii) to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Outstanding
Securities;
(d) an acceleration of the maturity of Debt of the Company (other than
Non-recourse Debt), at any one time, in an aggregate amount in excess of the
greater of (i) $25 million and (ii) 5% of Consolidated Net Tangible Assets,
if such acceleration is not annulled within 30 days after written notice to
the Company by the Trustee and the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities;
(e) the entry by a court of competent jurisdiction of (i) a decree or
order for relief in respect of the Company or any Significant Subsidiary in
an involuntary case or proceeding under any applicable Bankruptcy Law or (ii)
a decree or order adjudging the Company or any Significant Subsidiary
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Subsidiary or of any substantial part of
their respective properties, or ordering the winding up or liquidation of
their respective affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be unstayed
and in effect, for a period of 60 consecutive days; or
<PAGE>
(f) (i) the Company or any Significant Subsidiary commences a voluntary
case or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (ii) the Company or any
Significant Subsidiary consents to the entry of a decree or order for relief
in respect of the Company or such Significant Subsidiary in an involuntary
case or proceeding under any applicable Bankruptcy Law or to the commencement
of any bankruptcy or insolvency case or proceeding against it, (iii) the
Company or any Significant Subsidiary files a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law,
(iv) the Company or any Significant Subsidiary (A) consents to the filing of
such petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
the Company or such Significant Subsidiary or of any substantial part of
their respective properties, (B) makes an assignment for the benefit of
creditors or (C) admits in writing its inability to pay its debts generally
as they become due or (v) the Company or any Significant Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph (i); or
(g) a failure to comply with the provisions of the Security Agreement,
including, without limitation, a default in the payment, if required pursuant
to Section 11.09, on the Special Redemption Date, of the principal amount of
all of the Securities and all accrued and unpaid interest thereon through the
Special Redemption Date.
Section 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Sections 5.01(e) and (f) with respect to the Company) shall occur and be
continuing with respect to this Indenture, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Securities then
Outstanding may, and the Trustee at the request of such Holders shall,
declare all unpaid principal of, premium, if any, and accrued interest on all
Securities to be due and payable, by a notice in writing to the Company (and
to the Trustee if given by the Holders of the Securities) and upon any such
declaration, such principal, premium, if any, and interest shall become due
and payable immediately. If an Event of Default specified in clause (e) or
(f) of Section 5.01 occurs with respect to the Company and is continuing,
then all the Securities shall IPSO FACTO become and be due and payable
immediately in an amount equal to the principal amount of the Securities,
together with accrued and unpaid interest thereon, if any, to the date the
Securities become due and payable, without any declaration or other act on
the part of the Trustee or any Holder. Thereupon, the Trustee may, at its
discretion, proceed to protect and enforce the rights of the Holders of the
Securities by appropriate judicial proceedings.
After a declaration of acceleration with respect to the Securities, but
before a judgment or decree for payment of the money due has been obtained
<PAGE>
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in aggregate principal amount of the Securities Outstanding, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding Securities,
(iii) the principal of and premium, if any, on any Outstanding
Securities which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Securities, and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities; and
(b) all Events of Default, other than the non-payment of principal of
the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13. No such
rescission shall affect any subsequent Default or impair any right consequent
thereon.
Section 5.03 COLLECTION OF DEBT AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period
of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any Security at the Stated Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and premium, if any, and interest, with interest upon
the overdue principal and premium, if any, and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Securities; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the
<PAGE>
Trustee, its agents and counsel.
If the Company fails to pay such amounts within 3 Business Days of such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any other obligor upon
the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture by such appropriate private or judicial
proceedings as the Trustee shall deem most effectual to protect and enforce
such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein or therein, or to enforce any other proper remedy, subject however to
Section 5.12. No recovery of any such judgment upon any property of the
Company shall affect or impair any rights, powers or remedies of the Trustee
or the Holders.
Section 5.04 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal, and
premium, if any, and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or similar official in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
<PAGE>
consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 5.05 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any
of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought
in its own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
Section 5.06 APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article or otherwise
on behalf of the Holders or the Trustee pursuant to this Article or through
any proceeding or any arrangement or restructuring in anticipation or in lieu
of any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of
principal, premium, if any, or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.07;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal, premium, if any, and interest, in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such Securities for principal, premium, if any, and interest; and
THIRD: The balance, if any, to the Person or Persons entitled thereto,
including the Company, provided that all sums due and owing to the Holders
and the Trustee have been paid in full as required by this Indenture.
<PAGE>
Section 5.07 LIMITATION ON SUITS.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 15 days after its receipt of such notice, request
and offer (and if requested, provision) of indemnity has failed to institute
any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Security to affect, disturb or prejudice the rights
of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture or any Security, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
Section 5.08 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right based on the terms stated herein, which is
absolute and unconditional, to receive payment of the principal of, premium, if
any, and (subject to Section 3.09) interest on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or the repurchase date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
<PAGE>
without the consent of such Holder.
Section 5.09 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, any
other obligor on the Securities, the Trustee and the Holders shall, subject
to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 5.10 RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default
or an acquiescence therein. Every right and remedy given by this Article or
by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
Section 5.12 CONTROL BY HOLDERS.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities shall have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
PROVIDED that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture (including, without limitation, Section 5.07), expose the Trustee
to personal liability, or be unduly prejudicial to Holders not joining therein;
and
<PAGE>
(b) subject to the provisions of Section 315 of the Trust Indenture
Act, the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
Section 5.13 WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities may on behalf of the Holders of all Outstanding
Securities waive any past Default hereunder and its consequences, except a
Default
(a) in the payment of the principal of, premium, if any, or interest on
any Security; or
(b) in respect of a covenant or a provision hereof which under this
Indenture cannot be modified or amended without the consent of the Holder of
each Security Outstanding affected by such modification or amendment.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other Default or impair any right consequent thereon.
Section 5.14 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by
such party litigant, but the provisions of this Section shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount
of the Outstanding Securities, or to any suit instituted by any Holder for
the enforcement of the payment of the principal of, premium, if any, or
interest on, any Security on or after the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on or after the
Redemption Date).
Section 5.15 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or
<PAGE>
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which
would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities contemplated
herein or in the Securities or which may affect the covenants or the
performance of this Indenture; and each of the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
Section 5.16 REMEDIES SUBJECT TO APPLICABLE LAW.
All rights, remedies and powers provided by this Article V may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Indenture are intended to be subject to all applicable mandatory provisions
of law which may be controlling in the premises, including applicable gaming
laws, and to be limited to the extent necessary so that they will not render
this Indenture invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
ARTICLE VI
THE TRUSTEE
Section 6.01 DUTIES OF TRUSTEE.
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
(a) if a Default or an Event of Default has occurred and is continuing,
and subject to compliance with applicable gaming laws, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in its exercise thereof as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs;
(b) except during the continuance of a Default or an Event of Default:
(i) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or obligations
shall be implied in this Indenture that are adverse to the Trustee; and
(ii) in the absence of bad faith or willful misconduct on its part,
<PAGE>
the Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture;
(c) the Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this Subsection (c) does not limit the effect of Subsection
(b) of this Section 6.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith, in accordance with a direction of
the Holders of a majority in principal amount of Outstanding Securities
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power confirmed
upon the Trustee under this Indenture;
(d) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it;
(e) whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to
Subsections (a), (b), (c) and (d) and (f) of this Section 6.01;
(f) the Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to
the extent required by law; and
(g) the Trustee shall cooperate with any gaming authority (including,
but not limited to, the New Jersey Casino Control Commission, the New Jersey
Division of Gaming Enforcement and the Mississippi Gaming Commission) of any
jurisdiction in which the Company or any of its subsidiaries conducts or
proposes to conduct gaming and shall produce any document or information as
any of them may request.
(h) The Trustee shall in no event be required to expend its own funds
<PAGE>
in the exercise of any of the remedies set forth in this Section 6.01.
Section 6.02 NOTICE OF DEFAULTS.
Within 30 days after a Responsible Officer of the Trustee receives
notice of the occurrence of any Default, the Trustee shall transmit by mail
to all Holders and any other Persons entitled to receive reports pursuant to
Section 313(c) of the Trust Indenture Act, as their names and addresses
appear in the Security Register, notice of such Default hereunder known to
the Trustee, unless such Default shall have been cured or waived; PROVIDED,
HOWEVER, that, except in the case of a Default in the payment of the
principal of, premium, if any, or interest on any Security, the Trustee shall
be protected in withholding such notice if and so long as a trust committee
of Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
Section 6.03 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.01 hereof and Trust Indenture Act
Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon receipt by it of any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Debt or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) the Trustee may consult with counsel of its selection and any
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred therein
or,
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of
<PAGE>
the negligence, bad faith or willful misconduct of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document unless requested in writing to do so by the Holders of not less
than a majority in aggregate principal amount of the Securities then
Outstanding; PROVIDED that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses
of every such investigation so requested by the Holders of not less than 25%
in aggregate principal amount of the Securities Outstanding shall be paid by
the Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand; PROVIDED, FURTHER, the Trustee in its
discretion may make such further inquiry or investigation into such facts or
matters as it may deem fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.04 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF
SECURITIES OR APPLICATION OF PROCEEDS THEREOF.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities, except that the Trustee represents that
it is duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made
by it in any Statement of Eligibility and Qualification on Form T-1 supplied
to the Company are true and accurate subject to the qualifications set forth
therein. The Trustee shall not be accountable for the use or application by
the Company of Securities or the proceeds thereof.
Section 6.05 TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS; ETC.
The Trustee, any Paying Agent, Security Registrar or any other agent of
the Company, in its individual or any other capacity, may become the owner or
<PAGE>
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the
same rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 6.06 MONEY HELD IN TRUST.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Except for funds or securities
deposited with the Trustee pursuant to Article IV, the Trustee shall be
required to invest all moneys received by the Trustee, until used or applied
as herein provided, in Cash Equivalents in accordance with the directions of
the Company.
Section 6.07 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR
CLAIM.
The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as the parties
shall agree in writing from time to time for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) and the Company
covenants and agrees to pay or reimburse the Trustee and each predecessor
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by or on behalf of the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
agents) except any such expense, disbursement or advance as may arise from
its negligence, bad faith or willful misconduct. The Company also covenants
and agrees to indemnify the Trustee and each predecessor Trustee for, and to
hold it harmless against, any claim, loss, liability, tax, assessment or
other governmental charge (other than taxes applicable to the Trustee's
compensation hereunder) or expense incurred without negligence, bad faith or
willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and
its duties hereunder, including enforcement of this Section 6.07 and also
including any liability which the Trustee may incur as a result of failure to
withhold, pay or report any tax, assessment or other governmental charge, and
the costs and expenses of defending itself against or investigating any claim
or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The obligations of the Company under this
Section 6.07 to compensate and indemnify the Trustee and each predecessor
Trustee and to pay or reimburse the Trustee and each predecessor Trustee for
reasonable expenses, disbursements and advances shall constitute an
additional obligation
<PAGE>
hereunder and shall survive the satisfaction and discharge of this Indenture
and the resignation or removal of the Trustee and each predecessor Trustee.
After the date of the Hilton Distribution, to secure the Company's
payment obligations in this Section 6.07, the Trustee shall have a perfected
lien prior to the Securities on all assets held or collected by the Trustee,
in its capacity as Trustee, except assets held in trust to pay principal and
premium, if any, of or interest on particular Securities.
Section 6.08 CONFLICTING INTERESTS.
The Trustee shall comply with the provisions of Section 3.09(b) of the
Trust Indenture Act.
Section 6.09 TRUSTEE ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be eligible
to act as trustee under Trust Indenture Act Section 3.09(a) and which shall
have a combined capital and surplus of at least $250,000,000, to the extent
there is an institution eligible and willing to serve. If the Trustee does
not have a Corporate Trust Office in The City of New York, the Trustee may
appoint an agent in The City of New York reasonably acceptable to the Company
to conduct any activities which the Trustee may be required under this
Indenture to conduct in The City of New York. If such Trustee publishes
reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section
6.09, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.09, the Trustee
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
Section 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 6.11.
(b) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice thereof to the Company. Upon
receiving such notice or resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors of the Company, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee. If an instrument of acceptance
by a successor
<PAGE>
trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may, or any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper,
appoint and prescribe a successor trustee.
(c) The Trustee may be removed at any time for any cause or for no
cause by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, delivered to the Trustee and
to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with the provisions of
Trust Indenture Act Section 3.09(b) after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security for at
least six months,
(ii) the Trustee shall cease to be eligible under Section 6.09
and shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, the Holder of any Security who has
been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
trustee and shall comply with the applicable requirements of Section 6.11.
If, within 60 days after such resignation, removal or incapability, or the
occurrence of such vacancy, the Company has not appointed a successor
Trustee, a successor trustee shall be appointed by the Act of the Holders of
a majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring
<PAGE>
Trustee. Such successor trustee so appointed shall forthwith upon its
acceptance of such appointment become the successor trustee and supersede the
successor trustee appointed by the Company. If no successor trustee shall
have been so appointed by the Company or the Holders of the Securities and
accepted appointment in the manner hereinafter provided, the Trustee or the
Holder of any Security who has been a bona fide Holder for at least six
months may, subject to Section 5.14, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register.
Each notice shall include the name of the successor trustee and the address
of its Corporate Trust Office or agent hereunder.
Section 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee as if originally named as
Trustee hereunder; but, nevertheless, on the written request of the Company
or the successor trustee, upon payment of its charges pursuant to Section
6.07 then unpaid, such retiring Trustee shall pay over to the successor
trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor trustee all such rights,
powers, duties and obligations. Upon request of any such successor trustee,
the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under
the provisions of Trust Indenture Act Section 3.09(a) and this Article VI and
shall have a combined capital and surplus of at least $250,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 6.10.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the appointment, then the notice called for
<PAGE>
by the preceding sentence may be combined with the notice called for by
Section 6.10. If the Company fails to give such notice within 10 days after
acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be given at the expense of the Company.
Section 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including the trust created by this Indenture) shall
be the successor of the Trustee hereunder, PROVIDED that such corporation
shall be eligible under Trust Indenture Act Section 310(a) and this Article
VI and shall have a combined capital and surplus of at least $250,000,000 and
have a Corporate Trust Office or an agent selected in accordance with Section
6.09, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities
or in this Indenture provided that the certificate of the Trustee shall have;
PROVIDED that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
Section 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company (or
other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee who has resigned
or been removed shall be subject to Trust Indenture Act Section 311(a) to the
extent indicated therein.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE
<PAGE>
Section 7.01 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 15 days after each Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a
list of similar form and content to that in subsection (a) hereof as of a
date not more than 15 days prior to the time such list is furnished;
PROVIDED, HOWEVER, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 7.02 DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Company, the Trustee, the Security Registrar and any other
Person shall have the protection of Trust Indenture Act Section 312(c).
Further, every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee or any agent of either of them shall be held accountable by reason of
the disclosure of any information as to the names and addresses of the
Holders in accordance with Trust Indenture Act Section 312, regardless of the
source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a
request made under Trust Indenture Act Section 312.
Section 7.03 REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year commencing with the first
May 15 after the issuance of Securities, the Trustee, if so required under
the Trust Indenture Act, shall transmit by mail to all Holders, in the manner
and to the extent provided in Trust Indenture Act Section 313(c), a brief
report dated as of such May 15 in accordance with and with respect to the
matters required by Trust Indenture Act Section 313(a). The Trustee shall
also transmit by mail to all Holders, in the manner and to the extent
provided in Trust Indenture Act Section 313(c), a brief report in accordance
with and with respect to the matters required by Trust Indenture Act Section
313(b)(2).
<PAGE>
(b) A copy of each report transmitted to Holders pursuant to this
Section 7.03 shall, at the time of such transmission, be mailed to the
Company and filed with each stock exchange, if any, upon which the Securities
are listed and also with the Commission. The Company will notify the Trustee
promptly if the Securities are listed on any stock exchange.
ARTICLE VIII
CONSOLIDATION, MERGER, SALE OF ASSETS
Section 8.01 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
(a) Prior to the Special Redemption Date, the Company shall not, in a
single transaction or through a series of related transactions, except in
accordance with the Transactions, (i) consolidate with or merge with or into
any other Person; or (ii) sell, assign, convey or transfer its properties and
assets substantially in their entirety (computed on a Consolidated basis) to
any Person.
(b) Following the Special Redemption Date, the Company may not, in a
single transaction or through a series of related transactions, (i)
consolidate with or merge with or into any other Person; or (ii) sell,
assign, convey or transfer its properties and assets substantially in their
entirety (computed on a Consolidated basis) to any Person, unless:
(i) either (A) the Company is the surviving entity; or (B) the
Person formed by or surviving such consolidation or merger (if other than the
Company) or to which such sale, assignment, conveyance or transfer shall have
been made (the "Surviving Entity") is an entity organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Surviving Entity assumes all the obligations of the
Company under the Securities and this Indenture; and
(iii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(c) The foregoing shall not apply to a sale, assignment, conveyance,
transfer, or other disposition of properties or assets solely between or
among the Company and any of its wholly-owned Subsidiaries.
Section 8.02 SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, conveyance or
transfer of the properties and assets of the Company substantially in their
entirety in accordance with Section 8.01, the Surviving Entity shall succeed to,
<PAGE>
and be substituted for, and may exercise every right and power of the Company
under this Indenture and/or in the Securities, as the case may be, with the
same effect as if such successor had been named as the Company herein and in
the Securities, and the Company shall be discharged from all obligations and
covenants hereof and in the Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01 SUPPLEMENTAL INDENTURES AND AGREEMENTS WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company and any other obligor
under the Securities when authorized by a Board Resolution, and the Trustee,
at any time and from time to time, may enter into one or more indentures
supplemental hereto or agreements in form and substance satisfactory to the
Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(c) to evidence the succession of another Person to the Company or any
other obligor upon the Securities, and the assumption by any such successor
or obligor of the covenants of the Company herein and in the Securities in
accordance with Article VIII;
(d) to add to the covenants of the Company or any other obligor upon
the Securities for the benefit of the Holders, or to surrender any right or
power conferred upon the Company or any other obligor upon the Securities, as
applicable, herein or in the Securities or to make any change that does not
adversely affect the legal rights of Holders under the Security Agreement;
(e) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 9.05 or otherwise; or
(f) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder.
Section 9.02 SUPPLEMENTAL INDENTURES AND AGREEMENTS WITH CONSENT OF
HOLDERS.
Except as permitted by Section 9.01, with the consent of the Holders of
at
<PAGE>
least a majority in aggregate principal amount of the Outstanding Securities,
by Act of said Holders delivered to the Company and the Trustee, the Company,
when authorized by Board Resolutions, and the Trustee may (i) enter into an
indenture or indentures supplemental hereto or agreements in form and
substance satisfactory to the Trustee, for the purpose of adding any
provisions to or amending, modifying or changing in any manner or eliminating
any of the provisions of this Indenture or the Securities (including but not
limited to, for the purpose of modifying in any manner the rights of the
Holders under this Indenture or the Securities) or (ii) waive compliance with
any provision in this Indenture or the Securities (other than waivers of past
Defaults covered by Section 5.13 and waivers of covenants which are covered
by Section 10.12); PROVIDED, HOWEVER, that no such supplemental indenture or
agreement shall, without the consent of the Holder of each Outstanding
Security affected thereby:
(a) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture or agreement, or the consent of whose Holders is
required for any waiver or compliance with certain provisions of this
Indenture;
(b) change the Stated Maturity of the principal of, or any installment
of interest on, or extend the time for payment of interest on any Security,
or change to an earlier date any Redemption Date of, or waive a default in
the payment of the principal or interest on, any such Security or otherwise
alter the provisions with respect to the redemption of the Securities in a
manner adverse to Holders, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which the principal of any Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date); and
(c) modify any of the provisions of this Section 9.02 or Sections 5.13,
10.01 or 10.12.
Upon the written request of the Company accompanied by a copy of Board
Resolutions authorizing the execution of any such supplemental indenture or
agreement and upon the filing with the Trustee of evidence of the consent of
Holders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section 9.02
to approve the particular form of any proposed supplemental indenture or
agreement, but it shall be sufficient if such Act shall approve the substance
thereof.
Section 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES OR AGREEMENTS.
<PAGE>
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article IX or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Trust
Indenture Act Sections 315(a) through 315(d) and Section 6.02 hereof) shall
be fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate stating that the execution of such supplemental indenture,
agreement or instrument is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture, agreement or instrument which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Section 9.04 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 9.05 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
Section 9.07 NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.02, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 1.06, setting forth in
general terms the substance of such supplemental indenture. Any failure of
the Company to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.
<PAGE>
ARTICLE X
COVENANTS
Section 10.01 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall duly and punctually pay the principal of, premium, if
any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture. Payments in respect of the Securities
represented by a Global Security (including principal, premium, if any,
interest and Additional Interest will be made by wire transfer of immediately
available funds to the accounts specified by the Global Security Holder.
With respect to Securities that are not Global Securities, the Company will
make all payments of principal, premium, if any, interest and Additional
Interest, if any, by wire transfer of immediately available funds to the
accounts specified by Holders thereof or, if no such account is specified, by
mailing a check to each such Holder's registered address.
Section 10.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment. The Company also will maintain in The
City of New York an office or agency where Securities may be surrendered for
registration of transfer, redemption or exchange and where notices and
demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of the Trustee, at its Corporate Trust
Office initially located at 40 Broad Street, Suite 550, Fifth Floor, New
York, New York 10004, will be such office or agency of the Company, unless
the Company shall designate and maintain some other office or agency for one
or more of such purposes. The Company will give prompt written notice to the
Trustee of the location and any change in the location of any such offices or
agencies. If at any time the Company shall fail to maintain any such
required offices or agencies or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the office of the Trustee and the Company hereby appoints
the Trustee such agent as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to
time rescind such designation. The Company will give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such office or agency.
The Trustee shall initially act as Paying Agent for the Securities.
<PAGE>
Section 10.03 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company or any of its Affiliates shall at any time act as Paying
Agent, it will, on or before each due date of the principal of, premium, if
any, or interest on any of the Securities, segregate and hold in trust for
the benefit of the Holders entitled thereto a sum sufficient to pay the
principal, premium, if any, or interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided, and will
promptly notify the Trustee of its action or failure so to act.
If the Company or any of its Affiliates is not acting as Paying Agent,
the Company will, on or before each due date of the principal of, premium, if
any, or interest on any of the Securities, deposit with a Paying Agent a sum
in same day funds sufficient to pay the principal, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying Agent
will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on the Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal,
premium, if any, or interest on the Securities;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities
of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
<PAGE>
the Company or such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal and premium, if any, or interest has become due and payable
shall promptly be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee
or such Paying Agent, before being required to make any such repayment, may
at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), and mail to each such
Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, publication and mailing, any unclaimed balance of such money
then remaining will promptly be repaid to the Company.
Section 10.04 CORPORATE EXISTENCE.
Subject to Article VIII, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Restricted Subsidiary; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right or franchise or the
corporate existence of any such Restricted Subsidiary if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer necessary or desirable in the conduct of the business of the Company
and its Restricted Subsidiaries as a whole; and PROVIDED, FURTHER, HOWEVER,
that the foregoing shall not prohibit a sale, transfer or conveyance of a
Restricted Subsidiary or any of its assets in compliance with the terms of
this Indenture.
Section 10.05 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged, on or
before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries shown to be due on any return of the Company or any of its
Subsidiaries or otherwise assessed or upon the income, profits or property of
the Company or any of its Subsidiaries if failure to pay or discharge the same
could reasonably be expected to have a material adverse effect on the ability of
the Company to perform its obligations hereunder and (b) all lawful claims for
<PAGE>
labor, materials and supplies, which, if unpaid, would by law become a Lien
upon the property of the Company or any of its Subsidiaries, except for any
Lien permitted to be incurred under Section 10.07, if failure to pay or
discharge the same could reasonably be expected to have a material adverse
effect on the ability of the Company to perform its obligations hereunder;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted and in
respect of which appropriate reserves (in the good faith judgment of
management of the Company) are being maintained in accordance with GAAP.
Section 10.06 MAINTENANCE OF INSURANCE.
The Company shall at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed
by the Company in good faith to be financially sound and responsible, against
loss or damage to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in the
same general geographic areas in which the Company and its Subsidiaries
operate, except where the failure to do so could not reasonably be expected
to have a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or prospects of the Company and its Subsidiaries,
taken as a whole.
Section 10.07 LIMITATION ON LIENS.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, assume or suffer to exist any Lien of any
kind upon the proceeds of the Special Redemption Account except pursuant to
the Security Agreement for the benefit of the Holders of the Securities.
Neither the Company nor any Restricted Subsidiary will, directly or
indirectly, create, assume or suffer to exist any Lien of any kind (i) upon
any Principal Property, (ii) upon any shares of Capital Stock of any
Restricted Subsidiary owned by the Company or any Restricted Subsidiary or
(iii) securing Debt of any Restricted Subsidiary, without equally and ratably
securing the Securities with (or prior to) the Debt secured by such Lien, for
so long as such Debt shall be so secured, PROVIDED, HOWEVER, that the Company
and any Restricted Subsidiary may, directly or indirectly, create, assume or
suffer to exist Permitted Liens.
(b) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may create, assume or suffer to exist Liens not otherwise
permitted as described above, provided that at the time of such incurrence,
assumption or sufferance, after giving effect to such Lien, the sum of
outstanding Debt secured by such Liens (not including Permitted Liens) plus
all Attributable Debt in respect of Sale and Lease-Back Transactions entered
into (not including Sale and Lease-Back Transactions expressly permitted
under Section 10.08(a) below),
<PAGE>
measured, in each case, at the time the Lien is incurred, does not exceed 15%
of Consolidated Net Tangible Assets.
Section 10.08 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
(a) Neither the Company nor any Restricted Subsidiary will enter into
any arrangement with any lessor (other than the Company or a Restricted
Subsidiary), providing for the lease to the Company or a Restricted
Subsidiary for a period of more than three years (including renewals at the
option of the lessee) of any Principal Property that has been or is to be
sold or transferred by the Company or any Restricted Subsidiary to such
lessor or to any other Person, and for which funds have been or are to be
advanced by such lessor or other Person on the security of the leased
property (a "Sale and Lease-Back Transaction"), unless either: (i) the
Company or such Restricted Subsidiary would be entitled, pursuant to the
provisions described in clauses (a) through (o) of the definition of
"Permitted Liens" to create, assume or suffer to exist a Lien on the property
to be leased without equally and ratably securing the Securities, or (ii) an
amount equal to (A) the greater of the net cash proceeds of such sale or the
fair market value of such property (in the opinion of the Board of Directors)
less (B) the fair market value (in the opinion of the Board of Directors) of
any noncash proceeds of the sale of such property (provided such noncash
proceeds constitute "Principal Property," acquired on the date the property
sold in the Sale and Lease-Back Transaction was acquired by the Company or
any of its Restricted Subsidiaries), is applied within 180 days to the
retirement or other discharge of the Securities or Pari Passu Debt.
(b) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may enter into Sale and Lease-Back Transactions not otherwise
permitted as described above, provided that at the time of entering into such
Sale and Lease-Back Transaction, after giving effect to such Sale and
Lease-Back Transaction, the sum of outstanding Debt secured by such Liens
(not including Permitted Liens) plus all Attributable Debt in respect of Sale
and Lease-Back Transactions entered into (not including Sale and Lease-Back
Transactions permitted under Section 10.08(a)), measured, in each case, at
the time any such Sale and Lease-Back Transaction is entered into, does not
exceed 15% of Consolidated Net Tangible Assets.
Section 10.09 RULE 144A INFORMATION REQUIREMENTS.
So long as any of the Initial Securities remain outstanding, the Company
shall furnish, within a reasonable amount of time, to the Holders or
beneficial owners of Initial Securities and to prospective purchasers of the
Initial Securities the information required by Rule 144A(d)(4) under the
Securities Act, upon their written request, until such time as the Company
has either exchanged the Initial Securities for the Exchange Securities or
until such time as the Holders thereof have disposed of such Initial
Securities pursuant to an effective shelf registration
<PAGE>
statement under the Securities Act. The Company shall also furnish such
information during the pendency of any suspension of effectiveness of the
shelf registration statement.
Section 10.10 STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, on or before a date not
more than 120 days after the end of each fiscal year of the Company ending
after the date hereof, a written statement signed by two executive officers
of the Company, one of whom shall be the principal executive officer,
principal financial officer or principal accounting officer of the Company,
as to compliance herewith, including whether or not, after a review of the
activities of the Company during such year and of the Company's performance
under this Indenture, to the best knowledge, based on such review, of the
signers thereof, the Company has fulfilled all of their respective
obligations and are in compliance with all conditions and covenants under
this Indenture throughout such year and, if there has been a Default
specifying each Default and the nature and status thereof and any actions
being taken by the Company with respect thereto.
(b) When any Default or Event of Default has occurred and is
continuing, the Company shall deliver notice to the Trustee promptly upon
becoming aware of any Default or Event of Default, by registered or certified
mail or facsimile transmission followed by an originally executed copy of an
Officers' Certificate specifying such Default or Event of Default, the status
thereof and what actions the Company is taking or proposes to take with
respect thereto.
Section 10.11 REPORTS BY COMPANY.
The Company shall:
(a) file with the Trustee, within 15 days after the Company is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or,
if the Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall (i) deliver to the Trustee
annual audited financial statements of the Company and its Subsidiaries,
prepared on a Consolidated basis in conformity with GAAP, within 120 days
after the end of each fiscal year of the Company, and (ii) file with the
Trustee and, to the extent permitted by law, the Commission, in accordance
with the rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 or Section 15(d) of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to
<PAGE>
time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as are
required from time to time by such rules and regulations (including such
information, documents and reports referred to in Trust Indenture Act Section
314(a)); and
(c) within the time period allowed for filings with the Trustee,
transmit by mail to all Holders in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section as are required by rules and
regulations prescribed from time to time by the Commission.
Section 10.12 WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.06 through 10.11, if, before
or after the time for such compliance, the Holders of not less than a
majority in aggregate principal amount of the Securities at the time
Outstanding shall, by Act (which for purposes of this Section 10.12 includes
transmissions across the internet) of such Holders, waive such compliance in
such instance with such covenant or provision, but no such waiver shall
extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any
such covenant or condition shall remain in full force and effect.
ARTICLE XI
REDEMPTION AND MANDATORY DISPOSITION OF SECURITIES
Section 11.01 RIGHTS OF REDEMPTION.
(a) The Securities are subject to redemption at any time, at the option
of the Company, in whole but not in part, at a Redemption Price equal to 100%
of the principal amount thereof plus the Make-Whole Premium, together with
accrued and unpaid interest thereon, if any, to the Redemption Date (subject
to the right of Holders of record on relevant Regular Record Dates and
Special Record Dates to receive interest due on relevant Interest Payment
Dates and Special Payment Dates).
Section 11.02 APPLICABILITY OF ARTICLE.
<PAGE>
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article XI.
Section 11.03 ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant to Section
11.01 shall be evidenced by a Company Order and an Officers' Certificate. In
case of any redemption at the election of the Company, the Company shall, not
less than 45 nor more than 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice period shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date and of the
principal amount of Securities to be redeemed.
Section 11.04 SECURITIES TO BE REDEEMED IN PART.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part in
accordance with Section 11.10, to the portion of the principal amount of such
Security which has been or is to be redeemed.
Section 11.05 NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at its address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed in
accordance with Section 11.10, the identification of the particular
Securities to be redeemed;
(d) in the case of a Security to be redeemed in part in accordance with
Section 11.10, the principal amount of such Security to be redeemed and that
after the Redemption Date upon surrender of such Security, new Security or
Securities in the aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
<PAGE>
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof to be redeemed, and
that (unless the Company shall default in payment of the Redemption Price)
interest thereon shall cease to accrue on and after said date;
(g) the names and addresses of the Paying Agent and the offices or
agencies referred to in Section 10.02 where such Securities are to be
surrendered for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the procedures that a Holder must follow to surrender the
Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company. If the Company
elects to give notice of redemption, it shall provide the Trustee with a
certificate stating that such notice has been given in compliance with the
requirements of this Section 11.05.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice.
In any case, failure to give such notice by mail or any defect in the notice
to the Holder of any Security designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any
other Security.
Section 11.06 DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company or any of its Affiliates
is acting as Paying Agent, segregate and hold in trust as provided in Section
10.03) an amount of money in same day funds sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment
Date or Special Payment Date) accrued interest on, all the Securities or
portions thereof which are to be redeemed on that date. The Paying Agent
shall promptly mail or deliver to Holders of Securities so redeemed payment
in an amount equal to the Redemption Price of the Securities purchased from
each such Holder. All money, if any, earned on funds held in trust by the
Trustee or any Paying Agent shall be remitted to the Company. For purposes
of this Section 11.06, the Company shall choose a Paying Agent which shall
not be the Company.
Section 11.07 SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so to
<PAGE>
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Holders will be
required to surrender the Securities to be redeemed to the Paying Agent at
the address specified in the notice of redemption at least one Business Day
prior to the Redemption Date. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price together with accrued interest to the
Redemption Date; PROVIDED, HOWEVER, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered
as such on the relevant Regular Record Dates and Special Record Dates
according to the terms and the provisions of Section 3.09.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by such
Security.
Section 11.08 SECURITIES REDEEMED OR PURCHASED IN PART.
Any Security which is to be redeemed or purchased only in part in
accordance with Section 11.10 shall be surrendered to the Paying Agent at the
office or agency maintained for such purpose pursuant to Section 10.02 (with,
if the Company, the Security Registrar or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to
the Company, the Security Registrar or the Trustee, as the case may be, duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder in aggregate principal amount equal to, and in exchange for, the
unredeemed portion of the principal of the Security so surrendered that is
not redeemed or purchased.
Section 11.09 SPECIAL REDEMPTION.
If all the Transactions have not been consummated on or before the
Special Redemption Date, the Company shall, on the Special Redemption Date,
redeem and retire (the "Special Redemption") all of the Securities for a
price equal to 100% of their principal amount plus accrued and unpaid
interest thereon through the Special Redemption Date, as follows:
(a) Upon issuance of the Initial Securities, the Company shall deliver
the net proceeds from the sale of the Initial Securities to the Securities
Intermediary. The Securities Intermediary shall use such net proceeds to
<PAGE>
purchase Cash Equivalents, as directed by the Company. The Company shall
simultaneously deliver to the Securities Intermediary additional cash for the
purchase of additional Cash Equivalents in an amount sufficient, together
with the Cash Equivalents purchased with the net proceeds of the offering of
the Initial Securities, for the full payment of the principal amount of all
of the Securities, all interest that shall accrue thereon until and through
the Special Redemption Date and the Securities Intermediary's customary fees.
The Securities Intermediary shall deposit all Cash Equivalents so purchased
into a securities account (the "Special Redemption Account") maintained at
the Securities Intermediary.
(b) If the Hilton Distribution has not been consummated on or before
the Special Redemption Date, the Securities Intermediary shall immediately
liquidate the Cash Equivalents in the Special Redemption Account and the
Trustee shall use the proceeds therefrom and any additional funds to redeem
and retire all of the Securities, for a price equal to 100% of their
principal amount plus accrued and unpaid interest thereon through the Special
Redemption Date, and to pay the Securities Intermediary's and the Trustee's
customary fees with such proceeds. Any remaining proceeds after such
redemption and retirement of the Securities and payment of the Securities
Intermediary's and the Trustee's fees shall be delivered promptly to the
Company.
(c) If the Hilton Distribution has been consummated on or before the
Special Redemption Date and the Trustee has released its security interest in
the Special Redemption Account in accordance with Section 12.01, but all of
the Transactions have not been consummated on or prior to the Special
Redemption Date, the Company shall, on the Special Redemption Date, deposit
sufficient cash with the Trustee for the payment in full of the principal
amount of all of the Securities and all interest that shall have accrued
thereon through the Special Redemption Date. The Trustee shall immediately
use such cash to redeem and retire all of the Securities for a price equal to
100% of their principal amount plus accrued and unpaid interest thereon
through the Special Redemption Date. If the Company does not deposit such
cash with the Trustee on the Special Redemption Date, the Securities shall
bear interest at the rate of 7 7/8% per annum plus Additional Interest, if
any, from the Special Redemption Date to the date that the Company redeems
and retires all of the Securities for a price equal to 100% of their
principal amount plus accrued and unpaid interest thereon through the date of
redemption.
(d) The Company's obligations under this Section 11.09 shall be
covenants of the Company.
Section 11.10 MANDATORY DISPOSITION PURSUANT TO GAMING LAWS.
Each Holder, by accepting a Security, shall be deemed to have agreed that
if the gaming authority of any jurisdiction in which the Company or any of its
<PAGE>
subsidiaries conducts or proposes to conduct gaming requires that a Person
who is a Holder or the beneficial owner of Securities be licensed, qualified
or found suitable under applicable gaming laws, such Holder or beneficial
owner, as the case may be, shall apply for a license, qualification or a
finding of suitability within the required time period. If such Person fails
to apply or become licensed or qualified or is found unsuitable, the Company
shall have the right, at its option:
(a) to require such Person to dispose of its Securities or beneficial
interest therein within 30 days of receipt of notice of the Company's
election or such earlier date as may be requested or prescribed by such
gaming authority, or
(b) to redeem such Securities at a Redemption Price equal to the lesser
of (i) such Person's cost or (ii) 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the earlier of the Redemption
Date or the date of the finding of unsuitability, which may be less than 30
days following the notice of redemption if so requested or prescribed by the
applicable gaming authority.
The Company shall notify the Trustee in writing of any such redemption
as soon as practicable. The Company shall not be responsible for any costs
or expenses any Holder or beneficial owner may incur in connection with its
application for a license, qualification or a finding or suitability.
Section 11.11 REDEMPTION PROCEDURES.
Other than as specifically provided in Sections 11.09 and 11.10, any
redemption pursuant to Sections 11.09 or 11.10 shall be made pursuant to the
provisions of Section 11.01 through 11.08 hereof, unless the context
otherwise requires.
ARTICLE XII
SECURITY
Section 12.01 SECURITY.
(a) Under the Security Agreement, the Trustee shall have a security
interest in the Special Redemption Account to secure the Company's obligations
under the Indenture, including the Company's obligation to redeem and retire all
of the Securities, as set forth in Section 11.09, if all the Transactions have
not been consummated on or before the Special Redemption Date. The Security
Agreement further provides that upon consummation of the Hilton Distribution,
the Trustee shall release its security interest in the Special Redemption
Account, and the Securities Intermediary shall liquidate the Cash Equivalents in
the Special Redemption Account and deliver the proceeds therefrom to the
<PAGE>
Company (less an amount necessary to pay the Securities Intermediary's and
the Trustee's customary fees). The Company intends to use those net proceeds
to pay down Hilton Debt. Thereafter, the Securities shall be unsecured
obligations of the Company.
(b) Each Holder, by its acceptance of a Security, consents and agrees
to the terms of the Security Agreement (including, without limitation, the
provisions described in the preceding paragraphs) as the same may be in
effect or may be amended from time to time in accordance with its terms, and
authorizes and directs the Trustee to enter into the Security Agreement and
to perform its obligations and exercise its rights thereunder in accordance
therewith. The Company will do or cause to be done all such acts and things
as may be necessary or proper to assure and confirm to the Trustee the
security interest in the Pledged Collateral (as defined in the Security
Agreement) contemplated hereby and by the Security Agreement, as from time to
time constituted, so as to render the same available for the security and
benefit of this Indenture and of the Securities secured hereby, according to
the intent and purposes herein expressed. The Company shall take, or shall
cause to be taken, any and all actions reasonably required (and any action
reasonably requested by the Trustee) to create and maintain, as security for
the obligation of the Company to make the Special Redemption and to secure
all of the Company's other obligations under this Indenture and the
Securities, a valid and enforceable first priority lien in and on all the
Pledged Collateral, in favor of the Trustee, superior to and prior to the
rights of third Persons and subject to no other Liens. The Trustee shall not
be liable for the validity, sufficiency or priority of the funds or Pledged
Collateral held under the Security Agreement or for the maintenance of the
perfection of any funds or securities held therein.
(c) To the extent applicable, the Company shall comply with TIA Section
314(d).
(d) The Trustee, in its sole discretion and without the consent of the
Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Securities then outstanding and upon receipt of indemnity
satisfactory to it shall, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (i) enforce any of the terms of the
Security Agreement and (ii) collect and receive any and all amounts payable
in respect of the obligations of the Company thereunder. The Trustee shall
have power to institute and to maintain such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement
of, or compliance with, such enactment, rule or order would impair the
security interest hereunder or be prejudicial to the interests of the Holders
or of the Trustee).
<PAGE>
ARTICLE XIII
SUBORDINATION
Section 13.01 SECURITIES SUBORDINATE TO SENIOR DEBT.
Until the earlier to occur of the Hilton Distribution or the Special
Redemption Date, the Securities will be secured by the Special Redemption
Account as set forth in Article XII. The Securities will not be subordinate
prior to the consummation of the Hilton Distribution.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, for the benefit of the
holders, from time to time, of Senior Debt that, after the consummation of
the Hilton Distribution, to the extent and in the manner hereinafter set
forth in this Article, the Debt represented by the Securities and the payment
of the principal of (and premium, if any) and interest on each and all of the
Securities are hereby expressly made subordinate and subject in right of
payment as provided in this Article to the prior payment in full in cash or
cash equivalents of all Senior Debt; provided, however, that the Securities,
the Debt represented thereby and the payment of the principal of (and
premium, if any) and interest on the Securities in all respects shall rank
equally with, or prior to, all existing and future senior subordinated
indebtedness (including, without limitation, Debt) of the Company that is
subordinated to Senior Debt.
Section 13.02 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets,
or (b) any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company (except in connection
with the consolidation or merger of the Company or its liquidation or
dissolution following the conveyance, transfer or lease of its properties and
assets substantially as an entirety upon the terms and conditions described
under Article VIII), then and in any event:
(a) after the consummation of the Hilton Distribution, the holders of
Senior Debt will be entitled to receive payment in full in cash or Cash
Equivalents of all Senior Debt (including interest after the commencement of
any bankruptcy, insolvency or similar proceeding at the rate specified in the
applicable Senior Debt, whether or not such interest is an allowed claim in
any such proceeding), or provision shall be made for such payment in full,
before the Holders of Securities will be entitled to receive any payment or
distribution of any kind or
<PAGE>
character (other than any payment made pursuant to Article IV from monies or
U.S. Government Obligations previously deposited with the Trustee) on account
of principal of, or premium, if any, or interest on the Securities; and
(b) after the consummation of the Hilton Distribution, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than payments made pursuant to Article IV
from monies or U.S. Government Obligations previously deposited with the
Trustee), by set-off or otherwise, to which the Holders of the Securities or
the Trustee would be entitled but for the provisions of this Indenture shall
be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior Debt or
their representative or representatives ratably according to the aggregate
amounts remaining unpaid on account of the Senior Debt to the extent
necessary to make payment in full of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of
such Senior Debt.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article VIII shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance, transfer or
lease, comply with the conditions set forth in Article VIII.
Section 13.03 SUSPENSION OF PAYMENT WHEN DESIGNATED SENIOR DEBT IN
DEFAULT.
(a) Unless Section 13.02 shall be applicable, after the consummation of
the Hilton Distribution, upon the occurrence and continuance beyond the
applicable grace period of a Payment Default, no payment or distribution of
any assets of the Company of any kind or character, whether in cash, property
or securities (other than payments made pursuant to Article IV from monies or
U.S. Government Obligations previously deposited with the Trustee), may be
made by or on behalf of the Company on account of principal of, premium, if
any, or interest on the Securities or on account of the purchase, redemption
or other acquisition of Securities until such Payment Default shall have been
cured or waived in writing from any representative of a holder of Designated
Senior Debt or shall have ceased to exist or such Designated Senior Debt
shall have been discharged or paid in full in cash or cash equivalents, after
which the Company shall resume making any and all required payments in
respect of the Securities,
<PAGE>
including any missed payments.
(b) Unless Section 13.02 shall be applicable, after the consummation of
the Hilton Distribution, upon (i) the occurrence of a Non-Payment Default or
(ii) receipt by the Trustee of written notice thereof from the Company or any
representative of a holder of Designated Senior Debt (a "Payment Blockage
Notice"), then no payment or distribution of any assets of the Company of any
kind or character, whether in cash, property or securities (other than
payments made pursuant to Article IV from monies or U.S. Government
Obligations previously deposited with the Trustee), may be made by or on
behalf of the Company on account of principal of, premium, if any, or
interest on the Securities or on account of the purchase, redemption or other
acquisition of Securities for a period (a ''Payment Blockage Period'')
commencing on the date of receipt by the Trustee of a Payment Blockage Notice
and shall end on the earliest of (i) 179 days thereafter (PROVIDED that any
Designated Senior Debt as to which notice was given shall not theretofore
have been accelerated, in which case the provisions of paragraph (a) shall
apply), (ii) the date on which such Non-Payment Default is cured, waived or
ceases to exist or such Designated Senior Debt is discharged or paid in full
in cash or Cash Equivalents or (iii) the date on which such Payment Blockage
Period shall have been terminated by written notice to the Trustee or the
Company from such representative initiating such Payment Blockage Period,
after which the Company will resume making any and all required payments in
respect of the Securities, including any missed payments. In any event, no
new Payment Blockage Notice may be delivered unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No Non-Payment Default that existed or was continuing on the date of
the delivery of any Payment Blockage Notice to the Trustee shall be, or can
be made, the basis for the commencement of a subsequent Payment Blockage
Notice, unless such default has been cured or waived for a period of not less
than 180 consecutive days subsequent to the commencement of such initial
Payment Blockage Period.
In the event that, notwithstanding the foregoing and the provisions of
Section 13.02, any payments or distribution shall be made to the Trustee
which is prohibited by the foregoing provisions of this Section and the
provisions of Section 13.02, then and in such event such payment shall be
paid over and delivered forthwith by the Trustee to any representative of
holders of Designated Senior Debt, as their interests may appear, for
application to Designated Senior Debt.
Section 13.04 PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshalling of
assets and
<PAGE>
liabilities of the Company referred to in Section 13.02 or under the
conditions described in Section 13.03, from making payments at any time of
principal of, and premium, if any, or interest on the Securities.
Section 13.05 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
After the consummation of the Hilton Distribution, subject to the
payment in full of all Senior Debt, the Holders of the Securities shall be
subrogated (equally and ratably with the holders of all Pari Passu Debt of
the Company) to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt to the extent that distributions otherwise payable to the holders
of the Securities have been applied to the payment of Senior Debt. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to
the holders of Senior Debt by Holders of the Securities or on their behalf or
by the Trustee, shall, as among the Company, its creditors other than holders
of Senior Debt, and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Debt; it being
understood that the provisions of this Article are intended solely for the
purpose of determining the relative rights of the Holders of Securities, on
the one hand, and the holders of Senior Debt, on the other hand.
Section 13.06 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and
the holders of Senior Debt on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as between the Company and the Holders, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders the
principal of, and premium, if any, and interest on the Securities as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders and creditors
of the Company other than the holders of Senior Debt; or (c) prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article of the holders of Senior Debt.
Section 13.07 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
<PAGE>
Section 13.08 NO WAIVER OF SUBORDINATION PROVISIONS.
(a) No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this
Section, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing
the subordination provided in this Article or the obligations hereunder of
the Holders to the holders of Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (iii) release any Person liable
in any manner for the collection of Senior Debt; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
Section 13.09 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to the
applicable trustee, agent or representative for the holders of such Senior
Debt (a "Representative").
Upon any payment or distribution of assets of the Company referred to in
this Article XIII, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Debt of the Company,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other acts pertinent thereto or to this Article
13.
The Company must promptly notify holders of Senior Debt if payment of
the Securities is accelerated because of an Event of Default.
Section 13.10 NOTICE TO TRUSTEE.
<PAGE>
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company, a holder of Senior Debt or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to Sections 315(a) through 315(d) of the
Trust Indenture Act, shall be entitled in all respects to assume that no such
facts exist; provided, however, that, if the Trustee shall not have received
the notice provided for in this Section at least three Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of, and
premium, if any, or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to the
contrary which may be received by it within three Business Days prior to such
date.
(b) Subject to Sections 315(a) through 315(d) of the Trust Indenture
Act, the Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing itself to be a holder of Senior Debt (or a
trustee, fiduciary or agent therefor) to establish that such notice has been
given by a holder of Senior Debt (or a trustee, fiduciary or agent therefor).
In the event that the Trustee determines in good faith that further evidence
is required with respect to the right of any Person as a holder of Senior
Debt to participate in any payment or distribution pursuant to this Article,
the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article and, if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
Section 13.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to Sections 315(a) through 315(d) of the
Trust Indenture Act, and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction
in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee
<PAGE>
in bankruptcy, receiver, liquidating trustee, custodian, assignee for the
benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for
the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of Senior Debt and other Debt of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article;
provided that such court, trustee, receiver, custodian, assignee, agent or
other Person has been apprised of, or the order, decree or certificate makes
reference to, the provisions of this Article.
Section 13.12 RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Section 13.13 ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 13.12 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Section 13.14 NO SUSPENSION OF REMEDIES.
If the Company fails to make any payments on the Securities when due or
within any applicable grace period, whether or not on account of the
subordination provisions referred to in this Article 13, such failure would
constitute an Event of Default under this Indenture and would enable the
Holders of the Securities to accelerate the maturity thereof pursuant to
Article V. Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article V or to pursue any rights or
remedies hereunder or under applicable law, except as provided in Article V.
Section 13.15 TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments from
cash or the proceeds of U.S. Government Securities held in trust under
Article IV hereof by the Trustee (or other qualifying trustee) and which were
deposited in
<PAGE>
accordance with the terms of Article IV hereof and not in violation of
Section 13.03 hereof for the payment of principal of (and premium, if any)
and interest on the Securities shall not be subordinated to the prior payment
of any Senior Debt or subject to the restrictions set forth in this Article
XIII, and none of the Holders shall be obligated to pay over any such amount
to the Company or any holder of Senior Debt or any other creditor of the
Company.
Section 13.16 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and shall not be liable to any such holders if the Trustee
shall mistakenly, in the absence of gross negligence or wilful misconduct,
pay over or distribute to Holders of Securities or to the Company or to any
other person cash, property or securities to which any holders of Senior Debt
shall be entitled by virtue of this Article or otherwise. With respect to the
holders of Senior Debt, the Trustee undertakes to perform or to observe only
such of its covenants or obligations as are specifically set forth in this
Article and no implied covenants or obligations with respect to holders of
Senior Debt shall be read into this Indenture against the Trustee.
ARTICLE XIV
SATISFACTION AND DISCHARGE
Section 14.01 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities as expressly provided for herein) as to all Outstanding
Securities hereunder, and the Trustee, upon Company Request and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all the Securities theretofore authenticated and delivered
(other than (A) lost, stolen or destroyed Securities which have been replaced
or paid as provided in Section 3.08 or (B) all Securities whose payment has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust as
provided in Section 10.03) have been delivered to the Trustee for
cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee
for cancellation (A) have become due and payable, (B) will become due and
payable at their Stated Maturity within one year or (C) are to be called for
redemption within one year under arrangements reasonably satisfactory to the
<PAGE>
Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company; and the Company has irrevocably deposited
or caused to be deposited with the Trustee as trust funds in trust an amount
in United States dollars sufficient to pay and discharge the entire Debt on
the Securities not theretofore delivered to the Trustee for cancellation,
including the principal of, premium, if any, and accrued interest on, such
Securities at such Maturity, Stated Maturity or Redemption Date;
(iii) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(iv) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, in form and substance
reasonably satisfactory to the Trustee, each stating that (A) all conditions
precedent herein relating to the satisfaction and discharge hereof have been
complied with and (B) such satisfaction and discharge will not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound.
Notwithstanding the satisfaction and discharge hereof, the obligations
of the Company to the Trustee under Section 6.06 and, if United States
dollars shall have been deposited with the Trustee pursuant to subclause (2)
of subsection (a) of this Section 12.01, the obligations of the Trustee under
Section 12.02 and the last paragraph of Section 10.03 shall survive.
Section 14.02 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.03, all
United States dollars deposited with the Trustee pursuant to Section 12.01
shall be held in trust and applied by it, in accordance with the provisions
of the Securities and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal of, premium, if any, and interest on, the Securities for whose
payment such United States dollars have been deposited with the Trustee.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
Name: Scott A. LaPorta
Title Executive Vice President and Chief
Financial Officer
FIRST UNION NATIONAL BANK, as Trustee
By: /s/ Donna Flanagan
Name: Donna Flanagan
Title: Vice President
<PAGE>
EXHIBIT A
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 3.07(a)(i) of the Indenture)
First Union National Bank
40 Broad Street, Suite 550, Fifth Floor
New York, New York 1004
Re: 7 7/8% Senior Subordinated Notes due 2005 of Park Place Entertainment
Corporation (the "Securities")
Reference is made to the Indenture, dated as of December 21, 1998
(the "Indenture"), among Park Place Entertainment Corporation (the "Company")
First Union National Bank, as Trustee. Terms used herein and defined in the
Indenture or in Rule 144A or Rule 144 under the U.S. Securities Act of 1933
(the "Securities Act") are used herein as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). 700690AA8
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them
to do so. Such beneficial owner or owners are referred to herein collectively
as the "Owner". The Specified Securities are represented by a Global
Security and are held through the Depositary or an Agent Member in the name
of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form
of a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an
effective registration statement under the Securities Act, it is being
effected in accordance with Rule 144A or Rule 144 under the Securities Act
and all applicable securities laws of the states of the United States and
other jurisdictions. Accordingly, the Owner hereby further certifies as
follows:
(a) Rule 144A Transfers. If the transfer is being effected in
<PAGE>
accordance with Rule 144A:
(i) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring
for its own account or for the account of a qualified institutional buyer; and
(ii) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may be
relying on Rule 144A in connection with the transfer; and
(b) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(i) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the Specified Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and notice requirements
of Rule 144; or
(ii) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last acquired from
the Company or from an affiliate of the Company, whichever is later, and the
Owner is not, and during the preceding three months has not been, an
affiliate of the Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated: ________________
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
<PAGE>
EXHIBIT B
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 3.07(b))
First Union National Bank
40 Broad Street, Suite 550, Fifth Floor
New York, New York 1004
Re: 7 7/8% Senior Subordinated Notes due 2005 of Park Place Entertainment
Corporation (the "Securities")
Reference is made to the Indenture, dated as of December 21, 1998,
among Park Place Entertainment Corporation (the "Company") and First Union
National Bank, as Trustee. Terms used herein and defined in the Indenture or
in Rule 144 under the U.S. Securities Act of 1933 (the "Securities Act") are
used herein as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
-----------------------------
CERTIFICATE No(s).
-----------------------
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them
to do so. Such beneficial owner or owners are referred to herein collectively
as the "Owner". If the Specified Securities are represented by a Global
Security, they are held through the Depositary or an Agent Member in the name
of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Security, they are registered in
the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged
for Securities bearing no Private Placement Legend pursuant to Section
3.07(b) of the Indenture. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after a holding period of at least
two years (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the Specified Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is not, and
during the
<PAGE>
preceding three months has not been, an affiliate of the Company. The Owner
also acknowledges that any future transfers of the Specified Securities must
comply with all applicable securities laws of the states of the United States
and other jurisdictions.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:____________________
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
<PAGE>
APPENDIX I
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- - ---------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- - --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- - -------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES
FOR 7 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2005
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or May 28, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
/ / (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
/ / (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Security and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security in the name of any
Person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 3.07 of the
Indenture shall have been satisfied.
<PAGE>
Date:
------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:
------------------------------
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
--------------------------------------------------------------
NOTICE: To be executed by an authorized signatory
<PAGE>
APPENDIX II
FORM OF TRANSFEREE CERTIFICATE
I or we assign and transfer this Security to:
Please insert social security or other identifying number of assignee
Print or type name, address and zip code of assignee and irrevocably
appoint________________________________________________________________ as
Agent, to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
--------------------- --------------------------------------
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
<PAGE>
Exhibit 99.1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
----------------------------------------
DATED AS OF DECEMBER 31, 1998
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
ii
<PAGE>
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:
<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
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
</TABLE>
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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
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<PAGE>
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,
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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
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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.
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(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.
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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
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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
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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
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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;
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(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;
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(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.
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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
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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
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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
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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
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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:
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(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.
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(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
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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
<PAGE>
DEBT ASSUMPTION AGREEMENT
This Debt Assumption Agreement (the "Agreement") is entered into this
31st day of December, 1998 between Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), and Park Place Entertainment Corporation, a Delaware
corporation and indirect wholly-owned subsidiary of Hilton ("Park Place").
RECITALS
WHEREAS, Hilton and Park Place have entered into a Distribution
Agreement dated as of December 31, 1998, which provides for among other things,
(i) the distribution (the "Distribution") to the holders of Hilton's outstanding
shares of common stock, par value $2.50 per share (the "Common Stock"), on a
one-for-one basis, of all the outstanding shares of common stock, par value $.01
per share, of Park Place (the "Park Place Common Stock"), (ii) the division
between Hilton and Park Place of certain assets and liabilities and (iii)
certain other agreements governing the relationship between Hilton and Park
Place following the Distribution;
WHEREAS, Hilton has entered into an indenture dated as of April 15,
1997 (the "Indenture") with BNY Western Trust Company, as trustee (the
"Trustee"), pursuant to which Hilton may issue debt securities in series from
time to time;
WHEREAS, Hilton has outstanding $300 million aggregate principal
amount of 7.375% Senior Notes due 2002 (the "2002 Notes"), issued pursuant to
the Indenture, as supplemented by terms established pursuant to a Board
Resolution (as defined in the Indenture) adopted on May 28, 1997 and set forth
in an Officer's Certificate (the "2002 Officer's Certificate" and, together with
the Indenture, the "2002 Indenture");
WHEREAS, Hilton has outstanding $325 million aggregate principal
amount of 7% Senior Notes due 2004 (the "2004 Notes" and, together with the 2002
Notes, the "Notes") issued pursuant to the Indenture, as supplemented by terms
established pursuant to a Board
<PAGE>
Resolution adopted on July 17, 1997 and set forth in an Officer's Certificate
(the "2004 Officer's Certificate" and, together with the Indenture, the "2004
Indenture") (the 2002 Indenture and the 2004 Indenture being referred to
collectively herein as the "Indentures"); and
WHEREAS, the Distribution Agreement provides that Park Place shall
enter into this Agreement on or prior to the date on which the Distribution is
effected (the "Distribution Date"), in order to provide for the assumption of
obligations set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants set forth herein, the parties hereby agree as follows:
SECTION 1. CAPITALIZED TERMS.
Capitalized terms used herein, and not defined herein, shall have the
meanings ascribed to such terms in the Indentures.
SECTION 2. EXECUTION OF THE SUPPLEMENTAL INDENTURE.
Park Place and Hilton agree to amend the terms of the Indentures by
executing the First Supplemental Indenture in the form attached hereto as
Exhibit A (the "Supplemental Indenture") on the Distribution Date, which
Supplemental Indenture will serve to amend the 2002 Indenture with respect to
the 2002 Notes and the 2004 Indenture with respect to the 2004 Notes. The
Supplemental Indenture will not amend the Indenture with respect to any other
series of Debt Securities that Hilton has issued or may issue pursuant to the
Indenture. Hilton agrees to deliver to the Trustee an Officer's Certificate and
an Opinion of Counsel, in form and substance satisfactory to the Trustee,
stating that the execution of the Supplemental Indenture is permitted pursuant
to section 11.01 of the Indenture. Park Place and Hilton agree to take all such
other action as may be reasonably necessary to cause the Trustee to execute the
Supplemental Indenture.
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SECTION 3. PARK PLACE PAYMENT OBLIGATION.
Pursuant to the Supplemental Indenture, Park Place will assume
responsibility for, and agree to pay, one hundred percent (100%) of the amount
of each payment required to be made by Hilton to Holders of Notes pursuant to
the terms of the Indentures and the Notes with respect to the principal of (and
premium, if any) and interest on the Notes (the "Park Place Payment
Obligations"). Under the circumstances set forth below, Park Place shall be
entitled to certain payments from Hilton.
SECTION 4. HILTON OBLIGATIONS.
Any payments by Park Place in satisfaction of the Park Place Payment
Obligations shall be deemed to relieve Hilton of its obligations under the
Indentures to the extent of such payments by Park Place. Subject to the Park
Place Payment Obligations, Hilton shall retain all of its obligations with
respect to payments under the Indentures with respect to the Notes, including,
without limitation, the obligation to make payment of the Park Place Payment
Obligations in the event Park Place fails to make any such payments as provided
in Section 3.
SECTION 5. DIRECT PAYMENT BY HILTON.
Upon a default by Park Place in the Park Place Payment Obligations,
Hilton shall have the right to pay all or any portion of the Park Place Payment
Obligations directly to the Paying Agent or the Trustee. In such event, Park
Place shall be required to pay to Hilton upon demand any amounts paid by Hilton
in satisfaction of the Park Place Payment Obligations, together with interest on
any such amounts at the rate per annum borne by the applicable Notes plus 2% per
annum, calculated from the date such payment was due from Park Place under the
applicable Indenture to the date such payment is made by Park Place to Hilton.
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SECTION 6. HILTON REIMBURSEMENT OBLIGATION.
In the event of an Acquisition Related Rating Change, Hilton shall be
required to pay to Park Place, as such amounts become due under the applicable
Notes, the increase in the interest rate on the Notes attributable to such
Acquisition Related Rating Change.
SECTION 7. EVENT OF DEFAULT BY HILTON.
If Hilton creates an Event of Default under the Indentures and the
Notes are accelerated in accordance with the terms of the applicable Indenture
as a result thereof, Park Place will have the option to require Hilton to loan
it an amount sufficient to make such payments. In such event, Park Place will
repay such loan to Hilton on the schedule it would have adhered to for payments
on the Notes if no acceleration had occurred.
SECTION 8. OBLIGATION TO REPURCHASE OR DEFEASE NOTES.
If Park Place fails to pay any of the Park Place Payment Obligations
as and when payment of any principal of (or premium, if any) or interest on the
Notes is due, and any grace period with respect to such payment provided in the
Indenture has expired (or if Hilton pays any of such principal, premium or
interest and Park Place does not repay such amount to Hilton pursuant to Section
5 hereof within ten (10) days after demand therefor is made by Hilton), then, in
either case, upon the written request of Hilton, Park Place shall, within 90
days after it receives such written request, either (i) repurchase all of the
outstanding Notes and pay all accrued and unpaid interest thereon and other
amounts payable with respect thereto to the Persons entitled to such payment, or
(ii) defease the obligations of Hilton and Park Place under all of the
outstanding Notes pursuant to Article Fifteen of the Indenture, it being
understood that Park Place may elect either the "legal defeasance option" or the
"covenant defeasance option" (both as defined in Section 15.02 of the
Indenture), so long as Park Place satisfies all of the conditions precedent to a
defeasance pursuant to the option so elected that are set forth in the
Indentures.
4
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SECTION 9. COVENANTS.
Park Place agrees with Hilton to comply with the following covenants
for the sole benefit of Hilton and for so long as it is obligated to make the
Park Place Payment Obligations. Hilton's remedies upon a breach of the
following covenants by Park Place are set forth in Section 9(e) below. Certain
defined terms used below are set forth on Exhibit B hereto.
(a) LIMITATIONS ON LIENS. Other than as set forth in Section 9(c)
below, neither Park Place nor any Restricted Subsidiary will create, assume or
suffer to exist any Lien (i) upon any Principal Property, (ii) upon any shares
of capital stock of any Restricted Subsidiary owned by Park Place or any
Restricted Subsidiary or (iii) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the Notes with (or prior to) the Debt
secured by such Lien, for so long as such Debt shall be so secured, PROVIDED,
HOWEVER, that this limitation will not apply to (a) Liens existing on the date
of issuance of the Notes or on the date of the assumption by Park Place of the
payment obligations under the Indentures governing the Notes; (b) Liens existing
(i) on property at the time of acquisition thereof by Park Place or a Restricted
Subsidiary (whether such property is acquired through a merger, a consolidation
or otherwise), or (ii) on property or securing Debt of, or an equity interest
in, any corporation, partnership or other entity at the time such corporation,
partnership or other entity becomes a Restricted Subsidiary; (c) Liens to secure
Debt with respect to all or any part of the acquisition cost or the cost of
construction or improvement of property, PROVIDED, such Debt is incurred and
related Liens are created within 24 months of the acquisition, completion of
construction or improvement or commencement of full operation, whichever is
later, and such Debt does not exceed the aggregate amount of the acquisition
cost and/or the construction cost thereof; (d) Liens on shares of capital stock
or property of a Restricted Subsidiary to secure Debt with respect to all or
part of
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the acquisition cost of such Restricted Subsidiary, PROVIDED that such
Debt is incurred and related Liens are created within 24 months of the
acquisition of such Restricted Subsidiary and such Debt does not exceed the
acquisition cost of such Restricted Subsidiary; (e) Liens to secure Debt
incurred to construct additions to, or to make Capital Improvements to,
properties of Park Place or any Restricted Subsidiary, PROVIDED such Debt is
incurred and related Liens are created within 24 months of completion of
construction or Capital Improvements and such indebtedness does not exceed the
cost of such construction or Capital Improvements; (f) Liens in favor of Park
Place or another Restricted Subsidiary; (g) Liens to secure Debt on which
interest payments are exempt from Federal income tax under Section 103 of the
Internal Revenue Code of 1986, as amended; (h) Liens on the capital stock,
partnership or other equity interests of Park Place or any Restricted Subsidiary
in any Joint Venture or any Restricted Subsidiary which owns an equity interest
in such Joint Venture to secure Debt, PROVIDED the amount of such Debt is
contributed and/or advanced solely to such Joint Venture; (i) any extension,
renewal or replacement, in whole or in part, of any Liens referred to in the
foregoing clauses (a) through (h) or of any Debt secured thereby, including
premium, if any, PROVIDED that the aggregate principal amount secured does not
exceed (x) the greater of (i) the principal amount secured thereby at the time
of such extension, renewal or replacement, or, as the case may be, repayment or
extinguishment and (ii) 80% of the fair market value (in the opinion of Park
Place's board of directors) of the properties subject to such extension, renewal
or replacement plus (y) any reasonable fees and expenses associated with such
extension, renewal or replacement, and PROVIDED, FURTHER, that in the case of a
replacement thereof, such Debt is incurred and related Liens are created within
24 months of the repayment or extinguishment of the Debt or Liens referred to in
the foregoing clauses (a) through (h); (j) purchase money liens on personal
property; (k) Liens to secure payment of
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<PAGE>
workers' compensation or insurance premiums, or relating to tenders, bids or
contracts (except contracts for the payment of money); (l) Liens in
connection with tax assessments or other governmental charges, or as security
required by law or governmental regulation as a condition to the transaction
of any business or the exercise of any privilege or right; (m) mechanic's,
materialman's, carrier's or other like Liens, arising in the ordinary course
of business; and (n) Liens in favor of any domestic or foreign government or
governmental body in connection with contractual or statutory obligations.
(b) LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as
provided in Section 9(c) below, neither Park Place nor any Restricted Subsidiary
will enter into any arrangement with any lessor (other than Park Place or a
Restricted Subsidiary), providing for the lease to Park Place or a Restricted
Subsidiary for a period of more than three years (including renewals at the
option of the lessee) of any Principal Property that has been or is to be sold
or transferred by Park Place or such Restricted Subsidiary to such lessor or to
any other Person, and for which funds have been or are to be advanced by such
lessor or other Person on the security of the leased property ("Sale and
Lease-Back Transaction"), unless either (a) Park Place or such Restricted
Subsidiary would be entitled, pursuant to the provisions described in clauses
(a) through (n) of the proviso of Section 9(a), to create, assume or suffer to
exist a Lien on the property to be leased without equally and ratably securing
the Notes, or (b) an amount equal to (i) the greater of the net cash proceeds of
such sale or the fair market value of such property (in the opinion of Park
Place's board of directors) less (ii) the fair market value (in the opinion of
Park Place's board of directors) of any noncash proceeds of the sale of such
property (PROVIDED such noncash proceeds constitute "Principal Property,"
acquired on the date the property sold in the Sale and Lease-Back Transaction
was acquired by Park Place or any of its Restricted
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Subsidiaries), is applied within 180 days to the retirement or other
discharge of the Notes or Debt ranking on a parity with the Notes.
(c) EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS.
Notwithstanding the restrictions set forth in Sections 9(a) and 9(b) above, Park
Place or any Restricted Subsidiary may create, assume or suffer to exist Liens
or enter into Sale and Lease-Back Transactions not otherwise permitted as
described in Sections 9(a) and 9(b) above, PROVIDED that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted in Section 9(a)) plus all Attributable
Debt in respect of such Sale and Lease-Back Transactions entered into (not
including Sale and Lease-Back Transactions permitted in Section 9(b)), measured,
in each case, at the time any such Lien is incurred or any such Sale and
Lease-Back Transaction is entered into, by Park Place and Restricted
Subsidiaries does not exceed 15% of Consolidated Net Tangible Assets.
(d) LIMITATION ON MERGER, CONSOLIDATION AND TRANSFER OF ASSETS. Park
Place shall not consolidate with, merge with or into, or sell, assign, convey,
transfer or lease its properties and assets substantially in their entirety
(computed on a consolidated basis) to any Person unless:
(1) either (A) Park Place is the surviving entity or (B) the
successor or transferee (the "Successor Corporation") is a corporation organized
and existing under the laws of the United States, any State thereof or the
District of Columbia and shall expressly assume all of the obligations of Park
Place in this Agreement and the Supplemental Indenture; and
(2) immediately after giving effect to such transaction, Park
Place or the Successor Corporation, as the case may be, is not in default on its
obligations under the Agreement or the Supplemental Indenture.
8
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Upon any consolidation with or merger with or into any other
corporation, or any sale, assignment, conveyance, transfer or lease of the
properties and assets of Park Place substantially in their entirety in
accordance with this Section 9(d), the Successor Corporation formed by such
consolidation or into which Park Place is merged or to which such sale,
assignment, conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, Park Place under
this Agreement with the same effect as if such Successor Corporation had been
named as Park Place herein.
(e) BREACH OF COVENANTS BY PARK PLACE. If Park Place either (i)
breaches any of the covenants set forth in this Section 9 after written
notice by Hilton and the continuance of such default for 60 days, or (ii)
fails to pay any Park Place Payment Obligations as and when such payment is
due, then Hilton shall have the right to require that Park Place or the
Successor Corporation, as the case may be, set aside the remaining payments
due on the Notes in an escrow account for the benefit of Hilton. Park Place
will make scheduled payments to Holders of Notes from such escrow account.
If Park Place fails to make such payments from the escrow account, Hilton
shall be entitled to direct the Trustee to make scheduled payments due from
Park Place to Holders of Notes from such escrow account. If Park Place cures
such default and is otherwise in compliance with the Park Place Payment
Obligations, Park Place shall be entitled to the repayment of the amount
remaining in such escrow account.
SECTION 10. DEFEASANCE AND TENDER OFFERS.
(a) In the event Hilton wishes to repurchase or defease any or all
of the Notes at its option (other than pursuant to Section 10(b) hereof),
Hilton will loan Park Place the funds sufficient to permit Park Place to
effect such repurchase or defeasance. In such event, Park Place will repay
such loan, but the amount of such repayment shall not exceed, and will be
made on the
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same schedule as, the payments Park Place would have made on the Notes if no
repurchase or defeasance had occurred.
(b) In the event that Park Place fails to perform its obligation
to repurchase or defease the outstanding Notes pursuant to Section 8 hereof,
Hilton may effect such repurchase or defeasance. In such event, Park Place
will repay to Hilton, upon demand, the aggregate amount of cash and cash
equivalents applied by Hilton to effect such repurchase or defeasance,
together with interest on such amount at the rate per annum borne by the
applicable notes plus 2% per annum, calculated from the date of such
repurchase or defeasance to the date such payment is made by Park Place to
Hilton.
(c) In the event Park Place wishes to repurchase or defease any or
all of the Notes at its option it may do so and shall be responsible for any
payments required thereunder. Hilton agrees to provide the necessary
cooperation required from it as the original obligor on the Notes to effect
such repurchase or defeasance.
SECTION 11. NOTICE TO HOLDERS OF NOTES.
Hilton shall deliver a notice to Holders of Notes, reasonably
satisfactory in form and substance to Park Place, within 30 days following
the Distribution Date that describes the matters set forth in the
Supplemental Indenture.
SECTION 12. CERTAIN REPRESENTATIONS.
