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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ....................... to ......................
Commission File Number 1-3427
HILTON HOTELS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 36-2058176
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
</TABLE>
Registrant's telephone number, including area code: (310) 278-4321
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- - ---------------------------------------- --------------------------------------
<S> <C>
Common Stock, par value $2.50 per share New York, Pacific
Preferred Redeemable Increased Dividend New York, Pacific
Equity Securities-SM-, 8% PRIDES-SM-,
Convertible Preferred Stock, par value
$1.00 per share
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Based upon the February 28, 1997 New York Stock Exchange closing price of
$25.125 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $4.7 billion.
On that date, there were 249,238,660 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1996 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation and its majority and wholly owned subsidiaries are
collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. As of February 1, 1997, all of these
properties were located in the United States, with the exception of seven hotels
and four hotel-casinos operated by the Company's wholly owned subsidiary, Conrad
International Hotels Corporation and its subsidiaries ("Conrad International").
On February 1, 1997, Hilton owned or leased and operated 29 hotels and
managed 42 hotels partially or wholly owned by others. In addition, 174 hotels
were operated under the Hilton, Hilton Garden Inn and Hilton Suites names by
others pursuant to franchises granted by a subsidiary of Hilton.
Twelve of the hotels have substantial gaming operations, six of which are
wholly or majority owned by the Company and are located in Nevada, two of which
are wholly owned by the Company and are located in Atlantic City, New Jersey,
and the other four of which are partially owned by the Company and are located
in Australia, Turkey and Uruguay. The Company also wholly or partially owns and
manages four riverboat casinos in the United States and owns a 50% interest in a
company which operates one casino in Canada. The Company's gaming operations
accounted for approximately 58%, 50% and 33% of its total operating income in
1994, 1995 and 1996, respectively. The Company's domestic gaming operations are
conducted under the Hilton, Flamingo and Bally brand names. For additional
information, see the Five Year Summary on page 53 in the Company's Annual Report
to Stockholders for the fiscal year ended December 31, 1996 (the "Stockholders
Report"), which report is included as Exhibit 13 hereto and, to the extent
specific references are made thereto, incorporated herein by such references.
The Company, along with other entities in which the Company has an
investment, is also engaged in various other activities incidental or related to
the operation of hotels and hotel-casinos. See "Additional Information."
Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210, and its telephone number is (310) 278-4321.
RECENT DEVELOPMENTS
In December 1996, the Company consummated its acquisition of Bally
Entertainment Corporation ("Bally") through the merger of Bally with and into
the Company, with the Company surviving the merger (the "Bally Merger"). As a
result of the Bally Merger, the Company currently operates the following
additional properties, with the Company's percentage ownership indicated
parenthetically: (i) the 1,265-room Bally's Park Place Casino Resort in Atlantic
City, New Jersey (100%); (ii) the 509-room Atlantic City Hilton in Atlantic
City, New Jersey (formerly named The Grand) (100%); (iii) the 2,814-room Bally's
Las Vegas in Las Vegas, Nevada (84%); (iv) the Bally's Saloon Gambling Hall
Hotel dockside casino and 238-room hotel in Robinsonville, Mississippi (near
Memphis, Tennessee) (58%); and (v) the Bally's Casino Lakeshore Resort
riverboat casino in New Orleans, Louisiana (50%). Additionally, Arthur M.
Goldberg, the former Chairman and Chief Executive Officer of Bally, has joined
the Company's Board of Directors and serves as Executive Vice President and
President--Gaming Operations. See "Acquisitions" in the Notes to the Company's
Consolidated Financial Statements on page 39 in the Stockholders Report and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 25 through 32 in the Stockholders Report.
Also in December 1996, subsequent to the Bally Merger, the Company
consummated cash tender offers to purchase the outstanding debt securities of
certain former Bally subsidiaries and the related consent solicitations
(collectively, the "Bally Offers"). In total, the Company received tenders and
consents of approximately $1.1 billion, or 98% of the total aggregate principal
amount of the securities subject to
<PAGE>
the Bally Offers. The Company funded the Bally Offers primarily with commercial
paper. See "Extraordinary Item" in the Notes to the Company's Consolidated
Financial Statements on page 39 in the Stockholders Report.
During the 1996 fourth quarter, the Company acquired from The Prudential
Insurance Company of America ("Prudential") approximately 50% of the ownership
interests in joint ventures which own the Capital Hilton, Chicago Hilton &
Towers, New York Hilton & Towers, Rye Town Hilton, San Francisco Hilton & Towers
and Washington Hilton & Towers. As a result of these acquisitions, the Company's
ownership interest exceeds 99% in each of these properties, except the Chicago
Hilton & Towers, in which the Company's ownership interest is approximately 83%.
The Company continues to manage each of these hotels. In 1997 and 1998, the
Company will have an option to purchase Prudential's remaining interest in such
properties, other than Prudential's .5% interest in the New York Hilton &
Towers, and in certain cases Prudential has the right to require the Company to
purchase such interests. In connection with the Company's acquisition of
Prudential's ownership interest in such joint ventures, the Company and
Prudential eliminated area restrictions which limited the Company's ability to
operate additional hotels in the New York City and Washington, D.C. markets. See
"Acquisitions" in the Notes to the Company's Consolidated Financial Statements
on page 39 in the Stockholders Report, "Hotel Operations--Territorial
Restrictions" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 25 through 32 in the Stockholders Report.
In January 1997, the Company finalized agreements with Ladbroke Group PLC
("Ladbroke"), whose wholly owned subsidiary, Hilton International Co. ("HI"),
owns the rights to the Hilton name outside the United States. The agreements
provide for the reunification of the Hilton brand worldwide through a strategic
alliance between the companies, including cooperation on sales and marketing,
loyalty programs and other operational matters. The Company and HI have
integrated their reservation systems and, in February 1997, launched the Hilton
HHonors-Registered Trademark- Worldwide loyalty program. In addition, the
alliance permits the Company and Ladbroke to acquire up to 20% of each other's
outstanding capital stock and provides for mutual participation in certain
future hotel development focusing primarily upon management contracts and
franchises. Stephen F. Bollenbach, the Company's President and Chief Executive
Officer, has become a non-executive director of Ladbroke and Peter M. George,
Chief Executive of Ladbroke, has joined the Board of Directors of Hilton as a
non-executive director. Implementation of certain features of the alliance is
subject to the receipt of certain regulatory approvals. See "Hotel
Operations--Territorial Restrictions."
In December 1996, the Company and Patriot American Hospitality, Inc.
("Patriot") entered into a letter of intent for Patriot to acquire and develop a
range of Hilton properties in key U.S. markets. The alliance calls for Patriot
to acquire four existing wholly owned Hilton Suites hotels for approximately
$105 million, develop new suites, acquire and convert full-service hotels and
suites to the Hilton brand and develop approximately 15 new Hilton Garden Inns.
In January 1997, the Company commenced an offer to acquire ITT Corporation
("ITT") in a combination cash and stock transaction. The Company offered a price
of $55 for each ITT share, for a consideration of approximately $6.5 billion.
The total transaction, including assumption of ITT's outstanding debt, would be
valued at approximately $10.5 billion. The Company's offer consists of a cash
tender offer of $55 per share for a majority of the outstanding ITT shares (the
"Tender Offer"), to be followed by a merger whereby ITT shareholders would
receive shares of the Company's Common Stock with a value of $55 in exchange for
each remaining ITT share, subject to appropriate collar provisions. The Company
plans to fund the ITT Tender Offer from a combination of its available cash,
working capital, existing credit facilities, borrowings under credit facilities
that the Company will seek to obtain from commercial banks and/or issuance of
public debt. Hilton has reached a preliminary understanding with HFS
Incorporated ("HFS") under which HFS would license, on a long-term worldwide
basis, the Sheraton trademark, franchise systems and management agreements. The
acquisition is subject to regulatory approvals and other conditions, and
therefore there can be no assurance that the Company will be successful in
acquiring ITT, or if successful, what effect such acquisition will have on the
Company's financial condition or results
2
<PAGE>
of operations. On February 12, 1997, the board of directors of ITT recommended
that ITT shareholders reject Hilton's offer as inadequate and not in the best
interests of ITT shareholders. In response, Hilton expressed its continuing
commitment to the transaction, including pursuing the transaction by taking the
matter directly to ITT shareholders.
As of February 1, 1997, the Company owned 41% of the 11 3/4 First Mortgage
Notes due 2002 of Claridge Hotel and Casino Corporation ("Claridge"). Claridge
owns and operates the Claridge Casino Hotel in Atlantic City, New Jersey,
located adjacent to Bally's Park Place. The Company is discussing with Claridge
the possible acquisition by the Company of the Claridge Casino Hotel or all of
the outstanding stock in Claridge. There is no assurance that such acquisition
will occur. Any such acquisition by the Company would be subject to certain
regulatory approvals.
Since January 1, 1996, the Company has taken advantage of additional
opportunities to expand its business, which included the opening of a dockside
casino in Kansas City, Missouri, the opening of the 508-room Conrad
International Centennial Singapore, the opening of the casino in the 300-room
Conrad International Punta del Este Resort and Casino, the acquisition of the
entire ownership interest in the Anchorage Hilton, the acquisition of the
remaining 50% interest in the Hilton Grand Vacations Company joint venture, the
acquisition of an additional ownership interest of approximately 17% in Windsor
Casino Limited, the sale of the Company's 30% ownership interest in the Conrad
International Hong Kong and the sale of the Company's 10% ownership interest in
the Miami Airport Hilton & Towers.
For a more detailed description of the Company's recent developments, see
"Hotel Operations," "Gaming Operations" and "Additional Information--Vacation
Ownership." For a description of the Company's planned expansion activities, see
"Hotel Operations--Expansion Program" and "Gaming Operations--Expansion
Program."
INDUSTRY SEGMENTS
Hilton's revenue and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased,
partially owned and managed hotels and franchise fees; and (ii) gaming
operations, which include the operation of Hilton's owned, partially owned and
managed hotel-casinos and riverboat casinos. For financial data relating to the
Company's hotel and gaming operations for the three years ended December 31,
1996, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 48 and 49 in the Stockholders Report.
The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
Ireland, England, Hong Kong, Turkey, Belgium, Australia, Spain, Egypt, Singapore
and Uruguay. To date, the amounts of revenues, operating profits and
identifiable assets attributable to geographic areas other than the United
States have not been material.
HOTEL OPERATIONS
OWNED HOTELS
On February 1, 1997, the following hotels were owned in fee and operated by
Hilton:
<TABLE>
<CAPTION>
YEAR
NUMBER OF ACQUIRED
NAME AND LOCATION ROOMS/SUITES BY HILTON
- - -------------------------------------------------- ------------- ---------
<S> <C> <C>
Atlanta Airport Hilton & Towers 503 1960
Atlanta, Georgia(1)
Atlantic City Hilton 509 1996
Atlantic City, New Jersey(2)
Bally's Park Place Casino Resort 1,265 1996
Atlantic City, New Jersey(2)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR
NUMBER OF ACQUIRED
NAME AND LOCATION ROOMS/SUITES BY HILTON
- - -------------------------------------------------- ------------- ---------
<S> <C> <C>
Palmer House Hilton 1,639 1988
Chicago, Illinois(3)
Flamingo Hilton-Las Vegas 3,642 1971
Las Vegas, Nevada
Las Vegas Hilton 3,174 1971
Las Vegas, Nevada
Flamingo Hilton-Laughlin 2,000 1990
Laughlin, Nevada
New Orleans Airport Hilton 317 1959
New Orleans, Louisiana(1)
New York Hilton & Towers 2,041 1996
New York, New York(4)
Waldorf=Astoria 1,380 1977
New York, New York(5)
Portland Hilton 455 1963
Portland, Oregon
Flamingo Hilton-Reno 604 1981
Reno, Nevada(6)
Reno Hilton 2,001 1992
Reno, Nevada
Rye Town Hilton 438 1996
Rye Brook, New York(4)
San Francisco Hilton & Towers 1,895 1996
San Francisco, California(4)
Capital Hilton 543 1996
Washington, D.C.(4)
Washington Hilton & Towers 1,123 1996
Washington, D.C.(4)
Hilton Garden Inn 195 1993
Southfield, Michigan(7)
Hilton Suites 224 1991
Auburn Hills, Michigan(8)
Hilton Suites 203 1989
Brentwood, Tennessee(8)
Hilton Suites 230 1989
Orange, California(8)
Hilton Suites 226 1990
Phoenix, Arizona(8)
</TABLE>
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(1) The Atlanta Airport Hilton & Towers and the New Orleans Airport Hilton were
closed and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
(2) The Company acquired the referenced properties as a result of the Bally
Merger, which was consummated on December 18, 1996. See "General
Information--Recent Developments."
(3) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
acquiring the property in February 1988.
4
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(4) The Company has an ownership interest in excess of 99% in the joint ventures
which own each of the referenced properties. The Company had a 50% ownership
interest in these properties prior to the 1996 acquisition of substantially
all of Prudential's interest in such properties. See "General
Information--Recent Developments."
(5) The Company operated the Waldorf=Astoria under a lease from February 1950
until acquiring the property in April 1977.
(6) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(7) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
(8) The Company has entered into a letter of intent to sell its interest in each
of the referenced properties to Patriot. Subject to the execution of
definitive agreements, the sales are anticipated to occur in mid-1997, with
the Company continuing to manage each of the properties. See "General
Information--Recent Developments."
As of February 1, 1997, none of the hotels referenced in the table above had
any outstanding mortgage indebtedness, except for (i) the Atlanta Airport Hilton
& Towers in the amount of $50,000,000; and (ii) the New Orleans Airport Hilton
in the amount of $32,000,000.
LEASED HOTELS
Hilton leases the land upon which seven hotels are located. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 50 in the Stockholders
Report. Hilton, in all cases, owns all furniture and equipment, is responsible
for repairs, maintenance, operating expenses and lease rentals, and retains
complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenue of the facility, but in some
instances the rental is a fixed amount.
5
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On February 1, 1997, the following hotels were leased and operated by
Hilton:
<TABLE>
<CAPTION>
NUMBER OF
ROOMS
(YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
- - ------------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
O'Hare Hilton 858 2018
Chicago, Illinois(1) (1991)
Oakland Airport Hilton 363 2033
Oakland, California (1970)
Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30 years
Pittsburgh, Pennsylvania (1959)
San Diego Hilton Beach & Tennis 357 2019
Resort (1965)
San Diego, California
San Francisco Airport Hilton 527 1998
San Francisco, California (1959)
Seattle Airport Hilton 178 2004, with renewal options aggregating 30 years
Seattle, Washington (1961)
Tarrytown Hilton 236 2003, with renewal options aggregating 40 years
Tarrytown, New York(2) (1993)
</TABLE>
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(1) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
(2) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the remaining
equity interest in the joint venture leasing the land underlying the hotel.
During the three years ended December 31, 1996, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $13,300,000, $15,300,000 and $18,000,000, respectively. For
information relating to minimum rental commitments in the future, see "Leases"
in the Notes to the Company's Consolidated Financial Statements on page 50 in
the Stockholders Report.
MANAGED HOTELS
On February 1, 1997, Hilton operated 31 domestic hotels and 11 international
hotels under management agreements. Under its standard management arrangement,
Hilton operates a hotel for the benefit of its owner, which either owns or
leases the hotel and the associated personal property. Hilton's management fee
is generally based on a percentage of each hotel's gross revenue plus, in the
majority of properties, an incentive fee based on operating performance. The
expiration dates of Hilton's management agreements range from 1998 to 2021 and
generally contain renewal options ranging from five to 20 years, subject to
certain termination rights.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an equity
interest. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 40 and 41 in
the Stockholders Report.
6
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The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances. See
"Commitments and Contingent Liabilities" in the Notes to the Company's
Consolidated Financial Statements on page 50 in the Stockholders Report.
On February 1, 1997, the following hotels were operated by Hilton under
management agreements:
<TABLE>
<CAPTION>
NAME AND LOCATION NUMBER OF ROOMS/SUITES
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<S> <C>
DOMESTIC
Anaheim Hilton & Towers 1,576
Anaheim, California
Anchorage Hilton 591
Anchorage, Alaska(1)
Atlanta Hilton & Towers 1,224
Atlanta, Georgia
Beverly Hilton 581
Beverly Hills, California
Chicago Hilton & Towers 1,543
Chicago, Illinois(2)
Tamarron Hilton Resort 294
Durango, Colorado(3)
Brunswick Hilton & Towers 405
East Brunswick, New Jersey(3)
Hilton Hawaiian Village 2,545
Honolulu, Hawaii(4)
Bally's Las Vegas 2,814
Las Vegas, Nevada(5)
Long Beach Hilton 393
Long Beach, California
Los Angeles Airport Hilton & Towers 1,234
Los Angeles, California
McLean Hilton 458
McLean, Virginia(6)
Fontainebleau Hilton Resort & Towers 1,206
Miami, Florida
Miami Airport Hilton & Towers 500
Miami, Florida
Minneapolis Hilton & Towers 814
Minneapolis, Minnesota
Newark Airport Hilton 374
Newark, New Jersey
New Orleans Hilton Riverside & Towers 1,600
New Orleans, Louisiana(7)
Millenium Hilton 561
New York, New York
Turtle Bay Hilton Golf & Tennis 485
Resort
Oahu, Hawaii
</TABLE>
7
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<TABLE>
<CAPTION>
NAME AND LOCATION NUMBER OF ROOMS/SUITES
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Hilton at Walt Disney World 814
Orlando, Florida(3)
<S> <C>
Pasadena Hilton 291
Pasadena, California
The Pointe Hilton Resort on South 636
Mountain
Phoenix, Arizona
The Pointe Hilton Resort at Squaw 563
Peak
Phoenix, Arizona
The Pointe Hilton Resort at Tapatio 585
Cliffs
Phoenix, Arizona
Hilton Palacio del Rio 481
San Antonio, Texas
San Antonio Airport Hilton 387
San Antonio, Texas(3)
Hilton at Short Hills 300
Short Hills, New Jersey
Innisbrook Hilton Resort 873
Tarpon Springs, Florida(3)
Hilton Waikoloa Village 1,238
Waikoloa, Hawaii(6)
Hilton Suites 212
Oakbrook Terrace, Illinois(3)(4)
Hilton Garden Inn 152
Valencia, California(6)
INTERNATIONAL
Conrad International Barcelona 412
Barcelona, Spain(3)
Conrad International Treasury Casino, 136
Brisbane
Brisbane, Queensland, Australia(6)
Conrad International Brussels 269
Brussels, Belgium
Conrad International Dublin 191
Dublin, Ireland(3)(6)
Conrad International Hong Kong 510
Hong Kong(6)(8)
Conrad International Hurghada Resort 260
Hurghada, Egypt
Conrad International Istanbul 620
Istanbul, Turkey(3)(6)
Conrad International London 159
London, England
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AND LOCATION NUMBER OF ROOMS/SUITES
- - ------------------------------------- ----------------------
Conrad International Punta del Este 300
Resort and Casino
Punta del Este, Uruguay(3)(6)(9)
<S> <C>
Conrad Jupiters, Gold Coast 609
Gold Coast,
Queensland, Australia(6)
Conrad International Centennial 508
Singapore
Singapore
</TABLE>
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(1) In February 1997, the Company acquired 100% of the ownership interest in the
Anchorage Hilton.
(2) Hilton has an ownership interest of approximately 83% in the joint venture
which owns the Chicago Hilton & Towers. Hilton had a 33.3% ownership
interest in this property prior to the 1996 acquisition of Prudential's
ownership interest of approximately 50% of the property. See "General
Information-- Recent Developments."
(3) Hilton has made loans which are currently outstanding to the owners of each
of the referenced properties.
(4) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See "Investments" in the Notes to the Company's
Consolidated Financial Statements on pages 40 and 41 in the Stockholders
Report.
(5) Hilton owns approximately 84% of Bally's Grand, Inc., which owns and
operates Bally's Las Vegas.
(6) Hilton has equity interests of less than 50% in entities which own each of
the referenced properties. See "Investments" in the Notes to the Company's
Consolidated Financial Statements on pages 40 and 41 in the Stockholders
Report.
(7) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Hilton Riverside & Towers. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 40 and 41 in the
Stockholders Report.
(8) In February 1997, the Company sold its ownership interest in the Conrad
International Hong Kong. The Company continues to manage this hotel.
(9) The Company commenced casino operations in the Conrad International Punta
del Este Resort and Casino in January 1997. The hotel is scheduled to open
in late 1997.
FRANCHISE HOTELS
Pursuant to franchises granted by the Company through a subsidiary,
franchise hotels are operated under the Hilton, Hilton Garden Inn or Hilton
Suites names. The franchise hotels operated under the Hilton name are generally
smaller than the full-service hotels operated by the Company, average
approximately 250 rooms in size and target the mid-market segment. Franchise
hotels bearing the Hilton Garden Inn name are approximately 90 to 250 rooms in
size and utilize a modular design constructed around a courtyard containing an
indoor or outdoor swimming pool. The Hilton Suites properties operated pursuant
to franchise agreements utilize an all-suites design with approximately 200 to
250 suites. In general, Hilton approves the plan for, and the location of,
franchise hotels and assists in their design.
On February 1, 1997, there were 174 franchise hotels, of which 169 were
operated under the Hilton name, three were operated under the Hilton Garden Inn
name and two were operated under the Hilton Suites name. In general, franchisees
pay Hilton an initial fee based on the number of rooms in a franchise hotel and
a continuing fee based on a percentage of the facility's room revenue. Although
Hilton does not directly participate in the management or operation of franchise
hotels, it conducts periodic inspections to ensure that Hilton's standards are
maintained and renders advice with respect to hotel operations.
The Company has continued its ongoing program of monitoring and improving
its franchise operations. The Company added 11 franchises to its system in 1996,
while one franchise arrangement was
9
<PAGE>
terminated. In addition, the Company has entered into commitment agreements for
an additional 26 franchise hotels scheduled to commence operation during the
remainder of 1997 and 1998.
EXPANSION PROGRAM
In January 1996, Hilton announced plans for a major expansion of Hilton
Garden Inn properties over the next five years, with the addition of up to 100
new Hilton Garden Inns. The additional Hilton Garden Inns are anticipated to be
primarily newly constructed facilities which will be operated as franchise
hotels. In December 1996, Hilton and Patriot entered into a letter of intent for
Patriot to develop approximately 15 new Hilton Garden Inns. See "General
Information--Recent Developments."
Hilton also intends to expand its domestic operations through the
acquisition of ownership interests in existing hotels, conversion of existing
hotels into management and franchise properties and through development and
management of vacation ownership resorts. The Company will invest in new
domestic hotel projects or conversion properties where the return on investment
meets the Company's criteria.
The Company has entered into management contracts to operate the following
new international hotels, the anticipated opening dates of which are indicated
parenthetically: the 350-room Conrad International Sharm El Sheikh Resort in
Egypt (summer 1997); the 700-room Conrad International Jakarta in Indonesia
(1999); and the 400-room Conrad International Bangkok in Thailand (1999). Future
development of international hotels by the Company will be subject to agreements
entered into between the Company and Ladbroke in January 1997. Pursuant to such
agreements, Ladbroke has been granted rights to future international development
using the Conrad brand name and the Company and Ladbroke will have the
opportunity to participate in certain of each other's future hotel development
focusing primarily upon management contracts and franchises. See "General
Information--Recent Developments" and "Territorial Restrictions."
The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally. Certain countries
have also restricted, from time to time, the repatriation of funds. The Company
considers the foregoing factors, among others, when evaluating a management
and/or investment opportunity abroad, but the Company can give no assurances
that changes in law or governmental policy will not adversely affect
international operations in the future.
TERRITORIAL RESTRICTIONS
Hilton has entered into various agreements which restrict its right to
operate hotels in various areas. The most significant of such restrictions
related to agreements between the Company and Prudential which limited the
Company's right to operate additional hotels in the New York City, Washington,
D.C. and Chicago markets. In connection with the Company's acquisition of
substantially all of Prudential's ownership interests in the New York Hilton &
Towers, Rye Town Hilton, Capital Hilton and Washington Hilton & Towers, the
Company and Prudential terminated the area restrictions with respect to the New
York City and Washington, D.C. markets. See "General Information--Recent
Developments." The area restriction relating to the Chicago market expired in
1996.
Pursuant to an agreement entered into at the time of Hilton's distribution
on December 1, 1964 to its stockholders of all the issued and outstanding
capital stock of HI, as subsequently amended, Hilton was prohibited from
operating facilities outside the United States identified as "Hilton" hotels and
HI was prohibited from operating facilities within the continental United States
identified as "Hilton" hotels. The Company's international hotel and
hotel-casino operations are conducted under the Conrad International name. See
"Hotel Operations" and "Gaming Operations--International Hotel-Casinos."
In January 1997, the Company and Ladbroke, the parent company of HI, entered
into agreements to form a strategic alliance to reunite the Hilton name.
Pursuant to these agreements, the Conrad name has
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been licensed to HI for future development outside the United States for a
period of 20 years. HI has also licensed the Company to develop full-service
franchise properties under the Hilton name in Canada, Mexico and the Island of
St. John, U.S. Virgin Islands. Subject to the foregoing restrictions as to the
use of the "Hilton" name, Hilton and HI can compete in all, and do compete in
certain, markets. The Compass computerized reservation system utilized by Hilton
and HI provides information as to their respective hotels, if any, in each
market. See "General Information--Recent Developments," "Additional
Information--Computer Systems" and "Additional Information--Reservation System."
PROPERTY TRANSACTIONS
Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenue and
a favorable return on stockholders' equity.
GAMING OPERATIONS
NEVADA HOTEL-CASINOS
The Company owns and operates five hotel-casinos in the State of Nevada: the
3,174-room Las Vegas Hilton, the 3,642-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno. The Company also owns an 84% equity interest in Bally's
Grand, Inc., which owns and operates the 2,814-room Bally's Las Vegas.
The Company's Nevada gaming operations reach diverse markets by offering
gaming alternatives for premium players, convention visitors, mid-market
gamblers and budget-conscious customers. The Las Vegas Hilton is located
adjacent to the Las Vegas Convention Center and focuses on upscale individual
leisure guests and convention groups. Bally's Las Vegas is located at the famous
"Four Corners" on the Strip in Las Vegas and caters to convention groups and the
mid-to upper mid-market, including the group tour and travel segment. Bally's
Las Vegas is also serviced by a public monorail which connects to the MGM Grand
Hotel and Casino. The Flamingo Hilton-Las Vegas and the Flamingo Hilton-Reno
focus primarily on the mid-market, in particular the group tour and travel
segment. The Flamingo Hilton-Laughlin targets the budget and mid-market
segments. The Reno Hilton focuses primarily on the mid-market, in particular
convention groups. Each of these hotel-casinos has gaming, convention, dining,
shopping, entertainment and, with the exception of the Flamingo Hilton-Reno,
indoor and outdoor recreational facilities. A variety of popular entertainment
is featured in theaters and lounges at each hotel. The Company also operates a
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas. See
"Additional Information--Vacation Ownership."
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1996, the Las
Vegas Hilton completed two new suites for premium players, opened a new casino
cage and retail stores, renovated guest rooms and a restaurant and upgraded its
heating and cooling system. The Flamingo Hilton-Las Vegas added 19,000 square
feet of casino space, renovated the registration area and guest room corridors
and remodeled a restaurant. Bally's Las Vegas renovated the baccarat area of the
casino, restaurant areas and guest suites. The Flamingo Hilton-Laughlin
renovated guest bathrooms and continued its slot machine replacement program.
The Reno Hilton renovated restaurants and meeting rooms, and upgraded slot
machines and the life safety system. At the Flamingo Hilton-Reno, the Company
opened a new Benihana restaurant, renovated guest rooms and dining areas and
upgraded slot machines.
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The approximate square footage of the Company's casinos in Nevada is as
follows: Las Vegas Hilton--78,000 square feet (inclusive of 29,000 square feet
attributable to the race and sports book); Flamingo Hilton-Las Vegas--93,000
square feet (inclusive of 20,000 square feet attributable to O'Sheas Irish theme
casino adjacent to the hotel); Bally's Las Vegas--62,000 square feet (inclusive
of 7,000 square feet attributable to the race and sports book); Flamingo
Hilton-Laughlin--58,000 square feet (inclusive of 3,000 square feet attributable
to the race and sports book); Reno Hilton--118,000 square feet (inclusive of
12,000 square feet attributable to the race and sports book); and Flamingo
Hilton-Reno--46,000 square feet (inclusive of 2,500 square feet attributable to
the race and sports book).
Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big "6," baccarat, poker, keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno. Bally's Las Vegas also operates a race and
sports book.
It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenue from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.
As is the case of any business extensively involved in the handling of cash,
gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all six Nevada properties are monitored by computers.
The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las Vegas,
Bally's Las Vegas, the Flamingo Hilton-Laughlin, the Flamingo Hilton-Reno and
the Reno Hilton invite VIP customers to their casinos and may pay for or
reimburse the cost of their air transportation and provide them with
complimentary rooms, food and beverage. In addition, the Las Vegas Hilton and
the Reno Hilton have instituted special flight programs, pursuant to which free
air transportation on Company owned or chartered aircraft and complimentary
rooms, food and beverage are provided to groups or selected persons. These
persons either have established casino credit limits or cash on deposit in the
casinos and have previously evidenced a willingness to put substantial amounts
at risk at the casinos. The special flight programs are sometimes referred to as
junkets. The Las Vegas Hilton and the Reno Hilton hosted 18 and 4 special flight
programs in 1996, compared to 11 and 13 such programs in 1995, respectively.
Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations. As is customary in the Nevada gaming
industry, activities are conducted on a credit as well as a cash basis, in
accordance with procedures established and supervised by management.
Fluctuations in collecting casino receivables could have a material effect on
results of operations of these properties. An allowance is provided for
estimated uncollectible casino receivables. Casino receivables aggregated
$69,100,000, subject to a $16,000,000 (approximately 23%) reserve, at December
31, 1994; $87,300,000, subject to a $13,500,000 (approximately 15%) reserve, at
December 31, 1995; and $75,800,000, subject to a $14,900,000 (approximately 20%)
reserve, at December 31, 1996.
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ATLANTIC CITY HOTEL-CASINOS
The Company owns and operates two hotel-casinos in Atlantic City, New
Jersey: the 1,265-room Bally's Park Place Casino Resort ("Bally's Park Place")
and the 509-room Atlantic City Hilton (formerly named The Grand).
Bally's Park Place, currently the largest four-star hotel in New Jersey, is
located on an eight-acre site with ocean frontage at the intersection of Park
Place and the Boardwalk. With its strategic location on the Boardwalk and over
2,300 parking spaces, Bally's Park Place is strongly positioned to attract
significant walk-in and drive-in business. The Atlantic City Hilton is located
on approximately three acres at the intersection of Boston and Pacific Avenues
at the southern end of the Boardwalk in proximity to one of the major highways
leading into Atlantic City. This location gives the Atlantic City Hilton a
significant advantage in attracting destination oriented customers arriving by
automobile or bus.
Both of the Company's Atlantic City properties have gaming, dining,
shopping, entertainment, convention and meeting facilities, recreational
facilities and parking. A variety of popular entertainment, sports events and
production shows are featured at the Atlantic City Hilton.
Bally's Park Place contains approximately 80,000 square feet of casino area
(inclusive of 8,500 square feet attributable to the race book). The Atlantic
City Hilton contains approximately 60,000 square feet of casino area (inclusive
of 1,500 square feet attributable to the race book). Both Atlantic City casinos
are open 24 hours a day, seven days a week, for gaming activities, and feature
table games and slot machines similar to those offered at the Company's Nevada
hotel-casinos. Atlantic City casinos do not contain sports books. Revenue and
earnings for Bally's Park Place and the Atlantic City Hilton peak during the
summer, with less favorable operating results in the winter.
Bally's Park Place is a leader in Atlantic City's mid-market slot segment,
and also focuses on premium table game and slot players from New York,
Philadelphia and other northeastern metropolitan areas. The Atlantic City Hilton
primarily focuses on personalized service for upscale and mid-market casino
customers from the same geographic area.
RIVERBOAT CASINOS
The Company manages and owns equity interests in four riverboat casinos
located in the states of Louisiana, Missouri and Mississippi. These riverboat
casinos feature table games and slot machines similar to those offered at the
Company's hotel-casinos in Nevada and New Jersey.
Since February 1994, the Company has operated a riverboat casino located
adjacent to the New Orleans Hilton Riverside & Towers. The riverboat accomodates
1,500 passengers and has a 20,000 square foot casino. This vessel is wholly
owned by the Company and leased to a joint venture, of which the Company owns a
50% interest. In October 1996, the Company was granted approval by the Louisiana
Gaming Control Board to relocate this vessel from New Orleans to Shreveport,
Louisiana, where the vessel will operate as a dockside casino on the Red River.
The relocation is anticipated to occur in fall 1997.
The Company has an ownership interest of approximately 50% in the entity
that owns Bally's Casino Lakeshore Resort, a 2,500 passenger riverboat casino
facility which features a 30,000 square foot casino. This riverboat operates
from Lake Pontchartrain in Orleans Parish, which is approximately eight miles
from the French Quarter of New Orleans.
In October 1996, the Company commenced operation of the Flamingo
Casino-Kansas City, a dockside casino complex in Kansas City, Missouri. The
wholly owned complex features a 30,000 square foot casino, concessions and
entertainment facilities. An agreement between the Company and the Port
Authority of Kansas City provides for the Company, subject to certain
conditions, to sell 10% of its ownership interest in the complex to
locally-based minority interests.
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The Company has a 58% ownership interest in the entity that owns Bally's
Saloon Gambling Hall Hotel, a dockside casino and hotel complex in
Robinsonville, Mississippi, near Memphis, Tennessee. This complex is managed by
the Company and features a 40,000 square foot casino and a 30,000 square foot
land based facility, which includes a 238-room hotel, entertainment facilities,
a restaurant and health club facilities.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad International, manages four international
hotel-casinos which feature table games and slot machines similar to those
offered at the Company's hotel-casinos in Nevada and New Jersey.
In January 1997, the Company commenced casino operations of the Conrad
International Punta del Este Resort and Casino in Uruguay, which features a
38,000 square foot casino. Conrad International manages and has an equity
interest of approximately 43% in this hotel-casino. The 300-room hotel is
expected to open in late 1997, and will feature convention facilities,
restaurants and related amenities.
The Company has a 19.9% ownership interest in the 609-room Conrad Jupiters,
Gold Coast, which opened in 1985. This hotel-casino is located on the Gold Coast
in Queensland, Australia, and features a 70,000 square foot casino.
The Company also has a 19.9% ownership interest in the 136-room Conrad
International Treasury Casino, Brisbane in Brisbane, Queensland, Australia,
which opened in April 1995. This hotel-casino features a 65,000 square foot
casino and has the exclusive right to conduct casino gaming in Brisbane until
2005.
The Company has a 25% ownership interest in the 620-room Conrad
International Istanbul, which opened in 1992. This hotel-casino includes a
12,000 square foot casino.
CASINO WINDSOR
The Company and another shareholder of Windsor Casino Limited ("WCL")
operate the Casino Windsor, an interim 50,000 square foot casino in Windsor,
Ontario, Canada. The Company, through Conrad International, owns a 50% interest
in WCL, which operates this project for the Ontario provincial government. In
January 1997, WCL redeemed the shareholder interest of its third original
shareholder. The Company anticipates that the interim casino will be replaced by
a permanent facility in early 1998, which will include a hotel of approximately
400 rooms, a 75,000 square foot casino and entertainment and meeting facilities.
Since December 1995, the Company has chartered a riverboat to the Ontario
provincial government to serve as a complementary facility for Casino Windsor.
This vessel provides an additional 25,000 square feet of casino space for the
property.
EXPANSION PROGRAM
The Company continues to expand its domestic gaming operations through the
development of the 2,900-room Paris Casino-Resort, a new casino resort adjacent
to Bally's Las Vegas which is expected to feature an 85,000 square foot casino
and a 50-story replica of the Eiffel Tower. The Paris Casino-Resort is scheduled
to be completed in mid-1999.
The Company and Paramount Parks Inc. ("Paramount") are building a 65,000
square foot attraction to be called "Star Trek: The Experience at the Las Vegas
Hilton." This attraction is scheduled to open in summer 1997 and will feature a
motion-based simulation ride, interactive video and virtual reality stations,
dining and souvenir shops. The building housing the Star Trek attraction will be
owned by the Company and leased to Paramount. The attraction will also be
managed by Paramount. In conjunction with the Star
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Trek attraction, the Company is constructing SpaceQuest Casino, a themed 22,000
square foot casino addition at the Las Vegas Hilton, which is also scheduled to
open in summer 1997.
In 1997, the Company's Nevada hotel-casinos are scheduled to complete
additional expansion and renovation programs. The Las Vegas Hilton plans to
renovate elevators and 1,500 guest rooms, install a new marquee sign, open new
retail stores and a parking garage and upgrade its slot machines and life safety
system. The Flamingo Hilton-Las Vegas plans to renovate restaurant areas,
enlarge its casino bar and add a pool bar. Bally's Las Vegas plans to renovate
its life safety and building management systems. The Flamingo Hilton-Laughlin
plans to renovate guest rooms, install a riverside dock to accommodate a new
boat operation and continue its slot machine replacement program. The Reno
Hilton plans to renovate its bowling center, guest room suites and a restaurant
and enhance its heating and air conditioning system. At the Flamingo
Hilton-Reno, the Company plans to continue to renovate the casino and guest
rooms and upgrade slot machines.
The Company's Atlantic City, New Jersey hotel-casinos are also planning to
complete major expansion projects in 1997. Bally's Park Place is constructing a
new western-themed casino and entertainment complex on approximately four acres
adjacent to the hotel-casino. This complex is expected to include approximately
70,000 square feet of casino space (including space attributable to the race
book) and is scheduled to be completed in mid-1997. The Atlantic City Hilton is
building a new 300-room hotel tower adjacent to the hotel-casino, which will
include restaurants, meeting rooms and other related amenities. This hotel
addition is scheduled for completion in mid-1997.
Conrad International has entered into an agreement to develop and operate a
633-room hotel-casino in Cairo, Egypt. This property will feature a 17,000
square foot European-style casino. Conrad International will manage and have a
10% equity interest in the hotel-casino, which is scheduled to open in 1999.
ADDITIONAL INFORMATION
VACATION OWNERSHIP
In May 1996, the Company acquired the remaining 50% interest in the Hilton
Grand Vacations Company joint venture ("HGVC"), which currently operates 17
vacation ownership resorts in Florida and one in Nevada. In 1995, HGVC commenced
operation of a 200-unit vacation ownership resort adjacent to the Flamingo
Hilton-Las Vegas and the first phase of a 420-unit vacation ownership resort
adjacent to Sea World in Orlando, Florida. Construction of 116 units of the
Orlando resort has been completed. In 1997, HGVC anticipates development of a
52-unit vacation ownership resort in Miami Beach, Florida, through the
renovation of two historic art deco buildings. HGVC is actively seeking new
management, development and acquisition opportunities in other destination
resort locations.
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
and through its hotels division, provides design and furnishing services and
purchases and distributes furniture, furnishings, equipment and supplies to
hotels and hotel-casinos owned, leased or managed by Hilton and to hotels
franchised by Hilton or owned and operated by others. The revenues of this
operation depend primarily on the number of new hotels operated or franchised by
Hilton and on refurbishing and remodeling of existing Hilton hotels. In October
1996, Hilton entered into an agreement with Electronic Data Systems Corporation
("EDS") pursuant to which EDS will provide certain purchasing and distribution
services on behalf of Hilton Equipment Corporation under a fee arrangement.
COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by Hilton
and the balance by Budget Rent-A-Car, Inc. ("Budget"), operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets.
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Compass is being managed by Litton Computer Services. The Company has entered
into an agreement with Budget to acquire Budget's 50% ownership interest in
Compass. This acquisition is expected to be completed in spring 1997.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by Hilton
Service Corporation, the operator of a worldwide reservation system for hotels
owned, operated or franchised by Hilton, HI, their affiliates and others. Hilton
Service Corporation is owned 51% by Hilton and 49% by HI. Pursuant to agreements
entered into in January 1997 between the Company and Ladbroke, the parent
corporation of HI, the companies have agreed to merge Hilton Service Corporation
into a new entity to be formed to operate an updated computerized reservation
system. The Company and HI will each own 50% of such new entity. The new
computerized reservation system, which will replace the existing system, is
expected to commence operation in 1998. See "General Information--Recent
Developments."
MARKETING
The Company's hotel and gaming segments offer multiple product lines to a
broad range of customers in many geographic markets. The Company's diversified
hotel portfolio includes large urban hotels, airport hotels, suburban/suite
hotels and resorts. The gaming segment, with its major presence in Las Vegas and
Atlantic City, attracts premium players, convention visitors, mid-market
gamblers and budget-conscious customers.
Hotel occupancy at Hilton's metropolitan and airport properties is primarily
derived from the convention and meeting market and the business traveler market
(businesspersons traveling as individuals or in small groups). Hotel occupancy
at the Company's resort properties is primarily derived from the tour and
leisure market (tourists traveling either as individuals or in groups) and the
convention and meeting market. Hotel occupancy at the Company's hotel-casinos is
primarily derived from the convention and meeting market, the tour and leisure
market and junket and VIP programs. As indicated under "Business Risks" below,
these sources of business are sensitive to general economic and other
conditions. In addition, the Company participates in certain joint marketing
programs with business partners in the airline, car rental and cruise line
industries. The Company believes that its recent alliance with Ladbroke (which
currently owns the rights to the Hilton name outside the U.S.) will improve the
performance of the Company's operations as its properties benefit from the
worldwide integration of the Hilton brand, reservation systems, marketing
programs and sales organization. See "General Information--Recent Developments."
STATISTICAL DATA
For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Five Year
Summary on page 53 in the Stockholders Report.
BUSINESS RISKS
In 1996, the Company was able to increase average room rates for its hotels
and hotel-casinos by seven percent over 1995. The Company's future operating
results could be adversely impacted by industry overcapacity and weak demand,
which could restrict the Company's ability to raise room rates to keep pace with
the rate of inflation. The Company's business could also be adversely affected
by increases in transportation and fuel costs or sustained recessionary periods.
The operating results for the Company's hotel-casinos can be volatile depending
upon the table game play of premium players, particularly at the Las Vegas
Hilton.
Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Occupancy ratios at the Company's hotels could also be adversely
impacted by a decrease in travel resulting from fluctuations in the worldwide
economy and by excess industry capacity.
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COMPETITION
The Company seeks to maintain the diversity and balance of its lodging and
gaming operations while expanding both businesses. The Company intends to
improve and expand its core businesses by capitalizing on the synergies between
its hotel and gaming operations, leveraging its strong brand names, maximizing
operating efficiencies, expanding and enhancing properties and acquiring or
developing properties as appropriate.
Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.
To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Certain of the Company's competitors have announced, or are developing,
new casino projects in Las Vegas which, if completed, will add significant
casino space and hotel rooms to the market. Such new capacity additions to the
Las Vegas market could adversely impact the Company's gaming income. The
business of Hilton's Nevada hotel-casinos might also be adversely affected if
gaming operations of the type conducted in Nevada were to be permitted under the
laws of other states, particularly California. Similarly, legalization of gaming
operations in any jurisdiction located near Atlantic City, New Jersey, or the
establishment of new large scale gaming operations on nearby Native American
tribal lands, could adversely affect the Company's Atlantic City hotel-casinos.
The expansion of riverboat gaming or casino gaming on Native American tribal
lands could also impact the Company's gaming operations.
ENVIRONMENTAL MATTERS
The Company, like others in its industry, is subject to various federal,
state, local and, in some cases, foreign laws, ordinances and regulations that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous or toxic wastes, or (ii) may impose liability for the
costs of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous or toxic substances or wastes
(together, "Environmental Laws").
The Company endeavors to maintain compliance with Environmental Laws, but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including uncertainty whether a
Company facility in fact shipped any wastes to one such site, the number of
potentially responsible parties at such sites and, where available, the volume
and type of waste sent to each such site, the Company believes that any
liability arising from such disposals under Environmental Laws would not have a
material adverse effect on its results of operations or financial condition.
Bally received notice from the current landowner of a prior Bally facility
in Chicago, Illinois that the landowner may seek to recover past and future
costs of investigating and remediating alleged soil and groundwater
contamination at the facility. The Company does not believe that Bally's prior
operations at the site have contributed to the alleged contamination; as a
result, if the current landowner pursues its claim, the Company expects to
vigorously defend against the claim. The Company cannot at this time estimate
the potential costs of investigation or cleanup, if any, however, based on
currently available
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information, the Company believes that any such costs would be shared by several
parties and, in any event, the cost estimates provided to date indicate that any
such liability would not have a material adverse effect on the Company.
REGULATION AND LICENSING
Each of the Company's casinos is subject to extensive regulation under laws,
rules and supervisory procedures, primarily in the jurisdiction where located or
docked. Some jurisdictions, however, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting such gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
Under provisions of Nevada, New Jersey, Louisiana, Mississippi, Missouri and
other gaming laws, and the Company's Restated Certificate of Incorporation, as
amended, certain securities of the Company are subject to restrictions on
ownership which may be imposed by specified governmental authorities. Such
restrictions may require the holder to dispose of the securities or, if the
holder refuses to make such disposition, the Company may be obligated to
repurchase the securities.
NEVADA GAMING LAWS. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, Bally's Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno, are subject to the Nevada Gaming Control
Act and the regulations promulgated thereunder (the "Nevada Act") and various
local regulations. The Company's Nevada gaming operations are subject to the
licensing and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board") and,
depending on the facility's location, the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Nevada Commission, the
Nevada Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations.
Each subsidiary of the Company that operates a casino in Nevada
(individually, a "Corporate Licensee" and collectively, the "Corporate
Licensees") is required to be licensed by the Nevada Gaming Authorities. The
gaming license requires the periodic payment of fees and taxes and is not
transferable. The Company is required to be registered by the Nevada Commission
as a publicly traded corporation ("Registered Corporation") and as such, it is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information that the Nevada Commission
may require. No person may become a stockholder of, or receive any percentage of
profits from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company and the Corporate
Licensees have obtained from the Nevada Gaming Authorities the various
registrations, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or any of
its Corporate Licensees in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee.
Officers,
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directors and certain key employees of a Corporate Licensee must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers, directors
and key employees of the Company who are actively and directly involved in
gaming activities of any Corporate Licensee may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. An applicant for licensing or an applicant for a finding of
suitability must pay for all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and, in addition to
their authority to deny an application for a finding of suitability or
licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or any Corporate Licensee, the Company and the
Corporate Licensee would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company or a Corporate Licensee
to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or questions pertaining to licensing
are not subject to judicial review in Nevada.
The Company and all Corporate Licensees are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
of a Corporate Licensee must be reported to, or approved by, the Nevada
Commission.
If it were determined that the Nevada Act was violated by a Corporate
Licensee, the gaming licenses it holds could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Corporate Licensee, the Company and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor
could be appointed by the Nevada Commission to operate a Corporate Licensee's
gaming property and, under certain circumstances, earnings generated during the
supervisor's appointment (except for the reasonable rental value of the gaming
property) could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license of a Corporate Licensee or the appointment of a
supervisor could (and revocation of any gaming license would) have a material
adverse effect on the Company's gaming operations.
Any beneficial holder of the Company's Common Stock, Preferred Redeemable
Increased Dividend Equity Securities-SM-, 8% PRIDES-SM-, Convertible Preferred
Stock ("PRIDES") or any other voting security of the Company ("Company Voting
Securities"), regardless of the number of shares owned, may be required to file
an application, be investigated, and have such person's suitability as a
beneficial holder of Company Voting Securities determined if the Nevada
Commission has reason to believe that such ownership would otherwise be
inconsistent with the declared policies of the State of Nevada. The applicant
must pay all costs of the investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires a beneficial ownership of
more than 5% of Company Voting Securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of Company Voting Securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires
beneficial ownership of more than 10%, but not more than 15%, of Company Voting
Securities may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds Company Voting Securities for
investment purposes only. An institutional investor shall not be deemed to hold
Company Voting Securities for investment purposes unless Company
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Voting Securities were acquired and are held in the ordinary course of business
as an institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding Company Voting Securities for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, polices or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership, limited partnership, limited
liability company or trust, it must submit detailed business and financial
information including a list of beneficial owners. The applicant is required to
pay all costs of investigation. Barron Hilton, the Company's largest
stockholder, has been found suitable as a controlling stockholder of the
Company.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
by the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of Company Voting
Securities beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company or a
Corporate Licensee, the Company (i) pays that person any dividend or interest
upon any Company Voting Securities; (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities held by
that person; (iii) pays remuneration in any form to that person for services
rendered or otherwise; or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish the voting securities for cash at fair
market value. Additionally, the CCB has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming
licensee.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own such debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it (i) pays to the unsuitable person any dividend, interest or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner of any Company
Voting Securities. The Nevada Commission has the power to require the Company's
stock certificates to bear a legend indicating that the securities are subject
to the Nevada Act. However, to date, the Nevada Commission has not imposed such
a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. The Nevada Commission granted the Company prior approval to make
public offerings for a
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period of one year, expiring on September 20, 1997, subject to certain
conditions (the "Shelf Approval"). The Shelf Approval, however, may be rescinded
for good cause without prior notice upon the issuance of an interlocutory stop
order by the Chairman of the Nevada Board. Furthermore, any approval, if
granted, does not constitute a finding, recommendation or approval of the Nevada
Gaming Authorities as to the accuracy or adequacy of the prospectus or the
investment merits of the securities offered thereby. Any representation to the
contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licenses, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Corporate Licensees' respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
Corporate Licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of the Licensee's participation in such foreign gaming. The
revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. A Licensee is also subject to
disciplinary action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employs a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
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The sale of alcoholic beverages at establishments operated by a Corporate
Licensee is subject to licensing, control and regulation by applicable local
regulatory agencies. All licenses are revocable and are not transferable. The
agencies involved have full power to limit, condition, suspend or revoke any
such license, and any such disciplinary action could (and revocation would) have
a material adverse effect upon the operations of the Corporate Licensee.
NEW JERSEY GAMING LAWS. The ownership and operation of casino gaming
facilities in Atlantic City are subject to the New Jersey Casino Control Act
(the "New Jersey Act"), regulations of the New Jersey Casino Control Commission
(the "New Jersey Commission") and other applicable laws. No casino may operate
unless the required permits or licenses and approvals are obtained from the New
Jersey Commission. The New Jersey Commission is authorized under the New Jersey
Act to adopt regulations covering a broad spectrum of gaming and gaming related
activities and to prescribe the methods and forms of applications from all
classes of licensees. These laws and regulations concern primarily: (i) the
financial stability, integrity, responsibility, good character, honesty and
business ability of casino service suppliers and casino operators, their
directors, officers and employees, their security holders and others financially
interested in casino operations; (ii) the nature of casino hotel facilities; and
(iii) the operating methods and financial and accounting practices used in
connection with the casino operations.
Taxes are imposed by the State of New Jersey on gaming operations at the
rate of 8% of gross gaming revenues. In addition, the New Jersey Act provides
for an investment alternative tax of 2.5% of gross gaming revenues. This
investment alternative tax may be offset by investment tax credits equal to
1.25% of gross gaming revenues, which are obtained by purchasing bonds issued
by, or investing in housing or other development projects approved by, the
Casino Reinvestment Development Authority ("CRDA").
The New Jersey Commission has broad discretion with regard to the issuance,
renewal and revocation or suspension of casino licenses. A casino license is not
transferable, is issued for a term of up to one year for the first two renewals
and thereafter for a term of up to four years (subject to discretionary
reopening of the licensing hearing by the New Jersey Commission at any time),
and must be renewed by filing an application which must be acted on by the New
Jersey Commission prior to the expiration of the license in force. At any time,
upon a finding of disqualification or noncompliance, the New Jersey Commission
may revoke or suspend a license or impose fines or other penalties.
The New Jersey Act imposes certain restrictions on the ownership and
transfer of securities issued by a corporation that holds a casino license or is
deemed a holding company, intermediary company, subsidiary or entity qualifier
(each, an "affiliate") of a casino licensee. "Security" is defined by the New
Jersey Act to include instruments that evidence either a beneficial ownership in
an entity (such as common stock or preferred stock) or a creditor interest in an
entity (such as a bond, note or mortgage). Pursuant to the New Jersey Act, the
corporate charter of a publicly traded affiliate of a casino licensee must
require that a holder of the company's securities dispose of such securities if
the holder's continued interest would result in the company or any other
affiliate being no longer qualified to continue as a casino licensee under the
New Jersey Act. The corporate charter of a casino licensee or any privately held
affiliate of the licensee must: (i) establish the right of prior approval by the
New Jersey Commission with regard to a transfer of any security in the company
and (ii) create the absolute right of the company to repurchase at the market
price or purchase price, whichever is less, any security in the company in the
event the New Jersey Commission disapproves a transfer of such security under
the New Jersey Act. The corporate charter of the Company has been approved by
the New Jersey Commission pending the approval of an amendment thereto by the
Company's stockholders at the next regular stockholder's meeting to expand the
types of securities of the Company that are subject to repurchase by the Company
under certain circumstances to comport with the definition of "security" under
the New Jersey Act. The corporate charter of the Company's subsidiaries that
operate Bally's Park Place and the Atlantic City Hilton and the charters of
their privately held affiliates conform to the New Jersey Act's requirements
described above for privately held companies.
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If the New Jersey Commission finds that an individual owner or holder of
securities of a corporate licensee or an affiliate of such corporate licensee is
not qualified under the New Jersey Act, the New Jersey Commission may propose
remedial action. The New Jersey Commission may require divestiture of the
securities held by any disqualified holder who is required to be qualified under
the New Jersey Act (e.g., officers, directors, security holders and key casino
and other employees). In the event that disqualified persons fail to divest
themselves of such securities, the New Jersey Commission may revoke or suspend
the license. However, if an affiliate of a casino licensee is a publicly traded
company and the New Jersey Commission makes a finding of disqualification with
respect to any holder of any security thereof who is required to be qualified,
and the New Jersey Commission also finds that: (i) such company has complied
with aforesaid charter provisions; (ii) such company has made a good faith
effort, including the prosecution of all legal remedies, to comply with any
order of the New Jersey Commission requiring the divestiture of the security
interest held by the disqualified holder; and (iii) such disqualified holder
does not have the ability to control the corporate licensee or the affiliate, or
to elect one or more members of the board of directors of such affiliate, the
New Jersey Commission will not take action against the casino licensee or its
affiliate with respect to the continued ownership of the security interest by
the disqualified holder.
For purposes of the New Jersey Act, a security holder is presumed to have
the ability to control a publicly traded corporation, or to elect one or more
members of its board of directors, and thus require qualification, if such
holder owns or beneficially holds 5% or more of any class of the equity
securities of such corporation, unless such presumption of control or ability to
elect is rebutted by clear and convincing evidence. An "institutional investor,"
as that term is defined under the New Jersey Act, is entitled to a waiver of
qualification if it holds less than 10% of any class of the equity securities of
a publicly traded holding or intermediary company of a casino licensee and: (i)
the holdings were purchased for investment purposes only; (ii) there is no cause
to believe the institutional investor may be found unqualified; and (iii) upon
request by the New Jersey Commission, the institutional investor files a
certified statement to the effect that it has no intention of influencing or
affecting the affairs of the issuer, the casino licensee or its other
affiliates. The New Jersey Commission may grant a waiver of qualification to an
institutional investor holding 10% or more of such securities upon a showing of
good cause and if the conditions specified above are met.
With respect to debt securities, the New Jersey Commission generally
requires a person holding 15% or more of a debt issue of a publicly traded
affiliate of a casino licensee to qualify as a "financial source" where the use
of the proceeds from the debt issue is related in any way to the financing of
the casino licensee. There can be no assurance that the New Jersey Commission
will continue to apply the 15% threshold, and the New Jersey Commission could at
any time establish a lower threshold for qualification. An exception to the
qualification requirement is made for institutional investors, in which case the
institutional holder is entitled to a waiver of qualification if the holder's
position in the aggregate is less than 20% of the total outstanding debt of the
affiliate and less than 50% of any outstanding publicly traded issue of such
debt, and if the conditions specified in the above paragraph are met. As with
equity securities, a waiver of qualification may be granted to institutional
investors holding larger positions upon a showing of good cause and if all
conditions specified in the above paragraph are met.
Generally, the New Jersey Commission would require each institutional holder
seeking a waiver of qualification to execute a certificate to the effect that:
(i) the holder has reviewed the definition of institutional investor under the
New Jersey Act and believes that it meets the definition of institutional
investor; (ii) the holder purchased the securities for investment purposes only
and holds them in the ordinary course of business; (iii) the holder has no
involvement in the business activities of, and no intention of influencing or
affecting the affairs of, the issuer, the casino licensee or any affiliate; and
(iv) if the holder subsequently determines to influence or affect the affairs of
the issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' notice of such intent and shall file with the New Jersey Commission an
application for qualification before taking any such action.
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Commencing on the date the New Jersey Commission serves notice on a
corporate licensee or an affiliate of such corporate licensee that a security
holder of such corporation has been found disqualified, it will be unlawful for
the security holder to: (i) receive any dividends or interest upon any such
securities; (ii) exercise, directly or through any trustee or nominee, any right
conferred by such securities; or (iii) receive any remuneration in any form from
the corporate licensee for services rendered or otherwise.
Persons who are required to qualify under the New Jersey Act by reason of
holding debt or equity securities and are not otherwise previously qualified,
are required to place the securities into an Interim Casino Authorization
("ICA") trust pending qualification. Unless and until the New Jersey Commission
has reason to believe that the investor may not qualify, the investor will
retain the ability to direct the trustee how to vote, or whether to dispose of,
the securities. If at any time the New Jersey Commission finds reasonable cause
to believe that the investor may be found unqualified, it can order the trust to
become "operative," in which case the investor will lose voting power, if any,
over the securities but will retain the right to petition the New Jersey
Commission to order the trustee to dispose of the securities.
Once an ICA trust is created and funded, and regardless of whether it
becomes operative, the investor has no right to receive a return on the
investment until the investor becomes qualified. Should an investor ultimately
be found unqualified, the trustee would dispose of the trust property, and the
proceeds would be distributed to the unqualified applicant only in an amount not
exceeding the actual cost of the trust property. Any excess proceeds would be
paid to the State of New Jersey. If the securities were sold by the trustee
pending qualification, the investor would receive only actual cost, with
disposition of the remainder of the proceeds, if any, to await the investor's
qualification hearing.
In the event it is determined that a licensee has violated the New Jersey
Act or its regulations, then under certain circumstances, the licensee could be
subject to fines or have its license suspended or revoked. In addition, if a
person who is required to qualify under the New Jersey Act fails to qualify, or
if a security holder who is required to qualify fails to qualify and does not
dispose of the related securities in the licensee or in any affiliate of the
licensee, as may be required by the New Jersey Act, then, under certain
circumstances, the licensee could have its license suspended or revoked.
If a casino license was not renewed, was suspended for more than 120 days or
was revoked, the New Jersey Commission could appoint a conservator. The
conservator would be charged with the duty of conserving and preserving the
assets so acquired and continuing the operation of the hotel and casino of a
suspended licensee or with operating and disposing of the hotel-casino
facilities of a former licensee. Such suspended licensee or former licensee,
however, would be entitled only to a fair return on its investment, to be
determined under New Jersey law, with any excess to go to the State of New
Jersey, if so directed by the New Jersey Commission. Suspension or revocation of
any licenses or the appointment of a conservator by the New Jersey Commission
would have a material adverse effect on the businesses of the Company's Atlantic
City hotel-casinos.
In November 1996, the New Jersey Commission found the Company qualified as a
holding company for New Jersey casino licensees, Bally's Park Place and the
Atlantic City Hilton. Such licenses are scheduled for renewal in the year 2000.
LOUISIANA GAMING LAWS. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Gaming Control Board (the "Board"). The Board is responsible
for investigating the background of all applicants seeking a riverboat gaming
license, issuing the license and enforcing the laws, rules and regulations
relating to riverboat gaming activities.
The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Board. This requires the filing of an extensive
application to the Board disclosing personal, financial, criminal, business and
other information. On October 13, 1993, the Board's predecessor issued a
riverboat gaming license to the Queen of New Orleans, a joint venture of which
the Company owns a 50% interest. The Queen of New Orleans
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joint venture commenced riverboat gaming operations in New Orleans on February
10, 1994. On March 24, 1994, the Board's predecessor issued a riverboat gaming
license to Belle of Orleans, L.L.C., a limited liability company of which the
Company owns a 49.9% interest as a result of the Bally Merger. Belle of Orleans,
L.L.C. commenced riverboat gaming operations in New Orleans on July 9, 1995.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Board approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
The Board must approve all security holders of the licensees and may find
any such security holder not qualified to own those securities. Louisiana law
may require that the charter or bylaws of the licensee provide that securities
are held subject to the condition that, if a holder is found to be disqualified
by the Board, the holder must dispose of the securities of the licensee. If a
security holder of a licensee is found disqualified, it will be unlawful for the
security holder to (i) receive any dividend or interest with regard to the
securities; (ii) exercise, directly or indirectly, any rights conferred by the
securities; or (iii) receive any remuneration from the licensee for services
rendered or otherwise. The Board may impose similar approval requirements on
holders of securities of any intermediary or holding company of the licensee,
but may waive those requirements with respect to holders of publicly traded
securities of intermediary and holding companies if such holders do not have the
ability to control the publicly traded corporation or elect one or more
directors thereof.
On April 19, 1996, the Louisiana legislature approved legislation mandating
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual types of gaming. On November 5,
1996, Louisiana voters determined whether each of the following types of gaming
would be prohibited or permitted in the following described Louisiana parishes:
(i) the operation of video draw poker devices in each parish; (ii) the conduct
of riverboat gaming in each parish that is contiguous to a statutorily
designated river or waterway; or (iii) the conduct of land-based casino gaming
operations in Orleans Parish. In Orleans Parish, where both of the Company's
riverboat casinos currently operate, a majority of the voters elected to
continue to permit the three types of gaming described above. The current
legislation does not provide for any moratorium on future local elections on
gaming. Further, the current legislation does not provide for any moratorium
that must expire before future local elections on gaming could be mandated or
allowed.
On October 11, 1996, the Board granted the Company's petition to move the
Queen of New Orleans riverboat casino from New Orleans to the City of
Shreveport. Shreveport is located in Caddo Parish, where a majority of voters
have elected to continue to permit riverboat gaming. The Board's approval
permits the Company to move the riverboat casino to Shreveport at the earlier of
(i) October 1, 1997 or (ii) 30 days after the opening of the land-based casino
in New Orleans.
MISSISSIPPI GAMING LAWS. The ownership and operation of casino gaming
facilities in Mississippi are subject to extensive state and local regulation,
but primarily the licensing and regulatory control of the Mississippi Gaming
Commission and the Mississippi State Tax Commission. An owner and operator of
casino gaming facilities in Mississippi and its related holding companies must
register under the Mississippi Gaming Control Act (the "Mississippi Act") and
its gaming operations are subject to the licensing and regulatory control of the
Mississippi Gaming Commission and various local, city and county regulatory
agencies. Although not identical, the Mississippi Act is similar to the Nevada
Act. The adopted regulations of the Mississippi Gaming Commission are also
similar in many respects to the Nevada gaming regulations.
Mississippi statutes and regulations give the Mississippi Gaming Commission
the discretion to require a suitability finding with respect to any person or
entity who acquired any security of an owner and operator of casino gaming
facilities in Mississippi, regardless of the percentage of ownership. The
current policy of the Mississippi Gaming Commission is to require any person or
entity acquiring 5% or more of
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any voting securities of a public company with a licensed subsidiary or private
company licensee to be found suitable. If the owner of voting securities who is
required to be found suitable is a corporation, partnership or trust, it must
submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of investigation.
The sale of alcoholic beverages by the Company is subject to licensing, control
and regulation by the Alcoholic Beverage Control Division ("ABC") of the
Mississippi State Tax Commission. An ABC license is revocable and is not
transferable. The ABC of the Mississippi State Tax Commission has full power to
limit, condition, suspend or revoke any such license.
