<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 31, 1998
Hilton Hotels Corporation
-----------------------------
(Exact Name of Registrant as
Specified in Charter)
Delaware 1-3427 36-2058176
- ----------------- ------------- ----------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Identification
Incorporation) Number) No.)
9336 Civic Center Drive
Beverly Hills, California 90210
---------------------------------
(Address of Principal
Executive Offices)
(310) 278-4321
--------------------------------
(Registrant's telephone
number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1998, Hilton Hotels Corporation (the "Registrant")
announced that it had consummated the separation of its gaming business from
its lodging business through a spin-off of its indirect wholly owned
subsidiary, Park Place Entertainment Corporation. A copy of the Registrant's
press release dated December 31, 1998 is attached hereto as Exhibit 99.14 and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
7(b) PRO FORMA FINANCIAL INFORMATION
The pro forma financial information with respect to the Registrant's
spin-off of Park Place Entertainment Corporation was previously reported by
the Registrant in its definitive Joint Proxy Statement pursuant to Section
14(a) of the Securities Exchange Act of 1934, as amended, filed with the
Securities and Exchange Commission (the "Commission") on October 23, 1998 and
in its Form 8-K dated November 6, 1998 filed with the Commission on November 10,
1998.
7(c) Exhibits
--------
4.1 First Supplemental Indenture dated December 31, 1998 by and
among the Registrant, BNY Western Trust Company, as Trustee
and Park Place Entertainment Corporation to the Indenture
dated as of April 15, 1997 between the Registrant and BNY
Western Trust Company, as Trustee
99.1 Distribution Agreement dated as of December 31, 1998 between
the Registrant and Park Place Entertainment Corporation
99.2 Debt Assumption Agreement dated as of December 31, 1998
between the Registrant and Park Place Entertainment
Corporation
99.3 Assignment and License Agreement dated as of December 31,
1998 by and between the Registrant, Conrad International
Royalty Corporation and Park Place Entertainment Corporation
99.4 Hilton Hotels Corporation Corporate Services Agreement dated
as of December 31, 1998 by and between the Registrant and
Park Place Entertainment Corporation
99.5 Park Place Entertainment Corporation Corporate Services
Agreement dated as of December 31, 1998 by and between the
Registrant and Park Place Entertainment Corporation
99.6 Employee Benefits and Other Employment Matters Allocation
Agreement dated as of December 31, 1998 by and between the
Registrant and Park Place Entertainment Corporation
99.7 Tax Allocation and Indemnity Agreement dated as of
December 31, 1998 by and between the Registrant and Park
Place Entertainment Corporation
99.8 Third Amendment, dated as of December 31, 1998, to the
Registrant's 1984 Stock Option and Stock Appreciation
Rights Plan
99.9 Fourth Amendment, dated as of December 31, 1998, to the
Registrant's 1990 Stock Option and Stock Appreciation
Rights Plan
99.10 First Amendment, dated as of December 31, 1998, to the
Registrant's Chief Executive Stock Incentive Plan
99.11 First Amendment, dated as of December 31, 1998, to the
Registrant's 1997 Independent Director Stock Option Plan
99.12 Second Amendment, dated as of December 31, 1998, to the
Registrant's Employee Stock Purchase Plan
99.13 Employment Agreement dated as of December 31, 1998 between
the Registrant and Stephen F. Bollenbach
99.14 Press Release of Hilton Hotels Corporation, dated
December 31, 1998
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HILTON HOTELS CORPORATION
By: /s/ THOMAS E. GALLAGHER
------------------------------
Name: Thomas E. Gallagher
Dated: January 8, 1999 Title: Executive Vice President and
General Counsel
3
<PAGE>
Exhibit Index
Exhibit
Number Description
------ -----------
4.1 First Supplemental Indenture dated December 31, 1998 by and
among the Registrant, BNY Western Trust Company, as Trustee