Each party hereto represents to the other party hereto that this
Agreement is enforceable against such party in accordance with its terms.
SECTION 13. COMPLIANCE WITH INDENTURES.
(a) Hilton agrees to comply with all of its obligations under the
Indentures and the Supplemental Indentures, and not to take any action that
would cause an Event of Default under the Indentures.
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(b) Park Place agrees to comply with all of its obligations under
the Indentures and the Supplemental Indenture, and not to take any action
that would cause an Event of Default under the Indentures.
SECTION 14. AMENDMENT OF INDENTURES AND SUPPLEMENTAL INDENTURE.
Hilton agrees that it will not amend the Supplemental Indenture or
either of the Indentures with respect to the Notes without the prior written
consent of Park Place (which consent shall not be unreasonably withheld)
except to (i) evidence the succession of another entity in place of Hilton as
permitted by the Indentures or (ii) in the event Hilton is required to secure
the Notes under applicable provisions of the Indentures. Hilton may amend
the Indenture without the consent of Park Place with respect to any Debt
Securities other than the Notes.
SECTION 15. REMEDIES.
Hilton and Park Place acknowledge and agree that money damages
would be inadequate relief for any breach or threatened breach of their
obligations hereunder, and that either party shall be entitled to injunctive
or other equitable relief for any breach or threatened breach.
SECTION 16. SEVERABILITY.
The invalidity or partial invalidity or unenforcability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provisions.
SECTION 17. CHOICE OF LAW.
THIS AGREEMENT SHALL BE CONSTRUED UNDER AND ENFORCED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
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SECTION 18. ATTORNEY'S FEES.
If either party commences an action against the other with respect
to this Agreement, the prevailing party in such action shall be entitled to
an award of reasonable costs and expenses of litigation, including reasonable
attorneys' fees, to be paid by the non-prevailing party.
SECTION 19. ENTIRE AGREEMENT.
This Agreement and the Supplemental Indenture constitute the entire
agreement and understanding between the parties with respect to its subject
matter, are intended as a complete and exclusive statement of the terms of
their agreement with respect to the Notes and supersede any prior or
contemporaneous agreement or understanding related to the subject matter
hereof. To the extent that there is any conflict between the terms of the
Indentures and the Supplemental Indenture and the terms of this Agreement,
the terms of the Indentures and the Supplemental Indenture shall control.
SECTION 20. AMENDMENTS.
This Agreement may not be amended, supplemented or modified in any
respect except by written agreement between the parties, duly signed by their
respective authorized representatives, PROVIDED, that a Successor Corporation
may assume the obligations of Park Place hereunder in accordance with the
terms set forth in Section 9(d) and a successor corporation (as defined in
the Indenture) may assume the obligations of Hilton hereunder so long as in
connection therewith Hilton has complied with the provisions of Section 10.01
of the Indenture.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all such counterparts together shall
constitute but one and the same instrument.
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SECTION 22. WAIVER.
Either party may specifically waive any breach of this Agreement by
the other party, but no such waiver shall be deemed effective unless in
writing, signed by the waiving party, and specifically designating the breach
waived. No waiver shall constitute a continuing waiver of similar or other
breaches.
SECTION 23. NOTICES.
Any notice required or permitted hereunder shall be delivered in
the manner set forth in Section 1.05 of the Indentures.
SECTION 24. HEADINGS.
The descriptive headings of the several Sections of this Agreement
are for convenience only and do not constitute a part of the Agreement or
affect its meaning or interpretation.
SECTION 25. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement by the parties
hereto shall bind their respective successors and assigns and inure to the
benefit of their permitted successors and assigns.
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IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this Agreement as of the date first written above.
HILTON HOTELS CORPORATION
By: /s/ Mathew J. Hart
------------------------------
Its: Executive Vice President and Chief Financial Officer
-----------------------------
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
------------------------------
Its: Executive Vice President and Chief Financial Officer
-----------------------------
S-1
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Exhibit A
[First Supplemental Indenture]
A-1
<PAGE>
Exhibit B
DEFINED TERMS
"Acquisition Event" means a transaction or series of transactions that
constitute related steps that are part of a single transaction, with respect
to which a Public Notice has been given at any time on or before July 22,
2000,(1) the aggregate consideration of which exceeds $1,000,000,000, and
which involves a merger or consolidation, whether direct or indirect, of any
Person, with or into Hilton or of Hilton with or into any Person, or any
sale, transfer or other conveyance, whether direct or indirect, of any assets
of any Person to Hilton or of substantially all of the assets of Hilton to
any Person.
"Acquisition Related Rating Change" means the occurrence on or within 90
days after the date of a Public Notice (which period shall be extended so
long as the rating of Hilton's senior unsecured debt is (i) under review by
Moody's Investors Service, Inc., other than for possible upgrade or (ii) on
CreditWatch by Standard & Poor's Ratings Group, other than with positive
implications) of a decrease in the rating of Hilton's senior unsecured debt
by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group
attributable in whole or in part, directly or indirectly, to an Acquisition
Event.
"Attributable Debt" with respect to any Sale and Lease-Back Transaction
that is subject to the restrictions described in Exhibit C means the present
value of the minimum rental payments called for during the term of the lease
(including any period for which such lease has been extended), determined in
accordance with generally accepted accounting principles, discounted at a
rate that, at the inception of the lease, the lessee would have incurred to
borrow over a similar term the funds necessary to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of Park Place and its subsidiaries
(less applicable depreciation, amortization and other valuation reserves)
after deducting therefrom (a) all current liabilities of Park Place and its
subsidiaries (excluding (i) the current portion of long-term indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their
terms renewable or extendible at the option of the obligor thereon to a time
more than 12 months from the time as of which the amount thereof is being
computed) and (b) all goodwill, trade names, trademarks, patents, unamortized
debt discount and any other like intangibles, all as set forth on the most
recent consolidated balance sheet of Park Place and computed in accordance
with generally accepted accounting principles.
________________
(1) This date applies to the 7% Senior Notes due 2004. In the case of the
7.375% Senior Notes due 2002, such date is June 2, 2000.
B-1
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"Debt" means notes, bonds, debentures or other similar evidences of Debt
for borrowed money or any guarantee of any of the foregoing.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interest, outstanding voting
stock or other equity interest is owned, directly or indirectly, by Park
Place and/or one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets
of Park Place.
"Public Notice" means a written press release, governmental filing or
statement of a representative of Hilton reported in the media announcing that
Hilton has engaged, will engage, intends or seeks to engage in an Acquisition
Event.
"Restricted Subsidiary" means any Subsidiary of Park Place organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property
or (y) in which the investment of Park Place and all its Subsidiaries exceeds
5% of Consolidated Net Tangible Assets as of the date of such determination
other than, in the case of either clause (x) or (y), (i) each Subsidiary
whose business primarily consists of finance, banking, credit, leasing,
insurance, financial services or other similar operations, or any combination
thereof, (ii) each Subsidiary formed or acquired after the date hereof for
the purpose of developing new assets or acquiring the business or assets of
another Person and which does not acquire any part of the business or assets
of Park Place or any Restricted Subsidiary and (iii) Subsidiaries whose
principal business is conducting any Park Place timeshare business.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect
a majority of the directors of such corporation is, at the time, directly or
indirectly, owned by Park Place or by one or more Subsidiaries thereof, or by
Park Place and one or more Subsidiaries.
B-2
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ASSIGNMENT AND LICENSE AGREEMENT
THIS ASSIGNMENT AND LICENSE AGREEMENT (this "AGREEMENT") is made
and entered into as of this 31st day of December, 1998 by and among HILTON
HOTELS CORPORATION, a Delaware corporation ("HILTON"), CONRAD INTERNATIONAL
ROYALTY CORPORATION, a Nevada corporation ("CRC") and PARK PLACE
ENTERTAINMENT CORPORATION (f/n/a Gaming Co., Inc.), a Delaware corporation
("PARK PLACE"). Hilton and CRC shall sometimes be collectively referred to
herein as "LICENSORS."
RECITALS
WHEREAS, Hilton, directly and through its subsidiaries, owns,
operates and develops certain gaming facilities (the "GAMING BUSINESS"), and
owns, operates and develops lodging properties and engages in franchising of
lodging properties (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's common stock of all of the
outstanding shares of Park Place's common stock;
WHEREAS, in order to effect such separation, Hilton and Park Place
have entered into that certain Distribution Agreement, dated December 31,
1998 (the "DISTRIBUTION AGREEMENT"), pursuant to which Hilton will contribute
to Park Place and/or its subsidiaries, prior to the Distribution, all of the
operations, assets and liabilities of Hilton and the Retained Business
Subsidiaries (as defined below) comprising the Gaming Business;
WHEREAS, Schedule A hereto lists certain federal and state
registered trademarks and service marks, and certain trademarks and service
marks for which registration is pending, that are owned by Hilton and certain
Retained Business Subsidiaries and that are used primarily in the Gaming
Business (the "ASSIGNED MARKS"), including without limitation the marks
"Flamingo" and "Bally's," and any other marks obtained by Hilton or its
Subsidiaries as a result of the Bally's Acquisition (as defined below), to
the extent still held by Hilton or its Subsidiaries;
WHEREAS, the name and mark "Hilton" and certain variations thereof,
including certain related service marks, marks of origin, insignia, slogans,
emblems, symbols and other identifying characteristics, whether or not
registered in any jurisdiction (the "HILTON MARK"), is owned by Hilton in the
United States and is used primarily in the Retained Business but is also used
in the Gaming Business. The primary Hilton Mark is set forth in Schedule B
hereto, as such schedule may be modified from time to time;
WHEREAS, the name and mark "Conrad," and certain variations thereof
including certain related service marks, marks of origin, insignia, slogans,
emblems, symbols and other identifying characteristics, whether or not
registered in any jurisdiction, and as may be modified from time to time (the
"CONRAD MARK"), is owned by CRC, and is used primarily in the Retained
Business but is also used in the Gaming Business. The primary Conrad Mark is
set forth in Schedule C hereto, as such schedule may be modified from time to
time;
<PAGE>
WHEREAS, Hilton and the Hilton Parties (as defined below) desire to
assign and transfer to Park Place and the Gaming Subsidiaries (as defined
below), and Park Place and the Gaming Subsidiaries desire to acquire, (i) all
of the right, title and interest of Hilton and the Retained Business
Subsidiaries in and to the Assigned Marks and (ii) the rights to receive
license fees from third parties pursuant to certain license agreements with
respect to the usage of the Conrad Mark at certain properties;
WHEREAS, Hilton desires to license to the Park Place Parties (as
defined below) the right to use the Hilton Mark in connection with the
operation of certain casino hotels in the United States and the Park Place
Parties desire to license the Hilton Mark from Hilton, in accordance with the
terms of this Agreement; and
WHEREAS, CRC desires to license to the Park Place Parties the right
to use the Conrad Mark in connection with the operation of three casino
hotels and the Park Place Parties desire to license the Conrad Mark from CRC,
in accordance with the terms of this Agreement. The Hilton Mark and the
Conrad Mark are sometimes collectively referred to herein as the "LICENSED
MARKS."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Licensors and Park
Place agree as follows:
1. DEFINITIONS. As used herein, the following terms have the
meanings set forth below:
"ASSIGNED MARKS" has the meaning set forth in the Recitals.
"ASSIGNED RIGHTS" has the meaning set forth in Section 2.
"BALLY'S ACQUISITION" shall mean the acquisition of Bally Entertainment
Corporation by Hilton, which was effected on December 19, 1996.
"CRC" has the meaning set forth in the Recitals.
"CONRAD INTERNATIONAL MANAGEMENT AGREEMENTS" shall mean the agreements
under which an affiliate of CRC manages the Conrad Properties.
"CONRAD LICENSE AGREEMENTS" has the meaning set forth in Section 2(a).
"CONRAD MARK" has the meaning set forth in the Recitals.
"CONRAD PROPERTIES" means Conrad Jupiters, Gold Coast (Australia),
Conrad International Treasury Casino, Brisbane (Australia) and Conrad
International Punta del Este.
"DISTRIBUTION AGREEMENT" has the meaning set forth in the Recitals.
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"DISTRIBUTION DATE" has the meaning set forth in the Distribution
Agreement.
"EXPENSES" has the meaning set forth in Section 8.
"GAMING BUSINESS" has the meaning set forth in the Recitals.
"GAMING SUBSIDIARIES" has the meaning set forth in the Distribution
Agreement.
"HRW TERMS" shall mean the terms and conditions applicable to all hotels
participating in Hilton Reservations Worldwide as set forth in Annex A, as
such terms and conditions may be modified from time to time by Hilton
Reservations Worldwide, L.L.C.
"HILTON" has the meaning set forth in the Preamble.
"HILTON CASINO HOTELS" shall mean Reno Hilton, Las Vegas Hilton,
Atlantic City Hilton, Flamingo Hilton - Reno, Flamingo Hilton - Laughlin, and
Flamingo Hilton - Las Vegas.
"HILTON INDEMNITEES" has the meaning set forth in Section 8.
"HILTON MARK" has the meaning set forth in the Recitals.
"HILTON PARTIES" means Hilton and the Retained Business Subsidiaries.
"HILTON RESERVATIONS WORLDWIDE" shall mean the central reservation
system operated by Hilton Reservations Worldwide, L.L.C. which provides
reservation services to participating hotels.
"HHONORS PROGRAM" shall mean the frequent guest program operated by
Hilton HHonors Worldwide, L.L.C. which allows members to earn point credits
redeemable for various travel related rewards.
"HHONORS TERMS" shall mean the terms and conditions applicable to all
hotels participating in the HHonors Program, as such terms and conditions may
be modified from time to time by Hilton HHonors Worldwide, L.L.C.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.
"INDEMNITOR" has the meaning set forth in Section 8.
"INITIAL TERM" has the meaning set forth in Section 4.
"INJUNCTION" shall mean the Final Judgment of Permanent Injunction
entered on November 1, 1995 by the United States District Court for the
Southern District of New York in the action HILTON INTERNATIONAL CO. V.
HILTON, ET AL. (Civil Action No. 91 Civ. 751 (JFK)) in the form attached
hereto as Exhibit A.
"LICENSE" has the meaning set forth in Section 3.
"LICENSED MARKS" has the meaning set forth in the Recitals.
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"LICENSORS" has the meaning set forth in the Preamble.
"NET ROOM REVENUES" shall mean total room revenues excluding revenue
attributable to complimentary rooms.
"OTHER HOTELS" shall mean Bally's Las Vegas, Bally's Park Place,
Paris-Las Vegas, and any other hotels now or hereafter owned, operated,
managed or acquired by any Park Place Party.
"PARK PLACE" has the meaning set forth in the Preamble.
"PARK PLACE PARTIES" means Park Place and the Gaming Subsidiaries, while
such Persons remain Subsidiaries of Park Place.
"PARK PLACE PARTY INDEMNITEE" has the meaning set forth in Section 8.
"PERSON" means any individual, corporation, partnership, association,
trust company or other entity or organization, including any government
entity or authority.
"PROCEEDING" has the meaning set forth in Section 8.
"RETAINED BUSINESS" has the meaning set forth in the Recitals.
"RETAINED BUSINESS SUBSIDIARIES" has the meaning set forth in the
Distribution Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, (a) 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 (b) each partnership or limited liability company in
which such Person or another Subsidiary of such Person is the general
partner, managing partner or other otherwise controls.
2. ASSIGNMENT OF MARKS AND LICENSES.
(a) Without representation or warranty of any kind, express
or implied, and subject to all existing licenses, the Hilton Parties hereby
grant and assign to Park Place all of their right, title and interest in and
to (i) the Assigned Marks, (ii) all federal, state and foreign registrations
related to the Assigned Marks and all pending applications therefor, (iii)
all statutory, common law, equitable and civil law rights (whether arising
under federal, state or foreign law) related to the Assigned Marks, (iv) all
of the goodwill associated with the Assigned Marks, (v) all rights to income,
royalties, license and franchise fees and any other payments now or hereafter
due or payable with respect to the Assigned Marks, including without
limitation all damages and payments for past, present and future
infringements thereof, (vi) the right to sue for, and all rights of recovery
with respect to, all past, present and future infringements of the Assigned
Marks, (vii) all rights of the Hilton Parties under all license agreements
with respect to the Assigned Marks, (viii) all other rights and privileges
pertaining to or associated with the Assigned Marks throughout the world, the
same to be held and enjoyed by Park Place as fully as
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the same would have been held and enjoyed by the Hilton Parties had this
assignment not have been made and (ix) all rights of CRC to receive license
fees under the license agreements (the "CONRAD LICENSE AGREEMENTS") which
license the Conrad Mark for use with respect to the Conrad Properties (the
rights described in clauses (i) through (ix) above are collectively referred
to herein as the "ASSIGNED RIGHTS").
(b) Park Place hereby assumes all obligations and liabilities
of the Hilton Parties pertaining to the Assigned Rights, including without
limitation, any obligations and liabilities arising under any license
agreements to which Hilton or any of the Retained Business Subsidiaries is a
party and that are being assigned to Park Place under Section 2(a)(vii).
(c) Notwithstanding the grant to Park Place of the CRC's
rights to receive license fees under the Conrad License Agreements, pursuant
to Section 2(a)(ix), CRC shall retain its ownership of the Conrad Mark and
title to the Conrad Mark shall not be assigned to Park Place by virtue of
this Agreement.
3. LICENSE. Hilton hereby grants to the Park Place Parties a
non-exclusive right and license (the "HILTON LICENSE"), subject to the terms
and conditions set forth herein, to use the Hilton Mark for five years
following the Distribution Date, except that the Hilton License shall be for
10 years with respect to the Las Vegas Hilton, Reno Hilton and Atlantic City
Hilton (the "EXTENDED TERM"). CRC hereby grants to the Park Place Parties a
non-exclusive right and license (the "CONRAD LICENSE"), subject to the terms
and conditions set forth herein, to use the Conrad Mark for the duration of
the Conrad License Agreement applicable to such Conrad Property. The Hilton
License and the Conrad License shall sometimes be referred to herein,
collectively, as the "LICENSE."
The Licensed Marks shall be used only in accordance with the
following provisions:
(a) the Park Place Parties shall use the Hilton Mark solely
in connection with (i) the operation of the Hilton Casino Hotels in the
United States and in connection with the advertising and promotion of such
hotels worldwide; and (ii) the participation of Other Hotels in Hilton
Reservations Worldwide and/or the HHonors Program;
(b) the Park Place Parties shall use the Conrad Marks solely
in connection with the operation of Conrad Properties and in connection with
the advertising and promotion of the Conrad Properties worldwide; and
(c) the Licensed Marks may be used only in a manner
consistent with the use of such Licensed Mark during the year preceding this
Agreement and, without the prior written consent of the Licensor of such
Licensed Mark, which consent may be withheld at such Licensor's sole
discretion, Park Place shall not expand its business or operations to include
use of any of the Licensed Marks on products or services beyond those
products or services in use by Hilton or CRC on the Distribution Date.
4. PAYMENT OF FEES AND PARTICIPATION IN HILTON RESERVATIONS
WORLDWIDE AND THE HHONORS PROGRAM. The Park Place Parties shall pay no
royalty fees for the right to use the Hilton Mark for the first two years of
the term (the "INITIAL TERM") of the Hilton License.
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<PAGE>
Thereafter, the Park Place Parties shall pay the Hilton Parties a royalty fee
of 3% of the Net Room Revenues of each hotel that is branded with the Hilton
Mark; PROVIDED, THAT, with respect to the Las Vegas Hilton, Reno Hilton and
Atlantic City Hilton, the royalty fee shall be a fixed fee of, in the
aggregate, $5 million per year (the "YEARLY FEE"). The Park Place Parties
shall pay no royalty fees for the right to use the Conrad Mark for the term
of the Conrad License.
(a) Notwithstanding the foregoing, so long as any Park Place
Party shall license the Hilton Mark, such Park Place Party shall cause each
of the Hilton Casino Hotels to do all of the following: (i) participate in
Hilton Reservations Worldwide in accordance with the HRW Terms; (ii)
purchase, install and thereafter maintain, at their sole cost, computer
equipment and other hardware and software and related systems for the
utilization of Hilton Reservations Worldwide; (iii) participate in the
HHonors Program in accordance with the HHonors Terms; (iv) pay the fees
established annually by Hilton Reservations Worldwide, L.L.C. for
participation in Hilton Reservations Worldwide; (v) pay the fees and be
entitled to receive the reimbursements as such fees and reimbursements are
established annually by Hilton HHonors Worldwide, L.L.C., for participation
in the HHonors Program; and (vi) pay a national and regional group
advertising and sales and business promotions services fee to Hilton equal to
1% of Net Room Revenues for such hotel.
(b) As long as any Park Place Party shall license the Conrad
Mark, such Park Place Party shall cause each of the Conrad Properties to do
all of the following: (i) participate in Hilton Reservations Worldwide in
accordance with the HRW Terms; (ii) participate in the HHonors Program in
accordance with the HHonors Terms; (iii) pay the fees established annually by
Hilton Reservations Worldwide, L.L.C. for participation in Hilton
Reservations Worldwide; (iv) purchase, install and thereafter maintain, at
their sole cost, computer equipment and other hardware and software and
related systems for the utilization of Hilton Reservations Worldwide; (v) pay
the fees and be entitled to receive the reimbursements as such fees and
reimbursements are established annually by Hilton HHonors Worldwide, L.L.C.,
for participation in the HHonors Program and (vi) remit to Hilton the
advertising and promotion fees as set forth in the Conrad International
Management Agreements.
(c) Subject to Section 27 hereof, during the term of this
Agreement and at Park Place's request and subject to the approval of Hilton
and its subsidiaries, the Park Place Parties shall cause each of the Other
Hotels to do all of the following: (i) participate in Hilton Reservations
Worldwide in accordance with the HRW Terms; (ii) participate in the HHonors
Program in accordance with the HHonors Terms; (iii) pay the fees established
annually by Hilton Reservations Worldwide, L.L.C. for participation in Hilton
Reservations Worldwide; (iv) purchase, install and thereafter maintain, at
their sole cost, computer equipment and other hardware and software and
related systems for the utilization of Hilton Reservations Worldwide; (v) pay
the fees and be entitled to receive the reimbursements as such fees and
reimbursements are established annually by Hilton HHonors Worldwide, L.L.C.,
for participation in the HHonors Program and (vi) pay a national and regional
group advertising and sales and business promotions services fee to Hilton
equal to 1% of Net Room Revenues for such hotel; PROVIDED, HOWEVER, that
Bally's Park Place shall not be required to pay the fee described in the
preceding clause (vi).
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(d) Notwithstanding anything to the contrary in this
Agreement or in the HRW Terms or HHonors Terms, Hilton HHonors Worldwide,
L.L.C. and Hilton Reservations Worldwide, L.L.C. shall not provide
reservation services or any other services to any hotel or permit the
participation of any hotel in Hilton Reservations Worldwide or the HHonors
Program if the provision of such services or participation would violate
applicable law. As long as such hotels participate in the HHonors Program,
the Hilton Casino Hotels, Conrad Properties, and Other Hotels will have the
same rights to use the HHonors Program trademarks as any other hotels
participating in the HHonors Program.
5. OWNERSHIP OF MARKS.
(a) Hilton acknowledges, without representation, warranty or
inquiry, that, by virtue of the assignment made in Section 2, Park Place is
the exclusive owner of the Assigned Rights. Hilton agrees that no Hilton
Party has any right, title or interest in or to any of the Assigned Rights
from and after the date hereof.
(b) Hilton agrees to cooperate fully with Park Place, at Park
Place's expense, in recording appropriate assignment and other documents
evidencing Park Place's acquisition and ownership of the Assigned Rights.
Hilton agrees to take no action inconsistent with Park Place's ownership of
and interest in the Assigned Rights. Park Place agrees to cooperate fully
with the Hilton Parties at Park Place's expense in recording appropriate
documents evidencing the License to the Park Place Parties.
(c) No Hilton Party shall attack the validity of any of the
Assigned Rights, Park Place's ownership thereof, or any of the terms of this
Agreement, or assist any third party in doing any of the same, and each
Hilton Party hereby waives any right to contest the validity of the Assigned
Rights.
(d) Park Place acknowledges that Hilton is the exclusive
owner of the Hilton Mark and CRC is the exclusive owner of the Conrad Mark.
Park Place agrees that no Park Place Party has any right, title or interest
in or to any Licensed Mark, except as expressly set forth in Sections
2(a)(ix) and 3. Park Place agrees that all uses of any Licensed Mark by the
Park Place Parties and third parties and the goodwill associated with such
uses shall inure solely to the benefit of the Licensor of such Licensed Mark.
Upon termination of its rights to use a Licensed Mark as provided in this
Agreement, all right and interest of such Park Place Party in and to such
Licensed Mark shall revert fully to the Licensor of such Licensed Mark.
(e) Park Place agrees, if requested by either Licensor, to
cooperate fully with such party in recording appropriate documents evidencing
such Licensor's ownership of a Licensed Mark. Park Place agrees to take no
action inconsistent with either Licensor's ownership of and interest in its
Licensed Mark.
(f) No Park Place Party shall attack the validity of either
Licensor's ownership of its Licensed Mark or any of the terms of this
Agreement, or assist any third party in doing any of the same.
6. LIMITATIONS ON USE OF THE LICENSED MARKS. The License is
expressly subject to the following conditions:
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(a) in its use of any Licensed Mark, each Park Place Party
shall faithfully reproduce such mark's design, coloration and appearance, as
such design, coloration and appearance may be modified from time to time by
the Licensor of such Licensed Mark. No Park Place Party shall modify the
design, coloration or appearance of a Licensed Mark unless requested to do so
in writing by the Licensor of such Licensed Mark;
(b) all uses of a Licensed Mark by any Park Place Party,
other than any previously authorized use in effect as of the Distribution
Date in connection with the Gaming Business, shall be subject to the
applicable Licensor's prior written approval, which approval shall not be
unreasonably withheld or delayed, on the basis of samples submitted by such
Park Place Party and shall be made in strict conformance with such reasonable
specifications as the Licensor of the Licensed Mark shall establish, as such
specifications may be modified by the applicable Licensor from time to time;
(c) all displays of a Licensed Mark by each Park Place Party
shall bear such copyright, trademark, service mark and other notices as the
Licensor of such Licensed Mark shall reasonably require, and each Park Place
Party shall adhere to any other reasonable and customary posting requirements
developed by the applicable Licensor with respect to such Licensed Mark;
(d) no Park Place Party shall use a Licensed Mark as part of,
or display such Licensed Mark in conjunction with, any other names or marks
except with the Licensor of such Licensed Mark's prior written approval;
(e) no Park Place Party shall use a Licensed Mark or any
confusingly similar or diluting mark, term or design, except as expressly
authorized in this Agreement, and no Park Place Party shall attempt to
register or aid any third party in using or attempting to register any such
mark, term or design;
(f) no Park Place Party shall use a Licensed Mark in any
manner that will indicate that it is using such Licensed Mark other than as a
licensee; and
(g) no Park Place Party shall, and shall cause each of its
Subsidiaries and affiliates not to, at any time use the trademark, name or
sign "Hilton" or any variation thereof outside the United States to
represent, directly or indirectly, that any hotel, bar, restaurant, gaming
interest or related facility is owned, operated or licensed by Hilton in such
area or is a member of its group.
7. QUALITY CONTROL.
(a) The Licensors are familiar with the quality of the goods
and services to be provided by Park Place and the Gaming Subsidiaries in the
Gaming Business and find, at the present time, the quality of such goods and
services to be acceptable. All goods and services to be provided by the Park
Place Parties under a Licensed Mark shall be provided substantially in
accordance with the quality standards of Park Place and the Gaming
Subsidiaries now in place or with such other quality standards as the
applicable Licensor(s) may reasonably establish from time to time.
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(b) Each of Hilton and CRC shall have the right, at
reasonable times and with prior notice, to inspect any facility operated by
any Park Place Party under a Licensed Mark, and any goods (including, without
limitation, any advertising and promotional materials used in connection with
the Gaming Business and Conrad Properties) provided by any Park Place Party
that bear a Licensed Mark, at any time for the purpose of determining whether
they have met or are meeting the quality standards required under this
Agreement. Each Park Place Party shall promptly produce and deliver (at its
own expense) to the applicable Licensor such examples of its use of the
Licensor's Licensed Mark as such Licensor shall reasonably request.
8. LIMITATION OF LIABILITY; INDEMNITY.
(a) THE ASSIGNED RIGHTS AND THE LICENSED MARKS ARE PROVIDED
TO THE PARK PLACE PARTIES "AS IS." THE HILTON PARTIES DISCLAIM ANY EXPRESS
OR IMPLIED WARRANTY, INCLUDING NON-INFRINGEMENT, WITH RESPECT TO THE ASSIGNED
RIGHTS AND THE LICENSED MARKS. IN NO EVENT SHALL THE HILTON PARTIES BE
LIABLE FOR ANY MATTER WHATSOEVER RELATING TO THE USE BY ANY PARK PLACE PARTY
OF THE LICENSED MARKS, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 8
AND SECTION 9 OF THIS AGREEMENT.
(b) Park Place shall indemnify, defend and hold harmless the
Hilton Parties, their past and present affiliates, subsidiaries, other
related companies, licensees and properties, and each of the foregoing
entities' respective past and present employees, representatives, directors,
officers, partners and agents (each, a "HILTON PARTY INDEMNITEE"), from and
against any and all costs, liabilities and expenses, including, without
limitation, interest, penalties, attorney and third party fees, and all
amounts paid in the investigation, defense and/or settlement of any claim,
action or proceeding (collectively, "EXPENSES"), that relate to (i) the
provision or promotion of goods or services by any Park Place Party under a
Licensed Mark, notwithstanding any approval which may have been given by any
Hilton Party Indemnitee with respect to the provision or promotion of such
goods or services and/or (ii) any liabilities or obligations arising under
any license agreement assigned to the Park Place Parties pursuant to Section
2 of this Agreement; PROVIDED, HOWEVER, that the Park Place Parties shall
have no obligation to indemnify, defend and hold harmless any Hilton Party
Indemnitee under clause (i) above from any Expenses resulting from any claim
of any third party that a Licensed Mark is invalid, unless such claim of
invalidity arises from a Park Place Party's failure to comply with the terms
of this Agreement.
(c) Hilton or CRC, as applicable, shall indemnify, defend and
hold harmless the Park Place Parties and their respective past and present
employees, representatives, directors, officers and agents (each, a "PARK
PLACE PARTY INDEMNITEE"), from and against any and all Expenses resulting
from any claim asserted against any Park Place Party Indemnitee by any third
party alleging that a Park Place Party's use of a Licensed Mark infringes
upon the proprietary rights of such third party, PROVIDED that such claim
arises from such Park Place Party's use of such Licensed Mark in accordance
with the terms of this Agreement.
(d) If any claim or action is asserted against any party that
would entitle such party to indemnification pursuant to Section 8(b) or (c)
(a "PROCEEDING"), any party
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who seeks indemnification (the "INDEMNIFIED PARTY") shall give written notice
thereof to the party or parties from whom indemnification is sought (the
"INDEMNITOR") promptly, but in no event later than thirty (30) days after
such Indemnified Party learns of the existence of such Proceeding; PROVIDED,
HOWEVER, that the Indemnified Party's failure to give the Indemnitor prompt
notice shall not bar the Indemnified Party's right to indemnification unless
such failure has materially prejudiced the Indemnitor's ability to defend
such Proceeding. The Indemnitor shall have the right to employ counsel
reasonably acceptable to the Indemnified Party to defend any such Proceeding,
or to compromise, settle or otherwise dispose of the same, if the Indemnitor
deems it advisable to do so, all at the expense of the Indemnitor, PROVIDED
that the Indemnitor shall not have the right to control the defense of any
such Proceeding unless it has acknowledged in writing its obligation to
indemnify the Indemnified Party fully from all Expenses incurred as a result
of such Proceeding. The Indemnitor shall not settle, or consent to the entry
of any judgment in, any Proceeding without obtaining either (i) an
unconditional release of the Indemnified Party from all liability with
respect to all claims underlying such Proceeding or (ii) the prior written
consent of the Indemnified Party. Each Indemnitor and each Indemnified Party
will fully cooperate with each other in any such Proceeding and shall make
available to each other any books or records useful for the defense of any
such Proceeding. If the Indemnitor fails to acknowledge in writing its
obligation to defend against such Proceeding within fifteen (15) days after
receiving written notice thereof as provided above, the Indemnified Party
shall be free to dispose of the matter, at the expense of the Indemnitor, in
any way in which the Indemnified Party reasonably deems to be in its best
interest.
(e) The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification provisions set
forth herein are intended to supplement, but not to replace, the
indemnification provisions in the Distribution Agreement. To the extent the
indemnification provisions set forth herein conflict with those set forth in
the Distribution Agreement, those provisions that provide the greatest
benefits to the Indemnified Party shall control.
9. INFRINGEMENT PROCEEDINGS. Each Park Place Party shall provide
Hilton or CRC, as applicable, with prompt written notice of (i) any
unauthorized uses by third parties of a Licensed Mark, or of confusingly
similar or diluting trademarks, service marks, trade names, terms or designs,
which come to the attention of such Park Place Party and (ii) any action
commenced or threatened against such Park Place Party in connection with its
use of a Licensed Mark. Each Licensor shall have the right, in its sole
discretion, to commence infringement or unfair competition actions regarding
any unauthorized use by third parties of such Licensor's Licensed Mark or any
confusingly similar or diluting devices. The Park Place Parties shall
cooperate with and assist the Licensors in their investigation and
prosecution of any of the foregoing.
10. INJUNCTION. Each Park Place Party agrees that if application is
made by Hilton or Hilton International CO to reinstate the Injunction, such Park
Place Party shall not oppose or contest such application or take any other
action to interfere with the reinstatement of the Injunction. Each Park Place
Party shall cooperate, if requested by Hilton and/or Hilton International CO, in
obtaining court approval of any such application and shall execute any documents
required by the court in connection therewith. If the Injunction is reinstated,
each
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Park Place Party shall take all actions necessary to comply with the terms
and provisions set forth in the Injunction.
11. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
construed to create any relationship among the parties of agency,
partnership, franchise or joint venturer or render any party liable for any
debts or obligations incurred by any other party hereto. No party is
authorized to enter into agreements for or on behalf of any other party
hereto, to collect any obligation due or owed to any such party, or to bind
any other party in any manner whatsoever.
12. ASSIGNMENT AND SUBLICENSE. No Park Place Party may assign its
rights under this Agreement or sublicense its rights to use either Licensed
Mark to a third party without the prior written consent of the Licensor of
such Licensed Mark (which consent may be withheld in the sole discretion of
such Licensor). Upon any assignment or sublicense entered into in accordance
with this Section 12, such assignee or sublicensee shall enter into an
assignment or sublicense agreement with such Park Place Party, in a form
reasonably satisfactory to the applicable Licensor, pursuant to which such
assignee or sublicensee agrees to comply with, and be bound by, the terms of
this Agreement and acknowledges the status of Hilton and CRC as intended
third party beneficiaries of such assignment or sublicense agreement. If
requested by the applicable Licensor, such assignee or sublicensee shall also
execute an instrument or instruments pursuant to which such assignee or
sublicensee shall be bound by, and become a party to, this Agreement. Any
purported assignment or sublicense by any Park Place Party not in compliance
with the terms of this Agreement shall be null and void. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns.
13. TERM; TERMINATION OF LICENSE.
(a) This Agreement, unless earlier terminated pursuant to
this Section 13, shall expire upon the later to occur of the expiration (or
earlier termination) of the Hilton License and the Conrad License. By mutual
agreement of the parties, the term of this Agreement may be renewed with
respect to any License for an extended period to be determined by the parties.
(b) During the Initial Term, the Park Place Parties shall be
required to use the Hilton Mark at each of the Hilton Casino Hotels.
Thereafter, the Park Place Parties may terminate use of the Hilton Mark at
any Hilton Casino Hotel by giving the Hilton Parties at least six months'
written notice of the Park Place Parties' decision to terminate use of the
Hilton Mark; PROVIDED, HOWEVER, that with respect to the Las Vegas Hilton,
Reno Hilton and Atlantic City Hilton, the Park Place Parties shall be
required to use the Hilton Mark for the Extended Term, except the Park Place
Parties may terminate use of the Hilton Mark if: (i) the Las Vegas Hilton,
Reno Hilton and Atlantic City Hilton are sold by the Park Place Parties and
the Park Place Parties pay the Hilton Parties the present value of the Yearly
Fee due under the remainder of the Extended Term, discounted back at a six
percent annual rate or (ii) after the fifth anniversary of the date hereof,
the Park Place Parties provide the Hilton Parties with at least six months'
written notice of the Park Place Parties' decision to terminate use of the
Hilton Mark with respect to the Las Vegas Hilton, Reno Hilton and Atlantic
City Hilton, and the Park Place
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Parties pay the Hilton Parties the present value of the Yearly Fee due under
the remainder of the Extended Term, discounted back at a six percent annual
rate.
(c) Notwithstanding any of the foregoing, any party may at
any time terminate this Agreement in the event of a material breach by any
other party of any provision herein that has not been cured within ten days
following the receipt by the breaching party of notice of such breach,
PROVIDED, HOWEVER, that the availability of such right of termination shall
not prejudice the terminating party's right to pursue any additional remedies
at law or in equity with respect to such breach.
14. EFFECT OF TERMINATION.
(a) Upon the termination of this Agreement, the Park Place
Parties shall:
(i) immediately discontinue use of the Licensed Marks,
refrain from using any confusingly similar marks, terms or designs, and no
longer possess any right or interest in the Licensed Marks; and
(ii) if Hilton requires, cooperate with Hilton to apply
to the appropriate authorities to cancel from all governmental records the
recording of this Agreement or to record the termination of this Agreement.
(b) Notwithstanding any termination of this Agreement, (i)
the provisions of Section 2 (Assignment of Marks and Licenses), Section 5
(Ownership of Marks), Section 6(e) (Limitations on Use of the Licensed
Marks), Section 8 (Limitation on Liability; Indemnity), Section 15
(Severability), Section 17 (Specific Performance), Section 18 (Arbitration),
Section 19 (Choice of Law), Section 20 (Attorneys' Fees) and Section 25
(Waiver) of this Agreement shall remain in full force and effect in
perpetuity and (ii) the provisions of Section 14(a) of this Agreement shall
remain in effect until satisfied in full.
15. SEVERABILITY. The invalidity or partial invalidity or
unenforceability of any portion of this Agreement shall not affect the
validity or enforceability of any other portion. If it is ever held that any
covenant hereunder is too extensive to permit enforcement of such restriction
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.
16. REMEDIES. Each of the parties acknowledge and agree that
money damages would be inadequate relief for any breach or threatened breach
by the other party of its obligations hereunder, and that upon such breach,
the non-breaching party or parties, as the case may be, shall be entitled to
injunctive or other equitable relief for any breach or threatened breach
thereof.
17. 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
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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.
18. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance
or injunctive relief thereof.
19. CHOICE OF LAW. This Agreement shall be construed under and
entered in accordance with the laws of the State of New York.
20. ATTORNEYS' FEES. If any party commences an action against the
other with respect to this Agreement, the prevailing party in such action
shall be entitled to an award of reasonable costs and expenses of mediation,
arbitration and/or litigation, including reasonable attorneys' fees, to be
paid by the non-prevailing party.
21. EXPENSES. Except as specifically provided otherwise in this
Agreement, all fees and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby shall be paid by
Park Place. In addition, it is understood and agreed that Park Place shall
pay the legal, recording, filing and out-of-pocket expenditures in connection
with (a) the filing and recordation of the assignment of the Assigned Marks
and the License and (b) any accrued and unpaid fees and expenses with respect
to legal, recording, filing and other expenses related to the Assigned Marks.
22. ENTIRE AGREEMENT. This Agreement (and the exhibit, annexes
and schedules hereto which are incorporated by reference herein and made part
hereof) and the Distribution Agreement (including any Ancillary Agreements,
as such term is defined in the Distribution Agreement) constitute the entire
agreement and understanding among the parties hereto with respect to the
subject matter covered by such agreements, and supersedes any prior or
contemporaneous agreement or understanding related to the subject matter
hereof and thereof. To the extent that the terms of this Agreement and
similar terms of the Distribution Agreement or any Ancillary Agreement are in
conflict, the interpretation given to the conflicting terms of the
Distribution Agreement shall govern the interpretation and performance of
this Agreement.
23. AMENDMENTS. This Agreement may not be amended, supplemented
or modified in any respect except by written agreement among the parties,
duly signed by their respective authorized representatives.
24. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
25. WAIVER. Park Place may specifically waive any breach of this
Agreement by the Hilton Parties and Hilton may waive any breach of this
Agreement by a Park Place Party;
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PROVIDED, HOWEVER, that no such waiver shall be deemed effective unless in
writing, signed by the waiving party, and specifically designating the breach
waived. No waiver shall constitute a continuing waiver of similar or other
breaches.
26. NOTICES. Any notice required or permitted hereunder shall be
in writing and shall be deemed received (a) upon personal delivery, if so
delivered, (b) upon three (3) business days after having been deposited in
the United States mail, first class, postage prepaid, return receipt
requested, or (c) on the next business day if sent by nationally recognized
overnight delivery service. In each such case, notices shall be addressed as
follows:
If to Hilton:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn.: General Counsel
Telecopy: (310) 205-7677
If to CRC:
c/o Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn.: General Counsel
Telecopy: (310) 205-4613
If to one or more of the Park Place Parties:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn.: General Counsel
Fax: (702) 699-5179
or to such other address as one party may designate to the other by written
notice given in accordance with this Section 26.
27. NOTICE OF ENTRY INTO PARK PLACE MARKETS. Hilton shall give
Park Place six months' written notice (the "NOTICE OF ENTRY") prior to the
development or acquisition by any Hilton Party of any casino hotels branded
with the Hilton Mark or the Conrad Mark within any Park Place market. If the
Park Place Party operating in such Park Place market provides Hilton, within
30 days of receipt of such Notice of Entry, of its agreement to cease using
the Hilton Mark or Conrad Mark, as the case may be, in such market within six
months and of its decision to withdraw from Hilton Reservations Worldwide and
the HHonors Program (the "NOTICE OF WITHDRAWAL"), Hilton shall use its
reasonable best efforts to remove such Park Place Party from Hilton
Reservations Worldwide and the HHonors Program within six months of Hilton's
receipt of such Notice of Withdrawal.
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28. FURTHER ASSURANCES. The parties hereto hereby covenant and
agree to execute and deliver all such documents, make such government
filings, and to do or cause to be done all such acts or things as may be
necessary to complete and effect the transactions contemplated hereby.
29. COMPLIANCE BY SUBSIDIARIES. Hilton shall take all such
actions as are necessary to ensure compliance with the terms of this
Agreement by the Hilton Parties other than Hilton; and Park Place shall take
all such actions as are necessary to ensure compliance with the terms of this
Agreement by the Park Place Parties other than Park Place.
30. HEADINGS. The descriptive headings of the several sections of
this Agreement are for convenience only and do not constitute a part of the
Agreement or affect its meaning or interpretation.
[Signature page to follow]
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IN WITNESS WHEREOF, a duly authorized representative of each party
has executed this Agreement as of the date first written above.
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
CONRAD INTERNATIONAL ROYALTY CORPORATION,
a Nevada corporation
By: /s/ Robert M. La Forgia
---------------------------------------
Name: Robert M. La Forgia
Title: Senior Vice President and Controller
S-1
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on
this day personally appeared Thomas E. Gallagher, the Executive Vice
President and General Counsel of Hilton Hotels Corporation, known to me as
the person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 23rd day of December, 1998.
/s/ David Marote
[SEAL] ---------------------------------------
Notary Public
My Commission Expires: 8/8/2002
---------------------------------------
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on
this day personally appeared Scott A. LaPorta, the Executive Vice President
and Chief Financial Officer of Park Place Entertainment Corporation, known to
me as the person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 31st day of December, 1998.
/s/ SUSAN BIRD
[SEAL] ---------------------------------------
Notary Public
My Commission Expires: September 5, 2002
---------------------------------------
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on this
day personally appeared Robert M. La Forgia, the Senior Vice President and
Controller of Conrad International Royalty Corporation, known to me as the
person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 31st day of December, 1998.
/s/ Yvonne Tang
---------------------------------------
Notary Public
My Commission Expires: April 12, 2002
---------------------------------------
[SEAL]
<PAGE>
HILTON HOTELS CORPORATION CORPORATE SERVICES AGREEMENT
THIS HILTON HOTELS CORPORATION CORPORATE SERVICES AGREEMENT (this
"AGREEMENT"), dated December 31, 1998, is by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION, a Delaware corporation and wholly owned subsidiary of Hilton ("PARK
PLACE").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated December 31, 1998
(the "DISTRIBUTION AGREEMENT") between Hilton and Park Place, Hilton and certain
of its subsidiaries (the "RETAINED BUSINESS SUBSIDIARIES") will (i) contribute
to Park Place and certain of its subsidiaries that conduct gaming business all
of the operations, assets and liabilities of Hilton and the Retained Business
Subsidiaries comprising the gaming business and (ii) distribute all of the
outstanding shares of Park Place's common stock to the holders of Hilton's
common stock;
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that Hilton and Park Place enter into, among
other things, a corporate services agreement with substantially the same terms
and conditions set forth herein;
WHEREAS, Park Place desires to retain Hilton as described herein, and
Hilton desires to render services as described herein for a fee; and
WHEREAS, the Board of Directors of each of Hilton and Park Place have
determined that it is to the benefit and in the best interests of the respective
parties and their stockholders to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
warranties, covenants and agreements set forth below, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"ACCOUNTING PERIOD" shall be a one month period.
"ACTION" shall mean 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.
"CORPORATE SERVICES" shall mean the services described in Exhibit A.
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"DISTRIBUTION" means the distribution to the holders of Hilton's
common stock of all the outstanding shares of Park Place's common stock.
"DISTRIBUTION DATE" means the date on which the Distribution is
effected.
"INITIAL TERM" shall have the meaning set forth in Section 2.
"LIABILITIES" shall mean 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.
"PRIME RATE" shall be the rate identified from time to time in the New
York edition of the Wall Street Journal as being the prime rate of interest;
should such rate be shown as a spread of rates, then the highest such rate shall
be utilized.
"RELATED AGREEMENTS" shall have the meaning described in the
Distribution Agreement.
Any capitalized terms defined in the Distribution Agreement and used
herein shall have the meanings ascribed to them in the Distribution Agreement
unless otherwise defined herein.
2. TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence on the Distribution Date and, unless earlier terminated pursuant
to this Section 2, shall expire on the date that is 12 months immediately
following the Distribution Date. After the Initial Term, unless earlier
terminated pursuant to this Section 2, the parties may agree to renew the term
of this Agreement for an extended period to be determined by the parties;
PROVIDED, HOWEVER, that the term of this Agreement shall not extend past the
date that is 18 months immediately following the Distribution Date.
Notwithstanding the foregoing, (a) Park Place may terminate this Agreement or
any of the services provided by Hilton hereunder at any time for any reason or
no reason upon 30 days prior written notice to Hilton and (b) either party may
at any time terminate this Agreement in the event of a material default (past
the expiration of any applicable cure period provided herein) in accordance with
the provisions of this Agreement; PROVIDED, HOWEVER, that the availability of
such right of termination shall not prejudice such party's right under Section 9
hereof.
3. SERVICES. Upon 30 days written request from Park Place, Hilton
shall provide to Park Place, to the extent requested in such notice, the types
of Corporate Services set forth in Exhibit A. As of the date of this Agreement,
Park Place has requested Hilton to provide those services described on Exhibit
B. The scope of the services to be provided by Hilton hereunder shall be
consistent with the scope of the services being provided by the Retained
Business Group to the Gaming Group on the date the Merger Agreement is signed
and shall not be expanded unless otherwise agreed to in writing by the parties
hereto. Exhibit A and Exhibit B may be amended from time to time as the parties
may mutually agree in writing.
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In the event that Hilton is required to retain, outside of the
ordinary course of business, outside consultant/contractor assistance to perform
any of the services hereunder, Hilton shall first obtain the written consent of
Park Place to such retention (which consent may not be unreasonably withheld).
Hilton shall not be held responsible for the performance of such
consultant/contractor services and Park Place assumes the risk thereof.
4. COOPERATION. Park Place will provide access to information and
its employees necessary for Hilton to provide such Corporate Services. Park
Place shall, in a timely manner, take all such actions as may be reasonably
necessary or desirable in order to enable or assist Hilton to provide the
Corporate Services, including, but not limited to, providing necessary
information and specific written authorizations and consents, and Hilton shall
be relieved of its obligations hereunder to the extent that Park Place's failure
to take any such action renders performance by Hilton unlawful or impracticable.
5. FEES AND PAYMENT. Park Place shall pay Hilton for services
requested by and rendered to Park Place hereunder as follows:
a. Fees for the Corporate Services for the Initial Term
shall be based on the fair value of such services based on an arm's
length negotiation between Hilton and Park Place. Fees for work
performed by outside consultants/contractors retained by Hilton outside
of the ordinary course of business shall be paid directly by Park Place
and shall not include any mark-up or margins by Hilton.
b. Hilton shall invoice Park Place once each month for the
services performed during the prior month, other than services provided
by consultants/contractors outside of the ordinary course of business,
which services will be invoiced directly to Park Place by such
consultants/contractors. Payment for all services hereunder, other than
services provided by consultants/contractors outside of the ordinary
course of business, shall be made by Park Place to Hilton within 30 days
of receipt of invoice for payment (with appropriate supporting
documentation for any out-of-pocket expenses). Payment for services
performed by consultants/contractors outside of the ordinary course of
business shall be made promptly by Park Place following Park Place's
receipt of invoices for such services. Any payments not made by Park
Place to Hilton when due shall bear interest, computed daily, from the
date due to the date of payment based on the annual percentage rate
equal to the Prime Rate, as the same may vary from time to time, plus
two percentage points.
c. If at any time during the term of the Agreement, Park
Place moves its office location from 3930 Howard Hughes Parkway, 4th
Floor, Las Vegas, Nevada, both the availability of certain services and
their associated rates may be subject to change. If any additional
services are provided by Hilton, other than as set forth in the Exhibit
attached hereto, or if the scope or nature of the Corporate Services
provided at any time under this Agreement change materially, the parties
hereto will negotiate in good faith to set new fees based on the fair
value of providing such additional or revised services.
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d. Fees for Corporate Services provided after the Initial Term,
if any, shall be mutually agreed upon by the parties.
e. The parties agree that in the event that any tax or
assessment is required to be paid as a result of the provision of
services hereunder, other than any income tax (for which the party
incurring such expense shall be responsible), Park Place shall be solely
responsible for the payment of such tax or assessment.
6. DUTY OF CARE.
a. HILTON'S OBLIGATIONS. All services provided and all
obligations hereunder shall be administered in accordance with Hilton's
standard policies, procedures and practices in effect as of the date
hereof and as may be changed from time to time, or as otherwise
specified in accordance with the terms hereof. In so doing, Hilton
shall exercise the same care and skill as it exercises in performing
like services for itself. In the event Hilton changes its policies,
procedures or practices, the Corporate Services performed hereunder may
be modified by Hilton to meet such revised policies, procedures and
practices provided that Hilton gives Park Place prior written notice of
such change and a reasonable opportunity for Park Place to adapt its
operations to accommodate such changes or to reject such change. Park
Place's decision whether or not to accept the proposed change must be
made on or before the date Hilton implements such change, which date
shall be specified in the notice given to Park Place. Park Place agrees
to pay any charges (i) resulting from Hilton's need to maintain
different versions of the same systems, procedures, technologies, or
services and (ii) resulting from requirements of third party vendors.
Notwithstanding anything to the contrary in this Section 6.a., Hilton's
liability for the provision of services hereunder shall be strictly
limited, as set forth in Section 9.
b. PARK PLACE'S OBLIGATIONS. Park Place shall adopt
reasonable measures to limit its and Hilton's exposure with respect to
any potential losses and damages, including, but not limited to,
periodic examination and confirmation of results, provision for
identification and correction of errors and omissions, preparation and
storage of backup data, virus prevention, security, replacement of lost
or mutilated documents, and reconstruction of data.
7. LIAISON. Hilton shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President & General Counsel, Senior Vice
President & Treasurer and Senior Vice President & Controller (the "HILTON
REPRESENTATIVES") and Park Place shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President,Law & Corporate Affairs, &
Secretary and Vice President & Controller (the "PARK PLACE REPRESENTATIVES" and,
together with the Hilton Representatives, the "REPRESENTATIVES") to facilitate
communications and performance under this Agreement. Each party may treat an
act of a Representative of the other party as being authorized by such other
party without inquiring or ascertaining whether such Representative had
authority to so act. Each party shall have the right at any time and from time
to time to replace any of its Representatives by giving prior notice in writing
to the other party setting forth the name of (i) each Representative to be
replaced and (ii) the replacement, and certifying that
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<PAGE>
the replacement Representative is authorized to act for the party giving the
notice in all matters relating to this Agreement.
8. CONFIDENTIALITY.
a. Hilton and Park Place agree that all information
regarding the Corporate Services provided hereunder (the "CONFIDENTIAL
INFORMATION"), including, but not limited to, price, methods of
operation and software, shall be maintained in confidence and not be
released to any third party for any reason whatsoever, excluding such
parties' counsel, agents, auditors or lenders. However, a party may
release the Confidential Information to a third party upon the prior
approval of the other party (such approval not to be unreasonably
withheld, conditioned or delayed), upon court order or as such party in
good faith believes, based on the advice of counsel, is required by any
rules, regulations or laws. Notwithstanding the previous sentence, in
the event that a party becomes legally compelled (by deposition,
interrogatory, request for documents, subpoena, civil investigative
demand or otherwise) to disclose any information, such party shall
provide the other with prompt prior written notice of such requirement
so that the other party may seek a protective order or other appropriate
remedy to minimize disclosure of the Confidential Information. In the
event that such protective order or other remedy is not obtained, or the
other party approves the disclosure, the disclosing party agrees to
furnish only that portion of the Confidential Information which the
disclosing party in good faith believes, based on the advice of counsel,
is legally required and to exercise reasonable efforts to obtain
assurance that confidential treatment will be accorded to such
information. Each party shall cease use of all Confidential Information
which any party has obtained from the other upon the expiration or
earlier termination of this Agreement. The provisions of this Section 8
shall survive the expiration or earlier termination of this Agreement.
b. Any Park Place information or other information provided
by Park Place to Hilton for use with the Corporate Services provided
hereunder and identified in writing as confidential shall remain the
exclusive and confidential property of Park Place. Specifically, Park
Place's employee database and payroll information shall be deemed
confidential. Hilton shall treat such information as confidential and
will not disclose or otherwise make available any Park Place information
to any person other than employees, consultants, or auditors of Hilton
with a need-to-know or except as required by court order or as such
party in good faith believes, based on the advice of counsel, is
required by any rules, regulations or laws. Hilton will instruct its
employees who have access to the Park Place information to keep the same
confidential by using the same care and discretion that Hilton uses with
respect to its own confidential property and trade secrets.
c. Hilton will continue current security provisions
regarding third parties' access to Park Place information. Hilton
reserves the right to issue and change regulations and procedures from
time to time to improve file security.
d. Hilton will continue current precautions regarding the
loss or alteration of Park Place information. Park Place will, to the
extent it deems necessary, keep
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copies of all source documents delivered to Hilton and will maintain a
procedure external to Hilton's systems for the reconstruction of lost or
altered Park Place data.
e. Hilton will, to the extent applicable, retain Park
Place's information in accordance with and to the extent provided by
Hilton's then prevailing records retention policies and practices for
similar activities. Hilton will, in conformity with its then prevailing
records retention policies and practices, dispose of all Park Place
information in any manner it deems appropriate unless Park Place, prior
to such disposal, furnishes to Hilton written instructions for the
disposition of such Park Place information, at Park Place's expense. At
Park Place's request, Hilton will provide Park Place, in a standard
Hilton format and at Hilton's then standard rates for such format, any
and all Park Place information requested.
f. Hilton's systems used to perform the Corporate Services
provided hereunder, including but not limited to the payroll system, are
confidential and proprietary to Hilton or third parties. Park Place
shall treat these systems and all related procedures as confidential and
proprietary to Hilton or its third party vendors and shall be directly
bound by and responsible for applicable license and other obligations.
Park Place agrees that all software systems, procedures, and related
materials provided to Park Place by Hilton for the purposes of this
Agreement are for Park Place's interim, revocable internal use
exclusively and only as related to the Corporate Services or any of the
underlying systems used to provide Corporate Services hereunder. Park
Place may not sell, transfer, assign, or otherwise use the Corporate
Services provided hereunder, in whole or in part, for the benefit of any
other party. Park Place shall not copy, modify, reverse engineer, or in
any way alter these systems without Hilton's express written consent.
Title to all software systems used in performing the Corporate Services
provided hereunder shall remain in Hilton or its third party vendors.
9. WARRANTIES AND LIMITATIONS OF LIABILITY.
a. HILTON DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE CORPORATE
SERVICES PROVIDED HEREUNDER. Hilton will use reasonable efforts to
perform the Corporate Services provided hereunder in a professional and
workmanlike manner, but the results of the Corporate Services are
furnished "as is."
b. Hilton shall have no liability to any third party in
connection with the provision of the Corporate Services in any event,
and no liability to Park Place except to the extent (i) the performance
of such Corporate Services is in material breach of the standard of care
specified in this Agreement or (ii) the performance of such Corporate
Services is interrupted, delayed or otherwise not available, PROVIDED,
HOWEVER, that in each case such liability shall be subject to Sections
9.e. and 13 hereof.
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c. Hilton's sole liability to Park Place for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(i). above, shall be, at Park
Place's discretion, to (i) promptly perform again the particular
Corporate Service that was previously performed in breach of the
standard of care specified in this Agreement, at no additional cost to
Park Place or (ii) refund the portion of the fees attributable to the
performance of the Corporate Service that was previously performed in
breach of the standard of care specified in this Agreement.
d. Hilton's sole liability to Park Place for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(ii). above, shall be to use all
reasonable efforts to make the Corporate Services available as promptly
as reasonably practicable. Hilton will maintain the same back-up
procedures for Park Place's information that Hilton has for its own
similar information.
e. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, (i)
HILTON SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS, DELAYS, OR LOSSES
UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH OR GROSS
NEGLIGENCE AND (ii) HILTON SHALL NOT BE LIABLE FOR INCIDENTAL, INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR OTHER
ECONOMIC DAMAGES. PARK PLACE AGREES THAT IN NO EVENT SHALL THE TOTAL
AGGREGATE LIABILITY OF HILTON FOR ANY AND ALL CLAIMS, LOSSES, OR DAMAGES
ARISING UNDER THIS AGREEMENT AND FOR THE CORPORATE SERVICES PERFORMED
HEREUNDER EXCEED THE VALUE OF PARK PLACE'S PAYMENT FOR SAID SPECIFIC
CORPORATE SERVICE IN DISPUTE OVER ONE ACCOUNTING PERIOD'S TIME.
f. The foregoing provisions of this Section 9 set forth the
full extent of Hilton's liability hereunder (monetary or otherwise) for
any claim or action, regardless of the form in which any such claim or
action may be asserted against Hilton (e.g. contract, negligence or
otherwise).
g. "Hilton" as used in this Section 9 includes all of
Hilton's affiliates, subsidiaries, vendors, service providers,
licensors, licensees and properties, and each of such entities' agents,
officers, directors, agents, employees, guests, residents, invitees,
permitees, heirs, executors, successors and assigns, related persons or
entities (the "HILTON INDEMNITEES").
10. DEFAULT. If either party materially defaults hereunder, the non-
defaulting party may terminate this Agreement effective immediately (subject to
the cure periods set forth below) upon written notice to the defaulting party.
The non-defaulting party shall be entitled to all remedies provided by law or
equity (including reasonable attorneys' fees and costs). The following events
shall be deemed to be material defaults hereunder:
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a. Failure by any party to make any payment required to be
made to the other hereunder or under an agreement related to the
provision of Corporate Services, which failure is not remedied within 5
days after receipt of written notice thereof; or
b. Except as otherwise provided herein, failure by any party
substantially to perform in accordance with the terms and conditions of
this Agreement or under an agreement related to the provision of
Corporate Services, which failure is not remedied within 30 days after
receipt of written notice from the other party specifying the nature of
such default; or
c. (i) Filing of a voluntary bankruptcy petition by any
party; (ii) filing of an involuntary bankruptcy petition against any
party which is not withdrawn within 60 days after filing; (iii)
assignment for the benefit of creditors made by any party; or (iv)
appointment of a receiver for any party.
11. LAWS AND GOVERNMENTAL REGULATIONS. Park Place shall be
responsible for (a) compliance with all laws and governmental regulations
affecting its business and (b) any use it may make of the Corporate Services to
assist it in complying with such laws and governmental regulations. While
Hilton shall not have any responsibility for Park Place's compliance with the
laws and regulations referred to above, Hilton agrees to use reasonable efforts
to cause the Corporate Services to be designed in such manner that they will be
able to assist Park Place in complying with its applicable legal and regulatory
responsibilities as related to the Corporate Services. In no event, however,
will Park Place rely solely on its use of the Corporate Services in complying
with any laws and governmental regulations.
12. INDEMNIFICATION.
a. Park Place shall indemnify, defend and hold harmless each
Hilton Indemnitee from and against any and all losses, Liabilities,
damages and expenses (including, without limitation, the reasonable
costs and expenses of investigation and reasonable attorneys' fees and
expenses in connection with any or all such investigations or any and
all Actions, or threatened Actions) (collectively, "LOSSES") incurred or
suffered by such Hilton Indemnitee either (i) as the result of any claim
made against such Hilton Indemnitee by any third party arising out of
such Hilton Indemnitee's provision of the Corporate Services or (ii)
arising out of Park Place's negligence or malfeasance in connection with
its use of the Corporate Services.
b. The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification
provisions set forth herein are intended to supplement, but not to
replace, the indemnification provisions in the Distribution Agreement.
To the extent the indemnification provisions set forth herein conflict
with those set forth in the Distribution Agreement, those provisions
that provide the greatest benefits to the indemnified party shall
control.
13. FORCE MAJEURE. Park Place and Hilton shall incur no liability to
each other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire,
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flood, war, strike, lock-out work stoppage or slow-down, labor disturbances,
power failure, major equipment breakdowns, construction delays, accident,
riots, acts of God, acts of United States' enemies, laws, orders or at the
insistence or result of any governmental authority or any other event beyond
each other's reasonable control. In addition, Hilton shall not be liable or
deemed to be in default for any delay or failure to perform hereunder
resulting, directly or indirectly, from any cause beyond Hilton's reasonable
control, including limitations upon the availability of communications
facilities or failures of Park Place or other communications equipment or
failure of Park Place to prepare data properly for use in the Corporate
Services.
14. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller.
15. ASSIGNMENT. 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.
16. 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.
17. HEADINGS; REFERENCES. The 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 "Sections" or
"Exhibits" shall be deemed to be references to Sections hereof or Exhibits
hereto unless otherwise indicated.
18. 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 extensive in any respect
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.
19. 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):
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(a) if to Park Place, to
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President & Chief Financial
Officer and Executive Vice President--Law &
Corporate Affairs, & Secretary
Telecopy: 702-699-5190 and
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
(b) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: Executive Vice President & General Counsel and
Executive Vice President & Chief Financial Officer
Telecopy: 310-205-7677 and
310-205-4327
with a copy to:
Latham & Watkins
1001 Pennsylvania Ave., N.W.
Suite 1300
Washington, D.C. 20004-2505
Attn: Bruce Rosenblum, Esq.
Telecopy: 202-637-2201
20. FURTHER ACTION. Park Place and Hilton each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
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21. WAIVER. Park Place and Hilton each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute any
waiver of any subsequent default or rights herein or nullify the effectiveness
of that term or condition. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
22. 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 law.
23. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement, including the Exhibits hereto, and the Distribution Agreement
(including any Ancillary Agreements, as such term is defined in the
Distribution Agreement) and including the Schedules and Exhibits thereto,
constitute the entire understanding between the parties, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter covered by said agreements. To the extent
that the terms of this Agreement and similar terms of the Distribution
Agreement or any Ancillary Agreement are in conflict, the interpretation
given to the conflicting terms of the Distribution Agreement shall govern the
interpretation and performance of this Agreement. This Agreement is not
intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
24. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
25. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance
or injunctive relief thereof, and including the attorneys' fees provisions
referred to therein.
26. 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.
27. HILTON EQUIPMENT CORPORATION. With respect to any purchase
orders placed with Hilton Equipment Corporation, the agreed fair value of
services shall reflect the following: there shall be (i) no mark up of any
invoices relating to purchase orders in connection with the construction and
development of the Paris Hotel & Casino ("Paris Casino") and (ii) a mark up
to be agreed to by the parties hereto on all invoices relating to purchase
orders placed on or after the date hereof for all matters other than those
relating to the construction and development of the Paris Casino. Purchase
orders relating to the Paris Casino after the official opening date of the
property will be subject to a markup to be agreed to by the parties hereto.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Hilton and Park Place have caused this
Agreement to be signed by their 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
Its: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT
CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
---------------------------
Name: Scott A. LaPorta
Its: Executive Vice President and
Chief Financial Officer
S-1
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PARK PLACE ENTERTAINMENT CORPORATION
CORPORATE SERVICES AGREEMENT
THIS PARK PLACE ENTERTAINMENT CORPORATION CORPORATE SERVICES AGREEMENT
(this "AGREEMENT"), dated December 31, 1998, is by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION, a Delaware corporation and wholly owned subsidiary of Hilton ("PARK
PLACE").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated December 31, 1998
(the "DISTRIBUTION AGREEMENT") between Hilton and Park Place, Hilton and certain
of its subsidiaries (the "RETAINED BUSINESS SUBSIDIARIES") will (i) contribute
to Park Place and certain subsidiaries of Park Place that conduct gaming
business all of the operations, assets and liabilities of Hilton and the
Retained Business Subsidiaries comprising the gaming business and (ii)
distribute all of the outstanding shares of Park Place's common stock to the
holders of Hilton's common stock;
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that Park Place and Hilton enter into, among
other things, a corporate services agreement with substantially the same terms
and conditions set forth herein;
WHEREAS, Hilton desires to retain Park Place as described herein, and
Park Place desires to render services as described herein for a fee; and
WHEREAS, the Board of Directors of each of Park Place and Hilton have
determined that it is to the benefit and in the best interests of the respective
parties and their stockholders to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
warranties, covenants and agreements set forth below, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"ACCOUNTING PERIOD" shall be a one month period.
"ACTION" shall mean 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.
"CORPORATE SERVICES" shall mean the services described in Exhibit A.
<PAGE>
"DISTRIBUTION" means the distribution to the holders of Hilton's
common stock of all the outstanding shares of Park Place's common stock.
"DISTRIBUTION DATE" means the date on which the Distribution is
effected.
"INITIAL TERM" shall have the meaning set forth in Section 2.
"LIABILITIES" shall mean 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.
"PRIME RATE" shall be the rate identified from time to time in the New
York edition of the Wall Street Journal as being the prime rate of interest;
should such rate be shown as a spread of rates, then the highest such rate shall
be utilized.
"RELATED AGREEMENTS" shall have the meaning described in the
Distribution Agreement.
Any capitalized terms defined in the Distribution Agreement and used
herein shall have the meanings ascribed to them in the Distribution Agreement
unless otherwise defined herein.
2. TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence on the Distribution Date and, unless earlier terminated pursuant
to this Section 2, shall expire on the date that is 12 months immediately
following the Distribution Date. After the Initial Term, unless earlier
terminated pursuant to this Section 2, the parties may agree to renew the term
of this Agreement for an extended period to be determined by the parties;
PROVIDED, HOWEVER, that the term of this Agreement shall not extend past the
date that is 18 months immediately following the Distribution Date.
Notwithstanding the foregoing, (a) Hilton may terminate this Agreement or any of
the services provided by Park Place hereunder at any time for any reason or no
reason upon 30 days prior written notice to Park Place and (b) either party may
at any time terminate this Agreement in the event of a material default (past
the expiration of any applicable cure period provided herein) in accordance with
the provisions of this Agreement; PROVIDED, HOWEVER, that the availability of
such right of termination shall not prejudice such party's right under Section 9
hereof.
3. SERVICES. Upon 30 days written request from Hilton, Park Place
shall provide to Hilton, to the extent requested in such notice, the types of
Corporate Services set forth in Exhibit A. As of the date of this Agreement,
Hilton has requested Park Place to provide those services described on Exhibit
B. The scope of the services to be provided by Park Place hereunder shall be
consistent with the scope of the services being provided by the Gaming Group to
the Retained Business Group on the date the Merger Agreement is signed and shall
not be expanded unless otherwise agreed to in writing by the parties hereto.
Exhibit A and Exhibit B may be amended from time to time as the parties may
mutually agree in writing.
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In the event that Park Place is required to retain, outside of the
ordinary course of business, outside consultant/contractor assistance to perform
any of the services hereunder, Park Place shall first obtain the written consent
of Hilton to such retention (which consent may not be unreasonably withheld).
Park Place shall not be held responsible for the performance of such
consultant/contractor services and Hilton assumes the risk thereof.
4. COOPERATION. Hilton will provide access to information and its
employees necessary for Park Place to provide such Corporate Services. Hilton
shall, in a timely manner, take all such actions as may be reasonably necessary
or desirable in order to enable or assist Park Place to provide the Corporate
Services, including, but not limited to, providing necessary information and
specific written authorizations and consents, and Park Place shall be relieved
of its obligations hereunder to the extent that Hilton's failure to take any
such action renders performance by Park Place unlawful or impracticable.
5. FEES AND PAYMENT. Hilton shall pay Park Place for services
requested by and rendered to Hilton hereunder as follows:
a. Fees for the Corporate Services for the Initial Term shall
be based on the fair value of such services based on an arm's length
negotiation between Hilton and Park Place. Fees for work performed by
outside consultants/contractors retained by Park Place outside of the
ordinary course of business shall be paid directly by Hilton and shall not
include any mark-up or margins by Park Place.
b. Park Place shall invoice Hilton once each month for the
services performed during the prior month, other than services provided by
consultants/contractors outside of the ordinary course of business, which
services will be invoiced directly to Hilton by such
consultants/contractors. Payment for all services hereunder, other than
services provided by consultants/contractors outside of the ordinary course
of business, shall be made by Hilton to Park Place within 30 days of
receipt of invoice for payment (with appropriate supporting documentation
for any out-of-pocket expenses). Payment for services performed by
consultants/contractors outside of the ordinary course of business shall be
made promptly by Hilton following Hilton's receipt of invoices for such
services. Any payments not made by Hilton to Park Place when due shall
bear interest, computed daily, from the date due to the date of payment
based on the annual percentage rate equal to the Prime Rate, as the same
may vary from time to time, plus two percentage points.
c. If at any time during the term of the Agreement, Hilton
moves its office location from 9336 Civic Center Drive, Beverly Hills,
California, both the availability of certain services and their associated
rates may be subject to change. If any additional services are provided by
Park Place, other than as set forth in the Exhibits attached hereto, or if
the scope or nature of the Corporate Services provided at any time under
this Agreement change materially, the parties hereto will negotiate in good
faith to set new fees based on the fair value of providing such additional
or revised services.
d. Fees for Corporate Services provided after the Initial Term,
if any, shall be mutually agreed upon by the parties.
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e. The parties agree that in the event that any tax or
assessment is required to be paid as a result of the provision of services
hereunder, other than any income tax (for which the party incurring such
expense shall be responsible), Hilton shall be solely responsible for the
payment of such tax or assessment.
6. DUTY OF CARE.
a. PARK PLACE'S OBLIGATIONS. All services provided and all
obligations hereunder shall be administered in accordance with Park Place's
standard policies, procedures and practices in effect as of the date hereof
and as may be changed from time to time, or as otherwise specified in
accordance with the terms hereof. In so doing, Park Place shall exercise
the same care and skill as it exercises in performing like services for
itself. In the event Park Place changes its policies, procedures or
practices, the Corporate Services performed hereunder may be modified by
Park Place to meet such revised policies, procedures and practices provided
that Park Place gives Hilton prior written notice of such change and a
reasonable opportunity for Hilton to adapt its operations to accommodate
such changes or to reject such change. Hilton's decision whether or not to
accept the proposed change must be made on or before the date Park Place
implements such change, which date shall be specified in the notice given
to Hilton. Hilton agrees to pay any charges (i) resulting from Park
Place's need to maintain different versions of the same systems,
procedures, technologies, or services and (ii) resulting from requirements
of third party vendors. Notwithstanding anything to the contrary in this
Section 6.a., Park Place's liability for the provision of services
hereunder shall be strictly limited, as set forth in Section 9.
b. HILTON'S OBLIGATIONS. Hilton shall adopt reasonable
measures to limit its and Park Place's exposure with respect to any
potential losses and damages, including, but not limited to, periodic
examination and confirmation of results, provision for identification and
correction of errors and omissions, preparation and storage of backup data,
virus prevention, security, replacement of lost or mutilated documents, and
reconstruction of data.