MISSOURI GAMING LAWS. Missouri has enacted the Missouri Gaming Law (the
"MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for licensing and regulating riverboat gaming in Missouri. The MGL
does not specifically limit the number of licenses that the MGC may grant, but
generally authorizes the MGC to limit the number of licenses granted. The MGL
grants specific powers and duties to the MGC to supervise riverboat gaming,
implement the MGL and take other action as may be reasonable or appropriate to
enforce the MGL. The MGC may approve permanently moored ("dockside") riverboat
casinos subject to specific criteria.
The MGL extensively regulates owning and operating riverboat gaming
facilities in Missouri. Generally, a licensed company and its officers,
directors, employees, related subsidiaries and significant shareholders are
subject to such extensive regulation. The initial license and first subsequent
license renewal for an excursion gambling boat operator generally is for a
period of one year. The MGC, however, may reopen license hearings and may
terminate a license or impose additional regulations upon a licensee at any time
during the term of a license. In addition to the owner's license and operator's
license for the riverboat, individuals participating in gaming operations are
required to obtain an occupational license from the MGC. Applicants and
licensees are responsible for keeping the application and any requested
materials current, and this responsibility continues throughout any period of
licensure. In addition, Missouri has extensive licensing disclosure
requirements. In October 1996, the MGC granted a riverboat gaming license to the
Flamingo Hilton Riverboat Casino, L.P., a limited partnership wholly owned by
the Company.
Pursuant to its rulemaking authority, the MGC has adopted certain
regulations which provide, among other things, that: (i) no gaming licensee or
occupational licensee may pledge, hypothecate or transfer in any way any
license, or any interest in a license, issued by the MGC; (ii) no ownership
interest in a gaming licensee or a holding company that is not a publicly held
entity may be pledged or hypothecated in any way; (iii) at least 60 days prior
to consummation, a party must notify the MGC of its intention to transfer or
issue an ownership interest in a gaming licensee or a holding company that is
not a publicly held entity (and during such period the MGC may disapprove the
transaction or require the transaction be delayed pending further
investigation); (iv) at least 15 days prior to consummation, a party must notify
the MGC of its intention to: (a) issue an ownership interest in a publicly held
gaming licensee or holding company if such issuance would involve, directly or
indirectly, 5% or greater of the ownership interest in the gaming licensee or
holding company, (b) incur any private debt equal to or exceeding $1,000,000 by
a gaming licensee or any holding company affiliated with a gaming licensee or
(c) issue any public debt and, before or after consummation, the MGC may reopen
the gaming licensee's licensing hearing to consider the effect of the
transaction on the licensee's suitability; (v) not later than 7 days after
consummation, the following transactions must be reported to the MGC: (a) the
transfer or issuance of an ownership interest in a publicly held gaming licensee
or holding company, if such transfer or issuance would result in an entity or
group of entities acting in concert owning, directly or indirectly, a total
amount of ownership interest equaling 5% or greater of the ownership interest in
the gaming licensee or holding company and (b) any pledge or hypothecation of 5%
or more of the ownership interest in a publicly held gaming licensee or holding
company; (vi) no withdrawals of capital, loans, advances or distribution of any
type of assets in excess of 5% of accumulated earnings of a licensee to anyone
with an ownership interest in the licensee may occur without prior MGC approval;
and (vii) the MGC may take appropriate action against a licensee or other person
who has been disciplined in another jurisdiction for gaming related activity.
26
<PAGE>
QUEENSLAND GAMING LAWS. Queensland, Australia, like the jurisdictions
discussed above, has comprehensive laws and regulations governing the conduct of
casino gaming. All persons connected with the ownership and operation of a
casino, including the Company, its subsidiary that manages the Hotel Conrad
Jupiters, Gold Coast and the Conrad International Treasury Casino, Brisbane and
certain of their principal stockholders, directors and officers, must be found
suitable and licensed. A casino license once issued remains in force until
surrendered or cancelled. Queensland law defines the grounds for cancellation
and, in such event, an administrator may be appointed to assume control of the
hotel-casino complex. The Queensland authorities have conducted an investigation
of, and have found suitable, the Company and its subsidiary.
ONTARIO GAMING LAWS. Ontario, Canada also has laws and regulations
governing the conduct of casino gaming. Ontario law requires that the operator
of a casino must be found suitable and be registered. A registration once issued
remains in force until revoked. Ontario law defines the grounds for
registration, as well as revocation or suspension of such registration. The
Company and two other shareholders formed Windsor Casino Limited ("WCL") to
operate the Casino Windsor. The Ontario authorities have conducted an
investigation of, and have found suitable, the Company and the other two
shareholders of WCL in connection with the Ontario registration of WCL. In
January 1997, WCL redeemed the shareholder interest of one of its three original
shareholders.
TURKEY GAMING LAWS. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of operations and
conducts random inspections of ongoing casino operations. Under Turkish gaming
laws, access to casinos is limited to persons carrying a foreign passport or to
Turkish citizens receiving a permit from the Ministry of Tourism. The casino
located in the Conrad International Istanbul has been authorized to conduct
casino operations by the Turkish Ministry of Tourism.
URUGUAY GAMING LAWS. Uruguay also has laws and regulations governing the
establishment and operation of casino gaming. The Internal Auditors Bureau of
Uruguay is responsible for establishing the terms under which casino operations
are conducted, including suitability requirements of persons associated with
gaming operations, authorized games, specifications for gaming equipment,
security, surveillance and compliance. The casino located in the Conrad
International Punta del Este Resort and Casino has been authorized to conduct
casino operations by the Internal Auditors Bureau of Uruguay.
IRS REGULATIONS. The Internal Revenue Service ("IRS") requires operators of
casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain keno, bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates casinos, or in
which the Company has applied for licensing to operate a casino, require the
reporting of currency transactions in excess of $10,000 occurring within a
gaming day, including identification of the patron by name and social security
number. This reporting obligation commenced in May 1985 and may have resulted in
the loss of gaming revenues to jurisdictions outside the United States which are
exempt from the ambit of IRS regulations.
OTHER LAWS AND REGULATIONS. Each of the hotels and casinos operated by the
Company is subject to extensive state and local regulations and, on a periodic
basis, must obtain various licenses and permits, including those required to
sell alcoholic beverages. Management believes that the Company has obtained all
required licenses and permits and its businesses are conducted in substantial
compliance with applicable laws.
27
<PAGE>
EMPLOYEES
At February 1, 1997, Hilton employed approximately 65,000 persons, of whom
approximately 28,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel and gaming
industries generally. Although strikes of short duration have from time to time
occurred at certain of Hilton's facilities, Hilton believes its employee
relations are satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels and casinos to be leading establishments with
respect to desirability of location, size, facilities, physical condition,
quality and variety of services offered in most of the areas in which they are
located. Obsolescence arising from age and condition of facilities is a factor
in the hotel and gaming industries. Accordingly, Hilton expends, and intends to
continue to expend, substantial funds to maintain its facilities in first-class
condition in order to remain competitive.
Hotels and hotel-casinos owned and operated, leased and managed by Hilton
are briefly described under "Item 1" and, in particular, under the captions
"Hotel Operations" and "Gaming Operations." In addition, contemplated additions
to, and major refurbishing and remodeling of, existing properties and new hotels
and casinos presently under construction that will be operated by Hilton are
briefly described under the captions "Hotel Operations--Expansion Program" and
"Gaming Operations--Expansion Program" under "Item 1."
ITEM 3. LEGAL PROCEEDINGS
A purported class action against Bally, its directors and Hilton was
commenced in August 1996 under the caption PARNES V. BALLY ENTERTAINMENT
CORPORATION, ET AL. in the Court of Chancery of the State of Delaware, New
Castle County. The plaintiff alleges breaches of fiduciary duty in connection
with the Bally Merger, including allegedly illegal payments to Arthur M.
Goldberg purportedly denying Bally shareholders other than Mr. Goldberg an
opportunity to sell their shares to Hilton or any other bidder at the best
possible price. In the complaint, the plaintiff seeks, among other things: (i)
an order enjoining the Bally Merger; (ii) an award of damages in an unspecified
amount; (iii) an order requiring Mr. Goldberg to disgorge his profits; and (iv)
an award of attorneys' fees and expenses. Two other purported class actions
relating to the Bally Merger are pending against Bally and its directors, one
commenced in April 1996 under the caption KINDER V. BRUNET, ET AL. and the other
commenced in June 1996 under the caption LORD V. BRUNET, ET AL., in the Court of
Chancery of the State of Delaware, New Castle County. These actions are
virtually identical, and the plaintiffs also allege breaches of fiduciary duty
in connection with the Bally Merger. In the complaint, the plaintiffs seek,
among other things: (i) a declaration that defendants have breached their
fiduciary duties; (ii) an order requiring defendants to act in accordance with
their fiduciary duties in order to maximize the value obtained for Bally's
shareholders; (iii) an award of damages in an unspecified amount; and (iv) an
award of expenses, including attorneys' fees.
Two derivative actions purportedly brought on behalf of Bally's Grand, Inc.
("BGI") against its directors and Bally, one commenced in October 1995 and the
other in September 1996, have been consolidated under the caption IN RE: BALLY'S
GRAND DERIVATIVE LITIGATION in the Court of Chancery of the State of Delaware,
New Castle County. The consolidated complaint alleges breaches of fiduciary duty
and waste of corporate assets in connection with certain actions including the
sale by BGI to Bally of the capital stock of BGI's subsidiary that owns the land
and the development rights with respect to the Paris Casino-Resort in Las Vegas
(the "Paris Transaction"), alleged improper delegation of duties by BGI's board
of directors by virtue of a management agreement (the "Management Agreement")
between BGI and Bally's Grand Management Co., Inc., a wholly owned subsidiary of
Bally ("BGM"), BGM's designation pursuant
28
<PAGE>
to the Management Agreement of recipients awarded BGI stock options, stock
repurchases by BGI and Bally, and a consulting agreement entered into by BGI
with Arveron Investments L.P. in connection with BGI's repurchases of
securities. The plaintiffs seek, among other things: (i) rescission of the Paris
Transaction; (ii) a declaration that the Management Agreement is unlawful; (iii)
an accounting of damages to BGI and profits to defendants as a result of the
transactions complained of; (iv) an accounting for purchases of BGI stock by BGI
and Bally; and (v) costs and expenses, including reasonable attorneys' fees. A
third derivative action purportedly brought on behalf of BGI against its
directors, Bally, BGM and Hilton was commenced in November 1996 under the
caption TOWER INVESTMENT GROUP, INC., ET AL. V. BALLY'S GRAND, INC., ET AL. in
the Court of Chancery of the State of Delaware, New Castle County. The complaint
alleges breach of fiduciary duty and waste of corporate assets by BGI's
directors and Bally in connection with the Paris Transaction, aiding and
abetting by Hilton of the breaches of fiduciary duty and waste by BGI's
directors and Bally, fraud, willful misconduct or gross negligence by Bally and
BGM in connection with the Management Agreement, breach of fiduciary duty by
BGI's directors in connection with stock purchases by Bally while in possession
of material inside information concerning BGI's earnings, breach of fiduciary
duty by Bally in connection with alleged threats to abuse its controlling
interest in BGI, and violation by BGI's directors and Bally of Section 203 of
the Delaware General Corporation Law in connection with the Paris Transaction.
The plaintiffs seek, among other things: (i) rescission of the Paris
Transaction; (ii) termination of the Management Agreement; (iii) appointment of
a custodian to manage BGI's affairs; (iv) compensatory damages; (v) an order
enjoining Bally and Hilton from conveying the Paris Casino-Resort; (vi)
disgorgement by Bally and Hilton of the profits of the Paris Casino-Resort;
(vii) disgorgement by Arthur M. Goldberg of all payments, warrants and interests
received in connection with the Bally Merger; and (viii) disgorgement by Bally
of profits earned from any transactions in shares of BGI's stock based upon
material inside information. This action has been consolidated with the original
consolidated action under the caption IN RE: BALLY'S GRAND, INC. SHAREHOLDERS
LITIGATION.
Several purported derivative actions against Bally and certain of its former
directors, including Arthur M. Goldberg, originally filed in December 1990 and
January 1991, have been consolidated under the caption IN RE: BALLY
ENTERTAINMENT CORPORATION SHAREHOLDERS LITIGATION in the Court of Chancery of
the State of Delaware, New Castle County. The consolidated complaint alleges,
among other things: breach of fiduciary duty, corporate mismanagement and waste
of corporate assets in connection with certain actions including, among other
things, payment of compensation, certain acquisitions by Bally, the
dissemination of allegedly materially false and misleading information, the
restructuring of Bally's debt, and a subsidiary's allegedly discriminatory
practices. The plaintiffs seek, among other things: (i) injunctions against
payment of certain termination compensation benefits and implementation of the
restructuring plan; (ii) rescission of consummated transactions and a
declaration that the complained of transactions are null and void; (iii) an
accounting by individual defendants of damages to Bally and benefits received by
such defendants; (iv) the appointment of a representative to negotiate on behalf
of the former Bally stockholders in connection with any restructuring; and (v)
costs and disbursements, including a reasonable allowance for the fees and
expenses of plaintiff's attorneys, accountants and experts.
In management's opinion, disposition of pending litigation against the
Company, including the lawsuits described above, is not expected to have a
material effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
29
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
- - ------------------------- --------------------------------------------------------------- ---------
<S> <C> <C>
Barron Hilton Chairman of the Board, and previously served as Chief Executive 69
Officer until February 1996, and President until February 1993
Stephen F. Bollenbach President and Chief Executive Officer since February 1996 54
Eric M. Hilton Vice Chairman of the Board since May 1993, Executive Vice 63
President--International Operations from May 1992 until May
1993, President, Conrad International Hotels Corporation until
May 1993, and Senior Vice President--Real Estate Development,
International until May 1992
Arthur M. Goldberg Executive Vice President and President--Gaming Operations since 55
December 1996
Matthew J. Hart Executive Vice President and Chief Financial Officer since May 44
1996
Dieter H. Huckestein Executive Vice President and President--Hotel Operations since 53
May 1994, and Senior Vice President-- Hawaii/California/Arizona
Region until May 1994
</TABLE>
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1992. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.
All of the above named executive officers are directors of the Company,
except for Mr. Hart. Prior to joining Hilton, Mr. Hart served as Senior Vice
President and Treasurer of The Walt Disney Company since October 1995, Executive
Vice President and Chief Financial Officer of Host Marriott Corporation from
October 1992 until October 1995, and Senior Vice President and Treasurer of
Marriott Corporation until October 1992. Additional information for directors of
the Company will be included under "Election of Directors" in the Company's
definitive proxy statement to be used in connection with its annual meeting of
stockholders scheduled to be held on May 8, 1997 (the "Proxy Statement").
Reference is expressly made to the Proxy Statement for the specific information
incorporated herein by the aforesaid reference. See "Cover Page--Documents
Incorporated by Reference."
30
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock and PRIDES are listed on the New York and Pacific
Stock Exchanges and are traded under the symbols "HLT" and "HLT PR,"
respectively. Information regarding sales prices, dividend payments and record
holders with respect to the Company's Common Stock and PRIDES is set forth under
"Supplementary Financial Information" in the Notes to the Company's Consolidated
Financial Statements on page 52 in the Stockholders Report, which information is
incorporated herein by reference.
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of 20%
or more of the Company's Common Stock, the Rights are redeemable for one cent
per Right at the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The full text of the Plan has been filed as Exhibit 4.7 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.7.
ITEM 6. SELECTED FINANCIAL DATA
See the Five Year Summary on page 53 in the Stockholders Report and
"Segments of Business" in the Notes to the Company's Consolidated Financial
Statements on pages 48 and 49 in the Stockholders Report.
The ratio of earnings to fixed charges for the five years ended December 31,
1996 is as follows: 1996 - 3.3 to 1; 1995 - 3.2 to 1; 1994 - 2.8 to 1; 1993 -
2.7 to 1; and 1992 - 2.9 to 1. The computation of the aforesaid ratios is set
forth in Exhibit 12 hereto.
31
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 25 through 32 in the Stockholders Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the Stockholders Report on the pages indicated,
which information is incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated statements of income for
the three years ended December 31, 1996.............................................. 33
Consolidated balance sheets as of December 31, 1996 and 1995........................... 34
Consolidated statements of cash flow for
the three years ended December 31, 1996.............................................. 35
Consolidated statements of stockholders' equity for
the three years ended December 31, 1996.............................................. 36
Notes to consolidated financial statements............................................. 37
Report of independent public accountants............................................... 51
Segment data for the five years ended December 31, 1996
contained in the Five Year Summary................................................... 53
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers of the Company" in Part
I. Other information respecting certain executive officers, as well as the
required information for directors, will be contained in the Proxy Statement,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Security
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Election of
Directors--Certain Relationships and Interests in Certain Transactions" in the
Proxy Statement, and reference is expressly made thereto for the specific
information incorporated herein by the aforesaid reference.
32
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary
data is set forth under Item 8 on page 32 hereof.
2. Financial Statement Schedules:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants............................................... 34
Schedule II--Valuation and Qualifying Accounts......................................... 35
Supplemental Note to Consolidated Financial Statements................................. 36
</TABLE>
All other schedules are inapplicable or the required information is included
elsewhere herein.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated December 18, 1996,
under the caption "Item 2. Acquisition or Disposition of Assets." This filing
reported the consummation of the merger of Bally with and into the Company. This
filing also contained Bally's consolidated financial statements for the periods
ended December 31, 1995 and September 30, 1996, and the Company's pro forma
financial statements reflecting the Bally Merger. See "Item 1. General
Information--Recent Developments."
(C) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUPPLEMENTAL SCHEDULE AND SUPPLEMENTAL NOTE
To Hilton Hotels Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
14, 1997. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II and the supplemental
note to consolidated financial statements as shown on pages 35 and 36 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. The supplemental schedule and
the supplemental note to the consolidated financial statements have been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 14, 1997
34
<PAGE>
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT CHARGED TO (CREDITED) BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts
Hotel and other......................................... $ 12 4 (2) 5 1(A) 10
Casino.................................................. 18 25 -- 26 13(A) 30
Reserve for loss on other investments 20 6 -- 20 -- 6
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts
Hotel and other......................................... $ 14 6 (1) 7 -- 12
Casino.................................................. 18 20 -- 20 -- 18
Reserve for loss on other investments..................... 21 -- -- 1 -- 20
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts
Hotel and other......................................... $ 13 5 -- 4 -- 14
Casino.................................................. 9 14 -- 5 -- 18
Reserve for loss on other investments..................... 13 -- -- -- 8(B) 21
</TABLE>
- - ---------
(A) Represents balances acquired during the period.
(B) Represents unrealized holding losses on certain equity securities.
35
<PAGE>
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable...................................................................... $ 230 $ 167
Accrued salaries and wages...................................................................... 87 59
Remittances to owners........................................................................... 64 119
Other accrued expenses.......................................................................... 513 343
--------- ---------
$ 894 $ 688
--------- ---------
--------- ---------
</TABLE>
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 12, 1997.
HILTON HOTELS CORPORATION
(Registrant)
By: MATTHEW J. HART
-----------------------------------
Matthew J. Hart
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 12, 1997.
<TABLE>
<S> <C>
STEPHEN F. BOLLENBACH DIETER H. HUCKESTEIN
- - ------------------------------------------- -------------------------------------------
Stephen F. Bollenbach Dieter H. Huckestein
President and Chief Executive Officer Director
A. STEVEN CROWN ROBERT L. JOHNSON
- - ------------------------------------------- -------------------------------------------
A. Steven Crown Robert L. Johnson
Director Director
PETER M. GEORGE DONALD R. KNAB
- - ------------------------------------------- -------------------------------------------
Peter M. George Donald R. Knab
Director Director
ARTHUR M. GOLDBERG BENJAMIN V. LAMBERT
- - ------------------------------------------- -------------------------------------------
Arthur M. Goldberg Benjamin V. Lambert
Director Director
MATTHEW J. HART DONNA F. TUTTLE
- - ------------------------------------------- -------------------------------------------
Matthew J. Hart Donna F. Tuttle
Executive Vice President and Director
Chief Financial Officer
(Chief Financial and Accounting Officer)
BARRON HILTON SAM D. YOUNG, JR.
- - ------------------------------------------- -------------------------------------------
Barron Hilton Sam D. Young, Jr.
Chairman of the Board Director
ERIC M. HILTON
- - -------------------------------------------
Eric M. Hilton
Director
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - -------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of June 6, 1996, between Registrant and Bally Entertainment
Corporation, as amended (incorporated herein by reference from Exhibit 2.1 to Registrant's
Registration Statement on Form S-4 (File No. 333-10415))
3.1 Restated Certificate of Incorporation of Registrant, as amended (incorporated herein by reference
from Exhibit 4.1 to Registrant's Registration Statement on Form S-3 (File No. 333-18523))
3.2 By-Laws of Registrant, as amended (incorporated herein by reference from Exhibit 4.2 to
Registrant's Registration Statement on Form S-3 (File No. 333-18523))
4.1 Indenture, dated as of July 1, 1988, between Registrant and Citibank, N.A., regarding Registrant's
Subordinated Debt Securities (incorporated herein by reference from Exhibit 4.1 to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form S-3 (File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan Guaranty Trust Company of New
York, regarding Registrant's Senior Debt Securities (incorporated herein by reference from Exhibit
4.1 to Post-Effective Amendment No. 1 to Registrant's Registration Statement on Form S-3 (File No.
2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between Registrant and Morgan Guaranty
Trust Company of New York, regarding Registrant's Senior Debt Securities, relating to Exhibit 4.2
hereto (incorporated herein by reference from Exhibit 4.3 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)
4.4 Indenture, dated as of May 14, 1996, between Registrant and The Bank of New York, regarding
Registrant's 5% Convertible Subordinated Notes due 2006 (incorporated herein by reference from
Exhibit 4.6 to Registrant's Registration Statement on Form S-4 (File No. 333-10415))
4.5 Credit Agreement, dated as of October 18, 1996, among Registrant, the financial institutions
signatory thereto, Morgan Guaranty Trust Company of New York, as documentation agent and The Bank
of New York, as administrative agent..............................................................
4.6 Reimbursement Agreements, dated as of November 15, 1990, among Registrant, Swiss Bank Corporation
and the financial institutions signatory thereto (incorporated herein by reference from Exhibit
4.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)
4.7 Rights Agreement, dated as of July 14, 1988, between Registrant and The First National Bank of
Chicago (incorporated herein by reference from Exhibit 1 to Registrant's Current Report on Form
8-K, dated July 14, 1988)
4.8 Agreement Amending Rights Agreement, dated as of July 13, 1990, among Registrant, The First
National Bank of Chicago and Manufacturers Hanover Trust Company of California, relating to
Exhibit 4.7 hereto (incorporated herein by reference from Exhibit 8 to Registrant's Form 8-A,
dated May 2, 1996)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - -------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
4.9 Form of Certificate of Designations, Preferences, Rights and Limitations of Registrant's Preferred
Redeemable Increased Dividend Equity Securities, 8% PRIDES, Convertible Preferred Stock
(incorporated herein by reference from Exhibit 4.10 to Registrant's Registration Statement on Form
S-4 (File No. 333-10415))
10.1 1984 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
Agreement relating thereto, both as amended (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibit 10.1 hereto (incorporated herein by reference from Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
10.3 Amendment, dated November 14, 1996, to the 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.1 and 10.2 hereto*............................................
10.4 1990 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
Agreement relating thereto, both as amended (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
10.5 Amendment, dated January 20, 1994, to the 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibit 10.4 hereto (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
10.6 Amendment, dated January 19, 1995, to the 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.4 and 10.5 hereto (incorporated herein by reference from
Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.7 Amendment, dated November 14, 1996, to the 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.4, 10.5 and 10.6
hereto*...........................................................................................
10.8 1996 Stock Incentive Plan of Registrant (incorporated herein by reference from Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995)*
10.9 Amendment, dated November 14, 1996, to the 1996 Stock Incentive Plan of Registrant, relating to
Exhibit 10.8 hereto*..............................................................................
10.10 1996 Chief Executive Stock Incentive Plan of Registrant (incorporated herein by reference from
Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995)*
10.11 Incentive Compensation Plan of Registrant (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1980)*
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - -------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
10.12 Amendment, dated as of January 1, 1994, to the Incentive Compensation Plan of Registrant, relating
to Exhibit 10.11 hereto (incorporated herein by reference from Exhibit 10.7 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993)*
10.13 Retirement Plan of Registrant, as amended and restated (incorporated herein by reference from
Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.14 First Amendment, dated as of November 15, 1995, to the Retirement Plan of Registrant, relating to
Exhibit 10.13 hereto (incorporated herein by reference from Exhibit 10.11 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995)*
10.15 Second Amendment, effective December 31, 1996, to the Retirement Plan of Registrant, relating to
Exhibits 10.13 and 10.14 hereto*..................................................................
10.16 Third Amendment, effective December 31, 1996, to the Retirement Plan of Registrant, relating to
Exhibits 10.13, 10.14 and 10.15 hereto*...........................................................
10.17 Supplemental Executive Retirement Plan of Registrant, as amended (incorporated herein by reference
from Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year ended December 31,
1991)*
10.18 Amendment, effective April 1, 1994, to the Supplemental Executive Retirement Plan of Registrant,
relating to Exhibit 10.17 hereto (incorporated herein by reference from Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.19 Amendment, effective December 31, 1996, to the Supplemental Executive Retirement Plan of
Registrant, relating to Exhibits 10.17 and 10.18 hereto*..........................................
10.20 Directors' Retirement Benefit Plan of Registrant, as amended (incorporated herein by reference
from Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended December 31,
1991)*
10.21 Retirement Benefit Replacement Plan of Registrant, as amended (incorporated herein by reference
from Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)*
10.22 Amendment, dated as of January 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
relating to Exhibit 10.21 hereto (incorporated herein by reference from Exhibit 10.12 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
10.23 Amendment, effective April 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
relating to Exhibits 10.21 and 10.22 hereto (incorporated herein by reference from Exhibit 10.14
to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.24 Amendment, effective December 31, 1996, to the Retirement Benefit Replacement Plan of Registrant,
relating to Exhibits 10.21, 10.22 and 10.23 hereto*...............................................
10.25 Thrift Savings Plan of Registrant, as amended and restated*.......................................
10.26 Amendment, effective January 1, 1996, to the Thrift Savings Plan of Registrant, relating to
Exhibit 10.25 hereto*.............................................................................
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - -------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
10.27 Executive Deferred Compensation Plan of Registrant, as amended*...................................
10.28 Amendment, effective January 1, 1997, to the Executive Deferred Compensation Plan of Registrant,
relating Exhibit 10.27 hereto*....................................................................
10.29 Employee Stock Purchase Plan of Registrant*.......................................................
10.30 Form of Change of Control Agreement between Registrant and each of Barron Hilton, Eric M. Hilton,
Matthew J. Hart and Dieter H. Huckestein (incorporated herein by reference from Exhibit 10.16 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.31 Change of Control Agreement, dated as of January 30, 1996, between Registrant and Stephen F.
Bollenbach*.......................................................................................
10.32 Employment Agreement, dated as of February 1, 1996, between Registrant and Stephen F. Bollenbach
(incorporated herein by reference from Exhibit 10.21 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995)*
10.33 Amended Consulting and Employment Agreement, dated as of November 12, 1996, between Registrant and
Arthur M. Goldberg*...............................................................................
10.34 First Amendment, dated as of December 14, 1996, to the Amended Consulting and Employment
Agreement, relating to Exhibit 10.33 hereto*......................................................
10.35 Deferred Compensation Agreement, dated as of January 16, 1997, between Registrant and Arthur M.
Goldberg*.........................................................................................
10.36 Letter Agreement, dated as of October 10, 1996, between Registrant and Raymond C. Avansino,
Jr.*..............................................................................................
10.37 Release and Separation Agreement, dated as of February 19, 1997, between Registrant and William C.
Lebo, Jr.*........................................................................................
11 Computation of Earnings Per Share.................................................................
12 Computation of Ratios of Earnings to Fixed Charges................................................
13 Registrant's Annual Report to Stockholders for the year ended December 31, 1996...................
21 List of Registrant's Subsidiaries.................................................................
23 Consent of Independent Public Accountants.........................................................
99 Undertakings......................................................................................
</TABLE>
- - ---------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation
S-K, previously filed where indicated and incorporated herein by reference.
Pursuant to Regulation Section 229.601, Item 601(b)(4)(iii) of Regulation
S-K, upon request of the Securities and Exchange Commission, the Registrant
hereby undertakes to furnish a copy of any unfiled instrument which defines the
rights of holders of long-term debt of the Registrant and its consolidated
subsidiaries (and for any of its unconsolidated subsidiaries for which financial
statements are required to be filed) wherein the total amount of securities
authorized thereunder does not exceed 10% of the total consolidated assets of
the Registrant.
41
<PAGE>
Exhibit 4.5
[CONFORMED COPY]
$1,750,000,000
CREDIT AGREEMENT
dated as of
October 18, 1996
among
Hilton Hotels Corporation
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Documentation Agent
and
The Bank of New York,
as Administrative Agent
------------------------
J.P. Morgan Securities Inc.
Lead Arranger
BNY Capital Markets, Inc.
B.A. Securities Inc.
Wells Fargo Bank
Co-Arrangers
<PAGE>
TABLE OF CONTENTS(1)
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions..................................... 1
SECTION 1.02. Accounting Terms and Determinations............. 16
SECTION 1.03. Types of Borrowings............................. 16
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend............................. 17
SECTION 2.02. Notice of Committed Borrowings.................. 18
SECTION 2.03. Money Market Borrowings......................... 19
SECTION 2.04. Notice to Banks; Funding of Loans............... 23
SECTION 2.05. Notes........................................... 25
SECTION 2.06. Maturity of Loans............................... 25
SECTION 2.07. Interest Rates.................................. 25
SECTION 2.08. Facility Fees................................... 29
SECTION 2.09. Optional Termination or Reduction of Commitments 29
SECTION 2.10. Scheduled Termination of Commitments............ 30
SECTION 2.11. Optional Prepayments............................ 30
SECTION 2.12. General Provisions as to Payments............... 30
SECTION 2.13. Funding Losses.................................. 31
SECTION 2.14. Computation of Interest and Fees................ 32
SECTION 2.15. Withholding Tax Exemption....................... 32
SECTION 2.16. Increased Commitments; Additional Banks......... 33
SECTION 2.17. Termination of Existing Credit Agreements....... 34
SECTION 2.18. Judgment Currency............................... 34
SECTION 2.19. Letters of Credit............................... 35
SECTION 2.20. Regulation D Compensation....................... 38
- - ----------------
1. The Table of Contents is not a part of this Agreement.
i
<PAGE>
ARTICLE III
CONDITIONS
SECTION 3.01. Borrowings and Issuances of Letters of Credit... 39
SECTION 3.02. Effectiveness................................... 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................... 41
SECTION 4.02. Corporate and Governmental Authorization;
Contravention................................ 42
SECTION 4.03. Binding Effect.................................. 42
SECTION 4.04. Financial Information........................... 42
SECTION 4.05. Litigation...................................... 43
SECTION 4.06. Compliance with ERISA........................... 43
SECTION 4.07. Taxes........................................... 43
SECTION 4.08. Significant Subsidiaries........................ 44
SECTION 4.09. Not an Investment Company....................... 44
SECTION 4.10. Environmental Matters........................... 44
SECTION 4.11. Full Disclosure................................. 44
ARTICLE V
COVENANTS
SECTION 5.01. Information..................................... 45
SECTION 5.02. Maintenance of Property; Insurance.............. 47
SECTION 5.03. Conduct of Business and Maintenance of
Existence.................................... 48
SECTION 5.04. Compliance with Laws............................ 48
SECTION 5.05. Inspection of Property, Books and Records....... 48
SECTION 5.06. Negative Pledge................................. 49
SECTION 5.07. Consolidations, Mergers and Sales of Assets..... 50
SECTION 5.08. Use of Proceeds................................. 50
SECTION 5.09. Leverage Ratio.................................. 50
ARTICLE VI
DEFAULTS
ii
<PAGE>
SECTION 6.01. Events of Default............................... 51
SECTION 6.02. Notice of Default............................... 53
SECTION 6.03. Cash Cover...................................... 53
ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization................... 54
SECTION 7.02. Agents and Affiliates........................... 54
SECTION 7.03. Action by Agents................................ 54
SECTION 7.04. Consultation with Experts....................... 54
SECTION 7.05. Liability of Agent.............................. 54
SECTION 7.06. Indemnification................................. 55
SECTION 7.07. Credit Decision................................. 55
SECTION 7.08. Successor Agent................................. 55
SECTION 7.09. Agents' Fees.................................... 56
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair.................................... 56
SECTION 8.02. Illegality...................................... 57
SECTION 8.03. Increased Cost and Reduced Return............... 57
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans............................. 60
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices......................................... 60
SECTION 9.02. No Waivers...................................... 61
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.... 61
SECTION 9.04. Amendments and Waivers.......................... 61
SECTION 9.05. Successors and Assigns.......................... 62
SECTION 9.06. Collateral...................................... 64
SECTION 9.07. New York Law; Submission to Jurisdiction........ 64
SECTION 9.08. Counterparts; Integration....................... 64
SECTION 9.09. Several Obligations............................. 65
SECTION 9.10. Sharing of Set-Offs............................. 65
SECTION 9.11. WAIVER OF JURY TRIAL............................ 65
iii
<PAGE>
Pricing Schedule
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of General Counsel of the Borrower
Exhibit F - Opinion of Special Counsel for the Agents
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Extension Agreement
iv
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of October 18, 1996 among HILTON HOTELS
CORPORATION, the BANKS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent, and THE BANK OF NEW YORK, 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:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Additional Bank" has the meaning set forth in Section 2.16(b).
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Agent" means The Bank of New York in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
"Administrative Questionnaire" means, with respect to each Bank, 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 Bank.
"Agent" means either the Administrative Agent or the Documentation
Agent, and "Agents" means both of them.
"Alternative Currencies" means Canadian dollars, French francs,
Japanese yen, British pounds sterling, Italian lira and German deutsche marks,
PROVIDED that any other currency (except Dollars) shall also be an Alternative
Currency if (i) the Borrower requests, by notice to the Administrative Agent,
that such currency be included as an
<PAGE>
additional Alternative Currency for purposes of this Agreement, (ii) such
currency is freely transferable and freely convertible into Dollars, (iii)
deposits in such currency are customarily offered to banks in the London
interbank market and (iv) each Bank either (x) approves the inclusion of such
currency as an additional Alternative Currency for purposes hereof or (y) fails
to notify the Administrative Agent that it objects to such inclusion within five
Domestic Business Days after the Administrative Agent notifies it of the
Borrower's request for such inclusion.
"Alternative Currency Loan" means a Committed Loan that is made in
an Alternative Currency in accordance with the applicable Notice of Committed
Borrowing.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic 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.
"Approved Borrowing Amount" means, with respect to Loans in any
Alternative Currency, a minimum borrowing amount and increment in excess thereof
agreed from time to time between the Administrative Agent and the Borrower with
respect to Loans to be made in such Alternative Currency.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.05(c).
"Authorized Officer" means any of the controller, the treasurer or
the chief financial officer of the Borrower.
"Bank" means each bank listed on the signature pages hereof, each
Additional Bank which becomes a Bank pursuant to Section 2.16, each Assignee
which becomes a Bank pursuant to Section 9.05(c), each substitute financial
institution which becomes a Bank pursuant to Section 2.01(b), and their
respective successors and shall include, as the context may require, any Bank in
its capacity as Issuing Bank.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
2
<PAGE>
"Base Rate Loan" means a Committed Loan made or to be made by a Bank
as a Base Rate Loan in accordance with the applicable Notice of Committed
Borrowing or pursuant to Article VIII.
"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 Hilton Hotels Corporation, a Delaware corporation,
and its successors.
"Borrower's 1995 Form 10-K" means the Borrower's annual report on
Form 10-K for 1995, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report
on Form 10-Q for the quarter ended June 30, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan made or to be made by a Bank as a
CD Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Bank of America National Trust & Savings
Association, The Bank of New York, Morgan Guaranty Trust Company of New York and
Wells Fargo Bank.
"Change of Control" means the occurrence of a Ratings 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
3
<PAGE>
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, (iv)
the sale or disposition, whether directly or indirectly, by the Borrower of all
or substantially all of its assets relating to the Hotel Segment or the Gaming
Segment (as segment is used in Regulation S-K and Regulation S-X of the
Securities and Exchange Commission) or (v) the pro-rata distribution by the
Borrower to its stockholders of the Hotel Segment or the Gaming Segment.
"Commitment" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such Bank on
the signature pages hereof and (ii) with respect to each Additional Bank or
Assignee or substitute financial institution which becomes a Bank pursuant to
Section 2.16 or 9.05(c) or 2.01(b), the amount of the Commitment thereby assumed
by it, in each case as such amount may be reduced from time to time pursuant to
Section 2.09 or 2.10 or increased from time to time pursuant to Section 2.16.
"Committed Loan" means a loan made or to be made by a Bank pursuant
to Section 2.01.
"Consolidated Debt" has the meaning set forth in Section 5.09.
4
<PAGE>
"Consolidated EBITDA" has the meaning set forth in Section 5.09.
"Consolidated Net Income" means, for any period, the consolidated
net income of the Borrower and its Consolidated Subsidiaries for such period.
"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 Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person; it being understood that Debt does not include contingent obligations of
such Person to reimburse any other Person in respect of surety bonds or letters
of credit.
"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 Agent" means Morgan Guaranty Trust Company of New
York in its capacity as documentation agent for the Banks hereunder, and its
successors in such capacity.
"Dollar Amount" means:
(i) with respect to any Dollar-Denominated Loan at any time, the
principal amount thereof then outstanding; and
5
<PAGE>
(ii) with respect to any Alternative Currency Loan at any time
during the Interest Period applicable thereto, the principal amount
thereof then outstanding in the relevant Alternative Currency, converted
to Dollars at the Administrative Agent's spot buying rate for Dollars
against such Alternative Currency as of approximately 11:00 A.M. (London
time) three Euro-Currency Business Days before the first day of such
Interest Period.
If an Alternative Currency Loan is not paid when due, the Dollar Amount thereof
shall be recalculated as contemplated by clause (ii) above on the due date
thereof and at three-month intervals thereafter until such Loan is paid in full.
"Dollar-Denominated Loan" means a Loan that is made or to be made in
Dollars in accordance with the applicable Notice of Borrowing.
"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 Bank, 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 Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent; PROVIDED that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.02.
6
<PAGE>
"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-Currency Business Day" means a Euro-Dollar Business Day,
unless such term is used in connection with an Alternative Currency Borrowing or
Alternative Currency Loan for which funds are to be paid or made available in
such Alternative Currency on such day, in which case such day shall not be a
Euro-Currency Business Day unless commercial banks are open for domestic and
international business (including dealings in deposits in such Alternative
Currency) in both London and the place where such funds are to be paid or made
available.
"Euro-Currency Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Currency Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Currency Lending Office by notice
to the Borrower and the Administrative Agent; PROVIDED that any Bank may so
designate separate Euro-Currency Lending Offices for its Loans of each separate
currency, in which case all references herein to the Euro-Currency Lending
Office of such Bank shall be deemed to refer to any or each of such offices, as
the context may require.
"Euro-Currency Loan" means a Euro-Dollar Loan or an Alternative
Currency Loan.
"Euro-Currency Margin" has the meaning set forth in the Pricing
Schedule.
"Euro-Currency Reference Banks" means the principal London offices
of Bank of America National Trust & Savings Association, The Bank of New York,
Morgan Guaranty Trust Company of New York and Wells Fargo Bank.
7
<PAGE>
"Euro-Currency Reserve Percentage" has the meaning set forth in
Section 2.20.
"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 Loan" means a Committed Loan made or to be made by a
Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreements" means the $90,000,000 Credit Agreement
dated as of March 30, 1995 among the Borrower, the banks listed on the signature
pages thereof, Morgan Guaranty Trust Company of New York, as documentation
agent, and the Bank of New York, as administrative agent and the $300,000,000
Amended and Restated Credit Agreement dated as of September 1, 1994 among the
Borrower, the banks listed on the signature pages thereof and Morgan Guaranty
Trust Company of New York, as administrative agent, each as amended to the
Effective Date.
"Facility Fee Rate" has the meaning set forth in Section 2.08.
"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 CD Loans or Euro-Currency Loans or Money
Market Loans (excluding Money Market LIBOR
8
<PAGE>
Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any
combination of the foregoing.
"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), 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.
"Increased Commitments" has the meaning set forth in Section
2.16(a).
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending 1, 2,
3 or 6 months thereafter, and with respect to each Alternative Currency
Borrowing, the period commencing on the date of such Borrowing and ending 1, 2
or 3 months thereafter, in each case, as the Borrower may elect in the
applicable Notice of Committed Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Currency Business Day shall be extended to the next succeeding
Euro-Currency Business Day unless such Euro-Currency Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Currency Business Day for the relevant currency;
(b) any Interest Period which begins on the last Euro-Currency
Business Day for the relevant currency 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 (c) below,
end on the last Euro-Currency
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Business Day for the relevant currency in a calendar month; 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-Currency Business Day for the relevant currency, then on the
next preceding Euro-Currency Business Day for the relevant currency.
(2) with respect to each CD Borrowing, the period commencing on the date of
such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Committed Borrowing; 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; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; 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; and
(b) 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-Currency Business Day for the relevant currency, then on the next
preceding Euro-Currency Business Day for such currency.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending 1, 2, 3 or 6 months thereafter, as the
Borrower may elect in accordance with Section 2.03; 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
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
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(b) 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 Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 5 days) as the Borrower may elect in accordance
with Section 2.03; 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; and
(b) 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, (ii) with respect to Moody's, a rating of Baa3 or higher and (iii)
with respect to Duff & Phelps, a rating of BBB- or higher.
"Issuing Bank" means Morgan Guaranty Trust Company of New York, The
Bank of New York and any other Bank that may agree to issue letters of credit
hereunder, in each case as issuer of a Letter of Credit hereunder.
"LC Fee Rate" has the meaning set forth in Section 2.08(b).
"Letter of Credit" means a letter of credit to be issued hereunder
by an Issuing Bank in accordance with Section 2.19.
"Letter of Credit Commitment" means the lesser of (x) $250,000,000
and (y) the aggregate Commitments.
"Letter of Credit Liabilities" means, for any Bank and at any time,
such Bank's ratable participation in the sum of (x) the amounts then owing by
the Borrower in respect
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of amounts drawn under Letters of Credit and (y) the aggregate amount then
available for drawing under all Letters of Credit.
"Leverage Ratio" has the meaning set forth in Section 5.09.
"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.
"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 Domestic Loan or a Euro-Currency Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Currency Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"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 Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Agent; PROVIDED that any Bank 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 Bank shall be deemed to refer to either
or both of such offices, as the context may require.
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"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(a)).
"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 Bank to make a Money Market
Loan in accordance with Section 2.03.
"Moody's" has the meaning set forth in the Pricing Schedule.
"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.
"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 A 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 Issuance" has the meaning set forth in Section 2.19(b).
"Notice of Money Market Borrowing" has the meaning set forth in
Section 2.03(f).
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
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"Participant" has the meaning set forth in Section 9.05(b).
"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.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time to time in New York City by The Bank of
New York as its prime commercial lending rate, such rate to be adjusted
automatically (without notice) on the effective date of any change in such
publicly announced rate.
"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 Banks.
"Rating Agencies" means S&P, Moody's or Duff & Phelps.
"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
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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 Banks" means the CD Reference Banks or the Euro-Currency
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding at least 66 2/3% of the sum of the aggregate unpaid
principal amount of the Loans and the aggregate amount of Letter of Credit
Liabilities.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" has the meaning set forth in the Pricing Schedule.
"Significant Subsidiary" means at any time a Subsidiary of the
Borrower 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.
"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.
"Termination Date" means October 18, 2001 or such later date to
which the Revolving Credit Period shall have been extended pursuant to Section
2.01(b), or, if such day
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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, 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.
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 Banks; PROVIDED
that, if the Borrower notifies the Documentation 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 Documentation Agent notifies the Borrower that the Required Banks 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 Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings
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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 Banks participate in
proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing
under Section 2.03 in which the Bank participants are determined in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. (a) During the Revolving
Credit Period each Bank 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 the aggregate Dollar Amount of Committed Loans by such
Bank at any one time outstanding shall not exceed the amount of its Commitment.
Each Borrowing under this Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000, or in the case of a Borrowing
to be denominated in an Alternative Currency, an Approved Borrowing Amount with
respect to such Alternative Currency (except that any such Borrowing may be in
the aggregate amount available in accordance with Section 3.01(b)) and shall be
made from the several Banks 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 2.11, prepay Loans and
reborrow at any time on or prior to the Termination Date under this Section.
(b) The Termination Date may be extended, in the manner set forth
in this subsection (b), on October 18, 1997 and on each anniversary of such date
which falls not less than one year prior to the Termination Date as theretofore
extended (an "Extension Date"), for a period of one year after the date on which
the Termination Date would otherwise have expired. If the Borrower wishes to
request an extension of the Termination Date on any Extension Date, it shall
give written notice to that effect to the Documentation Agent not less than 45
nor more than 90 days prior to such Extension Date, whereupon the Documentation
Agent shall notify each of the Banks of such notice. Each Bank will respond to
such request, whether affirmatively or negatively, within 30 days. If a Bank or
Banks respond negatively or fail to timely respond to such request, but such
non-extending Bank(s) have Commitment(s) totalling less
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than 33 1/3% of the aggregate amount of the Commitments, the Borrower shall, for
a period of 60 days following the Extension Date, have the right, with the
assistance of the Documentation Agent, to seek a mutually satisfactory
substitute financial institution or financial institutions (which may be one or
more of the Banks) to assume the Commitment(s) of such non-extending Bank(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 Banks through the Documentation
Agent, either (i) terminate, effective on the third Domestic Business Day after
the giving of such notice, the Commitment(s) of such non-extending Bank(s),
whereupon the aggregate amount of such Commitment(s) shall be assumed by a
substitute financial institution or financial institutions within such 60-day
period or (ii) withdraw its request for an extension of the Termination Date.
The failure of the Borrower to timely take the actions contemplated by clause
(i) of the preceding sentence shall be deemed a withdrawal of its request for an
extension as contemplated by clause (ii) whether or not notice to such effect is
given. So long as Banks having Commitment(s) totalling 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 Documentation Agent of
counterparts of an Extension Agreement in substantially the form of Exhibit H
duly completed and signed by all of the parties hereto, 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. The Documentation Agent shall give
the Administrative Agent notice of any extension of the Termination Date under
this subsection (b).
SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The Borrower shall
give the Administrative Agent notice (a "Notice of Committed Borrowing") not
later than 11:30 A.M. (New York City time) on (w) 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 1:00 P.M. (New York City
time) on such date for the smallest amount permitted under Section 2.01 which is
sufficient to fund the shortfall), (x) the second Domestic Business Day before
each CD Borrowing, (y) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing and (z) the fourth Euro-Currency Business Day before each
Alternative Currency Borrowing, specifying:
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(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Currency Business Day
for the relevant currency in the case of a Euro-Currency Borrowing,
(b) the currency and aggregate amount (in such currency) of such
Borrowing,
(c) if such Borrowing is comprised of Dollar-Denominated Loans,
whether the Loans comprising such Borrowing are to be CD Loans, Base Rate
Loans or Euro-Dollar Loans, and
(d) in the case of a Committed Fixed Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
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 Banks prior to the Termination Date to make offers to make Money
Market Loans to the Borrower in Dollars. The Banks 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 B hereto so as to be received
no later than (x) 11:30 A.M. (New York City time) on the fifth 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. (New York City time) on the Domestic Business
Day next preceding 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 Banks 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 shall be
$10,000,000 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 more than one
Interest Period in a single Money Market Quote Request. 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 Banks
by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank 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. (i) Each
Bank 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) 2:00
P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 12:00 Noon
(New York City 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 Banks 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 Bank 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
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later than (x) one hour prior to the deadline for other Banks, in the case of a
LIBOR Auction or (y) 15 minutes prior to the deadline for other Banks, 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.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) 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 Bank, (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 Bank may be
accepted,
(C) 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,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
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(B) contains qualifying, conditional or similar language, except as
provided in subsection (d)(ii)(B)(z);
(C) 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
(D) arrives after the time set forth in subsection (d)(i).
(e) NOTICE TO BORROWER. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank 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 Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (x) 11:30
A.M. (New York City time) on the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 12:45 P.M.
(New York City 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 Banks 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:
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(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
$10,000,000 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.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by
two or more Banks 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 Banks as nearly as possible (in multiples of $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.
(h) EFFECT ON COMMITMENTS. Any Money Market Loans made by a Bank
pursuant to this Section shall not reduce such Bank's pro rata share of the
remaining undrawn Commitments.
SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of such Bank's share
(if any) of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date of
each Borrowing, if such Borrowing is to be made in Dollars, each Bank
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 in New York City, to the Administrative Agent
at its address referred to in
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Section 9.01; PROVIDED that if such Borrowing is to be made in an Alternative
Currency, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing in
such Alternative Currency (in such funds as may then be customary for the
settlement of international transactions in such Alternative Currency) to the
account of the Administrative Agent at such time and place as shall have been
notified by the Administrative Agent to the Banks by not less than four
Euro-Currency Business Days' notice. 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 Banks
available to the Borrower at the Administrative Agent's aforesaid address or
place.
(c) If any Bank 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 Bank, such
Bank 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 Bank to the
Administrative Agent as provided in subsection (b), or remitted by the Borrower
to the Administrative Agent as provided in Section 2.12, as the case may be.
(d) Unless the Administrative Agent shall have received notice from
a Bank prior to the date of any Borrowing that such Bank will not make available
to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank 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 2.04 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 Bank shall not have so
made such share available to the Administrative Agent, such Bank 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 2.07 and (ii) in the case
of such Bank, the Federal Funds Rate PROVIDED that, with respect to any
Borrowing to be denominated in an Alternative Currency, the rate shall be a
comparable overnight rate for such Alternative Currency as determined by the
Administrative Agent. If such Bank shall repay to the
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Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank'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 2.07, the applicable Bank shall pay the
Borrower the difference between such rates.
SECTION 2.05. NOTES. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account of
its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Documentation
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the context
may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.02(b),
the Documentation Agent shall forward such Note to such Bank. Each Bank shall
record the date, currency, amount (in such currency), 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 Bank 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
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank 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 2.06. MATURITY OF LOANS. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. 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
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until it becomes due, at a rate per annum equal to the Base Rate for such day.
Such interest shall be payable for each Interest Period on the last day thereof.
Any overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the otherwise applicable rate for such day.
(b) Each CD 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 the CD Margin for such day plus the
applicable Adjusted CD Rate for such Interest Period; PROVIDED that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the
sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such
Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing
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rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic 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 (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
(c) Each Euro-Currency 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 the Euro-Currency Margin for
such day plus 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.
The "London Interbank Offered Rate" applicable to any Interest
Period 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 the relevant
currency
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are offered to each of the Euro-Currency Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Currency Business Days
before the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro-Currency Loan of such Euro-Currency Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Currency Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the Euro-Currency 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-Currency Business Days, then
for such period of time not longer than 6 months as the Administrative Agent may
elect) deposits in the relevant currency in an amount approximately equal to
such overdue payment due to each of the Euro-Currency Reference Banks are
offered to such Euro-Currency Reference Bank in the London interbank market for
the applicable period determined as provided above by (ii) 1.00 minus the
Euro-Currency 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).
(e) 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 in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank 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 Bank 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 2%
plus the Base Rate for such day.
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(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. FACILITY FEES. (a) The Borrower shall pay to the
Administrative Agent for the account of the Banks ratably a facility fee at the
Facility Fee Rate (determined daily in accordance with the Pricing Schedule).
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).
(b) The Borrower shall pay to the Administrative Agent (i) for the
account of the Banks ratably a Letter of Credit fee (the "LC Fee Rate") 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 Pricing Schedule
and (ii) for the account of each Issuing Bank a Letter of Credit fronting fee
accruing daily on the aggregate amount then available for drawing under all
Letters of Credit issued by such Issuing Bank at a rate per annum as determined
from time to time by the Borrower and such Issuing Bank.
(c) PAYMENTS. Accrued fees under this Section 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.
SECTION 2.09. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS.
During the Revolving Credit Period, the Borrower may, upon at least three
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
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$1,000,000, the aggregate amount of the Commitments in excess of the aggregate
Dollar Amount of the Loans and the aggregate amount of Letter of Credit
Liabilities.
SECTION 2.10. 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 2.11. OPTIONAL PREPAYMENTS. (a) Subject in the case of
any CD Borrowing or Euro-Currency Borrowing to Section 2.13, 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
at the Base Rate pursuant to Section 8.01(a)) or CD Borrowing or upon at least
three Euro-Dollar Business Days' notice to the Administrative Agent, with
respect to any Euro-Dollar Borrowing, or at least four Euro-Currency Business
Days' notice to the Administrative Agent, with respect to any Alternative
Currency Borrowing, prepay any Euro-Currency 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
Banks included in such Borrowing.
(b) Except as provided in Section 2.11(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The
Borrower shall make each payment of principal of, and interest on,
Dollar-Denominated Loans and Letters of Credit Liabilities and of fees
hereunder, in Dollars not later than 2:00 P.M. (New York City time) on the date
when due, in Federal or other funds immediately available in New York City, to
the Administrative Agent at its address referred to in Section 9.01, without
offset or counterclaim. The Borrower shall make each payment of principal of,
and interest on, the Alternative Currency Loans in the relevant Alternative
Currency in such funds as may then be customary
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for the settlement of international transactions in such Alternative Currency,
for the account of the Administrative Agent at such time and at such place as
shall have been notified by the Administrative Agent to the Borrower and the
Banks by not less than four Euro-Currency Business Days' notice. The
Administrative Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Administrative Agent for the account of the
Banks, in the currency and type of funds received by the Administrative Agent.
Whenever any payment of principal of, or interest on, the Domestic 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 the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Currency Loans or Money Market LIBOR Loans shall be due on
a day which is not a Euro-Currency Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Currency Business Day unless such
Euro-Currency Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Currency 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-Currency Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Currency
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.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
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 Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
that the Borrower shall not have so made such payment, each Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.13. 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
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fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow any Fixed
Rate Loans after notice has been given to any Bank in accordance with Section
2.04(a), the Borrower shall reimburse each Bank 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 Bank 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 2.14. COMPUTATION OF INTEREST AND FEES. Interest based
on the Prime Rate, amounts denominated in British pounds sterling 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 2.15. 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 Bank, each Bank 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 Bank is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes.
Each Bank 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 Bank 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
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renders all such forms inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it and such Bank 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 2.16. INCREASED COMMITMENTS; ADDITIONAL BANKS. (a)
Subsequent to the Effective Date, the Borrower may, upon at least 30 days'
notice to the Documentation Agent (which shall promptly provide a copy of such
notice to the Banks), propose to increase the aggregate amount of the
Commitments by an amount not to exceed $437,500,000 (the amount of any such
increase, the "Increased Commitments"). Each Bank 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
Documentation 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.
(b) If any Bank party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may
designate another bank or other banks (which may be, but need not be, one or
more of the existing Banks) which at the time agree to (i) in the case of any
such bank that is an existing Bank, increase its Commitment and (ii) in the case
of any other such bank (an "Additional Bank"), become a party to this Agreement.
The sum of the increases in the Commitments of the existing Banks pursuant to
this subsection (b) plus the Commitments of the Additional Banks 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 2.16 shall become effective upon the receipt by the
Documentation Agent of an agreement in form and substance satisfactory to the
Documentation Agent signed by the Borrower, by each Additional Bank and by each
other Bank whose Commitment is to be increased, setting forth the new
Commitments of such Banks and setting forth the agreement of each Additional
Bank 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 Documentation Agent may reasonably request. The
Documentation Agent shall give the Administrative Agent notice of any increase
in the aggregate amount of the Commitments under this Section 2.16.
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SECTION 2.17. TERMINATION OF EXISTING CREDIT AGREEMENTS. On the
Effective Date (and, if a Borrowing is made or deemed made on the Effective
Date, concurrently with such Borrowing) the commitments of the banks under the
Existing Credit Agreements shall terminate and the Borrower shall repay all
loans (if any) outstanding under the Existing Credit Agreements, together with
all accrued but unpaid interest thereon, and all accrued but unpaid fees payable
under the Existing Credit Agreements. The parties hereto which are also parties
to the Existing Credit Agreements waive the provisions of Sections 2.09 and (if
applicable) 2.11 of the Existing Credit Agreements to the extent required to
permit such termination of commitments and repayment of loans. The Borrower
shall reimburse the banks as provided in Section 2.13 of the Existing Credit
Agreements for any loss or expense incurred as a result of such repayment
occurring on a day other than the last day of the interest period applicable to
any such loan.
SECTION 2.18. JUDGMENT CURRENCY. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from the Borrower
hereunder or under any Note in the currency expressed to be payable herein (the
"specified currency") into another currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at the Administrative Agent's New York office on the Euro-Currency
Business Day preceding that on which final judgment is given. The obligations
of the Borrower in respect of any sum due to any Bank or the Administrative
Agent hereunder or under any Note shall, notwithstanding any judgment in a
currency other than the specified currency, be discharged only to the extent
that, on the Euro-Currency Business Day following receipt by such Bank or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency, such Bank or the Administrative Agent (as the case may be)
may in accordance with normal banking procedures purchase the specified currency
with such other currency. If the amount of the specified currency so purchased
is less than the sum originally due to such Bank or the Administrative Agent, as
the case may be, in the specified currency, the Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Administrative
Agent, as the case may be, against such loss, and if the amount of the specified
currency so purchased exceeds (a) the sum originally due to any Bank or the
Administrative Agent, as the case may be, in the specified currency and (b) any
amounts shared with other
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Banks as a result of allocations of such excess as a disproportionate payment to
such Bank under Section 9.10, such Bank or the Administrative Agent, as the case
may be, agrees to remit such excess to the Borrower.
SECTION 2.19. LETTERS OF CREDIT. (a) Subject to the terms and
conditions hereof, each Issuing Bank 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 plus the aggregate outstanding amount of all
Loans shall not exceed the aggregate amount of the Commitments. Upon the date
of issuance by an Issuing Bank of a Letter of Credit, the Issuing Bank shall be
deemed, without further action by any party hereto, to have sold to each Bank,
and each Bank shall be deemed, without further action by any party hereto, to
have purchased from the Issuing Bank, 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 Bank 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"). Upon receipt of a Notice of
Issuance, the Issuing Bank shall promptly notify the Administrative Agent, and
the Administrative Agent shall promptly notify each Bank of the contents thereof
and of the amount of such Bank's participation in such Letter of Credit. The
issuance by the Issuing Bank 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 Bank and that the Borrower shall
have executed and delivered such other instruments and agreements relating to
such Letter of Credit as the Issuing Bank shall have reasonably requested. The
Borrower shall also pay to the Issuing Bank 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 Bank. 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
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unless notice of termination is given by the Issuing Bank, the Issuing Bank
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. No
Letter of Credit shall have a term extending or be so extendible beyond the
fifth Domestic Business Day preceding the Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the Issuing Bank shall
notify the Administrative Agent and the Administrative Agent shall promptly
notify the Borrower and each other Bank 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
Bank for any amounts paid by the Issuing Bank 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 Bank 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 Bank will pay to the Administrative
Agent, for the account of the Issuing Bank, immediately upon the Issuing Bank'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 Bank'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
Bank's demand for such payment (or, if such demand is made after 12:00 Noon (New
York City time) on such date, from the next succeeding Domestic Business Day) to
the date of payment by such Bank of such amount at a rate of interest per annum
equal to the Federal Funds Rate. The Issuing Bank will pay to each Bank 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 Bank has made payment to the Issuing Bank in respect of such Letter
of Credit pursuant hereto.
(d) The obligations of the Borrower and each Bank 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:
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(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;
(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 Banks (including the Issuing Bank) 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 Bank 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 Bank (including the Issuing Bank), 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 Bank's
obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each Bank
(including each Issuing Bank) and the Administrative Agent from and against any
and all claims, damages, losses, liabilities, costs or expenses which such Bank
or the Administrative Agent may incur (including, without limitation, any
claims, damages, losses, liabilities, costs or expenses which the Issuing Bank
may
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incur by reason of or in connection with the failure of any other Bank to
fulfill or comply with its obligations to such Issuing Bank hereunder (but
nothing herein contained shall affect any rights the Borrower may have against
such defaulting Bank)), and none of the Banks (including an Issuing Bank) 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 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 Bank,
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 Bank
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 Bank in
determining whether a request presented under any Letter of Credit complied with
the terms of such Letter of Credit or (y) the Issuing Bank'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 an Issuing Bank as required by this subsection, the Banks agree to do
so ratably in accordance with their Commitments.
SECTION 2.20. REGULATION D COMPENSATION. Each Bank may require
the Borrower to pay, contemporaneously with each payment of interest on the
Euro-Currency Loans, additional interest on the related Euro-Currency Loan of
such Bank at a rate per annum determined by such Bank up to but not exceeding
the excess of (i) (A) the applicable London Interbank Offered Rate divided by
(B) one minus the Euro-Currency Reserve Percentage over (ii) the applicable
London Interbank Offered Rate. Any Bank 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-Currency Loans of such Bank shall be
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payable to such Bank at the place indicated in such notice with respect to each
Interest Period commencing at least three Euro-Currency Business Days after the
giving of such notice and (y) shall notify the Borrower at least five
Euro-Currency Business Days prior to each date on which interest is payable on
the Euro-Currency Loans of the amount then due it under this Section.
"Euro-Currency 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 in New York City 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-Currency 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).
ARTICLE III
CONDITIONS
SECTION 3.01. BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT. The
obligation of any Bank to make a Loan on the occasion of any Borrowing and the
obligation of an Issuing Bank to issue (or renew or extend the term of) any
Letter of Credit 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 or 2.03, or receipt by the Issuing Bank of a
Notice of Credit Issuance as required by Section 2.19(b), as the case may
be;
(b) the fact that, immediately after such Borrowing or issuance of
a Letter of Credit, the sum of the aggregate outstanding Dollar Amount of
the Loans and the aggregate amount of Letter of Credit Liabilities will
not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing or
issuance of a Letter of Credit, no Default shall have occurred and be
continuing;
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(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except the representation and
warranty set forth in Section 4.04(c) and Section 4.05, in each case as to
any matter which has theretofore been disclosed in writing by the Borrower
to the Banks) shall be true on and as of the date of such Borrowing or
issuance of a Letter of Credit;
(e) in the case of an Alternative Currency Borrowing, there shall
not have occurred any change in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls which would in the opinion of the Agents make it impracticable
for such Borrowing to be denominated in the relevant Alternative Currency;
and
(f) in the case of an issuance of a Letter of Credit, the fact
that, 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):
(a) receipt by the Documentation 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 Documentation 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 Documentation Agent for the account of each Bank
of a duly executed Note dated on or before the Effective Date complying
with the provisions of Section 2.05;
(c) receipt by the Documentation Agent of an opinion of the General
Counsel for the Borrower, substantially in the form of Exhibit E hereto
and covering such additional matters relating to the
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transactions contemplated hereby as the Required Banks may reasonably
request;
(d) receipt by the Documentation Agent of an opinion of Davis Polk
& Wardwell, special counsel for the Agents, substantially in the form of
Exhibit F hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request;
(e) receipt by the Documentation Agent of a certificate signed by
the chief financial officer, controller or the treasurer of the Borrower,
to the effect set forth in clauses (b), (c) and (d) of Section 3.01, and
to the effect that no "Default" (as defined therein) has occurred and is
continuing under the Existing Credit Agreements;
(f) arrangements satisfactory to the Documentation Agent for the
repayment of all loans (if any) outstanding under the Existing Credit
Agreements and all interest and fees accrued thereunder shall have been
made; and
(g) receipt by the Documentation 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 Agents;
PROVIDED that this Agreement shall not become effective or binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
October 31, 1996. The Documentation Agent shall promptly notify the Borrower,
the Administrative Agent and each Bank of the effectiveness of this Agreement,
and such notice shall be conclusive and binding on all parties hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware,
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and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
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 body, agency or official 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.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1995 and the related consolidated
statements of income and cash flows for the fiscal year then ended, reported on
by Arthur Andersen LLP and set forth in the Borrower's 1995 Form 10-K, a copy of
which has been delivered to each of the Banks, fairly present in all material
respects, in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of June 30, 1996 and the related unaudited
consolidated statements of income and cash flows for the six months then ended,
set forth in the Borrower's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their
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consolidated results of operations and cash flows for such six month period
(subject to normal quarter-end adjustments).