7. LIAISON. Hilton shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President & General Counsel, Senior Vice
President & Treasurer and Senior Vice President & Controller (the "HILTON
REPRESENTATIVES") and Park Place shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President,Law & Corporate Affairs, &
Secretary and Vice President & Controller (the "PARK PLACE REPRESENTATIVES," and
together with the Hilton Representatives, the "REPRESENTATIVES") to facilitate
communications and performance under this Agreement. Each party may treat an
act of a Representative of the other party as being authorized by such other
party without inquiring or ascertaining whether such Representative had
authority to so act. Each party shall have the right at any time and from time
to time to replace any of its Representatives by giving prior notice in writing
to the other party setting forth the name of (i) each Representative to be
replaced and (ii) the replacement, and certifying that the replacement
Representative is authorized to act for the party giving the notice in all
matters relating to this Agreement.
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8. CONFIDENTIALITY.
a. Park Place and Hilton agree that all information regarding
the Corporate Services provided hereunder (the "CONFIDENTIAL INFORMATION"),
including, but not limited to, price, methods of operation and software,
shall be maintained in confidence and not be released to any third party
for any reason whatsoever, excluding such parties' counsel, agents,
auditors or lenders. However, a party may release the Confidential
Information to a third party upon the prior approval of the other party
(such approval not to be unreasonably withheld, conditioned or delayed),
upon court order or as such party in good faith believes, based on the
advice of counsel, is required by any rules, regulations or laws.
Notwithstanding the previous sentence, in the event that a party becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or otherwise) to disclose any
information, such party shall provide the other with prompt prior written
notice of such requirement so that the other party may seek a protective
order or other appropriate remedy to minimize disclosure of the
Confidential Information. In the event that such protective order or other
remedy is not obtained, or the other party approves the disclosure, the
disclosing party agrees to furnish only that portion of the Confidential
Information which the disclosing party in good faith believes, based on the
advice of counsel, is legally required and to exercise reasonable efforts
to obtain assurance that confidential treatment will be accorded to such
information. Each party shall cease use of all Confidential Information
which any party has obtained from the other upon the expiration or earlier
termination of this Agreement. The provisions of this Section 8 shall
survive the expiration or earlier termination of this Agreement
b. Any Hilton information or other information provided by
Hilton to Park Place for use with the Corporate Services provided hereunder
and identified in writing as confidential shall remain the exclusive and
confidential property of Hilton. Park Place shall treat such information
as confidential and will not disclose or otherwise make available any
Hilton information to any person other than employees, consultants, or
auditors of Park Place with a need-to-know or except as required by court
order or as such party in good faith believes, based on the advice of
counsel, is required by any rules, regulations or laws. Park Place will
instruct its employees who have access to the Hilton information to keep
the same confidential by using the same care and discretion that Park Place
uses with respect to its own confidential property and trade secrets.
c. Park Place will continue current security provisions
regarding third parties' access to Hilton information. Park Place reserves
the right to issue and change regulations and procedures from time to time
to improve file security.
d. Park Place will continue current precautions regarding the
loss or alteration of Hilton information. Hilton will, to the extent it
deems necessary, keep copies of all source documents delivered to Park
Place and will maintain a procedure external to Park Place's systems for
the reconstruction of lost or altered Hilton data.
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e. Park Place will, to the extent applicable, retain Hilton's
information in accordance with and to the extent provided by Park Place's
then prevailing records retention policies and practices for similar
activities. Park Place will, in conformity with its then prevailing
records retention policies and practices, dispose of all Hilton information
in any manner it deems appropriate unless Hilton, prior to such disposal,
furnishes to Park Place written instructions for the disposition of such
Hilton information, at Hilton's expense. At Hilton's request, Park Place
will provide Hilton, in a standard Park Place format and at Park Place's
then standard rates for such format, any and all Hilton information
requested.
f. Park Place's systems used to perform the Corporate Services
provided hereunder are confidential and proprietary to Park Place or third
parties. Hilton shall treat these systems and all related procedures as
confidential and proprietary to Park Place or its third party vendors and
shall be directly bound by and responsible for applicable license and other
obligations. Hilton agrees that all software systems, procedures, and
related materials provided to Hilton by Park Place for the purposes of this
Agreement are for Hilton's interim, revocable internal use exclusively and
only as related to the Corporate Services or any of the underlying systems
used to provide Corporate Services hereunder. Hilton may not sell,
transfer, assign, or otherwise use the Corporate Services provided
hereunder, in whole or in part, for the benefit of any other party. Hilton
shall not copy, modify, reverse engineer, or in any way alter these systems
without Park Place's express written consent. Title to all software
systems used in performing the Corporate Services provided hereunder shall
remain in Park Place or its third party vendors.
9. WARRANTIES AND LIMITATIONS OF LIABILITY.
a. PARK PLACE DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE CORPORATE
SERVICES PROVIDED HEREUNDER. Park Place will use reasonable efforts to
perform the Corporate Services provided hereunder in a professional and
workmanlike manner, but the results of the Corporate Services are furnished
"as is."
b. Park Place shall have no liability to any third party in
connection with the provision of the Corporate Services in any event, and
no liability to Hilton except to the extent (i) the performance of such
Corporate Services is in material breach of the standard of care specified
in this Agreement or (ii) the performance of such Corporate Services is
interrupted, delayed or otherwise not available, PROVIDED, HOWEVER, that in
each case such liability shall be subject to Sections 9.e. and 13 hereof.
c. Park Place's sole liability to Hilton for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(i). above, shall be, at Hilton's
discretion, to (i) promptly perform again the particular Corporate Service
that was previously performed in breach of the standard of care specified
in this
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Agreement, at no additional cost to Hilton or (ii) refund the portion of
the fees attributable to the performance of the Corporate Service that was
previously performed in breach of the standard of care specified in this
Agreement.
d. Park Place's sole liability to Hilton for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(ii). above, shall be to use all
reasonable efforts to make the Corporate Services available as promptly as
reasonably practicable. Park Place will maintain the same back-up
procedures for Hilton's information that Park Place has for its own similar
information.
e. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, (i) PARK
PLACE SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS, DELAYS, OR LOSSES
UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH OR GROSS
NEGLIGENCE AND (ii) PARK PLACE SHALL NOT BE LIABLE FOR INCIDENTAL,
INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR
OTHER ECONOMIC DAMAGES. HILTON AGREES THAT IN NO EVENT SHALL THE TOTAL
AGGREGATE LIABILITY OF PARK PLACE FOR ANY AND ALL CLAIMS, LOSSES, OR
DAMAGES ARISING UNDER THIS AGREEMENT AND FOR THE CORPORATE SERVICES
PERFORMED HEREUNDER EXCEED THE VALUE OF HILTON'S PAYMENT FOR SAID SPECIFIC
CORPORATE SERVICE IN DISPUTE OVER ONE ACCOUNTING PERIOD'S TIME.
f. The foregoing provisions of this Section 9 set forth the
full extent of Park Place's liability hereunder (monetary or otherwise) for
any claim or action, regardless of the form in which any such claim or
action may be asserted against Park Place (e.g. contract, negligence or
otherwise).
g. "Park Place" as used in this Section 9 includes all of Park
Place's affiliates, subsidiaries, vendors, service providers, licensors,
licensees and properties, and each of such entities' agents, officers,
directors, agents, employees, guests, residents, invitees, permitees,
heirs, executors, successors and assigns, related persons or entities (the
"PARK PLACE INDEMNITEES").
10. DEFAULT. If either party materially defaults hereunder, the
non-defaulting party may terminate this Agreement effective immediately (subject
to the cure periods set forth below) upon written notice to the defaulting
party. The non-defaulting party shall be entitled to all remedies provided by
law or equity (including reasonable attorneys' fees and costs). The following
events shall be deemed to be material defaults hereunder:
a. Failure by any party to make any payment required to be made
to the other hereunder or under an agreement related to the provision of
Corporate Services, which failure is not remedied within 5 days after
receipt of written notice thereof; or
b. Except as otherwise provided herein, failure by any party
substantially to perform in accordance with the terms and conditions of
this Agreement or
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under an agreement related to the provision of Corporate Services, which
failure is not remedied within 30 days after receipt of written notice from
the other party specifying the nature of such default; or
c. (i) Filing of a voluntary bankruptcy petition by any party;
(ii) filing of an involuntary bankruptcy petition against any party which
is not withdrawn within 60 days after filing; (iii) assignment for the
benefit of creditors made by any party; or (iv) appointment of a receiver
for any party.
11. LAWS AND GOVERNMENTAL REGULATIONS. Hilton shall be responsible
for (a) compliance with all laws and governmental regulations affecting its
business and (b) any use it may make of the Corporate Services to assist it in
complying with such laws and governmental regulations. While Park Place shall
not have any responsibility for Hilton's compliance with the laws and
regulations referred to above, Park Place agrees to use reasonable efforts to
cause the Corporate Services to be designed in such manner that they will be
able to assist Hilton in complying with its applicable legal and regulatory
responsibilities as related to the Corporate Services. In no event, however,
will Hilton rely solely on its use of the Corporate Services in complying with
any laws and governmental regulations.
12. INDEMNIFICATION.
a. Hilton shall indemnify, defend and hold harmless each Park
Place Indemnitee from and against any and all losses, Liabilities, damages
and expenses (including, without limitation, the reasonable costs and
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any or all such investigations or any and all Actions, or
threatened Actions) (collectively, "LOSSES") incurred or suffered by such
Park Place Indemnitee either (i) as the result of any claim made against
such Park Place Indemnitee by any third party arising out of such Park
Place Indemnitee's provision of the Corporate Services or (ii) arising out
of Hilton's negligence or malfeasance in connection with its use of the
Corporate Services.
b. The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification provisions
set forth herein are intended to supplement, but not to replace, the
indemnification provisions in the Distribution Agreement. To the extent
the indemnification provisions set forth herein conflict with those set
forth in the Distribution Agreement, those provisions that provide the
greatest benefits to the indemnified party shall control.
13. FORCE MAJEURE. Hilton and Park Place shall incur no liability to
each other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other event beyond each other's reasonable control. In
addition, Park Place shall not be liable or deemed to be in default for any
delay or failure to perform hereunder resulting, directly or indirectly, from
any cause beyond Park Place's reasonable control, including limitations upon the
availability of
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communications facilities or failures of Hilton or other communications
equipment or failure of Hilton to prepare data properly for use in the Corporate
Services.
14. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller.
15. ASSIGNMENT. 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.
16. 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.
17 HEADINGS; REFERENCES. The 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 "Sections" or
"Exhibits" shall be deemed to be references to Sections hereof or Exhibits
hereto unless otherwise indicated.
18 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 extensive in any respect
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.
19 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):
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(a) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: Executive Vice President & General Counsel and
Executive Vice President & Chief Financial Officer
Telecopy: 310-205-7677 and
310-205-4327
with a copy to:
Latham & Watkins
1001 Pennsylvania Ave., N.W.
Suite 1300
Washington, D.C. 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 & Chief Financial
Officer and Executive Vice President,Law &
Corporate Affairs, & Secretary
Telecopy: 702-699-5190 and
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
20. FURTHER ACTION. Hilton and Park Place each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
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21. WAIVER. Hilton and Park Place each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute any
waiver of any subsequent default or rights herein or nullify the effectiveness
of that term or condition. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
22. 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 law.
23. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
including the Exhibits hereto, and the Distribution Agreement (including any
Ancillary Agreements, as such term is defined in the Distribution Agreement) and
including the Schedules and Exhibits thereto, constitute the entire
understanding between the parties, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter covered by said agreements. To the extent that the terms of this
Agreement and similar terms of the Distribution Agreement or any Ancillary
Agreement are in conflict, the interpretation given to the conflicting terms of
the Distribution Agreement shall govern the interpretation and performance of
this Agreement. This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
24. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
25. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance or
injunctive relief thereof, and including the attorneys' fees provisions referred
to therein.
26. 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.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Park Place and Hilton have caused this Agreement
to be signed by their duly authorized officers as of the date first above
written.
PARK PLACE ENTERTAINMENT
CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
-------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
-------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
S-1
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----------------------------------------------------
EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
DATED AS OF DECEMBER 31, 1998
----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS. . . . . . . . . . . . . . . . . . . . 7
Section 2.1. Transfer of Employees.. . . . . . . . . . . . . . . . . . . 7
Section 2.2. Allocations between Hilton and Park Place.. . . . . . . . . 8
Section 2.3. Change of Control Benefits; Termination Benefits. . . . . . 9
ARTICLE III. INCENTIVE PLANS . . . . . . . . . . . . . . . . . . . . . .10
Section 3.1. Stock Option and Incentive Plans. . . . . . . . . . . . . .10
Section 3.2. Stock Purchase Plans. . . . . . . . . . . . . . . . . . . .11
Section 3.3. Compensation Plans. . . . . . . . . . . . . . . . . . . . .11
ARTICLE IV. PENSION AND SAVINGS PLAN. . . . . . . . . . . . . . . . . .12
Section 4.1. 401(k) Plans. . . . . . . . . . . . . . . . . . . . . . . .12
Section 4.2. Retirement Plan.. . . . . . . . . . . . . . . . . . . . . .14
ARTICLE V. WELFARE AND OTHER BENEFITS. . . . . . . . . . . . . . . . .15
Section 5.1. Hilton Medical/Dental Plans.. . . . . . . . . . . . . . . .15
Section 5.2. Park Place Medical/Dental Plans.. . . . . . . . . . . . . .16
Section 5.3. Vacation and Sick Pay Liabilities.. . . . . . . . . . . . .17
Section 5.4. Payroll Reporting and Withholding.. . . . . . . . . . . . .18
Section 5.5. Post-Retirement Welfare Benefits. . . . . . . . . . . . . .19
ARTICLE VI. LABOR AND EMPLOYMENT MATTERS. . . . . . . . . . . . . . . .19
Section 6.1. Separate Employers. . . . . . . . . . . . . . . . . . . . .19
Section 6.2. Employment Policies and Practices.. . . . . . . . . . . . .20
Section 6.3. Collective Bargaining Agreements. . . . . . . . . . . . . .20
Section 6.4. Notice of Claims. . . . . . . . . . . . . . . . . . . . . .20
Section 6.5. Assumption of Unemployment Tax Rates. . . . . . . . . . . .20
Section 6.6. Employees on Leave of Absence.. . . . . . . . . . . . . . .20
Section 6.7. Release and Separation Agreements.. . . . . . . . . . . . .20
ARTICLE VII. NON-U.S. PLANS. . . . . . . . . . . . . . . . . . . . . . .21
Section 7.1. Non-U.S. Plans Generally. . . . . . . . . . . . . . . . . .21
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ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .21
Section 8.1. Relationship of Parties.. . . . . . . . . . . . . . . . . .21
Section 8.2. Access to Information; Cooperation. . . . . . . . . . . . .21
Section 8.3. Assignment. . . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.5. Severability. . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.6. Parties in Interest; No Third Party Beneficiary Rights. . .22
Section 8.7. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 8.8. Further Assurances. . . . . . . . . . . . . . . . . . . . .24
Section 8.9. Waiver of Conditions. . . . . . . . . . . . . . . . . . . .24
Section 8.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . . .24
Section 8.11. Preservation of Right To Amend or Terminate Plans.. . . . .24
Section 8.12. Entire Agreement. . . . . . . . . . . . . . . . . . . . . .24
Section 8.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.14. Survival. . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.15. Dispute Resolution. . . . . . . . . . . . . . . . . . . . .25
Section 8.16. Reimbursement.. . . . . . . . . . . . . . . . . . . . . . .25
Section 8.17. Default.. . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.18. Force Majeure.. . . . . . . . . . . . . . . . . . . . . . .25
Section 8.19. Attorney/Client Privilege.. . . . . . . . . . . . . . . . .26
Section 8.20. Specific Performance. . . . . . . . . . . . . . . . . . . .26
</TABLE>
SCHEDULES
Schedule A Release and Separation Agreements
EXHIBITS
Exhibit A Park Place Entertainment Corporation 1998 Stock Incentive
Plan
Exhibit B Park Place Entertainment Corporation 1998 Independent
Director Stock Option Plan
Exhibit C Park Place Entertainment Corporation Employee Stock Purchase
Plan
ii
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EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT
(this "AGREEMENT") is made and entered into as of December 31, 1998, by and
between HILTON HOTELS CORPORATION, a Delaware corporation ("HILTON"), and PARK
PLACE ENTERTAINMENT CORPORATION (f/k/a Gaming Co., Inc.), a Delaware corporation
("PARK PLACE"), effective as of the Distribution Date (as hereinafter defined).
RECITALS
WHEREAS, subject to certain conditions, Hilton intends to spin-off its
operations, assets and liabilities relating to its gaming business by
distributing all of the issued and outstanding shares of common stock, par value
$.01 per share, of Park Place (together with the Park Place Rights, as
hereinafter defined, the "PARK PLACE COMMON STOCK") to the holders as of the
Record Date (as hereinafter defined) of the common stock, par value $2.50 per
share, of Hilton (the "HILTON COMMON STOCK"), on a pro rata basis (the
"DISTRIBUTION");
WHEREAS, in connection with such spin-off, Hilton and Park Place have
entered into a Distribution Agreement of even date herewith (the "DISTRIBUTION
AGREEMENT"), pursuant to which, among other things, Hilton is divested of the
gaming business to be conducted by Park Place; and
WHEREAS, pursuant to, and as contemplated by, the Distribution
Agreement, Hilton and Park Place have agreed to enter into an agreement
allocating responsibilities with respect to certain matters relating to
employees and employee compensation, benefits, labor and certain other
employment matters pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
agreements, undertakings and obligations set forth herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below. Capitalized
terms used and not otherwise defined in this Agreement shall have the meaning
ascribed to them in the Distribution Agreement. All references herein to
"Article," "Sections" or "Schedules" shall be deemed to be references to
Articles or Sections hereof or Schedules hereto unless otherwise indicated.
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"ANCILLARY AGREEMENT" shall mean any agreement contemplated by the
Distribution Agreement, and such other documents as the parties thereto shall
mutually agree are required to effect the Distribution.
"AMG COMPENSATION AGREEMENT" shall mean the Deferred Compensation
Agreement, dated as of January 16, 1997, by and between Hilton and Arthur M.
Goldberg.
"CHANGE OF CONTROL AGREEMENTS" shall mean any and all employment or
severance agreements of Hilton which provide severance or termination benefits
to any Employee subsequent to a change of control of Hilton.
"CIRP" shall mean the Conrad International Retirement Plan, with any
amendments thereto.
"COBRA" shall mean Code Section 4980B and ERISA Sections 601 through
608, and any applicable state law establishing employer requirements for
continuation of health care, life insurance or other Welfare Plan benefits for
the benefit of certain current and former employees or dependents thereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"COLLECTIVE BARGAINING AGREEMENT" shall mean any collective bargaining
agreement or other labor agreement to which Hilton or any of its subsidiaries or
affiliates was a party on or before the Distribution Date.
"DISTRIBUTION" shall have the meaning set forth in the Recitals.
"DISTRIBUTION AGREEMENT" shall have the meaning set forth in the
Recitals.
"DISTRIBUTION DATE" shall mean the date on which the Distribution
occurs.
"EMPLOYEE" shall mean with respect to any entity, an individual who is
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, layoff with rights of recall, and any other leave of absence or
similar interruption of active employment that is not considered, according to
the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave. An employee
includes, without limitation, any individual who is in one of the following
categories: a Retained Employee, a Hilton Terminee, a Park Place Employee or a
Transferred Employee.
"EMPLOYER" shall mean Hilton or Park Place, as the context so indicates.
"EMPLOYER COMMON STOCK" shall mean Hilton Common Stock with respect to
Hilton Individuals, and Park Place Common Stock with respect to Park Place
Individuals.
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"EMPLOYER STOCK OPTION PLAN" shall mean a plan which provides for awards
of additional compensation to eligible Employees in the form of nonqualified or
incentive options to purchase Employer Common Stock, including without
limitation, the Hilton Stock Option Plans and the Park Place Stock Option Plans.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor legislation.
"FOREIGN PLANS" shall have the meaning set forth in Section 7.1.
"FOREIGN PLANS AGREEMENT" shall have the meaning set forth in Section
7.1.
"HILTON" shall have the meaning set forth in the Preamble.
"HILTON COMMON STOCK" shall have the meaning set forth in the Recitals.
"HILTON COMPENSATION PLANS" shall mean collectively, the Hilton
Incentive Compensation Plan, the Hilton Executive Deferred Compensation Plan and
any and all other incentive or bonus compensation plans of Hilton.
"HILTON DIRECTOR OPTION PLAN" shall mean the 1997 Independent Director
Stock Option Plan of Hilton.
"HILTON EXECUTIVE DEFERRED COMPENSATION PLAN" shall mean the Executive
Deferred Compensation Plan, with amendments thereto, of Hilton.
"HILTON EXECUTIVE INCENTIVE PLAN" shall mean the 1996 Chief Executive
Stock Incentive Plan of Hilton.
"HILTON 401(k) PLAN" shall mean the Thrift Savings Plan of Hilton, as
amended and restated.
"HILTON INCENTIVE COMPENSATION PLAN" shall mean the Incentive
Compensation Plan of Hilton, as amended.
"HILTON INDIVIDUAL" shall mean any individual who (a) is a Retained
Employee, (b) is, as of the Distribution Date, a Hilton Terminee whose last
employment with Hilton or any of its subsidiaries was with a Hilton Retained
Business or (c) is a dependent or beneficiary of any individual specified in
clause (a) or (b).
"HILTON MEDICAL/DENTAL PLANS" shall mean any Medical/Dental Plans
maintained for or providing benefits to Hilton Individuals.
"HILTON 1984 STOCK OPTION PLAN" shall mean the 1984 Stock Option and
Stock Appreciation Rights Plan, and amendments thereto, of Hilton.
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"HILTON 1990 STOCK OPTION PLAN" shall mean the 1990 Stock Option and
Stock Appreciation Rights Plan, and amendments thereto, of Hilton.
"HILTON QUALIFIED BENEFICIARY" shall mean a Qualified Beneficiary who,
immediately following the Distribution, is not a Park Place Qualified
Beneficiary and who, immediately prior to the Distribution, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"HILTON RETAINED BUSINESS" shall mean any business or operation of
Hilton or its subsidiaries which is, pursuant to the Distribution Agreement, to
be conducted by Hilton following the Distribution.
"HILTON RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of
July 14, 1988 between Hilton and the First National Bank of Chicago, as rights
agent, as amended from time to time.
"HILTON STOCK INCENTIVE PLAN" shall mean the 1996 Stock Incentive Plan
of Hilton, as amended.
"HILTON STOCK OPTION" shall mean an option to purchase Hilton Common
Stock pursuant to any of the Hilton Stock Option Plans.
"HILTON STOCK OPTION PLANS" shall mean collectively, the Hilton 1984
Stock Option Plan, the Hilton 1990 Stock Option Plan, the Hilton Director Option
Plan, the Hilton Stock Incentive Plan and the Hilton Executive Incentive Plan.
"HILTON STOCK PURCHASE PLAN" shall mean the Employee Stock Purchase Plan
of Hilton, as amended.
"HILTON TERMINEE" shall mean any individual who was formerly employed by
Hilton who terminated such employment prior to the Distribution Date.
"HMO" shall mean any health maintenance organization organized under 42
U.S.C. Section 300e-9, or a state health maintenance organization statute that
provides medical services for Hilton Individuals or Park Place Individuals under
any Plan.
"IRS" shall mean the Internal Revenue Service.
"LOCAL ACTUARY" shall have the meaning set forth in Section 7.1.
"MEDICAL/DENTAL PLAN" shall mean a Welfare Plan providing health
benefits to Employees and their dependents.
"PARK PLACE" shall have the meaning set forth in the Preamble.
"PARK PLACE BUSINESS" shall mean any business or operation of Hilton or
its subsidiaries which, pursuant to the Distribution Agreement, is to be
conducted by Park Place immediately following the Distribution.
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"PARK PLACE COMMON STOCK" shall have the meaning set forth in the
Recitals.
"PARK PLACE COMPENSATION PLANS" shall have the meaning set forth in
Section 3.3(b).
"PARK PLACE EMPLOYEE" shall mean any individual who is (a) a Transferred
Employee or (b) not a Transferred Employee but becomes an employee of Park Place
on or after the Distribution Date.
"PARK PLACE EMPLOYMENT AGREEMENTS" shall have the meaning set forth in
Section 2.1(d).
"PARK PLACE 401(k) PLAN" shall have the meaning set forth in
Section 4.1(b).
"PARK PLACE INDIVIDUAL" shall mean any individual who (a) is a
Transferred Employee, (b) is otherwise a Park Place Employee, (c) is, as of the
Distribution Date, a Hilton Terminee whose last employment with Hilton or a
subsidiary of Hilton was with a Park Place Business or (d) is a dependent or
beneficiary of any individual described in clause (a), (b) or (c).
"PARK PLACE MEDICAL/DENTAL PLANS" shall mean the Medical/Dental Plans to
be established by Park Place in accordance with Section 5.2(a).
"PARK PLACE OPTION" shall have the meaning set forth in Section 3.1(a).
"PARK PLACE QUALIFIED BENEFICIARY" shall mean any Park Place Individual
(or dependent thereof) who, on or before the Distribution Date, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"PARK PLACE RIGHTS" shall mean the rights issued under the Park Place
Rights Agreement to purchase shares of Park Place Common Stock.
"PARK PLACE RIGHTS AGREEMENT" shall mean the Rights Agreement by and
between Park Place and ChaseMellon Shareholder Services, L.L.C., dated as of
December 23, 1998.
"PARK PLACE STOCK OPTION PLANS" shall mean the Stock Option Plans of
Park Place, as established by Park Place pursuant to Section 3.1(b) hereof.
"PLAN" shall mean any plan, policy, arrangement, contract or agreement
providing compensation benefits for any group of Employees or individual
Employees (including former Employees,) or the dependents or beneficiaries of
any such Employee, whether formal or informal or written or unwritten, and
including, without limitation, any means, whether or not legally required,
pursuant to which any benefit is provided by an Employer to any such Employee or
the beneficiaries of any such Employee, existing as of the Distribution Date or
prior thereto.
"QUALIFIED BENEFICIARY" shall mean an individual (or dependent thereof)
who either (a) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan or (b) becomes a "qualified
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beneficiary" (as that term is defined in Code Section 4980B(g)(1) and ERISA
607(3)) under any Medical/Dental Plan.
"RECORD DATE" shall mean December 23, 1998.
"RELEASE AND SEPARATION AGREEMENTS" shall mean those Release and/or
Separation Agreements identified on SCHEDULE A hereto, and any other similar
agreements entered into by Hilton or any of its subsidiaries and a Hilton
Terminee whose last employment with Hilton or such subsidiary was with either a
Park Place Business or a Hilton Retained Business.
"REPLACEMENT PLAN" shall mean the Retirement Benefit Replacement Plan of
Hilton, as amended.
"RETAINED EMPLOYEE" shall mean any individual who immediately prior to
the Distribution was an Employee of Hilton and who is an employee of Hilton
immediately following the Distribution.
"REV. PROC. 84-77" shall have the meaning set forth in Section 5.4(a).
"RETIREMENT PLAN" shall mean the Retirement Plan, and amendments
thereto, of Hilton.
"SEC" shall mean the Securities and Exchange Commission.
"SERP" shall mean the Supplemental Executive Retirement Plan effective
as of June 14, 1989, as amended and restated, of Hilton.
"SERVICE CREDIT" shall mean the period taken into account under any Plan
for purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
"TERMINATION BENEFITS" shall have the meaning set forth in Section
2.3(a).
"TRANSFERRED EMPLOYEE" shall mean any individual who was an Employee of
Hilton immediately prior to the Distribution and who becomes, immediately after
the Distribution, an Employee of Park Place.
"WELFARE PLAN" shall mean any Plan which provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment benefit, but
excluding vacation benefits covered under Section 5.3.
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ARTICLE II.
TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS
Section 2.1. TRANSFER OF EMPLOYEES.
(a) Hilton and Park Place shall take all steps necessary or
appropriate so that all of the Employees of Hilton and its subsidiaries are
allocated between the Hilton Retained Business and the Park Place Business in
accordance with the principles set forth in Section 2.1(b) below, and so that
each individual who is so allocated to the Park Place Business is, as of the
Distribution Date and immediately following the Distribution, an Employee of a
member of the Park Place Business, and each individual who is so allocated to
the Hilton Retained Business is, as of the Distribution Date and immediately
following the Distribution, an Employee of a member of the Hilton Retained
Business.
(b) In making the allocation provided for in this
Section 2.1, Hilton and Park Place shall allocate each Employee who is primarily
engaged in the Hilton Retained Business to Hilton and/or its subsidiaries and
each Employee who is primarily engaged in the Park Place Business to Park Place
and/or its subsidiaries. All other Employees shall be allocated in a mutually
agreeable manner that, to the extent possible, takes into account (i) the
Employees' expertise, experience and existing positions and duties, (ii) the
likelihood of unreasonably disrupting either the Hilton Retained Business or the
Park Place Business and (iii) maximizing the ability of each of Hilton and Park
Place and their respective subsidiaries to manage and operate their respective
businesses after the Distribution Date, taking into account the respective needs
of such businesses as established by past practice, and with a view towards
maximizing the value and effectiveness of both the Hilton Retained Business and
the Park Place Business.
(c) Hilton and Park Place each agree that, between the date
hereof and the Distribution Date, Employees will not be transferred between the
Hilton Retained Business or Park Place Business except as (i) necessary to
effect the transfer pursuant to this Section 2.1 or (ii) in the ordinary course
of business consistent with past practice. Notwithstanding the foregoing
allocation, Hilton and Park Place acknowledge that (x) Hilton may need the
services of certain Transferred Employees for a transitional period following
the Distribution and (y) Park Place may need the services of certain Retained
Employees for a transitional period following the Distribution. Hilton and Park
Place agree to enter into an Ancillary Agreement to this effect and to cooperate
to make such services available on a transitional basis.
(d) Effective as of the Distribution Date, Hilton shall
assume all obligations and liabilities for, and arising under all written
employment agreements and oral employment agreements, if any, in each case with
respect to Retained Employees, and Park Place shall have no liability or
obligation with respect thereto. Effective as of the Distribution Date, Park
Place shall assume all obligations and liabilities for and arising under all
written employment agreements and oral employment agreements, if any, in each
case with respect to Transferred Employees (the "PARK PLACE EMPLOYMENT
AGREEMENTS"), and Hilton shall have no liability or obligation with respect
thereto. Park Place shall take, or cause to be taken, all action necessary
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and appropriate to assume, effective as of the Distribution Date, all Park Place
Employment Agreements, with such changes as may be necessary to reflect the
change in the employer thereunder and such other changes as Park Place shall
determine. Such Park Place Employment Agreements shall otherwise have the same
terms and conditions as in effect immediately prior to the Distribution Date,
except that references to employment by or termination of employment with Hilton
and its affiliates shall be changed to references to employment by or
termination of employment with Park Place and its affiliates.
Section 2.2. ALLOCATIONS BETWEEN HILTON AND PARK PLACE.
(a) ALLOCATION OF RESPONSIBILITIES AS EMPLOYER ON
DISTRIBUTION DATE. On the Distribution Date, except to the extent assumed by
Hilton under this Agreement or any Ancillary Agreement, Park Place shall retain
or assume, as the case may be, responsibility as employer for Transferred
Employees. On the Distribution Date, except to the extent assumed by Park Place
under this Agreement or any Ancillary Agreement, Hilton shall retain
responsibility as employer for Retained Employees.
(b) ASSUMPTION OF LIABILITIES ON DISTRIBUTION DATE. Except
as specifically provided in this Agreement, or as otherwise agreed by the
parties hereto:
(i) Except as provided in Section 2.2(c) and with
respect to the Retirement Plan, immediately following the Distribution, Park
Place shall assume all benefit obligations and all related rights in connection
with any Plan with respect to the Transferred Employees and Hilton Terminees
engaged in a Park Place Business and Hilton shall have no further liability with
respect thereto.
(ii) Hilton shall retain all benefit obligations and
all related rights which accrue after the Distribution Date in connection with
any Plan and with respect to Retained Employees, and Park Place shall have no
further liability with respect thereto; PROVIDED, HOWEVER, that with respect to
such Retained Employees who become employed by Park Place after the
Distribution, any benefit obligations and all related rights in connection with
any Plan with respect to such employment with Park Place shall be assumed by
Park Place.
(c) SERVICE CREDITS.
(i) DISTRIBUTION DATE TRANSFERS. In connection with
the Distribution and for purposes of determining Service Credits under any Plan,
Hilton shall credit each Retained Employee and Park Place shall credit each
Transferred Employee with such Employee's Service Credits and original hire date
as reflected in the Hilton records as of the Distribution Date. Such Service
Credits and hire date shall continue to be maintained as described herein for as
long as the Employee does not terminate employment or as otherwise may be
required by applicable law or any applicable Plan.
(ii) SERVICE CREDITS FOLLOWING THE DISTRIBUTION DATE.
Subject to the provisions of applicable law, (x) Park Place may, in the case of
Transferred Employees, in its sole discretion, make such decisions as it deems
appropriate with respect to determining Service
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Credits accrued after the Distribution Date and (y) Hilton may, in the case of
Retained Employees, in its sole discretion, make such decisions as it deems
appropriate with respect to determining Service Credits accrued after the
Distribution Date.
Section 2.3. CHANGE OF CONTROL BENEFITS; TERMINATION BENEFITS.
(a) No Retained Employee and no Transferred Employee shall be
deemed, as a result of any actions taken pursuant to this Article II or
otherwise as a result of the consummation of the transactions contemplated by
the Distribution Agreement, to have become entitled to any benefits under any
Plan, contract, agreement, statute, regulation or other arrangement that
provides for the payment of severance pay, salary continuation, pay in lieu of
notice, unused vacation pay, or similar benefits in connection with actual or
constructive termination or alleged actual or constructive termination of
employment (collectively, "TERMINATION BENEFITS"). Without limiting the
generality of the foregoing, none of the transactions contemplated by the
Distribution Agreement constitutes a "change of control" or a "change in
control" for purposes of any Plan.
(b) Notwithstanding Section 2.3(a), effective as of the
Distribution Date, Hilton shall retain all liabilities relating to or arising
out of claims made by or on behalf of Retained Employees (including the
beneficiary, dependent or alternate payee of such individual) for, or with
respect to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of employment of any
Retained Employee with any member of the Park Place Business or the Hilton
Retained Business, whether before, on or after the Distribution Date. In
addition, Hilton shall retain all liabilities and obligations pursuant to any
Change of Control Agreements with respect to Retained Employees.
(c) Notwithstanding Section 2.3(a), and except as provided
otherwise in Section 2.3(b) above, effective as of the Distribution Date, Park
Place shall assume all liabilities relating to or arising out of claims made by
or on behalf of Transferred Employees (including the beneficiary, dependent or
alternative payee of such individual) for, or with respect to, Termination
Benefits relating to the actual or constructive termination or alleged actual or
constructive termination of employment of any Transferred Employee with any
member of the Park Place Business or the Hilton Retained Business, whether
before, on or after the Distribution Date. In addition, Park Place shall assume
all liabilities and obligations pursuant to any Change of Control Agreements
with respect to Transferred Employees.
ARTICLE III.
INCENTIVE PLANS
Section 3.1. STOCK OPTION AND INCENTIVE PLANS.
(a) HILTON STOCK OPTION PLANS. Hilton shall continue the
Hilton Stock Option Plans. Effective as of the Distribution Date, all
outstanding Hilton Stock Options, other than Hilton Stock Options held by Arthur
M. Goldberg, shall be adjusted to represent options to purchase an equivalent
number of shares of Hilton Common Stock and shares of Park Place Common Stock
(each such option to purchase Park Place Common Stock, a "PARK PLACE
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OPTION"). Pursuant to such adjustment, the intrinsic value of the Hilton Stock
Options prior to the Distribution shall be preserved after the Distribution, and
the exercise price of the Hilton Stock Options shall be allocated between the
Hilton Stock Options, as adjusted, and the Park Place Options based upon the
relative values of the Hilton Common Stock and the Park Place Common Stock on
December 21, 1998 (the first date on which the Park Place Common Stock traded on
a "when issued" basis), all as determined by Hilton. Effective as of the
Distribution Date, all outstanding Hilton Stock Options held by Arthur M.
Goldberg shall be adjusted to represent Park Place Options. Pursuant to such
adjustment, the intrinsic value of Mr. Goldberg's Hilton Stock Options prior to
the Distribution shall be preserved after the Distribution, and the number of
shares subject to and the exercise price of such Hilton Stock Options shall be
adjusted based on the relative values of the Hilton Common Stock and the Park
Place Common Stock on December 21, 1998 (the first date on which the Park Place
Common Stock traded on a "when issued" basis), all as determined by Hilton. To
the extent necessary, Hilton shall amend the Hilton Stock Option Plans to
provide that with respect to Park Place Individuals, references to employment or
termination of employment with Hilton and its affiliates shall be changed to
references to employment by or termination of employment with Park Place and its
affiliates.
(b) PARK PLACE STOCK OPTION PLANS. Park Place shall take, or
cause to be taken, all action necessary and appropriate to adopt, effective no
later than the Distribution Date, the Park Place Entertainment Corporation 1998
Stock Incentive Plan in substantially the form attached hereto as EXHIBIT A and
the Park Place Entertainment Corporation 1998 Independent Director Stock Option
Plan in substantially the form attached hereto as EXHIBIT B (such plans as
adopted, the "PARK PLACE STOCK OPTION PLANS"). All awards under the Park Place
Stock Option Plans will be options with respect to Park Place Common Stock.
Park Place Options which are issued pursuant to the adjustment of the Hilton
Stock Options under subsection (a) above shall otherwise have substantially
similar terms and conditions as the Hilton Stock Options with respect to which
they are issued, except that with respect to Hilton Individuals, references to
employment by or termination of employment with Park Place and its affiliates
shall be changed to references to employment by or termination of employment
with Hilton and its affiliates. From and after the Distribution Date, Park
Place shall assume all obligations with respect to the Park Place Options, and
shall administer the Park Place Stock Option Plans under terms governing such
awards.
Section 3.2. STOCK PURCHASE PLANS.
(a) HILTON STOCK PURCHASE PLAN. The Hilton Stock Purchase
Plan shall be administered and amended, if necessary, to provide that the
options held by each participant under such Plan shall be exercised on the
Distribution Date under the terms and conditions set forth in such Plan;
PROVIDED that, the exercise price per share shall be the lesser of (i) 95% of
the Fair Market Value (as defined therein) of Hilton Common Stock on the
applicable Grant Date (as defined therein) or (ii) 95% of the Fair Market Value
on the Distribution Date of Hilton Common Stock with a "due bill" to receive
Park Place Common Stock. From and after the Distribution Date, Hilton shall
continue the Hilton Stock Purchase Plan with respect to Retained Employees.
Hilton shall assume all obligations, and shall administer the Hilton Stock
Purchase Plan under
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terms governing such awards, with respect to Retained Employees, except as
adjusted or amended herein.
(b) PARK PLACE STOCK PURCHASE PLAN. Park Place shall take,
or cause to be taken, all action necessary and appropriate to adopt,
effective as of the Distribution Date, the Park Place Entertainment
Corporation Employee Stock Purchase Plan in substantially the form attached
hereto as EXHIBIT C.
Section 3.3. COMPENSATION PLANS.
(a) HILTON COMPENSATION PLANS. Hilton shall pay, or cause to
be paid, all compensation and bonuses earned by each Hilton Individual who, on
the Distribution Date, is a participant under any of the Hilton Compensation
Plans, for the period prior to the Distribution Date, in accordance with the
terms of the applicable Hilton Compensation Plan. From and after the
Distribution Date, Hilton shall retain all liabilities relating to or arising
under the Hilton Compensation Plans with respect to any Hilton Individuals.
(b) PARK PLACE COMPENSATION PLANS.
Park Place shall assume and shall be solely responsible for, all
obligations to pay all compensation and bonuses earned by each Park Place
Individual who, on the Distribution Date, is a participant under the Hilton
Compensation Plans. Park Place shall take, or cause to be taken, all action
necessary and appropriate to adopt, effective as of the Distribution Date,
compensation plans in substantially the same form as the Hilton Compensation
Plans which cover Park Place Individuals, with such changes as may be necessary
to reflect the change in the issuer of awards thereunder and such other changes
as Park Place shall determine (such plans as adopted, the "PARK PLACE
COMPENSATION PLANS"). From and after the Distribution Date, the Park Place
Compensation Plans shall provide future compensation benefits thereunder to Park
Place Individuals pursuant to the terms therein. The terms and conditions of
the Park Place Compensation Plans shall be substantially similar to the terms
and conditions of the Hilton Compensation Plans, until such time as Park Place
may determine that any amendment or termination of any Park Place Compensation
Plan is necessary or desirable.
(c) AMG COMPENSATION AGREEMENT. Park Place shall pay, or
caused to be paid, all compensation and bonuses earned by Arthur M. Goldberg
under the AMG Compensation Agreement according to the terms thereof. As of the
Distribution Date, Park Place shall retain and shall be solely responsible for,
all liabilities and obligations in connection with or arising under the AMG
Compensation Agreement, and Hilton shall have no liability or obligation with
respect thereto.
ARTICLE IV.
PENSION AND SAVINGS PLAN
Section 4.1. 401(k) PLANS.
(a) CONTINUATION OF HILTON 401(k) PLAN. Hilton shall take,
or cause to be taken, all action necessary and appropriate to maintain the
Hilton 401(k) Plan. From and after
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the Distribution Date, such Plan shall provide benefits for all eligible Hilton
Individuals, subject to the terms and provisions of such Plan.
(b) ESTABLISHMENT OF PARK PLACE 401(k) PLAN. Effective as of
the Distribution Date, Park Place shall take, or cause to be taken, all action
necessary and appropriate to establish and administer a 401(k) Plan separate
from the Hilton 401(k) Plan (the "PARK PLACE 401(k) PLAN"). The Park Place
401(k) Plan shall contain substantially the same terms and conditions as the
Hilton 401(k) Plan. The Park Place 401(k) Plan shall be a split up of that
portion of the Hilton 401(k) Plan which is attributable to Park Place
Individuals. Park Place shall provide benefits under the Park Place 401(k) Plan
after the Distribution Date for all Park Place Individuals subject to the terms
and provisions of such Plan. The Park Place 401(k) Plan shall be intended to
qualify for tax-favored treatment under Sections 401(a) and 401(k) of the Code
and to comply with the requirements of ERISA.
(c) MATCHING AND PROFIT SHARING CONTRIBUTIONS. Matching and
discretionary contributions under the Hilton 401(k) Plan with respect to Hilton
Individuals will be made solely by Hilton pursuant to the terms of the Hilton
401(k) Plan. Matching and discretionary contributions under the Park Place
401(k) Plan with respect to Park Place Individuals will be made solely by Park
Place pursuant to the terms of the Park Place 401(k) Plan.
(d) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES. As soon as
practicable after the Distribution Date, Hilton and Park Place shall cause
the trustees of the Hilton 401(k) Plan to transfer to the trustees or other
funding agent of the Park Place 401(k) Plan, the amounts (in cash,
securities, other property or a combination thereof) representing the account
balances of all Park Place Individuals, said amounts to be established as
account balances or accrued benefits of such individuals under the Park Place
401(k) Plan. Each such transfer shall comply with Section 414(1) of the Code
and the requirements of ERISA and the regulations promulgated thereunder.
Park Place shall cause the trustees or other funding agent of the Park Place
401(k) Plan to accept the plan-to-plan transfer from the Hilton 401(k) Plan
trustees, and to credit the accounts of such Transferred Employees under the
Park Place 401(k) Plan with amounts transferred on their behalf.
(e) INFORMATION. Hilton shall provide Park Place, as soon as
practicable after the Distribution Date (with the cooperation of Park Place to
the extent that relevant information is in the possession of Park Place), with a
list of Park Place Individuals who, to the best knowledge of Hilton, were
participants in or otherwise entitled to benefits under the Hilton 401(k) Plan
on the Distribution Date, together with a listing of each participant's Service
Credits under such Plan and a listing of each such Park Place Individual's
account balance thereunder, and each Park Place Individual's investment
election. Hilton shall, as soon as practicable after the Distribution Date,
provide Park Place with such additional information in the possession of Hilton
(and not already in the possession of Park Place) as may be reasonably requested
by Park Place and necessary for Park Place to administer effectively the Park
Place 401(k) Plan.
(f) REGULATORY FILINGS. Hilton and Park Place shall, in
connection with the plan-to-plan transfer described in this Section 4.1,
cooperate in making any and all appropriate
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filings required by the SEC or the IRS, or required under the Code or ERISA or
any applicable securities laws and the regulations thereunder, and take all such
action as may be necessary and appropriate to cause such plan-to-plan transfer
to take place as soon as practicable after the Distribution Date or otherwise
when required by law. Further, Park Place shall seek a favorable IRS
determination letter that the Park Place 401(k) Plan as organized, satisfies all
qualification requirements under Section 401(a) of the Code. Notwithstanding
the foregoing, such plan-to-plan transfers shall take place pending issuance of
such favorable determination letter. Park Place shall make any necessary
amendments on a retroactive basis to the Park Place 401(k) Plan as required by
the IRS to issue the favorable determination letter described above.
(g) ACCOUNT BALANCES OF PARTICIPANTS. Except as otherwise
provided herein, on the Distribution Date, Park Place shall assume sole
responsibility for all liabilities and obligations existing as of the
Distribution Date under the Park Place 401(k) Plan, and Hilton shall have no
liability or obligation with respect thereto. Hilton shall retain sole
responsibility for all liabilities and obligations arising before and after the
Distribution Date under the Hilton 401(k) Plan with respect to Retained
Employees, and Park Place shall have no liability or obligation with respect
thereto.
Section 4.2. RETIREMENT PLAN.
(a) RETIREMENT PLAN. Effective as of January 1, 1997,
Employees who were participants in the Retirement Plan ceased accruing
additional benefits thereunder. From and after the Distribution Date, Hilton
shall retain and shall be responsible for the administration of the Retirement
Plan, and each of Hilton and Park Place shall retain or assume, as applicable,
all liabilities and excess assets, if any, relating to or arising under the
Retirement Plan, including, without limitation, all liabilities for benefits
accrued and payable thereunder to each participant thereunder, and for all costs
of administering the Retirement Plan after the Distribution Date, in a
proportion based upon the ratios of the accrued benefits of Hilton Individuals
and of Park Place Individuals, respectively, as of December 31, 1997.
(b) SERP AND THE REPLACEMENT PLAN. Effective as of January
1, 1997, Employees who were participants in the SERP and/or the Replacement Plan
ceased accruing additional benefits thereunder. From and after the Distribution
Date, Hilton shall retain and shall be responsible for the administration of the
SERP and the Replacement Plan, and each of Hilton and Park Place shall retain or
assume, as applicable, all liabilities relating to or arising under the SERP
and/or the Replacement Plan, as the case may be, and for all costs of
administering the SERP and/or the Replacement Plan, as the case may be, after
the Distribution Date, in a proportion based upon the ratios of the accrued
benefits of Hilton Individuals and of Park Place Individuals, respectively,
under each such respective Plan, as of December 31, 1997.
(c) QUALIFICATION OF PLANS AND OTHER LIABILITIES. Hilton
shall be responsible for all liabilities incurred by Hilton or Park Place as a
result of any failure of the Hilton 401(k) Plan or the Retirement Plan to be
qualified under Section 401(a) of the Code, or any other liability which might
be incurred with respect to such Plans (including, without limitation, all
liabilities relating to or arising out of claims made by or on behalf of
participants therein for, or
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with respect to, benefits under such Plan), with respect to Hilton Individuals,
and Park Place shall be responsible for all liabilities incurred by Hilton or
Park Place as a result of any such failure or other liability (including,
without limitation, all liabilities relating to or arising out of claims made by
or on behalf of participants therein for, or with respect to, benefits under
such Plan) with respect to Park Place Individuals. Notwithstanding the
foregoing, to the extent that any liabilities incurred by Hilton or Park Place
as a result of any failure of the Hilton 401(k) Plan or the Retirement Plan to
be qualified under Section 401(a) of the Code, or any other liability which
might be incurred with respect to such Plans (including, without limitation, all
liabilities relating to or arising out of claims made by or on behalf of
participants therein for, or with respect to, benefits under such Plan) are not
directly or indirectly attributable to either Hilton Individuals or Park Place
Individuals, then each of Hilton and Park Place shall be responsible for such
liabilities in a proportion based upon the ratios of the accrued benefits of
Hilton Individuals and of Park Place Individuals, respectively, under each such
respective Plan, as of December 31, 1997. The parties hereto agree that to the
extent any of them becomes aware that any such Plan fails or may fail to be so
qualified, it shall notify the other party and the parties shall cooperate and
use best efforts to avoid such disqualification, including using the Internal
Revenue Service's Employee Plans Compliance Resolution System or similar
programs, and taking any steps available pursuant to such program to avoid
disqualification, as determined by the party who is made responsible under this
Section 4.2(c) for the liabilities that would result from such disqualification
(and the liabilities for which such party is responsible shall include all costs
and expenses resulting from such steps, including fines, penalties,
contributions, attorneys' fees and expenses and administrative expenses).
ARTICLE V.
WELFARE AND OTHER BENEFITS
Section 5.1. HILTON MEDICAL/DENTAL PLANS.
(a) LIABILITY FOR CLAIMS.
(i) Except as otherwise provided herein, as of the
Distribution Date, Hilton shall assume or retain and shall be responsible for,
or cause its insurance carriers or HMOs to be responsible for, all liabilities
and obligations related to claims asserted or incurred or premiums owed as of
and after the Distribution Date in respect of any Hilton Individual under any
Hilton Medical/Dental Plan and claims asserted or incurred or premiums due after
the Distribution Date in respect of any Hilton Individual under any Hilton
Medical/Dental Plan, and Park Place shall have no liability or obligation with
respect thereto.
(ii) Except as otherwise provided herein, as of the
Distribution Date, Park Place shall assume or retain and shall be responsible
for, or cause its insurance carriers or HMOs to be responsible for, all
liabilities and obligations related to claims asserted or incurred or premiums
owed as of and after the Distribution Date in respect of any Park Place
Individual under any Hilton Medical/Dental
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Plan and claims asserted or incurred or premiums due after the Distribution Date
in respect of any such Park Place Individual under any Hilton Medical/Dental
Plan or any Park Place Medical/Dental Plan, and Hilton shall have no liability
or obligation with respect thereto.
(b) CONTINUATION COVERAGE ADMINISTRATION. As of the
Distribution Date, Hilton shall retain and shall be solely responsible for, or
cause its insurance carriers or HMOs to be responsible for, providing and
administering the continuation coverage required by COBRA as it relates to any
Hilton Qualified Beneficiary, and Park Place shall have no liability or
obligation with respect thereto. As of the Distribution Date, Park Place shall
retain and shall be solely responsible for, or cause its insurance carriers or
HMOs to be responsible for, providing and administering the continuation
coverage required by COBRA as it relates to any Park Place Qualified
Beneficiary, and Hilton shall have no liability or obligation with respect
thereto.
(c) CONTINUATION COVERAGE CLAIMS. As of the Distribution
Date, Hilton shall assume or retain and shall be responsible for, or cause its
insurance carriers or HMOs to be responsible for, all liabilities and
obligations in connection with claims asserted or incurred or premiums owed
through the Distribution Date under any Hilton Medical/Dental Plan in respect of
any Hilton Qualified Beneficiary and claims asserted or incurred or premiums
owed after the Distribution Date under any Hilton Medical/Dental Plan in respect
of any Hilton Qualified Beneficiary, and Park Place shall have no liability or
obligation with respect thereto. As of the Distribution Date, Park Place shall
assume or retain and shall be responsible for, or cause its insurance carriers
or HMOs to be responsible for, all liabilities and obligations in connection
with claims asserted or incurred or premiums owed through the Distribution Date
under any Hilton Medical/Dental Plan in respect of any Park Place Qualified
Beneficiary and claims asserted or incurred or premiums owed after the
Distribution Date under any Hilton Medical/Dental Plan or any Park Place
Medical/Dental Plan in respect of any Park Place Qualified Beneficiary, and
Hilton shall have no liability or obligation with respect thereto.
Section 5.2. PARK PLACE MEDICAL/DENTAL PLANS.
(a) ESTABLISHMENT OF PARK PLACE MEDICAL/DENTAL PLANS. On or
prior to the Distribution Date, Park Place shall take, or cause to be taken, all
action necessary and appropriate to establish and administer the Park Place
Medical/Dental Plans and to provide benefits thereunder for all Park Place
Individuals and Park Place Qualified Beneficiaries (with respect to continuation
coverage under COBRA only) who, immediately prior to the Distribution Date, were
participants in or otherwise entitled to benefits under the Hilton
Medical/Dental Plans. Each such individual shall, to the extent applicable, for
all purposes under the new Park Place Medical/Dental Plans (i) have coverage
which is substantially comparable to that provided immediately prior to the
Distribution Date, (ii) have no preexisting condition limitation imposed other
than that which is or was already imposed under the applicable existing Plan and
(iii) be credited with or otherwise have taken into account, to the extent
applicable, Service Credits, any expenses incurred towards deductibles,
out-of-pocket limits, maximum benefit payments, and any benefit usage towards
plan limits credited to such individual as of the Distribution Date under the
terms of the applicable existing Plan as if such service had been rendered to
Park Place and as if such expenses and usage had originally been credited to
such individual under the Park Place Medical/Dental Plans.
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(b) HILTON TO PROVIDE INFORMATION. As soon as practicable
after the Distribution Date, Hilton shall provide Park Place (with the
cooperation of Park Place to the extent that relevant information is in the
possession of Park Place, and in accordance with Section 8.2), with a list of
Park Place Individuals who were, to the best knowledge of Hilton, participants
in or otherwise entitled to benefits under the Hilton Medical/Dental Plans
immediately prior to the Distribution Date, together with a listing of each such
individual's Service Credit under such Plans and a listing of each such
individual's expenses incurred towards deductibles, out-of-pocket limits,
maximum benefit payments, and any benefit usage towards plan limits thereunder.
Hilton shall, as soon as practicable after the Distribution Date, in accordance
with Section 8.2, provide Park Place with such additional information in the
possession of Hilton (and not already in the possession of Park Place) as may be
reasonably requested by Park Place and necessary for Park Place to establish and
administer effectively any Park Place Medical/Dental Plan.
Section 5.3. VACATION AND SICK PAY LIABILITIES.
(a) DIVISION OF LIABILITIES. Effective on the Distribution
Date, (i) Hilton shall retain and shall be responsible for all accrued
liabilities (whether vested or unvested, and whether funded or unfunded) for
vacation and sick leave in respect of all Hilton Individuals as of the
Distribution Date and (ii) Park Place shall assume and shall be responsible for
all accrued liabilities (whether vested or unvested, and whether funded or
unfunded) for vacation and sick leave in respect of all Park Place Individuals
as of the Distribution Date. From and after the Distribution Date, (x) Hilton
shall be solely responsible for the payment to Hilton Individuals of vacation or
sick leave accrued after the Distribution Date and (y) Park Place shall be
solely responsible for the payment to Park Place Individuals of vacation or sick
leave accrued after the Distribution Date.
(b) POST-DISTRIBUTION TRANSFERS. For a period of 90 days
after the Distribution Date, an Employee who leaves the service of one party to
immediately begin employment with the other party (i.e., leaving Hilton
employment to work for Park Place, or leaving Park Place employment to work for
Hilton) shall be provided by the successor employer with the same balance of
vested and unvested vacation and sick leave hours as had been accrued by the
former Employer through such termination date. The former Employer shall
promptly notify the successor Employer in writing of the occurrence of any
termination subject to the provisions of this Section 5.3(b), and the former
Employer shall make a payment to the successor Employer within thirty (30) days
of the aforesaid termination date in an amount equal to the value of the
terminating Employee's vested balance of vacation leave and sick leave accrued
by the former Employer through such termination date, based on the Employee's
final rate of pay with the former Employer. No payment shall be made by the
former Employer to the successor Employer for any unvested sick leave or
vacation leave balance relating to any post-Distribution transfer which occurs
within or after the 90-day period referred to above.
Section 5.4. PAYROLL REPORTING AND WITHHOLDING. (a) FORM W-2
REPORTING. Hilton and Park Place may adopt the "alternative procedure" for
preparing and filing IRS Forms W-2 (Wage and Tax Statements), as described in
Section 5 of Revenue Procedure 84-77, 1984-2 IRS
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Cumulative Bulletin 753 ("REV. PROC. 84-77"). Under this procedure Park
Place as the successor employer shall provide all required Forms W-2 to all
Park Place Individuals reflecting all wages paid and taxes withheld by both
Hilton as the predecessor and Park Place as the successor employer for the
entire year during which the Distribution takes place. Hilton shall provide
all required Forms W-2 to all Hilton Individuals reflecting all wages and
taxes paid and withheld by Hilton before and after the Distribution Date.
In connection with the aforesaid agreement under Rev. Proc. 84-77, each
business unit or business operation of Hilton shall be assigned to either Hilton
or Park Place, depending upon whether it is a Hilton Retained Business or a Park
Place Business, and each Hilton Individual or Park Place Individual associated
with such business unit or business operation shall be assigned for payroll
reporting purposes to Hilton or Park Place, as the case may be. Hilton and Park
Place shall be responsible for filing IRS Forms 941 for their respective
Employees.
(b) FORMS W-4 AND W-5. Hilton and Park Place may adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4
(Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate). Under this procedure Hilton shall provide to Park
Place all IRS Forms W-4 and W-5 on file with respect to each Park Place
Individual, and Park Place will honor these forms until such time, if any, that
such Park Place Individual submits a revised form.
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, AND WAGE
ASSIGNMENTS. With respect to garnishments, tax levies, child support orders,
and wage assignments in effect with Hilton on the Distribution Date, Park Place
shall honor such payroll deduction authorizations with respect to Park Place
Individuals and will continue to make payroll deductions and payments to the
authorized payee, as specified by the court or governmental order which was
filed with Hilton on or before the Distribution Date, and Hilton will continue
to make such payroll deductions and payments to authorized payees with respect
to Hilton Individuals. Hilton shall, as soon as practicable after the
Distribution Date, in accordance with Section 8.2, provide Park Place with such
information in the possession of Hilton (and not already in the possession of
Park Place) as may be reasonably requested by Park Place and necessary for Park
Place to make the payroll deductions and payments to the authorized payee as
required by this subsection (c).
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS. Unless otherwise
prohibited by this or another agreement entered into in connection with the
Distribution, or by a Plan document, with respect to Park Place Individuals with
authorizations for payroll deductions in effect with Hilton on the Distribution
Date, Park Place will honor such payroll deduction authorizations relating to
each Park Place Individual, and shall not require that such Park Place
Individual submit a new authorization to the extent that the type of deduction
by Park Place does not differ from that made by Hilton. Such deduction types
include, without limitation: contributions to any Plan; scheduled loan
repayments to any Plan or to an employee credit union; and direct deposit of
payroll, bonus advances, union dues, employee relocation loans, and other types
of authorized company receivables usually collectible through payroll
deductions. Hilton shall, as soon as practicable after the Distribution Date,
in accordance with Section 8.2, provide
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Park Place with such information in the possession of Hilton (and not already in
the possession of Park Place) as may be reasonably requested by Park Place and
necessary for Park Place to honor the payroll deduction authorizations
contemplated by this subsection (d).
Section 5.5. POST-RETIREMENT WELFARE BENEFITS. As of the
Distribution Date, Hilton shall assume or retain and shall be responsible
for, or cause its insurance carriers or HMOs to be responsible for, all
liabilities and obligations related to claims asserted or incurred or
premiums owed as of and after the Distribution Date for post-retirement
medical or life benefits in respect of any Hilton Individual under any Plan
and claims asserted or incurred or premiums due after the Distribution Date
in respect of any Hilton Individual under any such Plan, and Park Place shall
have no liability or obligation with respect thereto. As of the Distribution
Date, Park Place shall assume or retain and shall be responsible for, or
cause its insurance carriers or HMOs to be responsible for, all liabilities
and obligations related to claims asserted or incurred or premiums owed as of
and after the Distribution Date for post-retirement medical or life benefits
in respect of any Park Place Individual under any Plan and claims asserted or
incurred or premiums due after the Distribution Date in respect of any Park
Place Individual under any such Plan, and Hilton shall have no liability or
obligation with respect thereto.
ARTICLE VI.
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
agreement between Hilton and Park Place to the contrary, Hilton and Park Place
understand and agree that:
Section 6.1. SEPARATE EMPLOYERS. On and after the Distribution Date
and the separation of Employees into their respective companies, Hilton and Park
Place will be separate and independent employers.
Section 6.2. EMPLOYMENT POLICIES AND PRACTICES. Subject to the
provisions of ERISA and the provisions herein governing post-Distribution
transfers, and except as limited by applicable law or agreement, Hilton and Park
Place may adopt, continue, modify or terminate such employment policies,
compensation practices, retirement plans, welfare benefit plans, and other
employee benefit plans of any kind or description, as each may determine, in its
sole discretion, are necessary or appropriate.
Section 6.3. COLLECTIVE BARGAINING AGREEMENTS. With regard to
Employees covered by a Collective Bargaining Agreement on the Distribution Date
who are Retained Employees or become Park Place Employees, Hilton and Park Place
promise and covenant to each other not to take any action which disrupts or
otherwise negatively impacts the labor relations of the other. Hilton and Park
Place will diligently work to substitute the appropriate employer for Hilton in
Collective Bargaining Agreements with respect to Transferred Employees.
Section 6.4. NOTICE OF CLAIMS. Without limitation to the scope and
application to each party in the performance of its duties herein, each party
hereto will notify in writing and consult with the other party prior to making
any settlement of an employee claim, for the purpose of avoiding any prejudice
to such other party arising from the settlement.
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Section 6.5. ASSUMPTION OF UNEMPLOYMENT TAX RATES. Changes in state
unemployment tax experience from that of Hilton as of the Distribution Date
shall be handled as follows. In the event an option exists to allocate state
unemployment tax experience of Hilton, the Hilton experience shall be
transferred to Park Place if this results in the lowest aggregate unemployment
tax costs for both Hilton and Park Place combined, and the Hilton experience
shall be retained by Hilton if this results in the lowest aggregate unemployment
tax costs for Hilton and Park Place combined.
Section 6.6. EMPLOYEES ON LEAVE OF ABSENCE. After the Distribution
Date, Park Place shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Park Place Business. After the
Distribution Date, Hilton shall assume responsibility, if any, as employer for
all Employees returning from an approved leave of absence who prior to the
Distribution Date were not employed in a Park Place Business.
Section 6.7. RELEASE AND SEPARATION AGREEMENTS. Effective as of the
Distribution Date, Hilton shall assume all obligations and liabilities for, and
arising under those Release and Separation Agreements with respect to Hilton
Individuals, and Park Place shall have no liability or obligation with respect
thereto. Effective as of the Distribution Date, Park Place shall assume all
obligations and liabilities for and arising under those Release and Separation
Agreements with respect to Park Place Individuals, and Hilton shall have no
liability or obligation with respect thereto.
ARTICLE VII.
NON-U.S. PLANS
Section 7.1. NON-U.S. PLANS GENERALLY. As soon as practicable after
the date of this Agreement, the parties hereto shall enter into one or more
agreements or memoranda of understanding (collectively, the "FOREIGN PLANS
AGREEMENT") regarding the treatment and allocation of liabilities relating to or
arising under the CIRP and all other Plans (the "FOREIGN PLANS") for Employees
located outside the United States, including without limitation expatriates, and
to expatriate Employees located in the United States. The Foreign Plans
Agreement shall provide for the treatment of each Foreign Plan, which treatment
may include, without limitation, (a) the retention or assumption of such Foreign
Plan by Hilton, (b) the retention or assumption of such Foreign Plan by Park
Place or (c) an allocation of the liabilities and assets of the Foreign Plan
between a Plan (which may include the Foreign Plan) that is intended to be
maintained by Hilton and a Plan (which may include the Foreign Plan) that is
intended to be maintained by Park Place, after the Distribution Date. Any
transfers of assets or liabilities from a Foreign Plan shall be made on the
basis of reasonable methods and assumptions determined by the local actuarial
firm that is, as of the date of this Agreement, serving as the actuary for such
Foreign Plan (or another actuarial firm if the parties hereto so agree) (the
"LOCAL ACTUARY"), in accordance with applicable legal and regulatory
requirements, local practice and the past practice of Hilton; PROVIDED that,
each of Hilton and Park Place shall be entitled to review such methods and
assumptions and object to them if they are unreasonable, and to review all
calculations and determinations of the Local Actuary for accuracy.
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ARTICLE VIII.
MISCELLANEOUS
Section 8.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall
be deemed or construed by the parties hereto or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties hereto, it being understood and agreed that no provision contained
herein, and no act of the parties hereto, shall be deemed to create any
relationship between such parties other than the relationship set forth herein.
Section 8.2. ACCESS TO INFORMATION; COOPERATION. Hilton and Park
Place and their authorized agents shall be given reasonable access to and may
take copies of all information relating to the subjects of this Agreement (to
the extent permitted by federal and state confidentiality laws) in the custody
of the other party, including any agent, contractor, subcontractor, agent or any
other person or entity under the contract of such party. The parties hereto
shall provide one another with such information within the scope of this
Agreement as is reasonably necessary to administer each party's Plans. The
parties hereto shall cooperate with each other to minimize the disruption caused
by any such access and providing of information.
Section 8.3. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party hereto and any purported transfer without
such consent shall be void.
Section 8.4. HEADINGS. The section and paragraph headings and table
of contents contained herein are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
Section 8.5. SEVERABILITY. If any provision set forth in this
Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of its being too extensive in any respect, such
provision shall be interpreted to have the broadest application as shall be
enforceable. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the validity of the other provisions hereof,
which shall continue in full force and effect.
Section 8.6. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
(a) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as specifically provided herein, this Agreement is for the sole
and exclusive benefit of the parties hereto and nothing herein is intended to
give or shall be construed to give to any person or entity other than the
parties hereto any rights or remedies hereunder.
(b) No provision of this Agreement shall create any third
party beneficiary rights in any Employee, any beneficiary or dependent thereof,
or any collective bargaining representative thereof, with respect to the
compensation, terms and conditions of employment
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and benefits that may be provided to any Employee by either party hereto or
under any Plan which a party may maintain.
(c) Nothing contained in this Agreement shall confer upon any
Employee any right with respect to continuance of employment by either party
hereto, nor shall anything herein interfere with the right of either party
hereto to terminate the employment of any Employee at any time, with or without
cause, or restrict a party in the exercise of its independent business judgment
in modifying any of the terms and conditions of the employment of an Employee,
except as provided by applicable law.
Section 8.7. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to be
given and effective (a) upon delivery if delivered in person or by courier,
(b) when sent by electronic transmission (telegraph, telex, telecopy or
facsimile transmission), receipt confirmed, (c) five days after being sent by
airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall be
delivered to the addresses of each party hereto as follows, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice:
(a) if to Hilton:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attn: General Counsel
Fax: (310) 205-7677
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1000
Washington, D.C. 20004-2505
Attn: Bruce E. Rosenblum, Esq.
Fax: (202) 637-2201
(b) if to Park Place:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Fax: 702-699-5179
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with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Michael Tischman, Esq.
Fax: 973-643-6500
Section 8.8. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions hereof
and to consummate the transactions contemplated hereby.
Section 8.9. WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to effect the transactions contemplated herein are for the
sole benefit of such party. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
Section 8.10. GOVERNING LAW. This Agreement shall be deemed to be made
in and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 8.11. PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS.
Except as otherwise expressly provided herein, no provisions of this Agreement,
including, without limitation, the agreement of Hilton or Park Place to make a
contribution or payment to or under any Plan referred to herein for any period,
shall be construed as a limitation on the right of Hilton or Park Place to amend
such Plan or terminate its participation therein which Hilton or Park Place
would otherwise have under the terms of such Plan or otherwise, and no provision
of this Agreement shall be construed to create a right in any employee or former
employee, or dependent or beneficiary of such employee or former employee under
a Plan which such person would not otherwise have under the terms of the Plan
itself; PROVIDED, HOWEVER, that neither party shall amend any Plan to the extent
that such amendment would have the effect of increasing the liabilities of the
other party under any Plan of the other party, without such other party's
consent.
Section 8.12. ENTIRE AGREEMENT. This Agreement, the Distribution
Agreement and all other Ancillary Agreements constitute the entire understanding
between the parties hereto, and supersede all prior written or oral
communications, relating to the subject matter covered by said agreements. To
the extent that the terms of this Agreement and similar terms of the
Distribution Agreement are in conflict, the interpretation given to the
conflicting terms of the Distribution Agreement shall govern the interpretation
and performance of this Agreement. No amendment, modification, extension or
failure to enforce any condition of this Agreement by either party shall be
deemed a waiver of any of its rights herein.
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Section 8.13. COUNTERPARTS. This Agreement and any amendments hereto
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
party, it being understood that all parties need not sign the same counterpart.
Section 8.14. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Distribution Date.
Section 8.15. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.14 of the Distribution Agreement, including Section 9.14(c) thereof
regarding the parties' ability to seek specific performance or injunctive
relief, and including the attorneys' fees provisions referred to therein.
Section 8.16. REIMBURSEMENT. Hilton and Park Place acknowledge that
Hilton, on the one hand, and Park Place, on the other hand, may incur costs and
expenses, including, but not limited to, contributions to Plans and the payment
of insurance premiums arising from or related to any of the Plans which are, as
set forth in this Agreement, the responsibility of the other party hereto.
Accordingly, Hilton and Park Place shall reimburse each other, as soon as
practicable, but in any event within thirty (30) days of receipt from the other
party hereto of appropriate verification, for all such costs and expenses.
Section 8.17. DEFAULT. In the event of a material default by either
party hereunder, the non-defaulting party shall be entitled to all remedies
provided by law or equity (including reasonable attorneys' fees and costs of
suit incurred).
Section 8.18. FORCE MAJEURE. Hilton and Park Place shall incur no
liability to each other due to a default under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out, work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other delay beyond each other's reasonable control.
Section 8.19. ATTORNEY/CLIENT PRIVILEGE. The provisions herein
requiring either party hereto to cooperate shall not be deemed to be a waiver of
the attorney/client privilege for either party hereto nor shall it require
either party to waive its attorney/client privilege.
Section 8.20. 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.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement 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
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TAX ALLOCATION AND INDEMNITY AGREEMENT
THIS TAX ALLOCATION AND INDEMNITY AGREEMENT (this "AGREEMENT"), is
made and entered into as of December 31, 1998, by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION (f/n/a Gaming Co., Inc.), a Delaware corporation and wholly owned
subsidiary of Hilton ("PARK PLACE").
WHEREAS, Hilton, Park Place and Hilton's other subsidiaries have
joined in filing consolidated federal Income Tax Returns and certain
consolidated, combined, unitary or similar state, foreign and local Tax Returns;
WHEREAS, pursuant to a Distribution Agreement dated as of December 31,
1998 by and among Hilton and Park Place (the "Distribution Agreement"), Hilton
will distribute to the holders of its common stock all of the shares of common
stock of Park Place (the "Distribution");
WHEREAS, pursuant to the Distribution Agreement, Park Place will leave
the Hilton Group (as defined herein); and
WHEREAS, the parties hereto wish to provide for (i) the allocation of,
and indemnification against, certain liabilities for Taxes, (ii) the preparation
and filing of Tax Returns and the payment of Taxes with respect thereto and
(iii) certain related matters.
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
ARTICLE I.
DEFINITIONS
When used herein the following terms shall have the following
meanings:
AFFILIATE: with respect to any corporation (the "given corporation"),
each entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the given
corporation. For purposes of this definition, "control" means the possession,
directly or indirectly, of 50% or more of the voting power or value of
outstanding equity interests.