(c) Since June 30, 1996, there has been no material adverse change
in the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. LITIGATION. Except as disclosed in the Borrower's
Latest Form 10-Q, 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
in the Borrower's Latest Form 10-Q, (i) the disclosure contained in the
Borrower's Latest Form 10-Q was accurate as of the date of the Borrower's Latest
Form 10-Q and (ii) 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.
SECTION 4.07. TAXES. United States Federal income tax returns of
the Borrower and its Subsidiaries have been examined and closed through the
fiscal year ended December 31, 1985. The Borrower and its Significant
Subsidiaries have filed all United States Federal income tax returns and all
other material tax returns which are
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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 is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
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 the Borrower to either Agent or any Bank 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 either Agent or any
Bank will be, 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
Banks 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 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.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank 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 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;
(b) 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;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of an
Authorized Officer (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of clauses (g) and (h) of Section 5.06 and Section 5.09 on
the date of such financial statements, (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes
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to take with respect thereto and (iii) if the Borrower elects that Status
shall be determined for purposes of the Pricing Schedule on the basis of
the Leverage Ratio reflected in such certificate, a statement to such
effect;
(d) 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;
(e) 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;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) 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;
(h) 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 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
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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;
(i) 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
(j) from time to time such additional information regarding the
financial position or business of the Borrower as the Documentation Agent,
at the request of any Bank, may reasonably request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE.
(a) 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.
(b) 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 Banks, upon
request from the Documentation Agent, information presented in reasonable detail
as to the insurance so carried. Notwithstanding the foregoing, the
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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 as now conducted by the
Borrower and its Significant Subsidiaries, 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 the
Borrower in good faith determines that such termination is in the best interest
of the Borrower and is not materially disadvantageous to the Banks.
SECTION 5.04. COMPLIANCE WITH LAWS. The Borrower will comply,
and cause each Significant Subsidiary to comply, in all material respects with
all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and 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 Bank at such Bank'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
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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 cover any transaction costs of such refinancing,
extension, renewal or refunding) and is not secured by any additional
assets;
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(g) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any single obligation in an amount
exceeding $50,000,000 and (iii) do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business;
(h) Liens securing Debt of a Subsidiary to the Borrower or another
Subsidiary; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 15% of Consolidated Net Worth.
SECTION 5.07. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower 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;
PROVIDED that the Borrower may merge with another Person 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. 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, the back stop of commercial paper, the
acquisition of full-service hotels and the potential tender of Bally's high
yield bonds. 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.
SECTION 5.09. LEVERAGE RATIO. The Leverage Ratio will at no time
exceed 4:1.
"Consolidated Debt" means at any date the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"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) discontinued operations and (vii) the cumulative effect of
changes in accounting principles.
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"Leverage Ratio" means at any date the ratio of Consolidated Debt at
such date to Consolidated EBITDA for the period of four consecutive fiscal
quarters most recently ended on or prior to such date.
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 reimburse any drawing under any
Letter of Credit when required hereunder or to pay when due any principal
of any Loan under this Agreement, or shall fail to 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 5.09, 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 Documentation Agent at the request of any Bank;
(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 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;
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(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 judgment or order shall continue unsatisfied and unstayed for a
period of 30 days; or
(k) a Change of Control;
then, and in every such event, the Documentation Agent shall (i) if requested by
Banks having more than 50% in aggregate amount of the Commitments, by notice to
the Borrower terminate the Commitments and they shall thereupon terminate, and
(ii) if requested by Banks holding more than 50% of the sum of the aggregate
principal amount of the Loans and the Letter of Credit Liabilities, 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 Documentation Agent
or the Banks, 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 Documentation Agent shall
give notice to the Borrower under Section 6.01(c) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks 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 Documentation
Agent upon the instruction of the Banks having more than 50% in aggregate amount
of the Commitments (or, if the Commitments shall have been terminated, holding
at least 50% of the Letter of Credit Liabilities), pay to the Administrative
Agent an amount in immediately available funds (which funds shall be held as
collateral pursuant to arrangements satisfactory to the Documentation 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, the Borrower shall pay such amount forthwith without any
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notice or demand or any other act by either Agent or the Banks.
ARTICLE VII
THE AGENTS
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank
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. Morgan Guaranty Trust
Company of New York and The Bank of New York shall each have the same rights and
powers under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not an Agent, and Morgan Guaranty Trust
Company of New York and The Bank of New York 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
it were not an Agent 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, neither Agent shall be required to take any action
with respect to any Default, except in the case of the Documentation Agent 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 Banks 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,
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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 Documentation Agent receipt of items
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. Neither Agent shall incur any 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 Bank shall, ratably in
accordance with its Commitment, indemnify each Agent, its 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 such Agent's role under this
Agreement or any related action taken or omitted by such indemnitees hereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon either Agent or any other Bank, 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 Bank also
acknowledges that it will, independently and without reliance upon either Agent
or any other Bank, 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. Either Agent may resign at any
time subject to the appointment of a successor Agent by giving notice to the
Banks and the Borrower. Upon any such resignation, the Required Banks 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 Bank. 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 Banks, and without
the Borrower's consent, appoint a successor Agent, which shall be a
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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 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.
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 Reference Banks that
deposits in the applicable currency and amounts are not being offered to
the Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more
of the aggregate amount of the Commitments advise the Administrative Agent
that the Adjusted CD Rate or the London Interbank Offered Rate, as the
case may be, as determined by the Administrative Agent will not adequately
and fairly reflect the cost to such Banks of funding their CD Loans or
Euro-Currency Loans, as the case may be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make CD Loans or Euro-Currency Loans (in the
affected currency), as the case may be, 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
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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 Base Rate for such day. The Administrative Agent shall promptly
notify the Banks 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 Bank (or its Euro-Currency 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
Bank (or its Euro-Currency Lending Office) to make, maintain or fund its
Euro-Currency Loans and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Currency Loans shall be
suspended. Before giving any notice to the Administrative Agent pursuant to
this Section, such Bank shall designate a different Euro-Currency Lending Office
if such designation will avoid the need for giving such notice and will not, in
the sole judgment of such Bank, be otherwise disadvantageous to such Bank. If
such Bank shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Currency 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-Currency Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Currency Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Currency Loans of the other Banks), and such Bank shall make such a Base
Rate Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or
after (x) the date hereof, in the case of any Committed Loan or Letter of Credit
or any obligation to make
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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 Bank (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:
(i) shall subject any Bank (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 Bank (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 Bank or its Applicable Lending Office imposed
by the jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii) 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 (a) with respect
to any CD Loan any such requirement included in an applicable Domestic
Reserve Percentage and (b) with respect to any Euro-Currency Loan any such
requirement included in an applicable Euro-Currency Reserve Percentage),
special deposit, insurance assessment (excluding, with respect to any CD
Loan, any such requirement reflected in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Bank (or its Applicable Lending Office) or
shall impose on any Bank (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;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of
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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 Bank (or its Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank to be material,
then, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If, after the date hereof, any Bank 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 Bank (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 Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (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 Bank to be material, then from time to time, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction.
(c) Each Bank 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 Bank 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 Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank 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 Bank may use any reasonable averaging and attribution methods.
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SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make Euro-Currency Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03(a) and the Borrower shall, by at least five Euro-Currency
Business Days' prior notice to such Bank through the Administrative Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank 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 Bank as CD
Loans or Euro-Currency Loans, as the case may be, 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 Banks),
and
(b) after each of its CD Loans or Euro-Currency Loans, as the case
may be, 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.
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 either Agent, at its address or telex or telecopier
number set forth on the signature pages hereof, (y) in the case of any Bank, 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 Bank under
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Article II or Article VIII shall not be effective until received.
SECTION 9.02. NO WAIVERS. No failure or delay by either Agent or
any Bank 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. (a)
The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agents,
including reasonable fees and disbursements of special counsel for the Agents,
in connection with the preparation of this Agreement, any waiver 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 either Agent or any Bank, including fees and disbursements of either
in-house counsel or outside counsel (but not both for any one Bank either in its
capacity as Agent or Bank), in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. The Borrower shall indemnify each Bank 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 or the Notes.
(b) The Borrower agrees to indemnify each Agent and each Bank,
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, 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. Any provision of this
Agreement or the Notes may be amended or
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waived if, but only if, such amendment or waiver is in writing and is signed by
the Borrower and the Required Banks (and, if the rights or duties of either
Agent or any Issuing Bank are affected thereby, by such Agent or Issuing Bank,
as relevant); PROVIDED that no such amendment or waiver shall, unless signed
by all the Banks, (i) except as contemplated by Section 2.16, increase or
decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank 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, (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
Banks, which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement or (v) change
Section 9.05(a).
SECTION 9.05. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all of its
Loans and Letter of Credit Liabilities or, upon ten days' notice and with the
consent of the Borrower which consent shall not be unreasonably withheld or
delayed, its Commitment; PROVIDED that no such notice or consent shall be
required if the Participant is a Bank or an affiliate of a Bank; and PROVIDED
FURTHER that such Participant shall agree to be bound by Section 9.10 of this
Agreement. In the event of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to the Borrower and the
Administrative Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and the Borrower, the Issuing Banks and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including,
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without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; PROVIDED that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.04
without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article VIII with respect to its participating
interest; PROVIDED that all amounts payable to a Bank for the account of a
Participant under Article VIII shall be determined as if such Bank had not
granted such participation to such Participant. An assignment or other transfer
which is not permitted by subsection (c) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may, upon ten days' notice and with the consent of the
Borrower and the Administrative Agent, assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit G hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower, which shall not be unreasonably withheld, the Issuing
Banks and the Administrative Agent, which shall not be unreasonably withheld,
(with written notice of such assignment to be given to the Documentation Agent);
PROVIDED that the foregoing shall not be applicable in the case of, and this
subsection (c) shall not restrict, an assignment or other transfer by any Bank
to an affiliate of such Bank or to a Federal Reserve Bank; and PROVIDED
FURTHER that such assignment may, but need not, include rights of the
transferor Bank in respect of outstanding Money Market Loans. Upon execution
and delivery of such an instrument and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Administrative Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such
63
<PAGE>
assignment, the transferor Bank shall pay or cause to be paid to the
Administrative Agent an administrative fee for processing such assignment in the
amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are payable hereunder for its account, deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 2.15.
(d) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless (subject to the provisions of subsection (b) above) such
transfer is made with the Borrower's prior written consent or by reason of the
provisions of Section 8.02 or 8.03 requiring such Bank to designate a different
Applicable Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
SECTION 9.06. COLLATERAL. Each of the Banks represents to each
Agent and each of the other Banks 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. NEW YORK LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be construed in accordance with and governed by
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
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.
64
<PAGE>
SECTION 9.09. SEVERAL OBLIGATIONS. The obligations of the Banks
hereunder are several. Neither the failure of any Bank to carry out its
obligations hereunder nor of this Agreement to be duly authorized, executed and
delivered by any Bank shall relieve any other Bank of its obligations hereunder
(or affect the rights hereunder of such other Bank). No Bank shall be
responsible for the obligations of, or any action taken or omitted by, any other
Bank hereunder.
SECTION 9.10. SHARING OF SET-OFFS. Each Bank 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 and any Letter of Credit Liabilities which
is greater than the proportion received by any other Bank 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 Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
and Letter of Credit Liabilities held by the other Banks, 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 Banks shall be shared by the Banks pro rata; PROVIDED
that nothing in this Section shall impair the right of any Bank 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.
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.
65
<PAGE>
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.
HILTON HOTELS CORPORATION
By /S/ SCOTT A. LAPORTA
---------------------------------------------
Title: Senior Vice President and Treasurer
9336 Civic Center Drive
Beverly Hills, California 90210
Telecopier number: 310-205-7849
66
<PAGE>
COMMITMENTS
$140,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /S/ DIANA H. IMHOF
-----------------------------------------
Title: Vice President
$140,000,000 THE BANK OF NEW YORK
By /S/ LISA YEE BROWN
-----------------------------------------
Title: Vice President
$120,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By /S/ SCOTT L. FABER
-----------------------------------------
Title: Vice President
$20,000,000 BANK OF AMERICA NEVADA
By /S/ ALAN F. GORDON
-----------------------------------------
Title: Vice President
$140,000,000 WELLS FARGO BANK
By /S/ DANIEL H. HOM
-----------------------------------------
Title: Vice President
CO-AGENTS
$60,000,000 THE BANK OF NOVA SCOTIA
By /S/ M. VAN OTTERLOO
-----------------------------------------
Title: Senior Relationship Manager
$60,000,000 BANKERS TRUST COMPANY
By /S/ MARY JO JOLLY
-----------------------------------------
Title: Assistant Vice President
67
<PAGE>
$60,000,000 CIBC INC.
By /S/ CARTER HARNED
-----------------------------------------
Title: Agent
$60,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /S/ MARY P. DALY
-----------------------------------------
Title: Vice President
$60,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By /S/ J. SCOTT JESSUP
-----------------------------------------
Title: Vice President
By /S/ ROSS A. HOWARD
-----------------------------------------
Title: Director
$60,000,000 FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /S/ JANE W. WORKMAN
-----------------------------------------
Title: Senior Vice President
$60,000,000 THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
By /S/ NOBUHIRO UMEMURA
-----------------------------------------
Title: Joint General Manager
$60,000,000 NATIONSBANK OF TEXAS, N.A.
By /S/ MICHELE M. SHAFROTH
-----------------------------------------
Title: Senior Vice President
$60,000,000 SOCIETE GENERALE
By /S/ GEORGE Y.L. CHEN
-----------------------------------------
Title: Vice President
68
<PAGE>
$60,000,000 THE SUMITOMO BANK, LIMITED
By /S/ GIRO HIRAI
-----------------------------------------
Title: Joint General Manager
PARTICIPANTS
$35,000,000 DRESDNER BANK AG, NEW YORK AND
CAYMAN ISLAND BRANCHES
By /S/ JOHN W. SWEENEY
-----------------------------------------
Title: Assistant Vice President
By /S/ THOMAS J. NADRAMIA
-----------------------------------------
Title: Vice President
$35,000,000 THE MITSUBISHI TRUST AND BANKING CORPORATION
By /S/ HIROAKI KOSEKI
-----------------------------------------
Title: Deputy General Manager
$35,000,000 THE NORTHERN TRUST COMPANY
By /S/ MICHELLE D. GRIFFIN
-----------------------------------------
Title: Vice President
$35,000,000 PNC BANK, NATIONAL ASSOCIATION
By /S/ DENISE D. KILLEN
-----------------------------------------
Title: Vice President
$35,000,000 THE SAKURA BANK LIMITED, LOS ANGELES AGENCY
By /S/ OFUSA SATO
-----------------------------------------
Title: Senior Vice President and
Assistant General Manager
69
<PAGE>
$35,000,000 UNITED STATES NATIONAL BANK OF OREGON
By /S/ DALE PARSHALL
-----------------------------------------
Title: Assistant Vice President
$35,000,000 UNION BANK OF CALIFORNIA, N.A.
By /S/ DENTON FOLKES
-----------------------------------------
Title: Regional Manager
$35,000,000 WACHOVIA BANK OF GEORGIA, N.A.
By /S/ JOEL K. WOOD
-----------------------------------------
Title: Vice President
$35,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK
BRANCH
By /S/ KAREN E. HOPLOCK
-----------------------------------------
Title: Vice President
By /S/ THOMAS LEE
-----------------------------------------
Title: Associate
$25,000,000 BANK OF HAWAII
By /S/ ALISON SIERENS
-----------------------------------------
Title: Assistant Vice President
$25,000,000 CREDIT SUISSE
By /S/ STEPHEN M. FLYNN
-----------------------------------------
Title: Member of Senior Management
By /S/ KEVIN MARK FOWLER
-----------------------------------------
Title: Associate
70
<PAGE>
$25,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By /S/ MASATSUGU MORISHITA
-----------------------------------------
Title: Senior Vice President and Joint General
Manager
$25,000,000 FIRST HAWAIIAN BANK
By /S/ ROBERT M. WHEELER, III
-----------------------------------------
Title: Vice President
$25,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES
AGENCY
By /S/ TAKAHIDE AKIYAMA
-----------------------------------------
Title: Joint General Manager
$25,000,000 THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., LOS ANGELES AGENCY
By /S/ PAUL CLIFFORD
-----------------------------------------
Title: Deputy General Manager
$25,000,000 MELLON BANK, N.A.
By /S/ MACK CLAPP
-----------------------------------------
Title: First Vice President
$25,000,000 THE MITSUI TRUST & BANKING CO., LTD.
By /S/ MARGARET HOLLOWAY
-----------------------------------------
Title: Vice President and Manager
$25,000,000 THE SANWA BANK, LIMITED,
LOS ANGELES BRANCH
By /S/ GILL S. REALON
-----------------------------------------
Title: Vice President
71
<PAGE>
$25,000,000 THE TOYO TRUST & BANKING CO., LTD., LOS ANGELES
AGENCY
By /S/ KENJI FUJIKAWA
-----------------------------------------
Title: General Manager
$25,000,000 FIRST NATIONAL BANK OF COMMERCE
By /S/ LOUIS BALLERO
-----------------------------------------
Title: Senior Vice President
- - -----------------
Total Commitments
$1,750,000,000
- - -----------------
- - -----------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By /S/ DIANA H. IMHOF
-----------------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260
Attention: Diana H. Imhof
Facsimile: 212-648-5018
THE BANK OF NEW YORK,
as Administrative Agent
By /S/ LISA YEE BROWN
-----------------------------------------
Title: Vice President
One Wall Street
18th Floor
New York, NY 10286
Attention: Calyani Bose
Facsimile: 212-635-6365
72
<PAGE>
PRICING SCHEDULE
The "Euro-Currency Margin", "CD Margin," "Facility Fee Rate" and LC
Fee Rate for any day are the respective percentages set forth below in the
applicable row under the column corresponding to the Status that exists on such
day:
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
Level Level Level Level Level
Status I II III IV V
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
Facility Fee Rate 0.070% 0.075% 0.085% 0.125% 0.175%
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
Euro-Currency 0.130% 0.150% 0.165% 0.225% 0.325%
Margin
- - -----------------------------------------------------------------------
CD Margin 0.255% 0.275% 0.290% 0.350% 0.450%
- - -----------------------------------------------------------------------
LC Fee Rate 0.130% 0.150% 0.165% 0.225% 0.325%
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
For purposes of this Schedule, the following terms have the
following meanings, subject to the final two paragraphs of this Schedule:
"Level I Status" exists at any date if, at such date, either (x) the
Borrower's long-term public debt is rated A or higher by S&P OR A2 or higher
by Moody's or (y) the Leverage Ratio as of the last day of the most recent
fiscal period for which financial statements have been delivered (or required to
be delivered) is not greater than 1.75:1.
"Level II Status" exists at any date if, at such date, (i) either
(x) the Borrower's long-term public debt is rated A- or higher by S&P OR A3 or
higher by Moody's or (y) the Leverage Ratio as of the last day of the most
recent fiscal period for which financial statements have been delivered (or
required to be delivered) is not greater 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 Borrower's long-term public debt is rated BBB+ or higher by S&P OR
Baa1 or higher by Moody's or (y) the Leverage Ratio as of the last day of the
most recent fiscal period for which financial statements have been delivered (or
required to be delivered) is not greater than 2.75:1 and (ii) neither Level I
Status nor Level II Status exists.
<PAGE>
"Level IV Status" exists at any date, if, at such date, (i) either
(x) the Borrower's long-term public debt is rated BBB or higher by S&P OR Baa2
or higher by Moody's or (y) the Leverage Ratio as of the last day of the most
recent fiscal period for which financial statements have been delivered (or
required to be delivered) is not greater than 3.25:1 and (ii) none of Level I
Status, Level II Status and Level III Status exists.
"Level V Status" exists at any date if, at such date, no such other
Status exists.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Status" refers to the determination of which of Level I Status,
Level II Status or Level III Status exists at any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned 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. The rating in effect at any
date is that in effect at the close of business on such date.
If the Borrower is split-rated and the rating differential is one level, the
higher of the two ratings will apply (E.G. A/A3 results in Level I Status and
A-/Baa1 results in Level II Status). 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/Baa1 results
in Level II Status, as does A/Baa2).
Status shall be determined on the basis of the ratings assigned to the
Borrower's long-term debt securities unless the Borrower otherwise elects in a
certificate delivered pursuant to Section 5.01(c), in which case Status shall be
determined on the basis of the Leverage Ratio reflected in such certificate.
Any such election shall be effective from and including the Domestic Business
Day next following the date of delivery of such certificate to the
Administrative Agent to and including the next date on which a certificate is
delivered (or required to be delivered) pursuant to Section 5.01(c).
2
<PAGE>
EXHIBIT A
NOTE
New York, New York
, 19
For value received, HILTON HOTELS CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in the manner and at the place provided for in the Credit
Agreement.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; PROVIDED that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of October 18, 1996 among the Borrower, the Banks party thereto, Morgan
Guaranty Trust Company of New York, as Documentation Agent, and The Bank of New
York, as Administrative Agent (as the same may be amended from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the
<PAGE>
same meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
HILTON HOTELS CORPORATION
By
---------------------------
Title:
2
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - -----------------------------------------------------------------------------
Amount Currency Type Amount of
of of of Principal Maturity Notation
Date Loan Loan Loan Repaid Date Made By
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
3
<PAGE>
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: The Bank of New York, as Administrative Agent
From: Hilton Hotels Corporation
Re: Credit Agreement, (as amended from time to time, the "Credit
Agreement") dated as of October 18, 1996 among the Borrower, the
Banks listed in the signature pages thereof and Morgan Guaranty
Trust Company of New York, as Documentation Agent, and The Bank of
New York, as Administrative Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
PRINCIPAL AMOUNT* INTEREST PERIOD**
- - ----------------- -----------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- - -----------------------
* Amount must be $10,000,000 or a larger multiple of $1,000,000.
** 1, 2, 3 or 6 months (LIBOR Auction) or not less than 5 days (Absolute Rate
Auction), subject to the provisions of the definition of Interest Period.
<PAGE>
Terms used herein have the meanings assigned to them in the Credit
Agreement.
HILTON HOTELS CORPORATION
By________________________
Title:
2
<PAGE>
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to Hilton Hotels Corporation (the
"Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of October
18, 1996 among the Borrower, the Banks party thereto and Morgan Guaranty Trust
Company of New York, as Documentation Agent, and the undersigned, as
Administrative Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
PRINCIPAL AMOUNT INTEREST PERIOD
- - ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[12:00 Noon] (New York City time) on [date].
THE BANK OF NEW YORK
By______________________
Authorized Officer
<PAGE>
EXHIBIT D
FORM OF MONEY MARKET QUOTE
THE BANK OF NEW YORK, as
Administrative Agent
One Wall Street
New York, New York 10286
Attention:
Re: Money Market Quote to
Hilton Hotels Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
- - --------------------
*As specified in the related Invitation.
<PAGE>
PRINCIPAL INTEREST MONEY MARKET
AMOUNT* PERIOD** [MARGIN***] [ABSOLUTE RATE****]
- - --------- --------- -------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $____________.]**
We understand and agree that the offer(s) set forth above, subject
to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of October 18, 1996 among the Borrower, the Banks party
thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and
yourselves, as Administrative Agent, irrevocably obligates us to make the Money
Market Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
- - ----------------------
* Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
** 1, 2, 3 or 6 months or not less than 15 days, as specified in the related
Invitation. No more than five bids are permitted for each Interest Period.
*** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
****Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT E
OPINION OF
GENERAL COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I am the General Counsel of Hilton Hotels Corporation (the
"Borrower"), and I am familiar with the Credit Agreement (the "Credit
Agreement") dated as of October 18, 1996 among the Borrower, the banks party
thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and
The Bank of New York, as Administrative Agent. Terms defined in the Credit
Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit 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 body, agency or official and do
not contravene, or constitute a default under, any
<PAGE>
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.
3. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and the Notes constitute valid and binding obligations of the
Borrower in each case enforceable in accordance with their respective terms
except as limited by (a) bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and (b) general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
4. Except as disclosed in the Borrower's Latest Form 10-Q, there is
no action, suit or proceeding pending against, or to the best of my knowledge
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 the Credit
Agreement or the Notes. Without limiting the generality of the foregoing, with
respect to those litigation matters described in the Borrower's Latest Form
10-Q, (i) the disclosure contained in the Borrower's Latest Form 10-Q was
accurate as of the date of the Borrower's Latest Form 10-Q and (ii) since such
date there has been no material adverse development.
5. Each of the Borrower's Significant Subsidiaries is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
I am a member of the Bar of the State of New York and I am generally
familiar with the General Corporation Law of the State of Delaware and I do not
hold myself out as being conversant with, and express no opinion as to, the laws
of any jurisdiction other than those of the United States of America, the State
of New York and the General Corporation Law of the State of Delaware.
2
<PAGE>
The opinions expressed herein are solely for your benefit and may
not be relied upon in any manner or for any purpose by any other person.
Very truly yours,
3
<PAGE>
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of October 18, 1996 among Hilton Hotels
Corporation, a Delaware corporation (the "Borrower"), the banks party thereto
(the "Banks"), Morgan Guaranty Trust Company of New York, as Documentation
Agent, and The Bank of New York, as Administrative Agent (collectively, the
"Agents"), and have acted as special counsel for the Agents for the purpose of
rendering this opinion pursuant to Section 3.02(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
<PAGE>
2. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and the Notes constitute valid and binding obligations of the
Borrower in each case enforceable in accordance with their respective terms
except as limited by (a) bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and (b) general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of the law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), HILTON HOTELS CORPORATION (the
"Borrower") and THE BANK OF NEW YORK, as Administrative Agent.
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of October 18, 1996 among the
Borrower, the Assignor and the other Banks party thereto, as Banks and Morgan
Guaranty Trust Company of New York, as Documentation Agent, and The Bank of New
York, as Administrative Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower and participate in Letters of
Credit in an aggregate principal amount at any time outstanding not to exceed
$__________;
WHEREAS, [Committed] Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof;
WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of its outstanding [Committed] Loans and
Letter of Credit Liabilities, and the Assignee proposes to accept assignment of
such rights and assume the corresponding obligations from the Assignor on such
terms;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
[Committed] Loans made by, and Letter of Credit Liabilities of, the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee[, the Borrower, the Issuing Banks and the Administrative
Agent] and the payment of the amounts specified in Section 3 hereof required to
be paid on the date hereof (i) the Assignee shall, as of the date hereof,
succeed to the rights and be obligated to perform the obligations of a Bank
under the Credit Agreement with a Commitment in an amount equal to the Assigned
Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to the
Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds an amount mutually agreed between them*. It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
- - -----------------
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee.
2
<PAGE>
[SECTION 4. CONSENT OF THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE ISSUING BANKS. This Agreement is conditioned upon the consent of the
Borrower, the Administrative Agent and the Issuing Banks pursuant to Section
9.05(c) of the Credit Agreement. The execution of this Agreement by the
Borrower and the Administrative Agent is evidence of this consent. Pursuant to
Section 9.05(c) the Borrower agrees to execute and deliver a Note payable to the
order of the Assignee to evidence the assignment and assumption provided for
herein.]
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. 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.
SECTION 8. NO AMENDMENT. This Agreement is not an amendment of
the Credit Agreement, and, except as expressly set forth in Section 2, shall not
affect the respective rights or obligations of any of the parties to the Credit
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By_________________________
Title:
3
<PAGE>
[ASSIGNEE]
By__________________________
Title:
HILTON HOTELS CORPORATION
By__________________________
Title:
THE BANK OF NEW YORK
By__________________________
Title:
[LETTER OF CREDIT ISSUING BANK]
By__________________________
Title:
4
<PAGE>
EXHIBIT H - Extension Agreement
EXTENSION AGREEMENT
HILTON HOTELS CORPORATION
9336 Civic Center Drive
Beverly Hills, CA 90210
Morgan Guaranty Trust Company
of New York, as
Documentation Agent
under the Credit Agreement
referred to below
60 Wall Street
New York, NY 10260
Gentlemen:
The undersigned hereby agree to extend, effective [Extension Date],
the Revolving Credit Period under the Credit Agreement dated as of October 18,
1996 among Hilton Hotels Corporation, the Banks listed therein and Morgan
Guaranty Trust Company of New York, as Agent (the "Credit Agreement") for one
year to [date to which the Revolving Credit Period is extended]. Terms defined
in the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York.
[NAME OF BANK]
By____________________________
Name:
Title:
Agreed and accepted:
HILTON HOTELS CORPORATION
By__________________
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By____________________
Name:
Title:
2
<PAGE>
Exhibit 10.3
AMENDMENT TO
1984 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
On November 14, 1996, the Board of Directors of Hilton Hotels Corporation
(the "Company") authorized an amendment to Section 10(d) of the Company's
1984 Stock Option and Stock Appreciation Rights Plan which deletes the
requirement that the Company provide written consent to a terminated optionee
that such optionee may exercise options for a period equal to the lesser of:
(i) three months after termination of employment or (ii) the balance of such
option's term.
<PAGE>
Exhibit 10.7
AMENDMENT TO
1990 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
On November 14, 1996, the Board of Directors of Hilton Hotels Corporation
(the "Company") authorized an amendment to Section 8(d) of the Company's 1990
Stock Option and Stock Appreciation Rights Plan which deletes the requirement
that the Company provide written consent to a terminated optionee that such
optionee may exercise options for a period equal to the lesser of: (i) three
months after termination of employment or (ii) the balance of such option's
term.
<PAGE>
Exhibit 10.9
AMENDMENT TO
1996 STOCK INCENTIVE PLAN
On November 14, 1996, the Board of Directors of Hilton Hotels Corporation
(the "Company") authorized an amendment to Section 5(i) of the Company's 1996
Stock Incentive Plan which deletes the requirement that the Company provide
written consent to a terminated optionee that such optionee may exercise
options for a period equal to the lesser of: (i) three months after
termination of employment or (ii) the balance of such option's term.
<PAGE>
Exhibit 10.15
SECOND AMENDMENT
OF
HILTON HOTELS RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1987)
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the
Hilton Hotels Retirement Plan (the "Plan"); and
WHEREAS, the Internal Revenue Service ("IRS") has requested certain
changes to the Plan in order for the IRS to issue favorable determination
letters with respect to the Participating Employers under the Plan; and
WHEREAS, it is also desirable to amend the Plan to clarify that fact
that (1) the amount of severance pay paid to an Employee, and (2) any period
of service attributable to such severance pay, are taken into account under
the Plan for purposes of determining such Employee's Compensation, Years of
Benefit Service and Years of Vesting Service, respectively, but only if such
severance pay is paid in the form of periodic payments; and
WHEREAS, The Hilton Hotels Pension Committee (the "Committee") and
the Board of Directors of the Company have granted the Company the authority
to adopt any amendments to the Plan which do not have the effect of increasing
the liability of a Participating Employer in a manner which would cause a
significant detriment to such Participating Employer; and
WHEREAS, nothing in this amendment creates a significant detriment or
increases the duties of the Committee under the Plan.
NOW, THEREFORE, BE IT RESOLVED, by virtue and in exercise of the
power reserved to the Company by Section 8.1 of the Plan, the Plan, as
previously amended, be and is hereby further amended, effective as of January
1, 1987 unless otherwise stated below, in the following particulars:
* * *
1. Section 1.2 of the Plan is amended by adding the following at
the end of the first paragraph of the definition of "Compensation" thereunder:
"Pursuant to rules adopted and uniformly applied by the Committee,
severance pay paid to an Employee upon a Break in Employment shall be
considered as Compensation, but only to the extent that such severance pay
is paid in the form of
<PAGE>
periodic payments. Severance pay paid in the form of a single lump sum
shall not be considered as Compensation."
2. Section 1.2 of the Plan is further amended by revising the last
sentence of the definition of "Compensation" thereunder to read as follows:
"In any case in which such aggregation would produce Compensation in excess
of the Maximum Compensation Limitation, the Maximum Compensation Limitation
shall be prorated among the affected Participants in proportion to each
such Participant's Compensation as determined prior to the application of
the Maximum Compensation Limitation."
3. Section 1.2 of the Plan is further amended by adding the
following at the end of the definition of "Eligibility Computation Period"
thereunder to read as follows:
"For purposes of determining whether an Employee has completed 500 or fewer
Hours of Service during any Eligibility Computation Period, rules similar
to the rules contained in the definition of 'One Year Break in Service
Year' shall apply, notwithstanding anything to the contrary contained
therein."
4. Section 1.2 of the Plan is further amended by adding the
following subparagraph (g) at the end of the first paragraph of the definition
of "Years of Benefit Service" thereunder, to read as follows:
"(g) Pursuant to rules adopted and uniformly applied by the
Committee, the period of service, if any, attributable to severance pay
paid to a Participant upon a Break in Employment shall be included in
determining such Participant's Years of Benefit Service, but only to the
extent that such severance pay is paid in the form of periodic payments.
Service attributable to severance pay paid in the form of a single lump sum
shall not be included in determining Years of Benefit Service."
5. Section 1.2 of the Plan is further amended by adding the
following subparagraph (f) at the end of the definition of "Years of Vesting
Service" thereunder, to read as follows:
"(f) Pursuant to rules adopted and uniformly applied by the
Committee, the period of service, if any,
2
<PAGE>
attributable to severance pay paid to an Employee upon a Break in
Employment shall be included in determining such Employee's Years of
Vesting Service, but only to the extent that such severance pay is paid in
the form of periodic payments. Service attributable to severance pay paid
in the form of a single lump sum shall not be included in determining
Years of Vesting Service."
6. Section B.1 of Appendix B to the Plan is amended by revising
subsection (d) of the definition of "Section 415 Compensation" thereunder to
read as follows:
"(d) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in Section
403(b) of the Code (whether or not the contributions are actually
excludible from the gross income of the Employee)."
7. Section C.2 of Appendix C to the Plan is amended by deleting
"402(a)(8)" in the last sentence of subsection (e) thereunder and inserting
"402(e)(3)" in lieu thereof.
8. Effective as of January 1, 1994, Appendix F to the Plan is
amended by adding the following Managed Properties at the end thereof:
SPECIAL EMPLOYEE
"NAME OF EMPLOYER CLASSIFICATION LIMITATION
- - ----------------- -------------------------
Bel Air Hotel None
Somerset Hotel None
Springhill Lake Hotel None
Midwestern Hotel None
Standard Financial Group None
The Equitable Assurance Co. None
Pleasant Travel Service None
Airport Center None"
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
amendment to be signed on its behalf by its duly authorized
officer as of the _______ day of __________________, 1996.
HILTON HOTELS CORPORATION
By _______________________
Its ______________________
4
<PAGE>
EXHIBIT 10.16
THIRD AMENDMENT
HILTON HOTELS RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1987)
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the
Hilton Hotels Retirement Plan ("Plan"); and
WHEREAS, the Company has the right to amend the Plan on behalf of
itself and all Participating Affiliates; and
WHEREAS, the Company has resolved that benefit accruals under the
Plan should be frozen effective December 31, 1996 for all Participants,
whether employed by the Company or a Participating Affiliate;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The definition of Average Monthly Compensation contained in
Section 1.2 is amended by adding the following to the end of the section:
<PAGE>
"Because of the benefit freeze effective December 31, 1996, as set forth in
Section 4.12, Average Monthly Compensation shall be calculated by
substituting the phrase 'immediately preceding January 1, 1997' for the
phrase 'immediately preceding his Break in Employment' in both clause (i)
and clause (ii) above."
2. The following is added to the end of the definition of Years of
Benefit Service contained in Section 1.2:
"Notwithstanding the freeze on benefit accruals, service performed before
January 1, 1997 which would otherwise be excluded under the Hilton Property
Exclusion or the Union Exclusion shall be included if a Participant
satisfies (before, on or after January 1, 1997) the requirements set forth
above which provide for inclusion of such service. Under no circumstances
shall service performed after December 31, 1996 be included as a result of
the preceding sentence."
3. The following new Section 4.12 is hereby added:
2
<PAGE>
"4.12 -- BENEFIT FREEZE. Effective January 1, 1997, no further benefits
shall be accrued by any Participant in this Plan. Accordingly, each
Participant in this Plan shall be entitled to the benefit he or she earned
through and including December 31, 1996, but shall not be credited with any
additional benefit following December 31, 1996. Thus, by way of
illustration and not limitation, Participants shall be entitled to benefits
based only upon their Years of Benefit Service through December 31, 1996,
and shall not be entitled to benefits based upon any portion of a Year of
Benefit Service following December 31, 1996; provided, however, that as
specifically set forth in the definition of Years of Benefit Service,
certain service performed before January 1, 1997 which would otherwise be
excluded under the Hilton Property Exclusion and the Union Exclusion shall
be included even if the conditions for inclusion of such service are
satisfied after December 31, 1996. As a further illustration, and not a
limitation, increases in a Participant's Average Monthly Compensation based
upon Compensation paid after December 31, 1996 shall not be considered
under the Plan. As a further illustration, and not a limitation, no
portion of a Year of Benefit Service
3
<PAGE>
after January 1, 1997 shall be included in determining whether a Participant
is eligible for the minimum benefits referred to in Section 4.1(a), or the
amount of any such minimum benefits. All Early Retirement Benefits, Late
Retirement Benefits, Disability Retirement Benefits and Surviving Spouse
Benefits shall be calculated based upon the frozen benefit earned through
December 31, 1996. The benefit freeze shall apply to all Participants
hereunder, whether employed by the Company or any Participating Affiliate.
Notwithstanding the foregoing, should the Plan become a top-heavy plan as
set forth in Appendix C, then the minimum accruals for Non-Key Employees
shall continue to apply under Appendix C."
IN WITNESS WHEREOF, this Third Amendment is hereby adopted this
____ day of November, 1996.
HILTON HOTELS CORPORATION
By _______________________
Its ______________________
4
<PAGE>
Exhibit 10.19
AMENDMENT
HILTON HOTELS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the
Hilton Hotels Supplmental Executive Retirement Plan ("Plan"); and
WHEREAS, the Company has the right to amend the Plan; and
WHEREAS, the Company has resolved that benefit accruals under the
Plan should be frozen effective December 31, 1996 for all Participants;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The definition of Average Earnings contained in Section 2.4 is
amended by adding the following to the end of the section:
"Because of the benefit freeze effective December 31, 1996, as set forth in
Section 4.5, Average Earnings shall be calculated only with respect to
calendar years ending on or before December 31, 1996."
2. The following new Section 4.5 is hereby added:
<PAGE>
"4.5 -- BENEFIT FREEZE. Effective January 1, 1997, no further benefits
shall be accrued by any Participant in this Plan. Accordingly, each
Participant in this Plan shall be entitled to the benefit he or she earned
through and including December 31, 1996, but shall not be credited with any
additional benefit following December 31, 1996. Thus, by way of
illustration and not limitation, Participants shall be entitled to Monthly
Retirement Income benefits based only upon their years of service through
December 31, 1996, and shall not be entitled to benefits based upon any
portion of a year of service following December 31, 1996. As a further
illustration, and not a limitation, increases in a Participant's Average
Earnings based upon earnings paid after December 31, 1996 shall not be
considered under the Plan. All early retirement benefits, deferred vested
benefits and Spouse's Benefits shall be calculated based upon the frozen
benefit earned through December 31, 1996."
IN WITNESS WHEREOF, this Amendment is hereby adopted this ____ day of
November, 1996.
HILTON HOTELS CORPORATION
By_______________________
Its______________________
2
<PAGE>
EXHIBIT 10.24
AMENDMENT
HILTON HOTELS RETIREMENT BENEFIT REPLACEMENT PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the
Hilton Hotels Retirement Benefit Replacement Plan ("Plan"); and
WHEREAS, the Company has the right to amend the Plan; and
WHEREAS, the Company has resolved that benefit accruals under the Plan
should be frozen effective December 31, 1996 for all Participants;
NOW, THEREFORE, the Plan is hereby amended as follows:
The following is added to the end of Section 2.2:
"Effective January 1, 1997, no further benefits shall be accrued by
any Participant in this Plan. Accordingly, each Participant in this Plan
shall be entitled to the benefit he or she earned through and including
December 31, 1996, but shall not be credited with any additional benefit
following December 31, 1996. The benefit payable under this plan shall,
however, be calculated by reference to the actual benefit payable from the
retirement plan. Thus, by way of illustration and not limitation, if cost
of living
<PAGE>
increases under Internal Revenue Code Section 415 following December 31,
1996 increase the benefit payable to a Participant under the retirement
plan, the benefit payable to the Participant under this Plan shall be
correspondingly decreased."
IN WITNESS WHEREOF, this Amendment is hereby adopted this ____ day of
November, 1996.
HILTON HOTELS CORPORATION
By ______________________
Its _____________________
2
<PAGE>
Exhibit 10.25
HILTON HOTELS THRIFT SAVINGS PLAN
(1996 RESTATEMENT)
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.1 Requirements for Participation . . . . . . . . . . 23
Section 2.2 Notice of Eligibility. . . . . . . . . . . . . . . 23
Section 2.3 Application to Participate . . . . . . . . . . . . 23
Section 2.4 Designation of Beneficiary . . . . . . . . . . . . 24
Section 2.5 Date of Participation. . . . . . . . . . . . . . . 26
ARTICLE III
PARTICIPANT'S CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 26
Section 3.1 Participant Contributions. . . . . . . . . . . . . 26
Section 3.2 Compensation Deferrals . . . . . . . . . . . . . . 27
Section 3.3 Change in Participant's Contributions. . . . . . . 29
Section 3.4 Cessation of Participation . . . . . . . . . . . . 29
Section 3.5 Investment Funds . . . . . . . . . . . . . . . . . 30
Section 3.6 Valuation of Accounts. . . . . . . . . . . . . . . 31
Section 3.7 Section 404(c) Provisions. . . . . . . . . . . . . 31
Section 3.8 Section 402(g) Limit on Compensation
Deferrals. . . . . . . . . . . . . . . . . . . . . 32
Section 3.9 Section 401(k) Limitations on
Compensation Deferrals . . . . . . . . . . . . . . 34
Section 3.10 Section 401(m) Limitations on Participant
Contributions and Matching Company Contributions . 39
Section 3.11 Rollover Contributions . . . . . . . . . . . . . . 43
ARTICLE IV
COMPANY CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 44
Section 4.1 Matching Company Contributions . . . . . . . . . . 44
Section 4.2 Allocation of Matching Company
Contributions. . . . . . . . . . . . . . . . . . . 46
Section 4.3 Contribution Limits. . . . . . . . . . . . . . . . 47
Section 4.4 Limit of Deductible Contributions By The
Company. . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V
PARTICIPANT'S ACCOUNTS. . . . . . . . . . . . . . . . . . . . . 47
Section 5.1 Account Balances . . . . . . . . . . . . . . . . . 47
Section 5.2 Allocation of Earnings, Losses and
Changes in Fair Market Value of the Net Assets of
the Funds. . . . . . . . . . . . . . . . . . . . . 48
Section 5.3 Vesting of Participant's Interests . . . . . . . . 48
ARTICLE VI
DISTRIBUTION FROM TRUST FUND. . . . . . . . . . . . . . . . . . 51
i
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
----
Section 6.1 When Interests Become Distributable and
Effect Thereof . . . . . . . . . . . . . . . . . . 51
Section 6.2 Payment. . . . . . . . . . . . . . . . . . . . . . 52
Section 6.3 Disposition of Forfeitable Interest -
Effect of Rehiring . . . . . . . . . . . . . . . . 57
Section 6.4 Spendthrift Trust Provisions . . . . . . . . . . . 58
Section 6.5 Withdrawal of Contributions. . . . . . . . . . . . 59
Section 6.6 Missing Participant or Beneficiary . . . . . . . . 66
Section 6.7 Direct Rollovers . . . . . . . . . . . . . . . . . 67
ARTICLE VII
COMMITTEE, INVESTMENT AND ADMINISTRATION. . . . . . . . . . . . 69
Section 7.1 Appointment of Committee . . . . . . . . . . . . . 69
Section 7.2 General Duties and Powers of Committee . . . . . . 69
Section 7.3 Investment Powers and Duties . . . . . . . . . . . 71
Section 7.4 Organization of Committee. . . . . . . . . . . . . 74
Section 7.5 Records and Reports. . . . . . . . . . . . . . . . 75
Section 7.6 Claims Procedure . . . . . . . . . . . . . . . . . 76
Section 7.7 Manner of Administering. . . . . . . . . . . . . . 77
Section 7.8 Compensation, Bonding, Expenses
and Indemnity. . . . . . . . . . . . . . . . . . . 77
ARTICLE VIII
CONTINUANCE AND AMENDMENT OF PLAN . . . . . . . . . . . . . . . 79
Section 8.1 Continuance of Plan Not a Contractual
Obligation of Company - Impossibility of
Diversion. . . . . . . . . . . . . . . . . . . . . 79
Section 8.2 Consolidation or Merger. . . . . . . . . . . . . . 80
Section 8.3 Amendments . . . . . . . . . . . . . . . . . . . . 81
Section 8.4 Termination of Plan. . . . . . . . . . . . . . . . 82
ARTICLE IX
ADMINISTRATION OF THE TRUST FUND -
THE TRUST AGREEMENT - EXPENSES. . . . . . . . . . . . . . . . . 83
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.1 Loans to Participants. . . . . . . . . . . . . . . 84
Section 10.2 Limits on Employees' Rights. . . . . . . . . . . . 88
Section 10.3 Transfers of Participants. . . . . . . . . . . . . 88
Section 10.4 Context to Control . . . . . . . . . . . . . . . . 89
Section 10.5 Construction . . . . . . . . . . . . . . . . . . . 89
Section 10.6 Qualified Domestic Relations Orders. . . . . . . . 89
Section 10.7 Action by Participant or Other Person. . . . . . . 89
Section 10.8 Receipt or Release . . . . . . . . . . . . . . . . 90
ii
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TABLE OF CONTENTS (CONTINUED)
PAGE
----
Section 10.9 Persons Under Incapacity . . . . . . . . . . . . . 90
Section 10.10 Top-Heavy Plan Requirements . . . . . . . . . . . 90
ARTICLE XI
LAW GOVERNING AND SEVERABILITY. . . . . . . . . . . . . . . . . 91
APPENDIX A
ANNUAL ADDITION LIMITS. . . . . . . . . . . . . . . . . . . . .A-1
APPENDIX B
TOP-HEAVY PROVISIONS. . . . . . . . . . . . . . . . . . . . . .B-1
iii
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HILTON HOTELS THRIFT SAVINGS PLAN
(1996 Restatement)
HILTON HOTELS CORPORATION, pursuant to action of its Board
of Directors taken at a duly called meeting, has adopted and does institute
the following as an amendment and restatement in toto of the Hilton Hotels
Thrift Savings Plan:
ARTICLE I
DEFINITIONS
When used herein and in the Trust Agreement, with the first
letter capitalized, the following words shall have the following meanings
unless the context clearly indicates otherwise.
"Account" or "Accounts" shall mean the accounts established
to record a Participant's interest in the Trust Fund established in
accordance with this Plan.
"Affiliated Employer" shall mean, with respect to the
Company and each Participating Employer;
(a) Each corporation which is a member of a controlled
group of corporations (within the meaning of Section 1563(a) of the Code,
determined without regard to Section 1563(a)(4) and (e)(3)(C) thereof) of
which the Company or Participating Employer is a component member,
(b) each entity (whether or not incorporated) which is
under common control with the Company or
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<PAGE>
Participating Employer, as such common control is defined in Section 414(c)
of the Code and Regulations issued thereunder,
(c) any organization which is a member of an affiliated
service group (within the meaning of Section 414(m) of the Code) of which the
Company or a Participating Employer is a member, and
(d) any organization which is required by regulations
issued under Section 414(o) of the Code to be treated as an Affiliated
Employer. For the purposes of Section 4.3 of this Plan the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent" each
place it appears in Section 1563(a)(1) of the Code. The term "Affiliated
Employer" shall also include each predecessor employer to the extent required
by Section 414(a) of the Code or to the extent designated by the Board of
Directors. Notwithstanding the foregoing, an organization shall not be
considered an Affiliated Employer for any purpose under the Plan prior to the
date it is considered affiliated under clauses (a) through (d) above.
"Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, personal representative or other fiduciary,
last designated in writing by a Participant in accordance with the provisions
of Section 2.4 to receive the benefits specified hereunder in the event of
the Participant's death. If there is no valid Beneficiary designation in
effect that complies with
2
<PAGE>
the provisions of Section 2.4, or if there is no surviving designated
Beneficiary, then the Participant's surviving spouse shall be the
Beneficiary. If there is no surviving spouse to receive any benefits payable
in accordance with the preceding sentence, the duly appointed and currently
acting personal representative of the Participant's estate (which shall
include either the Participant's probate estate or living trust) shall be the
Beneficiary. In any case where there is no such personal representative of
the Participant's estate duly appointed and acting in that capacity within 90
days after the Participant's death (or such extended period as the Committee
determines is reasonably necessary to allow such personal representative to
be appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary or Beneficiaries shall mean the person or persons who can verify
by affidavit or court order to the satisfaction of the Committee that they
are legally entitled to receive the benefits specified hereunder.
In the event any amount is payable under the Plan to a
minor, payment shall not be made to the minor, but instead shall be paid (i)
to that person's then living parent(s) to act as custodian, (ii) if that
person's parents are then divorced, and one parent is the sole custodial
parent, to such custodial parent, or (iii) if no parent of that person is
then living, to a custodian selected by the Committee to hold the funds for
the minor under the Uniform
3
<PAGE>
Transfers or Gifts to Minors Act in effect in the jurisdiction in which the
minor resides. If no parent is living and the Committee decides not to
select another custodian to hold the funds for the minor, then payment shall
be made to the duly appointed and currently acting guardian of the estate for
the minor or, if no guardian of the estate for the minor is duly appointed
and currently acting within 60 days after the date the amount becomes
payable, payment shall be deposited with the court having jurisdiction over
the estate of the minor.
"Board of Directors" shall mean the Board of Directors of
HILTON HOTELS CORPORATION.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" shall mean the Administrative Committee
appointed in accordance with Article VII.
"Company" shall mean HILTON HOTELS CORPORATION, any
predecessor corporation, or any successor corporation resulting from merger,
consolidation, or transfer of assets substantially as a whole which shall
expressly agree in writing to continue this Plan and, where the context so
warrants, any Participating Employer.
"Company Contribution Account" shall mean the Account
established to hold matching Company contributions contributed in accordance
with Article IV on behalf of each Participant, together with the allocations
thereto as required by the Plan.
4
<PAGE>
"Compensation" shall mean compensation paid or accrued, to
or on behalf of a Participant, subject to Employer FICA Taxes under the Code
provisions in effect on March 1, 1978 (without regard to the dollar
limitation). Such Compensation shall include overtime, bonuses, gratuities
subject to Employer FICA Taxes, vacation pay and holiday pay. Such
Compensation shall not include tips, tokens, gratuities or other forms of
extra Compensation not subject to Employer FICA Taxes, relocation,
maintenance or severance allowances, retirement plan contributions or
benefits, fees, or insurance premiums or benefits, and shall also exclude any
amounts attributable to a plan, program or other arrangement based on or
involving Hilton Hotels Corporation capital stock which otherwise would be
treated as Compensation. Compensation shall include amounts by which a
Participant's Compensation is reduced pursuant to a cafeteria plan, in
accordance with Section 125 of the Code. Effective January 1, 1994,
Compensation shall include tips, tokens and gratuities, but only to the
extent that such tips, tokens and gratuities are actually reported as income
subject to income tax withholding on form W-2 for the Employee.
Notwithstanding the foregoing, for purposes of Section 3.10
of this Plan, Compensation shall mean compensation actually paid by the
Company to the Participant during the Plan Year and reportable for federal
income tax
5
<PAGE>
purposes on Form W-2, reduced by the amounts described in Treas. Reg. Section
1.414(s)-1(c)(3).
For Plan years beginning on or after January 1, 1989, the
maximum amount of an Employee's Compensation which shall be taken into
account under the Plan for any Plan Year shall be $200,000 adjusted at the
same time and in the same manner as under Section 415(d) of the Code. For
any Plan Year of fewer than twelve months, the $200,000 limit shall be
reduced to the amount obtained by multiplying the $200,000 limit (as adjusted
under Code Section 415(d)) by a fraction having a numerator equal to the
number of full months in the Plan Year and a denominator equal to twelve.
For purposes of the $200,000 limitation referred to above, the Compensation
of any Participant who is either a 5% owner (as defined in Section 416(i)(1)
of the Code), or one of the ten most highly paid Highly Compensated Employees
during the Plan Year ("First Participant") shall be aggregated with the
Compensation of any Participant who has not attained age 19 and is a lineal
descendant of the First Participant and any Participant who is the spouse of
the First Participant. In any case in which such aggregation would produce
Compensation in excess of the $200,000 limitation, the amount of the First
Participant's Compensation that is considered under the Plan shall be reduced
until the $200,000 limitation is met.
Notwithstanding the foregoing, for Plan Years beginning on
or after January 1, 1994, the $200,000 limit
6
<PAGE>
referred to above shall be reduced to $150,000 adjusted in accordance with
Section 401(a)(17)(B) of the Code. For purposes of applying the $150,000
limit, the rules set forth in the preceding paragraph shall continue to
apply, except that "$150,000" shall replace "$200,000" each place it appears.
"Compensation Deferrals" shall mean an amount contributed to this Plan
by the Company in lieu of being paid to a Participant as salary or wages.
Compensation Deferrals shall be made under salary reduction arrangements
between each Participant and the Company with respect to salary or wages not
yet paid or otherwise available to the Participant as of the date of the
Participant's election under the arrangement. Section 3.2 contains the
provisions under which Compensation Deferrals may be made.
"Compensation Deferral Account" shall mean the Account maintained by
the Committee for each Participant that is to be credited with Company
payments to the Plan attributable to the Participant's Compensation Deferrals
that are credited to this Account in accordance with Section 3.2, together
with the allocations thereto as required by the Plan.
"Disability Retirement Date" shall mean the date of retirement prior
to the Normal Retirement Date fixed by the Company for a Participant who is
found by the Committee, in its sole discretion, after consideration of such
evidence as it may require, including reports of such physicians as
7
<PAGE>
it may designate, to have become totally and permanently unable to discharge
his assigned duties as a result of mental or physical disease or condition.
"Effective Date" of this Plan is the 1st day of January, 1979.
"Eligible Employee" shall mean each Employee of the Company and
Participating Employers except that there shall be excluded all leased
employees described in Section 414(n) of the Code and those employees covered
by a collective bargaining agreement between the Company or Participating
Employers and any collective bargaining representative if retirement benefits
were the subject of good faith bargaining between such representative and the
Company or Affiliated Employer unless the Employee is a member of a group of
employees to whom this Plan has been extended by such a collective bargaining
agreement.
"Employee" shall mean every person employed by the Company or an
Affiliated Employer, including any leased employee described in Section
414(n) of the Code and any other individual required to be treated as
employed by the Company or an Affiliated Employer under Section 414(o) of the
Code.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Fiduciary" shall mean all persons defined in Section 3(21) of ERISA
associated in any manner with the control, management, operation, and
administration of the
8
<PAGE>
Plan or the assets of the Plan, and such term shall be construed as including
the term "Named Fiduciary" with respect to those Fiduciaries named in the
Plan or who are identified as Fiduciaries pursuant to procedures specified in
the Plan.
"Fiscal Year" shall mean the fiscal year of the HILTON HOTELS
CORPORATION. At present, that Fiscal Year commences the first day of January
and ends the last day of December, and this shall be the Plan Year,
limitation year, and the taxable year of the Trust established pursuant to
this Plan.
"Highly Compensated Employee" shall, with respect to the Company and
each Participating Employer, mean:
a) For Plan Years Commencing on or prior to December 31,
1996:
(i) Any Employee who performs services for the Company or any
Affiliated Employer during the "determination year" and who, during the
"look-back year" (1) was a 5% owner of the Company or any Affiliated
Employer; (2) received compensation from the Company or any Affiliated
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d) of the
Code); (3) received compensation from the Company or any Affiliated Employer
in excess of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and
was a member of the "top-paid group" for such year; or (4) was an officer of
the Company or any Affiliated Employer and received compensation during such
year that is
9
<PAGE>
greater than 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code;
(ii) Any Employee who performs services for the Company or any
Affiliated Employer during the determination year and who, with respect to
the determination year, is either described in (a)(i)(1) above or is both one
of the 100 Employees who received the most compensation from the Company or
any Affiliated Employer during the determination year and is described in
(a)(i)(2), (a)(i)(3) or (a)(i)(4); or
(iii) Any Employee who separated from service (or was deemed
to have separated) prior to the determination year, performs no services for
the Company or any Affiliated Employer during the determination year, and met
the description in (a)(i) or (a)(ii) above for either the separation year or
any determination year ending on or after the Employee's 55th birthday.
(iv) If no officer of the Company or any Affiliated Employer
has compensation in excess of 50% of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code during a determination year or a look-back
year, the highest paid officer for such year shall be treated as a Highly
Compensated Employee.
(v) If an Employee is, during a determination year or
look-back year, a "family member" of either a 5% owner who is an Employee or
of a Highly Compensated Employee in the group consisting of the 10 most
10
<PAGE>
highly compensated Employees ranked on the basis of compensation paid by the
Company or any Affiliated Employer during the determination year or the
look-back year, then the family member and 5% owner or top-ten Highly
Compensated Employee shall be treated as a single Employee, and their
compensation and contributions or benefits under this Plan shall be
aggregated. Except as otherwise provided under Section 401(a)(17) of the
Code, "family member' includes the spouse, lineal ascendants and descendants
of the Employee or former Employee and the spouses of such lineal ascendants
and descendants.
(vi) The "determination year" shall be the Plan Year for
which compliance is being tested, and the "look-back year" shall be the
12-month period immediately preceding the determination year.
(vii) The top-paid group for a determination year or a
look-back year shall consist of the top 20% of Employees ranked on the basis
of compensation received during the year excluding Employees described in
Section 414(q)(8) of the Code and Treasury Regulations thereunder. The
number of Employees treated as officers shall be limited to 50 (or, if less,
the greater of 3 Employees or 10% of the Employees). For purposes of this
definition of "Highly Compensated Employee", "compensation" means
compensation within the meaning of Section 415(c)(3) of the Code, but
including elective or salary reduction contributions to a
11
<PAGE>
cafeteria plan, cash or deferred arrangement or tax-sheltered annuity.
(viii) If the Company or Participating Employer makes an
election for any year under this Paragraph (viii), in determining whether an
Employee is a Highly Compensated Employee for such year, Paragraph (a)(i)(2)
shall be applied by substituting "$50,000" for "$75,000," and Paragraph
(a)(i)(3) shall not apply.
b) For Plan Years Commencing after December 31, 1996:
(i) Any Employee who performs services for the Company or
any Affiliated Employer who, at any time during the "determination year" or
the "look-back year" was a 5% owner of the Company or any Affiliated
Employer, or who, during the "look-back year," received compensation from the
Company or any Affiliated Employer in excess of $80,000 (as adjusted pursuant
to Section 415(d) of the Code); or
(ii) Any Employee who separated from service (or was
deemed to have separated) prior to the determination year, performs no
services for the Company or any Affiliated Employer during the determination
year, and met the description in (b)(i) above for either the separation year
or any determination year ending on or after the Employee's 55th birthday.
(iii) The "determination year" shall be the Plan Year for
which compliance is being tested, and the "look-back year" shall be the
12-month period immediately
12
<PAGE>
preceding the determination year. The provisions of this Subsection (b)
shall be applied to determine "Highly Compensated Employees" in any look-back
year even if such look-back year coincided with a Plan Year which commenced
on or prior to December 31, 1996.
(iv) For purposes of this definition of "Highly
Compensated Employee", "compensation" means compensation within the meaning
of Section 415(c)(3) of the Code, but including elective or salary reduction
contributions to a cafeteria plan, cash or deferred arrangement or
tax-sheltered annuity.
(v) If the Company or Participating Employer makes an
election for any year under this Paragraph (b)(v), in determining whether an
Employee is a Highly Compensated Employee for such year, Paragraph (b)(i)
shall be applied by substituting "$80,000 (as adjusted pursuant to Section
415(d) of the Code) and who was a member of the 'top-paid group' for such
year" for "$80,000 (as adjusted pursuant to Section 415(d) of the Code)"
therein. The "top-paid group" for a look-back year shall consist of the top
20% of Employees ranked on the basis of compensation received during the year
excluding Employees described in Section 414(q)(5) of the Code and Treasury
Regulations thereunder.
13
<PAGE>
"Hour of Service" shall be defined as each hour
(a) for which an Employee is paid, or entitled to payment, for the
performance of duties for the Company or an Affiliated Employer;
(b) for which the Employee is paid or entitled to payment by the
Company or an Affiliated Employer on account of a period during which no
duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence; or
(c) for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Company or an Affiliated Employer.
The following additional rules shall apply in calculating Hours of
Service: (1) no more than 501 Hours of Service are required to be credited
to an Employee on account of any single period during which the Employee
performs no duties; (2) an hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which
no duties are performed is not required to be credited to the Employee if
such payment is made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment compensation,
or disability insurance laws; (3) Hours of Service are not required to be
credited for a payment which solely reimburses an Employee for medical or
14
<PAGE>
medically related expenses incurred by the Employee; (4) a payment shall be
deemed to be made by or due from a Company or an Affiliated Employer
regardless of whether such payment is made by or due from the Company or an
Affiliated Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Company or an Affiliated Employer contributes
or pays premiums and regardless of whether contributions made or due to the
trust fund, insurer, or other entity are for the benefit of particular
Employees or on behalf of a group of Employees in the aggregate; (5) no more
than one Hour of Service shall be credited with respect to any hour of time;
(6) an "Hour of Service" shall include any hour for which an Employee is
entitled to payment by a "leasing organization" (as described in Section
414(n)(2) of the Code) for the performance of duties for the Company or an
Affiliated Employer.
The definition of "Hour of Service" set forth herein shall also be
construed in accordance with, and shall include any additional periods of
service, that may be required by regulations promulgated by the United States
Department of Labor. The hour of service rules stated in the Department of
Labor Regulations Section 2530.200b-2(b) and -2(c) are herein incorporated by
reference.
"Investment Fund" shall mean one of the funds established by the
Committee for the investment of the assets of the Plan pursuant to Sections
2.3(b) and 3.5.
15
<PAGE>
"Investment Manager" shall mean a Fiduciary designated by the
Committee under this Plan to whom has been delegated the responsibility and
authority to manage, acquire or dispose of Plan assets (a) who (1) is
registered as an investment adviser under the Investment Advisers Act of
1940; (2) is a bank, as defined in that Act; or (3) is an insurance company
qualified to perform investment advisory services under the laws of more than
one state; and (b) who has acknowledged in writing that he is a Fiduciary
with respect to the management, acquisition, and control of Plan assets.
"Matched Compensation Deferrals" shall mean a Participant's
Compensation Deferrals which are matched by the Company in accordance with
Section 4.1.
"Matching Company Contributions" shall mean the contributions made by
the Company or a Participating Employer pursuant to Section 4.1.
"Normal Retirement Age" shall mean a Participant's sixty-fifth
birthday. A Participant may retire at any time after attaining Normal
Retirement Age. Until actual retirement, a Participant shall continue to
participate in this Plan.
"One Year Break in Service" or "Break in Service" shall mean a
computation period during which an individual completes not more than 500
Hours of Service. The computation period for purposes of Section 2.1 shall
be the twelve-month period commencing on the date the Employee
16
<PAGE>
first becomes an Employee and anniversaries thereof and for all other
purposes shall be the Fiscal Year.
(a) Solely for purposes of determining whether an
Employee sustains a Break in Service, an Employee shall be eligible to
receive credit for absence (i) by reason of pregnancy of the Employee, (ii)
by reason of the birth of a child of the Employee, (iii) by reason of the
placement of a child with the Employee in connection with the adoption of the
child by the Employee, or (iv) for purposes of caring for the child for a
period beginning immediately following the birth or placement.
(b) The number of Hours of Service which shall
credited to an Employee for a period of absence described in Subsection (a)
above shall be (i) the number which otherwise would normally have been
credited to the Employee but for the absence, or (ii) if the Committee
determines that such number can not be determined, eight (8) Hours of Service
per day of such absence; provided, however, that the total number of hours
treated as Hours of Service under this Subsection (b) shall not exceed five
hundred one (501) and that these Hours of Service shall be taken into account
solely for purposes of determining whether or not the Employee has incurred a
Break in Service.
(c) The Hours of Service described in Subsection
(b) above shall be credited to the computation period (i) in which the
absence from work begins, if the Employee would be prevented from incurring a
Break in Service in that
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<PAGE>
computation period solely because of such crediting, or (ii) in any other
case, in the immediately following computation period.
(d) Subsections (a)-(c) above shall not apply
unless the Employee provides such timely information as the Committee may
reasonably require to establish (i) that the absence is for reasons described
in Subsection (a), and (ii) the number of days for which there was such an
absence.
"Participant" shall mean any Eligible Employee included in
the Plan as provided in Article II.
"Participant Contribution Account" shall mean the account
to which Participant Matched Contributions and Participant Supplementary
Contributions are allocated pursuant to Section 5.1 on behalf of such
Participant, together with the allocations thereto as required by the Plan.
"Participant Contributions" shall mean the Participant
Matched Contributions and Participant Supplementary Contributions.
"Participant Matched Contributions" shall mean the
contributions of Compensation made by a Participant pursuant to Section 3.1
which are matched by the Company in accordance with Section 4.1.
"Participant Supplementary Contributions" shall mean
contributions of Compensation made by a Participant pursuant to Section 3.1
in excess of the Participant's
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<PAGE>
Matched Contributions which shall not be matched by Company contributions.
"Participating Employer" shall mean the Company and any
Affiliated Employer with respect to the Company which, by resolution of its
board of directors and with the approval of the Board of Directors, elects to
participate in this Plan. In addition, "Participating Employer" shall mean
other business entities in which the Company, directly or indirectly, has an
interest or with which it has a contractual relationship designated from time
to time by the Committee as being eligible to be included in the Plan, and
which adopts the Plan by appropriate action; but any such designation or
adoption may be terminated or withdrawn at any time by filing with the
Company a resolution, respectively of the Committee or of the adopting
business entity, and such termination or withdrawal the entity whose
designation or adoption was so terminated or withdrawn shall not thereafter
be considered a Participating Employer under this Plan. By electing to
participate in this Plan, a Participating Employer agrees to be bound by any
Plan or Trust amendment adopted by resolution of the Board of Directors or by
the written instrument of any person to whom the Board of Directors has
delegated its authority to adopt the amendment. Each Participating Employer
shall also be bound by the investment and administrative control of the Plan
by delegates properly appointed by the Company and Committee. Appendix C
hereto sets forth the names of all
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Participating Employers as of November 1, 1991 and shall be revised from time
to time by the Committee or its delegate.
"Plan" means the Hilton Hotels Thrift Savings Plan set
forth in this document and all subsequent amendments thereto.
"Plan Year" shall mean the Fiscal Year.
"Rollover Account" shall mean the Account maintained for a
Participant that is credited with the amount, if any, received by the Plan in
accordance with Section 3.11 as a rollover contribution, as defined in
Section 402(a)(5) of the Code, together with the allocations thereto as
required by the Plan.
"Supplemental Compensation Deferrals" shall mean a
Participant's Compensation Deferrals in excess of his or her Matched
Compensation Deferrals. Supplemental Compensation Deferrals are those which
are not matched by Company contributions.
"Trust" shall mean that Trust established pursuant to the
Trust Agreement.
"Trust Agreement" shall mean that certain agreement between
the Company and the Trustee providing for the investment and administration
of the Trust Fund.
"Trust Fund" shall mean the fund established under the
Trust Agreement by contributions made by the Company and Participants and
from which any amounts payable under the Plan are to be paid.
20
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"Trustee" shall mean the Trustee under the Trust Agreement.
"Valuation Date" shall mean any date as of which the Trust
Fund was valued pursuant to Section 3.6.
"Year of Service" shall mean a computation period during
which the Employee completes one thousand (1,000) or more Hours of Service
for the Company or an Affiliated Employer. The computation period referred
to in the preceding sentence shall be the Fiscal Year except for purposes of
Section 2.1, in which case the computation period shall be the twelve (12)
month period commencing on the date the Employee first becomes an Employee
(or any anniversary thereof). In no instance will an Employee be credited
with more than one (1) Year of Service with respect to service performed in a
single computation period. Notwithstanding any provision to the contrary in
this Plan, an Employee shall be credited with Years of Service only with
respect to periods of "covered service" and "contiguous noncovered service."
For purposes of determining an Employee's Years of Service, "covered service"
shall mean an Employee's service as an Eligible Employee and "contiguous
noncovered service" shall mean an Employee's noncovered service as a
non-Eligible Employee which immediately precedes or follows such Employee's
covered service and no quit, discharge or retirement occurs between such
covered service and uncovered service; provided, however, that any transfer
of an Employee between (a) a corporation or trade
21
<PAGE>
or business included within the definition of "Company" and (b) an Affiliated
Employer not included within the definition of "Company" shall result in such
Employee's period of noncovered service which immediately precedes or follows
such transfer being deemed "noncontiguous" for purposes of this definition of
Year of Service.
A Participant's employment is not considered terminated for
purposes of the Plan if the Employee has been on leave of absence with the
consent of the Company or an Affiliated Employer, provided that he returns to
the employ of the Company or an Affiliated Employer at the expiration of such
leave or such longer period as may be prescribed by law in the case of a
Participant who is a member of the armed forces of the United States. A
leave of absence shall mean leaves granted by the Company or an Affiliated
Employer, in accordance with rules uniformly applied to all Employees, for
reasons of health, military or public service or for reasons determined by
the Company or an Affiliated Employer to be in its best interests.
Participants who do not return to the employ of the Company or an Affiliated
Employer within ten days following the end of the leave of absence, or within
the required time in case of service with the armed forces, shall be deemed
to have terminated their employment as of the date when their leave began,
unless such failure to return was the result of their death, total disability
or normal retirement.
22
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ARTICLE II
ELIGIBILITY
SECTION 2.1 REQUIREMENTS FOR PARTICIPATION. Participation
in the Plan on the part of each Employee is voluntary. An Eligible Employee
who on the Effective Date of this Plan, or the first day of any calendar
month thereafter, has completed at least one Year of Service shall be
eligible to participate as of the first day of the first calendar month
coinciding with or next following the date the Eligible Employee satisfies
the aforesaid service requirement.
SECTION 2.2 NOTICE OF ELIGIBILITY. The Committee shall
give reasonable advance written notice to Employees of their prospective
eligibility to become Participants, and shall state therein the conditions of
participation.
SECTION 2.3 APPLICATION TO PARTICIPATE. An Eligible
Employee eligible to become a Participant may become a Participant by filing,
at least thirty (30) days before the first day of the month as of which
participation is to commence, in such form and with such persons as the
Committee shall designate, an application which shall:
(a) Specify the amount of Compensation Deferrals
and Participant Contributions to be deducted from his Compensation by the
Company and paid to the Trustee on his behalf;
23
<PAGE>
(b) Specify the manner in which such contributions
shall be invested, provided that such investments must be in accordance with
Section 3.5;
(c) Designate a Beneficiary or Beneficiaries to
receive any payments which may be due under the Plan upon his death;
(d) Contain such other or additional information
as in the opinion of the Committee is desirable or necessary in the operation
of the Plan.
(e) Notwithstanding anything herein to the
contrary, an Employee shall not be entitled to make contributions or
deferrals for any calendar month which commenced prior to the Employee's
specification of the amount of contributions or deferrals to be deducted from
his Compensation, nor shall he be entitled to retroactively increase his
specified contributions or deferrals.
(f) The aggregate Compensation Deferrals and
Participant Contributions specified by a Participant pursuant to Section
2.3(a) shall not exceed 14% of such Participant's Compensation.
SECTION 2.4 DESIGNATION OF BENEFICIARY. Upon forms
provided by the Committee, each Employee who becomes a Participant shall
designate in writing the Beneficiary or Beneficiaries whom such Employee
desires to receive any benefits payable under this Plan in the event of such
Employee's death. A Participant may from time to time change his designated
Beneficiary or Beneficiaries without
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<PAGE>
the consent of such Beneficiary or Beneficiaries by filing a new designation
in writing with the Committee. However, if a married Participant wishes to
designate a person other than his spouse as Beneficiary, such designation
shall be consented to in writing by the spouse, which consent shall
acknowledge the effect of the designation and be witnessed by a Plan
representative or a notary public. The Participant may change any election
designating a Beneficiary or Beneficiaries without any requirement of further
spousal consent if the spouse's consent so provides. Notwithstanding the
foregoing, spousal consent shall be unnecessary if it is established (to the
satisfaction of a Plan representative) that there is no spouse or that the
required consent cannot be obtained because the spouse cannot be located, or
because of other circumstances prescribed by Treasury Regulations. The
Company, the Committee and the Trustee may rely upon his designation of
Beneficiary or Beneficiaries last filed in accordance with the terms of this
Plan. Upon the dissolution of marriage of a Participant, any designation of
the Participant's former spouse as a Beneficiary shall be treated as though
the Participant's former spouse had predeceased the Participant, unless (i)
the Participant executes another Beneficiary designation that complies with
this Section 2.4 and that clearly names such former spouse as a Beneficiary,
or (ii) a court order presented to the Committee prior to distribution on
behalf of the Participant explicitly requires the
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<PAGE>
Participant to continue to maintain the former spouse as the Beneficiary. In
any case in which the Participant's former spouse is treated under the
Participant's Beneficiary designation as having predeceased the Participant,
no heirs or other beneficiaries of the former spouse shall receive benefits
from the Plan as a Beneficiary of the Participant except as provided
otherwise in the Participant's Beneficiary designation.
SECTION 2.5 DATE OF PARTICIPATION. Once the application
for participation is completed, participation shall become effective on the
date of eligibility specified in Section 2.1 and shall continue during the
Participant's employment with the Company or Participating Employer.
ARTICLE III
PARTICIPANT'S CONTRIBUTIONS
SECTION 3.1 PARTICIPANT CONTRIBUTIONS.
(a) A Participant may make Participant
Contributions which shall be made solely by payroll deductions from his
Compensation and the amounts so deducted shall be paid to the Trustee on or
before ninety days following the time when the deduction is made. The
amount, which shall be specified under Section 2.3(a) and deducted under this
Section, shall be in whole percentages from 1% to 14% of his Compensation as
specified by the Participant, subject to the limitation in Section 2.3(f).
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<PAGE>
(b) Notwithstanding any provision in this Plan to the
contrary, if, due to federal or state tax withholding requirements the net
amount of after-tax Compensation payable to a Participant by the Company for
a pay period is less than the Compensation percentage specified by the
Participant in accordance with Section 2.3(a), the Participant may make a
cash contribution to the Plan equal to the difference between the
Participant's contribution for the payroll period by payroll deduction, if
any, and the Compensation percentage specified by the Participant. Any
direct cash contribution by a Participant with respect to a payroll period in
accordance with this Section 3.1(d) shall be made within thirty (30) days
following the last day of such payroll period.
SECTION 3.2 COMPENSATION DEFERRALS.
(a) ELECTION TO DEFER. Subject to the limitations in
Sections 2.3(f), 3.8, 3.9 and Appendix A, each Participant may elect
Compensation Deferrals, in writing in the manner prescribed by the Committee,
in whole percentages from 1% to 14% of the Participant's Compensation for
each payroll period. The Participant's compensation shall be reduced by the
amount of his Compensation Deferrals, which shall be credited to the
Participant's Compensation Deferral Account, and shall be made in accordance
with rules established by the Committee.
(b) STATUS OF COMPENSATION DEFERRALS. To make Compensation
Deferrals under this Section, the Company will
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<PAGE>
reduce the Participant's compensation in the amount authorized by the
Participant and make a contribution to the Trustee equal to such reduction as
of the earliest date on which such amount can reasonably be segregated from
the Company's general assets, not to exceed 90 days from the date on which
such amount would otherwise have been payable to the Participant in cash, or
as of such earlier date as may be required by regulations issued pursuant to
ERISA. Effective February 3, 1997, to make Compensation Deferrals under this
Section, the Company will reduce the Participant's compensation in the amount
authorized by the Participant and make a contribution to the Trustee equal to
such reduction as of the earliest date on which such amount can reasonably be
segregated from the Company's general assets, not to occur later than the
15th business day of the month following the month in which such amount would
otherwise have been payable to the Participant in cash, or as of such earlier
date as may be required by regulations issued pursuant to ERISA, or as of
such later date as may be applicable if the Company qualifies for an
extension of time to make such payment pursuant to regulations issued under
ERISA. Compensation Deferrals constitute Company contributions under the
Plan and are intended to qualify as elective contributions under Code Section
401(k).
(c) GENERAL LIMITATIONS ON COMPENSATION DEFERRALS. As of the
last day of the Plan Year, the Committee shall determine the amount of
Compensation
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<PAGE>
Deferrals in excess of those permitted under Section 3.8 of the Plan, and any
excess shall be distributed to the Participant responsible for the excess
Compensation Deferral in accordance with the Code, Treasury Regulations and
Section 3.9(d).
SECTION 3.3 CHANGE IN PARTICIPANT'S CONTRIBUTIONS. A
Participant may as of the first day of any calendar month change the
specifications with respect to payroll deductions made under Section 2.3(a),
3.1(a) and 3.2(a) to another specification permitted under such Sections by
filing an application to change such specification in such form and with such
person as the Committee shall designate. Such change in specification shall
not become effective until the first day of the calendar month which is at
least thirty days after the filing of such application.
SECTION 3.4 CESSATION OF PARTICIPATION. A Participant who
changes his specification to direct that no contributions shall be deducted
from his Compensation shall have such change effective as of the next regular
payroll period and need not wait until the beginning of the next calendar
month; provided, however, that such Participant may not again change such
specification to begin further contributions sooner than the beginning of the
payroll period in the calendar month coinciding with or next
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<PAGE>
following three (3) months after the first payroll date for which no
contribution is made by that Participant.
SECTION 3.5 INVESTMENT FUNDS.
(a) Five separate Investment Funds shall be established and
maintained by the Committee under this Plan. The Committee, the Trustee or the
Investment Manager shall determine the investments to be made under the
Investment Funds. The Investment Funds shall be (i) a Fixed Income Fund,
(ii) a S&P 500 Index Stock Fund, (iii) a Growth & Income Stock Fund, (iv) a
Balanced Fund, and (v) a Self-managed Account.
(b) Pursuant to rules established by the Committee and
subject to the provisions of this Section, each Participant shall have the
right and obligation to designate, in 10% increments, in which of the Investment
Funds his Accounts will be invested, and to change such designation. The
designation shall be on such forms as are established by the Committee or
pursuant to such other methods (including telephonic transfers if authorized by
the Committee). The Committee shall describe to the Participants the
investments to be made under each Investment Fund in such detail as the
Committee deems appropriate in its sole discretion.
(c) Participant loans made pursuant to this Plan shall not
be included in any of the Investment Funds. Instead, for any Participant who
takes such a loan, such loan shall be considered an investment of his Accounts.
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<PAGE>
Such Participant's Accounts shall be credited with the investment gain or
loss attributable to such loan. The Committee may establish other rules,
regulations, and procedures regarding the Investment Funds as it deems
appropriate in its sole discretion.
SECTION 3.6 VALUATION OF ACCOUNTS.
(a) The value of the Accounts invested in the Investment
Funds shall be established on each business day by the Trustee or the applicable
Investment Manager, and investment gains and losses shall be allocated to such
Accounts according to the investment elections of Participants.
(b) Notwithstanding anything to the contrary herein, if the
Committee determines that an alternative method of allocating earnings and
losses would better serve the interests of Participants and Beneficiaries or
could be more readily implemented, the Committee may substitute such
alternative; provided that any such alternative method must result in Plan
earnings being allocated on the general basis of Account balances.
SECTION 3.7 SECTION 404(c) PROVISIONS.
(a) This Plan is intended to constitute a plan described in
Section 404(c) of ERISA, and the regulations thereunder. As a result, with
respect to elections described in this Plan and any other exercise of control by
a Participant or his or her Beneficiary over assets in the Participant's
Accounts, such Participant or Beneficiary
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<PAGE>
shall be solely responsible for such actions and neither the Trustee, the
Committee, the Company, an Investment Manager nor any other person or entity
which is otherwise a Fiduciary shall be liable for any loss or liability
which results from such Participant's or Beneficiary's exercise of control.
(b) The Committee shall provide to each Participant or his or
her Beneficiary the information described in Section 2530.404b-1(b)(2)(i)(B)(1)
of the Department of Labor Regulations. Upon request by a Participant or his or
her Beneficiary, the Committee shall provide the information described in
Section 2530.404b-1(b)(2)(i)(B)(2) of the Department of Labor Regulations.
(c) The Committee may take such other actions or implement
such other procedures as it deems necessary or desirable in order that the Plan
comply with Section 404(c) of ERISA.
SECTION 3.8 SECTION 402(g) LIMIT ON COMPENSATION DEFERRALS.
(a) Compensation Deferrals made on behalf of any Participant
under this Plan and all other plans (which are described in Section 3.8(c))
maintained by the Company or an Affiliated Employer shall not exceed the
limitation under Code Section 402(g)(1) for the taxable year of the Participant,
as adjusted annually under Section 402(g)(5) of the Code, and shall be effective
as of January 1 of each calendar year.
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<PAGE>
(b) In the event that the dollar limitation provided for in
Section 3.8(a) is exceeded, the Participant is deemed to have requested a
distribution of the excess amount by the first March 1 following the close of
the Participant's taxable year, and the Committee shall distribute such excess
amount, and any income allocable to such amount, to the Participant by
April 15th. In determining the excess amount distributable with respect to a
Participant's taxable year, excess Compensation Deferrals previously distributed
or redesignated as after-tax contributions for the Plan Year beginning with or
within such taxable year shall reduce the amount otherwise distributable under
this Subsection (b).
(c) In the event that a Participant is also a participant in
(1) another qualified cash or deferred arrangement as defined in Section 401(k)
of the Code, (2) a simplified employee pension, as defined in Section 408(k) of
the Code, or (3) a salary reduction arrangement, within the meaning of
Section 3121(a)(5)(D) of the Code, and the elective deferrals, as defined in
Section 402(g)(3) of the Code, made under such other arrangement(s) and this
Plan cumulatively exceed the dollar limit under Section 3.8(a) for such
Participant's taxable year, the Participant may, not later than March 1
following the close of his taxable year, notify the Committee in writing of such
excess and request that the Compensation Deferrals made on his behalf under this
Plan be reduced by an amount specified by the Participant.
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<PAGE>
The Committee may then determine to distribute such excess in the same manner
as provided in Section 3.8(b).
SECTION 3.9 SECTION 401(k) LIMITATIONS ON COMPENSATION
DEFERRALS.
(a) The Committee will estimate, as soon as practical before
the close of the Plan Year and at such other times as the Committee in its
discretion determines, the extent, if any, to which Compensation Deferral
treatment under Section 401(k) of the Code may not be available to any
Participant or class of Participants. In accordance with any such estimate, the
Committee may modify the limits in Section 3.2(a), or set initial or interim
limits, for Compensation Deferrals relating to any Participant or class of
Participants. These rules may include provisions authorizing the suspension or
reduction of Compensation Deferrals above a specified dollar amount or
percentage of Compensation.
(b) For each Plan Year, an actual deferral percentage will be
determined for each Participant equal to the ratio of the total amount of the
Participant's Compensation Deferrals allocated under Section 3.2(a) for the
Plan Year divided by the Participant's Compensation in the Plan Year. For
purposes of this Section 3.9, "Compensation" shall meet the requirements of
Section 414(s) of the Code and Treasury Regulations. For Plan Years commencing
on or before December 31, 1996, in the case of
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<PAGE>
family members treated as a single Highly Compensated Employee under
Paragraph (a)(v) of the definition of "Highly Compensated Employee" in
Article I, in accordance with the family aggregation rules of Section
414(q)(6) of the Code, the actual deferral percentage shall be determined by
combining the Compensation Deferrals and Compensation of all eligible family
members. Except to the extent taken into account in the preceding sentence,
the Compensation Deferrals and Compensation of such family members shall be
disregarded for purposes of determining the actual deferral percentages for
the group of non-Highly Compensated Employees under this Section 3.9. An
Employee's Compensation taken into account for this purpose shall be limited
to Compensation received during the Plan Year while the Employee is a
Participant. Except as otherwise provided in this Section 3.9(b), with
respect to Participants who have made no Compensation Deferrals under this
Plan, such actual deferral percentage will be zero.
(c) The average of the actual deferral percentages for Highly
Compensated Employees ("High Average") when compared with the average of the
actual deferral percentages for non-Highly Compensated Employees ("Low Average")
must meet one of the following requirements:
(1) The High Average is no greater than 1.25 times the Low
Average; or
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<PAGE>
(2) The High Average is no greater than two times the Low
Average, and the High Average is no greater than the Low Average plus
two percentage points.
(d) If, at the end of a Plan Year, a Participant or class of
Participants has excess Compensation Deferrals, then the Committee may elect, at
its discretion, to pursue any of the following courses of action or any
combination thereof:
(i) Excess Compensation Deferrals, and any earnings
attributable thereto through the end of the Plan Year, may be
distributed to the Participant within the 2-1/2 month period following
the close of the Plan Year to which the excess Compensation Deferrals
relate to the extent feasible, but in all events no later than 12
months after the close of such Plan Year. A Participant's Supplemental
Compensation Deferrals, and any earnings thereon, shall be distributed
prior to his or her Matched Compensation Deferrals, and any earnings
thereon.
(ii) The Company, in its discretion, may make a contribution
to the Plan, which will be allocated as a fixed dollar amount among the
Accounts of some or all non-Highly Compensated Employees (as determined
by the Company) who have met the requirements of Section 2.1. Such
contributions shall be fully (100%) vested at all times, and shall be
subject to the withdrawal restrictions which are applicable to
Compensation
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<PAGE>
Deferrals. Such contributions shall be considered "Qualified
Non-Elective Contributions" under applicable Treasury
Regulations.
Any such excess Compensation Deferrals distributed from the Plan with respect
to a Participant for a Plan Year shall be reduced by any amount previously
distributed to such Participant under Section 3.8(b) for the Participant's
taxable year ending with or within such Plan Year.
(e) The amount of the excess Compensation Deferrals will be
determined by the Committee by reducing the actual deferral percentage of the
Highly Compensated Employee(s) with the highest actual deferral percentage to
the extent required to enable the Plan to meet the limits in (c) above or to
cause the actual deferral percentage of such Highly Compensated Employee(s)
to equal the actual deferral percentage of the Highly Compensated Employee(s)
with the next-highest actual deferral percentage. The process in the
preceding sentence shall be repeated until the Plan satisfies the limits in
(c) above. In the case of family members subject to the family aggregation
rules of Section 414(q)(6) of the Code, excess Compensation Deferrals will be
allocated among family members in proportion to the Compensation Deferrals of
each family member that have been combined under Section 3.9(b) above.
Effective for Plan Years commencing after December 31, 1996, the amount of
the excess Compensation Deferrals will be determined by the Committee by
reducing the Compensation Deferrals of the
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<PAGE>
Highly Compensated Employee(s) with the highest actual Compensation Deferrals
to the extent required to enable the Plan to meet the limits in (c) above or
to cause the amount of such deferrals to equal the Compensation Deferrals of
the Highly Compensated Employee(s) with the next-highest actual Compensation
Deferrals. The process in the preceding sentence shall be repeated until the
Plan satisfies the limits in (c) above. The earnings attributable to excess
Compensation Deferrals will be determined in accordance with Treasury
Regulations. The Committee will not be liable to any Participant (or his
Beneficiary, if applicable) for any losses caused by inaccurately estimating
or calculating the amount of any Participant's excess Compensation Deferrals
and earnings attributable to the Compensation Deferrals.
(f) If the Committee determines that an amount to be
deferred pursuant to the election provided in Section 3.2 would cause Company
contributions under this and any other tax-qualified retirement plan
maintained by any Company to exceed the applicable deduction limitations
contained in Section 404 of the Code, or to exceed the maximum Annual
Addition determined in accordance with Appendix A, the Committee may treat
such amount in accordance with the rules in Section 3.9(d)(2) hereof.
(g) In the discretion of the Committee, the tests described
in this section may be applied by aggregating the Plan with any other defined
contribution plans permitted under the Code. For purposes of determining
whether the
38
<PAGE>
Plan satisfies the requirements of this Section 3.9, all Compensation
Deferrals and Elective Contributions under any other Plan maintained by the
Company which is aggregated with this Plan for purposes of Section 401(a) or
410(b) of the Code (other than Section 410(b)(2)(A)(ii)) are to be treated as
made under a single plan. Furthermore, if two or more plans are permissively
aggregated for purposes of the test described in this section, the aggregated
plans must also satisfy Code Sections 401(a)(4) and 410(b) as though they
were a single plan.
SECTION 3.10 SECTION 401(m) LIMITATIONS ON PARTICIPANT
CONTRIBUTIONS AND MATCHING COMPANY CONTRIBUTIONS.
(a) The Committee will estimate, as soon as practicable,
before the close of the Plan Year and at such other times as the Committee in
its discretion determines, the extent to which Participant Contributions
and/or Matching Company Contributions may not be available to any Participant
or class of Participants under Code Section 401(m). In accordance with any
such estimate, the Committee may modify the limits in Section 3.1 or set
initial or interim limits, for Participant Contributions and/or Matching
Company Contributions relating to any Participant or class of Participants.
The tests of this Section 3.10 shall be performed separately with respect to
the Company and Participating Employers together with their respective
Affiliated Employers.
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<PAGE>
(b) For each Plan Year, a contribution percentage will be
determined for each Eligible Employee equal to the ratio of the total amount
of the Participant Contributions and Matching Company Contributions allocated
under Sections 3.1 and 4.1 for the Plan Year divided by the Eligible
Employee's Compensation in the Plan Year during which the Eligible Employee
was eligible to participate in the Plan. For Plan Years commencing on or
before December 31, 1996, in the case of family members treated as a single
Highly Compensated Employee under Paragraph (a)(v) of the definition of
"Highly Compensated Employee," in accordance with the family aggregation
rules of Section 414(q)(6) of the Code, the contribution percentage shall be
determined by combining the Participant Contributions, Matching Company
Contributions and Compensation of all eligible family members. Except to the
extent taken into account in the preceding sentence, the Participant
Contributions, Matching Company Contributions, and Compensation of such
family members shall be disregarded for purposes of determining the average
of the contribution percentages for the group of non-Highly Compensated
Employees under this Section 3.10(b). Except as otherwise provided in this
Section 3.10(b), with respect to Eligible Employees who have made no
Participant Contributions and for whom there were no Matching Contributions
under this Plan, such contribution percentage will be zero.
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<PAGE>
(c) The average of the contribution percentages for Highly
Compensated Employees ("High Average") when compared with the average of the
contribution percentages for non-Highly Compensated Employees ("Low Average")
must meet one of the following requirements:
(i) The High Average is no greater than 1.25
times the Low Average; or
(ii) The High Average is no greater than two
times the Low Average, and the High Average is no greater than the
Low Average plus two percentage points.
(iii) If, at the end of a Plan Year, a
Participant or class of Participants has excess contributions, then the
Committee may elect, at its discretion, to pursue any of the following
courses of action or any combination thereof:
(1) Matching Company Contributions
(and any earnings attributable thereto through the end of the Plan Year) that
are not vested may be forfeited.
(2) Excess Participant Contributions
and excess Matching Company Contributions (and any earnings attributable to
such excess amounts through the end of the Plan Year) may be distributed to
the Participant within the 2-1/2 month period following the close of the Plan
Year to the extent feasible, and in all events no later than 12 months after
the close of the Plan Year. The Company may distribute the Participant
Supplementary Contributions
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<PAGE>
before distributing any Participant Matched Contributions or may distribute
(or forfeit pursuant to clause i above) Matching Company Contributions prior
to distributing any Participant Matched Contributions.
(e) The amount of excess Participant Contributions
and Matching Company Contributions shall be determined by the Committee by
reducing the contribution percentage of the Highly Compensated Employees with
the highest contribution percentage to the extent required to enable the Plan to
meet the limits in (c) above or to cause the contribution percentage of such
Participants to equal the contribution percentage of the Highly Compensated
Employees with the next-highest contribution percentage. The process in the
preceding sentence shall be repeated until the Plan satisfies the limits in (c)
above. The earnings attributable to excess contributions will be determined in
accordance with Treasury Regulations. The Company and Committee will not be
liable to any Participant (or to his Beneficiary, if applicable) for any losses
caused by inaccurately estimating or calculating the amount of any Participant's
excess contributions and earnings attributable to such contributions.
(f) For purposes of performing the tests described in
this Section:
(i) if, for purposes of meeting the
requirements of Sections 401(m), 401(a)(4) and 410(b) of the Code
(other than Section 410(b)(2)(A)(ii) of the
42
<PAGE>
Code), this Plan is aggregated with any other plan(s) of the Company
which provide for elective deferrals, employer matching and/or
employee after-tax contributions, then all contributions subject to
Section 401(m) of the Code that are made under this Plan and such
other plan(s) shall be treated as having been made under one plan;
and
(ii) if any Highly Compensated Employee under this
Plan participates in any other plan(s) of the Company which provide
for elective deferrals, employer matching and/or employee after-tax
contributions, then all contributions made by such Highly
Compensated Employee under this Plan and such other plan(s) shall be
treated as having been made under one plan.
SECTION 3.11 ROLLOVER CONTRIBUTIONS.
(a) An Eligible Employee, regardless of whether he has
satisfied the participation requirements of Section 2.1 who, as a result of a
termination of employment, disability or attainment of age 59-1/2, has
received a distribution from a plan which meets the requirements of Section
401(a) of the Code may, in accordance with procedures approved by the
Committee, transfer the distribution received from the other plan to the
Trust; provided that the distribution is eligible for rollover treatment and
exclusion from the gross income of the Participant in accordance with Section
402(a)(5) of the Code.
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(b) The Committee shall develop such procedures, and may
require such information from an Employee desiring to make such a transfer,
as it deems necessary or desirable to determine that the proposed transfer
will meet the requirements of this Section. Upon approval by the Committee,
the amount transferred shall be deposited in the Trust and shall be credited
to an account which shall be referred to as the "Rollover Account." Such
account shall be 100% vested in the Employee and shall share in income
allocations as provided in the Plan, but shall not share in Company
contribution allocations. Upon termination of employment, the total amount of
the Employee's Rollover Account shall be distributed in accordance with
Article VI.
(c) Upon such transfer by an Eligible Employee who has not
yet completed the participation requirements of Section 2.1, his Rollover
Account shall represent his sole interest in the Plan until he becomes a
Participant.
ARTICLE IV
COMPANY CONTRIBUTIONS
SECTION 4.1 MATCHING COMPANY CONTRIBUTIONS. With respect to
Participant's who have completed five or fewer Years of Service, at the time
such Participant's contributions are paid to the Trustee, the Company will pay
to the Trustee a corresponding contribution equal to fifty percent (50%) of the
Participant Contributions or Compensation Deferrals for the payroll period of
each such
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Participant (reduced by certain forfeitures as provided in Section 6.3);
provided that the maximum Matching Company Contribution made on behalf of any
such Participant shall not exceed 3% of such Participant's Compensation
during the payroll period. With respect to Participant's who have completed
more than five Years of Service, at the time such Participant's contributions
are paid to the Trustee, the Company will pay to the Trustee a corresponding
contribution equal to seventy-five percent (75%) of the Participant
Contributions or Compensation Deferrals for the payroll period of each such
Participant (reduced by certain forfeitures as provided in Section 6.3);
provided that the maximum Matching Company Contribution made on behalf of any
such Participant shall not exceed 4.5% of such Participant's Compensation
during the payroll period. Matching Company Contributions shall be deemed to
be made first with respect to a Participant's Compensation Deferrals, and
then, in the event that such Participant's Matching Company Contributions
exceed the maximum amount which could have been made with respect to his or
her Compensation Deferrals, with respect to his or her Participant
Contributions. Notwithstanding the foregoing, to the extent determined by the
Company, the Company may at its sole discretion make an additional Matching
Contribution for any Plan Year on behalf of Participants whose Compensation
does not exceed a specified dollar amount ("Eligible Participants"). Such
additional Matching Company Contribution for a Plan Year
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<PAGE>
shall be allocated among Eligible Participants who are Employees as of the
last day of such Plan Year in the proportion that each such Eligible
Participant's Matched Contributions for the Plan Year bears to the total of
Matched Contributions by all such Eligible Participants for such Plan Year.
Any additional Matching Company Contribution shall be made within the time
prescribed under Section 404 of the Code and such contribution shall be
deemed to be made with respect to that Participant's Compensation Deferrals.
The Company shall pay to the Trustee the Company Matching
Contribution for any Plan Year within the time prescribed by law, including
extensions of time for filing the Company's federal income tax return for the
Company's taxable year ending with or within the Plan Year to which the
contribution relates.
Contributions by the Company shall be made without regard to
current and accumulated profits for the year; provided, however, that the Plan
shall continue to be designed to qualify as a profit sharing plan for purposes
of Sections 401(a) et seq. of the Code.
SECTION 4.2 ALLOCATION OF MATCHING COMPANY CONTRIBUTIONS.
Contributions made by the Company for any payroll period shall be allocated to
the Company Contribution Account maintained for the Participant on behalf of
whom the contribution under Section 4.1 was made. No part of the contributions
paid by the Company to the Trustee shall be recoverable by the Company, and it
is
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intended that the contributions not be used for or diverted to purposes other
than for the exclusive benefit of the Participants.
SECTION 4.3 CONTRIBUTION LIMITS. Notwithstanding anything
else contained herein, the Annual Additions, to all the Accounts of a
Participant shall not exceed the lesser of $30,000 (or, if greater, 1/4 of
the defined benefit dollar limitation in effect under Section 415(b)(1) of
the Code for the limitation year) or 25% of the Participant's Section 415
Compensation from the Company or Affiliated Employers during the Plan Year,
in accordance with the provisions of Appendix A attached hereto.
SECTION 4.4 LIMIT OF DEDUCTIBLE CONTRIBUTIONS BY THE
COMPANY. The amount of the contribution made by the Company or a Participating
Employer for any fiscal year shall not exceed the amount deductible by such
Company or Participating Employer for federal income tax purposes, including
any amounts which may be carried forward.
ARTICLE V
PARTICIPANT'S ACCOUNTS
SECTION 5.1 ACCOUNT BALANCES. There shall be maintained
for each Participant a Participant Contribution Account, a Compensation
Deferral Account, a Rollover Account, and a Company Contribution Account
which shall show the dollar value of his current interest in the Trust Fund
valued pursuant to Section 3.6, including the Participant
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Contributions and Compensation Deferrals made by the Participant during the
calendar month through such date, the Matching Company Contributions made
during the calendar month through such date on behalf of each such
Participant, and all forfeitures allocated to such Participant under this
Plan during the calendar month through such date. For purposes of
determining a Participant's basis in his Account under Section 72(e) of the
Code, his interest in the Participant Contribution Account attributable to
any pre-1987 Participant Supplementary Contributions and pre-1987 Participant
Matched Contributions shall be separately accounted for.
SECTION 5.2 ALLOCATION OF EARNINGS, LOSSES AND CHANGES IN
FAIR MARKET VALUE OF THE NET ASSETS OF THE FUNDS. Earnings, losses and
changes in fair market value of the net assets of each fund comprising the
Investment Funds shall be allocated as of the date provided in Section 3.6 to
the Participant's Accounts in the ratio which the dollar value of the
interest of each such Participant in the respective fund bears to the dollar
value of the interests in such fund of all such Participants as of the most
recent Valuation Date.
SECTION 5.3 VESTING OF PARTICIPANT'S INTERESTS.
(a) FULLY VESTED ACCOUNTS. A Participant's
Participant Contribution Account, Compensation Deferral Account, and Rollover
Account shall be 100% vested and nonforfeitable.
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(b) COMPANY CONTRIBUTION ACCOUNT. A Participant's
interest allocated to his Company Contribution Account shall become vested to
the extent of twenty-five percent (25%) upon completion of two Years of
Service and twenty-five percent (25%) for each additional Year of Service.
Therefore, a Participant shall be fully vested in his Company Contribution
Account balance after five Years of Service. Any portion of the interest of
a Participant which shall not have become vested as herein provided shall be
a forfeitable interest.
(i) With respect to an Employee who has a
One-Year Break in Service, such Employee's pre-break and post-break service
will be aggregated for vesting purposes only after the Employee's post-break
service is at least one year.
(ii) If any Employee has five (5) or more
consecutive One Year Breaks in Service and the number of such consecutive
Breaks in Service is greater than the number of Years of Service he had prior
to such break, and if such Employee has no vested benefits under this Plan
derived from contributions by the Company at the time of said break, then
Years of Service prior to such break shall not be added to the Years of
Service after such break for vesting purposes.
(c) DISCONTINUANCE OF CONTRIBUTIONS. If the Company shall,
for any reason, completely discontinue its contributions to the Trust Fund,
the entire interest of each
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Participant in his Company Contribution Account shall be one hundred percent
(100%) vested.
(d) VALUATION OF AMOUNTS DISTRIBUTABLE. The value of
Participant Account balances shall be determined as of the Valuation Date
immediately preceding the date of distribution.
(e) VESTING ON DEATH OR NORMAL RETIREMENT. When any
Participant shall reach his Normal Retirement Age or shall die, or shall
suffer total disability while an Employee, his entire interest in the Trust
Fund shall become one hundred percent (100%) vested without regard to his
period of employment.
(f) PLAN PROVISIONS GOVERN DISTRIBUTION. Any interest in
the Trust Fund, whether forfeitable or vested, shall be and become payable to
such Participant or his Beneficiaries only as and to the extent provided in
this Plan, and a Participant or a former Participant who dies having
designated a Beneficiary shall cease to have any interest hereunder or in his
separate Account, and his Beneficiary shall become entitled to payment
thereof solely as provided by the terms of this Plan.
(g) AMENDMENT OF VESTING SCHEDULE. If the vesting schedule
under the Plan is amended or if the Plan is amended in any way that directly
or indirectly affects the computation of a Participant's vested interest in
the Trust Fund, each Participant who has completed at least three (3) Years
of Service may elect, within a reasonable time after
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the adoption of the amendment, to continue to have such vested interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence with the date the amendment is
adopted and shall end on the latest of: (i) 60 days after the amendment is
adopted; (ii) 60 days after the amendment is effective; or (iii) 60 days
after the Participant is issued written notice of the amendment.
ARTICLE VI
DISTRIBUTION FROM TRUST FUND
SECTION 6.1 WHEN INTERESTS BECOME DISTRIBUTABLE AND EFFECT
THEREOF.
(a) UPON DEATH, DISABILITY OR RETIREMENT. When a
Participant dies, suffers total disability or retires, his entire interest in
the Trust Fund as defined in this Plan, which shall have become one hundred
percent (100%) vested as provided in Article V hereof, shall thereupon become
distributable as hereinafter provided.
(b) UPON TERMINATION OF EMPLOYMENT. When a Participant's
employment is terminated for any reason other than death, total disability or
retirement, such portion of his interest in the Trust Fund as shall have
become vested as provided in Article V hereof shall thereupon become
distributable as hereinafter provided.
(c) EFFECT OF INTEREST BECOMING DISTRIBUTABLE. When a
Participant's vested interest shall become
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distributable upon termination of employment for any reason, as provided in
this Section 6.1, such Participant, or his designated Beneficiary, shall
cease to have any further interest or participation in the Trust Fund, or any
subsequent accrual or contributions thereto, except the right to receive, in
accordance with this Plan, payment of the value of his vested Account
balance.
SECTION 6.2 PAYMENT.
(a) DISTRIBUTION UPON RETIREMENT OR DISABILITY. A
Participant whose termination of employment occurs on or after attaining
Normal Retirement Age or Disability Retirement Date shall, prior to the
commencement of benefits, make an election with respect to the method of
payment of his interest in the Trust Fund. The Committee shall then
institute one of the following methods of payment, as elected by the
Participant, normally within ninety (90) days of said election to the extent
administratively feasible:
(i) Payment of the entire interest in cash
in a lump sum.
(ii) Transfer of the entire interest to a
separate account for the Participant as described in Section 6.2(d), and
payment thereof, including earnings to the Participant or Beneficiary, in
substantially equal monthly installments not to exceed 120.
Notwithstanding the preceding provisions of this Section
6.2(a), no payment period shall extend beyond the
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maximum period prescribed under Section 401(a)(9)(A) of the Internal Revenue
Code. In the event a Participant or Beneficiary shall fail to make a timely
election with respect to the method of payment, payment shall be made in a
cash lump sum and shall be made as soon as practicable following attainment
of Normal Retirement Age or Disability Retirement Date.
(b) DISTRIBUTION UPON DEATH.
If such Participant's interest is to be distributed because
of his death, his Beneficiary or Beneficiaries shall be paid the entire
amount of his interest in a lump sum within ninety (90) days after the
receipt of notice of death and any other documents deemed appropriate by the
Committee to the extent administratively feasible; provided, however, if an
election for payment other than lump sum is in effect under Section 6.2(a),
the selected mode of payment shall continue, and the method of distribution
shall be at least as rapid as in effect on the date of the Participant's
death. However, a Beneficiary may make an election to have the Participant's
interest payable in installments, as provided in Section 6.2(a). Neither the
Trustee nor the Company shall in any way be responsible for payment of death
taxes attributable to payment of benefits hereunder. Notwithstanding the
preceding provisions of this Section 6.2(b), no payment period shall extend
beyond the maximum period described by Code Section 401(a)(9), and, if
payment is to be made in a lump sum, the Participant's
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interest shall be distributed within five (5) years of the Participant's
death.
(c) DISTRIBUTION UPON TERMINATION OF EMPLOYMENT.
If a Participant's employment terminates prior to his Normal Retirement Age
for any reason other than death or total disability, his vested interest in
the Trust Fund shall be distributable in cash in a lump sum after receipt by
the Committee of all required documentation, as follows:
(i) In the case of a Participant whose
vested interest does not exceed $3,500, distribution shall be made within
ninety (90) days following the Participant's termination of employment to the
extent administratively feasible, whether or not the Participant consents to
such distribution.
(ii) In the case of a Participant whose
vested interest exceeds $3,500 distribution shall be made, to the extent
administratively feasible, within ninety (90) days after the Participant's
termination of employment, but only after the receipt by the Committee of the
properly completed application of the Participant and any other required
documentation to request distribution, including the Participant's consent to
the distribution.
(iii) If a Participant described in (ii)
above fails to consent to distribution of his vested interest prior to ninety
(90) days following the Participant's termination of employment, the
provisions of Section 6.2(d) shall apply. Such a Participant shall be deemed
to have
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made an election to defer distribution to his Normal Retirement Age, unless
prior to Normal Retirement Age and in accordance with (ii) above the
Participant submits a request for an earlier distribution.
(d) TRANSFER FOR DEFERRED PAYMENTS. A terminated
Participant's forfeitable interest in the Trust Fund, if any, and any vested
interest of the Participant that is not distributed prior to ninety (90) days
following the Participant's termination of employment, pursuant to (i) an
election of an installment distribution under Section 6.2(a) or (ii) the
deferral of the distribution under Section 6.2(c), shall be transferred to
and held in the Short-Term Money Market Income Fund or equivalent fund as
designated by the Committee.
(e) REQUIRED DISTRIBUTION DATE.
(i) Unless a Participant elects otherwise
in writing, payment of benefits hereunder shall commence, notwithstanding
anything to the contrary contained herein, no later than sixty days following
the close of the later of the Plan Year in which (1) the Participant reaches
Normal Retirement Age, (2) the Participant terminates employment, or (3) in
which occurs the tenth anniversary of the year in which the Participant
commenced participation in the Plan (unless the amount of the Participant's
benefit has not been calculated by that date or the Participant cannot be
located, in which case distribution shall begin no later
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than sixty days after the payment can be calculated or the Participant
located).
(ii) Notwithstanding anything to the
contrary contained herein, the distribution options under the Plan shall
comply with Section 401(a)(9) of the Code and regulations promulgated
thereunder, which are hereby incorporated by this reference as a part of the
Plan. Accordingly, unless otherwise permitted by law, the entire interest of
each Participant shall be distributed by April 1 of the calendar year
following the calendar year in which the Participant reaches age 70-1/2.
However, effective January 1, 1997 and only with respect to a Participant who
is not a five percent (5%) owner of the Company or an Affiliated Employer at
any time during Plan Year ending in the calendar year in which he or she
attains age 70-1/2, and except as otherwise provided by law, such a
Participant is not required to receive a distribution of his or her interest
until the April 1 of the calendar year following the calendar year in which
he or she retires. Except as provided by law, a Participant who reached age
70-1/2 before January 1, 1988 and who was not a five percent owner of the
Company at any time during the Plan Year ending with or within the calendar
year in which the Participant attains age 66-1/2 or thereafter, is not
required to receive distribution of his interest until he separates from
service.
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SECTION 6.3 DISPOSITION OF FORFEITABLE INTEREST - EFFECT OF
REHIRING.
(a) Subject to the provisions of (c) below, any
forfeitable portion of a Participant's interest in the Trust Fund shall be
forfeited as of the earlier of the date the Participant's vested interest is
distributed to him, as provided in Section 6.2(c), or the date the Participant
incurs five (5) consecutive Breaks in Service.
(b) Effective as of January 1, 1997, as of the last
day of each Plan year, any and all amounts forfeited by Participants shall used
to pay expenses and fees in connection with the administration of the Plan and
Trust, except that if the Company pays such expenses and fees, then the amounts
forfeited by Participants shall be applied to reduce future Matching Company
Contributions by the Company or Participating Employer that made such
contribution on behalf of the Participant.
(c) In accordance with such rules as the Committee
may prescribe, there shall be restored to the Participant's credit in his
Account the dollar value of any portion of a Participant's interest in the
Trust Fund which was forfeited upon distribution of the Participant's vested
interest in accordance with Section 6.2(c); provided, however, that such
restoration shall be made only in the case of the Participant's reemployment
as an Eligible Employee prior to sustaining five (5) consecutive one year
Breaks in Service, and only if the Participant repays to the
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Plan in cash no later than the fifth anniversary of his reemployment as an
Eligible Employee, the amount of the distribution attributable to Company
Matching Contributions and earnings thereon received at termination. The
determination of the amount the Participant is required to repay in cash
under this Subsection (c), and the determination of the dollar value of the
forfeited amount required to be restored shall be made as of the Valuation
Date the Participant's Account was valued for purposes of determining the
amount of his distribution from the Trust Fund. No adjustment in the dollar
value of the forfeited amount shall be made for any gains or losses of the
Trust Fund between the applicable Valuation Date and the restoration of the
dollar value of the forfeited portion of Participant's interest in the Trust
Fund. The repaid amount and the Participant's restored interest in the Trust
Fund shall upon repayment become a part of the Participant's new Account
balance. Said forfeited interest shall be restored from forfeitures in the
Plan Year of repayment, or as soon as available.
SECTION 6.4 SPENDTHRIFT TRUST PROVISIONS. Except as
otherwise provided hereunder, all amounts payable hereunder by the Trustee
shall be paid only to the person or persons entitled thereto, and all such
payments shall be made directly into the hands of such person or persons and
not into the hands of any other person or corporation whatsoever. The
interests of any Participant or Beneficiary
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in the Trust Fund and/or any of the benefits, payments, proceeds or avails
therefrom and under this Plan shall not be subject to claims of his
creditors, or others, or subject to attachment, garnishment, execution or
other process of law, and no Participant or Beneficiary shall have any right
to alienate, assign, anticipate, commute, pledge or encumber his interest in
the Trust Fund and/or any of the benefits, payments, proceeds or avails
therefrom or under this Plan in any manner.
SECTION 6.5 WITHDRAWAL OF CONTRIBUTIONS. Effective on the
last day of any given calendar month, or effective upon such other date as
the Committee shall determine, a Participant may, upon giving notice as
required by the Committee, withdraw a part of the dollar value of his Account
subject to the following conditions and limitations:
(a) Such withdrawal must first be made from the
Participant's pre-1987 Supplementary Contributions, if any, but exclusive of
earnings thereon. A Participant who elects to make a withdrawal of his
pre-1987 Supplementary Contributions under the provisions of this Subsection
(a) shall not be permitted to make further Participant Contributions or
Compensation Deferrals until the beginning of the calendar month following a
period of three months from the last day of the calendar month in which such
withdrawal request is made.
(b) Upon exhaustion of the Participant's pre-1987
Supplementary Contributions, any further withdrawal must
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then be made from the Participant's pre-1987 Matched Contributions, if any,
also exclusive of earnings thereon; provided, however, that any Participant
withdrawing pre-1987 Matched Contributions shall not be permitted to make
further Participant Contributions or Compensation Deferrals until the
beginning of the calendar month following a period of three months from the
last day of the calendar month in which such withdrawal request is made.
(c) Upon exhaustion of the Participant's pre-1987 Matched
Contributions, if any, exclusive of earnings thereon, any further withdrawal
must then be made from the Participant's post-1986 Participant Contributions
and earnings allocable to his aggregate Participant Contributions under the
Plan. Any such withdrawal shall be treated as an allocable withdrawal of his
post-1986 Participant Contributions and of the earnings thereon in accordance
with Section 72(e); provided, however, any withdrawal treated under Section
72(e) of the Code as a withdrawal of amounts contributed by the Participant
shall be first allocable to the Participant's Supplementary Contributions and
then to his Matched Contributions. A Participant who elects to make a
withdrawal of any or all of his post-1986 Participant Contributions and
earnings on his aggregate contributions under the provisions of this
Subsection (c) shall not be permitted to make further Participant
Contributions or Compensation Deferrals until the beginning of the calendar
month following a period of
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three months from the last day of the calendar month in which such withdrawal
request is made.
(d) Notwithstanding Subsections (a), (b), and (c), a
Participant may at any time request a withdrawal from his or her Rollover
Account.
(e) Notwithstanding Subsections (a), (b), and (c), in the
case of a Participant who has withdrawn the total dollar value of his or her
Participant Contributions, earnings allocable to such contributions, and his
or her Rollover Account, withdrawals may be made in the following order: (i)
first, from the Participant's Supplementary Compensation Deferrals, and (ii)
second, from the Participant's Matched Compensation Deferrals; exclusive of
any earnings thereon; provided, however, that a Participant must be
determined by the Committee to have an immediate and heavy financial need and
the amount withdrawn must be necessary to meet that need.
Subject to the approval of the Committee and guidelines
promulgated by the Committee, withdrawals pursuant to this Subsection (e) may
be permitted upon written request by the Participant to meet an immediate and
heavy financial need resulting from:
(i) Uninsured medical expenses previously
incurred by the Participant, or the Participant's spouse or
dependent or necessary to obtain such medical care;
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(ii) The purchase (excluding mortgage payments)
of a principal residence of the Participant;
(iii) The payment of tuition for the next 12
months of post-secondary education for the Participant, or the
Participant's spouse, children or dependents;
(iv) The prevention of eviction of the
Participant from his principal residence, or foreclosure on the
mortgage of the Participant's principal residence; and
(v) Any other event described in Treasury
Regulations or rulings as an immediate and heavy financial
need and approved by the Company as a reason for permitting
distribution under this Subsection (e).
The Committee shall determine, in a uniform
and non-discriminatory manner, whether a Participant has an
immediate and heavy financial need. A hardship distribution
may be made under this Subsection (e) only if such
distribution does not exceed the amount required to meet the
immediate financial need created by the hardship (including
taxes or penalties reasonably anticipated from the
distribution) and is not reasonably available from other
resources of the Participant.
A Participant shall not be permitted to make any hardship
withdrawals from his Accounts pursuant to this Subsection (e) until he has
obtained all distributions, other than hardship distributions, and all non-
taxable loans
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currently available under all qualified profit sharing and retirement plans
maintained by the Company or an Affiliated Employer.
The Participant's request for a hardship withdrawal shall
include his written statement that the need cannot be relieved: (i) through
reimbursement or compensation by insurance or otherwise; (ii) by reasonable
liquidation of the Participant's assets, to the extent such liquidation would
not itself cause immediate and heavy financial need; (iii) by cessation of
Participant Contributions or Compensation Deferrals under the Plan or by
cessation of contributions to any other qualified or nonqualified plans of
deferred compensation maintained by the Company or an Affiliated Employer; or
(iv) by other distributions or nontaxable loans currently available from plans
maintained by the Company or an Affiliated Employer, or by borrowing from
commercial sources on reasonable commercial terms; and a statement consenting
to the suspension of his or her Participant Contributions and Compensation
Deferrals as provided below.
A Participant who makes a hardship withdrawal shall make no
further Participant Contributions or Compensation Deferrals under this Plan or
any other qualified or nonqualified plan of deferred compensation (including
stock purchase or stock option plans, but not including any cafeteria or other
health or welfare plan) maintained by the Company or an Affiliated Employer
until
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the beginning of the calendar month following a period of twelve months from
the last day of the calendar month in which such withdrawal is made.
The Compensation Deferrals in the taxable year following a
taxable year in which a Participant makes a hardship withdrawal shall not
exceed: (1) the limit set forth in Section 3.8, minus (2) the amount of
Compensation Deferrals made by such Participant in the taxable year in which
such hardship withdrawal was made.
(f) Notwithstanding Subsections (a), (b), and (c), in the
case of a Participant who has withdrawn the total dollar value of his or her
Participant Contributions, earnings allocable to such contributions, and his
or her Rollover Account, withdrawals may be made from the Company's Matching
Contributions made with respect to that Participant's Participant
Contributions and any earnings thereon, up to the full amount thereof;
provided, however, that such Participant must be fully vested (100%) in
Company contributions at the date of such a withdrawal, and must be
determined by the Committee to have a hardship need. Participants shall not
withdraw any Company Matching Contributions made with respect to Compensation
Deferrals, or any earnings thereon. A Participant who makes a withdrawal
pursuant to this Subsection (f) shall make no further Participant
Contributions or Compensation Deferrals until the beginning of the calendar
month following a period
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of three months from the last day of the calendar month in which such
withdrawal is made.
Hardship determinations shall be made by in a uniform and
non discriminatory manner. By way of example, and not limitation, hardship
would be a financial hardship occurring in the personal affairs of a
Participant because of:
(i) A financial need of long range proportion,
such as a need for Participant's purchase of a primary home or
residence or for the post-secondary education of Participant's
children; or
(ii) A financial need of large proportion,
such as a need due to major destruction of Participant's
residence when not covered by insurance; major loss of income
caused by accident, sickness, or temporary disability of
Participant; major loss of income caused by extended layoff of at
least 90 days of Participant; major financial burden caused by
death occurring in the immediate family of Participant;
foreclosure on the mortgage of Participant's residence; and
medical expenses of Participants who are eligible to participate
in the Hilton Hotels Group Health Plans to the extent such
expenses are not otherwise covered under those plans. Such
election shall be effective as of the first day of the calendar
month which is at least 30 days following the date the election
is filed.
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(g) If a Participant's Compensation Deferrals or
Participant Contributions are suspended in the event of a withdrawal under
this Section, such contributions shall not be resumed unless the Participant
files a written election with the Committee to that effect.
(h) Withdrawals under this Section may not be in an amount
less than the lesser of the amount contributed to the Plan by the
Participant, or $500.00, and a period of 12 months must have elapsed since
the last withdrawal, except for hardship withdrawals under Subsection (d)
hereof.
SECTION 6.6 MISSING PARTICIPANT OR BENEFICIARY. If a
Participant's vested interest cannot be distributed because such Participant
or his Beneficiary or Beneficiaries cannot be located, the Trustee shall
transfer the value of the Participant's interest in the Trust Fund to the
fund described in Section 6.2(d) for the benefit of such Participant or
Beneficiary. Thereafter, if the Committee fails to locate the Participant or
Beneficiary entitled to a distribution, the entire amount set aside with
respect to such payee, plus earnings, shall be forfeited as of the beginning
of the calendar month coinciding with or next following the fifth anniversary
of the date distribution of said vested interest was first attempted. Said
forfeited amount shall be disposed of as provided in Section 6.3 hereof.
Should a Participant or Beneficiary to whom payment is due
make a claim for his vested interest in the
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Trust Fund, the vested interest so forfeited will be reinstated on behalf of
such claimant. Said reinstated vested interest shall be paid from
forfeitures arising in the Plan Year during which the claim is settled, or as
soon as available from forfeitures.
SECTION 6.7 DIRECT ROLLOVERS.
(a) This Section 6.7 applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section 6.7, a
Distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.
(b) ELIGIBLE ROLLOVER DISTRIBUTIONS: For purposes of this Section 6.7,
an "Eligible Rollover Distribution" is any distribution of all or any portion
of the balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include:
(i) any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
(ii) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
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(c) ELIGIBLE RETIREMENT PLAN: For purposes of this Section 6.7, an
"Eligible Retirement Plan" is an individual retirement account described in
Section 408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in Section 403(a) of
the Code, or a qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
(d) DISTRIBUTEE: For purposes of this Section 6.7, a "Distributee"
includes an Employee or former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are Distributees
with regard to the interest of the spouse or former spouse.
(e) DIRECT ROLLOVER: For purposes of this Section 6.7, a "Direct
Rollover" is a payment by the Plan to the Eligible Retirement Plan specified
by the Distributee."
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ARTICLE VII
COMMITTEE, INVESTMENT AND ADMINISTRATION
SECTION 7.1 APPOINTMENT OF COMMITTEE. The Committee shall consist of
three or more members appointed by the Board of Directors of the Company.
The Board of Directors shall by resolution appoint the original members of
such Committee, and such members shall hold office until resignation, death
or removal by the Board of Directors. The Committee may then select a Plan
Administrator under the Plan.
SECTION 7.2 GENERAL DUTIES AND POWERS OF COMMITTEE. The Committee
shall be charged with the administration of this Plan and shall decide,
subject to the terms of the Trust Agreement, all questions arising in the
administration, interpretation and application of this Plan, including all
questions of eligibility.
The Committee shall, from time to time, direct the Trustee concerning
the payments to be made out of the Trust Fund pursuant to this Plan and shall
have such other powers respecting the administration of the Trust Fund as may
be conferred upon it hereunder or under the Trust Agreement.
Within a reasonable time after the last day of a calendar month, the
Company shall certify to the Committee in writing the total amount of the
Company's contribution to the Trust Fund for such month and such information
from the Company's records with respect to Employees as the Committee may
require in order to determine the identity and interests
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of the Participants and otherwise to perform its duties hereunder.
Any certification by the Company of information to the Committee
pursuant to this Plan shall, for all purposes of this Plan, be binding on all
parties, provided that whenever any Employee proves to the satisfaction of
the Company that his period of employment or his Compensation as so certified
is incorrect, the Company shall correct such certification, all in accordance
with the claims procedure provided herein.
The determination of the Committee as to the identity of the respective
Participants and as to their respective interests shall be binding upon the
Company, the Trustee, the Employees, the Participants and all the
Beneficiaries.
In any matter affecting any member of the Committee in his individual
capacity as a Participant hereunder, separate and apart from his status as a
member of the group of Participants, such interested member shall have no
authority or vote in the determination of such matter as a member of the
Committee, but said Committee shall determine such matter as if said
interested member were not a member of the Committee; provided, however, that
this shall not be deemed to take from said interested member any of his
rights hereunder as a Participant. In the event that the remaining members
of the Committee should be unable to agree on any matter so affecting an
interested member
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because of an equal division of voting, the Board of Directors shall appoint
a temporary member of the Committee in order to create an odd number of
voting members.
SECTION 7.3 INVESTMENT POWERS AND DUTIES. The Committee may
direct the Trustee with respect to the investment and reinvestment of the Trust
Fund, and to the extent it exercises its power to direct the Trustee, shall be
the Fiduciary with respect to investment, management and control of Trust
assets.
The Committee may transfer to the Trustee or an Investment Manager the
authority and duty to direct the investment and management of all or a
portion of the Trust assets. Upon such transfer the Trustee or the
Investment Manager, as the case may be, shall be the Fiduciary with respect
to the investment and management of such Trust assets and the Committee shall
have no responsibility therefor. Any transfer of investment and management
to the Trustee or to an Investment Manager may be revoked upon receipt by the
Trustee and the Investment Manager, if applicable, of a notice to that effect
by the Committee. The appointment, selection and retention of a qualified
Investment Manager shall be solely the responsibility of the Committee. The
Trustee is authorized and entitled to rely upon the fact that said Investment
Manager is at all times a qualified Investment Manager until such time as the
Trustee has received a written notice from the Committee to the contrary, as
well as to rely upon the fact that said
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Investment Manager is authorized to direct the investment and management of
the assets of the aforesaid Trust until such time as the Committee shall
notify the Trustee in writing that another Investment Manager has been named
or, in the alternative, that the Investment Manager named has been removed
and the responsibility for the investment and management of the Trust assets
has been assumed by the Committee or has been transferred back to the
Trustee, as the case may be.
To the extent the Committee exercises its power to direct the Trustee
with respect to the investment and management of all or a portion of the
assets of the Trust Fund, the Trustee shall not be liable nor responsible for
losses or unfavorable results arising from the Trustee's compliance with
proper directions of the Committee which are made in accordance with the
terms of the Plan and Trust and which are not contrary to the provisions of
any applicable Federal or State statute regulating such investment and
management of the assets of an employee benefit trust. To the extent
authority and responsibility with respect to the investment and management of
all or a portion of the Trust assets are transferred to an Investment
Manager, the Trustee shall not be liable nor responsible in any way for any
losses or other unfavorable results arising from the Trustee's compliance
with investment or management directions received by the Trustee from the
Investment Manager. Any directions by the Committee shall be in accordance
with the Trust Agreement.
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Any directions by an Investment Manager shall be in accordance with an
agreement between said Manager, the Committee and the Trustee; provided,
however, the Trustee shall be under no duty to question any directions of the
Investment Manager nor to review any securities or other property of the
Trust constituting assets thereof with respect to which an Investment Manager
has investment responsibility, nor to make any suggestions to such Investment
Manager in connection therewith. The Trustee shall, as promptly as possible,
comply with any written directions given by the Committee or an Investment
Management hereunder.
The Trustee shall not be liable, in any manner nor for any reason, for
the making or retention of any investment pursuant to such directions of the
Investment Manager, nor shall the Trustee be liable for its failure to invest
any or all of the Trust Funds in the absence of such written directions. In
any event, neither the Committee nor any Investment Manager referred to above
shall direct the purchase, sale or retention of any assets of the Trust Fund
if such directions are not in compliance with the applicable provisions of
the Act and any Regulations or Rulings issued thereunder. No Fiduciary shall
permit the indicia of ownership of any of the Trust assets to be maintained
at a location outside the jurisdiction of the District Courts of the United
States, except as authorized by the Secretary of Labor.
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During such period or periods of time, if any, as the Committee or an
Investment Manager is authorized to direct the investment and management of
the Trust assets, the Trustee shall have no obligation to determine the
existence of any conversion, redemption, exchange, subscription or other
right relating to any of said securities purchased of which notice was given
prior to the purchase of such securities, and shall have no obligation to
exercise any such right unless the Trustee is informed of the existence of
the right and is instructed to exercise such right, in writing, by the
Committee or the Investment Manager, as the case may be, within a reasonable
time prior to the expiration of such right.