AFFILIATED GROUP: an affiliated group of corporations within the
meaning of Code Section 1504(a) (and without regard to the exclusions contained
in Code Section 1504(b)) for the
<PAGE>
Taxable Period or, for purposes of any state, foreign or local Tax matters that
are filed on a consolidated, combined, unitary or similar basis, any
consolidated, combined, unitary or similar group of corporations within the
meaning of the corresponding provisions of tax law for the jurisdiction in
question.
AFTER-TAX BASIS: any indemnity payment made hereunder shall give
effect to, and be adjusted by the value of, any and all Tax Benefit(s) for
federal, state or other Income Tax purposes attributable to the payment of the
indemnified liability, which value shall be determined on an assumed basis by
(a) multiplying the amount of any applicable deductions, losses, offsets or
other Tax items (such amount determined as if such deductions, losses, offsets
or other Tax items will generate an immediate deduction for the full amount
ultimately available) by (i) 39% or (ii) if no state Tax Benefit shall result
therefrom (determined on a hypothetical basis by using the highest marginal
corporate Tax rate), 35% (such percentages to increase or decrease on a
percentage-for-percentage basis with any subsequent increases or decreases in
the current 35% maximum marginal federal Income Tax rate for corporations, and
100% minus the maximum marginal federal Income Tax rate for corporations (E.G.,
65%) of any increases or decreases in the maximum marginal state or local Income
Tax rate for corporations) and (b) valuing any credits or other direct
reductions of Tax on a dollar-for-dollar basis. For example, if a deductible
payment of $100 is indemnified hereunder, the indemnification payment with
respect thereto (applying the characterization set forth in Section 4.2) shall
be reduced by $39 to $61.
AUDIT: any audit, assessment of Taxes, other examination by any
Taxing Authority, proceeding or appeal of such a proceeding relating to Taxes,
whether judicial or administrative.
CARRYFORWARDS: as defined in Section 2.12 of this Agreement.
CLOSING DATE: the date on which the Distribution is effected by
Hilton.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the Taxable Year in question.
COMBINED JURISDICTION: for any Taxable Period, any state, foreign or
local jurisdiction in which Hilton and a Hilton Affiliate (or two or more Hilton
Affiliates) for that period join in the filing of a consolidated, combined,
unitary or similar return for state, foreign or local Tax purposes.
CORPORATE SERVICES AGREEMENT: the Hilton Hotels Corporation Corporate
Services Agreement entered into by and between Hilton and Park Place dated as of
December 31, 1998 which provides, among other things, that Hilton shall, during
the transition period specified therein, prepare or cause to be prepared, on
Park Place's behalf, certain Tax and Information Returns of Park Place and Park
Place Members.
DISPUTE RESOLUTION PROCEDURE: a procedure whereby (i) Hilton shall
select a representative of a nationally recognized accounting firm; (ii) Park
Place shall select a representative of a second nationally recognized accounting
firm; (iii) the two representatives so
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selected shall together select a representative of a third nationally recognized
accounting firm, provided however, that the representative so selected shall not
be from any of the following firms: (a) Arthur Andersen, LLP, (b) Ernst & Young,
LLP, or (c) any other firm which shall have received more than $500,000 in fees
from Hilton, Park Place, or any successor or predecessor entity in any of the
preceding five years; and (iv) the three representatives together (or, if they
are unable to agree, a majority of them) shall, within a reasonable period of
time, decide the issue(s) submitted to them. Hilton and Park Place shall each
be responsible for the fees of their respective representative, and the fees of
the third representative shall be shared equally by Hilton and Park Place. Any
decision rendered pursuant to a Dispute Resolution Procedure shall be final and
binding on all Post-Distribution Members and Park Place Members.
DISTRIBUTION: as defined in the Preamble.
EFFECTIVE TIME: the time at which the Distribution becomes effective.
FINAL DETERMINATION: (i) a decision, judgment, decree, or other order
by a court of competent jurisdiction, which has become final and unappealable;
(ii) a closing agreement or accepted offer in compromise under Code Sections
7121 or 7122, or comparable agreements under the laws of other jurisdictions;
(iii) any other final settlement with the IRS or other Taxing Authority
(including the execution of IRS Form 870AD, or a comparable form under the laws
of other jurisdictions, but excluding any such form that reserves (whether by
its terms or by operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the Taxing Authority to assert a further deficiency);
(iv) the expiration of an applicable statute of limitations; or (v) the
allowance of a refund or credit, but only after the expiration of all periods
during which such refund or credit may be recovered (including by way of
offset).
FINAL HILTON GROUP COMBINED TAX RETURN: as defined in Section 2.7(c)
of this Agreement.
HILTON: as defined in the preamble to this Agreement.
HILTON GROUP: Hilton and each corporation that is a member of an
Affiliated Group with respect to which Hilton is the common parent.
INCOME TAX(ES): with respect to any corporation or Affiliated Group,
any and all Taxes based upon or measured by net income (regardless of whether
denominated as an "income tax," a "franchise tax" or otherwise).
INCOME TAX RETURN: a Tax Return relating to the payment or receipt of
any refund of any Income Tax.
INFORMATION RETURN(S): with respect to any corporation or Affiliated
Group, any and all returns, reports, estimates, statements, declarations and
other filings (other than Tax Returns) required to be filed or supplied to any
Taxing Authority.
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IRS: the Internal Revenue Service or any successor thereto, including
but not limited to its Representatives.
IRS RULING: The letter ruling issued by the IRS in response to the
Ruling Request.
MERGER AGREEMENT: That certain Agreement and Plan of Merger, dated as
of June 30, 1998 by and among Hilton; Park Place; Gaming Acquisition
Corporation, a Minnesota corporation; Grand Casinos, Inc., a Minnesota
corporation; and Lakes Gaming, Inc., a Minnesota corporation.
OVERDUE RATE: a variable rate of interest per annum equal to the
Federal short-term rate as established from time to time pursuant to Code
Section 1274(d).
PARK PLACE: as defined in the preamble to this Agreement.
PARK PLACE GROUP: Park Place and each corporation that was a
Pre-Distribution Member and which would be a member of an Affiliated Group with
respect to which Park Place would be the common parent during any Post-Closing
Taxable Period. For purposes of this Agreement, the Park Place Group shall
exist from and after the day after the close of business on the Closing Date.
To the extent applicable to any state, foreign or local Tax matters that are
filed on a consolidated, combined, unitary or similar basis, the "Park Place
Group" shall consist of all corporations joining with Park Place in the filing
of a consolidated, combined, unitary or similar Tax Return for the jurisdiction
in question.
PARK PLACE MEMBER: a corporation that would be a member of the Park
Place Group.
POST-CLOSING STRADDLE PERIOD: with respect to any Straddle Period, the
portion beginning after the close of business on the Closing Date and ending on
the last day of such Taxable Year.
POST-CLOSING TAXABLE PERIOD: a Taxable Year that begins after the
close of business on the Closing Date.
POST-DISTRIBUTION HILTON GROUP: Hilton and each corporation that was a
Pre-Distribution Member and which would be a member of an Affiliated Group with
respect to which Hilton would be the common parent during any Post-Closing
Taxable Period. For purposes of this Agreement, the Post-Distribution Hilton
Group shall exist from and after the close of business on the Closing Date. To
the extent applicable to any state, foreign or local Tax matters that are filed
on a consolidated, combined, unitary or similar basis, the "Post-Distribution
Hilton Group" shall consist of all corporations joining with Hilton in the
filing of a consolidated, combined, unitary or similar Tax Return for the
jurisdiction in question.
POST-DISTRIBUTION MEMBER: a corporation that was a Pre-Distribution
Member and is a member of the Post-Distribution Hilton Group after the close of
business on the Closing Date.
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PRE-CLOSING STRADDLE PERIOD: with respect to any Straddle Period, the
portion beginning on the first day of such Taxable Year and ending on the close
of business on the Closing Date.
PRE-CLOSING TAXABLE PERIOD: a Taxable Year that ends on or before the
Closing Date.
PRE-DISTRIBUTION HILTON GROUP: Hilton and each corporation that would
be a member of an Affiliated Group with respect to which Hilton would be the
common parent during any Pre-Closing Taxable Period. For purposes of this
Agreement, the Pre-Distribution Hilton Group shall terminate at the close of
business on the Closing Date. To the extent applicable to any state, foreign or
local Tax matters that are filed on a consolidated, combined, unitary or similar
basis, the "Pre-Distribution Hilton Group" shall consist of all corporations
joining with Hilton in the filing of a consolidated, combined, unitary or
similar Tax Return for the jurisdiction in question.
PRE-DISTRIBUTION MEMBER: a corporation that was a member of the
Pre-Distribution Hilton Group at the close of business on the Closing Date.
REPRESENTATIVE(S): with respect to any person or entity, any of such
person's or entity's directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.
RULING REQUEST: The private letter ruling request filed by Hilton
with the IRS, as supplemented and amended from time to time, with respect to
certain federal Income Tax matters relating to the Distribution and other
related matters.
STRADDLE PERIOD: any Taxable Year beginning before and ending after
the close of business on the Closing Date.
TAX BENEFIT(S): (i) in the case of a Tax for which a consolidated
federal, or a consolidated, combined, unitary or similar state, foreign or local
Tax Return is filed, the amount by which the Tax liability of the Affiliated
Group is reduced (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
taxable income in any other Taxable Year or as a carryforward or carryback, and
including the effect on other Taxes of such reduction), plus any interest
received with respect to any related Tax refund, and (ii) in the case of any
other Tax, the amount by which the Tax liability of a corporation is reduced (by
deduction, entitlement to refund, credit, offset or otherwise, whether available
in the current Taxable Year, as an adjustment to taxable income in any other
Taxable Year or as a carryforward or carryback, and including the effect on
other Taxes of such reduction), plus any interest received with respect to any
related Tax refund, determined in the case of both (i) and (ii) on a basis
consistent with the computation of After-Tax Basis.
TAX PRACTICES: the most recently applied policies, procedures and
practices employed by the Hilton Group in the preparation and filing of, and
positions taken on, any Tax
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Returns of Hilton or any Pre-Distribution Member or Hilton Affiliate for any
Pre-Closing Taxable Period.
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.
TAX TREATMENT: as defined in Section 3.3 hereto.
TAXABLE PERIOD: a Pre-Closing Taxable Period, a Post-Closing Taxable
Period or a Straddle Period.
TAXABLE YEAR: a taxable year (which may be shorter than a full
calendar or fiscal year) or similar period with respect to which any Tax may be
imposed.
TAX(ES): any federal, state, foreign or local 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; EXCLUDING, HOWEVER, any "Transaction
Taxes" as defined in Section 6.05 of the Distribution Agreement.
TAXING AUTHORITY: the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Tax.
ARTICLE II.
FILING OF TAX RETURNS AND PAYMENT OF TAXES
Section 2.1. PREPARATION AND FILING OF TAX RETURNS.
(a) BY HILTON. Hilton shall prepare and timely file (or cause to be
prepared and timely filed):
(i) all Tax and Information Returns of the Hilton
Group or any Pre-Distribution Member or group of
Pre-Distribution Members for all Pre-Closing Taxable Periods
that are required to be filed on or before the Closing Date;
(ii) all Tax and Information Returns of the Hilton
Group or any Pre-Distribution Member or group of
Pre-Distribution Members for all Pre-Closing Taxable Periods
(other than such Returns that relate solely to any Park
Place Member or group of Park Place Members) that are not
required to be filed on or before the Closing Date; and
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(iii) all Tax and Information Returns of the Hilton
Group or any Post-Distribution Member or group of
Post-Distribution Members for all Straddle Periods and
Post-Closing Taxable Periods.
(b) BY PARK PLACE. Park Place shall prepare and timely file (or
cause to be prepared and timely filed):
(i) all Tax and Information Returns that relate
solely to any Park Place Member or group of Park Place
Members for all Pre-Closing Taxable Periods that are not
required to be filed on or before the Closing Date; and
(ii) all Tax and Information Returns of the Park
Place Group or any Park Place Member or group of Park Place
Members for all Straddle Periods and Post-Closing Taxable
Periods.
Pursuant to the Corporate Services Agreement, during a transition period
specified therein, certain Tax and Information Returns described in
Section 2.1(b) will be prepared (or caused to be prepared) by Hilton on Park
Place's behalf.
Section 2.2. PROVISION OF FILING INFORMATION. Park Place (or
Hilton, as the case may be) shall cooperate and assist Hilton (or Park Place) in
the preparation and filing of all Tax and Information Returns subject to
Section 2.1 and any tax planning related thereto, and shall submit to Hilton (or
Park Place) (i) all necessary filing information in a manner consistent with
past Tax Practices and (ii) all other information reasonably requested by Hilton
(or Park Place) in connection with the preparation of such Tax Returns and any
such tax planning promptly after such request, including permission to copy any
applicable documents. It is expressly understood and agreed that Hilton's (or
Park Place's) ability to discharge its Tax and Information Return preparation
and filing responsibilities is contingent upon Park Place (or Hilton) providing
Hilton (or Park Place) with all cooperation, assistance and information
reasonably necessary or requested for the filing of such Tax and Information
Returns and that Park Place (or Hilton) shall indemnify Hilton (or Park Place),
if, and to the extent that, Taxes are increased as a result of material
inaccuracies in such information or failures to provide such information and
assistance on a timely basis.
Section 2.3. TAXABLE YEAR. Park Place and Hilton agree that, to the
extent permitted by applicable law, (i) the Taxable Year of the Park Place
Members included in the consolidated federal Income Tax Return of the Hilton
Group for the Taxable Period that includes the Closing Date (and all
corresponding consolidated, combined, unitary or similar state, foreign or local
Income Tax Returns of the Hilton Group) shall end at the close of business on
the Closing Date, and (ii) the Park Place Group and each Park Place Member shall
begin a new Taxable Year for purposes of such federal, state, foreign or local
Income Taxes on the day after the Closing Date. The parties further agree that,
to the extent permitted by applicable law, all federal, state, foreign or local
Tax and Information Returns shall be filed consistently with this position.
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Section 2.4. ADVANCE REVIEW OF TAX RETURNS. At least thirty (30)
days prior to the filing of any federal Income Tax Return (including amendments
thereto) that includes a Park Place Member, and at least fifteen (15) days prior
to the filing of any other Tax Return (including amendments thereto) that
includes a Park Place Member, Hilton shall provide Park Place with the portion
of such Tax Return related to the Park Place Member. In the case of each Tax
Return (including amendments thereto) subject to the conformity requirements of
Section 2.5 and filed pursuant to Section 2.1(b), Park Place shall provide
Hilton with copies of any such Tax Return at least thirty (30) days prior to the
filing thereof. Park Place and its Representatives (or Hilton and its
Representatives, as the case may be) shall have the right to review all related
work papers prior to the filing of any such Tax Return. Hilton (or Park Place,
as the case may be) shall consult with Park Place (or Hilton) regarding its
comments with respect to such Tax Returns and shall in good faith (A) consult
with Park Place (or Hilton) in an effort to resolve any differences with respect
to the preparation and accuracy of such Tax Returns and their consistency with
past Tax Practices and (B) consider Park Place's (or Hilton's) recommendations
for alternative positions with respect to items reflected on such Tax Returns;
PROVIDED, HOWEVER, that Hilton (or Park Place) shall not be required to consider
any such recommendation if the result thereof would adversely affect the Taxes
of the Hilton Group or any Post-Distribution Member (or the Park Place Group or
any Park Place Member) for any Straddle Period or Post-Closing Taxable Period,
and Hilton (or Park Place) may condition the acceptance of any such
recommendation upon the receipt of appropriate indemnification from Park Place
(or Hilton) for any increases in Taxes that may result from the adoption of the
relevant alternative position.
Section 2.5. CONSISTENT POSITIONS ON TAX RETURNS. Hilton (or Park
Place, as the case may be) shall (i) prepare all Tax Returns filed pursuant to
this Agreement for all Taxable Years ended on or before December 31, 1999 in a
manner consistent with past Tax Practices, and (ii) prepare all Tax Returns
filed pursuant to this Agreement in a manner consistent with the IRS Ruling and
the Ruling Request, except in either (i) or (ii) as otherwise required by
changes in applicable law or material underlying facts or as the parties hereto
shall otherwise consent in writing, which consent shall not be unreasonably
withheld.
Section 2.6. STRADDLE PERIOD TAXES. For purposes of this Agreement,
Taxes attributable to Straddle Periods shall be allocated between the Pre- and
Post-Closing Straddle Periods, in Hilton's reasonable judgment with the consent
of Park Place, in the following manner:
(a) To the extent not impractical, on the basis of the actual
operations and taxable income for each such period, determined by closing the
books of the entity at the close of business on the Closing Date; or
(b) To the extent that an allocation based on a closing of the books
is impractical, on the basis of allocations of taxable income, loss, gain,
deduction and credits made for the entity for federal Income Tax purposes.
Section 2.7. PAYMENT OF TAXES
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(a) Hilton shall pay (i) (A) all Taxes shown to be due and payable on
all Tax Returns as filed pursuant to Sections 2.1(a) and 2.1(b)(i) hereof and
(B) all Taxes shown to be due and payable on all Tax Returns as filed pursuant
to Section 2.1(b)(ii) for Straddle Periods, to the extent allocable to
Pre-Closing Straddle Periods, and (ii) subject to Article III below, all
additional Taxes that shall thereafter become due and payable as a result of a
Final Determination with respect to all Tax Returns filed by Hilton pursuant to
Section 2.1(a) hereof; PROVIDED, HOWEVER, that Park Place shall reimburse Hilton
for the amount of any such additional Taxes required to be paid as a result of
the operation of the foregoing Subsection 2.7(a)(ii) within 15 days of receipt
of notification from Hilton, if and to the extent that such Tax Returns include
one or more Park Place Members and such additional Taxes are allocable to one or
more Park Place Members as set forth in Section 2.8 herein.
(b) Park Place shall pay (i) all Taxes shown to be due and payable on
all Tax Returns filed by Park Place pursuant to Section 2.1(b)(ii), (A) for
Straddle Periods, to the extent allocable to Post-Closing Straddle Periods, and
(B) for Post-Closing Taxable Periods and (ii) subject to Article III, all
additional Taxes that shall thereafter become due and payable as a result of a
Final Determination with respect to all Tax Returns filed by Park Place pursuant
to Section 2.1(b) hereof.
(c) With respect to the 1998 Hilton Group consolidated federal Income
Tax Return and any Hilton Group Income Tax Return for any Combined Jurisdiction
for the Taxable Period that includes the Closing Date (together, a "Final Hilton
Group Combined Tax Return"), within 15 days of receipt of notice from Hilton,
Park Place shall reimburse Hilton in an amount equal to fifty percent (50%) of
(i) any additional payment of Income Taxes required to be made by Hilton with
any request for extension of any Final Hilton Group Combined Tax Return and
(ii) any additional payment of Income Taxes required to be made by Hilton with
the filing of any Final Hilton Group Combined Tax Return. To the extent that
the amount of Income Taxes previously paid by Hilton with respect to the Taxable
Year reported on any Final Hilton Group Combined Tax Return exceeds the Income
Tax liability shown on such Income Tax Return, Hilton shall reimburse Park
Place, within 15 days of the filing of such Tax Return an amount equal to fifty
percent (50%) of such excess.
(d) With respect to all Tax Returns described in Section 2.7(a)(i)
above that relate solely to any Park Place Member or group of Park Place
Members, within 15 days of receipt of notice from Hilton, Park Place shall
reimburse Hilton in an amount equal to one hundred percent (100%) of (i) any
additional payment of Taxes required to be made by Hilton with any request for
extension of the due date of such Tax Returns and (ii) any additional payment of
Taxes required to be made by Hilton with the filing of such Tax Returns. To the
extent that the amount of Taxes previously paid by Hilton with respect to the
Taxable Year reported on any Tax Return described in Section 2.7(a)(i) above
which relates solely to any Park Place Member or group of Park Place Members
exceeds the Tax liability shown on such Tax Return, Hilton shall reimburse Park
Place, within 15 days of the filing of such Tax Return, in an amount equal to
one hundred percent (100%) of such excess.
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Section 2.8. ALLOCATION OF ADDITIONAL TAXES.
(a) For purposes of determining the reimbursement obligations of Park
Place pursuant to Section 2.7(a) with respect to additional Taxes required to be
paid by Hilton pursuant to Section 2.7(a)(ii), such additional Taxes shall be
allocated in the following manner:
(i) Any additional Taxes that relate to Tax Returns
consisting solely of one or more Park Place Members shall be
allocated in full to such Park Place Members.
(ii) Any additional Taxes that relate to Tax Returns
consisting solely of Pre-Distribution Members, none of which
are Park Place Members, shall be allocated in full to such
Pre-Distribution Members.
(iii) With respect to additional Taxes that relate to
Tax Returns that are filed on a consolidated, combined,
unitary or similar basis and that include at least one Park
Place Member but do not consist solely of Park Place
Members, such additional Taxes shall be allocated to the
Park Place Members to the extent that such additional Taxes
result in an increase in the separate return tax liabilities
of the Park Place Members as computed under Treasury
Regulation Section 1.1552-1(a)(2)(ii) in the case of a
consolidated federal Income Tax Return. In the case of
federal Taxes other than the regular Income Tax, similar
principles will apply with the application determined
separately for each separate type of Tax. Similarly, in the
case of consolidated, combined, unitary or similar state,
foreign or local Tax Returns, similar principles will apply
with the application determined separately for each separate
type of such Tax.
(b) Notwithstanding any other provision of this Agreement, for
purposes of this Section 2.8, the parties hereto intend that the following
entities shall be treated as if they were Park Place Members, but only with
respect to Pre-Closing Taxable Periods and Pre-Closing Straddle Periods:
Bally's Grand Inc., a Nevada corporation; Bally's Grand Property Sub I, Inc., a
Nevada corporation; Bally's Casino Management, Inc., a Delaware corporation;
Hilton Gaming Corporation, a Nevada corporation; Paris Casino Corp., a Nevada
corporation; Conrad International Hotels Corporation, a Nevada corporation;
Conrad International Investment Corporation, a Nevada corporation; Conrad
International Royalty Corporation, a Nevada corporation.
(c) With respect to any of the entities described in the preceding
Section 2.8(b), (i) Hilton shall not take any actions subsequent to the Closing
which could reasonably be expected to have a material and adverse effect on any
indemnification obligation of Park Place hereunder, and (ii) Hilton shall, for
all Pre-Closing Taxable Periods and Pre-Closing Straddle Periods, under the
principles set forth in Section 2.4 above, in good faith afford Park Place a
reasonable
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opportunity to review in advance any Tax Returns pertaining to such entities,
and such Tax Returns shall not be filed without the written consent of Park
Place, which consent shall not be unreasonably withheld.
Section 2.9. AMENDMENTS TO TAX AND INFORMATION RETURNS. Hilton (or
Park Place, as the case may be) shall be entitled to amend Tax and Information
Returns filed by Hilton (or Park Place) pursuant to Section 2.1; PROVIDED,
HOWEVER, that Park Place (or Hilton) shall not amend for any reason whatsoever
any Tax or Information Return of Hilton, the Hilton Group, any Pre-Distribution
Member or group thereof or any Post-Distribution Member or group thereof (or of
Park Place, the Park Place Group or any Park Place Member or group thereof) for
any Taxable Period ending on or before December 31, 1999, except (A) pursuant to
the settlement or other resolution of an Audit subject to Article VI or (B) with
Hilton's (or Park Place's) written consent (which consent shall not be
unreasonably withheld, PROVIDED, HOWEVER, that such consent may be conditioned
upon the receipt of appropriate indemnification for any increases in Taxes that
may result from the amendment; PROVIDED, HOWEVER, that such prohibition shall
not extend to the correction of mathematical or material factual errors or other
adjustments necessary to conform such Tax and Information Returns to applicable
law or to comply with Section 2.5.
Section 2.10. REFUNDS OF TAXES. Hilton shall be entitled to any
refund of Taxes for which Hilton would be ultimately liable pursuant to a Final
Determination of such Taxes under Section 2.7(a), and Park Place shall be
entitled to any refund of Taxes for which Park Place would be ultimately liable
pursuant to a Final Determination of such Taxes under Section 2.7(a) or (b), in
each case taking into account Park Place's reimbursement obligations which
obligations are described therein and allocated pursuant to Section 2.8. If
Hilton or any Post-Distribution Member (or Park Place or any Park Place Member,
as the case may be) receives a Tax refund to which Park Place or any Park Place
Member (or Hilton or any Post-Distribution Member) is entitled pursuant to this
Agreement, Hilton (or Park Place) shall pay (in accordance with Article IV) the
amount of such refund (including any interest received thereon) to Park Place
(or Hilton) promptly after receipt thereof.
Section 2.11. CARRYBACKS. Park Place shall notify Hilton promptly of
the existence of any items of deduction, loss or credit arising in a
Post-Closing Taxable Year that are required to be carried back to a Taxable
Period of the Hilton Group or any Pre-Distribution Member (other than to a
separate Tax Return of a member of the Park Place Group). Park Place hereby
expressly agrees (on its behalf and on behalf of all Park Place Members and
successors thereto) that Hilton or any Post-Distribution Member may retain any
cash refund or reduction of a Tax liability or any other Tax Benefit obtained by
Hilton or any Post-Distribution Member (other than a member of the Park Place
Group) as a result of any carryback without compensation to Park Place or any
Park Place Member. Notwithstanding Section 2.5, Park Place and Hilton agree
that Park Place shall elect to carry forward all such items that affect Park
Place or any member of the Park Place Group, or otherwise take such steps to the
extent permitted under applicable law to preserve the benefit to it of all items
generated by Park Place or any member of the Park Place Group.
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Section 2.12. NOL, ITC, AMT AND FTC CREDIT BENEFITS. If any Park
Place Members have attributable to them, under applicable federal and state
Income Tax law (including, without limitation, Code Section 1502 and the
Treasury Regulations promulgated thereunder), any net operating loss
carryforwards, investment tax credit carryforwards, alternative minimum tax
credit carryforwards or foreign tax credit carryforwards (the "CARRYFORWARDS"),
the parties hereto agree that the Park Place Group and the Park Place Members
shall be exclusively entitled to use and benefit from the Carryforwards without
compensation to the Hilton Group or any Pre-Distribution Member. Hilton hereby
agrees to take any action or make any election reasonably required to permit
Park Place and the Park Place Members to utilize the Carryforwards; PROVIDED,
HOWEVER, that no such action or election shall be required if it would adversely
affect in any way the Income Tax liabilities of the Hilton Group or any
Post-Distribution Member for any Taxable Year. The parties also hereby agree
that the provisions of this Section 2.12 shall apply with respect to any similar
carryforwards available under applicable state, foreign or local Tax law.
Section 2.13. DISPUTES. If Hilton and Park Place are unable to agree
on any calculation, numerical value, procedure or payment set forth in or
required by this Article II, such item shall be determined pursuant to the
Dispute Resolution Procedure.
ARTICLE III.
INDEMNIFICATION.
Section 3.1. BY HILTON.
(a) TAXES. Subject to Section 3.3, Hilton shall indemnify and hold
Park Place and each Park Place Member harmless (on an After-Tax Basis) against
any and all Taxes for which Hilton is ultimately liable pursuant to a Final
Determination of such Taxes under Section 2.7(a), taking into account Park
Place's reimbursement obligations described therein.
(b) MEMBER LIABILITY. Subject to Sections 3.2 and 3.3, Hilton shall
indemnify and hold Park Place and each Park Place Member harmless (on an
After-Tax Basis) against each and every liability for Taxes of the Hilton Group
asserted by any Taxing Authority under Treasury Regulation Section 1.1502-6 or
any similar law, rule or regulation.
Section 3.2. BY PARK PLACE. Subject to Section 3.3, Park Place
shall indemnify and hold the Hilton Group and each Post-Distribution Member
harmless (on an After-Tax Basis) against the Taxes for which Park Place is
ultimately liable pursuant to a Final Determination of such Taxes under Section
2.7(a) or (b), taking into account Park Place's reimbursement obligations
described therein.
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Section 3.3. ASSUMED TAX TREATMENTS
(a) The parties expressly agree for all purposes to treat the
Distribution as a tax-free distribution under Code Section 355 in accordance
with (i) the IRS Ruling and Ruling Request or (ii) an opinion of tax counsel as
described in Section 7.11 of the Merger Agreement (the "TAX TREATMENT"). Each
party hereto also expressly agrees not to take (and to cause each of its
Affiliates not to take) any action (except where such action is required by law)
that is inconsistent with the treatment of the Distribution and all related
transactions in accordance with the Tax Treatment and to take (and to cause each
of its Affiliates to take) any and all actions reasonably available to such
party (or Affiliate) to support and defend the Tax Treatment.
(b) Notwithstanding anything to the contrary in Sections 2.7, 3.1 or
3.2:
(i) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and either (A) there has been no material breach
of Section 3.3(a) and no Post-Distribution Member or Park
Place Member has taken actions after the Distribution which
result in such disallowance, or (B) if one or more
Post-Distribution Members and one or more Park Place Members
have materially breached Section 3.3(a) or taken actions
after the Distribution which result in such disallowance,
then any liability of Hilton for Taxes as a result of such
disallowance shall be divided equally between Hilton and
Park Place.
(ii) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and any Park Place Member (and no
Post-Distribution Member) has materially breached Section
3.3(a) or has taken any action after the Distribution which
results in such disallowance, then Park Place shall
indemnify and hold each Post-Distribution Member harmless
for any Taxes which would not have occurred but for such
disallowance.
(iii) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and any Post-Distribution Member (and no Park
Place Member) has materially breached Section 3.3(a) or has
taken any action after the Distribution which results in
such disallowance, then Hilton shall indemnify and hold each
Park Place Member harmless for any Taxes which would not
have occurred but for such disallowance.
Any such claim for indemnification shall otherwise be handled in the
manner specified under this Article III, but shall not affect in any manner the
provisions of Articles V and VI with respect to cooperation and control of
Audits.
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Section 3.4. CERTAIN REIMBURSEMENTS. Park Place (or Hilton, as the
case may be) shall notify Hilton (or Park Place) of any Taxes paid by the Park
Place Group or any Park Place Member (or the Hilton Group or any
Post-Distribution Member) which are subject to indemnification under this
Article III; PROVIDED, HOWEVER, that no Tax liability of $10,000 or less in the
aggregate shall in any event be indemnified hereunder. Any notification
contemplated by this Section 3.4 shall include a detailed calculation
(including, if applicable, separate allocations of such Taxes between Pre- and
Post-Closing Taxable Periods and supporting work papers) and a brief explanation
of the basis for indemnification hereunder. Whenever a notification described
in this Section 3.4 is given, the notified party shall pay the amount requested
in such notice to the notifying party in accordance with Article IV, but only to
the extent that the notified party agrees with such request. To the extent the
notified party disagrees with such request, it shall, within 15 days of receipt
of such notice, so notify the notifying party, whereupon the parties shall use
their best efforts to resolve any such disagreement. To the extent not
otherwise provided for in this Article III or in Article IV, any payment made
after such 15-day period shall include interest at the Overdue Rate from the
date of receipt of original notice of such payment.
Section 3.5. LOSS OF TAX BENEFITS. Appropriate payments shall be
made between the parties to take account of subsequent losses of, or changes in,
any Tax Benefit that has been taken into account for purposes of determining the
After-Tax Basis of any indemnification payment.
ARTICLE IV.
METHOD, TIMING AND CHARACTER OF PAYMENTS REQUIRED BY THIS
AGREEMENT.
Section 4.1. PAYMENT IN IMMEDIATELY AVAILABLE FUNDS; INTEREST. All
payments made pursuant to this Agreement shall be made in immediately available
funds. Except as otherwise provided herein, any payment not made within 15 days
of receipt of notice of such payment shall thereafter bear interest at the
Overdue Rate from the date of receipt of notice of such payment.
Section 4.2. CHARACTERIZATION OF PAYMENTS. Any payment (other than
interest thereon) made hereunder by Hilton to Park Place or by Park Place to
Hilton shall be treated by all parties for all purposes to the extent permitted
by law as a non-taxable dividend distribution or capital contribution made prior
to the close of business on the Closing Date. If, pursuant to a Final
Determination, it is determined that the receipt or accrual of any payment under
this Agreement (other than interest thereon) is, itself, subject to any Tax, the
party making such payment shall be required to pay an additional amount to cover
the additional Tax (on an After-Tax Basis), together with interest at the
Overdue Rate from the date the Tax accrues through the date of payment of the
additional amount.
ARTICLE V.
COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
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Section 5.1. PROVISION OF COOPERATION, DOCUMENTS AND OTHER
INFORMATION. Upon reasonable request by a requesting party, Hilton and Park
Place shall promptly provide (and shall cause their respective Affiliates to
provide) such requesting party with such cooperation and assistance, documents,
and other information, without charge, as may be necessary or reasonably helpful
in connection with (i) the preparation and filing of any original or amended Tax
or Information Return, (ii) the conduct of any Audit involving to any extent
Taxes or Tax or Information Returns within the scope of this Agreement, or (iii)
the verification by a party of an amount payable hereunder to, or receivable
hereunder from, another party. Such cooperation and assistance shall include,
without limitation: (w) the provision on demand of books, records, Tax or
Information Returns, documentation or other information relating to any relevant
Tax Return; (x) the execution of any document that may be necessary or
reasonably helpful in connection with the filing of any Tax or Information
Return by the Hilton Group, a Pre-Distribution Member, a Post-Distribution
Member, the Park Place Group or a Park Place Member, or in connection with any
Audit of the type generally referred to in the preceding sentence, including,
without limitation, the execution of powers of attorney and extensions of
applicable statutes of limitations with respect to Tax or Information Returns
which Hilton may be obligated to file on behalf of Park Place Members pursuant
to Section 2.1; (y) the prompt and timely filing of appropriate claims for
refund; and (z) the use of reasonable best efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
Section 5.2. PARTICIPATION IN THE RULING REQUEST. With respect to
the ruling Request, Hilton shall (i) afford park place full opportunity to
review any submissions related to the Ruling Request and correspondence from the
IRS, and to participate in any proceedings related to the Ruling Request, (ii)
in good faith consult with Park Place regarding its comments with respect to
such submissions and proceedings in an effort to resolve any differences with
respect to Hilton's positions with regard to such issues, (iii) in good faith
consider Park Place's recommendations for alternative positions with respect to
such issues, and (iv) provide Park Place with final copies of such submissions
and correspondence. Hilton shall not make any representations in connection
with the Ruling Request that could reasonably be expected to have a material and
adverse effect on (A) any indemnification obligation of park place hereunder or
(B) any tax liability of the Park Place group or any Park Place member for any
taxable period, without the prior written consent of Park Place, which consent
shall not be unreasonably withheld. Moreover, Hilton agrees that, at the
reasonable request of Park Place, Hilton shall cooperate with Park Place and use
its reasonable best efforts to expeditiously obtain, at Park Place's expense,
supplemental rulings from the IRS confirming (x) the continuing validity of the
IRS Ruling, and (y) compliance on the part of Park Place or any Park Place
member with its obligation under Section 3.3(a) to conform to the Tax Treatment.
SECTION 5.3. RETENTION OF BOOKS AND RECORDS. Hilton, each Post
Distribution Member, Park Place and each Park Place Member shall retain or cause
to be retained all Tax and Information Returns, and all books, records,
schedules, workpapers, and other documents relating thereto, until the
expiration of the later of (i) seven (7) years from the close of the Taxable
Year, (ii)
15
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all applicable statutes of limitations (including any waivers or extensions
thereof) and (iii) any retention period required by law (E.G., depreciation or
inventory records) or pursuant to any record retention agreement. The parties
hereto shall notify each other in writing of any waivers, extensions or
expirations of applicable statutes of limitations. The parties hereto shall
provide at least thirty (30) days prior written notice of any intended
destruction of the documents referred to in this Section 5.2. A party giving
such a notification shall not dispose of any of the foregoing materials without
first obtaining the written approval (which may not be unreasonably withheld) of
the notified party and, in lieu of destruction or disposition, the notified
party shall be permitted to take possession, at its sole cost, of the foregoing
materials which affect (or potentially affect) its liability for Tax.
Section 5.4. CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Except
as required by law or with the prior written consent of the other party, all Tax
and Information Returns, documents, schedules, work papers and similar items and
all information contained therein which are within the scope of this Agreement
shall be kept confidential by the parties hereto and their Representatives,
shall not be disclosed to any other person or entity and shall be used only for
the purposes provided herein.
ARTICLE VI.
AUDITS.
Section 6.1. STATUS AND OTHER INFORMATION REGARDING AUDITS AND
DISPUTES. Upon the receipt by Hilton or any Post-Distribution Member (or Park
Place or any Park Place Member, as the case may be) of notice of, or relating
to, an Audit which asserts, proposes or recommends a deficiency, claim or
adjustment (including the receipt of a IRS Form 5701 or comparable form from any
other Taxing Authority) that, if sustained, would affect the liability for Taxes
which are subject to indemnification under this Agreement, Hilton (or Park
Place) shall promptly notify Park Place (or Hilton) in writing of the receipt of
such notice. Hilton (or Park Place) shall use reasonable best efforts to keep
Park Place (or Hilton) advised as to the status of Audits pertaining to Taxes
subject to indemnification under this Agreement. To the extent relating to any
such issue, Hilton (or Park Place) shall promptly furnish Park Place (or Hilton)
with copies of any inquiries or requests for information from any Taxing
Authority or any other administrative, judicial or other governmental authority,
as well as copies of any revenue agent's report or similar report, notice of
proposed adjustment or notice of deficiency.
Section 6.2. CONTROL AND SETTLEMENT.
(a) Hilton shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating, in whole or in part,
to any Pre-Closing Taxable Period or any other Taxable Period for which Hilton
is responsible, in whole or in part, for Taxes under Section 2.7(a) and Article
III, and to employ counsel of its choice at its expense; PROVIDED, HOWEVER,
that, with respect to such issues that may impact Park Place or any Park Place
Member for any Post-Closing Taxable Period or for which Park Place may be
responsible in part under Section 2.7(a) and Article III, Hilton shall in good
faith (i) afford Park Place full opportunity to
16
<PAGE>
observe at any such proceedings and to review any submissions related to such
issues, (ii) consult with Park Place regarding its comments with respect to such
proceedings and submissions in an effort to resolve any differences with respect
to Hilton's positions with regard to such issues, (iii) in good faith consider
Park Place's recommendations for alternative positions with respect to such
issues, (iv) advise Park Place of the reasons for rejecting any such alternative
position, and (v) provide Park Place with final copies of such submissions. In
the event of any disagreement regarding the proceedings, Hilton shall have the
ultimate control of the Audit and any settlement or other resolution thereof,
PROVIDED, HOWEVER, that Hilton shall not agree to settle any such proceeding in
a manner that could reasonably be expected to have a material and adverse effect
on (A) any indemnification obligation of Park Place hereunder or (B) any Tax
liability of the Park Place Group or any Park Place Member for any Taxable
Period, without the prior written consent of Park Place, which consent shall not
be unreasonably withheld.
(b) Park Place shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating solely to any
Post-Closing Taxable Period of the Park Place Group or any Park Place Member, or
relating to any other Taxable Period for which Park Place is solely responsible
for Taxes under Section 2.7(b) and Article III, and to employ counsel of its
choice at its expense; PROVIDED, HOWEVER, that Park Place shall in good faith
(i) afford Hilton full opportunity to observe at any such proceedings and to
review any submissions related thereto and (ii) not agree to settle any such
proceeding in a manner that could reasonably be expected to have a material and
adverse effect on (A) any indemnification obligation of Hilton hereunder or (B)
any Tax liability of the Hilton Group or any Post-Distribution Member for any
Taxable Period, without the prior written consent of Hilton, which consent shall
not be unreasonably withheld.
ARTICLE VII.
MISCELLANEOUS.
Section 7.1. EFFECTIVENESS. This Agreement shall be effective from
and after the Closing Date and shall survive until the expiration of any
applicable statute of limitations.
Section 7.2. ENTIRE AGREEMENT. This Agreement and the Distribution
Agreement, together with all documents and instruments referred to herein and
therein constitute the entire agreement and supersede and terminate all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
Section 7.3. GUARANTEES OF PERFORMANCE. Hilton and Park Place
hereby guarantee the complete and prompt performance by the members of their
respective Affiliated Groups of all of their obligations and undertakings
pursuant to this Agreement. If, subsequent to the Effective Time, either Hilton
or Park Place shall be acquired by another entity such that 50% or more of its
common stock is in common control, such acquirer shall, by making such
acquisition, simultaneously agree to jointly and severally guarantee the
complete and prompt performance by the acquired corporation and any Affiliate of
the acquired corporation of all of their obligations and undertakings pursuant
to this Agreement.
17
<PAGE>
Section 7.4. SEVERABILITY. 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 restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction 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 restriction.
Section 7.5. INDULGENCES, ETC.. Neither the failure nor any delay
on the part of any party hereto to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise of the same or any other right, nor
shall any waiver of any right with respect to any occurrence be construed as a
waiver of such right with respect to any other occurrence.
Section 7.6. 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.
Section 7.7. NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be made in the
manner provided in Section 9.05 of the Distribution Agreement.
Section 7.8. AMENDMENTS. This Agreement may be amended at any time
only by written agreement executed and delivered by duly authorized officers of
Park Place and Hilton.
Section 7.9. 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 7.10. 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.
Section 7.11. 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 7.12. PREDECESSORS AND SUCCESSORS. To the extent necessary
to give effect to the purposes of this Agreement, any reference to any
corporation, Affiliated Group or member of an Affiliated Group shall also
include any predecessors or successors thereto, by operation of law or
otherwise.
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<PAGE>
Section 7.13. TAX ELECTIONS. Nothing in this Agreement is intended
to change or otherwise affect any previous tax election made by or on behalf of
the Hilton Group (including the election with respect to the calculation of
earnings and profits under Code Section 1552 and the regulations thereunder).
Hilton, as common parent of the Hilton Group, shall continue to have sole
discretion to make any and all elections with respect to all members of the
Hilton Group for all Taxable Periods for which it is obligated to file Tax or
Information Returns under Section 2.1(a). Park Place, as common parent of the
Park Place Group, shall have sole discretion to make any and all elections with
respect to all members of the Park Place Group for all Taxable Periods for which
it is obligated to file Tax or Information Returns under Section 2.1(b);
PROVIDED, HOWEVER, that any such election for a Pre-Closing Taxable Period or
Pre-Closing Straddle Period shall be made only with the written consent of
Hilton, which consent shall not be unreasonably withheld.
Section 7.14. 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 7.15. FURTHER ASSURANCES. Subject to the provisions hereof,
the parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as it
may reasonably request in order to be able to comply with the provisions of this
sentence.
Section 7.16. SETOFF. All payments to be made by any party under
this Agreement shall be made without setoff, counterclaim or withholding, all of
which are expressly waived.
Section 7.17. EXPENSES. Except as specifically provided in this
Agreement or in a Related Agreement, 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.
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<PAGE>
Section 7.18. RULES OF CONSTRUCTION. Any ambiguities shall be resolved without
regard to which party drafted the Agreement.
[Signature Page To Follow]
20
<PAGE>
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
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "AGREEMENT") is made and entered
into as of December 31, 1998, by and between Lyle Berman (the "EXECUTIVE") and
Park Place Entertainment Corporation (f/n/a Gaming Co., Inc.), a Delaware
corporation ("PARK PLACE").
RECITALS
WHEREAS, Gaming Co., Inc. (n/k/a Park Place Entertainment
Corporation), a Delaware corporation, Hilton Hotels Corporation, a Delaware
corporation ("HILTON"), Grand Casinos, Inc., a Minnesota corporation
("COMPANY"), Gaming Acquisition Corporation, a Minnesota corporation and a
wholly-owned subsidiary of Park Place ("MERGER SUB") and GCI Lakes, Inc. (n/k/a
Lakes Gaming, Inc.), a Minnesota corporation and a wholly-owned subsidiary of
Company ("LAKES") entered into an Agreement and Plan of Merger, dated as of June
30, 1998 (as the same may be amended or modified from time to time in accordance
with the terms thereof, the "MERGER AGREEMENT"), pursuant to which, upon the
terms and subject to the conditions thereof, Merger Sub will merge with and into
Company, with Company as the surviving corporation (the "MERGER");
WHEREAS, the parties hereto recognize that the Executive may have
certain expertise in the business conducted by Park Place, the skills to compete
in the gaming industry, and the economic resources to compete in such industry.
Therefore, the parties hereto agree a non-competition agreement is necessary,
prudent, and has been bargained for in respect to the Merger.
WHEREAS, as a condition and inducement to each of Hilton's and Park
Place's willingness to consummate the transactions contemplated by the Merger
Agreement, Hilton and Park Place have requested that the Executive enter into a
non-compete agreement, upon the terms and subject to the conditions hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
undertakings and obligations set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. COVENANT. Except for matters expressly provided for in or
contemplated by this Agreement, the Executive hereby agrees that he will not,
without the prior written consent of Park Place, directly or indirectly engage
in any of the following actions on or before the date that is two years after
the Closing Date (as defined in the Merger Agreement):
(a) own any interest in, manage, operate, join, control, lend money
or render other financial assistance to, participate or be
connected with, as an officer, employee, partner, stockholder,
consultant or otherwise, any entity
<PAGE>
whose products or services are offered in the State of
Mississippi and could be considered part of the gaming industry;
PROVIDED, HOWEVER, that nothing in this Section 1 shall preclude
the Executive from holding less than five percent (5%) of the
outstanding capital stock of any corporation whose products or
services are offered in such states and could be considered part
of such industry and which is required to file periodic reports
with the U.S. Securities and Exchange Commission under Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
securities of which corporation are listed on any securities
exchange, quoted on the National Association of Securities
Dealers Automated Quotation System or traded in the
over-the-counter market; or
(b) solicit for employment, endeavor to entice away from Park Place
or any of its subsidiaries or affiliates or otherwise interfere
with the relationship of Park Place or any of its subsidiaries or
affiliates with any person who is employed by, or otherwise
engaged to, perform services for Park Place or any of its
subsidiaries or affiliates, whether for the Executive's own
account or for the account of any other individual, partnership,
firm, corporation or other business entity.
Section 2. ENFORCEMENT. If the scope of the Executive's agreement
under Section 1 hereof is determined by any court of competent jurisdiction to
be too broad to permit the enforcement of all of the provisions of such section
to their fullest extent, then the provisions of Section 1 hereof shall be
construed (and each of the parties hereto hereby confirm that its intent is that
such provisions be so construed) to be enforceable to the fullest extent
permitted by applicable law. To the maximum extent permitted by applicable law,
the Executive hereby consents to the judicial modification of the provisions of
Section 1 hereof in any proceeding brought to enforce such provisions in such a
manner that renders such provisions enforceable to the maximum extent permitted
by applicable law.
Section 3. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties hereto or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties hereto, it being understood and agreed that no provision contained
herein, and no act of the parties hereto, shall be deemed to create any
relationship between such parties other than the relationship set forth herein.
Section 4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party hereto and any purported transfer without such
consent shall be void.
Section 5. HEADINGS. The section and paragraph headings and table of
contents contained herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
-2-
<PAGE>
Section 6. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the validity of the
other provisions hereof, which shall continue in full force and effect.
Section 7. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Except as
specifically provided herein, this Agreement is for the sole and exclusive
benefit of the parties hereto and nothing herein is intended to give or shall be
construed to give to any person or entity other than the parties hereto any
rights or remedies hereunder.
Section 8. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to be
given and effective (a) upon delivery if delivered in person or by courier,
(b) when sent by electronic transmission (telegraph, telex, telecopy or
facsimile transmission), receipt confirmed, (c) five days after being sent by
airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall be
delivered to the addresses of each party hereto as follows, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice:
(i) if to Park Place:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Fax: (702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Michael Tischman, Esq.
Fax: (973) 643-6500
(ii) if to the Executive:
Lakes Gaming Inc.
130 Cheshire Lane
Minnetonka, Minnesota 55305
Attn: Lyle Berman
Fax: (612) 449-7003
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<PAGE>
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell, Esq.
Fax: (612) 672-8397
Section 9. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions hereof
and to consummate the transactions contemplated hereby.
Section 10. WAIVER OF CONDITIONS. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 11. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties hereto, and supersede all prior written or
oral communications, relating to the subject matter covered by said agreements.
No amendment, modification, extension or failure to enforce any condition of
this Agreement by either party shall be deemed a waiver of any of its rights
herein.
Section 13. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Closing Date.
Section 14. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.14 of the Hilton Distribution Agreement (as defined in the Merger
Agreement), including Section 9.14(c) thereof regarding the parties' ability to
seek specific performance or injunctive relief thereof, and including the
attorneys' fees provisions referred to therein.
Section 15. 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.
-4-
<PAGE>
Section 16. DEFAULT. In the event of a material default by either party
hereunder, the non-defaulting party shall be entitled to all remedies provided
by law or equity (including reasonable attorneys' fees and costs of suit
incurred).
Section 17. COUNTERPARTS. This Agreement and any amendments hereto 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 party, it
being understood that all parties need not sign the same counterpart.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LYLE BERMAN,
an Individual
By: /s/ Lyle Berman
-------------------------------
Name: Lyle Berman
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
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "AGREEMENT") is made and entered
into as of December 31, 1998, by and between Stanley M. Taube (the "EXECUTIVE")
and Park Place Entertainment Corporation (f/k/a Gaming Co., Inc.), a Delaware
corporation ("PARK PLACE").
RECITALS
WHEREAS, Gaming Co., Inc. (n/k/a Park Place Entertainment
Corporation), a Delaware corporation, Hilton Hotels Corporation, a Delaware
corporation ("HILTON"), Grand Casinos, Inc., a Minnesota corporation
("COMPANY"), Gaming Acquisition Corporation, a Minnesota corporation and a
wholly-owned subsidiary of Park Place ("MERGER SUB") and GCI Lakes, Inc. (n/k/a
Lakes Gaming, Inc.), a Minnesota corporation and a wholly-owned subsidiary of
Company ("LAKES") entered into an Agreement and Plan of Merger, dated as of June
30, 1998 (as the same may be amended or modified from time to time in accordance
with the terms thereof, the "MERGER AGREEMENT"), pursuant to which, upon the
terms and subject to the conditions thereof, Merger Sub will merge with and into
Company, with Company as the surviving corporation (the "MERGER");
WHEREAS, the parties hereto recognize that the Executive may have
certain expertise in the business conducted by Park Place, the skills to compete
in the gaming industry, and the economic resources to compete in such industry.
Therefore, the parties hereto agree a non-competition agreement is necessary,
prudent, and has been bargained for in respect to the Merger.
WHEREAS, as a condition and inducement to each of Hilton's and Park
Place's willingness to consummate the transactions contemplated by the Merger
Agreement, Hilton and Park Place have requested that the Executive enter into a
non-compete agreement, upon the terms and subject to the conditions hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
undertakings and obligations set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. COVENANT. Except for matters expressly provided for in or
contemplated by this Agreement, the Executive hereby agrees that he will not,
without the prior written consent of Park Place, directly or indirectly engage
in any of the following actions on or before the date that is two years after
the Closing Date (as defined in the Merger Agreement):
(a) own any interest in, manage, operate, join, control, lend money
or render other financial assistance to, participate or be
connected with, as an officer, employee, partner, stockholder,
consultant or otherwise, any entity
<PAGE>
whose products or services are offered in the State of
Mississippi and could be considered part of the gaming industry;
PROVIDED, HOWEVER, that nothing in this Section 1 shall preclude
the Executive from holding less than five percent (5%) of the
outstanding capital stock of any corporation whose products or
services are offered in such states and could be considered part
of such industry and which is required to file periodic reports
with the U.S. Securities and Exchange Commission under Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
securities of which corporation are listed on any securities
exchange, quoted on the National Association of Securities
Dealers Automated Quotation System or traded in the
over-the-counter market; or
(b) solicit for employment, endeavor to entice away from Park Place
or any of its subsidiaries or affiliates or otherwise interfere
with the relationship of Park Place or any of its subsidiaries or
affiliates with any person who is employed by, or otherwise
engaged to, perform services for Park Place or any of its
subsidiaries or affiliates, whether for the Executive's own
account or for the account of any other individual, partnership,
firm, corporation or other business entity.
Section 2. ENFORCEMENT. If the scope of the Executive's agreement
under Section 1 hereof is determined by any court of competent jurisdiction to
be too broad to permit the enforcement of all of the provisions of such section
to their fullest extent, then the provisions of Section 1 hereof shall be
construed (and each of the parties hereto hereby confirm that its intent is that
such provisions be so construed) to be enforceable to the fullest extent
permitted by applicable law. To the maximum extent permitted by applicable law,
the Executive hereby consents to the judicial modification of the provisions of
Section 1 hereof in any proceeding brought to enforce such provisions in such a
manner that renders such provisions enforceable to the maximum extent permitted
by applicable law.
Section 3. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties hereto or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties hereto, it being understood and agreed that no provision contained
herein, and no act of the parties hereto, shall be deemed to create any
relationship between such parties other than the relationship set forth herein.
Section 4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party hereto and any purported transfer without such
consent shall be void.
Section 5. HEADINGS. The section and paragraph headings and table of
contents contained herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
-2-
<PAGE>
Section 6. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the validity of the
other provisions hereof, which shall continue in full force and effect.
Section 7. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Except as
specifically provided herein, this Agreement is for the sole and exclusive
benefit of the parties hereto and nothing herein is intended to give or shall be
construed to give to any person or entity other than the parties hereto any
rights or remedies hereunder.
Section 8. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to be
given and effective (a) upon delivery if delivered in person or by courier,
(b) when sent by electronic transmission (telegraph, telex, telecopy or
facsimile transmission), receipt confirmed, (c) five days after being sent by
airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall be
delivered to the addresses of each party hereto as follows, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice:
(i) if to Park Place:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Fax: (702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Michael Tischman, Esq.
Fax: 973-643-6500
(ii) if to the Executive:
Stanley M. Taube
17 Cascade Creek Lane
Las Vegas, Nevada 89113
Attn: Stanley M. Taube
Fax: (702) 889-1502
-3-
<PAGE>
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell, Esq.
Fax: (612) 672-8397
Section 9. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions hereof
and to consummate the transactions contemplated hereby.
Section 10. WAIVER OF CONDITIONS. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 11. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties hereto, and supersede all prior written or
oral communications, relating to the subject matter covered by said agreements.
No amendment, modification, extension or failure to enforce any condition of
this Agreement by either party shall be deemed a waiver of any of its rights
herein.
Section 13. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Closing Date.
Section 14. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.14 of the Hilton Distribution Agreement (as defined in the Merger
Agreement), including Section 9.14(c) thereof regarding the parties' ability to
seek specific performance or injunctive relief thereof, and including the
attorneys' fees provisions referred to therein.
Section 15. 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.
-4-
<PAGE>
Section 16. DEFAULT. In the event of a material default by either party
hereunder, the non-defaulting party shall be entitled to all remedies provided
by law or equity (including reasonable attorneys' fees and costs of suit
incurred).
Section 17. COUNTERPARTS. This Agreement and any amendments hereto 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 party, it
being understood that all parties need not sign the same counterpart.
[Signature Page to Follow]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
STANLEY M. TAUBE,
an Individual
By: Stanley M. Taube
----------------------------------
Name: Stanley M. Taube
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
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "AGREEMENT") is made and entered
into as of December 31, 1998, by and between Thomas J. Brosig (the "EXECUTIVE")
and Park Place Entertainment Corporation (f/n/a Gaming Co., Inc.), a Delaware
corporation ("PARK PLACE").
RECITALS
WHEREAS, Gaming Co., Inc. (n/k/a Park Place Entertainment
Corporation), a Delaware corporation, Hilton Hotels Corporation, a Delaware
corporation ("HILTON"), Grand Casinos, Inc., a Minnesota corporation
("COMPANY"), Gaming Acquisition Corporation, a Minnesota corporation and a
wholly-owned subsidiary of Park Place ("MERGER SUB") and GCI Lakes, Inc. (n/k/a
Lakes Gaming, Inc.), a Minnesota corporation and a wholly-owned subsidiary of
Company ("LAKES") entered into an Agreement and Plan of Merger, dated as of June
30, 1998 (as the same may be amended or modified from time to time in accordance
with the terms thereof, the "MERGER AGREEMENT"), pursuant to which, upon the
terms and subject to the conditions thereof, Merger Sub will merge with and into
Company, with Company as the surviving corporation (the "MERGER");
WHEREAS, the parties hereto recognize that the Executive may have
certain expertise in the business conducted by Park Place, the skills to compete
in the gaming industry, and the economic resources to compete in such industry.
Therefore, the parties hereto agree a non-competition agreement is necessary,
prudent, and has been bargained for in respect to the Merger.
WHEREAS, as a condition and inducement to each of Hilton's and Park
Place's willingness to consummate the transactions contemplated by the Merger
Agreement, Hilton and Park Place have requested that the Executive enter into a
non-compete agreement, upon the terms and subject to the conditions hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
undertakings and obligations set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. COVENANT. Except for matters expressly provided for in or
contemplated by this Agreement, the Executive hereby agrees that he will not,
without the prior written consent of Park Place, directly or indirectly engage
in any of the following actions on or before the date that is two years after
the Closing Date (as defined in the Merger Agreement):
(a) own any interest in, manage, operate, join, control, lend money
or render other financial assistance to, participate or be
connected with, as an officer, employee, partner, stockholder,
consultant or otherwise, any entity whose products or services
are offered in the State of Mississippi and could be considered
part of the gaming industry; PROVIDED, HOWEVER, that
<PAGE>
nothing in this Section 1 shall preclude the Executive from
holding less than five percent (5%) of the outstanding capital
stock of any corporation whose products or services are offered
in such states and could be considered part of such industry and
which is required to file periodic reports with the U.S.
Securities and Exchange Commission under Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, the securities
of which corporation are listed on any securities exchange,
quoted on the National Association of Securities Dealers
Automated Quotation System or traded in the over-the-counter
market; or
(b) solicit for employment, endeavor to entice away from Park Place
or any of its subsidiaries or affiliates or otherwise interfere
with the relationship of Park Place or any of its subsidiaries or
affiliates with any person who is employed by, or otherwise
engaged to, perform services for Park Place or any of its
subsidiaries or affiliates, whether for the Executive's own
account or for the account of any other individual, partnership,
firm, corporation or other business entity.
Section 2. ENFORCEMENT. If the scope of the Executive's agreement
under Section 1 hereof is determined by any court of competent jurisdiction to
be too broad to permit the enforcement of all of the provisions of such section
to their fullest extent, then the provisions of Section 1 hereof shall be
construed (and each of the parties hereto hereby confirm that its intent is that
such provisions be so construed) to be enforceable to the fullest extent
permitted by applicable law. To the maximum extent permitted by applicable law,
the Executive hereby consents to the judicial modification of the provisions of
Section 1 hereof in any proceeding brought to enforce such provisions in such a
manner that renders such provisions enforceable to the maximum extent permitted
by applicable law.
Section 3. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties hereto or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties hereto, it being understood and agreed that no provision contained
herein, and no act of the parties hereto, shall be deemed to create any
relationship between such parties other than the relationship set forth herein.
Section 4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party hereto and any purported transfer without such
consent shall be void.
Section 5. HEADINGS. The section and paragraph headings and table of
contents contained herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
Section 6. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the validity of the
other provisions hereof, which shall continue in full force and effect.
-2-
<PAGE>
Section 7. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Except as
specifically provided herein, this Agreement is for the sole and exclusive
benefit of the parties hereto and nothing herein is intended to give or shall be
construed to give to any person or entity other than the parties hereto any
rights or remedies hereunder.
Section 8. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to be
given and effective (a) upon delivery if delivered in person or by courier,
(b) when sent by electronic transmission (telegraph, telex, telecopy or
facsimile transmission), receipt confirmed, (c) five days after being sent by
airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall be
delivered to the addresses of each party hereto as follows, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice:
(i) if to Park Place:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Fax: (702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Michael Tischman, Esq.
Fax: (973) 643-6500
(ii) if to the Executive:
Grand Casinos, Inc.
11975 Seaway Road
Gulfport, Mississippi 39503
Attn: Thomas J. Brosig
Fax: (228) 604-5050
-3-
<PAGE>
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell, Esq.
Fax: (612) 672-8397
Section 9. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions hereof
and to consummate the transactions contemplated hereby.
Section 10. WAIVER OF CONDITIONS. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 11. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties hereto, and supersede all prior written or
oral communications, relating to the subject matter covered by said agreements.
No amendment, modification, extension or failure to enforce any condition of
this Agreement by either party shall be deemed a waiver of any of its rights
herein.
Section 13. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Closing Date.
Section 14. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.14 of the Hilton Distribution Agreement (as defined in the Merger
Agreement), including Section 9.14(c) thereof regarding the parties' ability to
seek specific performance or injunctive relief thereof, and including the
attorneys' fees provisions referred to therein.
Section 15. 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.
-4-
<PAGE>
Section 16. DEFAULT. In the event of a material default by either party
hereunder, the non-defaulting party shall be entitled to all remedies provided
by law or equity (including reasonable attorneys' fees and costs of suit
incurred).
Section 17. COUNTERPARTS. This Agreement and any amendments hereto 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 party, it
being understood that all parties need not sign the same counterpart.
[Signature Page to Follow]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THOMAS J. BROSIG,
an Individual
By: /s/ Thomas J. Brosig
----------------------------------
Name: Thomas J. Brosig
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
<PAGE>
SHORT TERM CREDIT AGREEMENT
dated as of
December 31, 1998
among
PARK PLACE ENTERTAINMENT CORPORATION
The Lenders, Documentation Agents and Syndication Agent Referred to Herein
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Administrative Agent
______________________________________
NATIONSBANC MONTGOMERY SECURITIES LLC.
Lead Arranger
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . .17
1.03 Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE II THE CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
2.01 Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . .19
2.02 Notice of Committed Borrowings. . . . . . . . . . . . . . . . . . .19
2.03 RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.04 RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.05 Conversion and Continuation of Committed Loans. . . . . . . . . . .20
2.06 Notice to Lenders; Funding of Loans . . . . . . . . . . . . . . . .20
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.08 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.09 Upfront Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
2.10 Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .23
2.11 RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2.12 Optional Termination or Reduction of Commitments by Borrower. . . .24
2.13 Optional Termination of Commitments by the Lenders. . . . . . . . .24
2.14 Scheduled Termination of Commitments. . . . . . . . . . . . . . . .24
2.15 Extensions of the Termination Date. . . . . . . . . . . . . . . . .24
2.16 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . .25
2.17 General Provisions as to Payments . . . . . . . . . . . . . . . . .26
2.18 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . .27
2.19 Computation of Interest and Fees. . . . . . . . . . . . . . . . . .27
2.20 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . .27
2.21 RESERVED.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
2.22 Regulation D Compensation . . . . . . . . . . . . . . . . . . . . .28
2.23 Increased Commitments; Additional Lenders. . . . . . . . . . . . .28
ARTICLE III CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
3.01 Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
3.02 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . .32
4.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . .32
-2-
<PAGE>
4.02 Corporate and Governmental Authorization; Contravention . . . . . .32
4.03 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .32
4.04 Financial Information . . . . . . . . . . . . . . . . . . . . . . .32
4.05 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
4.06 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . .33
4.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.08 Significant Subsidiaries. . . . . . . . . . . . . . . . . . . . . .34
4.09 Not an Investment Company . . . . . . . . . . . . . . . . . . . . .34
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .34
4.11 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.12 The Spin-Off Transaction. . . . . . . . . . . . . . . . . . . . . .35
4.13 Gaming Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
5.01 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
5.02 Maintenance of Property; Insurance. . . . . . . . . . . . . . . . .38
5.03 Conduct of Business and Maintenance of Existence. . . . . . . . . .39
5.04 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . .39
5.05 Inspection of Property, Books and Records . . . . . . . . . . . . .39
5.06 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . .40
5.07 Consolidations, Mergers and Sales of Assets . . . . . . . . . . . .41
5.08 Hostile Tender Offers . . . . . . . . . . . . . . . . . . . . . . .41
5.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .41
5.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . .42
5.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . .42
ARTICLE VI DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . .43
6.02 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . .45
6.03 RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
ARTICLE VII THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.01 Appointment and Authorization . . . . . . . . . . . . . . . . . . .46
7.02 Agents and Affiliates . . . . . . . . . . . . . . . . . . . . . . .46
7.03 Action by Agents. . . . . . . . . . . . . . . . . . . . . . . . . .46
7.04 Consultation with Experts . . . . . . . . . . . . . . . . . . . . .46
7.05 Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . . .46
7.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .47
7.07 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . .47
7.08 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . .47
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<PAGE>
7.09 Agents' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
ARTICLE VIII CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . .49
8.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . .49
8.02 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.03 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . .50
8.04 Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . .52
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .53
9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
9.02 No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
9.03 Expenses; Documentary Taxes; Indemnification. . . . . . . . . . . .53
9.04 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . .54
9.05 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .55
9.06 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
9.07 California Law; Submission to Jurisdiction. . . . . . . . . . . . .59
9.08 Counterparts; Integration . . . . . . . . . . . . . . . . . . . . .59
9.09 Several Obligations . . . . . . . . . . . . . . . . . . . . . . . .59
9.10 Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . .59
9.11 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . .61
</TABLE>
SCHEDULES:
- - ----------
Schedule 1 - Lender Commitments
Schedule 2 - Pricing Schedule
EXHIBITS:
- - ---------
Exhibit A - Compliance Certificate
Exhibit B - Form of Note
Exhibit C - Pricing Certificate
Exhibit D - Form of Notice of Committed Borrowing
Exhibit E - Reserved
Exhibit F - Reserved
Exhibit G - Reserved
Exhibit H - Extension Agreement
Exhibit I - Opinion of Gibson, Dunn & Crutcher LLP
Exhibit J - Opinion of Latham & Watkins, LLP
Exhibit K - Assignment and Assumption Agreement
-4-
<PAGE>
SHORT TERM CREDIT AGREEMENT
SHORT TERM CREDIT AGREEMENT dated as of December 31, 1998, among
PARK PLACE ENTERTAINMENT CORPORATION, the Lenders listed on the signature
pages hereto, THE BANK OF NEW YORK, as Syndication Agent, PNC BANK, NATIONAL
ASSOCIATION and SG, as Documentation Agents, and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Additional Lender" has the meaning set forth in Section 2.23.
"Administrative Agent" means Bank of America National Trust and Savings
Association in its capacity as administrative agent for the Lenders hereunder,
and its successors in such capacity.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Lender.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (and the correlative
terms, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise); PROVIDED
that, in any event, any Person that owns, directly or indirectly, 5% or more
of the securities having ordinary voting power for the election of directors
or other governing body of a corporation that has more than 100 record
holders of such
-5-
<PAGE>
securities, or 5% or more of the partnership or other ownership interests of
any other Person that has more than 100 record holders of such interests,
will be deemed to control such corporation or other Person.
"Agents" mean, collectively, the Administrative Agent, the Syndication
Agent and the Documentation Agents, and "Agent" means any of them.
"Applicable Lending Office" means, with respect to any Lender, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, and (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Authorized Officer" means any of the controller, the treasurer or the
chief financial officer of the Borrower.
"Bank of America" means Bank of America National Trust and Savings
Association, its successors and assigns.
"Base Rate" means, as of any date of determination, the rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the HIGHER OF
(a) the Reference Rate in effect on such date (calculated on the basis of a year
of 365 or 366 days and the actual number of days elapsed) and (b) the Federal
Funds Rate in effect on such date (calculated on the basis of a year of 360 days
and the actual number of days elapsed) PLUS 1/2 of 1% (50 basis points).
"Base Rate Loan" means a Committed Loan made or to be made by a Lender as a
Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Base Rate Margin" has the meaning set forth on Schedule 2.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means Park Place Entertainment Corporation, a Delaware
corporation, and its successors.
"Borrowing" means the aggregation of Loans of one or more Lenders to be
made to the Borrower pursuant to Article II on a single date and, in the case of
Fixed Rate Borrowings, for a single Interest Period.
-6-
<PAGE>
"Change of Control" means the occurrence of a Rating Decline in connection
with any of the following events: (i) upon any merger or consolidation of the
Borrower with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Borrower, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of securities representing a majority of the total
voting power of the aggregate outstanding securities of the transferee or
surviving entity normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated by The Securities
and-Exchange Commission under said Act) of securities representing a majority of
total voting power of the aggregate outstanding securities of the Borrower
normally entitled to vote in the election of directors of the Borrower, (iii)
when, during any period of 12 consecutive calendar months, individuals who were
directors of the Borrower on the first day of such period (together with any new
directors whose election by the board of directors of the Borrower or whose
nomination for election by the stockholders of the Borrower was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Borrower, or (iv) the sale or
disposition, whether directly or indirectly, by the Borrower of all or
substantially all of its assets.
"Combined Pro Forma Financial Statements" means (a) from the Effective Date
until the Borrower delivers the combined pro forma financial statements
described in Section 5.01(a), the combined pro forma financial statements of the
Gaming Segment of Hilton and the Grand Assets for the twelve month period ended
September 30, 1998 heretofore delivered by Hilton and the Borrower to the
Administrative Agent and each Lender, and (b) thereafter, the combined pro forma
financial statements for the twelve month period ended December 31, 1998 so
delivered.
"Commitment" means, as to each Lender, the commitment of that Lender to
make Loans in each case as such amount may be reduced from time to time
pursuant to Section 2.12, 2.13 or 2.14, or increased pursuant to Section
2.23. The aggregate amount of the Commitments under this Agreement as of the
Effective Date is
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$650,000,000 and the respective Commitments of the Lenders as of the
Effective Date are set forth on Schedule 1.
"Committed Loan" means a loan made or to be made by a Lender pursuant to
Section 2.01.
"Compliance Certificate" means a certificate, substantially in the form of
Exhibit A, properly completed and signed by an Authorized Officer.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date,
PROVIDED that Consolidated Debt shall exclude any Debt of the Borrower or a
Subsidiary as to which cash and cash equivalents sufficient to provide for
payment in full of such Debt at its scheduled maturity or at an earlier date at
which it shall have been or may be called for redemption shall have been
irrevocably deposited in trust for the benefit of the holders of such Debt or a
representative of such holders, which deposit shall have resulted in the legal
or in-substance defeasance thereof.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period before (i) income taxes, (ii) interest expense, (iii) depreciation
and amortization, (iv) minority interest, (v) extraordinary losses or gains,
(vi) Pre-Opening Expenses, (vii) transactional expenses associated with the
Spin-Off Transaction, and (viii) nonrecurring non-cash charges, PROVIDED that,
in calculating "Consolidated EBITDA":
(a) for all periods ending on or prior to December 31, 1998,
"Consolidated EBITDA" shall be computed on the basis of the operating
results of the Gaming Segment and the Grand Assets for such periods
reflected in the Combined Pro Forma Financial Statements.
(b) the operating results of each New Project which commences
operations and records not less than one full fiscal quarter's operations
during the relevant period shall be annualized; and
(c) Consolidated EBITDA shall be adjusted, on a pro forma basis, to
include the operating results of each resort or casino property acquired by
Borrower and its Consolidated Subsidiaries during the relevant period and
to exclude the operating results of each resort or casino property sold or
otherwise disposed of by Borrower and its Subsidiaries, or whose operations
are discontinued during the relevant period.
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"Consolidated Interest Expense" means, for any period, net interest expense
of Borrower and its Consolidated Subsidiaries for such period, determined in
accordance with generally accepted accounting principles, PROVIDED that for all
periods ending on or prior to December 31, 1998, "Consolidated Interest Expense"
shall be computed on the basis of the net interest expense allocated to Borrower
and its Consolidated Subsidiaries and shown on the Combined Pro Forma Financial
Statements.
"Consolidated Net Income" means, for any period, the consolidated net
income of the Borrower and its Consolidated Subsidiaries for such period,
provided that for all periods ending on or prior to December 31, 1998, such
consolidated net income shall be the consolidated net income of the Gaming
Segment and the Grand Assets for such periods reflected in the Combined Pro
Forma Financial Statements.
"Consolidated Net Tangible Assets" means the total amount of assets of
Borrower and its Consolidated Subsidiaries, after deducting therefrom (a) all
current liabilities of Borrower and its Consolidated Subsidiaries (excluding (i)
the current portion of long term indebtedness, (ii) inter-company liabilities,
and (iii) any liabilities which are by their terms renewable or extendable at
the option of the obligor thereon to a time more than twelve months from the
time as of which the amount thereof is being computed), and (b) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the latest consolidated balance
sheet of Borrower prepared in accordance with generally accepted accounting
principles.