In the event the Committee or Investment Manager has the power to direct
the Trustee in the investment of the Trust Fund, they shall have the power to
direct the Trustee to invest and/or reinvest any and all money or property of
any description at any time held by it and constituting a part of the Trust
Fund in accordance with the investment powers enumerated in the Trust
Agreement; providing investments are prudently made, with diversity to
minimize risk of loss, and are not in conflict with other fiduciary rules
hereunder and under the Trust Agreement.
SECTION 7.4 ORGANIZATION OF COMMITTEE. The Committee may adopt such
by-laws and regulations as it deems desirable for the conduct of its affairs
and appoint one of its own members chairman and appoint a secretary and one
or
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assistant secretaries and one or more other agents, none of whom need be a
member of the Committee, but any of whom may, but need not be, an officer or
employee of the Company. It may delegate to any agent such duties and
powers, both ministerial and discretionary, as it deems appropriate,
excepting only that all matters involving investment of funds, if applicable,
interpretation of this Plan and settlement of disputes shall be determined by
the Committee.
Any member of the Committee may resign at any time by giving written
notice to the other members and to the Secretary of the Company, effective as
therein stated, otherwise upon receipt. Any member who leaves the employ of
the Company shall be deemed to have resigned as a member on the date of his
termination of employment. Any member of the Committee may, at any time, be
removed by the Board of Directors.
Upon the death, resignation or removal of any member, the Board of
Directors shall at its next regular meeting, or at a special meeting if so
desired, appoint by resolution a successor. Notice of appointment of a
successor member shall be made by the Secretary of the Company in writing to
the Trustee and to the Committee.
SECTION 7.5 RECORDS AND REPORTS. The Committee shall keep accurate
records of all of its proceedings, as well as such books of account, records
and other data as may be necessary for the proper administration of the Plan.
The Plan Administrator, unless the Plan is otherwise exempted by
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law, shall, within the time prescribed by law, prepare and submit to the
Internal Revenue Service and the Company an Annual Report conforming with the
requirements of the Employee Retirement Income Security Act of 1974, as
amended, and any Regulations or Rulings thereunder. Notwithstanding anything
herein to the contrary, the Plan Administrator shall fully comply with all
reporting and disclosure requirements provided by law.
SECTION 7.6 CLAIMS PROCEDURE. Claims for benefits or hardship
withdrawal shall be filed with the Plan Administrator, who shall be required
to give written notice to any Participant or Beneficiary who makes a claim
under the Plan which claim is denied by the Committee. Unless additional
time is required, such notice shall be given within ninety (90) days of
receipt of the claim, and shall be sent to the Participant's or Beneficiary's
last known address and shall set forth the specific reasons for denial of the
benefit claimed, specify the pertinent Plan provisions on which the denial is
based, describe any additional material or information necessary for the
claimant to perfect the claim and explain why such material is necessary.
The notice must also explain the Plan's claim review procedure. The
Participant, Beneficiary or a duly authorized representative, shall have
sixty (60) days from the date such notice was given to submit a written
request for review of his claims denial. He shall be entitled to review
pertinent documents and submit issues and comments in
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writing, whereupon the entire Committee shall, unless additional time is
required, within thirty (30) days of receipt of the request, hear such appeal
and shall render a written decision within sixty (60) days thereafter.
SECTION 7.7 MANNER OF ADMINISTERING. The Committee shall have full
discretion to construe and interpret the terms and provisions of this Plan,
which interpretation or construction shall be final and binding on all
parties, including but not limited to the Company and any Participant or
Beneficiary, except as otherwise provided by law. The Committee shall
administer such terms and provisions in a uniform and nondiscriminatory
manner and in full accordance with any and all laws applicable to the Plan.
SECTION 7.8 COMPENSATION, BONDING, EXPENSES AND INDEMNITY.
(a) The members of the Committee shall serve without compensation for
their services hereunder.
(b) Members of the Committee and any delegates shall be bonded to the
extent required by Section 412(a) of ERISA and the regulations thereunder.
Bond premiums and all expenses of the Committee or of any delegate who is an
employee of the Company shall be paid by the Company and the Company shall
furnish the Committee and any such delegate with such clerical and other
assistance as is necessary in the performance of their duties.
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(c) The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of
its duties hereunder. Expenses and fees in connection with the
administration of the Plan and the Trust shall be paid from the Trust assets
as provided in Article IX to the fullest extent permitted by law, unless the
Company determines otherwise.
(d) To the extent permitted by applicable state law, the Company shall
indemnify and save harmless the Committee and each member thereof, the Board
of Directors and any delegate of the Committee who is an employee of the
Company against any and all expenses, liabilities and claims, including legal
fees to defend against such liabilities and claims arising out of their
discharge in good faith of responsibilities under or incident to the Plan,
other than expenses and liabilities arising out of willful misconduct. This
indemnity shall not preclude such further indemnities as may be available
under insurance purchased by the Company or provided by the Company under any
by-law, agreement or otherwise, as such indemnities are permitted under state
law. Payments with respect to any indemnity and payment of any expenses and
fees under this Section shall be made only from assets of the Company and
shall not be made directly or indirectly from Trust assets.
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ARTICLE VIII
CONTINUANCE AND AMENDMENT OF PLAN
SECTION 8.1 CONTINUANCE OF PLAN NOT A CONTRACTUAL OBLIGATION OF COMPANY
- - - IMPOSSIBILITY OF DIVERSION. It is the expectation of the Company that it
will continue this Plan indefinitely, but the continuance of this Plan is not
assumed as a contractual obligation by the Company, and the right is reserved
to the Company by action of its Board of Directors at any time to discontinue
this Plan. The discontinuance of this Plan by the Company shall not have the
effect of revesting in the Company any part of the Trust Fund, except as
specifically provided hereinafter. Upon the complete discontinuance of
contributions by any Company, affected Participants shall be one hundred
percent (100%) vested in their Account balances, and the Committee shall
direct the Trustee to distribute the net amount available, after payment of
any fees and expenses, in cash to the Participants entitled thereto according
to their Account balances, in accordance with Section 6.2.
In the event that the initial determination of the Commissioner of
Internal Revenue as to the qualification of this Plan and the Trust hereunder
under Sections 401 and 501(a) of the Federal Internal Revenue Code of 1954 or
any amendments thereto effective prior to said initial determination, or the
corresponding provisions of any later statute effective prior to said
determination, shall be that this Plan and the Trust hereunder do not
initially qualify
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under said sections, then the Company, by action of its Board of Directors,
shall have the right to discontinue this Plan and the Trust hereunder and to
cause all contributions made to the Trust hereunder by the Company to be
returned to the Company, and Participants shall have their contributions
returned as well.
Under no circumstances, other than those of the preceding paragraph,
shall any contributions by the Company to the Trust or any part of the Trust
Fund be recoverable by the Company from the Trustee or from any Participant
or former Participant, his Beneficiaries or other persons, or be used for or
diverted to purposes other than for the exclusive benefit of Participants and
their Beneficiaries and defraying the reasonable expenses of the Plan.
SECTION 8.2 CONSOLIDATION OR MERGER. In the event of the consolidation
or merger of the Company with or into any other business enterprise, or the
sale by the Company of its assets or stock, the resulting successor
enterprise may continue the Plan by formally adopting the same and by
executing a proper supplemental agreement to the Trust Agreement with the
Trustee; provided, however, that such continuation shall be allowed only with
the express written authorization of the Board of Directors of the Company;
and provided, further, that in the case of any merger or consolidation with
or transfer of assets or liabilities to any other plan, each Participant in
the Plan must, if the Plan is then terminated, receive a benefit
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immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer. If, within ninety (90) days
from the effective date of such consolidation, merger or sale of assets, the
Board of Directors of the Company does not authorize continuation or such
successor does not adopt the Plan, the Plan shall be terminated in accordance
with Section 8.4.
SECTION 8.3 AMENDMENTS. The Company, by action of the Board of
Directors, may at any time and from time to time amend this Plan; provided,
however, that no amendment shall be made at any time pursuant to which the
Trust Fund may be diverted to purposes other than for the exclusive benefit
of the Participants and their Beneficiaries, and provided further that no
amendment shall decrease the percentage of the interest of any Participant
which shall theretofore have become vested, nor shall any amendment
discriminate in favor of employees who are officers, shareholders, or highly
compensated employees, and further that no amendment shall be made which
affects the rights, duties or responsibilities of the Trustee without the
Trustees approval, and further if any amendment changes the vesting schedule,
any Participant with three or more Years of Service may, by filing a written
request thereto with the Company within sixty (60) days after he has received
notice of such amendment, elect to have his vested percentage
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computed under the vesting schedule in effect prior to the amendment. Notice
and disclosure of amendments shall be given by the Plan Administrator in
accordance with law.
Notwithstanding anything herein to the contrary, however, this Plan may
be amended at any time if necessary to conform to the provisions and
requirements of the Federal Internal Revenue Code, the provisions and
requirements of the Revenue and Taxation Code of the State of California with
respect to employee benefit trusts or any amendments thereto, or regulations
issued pursuant thereto, or any similar act, and the Employee Retirement
Income Security Act of 1974 or any amendments thereto, or regulations, orders
or rulings issued pursuant thereto; and no such amendment shall be considered
prejudicial to any interest of any Participant or Beneficiary.
Amendments made by the Board of Directors as above shall bind all
adopting corporations without further action on their part, unless the Board
of Directors is otherwise notified within thirty (30) days of such amendment.
SECTION 8.4 TERMINATION OF PLAN. While the Plan is intended as a
permanent program, the Board of Directors reserves the right to terminate the
Plan at any time. In the event of such termination or a partial termination,
all affected Participants shall be one hundred percent (100%) vested, to the
extent required by applicable law. To the extent permissible under Code
Section 411(a)(11), the Committee shall direct the Trustee to distribute the
net
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amount available, after payment of any fees and expenses, in cash to the
Participants entitled thereto according to their Account Balances. Any
payments shall be made within a reasonable time following the effective date
of the termination or a determination of the occurrence of a partial
termination.
ARTICLE IX
ADMINISTRATION OF THE TRUST FUND -
THE TRUST AGREEMENT - EXPENSES
Concurrently with the adoption of this Plan, the Company has executed a
Trust Agreement providing for the administration of the Trust Fund by the
Trustee hereunder and containing such provisions as the Company has deemed
appropriate with respect to the following: (a) powers and authority of the
Trustee as to the investment and reinvestment of the Trust Fund, the income
therefrom, and the general administration thereof, subject to an election by
the Company regarding the right of the Committee or an Investment Manager to
direct the Trustee with respect to investment of the Trust Fund; (b) the
limitations on the liability of the Trustee; (c) authority of the Committee
to settle the Accounts of the Trustee on behalf of all persons having any
interest in the Trust Fund and from time to time to appoint a new Trustee in
place of any then acting Trustee of the Trust Fund.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1 LOANS TO PARTICIPANTS.
(a) Each Participant shall have the right, subject to prior approval by
the Committee, to borrow from his Accounts. Application for a loan must be
submitted by a Participant to the Committee on such form(s) as the Committee
may require. Approval shall be granted or denied as specified in Subsection
(b), on the terms specified in Subsection (c). For purposes of this Section
10.1, but only to the extent required by Department of Labor Regulations
Section 2550.408b-1, the term "Participant" shall include any Employee,
former Employee, Beneficiary or alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, who is a party in
interest and has an interest in the Plan that is not contingent.
(b) The Committee shall grant any loan which meets each of the
requirements of paragraphs (i), (ii) and (iii) below:
(i) The amount of the loan, when added to the outstanding
balance of all other loans to the Participant from the Plan or any
other qualified plan of the Company or any Affiliate Company shall
not exceed the lesser of:
(1) $50,000, reduced by the excess, if any, of a Participant's
highest outstanding balance of all loans from the Plan or any other
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qualified plan maintained by the Company or an Affiliated Employer
during the preceding 12 months over the outstanding balance of such
loans on the loan date, or
(2) 50% of the value of the vested balance of the Participant's
Compensation Deferral Account, Participant Contribution Account and
Rollover Account;
(ii) The loan shall be for at least $1,000; and
(iii) No more than one loan may be outstanding to a Participant at
any time.
(c) Each loan granted shall, by its terms, satisfy each of the
following additional requirements:
(i) Each loan must be repaid within five years (except that
if the Committee is satisfied that the loan proceeds are being used
to purchase the principal residence of a Participant, the Committee
may, in its discretion, establish a term of up to 10 years for
repayment);
(ii) Each loan must require substantially level amortization
over the term of the loan, with payments not less frequently than
quarterly; and
(iii) Each loan must be adequately secured, with the security to
consist of the balance of the Participant's Accounts.
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(1) In the case of any Participant who is an active Employee,
automatic payroll deductions shall be required as additional security.
(2) In the case of any other Participant, the outstanding loan
balance may at no time exceed 50% of the outstanding vested balance
of the Participant's Accounts. If such limit is at any time exceeded,
or if the Participant fails to make timely repayment, the loan will
be treated as in default and become immediately payable in full.
(3) The investment gain or loss attributable to the loan shall
not be included in the calculation or allocation of the increase or
decrease in fair market value of the Investment Funds. Instead, the
entire gain or loss (including any gain or loss attributable to
interest payments or default) shall be allocated to the Accounts of
the Participant.
(iv) Each loan shall bear reasonable rate of interest, which rate
shall be the prime rate (as determined by the Committee) as of the last
day of the quarter preceding the quarter in which the loan is made, plus
one percent. Furthermore, the Participant's Accounts shall be charged a
setup fee of $75 at the
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time the loan is made; such setup fee shall be paid to the Plan's
recordkeeper.
(d) All loan payments shall be transmitted by the Company to the
Trustee as soon as practicable but not later than the end of the month during
which such amounts were received or withheld. Each loan may be prepaid in
full at any time. Any prepayment shall be paid directly to the Trustee in
accordance with procedures adopted by the Committee.
(e) Each loan shall be evidenced by a promissory note executed by the
Participant and payable in full to the Trustee, not later than the earliest
of (1) a fixed maturity date meeting the requirements of Subsection (c)(i)
above, (2) the Participant's death, or (3) the termination of the Plan. Such
promissory note shall evidence such terms as are required by this section.
(f) The Committee shall have the power to modify the above rules or
establish any additional rules with respect to loans extended pursuant to
this section. Such rules may be included in a separate document or documents
and shall be considered a part of this Plan; provided, each rule and each
loan shall be made only in accordance with the regulations and rulings of the
Internal Revenue Service and Department of Labor and other applicable state
or federal law. The Committee shall act in its sole discretion to ascertain
whether the requirements of such regulations and rulings and this section
have been met.
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SECTION 10.2 LIMITS ON EMPLOYEES' RIGHTS. Neither the action of the
Company in establishing this Plan, nor any action taken by it or the
Committee under the provisions hereof, nor any provision of this Plan shall
be construed as giving to any Employee of the Company the right to be
retained in its employ or any right to any payment whatsoever, except to the
extent of the benefits provided for by this Plan to be paid from the Trust
Fund. The Company expressly reserves its rights at any time to dismiss any
Employee without any liability for any claim against the Trust Fund for any
payment whatsoever except to the extent provided for in this Plan, or against
the Company. This Plan is strictly a voluntary undertaking on the part of
the Company and shall not be deemed to constitute a contract between the
Company and any Employee, or to be a consideration for, or an inducement or
condition of, the employment of any Employee.
SECTION 10.3 TRANSFERS OF PARTICIPANTS. A Participant who leaves the
employment of a Company or entity participating in the Plan and forthwith is
employed by transfer to another Company or entity participating in the Plan,
shall continue to be a Participant, and his vesting and benefit accumulation
shall continue without interruption.
A Participant who leaves the employment of a Company or entity
participating in the Plan, and forthwith is employed by transfer (not an
authorized leave of absence)
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to an Affiliated Employer or entity or property not participating in the
Plan, may continue to be a Participant, and, subject to the provisions of the
definition of Year of Service contained in Article I, his vesting shall
continue without interruption, but he may no longer continue to contribute to
the Plan.
SECTION 10.4 CONTEXT TO CONTROL. The headings of articles and sections
are included solely for convenience of reference, and if there be any
conflict between such headings and the text of this Plan, the text shall
control.
SECTION 10.5 CONSTRUCTION. The masculine gender shall be deemed to
include the feminine, and the singular the plural, unless the context clearly
indicates to the contrary.
SECTION 10.6 QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding any
other provision of this Plan to the contrary, the Committee may comply with
the terms of a qualified domestic relations order (within the meaning of such
term under Section 414(p) of the Internal Revenue Code). Consistent with the
preceding sentence, payments to an alternate payee pursuant to a qualified
domestic relations order may be made prior to the time the Participant
attains "earliest retirement age" (as defined in Section 414(p)(4)(B) of the
Internal Revenue Code).
SECTION 10.7 ACTION BY PARTICIPANT OR OTHER PERSON. Whenever an
election or consent or similar action is authorized by a Participant or other
person, such
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election, consent or action shall be taken in such form and manner as is
satisfactory to the Committee, in addition to satisfying applicable
requirements of the Plan.
SECTION 10.8 RECEIPT OR RELEASE. Any payment to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the
extent thereof, be in full satisfaction of all claims against the Trustee,
the Committee, and the Company. The Trustee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a receipt
and release to such effect.
SECTION 10.9 PERSONS UNDER INCAPACITY. In the event any amount is
payable under the Plan to a person for whom a conservator has been legally
appointed, the payment shall be distributed to the duly appointed and
currently acting conservator, without any duty on the part of the Committee
to supervise or inquire into the application of any funds so paid.
SECTION 10.10 TOP-HEAVY PLAN REQUIREMENTS. For any Plan Year for which
this Plan is a top-heavy plan as defined in Section B.3 of Appendix B,
attached hereto, and despite any other provisions of this Plan to the
contrary, this Plan will be subject to the provisions of Appendix B.
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ARTICLE XI
LAW GOVERNING AND SEVERABILITY
This Plan shall be construed, regulated and administered under ERISA,
and to the extent federal law is inapplicable, under the laws of the State of
California, and the Committee and the Trustee shall be liable to account only
in the courts of that State. All contributions received by the Trustee
hereunder shall be deemed to have been received in that State.
In the event any provision of this Plan shall be held illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
provisions of this Plan, which shall be fully severable, and this Plan shall
be construed and enforced as if said illegal or invalid provisions had never
been inserted.
This Restatement is executed this ____________ day of __________, 1996
HILTON HOTELS CORPORATION
By _______________________
Its ______________________
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APPENDIX A
ANNUAL ADDITION LIMITS
Section 4.3 of the Plan shall be construed in accordance with this
Appendix A. Unless the context clearly requires otherwise, words and phrases
used in this Appendix A shall have the same meanings that are assigned to
them under the Plan.
A.1 - DEFINITIONS.
As used in this Appendix A, the following terms shall have the meanings
specified below.
"Annual Additions" shall mean the sum credited to a Participant's
Accounts for any Plan Year of (a) Company contributions, (b) voluntary
contributions, (c) forfeitures, (d) amounts credited after March 31, 1984 to
an individual medical account, as defined in Section 415(l)(2) of the Code
which is part of a Defined Benefit Plan maintained by the Company, and (e)
amounts derived from contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account required
with respect to a key employee (as defined in Section B.2(e) of Appendix B to
the Plan) under a welfare benefit plan (as defined in Section 419(e) of the
Code) maintained by the Company.
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"Defined Benefit Plan" means a plan described in Section 414(j) of the
Code.
"Defined Contribution Plan" means a plan described in Section 414(i) of
the Code.
"Defined Benefit Plan Fraction" shall mean a fraction, the numerator of
which is the projected annual benefit (determined as of the close of the
relevant Plan Year) of the Participant under all Defined Benefit Plans
maintained by one or more Related Companies, and the denominator of which is
the lesser of (a) the product of 1.25 multiplied by the dollar limitation in
effect under Section 415(b)(1)(A) of the Code for the Plan Year, or (b) the
product of 1.4 multiplied by the amount which may be taken into account under
Section 415(b)(1)(B) of the Code with respect to the Participant for the Plan
Year.
"Defined Contribution Plan Fraction" shall mean a fraction, the
numerator of which is the sum of the annual additions to a Participant's
accounts under all Defined Contribution Plans maintained by one or more
Related Companies, and the denominator of which is the sum of the lesser of
(a) or (b) for such Plan Year and for each prior Plan Year of service with
one or more Related Companies, where (a) is the product of 1.25 multiplied by
the dollar limitation in effect under Section 415(c)(1)(A) of the Code for
the Plan Year (determined without regard to Section 415(c)(6) of the Code),
and (b) is the product of 1.4 multiplied by the amount which may be taken
into account under
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Section 415(c)(1)(B) of the Code (or Section 415(c)(7) of the Code, if
applicable) with respect to the Participant for the Plan Year. Solely for
purposes of this definition, contributions made directly by an Employee to a
Defined Benefit Plan which maintains a qualified cost-of-living arrangement
as such term is defined in Section 415(k)(2) shall be treated as Annual
Additions. Notwithstanding the foregoing, the numerator of the Defined
Contribution Plan Fraction shall be adjusted pursuant to Treasury Regulations
1.415-7(d)(1), Questions T-6 and T-7 of Internal Revenue Service Notice
83-10, and Questions Q-3 and Q-14 of Internal Revenue Service Notice 87-21.
"Section 415 Compensation" shall mean a Participant's earned income,
wages, salaries, and fees for professional services, and other amounts
received for personal services actually rendered in the course of employment
with an employer maintaining a plan (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and bonuses),
and excluding the following:
(a) Employer contributions to a plan of deferred compensation which
are not included in the Employee's gross income for the taxable year in
which contributed or employer contributions under a simplified employee
pension plan to the extent such contributions are
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deductible by the Employee, or any distributions from a plan of
deferred compensation;
(b) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described
in section 403(b) of the Code (whether or not the amounts are
actually excludable from the gross income of the Employee).
Compensation for any limitation year is the compensation actually paid or
includible in gross income during such year.
A.2 - ANNUAL ADDITION LIMITATIONS.
(a) The compensation limitation of Section 4.3 of the Plan shall not
apply to any contribution for medical benefits (within the meaning of Section
419A(f)(2)) after separation from service which is treated as an Annual
Addition. In the event that Annual Additions to all the
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accounts of a Participant would exceed the limitations of Section 4.3 of the
Plan, they shall be reduced in the following priority: (1) return of
voluntary contributions to the Participant; (2) reduction of Company
contributions.
(b) If any Company or any Affiliated Employer contributes amounts, on
behalf of Participants covered by the Plan, to other Defined Contribution
Plans, the limitation on Annual Additions provided in Article IV of the Plan
shall be applied to Annual Additions in the aggregate to the Plan and such
other plans. Reduction of Annual Additions, where required, shall be
accomplished by first refunding any voluntary contributions to Participants,
then by reducing contributions under such other plans pursuant to the
directions of the fiduciary for administration of such other plans or under
priorities, if any, established by the terms of such other plans, and then,
if necessary, by reducing contributions under the Plan.
(c) In any case where a Participant under the Plan is also a
participant under a Defined Benefit Plan or a Defined Benefit Plan and other
Defined Contribution Plans maintained by the Company or an Affiliated
Employer, the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction shall not exceed 1.0. Reduction of contributions
to or benefits from all plans, where required, shall be accomplished by first
reducing benefits under such other Defined Benefit Plan or plans, then by
allocating any excess in the manner set out above with
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respect to the Plan, and finally by reducing contributions or allocating any
excess contributions with respect to other Defined Contribution Plans, if
any; provided, however, that adjustments necessary under this or the next
preceding paragraph may be made in a different manner and priority pursuant
to the agreement of the Committee and the administrators of all other plans
covering such Participant, provided such adjustments are consistent with
procedures and priorities prescribed by Treasury Regulations under Section
415 of the Code.
(d) In the event the limitations of Section 4.3 of the Plan or this
Appendix A are exceeded and the conditions specified in Treasury Regulations
Section 1.415-6(b)(6) are met, the Committee may elect to apply the
procedures set forth in Treasury Regulations Section 1.415-6(b)(6).
A-6
<PAGE>
APPENDIX B
TOP-HEAVY PROVISIONS
Section 10.10 of the Plan shall be construed in accordance with this
Appendix B. Definitions in this Appendix B shall govern for the purposes of
this Appendix B. Any other words and phrases used in this Appendix B,
however, shall have the same meanings that are assigned to them under the
Plan, unless the context clearly requires otherwise.
B.1 - GENERAL.
This Appendix B shall be effective for Plan Years beginning on or after
January 1, 1984. This Appendix B shall be interpreted in accordance with
Section 416 of the Code and the regulations thereunder.
B.2 - DEFINITIONS.
(a) The "Benefit Amount" for any Employee means (1) in the case of any
defined benefit plan, the present value of his normal retirement benefit,
determined on the Valuation Date as if the Employee terminated on such
Valuation Date, plus the aggregate amount of distributions made to such
Employee within the five-year period ending on the Determination Date (except
to the extent already included on the Valuation Date) and (2) in the case of
any defined contribution plan, the sum of the amounts credited,
B-1
<PAGE>
on the Determination Date, to each of the accounts maintained on behalf of
such Employee (including accounts reflecting any nondeductible employee
contributions) under such plan plus the aggregate amount of distributions
made to such Employee within the five-year period ending on the Determination
Date. For purposes of this Section, the present value shall be computed using
a 5% interest assumption and the mortality assumptions contained in the
defined benefit plan for benefit equivalence purposes, provided that, if more
than one defined benefit plan is being aggregated for top-heavy purposes, the
actuarial assumptions which shall be used for testing top-heaviness are those
of the plan with the lowest interest assumption, provided further that if the
lowest interest assumption is the same for two or more plans, the actuarial
assumptions used shall be that of the plan with the greatest value of assets
on the applicable date.
(b) "Company" means any company (including unincorporated
organizations) participating in the Plan or plans included in the
"aggregation group" as defined in this Appendix B.
(c) "Determination Date" means the last day of the preceding Plan Year
or, in the case of the first Plan Year of the Plan, the last day of the Plan
Year.
(d) "Employees" means employees, former employees, beneficiaries, and
former beneficiaries who have
B-2
<PAGE>
a Benefit Amount greater than zero on the Determination Date.
(e) "Key Employee" means any Employee who, during the Plan Year
containing the Determination Date or during the four preceding Plan Years, is:
(1) one of the ten Employees of a Company having annual compensation
from such Company of more than the limitation in effect under Section
415(c)(1)(A) of the Code and owning (or considered as owning within the
meaning of Section 318 of the Code) both more than a 1/2% interest and the
largest interest in such Company (if two Employees have the same interest
the Employee having the greater annual compensation from the Company shall
be treated as having a larger interest);
(2) a 5% owner of a Company;
(3) a 1% owner of a Company who has an annual compensation above
$150,000; or
(4) an officer of a Company having an annual compensation greater
than 50% of the amount in effect under Section 415(b)(1)(A) of the Code
for any such Plan Year (however, no more than the lesser of (A) 50
employees or (B) the greater of 3 employees or 10% of the Company's
employees shall be treated as officers). For purposes of determining the
number of employees taken into account under this Section B.2(e)(4),
employees described in Section 414(q)(8) of the Code shall be excluded.
For Plan Years commencing after
B-3
<PAGE>
December 31, 1996, "Section 414(q)(8)" in the preceding sentence shall
be replaced with "Section 414(q)(5)."
(f) A "Non-Key Employee" means an Employee who is not a Key Employee.
(g) "Valuation Date" means the first day (or such other date which is
used for computing plan costs for minimum funding purposes) of the 12-month
period ending on the Determination Date.
(h) A "Year of Service" shall be calculated using the Plan rules that
normally apply for determining vesting service.
These definitions shall be interpreted in accordance with Section 416(i)
of the Code and the regulations thereunder and such rules are hereby
incorporated by reference. The term "Key Employee" shall not include any
officer or employee of an entity referred to in Section 414(d) of the Code.
For the purpose of this subsection, "compensation" shall mean compensation as
defined in Section 414(q)(7) of the Code and shall be determined without
regard to Sections 125, 402(a)(8), 402(h)(1)(B) or, in the case of employer
contributions made pursuant to a salary reduction agreement, Section 403(b).
For Plan Years commencing after December 31, 1996, "Section 414(q)(7)" in the
preceding sentence shall be replaced with "Section 414(q)(4)."
B-4
<PAGE>
B.3 - TOP-HEAVY DEFINITION.
The Plan shall be top-heavy for any Plan Year if, as of the
Determination Date, the "top-heavy ratio" exceeds 60%. The top-heavy ratio
is the sum of the Benefit Amounts for all employees who are Key Employees
divided by the sum of the Benefit Amounts for all Employees. For purposes of
this calculation only, the following rules shall apply:
(a) The Benefit Amounts of all Non-Key Employees who were Key
Employees during any prior Plan Year shall be disregarded.
(b) The Benefit Amounts of all employees who have not performed
any services for any Company at any time during the five-year period
ending on the Determination Date shall be disregarded; provided,
however, if an Employee performs no services for five years and then
again performs services, such Employee's Benefit Amount shall be taken
into account.
(c) (1) REQUIRED AGGREGATION. This calculation shall be made by
aggregating any plans, of the Company or an Affiliated Employer,
qualified under Section 401(a) of the Code in which a Key Employee
participates or which enables this Plan to meet the requirements
of Section 401(a)(4) or 410 of the Code; all plans so aggregated
constitute the "aggregation group."
(2) PERMISSIVE AGGREGATION. The Company may also aggregate
any such plan to the extent that
B-5
<PAGE>
such plan, when aggregated with this aggregation group, continues to
meet the requirements of Section 401(a)(4) and Section 410 of the
Code.
If an aggregation group includes two or more defined benefit plans,
the actuarial assumptions used in determining an Employee's Benefit
Amount shall be the same under each defined benefit plan and shall
be specified in such plans. The aggregation group shall also
include any terminated plan which covered a Key-Employee and which
was maintained within the five-year period ending on the
Determination Date.
(d) This calculation shall be made in accordance with
Section 416 of the Code (including 416(g)(3)(B) and (g)(4)(A)) and
the regulations thereunder and such rules are hereby incorporated
by reference. For purposes of determining the accrued benefit of a
Non-Key Employee who is a Participant in a defined benefit plan,
this calculation shall be made using the method which is used for
accrual purposes for all defined benefit plans of the Company, or
if there is no such method, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under Section
411(b)(1)(C) of the Code.
B-6
<PAGE>
B.4 - VESTING.
Notwithstanding the vesting provisions of the Plan, if the Plan is
top-heavy for any Plan Year, any Participant who completes one Hour of
Service during any day of such Plan Year or any subsequent Plan Year and who
terminates during any day of such Plan Year or any subsequent Plan Year shall
be entitled to a vested benefit which is the greater of his vested interest
pursuant to Section 5.2 of the Plan, or a vested interest at least equal to
the product of (x) the benefit such Participant would receive under the Plan
if he was 100% vested on the date of such termination times (y) the
percentage shown below:
NUMBER OF COMPLETED
YEARS OF SERVICE PERCENTAGE
-------------------- ----------
2 20%
3 40%
4 60%
5 80%
6 100%
Notwithstanding the foregoing, the nonforfeitable percentage of a
Participant's benefit under the Plan shall not be less than that determined
under the Plan without regard to the preceding vesting schedule. Such
benefit shall be payable in accordance with the provisions of the Plan
regarding payments to terminated Participants.
B-7
<PAGE>
Notwithstanding the preceding paragraph, if the Plan is no longer
top-heavy in a Plan Year following a Plan Year in which it was top-heavy, a
Participant's vesting percentage shall be computed under the vesting schedule
that otherwise exists under the Plan. However, in no event shall a
Participant's vested percentage in his accrued benefit be reduced. In
addition, a Participant shall have the option of remaining under the vesting
schedule set forth in this Section if he has completed three years of Vesting
Service. The period for exercising such option shall begin on the first day
of the Plan Year for which the Plan is no longer top-heavy and shall end 60
days after the later of such first day or the day the Participant is issued
written notice of such option by the Company or the Committee.
B.5 - MINIMUM BENEFITS OR CONTRIBUTIONS, COMPENSATION
LIMITATIONS AND SECTION 415 LIMITATIONS.
If the Plan is top-heavy for any Plan Year, the following provisions
shall apply to such Plan Year:
(a) (1) Except to the extent not required by Section 416 of the
Code or any other provision of law, notwithstanding any other provision
of this Plan, if the Plan and all other plans which are part of the
aggregation group are defined contribution plans, each Participant (and
any other Employee required by Section 416 of the Code) other than Key
employees shall receive an allocation of employer contributions and
forfeitures
B-8
<PAGE>
from a plan which is part of the aggregation group at least equal to
3% (or, if lesser, the largest percentage allocated to any Key Employee
for the Plan Year) of such Participant's compensation for such Plan Year
(the "defined contribution minimum"). For purposes of this subsection,
salary reduction contributions on behalf of a Key Employee must be taken
into account. For purposes of this subsection, a non-Key Employee shall
be entitled to a contribution if he is employed on the last day of the
Plan Year (1) regardless of his level of compensation, (2) without regard
to whether he has made any mandatory contributions required under the
Plan, and (3) regardless of whether he has less than 1,000 Hours of
Service (or the equivalent) for the accrual computation period.
(2) Except to the extent not required by Section 416 of the Code or
any other provision of law, notwithstanding any other provisions of the
Plan, if the Plan or any other plan which is part of the aggregation group
is a defined benefit plan each Participant who is a participant in any
such defined benefit plan (who is not a Key Employee) who accrues a full
Year of Service during such Plan Year shall be entitled to an annual
normal retirement benefit from a defined benefit plan which is part of the
aggregation group which shall not be less than the product of
B-9
<PAGE>
(1) the employee's average compensation for the five consecutive years when
the employee had the highest aggregate compensation and (2) the lesser of
2% per Year of Service or 20% (the "defined benefit minimum"). A Non-Key
Employee shall not fail to accrue a benefit merely because he is not
employed on a specified date or is excluded from participation because (1)
his compensation is less than a stated minimum or (2) he fails to make
mandatory employee contributions. For purposes of calculating the defined
benefit minimum, (1) compensation shall not include compensation in Plan
Years after the last Plan Year in which the Plan is top-heavy and (2) a
Participant shall not receive a Year of Service in any Plan Year before
January 1, 1984 or in any Plan Year in which the Plan is not top-heavy.
This defined benefit minimum shall be expressed as a life annuity (with no
ancillary benefits) commencing at normal retirement age. Benefits paid in
any other form or time shall be the actuarial equivalent (as provided in
the plan for retirement benefit equivalence purposes) of such life annuity.
Except to the extent not required by Section 416 of the Code or any other
provisions of law, each Participant (other than Key Employees) who is not a
participant in any such defined benefit plan shall receive the defined
contribution minimum (as defined in paragraph (a)(1) above).
B-10
<PAGE>
(3) If a non-Key Employee is covered by plans described in both
paragraphs (1) and (2) above, he shall be entitled only to the minimum
described in paragraph (1), except that for the purpose of paragraph
(1) "3% (or, if lesser, the largest percentage allocated to any key
employee for the Plan Year)" shall be replaced by "5%". Notwithstanding
the preceding sentence, if the accrual rate under the plan described in
(2) would comply with this Section B.5 absent the modifications required
by this Section, the minimum described in paragraph (1) above shall not
be applicable.
(b) For purposes of this Section, "compensation" shall mean all
earnings included in the Employee's Form W-2 for the calendar year that
ends within the Plan Year, not in excess of $200,000, adjusted at the
same time and in the same manner as under Section 415(d) of the Code.
(c) (1) Unless the Plan qualifies for an exception under Section
B.5(c)(2), "1.0" shall be substituted for "1.25" in the definitions of
Defined Benefit Plan Fraction and Defined Contribution Plan Fraction
used in Appendix A to the Plan.
(2) A Plan qualifies for an exception from the rule of Section
B.5(c)(1) if the Benefit Amount of all Employees who are Key Employees
does not exceed 90%
B-11
<PAGE>
of the sum of the Benefit Amounts for all Employees and one of the
following requirements is met:
(A) A defined benefit minimum of 3% per Year of Service
(up to 30%) is provided;
(B) For Participants covered only by a defined contribution
plan, a defined contribution minimum of 4% is provided;
(C) For Participants covered by both types of plans, benefits
from the defined contribution minimum are comparable to the 3%
defined benefit minimum;
(D) The plan provides a floor offset where the floor is a 3%
defined benefit minimum; or
(E) A defined contribution minimum of 7-1/2% of compensation
is provided for any non-Key Employee who is covered under both a
defined benefit plan and a defined contribution plan (each of which
is top-heavy) of a Company.
B-12
<PAGE>
APPENDIX C
SPECIAL EMPLOYEE
CLASSIFICATION
NAME OF EMPLOYER LIMITATION
- - ---------------- -----------------
Plan Sponsor:
Hilton Hotels Corporation None
Controlled Group Members:
Palmer House Company None
Hotel Waldorf Astoria Corp. None
Hilton Washington Corporation None
Hotel Equipment Corporation None
Hilton Casinos, Inc. None
Hilton San Diego Corporation None
Hilton Inns, Inc. None
Hilton New Jersey Corp. None
Benco, Inc. None
Conrad International Investment Corp. None
Conrad International Hotel Corp. None
Non-Controlled Group Subsidiaries:
Hilton Hawaiian Village Joint Venture None
Hilton Service Corporation None
Managed Properties:
Palacio Del Rio, Inc. (Hilton Palacio Del Rio) None
S.A. Hotel, Inc. None
Bristol Corporation (Anchorage Westward Hilton) None
<PAGE>
SPECIAL EMPLOYEE
CLASSIFICATION
NAME OF EMPLOYER LIMITATION
- - ---------------- -----------------
International Rivercenter (New Orleans Hilton) None
Koar-Pasadena Investment Partnership, G.P.
(Pasadena Hilton) None
Hotelerama Associates Limited
(Fontainebleu Hilton) None
Fortuna Ent. LP (Los Angeles Airport Hilton) None
Kuilima Resort Company (Turtle Bay Hilton) None
Anaheim Hotel Partnership None
C-2
<PAGE>
Exhibit 10.26
HILTON HOTELS THRIFT SAVINGS PLAN
(1996 RESTATEMENT)
AMENDMENT 1996-1
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the Hilton
Hotels Thrift Savings Plan (which was restated in 1996, and is referred to
herein as the "Plan) for certain employees of the Company; and
WHEREAS, the Company has determined that it is desirable to amend the
Plan as set forth herein; and
WHEREAS, the Company has the authority to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended, effective January 1, 1996,
by adding the following new section 4.5:
"(b) SPECIAL 1996 COMPANY CONTRIBUTION. The Company shall make a
special one-time contribution in an amount to be determined by the
Company in its sole discretion with respect to the 1996 Plan Year (the
"1996 Contribution"). The 1996 Contribution will be allocated to the
Accounts of those Participants who both are (1) participants in the
Hilton Hotels Retirement Plan as of December 31, 1996, and (2) Employees
as of December 31, 1996. The amount allocated to each such Participant's
<PAGE>
Account shall be equal to that portion of the total 1996 Contribution
that such Participant's "Compensation" (as defined in the Hilton Hotels
Retirement Plan) for the 1996 Plan Year bears to the total "Compensation"
(as so defined) of all such Participants."
IN WITNESS WHEREOF, this Amendment 1996-1 is hereby adopted this ____ day
of December, 1996.
HILTON HOTELS CORPORATION
By: ___________________________
Its: __________________________
2
<PAGE>
EXHIBIT 10.27
HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE AS OF JANUARY 1, 1997
<PAGE>
HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I
TITLE AND DEFINITIONS
1.1 - Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 - Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PARTICIPATION
2.1 - Participation. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
DEFERRAL ELECTIONS
3.1 - Elections to Defer Compensation. . . . . . . . . . . . . . . 10
3.2 - Investment Elections . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
ACCOUNTS
4.1 - Deferral Account . . . . . . . . . . . . . . . . . . . . . . 13
4.2 - Company Contribution Account . . . . . . . . . . . . . . . . 14
ARTICLE V
VESTING
5.1 - Deferral Account . . . . . . . . . . . . . . . . . . . . . . 16
5.2 - Company Contribution Account . . . . . . . . . . . . . . . . 16
ARTICLE VI
DISTRIBUTIONS
6.1 - Distribution of Deferred Compensation. . . . . . . . . . . . 17
6.2 - Inability to Locate Participant. . . . . . . . . . . . . . . 19
6.3 - Payment by Trust . . . . . . . . . . . . . . . . . . . . . . 19
6.4 - Withdrawals. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 - Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 - Distributions on Disability. . . . . . . . . . . . . . . . . 20
ARTICLE VII
DEATH BENEFITS
7.1 - In General . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 - Payment of Death Benefits. . . . . . . . . . . . . . . . . . 21
i
<PAGE>
ARTICLE VIII
ARBITRATION
8.1 - Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
ADMINISTRATION
9.1 - Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 - Committee Action . . . . . . . . . . . . . . . . . . . . . . 25
9.3 - Powers and Duties of the Committee . . . . . . . . . . . . . 25
9.4 - Construction and Interpretation. . . . . . . . . . . . . . . 26
9.5 - Information. . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 - Compensation, Expenses and Indemnity . . . . . . . . . . . . 27
9.7 - Quarterly Statements . . . . . . . . . . . . . . . . . . . . 28
ARTICLE X
MISCELLANEOUS
10.1 - Unsecured General Creditor . . . . . . . . . . . . . . . . . 28
10.2 - Restriction Against Assignment . . . . . . . . . . . . . . . 29
10.3 - Withholding . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 - Amendment, Modification, Suspension or Termination . . . . . 30
10.5 - Governing Law . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 - Receipt or Release . . . . . . . . . . . . . . . . . . . . . 30
10.7 - Payments on Behalf of Persons Under Incapacity . . . . . . . 31
10.8 - Headings, etc. Not Part of Agreement . . . . . . . . . . . . 31
ii
<PAGE>
HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") desires to
establish a deferred compensation plan to provide supplemental retirement
income benefits for a select group of management and highly compensated
employees through deferrals of salary and through the Company's
contributions, effective as of January 1, 1997; and
WHEREAS, it is believed that the adoption of this plan providing for
deferred compensation at the election of each executive will be in the best
interests of the Company;
NOW, THEREFORE, it is hereby declared as follows:
<PAGE>
ARTICLE I
TITLE AND DEFINITIONS
1.1 - TITLE.
This Plan shall be known as the Hilton Hotels Executive Deferred
Compensation Plan.
1.2 - DEFINITIONS.
Whenever the following words and phrases are used in this Plan, with
the first letter capitalized, they shall have the meanings specified below.
"Account" or "Accounts" shall mean a Participant's Deferral Account
and/or Company Contribution Account.
"Beneficiary" or "Beneficiaries" shall mean the person or persons,
including a trustee, personal representative or other fiduciary, last
designated in writing by a Participant in accordance with procedures
established by the Committee to receive the benefits specified hereunder in
the event of the Participant's death. No Beneficiary designation shall
become effective until it is filed with the Committee. If there is no
Beneficiary designation in effect, or if there is no surviving designated
Beneficiary, then the Participant's surviving spouse shall be the
Beneficiary. If there is no surviving spouse to receive any benefits payable
in accordance with the preceding sentence, the duly appointed and currently
acting personal
2
<PAGE>
representative of the participant's estate (which shall include either the
Participant's probate estate or living trust) shall be the Beneficiary. In
any case where there is no such personal representative of the Participant's
estate duly appointed and acting in that capacity within 90 days after the
Participant's death (or such extended period as the Committee determines is
reasonably necessary to allow such personal representative to be appointed,
but not to exceed 180 days after the Participant's death), then Beneficiary
shall mean the person or persons who can verify by affidavit or court order
to the satisfaction of the Committee that they are legally entitled to
receive the benefits specified hereunder. In the event any amount is payable
under the Plan to a minor, payment shall not be made to the minor, but
instead be paid (1) to that person's living parent(s) to act as custodian,
(2) if that person's parents are then divorced, and one parent is the sole
custodial parent, to such custodial parent, or (3) if no parent of that
person is then living, to a custodian selected by the Committee to hold the
funds for the minor under the Uniform Transfers or Gifts to Minors Act in
effect in the jurisdiction in which the minor resides. If no parent is
living and the Committee decides not to select another custodian to hold the
funds for the minor, then payment shall be made to the duly appointed and
currently acting guardian of the estate for the minor or, if no guardian of
the estate for the minor is duly appointed and currently acting within 60
days after the date the amount becomes payable, payment shall be deposited
with the court having jurisdiction over the estate of the minor.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Company.
3
<PAGE>
"Change in Control" shall mean shall mean the first to occur of any of
the following events:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company, or any corporation controlled by
the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c); or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute
at least a majority
4
<PAGE>
of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal
of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all
or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 70% of,
respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case my be, of the corporation resulting
from such Business Combination (including, without
limitation, a corporation
5
<PAGE>
which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Company of such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business combination and (iii) at
least a majority of the members of the board of directors
of the corporation resulting from such Business
Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
6
<PAGE>
"Committee" shall mean the Committee appointed by the Board to
administer the Plan in accordance with Article IX.
"Company" shall mean Hilton Hotels Corporation, any successor
corporation and each corporation which is a member of a controlled group of
corporations (within the meaning of Section 414(b) of the Code) of which Hilton
Hotels Corporation is a component member.
"Company Contribution Account" shall mean the bookkeeping account
maintained by the Committee for each Participant that is credited with an amount
equal to the Company Contribution Amount, if any, and earnings or losses
pursuant to Section 4.2.
"Company Contribution Amount" shall equal the amount described in
Section 4.2.
"Compensation" shall mean the total salary paid to the Eligible
Employee, including bonuses, in a Plan Year.
"Deferral Account" shall mean the bookkeeping account maintained by
the Committee for each Participant that is credited with amounts equal to
(1) the portion of the Participant's Compensation that he or she elects to
defer, and (2) investment gains and losses pursuant to Section 4.1.
"Disabled" or "Disability" shall mean that a Participant is disabled
due to sickness or injury which qualifies the Participant for disability
payments under the Company's long term
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disability plan. A Participant shall be considered totally and permanently
disabled on the date he qualifies for such long term disability payments.
"Effective Date" shall mean January 1, 1997.
"Eligible Employee" shall mean (i) officers of Hilton Hotels
Corporation at the Vice President level or higher, (ii) hotel general managers
who are employed by the Company, and (iii) Highly Compensated Employees who are
selected by the Committee (or its delegate) to participate in the Plan pursuant
to Section 2.1.
"Fund" or "Funds" shall mean one or more of the investments selected
by the Committee pursuant to Section 3.2(b).
"Highly Compensated Employee" shall mean an employee of the Company
who the Committee (or its delegate), in its discretion, anticipates will receive
Compensation in excess of the salary limitation contained in Section 401(a)(17)
of the Code for the applicable Plan Year.
"Investment Return" shall mean, for each Fund, an amount equal to the
net investment performance of such Fund on a given day, as determined by the
Committee.
"Participant" shall mean any Eligible Employee who elects to defer
Compensation in accordance with Section 3.1.
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"Plan" shall mean the Hilton Hotels Executive Deferred Compensation
Plan set forth herein, in effect as of the Effective Date, or as amended from
time to time.
"Plan Year" shall mean the 12 consecutive month period beginning on a
January 1.
"Year of Vesting Service" shall mean "Year of Service" as defined in
the Hilton Hotels Thrift Savings Plan. For Participant's who were employed by
Bally Entertainment Corp. ("Bally") immediately prior to Bally being merged with
the Company, Years of Vesting Service shall include any service of such
Participants with Bally, calculated as if Bally's had maintained the Hilton
Hotels Thrift Savings Plan.
ARTICLE II
PARTICIPATION
2.1 - PARTICIPATION.
Prior to December 31 of each year, the Committee (or its delegate)
shall designate which Highly Compensated Employees shall become Eligible
Employees for the following Plan Year. An Eligible Employee shall become a
Participant in the Plan by electing to defer a portion of his or her
Compensation in accordance with Section 3.1.
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ARTICLE III
DEFERRAL ELECTIONS
3.1 - ELECTIONS TO DEFER COMPENSATION.
(a) Each Eligible Employee may elect to defer Compensation by filing
with the Committee an election that conforms to the requirements of this Section
3.1, on a form provided by the Committee, no later than December 31 of the year
preceding the year for which the election is to become effective. Persons who
become Eligible Employees because they are promoted or hired by the Company to a
position of Vice President or hotel general manager on or after January 1, but
before July 1 of a Plan Year, may elect to defer Compensation effective July 1
of that Plan Year by filing with the Committee an election that conforms to the
requirements of this Section 3.1, on a form provided by the Committee, no later
than June 30 of that Plan Year.
(b) The amount of Compensation which an Eligible Employee may elect
to defer is any percentage or dollar amount of Compensation up to the limits
indicated in the following table, with respect to that Eligible Employee's age
as of the December 31 of the year preceding the year for which the election is
to become effective.
AGE MAXIMUM DEFERRAL
50 or younger 25% of Compensation
51 to 55 50% of Compensation
56 to 60 75% of Compensation
Over 60 100% of Compensation
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Notwithstanding the foregoing, no Eligible Employee shall be permitted
to defer Compensation which the Committee (or its delegate) reasonably
determines is required to pay the Eligible Employee's portion of payroll taxes
and contributions towards benefits (including, but not limited to, medical,
life, dental and disability) provided to the Eligible Employee and his or her
dependents.
(d) Any deferral election made under paragraph (a) of this Section
3.1 shall remain in effect and be irrevocable, notwithstanding any change in the
Participant's Compensation, for the entire Plan Year for which it is effective.
Subject to the provisions of this Section 3.1, a Participant shall file a new
election each year with the Committee by December 31, for Compensation earned
during the Plan Year beginning on January 1 of the immediately following year.
(e) Notwithstanding the above, any Participant may file a new
election with the Committee, on a form provided by the Committee, at any time
during the Plan Year to terminate such Participant's Deferral Election then in
effect, thereby reducing such Participant's Deferral Percentage to 0%. If such
an election is made, the Participant shall make no further deferrals under this
Plan for that Plan Year. Such election shall be valid as soon as
administratively feasible following its receipt by the Committee.
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3.2 - INVESTMENT ELECTIONS.
(a) At the time of making the deferral elections described in Section
3.1, the Participant shall designate, in a manner prescribed by the Committee,
which Funds the Participant's Accounts will be deemed to be invested in for
purposes of determining the Investment Return to be credited to those Accounts.
The initial Funds shall be as set forth below; the Committee may add, change, or
delete Funds at any time:
1) Fixed Income Fund
2) S & P 500 Index Stock Fund
3) Balanced Fund
4) Growth & Income Stock Fund
In making the designation pursuant to this Section 3.2, the
Participant may specify that all or any whole percentage of his Accounts be
deemed to be invested in one or more of the Funds. A Participant may change the
designation made under this Section 3.2, in a manner prescribed by the
Committee, on any business day. Such change shall be effective as soon as
administratively feasible after it is received.
(b) If a Participant fails to elect a type of Fund under this Section
3.2, he or she shall be deemed to have elected the Balanced Fund (or, if the
Balanced Fund is eliminated, the Fund designated by the Committee).
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(c) Although the Participant may designate the Funds according to
paragraph (a) above, the Committee shall select from time to time, in its sole
discretion, for each of the Funds described in paragraph (a), a commercially
available mutual fund or contract or an investment fund established with and
administered by an investment manager selected by the Committee. The Investment
Return of each such commercially available mutual fund, contract or investment
fund shall be used to determine the amount of earnings to be credited to
Participants' Accounts under Article IV.
ARTICLE IV
ACCOUNTS
4.1 - DEFERRAL ACCOUNT.
The Committee shall establish and maintain a Deferral Account for each
Participant under the Plan. Each Participant's Deferral Account shall be
further divided into separate subaccounts ("subaccounts"), each of which
corresponds to a Fund elected by the Participant pursuant to Section 3.2(a). A
Participant's Deferral Account shall be credited as follows:
(a) As of the last day of each payroll period, the Committee shall
credit the subaccounts of the Participant's Deferral Account with an amount
equal to the Compensation deferred by the Participant during such payroll period
in accordance with the Participant's election under Section 3.2(a); that is, the
portion of the Participant's deferred Compensation
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that the Participant has elected to be deemed to be invested in a certain
Fund shall be credited to the subaccount corresponding to that Fund; and
(b) Each subaccount of a Participant's Deferral Account shall, as of
each business day, be credited with earnings and debited with losses in an
amount equal to that determined by multiplying the balance credited to such
subaccount as of the previous day by the Investment Return for the corresponding
Fund pursuant to Section 3.2(b).
4.2 - COMPANY CONTRIBUTION ACCOUNT.
The Committee shall establish and maintain a Company Contribution
Account for each Participant under the Plan. Each Participant's Company
Contribution Account shall be further divided into separate subaccounts
corresponding to the Fund elected by the Participant pursuant to Section
3.2(a). A Participant's Company Contribution Account shall be credited as
follows:
(a) As of the last day of each payroll period, the Committee shall
credit the subaccounts of the Participant's Company Contribution Account with an
amount equal to the portion of the Company Contribution Amount, if any, which
the Participant elected to be deemed to be invested in a certain type of Fund.
Subject to paragraph (d) below, a Participant's Company Contribution Amount for
any payroll period shall be equal to: (1) If the Participant has five or fewer
Years of Vesting Service as of the December 31 preceding that Plan Year, 50% of
the Compensation deferred by the Participant during such payroll period in
accordance with the Participant's election under Section 3.2(a), disregarding
any such deferral in excess of 10% of the Participant's Compensation for such
payroll period or, if the Participant has more than five Years of Vesting
Service as of the December 31 preceding that Plan Year, 75% of the Compensation
deferred by the Participant during such payroll
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period in accordance with the Participant's election under Section 3.2(a),
disregarding any such deferral in excess of 10% of the Participant's
Compensation for such payroll period; less (2) any contributions that the
Company made on behalf of the Participant to the Hilton Hotels Thrift Savings
Plan for such payroll period;
(b) Each subaccount of a Participant's Company Contribution Account
shall be credited daily with earnings or losses in an amount equal to that
determined by multiplying the balance credited to such subaccount as of the
previous day by the Investment Return for the corresponding Fund selected by the
Company pursuant to Section 3.2(b);
(c) As of the last day of each month, forfeitures that occurred under
Section 5.2 during such month shall be returned to the Company for its
unrestricted use; and
(d) As of the last day of the last month for each Plan Year, a
Participant's Company Contribution Amount to be credited on such date pursuant
to paragraph (a) above, shall be adjusted so that the Participant's total
Company Contribution Amounts for the payroll periods ending in the Plan Year
equal: (1) either 50% or 75%, as determined pursuant to paragraph (a), of the
salary deferred by the Participant during the payroll periods ending in that
Plan Year, disregarding any such deferrals in excess of 10% of the
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Participant's Compensation for such payroll periods ending in that Plan Year;
less (2) any contributions that the Company made on behalf of the Participant
to the Hilton Hotels Thrift Savings Plan for such payroll periods ending in
that Plan Year.
(e) Notwithstanding the above paragraphs of this Section 4.2, from
time-to-time and in its sole discretion, the Board may provide that additional
Company Contribution Amounts be credited to some or all Participants, according
to the terms and conditions determined by the Board.
ARTICLE V
VESTING
5.1 - DEFERRAL ACCOUNT.
A Participant's Deferral Account shall be 100% vested at all times.
5.2 - COMPANY CONTRIBUTION ACCOUNT.
(a) Each Participant's Company Contribution Account shall become
nonforfeitable in the following increments: (1) 25% upon the Participant's
completion of two Years of Vesting Service, (2) an additional 25% (50% total)
upon completion of three Years of Vesting Service, (3) an additional 25% (75%
total) upon completion of four Years of Vesting
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Service, and (4) in its entirety after the Participant's completion of five
Years of Vesting Service.
(b) Notwithstanding paragraph (a) of this Section 5.2, a
Participant's Company Contribution Account shall become 100% vested should: (1)
the Participant die while employed by the Company, (2) the Participant become
Disabled while employed by the Company, or (3) there occur a Change of Control.
(c) When a Participant terminates employment, the portion of his or
her Company Contribution Account which is not vested shall immediately be
forever forfeited to the Company, and the Company shall have no obligation to
the Participant (or Beneficiary) with respect to such forfeited amount.
ARTICLE VI
DISTRIBUTIONS
6.1 - DISTRIBUTION OF DEFERRED COMPENSATION.
(a) A Participant may elect, on the form provided by the Committee to
defer Compensation under Section 3.1, to receive one of the optional forms of
payment described in Section 6.1(c). If such an election is made in a timely
fashion, as set forth in Section 6.1(c), it shall be effective for all of the
Participant's Accounts, subject to the Participant timely electing a new
optional form of payment pursuant to Section 6.1(c).
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(b) The amount credited to a Participant's Deferral Account and the
vested portion of the amount credited to his or her Company Contribution Account
shall be paid to the Participant (or, in the case of his or her death,
Beneficiary) in the form of payment the participant timely elected. If no such
timely election was made, the payment shall be made in the form of a cash lump
sum payment within 90 days following the Participant's termination of
employment.
(c) A Participant may elect one of the following optional forms of
payment provided that such optional form of payment does not occur or commence
before his or her termination date:
(1) A lump sum payment on the date designated by the Participant
in his or her election, or
(2) Substantially equal annual installments over five, ten, or
fifteen years, to begin on a date designated by the Participant in his
or her election.
A Participant's election is timely only if the election is filed with
the Committee in the manner prescribed by the Committee at least one year prior
to the date the Participant's employment with the Company terminates.
(d) The unpaid portion of a Participant's Accounts shall continue to
be credited monthly with earnings pursuant to Section 4.1 of the Plan until all
amounts credited to his or
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her Accounts under the Plan have been distributed. If installment payments
are made under this Plan, the Committee shall adjust the amount of the
installments as it deems appropriate to take into account investment gains or
losses which occur during the period when installment payments are made.
Such adjustments shall be made so that the total payments to the Participant
equal the Participant's Accounts, adjusted for investment gains and losses.
6.2 - INABILITY TO LOCATE PARTICIPANT.
In the event that the Committee is unable to locate a Participant or
Beneficiary within two years following the date the Participant was to commence
receiving payment, the entire amount allocated to the Participant's Deferral
Account and Company Contribution Account shall be forfeited. If, after such
forfeiture, the Participant or Beneficiary later claims such benefit, such
benefit shall be reinstated without interest or earnings from the date payment
was to commence under Section 6.1.
6.3 - PAYMENT BY TRUST.
The Company may cause the payment of benefits under this Plan to be
made in whole or in part by the trustee of a trust designated by the Committee
(the "Trust"). The Committee may direct the Trustee to pay the Participant's or
Beneficiary's benefit at the time and in the amount described herein. In the
event the amounts allocated to the Participant
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under the Trust are not sufficient to provide the full amount of benefit
payable to the Participant, the Company shall pay the remainder of such
benefit.
6.4 - WITHDRAWALS.
Any Participant may receive a distribution as set forth in this
Section 6.4 prior to termination of employment. Such distribution shall be paid
in the manner provided by the Committee. The Participant shall forever forfeit
10% of the amount of the distribution to the Company, and the Company shall have
no obligation to the Participant (or Beneficiary) with respect to such forfeited
amount. The Committee may provide that the forfeiture shall reduce the
distribution, or shall reduce the Participant's Account remaining in the Plan.
The total of all distributions to a Participant under this Section shall not
exceed the lesser of: (1) the Participant's aggregate Compensation deferrals
under Section 3.1; or (2) the Participant's Deferral Account.
6.5 - LOANS.
There shall be no loans permitted under the Plan.
6.6 - DISTRIBUTIONS ON DISABILITY.
If a Participant becomes Disabled, such Participant's Account shall be
distributed pursuant to Section 6.1(b).
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ARTICLE VII
DEATH BENEFITS
7.1 - IN GENERAL.
Upon the death of a Participant, and before his or her Account has
been paid in full (either in a lump sum or installment payments), his or her
Beneficiary shall receive the balance of the Participant's vested Account as of
the date of death in accordance with Section 7.2.
7.2 - PAYMENT OF DEATH BENEFITS.
The death benefit payable pursuant to Section 7.1 shall be paid to the
Participant's Beneficiary in a lump sum payment within 90 days of the
Participant's death.
ARTICLE VIII
ARBITRATION
8.1 - ARBITRATION.
(a) A Participant or, following the Participant's death, a
Beneficiary (collectively referred to in this section as "Claimant") may, if he
desires, submit any claim for payment under the Plan or any dispute regarding
the interpretation of the Plan to arbitration. This
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right to select arbitration shall be solely that of the Claimant, and the
Claimant may decide whether or not to arbitrate in his discretion. The
"right to select arbitration" does not impose on the Claimant a requirement
to submit a dispute for arbitration. The Claimant may, in lieu of
arbitration, bring an action in appropriate civil court. The Claimant
retains the right to select arbitration, even if a civil action (including,
without limitation, an action for declaratory relief) is brought by the
Company or any other fiduciary of the Plan prior to the commencement of
arbitration. If arbitration is selected by the Claimant after a civil action
concerning the Claimant's dispute has been brought by a person other than the
Claimant, the Company, the trustee of any grantor trust that holds assets for
the purpose of making benefit payments under the Plan ("Trustee"), and the
Claimant shall take such actions as are necessary or appropriate, including
dismissal of the civil action, so that the arbitration can be timely heard.
Once arbitration is commenced, it may not be discontinued without the
unanimous consent of all parties to the arbitration. During the lifetime of
the Participant only he can use the arbitration procedure set forth in this
section.
(b) Any claim for arbitration may be submitted as follows: if the
Claimant disagrees with an interpretation of the Plan by the Company or any
fiduciary of the Plan, or disagrees with the calculation of his benefit under
the Plan, such claim may be filed in writing with an arbitrator of the
Claimant's choice who is selected by the method described in the next four
sentences. The first step of the selection shall consist of the Claimant
submitting in writing a list of five potential arbitrators to the Company and to
the Trustee. Each of the five arbitrators must be either (1) a member of the
National Academy of Arbitrators located in the state of the Claimant's principal
residence or (2) a retired
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California Superior Court or Appellate Court judge. Within one week after
receipt of the list, the Trustee and the Company shall jointly select one of
the five arbitrators as the arbitrator of the dispute in question. If the
Trustee and Company fail to select an arbitrator in a timely manner
(including failure to select an arbitrator by reason of disagreement between
the Trustee and the Company as to the arbitrator to be selected), the
Claimant then shall designate one of the five arbitrators as the arbitrator
of the dispute in question.
(c) The arbitration hearing shall be held within seven days (or as
soon thereafter as possible) after the selection of the arbitrator. No
continuance of said hearing shall be allowed without the mutual consent of the
Claimant, the Trustee, and the Company. Absence from or nonparticipation at the
hearing by any party shall not prevent the issuance of an award. Hearing
procedures that will expedite the hearing may be ordered at the arbitrator's
discretion, and the arbitrator may close the hearing in his sole discretion when
he decides he has heard sufficient evidence to justify issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than one week after the close of the hearing. In
the event the arbitrator finds that the Claimant is entitled to the benefits he
claimed, the arbitrator shall order the Company and/or the Trustee to pay such
benefits, in the amounts and at such time as the arbitrator determines. The
obligation of the Trustee to pay such benefits shall not, however, exceed the
assets of the trust, and the Company shall be jointly and severally liable for
any amount that the Trustee is ordered to pay. The award of the arbitrator
shall be final and binding on the parties. The Company shall thereupon pay the
Claimant immediately
23
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the amount that the arbitrator orders to be paid in the manner described in
the award. The award may be enforced in any appropriate court as soon as
possible after its rendition. If any action is brought to confirm the award,
no appeal shall be taken by any party from any decision rendered in such
action.
(e) If the arbitrator determines either that the Claimant is entitled
to the claimed benefits or that the claim by the Claimant was made in good
faith, the arbitrator shall direct the Company to pay to the Claimant, and
Company agrees to pay to the Claimant in accordance with such order, an amount
equal to the Claimant's expenses in pursuing the claim, including attorneys'
fees.
ARTICLE IX
ADMINISTRATION
9.1 - COMMITTEE.
A committee shall be appointed by, and serve at the pleasure of, the
Board of Directors. The number of members comprising the Committee shall be
determined by the Board which may from time to time vary the number of members.