"Consolidated Net Worth" means at any date the consolidated stockholders,
equity of the Borrower and its Consolidated Subsidiaries determined as of such
date.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
"Covered Subsidiary" means at any time any Subsidiary of the Borrower that
has consolidated assets in an amount greater than $5,000,000.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all indebtedness
or other obligations secured by a contractual Lien on
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any asset of such Person, whether or not such indebtedness or other
obligations are otherwise an obligation of such Person, and (vi) all
Guarantees made by such Person (including by way of provision of letters of
credit or other contingent obligations) with respect to indebtedness or other
obligations of any other Person which constitute "Debt" of a type or class
described in clauses (i) through (v) of this definition.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Documentation Agents" means PNC Bank, National Association and SG, in each
case in their capacity as documentation agent for the Lenders hereunder. The
capacity of the Documentation Agents is titular in nature, and the Documentation
Agents shall have no obligations or liabilities under the Loan Documents by
reason of acting in such capacity.
"Dollars" and the sign "$" mean lawful money of the United States.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Los Angeles are authorized or
required by law to close.
"Domestic Lending Office" means, as to each Lender, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.02.
"Eligible Assignee" means (a) another Lender, (b) with respect to any
Lender, any Affiliate of that Lender, (c) any commercial bank having a combined
capital and surplus of $500,000,000 or more, (d) any (i) savings bank, savings
and loan association or similar financial institution or (ii) insurance company
engaged in the business of writing insurance which, in either case (A) has a net
worth of $500,000,000 or more, (B) is engaged in the business of lending money
and extending credit under credit facilities substantially similar to those
extended under this Agreement and (C) is operationally and procedurally able to
meet the obligations of a Lender hereunder to the same degree as a commercial
bank and (e) any other financial institution (INCLUDING
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a mutual fund or other fund) having total assets of $250,000,000 or more
which meets the requirements set forth in subclauses (B) and (C) of clause
(d) above; PROVIDED that each Eligible Assignee must either (a) be organized
under the Laws of the United States of America, any State thereof or the
District of Columbia or (b) be organized under the Laws of the Cayman Islands
or any country which is a member of the Organization for Economic Cooperation
and Development, or a political subdivision of such a country, and (i) act
hereunder through a branch, agency or funding office located in the United
States of America and (ii) is otherwise exempt from withholding of tax on
interest and delivers Form 1001 or Form 4224 pursuant to Section 2.20 at the
time of any assignment pursuant to Section 9.05.
"Environmental Laws" means any and all statutes, regulations, permits,
licenses or other governmental restrictions relating to the environment or to
releases of petroleum or petroleum products, chemicals or toxic or hazardous
substances or wastes into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending office" means, as to each Lender, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan made or to be made by a Lender as
a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth on Schedule 2.
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"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System with deposits exceeding five billion Dollars in respect of
"eurocurrency liabilities" (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Euro-Dollar
Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any bank to United States
residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Facility Fee Rate" has the meaning set forth in Section 2.10.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of l%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to The Bank of New York on such day on such
transactions as determined by the Administrative Agent.
"Fixed Rate Loans" means Euro-Dollar Loans.
"Gaming Board" means, collectively, (a) the Nevada Gaming Commission, (b)
the Nevada State Gaming Control Board, (c) the New Jersey Casino Control
Commission, (d) the New Jersey Division of Gaming Enforcement, (e) the
Mississippi Gaming Commission, and (f) any other Governmental Agency that holds
regulatory, licensing or permit authority over gambling, gaming or casino
activities conducted by Borrower or its Subsidiaries within its jurisdiction.
"Gaming Laws" means all laws pursuant to which any Gaming Board possesses
regulatory, licensing or permit authority over gambling, gaming or casino
activities conducted by Borrower or its Subsidiaries within its jurisdiction.
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"Gaming Segment" means the gaming segment (as "segment" is used in
Regulation S-K and Regulation S-X of the Securities and Exchange Commission) of
Hilton which, prior to the Effective Date, was comprised of assets and
operations owned and conducted by Borrower and its Subsidiaries following the
Effective Date.
"GCI Lakes, Inc." means GCI Lakes, Inc., a Minnesota corporation.
"Governmental Agency" means (a) any international, foreign, federal, state,
county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body (including any Gaming Board) or (c)
any court or administrative tribunal of competent jurisdiction.
"Grand" means Grand Casinos, Inc., a Minnesota corporation, and its
successors.
"Grand Agreement" means the Agreement and Plan of Merger dated as of June
30, 1998 among Hilton, Borrower (under its former name, Gaming Co., Inc.),
Gaming Acquisition Corporation, a Minnesota corporation, and GCI Lakes, Inc., a
Minnesota corporation and Grand, as amended as of the Effective Date.
"Grand Assets" means the assets of Grand and its Subsidiaries which are to
be retained by Grand following the Lakes Spin-off pursuant to the Grand
Distribution Agreement, including without limitation the assets described on
Schedule 1 to the Grand Distribution Agreement, and acquired by Borrower and its
Subsidiaries upon consummation of the merger between Borrower and Grand pursuant
to the Grand Agreement, including without limitation the resort casino
properties commonly known as (a) the Grand Casino Tunica, in Tunica,
Mississippi, (b) the Grand Casino Gulfport, in Gulfport, Mississippi, and (c)
the Grand Casino Biloxi, in Biloxi, Mississippi.
"Grand Distribution Agreement" means the Distribution Agreement dated as of
December 31, 1998 by and between Grand and GCI Lakes, Inc., together with the
agreements attached as Exhibits thereto.
"Grand Notes" means the 10 1/8% First Mortgage Notes of Grand due 2003
issued pursuant to the Indenture, dated as of November 30, 1995 executed by
Grand in favor of American National Bank, as Trustee.
"Granting Lender" has the meaning set forth in Section 9.05(f).
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other
Person and, without
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limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Debt of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part), including by way of provision of letters of credit or
other contingent obligations with respect thereto, provided that the term
Guarantee shall not include (x) endorsements for collection or deposit in the
ordinary course of business or (y) performance or completion guarantees. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hilton" means Hilton Hotels Corporation, a Delaware corporation.
"Hilton Distribution Agreement" means the Distribution Agreement dated as
of December 31, 1998 by and between Hilton and Borrower, together with the
agreements attached as Exhibits thereto.
"Hilton Notes" means the 7.35% senior notes of Hilton due 2002 in the
aggregate principal amount of $300,000,000 and the 7.00% senior notes of Hilton
due 2004 in the aggregate amount of $325,000,000 issued pursuant to the
Indenture, dated as of April 15, 1997 executed by Hilton in favor of BNY Western
Trust Company, as Trustee.
"Increased Commitment" has the meaning set forth in Section 2.23.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Coverage Ratio" means, as of each date of determination, the
ratio of (a) Consolidated EBITDA for the four fiscal quarters ending on that
date, to (b) Consolidated Interest Expense for the same period.
"Interest Period" means, with respect to each Euro-Dollar Borrowing, the
period commencing on the date of such Borrowing and ending one week or 1, 2, 3
or 6 months thereafter, as the Borrower may elect in the applicable Notice of
Committed Borrowing or Notice of Conversion/Continuation; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
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another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (a)(iii) below, end on the last Euro-Dollar
Business Day in the calendar month which is the last calendar month which
commences in such Interest Period; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date, or, if such date is not
a Euro-Dollar Business Day, then on the next preceding Euro-Dollar Business
Day.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment Grade" means (i) with respect to S&P, a rating of BBB- or
higher, and (ii) with respect to Moody's, a rating of Baa3 or higher.
"Lakes Spin-Off" means the contribution of all assets of Grand and its
Subsidiaries other than the Grand Assets to GCI Lakes, Inc. and the
corresponding distribution of the shares of GCI Lakes, Inc. to the shareholders
of Grand described in the Grand Agreement.
"Lead Arranger" means NationsBanc Montgomery Securities LLC. Following
the date of this Agreement, the Lead Arranger shall have no obligations or
liabilities under the Loan Documents.
"Lender" means each lender listed on the signature pages hereof and each
Lender which accepts an assignment pursuant to Section 9.05, and their
respective successors.
"Leverage Ratio" means, as of any date of determination, the ratio of (a)
Consolidated Debt on such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on such date.
"License Revocation" means the revocation, failure to renew or
suspension of, or the appointment of a receiver, supervisor or similar
official with respect to, any casino,
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gambling or gaming license issued by any Gaming Board covering any casino or
gaming facility of Borrower and its Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans" means Base
Rate Loans or Euro-Dollar Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes and each other instrument,
document or agreement now or hereafter executed by the parties in furtherance of
this Agreement.
"London Interbank Offered Rate" means, as to the Interest Period applicable
to each Euro-Dollar Loan, means the average rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which deposits in
Dollars are offered to the Administrative Agent in the London interbank market
at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before
the first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of the Administrative Agent to which
such Interest Period is to apply and for a period of time comparable to such
Interest Period.
"Margin Adjustment" has the meaning set forth in the Schedule 2.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
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"New Project" means each new hotel - casino, casino or resort project (as
opposed to any project which consists of an extension or redevelopment of an
operating hotel, casino or resort) having a development and construction budget
in excess of $25,000,000 which hereafter receives a certificate of completion or
occupancy and all relevant gaming and other licenses, and in fact commences
operations. Without limitation, the Paris Hotel & Casino located in Las Vegas,
Nevada, is a "New Project."
"Non-Recourse Debt" means Debt in respect of which the recourse of the
holder of such Debt is limited to the assets securing such Debt and such Debt
does not constitute the general obligation of the Borrower or any Subsidiary.
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit B hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined in
Section 2.02).
"Notice of Committed Borrowing" has the meaning set forth in Section 2.02.
"Notice of Conversion\Continuation" has the meaning set forth in Section
2.05.
"Other Commitments" means the lending commitments of the Lenders under the
Five Year Credit Agreement of even date herewith among the Lenders party to this
Agreement on the Effective Date, the Bank of New York, as Syndication Agent, PNC
Bank, National Association and SG, as Documentation Agents, and Bank of America
National Trust and Savings Association, as Administrative Agent.
"Parent" means, with respect to any Lender, any Person controlling such
Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
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either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pre-Opening Expenses" means, with respect to any fiscal period, the amount
of expenses (OTHER THAN Consolidated Interest Expense) incurred with respect to
capital projects which are classified as "pre-opening expenses" on the
applicable financial statements of Borrower and its Subsidiaries for such period
(or, with respect to periods prior to December 31, 1998, the Combined Pro Forma
Financial Statements), prepared in accordance with generally accepted accounting
principles.
"Pricing Certificate" means a Pricing Certificate substantially in the form
of Exhibit C hereto, properly completed and signed by an Authorized Officer of
Borrower.
"Pricing Period" means (a) the period beginning on the Effective Date and
ending on February 28, 1999, and (b) each period of three months beginning on
the first day of each March, June, September and December and ending on the last
day of the succeeding May, August, November and February.
"Proxy Statement" means the Joint Proxy Statement/Prospectus (S-4) filed
with the Securities and Exchange Commission on October 23, 1998, as it may be
amended or modified in any manner prior to the date hereof.
"Public Notice" means, without limitation, any filing or report made in
accordance with the requirements of the Securities and Exchange Commission (or
any successor), any press release or public announcement made by the Borrower or
any written notice the Borrower gives to the Administrative-Agent or the
Lenders.
"Rating Agencies" means S&P and Moody's.
"Rating Decline" means the occurrence on any date on or within 90 days
after the date of the first public notice of (i) the occurrence of an event
described in clauses (i)-(v) of the definition of "Change of Control" or (ii)
the intention by the Borrower to effect such an event (which 90-day period shall
be extended so long as the rating of the senior debt of the Borrower is under
publicly announced consideration for possible downgrade by any of the Rating
Agencies) of a decrease in the rating of the senior debt of the Borrower by any
of the Rating Agencies to below Investment Grade.
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"Reference Rate" means the rate of interest publicly announced from time to
time by Bank of America in San Francisco, California, as its "reference rate" or
the similar prime rate or reference rate announced by any successor
Administrative Agent. Bank of America's reference rate is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the Reference Rate announced by Bank of
America or any successor Administrative Agent shall take effect at the opening
of business on the day specified in the public announcement of such change.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding at least 51% of the sum of the aggregate unpaid principal
amount of the Loans.
"Revolving Credit Period" means the period from and including the Effective
Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., and its successors.
"Significant Subsidiary" means each Subsidiary of the Borrower at any time
having (i) at least "10% of the total consolidated assets of the Borrower and
its Subsidiaries (determined as of the last day of the most recent fiscal
quarter of the Borrower) or (ii) at least 10% of the consolidated revenues of
the Borrower and its Subsidiaries for the fiscal year of the Borrower then most
recently ended.
"Solvent" as to any Person shall mean that (a) the sum of the assets of
such Person, both at a fair valuation and at present fair saleable value,
exceeds its liabilities, including its probable liability in respect of
contingent liabilities, (b) such Person will have sufficient capital with
which to conduct its business as presently conducted and as proposed to be
conducted and (c) such Person has not incurred debts, and does not intend to
incur debts, beyond its ability to pay such debts as they mature. For
purposes of this definition, "debt" means any liability on a claim, and
"claim" means (x) a right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured, or (y) a right
to an equitable remedy for breach of performance if such
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breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured. With respect to any such
contingent liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or
matured liability.
"SPC" has the meaning set forth in Section 9.05(f).
"Spin-Off Transaction" means (a) the contribution by Hilton of the assets
and operations of the Gaming Segment, including without limitation the assets
described on Schedule 1 to the Hilton Distribution Agreement, to Borrower and
its Subsidiaries pursuant to the Hilton Distribution Agreement and the
substantially concurrent distribution of shares in Borrower to the shareholders
in Hilton, (b) the execution of the First Supplemental Indenture to Borrower's
Indenture dated as of April 15, 1997, and the Debt Assumption Agreement between
the Borrower and Hilton, in each case substantially in the form previously
delivered to the Administrative Agent prior to the Effective Date, and (c) the
merger of Borrower with Grand (following the Lakes Spin-Off) pursuant to the
Grand Agreement.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Syndication Agent" means The Bank of New York in its capacity as
syndication agent for the Lenders hereunder. The capacity of the Syndication
Agent is titular in nature, and the Syndication Agent shall have no obligations
or liabilities under the Loan Documents by reason of acting in such capacity.
"Termination Date" means December 30, 1999 or such later date to which the
Revolving Credit Period shall have been extended pursuant to Section 2.15, or,
if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar
Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan,
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but only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which (except
directors, qualifying shares) are at the time directly or indirectly owned by
the Borrower.
"Year 2000 Issue" means failure of computer software, hardware and firmware
systems, and equipment containing embedded computer chips, to properly receive,
transmit, process, manipulate, store, retrieve, re-transmit or in any other way
utilize data and information due to the occurrence of the year 2000 or the
inclusion of dates on or after January 1, 2000.
Section 1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants and disclosed in such
financial statements) with the most recent audited consolidated financial
statements of the Borrower and its Consolidated Subsidiaries delivered to the
Lenders; provided that, if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any covenant in Article V to eliminate the
effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Article V for such purpose),
then the Borrower's compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect immediately
before the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended
in a manner satisfactory to the Borrower and the Required Lenders.
Section 1.03 TYPES OF BORROWINGS. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article
II under which participation therein is determined (I.E., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which all Lenders participate
in proportion to their commitments).
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ARTICLE II
THE CREDITS
Section 2.01 COMMITMENTS TO LEND. During the Revolving Credit
Period each Lender severally agrees, on the terms and conditions set forth in
this Agreement, to lend to the Borrower pursuant to this Section from time to
time amounts such that (a) the aggregate principal of Committed Loans by such
Lender at any one time outstanding shall not exceed the amount of its
Commitment, and (b) the aggregate principal outstanding amount of all
Committed Loans shall not exceed the aggregate Commitments. Each Borrowing
under this Section shall be in an aggregate principal amount of $10,000,000
or any larger multiple of $1,000,000; and each Committed Borrowing shall be
made from the several Lenders ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, repay, or to the extent permitted by Section 2.17, prepay Loans and
reborrow at any time on or prior to the Termination Date under this Section.
The Committed Loans shall mature, and the principal amount thereof shall be
due and payable, on the Termination Date.
Section 2.02 NOTICE OF COMMITTED BORROWINGS. The Borrower shall
give the Administrative Agent notice (a "Notice of Committed Borrowing"),
substantially in the form of Exhibit D hereto, not later than 8:30 A.M.
(California local time) on (y) the date of each Base Rate Borrowing and (z)
the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans; and
(d) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Not more than twelve Committed Borrowings which are Euro-Dollar Borrowings
having different Interest Periods shall be outstanding at any time.
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Section 2.03 RESERVED.
Section 2.04 RESERVED.
Section 2.05 CONVERSION AND CONTINUATION OF COMMITTED LOANS.
Subject to the provisions of this Article II governing the making of
Euro-Dollar Loans, Borrower shall have the option at any time (i) to convert
all or any part of its outstanding Committed Loans equal to $10,000,000 and
integral multiples of $1,000,000 in excess of that amount from Loans bearing
interest at a rate determined by reference to one basis to Committed Loans
bearing interest at a rate determined by reference to an alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Euro-Dollar
Loan, to continue all or any portion of such Loan equal to $1,000,000 and
integral multiples of $100,000 in excess of that amount as a Euro-Dollar
Loan; PROVIDED, HOWEVER, that a Euro-Dollar Loan may only be converted into a
Base Rate Loan on the expiration date of an Interest Period applicable
thereto.
Borrower shall deliver, to the Administrative Agent, notice of any such
conversion or continuation, substantially in the form of Exhibit D (each a
"Notice of Conversion/Continuation"), no later than 8:30 A.M. (California
local time) at least one Domestic Business Day in advance of the proposed
conversion date (in the case of a conversion to a Base Rate Loan) and at
least three Euro-Dollar Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a
continuation of, a Euro-Dollar Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day in the case of Base Rate Loans and a Euro-Dollar Business Day,
in the case of conversion to or continuation of Euro-Dollar Loans), (ii) the
amount and type of the Loan to be converted/continued, (iii) the nature of
the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Euro-Dollar Loan, the requested Interest Period, and (v)
in the case of a conversion to, or a continuation of, a Euro-Dollar Loan,
that no Default or Event of Default has occurred and is continuing.
Section 2.06 NOTICE TO LENDERS; FUNDING OF LOANS.
Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Lender of the contents thereof and of such
Lender's share (if any) of such Borrowing and such Notice of Borrowing shall
not thereafter be revocable by the Borrower.
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Not later than 11:00 A.M. (California local time) on the date of
each Borrowing, if such Borrowing is to be made in Dollars, each Lender
participating therein shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing in Dollars, in federal or
other funds immediately available to the Administrative Agent at its address
referred to in Section 9.01. Unless the Administrative Agent determines that
any applicable condition specified in Article III has not been satisfied, the
Administrative Agent will make the funds so received from the Lenders
available to the Borrower at the Administrative Agent's aforesaid address or
place.
If any Lender makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Lender,
such Lender shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Lender
to the Administrative Agent as provided in subsection (b), or remitted by the
Borrower to the Administrative Agent as provided in Section 2.17, as the case
may be.
Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's share of such Borrowing,
the Administrative Agent may assume that such Lender has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.06 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have so made such share available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.08 and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Loan included in such Borrowing for purposes of this
Agreement. If the Borrower pays interest under
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this subsection (d) at the Federal Funds Rate and the Federal Funds Rate is
higher than the interest rate applicable thereto pursuant to Section 2.08,
the applicable Lender shall pay the Borrower the difference between such
rates.
Section 2.07 NOTES.
The Committed Loans of each Lender shall be evidenced by a single
Note payable to the order of such Lender for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Lender's Commitment.
Upon receipt of each Lender's Note pursuant to Section 3.02(b), the
Administrative Agent shall forward such Note to such Lender. Each Lender
shall record the date, amount, type and maturity of each Loan made by it and
the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Lender so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Lender is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as
and when required.
Section 2.08 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day PLUS any applicable Base Rate Margin. Such interest
shall be payable on the last Domestic Business Day of each calendar quarter
in arrears and on the Termination Date. Any overdue principal of or interest
on any Base Rate Loan shall, at the option of the Required Lenders, bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of the Base Rate PLUS any applicable Base Rate Margin PLUS
2% per annum.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of (a) the Euro-Dollar Margin
for such day plus (b) the
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applicable London Interbank Offered Rate for such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall, at
the option of the Required Lenders, bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the Euro-Dollar
Margin for such day plus the quotient obtained (rounded upwards, if necessary,
to the next higher 1/100 of 1%) by dividing (i) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than three Euro-Dollar
Business Days, then for such period of time not longer than 6 months as the
Administrative Agent may elect) deposits in Dollars in an amount approximately
equal to such overdue payment due to the Administrative Agent are offered to the
Administrative Agent in the London interbank market for the applicable period
determined as provided above by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(d) RESERVED.
(e) RESERVED.
(f) The Administrative Agent shall determine in accordance with the
provisions of this Agreement, each interest rate applicable to the Loans
hereunder. The Administrative Agent shall give prompt notice to the Borrower
and the participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
Section 2.09 RESERVED.
Section 2.10 UPFRONT FEES. On the Effective Date, the Borrower
shall pay to the Administrative Agent for the account of each Lender
non-refundable upfront fees in the amounts set forth in letter agreements
between each Lender and the Lead Arranger and advised by the Lead Arranger to
Borrower.
Section 2.11 FACILITY FEES. The Borrower shall pay to the
Administrative Agent for the account of the Lenders ratably facility fees at
the Facility Fee Rate determined daily in accordance with the Schedule 2 (the
"Facility Fee Rate"). Such facility fee shall accrue from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the daily aggregate
amount of the Commitments (whether used or unused). Facility
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fees shall be payable quarterly in arrears on the first day of each March,
June, September and December and upon the date of termination of the
Commitments in their entirety, and are non-refundable.
Section 2.12 RESERVED.
Section 2.13 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY
BORROWER. During the Revolving Credit Period, the Borrower may, upon at least
five Domestic Business Days' notice to the Administrative Agent, (i)
terminate the Commitments at any time, if no Loans are outstanding at such
time or (ii) ratably and permanently reduce from time to time by an aggregate
amount of $25,000,000 or any larger amount in multiples of $1,000,000, the
aggregate amount of the Commitments in excess of the the aggregate
outstanding principal balance of the Loans.
Section 2.14 OPTIONAL TERMINATION OF COMMITMENTS BY THE LENDERS.
Following the occurrence of a Change of Control, the Required Lenders may in
their sole and absolute discretion elect, during the sixty day period
immediately subsequent to the LATER OF (a) such occurrence and (b) the
EARLIER of (i) receipt of Borrower's written notice to the Administrative
Agent of such occurrence and (ii) if no such notice has been received by the
Administrative Agent, the date upon which the Administrative Agent and the
Lenders have actual knowledge thereof, to terminate all of the Commitments.
In any such case the Commitments shall be terminated effective on the date
which is sixty days subsequent to the date of written notice from the
Administrative Agent to Borrower thereof, and, to the extent that there is
then any Debt evidenced by the Notes, the same shall be immediately due and
payable.
Section 2.15 SCHEDULED TERMINATION OF COMMITMENTS. The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
Section 2.16 EXTENSIONS OF THE TERMINATION DATE. The Termination
Date may be extended, in the manner set forth in this Section, for a period
of 364 days after the date on which the Termination Date would otherwise have
occurred. If the Borrower wishes to extend the Termination Date, it shall
give written notice to that effect to the Administrative Agent not less than
90 days nor more than 150 days following the delivery to the Administrative
Agent of the audited annual financial statements of Borrower in accordance
with Section 5.01(b), whereupon the Administrative Agent shall notify each of
the Lenders of such notice. Each Lender will respond to such request,
whether affirmatively or negatively, within the period which ends upon the
later of (i) 30 days following Borrower's request, or (ii) 45 days prior to
the then
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effective Termination Date (the "Response Date"). If a Lender or Lenders
respond negatively or fail to timely respond to such request (each
non-responding Lender being conclusively deemed to refuse to consent to the
extension), but such non-extending Lender(s) have Commitment(s) aggregating
less than 33 1/3% of the aggregate amount of the Commitments, the Borrower
shall, for a period of 60 days following the Response Date, have the right,
with the assistance of the Administrative Agent, to seek a mutually
satisfactory substitute financial institution or financial institutions
(which may be one or more of the Lenders) to assume the Commitment(s) of such
non-extending Lender(s). Not later than the third Domestic Business Day
prior to the end of such 60-day period, the Borrower shall, by notice to the
Lenders through the Administrative Agent, either (i) terminate, effective on
the third Domestic Business Day after the giving of such notice, the
Commitment(s) of such non-extending Lender(s), whereupon the Lenders who have
consented to the extension shall continue with their commitments unaffected
to lend subject to the terms of this Agreement to the new Termination Date,
or (ii) designate one or more new financial institutions reasonably
acceptable to the Administrative Agent to assume the Commitments of such
non-extending Lenders, whereupon the aggregate amount of such Commitment(s)
shall be assumed by such substitute financial institution or financial
institutions within such 60-day period or (iii) withdraw its request for an
extension of the Termination Date, in which case the Commitments shall
continue unaffected. The failure of the Borrower to timely take the actions
contemplated by clause (i) or (ii) of the preceding sentence shall be deemed
a withdrawal of its request for an extension as contemplated by clause (iii)
whether or not notice to such effect is given, and in no event shall the
Termination Date be extended unless each Lender which has not consented to
the proposed extension has been either replaced or terminated as set forth
above. So long as Lenders having Commitment(s) totaling not less than
66 2/3% of the aggregate amount of the Commitment(s) shall have responded
affirmatively to such a request, and such request is not withdrawn in
accordance with the preceding sentence, then, subject to receipt by the
Administrative Agent of counterparts of an Extension Agreement in
substantially the form of Exhibit H duly completed and signed by the Borrower
and each of the affirmatively responding Lenders, the Termination Date shall
be extended, effective on such Extension Date, for a period of 364 days to
the date stated in such Extension Agreement.
Section 2.17 OPTIONAL PREPAYMENTS.
Subject in the case of any Euro-Dollar Borrowing to Section 2.18,
the Borrower may, upon at least one Domestic Business Day's notice to the
Administrative Agent, prepay any Base Rate Borrowing, or upon at least three
Euro-Dollar Business Days' notice to the Administrative Agent, with
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respect to any Euro-Dollar Borrowing, prepay any Euro-Dollar Borrowing, in
each case in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Lenders included in such Borrowing.
Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Lender of the contents
thereof and of such Lender's ratable share (if any) of such prepayment and
such notice shall not thereafter be revocable by the Borrower.
Section 2.18 RESERVED.
Section 2.19 GENERAL PROVISIONS AS TO PAYMENTS.
The Borrower shall make each payment of principal of, and interest
on, Loans and of fees hereunder, in Dollars not later than 11:00 A.M.
(California local time) on the date when due, in Federal or other immediately
available funds, to the Administrative Agent at its address referred to in
Section 9.01, without offset or counterclaim. The Administrative Agent will
promptly distribute to each Lender its ratable share of each such payment
received by the Administrative Agent for the account of the Lenders, in
Dollars and in the type of funds received by the Administrative Agent.
Whenever any payment of principal of, or interest on, the Base Rate Loans or
of fees shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
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may, in reliance upon such assumption, cause to be distributed to each Lender
on such due date an amount equal to the amount then due such Lender. If and
to the extent that the Borrower shall not have so made such payment, each
Lender shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date
such Lender repays such amount to the Administrative Agent, at the Federal
Funds Rate.
Section 2.20 FUNDING LOSSES. If the Borrower makes any payment
of principal with respect to any Fixed Rate Loan (pursuant to Article VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or if the Borrower fails to borrow any Fixed Rate Loans
after notice has been given to any Lender in accordance with section 2.06(a),
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or failure
to borrow, provided that such Lender shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate shall
be conclusive in the absence of manifest error.
Section 2.21 COMPUTATION OF INTEREST AND FEES. Interest based
on the Reference Rate and all fees hereunder shall be computed on the basis
of a year of 365 days (or 366 days in a leap year) and paid for the actual
number of days elapsed (including the first day but excluding the last day).
All other interest shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
Section 2.22 WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Lender, each Lender that is not incorporated
under the laws of the United States of America or a state thereof agrees that
it will deliver to each of the Borrower and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes.
Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Administrative Agent two additional
copies of such
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form (or a successor form) on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in
the most recent form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, in each case certifying that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Lender from duly completing and delivering any such form with respect to
it and such Lender advises the Borrower and the Administrative Agent that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
Section 2.23 RESERVED.
Section 2.24 REGULATION D COMPENSATION. Each Lender may require
the Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Lender at a rate per annum determined by such Lender up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Lender wishing to require
payment of such additional interest (x) shall so notify the Borrower and the
Agent, in which case such additional interest on the Euro-Dollar Loans of
such Lender shall be payable to such Lender at the place indicated in such
notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after the giving of such notice and (y) shall
notify the Borrower at least five Euro-Dollar Business Days prior to each
date on which interest is payable on the Euro-Dollar Loans of the amount then
due it under this Section.
Section 2.25 INCREASED COMMITMENTS; ADDITIONAL LENDERS.
(a) Subsequent to the Effective Date, the Borrower may, upon at least
30 days notice to the Administrative Agent (which shall promptly provide a
copy of such notice to the Lenders), propose to increase the aggregate amount
of the Commitments and the Other Commitments by an aggregate amount not to
exceed $625,000,000 (the amount of any such increase of the Commitments being
referred to as the "Increased Commitments"). Each Lender party to this
Agreement at such time shall have the right (but no obligation), for a period
of 15 days following receipt of such notice, to elect by notice to the
Borrower and the Administrative Agent to increase its Commitment by a
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principal amount which bears the same ratio to the Increased Commitments as
its then Commitment bears to the aggregate Commitments then existing. Each
Lender which fails to respond to any such request shall be conclusively
deemed to have refused to consent to an increase in its Commitment.
(b) If any Lender party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may
designate another Person which qualifies as an Eligible Assignee (which may
be, but need not be, one or more of the existing Lenders) which at the time
agrees to (i) in the case of any such Person that is an existing Lender,
increase its Commitment and (ii) in the case of any other such Person (an
"Additional Lender"), become a party to this Agreement. The sum of the
increases in the Commitments of the existing Lenders pursuant to this
subsection (b) plus the Commitments of the Additional Lenders shall not in
the aggregate exceed the unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.23 shall become effective upon the receipt by the
Administrative Agent of an agreement in form and substance satisfactory to
the Administrative Agent signed by the Borrower, by each Additional Lender
and by each other Lender whose Commitment is to be increased, setting forth
the new Commitments of such Lenders and setting forth the agreement of each
Additional Lender to become a party to this Agreement and to be bound by all
the terms and provisions hereof, together with such evidence of appropriate
corporate authorization on the part of the Borrower with respect to the
Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Administrative Agent may
reasonably request.
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ARTICLE III
CONDITIONS
Section 3.01 BORROWINGS. The obligation of any Lender to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing
as required by Section 2.02;
(b) immediately after such Borrowing, the sum of the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) immediately before and after such Borrowing, no Default or
Event of Default shall have occurred and be continuing; and
(d) the representations and warranties of the Borrower contained
in this Agreement (except the representations and warranties set forth
in Section 4.04(b) and Section 4.05, in each case as to any matter which
has theretofore been disclosed in writing by the Borrower to the
Lenders) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
Section 3.02 EFFECTIVENESS. This agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.04):
(a) receipt by the Administrative Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received, receipt by
the Administrative Agent in form satisfactory to it of telegraphic,
telex or other written confirmation from such party of execution of a
counterpart hereof by such party);
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(b) receipt by the Administrative Agent for the account of each
Lender of a duly executed Note dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Administrative Agent of an opinion of Gibson,
Dunn & Crutcher LLP, substantially in the form of Exhibit I hereto and
an opinion of Latham & Watkins, LLP, substantially in the form of
Exhibit J hereto, in each case covering such additional matters relating
to the transactions contemplated hereby as the Required Lenders may
reasonably request;
(d) Borrower shall have executed the First Supplemental Indenture
described in the definition of "Spin-Off Transaction" and shall have
thereby assumed primary liability with respect to Hilton Notes in an
aggregate principal amount not to exceed $625,000,000;
(e) receipt by the Administrative Agent of evidence acceptable to
the Administrative Agent that the Spin-Off Transaction has been or shall
concurrently be consummated;
(f) arrangements satisfactory to the Administrative Agent for the
repayment of all loans (if any) outstanding under the Grand's senior
bank credit facility and the related liens and the termination of all
capital lease facilities for which Grand and its subsidiaries have any
liability (except as to customary surviving indemnities and other
contingent obligations) and the payment of all interest and fees accrued
thereunder shall have been made; and
(g) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agents;
The Administrative Agent shall promptly notify the Borrower, the Administrative
Agent and each Lender of the effectiveness of this Agreement, and such notice
shall be conclusive and binding on all parties hereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.01 CORPORATE EXISTENCE AND POWER. The Borrower (a) is
a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware, (b) has all corporate powers and authority and all
material governmental licenses (including, without limitation, any such
license issued by a Gaming Board), authorizations, consents and approvals
required to own its property and assets and carry on its business as now
conducted and (c) is duly qualified as a foreign corporation and in good
standing in each jurisdiction where the ownership, leasing and operation of
its property or the conduct of its business requires such qualification.
Section 4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the Borrower of
this Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any Governmental Agency and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries.
Section 4.03 BINDING EFFECT. This Agreement constitutes a valid
and binding agreement of the Borrower and the Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and
binding obligations of the Borrower, in each case enforceable in accordance
with their respective terms.
Section 4.04 FINANCIAL INFORMATION.
The Combined Pro Forma Financial Statements (i) are derived from
(y) the audited financial statements of Hilton set forth in Hilton's 1997
Form 10-K, and the unaudited financial statements of Hilton set forth in
Hilton's Form 10-Q for the period ended September 30, 1998, and (z) the
audited financial statements of Grand set forth in Grand's 1997 Form 10-K and
the unaudited financial statements of Grand set forth in Grand's Form 10-Q
for the period ended September 30, 1998, (ii) represent allocation of the
assets, liabilities and results of operations of Grand and Hilton which
fairly present the
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pro forma combined financial position and results of operations of Borrower
and its Subsidiaries as of the dates and for the periods therein stated,
giving effect to the Spin-Off transaction and the Lakes Spin-Off, and (iii)
fairly present in all material respects, in conformity with generally
accepted accounting principles, the pro forma combined financial position of
the Gaming Segment and the divisions of Grand owning the Grand Assets as of
such date and their consolidated results of operations and cash flows for
such fiscal year
Since September 30, 1998, there has been no material adverse change
in the business, financial position, results of operations or prospects of
the Gaming Segment and the Grand Assets, or in the operations of the Persons
now comprising Borrower and its Consolidated Subsidiaries, considered as a
whole.
Section 4.05 LITIGATION. Except as disclosed in the form 10-Q
reports dated as of September 30, 1998 for Hilton and Grand, there is no
action, suit or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries or which in any manner draws into question the
validity or enforceability of this Agreement or the Notes. Without limiting
the generality of the foregoing, with respect to those litigation matters
described above as reported in the 10-Q reports as of September 30, 1998, for
Hilton and Grand), (a) the disclosure contained therein was accurate as of
the date of thereof, and (b) since such date there has been no material
adverse development.
Section 4.06 COMPLIANCE WITH ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions
of ERISA and the Internal Revenue Code with respect to each Plan. No member
of the ERISA Group has (i) sought a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which has resulted or could result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the
Internal Revenue Code or (iii) incurred any liability under Title IV or ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA.
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Section 4.07 TAXES. The United States Federal income tax returns
of Hilton and its Subsidiaries and of Grand and its Subsidiaries have been
examined and closed through the fiscal year ended December 31, 1997. The
Borrower and its Significant Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower
and its Significant Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
Section 4.08 SIGNIFICANT SUBSIDIARIES. Each of the Significant
Subsidiaries (a) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, (b) has
all corporate powers and authority and all material governmental licenses
(including, without limitation, any such license issued by a Gaming Board),
authorizations, consents and approvals required to own its property and
assets and carry on its business as now conducted and (c) is duly qualified
as a foreign corporation and in good standing in each jurisdiction where the
ownership, leasing and operation of its property or the conduct of its
business requires such qualification, and the failure to be so qualified
would have a material adverse effect on the Borrower and its Subsidiaries.
Section 4.09 NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.10 ENVIRONMENTAL MATTERS. The Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
Section 4.11 FULL DISCLOSURE. All information heretofore
furnished by Hilton, Grand and the Borrower to the Agents or to any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Administrative Agent or any Lender will be, taken as a whole,
true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the
Lenders in writing any and all facts which materially and adversely affect or
may affect (to the extent the Borrower can now reasonably foresee), the
business, operations or financial position of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower
to perform its obligations under this
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Agreement. With respect to any projections or forecasts provided, such
projections or forecasts represent, as of the date thereof, management's best
estimates based on reasonable assumptions and all available information, but
are subject to the uncertainty inherent in all projections and forecasts.
Section 4.12 THE SPIN-OFF TRANSACTION. As of the Effective Date,
the Spin-Off Transaction has been consummated in accordance with the Grand
Agreement and applicable laws. Giving effect to the Spin-Off Transaction, as
of the Effective Date, Borrower and its Significant Subsidiaries are, on a
consolidated basis, Solvent.
Section 4.13 GAMING LAWS. Borrower and its Subsidiaries are in
material compliance with all applicable Gaming Laws.
Section 4.14 YEAR 2000. Borrower and its Subsidiaries have
reviewed the effect of the Year 2000 Issue on the computer software, hardware
and firmware systems and equipment contained embedded microchips owned or
operated by or for Borrower and its Subsidiaries. The costs to Borrower and
its Subsidiaries of any reprogramming required as a result of the Year 2000
Issue to permit the proper functioning of such systems and equipment and the
proper processing of data, and the testing of such reprogramming, and of
required systems changes are not reasonably expected to result in a Default
or to have a material adverse effect on the business, financial position,
results of operations or prospects of Borrower and its Consolidated
Subsidiaries, considered as a whole.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Note remains unpaid:
Section 5.01 INFORMATION. The Borrower will deliver to the
Administrative Agent:
(a) as soon as available and in any event no later than March 31,
1999, pro forma combined statement of income of the Gaming Segment and
the Grand Assets for the period commencing October 1, 1998 and ending on
December 31, 1998, and a combined pro forma balance sheet of the Gaming
Segment and the Grand Assets as at December 31, 1998, in each case,
prepared in a manner consistent the with Combined Pro Forma Financial
Statements delivered to the Administrative Agent and the Lenders prior
to the Effective Date;
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, the consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative
form the figures as of the end of and for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing;
(c) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements of income and cash
flows in comparative form the figures for the corresponding quarter and
the corresponding portion of the Borrower's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency
by an Authorized Officer;
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(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a Compliance
Certificate (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 5.06, 5.10 and 5.11 on the date of such
financial statements, and (ii) stating whether any Default exists on the
date of such Compliance Certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(e) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith;
(f) as soon as available and in any event not later than the last
day of February of each year, a completed Pricing Certificate as of
December 31 of the prior year;
(g) within five Domestic Business Days of any officer of the
Borrower obtaining knowledge of any Default, if such Default is then
continuing, a certificate of an Authorized Officer setting forth the
details thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
(h) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Borrower shall have filed
with the Securities and Exchange Commission;
(j) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that
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the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title
IV of ERISA or notice that any Multiemployer Plan is in reorganization,
is insolvent or has been terminated, a copy of such notice; (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007
of ERISA) in respect of, or appoint a trustee to administer, any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information
filed with the PBGC; (vi) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails
to make any payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting
officer of the Borrower setting forth details as to such occurrence and
action, if any, which the Borrower or applicable member of the ERISA
Group is required or proposes to take;
(k) forthwith, notice of any change of which the Borrower becomes
aware in the rating by S&P or Moody's, of the Borrower's outstanding
senior unsecured long-term debt securities; and
(l) from time to time such additional information regarding the
financial position or business of the Borrower and its subsidiaries as
the Administrative Agent, at the request of any Lender, may reasonably
request.
Section 5.02 MAINTENANCE OF PROPERTY; INSURANCE.
The Borrower will keep, and will cause each Significant Subsidiary
to keep, all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted, except where failure to
do so would not have a material adverse effect on the business, financial
position, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
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The Borrower will, and will cause each of its Significant
Subsidiaries to, maintain (either in the name of the Borrower or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such
amounts and against at least such risks (and with such risk retention) as are
usually insured against in the same general area by companies of established
repute engaged in the same or a similar business and will furnish to the
Lenders, upon request from the Administrative Agent, information presented in
reasonable detail as to the insurance so carried. Notwithstanding the
foregoing, the Borrower may self-insure with respect to such risks with
respect to which companies of established repute engaged in the same or
similar business in the same general area usually self-insure.
Section 5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
The Borrower will continue, and will cause each Significant Subsidiary to
continue, to engage in business of the same general type conducted by the
Borrower and its Significant Subsidiaries as of the Effective Date, and will
preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section 5.03 shall prohibit (i) the merger of a
Subsidiary into the Borrower or the merger or the consolidation of a
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the corporate existence of any Subsidiary if (A) the Borrower
in good faith determines that such termination is in the best interest of the
Borrower and (B) such termination is not materially disadvantageous to the
Lenders.
Section 5.04 COMPLIANCE WITH LAWS. The Borrower will comply, and
cause each Significant Subsidiary to comply, in all material respect with all
applicable laws, ordinances, rules, regulations, and requirements of any
Governmental Agency (including, without limitation, Environmental Laws,
Gaming Laws and ERISA and, in each case, the rules and regulations
thereunder) except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings.
Section 5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Borrower will keep, and will cause each Significant Subsidiary to keep,
proper books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business
and activities; and will permit, and will cause
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each Significant Subsidiary to permit, representatives of any Lender at such
Lender's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
Section 5.06 NEGATIVE PLEDGE. None of the Borrower, any Covered
Subsidiary or any Significant Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing as of the Effective Date;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation
of such event;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset (it being understood that, for this purpose, the
acquisition of a Person is also an acquisition of the assets of such
Person); provided that the Lien attaches to such asset concurrently with
or within 180 days after the acquisition thereof, or such longer period,
not to exceed 12 months, due to the Borrower's inability to retain the
requisite governmental approvals with respect to such acquisition;
provided further that, in the case of real estate, (i) the Lien attaches
within 12 months after the latest of the acquisition thereof, the
completion of construction thereon or the commencement of full operation
thereof and (ii) the Debt so secured does not exceed the sum of (x) the
purchase price of such real estate plus (y) the costs of such
construction;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Borrower or
a Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Subsidiary and not created in contemplation
of such acquisition;
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(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased (other than to cover any transaction costs of such
refinancing, extension, renewal or refunding) and is not secured by any
additional assets;
(g) Liens securing Debt of a Subsidiary to the Borrower or another
Subsidiary; and
(h) Liens not otherwise permitted by the foregoing clauses of
this Section encumbering assets of the Borrower and its Consolidated
Subsidiaries having an aggregate fair market value which is not in
excess of 10% of Consolidated Net Tangible Assets (determined, in each
case, by reference to the Combined Pro Forma Financial Statements, or,
if then delivered, as of the most recent date for which Borrower has
delivered its financial statements under Section 5.01(b)).
Section 5.07 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower and its Subsidiaries will not (i) consolidate or merge with or into
any other Person or (ii) sell, lease or otherwise transfer all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as
a whole, to any other Person, or (iii) acquire all or substantially all of
the assets of, or more than 49% of the capital stock or other equity
securities of, any Person which is not engaged in the same general lines of
business as Borrower and its Subsidiaries, if, giving effect to such
consolidation, merger, sale or acquisition, Borrower is not in pro forma
compliance with the covenants set forth in Sections 5.10 and 5.11; PROVIDED
that, notwithstanding the foregoing, the Borrower may merge with another
Person only if (A) the Borrower is the corporation surviving such merger, and
(B) immediately after giving effect to such merger, no Default shall have
occurred and be continuing.
Section 5.08 HOSTILE TENDER OFFERS. The Borrower and its
Subsidiaries will not make any offer to purchase or acquire, or prosecute,
pursue or consummate a purchase or acquisition of, 5% or more of the capital
stock of any corporation or other business entity, if the board of directors
or other equivalent governing body of such corporation or business entity has
notified Borrower or its relevant Subsidiaries that it opposes such offer or
purchase and such notice has not been withdrawn or superseded.
Section 5.09 USE OF PROCEEDS. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate
purposes, including but not limited to (a) on the effective date, the
refinancing of obligations under the Hilton
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Credit Agreement and transactional and other expenses associated with the
Spin-Off Transaction, and (b), thereafter, for working capital, capital
expenditures, the back stop of commercial paper and the acquisition of
full-service hotel\casino, casino and casino\resort properties. None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U other than "margin stock" issued by the
Borrower which is retired upon purchase or for any purpose which violates
Section 5.08.
Section 5.10 LEVERAGE RATIO. The Leverage Ratio will not, as of
the last day of any fiscal quarter of Borrower described in the matrix below,
exceed the ratio set forth opposite that fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDING MAXIMUM RATIO
-------------------------------------------
<S> <C>
Effective Date through
December 31, 2000 4.75:1.00
Later Fiscal Quarters 4.50:1.00.
</TABLE>
Section 5.11 INTEREST COVERAGE RATIO. The Interest Coverage
Ratio shall not, as of the last day of any fiscal quarter of Borrower, be
less than 3.00:1.00.
Section 5.12 YEAR 2000. Borrower shall make, and shall cause
each of its Subsidiaries to make, all required systems changes by December
31, 1999, in computer software, hardware and firmware systems and equipment
containing embedded microchips owned or operated by or for Borrower and its
Subsidiaries required as a result of the Year 2000 Issue to permit the proper
functioning of such computer systems and other equipment, except to the
extent that the failure to take any such action could not reasonably be
expected to result in a Default or to have a material adverse effect on the
business, financial position, results of operations or prospects of Borrower
and its Consolidated Subsidiaries, considered as a whole. At the request of
any Lender, Borrower shall provide, and shall cause each of its Subsidiaries
to provide, to such Lender reasonable assurance of its compliance with the
preceding sentence.
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ARTICLE VI
DEFAULTS
Section 6.01 EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to (i) pay when due any principal of
any Loan under this Agreement, or (ii) pay within five days of the due
date thereof any interest, fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.06 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for 7 days after written notice thereof has
been given to the Borrower by the Administrative Agent, which notice
shall be delivered to Borrower by the Administrative Agent at the
request of any Lender;
(d) any representation, warranty, certification or statement made
or deemed made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect
when made (or deemed made);
(e) the Borrower or any Covered Subsidiary or any Significant
Subsidiary shall fail to make any payment in respect of any Debt (other
than the Notes and Non-Recourse Debt) when due or within any applicable
grace period and the aggregate principal amount of such Debt is in
excess of $100,000,000;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt (other than Non-Recourse Debt)
in excess of $100,000,000 of the Borrower or any Covered Subsidiary or
any Significant Subsidiary or enables or entitles the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) the Borrower or any Significant Subsidiary shall ommence a
voluntary case or other proceeding seeking liquidation,
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reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be
entered against the Borrower or any Significant Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer, any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Subsidiary
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and such judgment or order shall continue unsatisfied and unstayed for a
period of 30 days;
(k) the occurrence of a License Revocation with respect to a
license issued to Borrower or any of its Subsidiaries by any Gaming
Board of the States of Mississippi, New Jersey or Nevada with respect to
gaming operations at any gaming facility accounting for five percent
(5%) or more of the consolidated gross revenues of Borrower and its
Subsidiaries that continues for thirty calendar days;
(l) then, and in every such event, the Administrative Agent shall
(i) if requested by the Required Lenders, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii)
if requested by the Required Lenders, by notice to the Borrower declare
the Loans (together with accrued interest thereon) to be, and the Loans
(together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Borrower; PROVIDED that in the case of any of the Events of Default
specified in clause (g) or (h) above with respect to the Borrower,
without any notice to the Borrower or any other act by the
Administrative Agent or the Lenders, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the
Borrower.
Section 6.02 NOTICE OF DEFAULT. The Administrative Agent shall
give notice to the Borrower under Section 6.01(c) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof.
Section 6.03 RESERVED.
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ARTICLE VII
THE AGENTS
Section 7.01 APPOINTMENT AND AUTHORIZATION. Each Lender
irrevocably appoints and authorizes each Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes
as are delegated to such Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
Section 7.02 AGENTS AND AFFILIATES. Bank of America and the
other Agents shall each have the same rights and powers under this Agreement
as any other Lender and each may exercise or refrain from exercising the same
as though it were not an Agent, and Bank of America and the other Agents and
their respective affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with, the Borrower or any Subsidiary
or Affiliate of the Borrower as if they were not Agents hereunder.
Section 7.03 ACTION BY AGENTS. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Administrative Agent shall not be required
to take any action with respect to any Default, except as expressly provided
in Article VI.
Section 7.04 CONSULTATION WITH EXPERTS. Each Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
Section 7.05 LIABILITY OF AGENT. Neither any Agent nor any of
their respective affiliates nor any of the respective directors, officers,
agents or employees of any of the foregoing shall be liable for any action
taken or not taken by it in connection herewith (i) with the consent or at
the request of the Required Lenders or (ii) in the absence of its own gross
negligence or willful misconduct. Neither any Agent nor any of their
respective affiliates nor any of the respective directors, officers, agents
or employees of any of the foregoing shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article III, except in the case of the Administrative Agent receipt of
items
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required to be delivered to it; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Administrative Agent shall incur no
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed
by the proper party or parties.
Section 7.06 INDEMNIFICATION. Each Lender shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent, its
affiliates and its directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except
such as result from such indemnitees' gross negligence or willful misconduct)
that such indemnitee may suffer or incur in connection with the
Administrative Agent's role under this Agreement or any related action taken
or omitted by such indemnitee hereunder.
Section 7.07 CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent, the
Lead Arranger or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent, the
Lead Arranger or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this Agreement.
Section 7.08 SUCCESSOR AGENT. The Administrative Agent may
resign at any time subject to the appointment of a successor Agent by giving
notice to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent with the
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed; provided that no such consent shall be required if the successor
Agent is a Lender. If no successor Agent shall have been so appointed, and
shall have accepted such appointment, within 30 days after the retiring
Agent's 'giving of notice of resignation, then the retiring Agent may, on
behalf of the Lenders, and without the Borrower's consent, appoint a
successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $1,000,000,000. Upon the acceptance
of its appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's
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resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
Section 7.09 AGENTS' FEES. The Borrower shall pay to each Agent
for its own account fees in the amounts and at the times previously agreed
upon between the Borrower and such Agent.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Administrative Agent is advised by the Majority Lenders
that deposits in Dollars and in the required amounts are not being
offered to the Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Lenders having 50% or
more of the aggregate amount of the Commitments advise the
Administrative Agent that the London Interbank Offered Rate, as
determined by the Administrative Agent, will not adequately and fairly
reflect the cost to such Lenders of funding their Euro-Dollar Loans for
such Interest Period,
(c) the Administrative Agent shall forthwith give notice thereof
to the Borrower and the Lenders, whereupon until the Administrative
Agent notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Lenders to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the
Administrative Agent at least two Domestic Business Days before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, such
Fixed Rate Borrowing shall instead be made as a Base Rate Borrowing.
The Administrative Agent shall promptly notify the Lenders of any
election by the Borrower pursuant to the preceding sentence.
Section 8.02 ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Lender (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall
so notify the Administrative Agent, the Administrative Agent shall forthwith
give notice thereof to the other Lenders and the Borrower, whereupon until
such Lender notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation
of such Lender to make Euro-Dollar Loans
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shall be suspended. Before giving any notice to the Administrative Agent
pursuant to this Section, such Lender shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender. If such Lender shall determine that it may
not lawfully continue to maintain and fund any of its outstanding Euro-Dollar
Loans to maturity and shall so specify in such notice, the Borrower shall
immediately prepay in full the then outstanding principal amount of each such
Euro-Dollar Loan, together with accrued interest thereon. Concurrently with
prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate
Loan in an equal principal amount from such Lender (on which interest and
principal shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Lenders), and such Lender shall make such a Base Rate Loan.
Section 8.03 INCREASED COST AND REDUCED RETURN.
If on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its Applicable Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(a) shall subject any Lender (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Loans, its
Note or its obligation to make Fixed Rate Loans, or shall change the
basis of taxation of payments to any Lender (or its Applicable Lending
Office) of the principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its Fixed Rate
Loans or its obligation to make Fixed Rate Loans (except for changes in
the rate of tax on the overall net income of such Lender or its
Applicable Lending Office imposed by the jurisdiction in which such
Lender's principal executive office or Applicable Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding, with
respect to any Euro-Dollar Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits
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with or for the account of, or credit extended by, any Lender (or its
Applicable Lending Office) or shall impose on any Lender (or its
Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Note or its obligation to
make Fixed Rate Loans;
(c) and the result of any of the foregoing is to increase the cost
to such Lender (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of any sum
received or receivable by such Lender (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an
amount deemed by such Lender to be material, then, within 15 days after
demand by such Lender (with a copy to the Administrative Agent), the
Borrower shall pay to such Lender such additional amount or amounts as
will compensate such Lender for such increased cost or reduction.
(d) If, after the date hereof, any Lender shall have determined
that any applicable law, rule or regulation regarding capital adequacy
(irrespective of the actual timing of the adoption or implementation
thereof and including, without limitation, any law or regulation adopted
pursuant to the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices) or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any
Lender (or its Applicable Lending Office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on capital of such Lender (or
its Parent) as a consequence of such Lender's obligations hereunder to a
level below that which such Lender (or its Parent) could have achieved
but for such law, regulation, change or compliance (taking into
consideration its policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time,
within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender (or its
Parent) for such reduction.
(e) Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Lender to compensation
pursuant to this
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Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole judgment of such Lender, be
otherwise disadvantageous to such Lender. A certificate of any Lender
claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
Section 8.04 BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Lender to make Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Lender has demanded
compensation under Section 8.03(a) and the Borrower shall, by at least five
Euro-Dollar Business Days, prior notice to such Lender through the
Administrative Agent, have elected that the provisions of this Section shall
apply to such Lender, then, unless and until such Lender notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Lender as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the
related Fixed Rate Loans of the other Lenders), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate Loans instead.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, telecopy or similar writing) and shall be given to such party:
(x) in the case of the Borrower or the Administrative Agent, at its address
or telex or telecopier number set forth on the signature pages hereof, (y) in
the case of any Lender, at its address or telex or telecopier number set
forth in its Administrative Questionnaire or (z) in the case of any party,
such other address or telex or telecopier number as such party may hereafter
specify for the purpose by notice to the Administrative Agent and the
Borrower. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answer back is received,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when delivered or received at the address specified
in this Section; provided that notices to the Administrative Agent under
Article II or Article VIII shall not be effective until received.
Section 9.02 NO WAIVERS. No failure or delay by the
Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any Note shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
Section 9.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION.
The Borrower shall pay (i) all reasonable out-of-pocket expenses of
the Administrative Agent and the Lead Arranger, including reasonable fees and
disbursements of counsel for the Administrative Agent (including the
allocated fees and expenses of any internal counsel), in connection with the
preparation of this Agreement and all related documents, the negotiation,
closing and syndication of this Agreement and the Loans, and in connection
with any waiver, amendment or consent hereunder or any amendment hereof or
any Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Administrative
Agent or any Lender, including fees and disbursements of counsel (including
the allocated fees and expenses of any internal counsel), in
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connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom. The Borrower shall
indemnify each Lender against any transfer taxes, documentary taxes, mortgage
recording taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery or enforcement of this Agreement and the
Notes.
The Borrower agrees to indemnify each Agent, the Lead Arranger
and each Lender, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "Indemnitee") and
hold each Indemnitee harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel (including the
allocated fees and expenses of any internal counsel), which may be incurred
by such Indemnitee in connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
Section 9.04 AMENDMENTS AND WAIVERS. No amendment or waiver of
the terms of this Agreement or the other Loan Documents shall be made or be
effective unless such amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (and, if the rights or duties of the
Administrative Agent are affected thereby, by the Administrative Agent);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) increase or decrease the amount of the Commitment of any Lender
without the consent of that Lender (except for a ratable decrease in the
Commitments of all Lenders) or subject any Lender to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or
interest thereon or any fees hereunder, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or interest thereon or any
fees hereunder, or the Termination Date (except as contemplated by Section
2.15), (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the percentage of Lenders, which
shall be required for the Lenders or any of them to take any action under
this Section or any other provision of this Agreement or (v) render more
restrictive the ability of any Lender to assign or grant participations in
its Commitment under Section 9.05.
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Section 9.05 SUCCESSORS AND ASSIGNS.
This Agreement and the other Loan Documents to which
Borrower is a party will be binding upon and inure to the benefit of
Borrower, the Administrative Agent, each of the Lenders, and their
respective successors and assigns, EXCEPT that the Borrower may not assign
its rights hereunder or thereunder or any interest herein or therein
without the prior written consent of all the Lenders. Each Lender
represents that it is not acquiring its Note with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (subject to any requirement that disposition of such Note must be
within the control of such Lender). Any Lender may at any time pledge its
Note or any other instrument evidencing its rights as a Lender under this
Agreement to a Federal Reserve Bank, but no such pledge shall release that
Lender from its obligations hereunder or grant to such Federal Reserve Bank
the rights of a Lender hereunder absent foreclosure of such pledge.
From time to time following the Effective Date, each
Lender may assign to one or more Eligible Assignees all or any portion of
its Commitment; PROVIDED that (i) such Eligible Assignee, if not then a
Lender or an Affiliate of the assigning Lender, shall be approved by each
of the Administrative Agent and (if no Event of Default then exists)
Borrower (neither of which approvals shall be unreasonably withheld or
delayed), (ii) such assignment shall be evidenced by an Assignment and
Assumption Agreement substantially in the form of Exhibit K, a copy of
which shall be furnished to the Administrative Agent as hereinbelow
provided, (iii) EXCEPT in the case of an assignment to an Affiliate of the
assigning Lender, to another Lender or of the entire remaining Commitment
of the assigning Lender, the assignment shall not assign a portion of the
Commitments that is equivalent to less than $5,000,000, and (iv) the
effective date of any such assignment shall be as specified in the
Assignment and Assumption Agreement, but not earlier than the date which is
five Banking Days after the date the Administrative Agent has received the
Assignment and Assumption Agreement. Upon the effective date of the
Assignment and Assumption Agreement, the Eligible Assignee named therein
shall be a Lender for all purposes of this Agreement, with the Commitment
therein set forth and, to the extent of such Commitment, the assigning
Lender shall be released from its further obligations under this Agreement.
Borrower agrees that they shall execute and deliver (against delivery by
the assigning Lender to Borrower of its Note) to such assignee Lender, a
Note evidencing that
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assignee Lender's Commitment, and to the assigning Lender, a Note evidencing
the remaining Commitment retained by the assigning Lender.
By executing and delivering an Assignment and Assumption Agreement,
the Eligible Assignee thereunder acknowledges and agrees that: (i) other than
the representation and warranty that it is the legal and beneficial owner of
the Commitment being assigned thereby free and clear of any adverse claim,
the assigning Lender has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has made no representation or
warranty and assumes no responsibility with respect to the financial
condition of Borrower or the performance by Borrower of its obligations under
this Agreement; (iii) it has received a copy of this Agreement, together with
copies of the most recent financial statements delivered pursuant to Section
5.01 and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Assumption Agreement; (iv) it will, independently and without reliance upon
the Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (v)
it appoints and authorizes the Administrative Agent to take such action and
to exercise such powers under this Agreement as are delegated to the
Administrative Agent by this Agreement; and (vi) it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
The Administrative Agent shall maintain a copy of each Assignment
and Assumption Agreement delivered to it and a register (the "Register") of
the names and address of each of the Lenders and the Commitment held by each
Lender, giving effect to each Assignment and Assumption Agreement. The
Register shall be available during normal business hours for inspection by
Borrower or any Lender upon reasonable prior notice to the Administrative
Agent. After receipt of a completed Assignment and Assumption Agreement
executed by any Lender and an Eligible Assignee, and receipt of an assignment
fee of $3,500 from such Lender or Eligible Assignee, the Administrative Agent
shall, promptly following the effective date thereof, provide to Borrower and
the Lenders a revised Schedule 1 giving effect thereto. Borrower, the
Administrative Agent and the Lenders shall deem and treat the
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Persons listed as Lenders in the Register as the holders and owners of the
Commitments listed therein for all purposes hereof, and no assignment or
transfer of any Commitment shall be effective, in each case unless and until
an Assignment and Assumption Agreement effecting the assignment or transfer
thereof shall have been accepted by the Administrative Agent and recorded in
the Register as provided above. Prior to such recordation, all amounts owed
with respect to the applicable Commitment shall be owed to the Lender listed
in the Register as the owner thereof, and any request, authority or consent
of any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitment.
Each Lender may from time to time grant participations to one or
more Lenders or other financial institutions (INCLUDING another Lender) in
its Commitment; PROVIDED, HOWEVER, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participating Lenders or other financial institutions
shall not be a Lender hereunder for any purpose EXCEPT, if the participation
agreement so provides, for the purposes of Sections 2.22, 8.03 and 9.03 but
only to the extent that the cost of such benefits to Borrower does not exceed
the cost which Borrower would have incurred in respect of such Lender absent
the participation, (iv) Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement,
(v) the participation interest shall be expressed as a percentage of the
granting Lender's Commitment as it then exists and shall not restrict an
increase in the Commitments, or in the granting Lender's Commitment, so long
as the amount of the participation interest is not affected thereby and (vi)
the consent of the holder of such participation interest shall not be
required for amendments or waivers of provisions of the Loan Documents OTHER
THAN those which result in (A) a decrease in fees, interest rate spreads or
principal payable to the holder of such participation, (B) increase the
Commitment of the granting Lenders and thereby increase the funding
requirements of the holder of such a participation, or (C) extend the
Termination Date.
Notwithstanding anything to the contrary contained herein, any Lender (a
"Granting Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting Lender, identified as such in writing from time to time by
the Granting
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Lender to the Administrative Agent and the Borrower the option to provide all
or any part of any Committed Loan that such Granting Lender would otherwise
be obligated to make pursuant to this Agreement, provided that (i) nothing
herein shall constitute a commitment to make any Loan by any SPC, (ii) if an
SPC elects not to exercise such option or otherwise fails to provide all or
any part of such Loan, the Granting Lender shall be obligated to make such
Loan pursuant to the terms hereof, and (iii) except as expressly set forth
herein, the rights of any such SPC shall be derivative of the rights of the
Granting Lender, and each SPC shall be subject to all of the restrictions
upon the Granting Lender herein contained. Each SPC shall be conclusively
presumed to have made arrangements with its Granting Lender for the exercise
of voting and other rights hereunder in a manner which is acceptable to the
SPC, and the Administrative Agent, the Lenders and Borrower and each other
party shall be entitled to rely upon and deal solely with the Granting Lender
with respect to Loans made by or through its SPC. The making of a Loan by an
SPC hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Loan were made by the Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the related Granting Lender). In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day after
the payment in full of all outstanding senior indebtedness of any SPC, it
will not institute against, or join any other person in insituting against,
such SPC any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or similar proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary contained in this Section 9.05, each SPC may, at any time, without
regard to the period required by Section 9.05(b)(iv), (i) with notice to, but
without the prior written consent of, the Borrower, the Borrower or the
Administrative Agent, and without paying any processing fee therefor, assign
all or a portion of its interests in any Loans to its Granting Lender or to
any financial institutions providing liquidity and/or credit facilities to or
for the account of such SPC to fund the Loans made by such SPC or to support
the securities (if any) issued by such SPC to fund such Loans (but nothing
contained herein shall be construed in derogation of the obligation of the
Granting Lender to make Loans hereunder), and (ii) disclose on a confidential
basis any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of a surety, guarantee or credit or
liquidity enhancement to such SPC. This Section 9.05(f) may not be amended
without the consent of all SPC's then designated to the Administrative Agent
in accordance with the foregoing provisions of this Section.
-61-
<PAGE>
Section 9.06 COLLATERAL. Each of the Lenders represents to each
Agent and each of the other Lenders that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
Section 9.07 CALIFORNIA LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be construed in accordance with and governed by
the laws of the State of California. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Central
District of California and of any California State court sitting in Los
Angeles, California for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably, waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 9.08 COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
Section 9.09 SEVERAL OBLIGATIONS. The obligations of the Lenders
hereunder are several. Neither the failure of any Lender to carry out its
obligations hereunder nor the failure of this Agreement to be duly
authorized, executed and delivered by any Lender shall relieve any other
Lender of its obligations hereunder (or affect the rights hereunder of such
other Lender). No Lender shall be responsible for the obligations of, or any
action taken or omitted by, any other Lender hereunder.
Section 9.10 SHARING OF SET-OFFS. Each Lender agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater than the
proportion received by any other Lender in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other
Lender, the Lender receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Lenders, and such
other adjustments shall be made, as may be required so that all such payments
of principal and interest with respect to the Notes held by the Lenders shall
be shared by the Lenders pro rata; PROVIDED that nothing in this Section
shall impair the right of any
62
<PAGE>
Lender to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Borrower in
the amount of such participation.
63
<PAGE>
Section 9.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PARK PLACE ENTERTAINMENT CORPORATION
By: Scott LaPorta
---------------------------
Scott LaPorta, Executive Vice President and
Chief Financial Officer
Address for Notices:
Telecopier number:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: Janice Hammond
---------------------------
Janice Hammond, Vice President
Bank of America National Trust and Savings
Association
555 South Flower Street
11th Floor
Los Angeles, California 90071
Attn: Janice Hammond
Telecopier: (213) 228-2299
Telephone: (213) 228-9861
64
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: Scott L. Faber
----------------------------
Scott L. Faber, Vice President
THE BANK OF NEW YORK
By: Lisa Y. Brown
----------------------------
Lisa Y. Brown, Vice President
SOCIETE GENERALE
By: Donald Schubert
----------------------------
Donald Schubert, Managing Director
PNC BANK, NATIONAL ASSOCIATION
By: Gary Wessels
----------------------------
Gary Wessels, Vice President
CREDIT SUISSE FIRST BOSTON
By: Chris T. Horgan
----------------------------
Chris T. Horgan, Vice President
By: Kristin Lepri
----------------------------
Title: Associate
-------------------------
65
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: Mark A. Isley
----------------------------
Mark A. Isley, First Vice President
FIRST UNION NATIONAL BANK
By: John Reid
----------------------------
John Reid
Title: Vice President
-------------------------
WACHOVIA BANK
By: Charles S. Zimmerman
----------------------------
Charles S. Zimmerman
Title: Vice President
-------------------------
WELLS FARGO BANK, N.A.
By: Kathleen S. Stone
----------------------------
Kathleen S. Stone, Vice President
BANKBOSTON, N.A.
By: Daniel P. Gilbert
----------------------------
Daniel P. Gilbert, Vice President
66
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH
By: Dianne M. Scott
----------------------------
Dianne M. Scott, First Vice President
and Manager
FLEET BANK N.A.
By: John Harrison
----------------------------
John Harrison, Senior Vice President
FIRST SECURITY BANK, N.A.
By: David P. Williams
----------------------------
David P. Williams, Vice President
ABN-AMRO BANK N.V.
By: Michael M. Tolentino
----------------------------
Title: Vice President
-------------------------
By: Jeffrey A. French
----------------------------
Title: Group Vice President & Director
-------------------------
BANK OF HAWAII
By: Robert M. Wheeler, III
----------------------------
Robert M. Wheeler, III, Vice President
67
<PAGE>
COMMERZBANK AG, LOS ANGELES BRANCH
By: Christian Jagenberg
-------------------------------------
Christian Jagenberg, SVP and Manager
By: Karla Wirth
-----------------------------
Karla Wirth, Assistant Treasurer
HIBERNIA NATIONAL BANK
By: Ross W. Wales
-------------------------------
Ross S. Wales, Vice President
MERRILL LYNCH CAPITAL CORPORATION
By: David Dysenchuk
----------------------------
David Dysenchuk
Title: Managing Director
---------------------------
THE NORTHERN TRUST COMPANY
By: John E. Burda
------------------------------
Title: Second Vice President
-----------------------------
By: James F.T. Monhart
--------------------------------
Title: Senior Vice President
-------------------------------
U.S. BANK NATIONAL ASSOCIATION
-68-
<PAGE>
By: Dale Parshall
--------------------------
Dale Parshall, Vice President
WHITNEY NATIONAL BANK
By: John Zollinger
---------------------------
John Zollinger, Vice President
COMERICA WEST INCORPORATED
By: Eoin P. Collins
----------------------------
Eoin P. Collins, Account Officer
FIRST AMERICAN NATIONAL BANK, operating as
DEPOSIT GUARANTY NATIONAL BANK
By: Larry C. Ratzlaff
------------------------------
Larry C. Ratzlaff, Senior Vice President
FIRST TENNESSEE BANK NATIONAL ASSOCATION
By: Jim Moore
----------------------
Jim Moore
Title: Vice President
------------------------
HANCOCK BANK
-69-
<PAGE>
By: John S. Hall
-------------------------
John S. Hall, Senior Vice President
TRUSTMARK NATIONAL BANK
By: Barney Daly FVP
----------------------------
Barney Daly, First Vice President
THE PEOPLES BANK, BILOXI, MISSISSIPPI
By: Robert M. Tucei - Sr.V.P.
--------------------------------------
Robert M. Tucei, Senior Vice President
-70-
<PAGE>
Schedule 1 -
Lender Commitments
-71-
<PAGE>
Schedule 2 - Pricing Schedule - 364 Day Facility
This Schedule 2 is attached to and made a part of the Short Term Credit
Agreement dated as of December 31, 1998 among Park Place Entertainment
Corporation, a Delaware corporation, the Lenders, Syndication Agent and
Documentation Agent referred to therein, Bank of America National Trust and
Savings Association, as Administrative Agent, and NationsBanc Montgomery
Securities, LLC as Lead Arranger (the "Credit Agreement"). Capitalized terms
used in this Schedule 2 are used with the meanings set forth for those terms
in the Credit Agreement.
The "Euro-Dollar Margin," "Base Rate Margin," and "Facility Fee Rate"
referred to in the Credit Agreement shall be determined for any day on the
basis of the Status (as defined below) of the Borrower as of that date,
provided, that in the event that Borrower fails to deliver any Compliance
Certificate or Pricing Certificate on the date when required by Section 5.01,
and it is ultimately determined that the Status of Borrower would have been
changed on the basis of such delivery, then (a) the rate at which interest,
facility fees, and letter of credit fees accrue under the Credit Agreement
shall be increased in accordance with this Schedule, with retroactive effect
to the first day of the Pricing Period to which such Compliance Certificate
relates, and (b) Borrower shall, within 10 Business Days of a request by the
Administrative Agent, make such additional payments to the Lenders through
the Administrative Agent as are required to give effect to such increased
interest rates, facility fees and letter of credit fees in respect of any
payments previously made by Borrower. As of each date of determination, the
Euro-Dollar Margin and Facility Fee Rates shall equal the percentages set
forth below under the column corresponding to the Status that exists on such
day, PROVIDED that the Euro- Dollar Margin shall be increased or decreased by
the "Margin Adjustment" described below:
-72-
<PAGE>
<TABLE>
<CAPTION>
Status Level Level Level Level Level Level
I II III IV V VI
<S> <C> <C> <C> <C> <C> <C>
Facility Fee Rate 0.080% 0.100% 0.125% 0.150% 0.200% 0.250%
Euro-Dollar Margin 0.520% 0.650% 0.875% 0.975% 1.175% 1.500%
</TABLE>
The "Base Rate Margin" shall, as of each date of determination, be the
percentage, not less than 0.000% per annum, which is equal to the then
prevailing Euro-Dollar Margin (after adjustment upwards or downwards by the
Margin Adjustment), MINUS 1.250%
As of each date of determination, the Status of the Borrower shall be
determined on the basis of:
(a) the Borrower's Debt Rating as of that date; or
(b) from and after March 1, 2000 the Leverage Ratio as of the last day of
the fiscal quarter of Borrower ending immediately prior to the first day of
the Pricing Period in which such date of determination occurs (the
"Applicable Leverage Ratio");
whichever such criteria yields the more favorable pricing to the Borrower
according to the following standards:
"Level I Status" exists at any date if, at such date, either (x) the
Debt Rating assigned by S&P is A- or the Debt Rating assigned by Moody's is
A3 or higher, or (y) the Applicable Leverage Ratio is less than 1.50:1.