A member of the Committee may resign by delivering a written notice of
resignation to the Board. The Board may remove any member by delivering a
certified copy of its resolution of removal to such member. Vacancies in the
membership of the Committee shall be filled promptly by the Board.
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9.2 - COMMITTEE ACTION.
The Committee shall act at meetings by affirmative vote of a majority
of the members of the Committee. Any action permitted to be taken at a meeting
may be taken without a meeting if, prior to such action, a written consent to
the action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of the
Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee.
9.3 - POWERS AND DUTIES OF THE COMMITTEE.
(a) The Committee, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms, shall be
charged with the general administration of the Plan, and shall have all powers
necessary to accomplish its purposes, including, but not by way of limitation,
the following:
(1) To select the mutual funds, contracts or investment funds to
be the Funds in accordance with Section 3.2(b) hereof;
(2) To construe and interpret the terms and provisions of this
Plan;
(3) To compute and certify to the amount and kind of benefits
payable to Participants and their Beneficiaries;
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(4) To maintain all records that may be necessary for the
administration of the Plan;
(5) To provide for the disclosure of all information and the
filing or provision of all reports and statements to
Participants, Beneficiaries or governmental agencies as
shall be required by law;
(6) To make and publish such rules for the regulation of the
Plan and procedures for the administration of the Plan as
are not inconsistent with the terms hereof; and
(7) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with
the administration of the Plan as the Committee may from
time to time prescribe.
(8) To select those Highly Compensated Employees who shall be
Eligible Employees.
9.4 - CONSTRUCTION AND INTERPRETATION.
The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to the Company and
any Participant or Beneficiary. The Committee shall administer such terms and
provisions in a uniform and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.
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9.5 - INFORMATION.
To enable the Committee to perform its functions, the Company shall
supply full and timely information to the Committee on all matters relating to
the Compensation of all Participants, their death, Disability, or other cause of
termination, and such other pertinent facts as the Committee may require.
9.6 - COMPENSATION, EXPENSES AND INDEMNITY.
(a) The Committee is authorized at the expense of the Company to
employ such legal counsel as it may deem advisable to assist in the performance
of its duties hereunder. Expenses and fees in connection with the
administration of the Plan shall be paid by the Company.
(b) To the extent permitted by applicable state law, the Company
shall indemnify and save harmless the Committee and each member thereof, the
Board of Directors and any delegate of the Committee who is an employee of the
Company against any and all expenses, liabilities and claims, including legal
fees to defend against such liabilities and claims arising out of their
discharge in good faith of responsibilities under or incident to the Plan, other
than expenses and liabilities arising out of willful misconduct. This indemnity
shall not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.
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9.7 - QUARTERLY STATEMENTS.
Under procedures established by the Committee, a Participant shall
receive a statement with respect to such Participant's Accounts on a quarterly
basis as of each March 31, June 30, September 30 and December 31.
ARTICLE X
MISCELLANEOUS
10.1 - UNSECURED GENERAL CREDITOR.
Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any specific
property or assets of the Company. No assets of the Company shall be held
under any trust, or held in any way as collateral security for the fulfilling
of the obligations of the Company under this Plan. Any and all of the
Company's assets shall be, and remain, the general unpledged, unrestricted
assets of the Company. The Company's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Company to pay money
in the future, and the rights of the Participants and Beneficiaries shall be
no greater than those of unsecured general creditors.
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10.2 - RESTRICTION AGAINST ASSIGNMENT.
The Company shall pay all amounts payable hereunder only to the
person or persons designated by the Plan and not to any other person or
corporation. No part of a Participant's Accounts shall be liable for the
debts, contracts, or engagements of any Participant, his or her Beneficiary,
or successors in interest, nor shall a Participant's Accounts be subject to
execution by levy, attachment, or garnishment or by any other legal or
equitable proceeding, nor shall any such person have any right to alienate,
anticipate, commute, pledge, encumber, or assign any benefits or payments
hereunder in any manner whatsoever. If any Participant, Beneficiary or
successor in interest is adjudicated bankrupt or purports to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any distribution
or payment from the Plan, voluntarily or involuntarily, the Committee, in its
discretion, may cancel such distribution or payment (or any part thereof) to
or for the benefit of such Participant, Beneficiary or successor in interest
in such manner as the Committee shall direct.
10.3 - WITHHOLDING.
There shall be deducted from each payment made under the Plan or any
other compensation payable to the Participant (or Beneficiary) all taxes which
are required to be withheld by the Company in respect to such payment or this
Plan. The Company shall have the right to reduce any payment (or compensation)
by the amount of cash sufficient to provide the amount of said taxes.
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10.4 - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION.
The Company may amend, modify, suspend or terminate the Plan in whole
or in part, except that (a) no amendment, modification, suspension or
termination shall have any retroactive effect to reduce any amounts allocated to
a Participant's Accounts, and (b) Section 8.1 may not be amended with respect to
any Participant or Beneficiary following the date the Participant or Beneficiary
makes a claim for benefits under the Plan. In the event that this Plan is
terminated, the amounts credited to a Participant's Accounts (including any
previously unvested amounts) shall be distributed to the Participant or, in the
event of his or her death, his or her Beneficiary in a lump sum within thirty
(30) days following the date of termination.
10.5 - GOVERNING LAW.
This Plan shall be construed, governed and administered in accordance
with the laws of the State of California.
10.6 - RECEIPT OR RELEASE.
Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Committee, the Company and the
Trustee. The Committee may require such Participant
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or Beneficiary, as a condition precedent to such payment, to execute a
receipt and release to such effect.
10.7 - PAYMENTS ON BEHALF OF PERSONS UNDER INCAPACITY.
In the event that any amount becomes payable under the Plan to a
person who, in the sole judgement of the Committee, is considered by reason of
physical or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee, in its sole judgement, to have assumed the care of such person. Any
payment made pursuant to such determination shall constitute a full release and
discharge of the Committee and the Company.
10.8 - HEADINGS, ETC. NOT PART OF AGREEMENT.
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
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IN WITNESS WHEREOF, the Company has caused this document to be
executed by its duly authorized officer on this _______ day of __________, 1996.
HILTON HOTELS CORPORATION
By:
----------------------------------
Its:
----------------------------------
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EXHIBIT 10.28
AMENDMENT 1996-1
HILTON HOTELS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the Hilton
Hotels Executive Deferred Compensation Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan, effective January 1,
1997, as set forth herein; and
WHEREAS, Company has the ability to amend the Plan pursuant to Section
10.4 thereof;
NOW, THEREFORE, the Plan is hereby amended, effective January 1, 1997,
as follows:
1. The definition of Eligible Employee contained in Section 1.2
is amended to read as follows:
"'Eligible Employee' shall mean (i) an officer of Hilton Hotels
Corporation at the Vice President level or higher, (ii) a hotel
general manager who is employed by the Company, or (iii) a member of a
select group of management or highly compensated employees of the
Company who is selected by the Committee (or its delegate) to
participate in the Plan pursuant to Section 2.1."
2. Section 1.2 is amended by deleting the definition of "Highly
Compensated Employee" therein.
<PAGE>
3. The first sentence of Section 2.1 is amended to read as
follows:
"Prior to December 31 of each year, the Committee (or its
delegate) shall designate which members of a select group of
management or highly compensated employees of the Company shall become
Eligible Employees for the following Plan Year."
4. Paragraph (8) of Section 9.3(a) is amended to read as
follows:
"To select those members of a select group of management or
highly compensated employees who shall be Eligible Employees."
IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer on this _____ day of December, 1996.
HILTON HOTELS CORPORATION
By: ______________________
Its: _____________________
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EXHIBIT 10.29
HILTON HOTELS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
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1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS . . . . . . . . . . . . . 3
5. OFFERING PERIODS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. METHOD OF PAYMENT OF CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . 4
8. GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9. EXERCISE OF OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. DELIVERY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
11. TERMINATION OF EMPLOYMENT; REDUCTION IN SERVICE . . . . . . . . . . . . 6
12. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13. DESIGNATION OF BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . 7
14. TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
15. USE OF FUNDS; INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . 8
16. REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK . . . . . . . . . . . . . . . . 8
18. TERM OF PLAN; AMENDMENT OR TERMINATION. . . . . . . . . . . . . . . . . 9
19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
20. CONDITIONS UPON ISSUANCE OF SHARES. . . . . . . . . . . . . . . . . . . 9
21. ADDITIONAL RESTRICTIONS OF RULE 16b-3 . . . . . . . . . . . . . . . . . 9
22. EMPLOYEE'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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HILTON HOTELS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Hilton Hotels Corporation
Employee Stock Purchase Plan, effective January 1, 1997.
1. PURPOSE
The purpose of this Plan is to provide Eligible Employees with an incentive
to advance the best interests of Hilton Hotels Corporation by providing a
method whereby they may voluntarily purchase Common Stock at a favorable
price and upon favorable terms. This Plan is not intended to meet the
requirements of Section 423 of the Code.
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined shall have
the following meanings.
"ACCOUNT" shall mean the bookkeeping account maintained by the
Company, or by a recordkeeper on behalf of the Company, for a Participant
pursuant to Section 7(a).
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the committee appointed by the Board to
administer this Plan pursuant to Section 12.
"COMMON STOCK" shall mean the Common Stock of the Company.
"COMPANY" shall mean Hilton Hotels Corporation, a Delaware
corporation.
"COMPENSATION" shall mean the following: regular earnings, overtime,
shift premium, shift differential, vacation pay, incentive compensation,
and bonuses. Compensation also includes amounts contributed as salary
reduction contributions to a plan qualifying under Section 401(k), 125 or
129 of the Code. Compensation includes tips, tokens and gratuities, but
only to the extent that such tips, tokens and gratuities are actually
reported as income subject to income tax withholding on form W-2 for an
Eligible Employee. Any other form of remuneration is excluded from
Compensation, including prizes, awards,
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housing allowances, stock option exercises, restricted stock exercises,
performance awards, auto allowances and other forms of imputed income.
"CONTRIBUTIONS" shall mean all bookkeeping amounts credited to the
Account of a Participant pursuant to Section 7(a).
"ELIGIBLE EMPLOYEE" shall mean any employee of the Company or of any
Subsidiary which has been designated in writing by the Committee as a
"Participating Subsidiary," except that any employee who has not as of the
Grant Date completed at least 12 months of continuous full-time employment
with the Company or a Subsidiary or whose customary employment is for less
than 30 hours per week shall not be an Eligible Employee. In addition, no
person whose employment is subject to the terms of a collective bargaining
agreement shall be an Eligible Employee, unless the terms of such agreement
specifically extend the benefits of this Plan to such employee.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXERCISE DATE" shall mean, with respect to an Offering Period, the
first business day of the month following the end of that Offering Period.
"FAIR MARKET VALUE" shall mean the closing price of a Share on The New
York Stock Exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as
reported in THE WALL STREET JOURNAL or, in the event the Common Stock is
not listed on The New York Stock Exchange, the "Fair Market Value" shall be
the closing price of the Common Stock for such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by the National Association of Securities
Dealers Automated Quotation ("NASDAQ") or, if such price is not reported,
the mean of the bid and asked prices per Share as reported by NASDAQ or, if
such prices are not so listed or reported, as determined by the Committee
(or its delegate), in its discretion.
"GRANT DATE" shall mean the first business day of each Offering
Period.
"OFFERING PERIOD" shall mean the 6-consecutive month period commencing
on each January 1 or July 1.
"OPTION" shall mean the nonqualified stock option to acquire Shares
granted to a Participant pursuant to Section 8.
"OPTION PRICE" shall mean the per share exercise price of an Option as
determined in accordance with Section 8(b).
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"PARTICIPANT" shall mean an Eligible Employee who has elected to
participate in this Plan and who has filed a valid and effective
Subscription Agreement to make Contributions pursuant to Section 6.
"PLAN" shall mean this Hilton Hotels Corporation Employee Stock
Purchase Plan, as amended from time to time.
"SHARE" shall mean a share of Common Stock.
"SUBSCRIPTION AGREEMENT" shall mean the agreement filed by an Eligible
Employee with the Company pursuant to Section 6 to participate in this
Plan.
"SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations (beginning with the Company) in which each corporation (other
than the last corporation) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one or more of the other
corporations in the chain.
3. ELIGIBILITY
Any person employed as an Eligible Employee as of a Grant Date shall be
eligible to participate in this Plan during the Offering Period in which
such Grant Date occurs, subject to the Eligible Employee satisfying the
requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
The total number of Shares to be made available under this Plan is
2,000,000 authorized and unissued or treasury shares of Common Stock,
subject to adjustments pursuant to Section 17. In the event that all of
the Shares made available under this Plan are subscribed prior to the
expiration of this Plan, this Plan may be terminated in accordance with
Section 18.
5. OFFERING PERIODS
During the term of this Plan, the Company will offer Options to purchase
Shares to all Participants during each Offering Period. Each Option shall
become effective on the Grant Date. The term of each Option is 6 months
and shall end on the Exercise Date. Offering Periods shall continue until
this Plan is terminated in accordance with Section 18, or, if earlier,
until no Shares remain available for Options pursuant to Section 4.
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6. PARTICIPATION
An Eligible Employee may become a participant in this Plan by completing a
Subscription Agreement on a form approved by and in a manner prescribed by
the Committee (or its delegate). To become effective, Subscription
Agreements must be filed with the Company prior to the applicable Grant
Date and must set forth the percentage of such Eligible Employee's
Compensation (which shall be a whole percentage point not less than 1% and
not more than 10%) to be credited to the Participant's Account as
Contributions each pay period. Subscription Agreements shall contain the
Eligible Employee's authorization and consent to the Company's withholding
from his or her Compensation the amount of his or her Contributions.
Subscription Agreements shall remain valid for all Offering Periods until
(i) an Eligible Employee's participation terminates pursuant to the terms
hereof, or (ii) until a new Subscription Agreement becomes effective
pursuant to Section 7.
7. METHOD OF PAYMENT OF CONTRIBUTIONS
(a) The Company shall maintain on its books, or cause to be maintained by
a recordkeeper, an Account in the name of each Participant. The
percentage of Compensation elected to be applied as Contributions by a
Participant shall be deducted from such Participant's Compensation on
each payday during the period for payroll deductions set forth below
and such payroll deductions shall be credited to that Participant's
Account as soon as administratively practicable after such date. A
Participant may not make any additional payments into his or her
Account. A Participant's Account shall be reduced by any amounts used
to pay the Option Price of Shares acquired, or by any amounts
distributed, pursuant to the terms hereof.
(b) Payroll deductions with respect to an Offering Period shall commence
as of the first day of the payroll period which coincides with or
immediately follows the applicable Grant Date and shall end on the
last day of the payroll period which immediately precedes the
applicable Exercise Date, unless sooner terminated by the Participant
as provided in this Section or until his or her participation
terminates pursuant to Section 11.
(c) The maximum amount of Contributions to a Participant's Account in any
one Offering Period shall not exceed $12,500. Should a Participant's
Account balance reach $12,500, such Participant's payroll deductions
made pursuant to this Section shall terminate for that Offering
Period. Any excess shall be refunded to such Participant as soon as
administratively practicable.
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(d) A Participant may terminate his or her Contributions by completing and
filing with the Company, on such terms as the Committee (or its
delegate) may prescribe, a new Subscription Agreement. Such
termination shall be effective as soon as administratively practicable
after its receipt by the Company.
(e) A Participant may otherwise change the amount of his or her
Contributions effective as of the next Grant Date by completing and
filing with the Company, on such terms as the Committee (or its
delegate) may prescribe, a new Subscription Agreement.
8. GRANT OF OPTION
(a) On each Grant Date, each Eligible Employee who is a participant during
that Offering Period shall be granted an Option to purchase a number
of Shares. The Option shall be exercised on the Exercise Date. The
number of Shares subject to the Option shall be determined by dividing
the Participant's Account balance as of the applicable Exercise Date
by the Option Price.
(b) The Option Price per Share of the Shares subject to an Option shall be
the lesser of: (i) 95% of the Fair Market Value of a Share on the
applicable Grant Date; or (ii) 95% of the Fair Market Value of a Share
on the applicable Exercise Date.
9. EXERCISE OF OPTION
Unless a Participant's Plan participation is terminated as provided in
Section 11, his or her Option for the purchase of Shares shall be exercised
automatically on the Exercise Date for that Offering Period, without any
further action on the Participant's part, and the maximum number of whole
Shares subject to such Option shall be purchased at the Option Price with
the balance of such Participant's Account. If any amount (which is not
sufficient to purchase a whole Share) remains in a Participant's Account
after the exercise of his or her Option on the Exercise Date: (i) such
amount shall be credited to such Participant's Account for the next
Offering Period, if he or she is then a Participant; or (ii) if such
Participant is not a Participant in the next Offering Period, or if the
Committee so elects, such amount shall be refunded to such Participant as
soon as administratively practicable after such date.
10. DELIVERY
As soon as administratively practicable after the Exercise Date, the
Company shall deliver to each Participant a certificate representing the
Shares purchased upon exercise of his or her Option. The Company may make
available an
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alternative arrangement for delivery of Shares to a recordkeeping
service. The Committee (or its delegate) in its discretion may either
require or permit the Participant to elect that such certificates be
delivered to such recordkeeping service.
11. TERMINATION OF EMPLOYMENT; REDUCTION IN SERVICE
(a) Upon a Participant's termination from employment with the Company and
its Subsidiaries for any reason (including, but not limited to, death
or retirement), or in the event that a Participant is no longer an
Eligible Employee, at any time prior to the last day of an Offering
Period in which he or she participates, such Participant's Account
shall be paid to him or her or in cash, or, in the event of such
Participant's death, paid to the person or persons entitled thereto
under Section 13, and such Participant's Option for that Offering
Period shall be automatically terminated.
(b) A Participant's termination from Plan participation precludes the
Participant from again participating in this Plan during that Offering
Period. However, such termination shall not have any effect upon his
or her ability to participate in any succeeding Offering Period,
provided that the applicable eligibility and participation
requirements are again then met. A Participant's termination from
Plan participation shall be deemed to be a revocation of that
Participant's Subscription Agreement and such Participant must file a
new Subscription Agreement to resume Plan participation in any
succeeding Offering Period.
12. ADMINISTRATION
The Board shall appoint the Committee which shall supervise and administer
this Plan and shall have full power and discretion to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration
of this Plan and not inconsistent with the terms of this Plan, and to make
all other determinations necessary or advisable for the administration of
this Plan. No member of the Committee shall be entitled to act on or
decide any matter relating solely to himself or herself or any of his or
her rights or benefits under this Plan. The Committee shall have full
power and discretionary authority to construe and interpret the terms and
conditions of this Plan, which construction or interpretation shall be
final and binding on all parties including the Company, Participants and
Beneficiaries. The composition of the Committee shall be in accordance
with the requirements to obtain or retain any available exemption from
Section 16(b) of the Exchange Act.
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13. DESIGNATION OF BENEFICIARY
(a) A Participant may file, in a manner prescribed by the Committee (or
its delegate), a written designation of a beneficiary who is to
receive any Shares or cash from such Participant's Account under this
Plan in the event of such Participant's death. If a Participant's
death occurs subsequent to the end of an Offering Period but prior to
the delivery to him or her of any Shares deliverable under the terms
of this Plan, such Shares and any remaining balance of such
Participant's Account shall be paid to such beneficiary (or such other
person as set forth in Section 13(b)) as soon as administratively
practicable after the Company receives notice of such Participant's
death and any outstanding unexercised Option shall terminate. If a
Participant's death occurs at any other time, the balance of such
Participant's Account shall be paid to such beneficiary (or such other
person as set forth in Section 13(b)) in cash as soon as
administratively practicable after the Company receives notice of such
Participant's death and such Participant's Option shall terminate. If
a Participant is married and the designated beneficiary is not his or
her spouse, spousal consent shall be required for such designation to
be effective.
(b) Beneficiary designations may be changed by the Participant (and his or
her spouse, if required) at any time on forms provided and in the
manner prescribed by the Committee (or its delegate). If a
Participant dies with no validly designated beneficiary under this
Plan who is living at the time of such Participant's death, the
Company shall deliver all Shares and/or cash payable pursuant to the
terms hereof to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been
appointed, the Company, in its discretion, may deliver such Shares
and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company may
designate.
14. TRANSFERABILITY
Neither Contributions credited to a Participant's Account nor any Options
or rights with respect to the exercise of Options or right to receive
Shares under this Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 13) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an event
terminating such Participant's status as an Eligible Employee for that
Offering Period for purposes of, and such Participant's Plan participation
for that Offering Period may be terminated
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pursuant to, Section 11. During a Participant's lifetime, Options shall
only be exercisable by him or her.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Company under this Plan will be
included in the general assets of the Company and may be used for any
corporate purpose. No interest will be paid to any Participant or credited
to his or her Account under this Plan.
16. REPORTS
Statements shall be provided to Participants as soon as administratively
practicable following each Exercise Date. Each Participant's statement
shall set forth, as of such Exercise Date, that Participant's Account
balance immediately prior to the exercise of his or her Option, the Fair
Market Value of a Share, the Option Price, the number of Shares purchased
and his or her remaining Account balance, if any.
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK
In the event that the Shares shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the
Company or of another corporation (whether by reason or merger,
consolidation, recapitalization, stock split, combination of shares, or
otherwise), or if the number of Shares shall be increased through a stock
split or the payment of a stock dividend, then there shall be substituted
for or added to each Share theretofore reserved for sale under this Plan,
the number and kind of shares of stock or other securities into which each
outstanding Share shall be so changed, or for which each such Share shall
be exchanged, or to which each such Share is entitled, as the case may be,
or the number or kind of securities which may be sold under this Plan and
the purchase price per Share shall be appropriately adjusted consistent
with such change in such manner as the Committee (or its delegate) may deem
equitable to prevent substantial dilution or enlargement of rights granted
to, or available for, Eligible Employees under this Plan.
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18. TERM OF PLAN; AMENDMENT OR TERMINATION
(a) This Plan shall become effective January 1, 1997. No new Offering
Periods shall commence after December 31, 2006 and this Plan shall
terminate on the first business day following such date unless sooner
terminated pursuant to this Section 18.
(b) The Board may amend, modify or terminate this Plan at any time without
notice, provided that no Participant's existing rights are adversely
affected thereby.
19. NOTICES
All notices or other communications by a Participant to the Company
contemplated by this Plan shall be deemed to have been duly given when
received in the form and manner specified by the Committee (or its
delegate) at the location, or by the person, designated by the Committee
(or its delegate) for that purpose.
20. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued with respect to an Option unless the exercise of
such Option and the issuance and delivery of such Shares complies with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, any
applicable state securities laws, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the
Shares may then be listed.
As a condition precedent to the exercise of any Option, if, in the opinion
of counsel for the Company such a representation is required under
applicable law, the Company may require any person exercising such Option
to represent and warrant that the Shares subject thereto are being acquired
only for investment and without any present intention to sell or distribute
such Shares.
21. ADDITIONAL RESTRICTIONS OF RULE 16b-3
The terms and conditions of Options granted hereunder to, and the purchase
of Shares by, persons subject to Section 16 of the Exchange Act shall
comply with the applicable provisions of Rule 16b-3 promulgated thereunder
("Rule 16b-3"). This Plan shall be deemed to contain, and Options shall
contain, and the Shares issued upon exercise thereof shall be subject to,
such additional conditions and restrictions as the Committee (or its
delegate) may determine, in its discretion, are required by Rule 16b-3 to
qualify for the maximum exemption available from Section 16 of the Exchange
Act.
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22. EMPLOYEE'S RIGHTS
Nothing in this Plan shall prevent the Company or any Subsidiary from
terminating any employee's employment. No employee shall have any rights
as a shareholder until a certificate for Shares has been issued in the
Participant's name following exercise of his or her Option.
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Exhibit 10.31
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Hilton Hotels Corporation, a Delaware
corporation (the "Company") and Stephen F. Bollenbach (the "Employee"), dated as
of the 30th day of January, 1996.
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 assure
that the Company will have the continued dedication of the Employee,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Employee by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control, to
encourage the Employee's full attention and dedication to the Company currently
and in the event of any threatened or pending Change of Control, and to provide
the Employee with compensation arrangements upon a Change of Control which
provide the Employee with individual financial security and which are
competitive with those of other corporations and, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
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NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first
date during the "Change of Control Period" (as defined in Section 1(b)) on which
a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (1) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or
(2) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the earlier to occur of (i) the third anniversary of
such date or (ii) the first day of the month next following the Employee's
normal retirement date ("Normal Retirement Date") under Hilton Hotels Retirement
Plan or any successor retirement plan (the "Retirement Plan"); PROVIDED,
HOWEVER, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate on the earlier of (x) three
years from such Renewal Date or (y) the first day of the month coinciding with
or next following the Employee's Normal
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Retirement Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. 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 date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
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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 14a-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.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the earlier to occur of (a) the third anniversary of such date or (b) the first
day of the month coinciding with or next following the Employee's
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Normal Retirement Date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Employee's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Employee's services shall be performed at the location where the Employee
was employed immediately preceding the Effective Date or any office or location
less than thirty-five (35) miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, (C) manage personal investments and (D)
participate as a member or consultant to professional
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associations and to otherwise participate in the activities of associations in
such manner as has been historically conducted by the Employee, so long as such
activities do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Employee shall receive an annual base salary ("Base Salary") at a monthly
rate at least equal to the highest monthly base salary paid or payable to the
Employee by the Company during the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Base Salary shall be reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially consistent with increases
in base salary awarded in the ordinary course of business to other key employees
of the Company and its subsidiaries. Any increase in Base Salary shall not
serve to limit or reduce any other obligation to the Employee under this
Agreement. Base Salary shall not be reduced after any such increase.
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(ii) ANNUAL BONUS. In addition to Base Salary,
the Employee shall be awarded, for each fiscal year during the Employment
Period, an annual bonus (an "Annual Bonus") (either pursuant to the incentive
compensation plan of the Company or otherwise) in cash at least equal to the
average bonus payable to the Employee from the Company and its subsidiaries in
respect of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to
Base Salary and Annual Bonus payable as hereinabove provided, the Employee shall
be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs applicable to
other key employees of the Company and its subsidiaries (including Company's
employee benefit plans, in each case providing benefits which are the economic
equivalent to those in effect or as subsequently amended). Such plans,
practices, policies and programs, in the aggregate, shall provide the Employee
with compensation, benefits and reward opportunities at least as favorable as
the most favorable of such compensation, benefits and reward opportunities
provided by the Company for the Employee under such plans, practices, policies
and programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as provided
at any time thereafter with respect to other key employees of the Company and
its subsidiaries.
7
<PAGE>
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(v) EXPENSES. During the Employment Period, the Employee shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries.
(vi) FRINGE BENEFITS. During the Employment Period, the
Employee shall be entitled to fringe benefits, including use of an automobile
and payment of related expenses,
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<PAGE>
in accordance with the most favorable plans, practices, programs and policies of
the Company and its subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter with respect to other key employees of the
Company and its subsidiaries.
(c) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Employee by
the Company and its subsidiaries at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Employee,
as provided at any time thereafter with respect to other key employees of the
Company and its subsidiaries.
(d) VACATION. During the Employment Period, the Employee shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its subsidiaries as in effect at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees of the Company and its subsidiaries.
(e) INDEMNIFICATION. During the term of the Employee's employment
with the Company and for a period of not less than three years after the Date of
Termination, the Employee
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<PAGE>
shall be entitled to indemnification and, to the extent available on
commercially reasonable terms, insurance coverage therefor, with respect to the
various liabilities as to which the Employee has been customarily indemnified
during the Change of Control Period.
5. TERMINATION. (a) DEATH OR DISABILITY. This Agreement shall
terminate automatically upon the Employee's death. If the Company determines in
good faith that the Disability of the Employee has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the
Employee written notice of its intention to terminate the Employee's employment.
In such event, the Employee's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" means
disability which, at least 26 weeks after its commencement, is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Employee or the Employee's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Employee's employment for
"Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal
10
<PAGE>
enrichment of the Employee at the expense of the Company, (ii) repeated
violations by the Employee of the Employee's obligations under Section 4(a) of
this Agreement which are demonstrably willful and deliberate on the Employee's
part and which are not remedied in a reasonable period of time after receipt of
written notice from the Company, (iii) the conviction of the Employee of a
felony, (iv) any refusal by the Employee to provide appropriate information or
to otherwise participate and cooperate in connection with the obtaining by the
Company or any of its subsidiaries of all licenses, permits and approvals
necessary to the conduct of their gaming business, or (v) the inability of the
Employee to obtain any license, permit or other authorization required to be
obtained by the Employee as a condition to the conduct by the Company or its
subsidiaries of gaming related activities.
(c) GOOD REASON. The Employee's employment may be terminated by the
Employee for Good Reason. For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for
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<PAGE>
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof, except for travel reasonably required in the performance of
the Employee's responsibilities;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Employee shall be conclusive.
Anything in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period immediately following
the first anniversary of the
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<PAGE>
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice). The failure by the Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; PROVIDED, HOWEVER, that (i) if the Employee's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Employee
13
<PAGE>
of such termination and (ii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of
death of the Employee or the Disability Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Employee's employment is terminated by reason of
the Employee's death, this Agreement shall terminate without further obligations
to the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest rate in effect at any time from the
start of the 90-day period preceding the Effective Date through the Date of
Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus
paid to the Employee for the last full fiscal year and a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (iii) any compensation
previously deferred by the Employee (together with any accrued interest thereon)
and not yet paid by the Company and any accrued vacation pay not yet paid by the
Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter
referred to as "Accrued Obligations"). All such Accrued Obligations shall be
14
<PAGE>
paid to the Employee's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the Company
and any of its subsidiaries to surviving families of employees of the Company
and such subsidiaries under such plans, programs, practices and policies
relating to family death benefits, if any, in accordance with the most favorable
plans, programs, practices and policies of the Company and its subsidiaries in
effect at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee and/or the Employee's family, as in
effect on the date of the Employee's death with respect to other key employees
of the Company and its subsidiaries and their families.
(b) DISABILITY. If the Employee's employment is terminated by reason
of the Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including
for this purpose, all Accrued Obligations. All such Accrued Obligations shall
be paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Employee shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most
15
<PAGE>
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Employee's employment
shall be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the Employee the
Highest Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Employee (together with accrued interest
thereon). If the Employee terminates employment other than for Good Reason,
this Agreement shall terminate without further obligations to the Employee,
other than those obligations accrued or earned and vested (if applicable) by the
Employee through the Date of Termination, including for this purpose, all
Accrued Obligations. All such Accrued Obligations shall be paid to the Employee
in a lump sum in cash within 30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the
16
<PAGE>
Employee's employment other than for Cause, Disability, or death or if the
Employee shall terminate his employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. to the extent not theretofore paid, the Employee's Highest
Base Salary through the Date of Termination; and
B. the product of (x) the Annual Bonus paid to the Employee for
the last full fiscal year (if any) ending during the Employment Period
or, if higher, the Annual Bonus paid to the Employee for the last full
fiscal year prior to the Effective Date (as applicable, the "Recent
Bonus") and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination and
the denominator of which is 365; and
C. the product of (x) 2.99 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred by the
Employee, all amounts previously deferred (together with any accrued
interest thereon) and not yet paid by the Company, and any accrued
vacation pay not yet paid by the Company; and
E. the Employee shall be entitled to receive a
17
<PAGE>
lump-sum retirement benefit equal to the difference between (a) the
actuarial equivalent of the benefit under the Retirement Plan, the
Hilton Supplemental Executive Retirement Plan and the Hilton Hotels
Retirement Benefit Replacement Plan the Employee would receive if he
remained employed by the Company at the compensation level provided
for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for the
remainder of the Employment Period and (b) the actuarial equivalent,
as of the Date of Termination, of his benefit, if any, under the
Retirement Plan and the Hilton Supplemental Executive Retirement Plan
and the Hilton Hotels Retirement Benefit Replacement Plan; and
(ii) for the remainder of the Employment Period, or
such longer period as any plan, program, practice or policy may provide,
the Company shall continue benefits to the Employee and/or the Employee's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Sections 4(b)(iv) and (vi) of this Agreement if the Employee's employment
had not been terminated, including health insurance and life insurance, in
accordance with the most favorable plans, practices, programs or policies
of the Company and its subsidiaries during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in
effect at any time
18
<PAGE>
thereafter with respect to other key employees and their families and for
purposes of eligibility for retiree benefits pursuant to such plans,
practices, programs and policies, the Employee shall be considered to have
remained employed until the end of the Employment Period and to have
retired on the last day of such period.
7. NON-EXCLUSIVITY OF RIGHTS. The Employee and the Company are
parties to an employment agreement dated February 1, 1996, pursuant to which
the Employee serves as the Chief Executive Officer of the Company (the
"Employment Agreement"). This Agreement is intended to afford the Employee
rights and compensation following a Change of Control which are in addition
to those provided under the Employment Agreement (the "Contract Rights"), in
recognition of the additional efforts expected to be required of the Employee
in such circumstances. Nothing in this Agreement shall be construed to limit
the Employee's Contract Rights. Following a Change of Control, the Contract
Rights shall be deemed to constitute part of this Agreement, PROVIDED THAT, to
the extent any benefit otherwise provided hereunder is directly duplicative
of any Contract Right, the benefit which is least favorable to the Employee
should be reduced or eliminated to the extent required to avoid such
duplication. Nothing this Agreement shall prevent or limit the Employee's
continuing or future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices, provided by the Company or any of its
subsidiaries and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under
any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its subsidiaries at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice
or program.
19
<PAGE>
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Employee, the Company or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Employee about the amount of any payment pursuant to Section 9 of this
20
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Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Employee, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any payments required under this Section 9 (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that, after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether a Gross-Up Payment is
required and the amount
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of such Gross-Up Payment, shall be made by Arthur Andersen & Co. (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the Date of Termination,
if applicable, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax on the
Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder.
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In the event that the Company exhausts its remedies pursuant to Section 9(c) and
the Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee.
(c) The Employee 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 Employee 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 Employee 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 Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee 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
23
<PAGE>
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 Employee harmless, on an
after-tax basis, for any Excise Tax or income 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(c), 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, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination 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 Employee
to pay such claim and sue for a refund, the Company shall advance the amount
24
<PAGE>
of such payment to the Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis, from any Excise Tax or
income 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 Employee
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 Employee 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.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 9(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 9(c)) 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 Employee
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its intent
to contest such denial of refund prior to
25
<PAGE>
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.
10. CONFIDENTIAL INFORMATION. The Employee shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its subsidiaries, and their respective businesses, which shall have been
obtained by the Employee during the Employee's employment by the Company or any
of its subsidiaries and which shall not be or become public knowledge (other
than by acts by the Employee or his representatives in violation of this
Agreement). After termination of the Employee's employment with the Company,
the Employee shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure
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to the benefit of and be enforceable by the Employee'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 will 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 to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. 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 otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt
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requested, postage prepaid, addressed as follows:
IF TO THE EMPLOYEE:
Mr. Stephen F. Bollenbach
President and Chief Executive Officer
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
IF TO THE COMPANY:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice 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.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
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(f) Upon a termination of the Employee's employment or upon the
Employee's ceasing to be an officer of the Company, in each case, prior to the
Effective Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
EMPLOYEE
/s/ STEPHEN F. BOLLENBACH
-----------------------------------
HILTON HOTELS CORPORATION
By /s/ WILLIAM C. LEBO, JR.
---------------------------------
Attest: /s/ CHERYL L. MARSH
----------------------------
Secretary
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EXHIBIT 10.33
AMENDED CONSULTING AND EMPLOYMENT AGREEMENT
AMENDED CONSULTING AND EMPLOYMENT AGREEMENT (this "Agreement") made
and entered into as of the 12th day of November, 1996 by and between
HILTON HOTELS CORPORATION, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), BALLY
ENTERTAINMENT CORPORATION, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, "Bally"), and ARTHUR
M. GOLDBERG (the "Executive").
WHEREAS, the Executive is the Chairman, President, and Chief Executive
Officer of Bally;
WHEREAS, the Company has entered into an Agreement and Plan of Merger
among the Company and Bally dated June 6, 1996 (the "Acquisition Agreement");
WHEREAS, the Executive and Bally have entered into an Employment
Agreement dated November 1, 1990, which agreement has been subsequently amended
on December 4, 1991, September 29, 1993, January 4, 1995 and June 6, 1996
(collectively, the "Bally Employment Agreement");
<PAGE>
WHEREAS, the Executive and the Company have entered into a Consulting
Agreement dated June 6, 1996 (the "Original Consulting Agreement") pursuant to
which the Executive and the Company agreed to the termination of the Executive's
employment under the Bally Employment Agreement immediately after the closing of
the merger of Bally and the Company under the Acquisition Agreement (the
"Closing");
WHEREAS, with Bally's consent and agreement, the Executive and the
Company have determined that the Executive could best provide his expertise,
knowledge, and assistance to the Company and its business by having the
Executive terminate his employment with Bally effective as of the day following
the last of the necessary Casino Control Commission approvals of the transaction
provided for in the Acquisition Agreement (said approval date being herein
referred to as the "C.C. Approval Date"), by having the Executive serve as a
consultant to the Company beginning on the second day after the C.C. Approval
Date until the Closing, and by having the Executive become an employee and
officer of the Company immediately after the Closing; and
WHEREAS, the Company desires to retain Executive to provide such
services to the Company and the Executive desires to provide such services to
the Company, subject to the terms and
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provisions of this Agreement, which shall constitute a complete amendment and
restatement of the Original Consulting Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company, Bally, and the Executive (individually a "Party"
and together the "Parties") agree as follows:
1. INITIAL CONSULTING TERM AND DUTIES; EMPLOYMENT TERM.
(a) This Agreement shall constitute a complete amendment and
restatement of the Original Consulting Agreement.
(b) The Executive's employment with Bally shall terminate on the
day after the C.C. Approval Date.
(c) From the second day after the C.C. Approval Date until the
earlier of (i) the Effective Date (hereinafter defined) or (ii) the date of the
termination of the Acquisition Agreement by the Company or Bally (the "Initial
Consulting Term"), the Executive shall provide consulting services to the
Company at the request of the President and Chief Executive Officer of the
Company on transitional issues with respect to the merger of Bally and the
Company and other mutually-agreeable
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projects, and the Executive shall be paid the compensation and provided with
the benefits, reimbursements, and perquisites set forth in Sections 3, 5, 6,
and 7 of this Agreement (without limiting other rights or obligations of the
Parties with respect to the Initial Consulting Term).
(d) The Executive's employment term with the Company (the
"Employment Term") shall commence on the closing date of the Acquisition
Agreement (the "Effective Date") and shall end at the close of business on the
third anniversary of the Effective Date, unless it is terminated earlier under
Section 9 or extended by mutual agreement of the Company and the Executive.
(e) In the event that the Employment Term is terminated, for any
reason, prior to the close of business on the third anniversary of the Effective
Date, then in such event the Executive shall act as a consultant to the Company
for that period of time which commences on the date of employment termination
and ends on the third anniversary of the Effective Date, all in accordance with
a separate Consulting Agreement to be entered into concurrently with the
termination of the Employment Term, substantially in accordance with the form
annexed hereto as Exhibit 1 (the "New Consulting Agreement").
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<PAGE>
2. EMPLOYMENT DUTIES.
(a) During the Employment Term, the Executive shall serve as an
Executive Vice President of the Company and President-Gaming Operations and
shall perform such executive duties as may be assigned to him from time to time
by the President and Chief Executive Officer of the Company.
(b) Except as set forth below, during the Employment Term, the
Executive shall devote his full time and attention to such duties. The
Executive shall not be required to devote his full time and attention to his
duties when absent for sick leave, reasonable vacations, excused leaves of
absences, or attending to his Other Business (hereinafter defined). The Company
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, and/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. "Other
Business" shall mean those items described in clauses (i), (ii), and (iii) in
the preceding sentence. The Executive agrees to use his best efforts during the
Employment Term to protect, encourage, and promote the interests of the Company.
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<PAGE>
3. COMPENSATION.
(a) During the Initial Consulting Term and the Employment Term,
the Executive shall be paid an annual salary of $2,000,000, payable semi-monthly
in arrears; PROVIDED, HOWEVER, that the portion of such 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 salary is paid or accrued because of the application of the limitation
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be deferred and paid to the Executive, in a lump sum, on that
date (the "Deferral Date") which is thirty (30) days after the earlier of (i)
the last day of the Company's taxable year in which the Executive ceases to be a
"covered employee" within the meaning of Code Section 162(m)(3) or (ii) the date
upon which the Company's deduction with respect to all of such deferred salary
shall no longer be subject to limitation under Code Section 162(m) or any
successor section thereto. Any amounts of salary deferred hereunder 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
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<PAGE>
such accrued interest shall be paid to the Executive on the Deferral Date
(said deferred salary plus interest collectively referred to as the "Deferred
Compensation").
(b) The Deferred Compensation shall be paid in accordance with
the following provisions:
(1) The Company agrees to pay the Deferred Compensation on
the Deferral Date by wire transfer to an account
designated by the Executive prior to the Deferral Date.
(2) 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 against the Executive or his
affiliates, whether predicated on this Agreement, the
Acquisition Agreement, the Bally Employment Agreement
or otherwise shall not
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<PAGE>
constitute a defense or entitle the Company to an
offset against the payment of the Deferred
Compensation in full on the Deferral Date.
(3) 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.
(4) In the event of a default, the Executive shall be
entitled to be paid, upon demand, (i) one hundred
twenty (120%) percent of the Deferred Compensation plus
interest on said amount from the 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
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<PAGE>
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.
(5) In the event of a default, notwithstanding the
provisions of Section 21 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 the 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
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<PAGE>
service of process if made in accordance with any of the
methods by which notices may be given pursuant to
Section 22; 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.
4. GRANT OF STOCK OPTIONS.
(a) On the Effective Date, the Company shall grant the Executive
an option to purchase 600,000 shares of the common stock of the Company (the
"Initial Option"). In the event that the common stock of the Company is subject
to a stock split or stock dividend following the date of this Agreement, or if
there is any other change in the common stock of the Company following the date
of this Agreement, the number of shares underlying the Initial Option shall be
adjusted appropriately to reflect such stock split, stock dividend, or other
change. The Initial Option shall have an exercise price equal to the average of
the high and low prices of the common stock of the Company on the Effective
Date, as reported in The Wall Street Journal. The Initial Option shall: (i)
expire on the fifth anniversary of the date of grant and (ii) be fully
exercisable on the date of grant;
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<PAGE>
PROVIDED, HOWEVER, that in the event that (x) the Executive voluntarily
terminates this Agreement and (y) the Executive voluntarily terminates the
New Consulting Agreement prior to that date which is the third anniversary of
the Effective Date, then, in such event, the Initial Option shall expire upon
the 180th day after the date of the Executive's voluntary termination of the
New Consulting Agreement.
(b) On each of the first and second anniversary of the Effective
Date during the Employment Term, the Company shall grant the Executive an option
to purchase 600,000 shares of the common stock of the Company (the "Anniversary
Option"). In the event that the common stock of the Company is subject to a
stock split or stock dividend following the date of this Agreement, or if there
is any other change in the common stock of the Company following the date of
this Agreement, the number of shares underlying each Anniversary Option shall be
adjusted appropriately to reflect such stock split, stock dividend, or other
change. Each Anniversary Option shall have an exercise price equal to the
average of the high and low prices of the common stock of the Company on the
date of grant, as reported in The Wall Street Journal. Each Anniversary Option
shall: (i) expire on the fifth anniversary of the date of grant and (ii) be
fully exercisable on the date of grant; PROVIDED, HOWEVER, that in the event
that (x) the Executive voluntarily terminates this
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<PAGE>
Agreement and (y) the Executive voluntarily terminates the New Consulting
Agreement prior to that date which is the third anniversary of the Effective
Date, then, in such event, each of the Anniversary Options shall expire upon
the 180th day after the date of the Executive's voluntary termination of the
New Consulting Agreement.
(c) The Company shall use its reasonable efforts to effect the
registration of the shares of common stock of the Company underlying the Initial
Option and the Anniversary Options under the Securities Act of 1933, as amended,
by filing a registration statement on Form S-8.
5. EMPLOYEE BENEFIT PROGRAMS.
(a) During the Initial Consulting Term and the Employment Term,
the Executive and/or the Executive's family, as the case may be, shall be
entitled to receive benefits under all pension and welfare benefit plans,
practices, policies, and programs provided by the Company (including, without
limitation, medical, prescription drug, dental, disability, employee life
insurance, group life insurance, accidental death, and travel accident insurance
plans and programs) to at least the same extent as the senior executives of the
Company.
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<PAGE>
(b) 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 is entitled to receive during the Initial Consulting Term
and the Employment Term (pursuant to Section 5(a) above), until the date of the
Executive's 62nd birthday; and (ii) the Company shall fulfill the obligations it
assumed from Bally upon the merger, as set forth in the Split Dollar Agreement
dated September 6, 1991 between Bally and the Arthur M. Goldberg 1989
Irrevocable Trust.
6. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES.
The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, and the
Company shall promptly reimburse him for all reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
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<PAGE>
7. PERQUISITES.
(a) During the Initial Consulting Term and the Employment Term,
the Executive shall be entitled to benefits and perquisites under the fringe
benefits and perquisite programs offered to the Company's senior executive
officers and directors in accordance with the most favorable plans, practices,
programs, and policies of the Company.
(b) Notwithstanding anything herein to the contrary, during the
Initial Consulting Term and the Employment Term, the Executive shall be entitled
to, and the Company shall provide, the Executive with:
(1) office space, secretary (as selected by the Executive),
and support services comparable to the office space,
secretary, and support services currently provided to
the Executive by Bally;
(2) a U.S. automobile comparable to the automobile which
the Executive currently uses, and a full-time driver
(as
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<PAGE>
selected by the Executive) for such automobile;
(3) exclusive use of a suite at Bally's Park Place and a
suite at Bally's Las Vegas, as currently occupied by
the Executive (which suite, upon the Company's request,
may be used by others if not then being used by the
Executive); and
(4) unrestricted, but not exclusive, use of the Company's
and Bally's aircraft (leased or owned); PROVIDED,
HOWEVER, that if the Executive uses the Company's or
Bally's aircraft for his personal use, 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.
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<PAGE>
8. PURCHASE OF EXECUTIVE'S RESIDENCE.
Due to the need of the Executive to provide employment services in Las
Vegas, Nevada and Beverly Hills, California, if Bally's has already not done so
or caused it to be done, the Company shall, within 30 days following the
Effective Date, purchase the Executive's residence located at 6 Kimball Circle,
Westfield, New Jersey 07090. The purchase price of such residence shall be
$2,100,000 (which the Parties acknowledge represents the fair market value of
the residence as determined by a real estate appraiser heretofore mutually
selected by the Executive and Bally and approved by the Company).
9. TERMINATION OF EMPLOYMENT TERM.
(a) Unless extended by mutual agreement of the Company and the
Executive, the Employment Term shall terminate at the first to occur of (i) the
close of business on the third anniversary of the Effective Date; (ii) the date
of the death of the Executive; and (iii) at any time after the Due Date (as
defined in Section 25(b)) upon sixty (60) days notice from the Executive to the
Company or the Company to the Executive.
(b) Notwithstanding anything herein to the contrary, the
Employment Term shall not terminate during any
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<PAGE>
period of physical or mental incapacity of the Executive which results in the
Executive's temporary or permanent inability to perform the services
contemplated under this Agreement, as determined by an Approved Medical
Doctor. For this purpose, an Approved Medical Doctor shall be a medical
doctor jointly selected by the Executive and the Company. In the event that
the Executive and the Company cannot agree on a medical doctor, each Party
shall select a medical doctor and the two selected medical doctors shall
jointly select a third medical doctor to serve as the Approved Medical Doctor.
10. PARACHUTE PAYMENTS.
(a) If it shall be determined that any payment, distribution, or
benefit received or to be received by the Executive from either Bally or the
Company ("Payments") would be subject to the excise tax imposed by Code Section
4999 (the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment from Bally or the Company (the "Excise Tax Gross-Up Payment")
in an amount such that the net amount retained by the Executive, after the
calculation and deduction of any Excise Tax (together with any penalties and
interest that have been or will be imposed on the Executive in connection
therewith) on the Payments and any federal, state, and local income taxes,
excise tax, and payroll taxes (including the tax imposed by Code
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<PAGE>
Section 3101(b)) on the Excise Tax Gross-Up Payment provided for in this
subsection 10(a), shall be equal to the Payments. In determining this amount,
the amount of the Excise Tax Gross-Up Payment attributable to federal income
taxes shall be reduced by the maximum reduction in federal income taxes that
could be obtained by the deduction of the portion of the Excise Tax Gross-Up
Payment attributable to state and local income taxes. Finally, the Excise Tax
Gross-Up Payment shall be subject to income, excise, or payroll tax withholding
to the extent required by applicable law. No payments pursuant to this
Section 10 shall be duplicative of any payments already made by Bally, the
Company, or any affiliate of either.
(b) All determinations required to be made under this Section
10, including whether and when an Excise Tax Gross-Up Payment is required and
the amount of such Excise Tax Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, except as specified in subsection
10(a) above, shall be made by the Company's independent auditors (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after Bally or the Company
makes any Payments to the Executive. The determination of tax liability and the
assumptions made by the Accounting Firm shall be subject to review by the
Executive's tax advisors, and, if the Executive's
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<PAGE>
tax advisors do not agree with the determination reached by the Accounting
Firm, then the Accounting Firm and the Executive's tax advisors shall jointly
designate a nationally-recognized public accounting firm, which shall make
the determination. All fees and expenses of the accountants and tax advisors
retained by either the Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this
subsection 10(b), shall be paid by the Company to the Executive within five
days after the receipt of the determination. Any determination by a
jointly-designated public accounting firm shall be binding upon the Company
and the Executive.
(c) As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial determination by Bally or the Company,
it is possible that the Executive may be required to make one or more payments
of Excise Tax to the Internal Revenue Service, together with interest and/or
penalties that have been imposed upon the Executive in connection therewith,
whether upon the Executive's filing of his original or amended tax returns or
upon a subsequent audit, administrative appeal or judicial determination, which
exceed the amounts taken into account in determining the initial Excise Tax
Gross-Up Payment made pursuant to Section 10(a) (such excess payments referred
to as the "Deficiency"). In such an event,
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<PAGE>
there shall be an additional Excise Tax Gross-Up Payment computed on the
Deficiency in the same manner as the Excise Tax Gross-Up Payment in Section
1O(a) above, and the same shall be promptly paid by the Company to or for the
benefit of the Executive. In the event that any Excise Tax Gross-Up Payment
exceeds the amount subsequently determined to be due, such excess shall
constitute a loan from the Company to the Executive payable on the fifth day
after demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(d) Notwithstanding anything herein to the contrary, no Excise
Tax Gross-Up Payment shall be made pursuant to this Section 10 if, and to the
extent that, such Excise Tax Gross-Up Payment has already been paid by the
Company or Bally pursuant to the Bally Employment Agreement.
11. INDEMNIFICATION.
(a) The Company agrees that if the Executive is made a party, or
is threatened to be made a party, to any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (a "Proceeding"), by reason of
the fact that he is or was (i) a director of the Company or Bally, and/or (ii)
serving at the request of the Company or Bally as a director, officer, member,
employee, consultant, or agent of another
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<PAGE>
corporation, partnership, joint venture, trust, or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive's alleged action in an official
capacity while serving as a director, officer, member, employee, consultant,
or agent, the Executive shall be indemnified and held harmless by the Company
to the fullest extent legally permitted or authorized by the Company's
certificate of incorporation or bylaws or resolutions of the Company's Board
of Directors or, if greater, by the laws of the State of Delaware, against
all cost, expense, liability, and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes, or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Executive in connection therewith, and such indemnification shall
continue as to the Executive, even if he has ceased to be a director, member,
employee, consultant, or agent of the Company, Bally, or other entity and
shall inure to the benefit of the Executive's heirs, executors, and
administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance.
Such request shall include an undertaking by the Executive to repay the
amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.
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<PAGE>
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel, or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 11(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination of the Company (including its board of directors,
independent legal counsel, or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
12. EFFECT OF AGREEMENT.
Except as specifically provided in this Agreement, this Agreement
shall not affect nor have any force or effect upon any other agreement to which
the Executive is a party and/or beneficiary.
13. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive),
and assigns. No rights or obligations of the Company under this Agreement may
be assigned
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or transferred by the Company, except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which the
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; PROVIDED, HOWEVER, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the
liabilities, obligations, and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in
the preceding sentence, it shall take whatever action it legally can in order
to cause such assignee or transferee to expressly assume the liabilities,
obligations, and duties of the Company hereunder. No rights or obligations
of the Executive under this Agreement may be assigned or transferred by the
Executive, except that all of his rights may be transferred by will or
operation of law.
14. REPRESENTATION.
(a) Each of Bally and the Company represents and warrants that
it is fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm, or organization.
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(b) The Executive represents that he knows of no agreement
between him and any other person, firm, or organization that would be violated
by the performance of his obligations under this Agreement.
(c) Bally represents that, on or before the date of this
Agreement, the Stock Option and Compensation Committee of Bally's Board of
Directors has approved the acceleration of vesting of all of the Executive's
unvested stock options with respect to Bally's common stock, effective
immediately, whether or not this Agreement is terminated as a result of a
termination of the Acquisition Agreement (as provided by Section 26).
15. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement among
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations, and undertakings, whether
written or oral, among the Parties with respect thereto.
16. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the
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Executive and an authorized officer of the Company; and, if prior to the
Effective Date, Bally. No waiver by any Party of any breach by any other
Party of any condition or provision contained in this Agreement to be
performed by any other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent
time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company or Bally, as the case may be.
17. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
18. SURVIVORSHIP.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment or consulting 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, 4, 5(b), 10, 11, and 25.
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19. BENEFICIARIES / REFERENCES.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate, or other legal representative.
20. GOVERNING LAW / JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New Jersey without reference to principles of
conflict of laws.
21. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall,
at the election of the Executive, Bally, or the Company, be resolved by binding
arbitration, to be held in Trenton, New Jersey in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
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rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Costs of the arbitration or litigation, including, without limitation,
reasonable attorneys' fees of all Parties, shall be borne by the Company.
Pending the resolution of any arbitration or court proceeding, the Company or
Bally shall continue payment of all amounts due the Executive under this
Agreement and all benefits to which the Executive is entitled at the time the
dispute arises.
22. NOTICES.
Any notice given to a Party shall be in writing and shall be deemed to
have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company, to:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: William C. Lebo, Jr., Esq.
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Bruce E. Rosenblum, Esq.
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If to Bally, to:
Chief Executive Officer
Bally Entertainment Corporation
380 Middlesex Avenue
Carteret, NJ 07008
with a copy to:
Dennis J. Block, Esq.
Weil, Gotshal & Manges, LLP
767 Fifth Avenue
New York, NY 10153
and:
If to the Executive, to:
Mr. Arthur M. Goldberg
380 Middlesex Avenue
Carteret, NJ 07008
with a copy to:
Frank L. Stifelman, Esq.
Orloff, Lowenbach, Stifelman & Siegel, P.A.
101 Eisenhower Parkway
Roseland, New Jersey 07068
23. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
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24. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
25. COORDINATION WITH CERTAIN OTHER AGREEMENTS.
(a) Notwithstanding the provisions of Section 1(b) and except as
otherwise provided herein, Bally and the Company agree that Bally shall provide
the Executive with all payments and benefits described in Section 1O(e) of the
Bally Employment Agreement, subject only to the following adjustments:
(1) If the "Determination Price", as defined in the
Acquisition Agreement (the "Determination Price"),
is $31.00, the amount of the lump-sum payment (the
"Lump-Sum Payment") which the Executive shall be
entitled to receive pursuant to clause (i) of
Section 10(e) of the Bally Employment Agreement
shall be $8,030,000. If the Determination Price is
less than $31.00, the Lump-Sum Payment shall be
$8,030,000, plus $50,741 (the "Adjustment Amount")
for
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each $1.00 by which the Determination Price is
less than $31.00, subject to proration of the
Adjustment Amount to the extent that the
Determination Price divided by $1.00 is not a whole
number. If the Determination Price is more than
$31.00, the Lump-Sum Payment shall be $8,030,000,
minus the Adjustment Amount for each $1.00 by which
the Determination Price is more than $31.00, subject
to proration of the Adjustment Amount to the extent
that the Determination Price divided by $1.00 is not
a whole number.
(2) Bally shall pay: (i) the Lump-Sum Payment; and (ii)
the amounts required pursuant to Section 10(e)(v) of
the Bally Employment Agreement (computed in
accordance with Section 8(g)(vi) of the Bally
Employment Agreement and agreed to be a gross amount
of $6,880,622), by wire transfer (pursuant to
instructions received from Arthur M. Goldberg prior
to the Effective Date), respectively, to
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<PAGE>
Arthur M. Goldberg for the Lump-Sum Payment and to
the "Arthur M. Goldberg 1993 Grantor Trust UTAD May
14, 1993, as amended October 17, 1993 and December
29, 1993, Tarek Sherif, Trustee" for the Section
10(e)(v) payments; both subject to the appropriate
withholding as required by law.
(b) Notwithstanding any provision to the contrary of any stock
option plan of Bally or any stock option agreement between Bally and the
Executive, or any other agreement, the Company shall pay the Executive the
amounts specified under the Acquisition Agreement with respect to the
cancellation of the Executive's stock options with respect to Bally's common
stock seventy-seven (77) days after the Effective Date (the "Due Date"),
together with interest from the Effective Date until the Due Date, 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 (said amounts collectively
the "Deferred Payment"), in accordance with the remaining provisions of this
Section 25(b).
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<PAGE>
(1) The Company agrees to pay the Deferred Payment on the
Due Date by wire transfer to an account designated by
the Executive prior to the Due Date.
(2) The Company agrees to pay the Deferred Payment in any
and all events on the Due Date without setoff or offset
for any claim whatsoever against the Executive or any
of his affiliates. The existence of any claim or cause
of action on the part of the Company or any of its
affiliates against the Executive or his affiliates,
whether predicated on this Agreement, the Acquisition
Agreement, the Bally Employment Agreement or otherwise
shall not constitute a defense or entitle the Company
to an offset against the payment of the Deferred
Payment in full on the Due Date.
(3) Failure to pay the Deferred Payment on the Due Date
shall constitute a default, without any need for the
Executive to have given notice or demand of any kind
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<PAGE>
to the Company, which notices and demands of any kind
are expressly waived by the Company.
(4) In the event of a default, the Executive shall be
entitled to be paid, upon demand, (i) one hundred
twenty (120%) percent of the Deferred Payment plus
interest on said amount from the Due 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 25(b), shall be payable on demand, and shall
bear interest at the Default Rate from the date
incurred until paid in full.
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<PAGE>
(5) In the event of a default, notwithstanding the
provisions of Section 21 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 the purpose of all legal
proceedings arising out of or relating to this
Section 25(b); (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 22; 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.
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<PAGE>
(6) (i) In the event that, as a result of an income tax
audit by any taxing authority or a related
administrative appeal, judicial decision or settlement,
it is finally determined (the "Tax Determination") that
the Executive is required to include some or all of the
Deferred Payment in his gross income for federal, state
or local income tax purposes in a taxable year (the
"Deficiency Year") prior to the taxable year in which
he actually reports such amount (the "Refund Year"),
then in such event the Company shall pay the Executive
an amount (the "Tax Indemnity") equal to the sum of (x)
any reasonable fees paid by the Executive to his tax
advisors in connection with the Tax Determination, plus
(y) the excess, if any, of:
(A) the entire amount of taxes, interest, penalties
and additions to tax imposed on the Executive as a
result of the Tax Determination
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<PAGE>
for the Deficiency Year (or any other year to the
extent that the adjustment relating to the Deferred
Payment affects the amount of a carryback or
carryforward); over
(B) any refund or credit of tax, plus interest, paid
or allowed to the Executive for the Refund Year as
a result of the Tax Determination.
(ii) In addition to the Tax Indemnity, the Executive
shall be entitled to receive an additional payment from
the Company (the "Income Tax Gross-Up Payment") in an
amount such that the total amount received by the
Executive from the Company under this subsection
25(b)(6) (I.E., the sum of the Tax Indemnity and the
Income Tax Gross-up Payment), after subtracting any
federal, state, and local income taxes, Excise Tax, and
payroll taxes (including the tax imposed by Code
Section 3101(b)) imposed on the Executive by reason of
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<PAGE>
(x) his receipt from the Company of the total amount
provided for in this subsection 25(b)(6), and (y) his
receipt of refunds or credits of tax plus interest
referred to in clause (B) of Section 25(b)(6)(i) above,
shall be equal to the Tax Indemnity.
(iii) All determinations of the amounts of payments
required to be made under this Section 25(b)(6),
including whether and when a Tax Indemnity or an Income
Tax Gross-Up Payment is required and the amount of
payment and the assumptions to be utilized in arriving
at such determination, except as specified above, shall
be made in the same manner as provided in Section 10(a)
for Excise Tax Gross-Up Payments.
(iv) Any Tax Indemnity or Income Tax Gross-Up Payment,
as determined pursuant to this subsection 25(b)(6),
shall be paid by the Company to the Executive within
five days after the receipt of
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<PAGE>
the Accounting Firm's determination. Any
determination by a jointly-designated public
accounting firm shall be binding upon the Company
and the Executive. The Company's payment of the Tax
Indemnity and the Income Tax Gross-Up Payment shall
be subject to the same provisions applicable to the
Company's payment of the Deferred Payment which are
set forth in subsections 25(b)(1) through 25(b)(5).
26. EFFECTIVENESS OF AGREEMENT.
Notwithstanding anything herein to the contrary, except with respect
to Sections 1(b) and 14(c) of this Agreement, and except with respect to any
Sections of this Agreement which apply during (or relate to) the Initial
Consulting Term, this Agreement shall not become effective until the closing of
the merger of the Company and Bally under the Acquisition Agreement and neither
the Company, Bally, nor the Executive shall have any obligations or liabilities
hereunder until this Agreement shall then become effective. In the event that
the Company or Bally terminate the Acquisition Agreement, this Agreement shall
be terminated and
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<PAGE>
become void and have no effect, without further action by the Company or the
Executive.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
HILTON HOTELS CORPORATION
By: /s/ Stephen F. Bollenbach
-------------------------------------
[name]
[title]
BALLY ENTERTAINMENT CORPORATION
By: /s/ ARTHUR M. GOLDBERG
-------------------------------------
[name]
[title]
/s/ ARTHUR M. GOLDBERG
----------------------------------------
ARTHUR M. GOLDBERG
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<PAGE>
EXHIBIT 1
FORM OF CONSULTING AGREEMENT
PURSUANT TO SECTION 1(e) OF THE
AMENDED CONSULTING AND EMPLOYMENT AGREEMENT
CONSULTING AGREEMENT (this "Agreement"), made and entered into as of the
12th day of November, 19__ by and between Hilton Hotels Corporation, a Delaware
corporation (together with its successors and assigns permitted under this
Agreement, the "Company"), and Arthur M. Goldberg (the "Consultant").
W I T N E S S E T H :
WHEREAS, the Consultant was the Executive Vice President of the Company and
the President-Gaming Operations pursuant to the terms and conditions of that
Amended Consulting and Employment Agreement (the "Employment Agreement") by and
among the parties hereto and Bally Entertainment Corporation ("Bally") dated as
of ____________, 1996, which employment commenced on the date of the closing of
the merger of the Company and Bally (the "Effective Date") pursuant to the
Agreement and Plan of Merger among the Company and Bally dated June 6, 1996;
WHEREAS, the Consultant's employment with the Company has been terminated;
WHEREAS, the Consultant has the ability to offer to the Company expertise,
knowledge and assistance with respect to matters relating to its business; and
WHEREAS, the Company desires to retain Consultant to provide such services
to the Company, and the Consultant desires to provide such services to the
Company, subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Consultant (individually a "Party" and
together the "Parties") agree as follows:
<PAGE>
1. CONSULTING TERM.
The Consulting Term shall commence on the day of the termination of the
Consultant's employment term with the Company (the "Commencement Date") and
shall end at the close of business on the third anniversary of the Effective
Date, unless it is terminated earlier under Section 9 or extended by mutual
agreement of the Parties.