"Level II Status" exists at any date if, at such date, (i) either (x)
the Debt Rating assigned by S&P is BBB+ or higher or the Debt Rating
assigned by Moody's is Baa1 or higher, or (y) the Applicable Leverage Ratio
is less than 2.25:1 and (ii) Level I Status does not exist.
"Level III Status" exists at any date, if, at such date, (i) either
(x) the Debt Rating assigned by S&P is BBB or higher or the Debt Rating
assigned by Moody's is Baa2 or higher, or (y) the Applicable Leverage Ratio
is less than 3.00:1 and (ii) neither Level I Status nor Level II Status
exists.
"Level IV Status" exists at any date, if, at such date, (i) either (x)
the Debt Rating assigned by S&P is BBB- or higher or the Debt Rating
Assigned by Moody's is Baa3 or higher, or (y) the Applicable Leverage Ratio
is less than 3.75 and (ii) none of Level I Status, Level II Status or Level
III Status exists.
"Level V Status" exists at any date, if, at such date, (i) either (x)
the Debt Rating assigned by S&P is BB+ or higher or the Debt Rating
assigned by Moody's is Ba1 or higher or (y) the Applicable Leverage Ratio
is less than 4.25:1 and (ii) none of Level I Status, Level II Status, Level
III Status or Level IV Status exists.
-73-
<PAGE>
"Level VI Status" exists at any date if, at such date, no such other
Status exists.
For purposes of this Schedule, the following terms have the following
meanings, subject to the final two paragraphs of this Schedule:
"Margin Adjustment" means, (a) as of any date of determination when the
Applicable Leverage Ratio is in excess of 3.50:1 but equal to or less than
4.00:1, an incremental interest margin of 0.075% per annum to be added to the
Euro-Dollar Margin in determining the rate applicable to Euro-Dollar Loans,
(b) as of any date of determination when the Applicable Leverage Ratio is in
excess of 4.00:1, an incremental interest margin of 0.150% per annum to be
added to the Euro-Dollar Margin in determining the rate applicable to
Euro-Dollar Loans, and (c) as of any date of determination when the
Applicable Leverage Ratio is less than 2.00:1, a deduction of 0.075% per
annum to be subtracted from the Euro-Dollar Margin in determining the rate
applicable to Euro-Dollar Loans.
"Debt Rating" means, as of any date of determination, the rating
assigned by the Rating Agencies to the senior unsecured long-term debt
securities of the Borrower without third-party credit enhancement (and any
rating assigned to any other debt security of the Borrower shall be
disregarded) as of the close of business on such date, provided that (a)
during the period between the Effective Date and March 31, 2000, to the
extent that no such credit rating has been assigned, a credit rating of BBB-
shall be assumed, (b) if such securities receive a split-rating and the
rating differential is one level, the higher of the two ratings will apply
(e.g. A-/Baa1 results in Level I Status and A-/Baa2 results in Level II
Status), and (c) if the Borrower is split-rated and the ratings differential
is more than one level, the average of the two ratings (or the higher of any
two intermediate ratings) shall be used (e.g.. A-/Baa2 results in Level II
Status, as does A-/Baa3).
-74-
<PAGE>
FIVE YEAR CREDIT AGREEMENT
dated as of
December 31, 1998
among
PARK PLACE ENTERTAINMENT CORPORATION
The Lenders, Documentation Agents and Syndication Agent Referred to Herein
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Administrative Agent
--------------------------------------
NATIONSBANC MONTGOMERY SECURITIES LLC.
Lead Arranger
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . .20
1.03 Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE II THE CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.01 Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . .22
2.02 Notice of Committed Borrowings. . . . . . . . . . . . . . . . . . .22
2.03 Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . .23
2.04 Swing Line Loans. . . . . . . . . . . . . . . . . . . . . . . . . .28
2.05 Conversion and Continuation of Committed Loans. . . . . . . . . . .30
2.06 Notice to Lenders; Funding of Loans . . . . . . . . . . . . . . . .31
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
2.08 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . .33
2.09 Upfront Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.10 Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.11 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . .35
2.12 Optional Termination or Reduction of Commitments by Borrower. . . .35
2.13 Optional Termination of Commitments by the Lenders. . . . . . . . .35
2.14 Scheduled Termination of Commitments. . . . . . . . . . . . . . . .36
2.15 Extensions of the Termination Date. . . . . . . . . . . . . . . . .36
2.16 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . .37
2.17 General Provisions as to Payments . . . . . . . . . . . . . . . . .37
2.18 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . .38
2.19 Computation of Interest and Fees. . . . . . . . . . . . . . . . . .39
2.20 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . .39
2.21 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . .39
2.22 Regulation D Compensation . . . . . . . . . . . . . . . . . . . . .43
ARTICLE III CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
3.01 Borrowings and Issuances of Letters of Credit . . . . . . . . . . .45
3.02 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . .48
4.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . .48
4.02 Corporate and Governmental Authorization; Contravention . . . . . .48
-2-
<PAGE>
4.03 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .48
4.04 Financial Information . . . . . . . . . . . . . . . . . . . . . . .48
4.05 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
4.06 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . .49
4.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
4.08 Significant Subsidiaries. . . . . . . . . . . . . . . . . . . . . .50
4.09 Not an Investment Company . . . . . . . . . . . . . . . . . . . . .50
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .50
4.11 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
5.01 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
5.02 Maintenance of Property; Insurance. . . . . . . . . . . . . . . . .54
5.03 Conduct of Business and Maintenance of Existence. . . . . . . . . .55
5.04 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . .55
5.05 Inspection of Property, Books and Records . . . . . . . . . . . . .55
5.06 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . .56
5.07 Consolidations, Mergers and Sales of Assets . . . . . . . . . . . .57
5.08 Hostile Tender Offers . . . . . . . . . . . . . . . . . . . . . . .57
5.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .57
5.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . .58
5.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . .58
ARTICLE VI DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . .59
6.02 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . .61
6.03 Cash Cover. . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
ARTICLE VII THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .63
7.01 Appointment and Authorization . . . . . . . . . . . . . . . . . . .63
7.02 Agents and Affiliates . . . . . . . . . . . . . . . . . . . . . . .63
7.03 Action by Agents. . . . . . . . . . . . . . . . . . . . . . . . . .63
7.04 Consultation with Experts . . . . . . . . . . . . . . . . . . . . .63
7.05 Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . . .63
7.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .64
7.07 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . .64
7.08 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . .64
7.09 Agents' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .65
ARTICLE VIII CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . .66
-3-
<PAGE>
8.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . .66
8.02 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
8.03 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . .67
8.04 Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . .69
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.02 No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.03 Expenses; Documentary Taxes; Indemnification. . . . . . . . . . . .70
9.04 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . .71
9.05 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .72
9.06 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
9.07 California Law; Submission to Jurisdiction. . . . . . . . . . . . .76
9.08 Counterparts; Integration . . . . . . . . . . . . . . . . . . . . .76
9.09 Several Obligations . . . . . . . . . . . . . . . . . . . . . . . .76
9.10 Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . .77
9.11 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . .78
SCHEDULES:
Schedule 1 - Lender Commitments
Schedule 2 - Pricing Schedule
EXHIBITS:
Exhibit A - Compliance Certificate
Exhibit B - Form of Note
Exhibit C - Pricing Certificate
Exhibit D - Form of Notice of Committed Borrowing
Exhibit E - Form of Money Market Quote Request
Exhibit F - Form of Invitation for Money Market Quotes
Exhibit G - Form of Money Market Quote
Exhibit H - Extension Agreement
Exhibit I - Opinion of Gibson, Dunn & Crutcher LLP
Exhibit J - Opinion of Latham & Watkins, LLP
Exhibit K - Assignment and Assumption Agreement
</TABLE>
-4-
<PAGE>
FIVE YEAR CREDIT AGREEMENT
FIVE YEAR CREDIT AGREEMENT dated as of December 31, 1998, among PARK
PLACE ENTERTAINMENT CORPORATION, the Lenders listed on the signature pages
hereto, THE BANK OF NEW YORK, as Syndication Agent, PNC BANK, NATIONAL
ASSOCIATION and SG, as Documentation Agents, and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms, as used herein,
have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.03.
"Additional Lender" has the meaning set forth in Section 2.23.
"Administrative Agent" means Bank of America National Trust and Savings
Association in its capacity as administrative agent for the Lenders hereunder,
and its successors in such capacity.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Lender.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (and the correlative
terms, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise);
-5-
<PAGE>
PROVIDED that, in any event, any Person that owns, directly or indirectly, 5%
or more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation that has more than 100
record holders of such securities, or 5% or more of the partnership or other
ownership interests of any other Person that has more than 100 record holders
of such interests, will be deemed to control such corporation or other Person.
"Agents" mean, collectively, the Administrative Agent, the Syndication
Agent and the Documentation Agents, and "Agent" means any of them.
"Applicable Lending Office" means, with respect to any Lender, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Authorized Officer" means any of the controller, the treasurer or the
chief financial officer of the Borrower.
"Bank of America" means Bank of America National Trust and Savings
Association, its successors and assigns.
"Base Rate" means, as of any date of determination, the rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the HIGHER OF
(a) the Reference Rate in effect on such date (calculated on the basis of a year
of 365 or 366 days and the actual number of days elapsed) and (b) the Federal
Funds Rate in effect on such date (calculated on the basis of a year of 360 days
and the actual number of days elapsed) PLUS 1/2 of 1% (50 basis points).
"Base Rate Loan" means a Committed Loan made or to be made by a Lender as a
Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Base Rate Margin" has the meaning set forth on Schedule 2.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by any member of the
ERISA Group.
"Borrower" means Park Place Entertainment Corporation, a Delaware
corporation, and its successors.
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"Borrowing" means the aggregation of Loans of one or more Lenders to be
made to the Borrower pursuant to Article II on a single date and, in the case
of Fixed Rate Borrowings, for a single Interest Period.
"Change of Control" means the occurrence of a Rating Decline in
connection with any of the following events: (i) upon any merger or
consolidation of the Borrower with or into any person or any sale, transfer
or other conveyance, whether direct or indirect, of all or substantially all
of the assets of the Borrower, on a consolidated basis, in one transaction or
a series of related transactions, if, immediately after giving effect to such
transaction, any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) is or becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of securities representing
a majority of the total voting power of the aggregate outstanding securities
of the transferee or surviving entity normally entitled to vote in the
election of directors, managers, or trustees, as applicable, of the
transferee or surviving entity, (ii) when any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of
1934, as amended) is or becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated by The Securities and-Exchange Commission under said
Act) of securities representing a majority of total voting power of the
aggregate outstanding securities of the Borrower normally entitled to vote in
the election of directors of the Borrower, (iii) when, during any period of
12 consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period (together with any new directors
whose election by the board of directors of the Borrower or whose nomination
for election by the stockholders of the Borrower was approved by a vote of a
majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of the Borrower, or (iv) the sale or disposition, whether
directly or indirectly, by the Borrower of all or substantially all of its
assets.
"Combined Pro Forma Financial Statements" means (a) from the Effective
Date until the Borrower delivers the combined pro forma financial statements
described in Section 5.01(a), the combined pro forma financial statements of
the Gaming Segment of Hilton and the Grand Assets for the twelve month period
ended September 30, 1998 heretofore delivered by Hilton and the Borrower to
the Administrative Agent and each Lender, and (b), thereafter, the combined
pro forma financial statements for the twelve month period ended December 31,
1998 so delivered.
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"Commitment" means, as to each Lender, the commitment of that Lender to
make Loans and to participate in Letters of Credit and Swing Line Loans, in
each case as such amount may be reduced from time to time pursuant to Section
2.12, 2.13 or 2.14, or increased pursuant to Section 2.23. The aggregate
amount of the Commitments under this Agreement as of the Effective Date is
$1,500,000,000, and the respective Commitments of the Lenders as of the
Effective Date are set forth on Schedule 1.
"Committed Loan" means a loan made or to be made by a Lender pursuant to
Section 2.01.
"Compliance Certificate" means a certificate, substantially in the form of
Exhibit A, properly completed and signed by an Authorized Officer.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date,
PROVIDED that Consolidated Debt shall exclude any Debt of the Borrower or a
Subsidiary as to which cash and cash equivalents sufficient to provide for
payment in full of such Debt at its scheduled maturity or at an earlier date at
which it shall have been or may be called for redemption shall have been
irrevocably deposited in trust for the benefit of the holders of such Debt or a
representative of such holders, which deposit shall have resulted in the legal
or in-substance defeasance thereof.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period before (i) income taxes, (ii) interest expense, (iii) depreciation
and amortization, (iv) minority interest, (v) extraordinary losses or gains,
(vi) Pre-Opening Expenses, (vii) transactional expenses associated with the
Spin-Off Transaction, and (viii) nonrecurring non-cash charges, PROVIDED that,
in calculating "Consolidated EBITDA":
(a) for all periods ending on or prior to December 31, 1998,
"Consolidated EBITDA" shall be computed on the basis of the operating
results of the Gaming Segment and the Grand Assets for such periods
reflected in the Combined Pro Forma Financial Statements.
(b) the operating results of each New Project which commences
operations and records not less than one full fiscal quarter's
operations during the relevant period shall be annualized; and
(c) Consolidated EBITDA shall be adjusted, on a pro forma
basis, to include the operating results of each resort or casino
property acquired by Borrower and its Consolidated Subsidiaries during
the relevant period and to exclude the
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operating results of each resort or casino property sold or otherwise
disposed of by Borrower and its Subsidiaries, or whose operations are
discontinued during the relevant period.
"Consolidated Interest Expense" means, for any period, net interest
expense of Borrower and its Consolidated Subsidiaries for such period,
determined in accordance with generally accepted accounting principles,
PROVIDED that for all periods ending on or prior to December 31, 1998,
"Consolidated Interest Expense" shall be computed on the basis of the net
interest expense allocated to Borrower and its Consolidated Subsidiaries and
shown on the Combined Pro Forma Financial Statements.
"Consolidated Net Income" means, for any period, the consolidated net
income of the Borrower and its Consolidated Subsidiaries for such period,
provided that for all periods ending on or prior to December 31, 1998, such
consolidated net income shall be the consolidated net income of the Gaming
Segment and the Grand Assets for such periods reflected in the Combined Pro
Forma Financial Statements.
"Consolidated Net Tangible Assets" means the total amount of assets of
Borrower and its Consolidated Subsidiaries, after deducting therefrom (a) all
current liabilities of Borrower and its Consolidated Subsidiaries (excluding
(i) the current portion of long term indebtedness, (ii) inter-company
liabilities, and (iii) any liabilities which are by their terms renewable or
extendable at the option of the obligor thereon to a time more than twelve
months from the time as of which the amount thereof is being computed), and
(b) all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles, all as set forth on the latest
consolidated balance sheet of Borrower prepared in accordance with generally
accepted accounting principles.
"Consolidated Net Worth" means at any date the consolidated
stockholders, equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements as of such date.
"Covered Subsidiary" means at any time any Subsidiary of the Borrower
that has consolidated assets in an amount greater than $5,000,000.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by
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bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of business,
(iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all
indebtedness or other obligations secured by a contractual Lien on any asset
of such Person, whether or not such indebtedness or other obligations are
otherwise an obligation of such Person, and (vi) all Guarantees made by such
Person (including by way of provision of letters of credit or other
contingent obligations) with respect to indebtedness or other obligations of
any other Person which constitute "Debt" of a type or class described in
clauses (i) through (v) of this definition.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Documentation Agents" means PNC Bank, National Association and SG, in
each case in their capacity as documentation agent for the Lenders hereunder.
The capacity of the Documentation Agents is titular in nature, and the
Documentation Agents shall have no obligations or liabilities under the Loan
Documents by reason of acting in such capacity.
"Dollars" and the sign "$" mean lawful money of the United States.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Los Angeles (and, in the
case of Swing Line Loans, Las Vegas, Nevada) are authorized or required by
law to close.
"Domestic Lending Office" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Lender may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Administrative Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.02.
"Eligible Assignee" means (a) another Lender, (b) with respect to any
Lender, any Affiliate of that Lender, (c) any commercial bank having a
combined capital and surplus of $500,000,000 or more, (d) any (i) savings
bank, savings and loan association or similar financial institution or (ii)
insurance company engaged in the business of
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writing insurance which, in either case (A) has a net worth of $500,000,000
or more, (B) is engaged in the business of lending money and extending credit
under credit facilities substantially similar to those extended under this
Agreement and (C) is operationally and procedurally able to meet the
obligations of a Lender hereunder to the same degree as a commercial bank and
(e) any other financial institution (INCLUDING a mutual fund or other fund)
having total assets of $250,000,000 or more which meets the requirements set
forth in subclauses (B) and (C) of clause (d) above; PROVIDED that each
Eligible Assignee must either (a) be organized under the Laws of the United
States of America, any State thereof or the District of Columbia or (b) be
organized under the Laws of the Cayman Islands or any country which is a
member of the Organization for Economic Cooperation and Development, or a
political subdivision of such a country, and (i) act hereunder through a
branch, agency or funding office located in the United States of America and
(ii) is otherwise exempt from withholding of tax on interest and delivers
Form 1001 or Form 4224 pursuant to Section 2.20 at the time of any assignment
pursuant to Section 9.05.
"Environmental Laws" means any and all statutes, regulations, permits,
licenses or other governmental restrictions relating to the environment or to
releases of petroleum or petroleum products, chemicals or toxic or hazardous
substances or wastes into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending office" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Administrative Agent.
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"Euro-Dollar Loan" means a Committed Loan made or to be made by a Lender
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth on Schedule 2.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System with deposits exceeding five billion Dollars in respect of
"eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate
on Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any bank
to United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Facility Fee Rate" has the meaning set forth in Section 2.10.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business
Day next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal Funds
Rate for such day shall be the average rate quoted to The Bank of New York on
such day on such transactions as determined by the Administrative Agent.
"Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans
(excluding Money Market Loans bearing interest at the Base Rate pursuant to
Section 8.01(a)) or any combination of the foregoing.
"Gaming Board" means, collectively, (a) the Nevada Gaming Commission,
(b) the Nevada State Gaming Control Board, (c) the New Jersey Casino Control
Commission, (d) the New Jersey Division of Gaming Enforcement (e) the
Mississippi Gaming Commission, and (f) any other Governmental Agency that
holds regulatory, licensing
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or permit authority over gambling, gaming or casino activities conducted by
Borrower or its Subsidiaries within its jurisdiction.
"Gaming Laws" means all laws pursuant to which any Gaming Board
possesses regulatory, licensing or permit authority over gambling, gaming or
casino activities conducted by Borrower or its Subsidiaries within its
jurisdiction.
"Gaming Segment" means the gaming segment (as "segment" is used in
Regulation S-K and Regulation S-X of the Securities and Exchange Commission)
of Hilton which, prior to the Effective Date, was comprised of assets and
operations owned and conducted by Borrower and its Subsidiaries following the
Effective Date.
"GCI Lakes, Inc." means GCI Lakes, Inc., a Minnesota corporation.
"Governmental Agency" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b)
any governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body (including any Gaming
Board) or (c) any court or administrative tribunal of competent jurisdiction.
"Grand" means Grand Casinos, Inc., a Minnesota corporation, and its
successors.
"Grand Agreement" means the Agreement and Plan of Merger dated as of
June 30, 1998 among Hilton, Borrower (under its former name, Gaming Co.,
Inc.), Gaming Acquisition Corporation, a Minnesota corporation, and GCI
Lakes, Inc., a Minnesota corporation and Grand, as amended as of the
Effective Date.
"Grand Assets" means the assets of Grand and its Subsidiaries which are
to be retained by Grand following the Lakes Spin-off pursuant to the Grand
Distribution Agreement, including without limitation the assets described on
Schedule 1 to the Grand Distribution Agreement, and acquired by Borrower and
its Subsidiaries upon consummation of the merger between Borrower and Grand
pursuant to the Grand Agreement, including without limitation the resort
casino properties commonly known as (a) the Grand Casino Tunica, in Tunica,
Mississippi, (b) the Grand Casino Gulfport, in Gulfport, Mississippi, and (c)
the Grand Casino Biloxi, in Biloxi, Mississippi.
"Grand Distribution Agreement" means the Distribution Agreement dated as
of December 31, 1998 by and between Grand and GCI Lakes, Inc., together with
the agreements attached as Exhibits thereto.
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"Grand Notes" means the 10 1/8% First Mortgage Notes of Grand due 2003
issued pursuant to the Indenture, dated as of November 30, 1995 executed by
Grand in favor of American National Bank, as Trustee.
"Granting Lender" has the meaning set forth in Section 9.05(f).
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Debt of the payment
thereof or to protect such holder against loss in respect thereof (in whole or
in part), including by way of provision of letters of credit or other contingent
obligations with respect thereto, provided that the term Guarantee shall not
include (x) endorsements for collection or deposit in the ordinary course of
business or (y) performance or completion guarantees. The term "Guarantee" used
as a verb has a corresponding meaning.
"Hilton" means Hilton Hotels Corporation, a Delaware corporation.
"Hilton Distribution Agreement" means the Distribution Agreement dated as
of December 31, 1998 by and between Hilton and Borrower, together with the
agreements attached as Exhibits thereto.
"Hilton Notes" means the 7.35% senior notes of Hilton due 2002 in the
aggregate principal amount of $300,000,000 and the 7.00% senior notes of Hilton
due 2004 in the aggregate principal amount of $325,000,000 issued pursuant to
the Indenture, dated as of April 15, 1997 executed by Hilton in favor of BNY
Western Trust Company, as Trustee.
"Increased Commitment" has the meaning set forth in Section 2.23.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Coverage Ratio" means, as of each date of determination, the
ratio of (a) Consolidated EBITDA for the four fiscal quarters ending on that
date, to (b) Consolidated Interest Expense for the same period.
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"Interest Period" means:
(a) with respect to each Euro-Dollar Borrowing, the period commencing on the
date of such Borrowing and ending one week or 1, 2, 3 or 6 months thereafter, as
the Borrower may elect in the applicable Notice of Committed Borrowing or Notice
of Conversion/Continuation; provided that:
(i) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar Business Day
in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (a)(iii) below, end on the last
Euro-Dollar Business Day in the calendar month which is the last calendar
month which commences in such Interest Period; and
(iii) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date, or, if such date is
not a Euro-Dollar Business Day, then on the next preceding Euro-Dollar
Business Day.
(b) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending one week or 1, 2, 3 or 6
months thereafter, as the Borrower may elect in accordance with Section 2.03;
provided that:
(i) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
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Period) shall, subject to clause (b)(iii) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(iii) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
(c) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending not less than 5 days nor
more than the earlier to occur of 364 days or the Termination Date, as the
Borrower may elect in accordance with Section 2.03; provided that:
(i) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment Grade" means (i) with respect to S&P, a rating of BBB- or
higher, and (ii) with respect to Moody's, a rating of Baa3 or higher.
"Issuing Lender" means Bank of America, in its capacity as issuer of a
Letter of Credit hereunder.
"Lakes Spin-Off" means the contribution of all assets of Grand and its
Subsidiaries other than the Grand Assets to GCI Lakes, Inc. and the
corresponding distribution of the shares of GCI Lakes, Inc. to the shareholders
of Grand described in the Grand Agreement.
"LC Fee Rate" has the meaning set forth in Section 2.11.
"Lead Arranger" means NationsBanc Montgomery Securities LLC. Following
the date of this Agreement, the Lead Arranger shall have no obligations or
liabilities under the Loan Documents.
"Lender" means each lender listed on the signature pages hereof and each
Lender which accepts an assignment pursuant to Section 9.05, and their
respective successors
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and shall include, as the context may require, the Issuing Lender in its
capacity as Issuing Lender.
"Letter of Credit" means a letter of credit to be issued hereunder by the
Issuing Lender in accordance with Section 2.21.
"Letter of Credit Commitment" means the lesser of (x) $250,000,000 and (y)
the aggregate Commitments.
"Letter of Credit Liabilities" means, for any Lender and at any time, such
Lender's ratable participation in the sum of (x) the amounts then owing by the
Borrower in respect of amounts drawn under Letters of Credit and (y) the
aggregate amount then available for drawing under all Letters of Credit.
"Leverage Ratio" means, as of any date of determination, the ratio of (a)
Consolidated Debt on such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on such date.
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the London Interbank Offered Rate pursuant to
Section 2.03.
"License Revocation" means the revocation, failure to renew or suspension
of, or the appointment of a receiver, supervisor or similar official with
respect to, any casino, gambling or gaming license issued by any Gaming Board
covering any casino or gaming facility of Borrower and its Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan or a Money Market Loan
and "Loans" means Base Rate Loans or Euro-Dollar Loans or Money Market Loans or
any combination of the foregoing.
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"Loan Documents" means this Agreement, the Notes and each other instrument,
document or agreement now or hereafter executed by the parties in furtherance of
this Agreement.
"London Interbank Offered Rate" means, as to the Interest Period applicable
to each Euro-Dollar Loan, means the average rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which deposits in
Dollars are offered to the Administrative Agent in the London interbank market
at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before
the first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of the Administrative Agent to which
such Interest Period is to apply and for a period of time comparable to such
Interest Period.
"Margin Adjustment" has the meaning set forth in the Schedule 2.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.
"Maximum Money Market Loan Amount" has the meaning set forth in Section
2.03(a).
"Money Market Absolute Rate" has the meaning set forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Lender
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Lender, its Domestic
Lending Office or such other office, branch or affiliate of such Lender as it
may hereafter designate as its Money Market Lending office by notice to the
Borrower and the Agent; provided that any Lender may from time to time by notice
to the Borrower and the Administrative Agent designate separate Money Market
Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which case all references
herein to the Money Market Lending Office of such Lender shall be deemed to
refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Lender pursuant to a
LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant
to Section 8.02).
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"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Lender to make a Money Market Loan
in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"New Project" means each new hotel - casino, casino or resort project (as
opposed to any project which consists of an extension or redevelopment of an
operating hotel, casino or resort) having a development and construction budget
in excess of $25,000,000 which hereafter receives a certificate of completion or
occupancy and all relevant gaming and other licenses, and in fact commences
operations. Without limitation, the Paris Hotel & Casino located in Las Vegas,
Nevada, is a "New Project."
"Non-Recourse Debt" means Debt in respect of which the recourse of the
holder of such Debt is limited to the assets securing such Debt and such Debt
does not constitute the general obligation of the Borrower or any Subsidiary.
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit B hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined in
Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
"Notice of Committed Borrowing" has the meaning set forth in Section 2.02.
"Notice of Conversion\Continuation" has the meaning set forth in Section
2.05.
"Notice of Issuance" has the meaning set forth in Section 2.21 (b) .
"Notice of Money Market Borrowing" has the meaning set forth in Section
2.03(f).
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"Other Commitments" means the lending commitments of the Lenders under the
Short Term Credit Agreement of even date herewith among the Lenders party to
this Agreement on the Effective Date, the Bank of New York, as Syndication
Agent, PNC Bank, National Association and SG, as Documentation Agents, and Bank
of America National Trust and Savings Association, as Administrative Agent.
"Parent" means, with respect to any Lender, any Person controlling such
Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pre-Opening Expenses" means, with respect to any fiscal period, the amount
of expenses (OTHER THAN Consolidated Interest Expense) incurred with respect to
capital projects which are classified as "pre-opening expenses" on the
applicable financial statements of Borrower and its Subsidiaries for such period
(or, with respect to periods prior to December 31, 1998, the Combined Pro Forma
Financial Statements), prepared in accordance with generally accepted accounting
principles.
"Pricing Certificate" means a Pricing Certificate substantially in the form
of Exhibit C hereto, properly completed and signed by an Authorized Officer of
Borrower.
"Pricing Period" means (a) the period beginning on the Effective Date and
ending on February 28, 1999, and (b) each period of three months beginning on
the first day of each March, June, September and December and ending on the last
day of the succeeding May, August, November and February.
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"Proxy Statement" means the Joint Proxy Statement/Prospectus (S-4) filed
with the Securities and Exchange Commission on October 23, 1998, as it may be
amended or modified in any manner prior to the date hereof.
"Public Notice" means, without limitation, any filing or report made in
accordance with the requirements of the Securities and Exchange Commission (or
any successor), any press release or public announcement made by the Borrower or
any written notice the Borrower gives to the Administrative-Agent or the
Lenders.
"Rating Agencies" means S&P and Moody's.
"Rating Decline" means the occurrence on any date on or within 90 days
after the date of the first public notice of (i) the occurrence of an event
described in clauses (i)-(v) of the definition of "Change of Control" or (ii)
the intention by the Borrower to effect such an event (which 90-day period shall
be extended so long as the rating of the senior debt of the Borrower is under
publicly announced consideration for possible downgrade by any of the Rating
Agencies) of a decrease in the rating of the senior debt of the Borrower by any
of the Rating Agencies to below Investment Grade.
"Reference Rate" means the rate of interest publicly announced from time to
time by Bank of America in San Francisco, California, as its "reference rate" or
the similar prime rate or reference rate announced by any successor
Administrative Agent. Bank of America's reference rate is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the Reference Rate announced by Bank of
America or any successor Administrative Agent shall take effect at the opening
of business on the day specified in the public announcement of such change.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding at least 51% of the sum of the aggregate unpaid principal
amount of the Loans and the aggregate amount of Letter of Credit Liabilities.
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"Revolving Credit Period" means the period from and including the Effective
Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., and its successors.
"Significant Subsidiary" means each Subsidiary of the Borrower at any time
having (i) at least "10% of the total consolidated assets of the Borrower and
its Subsidiaries (determined as of the last day of the most recent fiscal
quarter of the Borrower) or (ii) at least 10% of the consolidated revenues of
the Borrower and its Subsidiaries for the fiscal year of the Borrower then most
recently ended.
"Solvent" as to any Person shall mean that (a) the sum of the assets of
such Person, both at a fair valuation and at present fair saleable value,
exceeds its liabilities, including its probable liability in respect of
contingent liabilities, (b) such Person will have sufficient capital with which
to conduct its business as presently conducted and as proposed to be conducted
and (c) such Person has not incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature. For purposes of this
definition, "debt" means any liability on a claim, and "claim" means (x) a right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (y) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured. With respect to
any such contingent liabilities, such liabilities shall be computed at the
amount which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or
matured liability.
"SPC" has the meaning set forth in Section 9.05(f).
"Spin-Off Transaction" means (a) the contribution by Hilton of the assets
and operations of the Gaming Segment, including without limitation the assets
described on Schedule 1 to the Hilton Distribution Agreement, to Borrower and
its Subsidiaries pursuant to the Hilton Distribution Agreement and the
substantially concurrent distribution of shares in Borrower to the shareholders
in Hilton, (b) the execution of the First Supplemental Indenture to Borrower's
Indenture dated as of April 15, 1997, and the Debt Assumption Agreement between
the Borrower and Hilton, in each case substantially in the form previously
delivered to the Administrative Agent prior to the
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Effective Date, and (c) the merger of Borrower with Grand (following the
Lakes Spin-Off) pursuant to the Grand Agreement.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Swing Line" means the revolving line of credit established by the Swing
Line Lender in favor of Borrower pursuant to Section 2.04.
"Swing Line Loans" means Loans made by the Swing Line Lender to Borrower
pursuant to Section 2.04.
"Swing Line Lender" means, when acting in such capacity, Bank of America
(through its Nevada Corporate Banking Division), its successors and assigns.
"Swing Line Documents" means the promissory note and any other documents
executed by Borrower in favor of the Swing Line Lender in connection with the
Swing Line.
"Swing Line Outstandings" means, as of any date of determination, the
aggregate principal Indebtedness of Borrower on all Swing Line Loans then
outstanding.
"Syndication Agent" means The Bank of New York in its capacity as
syndication agent for the Lenders hereunder. The capacity of the Syndication
Agent is titular in nature, and the Syndication Agent shall have no obligations
or liabilities under the Loan Documents by reason of acting in such capacity.
"Termination Date" means December 31, 2003, or such later date to which the
Revolving Credit Period shall have been extended pursuant to Section 2.15, or,
if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar
Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan,
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but only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which (except
directors, qualifying shares) are at the time directly or indirectly owned by
the Borrower.
"Year 2000 Issue" means failure of computer software, hardware and firmware
systems, and equipment containing embedded computer chips, to properly receive,
transmit, process, manipulate, store, retrieve, re-transmit or in any other way
utilize data and information due to the occurrence of the year 2000 or the
inclusion of dates on or after January 1, 2000.
Section 1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants and disclosed in such
financial statements) with the most recent audited consolidated financial
statements of the Borrower and its Consolidated Subsidiaries delivered to the
Lenders; provided that, if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any covenant in Article V to eliminate the
effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Article V for such purpose),
then the Borrower's compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect immediately
before the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended
in a manner satisfactory to the Borrower and the Required Lenders.
Section 1.03 TYPES OF BORROWINGS. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article
II under which participation therein is determined (I.E., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which all Lenders participate
in proportion to their commitments, while a "Money Market Borrowing" is a
Borrowing under Section 2.03 in which the Lender participants are determined
in accordance therewith).
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ARTICLE II
THE CREDITS
Section 2.01 COMMITMENTS TO LEND. During the Revolving Credit Period
each Lender severally agrees, on the terms and conditions set forth in this
Agreement, to lend to the Borrower pursuant to this Section from time to time
amounts such that (a) the aggregate principal of Committed Loans by such
Lender at any one time outstanding shall not exceed the amount of its
Commitment, and (b) the aggregate principal outstanding amount of all
Committed Loans, Money Market Loans and Swing Line Loans plus the Letter of
Credit Liabilities shall not exceed the aggregate Commitments. Each
Borrowing under this Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000; and each Committed
Borrowing shall be made from the several Lenders ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, repay, or to the extent permitted by Section 2.16,
prepay Loans and reborrow at any time on or prior to the Termination Date
under this Section. The Committed Loans shall mature, and the principal
amount thereof shall be due and payable, on the Termination Date.
Section 2.02 NOTICE OF COMMITTED BORROWINGS. The Borrower shall give
the Administrative Agent notice (a "Notice of Committed Borrowing"),
substantially in the form of Exhibit D hereto, not later than 8:30 A.M.
(California local time) on (y) the date of each Base Rate Borrowing (or, if
the Borrower shall have requested Money Market Quotes in an Absolute Rate
Auction to be submitted on such date but shall not have accepted such Money
Market Quotes in the full amount requested, then the Borrower may give a
Notice of Committed Borrowing not later than 10:00 A.M. (California local
time) on such date for the smallest amount permitted under Section 2.01 which
is sufficient to fund the shortfall), and (z) the third Euro-Dollar Business
Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to be Base
Rate Loans or Euro-Dollar Loans; and
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(d) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Not more than twelve Committed Borrowings which are Euro-Dollar Borrowings
having different Interest Periods shall be outstanding at any time.
Section 2.03 MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Lenders prior to the Termination Date to make offers to make
Money Market Loans to the Borrower in Dollars in a maximum aggregate
principal amount not to exceed $1,000,000,000 at any time outstanding (the
"Maximum Money Market Loan Amount"), provided that, giving effect to the
making of each Money Market Loan, the aggregate principal outstanding amount
of all Committed Loans, Money Market Loans and Swing Line Loans plus the
Letter of Credit Liabilities shall not exceed the aggregate Commitments. The
Lenders may, but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to
the Administrative Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit E hereto so as to be
received no later than (x) 11:30 A.M. (California local time) on the fourth
Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in
the case of a LIBOR Auction or (y) 10:30 A.M. (California local time) on the
Domestic Business Day prior to the date of Borrowing proposed therein, in the
case of an Absolute Rate Auction (or, in either case, such other time or date
as the Borrower and the Administrative Agent shall have mutually agreed and
shall have notified to the Lenders not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
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(ii) the aggregate amount of such Borrowing, which (A) when added
to the aggregate amount of all Money Market Loans then outstanding shall
not exceed the Maximum Money Market Loan Amount and (B) shall be $5,000,000
or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for no more than
three Interest Periods in a single Money Market Quote Request, and no more
than twelve Money Market Loans shall be outstanding at any time. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days (or
such other number of days as the Borrower and the Administrative Agent may
agree) of any other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Administrative Agent shall send to the
Lenders by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit F hereto, which shall constitute
an invitation by the Borrower to each Lender to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES.
Each Lender may submit a Money Market Quote containing an offer or
offers to make Money Market Loans in response to any Invitation for Money
Market Quotes. Each Money Market Quote must comply with the requirements of
this subsection (d) and must be submitted to the Administrative Agent by
telex or facsimile transmission at its offices specified in or pursuant to
Section 9.01 not later than (x) 8:00 A.M. (California local time) on the
fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 8:00 A.M. (California local time) on the
Domestic Business Day immediately preceding the proposed date of Borrowing,
in the case of an Absolute Rate Auction (or, in either case, such other time
or date as the Borrower and the Administrative Agent shall have
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mutually agreed and shall have notified to the Lenders not later than the
date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective); provided
that Money Market Quotes submitted by the Administrative Agent (or any
affiliate of the Administrative Agent) in the capacity of a Lender may be
submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for other Lenders,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for
other Lenders, in the case of an Absolute Rate Auction. Subject to Articles
III and VI, any Money Market Quote so made shall be irrevocable except with
the written consent of the Administrative Agent given on the instructions of
the Borrower.
(e) Each Money Market Quote shall be in substantially the form of
Exhibit G hereto and shall in any case specify:
(i) the proposed date of Borrowing,
(ii) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than
or less than the Commitment of the quoting Lender, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may not exceed the principal
amount of Money Market Loans for which offers were requested and (z) may
be subject to an aggregate limitation as to the principal amount of Money
Market Loans for which offers being made by such quoting Lender may be
accepted,
(iii) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(iv) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%)
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(the "Money Market Absolute Rate") offered for each such Money Market
Loan, and
(v) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Lender with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(f) Any Money Market Quote shall be disregarded if it:
(i) is not substantially in conformity with Exhibit G hereto or does
not specify all of the information required by subsection (d)(ii);
(ii) contains qualifying, conditional or similar language, except as
provided in subsection (d)(ii)(B)(z);
(iii) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes, except as provided in
subsection (d)(ii)(B)(z); or
(iv) arrives after the time set forth in subsection (d)(i) .
(g) NOTICE TO BORROWER. The Administrative Agent shall promptly notify
the Borrower of the terms (i) of any Money Market Quote submitted by a Lender
that is in accordance with subsection (d) and (ii) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Lender with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded
by the Administrative Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money Market
Quote. The Administrative Agent's notice to the Borrower shall specify (A)
the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins
or Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money
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Market Loans for which offers in any single Money Market Quote may be
accepted.
(h) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (x) 8:30 A.M.
(California local time) on the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 8:30 A.M.
(California local time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall
have notified to the Lenders not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Administrative
Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e). In the case of acceptance, such notice (a
"Notice of Money Market Borrowing") shall specify the aggregate principal
amount of offers for each Interest Period that are accepted. The Borrower
may accept any Money Market Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(i) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or
more Lenders with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are permitted to be accepted for the
related Interest Period, the principal amount of Money Market Loans in
respect of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in multiples
of
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$1,000,000, as the Administrative Agent may deem appropriate) in proportion
to the aggregate principal amounts of such offers. Determinations by the
Administrative Agent of the amounts of Money Market Loans shall be conclusive
in the absence of manifest error.
(j) EFFECT ON COMMITMENTS. Any Money Market Loans made by a Lender
pursuant to this Section shall not reduce such Lender's pro rata share of the
remaining undrawn Commitments.
(k) MATURITY OF MONEY MARKET LOANS. Each Money Market Loan shall
mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to that Money Market Loan.
Section 2.04 SWING LINE LOANS.
The Swing Line Lender shall from time to time from the Effective Date
through the day prior to the Termination Date make Swing Line Loans in
Dollars to Borrower in such amounts as Borrower may request, PROVIDED that
(i) after giving effect to such Swing Line Loan, (A) the aggregate Swing Line
Outstandings shall not exceed $15,000,000 and (B) the aggregate principal
outstanding amount of all Committed Loans, Money Market Loans and Swing Line
Loans plus the Letter of Credit Liabilities shall not exceed the aggregate
Commitments, (ii) without the consent of all of the Lenders, no Swing Line
Loan may be made during the continuation of any Default or Event of Default
and (iii) the Swing Line Lender has not given at least twenty-four hours
prior notice to Borrower that availability under the Swing Line is suspended
or terminated. Borrower may borrow, repay and reborrow under this Section.
Unless notified to the contrary by the Swing Line Lender, borrowings under
the Swing Line may be made in amounts which are integral multiples of
$1,000,000 upon telephonic request by a Responsible Official of Borrower made
to the Administrative Agent not later than 1:00 P.M. (California local time),
on the Domestic Business Day of the requested Swing Line Loan (which
telephonic request shall be promptly confirmed in writing by telecopier).
Promptly after receipt of such a request for a Swing Line Loan, the
Administrative Agent shall provide telephonic verification to the Swing Line
Lender that the requested Swing Line Loan is in conformity with this Section.
Unless the Swing Line Lender otherwise agrees, each repayment of a Swing Line
Loan shall be in an amount which is an integral multiple of $1,000,000. If
Borrower instructs the Swing Line Lender to debit its demand deposit account
at the Swing Line Lender in the amount of any payment with respect to a Swing
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Line Loan, or the Swing Line Lender otherwise receives repayment, after 3:00
p.m. (California local time), on a Domestic Business Day, such payment shall
be deemed received on the next Domestic Business Day. The Swing Line Lender
shall promptly notify the Administrative Agent of the Swing Loan Outstandings
each time there is a change therein.
The Swing Line Lender shall be responsible for submitting invoices to
Borrower for such interest. The interest payable on Swing Line Loans shall
be solely for the account of the Swing Line Lender unless and until the Banks
fund their participations therein pursuant to clause (d) of this Section.
The Swing Line Loans shall be payable on demand made by the Swing Line
Lender and in any event on the Termination Date.
Upon the making of a Swing Line Loan, each Lender shall be deemed to
have purchased from the Swing Line Lender a participation therein in an
amount equal to that Lender's percentage of the aggregate Commitments TIMES
the amount of the Swing Line Loan. Upon demand made by the Swing Line
Lender, each Lender shall, according to such percentage, promptly provide to
the Swing Line Lender its purchase price therefor in an amount equal to its
participation therein. The obligation of each Lender to so provide its
purchase price to the Swing Line Lender shall be absolute and unconditional
and shall not be affected by the occurrence of a Default or Event of Default.
Each Lender that has provided to the Swing Line Lender the purchase price due
for its participation in Swing Line Loans shall thereupon acquire a pro rata
participation, to the extent of such payment, in the claim of the Swing Line
Lender against Borrower for principal and interest and shall share, in
accordance with that pro rata participation, in any principal payment made by
Borrower with respect to such claim and in any interest payment made by
Borrower (but only with respect to periods subsequent to the date such Lender
paid the Swing Line Lender its purchase price) with respect to such claim.
In the event that the Swing Line Outstandings are in excess of
$10,000,000 on three consecutive Domestic Business Days then, on the next
Domestic Business Day (unless Borrower has made other arrangements acceptable
to the Swing Line Lender to reduce the Swing Line Outstandings below
$10,000,000), Borrower shall request a Borrowing in an amount sufficient to
reduce the Swing Line Outstandings below $10,000,000. In addition, upon any
demand for payment of the Swing Line Outstandings by the Swing Line Lender
(unless Borrower has made other arrangements acceptable
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to the Swing Line Lender to reduce the Swing Line Outstandings to $0),
Borrower shall request a Borrowing in an amount sufficient to repay all Swing
Line Outstandings (and, for this purpose, the limitations as to the minimum
amounts of Base Rate Borrowings set forth in Section 2.01 shall not apply).
In each case, the Administrative Agent shall automatically provide the
responsive Loans made by each Lender to the Swing Line Lender (which the
Swing Line Lender shall then apply to the Swing Line Outstandings). In the
event that Borrower fails to request a Borrowing within the time specified by
Section 2.02 on any such date, the Administrative Agent may, but shall not be
required to, without notice to or the consent of Borrower, cause Loans to be
made by the Lenders under their Commitments in amounts which are sufficient
to reduce the Swing Line Outstandings as required above. The conditions
precedent set forth in Section 3.01 shall not apply to Loans to be made by
the Lenders pursuant to the three preceding sentences. The proceeds of such
Loans shall be paid directly to the Swing Line Lender for application to the
Swing Line Outstandings.
Section 2.05 CONVERSION AND CONTINUATION OF COMMITTED LOANS. Subject
to the provisions of this Article II governing the making of Euro-Dollar
Loans, Borrower shall have the option at any time (i) to convert all or any
part of its outstanding Committed Loans equal to $10,000,000 and integral
multiples of $1,000,000 in excess of that amount from Loans bearing interest
at a rate determined by reference to one basis to Committed Loans bearing
interest at a rate determined by reference to an alternative basis or (ii)
upon the expiration of any Interest Period applicable to a Euro-Dollar Loan,
to continue all or any portion of such Loan equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount as a Euro-Dollar Loan;
PROVIDED, HOWEVER, that a Euro-Dollar Loan may only be converted into a Base
Rate Loan on the expiration date of an Interest Period applicable thereto.
Borrower shall deliver, to the Administrative Agent, notice of any such
conversion or continuation, substantially in the form of Exhibit D (each a
"Notice of Conversion/Continuation"), no later than 8:30 A.M. (California
local time) at least one Domestic Business Day in advance of the proposed
conversion date (in the case of a conversion to a Base Rate Loan) and at
least three Euro-Dollar Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a
continuation of, a Euro-Dollar Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day in the case of Base Rate Loans and a Euro-Dollar Business Day,
in the case of conversion to or continuation of Euro-Dollar Loans), (ii) the
amount and type of the Loan to be converted/continued, (iii) the nature of
the proposed
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conversion/continuation, (iv) in the case of a conversion to, or a
continuation of, a Euro-Dollar Loan, the requested Interest Period, and (v)
in the case of a conversion to, or a continuation of, a Euro-Dollar Loan,
that no Default or Event of Default has occurred and is continuing.
Section 2.06 NOTICE TO LENDERS; FUNDING OF LOANS.
Upon receipt of a Notice of Borrowing, the Administrative Agent shall
promptly notify each Lender of the contents thereof and of such Lender's
share (if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
Not later than 11:00 A.M. (California local time) on the date of each
Borrowing, if such Borrowing is to be made in Dollars, each Lender
participating therein shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing in Dollars, in federal or
other funds immediately available to the Administrative Agent at its address
referred to in Section 9.01. Unless the Administrative Agent determines that
any applicable condition specified in Article III has not been satisfied, the
Administrative Agent will make the funds so received from the Lenders
available to the Borrower at the Administrative Agent's aforesaid address or
place.
If any Lender makes a new Loan hereunder on a day on which the Borrower
is to repay all or any part of an outstanding Loan from such Lender, such
Lender shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Lender
to the Administrative Agent as provided in subsection (b), or remitted by the
Borrower to the Administrative Agent as provided in Section 2.17, as the case
may be.
Unless the Administrative Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available
to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.06 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have so made such share available to the Administrative
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Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.08 and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Loan included in such Borrowing for purposes of this
Agreement. If the Borrower pays interest under this subsection (d) at the
Federal Funds Rate and the Federal Funds Rate is higher than the interest
rate applicable thereto pursuant to Section 2.08, the applicable Lender shall
pay the Borrower the difference between such rates.
Section 2.07 NOTES.
The Committed Loans of each Lender shall be evidenced by a single Note
payable to the order of such Lender for the account of its Applicable Lending
Office in an amount equal to the aggregate unpaid principal amount of such
Lender's Commitment.
Each Lender may, by notice to the Borrower and the Administrative Agent,
request that its Money Market Loans be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Money Market
Loans. Each such Note shall be in substantially the form of Exhibit B hereto
with appropriate modifications to reflect the fact that it evidences solely
Money Market Loans. Each reference in this Agreement to the "Note" of such
Lender shall be deemed to refer to and include any or all of such Notes, as
the context may require.
Upon receipt of each Lender's Note pursuant to Section 3.02(b), the
Administrative Agent shall forward such Note to such Lender. Each Lender
shall record the date, amount, type and maturity of each Loan made by it and
the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Lender so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Lender is
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hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as
and when required.
Section 2.08 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day PLUS any applicable Base Rate Margin. Such interest
shall be payable on the last Domestic Business Day of each calendar quarter
in arrears and on the Termination Date. Any overdue principal of or interest
on any Base Rate Loan shall, at the option of the Required Lenders, bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of the Base Rate PLUS any applicable Base Rate Margin PLUS
2% per annum.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of (a) the Euro-Dollar Margin
for such day plus (b) the applicable London Interbank Offered Rate for such
Interest Period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall,
at the option of the Required Lenders, bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the
Euro-Dollar Margin for such day plus the quotient obtained (rounded upwards,
if necessary, to the next higher 1/100 of 1%) by dividing (i) the average
(rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such period of
time not longer than 6 months as the Administrative Agent may elect) deposits
in Dollars in an amount approximately equal to such overdue payment due to
the Administrative Agent are offered to the Administrative Agent in the
London interbank market for the applicable period determined as provided
above by (ii) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist, at
a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day).
(d) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined as if the related
Money Market LIBOR Borrowing
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were a Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted
by the Lender making such Loan in accordance with Section 2.03. Each Money
Market Absolute Rate Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per
annum equal to the Money Market Absolute Rate quoted by the Lender making
such Loan in accordance with Section 2.03. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period
is longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of the Base Rate PLUS any applicable Base Rate Margin PLUS
2% per annum for such day.
(e) Swing Line Loans shall bear interest at a fluctuating rate per
annum equal to the Base Rate PLUS any applicable Base Rate Margin. Interest
on the Swing Line Loans shall be payable on such dates, not more frequent
than monthly, as may be specified by the Swing Line Lender and in any event
on the Termination Date. Any overdue principal of or interest on any Swing
Line Loan shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of the Base Rate PLUS any applicable Base
Rate Margin PLUS 2% per annum for such day.
(f) The Administrative Agent shall determine in accordance with the
provisions of this Agreement each interest rate applicable to the Loans
hereunder. The Administrative Agent shall give prompt notice to the Borrower
and the participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
Section 2.09 UPFRONT FEES. On the Effective Date, the Borrower shall
pay to the Administrative Agent for the account of each Lender non-refundable
upfront fees in the amounts set forth in letter agreements between each
Lender and the Lead Arranger and advised by the Lead Arranger to Borrower.
Section 2.10 FACILITY FEES. The Borrower shall pay to the
Administrative Agent for the account of the Lenders ratably facility fees at
the Facility Fee Rate determined daily in accordance with the Schedule 2 (the
"Facility Fee Rate"). Such facility fee shall accrue from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the daily aggregate
amount of the Commitments (whether used or unused). Facility fees shall be
payable quarterly in arrears on the first day of each March, June, September
and December and upon the date of termination of the Commitments in their
entirety, and are non-refundable.
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Section 2.11 LETTER OF CREDIT FEES. The Borrower shall pay to the
Administrative Agent (i) for the account of the Lenders ratably a Letter of
Credit fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit at a rate per annum determined in accordance with
the Schedule 2 (the "LC Fee Rate") and (ii) for the account of the Issuing
Lender a Letter of Credit fronting fee accruing daily on the aggregate amount
then available for drawing under all Letters of Credit issued by the Issuing
Lender at a rate per annum set forth in a letter agreement between the
Borrower and the Issuing Lender. Letter of Credit fees shall payable
quarterly in arrears on the first day of each March, June, September and
December and upon the date of termination of the Commitments in their
entirety and are non-refundable.
Section 2.12 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY
BORROWER. During the Revolving Credit Period, the Borrower may, upon at least
five Domestic Business Days' notice to the Administrative Agent, (i)
terminate the Commitments at any time, if no Loans or Letter of Credit
Liabilities are outstanding at such time or (ii) ratably and permanently
reduce from time to time by an aggregate amount of $25,000,000 or any larger
amount in multiples of $1,000,000, the aggregate amount of the Commitments in
excess of the sum of the aggregate outstanding principal balance of the Loans
and the aggregate amount of Letter of Credit Liabilities.
Section 2.13 OPTIONAL TERMINATION OF COMMITMENTS BY THE LENDERS.
Following the occurrence of a Change of Control, the Required Lenders may in
their sole and absolute discretion elect, during the sixty day period
immediately subsequent to the LATER OF (a) such occurrence and (b) the
EARLIER of (i) receipt of Borrower's written notice to the Administrative
Agent of such occurrence and (ii) if no such notice has been received by the
Administrative Agent, the date upon which the Administrative Agent and the
Banks have actual knowledge thereof, to terminate all of the Commitments. In
any such case the Commitments shall be terminated effective on the date which
is sixty days subsequent to the date of written notice from the
Administrative Agent to Borrower thereof, and (i) to the extent that there is
then any Debt evidenced by the Notes, the same shall be immediately due and
payable, and (ii) to the extent that any Letters of Credit are then
outstanding, Borrower shall provide cash collateral for the same.
Section 2.14 SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
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Section 2.15 EXTENSIONS OF THE TERMINATION DATE. The Termination Date
may be extended, in the manner set forth in this Section, for a period of one
year after the date on which the Termination Date would otherwise have
occurred. If the Borrower wishes to extend the Termination Date, it shall
give written notice to that effect to the Administrative Agent not less than
90 days nor more than 150 days following the delivery to the Administrative
Agent of the audited annual financial statements of Borrower in accordance
with Section 5.01(b), whereupon the Administrative Agent shall notify each of
the Lenders of such notice. Each Lender will respond to such request,
whether affirmatively or negatively, within 30 days (the "Response Date").
If a Lender or Lenders respond negatively or fail to timely respond to such
request (each non-responding Lender being conclusively deemed to refuse to
consent to the extension), but such non-extending Lender(s) have
Commitment(s) aggregating less than 33 1/3% of the aggregate amount of the
Commitments, the Borrower shall, for a period of 60 days following the
Response Date, have the right, with the assistance of the Administrative
Agent, to seek a mutually satisfactory substitute financial institution or
financial institutions (which may be one or more of the Lenders) to assume
the Commitment(s) of such non-extending Lender(s). Not later than the third
Domestic Business Day prior to the end of such 60-day period, the Borrower
shall, by notice to the Lenders through the Administrative Agent, either (i)
terminate, effective on the third Domestic Business Day after the giving of
such notice, the Commitment(s) of such non-extending Lender(s), whereupon the
Lenders who have consented to the extension shall continue with their
commitments unaffected to lend subject to the terms of this Agreement to the
new Termination Date, or (ii) designate one or more new financial
institutions reasonably acceptable to the Administrative Agent to assume the
Commitments of such non-extending Lenders, whereupon the aggregate amount of
such Commitment(s) shall be assumed by such substitute financial institution
or financial institutions within such 60-day period or (iii) withdraw its
request for an extension of the Termination Date, in which case the
Commitments shall continue unaffected. The failure of the Borrower to timely
take the actions contemplated by clause (i) or (ii) of the preceding sentence
shall be deemed a withdrawal of its request for an extension as contemplated
by clause (iii) whether or not notice to such effect is given, and in no
event shall the Termination Date be extended unless each Lender which has not
consented to the proposed extension has been either replaced or terminated as
set forth above. So long as Lenders having Commitment(s) totaling not less
than 66 2/3% of the aggregate amount of the Commitment(s) shall have
responded affirmatively to such a request, and such request is not withdrawn
in accordance with the preceding sentence, then, subject to receipt by the
Administrative Agent of counterparts of an Extension Agreement in
substantially the form of Exhibit H duly completed and signed by the Borrower
and each of the affirmatively responding
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Lenders, the Termination Date shall be extended, effective on such Extension
Date, for a period of one year to the date stated in such Extension
Agreement.
Section 2.16 OPTIONAL PREPAYMENTS.
Subject in the case of any Euro-Dollar Borrowing to Section 2.18, the
Borrower may, upon at least one Domestic Business Day's notice to the
Administrative Agent, prepay any Base Rate Borrowing (or any Money Market
Borrowing bearing interest with reference to the Base Rate pursuant to
Section 8.01(a)) or upon at least three Euro-Dollar Business Days' notice to
the Administrative Agent, with respect to any Euro-Dollar Borrowing, prepay
any Euro-Dollar Borrowing, in each case in whole at any time, or from time to
time in part in amounts aggregating $10,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several
Lenders included in such Borrowing.
Except as provided in Section 2.16(a), the Borrower may not prepay all
or any portion of the principal amount of any Money Market Loan prior to the
maturity thereof.
Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Lender of the contents
thereof and of such Lender's ratable share (if any) of such prepayment and
such notice shall not thereafter be revocable by the Borrower.
Section 2.17 GENERAL PROVISIONS AS TO PAYMENTS.
The Borrower shall make each payment of principal of, and interest on,
Loans and Letters of Credit Liabilities and of fees hereunder, in Dollars not
later than 11:00 A.M. (California local time) on the date when due, in
Federal or other immediately available funds, to the Administrative Agent at
its address referred to in Section 9.01, without offset or counterclaim. The
Administrative Agent will promptly distribute to each Lender its ratable
share of each such payment received by the Administrative Agent for the
account of the Lenders, in Dollars and in the type of funds received by the
Administrative Agent. Whenever any payment of principal of, or interest on,
the Base Rate Loans or Letters of Credit Liabilities or of fees shall be due
on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to
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the next succeeding Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans or Money Market LIBOR Loans shall
be due on a day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or interest
on, the Money Market Absolute Rate Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Lender
on such due date an amount equal to the amount then due such Lender. If and
to the extent that the Borrower shall not have so made such payment, each
Lender shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date
such Lender repays such amount to the Administrative Agent, at the Federal
Funds Rate.
Section 2.18 FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII
or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the last day of an applicable period fixed pursuant to
Section 2.08(d), or if the Borrower fails to borrow any Fixed Rate Loans
after notice has been given to any Lender in accordance with section 2.06(a),
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or failure
to borrow, provided that such Lender shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate shall
be conclusive in the absence of manifest error.
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Section 2.19 COMPUTATION OF INTEREST AND FEES. Interest based on the
Reference Rate and all fees hereunder shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and paid for the actual number
of days elapsed (including the first day but excluding the last day). All
other interest shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
Section 2.20 WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Lender, each Lender that is not incorporated
under the laws of the United States of America or a state thereof agrees that
it will deliver to each of the Borrower and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes.
Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, in each case certifying that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.
Section 2.21 LETTERS OF CREDIT.
(a) Subject to the terms and conditions hereof, the Issuing Lender
agrees to issue Letters of Credit hereunder from time to time before the
tenth day before the Termination Date upon the request of the Borrower;
PROVIDED that, immediately after each Letter of Credit is issued, (i)
the aggregate amount of the Letter of Credit Liabilities shall not
exceed the Letter of Credit Commitment and (ii) the aggregate amount of
the Letter of Credit Liabilities
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plus the aggregate outstanding amount of all Loans shall not exceed-the
aggregate amount of the Commitments. Upon the date of issuance of a
Letter of Credit, the Issuing Lender shall be deemed, without further
action by any party hereto, to have sold to each Lender, and each Lender
shall be deemed, without further action by any party hereto, to have
purchased from the Issuing Lender, a participation in such Letter of
Credit and the related Letter of Credit Liabilities in the proportion
their respective Commitments bear to the aggregate Commitments.
(b) The Borrower shall give the Issuing Lender notice at least
five days prior to the requested issuance of a Letter of Credit
specifying the date such Letter of Credit is to be issued, and
describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such
notice given in connection with the extension of a Letter of Credit, a
"Notice of Issuance") and shall concurrently submit to the Issuing Bank
a letter of credit application on the Issuing Bank's then standard form
for the issuance of letters of credit. Upon receipt of a Notice of
Issuance, the Issuing Lender shall promptly notify the Administrative
Agent, and the Administrative Agent shall promptly notify each Lender of
the contents thereof and of the amount of such Lender's participation in
such Letter of Credit. The issuance by the Issuing Lender of each
Letter of Credit shall, in addition to the conditions precedent set
forth in Article III, be subject to the conditions precedent that such
Letter of Credit shall be in such form and contain such terms as shall
be satisfactory to the Issuing Lender and that the Borrower shall have
executed and delivered such other instruments and agreements relating to
such Letter of Credit as the Issuing Lender shall have reasonably
requested. The Borrower shall also pay to the Issuing Lender for its
own account issuance, drawing, amendment and extension charges in the
amounts and at the times as agreed between the Borrower and the Issuing
Lender. The extension or renewal of any Letter of Credit shall be
deemed to be an issuance of such Letter of Credit, and if any Letter of
Credit contains a provision pursuant to which it is deemed to be
extended unless notice of termination is given by the Issuing Lender,
the Issuing Lender shall timely give such notice of termination unless
it has theretofore timely received a Notice of Issuance and the other
conditions to issuance of a Letter of Credit have also theretofore been
met with respect to such extension. NoLetter of Credit shall have a
term extending or be so extendible beyond the fifth Domestic Business
Day preceding the Termination Date.
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(c) Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the Issuing Lender
shall notify the Administrative Agent and the Administrative Agent shall
promptly notify the Borrower and each other Lender as to the amount to
be paid as a result of such demand or drawing and the payment date. The
Borrower shall be irrevocably and unconditionally obligated forthwith to
reimburse the Issuing Lender for any amounts paid by the Issuing Lender
upon any drawing under any Letter of Credit, without presentment,
demand, protest or other formalities of any kind. All such amounts paid
by the Issuing Lender and remaining unpaid by the Borrower shall bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for
such day. In addition, each Lender will pay to the Administrative Agent,
for the account of the Issuing Lender, immediately upon the Issuing
Lender's demand at any time during the period commencing after such
drawing until reimbursement therefor in full by the Borrower, an amount
equal to such Lender's ratable share of such drawing (in proportion to
its participation therein), together with interest on such amount for
each day from the date of the Issuing Lender's demand for such payment
(or, if such demand is made after 9:00 A.M. (California local time) on
such date, from the next succeeding Domestic Business Day) to the date
of payment by such Lender of such amount at a rate of interest per annum
equal to the Federal Funds Rate. The Issuing Lender will promptly pay
to each Lender ratably all amounts received from the Borrower for
application in payment of its reimbursement obligations in respect of
any Letter of Credit, but only to the extent such Lender has made
payment to the Issuing Lender in respect of such Letter of Credit
pursuant hereto.
(d) The obligations of the Borrower and each Lender under
subsection (c) above shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any Letter of Credit or any document related hereto or thereto;
(ii) any amendment, waiver of or any consent to departure from
all or any of the provisions of this Agreement, any Letter of Credit
or any document related hereto or thereto;
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(iii) the use which may be made of the Letter of Credit by, or
any acts or omission of, a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary
of a Letter of Credit (or any Person for whom the beneficiary may be
acting), the Lenders (including the Issuing Lender) or any other
Person, whether in connection with this Agreement or the Letter of
Credit or any document related hereto or thereto or any unrelated
transaction;
(v) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(vi) payment under a Letter of Credit to the beneficiary of
such Letter of Credit against presentation to the Issuing Lender of a
draft or certificate that does not comply with the terms of the
Letter of Credit; or
(vii) any other act or omission to act or delay of any kind by
any Lender (including the Issuing Lender), the Administrative Agent or
any other Person or any other event or circumstance whatsoever that
might, but for the provisions of this subsection (vii), constitute
a legal or equitable discharge of the Borrower's or the Lender's
obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each Lender
(including the Issuing Lender) and the Administrative Agent from and
against any and all claims, damages, losses, liabilities, costs or
expenses which such Lender or the Administrative Agent may incur
(including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Issuing Lender may incur by
reason of or in connection with the failure of any other Lender to
fulfill or comply with its obligations to the Issuing Lender hereunder
(but nothing herein contained shall affect any rights the Borrower may
have against such defaulting Lender)), and none of the Lenders
(including the Issuing Lender) nor the Administrative Agent nor any of
their officers or directors or employees or agents shall be liable or
responsible, by reason of or in connection with the execution and
delivery or transfer of or payment or
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failure to pay under any Letter of Credit, including without limitation any
of the circumstances enumerated in subsection (d) above, as well as (i)
any error, omission, interruption or delay in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, (ii) any
error in interpretation of technical terms, (iii) any loss or delay in
the transmission of any document required in order to make a drawing
under a Letter of Credit, (iv) any consequences arising from causes
beyond the control of the Issuing Lender, including without limitation
any government acts, or any other circumstances whatsoever in making or
failing to make payment under such Letter of Credit; PROVIDED that the
Borrower shall not be required to indemnify the Issuing Lender for any
claims, damages, losses, liabilities, costs or expenses, and the
Borrower shall have a claim for direct (but not consequential) damage
suffered by it, to the extent found by a court of competent jurisdiction
to have been caused by (x) the willful misconduct or gross negligence of
the Issuing Lender in determining whether a request presented under any
Letter of Credit complied with the terms of such Letter of Credit or (y)
the Issuing Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and
conditions of the Letter of Credit. Nothing in this subsection (e) is
intended to limit the obligations of the Borrower under any other
provision of this Agreement. To the extent the Borrower does not
indemnify the Issuing Lender as required by this subsection, the Lenders
agree to do so ratably in accordance with their Commitments.
Section 2.22 REGULATION D COMPENSATION. Each Lender may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Lender at a rate per annum determined by such Lender up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Lender wishing to require
payment of such additional interest (x) shall so notify the Borrower and the
Agent, in which case such additional interest on the Euro-Dollar Loans of
such Lender shall be payable to such Lender at the place indicated in such
notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after the giving of such notice and (y) shall
notify the Borrower at least five Euro-Dollar Business Days prior to each
date on which interest is payable on the Euro-Dollar Loans of the amount then
due it under this Section.
Section 2.23 INCREASED COMMITMENTS; ADDITIONAL LENDERS.
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(a) Subsequent to the Effective Date, the Borrower may, upon at least 30
days notice to the Administrative Agent (which shall promptly provide a copy of
such notice to the Lenders), propose to increase the aggregate amount of the
Commitments and the Other Commitments by an aggregate amount not to exceed
$625,000,000 (the amount of any such increase of the Commitments being referred
to as the "Increased Commitments"). Each Lender party to this Agreement at such
time shall have the right (but no obligation), for a period of 15 days following
receipt of such notice, to elect by notice to the Borrower and the
Administrative Agent to increase its Commitment by a principal amount which
bears the same ratio to the Increased Commitments as its then Commitment bears
to the aggregate Commitments then existing. Each Lender which fails to respond
to any such request shall be conclusively deemed to have refused to consent to
an increase in its Commitment.
(b) If any Lender party to this Agreement shall not elect to increase its
Commitment pursuant to subsection (a) of this Section, the Borrower may
designate another Person which qualifies as an Eligible Assignee (which may be,
but need not be, one or more of the existing Lenders) which at the time agrees
to (i) in the case of any such Person that is an existing Lender, increase its
Commitment and (ii) in the case of any other such Person (an "Additional
Lender"), become a party to this Agreement. The sum of the increases in the
Commitments of the existing Lenders pursuant to this subsection (b) plus the
Commitments of the Additional Lenders shall not in the aggregate exceed the
unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.23 shall become effective upon the receipt by the Administrative
Agent of an agreement in form and substance satisfactory to the Administrative
Agent signed by the Borrower, by each Additional Lender and by each other Lender
whose Commitment is to be increased, setting forth the new Commitments of such
Lenders and setting forth the agreement of each Additional Lender to become a
party to this Agreement and to be bound by all the terms and provisions hereof,
together with such evidence of appropriate corporate authorization on the part
of the Borrower with respect to the Increased Commitments and such opinions of
counsel for the Borrower with respect to the Increased Commitments as the
Administrative Agent may reasonably request.
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ARTICLE III
CONDITIONS
Section 3.01 BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT. The
obligation of any Lender to make a Loan on the occasion of any Borrowing, the
obligation of the Issuing Lender to issue (or renew or extend the term of)
any Letter of Credit and the obligation of the Swing Line Lender to make any
Swing Line Loan are each subject to the satisfaction of the following
conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, or receipt by the Issuing Lender of a
Notice of Issuance as required by Section 2.21(b), as the case may be;
(b) immediately after such Borrowing or issuance of a Letter of Credit,
the sum of the aggregate outstanding principal amount of the Loans and Swing
Line Loans and the aggregate amount of Letter of Credit Liabilities will not
exceed the aggregate amount of the Commitments;
(c) immediately before and after such Borrowing or issuance of a Letter
of Credit, no Default or Event of Default shall have occurred and be
continuing;
(d) the representations and warranties of the Borrower contained in this
Agreement (except the representations and warranties set forth in Section
4.04(b) and Section 4.05, in each case as to any matter which has theretofore
been disclosed in writing by the Borrower to the Lenders) shall be true on
and as of the date of such Borrowing or issuance of such Letter of Credit; and
(e) in the case of an issuance of a Letter of Credit, immediately after
such issuance of a Letter of Credit, the aggregate amount of the Letter of
Credit Liabilities shall not exceed the Letter of Credit Commitment.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed
to be a representation and warranty by the Borrower on the date of such
Borrowing or issuance as to the facts specified in clauses (b), (c) and (d)
of this Section.
Section 3.02 EFFECTIVENESS. This agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 9.04):
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(a) receipt by the Administrative Agent of counterparts hereof signed by
each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of telegraphic, telex or
other written confirmation from such party of execution of a counterpart
hereof by such party);
(b) receipt by the Administrative Agent for the account of each Lender of
a duly executed Note dated on or before the Effective Date complying with the
provisions of Section 2.07 and of the Swing Line Documents;
(c) receipt by the Administrative Agent of an opinion of Gibson, Dunn &
Crutcher LLP, substantially in the form of Exhibit I hereto and an opinion of
Latham & Watkins, LLP, substantially in the form of Exhibit J hereto, in each
case covering such additional matters relating to the transactions
contemplated hereby as the Required Lenders may reasonably request;
(d) Borrower shall have executed the First Supplemental Indenture
described in the definition of "Spin-Off Transaction" and shall have thereby
assumed primary liability with respect to Hilton Notes in an aggregate
principal amount not to exceed $625,000,000;
(e) receipt by the Administrative Agent of evidence acceptable to the
Administrative Agent that the Spin-Off Transaction has been or shall
concurrently be consummated;
(f) arrangements satisfactory to the Administrative Agent for the
repayment of all loans (if any) outstanding under the Grand's senior bank
credit facility and the related liens and the termination of all capital
lease facilities for which Grand and its subsidiaries have any liability
(except as to customary surviving indemnities and other contingent
obligations) and the payment of all interest and fees accrued thereunder
shall have been made; and
(g) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agents;
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(h) The Administrative Agent shall promptly notify the Borrower, the
Administrative Agent and each Lender of the effectiveness of this Agreement,
and such notice shall be conclusive and binding on all parties hereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.01 CORPORATE EXISTENCE AND POWER. The Borrower (a) is a
corporation duly incorporated, validly existing and in good standing under
the laws of Delaware, (b) has all corporate powers and authority and all
material governmental licenses (including, without limitation, any such
license issued by a Gaming Board), authorizations, consents and approvals
required to own its property and assets and carry on its business as now
conducted and (c) is duly qualified as a foreign corporation and in good
standing in each jurisdiction where the ownership, leasing and operation of
its property or the conduct of its business requires such qualification.
Section 4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Borrower of this Agreement and
the Notes are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any Governmental Agency and do not contravene,
or constitute a default under, any provision of applicable law or regulation
or of the certificate of incorporation or by-laws of the Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or result in the creation or imposition of any Lien on any
asset of the Borrower or any of its Subsidiaries.
Section 4.03 BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and the Notes, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower, in each case enforceable in accordance with
their respective terms.
Section 4.04 FINANCIAL INFORMATION.
The Combined Pro Forma Financial Statements (i) are derived from (y)
the audited financial statements of Hilton set forth in Hilton's 1997 Form
10-K, and the unaudited financial statements of Hilton set forth in Hilton's
Form 10-Q for the period ended September 30, 1998, and (z) the audited
financial statements of Grand set forth in Grand's 1997 Form 10-K and the
unaudited financial statements of Grand set forth in Grand's Form 10-Q for
the period ended September 30, 1998, (ii) represent allocation of the assets,
liabilities and results of operations of Grand and Hilton which fairly
present the
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pro forma combined financial position and results of operations of Borrower
and its Subsidiaries as of the dates and for the periods therein stated,
giving effect to the Spin-Off transaction and the Lakes Spin-Off, and (iii)
fairly present in all material respects, in conformity with generally
accepted accounting principles, the pro forma combined financial position of
the Gaming Segment and the divisions of Grand owning the Grand Assets as of
such date and their consolidated results of operations and cash flows for
such fiscal year
Since September 30, 1998, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Gaming Segment and the Grand Assets, or in the operations of the Persons now
comprising Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.05 LITIGATION. Except as disclosed in the form 10-Q reports
dated as of September 30, 1998 for Hilton and Grand, there is no action, suit
or proceeding pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Borrower and its Consolidated
Subsidiaries or which in any manner draws into question the validity or
enforceability of this Agreement or the Notes. Without limiting the
generality of the foregoing, with respect to those litigation matters
described above as reported in the 10-Q reports as of September 30, 1998, for
Hilton and Grand), (a) the disclosure contained therein was accurate as of
the date of thereof, and (b) since such date there has been no material
adverse development.