2. CONSULTING SERVICES.
(a) The Consultant shall provide Consulting Services to the Company
at the request of the President and Chief Executive Officer of the Company. Such
Consulting Services shall include advice on the Company's gaming businesses and
other mutually agreeable projects.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Company shall not, without the Consultant's prior written
consent, require the Consultant to provide Consulting Services for more than
100 full days in any calendar year (or aliquot portion thereof if this
Consulting Agreement is in effect for less than a full twelve months in any
calendar year). In addition, the Company shall notify the Consultant in
writing as to the Company's need for the Consultant's services within a
reasonable time prior to the date such services are required.
(c) The Parties acknowledge and agree that the Consultant is an
independent contractor and is not a partner, employee, or agent with the
Company or any of its subsidiaries or affiliates. Nothing in this Agreement
shall be construed to grant either Party the authority to enter into a
contract in the name of the other Party, or to bind the other Party in any
manner. Notwithstanding the above, at the request of the Company the
Consultant agrees to accept and serve in the position of a Vice-Chairman of
the Company during the Consulting Term.
3. CONSULTING FEE.
The Consultant shall be paid an annual Consulting Fee of $2,000,000,
payable on a quarterly basis in advance.
4. GRANT OF STOCK OPTION.
(a) If, as of the Commencement Date, the Company has not fulfilled
its option grant obligations provided for in Section 4(b) of the Employment
Agreement, then on each of the
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<PAGE>
first and second anniversary of the Effective Date, the Company shall grant
the Consultant an option to purchase 600,000 shares (subject to any
adjustments required under Section 4(b) of the Employment Agreement before
the Commencement Date) of the common stock of the Company (the "Anniversary
Option"). In the event that the common stock of the Company is subject to a
stock split or stock dividend following the date of this Agreement, or if
there is any other change in the common stock of the Company following the
date of this Agreement, the number of shares underlying each Anniversary
Option shall be adjusted appropriately to reflect such stock split, stock
dividend, or other change. Each Anniversary Option shall have an exercise
price equal to the average of the high and low prices of the common stock of
the Company on the date of grant, as reported in The Wall Street Journal.
Each Anniversary Option shall: (i) expire on the fifth anniversary of the
date of grant and (ii) be fully exercisable on the date of grant; PROVIDED,
HOWEVER, that in the event that (x) the termination of the Consultant's
employment term with the Company resulted from a voluntary termination by the
Consultant, and (y) the Consultant voluntarily terminates this Agreement prior
to that date which is the third anniversary of the Effective Date, then in
such event each of the Anniversary Options shall expire upon the 180th day
after the date of Consultant's voluntary termination of this Agreement.
(b) The Company shall use its reasonable efforts to effect the
registration of the shares of common stock of the Company underlying the
Anniversary Options under the Securities Act of 1933, as amended, by filing a
registration statement on Form S-8.
5. EMPLOYEE BENEFIT PROGRAMS.
(a) During the Consulting Term, the Consultant and/or the
Consultant's family, as the case may be, shall be entitled to receive
benefits that are comparable to all benefits under all welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, employee life
insurance, group life insurance, accidental death and travel accident
insurance plans and programs) to at least the same extent as the senior
executives of the Company. In the event that the Company cannot provide
comparable benefits to the Consultant under any group benefit plan or
arrangement, the Company shall provide the Consultant with the after-tax
economic equivalent of the benefits provided under such group plan or
arrangement in which he is unable to participate. The economic equivalent of
any benefit foregone shall be deemed to be a reasonable competitive cost that
the Consultant would reasonably incur in obtaining such benefit
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<PAGE>
for himself on an individual basis.
(b) Whether or not the Consultant is then serving as a consultant
to the Company and notwithstanding anything herein to the contrary: (i) the
Company shall provide the Consultant and/or the Consultant's family with
health insurance benefits equal or comparable to the health insurance
benefits he is entitled to receive during the Consulting Term (pursuant to
Section 5(a) above), until the date of the Executive's 62nd birthday; and
(ii) the Company shall fulfill the obligations it assumed from Bally upon the
merger, as set forth in the Split Dollar Agreement dated September 6, 1991
between Bally and the Arthur M. Goldberg 1989 Irrevocable Trust.
6. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES.
The Consultant is authorized to incur reasonable expenses in carrying
out his duties and responsibilities under this Agreement and the Company
shall promptly reimburse him for all reasonable business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
7. PERQUISITES.
(a) During the Consulting Term, the Consultant shall be entitled
to benefits and perquisites that are comparable to the fringe benefits and
perquisites offered to the Company's senior executive officers and directors
in accordance with the most favorable plans, practices, programs and policies
of the Company.
(b) Notwithstanding anything herein to the contrary, during the
Consulting Term, the Consultant shall be entitled to, and the Company shall
provide the Consultant with:
(1) office space, secretary (as selected by the Consultant)
and support services comparable to the office space,
secretary and support services equivalent to that
provided to the Consultant by Bally when he was its Chief
Executive Officer;
(2) a U.S. automobile comparable to the automobile used by
the Consultant when he was Chief Executive Officer of
Bally, and a full-time driver (as selected by the
Consultant) for such automobile;
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<PAGE>
(3) exclusive use of a suite at Bally's Park Place and a
suite at Bally's Las Vegas, as occupied by the Consultant
when he was Chief Executive Officer of Bally (which
suite, upon the Company's request, may be used by others
if not then being used by Consultant); and
(4) unrestricted, but not exclusive, use of the Company's and
Bally's aircraft (leased or owned); PROVIDED, HOWEVER,
that if the Consultant uses the Company's or Bally's
aircraft for his personal use, 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.
8. TERMINATION OF CONSULTING TERM.
(a) Unless extended by mutual agreement of the Parties the
Consulting Term shall terminate at the earlier of the (i) the close of
business on the third anniversary of the Effective Date or (ii) the date of
the death of the Consultant.
(b) Notwithstanding anything herein to the contrary, the
Consulting Term shall not terminate during any period of physical or mental
incapacity of the Consultant which results in the Consultant's temporary or
permanent inability to perform the services contemplated under this
Agreement, as determined by an Approved Medical Doctor. For this purpose, an
Approved Medical Doctor shall be a medical doctor jointly selected by the
Consultant and the Company. In the event that the Consultant and the Company
cannot agree on a medical doctor, each party shall select a medical doctor
and the two selected medical doctors shall jointly select a third medical
doctor to serve as the Approved Medical Doctor.
9. PARACHUTE PAYMENTS.
The provisions of Section 10 of the Employment Agreement shall be
applicable to the Consultant and the Company as if set forth in full herein.
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<PAGE>
10. INDEMNIFICATION.
The provisions of Section 11 of the Employment Agreement shall be
applicable to the Consultant and the Company as if set forth in full herein.
11. EFFECT OF AGREEMENT.
Except as specifically provided in this Agreement, this Agreement shall not
affect nor have any force or effect upon any other agreement to which the
Consultant is a party and/or beneficiary, including, without limitation, those
provisions of the Employment Agreement which survive the termination of the
Executive's employment.
12. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Consultant)
and assigns. No rights or obligations of the Company under this Agreement may
be assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; PROVIDED, HOWEVER, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No rights or obligations of the Consultant under this
Agreement may be assigned or transferred by the Consultant, except that all of
his rights may be transferred by will or operation of law.
13. REPRESENTATION.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Consultant represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
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<PAGE>
14. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof and (except as provided
otherwise in this Agreement or the Employment Agreement) supersedes all prior
agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
15. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Consultant and an authorized officer
of the Company. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by
such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any
waiver must be in writing and signed by the Consultant or an authorized
officer of the Company, as the case may be.
16. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
17. SURVIVORSHIP.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Consulting Term 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, 4,
5(b), 9, and 10.
18. BENEFICIARIES/REFERENCES.
The Consultant 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
Consultant's death by giving the Company written notice thereof. In the event
of the Consultant's death or a judicial determination of his incompetence,
reference in this Agreement to the Consultant shall be deemed, where
appropriate, to refer to his beneficiary, estate
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<PAGE>
or other legal representative.
19. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New Jersey without reference to principles of
conflict of laws.
20. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall, at
the election of the Consultant or the Company, be resolved by binding
arbitration, to be held in Trenton, New Jersey in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Costs of the arbitration or litigation, including, without limitation,
reasonable attorneys' fees of both Parties, shall be borne by the Company.
Pending the resolution of any arbitration or court proceeding, the Company shall
continue payment of all amounts due the Consultant under this Agreement and all
benefits to which the Consultant is entitled at the time the dispute arises.
21. NOTICES.
Any notice given to a Party shall be in writing and shall be deemed to have
been given when delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the party concerned
at the address indicated below or to such changed address as such Party may
subsequently give such notice of:
If to the Company, to:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: William C. Lebo, Jr., Esq.
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Bruce E. Rosenblum, Esq.
and:
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<PAGE>
If to the Consultant, to:
Mr. Arthur Goldberg
380 Middlesex Avenue
Carteret, NJ 07008
with a copy to:
Frank L. Stifelman, Esq.
Orloff, Lowenbach, Stifelman & Siegel, P.A.
101 Eisenhower Parkway
Roseland, NJ 07068
22. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
HILTON HOTELS CORPORATION
By: /s/ STEPHEN F. BOLLENBACH
-------------------------------------
Name: Stephen F. Bollenbach
Title: President and Chief
Executive Officer
/s/ ARTHUR M. GOLDBERG
----------------------------------------
ARTHUR M. GOLDBERG
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<PAGE>
EXHIBIT 10.34
FIRST AMENDMENT TO AMENDED
CONSULTING AND EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED CONSULTING AND EMPLOYMENT AGREEMENT
(this "Amendment") made and entered into as of December 14, 1996 by and
between HILTON HOTELS CORPORATION, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), BALLY
ENTERTAINMENT CORPORATION, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, "Bally"), and ARTHUR
M. GOLDBERG (the "Executive").
WHEREAS, the Executive is the Chairman, President, and Chief Executive
Officer of Bally;
WHEREAS, the Executive, Bally and the Company have entered into an
Amended Consulting and Employment Agreement dated as of the 12th day of
November, 1996 (the "Agreement");
WHEREAS, the Executive, Bally and the Company wish to amend the
Agreement to modify certain provisions relating to the timing of the
Executive's termination of employment with Bally;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company, Bally, and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS. Capitalized terms which are not defined in this
Amendment shall have the meanings assigned to them in the Agreement.
2. AMENDMENTS.
2.1. The fifth (5th) "Whereas" clause of the Agreement is amended
and restated so that it reads in its entirety as follows:
"WHEREAS, with Bally's consent and agreement, the
Executive and the Company have determined that the
Executive could best provide his expertise, knowledge,
and assistance to the Company and its business by
having the Executive terminate his employment with
Bally effective as of the close of business on
December 14, 1996 (said date being herein referred to
as the "Termination Date"), by having the Executive
serve as a consultant to the Company beginning on the
<PAGE>
day after the Termination Date until the Closing, and
by having the Executive become an employee and officer
of the Company immediately after the Closing; and"
2.2. Section 1(b) of the Agreement is amended and
restated so that it reads in its entirety as follows:
"(b) The Executive's employment with Bally (and
the Executive's positions as an officer and/or employee
with any and all subsidiaries and affiliates of Bally)
shall terminate on the Termination Date."
2.3. Section 1(c) of the Agreement is amended and
restated so that it reads in its entirety as follows:
"(c) From the day after the Termination Date
until the earlier of (i) the Effective Date
(hereinafter defined) or (ii) the date of the
termination of the Acquisition Agreement by the Company
or Bally (the "Initial Consulting Term"), the Executive
shall provide consulting services to the Company at the
request of the President and Chief Executive Officer of
the Company on transitional issues with respect to the
merger of Bally and the Company and other mutually-
agreeable projects, and the Executive shall be paid the
compensation and provided with the benefits,
reimbursements, and perquisites set forth in
Sections 3, 5, 6, and 7 of this Agreement (without
limiting other rights or obligations of the Parties
with respect to the Initial Consulting Term)."
3. EFFECTIVE DATE OF AMENDMENT.
The provisions of this Amendment shall be effective as of the effective
date of the Agreement (as determined in accordance with Section 26 of the
Agreement), as if the provisions of this Amendment had been fully set forth
in the Agreement in lieu of the provisions which they replace.
4. MISCELLANEOUS.
4.1. This Amendment binds and shall operate for the benefit of
each of the Parties and their respective successors and permitted assigns.
4.2. All references made and pronouns used in this Amendment
shall be construed in the singular or plural, and in such gender, as the
sense and circumstances require. Section headings are for convenience only
and shall not affect nor be used in construing this Amendment.
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<PAGE>
4.3. This Amendment may be signed in counterparts and by
facsimile, all of which when taken together shall constitute a signed
agreement.
4.4. This Amendment shall be governed by and construed in
accordance with New Jersey law.
4.5. Except as amended by this Amendment, the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
HILTON HOTELS CORPORATION
By: /s/ STEPHEN F. BOLLENBACH
--------------------------------------
[name] STEPHEN F. BOLLENBACH
[title] PRESIDENT & CEO
BALLY ENTERTAINMENT CORPORATION
By: /s/ ARTHUR M. GOLDBERG
--------------------------------------
[name]
[title]
/s/ ARTHUR M. GOLDBERG
-----------------------------------------
ARTHUR M. GOLDBERG
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<PAGE>
EXHIBIT 10.35
DEFERRED COMPENSATION AGREEMENT
This DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made and
entered into as of the 16th day of January, 1997 by and between HILTON HOTELS
CORPORATION, a Delaware corporation (together with its successors and assigns
permitted under this Agreement, the "Company"), and ARTHUR M. GOLDBERG (the
"Executive").
WHEREAS, the Executive is an Executive Vice President of the Company and
President of the Company's Gaming Division;
WHEREAS, the Company, the Executive and Bally Entertainment Corporation,
a Delaware corporation ("Bally"), have entered into an Amended Consulting and
Employment Agreement dated as of November 12, 1996 as amended by a First
Amendment thereto dated as of December 14, 1996 (collectively, the
"Employment Agreement"), which Employment Agreement constitutes an amendment
and restatement of a Consulting Agreement dated as of June 6, 1996 (the
"Consulting Agreement") between the Company and the Executive;
WHEREAS, the Company desires to provide the Executive with certain
deferred compensation payments in recognition of (i) the valuable services
provided by the Executive to the Company in assisting the Company in
obtaining gaming commission approvals of the Company's acquisition of Bally
and facilitating a smooth integration of the Company's and Bally's gaming
operations, (ii) the valuable services which the Executive is now providing
and will provide in the future to the Company and (iii) the fact that
<PAGE>
the compensation provided by the Company to the Executive under the
Employment Agreement was established in the Consulting Agreement, was
intended to compensate the Executive for less than full-time services for the
Company and has not been increased to reflect the Executive's full-time
employment by the Company under the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Executive (individually a "Party" and
together the "Parties") agree as follows:
1. DEFINITIONS. Capitalized terms which are not defined in this
Agreement shall have the meanings assigned to them in the Employment
Agreement.
2. DEFERRED COMPENSATION.
(a) The Company shall pay the Executive $2,400,000, in a lump sum,
on that date (the "Payment Date") which is thirty (30) days after the earlier
of (i) the last day of the Company's taxable year in which the Executive
ceases to be a "covered employee" within the meaning of Code Section
162(m)(3) or (ii) the date upon which the Company's deduction with respect to
all of such deferred salary shall no longer be subject to limitation under
Code Section 162(m) or any successor section thereto. Such amount shall be
credited with interest from the date of this Agreement to the day immediately
preceding the
2
<PAGE>
Payment Date 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 Payment Date (said payment plus interest collectively
referred to as the "Deferred Compensation").
(b) The Deferred Compensation shall be paid in accordance with the
following provisions:
(1) The Company agrees to pay the Deferred Compensation on the
Payment Date by wire transfer to an account designated by
the Executive prior to the Payment Date.
(2) The Company agrees to pay the Deferred Compensation in any
and all events on the Payment Date without setoff or offset
for any claim whatsoever against the Executive or any of
his affiliates. The existence of any claim or cause of
action on the part of the Company or any of its affiliates
against the Executive or his affiliates, whether predicated
on this Agreement or otherwise shall not constitute a
defense or entitle the Company to an offset against the
payment
3
<PAGE>
of the Deferred Compensation in full on the Payment Date.
(3) Failure to pay the Deferred Compensation on the Payment
Date shall constitute a default, without any need for the
Executive to have given notice or demand of any kind to
the Company, which notices and demands of any kind are
expressly waived by the Company.
(4) In the event of a default, the Executive shall be entitled
to be paid, upon demand, (i) one hundred twenty (120%)
percent of the Deferred Compensation plus interest on
said amount from the Payment Date until paid at the rate of
eighteen (18%) percent per annum (the "Default Rate"); plus
all reasonable attorneys' fees and other costs of
collection incurred by the Executive in effecting
collection of the amounts due hereunder, whether or not a
legal action is instituted or prosecuted to judgment.
All such costs and expenses shall be added to the amount
due under this Section 2, shall be payable on demand,
4
<PAGE>
and shall bear interest at the Default Rate from the date
incurred until paid in full.
(5) In the event of a default, notwithstanding the provisions
of Section 13 of this Agreement: (i) the Executive shall be
entitled to 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 the purpose of all legal
proceedings arising out of or relating to this Section 2;
(iii) the Company agrees that the service or delivery of
process of any such lawsuit shall constitute lawful and
valid service of process if made in accordance with any
of the methods by which notices may be given pursuant to
Section 14; and (iv) the Company waives any defense based
upon personal jurisdiction, venue, improper service,
5
<PAGE>
and the right to assert a claim of FORUM NON CONVENIENS
or the like.
3. PARACHUTE PAYMENTS.
(a) If it shall be determined that any payment, distribution, or
benefit received or to be received by the Executive under this Agreement (the
"Payments") would be subject to the excise tax imposed by Code Section 4999
(the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment from the Company (the "Excise Tax Gross-Up Payment") in an
amount such that the net amount retained by the Executive, after the
calculation and deduction of any Excise Tax (together with any penalties and
interest that have been or will be imposed on the Executive in connection
therewith) on the Payments and any federal, state, and local income taxes,
excise tax, and payroll taxes (including the tax imposed by Code Section
3101(b)) on the Excise Tax Gross-Up Payment provided for in this subsection
3(a), shall be equal to the Payments. In determining this amount, the amount
of the Excise Tax Gross-Up Payment attributable to federal income taxes shall
be reduced by the maximum reduction in federal income taxes that could be
obtained by the deduction of the portion of the Excise Tax Gross-Up Payment
attributable to state and local income taxes. Finally, the Excise Tax
Gross-Up Payment shall be subject to income, excise, or payroll tax
withholding to the extent required by applicable law.
6
<PAGE>
(b) All determinations required to be made under this Section 3,
including whether and when an Excise Tax Gross-Up Payment is required and the
amount of such Excise Tax Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, except as specified in subsection 3(a)
above, shall be made by the Company's independent auditors (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days after the Company makes any
Payments to the Executive. The determination of tax liability and the
assumptions made by the Accounting Firm shall be subject to review by the
Executive's tax advisors, and, if the Executive's tax advisors do not agree
with the determination reached by the Accounting Firm, then the Accounting
Firm and the Executive's tax advisors shall jointly designate a
nationally-recognized public accounting firm, which shall make the
determination. All fees and expenses of the accountants and tax advisors
retained by either the Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this
subsection 3(b), shall be paid by the Company to the Executive within five
days after the receipt of the determination. Any determination by a
jointly-designated public accounting firm shall be binding upon the Company
and the Executive.
(c) As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial
7
<PAGE>
determination by the Company, it is possible that the Executive may be
required to make one or more payments of Excise Tax to the Internal Revenue
Service, together with interest and/or penalties that have been imposed upon
the Executive in connection therewith, whether upon the Executive's filing of
his original or amended tax returns or upon a subsequent audit,
administrative appeal or judicial determination, which exceed the amounts
taken into account in determining the initial Excise Tax Gross-Up Payment
made pursuant to Section 3(a) (such excess payments referred to as the
"Deficiency"). In such an event, there shall be an additional Excise Tax
Gross-Up Payment computed on the Deficiency in the same manner as the Excise
Tax Gross-Up Payment in Section 3(a) above, and the same shall be promptly
paid by the Company to or for the benefit of the Executive. In the event that
any Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to the
Executive payable on the fifth day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(d) Notwithstanding anything herein to the contrary, no Excise
Tax Gross-Up Payment shall be made pursuant to this Section 3 if, and to the
extent that, such Excise Tax Gross-Up Payment has already been paid by the
Company pursuant to the Employment Agreement.
8
<PAGE>
4. EFFECT OF AGREEMENT.
Except as specifically provided in this Agreement, this Agreement shall
not affect nor have any force or effect upon any other agreement to which the
Executive is a party and/or beneficiary.
5. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the
Executive), and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale
or liquidation of all or substantially all of the assets of the Company;
PROVIDED, HOWEVER, that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or
transferee assumes the liabilities, obligations, and duties of the Company,
as contained in this Agreement, either contractually or as a matter of law.
The Company further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it shall take whatever
action it legally can in order to cause such assignee or transferee to
expressly assume the liabilities, obligations, and duties of the Company
hereunder. No rights or
9
<PAGE>
obligations of the Executive under this Agreement may be assigned or
transferred by the Executive, except that all of his rights may be
transferred by will or operation of law.
6. REPRESENTATION.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it
and any other person, firm, or organization.
7. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement among the
Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations, and undertakings,
whether written or oral, among the Parties with respect thereto.
8. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by the
10
<PAGE>
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of the Company.
9. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
10. SURVIVORSHIP.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment by, or consulting
arrangements with, the Company to the extent necessary to the intended
preservation of such rights and obligations.
11. BENEFICIARIES/REFERENCES.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the
Executive's death by
11
<PAGE>
giving the Company written notice thereof. In the event of the Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate, or other legal representative.
12. GOVERNING LAW / JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New Jersey without reference to principles of
conflict of laws.
13. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in Trenton, New Jersey in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Costs of the arbitration or litigation, including,
without limitation, reasonable attorneys' fees of all Parties, shall be borne
by the Company. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts due the
Executive under this Agreement and all benefits to which the Executive is
entitled at the time the dispute arises.
12
<PAGE>
14. NOTICES.
Any notice given to a Party shall be in writing and shall be deemed to
have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company, to:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: General Counsel
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Bruce E. Rosenblum, Esq.
and:
If to the Executive, to:
Mr. Arthur M. Goldberg
380 Middlesex Avenue
Carteret, NJ 07008
with a copy to:
Frank L. Stifelman, Esq.
Orloff, Lowenbach, Stifelman & Siegel, P.A.
101 Eisenhower Parkway
Roseland, New Jersey 07068
13
<PAGE>
15. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
16. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
HILTON HOTELS CORPORATION
By: /s/ STEPHEN F. BOLLENBACH
----------------------------------
STEPHEN F. BOLLENBACH
President and
Chief Executive Officer
/s/ ARTHUR M. GOLDBERG
------------------------------------
ARTHUR M. GOLDBERG
14
<PAGE>
EXHIBIT 10.36
Raymond C. Avansino, Jr.
161 West Liberty Street
Reno, Nevada 89501
October 10, 1996
Mr. Stephen F. Bollenbach
President and Chief Executive Officer
Hilton Hotels Corporation
9336 Civil Center Drive
Beverly Hills, California 90210
Dear Mr. Bollenbach:
This letter sets forth and confirms the following understandings and
agreements between myself and the Hilton Entities (defined below) respecting
the offer of termination of my contractual and business relationships with
the Hilton Entities and my offer to resign as a consultant and director of
the Hilton Entities:
1. For purposes of this letter agreement, the term (a) Hilton Entities
means Hilton Hotel Corporation and all its subsidiary corporations and its
successors and assigns: (b) Hilton Parties means Hilton Entities and their
respective officers, directors, employers, and shareholders, successors and
assigns.
2. I hereby voluntarily offer to resign any and all offices and
positions as a director which I may hold with any of the Hilton Entities, and
voluntarily offer to terminate all consulting relationships which I may have
with any of the Hilton Entities. If accepted, these resignations will be
effective as of that date.
3. Effective immediately upon your acceptance of this Letter, (a) I
will be entitled to receive, without abatement, reduction, set-off or
defense, the payments, options and other compensation listed and described on
Exhibit A hereto as and when specified therein, (b) I will be deemed and
treated as having become fully vested in the stock options specified on
Exhibit A, and all actions necessary to fully vest those options will be
deemed to have occurred. Further, you will cause the appropriate Hilton
Entities to amend the applicable stock plans and to grant me the right to
exercise all options heretofore awarded on or before April 28, 1998. In the
event that the stock plan has not been amended by December 15, 1996, then on
or before December 31, 1996 the appropriate Hilton Entities shall pay me
$3,043,912 as full payment and compensation for the options which I own and
which have not vested as of this date, without regard to options which have
already vested which I continue to hold, absolutely and
<PAGE>
unconditionally and without being subject to any abatement, reduction,
set-off, defense or counterclaim. All payments now or hereafter owed to me by
any of the Hilton Entities are absolute and unconditional and shall be due
and payable without being subject to any abatement, reduction, set-off,
defense, or counterclaim.
4. Upon your acceptance, I will be entitled to all rights of
indemnification currently provided to any officer or director of any of the
Hilton Entities under any of the Hilton Entities' respective Articles of
Incorporation, By-Laws or Resolutions (without amendment or change).
5. Neither party will make any public statement or announcement to
anyone concerning the resignations or the termination of my relationships and
associations with the Hilton Entities except to state that I have voluntarily
offered to resign.
I hereafter will not publicly disparage or denigrate the Hilton Entities
or any of their officers or directors, and the Hilton Parties hereafter will
not publicly disparage or denigrate me, except that this does not prohibit
anyone from truthfully testifying in any proceeding.
6. I waive any and all rights to request a service letter and agree not
to request any such letter.
7. I hereby release, relinquish, and give up (and agree not to file any
suit with respect to) any and all claims, suits, and causes of action which I
may have or hold against any of the Hilton Parties in any way arising out of,
relating to, or resulting from (a) my consulting relationships, or my
services as a director for, any of the Hilton Entities or the termination
thereof, (b) any fact or conduct occurring prior to this date, (c) any
employment or business custom, practice, or policy of any of the Hilton
Entities, (d) any agreement between me and any of the Hilton Entities,
(e) any conduct or decision of any of the Hilton Parties which in any way
affected me. However, this does not constitute a release of any claim for
breach of any term of this Agreement, or my rights, if any, to any benefit
due me under any stock option or other compensation or benefit plan, or any
claims arising after the date this Agreement is executed.
8. The Hilton Parties hereby release, relinquish and give up (and agree
not to file any suit with respect to) any and all claims, suits, actions and
causes of action which any of them may have or hold against me in any way
arising out of, resulting from or existing by reason of (a) my consulting
relationships, or my services as a director for, any of the Hilton Entities
or the termination thereof, (b) any fact or conduct occurring prior to this
date, (c) any services or advice I provided to or on behalf of any of the
Hilton Parties, (d) any agreement between me and any of the Hilton Entities,
(e) any conduct or decision by me which in any way
<PAGE>
affected any of the Hilton Parties. This, however, does not constitute a
release of any claim for a breach of this Agreement.
9. The foregoing payments and agreements are made without any admission
as to fault, liability, wrongdoing or the validity of any other party's
position by me or any of the Hilton Parties, and we each expressly deny any
and all fault, liability and wrongdoing.
10. This Agreement contains the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior oral and
written communications and agreements between the parties concerning such
subject matter. The Hilton Parties shall pay upon request the costs and
expenses (including attorney's fees) incurred by me in connection with the
negotiation, preparation and execution of this Agreement, and related
services. Neither this Agreement, nor any of its terms, may be waived, added
to, changed or altered except in a writing signed by me and you.
11. I acknowledge that I have carefully read this Agreement, understand
all its terms, and have signed it voluntarily with full knowledge of its
significance after adequate opportunity for consideration and consultation
with my attorneys and/or advisors and after having been advised to consult an
attorney before signing this Agreement. I represent that no payments or
considerations have been promised to me for executing and delivering this
Agreement other than the payments, agreements, and benefits described herein,
which payments, benefits and agreements constitute adequate and sufficient
consideration for the claims herein released and my other agreements outlined
in this agreement.
This Agreement shall be governed by and construed and interpreted
according to the laws of the State of Delaware except to the extent the laws
of the United States apply.
12. In any action to enforce or recover for a breach of this Agreement,
the party who establishes by final judgment either a breach of or enforces
this Agreement shall be entitled to recover the costs and reasonable
attorneys' fees incurred to so enforce the Agreement or establish such breach
in addition to and not in lieu of any other rights and remedies to which such
party may be entitled.
Please signify your confirmation and agreement to the foregoing by
signing below where indicated.
THIS AGREEMENT CONTAINS A RELEASE OF ALL CLAIMS: READ IT CAREFULLY.
/s/ Raymond C. Avansino, Jr., attorney-in-fact
______________________________________________
Raymond C. Avansino, Jr.
<PAGE>
Accepted, confirmed and
agreed to as of the date
of this letter
HILTON HOTELS CORPORATION
By /s/ Stephen F. Bollenbach
________________________________
Stephen F. Bollenbach
On behalf of the Hilton Entities
<PAGE>
EXHIBIT A
RAYMOND C. AVANSINO, JR. ID: ###-##-####
1018 La Rue Avenue
RENO, NV 83509
I. STOCK OPTIONS
- - --------------------------------------------------------------------------------
OPTION DETAIL
- - --------------------------------------------------------------------------------
Option Number L-3915 Option Type NQ
Option Date 3/11/93 Shares Granted 200,000
Plan 90 Option Price $11.8905
- - --------------------------------------------------------------------------------
VESTING SCHEDULE EXERCISABLE
- - ---------------------------------- --------------------------------------------
Granted Full Vest Expires Exercisable Total Price Potential Net Gain
------- --------- ------- ----------- ------------- ------------------
Period 1 50,000 3/11/94 3/11/03 50,000 $594,531.25 $0.00
Period 2 50,000 3/11/95 3/11/03 50,000 $594,531.25 $0.00
Period 3 50,000 3/11/96 3/11/03 50,000 $594,531.25 $0.00
Period 4 50,000 3/11/97 3/11/03 0 $0.00 $0.00
------- ----------- ------------- ------------------
200,000 150,000 $1,783,593.75 $0.00
OPTION DETAIL
- - --------------------------------------------------------------------------------
Option Number L-3917 Option Type NQ
Option Date 1/20/94 Shares Granted 360,000
Plan 90 Option Price $16.2031
- - --------------------------------------------------------------------------------
VESTING SCHEDULE EXERCISABLE
- - ---------------------------------- --------------------------------------------
Granted Full Vest Expires Exercisable Total Price Potential Net Gain
------- --------- ------- ----------- ------------- ------------------
Period 1 90,000 1/20/95 1/20/04 90,000 $1,458,281.25 $0.00
Period 2 90,000 1/20/96 1/20/04 90,000 $1,458,281.25 $0.00
Period 3 90,000 1/20/97 1/20/04 0 $0.00 $0.00
Period 4 90,000 1/20/98 1/20/04 0 $0.00 $0.00
------- ----------- ------------- ------------------
360,000 180,000 $2,916,562.50 $0.00
- - ---------------------------------- --------------------------------------------
EXERCISES CANCELLATIONS
- - ---------------------------------- --------------------------------------------
Date Type Shares Value Date Reason Shares
- - ---- ---- ------ ----- ---- ------ ------
II. AUTOMOBILE
1993 Mercedes 500 SL (currently using)
III. OFFICE EQUIPMENT
Office equipment currently in Avansino's possession
<PAGE>
Exhibit 10.37
RELEASE AND SEPARATION AGREEMENT
This Release and Separation Agreement (hereinafter referred to as
"Agreement") is made and entered into by and between William C. Lebo, Jr., a
resident of Tennessee, his agents, representatives, attorneys, assigns,
heirs, executors and administrators (hereinafter collectively referred to as
"Lebo"), and HILTON HOTELS CORPORATION, its predecessors, successors,
subsidiaries, divisions, affiliates, representatives, attorneys, directors,
officers, trustees, agents and employees (hereinafter collectively referred
to as "Hilton").
In consideration of the moneys, mutual promises and covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
I. RESIGNATION OF EMPLOYMENT
Lebo agrees to resign his employment with Hilton effective February 1,
1997.
II. PAYMENT OF VACATION DAYS
Hilton will pay to Lebo a sum equal to the amount representing all
accrued and unused vacation days due to Lebo as of January 31, 1997, subject
to the maximum number of days set forth in Hilton's Vacation policy.
III. AUTOMOBILE
Ownership of that certain automobile described as a 1992 Range Rover,
vehicle identification number SALHV1242NA617906, will be forthwith
transferred from Hilton to Lebo, and Lebo agrees to be responsible for all
maintenance, operating expenses, and insurance coverage thereof as of
February 28, 1997. Lebo agrees to pay any and all applicable taxes due on the
remaining unamortized residual value of the vehicle.
<PAGE>
IV. VALUABLE CONSIDERATION OF RELEASE
(a) If Lebo signs and does not revoke this Agreement, in consideration of
the promises made by the parties herein, Hilton will pay Lebo, a
lump sum in the amount of Eight Hundred Seventy-One Thousand Six
Hundred dollars ($871,600), subject to legally required withholding
deductions, which amount shall be paid to Lebo on or before
February 28, 1997.
(b) Hilton and Lebo agree that Lebo's right to continue medical and
dental coverage under the Hilton Group Benefit Plan as provided by
COBRA shall begin on February 1, 1997. Hilton further agrees to
reimburse Lebo for his COBRA medical and dental premiums for a
period beginning February 1, 1997 and continuing until the earlier
of (i) July 31, 1998, or (ii) Lebo becomes eligible to receive
medical and dental benefits under another employer-sponsored health
benefits plan. Lebo's participation in all Hilton benefit plans and
programs, including but not limited to, medical, dental and other
benefits under the Hilton Group Benefits Plans, the Hilton Thrift
Plan, Stock Purchase Plan, Executive Deferred Compensation Plan,
Hilton's Stock Option Plan, and vacation accrual will terminate
effective February 1, 1997; provided however, that commencing as of
Lebo's 65th birthday, Lebo shall be eligible to receive those
benefits to which he is entitled under Hilton's qualified pension
plan, its Retirement Benefit Replacement Plan and its Supplemental
Executive Retirement Plans.
(c) The foregoing payment and other benefits are in full, final and
complete settlement of any and all claims, actions, damages,
attorney's fees, and/or costs which may now or hereinafter exist
against Hilton arising out of or relating to Lebo's employment with
and/or resignation from Hilton. Lebo agrees that the moneys and
other benefits described above are above and beyond consideration
to which he would otherwise have been entitled and that this
consideration constitutes extra payment in exchange for signing
this Agreement.
V. RELEASE OF ALL CLAIMS
By signing this Agreement and receiving the valuable consideration
described above, subject to the provisions of paragraph VI, Lebo hereby
releases and discharges the Hilton Indemnities/Releases, and Hilton hereby
releases and discharges the Lebo Indemnities/Releases from any and all
actions, complaints, causes of action, grievances, claims, damages,
obligations, debts, promises, losses, demands, wages, bonuses, benefits,
actual damages, compensatory damages, severance pay, mental anguish, pain,
humiliation, emotional distress, exemplary and/or punitive damages, statutory
penalties, and/or any other liabilities of any kind which have been or could
be asserted against the Hilton
<PAGE>
Indemnities/Releases or the Lebo Indemnities/Releases, respectively, arising
out of or relating in any way to Lebo's employment with and/or resignation of
employment from Hilton, and/or any other occurrence through January 31, 1997,
whether presently asserted or otherwise, including but not limited to:
(a) claims, demands, actions or liability arising under the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act
of 1964, as amended, the Civil Rights Act of 1991, the Americans
With Disabilities Act, the Family and Medical Leave Act, the
Employee Retirement Income Security Act, the Rehabilitation Act of
1973, the California Fair Employment and Housing Act and/or any
other federal, state or local statute, ordinance or regulation
(including but not limited to claims based on race, age, sex,
sexual preference, marital status, religion, national origin,
disability, retaliation, attainment of benefit plan rights and
veteran status); and/or
(b) claims, demands, actions or liability on the basis of any common
law, tort, contract, implied contract, breach of implied covenant
of good faith and fair dealing, public policy, wrongful or
retaliatory discharge, defamation, intentional infliction of
emotional distress, negligence; and/or
(c) claims, demands, actions or liability relating to any Hilton Bonus
Plans; and/or
(d) any other common law, statutory or other claim whatsoever arising
out of or relating to Lebo's employment with and/or resignation of
employment from Hilton and/or any other occurrence up to and
including the date of this Agreement, except such claims which by
law cannot be waived and the filing of an administrative charge.
For the purpose of implementing a full and complete release and
discharge of all parties, Lebo and Hilton each expressly acknowledge that this
Agreement is also intended to include in its effect, without limitation, all
claims which it or he does not know or expect to exist in its or his favor
relating to the period ending January 31, 1997, and the parties agree that
this Agreement contemplates the extinguishment of any such claim, or claims.
In this connection, Lebo and Hilton each expressly waive and relinquish all
rights and benefits afforded by Section 1542 of the Civil Code of California
and do so understanding and acknowledging the significance and consequences
of such specific waiver of said provisions of law. Section 1542 of the Civil
Code of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE
WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
<PAGE>
In the event either party breaches this Agreement by suing the other in
violation of this paragraph, such party shall be required to pay the other's
litigation costs (including its reasonable attorney's fees and costs)
associated with defending against such party's lawsuit or other claim.
VI. CONFIDENTIALITY AND NON-DISPARAGEMENT
Hilton and Lebo agree that, as a condition of this Agreement, the fact
of and terms and provisions of this Agreement are to remain strictly
confidential and shall not be disclosed to any other person except to members
of Lebo's immediate family and his tax advisors or to gaming authorities and
as required by law or the rules of any stock exchange on which Hilton's stock
is listed. In the event a third party seeks a copy of this agreement,
pursuant to court order or subpoena, Lebo agrees that he will inform Hilton
within forty-eight (48 hours) of receipt of such court order or subpoena and
will not produce the Agreement until Hilton has been given an opportunity to
move to quash such subpoena. Lebo further agrees that he will make no
negative or disparaging statements, either written or oral, regarding Hilton,
provided however, that statements made by Lebo under oath during the course
of legal or administrative proceedings shall not be considered to violate
this provision. Likewise, Hilton agrees that it will make no negative or
disparaging statements, either written or oral, regarding Lebo. This
paragraph will survive the termination or expiration of this Agreement,
except that either party shall be relieved of his/its respective obligation
hereunder in the event of a breach by the other.
VII. COOPERATION
Lebo agrees to cooperate on a reasonable basis with Hilton Hotels
Corporation or any of the other Releases in any litigation or administrative
proceedings involving any matters with which Lebo was involved during his
Hilton employment. Hilton agrees to reimburse Lebo for reasonable travel
expenses, if any, approved by Hilton or any of the other Releases incurred in
providing such assistance. Lebo's obligations under this paragraph are
subject to the following:
(a) that no reasonably foreseeable negative effect to Lebo's
employment, if he be then employed, will result; and
(b) that Hilton Hotels Corporation and Lebo agree to reasonable
compensation for time devoted by Lebo in carrying out his obligations
hereunder. In determining "reasonable compensation" as used in this
paragraph, the parties agree that compensation being paid to Lebo by his
employer, if he be then employed, will be taken into account; and
<PAGE>
(c) that Lebo shall be entitled to (i) indemnification in respect of
such litigation or administrative proceedings or any other claims relating to
the period ending January 31, 1997, as though Lebo were still an employee of
Hilton, and (ii) at Hilton's expense, legal counsel deemed necessary by Lebo
and preapproved by Hilton with respect to such litigation, administrative
proceedings or claims.
VIII. ENTIRE AGREEMENT AND SEVERABILITY
Hilton and Lebo agree that this Agreement sets forth the entire
agreement between the parties and supersedes any written or oral
understandings, other than those set forth in Hilton's retirement plans, on
which Lebo is relying in entering into this agreement. Other than as stated
herein, Hilton and Lebo acknowledge and agree that no promise or inducement
has been offered for the Agreement and no other promises or agreements shall
be binding unless reduced to writing and signed by the parties.
Hilton and Lebo agree that, to the extent that any portion or covenant
of this Agreement may be held to be invalid or legally unenforceable by a
court of competent jurisdiction, the remaining portions of this Agreement
shall not be affected and shall be given full force and effect. This
Agreement shall survive a change of control, a division of operating units
into separate entities, a merger, or any other substantial reorganization of
Hilton.
IX. KNOWING AND VOLUNTARY RELEASE
(a) Lebo hereby acknowledges and agrees that Hilton has advised him to
consult with an attorney regarding the subject matter of this Release and
Separation Agreement prior to executing this Agreement.
(b) Lebo further acknowledges and agrees that he has been given at
least twenty-one (21) days from the date he receives the Agreement within
which to consider this Agreement before signing below. Lebo acknowledges that
he has read this Agreement and the release contained herein and understands
all of the terms hereof, that he has not been coerced, threatened or
intimidated into signing this Agreement, and that he executes this Agreement
voluntarily and with full knowledge of this meaning and consequences.
<PAGE>
(c) Lebo agrees and understands that he may revoke this Agreement
within seven (7) days after he signs the Agreement and that the Agreement
shall not become effective or enforceable until eight (8) days after the date
on which Lebo signs the Agreement. Any revocation must be in writing and
directed to James M. Anderson.
HILTON HOTELS CORPORATION
/s/ William C. Lebo, Jr. By /s/ James M. Anderson
- - ---------------------------- ---------------------------------------
William C. Lebo, Jr.
James M. Anderson
Senior Vice President
Date: 2/18/97 Labor Relations & Personnel Administration
----------------------
Date: 2/19/97
------------------------------------
<PAGE>
EXHIBIT 11
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS(1)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Income (in millions)
Before extraordinary item $156 $173 $122
Deduct dividends on preferred shares - - -
------------ ----------- ------------
Income applicable to common stock
before extraordinary item 156 173 122
Extraordinary item, net (74) - -
------------ ----------- ------------
Income applicable to common stock $82 $173 $122
------------ ----------- ------------
------------ ----------- ------------
Shares
Shares outstanding January 1 193,348,712 192,458,892 191,387,416
Stock option - weighted average exercises 177,702 74,152 89,936
Weighted average shares issued 1,860,359 - -
Outstanding when market price exceeds
exercise price at ends of periods 10,331,635 5,469,300 4,882,240
Less shares assumed purchased with proceeds (8,575,719) (3,909,872) (3,222,220)
------------ ----------- ------------
Common and common equivalent shares 197,142,689 194,092,472 193,137,372
------------ ----------- ------------
------------ ----------- ------------
Earnings per common share
Income before extraordinary item $0.79 $0.89 $0.63
Extraordinary item (0.38) - -
------------ ----------- ------------
Net income $0.41 $0.89 $0.63
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
(1) All periods restated to give effect to 4 for 1 common stock split in
September 1996.
<PAGE>
Exhibit 12
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollar amounts in millions) (unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Income before income taxes
and minority interest (1) $235 $262 $184 $156 $157
Add:
Interest expense (1) 96 114 95 90 74
Distributions from less than 50% owned 18 13 12 6 5
Interest component of rent expense (1) 4 4 3 3 3
------- ------ ------ ------ -------
Earnings available for fixed charges $353 $393 $294 $255 $239
------- ------ ------ ------ -------
------- ------ ------ ------ -------
Fixed charges:
Interest expense (1) $96 $114 $95 $90 $74
Capitalized interest 7 3 8 2 5
Interest component of rent expense (1) 4 4 3 3 3
------- ------ ------ ------ -------
Total fixed charges $107 $121 $106 $95 $82
------- ------ ------ ------ -------
------- ------ ------ ------ -------
Ratio of earnings to fixed charges 3.3x 3.2x 2.8x 2.7x 2.9x
------- ------ ------ ------ -------
------- ------ ------ ------ -------
- - ------------------
</TABLE>
(1) Includes 50% owned companies.
<PAGE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
STRATEGIC AND FINANCIAL OBJECTIVES
Management's primary objective is to maximize shareholder value. Management
intends to achieve this objective through the pursuit of four major
strategies: make efficient use of the Company's strong balance sheet and
the attractive capital markets while maintaining an investment grade
rating; grow the hotel business by buying and owning full-service hotels in
major market locations; expand the Company's gaming operations through
acquisitions and new development; and leverage the Hilton brand name
worldwide. Management believes that continued implementation of these
strategies will result in strong cash flow growth and enhanced shareholder
value.
FINANCIAL CONDITION
LIQUIDITY
(in millions) 1996 1995 1994
--------------------------------------------------------------------------
EBITDA(1)
Hotels $392 301 240
Gaming 233 267 244
Corporate (48) (25) (23)
-----------------------------
Total $577 543 461
-----------------------------
-----------------------------
Net cash provided by operating activities $438 380 253
Working capital 153 183 346
Capital expenditures 242 186 265
Additional investments 104 98 157
(1) EBITDA is earnings before interest, taxes, depreciation, amortization
and non-cash charges. EBITDA is presented supplementally because
management believes it allows for a more complete analysis of results
of operations. This information should not be considered as an
alternative to any measure of performance or liquidity as promulgated
under generally accepted accounting principles nor should it be
considered as an indicator of the overall financial performance of the
Company.
Total EBITDA increased $34 million compared to the prior year. This
increase is attributable to continued strong results at the Company's owned
and partially owned full-service hotels and resorts. EBITDA for the
Company's hotel segment increased $91 million, a 30 percent improvement
from the prior year. The primary contributors to this strong performance
were the Company's ten major owned and partially owned properties in New
York, Chicago, San Francisco, Washington D.C., New Orleans and Honolulu.
EBITDA for the Company's gaming segment decreased $34 million or 13 percent
compared to the prior year primarily as a result of a substantial decrease
in baccarat drop and win percentage at the Las Vegas Hilton along with
sluggish conditions at its hotel casinos in Laughlin and Reno.
ACQUISITIONS AND CAPITAL SPENDING
The Company seeks to expand its gaming and hotel operations while
maintaining diversity in its operations and a balance of cash flows
generated by each segment. Growth in the gaming segment will occur
primarily through acquisitions and new development. In December 1996, the
Company consummated its acquisition of Bally Entertainment Corporation
(Bally) through the merger of Bally with and into the Company (Bally
Merger). Aggregate consideration consisted of approximately 53 million
shares of the Company's common stock and approximately 15 million shares of
the Company's newly authorized Preferred Redeemable Increased Dividend
Equity Securities, 8% PRIDES, Convertible Preferred Stock (PRIDES), for a
combined equity value of $1.9 billion and the assumption of $1.2 billion of
Bally and Bally subsidiary debt.
As a result of the Bally Merger, the Company now operates the
following additional properties: the 1,265-room Bally's Park Place Casino
Resort and the 509-room Atlantic City Hilton (formerly The Grand), both in
Atlantic City, New Jersey and wholly owned by the Company; the 2,814-room
Bally's Las Vegas which is 84% owned; the 58% owned Bally's Saloon Gambling
Hall Hotel dockside casino and 238-room hotel in Robinsonville, Mississippi
and the 50% owned Bally's Casino Lakeshore Resort riverboat casino in New
Orleans, Louisiana.
25
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - -------------------------------------------------------------------------------
(CONTINUED)
The Atlantic City Hilton is mid-way through the construction of a new
300-room tower that will increase capacity by nearly 60 percent. This $50
million project is expected to be completed by mid-1997. Adjacent to
Bally's Park Place, the Company is mid-way through construction of a new
themed western-style casino and entertainment complex which is expected to
be Atlantic City's first themed casino. This $110 million project is
located on approximately four acres of boardwalk property and will feature
a 70,000 square foot casino complex.
The Bally Merger also resulted in the acquisition of a 24 acre parcel
adjacent to Bally's Las Vegas. This will be the site of the planned $750
million, 2,900-room Paris Casino-Resort which will feature an 85,000 square
foot casino and a 50-story replica of the Eiffel Tower. This project is
expected to be completed in mid-1999.
During 1996, the Company continued to expand on a number of new
development fronts. In October, the Company opened the Flamingo Casino-
Kansas City located adjacent to the Missouri River near downtown Kansas
City. This $103 million project includes a 30,000 square foot casino on a
continuously docked barge as well as concession and entertainment
facilities. In January 1996, the Company began construction on "Star Trek:
The Experience at the Las Vegas Hilton," an adult-oriented attraction being
developed in collaboration with Paramount Parks, Inc. This project will
include the addition of a new 22,000 square foot themed casino and is
scheduled to open in late summer 1997. The Company's share of costs for
this project will total approximately $70 million.
During 1996, construction continued on the Conrad International Punta
del Este Resort and Casino in Uruguay. This $193 million project includes a
38,000 square foot casino which opened in January 1997, and a 300-room
luxury hotel which is scheduled to open in late-1997. As of December 31,
1996, the Company has provided debt financing for this project totaling $55
million. This property is approximately 43% owned by the Company and is
being financed with a combination of long-term debt and equity.
In addition to the estimated $380 million in 1997 expenditures related
to the aforementioned gaming projects, the Company anticipates spending
approximately $150 million in the gaming segment in 1997 on normal capital
replacements, structural and technology upgrades, ADA/safety compliance and
improvement projects that are evaluated using the Company's ROI criteria.
Growth in the hotel segment continues through selective acquisition of
large full-service hotels in major market locations. During the 1996 fourth
quarter, the Company acquired from The Prudential Insurance Company of
America (Prudential) approximately 50% of the ownership interests in the
joint ventures which own the Capital Hilton, Washington Hilton & Towers,
Chicago Hilton & Towers, New York Hilton & Towers, Rye Town Hilton and the
San Francisco Hilton & Towers for approximately $430 million. As a result
of these acquisitions, the Company's ownership interest exceeds 99% in each
of these properties, except the Chicago Hilton & Towers, in which the
Company's ownership interest is approximately 83%. In 1997 and 1998, the
Company will have an option to purchase the remaining interest in such
properties, other than Prudential's .5% interest in the New York Hilton &
Towers.
The Company expects to make further acquisitions in 1997. In addition,
the Company intends to spend approximately $85 million in the hotel segment
on normal capital replacements, upgrades,compliance and improvement
projects which are subject to strict ROI analysis.
The estimated 1997 expenditures required to complete the
aforementioned projects and capital spending programs will be financed
through available cash flows and general corporate borrowings.
SIGNIFICANT NEW DEVELOPMENTS
In December 1996, the Company and Patriot American Hospitality, Inc.
(Patriot) entered into a letter of intent for Patriot to acquire and
develop a range of Hilton properties in key U.S. markets. The alliance
calls for Patriot to acquire four existing wholly owned Hilton Suites
hotels for approximately $105 million, develop new suites, acquire and
convert full-service hotels and suites to the Hilton brand and develop
approximately 15 new Hilton Garden Inns within an 18-month period.
In January 1997, the Company finalized agreements with Ladbroke Group
PLC (Ladbroke), whose wholly owned subsidiary, Hilton International Co.
(HI), owns the rights to the Hilton name outside the United States. The
agreements provide for the reunification of the Hilton brand worldwide
through a strategic alliance between the companies, including cooperation
on sales and marketing, loyalty programs and other operational matters. The
Company and HI have integrated their reservation systems and, in February
1997, launched the Hilton HHonors Worldwide loyalty program. In addition,
the agreements permit the Company and Ladbroke to acquire up to 20% of each
other's outstanding capital stock.
26
<PAGE>
1996 ANNUAL REPORT
In January 1997, the Company commenced an offer to acquire ITT
Corporation (ITT) in a combination cash and stock transaction. The Company
offered a price of $55 for each ITT share, for a consideration of
approximately $6.5 billion. The total transaction, including assumption of
ITT's outstanding debt, would be valued at approximately $10.5 billion. The
Company's offer consists of a cash tender offer of $55 per share for a
majority of the outstanding ITT shares, to be followed by a merger whereby
ITT shareholders would receive shares of the Company's common stock with a
value of $55 in exchange for each remaining ITT share, subject to
appropriate collar provisions. The Company plans to fund the ITT tender
offer from a combination of its available cash, working capital, existing
credit facilities, borrowings under credit facilities that the Company will
seek to obtain from commercial banks and/or issuance of public debt. The
Company has reached a preliminary understanding with HFS Incorporated (HFS)
under which HFS would license, on a long-term worldwide basis, the Sheraton
trademark, franchise systems and management agreements. The acquisition is
subject to regulatory approvals and other conditions, and therefore there
can be no assurance that the Company will be successful in acquiring ITT,
or if successful, what effect such acquisition will have on the Company's
financial condition or results of operations.
As of February 1, 1997, the Company owned 41 percent of the 11 3/4%
First Mortgage Notes due 2002 of Claridge Hotel and Casino Corporation
(Claridge). The Company is discussing with Claridge the possible
acquisition of Claridge by the Company. The acquisition of Claridge would
be subject to certain regulatory approvals.
In February 1997, the Company sold its 30% equity interest in the
Conrad International Hong Kong for total consideration of approximately
$112 million. Also in February 1997, the Company purchased the Anchorage
Hilton hotel in Anchorage, Alaska for $67 million from Bristol Corporation.
LONG-TERM DEBT
Long-term debt at December 31, 1996 totaled $2.6 billion compared to $1.1
billion at December 31, 1995. Debt assumed in the Bally Merger totaled
approximately $1.2 billion. Subsequent to the merger date the Company
completed its cash tender offers and consent solicitations for
substantially all of the outstanding notes of certain wholly owned
subsidiaries including the 9 1/4% Bally's Park Place Funding Inc. First
Mortgage Notes due 2004, the 10 5/8% GNF, Corp. First Mortgage Notes due
2003 and Bally's Casino Holdings, Inc. Senior Discount Notes. The remaining
untendered notes were defeased. The Company also purchased 99.1% of the
outstanding 10 3/8% Bally's Grand, Inc. First Mortgage Notes due 2003. The
aggregate principal amount of debt securities tendered, purchased, or
defeased totaled $1.1 billion. Tender and defeasance premiums and related
expenses totaled approximately $126 million. The Company funded the tender
offers and defeasance primarily with commercial paper.
In May 1996, the Company issued $500 million of 5% Convertible
Subordinated Notes due 2006. Proceeds from the issuance were used to repay
certain outstanding indebtedness and for general corporate purposes,
including the funding of various development and construction projects.
The Company has an effective shelf registration statement on file with
the Securities and Exchange Commission registering up to $1 billion in debt
or equity securities. The terms of any securities offered pursuant to the
shelf registration statement will be determined by market conditions at the
time of issuance.
The Company had $1.4 billion of commercial paper outstanding at
December 31, 1996. In 1996, the Company entered into a five year $1.75
billion revolving credit facility. At December 31, 1996, $1.4 billion of
the aggregate commitment supported the issuance of commercial paper and $75
million was outstanding, leaving approximately $243 million of the
revolving bank debt facility available to the Company at such date.
In February 1997, the Company redeemed its 6% Convertible Subordinated
Notes due 1998 and its 10% Convertible Subordinated Notes due 2006. These
notes, which were formerly obligations of Bally, had an outstanding
principal amount of $1 million and $70 million, respectively, at December
31, 1996.
27
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
(CONTINUED)
STOCKHOLDERS' EQUITY
Stockholders' equity totaled $3.2 billion or $12.90 per share at December
31, 1996. Book value per share was $6.50 in 1995 and $5.86 in 1994.
Dividends paid on common shares were $.305 per share in 1996 and $.30 per
share in 1995 and 1994.
OTHER MATTERS
Various lawsuits are pending against the Company. In management's opinion,
disposition of these lawsuits is not expected to have a material effect on
the Company's financial position or results of operations.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the years
ended December 31, 1996 and 1995 is as follows:
(in millions, except per share amounts) 1996 1995 % Change
--------------------------------------------------------------------------
Revenue $3,940 3,555 11%
Operating income 329 355 (7)
Income before extraordinary item 156 173 (10)
Net income 82 173 (53)
Income before extraordinary item per share .79 .89 (11)
Net income per share .41 .89 (54)
HOTELS
The hotel segment includes the consolidated results of the Company's owned
and leased properties, affiliates operated under long-term management
agreements and franchise fees. Operating results are reduced by the portion
of earnings of non-controlled affiliates applicable to other ownership
interests. At December 31, 1996 the Company owned and partially owned,
managed and franchised 31, 28 and 172 properties, respectively, totaling
approximately 84,000 rooms worldwide.
Hotel segment results are primarily affected by volume (as measured by
occupancy), pricing (as measured by average room rate) and the Company's
ability to manage costs. Hotel industry fundamentals remained strong in
1996, particularly in the full-service segment. High demand and limited new
supply growth continued to benefit the Company's major market full-service
properties. Hotel segment results demonstrated the Company's ability to
capitalize on these strong fundamentals by offering superior products and
top quality service. Occupancy for hotels owned or managed increased to 74
percent in 1996 compared to 73 percent in 1995. Average room rates
increased six percent over 1995.
Consolidated hotel revenue increased 11 percent in 1996 to $2.5
billion. Revenue per available room (REVPAR) is a measure of hotel revenue
generation. REVPAR for owned and managed hotels increased 9 percent in
1996. Hotel operating income, primarily income from hotel interests, long-
term management agreements and franchise fee income, increased 31 percent
in 1996 to $272 million.
Hotel operating income is significantly influenced by the operating
results of the Company's principal downtown/convention, resort and airport
locations where it has large equity interests. A strong domestic economy
continues to fuel increases in both business and leisure travel volume. In
addition, strong international visitor volume continues to benefit a number
of the Company's major market and resort properties. Room nights related to
individual business travel, company meetings and leisure guests each
increased from the prior year. Limited supply growth has also resulted in
substantial pricing power in many key markets. The Company derives
considerable operating leverage from increases in revenue as hotel
operating costs are generally fixed. As a result, the Company improved
margins and increased operating income at nearly all of its owned and
partially owned hotels.
28
<PAGE>
Each of the Company's ten major full-service properties realized
improved operating results in 1996 compared to the prior year. Combined
results from the Waldorf=Astoria and the New York Hilton & Towers increased
$19 million compared to 1995. Strong individual business traveler and
leisure guest volume contributed to a combined REVPAR increase of 12
percent over the prior year for these two properties. Double digit REVPAR
growth also helped support a $15 million combined increase in the operating
income of the Palmer House Hilton, the O'Hare Hilton and the 83% owned
Chicago Hilton & Towers. International guest volume at the 50% owned Hilton
Hawaiian Village increased 8 percent over 1995 levels, contributing to a $5
million increase in operating income. International room nights accounted
for over 60 percent of total volume at the Hilton Hawaiian Village in 1996.
Company meeting volume rose 40 percent at the San Francisco Hilton &
Towers, which posted double-digit REVPAR growth and a $6 million increase
in operating results. Results from these ten major full-service hotels and
resorts, which also include the Capital Hilton, the 67% owned New Orleans
Hilton Riverside & Towers and the Washington Hilton & Towers, increased $49
million, or 41 percent, over 1995.
The Company's airport locations continue to benefit from strong
business travel volume. Operating income from the Company's airport
properties in Atlanta, Oakland and San Francisco increased $5 million over
the prior year. Benefiting from major renovation projects completed in
1995, operating income at the San Diego Hilton Beach and Tennis Resort and
the Portland Hilton increased a combined $8 million in 1996. REVPAR at
these two wholly owned properties increased a combined 25 percent over the
prior year. Results from the Company's Orlando and Las Vegas vacation
ownership projects increased $8 million from the prior year. Results in
1995 include the recognition of deferred operating losses of the Orlando
project.
Franchise fee revenue, which is based primarily on rooms revenue at
franchised properties, increased $4 million in 1996 to $43 million.
Hotel segment results were adversely effected by $25 million of
non-recurring charges in the fourth quarter of 1996. These charges
included the write-down of certain investments and notes receivable to
estimated fair market value.
The Company has an ongoing program of actively monitoring and
improving its franchise hotels. In 1996, 11 properties and 2,507 rooms were
added to the franchise system, while one franchise contract, representing
500 rooms, was terminated by the Hilton Inns franchise system.
Although the supply-demand balance generally remains favorable, future
operating results could be adversely impacted by increased capacity and
weak demand. These conditions could limit the Company's ability to pass
through inflationary increases in operating costs in the form of higher
rates. Increases in transportation and fuel costs or sustained recessionary
periods could also unfavorably impact future results. However, the Company
believes that its financial strength, market presence and diverse product
line will enable it to remain extremely competitive.
GAMING
The gaming segment includes the consolidated results of the Company's owned
properties and affiliates operated under long-term management agreements.
Operating results are reduced by the portion of earnings of non-controlled
affiliates applicable to other ownership interests. The Company operates
its domestic gaming business under the Hilton, Bally and Flamingo brand
names. The gaming segment includes five wholly owned and one majority owned
Nevada hotel casinos; two wholly owned Atlantic City hotel casinos; a
wholly owned riverboat gaming operation in Kansas City, Missouri; partially
owned riverboat gaming operations in New Orleans, Louisiana (2) and
Robinsonville, Mississippi; partially owned hotel casinos in Australia (2)
and Istanbul, Turkey; managed gaming operations in Windsor, Ontario,
Canada; and beginning in January 1997, a partially owned casino in Punta
del Este, Uruguay.
The Company's Nevada gaming operations offer a diversified product and
service mix which appeal to a broad spectrum of customers. The Flamingo
Hilton-Las Vegas caters to the broad Las Vegas middle market, while the Las
Vegas Hilton caters to premium players and the convention market. Bally's
Las Vegas caters to convention groups and the mid to upper middle market.
The Flamingo Hilton-Reno focuses on middle market activity, while the Reno
Hilton targets both convention and middle market activity. The Flamingo
Hilton-Laughlin targets the budget market segment.
29
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
(continued)
Total gaming revenue increased 10 percent to $1.4 billion in 1996
compared to $1.3 billion in 1995. Casino revenue, a component of gaming
revenue, was $857 million in 1996 compared to $791 million in 1995. Gaming
operating income was $109 million in 1996, a 39 percent decrease from $179
million in 1995.
Operating income at the Las Vegas Hilton decreased $61 million
compared to the prior year primarily due to lower than normal drop combined
with a significant reduction in the win percentage on its premium play
baccarat business. The baccarat win percentage decreased 13 points from a
more normalized win percentage in the prior year. Results at the Las Vegas
Hilton are more volatile than the Company's other casinos because this
property caters to the premium play segment of the market. Future
fluctuations in premium play volume and win percentage could result in
greater volatility in the operating income of this property.
Benefiting from a significant renovation and expansion effort
completed in the prior year, the Flamingo Hilton-Las Vegas posted
outstanding results in 1996. Occupancy increased 7 points to 96 percent and
REVPAR increased 15 percent from 1995 levels. Total operating income
increased $24 million from the prior year. A generally soft market
continues to affect the operating income at the Flamingo Hilton-Laughlin
which decreased $4 million compared to 1995. Combined operating income from
the Reno Hilton and the Flamingo Hilton-Reno decreased $12 million from the
prior year primarily due to increased competition and adverse weather
conditions resulting in lower occupancy and average room rates.
Occupancy for the Nevada hotel casinos was 90 percent and 88 percent
in 1996 and 1995, respectively. Average room rates increased four percent
in 1996.
Operating results from the Company's New Orleans river casino
operations remained flat in 1996, reflecting market softness. In October
1996, the Company received approval from Louisiana gaming regulators to
relocate the Flamingo Casino-New Orleans to Shreveport, a move that is
expected to take place in the fall of 1997. Reflecting the increasingly
competitive nature of the Kansas City, Missouri market, initial results
from the Flamingo Casino-Kansas City, which opened in October 1996, were
not significant.
Income from the 19.9% owned Conrad Jupiters, Gold Coast hotel casino
in Australia increased $7 million from 1995, primarily due to increased
table game win and double digit REVPAR growth. Benefiting from a full year
of operations, income from the 19.9% owned Conrad International Treasury
Casino, Brisbane increased $5 million.
The operating income contribution from the properties acquired in the
Bally Merger on December 18, 1996 were not significant to 1996 results.
Gaming segment results were adversely effected by $38 million of non-
recurring charges in the fourth quarter of 1996. These charges included the
write-off of pre-opening expenses for the Flamingo Casino- Kansas City and
costs associated with the planned relocation of the Flamingo Casino-New
Orleans to Shreveport.
The gaming industry continues to experience growth in both existing
markets and new jurisdictions. The Las Vegas and Atlantic City markets are
becoming increasingly competitive due to expansion projects which challenge
the Company's existing market share. These expansion projects, if
completed, could adversely impact the Company's future gaming income.
CORPORATE EXPENSE
Corporate expense increased $20 million in 1996 to $52 million. The
1996 expense includes a $10 million charge for stock-based compensation
related to the 1996 Chief Executive Stock Incentive Plan and a $5 million
non-recurring charge related to certain executive terminations.
INTEREST AND DIVIDEND INCOME/EXPENSE
Interest and dividend income increased $3 million compared with the
prior year. Interest expense, net of amounts capitalized, decreased $5
million. Adjusting for realized losses on the sale of certain investments
included in interest expense in 1996, interest expense decreased $13
million. This decrease is primarily due to lower average debt levels and
lower interest rates. Interest expense, net, from equity investments
decreased $5 million from 1995.
30
<PAGE>
INCOME TAXES
The effective income tax rate in 1996 was 39.7% compared to 36.4% in 1995.
The Company's effective income tax rate is determined by the level and
composition of pretax income and the mix of income subject to varying
foreign, state and local taxes. The 1995 effective income tax rate
benefited from $6 million in credits resulting from the favorable
resolution of Federal tax issues for prior years and higher utilization of
foreign tax credits.
MINORITY INTEREST
The minority interest primarily results from the consolidation of the
approximately 67% owned New Orleans Hilton Riverside & Towers.
EXTRAORDINARY LOSS
The costs and expenses incurred in connection with the extinguishment of
debt, including tender and defeasance premiums, resulted in an
extraordinary loss totaling $74 million, net of a tax benefit of $52
million.
FISCAL 1995 COMPARED WITH FISCAL 1994
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the years
ended December 31, 1995 and 1994 is as follows:
(in millions, except per share amounts) 1995 1994 % Change
---------------------------------------------------------------------------
Revenue $3,555 3,301 8%
Operating income 355 286 24
Net income 173 122 42
Net income per share .89 .63 41
HOTELS
Consolidated hotel revenue increased seven percent in 1995 to $2.3 billion.
Hotel operating income increased 41 percent in 1995 to $208 million.
Results from the Waldorf=Astoria increased $6 million and results from
the 50% owned New York Hilton & Towers increased $5 million, representing a
combined 58 percent increase over the prior year. Both properties produced
increases in average rate and occupancy linked to strong international room
nights and increased business travel volume. A significant increase in
individual business traveler room nights supported a $6 million increase in
operating income at the Palmer House Hilton. Improved occupancy also
benefited a number of the Company's major market equity properties,
including the Capital Hilton, San Francisco Hilton & Towers and Washington
Hilton & Towers, each 50% owned by the Company during 1995. Combined
results at these three properties increased $4 million, or 65 percent, over
1994.
Operating income from the New Orleans Hilton Riverside & Towers
increased $15 million over the prior year. Strong operating performance led
by increased leisure and company meeting volume accounted for $8 million of
the increase, while $7 million is attributable to increased ownership of
the property.
Average room rate growth in the leisure travel segment combined with
improved occupancy produced a $4 million increase in operating income at
the 50% owned Hilton Hawaiian Village. International room nights at this
property increased eight percent as tourism from the key Japanese market
remained strong.
The strength of business travel continued to benefit the Company's
airport properties. Each of the Company's airport locations attained
increases in average room rate and operating income compared to the prior
year. Combined income for the Company's eight wholly owned and partially
owned airport properties increased $8 million, or 65 percent, over 1994
levels.
Results at the Company's vacation ownership facility in Orlando,
Florida were adversely impacted by slower than expected sales. Results also
reflect the required recognition of previously deferred operating losses of
the Orlando project, prompted by the completion of the first phase of
construction in August 1995. Combined results from the Company's Orlando
and Las Vegas vacation ownership projects decreased $9 million from the
prior year.
Occupancy for hotels owned or managed increased to 73 percent in 1995
compared to 70 percent in 1994. Average room rates increased six percent
over 1994.
31
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
HILTON HOTELS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(continued)
GAMING
Total gaming revenue increased eight percent to $1.3 billion in 1995
compared to $1.2 billion in 1994. Casino revenue, a component of gaming
revenue, was $791 million in 1995 compared to $729 million in 1994.
Operating income at the Las Vegas Hilton increased $26 million from
the prior year primarily due to significantly higher table game win. The
hotel casino's luxury "Sky Villa" suites and new baccarat facility greatly
increased premium play volume compared to the prior year. Baccarat volume
more than doubled resulting in a 91 percent increase in baccarat win
compared to the prior year. The property also benefited from a 10 percent
increase in average room rate.
Results at the Flamingo Hilton-Las Vegas increased $4 million in 1995,
despite disruptions during the first half of the year resulting from major
construction and renovation projects at the property. Average room rate
increased 11 percent over 1994 levels. Operating income at the Flamingo
Hilton-Laughlin decreased $3 million from the prior year, reflecting
continued market softness and competition from Las Vegas. Benefiting from
the mid-year completion of a major casino renovation, operating income from
the Reno Hilton increased $5 million from the prior year. Results from the
Flamingo Hilton-Reno decreased $1 million, primarily due to increased
supply in the last six months of 1995. Results from the Company's New
Orleans river casino operations decreased $2 million from 1994.
Occupancy for the Nevada hotel casinos was 88 percent and 91 percent
in 1995 and 1994, respectively. Average room rates increased seven percent
in 1995.
Income from the consortium which operates and manages the Casino
Windsor increased $3 million from the prior year. The facility opened in
May 1994. Results at the 25% owned Conrad International Istanbul increased
$1 million due to a significant increase in occupancy.
Income from the 19.9% owned Conrad Jupiters, Gold Coast hotel casino
in Australia decreased $11 million from 1994, primarily due to
significantly lower table game win. Income from the 19.9% owned Conrad
International Treasury Casino, Brisbane, which opened in May 1995, totaled
$2 million.
CORPORATE EXPENSE
Corporate expense increased $4 million in 1995 to $32 million primarily due
to $5 million in costs incurred in evaluating strategic alternatives to
enhance shareholder value.
INTEREST AND DIVIDEND INCOME/EXPENSE
Interest and dividend income increased $13 million in 1995 to $35 million
due to higher investable balances. Interest expense, net of amounts
capitalized, increased $6 million primarily due to higher average debt
levels and higher interest rates on commercial paper borrowings. The
increase in consolidated interest expense includes $4 million attributable
to the consolidation of the New Orleans Hilton Riverside & Towers in June
1994. Interest expense, net, from equity investments increased $5 million
over 1994.
INCOME TAXES
The effective income tax rate in 1995 was 36.4% compared to 40.7% in 1994.
The 1995 effective tax rate benefited from $6 million in credits resulting
from the favorable resolution of Federal tax issues for prior years and the
utilization of foreign tax credits.
32
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(in millions, except per share amounts) Year Ended December 31, 1996 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Rooms $1,734 1,562 1,445
Food and beverage 857 782 738
Casino 857 791 729
Franchise fees 43 39 37
Other 449 381 352
-------------------------------------
3,940 3,555 3,301
-------------------------------------
Expenses
Rooms 508 484 462
Food and beverage 674 625 601
Casino 466 400 344
Other expenses, including remittances to owners 1,911 1,659 1,580
Corporate expense 52 32 28
-------------------------------------
3,611 3,200 3,015
-------------------------------------
Operating Income 329 355 286
Interest and dividend income 38 35 22
Interest expense (88) (93) (87)
Interest expense, net, from equity investments (12) (17) (12)
-------------------------------------
Income Before Income Taxes and Minority Interest 267 280 209
Provision for income taxes 106 102 85
Minority interest, net 5 5 2
-------------------------------------
Income Before Extraordinary Item 156 173 122
Extraordinary loss on extinguishment of debt,
net of tax benefit of $52 (74) -- --
-------------------------------------
Net Income $82 173 122
-------------------------------------
-------------------------------------
Earnings Per Share
Income before extraordinary item $.79 .89 .63
Extraordinary loss (.38) -- --
-------------------------------------
Net Income Per Share $.41 .89 .63
-------------------------------------
-------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
<PAGE>
HILTON HOTELS CORPORATION AND SUBSIDIARIES 1996 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in millions) December 31, 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $388 433
Temporary investments 50 101
Accounts receivable, net 430 348
Other current assets 283 218
---------------------
Total current assets 1,151 1,100
---------------------
Investments, Property and Other Assets
Equity investments 277 576
Other investments 96 19
Property and equipment, net 4,698 1,696
Goodwill 1,295 --
Other assets 60 52
---------------------
Total investments, property and other assets 6,426 2,343
---------------------
Total Assets $7,577 3,443
---------------------
---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities $998 917
Long-term debt 2,606 1,070
Deferred income taxes 598 124
Insurance reserves and other 164 78
---------------------
Total liabilities 4,366 2,189
---------------------
Commitments and Contingencies
Stockholders' Equity
8% PRIDES convertible preferred stock 15 --
Common stock, 249 million and 193 million
shares outstanding, respectively 627 494
Additional paid-in capital 1,745 --
Retained earnings 931 909
Other 4 (7)
---------------------
3,322 1,396
Less treasury shares, at cost 111 142
----------------------
Total stockholders' equity 3,211 1,254
---------------------
Total Liabilities and Stockholders' Equity $7,577 3,443
---------------------
---------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34
<PAGE>
HILTON HOTELS CORPORATION AND SUBSIDIARIES 1996 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(in millions) Year Ended December 31, 1996 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $82 173 122
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss on extinguishment of
debt 74 -- --
Depreciation and amortization 178 142 133
Non-cash charges 23 -- --
Amortization of debt issue costs 1 1 1
Change in working capital components:
Inventories 23 (11) (37)
Accounts receivable (43) (41) (73)
Other current assets (19) 25 (23)
Accounts payable and accrued expenses 9 71 131
Income taxes payable 43 4 (1)
Change in deferred income taxes (22) 1 (21)
Change in other liabilities 20 (14) 8
Distributions from equity investments in
excess of earnings 33 30 6
Gain from property transactions (5) (1) (1)
Other 41 -- 8
-------------------------------------
Net cash provided by operating activities 438 380 253
-------------------------------------
Investing Activities
Capital expenditures (242) (186) (265)
Additional investments (104) (98) (157)
Decrease in long-term marketable securities -- 1 63
Change in temporary investments 83 139 (119)
Payments on notes and other 21 17 61
Acquisitions, net of cash acquired (288) -- --
-------------------------------------
Net cash used in investing activities (530) (127) (417)
-------------------------------------
Financing Activities
Change in commercial paper borrowings
and revolving loans 1,041 189 (113)
Long-term borrowings 492 1 170
Reduction of long-term debt (1,457) (192) (32)
Issuance of common stock 31 11 12
Cash dividends (60) (58) (58)
-------------------------------------
Net cash provided by (used in) financing
activities 47 (49) (21)
-------------------------------------
(Decrease) Increase in Cash and Equivalents (45) 204 (185)
Cash and Equivalents at Beginning of Year 433 229 414
-------------------------------------
Cash and Equivalents at End of Year $388 433 229
-------------------------------------
-------------------------------------
</TABLE>
See notes to consolidated financial statements
35
<PAGE>
HILTON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PRIDES
Convertible Additional
Preferred Common Paid-in Retained Treasury
(in millions, except per share amounts) Stock Stock Capital Earnings Other Shares
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $-- 494 2 732 (2) (169)
Exercise of stock options -- -- (2) (1) -- 15
Cumulative translation
adjustment, net of
deferred tax -- -- -- -- 1 --
Unrealized loss on marketable
securities, net of deferred
tax benefit -- -- -- -- (5) --
Net income -- -- -- 122 -- --
Dividends ($.30 per share) -- -- -- (58) -- --
---------------------------------------------------------------------------
Balance, December 31, 1994 -- 494 -- 795 (6) (154)
Exercise of stock options -- -- -- (1) -- 12
Cumulative translation
adjustment, net of
deferred tax benefit -- -- -- -- (1) --
Net income -- -- -- 173 -- --
Dividends ($.30 per share) -- -- -- (58) -- --
---------------------------------------------------------------------------
Balance, December 31, 1995 -- 494 -- 909 (7) (142)
Exercise of stock options -- -- -- -- -- 31
Bally acquisition 15 133 1,735 -- -- --
Cumulative translation
adjustment, net of
deferred tax -- -- -- -- 6 --
Realized loss on
marketable securities,
net of deferred tax -- -- -- -- 5 --
Deferred compensation -- -- 10 -- -- --
Net income -- -- -- 82 -- --
Dividends ($.305 per share) -- -- -- (60) -- --
---------------------------------------------------------------------------
Balance, December 31, 1996 $15 627 1,745 931 4 (111)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
36
<PAGE>
1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
During 1996, Hilton Hotels Corporation and subsidiaries (the Company)
elected to change the presentation in its consolidated financial statements
to include the operating results and working capital of properties operated
under long-term management agreements. These agreements effectively convey
to the Company the right to use the properties in exchange for payments to
the property owners, which are based primarily on the properties
profitability. All periods presented reflect this change in presentation
which the Company believes is preferable. The consolidated financial
statements include the following amounts related to managed hotels: current
assets and current liabilities of $344 million and $383 million in 1996 and
1995, respectively, including cash and equivalents of $115 million and $95
million, respectively; revenue of $2.2 billion, $2.0 billion and $1.9
billion in 1996, 1995 and 1994, respectively; and operating expenses,
including remittances to owners, of $2.0 billion, $1.9 billion and
$1.8 billion in 1996, 1995 and 1994, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is primarily engaged in the ownership, management and
franchising of hotels, resorts and vacation ownership properties and the
ownership and management of casinos and hotel casino properties. The
Company operates in select markets throughout the world, predominately in
the United States. Revenue and income are derived from two business
segments: hotel operations and gaming operations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Hilton Hotels
Corporation and its majority owned and controlled subsidiaries. The Company
also consolidates the operating results and working capital of affiliates
operated under long-term management agreements, including such affiliates
in which the Company has investments of 50% or less. All material
intercompany transactions are eliminated and net earnings are reduced by
the portion of the earnings of affiliates applicable to other ownership
interests. There are no significant restrictions on the transfer of funds
from the Company's wholly owned subsidiaries to Hilton Hotels Corporation.
CASH AND EQUIVALENTS
Cash and equivalents include investments with initial maturities of three
months or less.
CASINO REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenue is the aggregate of gaming wins and losses. The revenue
components presented in the consolidated financial statements and the notes
thereto exclude the retail value of rooms, food and beverage provided to
customers on a complimentary basis. The estimated cost of providing these
promotional allowances is as follows:
(in millions) 1996 1995 1994
--------------------------------------------------------------------------
Rooms $14 11 11
Food and beverage 40 37 35
----------------------------
Total cost of promotional allowances $54 48 46
---------------------------
---------------------------
The cost of promotional allowances has been allocated to expense as
follows:
(in millions) 1996 1995 1994
-------------------------------------------------------------------------
Casino $46 39 37
Other costs and expenses 8 9 9
37
<PAGE>
HILTON HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
CURRENCY TRANSLATION
Assets and liabilities denominated in most foreign currencies are
translated into U.S. dollars at year-end exchange rates and related gains
and losses, net of applicable deferred income taxes, are reflected in
stockholders' equity. Gains and losses from foreign currency transactions
and translation of balance sheets in highly inflationary economies are
included in earnings.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Interest incurred during
construction of facilities is capitalized and amortized over the life of
the asset.
Costs of improvements are capitalized. Costs of normal repairs and
maintenance are charged to expense as incurred. Upon the sale or retirement
of property and equipment, the cost and related accumulated depreciation
are removed from the respective accounts, and the resulting gain or loss,
if any, is included in income.
Depreciation is provided on a straight-line basis over the estimated
useful life of the assets. Leasehold improvements are amortized over the
shorter of the asset life or lease term. The service lives of assets are
generally 40 years for buildings, 30 years for riverboats and 8 years for
building improvements and furniture and equipment.
GOODWILL
The excess of purchase price over net assets of businesses acquired
(goodwill) is amortized using the straight-line method over 40 years. The
Company periodically evaluates the carrying value of goodwill and measures
the amount of impairment, if any, by assessing current and future levels of
income and cash flows as well as other factors.
PRE-OPENING COSTS
Costs associated with the opening of new properties or major additions to
properties placed in service through December 31, 1994 were deferred and
charged to income over a three year period after the opening date. For
projects placed in service after December 31, 1994, pre-opening costs are
deferred and amortized over the shorter of the period benefited or one
year.
UNAMORTIZED LOAN COSTS
Debt discount and issuance costs incurred in connection with long-term debt
are capitalized and amortized to expense, principally on the bonds
outstanding method.
SELF-INSURANCE
The Company is self-insured for various levels of general liability,
workers' compensation and employee medical and life insurance coverage.
Insurance reserves include the present values of projected settlements for
claims.
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common shares
outstanding plus the common share equivalents which arise from the assumed
exercise of stock options and convertible securities considered to be
common stock equivalents. In September 1996, the stockholders of the
Company approved a four-for-one stock split. All references in the
financial statements to number of shares, per share amounts, dividends paid
and stock option data have been restated to reflect the stock split.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
The consolidated financial statements for prior years reflect certain
reclassifications to conform with classifications adopted in 1996. These
classifications have no effect on net income.
38
<PAGE>
1996 Annual Report
ACQUISITIONS
Effective December 18, 1996, the Company completed the merger of Bally
Entertainment Corporation (Bally) with and into the Company pursuant to an
agreement dated June 6, 1996. Aggregate consideration consisted of
approximately 53 million shares of the Company's common stock and
approximately 15 million shares of the Company's newly authorized Preferred
Redeemable Increased Dividend Equity Securities, 8% PRIDES, Convertible
Preferred Stock (PRIDES) for a combined equity value of $1.9 billion and
assumption of Bally and Bally subsidiary debt totaling $1.2 billion.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the acquisition cost of $3.1 billion has been
allocated to the assets acquired and liabilities assumed based on estimates
of their fair value. A total of $1.3 billion, representing the excess of
acquisition cost over the fair value of Bally's tangible net assets, has
been allocated to goodwill and is being amortized over 40 years.
The Company's consolidated results of operations have incorporated
Bally's activity from the effective date of the merger. The following
unaudited pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the respective periods.
This pro forma information does not purport to be indicative of future
results or what would have occurred had the acquisition been made as of
those dates.
(in millions, except per share amounts) (unaudited) 1996 1995
-------------------------------------------------------------------------
Revenue $5,041 4,565
Operating income 525 550
Income before extraordinary item 243 278
Net income 169 278
Income before extraordinary item per share .93 1.07
Net income per share .64 1.07
During the 1996 fourth quarter, the Company acquired the majority of
The Prudential Insurance Company of America's (Prudential) ownership
interests in the Chicago Hilton & Towers, San Francisco Hilton & Towers,
Washington Hilton & Towers, New York Hilton & Towers, Rye Town Hilton and
Capital Hilton hotels for a combined cost of approximately $430 million.
The purchase price has been allocated to the assets acquired and
liabilities assumed using the purchase method of accounting. The pro forma
impact on operations was not significant.
EXTRAORDINARY ITEM
In December 1996, the Company completed cash tender offers and consent
solicitations for substantially all of the outstanding notes of certain
wholly owned subsidiaries including the 9 1/4% Bally's Park Place Funding,
Inc. First Mortgage Notes due 2004; 10 5/8% GNF, Corp. First Mortgage Notes
due 2003 and Bally's Casino Holdings, Inc. Senior Discount Notes. The
remaining untendered notes were defeased. The Company also purchased 99.1%
of the outstanding 10 3/8% First Mortgage Notes due 2003 of Bally's Grand,
Inc., an approximately 84% owned subsidiary. Cash consideration for the
repurchase and defeasance, including premiums, totaled $1.2 billion, which
resulted in an after tax extraordinary loss of $74 million, net of a tax
benefit of $52 million.
39
<PAGE>
HILTON HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 and 1995 are as follows:
(in millions) 1996 1995
-------------------------------------------------------------------------
Hotel accounts receivable $364 284
Less allowance for doubtful accounts 10 12
----------------
354 272
----------------
Casino accounts receivable 106 94
Less allowance for doubtful accounts 30 18
----------------
76 76
----------------
Total $430 348
----------------
The allowance provided for estimated uncollectible casino receivables,
net of recoveries, is included in casino expenses in the amount of $25
million, $19 million and $13 million in 1996, 1995 and 1994, respectively.
INVENTORIES
Included in other current assets at December 31, 1996 and 1995 are
inventories of $82 million and $98 million, respectively, determined on a
first-in, first-out basis.
INVESTMENTS
The composition of the Company's total equity investments at December 31,
1996 and 1995 is as follows:
(in millions) 1996 1995
------------------------------------------------------------------------
Equity Investments
Hotels (7 in 1996, 14 in 1995) $78 307
Hotel casinos (5 in 1996 and 1995) and riverboat
casino 101 97
Other 25 15
----------------
204 419
Notes receivable 73 157
----------------
Total $277 576
----------------
----------------
The changes in the Company's equity investments are as follows:
(in millions) 1996 1995
------------------------------------------------------------------------
Investments, January 1 $419 428
Earnings 62 37
Distributions received (95) (67)
Additional investments 11 22
Purchase of outside interests (200) --
Other, net 7 (1)
----------------
Investments, December 31 $204 419
----------------
----------------
40
<PAGE>
1996 ANNUAL REPORT
Summarized balance sheet information of equity investments at December 31,
1996 and 1995 is as follows:
(in millions) 1996 1995
-------------------------------------------------------------------------
Current assets $274 347
Property and other assets, net 1,359 1,863
Current liabilities 330 363
Long-term debt and other 529 592
Equity 774 1,255
The Company's proportionate share of capital expenditures and
depreciation expense of equity investments were $60 million and $42
million, respectively, in 1996, $61 million and $40 million, respectively,
in 1995 and $61 million and $39 million, respectively, in 1994.
Summarized results of operations of equity investments for the years
ended December 31 are as follows:
(in millions) 1996 1995 1994
--------------------------------------------------------------------------
Revenue $1,388 1,321 1,217
Expenses 1,181 1,184 1,075
Net income 178 117 112
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 are as follows:
(in millions) 1996 1995
------------------------------------------------------------------------
Land $712 158
Buildings and leasehold improvements 3,823 1,718
Riverboats 128 32
Furniture and equipment 891 517
Property held for sale or development 40 37
Construction in progress 106 28
-------------------
5,700 2,490
Less accumulated depreciation 1,002 794
-------------------
Total $4,698 1,696
-------------------
-------------------
CURRENT LIABILITIES
Current liabilities at December 31, 1996 and 1995 are as follows:
(in millions) 1996 1995
------------------------------------------------------------------------
Accounts payable and accrued expenses $894 688
Current maturities of long-term debt 101 217
Income taxes payable 3 12
-------------------
Total $998 917
-------------------
-------------------
41
<PAGE>
HILTON HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial development revenue bonds at adjustable rates, due 2015 $ 82 82
Senior notes, with an average rate of 7.70%, due 1997 to 2002 422 637
Mortgage notes, 6.30% to 10.40%, due 1997 to 2011 133 104
5% Convertible subordinated notes due 2006 491 --
10% Convertible subordinated notes due 2006 70 --
Commercial paper 1,423 406
Revolving loans, with an average rate of 5.73% at December 31, 1996 75 51
Other 11 7
----------------------
2,707 1,287
Less current maturities 101 217
----------------------
Net long-term debt $2,606 1,070
----------------------
----------------------
</TABLE>
Interest paid, net of amounts capitalized, was $88 million, $95
million and $88 million in 1996, 1995 and 1994, respectively. Capitalized
interest amounted to $6 million, $3 million and $7 million, respectively.
Debt maturities during the next five years are as follows:
(in millions)
---------------------------------------------------------------------
1997 $101
1998 150
1999 68
2000 11
2001 1,500
During 1996 and 1995 the Company issued and renewed commercial paper
for varying periods with interest at market rates. The Company had $1.4
billion and $406 million in commercial paper outstanding at December 31,
1996 and 1995, respectively. In 1996 and 1995 average amounts of commercial
paper outstanding were $260 million and $288 million, respectively, with
the largest amounts outstanding at any one time being $1.4 billion and $418
million, respectively. Weighted average interest rates were 5.57% and
5.98%, respectively.
The Company has entered into a long-term revolving credit facility
with an aggregate commitment at December 31, 1996 of $1.75 billion, which
expires in 2001. A commitment fee of .085% per annum is paid on the unused
portion of the commitments. At December 31, 1996, $1.4 billion of the
aggregate commitment supported the issuance of commercial paper and $75
million was outstanding, leaving approximately $243 million of the
revolving bank debt facility available to the Company at such date.
The Company has an effective shelf registration with the Securities
and Exchange Commission for up to $1 billion in debt or equity securities.
The terms and conditions of these securities will be determined by market
conditions at the time of issuance.
In February 1997, the Company redeemed its 6% convertible subordinated
notes due 1998 and its 10% convertible subordinated notes due 2006. These
notes had an outstanding principal amount of $1 million and $70 million,
respectively, at December 31, 1996.
Provisions under various loan agreements require the Company to comply
with certain financial covenants which include maintaining a minimum
consolidated tangible net worth and limiting the amount of outstanding
indebtedness.
42
<PAGE>
1996 ANNUAL REPORT
FINANCIAL INSTRUMENTS
CASH EQUIVALENTS, TEMPORARY INVESTMENTS AND LONG-TERM MARKETABLE SECURITIES
The fair value of cash equivalents, temporary investments and long-term
marketable securities is estimated based on the quoted market price of the
investments.
OTHER FINANCIAL INSTRUMENTS
At December 31, 1996 the Company was party to one interest rate swap
agreement which was not significant. No foreign currency exchange contracts
were outstanding at December 31, 1996 and were not significant at December
31, 1995.
LONG-TERM DEBT
The estimated fair value of long-term debt is based on the quoted market
prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------
Carrying Fair Carrying Fair
(in millions) Amount Value Amount Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents and temporary investments $ 438 438 534 534
Long-term debt (including current maturities) 2,707 2,738 1,287 1,318
</TABLE>
INCOME TAXES
The provisions for income taxes for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $108 81 84
State, foreign and local 22 20 19
------------------------------------
130 101 103
Deferred (24) 1 (18)
------------------------------------
Total $106 102 85
------------------------------------
------------------------------------
</TABLE>
The components of deferred income tax expense for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity investments $(3) 12 (9)
Bad debt reserves 2 -- (3)
Self-insurance reserves 4 5 1
Benefit plans (7) (6) (4)
Net operating losses (15) -- --
Other, net (5) (10) (3)
------------------------------------
Total $(24) 1 (18)
-----------------------------------
------------------------------------
</TABLE>
During 1996, 1995 and 1994 the Company paid income taxes of $83 million, $95
million and $104 million, respectively.
43
<PAGE>
HILTON HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The income tax effects of temporary differences between financial and
income tax reporting that gave rise to deferred income tax assets and
liabilities at December 31, 1996 and 1995 are as follows:
(in millions) 1996 1995
-------------------------------------------------------------------------
Deferred tax assets
Accrued expenses $47 13
Bad debt reserves 17 13
Self-insurance reserves 21 20
Benefit plans 22 10
Net operating losses 29 --
AMT credits 12 --
Other asset reserves 19 6
Foreign tax credit carryovers (expire beginning
in 2000) 5 6
Other 64 26
-------------------
236 94
Valuation allowance (9) (6)
-------------------
227 88
-------------------
Deferred tax liabilities
Fixed assets, primarily depreciation (663) (98)
Equity investments (65) (69)
Other (37) (21)
-------------------
(765) (188)
-------------------
Net deferred tax liability $(538) (100)
-------------------
-------------------
Reconciliation of the Federal income tax rate and the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0 35.0
Increase (reduction) in taxes:
State and local income taxes, net of Federal
tax benefits 2.7 3.1 3.3
Foreign taxes, net .6 (.9) .8
Benefit of dividend and municipal bond income (.2) (.3) (.3)
Other 1.6 (.5) 1.9
-----------------------------
Effective tax rate 39.7% 36.4 40.7
-----------------------------
-----------------------------
</TABLE>
CAPITAL STOCK
Four hundred million shares of common stock with a par value of $2.50 per
share are authorized, of which 251 million and 196 million were issued at
December 31, 1996 and 1995, respectively, including treasury shares of 2
million and 3 million in 1996 and 1995, respectively. Authorized preferred
stock includes 25 million shares of preferred stock with a par value of
$1.00 per share. At December 31, 1996, 15 million shares of 8% PRIDES
convertible preferred stock were issued and outstanding; no preferred
shares were issued or outstanding in 1995.
Generally, holders of PRIDES have the right to vote upon matters
coming before any meeting of the holders of common stock on the basis of
4/5 of a vote for each share of PRIDES held. On October 3, 1999, each share
of PRIDES mandatorily converts into 1.12 shares of common stock and the
right to receive an amount in cash equal to any accrued and unpaid
dividends theron. At any time prior to October 3, 1999, unless previously
redeemed, each share of PRIDES is convertible at the option of the holder
into .92 of a share of common stock. The shares of PRIDES are not
redeemable by the Company prior to October 3, 1998.
44
<PAGE>
1996 ANNUAL REPORT
The Company has a Share Purchase Rights Plan under which a right is
attached to each share of the Company's common stock. The rights may only
become exercisable under certain circumstances involving actual or
potential acquisitions of the Company's common stock by a specified person
or affiliated group. Depending on the circumstances, if the rights become
exercisable, the holder may be entitled to purchase units of the Company's
junior participating preferred stock, shares of the Company's common stock
or shares of common stock of the acquiror. The rights remain in existence
until July 25, 1998 unless they are terminated, exercised or redeemed.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock-based compensation plans. Accordingly,
compensation expense recognized was different than what would have
otherwise been recognized under the fair value based method defined in
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." Had compensation cost for the Company's stock-
based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of SFAS
123, the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated as follows:
(in millions, except per share amounts) 1996 1995
-------------------------------------------------------------------------
Net income
As reported $82 173
Pro forma 75 172
Net income per share
As reported .41 .89
Pro forma .38 .89
At December 31, 1996, 17 million shares of common stock were reserved
for the exercise of options under the Company's 1990 and 1996 Stock
Incentive Plans. Options may be granted to salaried officers and other key
employees of the Company to purchase common stock at not less than the fair
market value at the date of grant. Generally, options may be exercised in
installments commencing one year after the date of grant. The 1990 and 1996
Stock Incentive Plans also permit the granting of Stock Appreciation Rights
(SARS). No SARS have been granted as of December 31, 1996.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1996 and 1995, respectively:
dividend yield of one percent for both years; expected volatility of 27 and
18 percent; risk-free interest rates of 6.33 and 7.58 percent and expected
lives of 6.35 years for both years.
A summary of the status of the Company's stock option plans as of
December 31, 1996, 1995 and 1994, and changes during the years ending on
those dates is presented below:
<TABLE>
<CAPTION>
Options Weighted
Price Range Average Options Available
(Per Share) Price Outstanding for Grant
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $7.09 - 13.30 $9.86 5,409,704 1,759,108
Authorized -- 2,000,000
Granted 13.80 - 17.41 17.03 3,013,200 (3,013,200)
Exercised 7.09 - 13.30 8.59 (1,079,240) --
Cancelled 7.41 17.41 13.93 (259,404) 237,896
-----------------------------------------------------------------------
Balance at December 31, 1994 7.09 - 17.41 12.96 7,084,260 983,804
Granted 16.47 - 19.11 16.58 916,200 (916,200)
Exercised 7.09 - 17.41 10.01 (889,820) --
Cancelled 9.53 17.41 16.43 (284,900) 278,900
-----------------------------------------------------------------------
Balance at December 31, 1995 7.36 - 19.11 13.68 6,825,740 346,504
Authorized -- 12,000,000
Granted 18.67 - 29.38 20.87 9,777,900 (9,777,900)
Exercised 7.36 - 19.11 11.13 (2,135,426) --
Cancelled 7.41 26.95 17.33 (668,758) 653,158
-----------------------------------------------------------------------
Balance at December 31, 1996 $7.36 29.38 $18.99 13,799,456 3,221,762
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
45
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- -------------------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Price at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.36 - 17.41 4,134,756 6.21 $14.69 2,554,656 $13.32
18.67 - 18.67 6,000,000 4.08 18.67 -- --
23.02 - 29.38 3,664,700 8.57 24.38 600,000 26.56
-------------------------------------------------------------------------------------------------------------
$7.36 - 29.38 13,799,456 5.91 $18.99 3,154,656 $15.84
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1997, the Company adopted the 1997 Employee Stock
Purchase Plan by which the Company is authorized to issue up to two million
shares of common stock to its full-time employees. Under the terms of the
plan, employees can elect to have a percentage of their earnings withheld
to purchase the Company's common stock.
Under provisions of Nevada, New Jersey and other gaming laws, and the
Company's certificate of incorporation, certain securities of the Company
are subject to restrictions on ownership which may be imposed by specified
governmental authorities. Such restrictions may require the holder to
dispose of the securities or, if the holder refuses to make such
disposition, the Company may be obligated to repurchase the securities.
EMPLOYEE BENEFIT PLANS
The Company has a noncontributory retirement plan (Basic Plan) covering
substantially all regular full-time, nonunion employees. The Company also
has plans covering qualifying employees and non-officer directors
(Supplemental Plans). Benefits for all plans are based upon years of
service and compensation, as defined.
The Company's funding policy is to contribute not less than the
minimum amount required under Federal law but not more than the maximum
deductible for Federal income tax purposes. After December 31, 1996,
employees will not accrue additional benefits for future service under
either the Basic or Supplemental Plans. Plan assets will be used to pay
benefits due employees for service through that date.
The following sets forth the funded status for the Basic Plan as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(in millions) 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of $(194) and $(163), respectively $(214) (183)
----------------------
----------------------
Projected benefit obligation for service rendered to date $(214) (233)
Plan assets at fair value, primarily listed securities and temporary investments 199 178
----------------------
Projected benefit obligation in excess of plan assets (15) (55)
Unrecognized net loss from changes in assumptions -- 46
Unrecognized net asset as of January 1, 1986 -- (7)
----------------------
Accrued pension cost $(15) (16)
----------------------
----------------------
Pension cost includes the following components:
Service cost $12 9
Interest cost on projected benefit obligation 17 15
Actual return on assets (31) (33)
Net amortization 1 19
----------------------
Net periodic cost before allocation (1) 10
Cost allocated to managed properties 2 1
----------------------
Net periodic pension cost $(3) 9
-----------------------
</TABLE>
Included in plan assets at fair value are equity securities of the
Company of $36 million and $19 million at December 31, 1996 and 1995,
respectively.
46
<PAGE>
The following sets forth the funded status for the Supplemental Plans as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(in millions) 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits
of $(20) and $(19), respectively $(20) (19)
----------------------
----------------------
Projected benefit obligation for service rendered to date $(20) (28)
Plan assets at fair value 14 14
----------------------
Projected benefit obligation in excess of plan assets (6) (14)
Unrecognized net loss from changes in assumptions -- 11
Unrecognized obligation as of January 1, 1986 -- 1
----------------------
Accrued pension cost $(6) (2)
----------------------
----------------------
Pension cost includes the following components:
Service cost $1 1
Interest cost on projected benefit obligation 2 1
Actual return on assets (1) (1)
Net amortization 2 5
----------------------
Net periodic pension cost $4 6
----------------------
----------------------
</TABLE>
The discount rate used in determining the actuarial present values of
the projected benefit obligations was seven percent in 1996 and 1995, with
the rate of increase in future compensation projected at five percent in
1996 and 1995. The expected long-term rate of return on assets is nine
percent.
A significant number of the Company's employees are covered by union
sponsored, collectively bargained multi-employer pension plans. The Company
contributed and charged to expense $12 million, $10 million and $9 million
in 1996, 1995 and 1994, respectively, for such plans. Information from the
plans' administrators is not sufficient to permit the Company to determine
its share, if any, of unfunded vested benefits.
The Company also has employee saving plans whereby the Company
contributes certain percentages of employee contributions. The cost of the
plans is not significant.
47
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides life insurance benefits to certain retired employees.
Under terms of the plans covering such life insurance benefits, the Company
reserves the right to change, modify or discontinue these benefits. The
Company generally does not provide postretirement health care benefits to
its employees. The cost of these benefits is not significant.
SEGMENTS OF BUSINESS
Financial data of the Company's business segments for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization(1)
Hotels $63 57 56
Gaming 111 78 72
Corporate 4 7 5
------------------------------------
Total $178 142 133
------------------------------------
------------------------------------
Capital expenditures(1)
Hotels $46 54 61
Gaming 190 124 202
Corporate 6 8 2
------------------------------------
Total $242 186 265
------------------------------------
------------------------------------
Assets
Hotels $1,918 1,571 1,571
Gaming 5,299 1,380 1,207
Corporate 360 492 483
------------------------------------
Total $7,577 3,443 3,261
------------------------------------
------------------------------------
</TABLE>
(1) Excludes proportionate share of equity investments.
48
<PAGE>
Supplemental hotels segment operating data for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Rooms $1,473 1,324 1,230
Food and beverage 661 612 584
Franchise fees 43 39 37
Other products and services 340 290 261
--------------------------------------
2,517 2,265 2,112
--------------------------------------
Expenses
Rooms 420 401 383
Food and beverage 507 475 468
Other expenses, including remittances to owners 1,318 1,181 1,113
--------------------------------------
2,245 2,057 1,964
--------------------------------------
Hotels operating income $272 208 148
--------------------------------------
--------------------------------------
</TABLE>
Supplemental gaming segment operating data for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Rooms $261 238 215
Food and beverage 196 170 154
Casino 857 791 729
Other products and services 109 91 91
--------------------------------------
1,423 1,290 1,189
--------------------------------------
Expenses
Rooms 88 83 79
Food and beverage 167 150 133
Casino 466 400 344
Other expenses, including remittances to owners 593 478 467
--------------------------------------
1,314 1,111 1,023
--------------------------------------
Gaming operating income $109 179 166
--------------------------------------
--------------------------------------
</TABLE>
49
<PAGE>
HILTON HOTELS CORPORATION 1996 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
LEASES
The Company operates seven properties under noncancelable operating leases,
all of which are for land only, having remaining terms up to 37 years. Upon
expiration of four of the leases, the Company has renewal options of 25,
30, 30 and 40 years. Six leases require the payment of additional rentals
based on varying percentages of revenue or income. Minimum lease
commitments under noncancelable operating leases approximate $10 million
annually through 2001 with an aggregate commitment of $146 million through
2033.
COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1996 the Company had contractual commitments at its wholly
owned or leased properties for major expansion and rehabilitation projects
of approximately $200 million. Additionally, the Company is committed,
under certain conditions, to invest or loan up to $50 million to entities
developing hotel and gaming properties.
Various lawsuits are pending against the Company. In management's
opinion, disposition of these lawsuits is not expected to have a material
effect on the Company's financial position or results of operations.
In January 1997, the Company commenced an offer to acquire ITT
Corporation (ITT) in a combination cash and stock transaction. The Company
offered a price of $55 for each ITT share, for a consideration of
approximately $6.5 billion. The total transaction, including assumption of
ITT's outstanding debt, would be valued at approximately $10.5 billion. The
Company's offer consists of a cash tender offer of $55 per share for a
majority of the outstanding ITT shares, to be followed by a merger whereby
ITT shareholders would receive shares of the Company's common stock with a
value of $55 in exchange for each remaining ITT share, subject to
appropriate collar provisions. The Company plans to fund the ITT tender
offer from a combination of its available cash, working capital, existing
credit facilities, borrowings under credit facilities that the Company will
seek to obtain from commercial banks and/or issuance of public debt. The
Company has reached a preliminary understanding with HFS Incorporated (HFS)
under which HFS would license, on a long-term worldwide basis, the Sheraton
trademark, franchise systems and management agreements. The acquisition is
subject to regulatory approvals and other conditions, and therefore there
can be no assurance that the Company will be successful in acquiring ITT,
or if successful, what effect such acquisition will have on the Company's
financial condition or results of operations.
50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF HILTON HOTELS CORPORATION:
We have audited the accompanying consolidated balance sheets of Hilton
Hotels Corporation (a Delaware corporation) and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Hilton Hotels
Corporation and subsidiaries as of December 31, 1996 and 1995 and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Los Angeles, California
February 14, 1997
51
<PAGE>
HILTON HOTELS CORPORATION 1996 ANNUAL REPORT
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
Income
(in millions, except per Before Net
share amounts, stock Occupancy(1) Operating Income Net Income
prices and percentages) Hotels Gaming Revenue EBITDA(2) Income Taxes Income Per Share(3)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
1st Quarter 72% 89 $957 127 79 62 37 .19
2nd Quarter 77 91 1,004 158 113 100 59 .30
3rd Quarter 77 89 943 148 101 92 54 .28
4th Quarter 72 84 1,036 144 36 13 (68) (.33)
----------------------------------------------------------------------------------------------
Year 74% 88 $3,940 577 329 267 82 .41
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
1995
1st Quarter 70% 84 $854 120 75 55 32 .17
2nd Quarter 75 88 891 151 105 87 53 .27
3rd Quarter 76 87 788 97 53 33 25 .13
4th Quarter 71 87 1,022 175 122 105 63 .32
-----------------------------------------------------------------------------------------------
Year 73% 86 $3,555 543 355 280 173 .89
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
<CAPTION>
(in millions, except per
share amounts, stock Dividends High/Low
prices and percentages) Per Share Stock Price
---------------------------------------------------------
<S> <C> <C>
1996
1st Quarter .075 24.94/15.28
2nd Quarter .075 30.50/23.50
3rd Quarter .075 28.63/23.34
4th Quarter .08 31.75/25.63
-------------------------------
Year .305 31.75/15.28
-------------------------------
-------------------------------
1995
1st Quarter .075 19.47/16.03
2nd Quarter .075 19.94/16.41
3rd Quarter .075 18.53/15.09
4th Quarter .075 17.19/15.16
-------------------------------
Year .30 19.94/15.09
-------------------------------
-------------------------------
</TABLE>
As of December 31, 1996 there were approximately 16,200 stockholders of
record.
EBITDA(2)
<TABLE>
<CAPTION>
(in millions) Year ended December 31, 1996 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EBITDA
Hotels $392 301 240
Gaming 233 267 244
Corporate expense (48) (25) (23)
------------------------------------
Total EBITDA $577 543 461
------------------------------------
------------------------------------
Reconciliation to income before extraordinary item
EBITDA $577 543 461
Interest and dividend income 38 35 22
Interest expense (88) (93) (87)
Interest expense, net, from equity investments (12) (17) (12)
Depreciation and amortization(4) (225) (188) (175)
Non-cash charges (23) -- --
Provisions for income taxes (106) (102) (85)
Minority interest, net (5) (5) (2)
------------------------------------
Income before extraordinary item $156 173 122
------------------------------------
------------------------------------
</TABLE>
(1) Properties owned or managed.
(2) EBITDA is earnings before interest, taxes, depreciation, amortization and
non-cash charges.
(3) The sum of the net income per share for the four quarters in 1996 differs
from the annual net income per share due to the required method of
computing weighted average number of shares in the respective periods.
(4) Includes proportionate share of equity investments.
52
<PAGE>
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
(dollars in millions, except per share and Pro forma
average rate amounts) 1996(1) 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data for Years Ended December 31,
Revenue
Hotels $2,517 2,517 2,265 2,112 1,844 1,720
Gaming 2,524 1,423 1,290 1,189 1,057 930
------------------------------------------------------------------------
Total $5,041 3,940 3,555 3,301 2,901 2,650
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA(2)
Hotels $392 392 301 240 199 177
Gaming 528 233 267 244 234 213
Corporate expense (48) (48) (25) (23) (22) (20)
------------------------------------------------------------------------
Total $872 577 543 461 411 370
------------------------------------------------------------------------
------------------------------------------------------------------------
Earnings per share
Income before cumulative effect of
accounting changes and extraordinary item $.93 .79 .89 .63 .53 .54
Cumulative effect of accounting changes, net -- -- -- -- .02 --
Extraordinary loss, net (.29) (.38) -- -- -- --
------------------------------------------------------------------------
Net income $.64 .41 .89 .63 .55 .54
------------------------------------------------------------------------
------------------------------------------------------------------------
General Information
Occupancy(3)
Hotels 74% 73 70 67 66
Gaming 88% 86 87 86 85
Average Rates(3)
Hotels $135 127 120 113 112
Gaming $73 69 64 62 60
Casino square footage 937,000 626,000 526,000 435,000 432,000
Number of Properties at Year End
Owned or partially owned hotels 31 33 33 33 31
Managed hotels 28 24 24 26 25
Franchised hotels 172 162 161 171 180
Owned, partially owned and managed
casinos and hotel casinos 12 9 8 7 7
Wholly or partially owned riverboats 4 1 1 -- --
------------------------------------------------------------------------
Total 247 229 227 237 243
------------------------------------------------------------------------
------------------------------------------------------------------------
Available Rooms at Year End
Owned or partially owned hotels 23,092 24,098 24,098 24,151 22,711
Managed hotels 16,776 15,096 15,686 15,940 14,908
Franchised hotels 43,694 41,687 40,436 42,816 45,002
Wholly or partially owned hotel casinos 17,612 12,782 12,080 12,045 12,557
------------------------------------------------------------------------
Total 101,174 93,663 92,300 94,952 95,178
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
(1) Prepared assuming the Bally merger had taken place as of January 1, 1996.
This pro forma information does not purport to be indicative of future
results or what would have occurred had the acquisition been made as of
that date.
(2) EBITDA is earnings before interest, taxes, depreciation, amortization and
non-cash charges.
(3) Includes properties owned or managed.
53
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
HILTON HOTELS CORPORATION
<TABLE>
<CAPTION>
STATE OR COUNTRY
A. WHOLLY-OWNED SUBSIDIARIES OF INCORPORATION
- - ----------------------------- ----------------
<S> <C>
Bally Biloxi, Inc. (11) Mississippi
Bally Corporation (4) Illinois
Bally Data Systems, Inc. Illinois
Bally Indiana, Inc. (4) (11) Indiana
Bally Manufacturing Corporation Delaware
Bally Warwick, Inc. (4) (12) New Jersey
Bally's Casino Chicago, Inc. (4) (11) Delaware
Bally's Casino Holdings, Inc. (13) Delaware
Bally's Casino Indiana, Inc. (4) (11) Indiana
Bally's CHLV, Inc. (14) Delaware
Bally's Entertainment Florida, Inc. (4) (11) Florida
Bally's Florida Casino, Inc. (4) (11) Florida
Bally's Grand Management Co., Inc. (14) Nevada
Bally's Intermediate Casino Holdings, Inc. (14) Delaware
Bally's Intermediate Sub, Inc. Delaware
Bally's Limited (Chicago), Inc. (4) (11) Delaware
Bally's Louisiana, Inc. (11) Louisiana
Bally's Louisiana II, Inc. (4) (11) Louisiana
Bally's Manager, Inc. (11) Maryland
Bally's Maryland, Inc. Maryland
Bally's Mexico, Inc. (4) (11) Delaware
Bally's Ontario Casinos, Inc. (4) (14) Ontario, Canada
Bally's Operator, Inc. (11) Delaware
Bally's Park Place Funding, Inc. (15) Delaware
Bally's Park Place, Inc. (14) Delaware
Bally's Park Place, Inc.(16) New Jersey
Bally's Park Place Realty Co. (4) (12) New Jersey
Bally's Philadelphia, Inc. (11) Pennsylvania
Bally's Renaissance Harbor, Inc. (4) (11) Illinois
Bally's Sub, Inc. (17) Delaware
Bally's Tunica, Inc. (11) Mississippi
Benco, Inc. (1) Nevada
B.W. Realty Corp. (12) New Jersey
Conrad International (Egypt) Corporation (2) (5) Nevada
Conrad International (Indonesia) Corporation (2) (5) Nevada
Conrad International (Spain) Corporation (2) (5) Nevada
Conrad International (Thailand) Corporation (2) (5) Nevada
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
A. WHOLLY-OWNED SUBSIDIARIES OF INCORPORATION
- - ----------------------------- ----------------
(CONTINUED)
<S> <C>
Conrad International (Thailand) Limited (9) Thailand
Conrad International Hotels Corporation (3) Nevada
Conrad International Hotels (HK) Ltd. (5) Hong Kong
Conrad International Hotels Limited (2) (6) Ireland
Conrad International Investment Corporation (3) Nevada
Conrad International Investment (Jakarta) Corporation (9) Nevada
Conrad International Management Services (Singapore) Pte Ltd (5) Singapore
Conrad International Royalty Corporation (3) Nevada
Destination Resorts, Inc. Arizona
Flamingo Hilton Corporation (1) Nevada
Flamingo Hilton-Laughlin, Inc. (7) Nevada
Flamingo Hilton - Reno, Inc. (1) Nevada
Florida Locally Approved Gaming, Inc. (4) (19) Florida
GNF, Corp. (18) New Jersey
GNOC, Corp. New Jersey
Grand Vacations Realty, Inc. (10) Delaware
Hapeville Investors, Inc. Delaware
Hilton 12897 Corporation Nevada
Hilton Chicago Corporation Nevada
Hilton D.C. Corporation Nevada
Hilton Employee Relief Fund California
Hilton Equipment Corporation Delaware
Hilton Gaming Corporation Nevada
Hilton Gaming (Switzerland County) Corporation (1) Indiana
Hilton Hawaii Corporation Delaware
Hilton Holdings, Inc. Nevada
Hilton Hotels Partners I, Inc. Delaware
Hilton Hotels Partners II, Inc. Delaware
Hilton Hotels U.S.A., Inc. Delaware
Hilton Inns, Inc. Delaware
Hilton Insurance Corporation Vermont
Hilton Kansas City Corporation (1) Missouri
Hilton New Jersey Corporation (1) (2) New Jersey
Hilton New Orleans Corporation (1) Louisiana
Hilton New York Corporation Nevada
Hilton Pennsylvania Hotel Corporation Delaware
Hilton Recreation, Inc. Delaware
Hilton Resorts Corporation Delaware
Hilton San Diego Corporation California
Hilton San Francisco Corporation Nevada
Hilton Suites, Inc. Delaware
Hilton Supersports, Inc. (1) (4) Nevada
Hilton Systems, Inc. Nevada
Hilton Washington Corporation New York
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
A. WHOLLY-OWNED SUBSIDIARIES OF INCORPORATION
- - ----------------------------- ----------------
(CONTINUED)
<S> <C>
HKC Advertising, Inc. (8) Missouri
HKC Partners, Inc. (8) Missouri
Hotels Statler Company, Inc. Delaware
Kenner Investors, Inc. Delaware
Las Vegas Hilton Corporation (1) Nevada
Paris Casino Corp. Nevada
Reno Hilton Resort Corporation (1) Nevada
The BAC 1-11 Corporation (1) Nevada
The Beverly Hilton Corporation (2) California
The Hotel Waldorf-Astoria Corporation (2) New York
The New Yorker Hotel Corporation (2) New York
The Palmer House Hilton Hotel Company (2) Illinois
</TABLE>
- - -------------------------------------------------------------------------------
(1) Indirect ownership. Wholly-owned by Hilton Gaming Corporation, which
is wholly-owned by Hilton Hotels Corporation.
(2) Nameholding company.
(3) Indirect ownership. Wholly-owned by Hilton Hotels U.S.A., Inc.,
which is wholly-owned by Hilton Hotels Corporation.
(4) Inactive corporation.
(5) Indirect ownership. Wholly-owned by Conrad International Hotels
Corporation, which is wholly-owned by Hilton Hotels U.S.A., Inc.,
which is wholly-owned by Hilton Hotels Corporation.
(6) Indirect ownership. Wholly-owned by Conrad International Royalty
Corporation, which is wholly-owned by Hilton Hotels U.S.A., Inc.,
which is wholly-owned by Hilton Hotels Corporation.
(7) Indirect ownership. Wholly-owned by Flamingo Hilton Corporation,
which is wholly-owned by Hilton Gaming Corporation, which is
wholly-owned by Hilton Hotels Corporation.
(8) Indirect ownership. Wholly-owned by Hilton Kansas City Corporation,
which is wholly-owned by Hilton Gaming Corporation, which is
wholly-owned by Hilton Hotels Corporation.
(9) Indirect ownership. Wholly-owned by Conrad International Investment
Corporation, which is wholly-owned by Hilton Hotels U.S.A., Inc.,
which is wholly-owned by Hilton Hotels Corporation.
(10) This corporation is wholly-owned by Hilton Grand Vacations Company,
a joint venture which is 50%-owned by Hilton Hotels Corporation
and 50%-owned by Hilton Resorts Corporation, which is a wholly-
owned subsidiary of Hilton Hotels Corporation.
(11) Indirect ownership. Wholly-owned by Bally's Intermediate Casino
Holdings, Inc., which is wholly-owned by Bally's Casino Holdings,
Inc., which is wholly-owned by Bally's Sub, Inc., which is wholly-
owned by Bally's Intermediate Sub, Inc., which is wholly-owned by
Hilton Hotels Corporation.
3
<PAGE>
A. WHOLLY-OWNED SUBSIDIARIES (CONTINUED)
(12) Indirect ownership. Wholly-owned by Bally's Park Place, Inc. (a New
Jersey corp.), which is wholly-owned by Bally's Park Place,
Inc. (a Delaware corp.), which is wholly-owned by Bally's Casino
Holdings, Inc., which is wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation.
(13) Indirect ownership. Wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation.
(14) Indirect ownership. Wholly-owned by Bally's Casino Holdings, Inc.,
which is wholly-owned by Bally's Sub, Inc., which is wholly-owned
by Bally's Intermediate Sub, Inc., which is wholly-owned by Hilton
Hotels Corporation.
(15) Indirect ownership. Wholly-owned by Bally's Park Place, Inc. (a
Delaware corp.), which is wholly-owned by Bally's Casino Holdings,
Inc., which is wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation
(16) Indirect ownership. Wholly-owned by Bally's Park Place, Inc. (a
Delaware corp.), which is wholly-owned by Bally's Casino Holdings,
Inc., which is wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation.
(17) Indirect ownership. Wholly-owned by Bally's Intermediate Sub,
Inc., which is wholly-owned by Hilton Hotels Corporation.
(18) Indirect ownership. Wholly-owned by GNOC, Corp., which is
wholly-owned by Hilton Hotels Corporation.
(19) This corporation was formed in 1994 to serve as a political action
committee to promote the passage of pro-gaming legislation in
Florida.
4
<PAGE>
<TABLE>
<CAPTION>
% STATE OR COUNTRY
B. PARTIALLY-OWNED SUBSIDIARIES OWNERSHIP OF INCORPORATION
- - -------------------------------- --------- -----------------
<S> <C> <C>
Bally's Casino Management, Inc. (14) See (14) below. Nevada
Bally's Grand, Inc. (15) 84.738 Delaware
Bally's Grand Laundry Corporation (16) See (16) below. Nevada
Bally's Grand Property Sub I, Inc. (4) (16) See (16) below. Nevada
Bally's Grand Property Sub II, Inc. (16) See (16) below. Nevada
Bally's International
Marketing Corporation (16) See (16) below. Nevada
Baluma Holdings S.A. (1) 43 The Bahamas
Baluma S.A. (2) See (2) below. Uruguay
Belle of Orleans, L.L.C. (20) 49.9 Louisiana
Capital Hilton, L.L.C. (18) 99.9 New York
Compass Computer Services, Inc. 50 Delaware
Earlsfort Centre Hotel Proprietors
Limited (3) 14.7 Ireland
Grand Reservation Services, Inc. (16) See (16) below. Nevada
Grand Resorts, Inc. (16) See (16) below. Nevada
Grand Resorts Sub I, Inc. (17) See (17) below. Nevada
Hilton HHonors Worldwide, L.L.C. (19) 50 Delaware
Hilton Marketing Worldwide, L.L.C. (19) 50 Delaware
Hilton Reservations Worldwide, L.L.C. (19) 50 Delaware
Hilton Service Corporation (19) 51 Delaware
Indiana Ventures LLC (5) 48.5 Nevada
International Company for
Touristic Investments, S.A.E. (6) 10 Egypt
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
% STATE OR COUNTRY
B. PARTIALLY-OWNED SUBSIDIARIES OWNERSHIP OF INCORPORATION
- - -------------------------------- --------- -----------------
(CONTINUED)
<S> <C> <C>
Jupiters Limited (7) See (7) below. Australia
Jupiters Management Limited (4) (8) 66.6 Australia
On Command Corporation 7.8 Delaware
Pinnacle Gaming Development Corp. (9) 48.5 Colorado
Rye Hilton, L.L.C. (18) 99.9 New York
SKA Investments, L.L.C. 100 Delaware
Switzerland County Development Corp. (10) 48.5 Nevada
Washington Hilton, L.L.C. (18) 99.9 New York
Washington Hilton Racquet Club (11) 50 District of Columbia
Windsor Casino Finance Limited (12) 50 Ontario, Canada
Windsor Casino Limited (12) 50 Ontario, Canada
Windsor Casino Supplies Limited (12) 50 Ontario, Canada
Yeditepe Beynelmilel Otelcilik 25 Turkey
Turizm Ve Ticaret Anonim Sirketi
(Seven Hills International Hotel,
Tourism and Trade, A.S.) (13)
</TABLE>
- - -------------------------------------------------------------------------------
(1) This corporation is 43%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton
Hotels U.S.A., Inc., which is a wholly-owned subsidiary of Hilton
Hotels Corporation.
(2) This corporation is 99.9%-owned by Baluma Holdings S.A., a Bahamas
corporation [see (4) below.] The remaining .1% is owned by Conrad
International Hotels Corporation, which is a wholly-owned subsidiary
of Hilton Hotels U.S.A., Inc., which is a wholly-owned subsidiary of
Hilton Hotels Corporation.
(3) This corporation is 14.7%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
U.S.A., Inc., which is a wholly-owned subsidiary of Hilton Hotels
Corporation.
6
<PAGE>
B. PARTIALLY-OWNED SUBSIDIARIES (CONTINUED)
(4) Inactive corporation.
(5) This limited-liability company is 48.5%-owned by Hilton Gaming
(Switzerland County) Corporation, which is a wholly-owned subsidiary
of Hilton Gaming Corporation, which is a wholly-owned subsidiary of
Hilton Hotels Corporation.
(6) This corporation is 10%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
U.S.A., Inc., which is a wholly-owned subsidiary of Hilton Hotels
Corporation.
(7) This corporation is 18.35%-owned by Conrad International Investment
Corporation ("CIIC")and 1.56%-owned by Conrad International Hotels
Corporation ("CIHC"). Both CIIC and CIHC are wholly-owned by Hilton
Hotels U.S.A., Inc., which is a wholly-owned subsidiary of Hilton
Hotels Corporation.
(8) This corporation is 66.6%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
U.S.A., Inc., which is a wholly-owned subsidiary of Hilton Hotels
Corporation.
(9) This corporation is a wholly-owned subsidiary of Switzerland County
Development Corp., which is a wholly-owned subsidiary of Indiana
Ventures LLC, which is 48.5%-owned by Hilton Gaming (Switzerland
County) Corporation, which is a wholly-owned subsidiary of Hilton
Gaming Corporation, which is a wholly-owned subsidiary of Hilton
Hotels Corporation.
(10) Formerly named Conrad (New Zealand) Corporation. This corporation
is a wholly-owned subsidiary of Indiana Ventures LLC, which is
48.5%-owned by Hilton Gaming (Switzerland County) Corporation,
which is a wholly-owned subsidiary of Hilton Gaming Corporation,
which is a wholly-owned subsidiary of Hilton Hotels Corporation.
(11) This non-profit corporation is 50%-owned by Hilton Washington
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
Corporation. The remaining 50% is held by The Prudential Insurance
Company of America.
(12) This corporation is 50%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
U.S.A., Inc., which is a wholly-owned subsidiary of Hilton Hotels
Corporation.
(13) This corporation is 25%-owned by Conrad International Investment
Corporation, which is a wholly-owned subsidiary of Hilton Hotels
U.S.A., Inc., which is a wholly-owned subsidiary of Hilton Hotels
Corporation.
(14) Wholly-owned by Bally's Grand Property Sub I, Inc., which is
wholly-owned by Bally's Grand, Inc., which is 84.738% - owned by
Bally's CHLV, Inc., which is wholly-owned by Bally's Casino
Holdings, Inc., which is wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation.
7
<PAGE>
B. PARTIALLY-OWNED SUBSIDIARIES (CONTINUED)
(15) 84.738% - owned by Bally's CHLV, Inc., which is wholly-owned by
Bally's Casino Holdings, Inc., which is wholly-owned by Bally's Sub,
Inc., which is wholly-owned by Bally's Intermediate Sub, Inc., which
is wholly-owned by Hilton Hotels Corporation. The remainder of the
Corporation's shares are publicly held, primarily by large
institutional investors. Such publicly held shares are traded on
the NASDAQ stock exchange.
(16) Wholly-owned by Bally's Grand, Inc., which is 84.738% - owned by
Bally's CHLV, Inc., which is wholly-owned by Bally's Casino
Holdings, Inc., which is wholly-owned by Bally's Sub, Inc., which is
wholly-owned by Bally's Intermediate Sub, Inc., which is
wholly-owned by Hilton Hotels Corporation.
(17) Wholly-owned by Grand Resorts, Inc., which is wholly-owned by
Bally's Grand, Inc., which is 84.738%-owned by Bally's CHLV, Inc.,
which is wholly-owned by Bally's Casino Holdings, Inc., which is
wholly-owned by Bally's Sub, Inc., which is wholly-owned by Bally's
Intermediate Sub, Inc., which is wholly-owned by Hilton Hotels
Corporation.
(18) The remaining ownership interest is held by The Prudential Insurance
Company of America.
(19) The remaining ownership interest is held by Hilton International Co.
(20) 49.9%-owned by Bally's Louisiana, Inc.
STATE OF
C. AFFILIATES INCORPORATION
Hilton Beverage Corporation Louisiana
New Orleans Hilton Beverage Corporation Louisiana
These special purpose "affiliate" corporations were formed in connection with
the operation of beverage service at particular hotels. Hilton Hotels
Corporation does not directly or indirectly own any of the shares of these
corporations.
8
<PAGE>
[ARTHUR ANDERSEN LLP LETTERHEAD]
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 14, 1997, included (or incorporated by reference) in this
Form 10-K, for the year ended December 31, 1996, into the Company's previously
filed Registration Statements (File Nos. 2-90922, 2-95746, 2-99967, 333-10415
and 333-18523).
ARTHUR ANDERSEN LLP
Los Angeles, California
March 19,1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's consolidated statements of income and consolidated balance sheets and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 388
<SECURITIES> 50
<RECEIVABLES> 470
<ALLOWANCES> 40
<INVENTORY> 82
<CURRENT-ASSETS> 1,151
<PP&E> 5,700
<DEPRECIATION> 1,002
<TOTAL-ASSETS> 7,577
<CURRENT-LIABILITIES> 998
<BONDS> 2,606
0
15
<COMMON> 627
<OTHER-SE> 2,569
<TOTAL-LIABILITY-AND-EQUITY> 7,577
<SALES> 3,940
<TOTAL-REVENUES> 3,940
<CGS> 0
<TOTAL-COSTS> 3,532
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 267
<INCOME-TAX> 106
<INCOME-CONTINUING> 156
<DISCONTINUED> 0
<EXTRAORDINARY> 74
<CHANGES> 0
<NET-INCOME> 82
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
<PAGE>
EXHIBIT 99
UNDERTAKINGS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933 (the
"Securities Act"), the Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's Statement on
Form S-8 No. 2-90922 (filed May 2, 1990):
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