Section 4.06 COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and
the Internal Revenue Code with respect to each Plan. No member of the ERISA
Group has (i) sought a waiver of the minimum funding standard under Section
412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make
any contribution or payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a Lien
or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV or ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA.
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Section 4.07 TAXES. The United States Federal income tax returns of
Hilton and its Subsidiaries and of Grand and its Subsidiaries have been
examined and closed through the fiscal year ended December 31, 1997. The
Borrower and its Significant Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower
and its Significant Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
Section 4.08 SIGNIFICANT SUBSIDIARIES. Each of the Significant
Subsidiaries (a) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, (b) has
all corporate powers and authority and all material governmental licenses
(including, without limitation, any such license issued by a Gaming Board),
authorizations, consents and approvals required to own its property and
assets and carry on its business as now conducted and (c) is duly qualified
as a foreign corporation and in good standing in each jurisdiction where the
ownership, leasing and operation of its property or the conduct of its
business requires such qualification, and the failure to be so qualified
would have a material adverse effect on the Borrower and its Subsidiaries.
Section 4.09 NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.10 ENVIRONMENTAL MATTERS. The Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
Section 4.11 FULL DISCLOSURE. All information heretofore furnished by
Hilton, Grand and the Borrower to the Agents or to any Lender for purposes of
or in connection with this Agreement or any transaction contemplated hereby
is, and all such information hereafter furnished by the Borrower to the
Administrative Agent or any Lender will be, taken as a whole, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Borrower has disclosed to the Lenders in writing
any and all facts which materially and adversely affect or may affect (to the
extent the Borrower can now reasonably foresee), the business, operations or
financial position of the Borrower and its Consolidated Subsidiaries, taken
as a whole, or the ability of the Borrower to perform its obligations under
this Agreement. With respect to any
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projections or forecasts provided, such projections or forecasts represent,
as of the date thereof, management's best estimates based on reasonable
assumptions and all available information, but are subject to the uncertainty
inherent in all projections and forecasts.
Section 4.12 THE SPIN-OFF TRANSACTION. As of the Effective Date, the
Spin-Off Transaction has been consummated in accordance with the Grand
Agreement and applicable laws. Giving effect to the Spin-Off Transaction, as
of the Effective Date, Borrower and its Significant Subsidiaries are, on a
consolidated basis, Solvent.
Section 4.13 GAMING LAWS. Borrower and its Subsidiaries are in
material compliance with all applicable Gaming Laws.
Section 4.14 YEAR 2000. Borrower and its Subsidiaries have reviewed
the effect of the Year 2000 Issue on the computer software, hardware and
firmware systems and equipment contained embedded microchips owned or
operated by or for Borrower and its Subsidiaries. The costs to Borrower and
its Subsidiaries of any reprogramming required as a result of the Year 2000
Issue to permit the proper functioning of such systems and equipment and the
proper processing of data, and the testing of such reprogramming, and of
required systems changes are not reasonably expected to result in a Default
or to have a material adverse effect on the business, financial position,
results of operations or prospects of Borrower and its Consolidated
Subsidiaries, considered as a whole.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Note or any Letter of Credit Liability
remains unpaid:
Section 5.01 INFORMATION. The Borrower will deliver to the
Administrative Agent:
(a) as soon as available and in any event no later than March 31,
1999, pro forma combined statement of income of the Gaming Segment and
the Grand Assets for the period commencing October 1, 1998 and ending on
December 31, 1998, and a combined pro forma balance sheet of the Gaming
Segment and the Grand Assets as at December 31, 1998, in each case
prepared in a manner consistent the with Combined Pro Forma Financial
Statements delivered to the Administrative Agent and the Lenders prior
to the Effective Date;
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, the consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative
form the figures as of the end of and for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing;
(c) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements of income and cash
flows in comparative form the figures for the corresponding quarter and
the corresponding portion of the Borrower's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency
by an Authorized Officer;
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(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a Compliance
Certificate (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 5.06, 5.10 and 5.11 on the date of such
financial statements, and (ii) stating whether any Default exists on the
date of such Compliance Certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(e) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith;
(f) as soon as available and in any event not later than the last
day of February of each year, a completed Pricing Certificate as of
December 31 of the prior year;
(g) within five Domestic Business Days of any officer of the
Borrower obtaining knowledge of any Default, if such Default is then
continuing, a certificate of an Authorized Officer setting forth the
details thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
(h) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Borrower shall have filed
with the Securities and Exchange Commission;
(j) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that
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the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to
administer, any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of a
bond or other security, a certificate of the chief financial officer or
the chief accounting officer of the Borrower setting forth details as to
such occurrence and action, if any, which the Borrower or applicable
member of the ERISA Group is required or proposes to take;
(k) forthwith, notice of any change of which the Borrower becomes
aware in the rating by S&P or Moody's, of the Borrower's outstanding
senior unsecured long-term debt securities; and
(l) from time to time such additional information regarding the
financial position or business of the Borrower and its subsidiaries as
the Administrative Agent, at the request of any Lender, may reasonably
request.
Section 5.02 MAINTENANCE OF PROPERTY; INSURANCE.
The Borrower will keep, and will cause each Significant Subsidiary
to keep, all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted, except
where failure to do so would not have a material adverse effect on the
business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
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The Borrower will, and will cause each of its Significant Subsidiaries
to, maintain (either in the name of the Borrower or in such Subsidiary's own
name) with financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute engaged
in the same or a similar business and will furnish to the Lenders, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried. Notwithstanding the foregoing, the
Borrower may self-insure with respect to such risks with respect to which
companies of established repute engaged in the same or similar business in
the same general area usually self-insure.
Section 5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue, and will cause each Significant Subsidiary to
continue, to engage in business of the same general type conducted by the
Borrower and its Significant Subsidiaries as of the Effective Date, and will
preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section 5.03 shall prohibit (i) the merger of a
Subsidiary into the Borrower or the merger or the consolidation of a
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the corporate existence of any Subsidiary if (A) the Borrower
in good faith determines that such termination is in the best interest of the
Borrower and (B) such termination is not materially disadvantageous to the
Lenders.
Section 5.04 COMPLIANCE WITH LAWS. The Borrower will comply, and
cause each Significant Subsidiary to comply, in all material respect with all
applicable laws, ordinances, rules, regulations, and requirements of any
Governmental Agency (including, without limitation, Environmental Laws,
Gaming Laws and ERISA and, in each case, the rules and regulations
thereunder) except where the necessity of compliance therewith is contested
in good faith by appropriate proceedings.
Section 5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower
will keep, and will cause each Significant Subsidiary to keep, proper books
of record and account in which full, true and correct entries shall be made
of all dealings and transactions in relation to its business and activities;
and will permit, and will cause each Significant Subsidiary to permit,
representatives of any Lender at such Lender's expense to visit
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and inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times
and as often as may reasonably be desired.
Section 5.06 NEGATIVE PLEDGE. None of the Borrower, any Covered
Subsidiary or any Significant Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing as of the Effective Date;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation
of such event;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset (it being understood that, for this purpose, the
acquisition of a Person is also an acquisition of the assets of such
Person); provided that the Lien attaches to such asset concurrently with
or within 180 days after the acquisition thereof, or such longer period,
not to exceed 12 months, due to the Borrower's inability to retain the
requisite governmental approvals with respect to such acquisition;
provided further that, in the case of real estate, (i) the Lien attaches
within 12 months after the latest of the acquisition thereof, the
completion of construction thereon or the commencement of full operation
thereof and (ii) the Debt so secured does not exceed the sum of (x) the
purchase price of such real estate plus (y) the costs of such
construction;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Borrower or
a Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Subsidiary and not created in contemplation
of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased (other than to
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cover any transaction costs of such refinancing, extension, renewal or
refunding) and is not secured by any additional assets;
(g) Liens securing Debt of a Subsidiary to the Borrower or another
Subsidiary; and
(h) Liens not otherwise permitted by the foregoing clauses of this
Section encumbering assets of the Borrower and its Consolidated
Subsidiaries having an aggregate fair market value which is not in
excess of 10% of Consolidated Net Tangible Assets (determined, in each
case, by reference to the Combined Pro Forma Financial Statements or, if
then delivered, as of the most recent date for which Borrower has
delivered its financial statements under Section 5.01(b)).
Section 5.07 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower and its Subsidiaries will not (i) consolidate or merge with or into
any other Person or (ii) sell, lease or otherwise transfer all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as
a whole, to any other Person, or (iii) acquire all or substantially all of
the assets of, or more than 49% of the capital stock or other equity
securities of, any Person which is not engaged in the same general lines of
business as Borrower and its Subsidiaries, if, giving effect to such
consolidation, merger, sale or acquisition, Borrower is not in pro forma
compliance with the covenants set forth in Sections 5.10 and 5.11; PROVIDED
that, notwithstanding the foregoing, the Borrower may merge with another
Person only if (A) the Borrower is the corporation surviving such merger, and
(B) immediately after giving effect to such merger, no Default shall have
occurred and be continuing.
Section 5.08 HOSTILE TENDER OFFERS. The Borrower and its Subsidiaries
will not make any offer to purchase or acquire, or prosecute, pursue or
consummate a purchase or acquisition of, 5% or more of the capital stock of
any corporation or other business entity, if the board of directors or other
equivalent governing body of such corporation or business entity has notified
Borrower or its relevant Subsidiaries that it opposes such offer or purchase
and such notice has not been withdrawn or superseded.
Section 5.09 USE OF PROCEEDS. The proceeds of the Loans made under
this Agreement will be used by the Borrower for general corporate purposes,
including but not limited to (a) on the effective date, the refinancing of
obligations under the Hilton Credit Agreement and transactional and other
expenses associated with the Spin-Off Transaction, and (b), thereafter, for
working capital, capital expenditures, the back stop of commercial paper and
the acquisition of full-service hotel\casino, casino and
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casino\resort properties. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the meaning of Regulation U
other than "margin stock" issued by the Borrower which is retired upon
purchase or for any purpose which violates Section 5.08.
Section 5.10 LEVERAGE RATIO. The Leverage Ratio will not, as of the
last day of any fiscal quarter of Borrower described in the matrix below,
exceed the ratio set forth opposite that fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDING MAXIMUM RATIO
---------------------- -------------
<S> <C>
Effective Date through
December 31, 2000 4.75:1.00
Later Fiscal Quarters 4.50:1.00.
</TABLE>
Section 5.11 INTEREST COVERAGE RATIO. The Interest Coverage Ratio
shall not, as of the last day of any fiscal quarter of Borrower, be less
than 3.00:1.00.
Section 5.12 YEAR 2000. Borrower shall make, and shall cause each of
its Subsidiaries to make, all required systems changes by December 31, 1999,
in computer software, hardware and firmware systems and equipment containing
embedded microchips owned or operated by or for Borrower and its Subsidiaries
required as a result of the Year 2000 Issue to permit the proper functioning
of such computer systems and other equipment, except to the extent that the
failure to take any such action could not reasonably be expected to result in
a Default or to have a material adverse effect on the business, financial
position, results of operations or prospects of Borrower and its Consolidated
Subsidiaries, considered as a whole. At the request of any Lender, Borrower
shall provide, and shall cause each of its Subsidiaries to provide, to such
Lender reasonable assurance of its compliance with the preceding sentence.
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ARTICLE VI
DEFAULTS
Section 6.01 EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to (i) reimburse any drawing under any
Letter of Credit when required hereunder or (ii) pay when due any principal
of any Loan or Swing Line Loan under this Agreement, or (iii) pay when due
any interest on any Money Market Loan or (iv) pay within five days of the due
date thereof any other interest, fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained
in Sections 5.06 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a)
or (b) above) for 7 days after written notice thereof has been given to the
Borrower by the Administrative Agent, which notice shall be delivered to
Borrower by the Administrative Agent at the request of any Lender;
(d) any representation, warranty, certification or statement made or
deemed made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower or any Covered Subsidiary or any Significant Subsidiary
shall fail to make any payment in respect of any Debt (other than the Notes
and Non-Recourse Debt) when due or within any applicable grace period and the
aggregate principal amount of such Debt is in excess of $100,000,000;
(f) any event or condition shall occur which results in the acceleration
of the maturity of any Debt (other than Non-Recourse Debt) in excess of
$100,000,000 of the Borrower or any Covered Subsidiary or any Significant
Subsidiary or enables or entitles the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
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(g) the Borrower or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Significant Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $5,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer, any Material
Plan; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Subsidiary and such
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judgment or order shall continue unsatisfied and unstayed for a period of
30 days;
(k) the occurrence of a License Revocation with respect to a license
issued to Borrower or any of its Subsidiaries by any Gaming Board of the
States of Mississippi, New Jersey or Nevada with respect to gaming operations
at any gaming facility accounting for five percent (5%) or more of the
consolidated gross revenues of Borrower and its Subsidiaries that continues
for thirty calendar days;
then, and in every such event, the Administrative Agent shall (i) if
requested by the Required Lenders, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by the
Required Lenders, by notice to the Borrower declare the Loans and the Letter
of Credit Liabilities (together with accrued interest thereon) to be, and the
Loans (together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; PROVIDED
that in the case of any of the Events of Default specified in clause (g) or
(h) above with respect to the Borrower, without any notice to the Borrower or
any other act by the Administrative Agent or the Lenders, the Commitments
shall thereupon terminate and the Loans and the Letter of Credit Liabilities
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
Section 6.02 NOTICE OF DEFAULT. The Administrative Agent shall
give notice to the Borrower under Section 6.01(c) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof.
Section 6.03 CASH COVER. The Borrower agrees, in addition to
the provisions of Section 6.01 hereof, that upon the occurrence and during
the continuance of any Event of Default, it shall, if requested by the
Administrative Agent upon the instruction of the Required Lenders, pay to the
Administrative Agent an amount in immediately available funds (which funds
shall be held as collateral pursuant to arrangements satisfactory to the
Administrative Agent) equal to the aggregate amount available for drawing
under all Letters of Credit then outstanding at such time, provided that,
upon the occurrence of any Event of Default specified in Section 6.01(g) or
6.01(h) with respect to the Borrower or any of its Significant Subsidiaries,
the Borrower shall pay such amount forthwith without any notice or demand or
any other act by the Administrative Agent or the Lenders.
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ARTICLE VII
THE AGENTS
Section 7.01 APPOINTMENT AND AUTHORIZATION. Each Lender
irrevocably appoints and authorizes each Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes
as are delegated to such Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
Section 7.02 AGENTS AND AFFILIATES. Bank of America and the
other Agents shall each have the same rights and powers under this Agreement
as any other Lender and each may exercise or refrain from exercising the same
as though it were not an Agent, and Bank of America and the other Agents and
their respective affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with, the Borrower or any Subsidiary
or Affiliate of the Borrower as if they were not Agents hereunder.
Section 7.03 ACTION BY AGENTS. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Administrative Agent shall not be required
to take any action with respect to any Default, except as expressly provided
in Article VI.
Section 7.04 CONSULTATION WITH EXPERTS. Each Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
Section 7.05 LIABILITY OF AGENT. Neither any Agent nor any of
their respective affiliates nor any of the respective directors, officers,
agents or employees of any of the foregoing shall be liable for any action
taken or not taken by it in connection herewith (i) with the consent or at
the request of the Required Lenders or (ii) in the absence of its own gross
negligence or willful misconduct. Neither any Agent nor any of their
respective affiliates nor any of the respective directors, officers, agents
or employees of any of the foregoing shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article III, except in the case of the Administrative Agent receipt of
items
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required to be delivered to it; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Administrative Agent shall incur no
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed
by the proper party or parties.
Section 7.06 INDEMNIFICATION. Each Lender shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent, the
Issuing Lender, their affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrower) against
any cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may suffer or incur
in connection with the Administrative Agent's and Issuing Lender's roles
under this Agreement or any related action taken or omitted by such
indemnitees hereunder.
Section 7.07 CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent, the
Lead Arranger or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent, the
Lead Arranger or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this Agreement.
Section 7.08 SUCCESSOR AGENT. The Administrative Agent may
resign at any time subject to the appointment of a successor Agent by giving
notice to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent with the
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed; provided that no such consent shall be required if the successor
Agent is a Lender. If no successor Agent shall have been so appointed, and
shall have accepted such appointment, within 30 days after the retiring
Agent's 'giving of notice of resignation, then the retiring Agent may, on
behalf of the Lenders, and without the Borrower's consent, appoint a
successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $1,000,000,000. Upon the acceptance
of its appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be
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discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
Section 7.09 AGENTS' FEES. The Borrower shall pay to each Agent
for its own account fees in the amounts and at the times previously agreed
upon between the Borrower and such Agent.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Administrative Agent is advised by the Majority Lenders that
deposits in Dollars and in the required amounts are not being offered to the
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Lenders having 50% or more of
the aggregate amount of the Commitments advise the Administrative Agent that
the London Interbank Offered Rate, as determined by the Administrative Agent,
will not adequately and fairly reflect the cost to such Lenders of funding
their Euro-Dollar Loans for such Interest Period,
(c) the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Lenders, whereupon until the Administrative Agent notifies
the Borrower that the circumstances giving rise to such suspension no longer
exist, the obligations of the Lenders to make Euro-Dollar Loans shall be
suspended. Unless the Borrower notifies the Administrative Agent at least
two Domestic Business Days before the date of any Fixed Rate Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is a Committed
Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and
(ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the
Money Market LIBOR Loans comprising such Borrowing shall bear interest for
each day from and including the first day to but excluding the last day of
the Interest Period applicable thereto at the rate applicable to Base Rate
Loans for such day. The Administrative Agent shall promptly notify the
Lenders of any election by the Borrower pursuant to the preceding sentence.
Section 8.02 ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Lender (or its Euro-Dollar Lending
Office) to make,
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maintain or fund its Euro-Dollar Loans and such Lender shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Lenders and the Borrower, whereupon until such Lender
notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Lender
to make Euro-Dollar Loans shall be suspended. Before giving any notice to
the Administrative Agent pursuant to this Section, such Lender shall
designate a different Euro-Dollar Lending Office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of
such Lender, be otherwise disadvantageous to such Lender. If such Lender
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued
interest thereon. Concurrently with prepaying each such Euro-Dollar Loan,
the Borrower shall borrow a Base Rate Loan in an equal principal amount from
such Lender (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Lenders),
and such Lender shall make such a Base Rate Loan.
Section 8.03 INCREASED COST AND REDUCED RETURN. If on or after
(x) the date hereof, in the case of any Committed Loan or Letter of Credit or
any obligation to make Committed Loans or issue or participate in any Letter
of Credit or (y) the date of the related Money Market Quote, in the case of
any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Lender (or its Applicable
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency:
(a) shall subject any Lender (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its Note or
its obligation to make Fixed Rate Loans or its obligations hereunder in
respect of Letters of Credit, or shall change the basis of taxation of
payments to any Lender (or its Applicable Lending Office) of the principal of
or interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed
Rate Loans (except for changes in the rate of tax on the overall net income
of such Lender or its Applicable Lending
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Office imposed by the jurisdiction in which such Lender's principal executive
office or Applicable Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding, with respect to any Euro-Dollar
Loan any such requirement included in an applicable Euro-Dollar Reserve
Percentage), special deposit, insurance assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Lender (or its Applicable Lending Office) or shall impose on any
Lender (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans or its obligations hereunder in respect to Letters of Credit;
(c) and the result of any of the foregoing is to increase the cost to
such Lender (or its Applicable Lending Office) of making or maintaining any
Fixed Rate Loan or of issuing or participating in any Letter of Credit, or to
reduce the amount of any sum received or receivable by such Lender (or its
Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Lender to be material, then,
within 15 days after demand by such Lender (with a copy to the Administrative
Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction.
If, after the date hereof, any Lender shall have determined that any
applicable law, rule or regulation regarding capital adequacy (irrespective
of the actual timing of the adoption or implementation thereof and including,
without limitation, any law or regulation adopted pursuant to the July 1988
report of the Basle Committee on Banking Regulations and Supervisory
Practices) or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Lender (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on capital of such
Lender (or its Parent) as a consequence of such Lender's obligations
hereunder to a level below that which such Lender (or its Parent) could have
achieved but for such law,
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regulation, change or compliance (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Lender to be
material, then from time to time, within 15 days after demand by such Lender
(with a copy to the Administrative Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender (or
its Parent) for such reduction.
Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Lender to compensation pursuant to
this Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate of any Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
Section 8.03 BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Lender to make Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Lender has demanded
compensation under Section 8.03(a) and the Borrower shall, by at least five
Euro-Dollar Business Days, prior notice to such Lender through the
Administrative Agent, have elected that the provisions of this Section shall
apply to such Lender, then, unless and until such Lender notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Lender as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest
and principal shall be payable contemporaneously with the related Fixed Rate
Loans of the other Lenders), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, telecopy or similar writing) and shall be given to such party:
(x) in the case of the Borrower or the Administrative Agent, at its address
or telex or telecopier number set forth on the signature pages hereof, (y) in
the case of any Lender, at its address or telex or telecopier number set
forth in its Administrative Questionnaire or (z) in the case of any party,
such other address or telex or telecopier number as such party may hereafter
specify for the purpose by notice to the Administrative Agent and the
Borrower. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answerback is received,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when delivered or received at the address specified
in this Section; provided that notices to the Administrative Agent or the
Issuing Lender under Article II or Article VIII shall not be effective until
received.
Section 9.02 NO WAIVERS. No failure or delay by the
Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any Note shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
Section 9.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. The
Borrower shall pay (i) all reasonable out-of-pocket expenses of the
Administrative Agent and the Lead Arranger, including reasonable fees and
disbursements of counsel for the Administrative Agent (including the
allocated fees and expenses of any internal counsel), in connection with the
preparation of this Agreement and all related documents, the negotiation,
closing and syndication of this Agreement and the Loans, and in connection
with any waiver, amendment or consent hereunder or any amendment hereof or
any Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Administrative
Agent, the Issuing Lender, the Swing Line Lender or any Lender, including
fees and disbursements of counsel (including the allocated
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fees and expenses of any internal counsel), in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each Lender
and the Swing Line Lender against any transfer taxes, documentary taxes,
mortgage recording taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery or enforcement of this
Agreement, the Notes and the Swing Line Documents.
The Borrower agrees to indemnify each Agent, the Lead Arranger,
the Issuing Lender, the Swing Line Lender and each Lender, their respective
affiliates and the respective directors, officers, agents and employees of
the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from
and against any and all liabilities, losses, damages, costs and expenses of
any kind, including, without limitation, the reasonable fees and
disbursements of counsel (including the allocated fees and expenses of any
internal counsel), which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right
to be indemnified hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
Section 9.04 AMENDMENTS AND WAIVERS. No amendment or waiver of
the terms of this Agreement or the other Loan Documents shall be made or be
effective unless such amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (and, if the rights or duties of the
Administrative Agent, the Swing Line Lender or the Issuing Lender are
affected thereby, by the Administrative Agent, the Swing Line Lender or the
Issuing Lender, as relevant); provided that no such amendment or waiver
shall, unless signed by all the Lenders, (i) increase or decrease the amount
of the Commitment of any Lender without the consent of that Lender (except
for a ratable decrease in the Commitments of all Lenders) or subject any
Lender to any additional obligation, (ii) reduce the principal of or rate of
interest on any Loan or the amount to be reimbursed in respect of any Letter
of Credit or interest thereon or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or the amount
to be reimbursed in respect of any Letter of Credit or interest thereon or
any fees hereunder, or the Termination Date (except as contemplated by
Section 2.15), (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes and Letter of Credit
Liabilities, or the percentage of Lenders, which shall be required for the
Lenders
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or any of them to take any action under this Section or any other provision
of this Agreement or (v) render more restrictive the ability of any Lender to
assign or grant participations in its Commitment under Section 9.05.
Section 9.05 SUCCESSORS AND ASSIGNS.
(a) This Agreement and the other Loan Documents to which Borrower is a
party will be binding upon and inure to the benefit of Borrower, the
Administrative Agent, each of the Lenders, and their respective successors
and assigns, EXCEPT that the Borrower may not assign its rights hereunder or
thereunder or any interest herein or therein without the prior written
consent of all the Lenders. Each Lender represents that it is not acquiring
its Note with a view to the distribution thereof within the meaning of the
Securities Act of 1933, as amended (subject to any requirement that
disposition of such Note must be within the control of such Lender). Any
Lender may at any time pledge its Note or any other instrument evidencing its
rights as a Lender under this Agreement to a Federal Reserve Bank, but no
such pledge shall release that Lender from its obligations hereunder or grant
to such Federal Reserve Bank the rights of a Lender hereunder absent
foreclosure of such pledge.
(b) From time to time following the Effective Date, each Lender may
assign to one or more Eligible Assignees all or any portion of its
Commitment; PROVIDED that (i) such Eligible Assignee, if not then a Lender or
an Affiliate of the assigning Lender, shall be approved by each of the
Administrative Agent and (if no Event of Default then exists) Borrower
(neither of which approvals shall be unreasonably withheld or delayed), (ii)
such assignment shall be evidenced by an Assignment and Assumption Agreement
substantially in the form of Exhibit K, a copy of which shall be furnished to
the Administrative Agent as hereinbelow provided, (iii) EXCEPT in the case of
an assignment to an Affiliate of the assigning Lender, to another Lender or
of the entire remaining Commitment of the assigning Lender, the assignment
shall not assign a portion of the Commitments that is equivalent to less than
$5,000,000, and (iv) the effective date of any such assignment shall be as
specified in the Assignment and Assumption Agreement, but not earlier than
the date which is five Banking Days after the date the Administrative Agent
has received the Assignment and Assumption Agreement. Upon the effective
date of the Assignment and Assumption Agreement, the Eligible Assignee named
therein shall be a Lender for all purposes of this Agreement, with the
Commitment therein set forth and, to the extent of such Commitment, the
assigning Lender shall be released from its further obligations under this
Agreement. Borrower
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<PAGE>
agrees that they shall execute and deliver (against delivery by the assigning
Lender to Borrower of its Note) to such assignee Lender, a Note evidencing
that assignee Lender's Commitment, and to the assigning Lender, a Note
evidencing the remaining Commitment retained by the assigning Lender.
(c) By executing and delivering an Assignment and Assumption Agreement,
the Eligible Assignee thereunder acknowledges and agrees that: (i) other than
the representation and warranty that it is the legal and beneficial owner of
the Commitment being assigned thereby free and clear of any adverse claim,
the assigning Lender has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has made no representation or
warranty and assumes no responsibility with respect to the financial
condition of Borrower or the performance by Borrower of its obligations under
this Agreement; (iii) it has received a copy of this Agreement, together with
copies of the most recent financial statements delivered pursuant to Section
5.01 and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Assumption Agreement; (iv) it will, independently and without reliance upon
the Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (v)
it appoints and authorizes the Administrative Agent to take such action and
to exercise such powers under this Agreement as are delegated to the
Administrative Agent by this Agreement; and (vi) it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain a copy of each Assignment
and Assumption Agreement delivered to it and a register (the "Register") of
the names and address of each of the Lenders and the Commitment held by each
Lender, giving effect to each Assignment and Assumption Agreement. The
Register shall be available during normal business hours for inspection by
Borrower or any Lender upon reasonable prior notice to the Administrative
Agent. After receipt of a completed Assignment and Assumption Agreement
executed by any Lender and an Eligible Assignee, and receipt of an assignment
fee of $3,500 from such Lender or Eligible Assignee, the Administrative Agent
shall, promptly following the effective date thereof,
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<PAGE>
provide to Borrower and the Lenders a revised Schedule 1 giving effect
thereto. Borrower, the Administrative Agent and the Lenders shall deem and
treat the Persons listed as Lenders in the Register as the holders and owners
of the Commitments listed therein for all purposes hereof, and no assignment
or transfer of any Commitment shall be effective, in each case unless and
until an Assignment and Assumption Agreement effecting the assignment or
transfer thereof shall have been accepted by the Administrative Agent and
recorded in the Register as provided above. Prior to such recordation, all
amounts owed with respect to the applicable Commitment shall be owed to the
Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is listed in the Register as a Lender shall
be conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitment.
(e) Each Lender may from time to time grant participations to one or
more Lenders or other financial institutions (INCLUDING another Lender) in
its Commitment; PROVIDED, HOWEVER, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participating Lenders or other financial institutions
shall not be a Lender hereunder for any purpose EXCEPT, if the participation
agreement so provides, for the purposes of Sections 2.22, 8.03 and 9.03 but
only to the extent that the cost of such benefits to Borrower does not exceed
the cost which Borrower would have incurred in respect of such Lender absent
the participation, (iv) Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement,
(v) the participation interest shall be expressed as a percentage of the
granting Lender's Commitment as it then exists and shall not restrict an
increase in the Commitments, or in the granting Lender's Commitment, so long
as the amount of the participation interest is not affected thereby and (vi)
the consent of the holder of such participation interest shall not be
required for amendments or waivers of provisions of the Loan Documents OTHER
THAN those which result in (A) a decrease in fees, interest rate spreads or
principal payable to the holder of such participation, (B) increase the
Commitment of the granting Lenders and thereby increase the funding
requirements of the holder of such a participation, or (C) extend the
Termination Date.
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<PAGE>
(f) Notwithstanding anything to the contrary contained herein, any Lender (a
"Granting Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting Lender, identified as such in writing from time to time by
the Granting Lender to the Administrative Agent and the Borrower the option
to provide all or any part of any Committed Loan or Money Market Loan that
such Granting Lender would otherwise be obligated to make pursuant to this
Agreement, provided that (i) nothing herein shall constitute a commitment to
make any Loan by any SPC, (ii) if an SPC elects not to exercise such option
or otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof, and
(iii) except as expressly set forth herein, the rights of any such SPC shall
be derivative of the rights of the Granting Lender, and each SPC shall be
subject to all of the restrictions upon the Granting Lender herein contained.
Each SPC shall be conclusively presumed to have made arrangements with its
Granting Lender for the exercise of voting and other rights hereunder in a
manner which is acceptable to the SPC, and the Administrative Agent, the
Lenders and Borrower and each other party shall be entitled to rely upon and
deal solely with the Granting Lender with respect to Loans made by or through
its SPC. The making of a Loan by an SPC hereunder shall utilize the
Commitment of the Granting Lender (and, if such Loan is a Money Market Loan,
shall be deemed to utilize the Commitments of all the Lenders) to the same
extent, and as if, such Loan were made by the Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the related Granting Lender). In furtherance of the foregoing, each
party hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day after
the pament in full of all outstanding senior indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such
SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceedings under the laws of the United States or any
State thereof. In addition, notwithstanding anything to the contrary
contained in this Section 9.05, each SPC may, at any time, without regard to
the period required by Section 9.05(b)(iv), (i) with notice to, but without
the prior written consent of, the Borrower, the Borrower or the
Administrative Agent, and without paying any processing fee therefor, assign
all or a portion of its interests in any Loans to its Granting Lender or to
any financial institutions providing liquidity and/or credit facilities to or
for the account of such SPC to fund the Loans made by such SPC or to support
the securities (if any) issued by such SPC to fund such Loans (but nothing
contained herein shall be construed in derogation of the
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obligation of the Granting Lender to make Loans hereunder), and (ii) disclose
on a confidential basis any non-public information relating to its Loans to
any rating agency, commercial paper dealer or provider of a surety, guarantee
or credit or liquidity enhancement to such SPC. This Section 9.05(f) may not
be amended without the consent of all SPC's then designated to the
Administrative Agent in accordance with the foregoing provisions of this
Section.
Section 9.06 COLLATERAL. Each of the Lenders represents to each
Agent and each of the other Lenders that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
Section 9.07 CALIFORNIA LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be construed in accordance with and governed by
the laws of the State of California. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Central
District of California and of any California State court sitting in Los
Angeles, California for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably, waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 9.08 COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
Section 9.09 SEVERAL OBLIGATIONS. The obligations of the
Lenders hereunder are several. Neither the failure of any Lender to carry
out its obligations hereunder nor the failure of this Agreement to be duly
authorized, executed and delivered by any Lender shall relieve any other
Lender of its obligations hereunder (or affect the rights hereunder of such
other Lender). No Lender shall be responsible for the obligations of, or any
action taken or omitted by, any other Lender hereunder.
Section 9.10 SHARING OF SET-OFFS. Each Lender agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it
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and any Letter of Credit Liabilities which is greater than the proportion
received by any other Lender in respect of the aggregate amount of principal
and interest due with respect to any Note and any Letter of Credit
Liabilities held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the
Notes and Letter of Credit Liabilities held by the other Lenders, and such
other adjustments shall be made, as may be required so that all such payments
of principal and interest with respect to the Notes and Letter of Credit
Liabilities held by the Lenders shall be shared by the Lenders pro rata;
PROVIDED that nothing in this Section shall impair the right of any Lender to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes. The Borrower agrees,
to the fullest extent it may effectively do so under applicable law, that any
holder of a participation in a Note or Letter of Credit Liability, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation
as fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
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<PAGE>
Section 9.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PARK PLACE ENTERTAINMENT
CORPORATION
By: Scott Laporta
------------------
Scott LaPorta, Executive Vice President and
Chief Financial Officer
Address for Notices:
Telecopier number:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: Janice Hammond
------------------------------
Janice Hammond, Vice President
Bank of America National Trust and Savings
Association
555 South Flower Street
11th Floor
Los Angeles, California 90071
Attn: Janice Hammond
Telecopier: (213) 228-2299
Telephone: (213) 228-9861
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<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: Scott L. Faber
------------------------
Scott L. Faber, Vice President
THE BANK OF NEW YORK
By: Lisa Y. Brown
------------------------
Lisa Y. Brown, Vice President
SOCIETE GENERALE
By: Donald Schubert
------------------------
Donald Schubert, Managing Director
PNC BANK, NATIONAL ASSOCIATION
By: Gary Wessels
------------------------
Gary Wessels, Vice President
CREDIT SUISSE FIRST BOSTON
By: Chris T. Horgan
------------------------
Chris T. Horgan, Vice President
By: Kristin Lepri
------------------------
Title: Associate
-----------------
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<PAGE>
THE FIRST NATIONAL BANK OF
CHICAGO
By: Mark A. Isley
------------------------
Mark A. Isley, First Vice President
FIRST UNION NATIONAL BANK
By: John Reid
------------------------
John Reid
Title: Vice President
------------------------
WACHOVIA BANK
By: Charles S. Zimmerman
------------------------
Charles S. Zimmerman
Title: Vice President
------------------------
WELLS FARGO BANK, N.A.
By: Kathleen S. Stone
------------------------
Kathleen S. Stone, Vice President
BANKBOSTON, N.A.
By: Daniel P. Gilbert
------------------------
Daniel P. Gilbert, Vice President
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<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH
By: Dianne M. Scott
------------------------
Dianne M. Scott, First Vice President and Manager
FLEET BANK N.A.
By: John Harrison
------------------------
John Harrison, Senior Vice President
FIRST SECURITY BANK, N.A.
By: David P. Williams
------------------------
David P. Williams, Vice President
ABN-AMRO BANK N.V.
By: Michael M. Tolentino
------------------------
Title: Vice President
------------------
By: Jeffrey A. French
------------------------
Title: Group Vice President & Director
--------------------------------
BANK OF HAWAII
By: Robert M. Wheeler, III
------------------------
Robert M. Wheeler, III, Vice President
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<PAGE>
COMMERZBANK AG, LOS ANGELES BRANCH
By: Christian Jagenberg
--------------------------------
Christian Jagenberg, SVP and Manager
By: Karla Wirth
--------------------------------
Karla Wirth, Assistant Treasurer
HIBERNIA NATIONAL BANK
By: Ross W. Wales
---------------------------------
Ross S. Wales, Vice President
MERRILL LYNCH CAPITAL CORPORATION
By: David Dysenchuk
--------------------------------
David Dysenchuk
Title: Managing Director
-----------------------------
THE NORTHERN TRUST COMPANY
By: John E. Burda
----------------------
Title: Second Vice President
----------------------------
By: James F.T. Monhart
-------------------------
Title: Senior Vice President
---------------------------
U.S. BANK NATIONAL ASSOCIATION
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<PAGE>
By: Dale Parshall
-----------------------------
Dale Parshall, Vice President
WHITNEY NATIONAL BANK
By: John Zollinger
----------------------------------
John Zollinger, Vice President
COMERICA WEST INCORPORATED
By: Eoin P. Collins
------------------------------------
Eoin P. Collins, Account Officer
FIRST AMERICAN NATIONAL BANK, operating as
DEPOSIT GUARANTY NATIONAL BANK
By: Larry C. Ratzlaff
---------------------
Larry C. Ratzlaff, Senior Vice President
FIRST TENNESSEE BANK NATIONAL ASSOCATION
By: Jim Moore
---------------------
Jim Moore
Title: Vice President
-------------------------
HANCOCK BANK
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<PAGE>
By: John S. Hall
-------------------------
John S. Hall, Senior Vice President
TRUSTMARK NATIONAL BANK
By: Barney Daly FVP
----------------------------------
Barney Daly, First Vice President
THE PEOPLES BANK, BILOXI, MISSISSIPPI
By: Robert M. Tucei - Sr.V.P.
-----------------------------------
Robert M. Tucei, Senior Vice President
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<PAGE>
Schedule 1 - Lender Commitments
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Schedule 2 - Pricing Schedule - Five Year Facility
This Schedule 2 is attached to and made a part of the Five Year Credit
Agreement dated December 31, 1998 among Park Place Entertainment Corporation,
a Delaware corporation, the Lenders, Syndication Agent and Documentation
Agent referred to therein, Bank of America National Trust and Savings
Association, as Administrative Agent, and NationsBanc Montgomery Securities,
LLC as Lead Arranger (the "Credit Agreement"). Capitalized terms used in
this Schedule 2 are used with the meanings set forth for those terms in the
Credit Agreement.
The "Euro-Dollar Margin," "Base Rate Margin,""Facility Fee Rate" and "LC
Fee Rate" referred to in the Credit Agreement shall be determined for any day
on the basis of the Status (as defined below) of the Borrower as of that
date, PROVIDED that in the event that Borrower fails to deliver any
Compliance Certificate or Pricing Certificate on the date when required by
Section 5.01, and it is ultimately determined that the Status of Borrower
would have been changed on the basis of such delivery, then (a) the rate at
which interest, facility fees, and letter of credit fees accrue under the
Credit Agreement shall be increased in accordance with this Schedule, with
retroactive effect to the first day of the Pricing Period to which such
Compliance Certificate or Pricing Certificate relates, and (b) Borrower
shall, within 10 Business Days of a request by the Administrative Agent, make
such additional payments to the Lenders through the Administrative Agent as
are required to give effect to such increased interest rates, facility fees
and letter of credit fees in respect of any payments previously made by
Borrower. As of each date of determination, the Euro-Dollar Margin, Facility
Fee Rates and LC Fee Rates shall equal the percentages set forth below under
the column corresponding to the Status that exists on such day, PROVIDED that
the Euro-Dollar Margin shall be increased or decreased by the "Margin
Adjustment" described below:
<TABLE>
<CAPTION>
Status Level Level Level Level Level Level
I II III IV V VI
<S> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------
Facility Fee Rate 0.100% 0.125% 0.150% 0.200% 0.250% 0.300%
- - ------------------------------------------------------------------------
Euro-Dollar Margin 0.500% 0.625% 0.850% 0.925% 1.125% 1.450%
- - ------------------------------------------------------------------------
LC Fee Rate 0.600% 0.750% 1.000% 1.125% 1.375% 1.750%
- - ------------------------------------------------------------------------
</TABLE>
The "Base Rate Margin" shall, as of each date of determination, be the
percentage, not less than 0.000% per annum, which is equal to the then
prevailing Euro-Dollar Margin (after adjustment upwards or downwards by the
Margin Adjustment), MINUS 1.250%
As of each date of determination, the Status of the Borrower shall be
determined on the basis of:
(a) the Borrower's Debt Rating as of that date; or
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(b) from and after March 1, 2000, the Leverage Ratio as of the last
day of the fiscal quarter of Borrower ending immediately prior to the
first day of the Pricing Period in which such date of determination
occurs (the "Applicable Leverage Ratio");
whichever such criteria yields the more favorable pricing to the Borrower
according to the following standards:
"Level I Status" exists at any date if, at such date, either (x) the Debt
Rating assigned by S&P is A- or the Debt Rating assigned by Moody's is A3 or
higher, or (y) the Applicable Leverage Ratio is less than 1.50:1.
"Level II Status" exists at any date if, at such date, (i) either (x) the
Debt Rating assigned by S&P is BBB+ or higher or the Debt Rating assigned by
Moody's is Baa1 or higher, or (y) the Applicable Leverage Ratio is less than
2.25:1 and (ii) Level I Status does not exist.
"Level III Status" exists at any date, if, at such date, (i) either (x) the
Debt Rating assigned by S&P is BBB or higher or the Debt Rating assigned by
Moody's is Baa2 or higher, or (y) the Applicable Leverage Ratio is less than
3.00:1 and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date, if, at such date, (i) either (x) the
Debt Rating assigned by S&P is BBB- or higher or the Debt Rating Assigned by
Moody's is Baa3 or higher, or (y) the Applicable Leverage Ratio is less than
3.75 and (ii) none of Level I Status, Level II Status or Level III Status
exists.
"Level V Status" exists at any date, if, at such date, (i) either (x) the
Debt Rating assigned by S&P is BB+ or higher or the Debt Rating assigned by
Moody's is Ba1 or higher or (y) the Applicable Leverage Ratio is less than
4.25:1 and (ii) none of Level I Status, Level II Status, Level III Status or
Level IV Status exists.
"Level VI Status" exists at any date if, at such date, no such other Status
exists.
For purposes of this Schedule, the following terms have the following
meanings, subject to the final two paragraphs of this Schedule:
"Margin Adjustment" means, (a) as of any date of determination when the
Applicable Leverage Ratio is in excess of 3.50:1 but equal to or less than
4.00:1, an incremental interest margin of 0.075% per annum to be added to the
Euro-Dollar Margin in determining the rate
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applicable to Euro-Dollar Loans, (b) as of any date of determination when the
Applicable Leverage Ratio is in excess of 4.00:1, an incremental interest
margin of 0.150% per annum to be added to the Euro-Dollar Margin in
determining the rate applicable to Euro-Dollar Loans, and (c) as of any date
of determination when the Applicable Leverage Ratio is less than 2.00:1, a
deduction of 0.075% per annum to be subtracted from the Euro-Dollar Margin in
determining the rate applicable to Euro-Dollar Loans.
"Debt Rating" means, as of any date of determination, the rating assigned
by the Rating Agencies to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement (and any rating assigned to any
other debt security of the Borrower shall be disregarded) as of the close of
business on such date, provided that (a) during the period between the Effective
Date and March 31, 2000, to the extent that no such credit rating has been
assigned, a credit rating of BBB- shall be assumed, (b) if such securities
receive a split-rating and the rating differential is one level, the higher of
the two ratings will apply (e.g. A-/Baa1 results in Level I Status and A-/Baa2
results in Level II Status), and (c) if the Borrower is split-rated and the
ratings differential is more than one level, the average of the two ratings (or
the higher of any two intermediate ratings) shall be used (e.g.. A-/Baa2
results in Level II Status, as does A-/Baa3).
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<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT by and between Park Place Entertainment Corporation, a
Delaware corporation (the "Company"), and Arthur M. Goldberg (the
"Executive"), dated as of December 31, 1998.
WHEREAS, the Board of Directors of the Company (the ABoard") has
determined that it is in the best interests of the Company and its
shareholders to employ the Executive as the President and Chief Executive
Officer of the Company, and the Executive desires to serve in that capacity;
and
WHEREAS, the Executive and Hilton Hotels Corporation, the Company's
predecessor, entered into an Amended Consulting and Employment Agreement
dated as of November 12, 1996, as amended (the APrior Employment Agreement")
and a Change of Control Agreement dated as of April 1, 1997 (collectively
with the Prior Employment Agreement, the APrior Agreements"), which shall be
terminated and of no further force and effect as of the Split Date (as
defined below), except as provided in Section 14 below;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set
forth in this Agreement, for the period beginning on the effective date (the
"Split Date") of a transaction whereby the Company acquires the former gaming
operations of Hilton Hotels Corporation (the "Split") and ending on January
1, 2004 which shall automatically renew for periods of one year unless one
party gives written notice to the other, at least 60 days prior to January 1,
2004 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"). Notwithstanding the
foregoing, if the Split does not occur on or before December 31, 1999, (i)
this Agreement shall be terminated and thereafter neither party shall have
any continuing obligation to the other hereunder and the (ii) the Prior
Agreements shall continue in full force and effect.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed as the President and Chief Executive Officer of
the Company. In his executive capacities, the Executive shall report to the
Board as appropriate to the duties assigned by the Board.
(b) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
shall devote such attention and time during normal business hours to the
business and affairs of the Company to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement and Executive
shall use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to (A) serve
<PAGE>
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; provided, however, that it shall also not
be a violation of the foregoing nor shall it constitute "material
interference" for the Executive to continue to the same extent those specific
outside activities in which he was involved during the term of the Prior
Agreements. The Company hereby acknowledges that the Executive has (i)
substantial investments (including operating businesses of which he is a
substantial owner and for which he serves as a manager, officer or director)
which have required and will continue to require substantial time and
attention by the Executive, (ii) substantial eleemosynary involvements and
(iii) substantial civic involvements.
3. COMPENSATION. (a) BASE SALARY. (1) During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of $2,000,000, payable in accordance with the regular payroll
practices of the Company; provided, however, that the portion of such Annual
Base Salary 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 Base Salary 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. During the Employment Period, the Annual Base
Salary shall be reviewed for possible increase at least annually, with any
increase being at the sole discretion of the Board (or an appropriate
committee thereof). Any increase in the Annual Base Salary shall not limit
or reduce any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(2) Any amounts of Annual Base Salary deferred as provided above (plus any
Annual Bonus, as defined below, deferred pursuant to Section 3(b)) 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 Morgan 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 Base Salary and Annual Bonus plus interest collectively referred to as
the "Deferred Compensation").
(3) The Deferred Compensation shall be paid in accordance with the following
provisions:
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(A) The Company agrees to pay the Deferred Compensation on
the Deferral Date by wire transfer to an account designated by the Executive
prior to the Deferral Date.
(B) The Company agrees to pay the Deferred Compensation in
any and all events on the Deferral 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, whether predicated on this Agreement or otherwise shall
not constitute a defense or entitle the Company to an offset against the
payment of the Deferred Compensation in full on the Deferral Date.
(C) Failure to pay the Deferred Compensation on the Deferral
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.
(D) 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 Deferral 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 3, shall be payable on demand, and shall bear interest at the
Default Rate from the date incurred until paid in full.
(E) In the event of a default, notwithstanding the provisions
of Section 11 of this Agreement: (i) the Executive shall be entitled to sue
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 purpose of all legal proceedings arising out of or relating to
this Section 3; (iii) the Company agrees that 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 13; and (iv) the Company waives any defense based upon
personal jurisdiction, venue, improper service, and the right to assert a
claim of forum non conveniens or the like.
(b) ANNUAL BONUS. 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 Period, an annual bonus (the "Annual
Bonus") (either pursuant to the Company's annual incentive plan or otherwise)
provided that the Executive shall not receive an Annual Bonus for any fiscal
year in excess of $1,000,000 (as adjusted pro rata for any fiscal year in
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which the Executive is employed for only a portion of such fiscal year).
Each Annual Bonus shall be deferred on the same basis as it if it were
deferred Annual Base Salary under Section 3(a) above and paid to the
Executive on the Deferral Date.
(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; (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, 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; and (iii) the Executive
shall be entitled to, and the Company shall provide, the Executive with, a
U.S. automobile comparable to the automobile which the Executive currently
uses, and a full-time driver (as selected by the Executive) for such
automobile.
(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, 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 pay to the Company the cost 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 SERVICES. During the Employment
Period, the Executive shall be entitled to office space, and to secretarial
and other support services, at least equal to the most favorable of such as
provided with 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 of his choosing and may continue to maintain, at
the Company's expense, his current office in Chatham, New Jersey.
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(g) VACATION. During the Employment Period, the Executive
shall be entitled to four weeks of paid vacation annually.
(h) STOCK OPTIONS: (i) If the Split occurs, on the Split
Date, the Executive shall be granted non-statutory stock options (the
"Incentive Options") under the Company's Stock Incentive Plan (the AStock
Plan) covering 6,000,000 shares of the 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 shall be equal to the closing price of the Company's
common shares on the New York Stock Exchange on the Split Date. The exercise
price of the shares subject to the Special Option shall be equal to the
greater of (i) the closing price of the Company's common shares on the New
York Stock Exchange on the Split Date or (ii) 150% of the closing price of
Hilton Hotels Corporation's common shares on the New York Stock Exchange on
July 9, 1998, ratably reduced (in the manner described on Exhibit A hereto)
following the Split so as to reflect that revised July 9, 1998 closing price
as if only the Company's post-Split common shares existed on that date. The
grant of the Incentive Options is subject to obtaining the approval of the
Stock Plan by a majority of the shares of common stock of Hilton Hotels
Corporation, the predecessor to the Company, voting at the shareholders
meeting immediately preceding the Split Date. If such approval is not
obtained, the Executive shall have the right, upon written notice to the
Company delivered not later than 10 business days after the date of the
shareholders meeting referred to in the preceding sentence, to terminate this
Agreement, in which event neither party shall have any continuing obligation
to the other hereunder and the Prior Agreements shall continue in full force
and effect. If such approval is obtained, as soon as practicable after the
Split Date the Company shall use its best efforts to register with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, the shares issuable upon the exercise of the Incentive Options.
The Incentive Options shall be exercisable for 10 years after the Split Date
except as otherwise specifically provided in this Agreement.
The Regular Option shall vest and become exercisable on a cumulative basis
according to the following schedule if the Executive continues in the
employment of the Company through the applicable vesting date(s):
1. 25%: on the first anniversary of the Split Date.
2. 50%: on the second anniversary of the Split Date.
3. 75%: on the third anniversary of the Split Date.
4. 100%:on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is
9 years and 9 months following the Split Date if the Executive continues in
the employment of the Company through such date; provided, however, that, if
at any time prior to the fifth anniversary of the
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Split Date, the closing price of the Company's common shares on the New York
Stock Exchange equals or exceeds 200% of the closing price of Hilton Hotels
Corporation's common shares on the New York Stock Exchange on July 9, 1998
ratably reduced (in the manner described on Exhibit A hereto) following the
Split so as to reflect that revised July 9, 1998 closing price as if only the
Company's post-Split common shares existed on that date, on each of any 7
consecutive trading days, all shares under the Special Option shall be
immediately vested and exercisable if the Executive continues in the
employment of the Company through the date the closing prices of the
Company's shares meet that requirement. Notwithstanding the foregoing, all
shares subject to the Regular Option and the Special Option shall vest and
become exercisable upon the occurrence of any of the following events (each
of (A), (B) and (C) below a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below or
(ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because of
death or Disability; or
(C) termination of employment by the Executive for Good
Reason, as defined below;
provided that the Special Option shall vest and become (and remain)
exercisable upon a Triggering Event, subject to Section 8(e), only if
Executive does not breach the terms of the covenants contained in Sections 8
(a) and (b) below and such vesting and exercisability shall be part of the
consideration for the Executive's undertakings under Sections 8(a) and (b).
(ii) If a Triggering Event occurs, any portion of the
Incentive Options that have become vested on or before the date of such Event
(including without limitation, any portion that becomes exercisable due to
such Triggering Event) shall remain exercisable until the earlier to occur of
(x) the fifth anniversary of such date of termination or (y) the tenth
anniversary of the Split Date.
(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 Code.
(iv) The Incentive Options shall be subject to the terms of
the Stock Plan in all respects not described herein but only to the extent
not inconsistent with the terms of this Agreement.
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(v) If the Split occurs, as soon as practicable after the
Split Date, the Company shall ensure that all unexercised options previously
issued to the Executive by Hilton Hotels Corporation shall be converted into
options to purchase shares of the Company (in the manner described on Exhibit
B hereto) (the "Converted Options") and shall use its best efforts to
register with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, the shares issuable upon the exercise of the Converted
Options. It is acknowledged and understood that the Converted Options are in
addition to the Incentive Options and shall not be subject to any of the
vesting requirements or other provisions applicable to the Incentive Options
set forth in the preceding provisions of this Section 3(h); provided,
however, that the Converted Options shall be subject to the terms of the
Stock Plan applicable to "Adjusted Park Place Options" (as defined in the
Stock Plan) to the extent not inconsistent with the provisions of this
Section 3(h)(v).
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment and the Employment Period shall terminate
automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means
that (i) the Executive has been unable, for a period of 180 consecutive
business days, to perform the Executive's duties under this Agreement, as a
result of physical or mental illness or injury, and (ii) a physician selected
by the Company or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the Executive's
incapacity is total and permanent. The Executive agrees to reasonably
cooperate with the Company in order to obtain the physician's evaluation of
the Executive. A termination of the Executive's employment by the Company
for Disability shall be communicated to the Executive by written notice
("Notice of Termination for Disability"), stating the date, time and place of
a meeting of the Board called and held specifically for the purpose of
considering the Executive's termination for Disability, that takes place not
less than five and not more than 25 business days after the Executive
receives the Notice of Termination for Disability. The Executive shall be
given an opportunity, together with counsel, to be heard at such special
Board meeting. The Executive's termination for Disability shall be
effective, if confirmed at the meeting, 30 days after the adoption of a
resolution at such special Board meeting, stating that the Executive's
employment shall be terminated because of Disability (the "Disability
Effective Date"), unless the Executive returns to full-time performance of
the Executive's duties, as determined by the Board, before the Disability
Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without
Cause. Subject to clause (ii) below, "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
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performance that specifically identifies the manner in which the
Board believes that the Executive has not substantially
performed the Executive's duties;
(B) illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company;
or
(C) a material breach of the covenants or representations
contained in Section 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 30 and not more than 60 days after
the Executive receives the Notice of Termination for Cause. The Executive
shall be given an opportunity, together with counsel, to be heard at the
Special Board Meeting. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board
Meeting, stating that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in the Notice of Termination for Cause,
such conduct constitutes Cause under this Agreement and such conduct has not
ceased or been cured between the date the Executive receives the Notice of
Termination for Cause and the date of the meeting.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, whether
or not material, following a Change of Control) with paragraph
(a) 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 isolated, insubstantial and
inadvertent action that is not taken in bad faith and is
remedied by the Company within 30 days after receipt of
written notice thereof from the Executive;
(B) any material failure (any failure, whether or not
material, following a Change of Control, as defined below) by
the Company to comply with any provision of Section 3 of this
Agreement, other than an
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isolated, insubstantial and inadvertent failure that is not
taken in bad faith and is remedied by the Company within 30
days after receipt of written notice thereof from the
Executive;
(C) any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly
permitted by this Agreement; or
(D) any failure by the Company to comply with and satisfy
paragraph (c) of Section 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, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason, as the case
may be, is effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE
COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR
GOOD REASON. If, during the Employment Period, the Company terminates the
Executive's employment, other than for Cause or Disability or by reason of
the Executive's death, or the Executive terminates employment for Good
Reason, the Company shall fulfill its obligations as to Base Salary under
Section 3(a) hereof for the 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 pay to the Executive, in a lump sum in cash within 30 days after
the Date of Termination, the Executive's accrued but unpaid cash compensation
(the "Accrued Obligations"), which shall include but not be limited to, (1)
any portion of the
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Executive's Annual Base Salary through the Date of Termination that has not
yet been paid, (2) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) that has not yet
been paid; (3) any accrued but unpaid vacation pay and (4) similar unpaid
items that have accrued or to which the Executive has become entitled as of
the Date of Termination, including declared but unpaid bonuses and
unreimbursed employee business expenses; provided, however, that the
Company's obligation to make any payments under this Section 5(a) to the
extent any such payment shall not have accrued as of the day before the Date
of Termination shall also be conditioned upon the Executive's execution, and
non-revocation, of a written release, substantially in the form attached
hereto as Annex 1 (the "Release"), of any and all claims against the Company
and all related parties with respect to all matters arising out of the
Executive's employment by the Company (other than any entitlements under the
terms of this Agreement or under any other plans or programs of the Company
in which the Executive participated and under which the Executive has accrued
or become entitled to 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(a)
and (b) below, the Executive, in lieu of the amounts specified in the first
sentence of the prior paragraph, shall receive in a lump sum in cash within
30 days after the Date of Termination equal to 2.99 multiplied by the sum of
the Executive's Annual Base Salary and Annual Bonus for the year in which the
Change of Control occurs or the immediately preceding year, whichever
produces the higher sum. Fifty percent of such amount shall be consideration
for the Executive's undertaking not to breach the terms of the covenants
contained in Sections 8(a) and (b) below. In addition, the Executive shall
also be entitled to, in the case of compensation previously deferred by the
Executive, a lump sum equal to all amounts previously deferred (together
with any accrued interest thereon) and not yet paid by the Company, any
accrued vacation pay not yet paid by the Company and, for the balance of the
Employment Period, the Executive and the Executive's spouse and dependents,
where applicable, shall be eligible for a continuation of those employee
benefits provided for under Section 3(c)(i) and (ii) hereof, as in effect at
the time of such termination, and as the same may be changed from time to
time, as if the Executive had continued in employment during said period or
to receive cash in lieu of such benefits or premiums, as applicable, where
such benefits may not be continued (or where such continuation would
adversely affect the tax status of the plan pursuant to which the benefit is
provided) under applicable law or regulations.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall (i) pay the Annual Base Salary to the
Executive or the Executive's estate or legal representative, as applicable, for
the remaining portion of the Employment Period (determined without regard to the
fact that the Employment Period otherwise terminates under this Agreement) and
(ii) 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. In such event,
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the Company shall have no further obligations under this Agreement other than
for any entitlements under the terms of any other plans or programs of the
Company in which the Executive participated and under which the Executive has
accrued or become entitled to 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 any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon), in
each case to the extent not yet paid, and the 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 of any other plans or programs of the Company in which the Executive
participated and under which the Executive has accrued or become entitled to
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 of any
other plans or programs of the Company in which the Executive participated
and under which the Executive has accrued or become entitled to 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 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, 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.
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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 (the
"Section 3 Lump Sum") or fifty percent of the lump sum payment in lieu of
Base Salary provided under Section 5 in the event of Executive's termination
of employment following a Change of Control (the "Section 5 Lump Sum"), the
Executive agrees as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing
information, marketing and sales techniques, strategies and programs,
computer programs and software and financial information relating to the
Company or any of its affiliated companies and their respective businesses
that the Executive obtains during the Executive's employment by the Company
or any of its affiliated companies and that is not public knowledge (other
than as a result of the Executive's violation of this paragraph (a) of
Section 8) ("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 except as provided in
paragraph (e) below.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive
will not, except with the prior written consent of the Board, directly or
indirectly, own, manage, operate, join, control, finance or participate in
the ownership, management, operation, control or financing of, or be
connected as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with, or use or permit Executive's
name to be used in connection with, any business or enterprise which is
engaged in any business that is competitive with any business or enterprise
in which the Company is engaged at the Date of Termination or expiration of
the Employment Period. In addition, the Executive agrees that he will not,
for a period of two years after the expiration or termination of the
Executive's employment with the Company, without the prior written consent of
the Company, whether directly or indirectly, employ, whether as an employee,
officer, director, agent, consultant or independent contractor, or solicit
the employment of, any managerial or higher level person who is or at any
time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
(c) The Executive represents that he is licensed by the
gaming authorities in Nevada and New Jersey and knows of no reason why a
license necessary for him to perform his duties hereunder would not be
granted to or maintained by him by those or similar authorities in the future.
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(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 Company agrees to give the
Executive written notice of any action taken by the Executive that it
believes in good faith to constitute a violation of the Executive's
undertakings under Sections 8(a) and (b) and to give the Executive at least
60 days thereafter to cease any such action which, if he complies with such
request, will preclude any further action or any recovery by the Company. In
the event that the Executive fails to do so, the Executive agrees that the
Executive's right to the Section 3 Lump Sum or the Section 5 Lump Sum, as the
case may be, shall be forfeited (but only to the extent of those portions not
previously received) and the Executive's right to exercise the Special Option
(but not to any shares already obtained upon a prior exercise of the Special
Option or any cash received upon a prior cashless exercise of the Special
Option, if available) shall cease. In addition, in the case of any violation
of the provisions of this Section 8, the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as provable damages and an equitable accounting of
all earnings, profits and other benefits arising from any violation of this
Section (with appropriate credit for the amounts forfeited by the Executive
and the non-exercisability of the Special Option), which rights shall be
cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of this
Section should ever be adjudicated to exceed the time, geographic, service,
or other limitations permitted by applicable law in any jurisdiction, it is
the intention of the parties that the provision shall be amended to the
extent of the maximum time, geographic, service, or other limitations
permitted by applicable law, that such amendment shall apply only within the
jurisdiction of the court that made such adjudication and that the provision
otherwise be enforced to the maximum extent permitted by law. 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 District of Nevada, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Las Vegas, Nevada, (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
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<PAGE>
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 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 1934 (the "Exchange Act"). (excluding, for this purpose, (A)
the Company or its subsidiaries, (B) any employee benefit plan of the Company
or its subsidiaries which acquires beneficial ownership of voting securities
of the Company or (C) Barron Hilton, the Charitable Remainder Unitrust
created by Barron Hilton to receive shares from the Estate of Conrad N.
Hilton, or the Conrad N. Hilton Foundation, collectively the "Hilton
Interests"), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in
the election of directors; or
(ii) Individuals who, as of the Split Date, constitute
the Board (as of the Split Date, the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the Split Date whose election, or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such
terms are used in Rule 14 a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for
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purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of
the Company or (C) the sale of all or substantially all of the assets of the
Company; provided, however, that the Split shall not be deemed a "Change of
Control" for any purpose under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that 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(a) and 8(b).
(c) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code, the Executive shall be paid
an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive after deduction of any excise tax imposed under
Section 4999 of the Code, and any federal, state and local income and
employment tax and excise tax imposed upon the Gross-Up Payment shall be
equal to the Payment. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence (or, if
greater, the state and locality in which the Executive is required to file a
nonresident income tax return with respect to the Payment) 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.
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.
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<PAGE>
(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;
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 sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a termination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Executive to pay such claim and sue for a refund the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for
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<PAGE>
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.
(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.
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, to be held in Las Vegas , Nevada, 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 shall pay the fees and
costs of the arbitrator and all other costs in connection with any
arbitration, including reasonable legal fee and expenses.
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
17
<PAGE>
force or effect. This Agreement may not be amended or modified except by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO THE EXECUTIVE:
c/o Orloff, Lowenbach, Stifelman & Siegel, P.A.
101 Eisenhower Parkway
Roseland, NJ 07068
Attention: Frank L. Stifelman
IF TO THE COMPANY:
3930 Howard Hughes Parkway
Las Vegas, NV 89109
Attention: General Counsel
WITH A REQUIRED COPY TO:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Robert J. Lichtenstein
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 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.
(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,
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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, including the provisions of the Prior Agreements, except to the
extent specifically provided in this Section.
(a) Whether or not the Executive is then serving as a consultant
to or an employee of the Company and notwithstanding anything herein to the
contrary: (i) the Company shall provide the Executive and/or the Executive's
family with health insurance benefits equal or comparable to the health
insurance benefits he was entitled to receive under the Prior Employment
Agreement, until the date of the Executive's 62nd birthday; and (ii) the
Company shall assume the obligations of Hilton Hotels Corporation under the
Split Dollar Agreement dated September 6, 1991 between Bally Entertainment
Corporation and the Arthur M. Goldberg 1989 Irrevocable Trust, as such
obligations are further set forth in Section 5(b)(ii) of the Prior Employment
Agreement.
(b) The Company shall assume the obligations of Hilton Hotels
Corporation under Sections 3(a) and 3(b) of the Prior Employment Agreement to
pay to the Executive all amounts previously deferred for periods ending on or
before the Split Date, plus interest as provided therein. For purposes of
determining the "Deferral Date" (as such term is defined in Section 3(a) of
the Prior Employment Agreement), references to the "Company" in clauses (i)
and (ii) of Section 3(a) of the Prior Employment Agreement shall be deemed to
refer to Park Place Entertainment Corporation.
(c) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 10 of the Prior Employment
Agreement (relating to certain excise tax gross-up payments).
(d) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 11 of the Prior Employment
Agreement (relating to certain indemnification obligations).
(e) The Company shall assume the obligations of Hilton Hotels
Corporation to the Executive under Section 25(b)(6) of the Prior Employment
Agreement (relating to certain income tax indemnities). It is acknowledged
and understood, notwithstanding the Company's assumption of these obligations
and notwithstanding the termination of the Prior Employment Agreement, that
Hilton Hotels Corporation shall remain liable to the Executive for all
obligations
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under Section 25(b)(6) of the Prior Employment Agreement, if and to the
extent that the Company fails to satisfy its obligations pursuant to this
Section 14(e).
(f) The Company shall assume all obligations of Hilton Hotels
Corporation to the Executive under the Deferred Compensation Agreement
("Deferred Compensation Agreement") between the Executive and Hilton Hotels
Corporation, entered into as of January 16, 1997. For purposes of
determining the "Payment Date" (as such term is defined in Section 2(a) of
the Deferred Compensation Agreement), references to the "Company" in clauses
(i) and (iii) of Section 2(a) of the Deferred Compensation Agreement shall be
deemed to refer to Park Place Entertainment Corporation.
(g) The Company shall assume all obligations of Hilton Hotels
Corporation to the Executive under the Hilton Executive Deferred Compensation
Plan.
(h) Except as specifically provided in this 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.
(i) 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,
15. The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment or arrangements
to the extent necessary to the intended preservation of such rights and
obligations, including, but not by way of limitation, those rights and
obligations set forth in Sections 3, 5, 6, 10 and 14.
16. The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the
Executive's death by giving the Company written notice thereof. In the event
of the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative.
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this Agreement to the Executive shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the
Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
PARK PLACE ENTERTAINMENT CORPORATION
By /s/ Stephen F. Bottenbach /s/ Arthur M. Goldberg
-------------------------------- ----------------------------------
Arthur M. Goldberg
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<PAGE>
EXHIBIT A
All capitalized terms used and not otherwise defined in this Exhibit A
shall have the meanings ascribed to such terms in the Agreement.
For purposes of Section 3(h)(i) of the Agreement with respect to the
exercise price and accelerated vesting of the Special Option, the ratably
reduced closing price of Hilton Hotels Corporation's common shares on the New
York Stock Exchange on July 9, 1998 shall be determined as follows:
The ratably reduced July 9, 1998 closing price of Hilton Hotels Corporation's
common shares on the New York Stock Exchange shall be equal to the product of
(x) the per share closing price of Hilton Hotels Corporation's common stock
on the New York Stock Exchange on July 9, 1998 (which was $26.94), and (y)
the quotient obtained by dividing (a) the per share "when issued" closing
price of the Company's common stock on the New York Stock Exchange on the
Split Date by (b) the per share closing price of Hilton Hotels Corporation's
common stock with a "due bill" to receive the distribution of the Company's
common stock on the New York Stock Exchange on the Split Date.
<PAGE>
EXHIBIT B
All capitalized terms used and not otherwise defined in this Exhibit
B shall have the meanings ascribed to such terms in the Agreement.
For purposes of Section 3(h)(v) of the Agreement with respect to the
adjustment of all unexercised options previously issued to the Executive by
Hilton Hotels Corporation (the "Hilton Options"), all outstanding Hilton
Options held by the Executive as of the Split Date shall be adjusted to
represent options to purchase shares of the Company's common stock (each
adjusted option to purchase the Company's common stock, an "Adjusted Park
Place Option") as set forth below. This adjustment of Hilton Options held by
the Executive shall be based on the following per share New York Stock
Exchange closing prices on December 21, 1998 (the first date on which the
Company's common stock traded on a "when issued" basis):
<TABLE>
<S> <C>
"Hilton Closing Stock Price" The closing price of Hilton Hotels
Corporation's common stock with a
"due bill" to receive the
distribution of the Company's common
stock.
"Park Place Conversion Stock Price" The closing price of the Company's
common stock "when issued" (I.E. the right
to receive a share of the Company's
common stock when available).
"Hilton Conversion Stock Price" The price of Hilton Hotels Corporation's
common stock derived by subtracting the Park
Place Conversion Stock Price from the Hilton
Closing Stock Price.
</TABLE>
Concurrently with the Split, each outstanding Hilton Option held by
the Executive shall be adjusted as follows:
STEP 1.
With respect to each outstanding Hilton Option, the per share
exercise price of such Hilton Option shall be calculated as a
percentage of the Hilton Closing Stock Price.
STEP 2.
The per share exercise price of each Adjusted Park Place Option
issued to the Executive pursuant to Step 3 below shall be determined
by multiplying the Park Place Conversion Stock Price by the
percentage obtained in Step 1 above.
B-1
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STEP 3.
Each Hilton Option shall be adjusted to represent an Adjusted Park
Place Option covering that number of shares of the Company's common
stock equal to the product of (x) the number of shares of Hilton
Hotels Corporation's common stock which were subject to the Hilton
Option prior to the adjustment, and (y) the quotient obtained by
dividing the Hilton Closing Stock Price by the Park Place Conversion
Stock Price.
B-2
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT by and between Park Place Entertainment Corporation, a
Delaware corporation (the "Company"), and Stephen F. Bollenbach (the
"Executive"), dated as of the Split Date, as defined below.
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to employ the Executive as Chairman of the Board as well as Senior Advisor to
the Board, and the Executive desires to serve in that capacity;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, for the period beginning on the effective date (the "Split
Date") of a transaction whereby the Company acquires the former gaming
operations of Hilton Hotels Corporation (the "Split") and ending on July 1,
2005, which shall automatically renew for periods of one year unless one party
gives written notice to the other, at least 60 days prior to July 1, 2005 or at
least 60 days prior to the end of any one-year renewal period, that the
Agreement shall not be further extended, except as otherwise specifically
provided below, (the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall be employed as Chairman of the Board of the Company as well as
Senior Advisor to the Board and, when applicable, the Company shall cause the
Executive to be elected and reelected as a member of the Board. In his
executive capacities, the Executive shall report to the Board as to the duties
assigned by the Board.
<PAGE>
(b) During the Employment Period, and excluding any periods of
vacation and sick leave, the Executive shall devote such attention and time
during normal business hours to the business and affairs of the Company to the
extent necessary to discharge the responsibilities assigned to the Executive
under this Agreement and the Executive shall use the Executive's reasonable best
efforts to carry out such responsibilities faithfully and efficiently.
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
limit the ability of the Executive to provide services to Hilton Hotels
Corporation, which the parties hereto acknowledge is, and may remain, the
Executive's principal business activity. It shall also not be considered a
violation of the foregoing for the Executive to (A) serve on corporate, civic or
charitable boards or committees (excluding those which would create a conflict
of interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") of
$100,000, payable in accordance with the regular payroll practices of the
Company. During the Employment Period, the Annual Base Salary shall be reviewed
for possible increase at least annually, with any increase being at the sole
discretion of the Board (or an appropriate committee thereof). Any increase in
the Annual Base Salary shall not limit or reduce any other obligation of the
Company under this Agreement. The Annual Base Salary shall not be reduced after
any such increase, and the term "Annual Base Salary" shall thereafter refer to
the Annual Base Salary as so increased.
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<PAGE>
(b) WAIVER OF OTHER BENEFITS. During the Employment Period, the
Executive acknowledges that he shall not be entitled to participate in any
incentive, savings or retirement plans, practices, policies or programs nor in
any welfare benefit plans, practices, policies or programs otherwise provided by
the Company (including, without limitation, medical, prescription drug, vision,
dental, disability, salary continuance, vacation, employee life insurance, group
life insurance, accidental death and travel accident insurance plans and
programs) and that his execution of this Agreement shall constitute a complete
waiver of any such rights or entitlements.
(c) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement,
provided that the Executive complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
(d) STOCK OPTIONS: (i) If the Split occurs, on the Split Date,
the Executive shall be granted non-statutory stock options (the "Incentive
Options") under the Company's Stock Incentive Plan (the "Stock Plan) covering
3,000,000 shares of the Company's post-Split common stock in tranches of
2,000,000 shares (the "Regular Option") and 1,000,000 shares (the "Special
Option"), respectively. The exercise price of the shares subject to the Regular
Option shall be equal to the closing price of the Company's common shares on the
New York Stock Exchange on the Split Date. The exercise price of the shares
subject to the Special Option shall be equal to the greater of (i) the closing
price of the Company's common shares on the New York Stock Exchange on the Split
Date or (ii) 150% of the closing price of Hilton Hotel Corporation's common
shares on the New York Stock Exchange on July 9, 1998 ratably reduced (in the
manner described on Exhibit A hereto)
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following the Split so as to reflect that revised July 9, 1998 closing price
as if only the Company's post-Split common shares existed on that date. The
grant of the Incentive Options is subject to obtaining the approval of the
Stock Plan by a majority of the shares of common stock of Hilton Hotels
Corporation, the predecessor to the Company, voting at the shareholders
meeting immediately preceding the Split Date. As soon as practicable
thereafter, the Company shall register with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, the shares issuable
upon the exercise of the Incentive Options. The Incentive Options shall be
exercisable for 10 years after the Split Date except as otherwise
specifically provided in this Agreement.
The Regular Option shall vest and become exercisable on a cumulative basis
according to the following schedule if the Executive continues in the employment
of the Company through the applicable vesting date(s):
1. 25%: on the first anniversary of the Split Date.
2. 50%: on the second anniversary of the Split Date.
3. 75%: on the third anniversary of the Split Date.
4. 100%: on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9
years and 9 months following the Split Date if the Executive continues in the
employment of the Company through such date; provided, however, that, if, at any
time prior to the fifth anniversary of the Split Date, the closing price of the
Company's common shares on the New York Stock Exchange equals or exceeds 200% of
the closing price of Hilton Hotels Corporation's common shares on the New York
Stock Exchange on July 9, 1998 ratably reduced (in the manner described on
Exhibit A hereto) following the Split so as to reflect that revised July 9, 1998
closing price as if only the Company's post-Split
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<PAGE>
common shares existed on that date on each of any 7 consecutive trading days,
all shares under the Special Option shall be immediately vested and
exercisable if the Executive continues in the employment of the Company
through the date the closing prices of the Company's shares meet that
requirement. Notwithstanding the foregoing, all shares subject to the
Regular Option and the Special Option shall vest and become exercisable upon
the occurrence of any of the following events (each of (A), (B) and (C) below
a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below, or
(ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because of
death or Disability; or
(C) termination of employment by the Executive for Good
Reason, as defined below;
provided that the Special Option shall vest and become (and remain) exercisable
upon a Triggering Event, subject to Section 7(e), only if Executive does not
breach the terms of the covenants contained in Sections 7(a) and (b) below and
such vesting and exercisability shall be part of the consideration for the
Executive's undertakings under Sections 7(a) and (b).
(ii) If a Triggering Event occurs, any portion of the Incentive
Options that have become vested on or before the date of such Event (including
without limitation, any portion that becomes exercisable due to such Triggering
Event) shall remain exercisable until the earlier to occur of (x) the fifth
anniversary of such date of termination or (y) the tenth anniversary of the
Split Date.
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(iii) The Executive may assign the right to exercise the Incentive
Options to his spouse, children, grandchildren, to trusts for the benefit of the
Executive's immediately family, to a family partnership or limited liability
company designated by the Executive in which the Executive's family members are
the only partners or shareholders or to an entity exempt from federal income tax
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Code").
(iv) The Incentive Options shall be subject to the terms of the
Stock Plan in all respects not described herein but only to the extent not
inconsistent wit the terms of this Agreement.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment and the Employment Period shall terminate automatically
upon the Executive's death during the Employment Period. The Company shall be
entitled to terminate the Executive's employment because of the Executive's
Disability during the Employment Period. "Disability" means that (i) the
Executive has been unable, for a period of 180 consecutive business days, to
perform the Executive's duties under this Agreement, as a result of physical or
mental illness or injury, and (ii) a physician selected by the Company or its
insurers, and acceptable to the Executive or the Executive's legal
representative, has determined that the Executive's incapacity is total and
permanent. The Executive agrees to reasonably cooperate with the Company in
order to obtain the physician's evaluation of the Executive. A termination of
the Executive's employment by the Company for Disability shall be communicated
to the Executive by written notice ("Notice of Termination for Disability"),
stating the date, time and place of a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Disability, that takes place not less than five and not more than 25 business
days after the Executive receives the Notice
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of Termination for Disability. The Executive shall be given an opportunity,
together with counsel, to be heard at such special Board meeting. The
Executive's termination for Disability shall be effective, if confirmed at
the meeting, 30 days after the adoption of a resolution at such special Board
meeting, stating that the Executive's employment shall be terminated because
of Disability (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties, as determined by
the Board, before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties;
(B) illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company;
or
(C) a material breach of the covenants or representations
contained in Section 7.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause")
of its intention to terminate the Executive's employment for Cause, setting
forth in reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this Agreement
on which it relies, and stating the date, time and place of the Special Board
Meeting. The "Special Board Meeting" means a meeting of the Board called and
held specifically for the purpose of considering the
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Executive's termination for Cause, that takes place not less than 30 and not
more than 60 days after the Executive receives the Notice of Termination for
Cause. The Executive shall be given an opportunity, together with counsel,
to be heard at the Special Board Meeting. The Executive's termination for
Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting, stating that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in the Notice of Termination
for Cause, and such conduct constitutes Cause under this Agreement and such
conduct has not ceased or been cured between the date the Executive receives
the Notice of Termination for Cause and the date of the meeting.
(c) GOOD REASON. (i) The Executive may terminate employment for
Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, whether or
not material, following a Change of Control) with paragraph (a)
of Section 2 of this Agreement, or any other action by the
Company (other than the Split) that results in a material
diminution in the Executive's position or authority, duty,
titles, responsibilities, or reporting requirements other than an
isolated, insubstantial and inadvertent action that is not taken
in bad faith and is remedied by the Company within 30 days after
receipt of written notice thereof from the Executive;
(B) any material failure (any failure, whether or not
material, following a Change of Control, as defined below) by the
Company to comply with any provision of Section 3 of this
Agreement, other than a failure that is not taken in bad faith
and is remedied by the Company within 30 days after receipt of
written notice thereof from the Executive;
(C) any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly
permitted by this Agreement; or
(D) any failure by the Company to comply with and satisfy
paragraph (c) of Section 8 of this Agreement.
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In addition, following a Change of Control, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Change of Control shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective
on the fifth business day following the date when the Notice of Termination
for Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason or without Good Reason, as the case
may be, is effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE COMPANY
OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR GOOD REASON.
If, during the Employment Period, the Company terminates the Executive's
employment, other than for Cause or Disability or by reason of the Executive's
death, or the Executive terminates employment for Good Reason, the Company shall
fulfill its obligations as to Base Salary under Section 3(a) hereof for the
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balance of the Employment Period. Fifty percent of such amounts shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Section 7 below. The Company shall also pay to the
Executive, in a lump sum in cash within 30 days after the Date of Termination,
the Executive's accrued but unpaid cash compensation (the "Accrued
Obligations"), which shall include but not be limited to, (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not yet
been paid and (2) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) that has not yet been
paid; and, provided, however, that the Company's obligation to make any payments
under this Section 5(a) to the extent any such payment shall not have accrued as
of the day before the Date of Termination shall also be conditioned upon the
Executive's execution, and non-revocation, of a written release, substantially
in the form attached hereto as Annex 1, (the "Release"), of any and all claims
against the Company and all related parties with respect to all matters arising
out of the Executive's employment by the Company (other than any entitlements
under the terms of this Agreement or under any other plans or programs of the
Company in which the Executive participated and under which the Executive has
accrued a benefit), or the termination thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Sections 7(a)
and (b) below, the Executive, in lieu of the amounts specified in the first
sentence of the prior paragraph, shall receive in a lump sum in cash within 30
days after the Date of Termination equal to 2.99 multiplied by the sum of the
Executive's Annual Base Salary and Annual Bonus for the year in which the Change
of Control occurs or the immediately preceding year,
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whichever produces the higher sum. Fifty percent of such amount shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Sections 7(a) and (b) below. In addition, the
Executive shall also be entitled in the case of compensation previously
deferred by the Executive, to a lump sum equal to all amounts previously
deferred (together with any accrued interest thereon) and not yet paid by the
Company.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay the Annual Base Salary to the
Executive or the Executive's estate or legal representative, as applicable, for
the remaining portion of the Employment Period (determined without regard to the
fact that the Employment Period otherwise terminates under this Agreement), in a
lump sum in cash within 30 days after the Date of Termination. In such event,
the Company shall have no further obligations under this Agreement.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment Period,
the Company shall pay the Executive the Annual Base Salary through the Date of
Termination, the amount of any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon), in each case to the
extent not yet paid and the Company shall have no further obligations under this
Agreement. If the Executive voluntarily terminates employment during the
Employment Period, other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within 30 days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement.
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6. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
7. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period (the "Section
3 Lump Sum")or fifty percent of the lump sum payment in lieu of Base Salary
provided under Section 5 in the event of Executive's termination of employment
following a Change of Control (the "Section 5 Lump Sum"), the Executive agrees
as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer programs and
software and financial information relating to the Company or any of its
affiliated companies and their respective businesses that the Executive obtains
during the Executive's employment by the Company or any of its affiliated
companies and that is not public knowledge (other than as a result of the
Executive's violation of this paragraph (a) of Section 7) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except in the good faith performance of his duties hereunder,
with the prior written consent of the Company or as otherwise required by law or
legal process. In no event shall an asserted violation
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<PAGE>
of the provisions of this paragraph (a) of Section 7 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement except as provided in paragraph (e) below.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive will
not, except with the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Executive
agrees that he will not, for a period of two years after the expiration or
termination of the Executive's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent contractor,
or solicit the employment of, any managerial or higher level person who is or at
any time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
(c) The Executive represents that he is licensed by the gaming
authorities in Nevada and New Jersey and knows of no reason why a license
necessary for him to perform his duties hereunder would not be granted to or
maintained by him by those or similar authorities in the future.
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<PAGE>
4. Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties hereunder
conflicts with any contractual commitment on his part to any third party or
violates or interferes with any rights of any third party.
(e) The Executive acknowledges and agrees that the
restrictions contained in this Section are reasonable and necessary to
protect and preserve the legitimate interests, properties, goodwill and
business of the Company, that the Company would not have entered into this
Agreement in the absence of such restrictions and that irreparable injury
will be suffered by the Company should the Executive breach any of those
provisions. Executive represents and acknowledges that (i) the Executive has
been advised by the Company to consult Executive's own legal counsel in
respect of this Agreement, and (ii) that the Executive has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with the Executive's counsel. The Executive further acknowledges
and agrees that a breach of any of the restrictions in this Section cannot be
adequately compensated by monetary damages. The Company agrees to give the
Executive written notice of any action taken by the Executive that it
believes in good faith to constitute a violation of the Executive's
undertakings under Sections 7(a) and (b) and to give the Executive at least
60 days thereafter to cease any such action which, if he complies with such
request, will preclude any further action or any recovery by the Company. In
the event that the Executive fails to do so, the Executive agrees that agrees
that the Executive's right to the Section 3 Lump Sum or the Section 5 Lump
Sum, as the case may be, shall be forfeited (but only to the extent of those
portions not previously received) and the Executive's right to exercise the
Special Option (but not to any shares already obtained upon a prior exercise
of the Special Option or any cash received upon a prior cashless exercise of
the Special Option, if available) shall cease. In addition,
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<PAGE>
in the case of any violation of the provisions of this Section 7, the Company
shall be entitled to preliminary and permanent injunctive relief, without the
necessity of proving actual damages, as well as provable damages and an
equitable accounting of all earnings, profits and other benefits arising from
any violation of this Section (with appropriate credit for the amounts
forfeited by the Executive and the non-exercisability of the Special Option),
which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled. In the event that any of the
provisions of this Section should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, it is the intention of the parties that the provision shall be
amended to the extent of the maximum time, geographic, service, or other
limitations permitted by applicable law, that such amendment shall apply only
within the jurisdiction of the court that made such adjudication and that the
provision otherwise be enforced to the maximum extent permitted by law. and
other equitable relief, may be brought in the United States District Court
for the Southern District of California, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Los Angeles, California, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and
(iii) waives any objection which the Executive may have to the laying of
venue of any such suit, action or proceeding in any such court. The
Executive also irrevocably and unconditionally consents to the service of any
process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 11 hereof.
8. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by
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will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
9. CHANGE OF CONTROL.
(a) For the purpose of this Agreement, a "Change of Control" shall
mean:
(i) The acquisition by any person, entity or "group", within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934
(the "Exchange Act"). (excluding, for this purpose, (A) the Company or its
subsidiaries, (B) any employee benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company or (C)
Barron Hilton, the Charitable Remainder Unitrust created by Barron Hilton to
receive shares from the Estate of Conrad N. Hilton, or the Conrad N. Hilton
Foundation, collectively the "Hilton Interests"), of beneficial ownership,
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then outstanding shares of common stock or
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the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the Split Date, constitute the
Board (as of the Split Date, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the Split Date whose election, or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such
terms are used in Rule 14 a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of
the Company or (C) the sale of all or substantially all of the assets of the
Company;
provided, however, that the Split shall not be deemed a "Change of Control" for
any purpose under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that
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with respect to the Special Option, such immediate vesting and exercisability
shall be conditioned upon the Executive not breaching the terms of the
covenants contained in Sections 7(a) and (b).
(c) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the Executive shall be paid an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive after deduction of any excise tax imposed under Section 4999 of
the Code, and any federal, state and local income and employment tax and excise
tax imposed upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income tax and employment taxes at the highest marginal
rate of federal income and employment taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Termination Date, net of the maximum reduction in federal income taxes
that may be obtained from the deduction of such state and local taxes.
(d) All determinations to be made under this Section 9 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. Within five days after the
Accounting Firm's determination, the Company shall pay (or cause to be
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paid) or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement.
(e) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax, including
interest and penalties, with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a termination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Executive to pay such claim and sue for a refund the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
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(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to this Section, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of subsection (d)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(g) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or wilful misconduct of the Accounting Firm.
10. ARBITRATION. The Company and the Executive mutually consent to
the resolution by arbitration, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association, of
all claims or controversies arising out of the Executive's employment (or its
termination) that the Company may have against the Executive or that the
Executive may have against the Company or against its officers, directors,
shareholders,
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employees or agents in their capacity as such other than a claim which is
primarily for an injunction or other equitable relief. The Company and the
Executive shall equally share the fees and costs of the arbitrator, and each
party shall bear its own costs in connection with any arbitration, unless the
Executive shall prevail in an arbitration proceeding as to any material
issue, in which case the Company shall reimburse the Executive for all
reasonable costs, expenses and fees incurred in connection with such
arbitration.
11. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO THE EXECUTIVE:
c/o Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence Cagney
IF TO THE COMPANY:
3930 Howard Hughes Parkway
Las Vegas, NV 89109
Attention: General Counsel
WITH A REQUIRED COPY TO:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
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Attention: Robert J. Lichtenstein
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 5 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
12. The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment or arrangements to
the extent necessary to the
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intended preservation of such rights and obligations, including, but not by
way of limitation, those rights and obligations set forth in Sections 3, 5
and 9.
13. The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, references in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HILTON GAMING CORPORATION
By /s/ Arthur M. Goldberg /s/ Stephen F. Bollenbach
------------------------------- -----------------------------------
Stephen F. Bollenbach
24
<PAGE>
EXHIBIT A
Pursuant to Section 3(d) of the Agreement, the exercise price of shares subject
to the Special Option shall be equal to 150% of the amount determined under the
following formula:
The closing price of Hilton Common Stock on July 9, 1998, ($26.9375 per share)
divided by the combined market price of the Lodging Company and the Gaming
Company on the date of the split multiplied by the market price of the Gaming
Company on the date of the split, all as determined by the Personnel and
Compensation Committee of the Board of Directors.
<PAGE>
EXHIBIT 99.13
DISTRIBUTION AGREEMENT
BY AND BETWEEN
GRAND CASINOS, INC.
AND
LAKES GAMING, INC.
DATED AS OF DECEMBER 31, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. General. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Terms Defined Elsewhere in Agreement . . . . . . . . .13
ARTICLE II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . . . . .14
Section 2.01. Transfer of Assets to Lakes. . . . . . . . . . . . . .14
Section 2.02. Transfers of Assets from Non-Mississippi Subsidiaries to
Company or Mississippi Subsidiaries. . . . . . . . . . . . . . . . .15
Section 2.03. Transfers Not Effected Prior to the Distribution . . .15
Section 2.04. Cooperation Re: Assets. . . . . . . . . . . . . . . .15
Section 2.05. No Representations or Warranties; Consents . . . . . .16
Section 2.06. Conveyancing and Assumption Instruments. . . . . . . .16
Section 2.07. Cash Allocations After the Year-End. . . . . . . . . .17
Section 2.08. Cash Allocation; Cash Management . . . . . . . . . . .17
Section 2.09. Allocation of Debt . . . . . . . . . . . . . . . . . .18
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES. . . . . . . . . . .19
Section 3.01. Assumption and Satisfaction of Mississippi Business and
Non-Mississippi Business Liabilities . . . . . . . . . . . . . . . .19
Section 3.02 Assumption and Satisfaction of Contingent Company
Liabilities and Transaction Liabilities. . . . . . . . . . . . . . .19
ARTICLE IV. THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 4.01. Cooperation Prior to the Distribution. . . . . . . . .19
Section 4.02. Company Board Action; Conditions Precedent to the
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . .21
ARTICLE V. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .22
Section 5.01. Indemnification by Company . . . . . . . . . . . . . .22
Section 5.02. Indemnification by Lakes . . . . . . . . . . . . . . .22
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . .22
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. Lakes Board. . . . . . . . . . . . . . . . . . . . . .26
Section 6.02. Resignations; Company Board. . . . . . . . . . . . . .26
Section 6.03. Lakes Certificate and Bylaws . . . . . . . . . . . . .26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 6.04. Certain Post-Distribution Transactions . . . . . . . .26
Section 6.05. Sales and Transfer Taxes . . . . . . . . . . . . . . .27
Section 6.06. Settlement of Intercompany Accounts. . . . . . . . .27
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES. . . . . . . . . . . . . . . .27
Section 7.01. Provision of Corporate Records . . . . . . . . . . . .27
Section 7.02. Access to Information. . . . . . . . . . . . . . . . .28
Section 7.03. Production of Witnesses. . . . . . . . . . . . . . . .28
Section 7.04. Corporate Services . . . . . . . . . . . . . . . . . .29
Section 7.06. Retention of Records . . . . . . . . . . . . . . . . .29
Section 7.07. Confidentiality. . . . . . . . . . . . . . . . . . . .29
Section 7.08. Privileged Matters . . . . . . . . . . . . . . . . . .30
ARTICLE VIII. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.01. Policies and Rights Included Within the Non-Mississippi
Group Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.02. Policies and Rights Included Within the Mississippi
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. . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.01. Entire Agreement; No Third Party Beneficiaries . . . .34
Section 9.02. Tax Allocation and Indemnity Agreement; After-Tax
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.03. Expenses . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.04. Governing Law. . . . . . . . . . . . . . . . . . . . .35
Section 9.05. Notices. . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.06. Amendments . . . . . . . . . . . . . . . . . . . . . .35
Section 9.07. Assignments. . . . . . . . . . . . . . . . . . . . . .35
Section 9.08. Termination. . . . . . . . . . . . . . . . . . . . . .36
Section 9.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . .36
Section 9.10. Specific Performance . . . . . . . . . . . . . . . . .36
Section 9.11. Headings; References . . . . . . . . . . . . . . . . .36
Section 9.12. Counterparts . . . . . . . . . . . . . . . . . . . . .36
Section 9.13. Severability; Enforcement. . . . . . . . . . . . . . .36
Section 9.14. Arbitration of Disputes. . . . . . . . . . . . . . . .37
Section 9.15. Prompt Payment . . . . . . . . . . . . . . . . . . . .38
</TABLE>
<PAGE>
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "AGREEMENT"), dated as of December 31, 1998, by
and between GRAND CASINOS, INC., a Minnesota corporation ("COMPANY") and LAKES
GAMING, INC., a Minnesota corporation and wholly owned subsidiary of Company
("LAKES").
WHEREAS, Company, directly and through certain wholly-owned subsidiaries,
(a) owns, operates and develops certain gaming and resort facilities located in
the State of Mississippi (as more specifically described herein, the
"MISSISSIPPI BUSINESS"), and (b) manages and develops certain gaming facilities
located outside the State of Mississippi (as more specifically described herein,
the "NON-MISSISSIPPI BUSINESS");
WHEREAS, it is necessary to separate the Mississippi Business from the
Non-Mississippi Business in order to satisfy conditions precedent contained in
that certain Agreement and Plan of Merger dated June 30, 1998 (the "Merger
Agreement") by and among Company, Lakes, Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), Gaming Co., Inc. (n/k/a Park Place Entertainment
Corporation), a Delaware corporation and a wholly-owned subsidiary of Hilton
("Gaming Co."), and Gaming Acquisition Corp., a Minnesota corporation and a
wholly-owned subsidiary of Gaming Co. ("MergerSub");
WHEREAS, the Board of Directors of Company has determined that it is in the
best interests of Company for Company to merge with MergerSub (the "Merger")
pursuant to the Merger Agreement;
WHEREAS, subject to Company shareholder ratification and certain other
conditions, the Board of Directors of Company has determined that it is in the
best interests of Company and the shareholders of Company to separate the
Non-Mississippi Business from the Mississippi Business through a distribution
(the "DISTRIBUTION") to the holders of Company Common Stock (as defined herein)
of all of the outstanding shares of Lakes Common Stock (as defined herein) to
accomplish the Merger;
WHEREAS, in order to effect such separation, Company will contribute to
Lakes prior to the Distribution, all of the operations, assets and liabilities
of Company comprising the Non-Mississippi Business and such other assets,
liabilities and operations as are described below;
WHEREAS, in connection with the Distribution, Company and Lakes 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; and
WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall
<PAGE>
qualify as a tax-free distribution solely with respect to Company's Shareholders
within the meaning of Section 355 of the Internal Revenue Code of 1986, as
amended.
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 Company shall not include
Lakes, the Non-Mississippi Subsidiaries or any other Person which otherwise
would be an Affiliate of Company solely by reason of Company's ownership of the
capital stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution
or the fact that any officer or director of Company or any of the Mississippi
Subsidiaries shall also serve as an officer or director of Lakes or any of the
Non-Mississippi Subsidiaries; and (ii) the Affiliates of Lakes shall not include
Company, the Mississippi Subsidiaries or any other Person which otherwise would
be an Affiliate of Lakes solely by reason of Company's ownership of the capital
stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution or the
fact that any officer or director of Lakes or any of the Non-Mississippi
Subsidiaries shall also serve as an officer or director of Company or any of the
Mississippi Subsidiaries.
AGENT: Norwest Shareholder Services as distribution agent appointed by
Company to distribute the Lakes Common Stock pursuant to the Distribution.
ANCILLARY AGREEMENTS: The License Agreement, Employee Benefits Allocation
Agreement, and Tax Allocation and Indemnity Agreement.
ASSIGNED LAKES ASSETS: The assets indicated on Schedule 5.
ASSIGNED LAKES ASSETS PROCEEDS: The net proceeds of the sales, if any, of
the Assigned Lakes Assets after the date of the Merger Agreement but prior to
the Distribution Date, after deducting any costs, fees and taxes (calculated
using the highest marginal Tax rate for the relevant taxable period) associated
with such sales, including, but not limited to, costs and fees related to
advertising, marketing and transportation and sales, transfer, income (if any)
and other taxes; PROVIDED, HOWEVER, if such sale results in a capital or
ordinary loss, then such loss shall also be allocated to Lakes along with the
subject Assigned Lakes Assets Proceeds.
<PAGE>
ASSIGNED LAKES LIABILITIES: The liabilities indicated on Schedule 6.
ASSUMED DEBT: The Debt of Company and its Subsidiaries which is assumed by
Lakes and/or retained by the Non-Mississippi Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.09.
BANK OF AMERICA REVOLVING CREDIT FACILITY: The $100 million Capital Lease
Facility with BA Leasing Capital Corporation, et al. dated September 29, 1997.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
thereto as in effect for the taxable year in question.
COMPANY BOARD: The Board of Directors of Company as it is constituted
prior to the Distribution Date.
COMPANY COMMON STOCK: The common stock, par value $.01 per share, of
Company.
COMPANY NOTES: The First Mortgage Notes and the Senior Notes.
COMPANY GROUP: The meaning specified in the Tax Allocation and Indemnity
Agreement.
CONTINGENT COMPANY LIABILITY: The meaning set forth in Section 3.02.
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.
DEBT: All (i) indebtedness for borrowed money and obligations evidenced by
bonds, notes, debentures or similar instruments; (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).
DISTRIBUTION: The distribution to the holders of Company Common Stock as of
the Distribution Record Date of all of the outstanding shares of Lakes Common
Stock.
DISTRIBUTION DATE: The date on which the Distribution is effected.
DISTRIBUTION RECORD DATE: The date established by Company Board as the date
for taking a record of the Holders of Company Common Stock entitled to
participate in the Distribution.
<PAGE>
EMPLOYEE BENEFITS ALLOCATION AGREEMENT: The Employee Benefits and Other
Employment Matters Allocation Agreement between Lakes and Company, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit A.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FIRST MORTGAGE NOTES: The $450 million 10.125% First Mortgage Notes of
Company due December 1, 2003.
FORM 10: The Registration Statement on Form 10 under the Exchange Act with
respect to the Lakes Common Stock.
GAAP: Generally accepted accounting principles.
GAMING LAWS: Indian Gaming Laws, Louisiana Gaming Laws, Minnesota Gaming
Laws, Mississippi Gaming Laws, and Nevada Gaming Laws.
GAMING CO.: A Delaware corporation whose wholly-owned subsidiary,
MergerSub, will be merged with Company pursuant to the Merger Agreement.
GOVERNMENTAL AUTHORITY: Any court, administrative agency or commission or
other governmental authority or instrumentality.
HILTON: A Delaware corporation which is a party to the Merger Agreement.
HOLDERS: The holders of record of Company Common Stock as of the
Distribution Record Date.
INDIAN DEBT GUARANTEES: Shall mean (i) the guarantees of Company and Grand
Casinos of Louisiana, Inc. Tunica-Biloxi pursuant to the Guaranty Agreement,
dated as of August 7, 1994 in favor of Pitney Bowes Credit Corporation,
guaranteeing the debt obligations of the Tunica-Biloxi Tribe of Louisiana; (ii)
the guarantees of Company and Grand Casinos of Louisiana, Inc. - Coushatta
pursuant to the Guaranty Agreement, dated as of January 31, 1995 in favor of PB
Funding Corporation, guaranteeing the lease obligations of the Coushatta Tribe
of Louisiana; (iii) the guarantees of Company and Grand Casinos of Louisiana,
Inc. - Coushatta pursuant to the Guaranty Agreement, dated as of January 31,
1995 in favor of Sentry Financial Corporation, guaranteeing the lease
obligations of the Coushatta Tribe of Louisiana; (iv) the guarantees of Company
and Grand Casinos of Louisiana, Inc. - Tunica-Biloxi pursuant to the Commercial
Guaranty Agreement, dated as of April 7, 1997 in favor of Cottonport Bank,
guaranteeing the debt obligations of the Tunica-Biloxi Tribe of Louisiana; (v)
the guarantees of Company and Grand Casinos of Louisiana, Inc. - Coushatta
pursuant to the Commercial Guaranty Agreement, dated as of May 1, 1997 in favor
of Hibernia National Bank, guaranteeing the debt obligations of
<PAGE>
the Coushatta Tribe of Louisiana; and (vi) any other guarantees under which
Company or any of its subsidiaries has guaranteed the debt or lease obligations
of any Indian Tribes.
INDIAN GAMING LAWS: Shall mean (i) the Indian Gaming Regulatory Act of 1988
and the rules and regulations promulgated thereunder; (ii) any state laws and
regulations governing gaming operations and facilities on Indian land; and (iii)
any tribal ordinances and regulations governing gaming on land within such
tribe's jurisdiction.
INDIAN MANAGEMENT AGREEMENTS: shall mean the management agreements and
related collateral and other agreements of the Indian tribes, or of Company or
any of its Subsidiaries, relating to (i) Grand Casino Avoyelles; (ii) Grand
Casino Coushatta; (iii) Grand Casino Hinckley; and (iv) any other Indian gaming
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.
INSURANCE RECEIVABLE AGREEMENT: The Insurance Receivable Agreement between
the Company and Lakes which shall be entered into on or prior to the
Distribution Date in substantially the form attached hereto as Exhibit E.
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, uncollectibility 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 BOARD: The Board of Directors of Lakes.
LAKES BYLAWS: The Bylaws of Lakes, substantially in the form of Exhibit B,
to be in effect at the Distribution Date.
<PAGE>
LAKES ARTICLES OF INCORPORATION: The Articles of Incorporation of Lakes,
substantially in the form of Exhibit C, to be in effect at the Distribution
Date.
LAKES COMMON STOCK: The common stock, $.01 par value per share, of Lakes.
LAKES GROUP: The meaning specified in the Tax Allocation and Indemnity
Agreement.
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.
LICENSE AGREEMENT: The Intellectual Property License Agreement between
Company and Lakes, which agreement shall be entered into on or prior to the
Distribution Date with substantially such terms as are attached hereto as
Exhibit D.
LOUISIANA GAMING LAWS: The Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder.
LOUISIANA GAMING LICENSE: The Company's license to manage Louisiana-based
casinos issued pursuant to Louisiana Gaming Laws.
MBCA: shall mean the Minnesota Business Corporation Act, as amended from
time to time.
MINNESOTA GAMING LAWS: shall mean the Minnesota Lawful Gambling and
Gambling Devices Act and the rules and regulations promulgated thereunder.
MISSISSIPPI BUSINESS: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all of Company's casinos, hotels, related facilities and all other operations
located within the State of Mississippi, including the Grand Casino Tunica,
Grand Casino Biloxi and Grand Casino Gulfport properties and any operations
located outside the State of Mississippi which relate to the Mississippi Group
Assets.
MISSISSIPPI GAMING LAWS: shall mean the Mississippi Gaming Control Act and
the rules and regulations promulgated thereunder.
MISSISSIPPI GROUP: Company and the Mississippi Subsidiaries, collectively.
MISSISSIPPI GROUP EMPLOYEES: The meaning specified in the Employee
Benefits Allocation Agreement.
<PAGE>
MISSISSIPPI GROUP ASSETS: (i) All outstanding capital stock of the
Mississippi Subsidiaries and all assets of the Mississippi Subsidiaries other
than the Non-Mississippi Group Assets; (ii) all cash or cash equivalents
generated or derived from the sale or disposition of Mississippi Group Assets
prior to the Distribution Date; (iii) the Mississippi Group Books and Records;
(iv) the rights of Company and the Mississippi Subsidiaries insured under the
Shared Policies; (v) all of the assets expressly to be retained by, or assigned
or allotted to, Company or any of the Mississippi Subsidiaries under this
Agreement or the Related Agreements; (vi) the Retained Company Assets ; and
(vii) any other assets of Company and its Subsidiaries used principally in the
Mississippi Business; except, in each case, excluding the assets listed on
Schedule 5.
MISSISSIPPI GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Company and the Mississippi Subsidiaries and any other
books and records of Company's Subsidiaries which relate principally to the
Mississippi Group, are necessary to conduct the Mississippi Business or are
required by law to be retained by Company or a Mississippi Subsidiary,
including, without limitation: (i) all such books and records relating to
Company Employees; (ii) all files relating to any Action being retained by
Company as part of the Mississippi Group Liabilities; and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Company, the
Mississippi Subsidiaries or the Mississippi Business (but not including the
Non-Mississippi Group Books and Records, provided that Company shall have access
to, and shall have the right to obtain duplicate copies of, the Non-Mississippi
Group Books and Records in accordance with the provisions of Article VII).
MISSISSIPPI GROUP CASH ACCOUNTS: The bank accounts of the Mississippi Group
as set forth in Schedule 8 hereto.
MISSISSIPPI GROUP LIABILITIES: (i) All of the Liabilities of the
Mississippi Group under, or to be retained or assumed by Company or any of the
Mississippi Subsidiaries pursuant to, this Agreement (including Company's
portion of Contingent Company Liabilities and Transaction Liabilities as
provided in Section 3.02 herein) or any of the Related Agreements; (ii) all
Liabilities for payment of outstanding drafts of Company and its Subsidiaries
existing as of the Distribution Date; (iii) the Retained Debt; (iv) all
Liabilities of the Mississippi Subsidiaries, other than the Non-Mississippi
Group Liabilities; (v) all Actions against Company or its Subsidiaries arising
out of, or specifically associated with, any of the Mississippi Group Assets or
the Mississippi Business; (vi) the Retained Company Liabilities indicated on
Schedule 4; and (vii) all other Liabilities of Company and its Subsidiaries
arising out of, or specifically associated with, any of the Mississippi Group
Assets or the Mississippi Business; PROVIDED, HOWEVER, that the Mississippi
Group Liabilities shall not include (1) the Assumed Debt or (2) 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).
<PAGE>
MISSISSIPPI SUBSIDIARIES: The Subsidiaries of Company specified in Schedule
1 and any other Subsidiaries formed after the date hereof to conduct a portion
of the Mississippi Business.
NEVADA GAMING LAWS: shall mean 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 other applicable local
regulations.
NET CASH: The sum of (i) net cash (used in) or provided by financing
activities; (ii) net cash (used in) or provided by operating activities; and
(iii) net cash (used in) or provided by investing activities.
NON-MISSISSIPPI BUSINESS: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all Company's casinos, hotels, related facilities and all other operations
located outside the State of Mississippi which relate to the Non-Mississippi
Group Assets.
NON-MISSISSIPPI GROUP: Lakes and the Non-Mississippi Subsidiaries,
collectively.
NON-MISSISSIPPI GROUP ASSETS: (i) All outstanding capital stock of the
Non-Mississippi Subsidiaries; (ii) the Assigned Lakes Assets, to the extent in
existence on the Distribution Date; (iii) the Non-Mississippi Group Books and
Records; (iv) the rights of a Non-Mississippi Subsidiary insured under the
Shared Policies; (v) all of the assets expressly to be retained by, or assigned
or allocated to, Lakes or any of the Non-Mississippi Subsidiaries under this
Agreement or the Related Agreements; (vi) the Assigned Lakes Assets Proceeds;
and (vii) any other assets of Company and its Subsidiaries used principally in
the Non-Mississippi Business ; except, in each case excluding the assets
included on Schedule 3.
NON-MISSISSIPPI GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Lakes and the Non-Mississippi Subsidiaries and any
other books and records of Company and its Subsidiaries which relate principally
to the Non-Mississippi Group, are necessary to conduct the Non-Mississippi
Business, or are required by law to be retained by Lakes or a Non-Mississippi
Subsidiary, including, without limitation: (i) all such books and records
relating to Transferred Employees; (ii) all files relating to any Action being
assumed by Lakes or retained by a Non-Mississippi Subsidiary as part of the
Non-Mississippi Group Liabilities; and (iii) original corporate minute books,
stock ledgers and certificates, and all licenses, leases, agreements and
filings, relating to Lakes, the Non-Mississippi Subsidiaries or the
Non-Mississippi Business (but not including the Mississippi Group Books and
Records, provided that Lakes shall have access to, and have the right to obtain
duplicate copies of, any of the Mississippi Group Books and Records which
pertain to the Non-Mississippi Business in accordance with the provisions of
Article VII).
NON-MISSISSIPPI GROUP CASH ACCOUNTS: The bank accounts of Non-Mississippi
Group as
<PAGE>
set forth in Schedule 9 hereto.
NON-MISSISSIPPI GROUP LIABILITIES: (i) All of the Liabilities of the
Non-Mississippi Group under, or to be retained or assumed by Lakes or any of the
Non-Mississippi Subsidiaries pursuant to, this Agreement (including Lakes'
portion of Contingent Company Liabilities and Transaction Liabilities as
provided in Section 3.02 herein) or any of the Related Agreements (including the
Assumed Debt); (ii) the Stratosphere Liabilities; (iii) all Liabilities of Lakes
and the Non-Mississippi Subsidiaries, other than the Mississippi Group
Liabilities; (iv) all Actions against Company or its Subsidiaries arising out
of, or specifically associated with, any of the Non-Mississippi Group Assets or
the Non-Mississippi Business; (v) the Indian Debt Guarantees; (vi) all other
Liabilities of Company and its Subsidiaries arising out of, or specifically
associated with, any of the Non-Mississippi Group Assets or the Non-Mississippi
Business (including Debt secured by the Non-Mississippi Group Assets); and (vii)
the Assigned Lakes Liabilities indicated on Schedule 6; PROVIDED, HOWEVER, that
the Non-Mississippi Group Liabilities shall not include (x) any Retained Debt,
or (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).
NON-MISSISSIPPI SUBSIDIARIES: The Subsidiaries of Company specified in
Schedule 2 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Non-Mississippi Business.
NON-MISSISSIPPI SUBSIDIARIES NOTE GUARANTEES: The guarantees of the
Non-Mississippi Subsidiaries of Company Notes and the Bank of America Revolving
Credit Facility.
NON-MISSISSIPPI SUBSIDIARIES NOTE PLEDGE: The pledge of the outstanding
capital stock of the Non-Mississippi Subsidiaries pursuant to Grand Casinos,
Inc. Security and Pledge Agreement dated November 30, 1995 by Grand Casinos,
Inc. in favor of American Bank National Association (n/k/a Firstar Bank of
Minnesota, National Association) and Grand Casinos Resorts, Inc. Security and
Pledge Agreement dated November 30, 1995 by Grand Casinos Resorts, Inc. in favor
of American Bank National Association (n/k/a Firstar Bank of Minnesota, National
Association) relating to the Notes.
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 Non-Mississippi Business or the Mississippi 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 policies and
self-insurance and captive insurance company arrangements, together with the
rights and benefits thereunder.
<PAGE>
PRELIMINARY TRANSFERS: The contribution by Company and its Subsidiaries to
Lakes and the Non-Mississippi Subsidiaries, prior to the Distribution, of all of
the assets and liabilities of Company and its Subsidiaries comprising the
Non-Mississippi Business and such other assets, liabilities and operations as
are described herein.
PRIVILEGED INFORMATION: All information as to which Company, Lakes 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.
RESTRICTED PAYMENT: (i) the declaration or payment of any dividend or any
distribution on account of Lakes' or any of its Subsidiaries' equity interests;
or (ii) the purchase, redemption, defeasance or other acquisition or retirement
for value of any equity interests of Lakes, without the written consent of
Company, which consent can be given or withheld in Company's sole and absolute
discretion.
RETAINED COMPANY ASSETS: The assets indicated in Schedule 3.
RETAINED COMPANY LIABILITIES: The liabilities indicated on Schedule 4.
RETAINED DEBT: The Debt of Company and its Subsidiaries which is to be
retained by Company and/or the Mississippi Group Subsidiaries in connection with
the Distribution, as determined pursuant to Section 2.09 and not otherwise
assigned by or transferred to the Non-Mississippi Group.
RULING REQUEST: The private letter ruling request to be filed by Company
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 Company
and/or
<PAGE>
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."
SENIOR NOTES: The $115 million 9% Series B Notes of Company due 2004.
SHARED POLICIES: All Policies (including Self Insurance Programs), current
or past, which are owned or maintained by or on behalf of Company and/or any of
its Subsidiaries or their respective predecessors which insure both the
Mississippi Business and the Non-Mississippi Business.
STRATOSPHERE: Shall mean Stratosphere Corporation and any of its
Subsidiaries or Affiliates, including Stratosphere Gaming Corp., and any
business or operations conducted by or related to such entities, including the
Stratosphere Tower, Casino & Hotel and adjoining retail-entertainment center.
STRATOSPHERE CONTRACTS: Shall mean any and all contracts, loan agreements,
leases, guaranty agreements, notes, mortgages, indentures, obligations and other
agreements relating to Stratosphere, including, without limitation, (a) the
Standby Equity Commitment, dated as of March 9, 1995, by and between Company and
Stratosphere, (b) the Limited Guaranty, dated as of March 28, 1997, by Company
for the benefit of each of the beneficiaries listed therein, (c) the
Indemnification Agreement, dated as of May 1, 1997, by and between Company and
Thomas G. Bell, (d) the Indemnification Agreement, dated as of May 1, 1997, by
and between Company and Andrew S. Blumen, (e) the Indemnification Agreement,
dated as of May 1, 1997, by and between Company and Robert A. Maheu, (f) the
Indemnification Agreement, dated as of May 1, 1997, by and between Company and
David R. Wirshing, and (g) the indemnification arrangement described in the
Minutes of Company's Board of Directors, dated May 3, 1995, relating to the
indemnification of Lyle Berman, Neil Sell and Stanley Taube in connection with
their service on the Stratosphere Board of Directors.
STRATOSPHERE LIABILITIES: Shall mean any and all Liabilities relating to or
arising from Stratosphere, Company's investment in or relationship to
Stratosphere and/or the Stratosphere Litigation and/or the Stratosphere
Contracts.
STRATOSPHERE LITIGATION: Shall mean any and all actions, suits,
proceedings, claims, arbitrations or investigations relating to Stratosphere,
including the Stratosphere shareholders litigation in the U.S. District Court
for the District of Nevada (In re Stratosphere Corporation Securities Litigation
- - -- Master File No. CV-5-96-00708PMP), Grand Casinos, Inc. shareholders
litigation in the U.S. District Court for the District of Minnesota (In Re:
Grand Casinos, Inc. Securities Litigation -- Master Filed No. 4-96-890), the
Stratosphere shareholders litigation in the Nevada State Court (Victor M. Opitz,
et. al. v. Robert E. Stupak, et. al. -- Case No. A363019), the Cohen litigation
in the U.S. District Court for the District of Nevada (Henry Cohen, et al. v.
Stratosphere Corporation, et. al.-- Case No. A349985), the Stratosphere vacation
club litigation in the District Court in Clark County, Nevada (Richard Duncan,
et al. v. Bob and Jane Doe Stupak, et al. -- Case No. A370127), the Standby
Equity Commitment litigation in the
<PAGE>
U.S. District Court for the District of Nevada (IBJ Schroeder Bank & Trust
Company, Inc. v. Grand Casinos, Inc. -- File No. CV-S-97-01252-DWH), the
Stratosphere Noteholder Committee bankruptcy court action in the U.S. Bankruptcy
Court for the District of Nevada, Stratosphere Plan of Reorganization in the
U.S. Bankruptcy Court for the District of Nevada, the Las Vegas Downtown
Redevelopment Agency litigations in the Nevada Supreme Court (City of Las Vegas
Downtown Redevelopment Agency v. Crockett, et al. and City of Las Vegas Downtown
Redevelopment Agency v. Mouldo, et. al.), a derivative litigation in Hennepin
County, Minnesota District Court (Lloyd Drilling, et al. v. Lyle Berman, et al.
- - --Court File No. MC97-002807), and a Stratosphere action for Recovery of
Preferential Transfers Pursuant to Sections 547 and 550 of the Bankruptcy Court
filed with the Bankruptcy Court against Company, and including any actions,
suits, proceedings, claims, arbitrations or investigations relating to the
Litigation LLC described in Stratosphere Corporation's Restated Second Amended
Plan of Reorganization dated February 26, 1998.
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": Shall mean all actual taxes and estimated payment of
taxes, charges, fees, imposts, levies and gaming or other assessments, including
all income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment excise, severance, stamp,
occupation, property, premium, windfall profits, environmental, disability,
registration, alternative or add-on minimum taxes, custom duties, fees,
assessments and charges of any kind whatsoever, together with any interest and
any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign), and including any transferee liability
in respect of Taxes and any liability in respect of Taxes imposed by contract,
tax sharing agreement, tax indemnity agreement or any similar agreement.
TAX ALLOCATION AND INDEMNITY AGREEMENT: The Tax Allocation and Indemnity
Agreement between Company and Lakes pursuant to which such parties will provide
for the 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 RETURNS: The meaning specified in the Tax Allocation and Indemnity
Agreement.
TRANSACTION LIABILITIES: All liabilities relating to any Action or
threatened Action arising
<PAGE>
out of or pertaining to the transaction contemplated by the Merger Agreement or
this Distribution Agreement. " \l 2
TRANSFERRED CORPORATE FUNCTIONS: The corporate level and support functions
of Company to be contributed to Lakes in connection with the Distribution, as
set forth in Schedule 7 hereto. Currently expected to include corporate
treasury, accounting (including payroll), internal audit, tax, corporate
affairs, legal, human resources and risk management functions (including claims
administration), as well as certain purchasing and procurement functions.
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 Recitals or Section set forth opposite such
term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Recitals
Consents 4.01
Dispute 9.14
Company Indemnitees 5.02
Gaming Co. Recitals
Hilton Recitals
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lakes Recitals
Lakes Indemnities 5.01
Merger Recitals
MergerSub Recitals
Third Party Claim 5.04
Transaction Taxes 6.05
</TABLE>
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO LAKES . Prior to the Distribution Date,
Company shall take or cause to be taken all actions necessary to cause the
transfer, assignment, delivery and conveyance to Lakes and/or the appropriate
Non-Mississippi Subsidiaries designated by Lakes of all of Company's and its
Subsidiaries' right, title and interest in any Non-Mississippi Group Assets
held, on or prior to the Distribution Date, by Company or any Mississippi
Subsidiary including:
<PAGE>
(a) a contribution to Lakes of all of the outstanding capital stock of
the Non-Mississippi Subsidiaries indicated on Schedule 2;
(b) subject to the provisions of Section 2.07 and the Insurance
Receivable Agreement, transfer of $24 million dollars of cash by Company or any
Mississippi Subsidiary to Lakes in order to provide necessary and needed levels
of working capital and appropriate reserve for business investment purposes;
PROVIDED, HOWEVER, that;
(i) such amount will be DECREASED by any amount paid by the
Company prior to the Distribution Date in connection with Stratosphere up
to a maximum of $8 million, and
(ii) such amount shall be INCREASED by the Assigned Lakes Assets
Proceeds as indicated on Schedule 11.
(iii) such amount shall be increased by $9,292,339 representing
the proceeds received by the Company pursuant to that certain Agreement to
Terminate Management Agreement dated as of December 7, 1998 by and between
Mille Lacs Gaming Corporation, a Minnesota corporation and wholly-owned
subsidiary of the Company and Corporate Commission of the Mille Lacs Bank
of Ojibwe relating to the termination of that certain Amended and Restated
Management Construction Agreements by and between the Mille Lacs Band of
Chippewa Indians and Mille Lacs Gaming Corporation Hinckley Operations
dated as of September 10, 1990.
(c) transfer of the Assigned Lakes Assets, as indicated on Schedule 5,
which have not been sold prior to the Distribution Date; and
(d) transfer of the Transferred Corporate Functions as indicated on
Schedule 7; Section 2.02. TRANSFERS OF ASSETS FROM NON-MISSISSIPPI SUBSIDIARIES
TO COMPANY OR MISSISSIPPI SUBSIDIARIES . Prior to the Distribution Date, Lakes
shall take or cause to be taken all actions necessary to cause the transfer,
assignment, delivery and conveyance to Company and/or the applicable
Mississippi Subsidiaries designated by Company of all of Lakes's and the
Non-Mississippi Subsidiaries' right, title and interest in any Mississippi Group
Assets held, on or prior to the Distribution Date, by Lakes or any of the
Non-Mississippi Subsidiaries, if any.
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 Company and Lakes and their respective
Subsidiaries and Affiliates shall
<PAGE>
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.
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 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, Lakes reasonably determines that any of the Mississippi
Group Assets (other than the assets set forth in Schedule 3) are essential for
the conduct of the Non-Mississippi Business, or Company reasonably determines
that any of the Non-Mississippi Group Assets (other than the assets set forth in
Schedule 5) are essential for the conduct of the Mississippi Business, and the
nature of such assets makes it impracticable for Lakes or Company, 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 Lakes (with respect to the
Non-Mississippi Group Assets) and Company (with respect to the Mississippi 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, (a) 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 (b) 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 (a) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party; or (b) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
<PAGE>
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 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 Non-Mississippi Group and the
Mississippi 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 ALLOCATIONS AFTER THE YEAR-END . Notwithstanding
anything to the contrary herein, (i) Net Cash generated after December 31, 1998
from operations of the Mississippi Business (regardless of whether the
Distribution has occurred) shall be retained by Company; (ii) Net Cash generated
after December 31, 1998 from operations of the Non-Mississippi Business
(regardless of whether the Distribution has occurred) shall be retained by
Lakes; and (iii) the allocations of cash set forth in Section 2.08 (a) shall be
made as of December 31, 1998.
<PAGE>
Section 2.08. CASH ALLOCATION; CASH MANAGEMENT .
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. Subject to the
provisions of Section 2.01(b) hereof, the allocation between Company and Lakes
of all cash bank balances, short-term investments and outstanding checks and
drafts of Company and its Subsidiaries recorded per the books of Company 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 Non-Mississippi Group Cash
Accounts, after the close of business on the Distribution Date shall be remitted
to Company; PROVIDED, HOWEVER, that any such deposits that 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 Non-Mississippi Group Cash Accounts after the close of
business on the Distribution Date shall be remitted to Lakes and/or the
appropriate Non-Mississippi Subsidiary; PROVIDED, HOWEVER, that any such
deposits that are erroneously made to such accounts shall be redeposited to the
correct accounts as promptly as possible;
(iii) all cash, other than cash allocated pursuant to Sections
2.01(b), 2.07, 2.08(i) and 2.08(ii), shall be retained by or remitted to Company
and/or the appropriate Mississippi Subsidiaries.
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. All petty cash,
depository and disbursement accounts of Company (other than the Non-Mississippi
Group Cash Accounts) shall be retained by Company. The Non-Mississippi Group
Cash Accounts shall be transferred to Lakes, and Lakes shall establish and
maintain a separate cash management system and separate accounting records with
respect to the Non-Mississippi Group Business effective as of 12:01 a.m.
Minneapolis time on the day following the Distribution Date.
(c) ORDINARY COURSE OPERATIONS. The parties contemplate and agree that
the Non-Mississippi Business and the Mississippi 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.
Section 2.09. ALLOCATION OF DEBT . Debt will be allocated as follows:
(a) Debt secured by Mississippi Group Assets, or otherwise
specifically associated with the Mississippi Business, will be retained by
Company and/or the appropriate Mississippi Subsidiaries. As of the date of this
Agreement, such Debt consists of the First Mortgage Notes.
<PAGE>
(b) The Senior Notes will be retained by Company and/or the
appropriate Mississippi Subsidiary.
(c) Debt relating to the Bank of America Revolving Credit Facility
will be retained by Company and/or the appropriate Mississippi Subsidiary.
(d) Any other of Company's unsecured Debt will be Retained Debt.
(e) Debt secured by any Non-Mississippi Group Assets will be assumed
by Lakes and/or the appropriate Non-Mississippi Subsidiaries.
(f) Notwithstanding anything to the contrary herein, (i) increases
(decreases) in Debt incurred (repaid) after December 31, 1998 arising out of
operations of the Mississippi Business (regardless of whether the Distribution
has occurred) shall be allocated to Company and (ii) increases (decreases) in
Debt incurred (repaid) after December 31, 1998 arising out of operations of the
Non-Mississippi Business (regardless of whether the Distribution has occurred)
shall be allocated to Lakes; and, to the extent such increases (decreases) are
not already given effect in the definition of Net Cash, such increases
(decreases) shall increase or decrease (as applicable) the Debt allocated to
Company or Lakes (as applicable).
Section 2.10. ANCILLARY AGREEMENTS BETWEEN COMPANY AND LAKES. On or prior
to the Distribution Date, Company and Lakes shall enter into the Ancillary
Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF MISSISSIPPI BUSINESS AND
NON-MISSISSIPPI BUSINESS LIABILITIES . From and after the Distribution Date, (a)
Lakes shall, and/or shall cause the Non-Mississippi Subsidiaries to, assume,
pay, perform and discharge in due course all of the Non-Mississippi Group
Liabilities (including the Indian Guarantees and the Stratosphere Liabilities);
and; (b) Company shall, and/or shall cause the Mississippi Subsidiaries to,
assume, pay, perform and discharge in due course all of the Mississippi Group
Liabilities (including the Non-Mississippi Subsidiaries Note Guarantees).
Section 3.02 ASSUMPTION AND SATISFACTION OF CONTINGENT COMPANY LIABILITIES
AND TRANSACTION LIABILITIES . From and after the Distribution Date, to the
extent that there is a Company liability occurring prior to the
Distribution Date that is neither a Mississippi Group Liability nor a
Non-Mississippi Group Liability and cannot in good faith be allocated by the
parties hereto as either a Mississippi Group Liability or a Non-Mississippi
Group Liability, including, but not limited to the Liabilities set forth on
Schedule 10 attached hereto (all such Liabilities, "Contingent Company
Liabilities"), then such Contingent Company Liabilities and all Transaction
Liabilities shall be allocated between Company and Lakes on a pro rata basis as
<PAGE>
provided in Section 3.1(c)(1) of the Merger Agreement and shall be assumed,
paid, performed and discharged by each such party based upon such allocation.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION .
(a) Lakes and Company 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) Lakes and Company 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) Lakes and Company shall use all reasonable best 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) Lakes and Company 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 relating to the satisfaction of the conditions indicated in
Section 4.02 hereof.
Section 4.02. COMPANY BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION . Company 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 Lakes Board, comprised as contemplated by Section 6.01, shall
have been elected by Company, as sole shareholder of Lakes, and the Lakes
Articles and Lakes Bylaws shall have been adopted and shall be in effect;
(c) Company shall have received shareholder ratification of the
Distribution at
<PAGE>
a meeting of shareholders.
(d) the Merger Agreement shall be in full force and effect and no
material breach shall exist thereunder;
(e) 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;
(f) with respect to the Louisiana Gaming License:
(i) the Louisiana Gaming License is transferred to Lakes or a
Non-Mississippi Subsidiary;
(ii) the Non-Mississippi Subsidiaries are licensed pursuant to
Louisiana Gaming Laws; or
(iii) Lakes is licensed pursuant to Louisiana Gaming Laws.
(g) the IRS Ruling shall have been granted in form and substance
satisfactory to Company 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;
(h) the Form 10 shall have been declared effective by the SEC;
(i) the Lakes Common Stock shall have been approved for trading on the
NASDAQ National Market (or such other securities exchange comprising the
principal securities exchange or market on which the Lakes Common Stock is
listed or traded), subject to official notice of issuance;
(j) each of Lakes and Company 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;
(k) all necessary regulatory approvals and consents of third parties
shall have been received, including, without limitation, pursuant to the Gaming
Laws, except for any such 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 Company or Lakes;
(l) the Board of Directors of Company 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, Company will not be
insolvent (in that, both before and
<PAGE>
immediately following the Distribution, (1) the fair market value of Company's
assets would exceed Company's liabilities, (2) Company would be able to pay its
liabilities as they mature and become absolute and (3) Company would not have
unreasonably small capital with which to engage in its business); and (ii) the
Distribution would be permitted under the MBCA; and at the Board of Directors'
discretion, Company shall have received the opinion of a financial advisor or
other appraisal or valuation expert selected by Company, in form and substance
satisfactory to Company, as to the matters set forth in clauses (1) through (3)
above, and such opinion shall not have been withdrawn;
PROVIDED, HOWEVER, that (x) any such condition may be waived by Company Board in
its sole discretion, and (y) the satisfaction of such conditions shall not
create any obligation on the part of Company or any other party hereto to effect
the Distribution or in any way limit Company'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, Company shall deliver to the Agent, for the benefit
of the Holders, a share certificate representing all of the then outstanding
shares of Lakes Common Stock owned by Company, 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 Lakes Common Stock for every
four shares of Company Common Stock so held or, such number of shares that may
be issued pursuant to a stock split, stock or dividend, of the Lakes Common
Stock prior to, or simultaneously with, the Distribution Date. Lakes 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 COMPANY . Company shall indemnify, defend
and hold harmless Lakes and each of the Non-Mississippi 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 "LAKES 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 Lakes Indemnitees and arising out of or due to the
failure or alleged failure of Company, any Mississippi Subsidiary, or any of
their respective Affiliates to (a) pay, perform or otherwise discharge in due
course any of the Mississippi Group Liabilities, or (b) comply with the
provisions of Section 6.04 hereof.
Section 5.02. INDEMNIFICATION BY LAKES . Lakes shall indemnify, defend and
hold
<PAGE>
harmless Company and each of the Mississippi 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 "COMPANY INDEMNITEES") from and against any and all Indemnifiable Losses
incurred or suffered by any of Company Indemnitees and arising out of or due to
the failure or alleged failure of Lakes, any Non-Mississippi Subsidiaries, or
any of their respective Affiliates to (a) pay, perform or otherwise discharge in
due course any of the Non-Mississippi Group Liabilities; or (b) comply with the
provisions of Section 6.04 hereof.
Section 5.03. INSURANCE PROCEEDS . The amount which any party (an
"INDEMNIFYING PARTY") is or may be required to pay to 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) 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
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
<PAGE>
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 reasonably
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
to 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 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 or reasonableness of the settlement; (iii) to approve and pay the amount
of the settlement,
<PAGE>
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.
<PAGE>
(i) For so long as Surviving Corporation (as defined in the Merger
Agreement) is required to provide indemnification to any of the Indemnified
Persons (as defined in the Merger Agreement), Lakes shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment. If Lakes is unable, within 15 days of request, to repay in full any
claim made for indemnification by Company or any of its Affiliates pursuant to
this Agreement or the Merger Agreement, then for so long as any such claim or
any other claim for indemnification made by Company or any of its Affiliates
remains unpaid, Lakes shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable with respect to any indebtedness.
(j) Prior to the Distribution Date, Company and Lakes shall enter into
a Collateral Trust Agreement and a Pledge and Security Agreement. Company is
hereby entitled to all the rights and benefits under those agreements in order
to secure Lakes' indemnification obligations under this Agreement, the Related
Agreements and the Merger Agreement.
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 Lakes
and Company 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. LAKES BOARD . Lakes and Company shall take all actions which
may be required to appoint as officers and directors of Lakes those persons
named in the Form 10 (as may be altered or supplemented prior to the date hereof
by Company Board and the Lakes Board) to constitute, effective as of the
Distribution Date, the officers and the directors of Lakes.
Section 6.02. RESIGNATIONS; COMPANY BOARD . Lakes 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
Company or any of the Mississippi Subsidiaries on which they serve, and from all
positions as officers or employees of Company or any of the Mississippi
Subsidiaries in which they serve. Company shall cause all of its directors and
the Mississippi Group Employees to resign from all boards of directors or
similar governing bodies of Lakes or any of the Non-Mississippi Subsidiaries on
which they serve, and from all positions as officers or employees of Lakes or
any of the Non-Mississippi Subsidiaries in which they serve.
<PAGE>
Section 6.03. LAKES CERTIFICATE AND BYLAWS . On or prior to the
Distribution Date, Lakes shall adopt the Lakes Articles and the Lakes Bylaws,
and shall file the Lakes Articles with the Secretary of State of the State of
Minnesota. Company shall provide all necessary shareholder approvals for the
Lakes Articles prior to the filing of the Lakes Articles with the Secretary of
State of the State of Minnesota.
Section 6.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS . Each of Company and
Lakes 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 Company and Lakes acting together,
from any such taxing authority with respect to any transaction contemplated by
this Agreement.
Section 6.05. SALES AND TRANSFER TAXES . Company and Lakes 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"). Company
agrees to file promptly and timely the Tax Returns for such Transaction Taxes
and Lakes will join in the execution of any such Tax Returns or other
documentation. Financial responsibility for payment of all such Transaction
Taxes shall be allocated between Company and Lakes on a pro rata basis as
provided in Section 3.1(c)(1) of the Merger Agreement.
Section 6.06. SETTLEMENT OF INTERCOMPANY ACCOUNTS. All accounts between the
Company and the Non-Mississippi Subsidiaries and accounts between Mississippi
Subsidiaries and the Non-Mississippi Subsidiaries shall be paid in full and
settled prior to the Distribution Date and to the extent that such accounts
exist prior to the Distribution Date, shall be deemed to be a capital
contribution or dividend to such entity, PROVIDED, HOWEVER, that nothing
contained in this Section 6.06 shall affect the (i) transfer of assets pursuant
to Article II, (ii) the assumption and satisfaction of Liabilities pursuant to
Article III or (iii) the indemnification provisions related to the parties
pursuant to this Agreement and the Merger Agreement.
<PAGE>
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,
Company 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 Lake's cost) to Lakes of
the Non-Mississippi Group Books and Records in its possession, except to the
extent such items are already in the possession of Lakes or a Non-Mississippi
Subsidiary. The Non-Mississippi Group Books and Records shall be the property of
Lakes, but the Non-Mississippi Group Books and Records that reasonably relate to
Company or the Mississippi Business shall be available to Company for review and
duplication until Company shall notify Lakes in writing that such records are no
longer of use to Company.
(b) Except as may otherwise be provided in a Related Agreement, Lakes
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 Company's cost) to Company of the
Mississippi Group Books and Records in its possession, except to the extent such
items are already in the possession of Company or a Mississippi Subsidiary. The
Mississippi Group Books and Records shall be the property of Company, but the
Mississippi Group Books and Records that reasonably relate to Lakes or the
Non-Mississippi Business shall be available to Lakes for review and duplication
until Lakes shall notify Company in writing that such records are no longer of
use to Lakes.
Section 7.02. ACCESS TO INFORMATION . Except as otherwise provided in a
Related Agreement, from and after the Distribution Date, Company shall afford to
Lakes 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 Company's possession or control, insofar as
such access is reasonably required by Lakes for the conduct of its business,
subject to appropriate restrictions for classified or Privileged Information.
Similarly, except as otherwise provided in a Related Agreement, Lakes shall
afford to Company 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 Lakes's possession or control,
insofar as such access is reasonably required by Company 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
<PAGE>
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 Lakes and Company shall use reasonable efforts to
make available to the other, upon written request, its and its Subsidiaries'
present and past 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. CORPORATE SERVICES . The parties hereto shall enter into a
corporate services agreement to the extent Lakes requires corporate services to
be provided to it following the Distribution Date. The services shall be
provided for up to one year following the Distribution Date at a fee equal to
the fair value for such services. The corporate services agreement shall be
negotiated on an arms-length basis. The final cost, types and scope of services
to be provided shall be subject to the approval of Company, such approval not to
be unreasonably withheld.
Section 7.05. 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 7.06. RETENTION OF RECORDS . Except as otherwise required by law or
agreed to in a Related Agreement or otherwise in writing, each of Lakes and
Company 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 (a) all applicable statutes of
limitations (including any waivers or extensions thereof) with respect to Tax
Returns which Company or Lakes, as the case may be, may be obligated to file on
behalf of any member of the Lakes Group or any member of Company Group, as the
case may be; and (b) any retention period required by law or pursuant to any
record retention agreement, provided, however, that prior to such destruction or
disposal, (x) 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 (y) 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 delivery of such of the Information as
was
<PAGE>
requested at the expense of the party requesting such Information.
Section 7.07. CONFIDENTIALITY . Each of Company and its Subsidiaries on the
one hand, and Lakes 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 Mississippi Group and the Non-Mississippi Group, (y) any
contractual agreement to which members of the Mississippi Group or the
Non-Mississippi Group are currently parties, or (z) in exercise of either
party's rights hereunder.
Section 7.08. PRIVILEGED MATTERS . Lakes and Company 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 Mississippi Group and the Non-Mississippi Group and that both the
Mississippi Group and the Non-Mississippi 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) Company shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Company 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 Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Company or a Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
(b) Lakes shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Non-Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Lakes 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 Non-Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Lakes or a Non-Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
<PAGE>
(c) Lakes and Company 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 Lakes and Company, or
in respect of which both Lakes and Company 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
Mississippi Group and a member of the Non-Mississippi 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 Mississippi Group and the Non-Mississippi
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 Non-Mississippi Group Books and Records and
the Mississippi Group Books and Records and other Information between Company
and its Subsidiaries and Lakes and its Subsidiaries is made in reliance on the
agreement of Lakes and Company, as set forth in Sections 7.06 and 7.07, to
maintain the confidentiality of Privileged
<PAGE>
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 Company and its Subsidiaries
and Lakes 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 NON-MISSISSIPPI GROUP
ASSETS . Without limiting the generality of the definition of the
Non-Mississippi Group Assets or the effect of Section 2.01, the Non-Mississippi
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 Non-Mississippi Business or, to the extent
any claim is made against Lakes or any of its Subsidiaries, the Mississippi
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 MISSISSIPPI GROUP
ASSETS . Without limiting the generality of the definition of the Mississippi
Group Assets or the effect of Section 2.01 and except as provided in the
Insurance Receivable Agreement, the Mississippi 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 Mississippi Business or, to the extent any claim is made
against Company or any of the Mississippi Subsidiaries, the Non-Mississippi
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:
(i) Company shall be responsible for the Insurance Administration
of the Shared Policies; provided, however, that the administration of the Shared
Policies by Company 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, Lakes or any of its Subsidiaries
or Affiliates;
<PAGE>
(ii) Lakes shall be entitled to any reserves established by
Company or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Non-Mississippi Group Liabilities; and
(iii) Company shall be entitled to any reserves established by
Company or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Mississippi Group Liabilities.
(b) INSURANCE PREMIUMS.
(i) Lakes shall have the right but not the obligation to pay the
premiums, to the extent that Company does not pay premiums with respect to
Mississippi Group Liabilities (retrospectively-rated or otherwise), with respect
to Shared Policies as required under the terms and conditions of the respective
Policies, whereupon Company shall forthwith reimburse Lakes for that portion of
such premiums paid by Lakes as are attributable to the Mississippi Group
Liabilities.
(ii) Company shall have the right but not the obligation to pay
the premiums, to the extent that Lakes does not pay premiums with respect to
Non-Mississippi Group Liabilities (retrospectively-rated or otherwise), with
respect to Shared Policies as required under the terms and conditions of the
respective Policies, whereupon Lakes shall forthwith reimburse Company for that
portion of such premiums paid by Company as are attributable to the
Non-Mississippi Group Liabilities.
(c) ALLOCATION OF INSURANCE PROCEEDS. Except as provided in the
Insurance Receivable Agreement, Insurance Proceeds received with respect to
claims, costs and expenses under the Policies shall be paid to Lakes with
respect to the Non-Mississippi Group Liabilities and to Company with respect to
the Mississippi 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.
<PAGE>
(d) INSURANCE CHARGES.
(i) Notwithstanding anything to the contrary contained herein,
Lakes or an appropriate Non-Mississippi 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 Lakes or a
Non-Mississippi Subsidiary for charges which relate to the period before the
Distribution Date. In the event that Lakes or a Non-Mississippi 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 Company or a Mississippi Subsidiary,
Company or a Mississippi Subsidiary may (but shall not be required to) pay such
Insurance Charges for and on behalf of Lakes or a Non-Mississippi Subsidiary and
thereafter Lakes shall forthwith reimburse Company or such Mississippi
Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary contained herein,
Company or an appropriate Mississippi 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
Company or a Mississippi Subsidiary for charges which relate to the period
before the Distribution Date. In the event that Company or a Mississippi
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 Lakes or a
Non-Mississippi Subsidiary, Lakes or a Non-Mississippi Subsidiary may (but shall
not be required to) pay such Insurance Charges for and on behalf of Company or a
Mississippi Subsidiary and thereafter Company shall forthwith reimburse Lakes or
such Non-Mississippi Subsidiary for such payment.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE . In the
event that Insured Claims of both Lakes and Company exist relating to the same
occurrence, Lakes and Company 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.
<PAGE>
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.
(b) If, at the time Lakes is required to make any payment to Company
under this Agreement, Company owes Lakes 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 Company is
required to make any payment to Lakes under this Agreement, Lakes owes Company
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, 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. In addition, it is
understood and agreed that Lakes shall pay the legal, filing, accounting,
printing and other accountable and out-of-pocket expenditures in connection with
the preparation, printing and filing of the Form 10.
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.
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):
<PAGE>
if to Company, to
Gaming Co., Inc.
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Facsimile: (702) 699-5179
if to Lakes, to
Lakes
130 Cheshire Lane
Minnetonka, MN 55305
Attn: Chief Executive Officer
Facsimile: (612) 449-7003
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 Company Board without the approval of Lakes's or of Company'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
<PAGE>
"Exhibits" shall be deemed to be references to Articles or Sections hereof or
Exhibits hereto unless otherwise indicated.
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 restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction 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 restriction.
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 Minnesota or
Mississippi or 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 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. The parties agree that any legal remedy available to a party with respect
to a
<PAGE>
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 Minnesota
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.
<PAGE>
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.
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Company and Lakes have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
GRAND CASINOS, INC.
/s/ Thomas J. Brosig
By: Thomas J. Brosig
Its: President and Chief Executive Officer
LAKES GAMING, INC.
/s/ Timothy J. Cope
By: Timothy J. Cope
Its: Chief Financial Officer
<PAGE>
[LOGO]
Hilton Contact: Marc Grossman Park Place Contact: Geoffrey Davis
310-205-4030 702-699-5037
310-205-4541
Kathy Shepard
310-205-7676 Scott LaPorta
702-699-5000
310-205-4331
HILTON COMPLETES SPIN-OFF OF GAMING OPERATIONS
PARK PLACE ENTERTAINMENT ACQUIRES MISSISSIPPI OPERATIONS OF GRAND CASINOS, INC.
BEVERLY HILLS, Calif., December 31, 1998 -- Hilton Hotels Corporation
(NYSE:HLT) today completed the separation of its gaming and lodging
businesses -- via a tax-free distribution of its casino gaming operations to
shareholders, creating a newly formed gaming company named Park Place
Entertainment Corporation (NYSE:PPE). Concurrently, Park Place Entertainment
acquired the three Mississippi gaming operations of Grand Casinos, Inc.
(NYSE:GND), making it the world's largest casino gaming company. In the
Grand merger, Park Place has assumed approximately $565 million of debt and
issued shares of Park Place to Grand shareholders in a ratio of one share of
Park Place for each share of Grand.
Hilton shareholders of record at the close of business on December 23,
1998 will receive one share of Park Place common stock for each share of
Hilton common stock they own. An estimated 260.8 million shares of Park
Place will be distributed to Hilton shareholders to effectuate the spin-off
and an additional 42.3 million shares of Park Place will be issued to Grand
shareholders to effectuate the merger. ChaseMellon Shareholders Services, LLC
is the transfer agent.
The transactions were approved in November by shareholders of both
Hilton and Grand Casinos, Inc. Approvals have also been received from casino
gaming regulators in Nevada, New Jersey, Mississippi, Louisiana, Australia
and Uruguay.
Concurrent with the closing of the transactions, Stephen F. Bollenbach
becomes chairman of the board of Park Place Entertainment, while remaining
president and chief executive officer of Beverly Hills-based Hilton Hotels
Corporation. Arthur Goldberg, currently president - gaming operations for
Hilton Hotels, becomes president and chief executive officer and a director
of Park Place Entertainment. He remains on Hilton's board of directors.
Additionally, Lyle Berman current chairman of the board of Grand Casinos,
Inc. has joined the board of Park Place Entertainment.
-more-
<PAGE>
Hilton Business Separation
2-2-2-2
Hilton Hotels Corporation is one of the world's foremost lodging
companies. The company owns, manages or franchises approximately 250 hotels
in the United States, Canada and Mexico, including ownership of some of the
world's most renowned properties, such as the Waldorf=Astoria, Hilton San
Francisco and Towers, Hilton Hawaiian Village and Chicago's Palmer House
Hilton. Hilton will continue to pursue a growth strategy centered on
acquiring full-service hotels in markets seeing little new supply. In 1998,
Hilton purchased approximately $950 million of hotels at attractive prices.
The company also will continue aggressively building its franchise program in
the U.S., Canada and Mexico, which will include the company's successful
Hilton Garden Inn program, which is expected to have 200 hotels open or under
contract by 2000.
Park Place Entertainment is the world's largest gaming company, as
measured by casino square footage and revenues, and is the only casino gaming
company with a leading presence in Nevada, New Jersey and Mississippi--the
three largest gaming markets in the U.S. In 1999, the company will own or
have an interest in 18 gaming properties located throughout the United States
and in Australia and Uruguay, with a total of 1.4 million square feet of
casino space and more than 23,000 hotel rooms.
# # #