and Park Place Entertainment Corporation to the Indenture
dated as of April 15, 1997 between the Registrant and BNY
Western Trust Company, as Trustee
99.1 Distribution Agreement dated as of December 31, 1998 between
the Registrant and Park Place Entertainment Corporation
99.2 Debt Assumption Agreement dated as of December 31, 1998
between the Registrant and Park Place Entertainment
Corporation
99.3 Assignment and License Agreement dated as of December 31,
1998 by and between the Registrant, Conrad International
Royalty Corporation and Park Place Entertainment Corporation
99.4 Hilton Hotels Corporation Corporate Services Agreement dated
as of December 31, 1998 by and between the Registrant and
Park Place Entertainment Corporation
99.5 Park Place Entertainment Corporation Corporate Services
Agreement dated as of December 31, 1998 by and between the
Registrant and Park Place Entertainment Corporation
99.6 Employee Benefits and Other Employment Matters Allocation
Agreement dated as of December 31, 1998 by and between the
Registrant and Park Place Entertainment Corporation
99.7 Tax Allocation and Indemnity Agreement dated as of
December 31, 1998 by and between the Registrant and Park
Place Entertainment Corporation
99.8 Third Amendment, dated as of December 31, 1998, to the
Registrant's 1984 Stock Option and Stock Appreciation
Rights Plan
99.9 Fourth Amendment, dated as of December 31, 1998, to the
Registrant's 1990 Stock Option and Stock Appreciation
Rights Plan
99.10 First Amendment, dated as of December 31, 1998, to the
Registrant's Chief Executive Stock Incentive Plan
99.11 First Amendment, dated as of December 31, 1998, to the
Registrant's 1997 Independent Director Stock Option Plan
99.12 Second Amendment, dated as of December 31, 1998, to the
Registrant's Employee Stock Purchase Plan
99.13 Employment Agreement dated as of December 31, 1998 between
the Registrant and Stephen F. Bollenbach
99.14 Press Release of Hilton Hotels Corporation, dated
December 31, 1998
4
<PAGE>
- -------------------------------------------------------------------------------
HILTON HOTELS CORPORATION
7.375% Senior Notes due 2002
and
7% Senior Notes due 2004
FIRST SUPPLEMENTAL INDENTURE
to
Indenture dated as of April 15, 1997
BY AND AMONG HILTON HOTELS CORPORATION,
PARK PLACE ENTERTAINMENT CORPORATION AND
BNY WESTERN TRUST COMPANY, TRUSTEE
- -------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture (the "Supplemental Indenture') to
the Indenture dated as of April 15, 1997 (the "Indenture") between Hilton Hotels
Corporation, a Delaware corporation ("Hilton") and BNY Western Trust Company, as
Trustee (the "Trustee"), is entered into this 31st day of December, 1998, by and
among Hilton, the Trustee and Hilton's indirect wholly-owned subsidiary, Park
Place Entertainment Corporation, a Delaware corporation ("Park Place").
WHEREAS, pursuant to the Indenture, Hilton may issue debt securities
in one or more series from time to time;
WHEREAS, Hilton has outstanding $300 million aggregate principal
amount of 7.375% Senior Notes due 2002 (the "2002 Notes"), issued pursuant to
the Indenture, as supplemented by terms established pursuant to a Board
Resolution (as defined in the Indenture) adopted on May 28, 1997 and set forth
in an Officer's Certificate (the "2002 Officer's Certificate" and, together with
the Indenture, the "2002 Indenture"), and $325 million aggregate principal
amount of 7% Senior Notes due 2004 (the "2004 Notes" and, together with the 2002
Notes, the "Notes"), issued pursuant to the Indenture, as supplemented by terms
established pursuant to a Board Resolution adopted on July 17, 1998 and set
forth in an Officer's Certificate (the "2004 Officer's Certificate" and,
together with the Indenture, the "2004 Indenture") (the 2002 Indenture and the
2004 Indenture being referred to collectively herein as the "Indentures");
WHEREAS, Hilton plans to declare a special dividend consisting of the
distribution (the "Distribution") to holders of its outstanding shares of common
stock, par value $2.50 per share, on a one-for-one basis, of all the outstanding
shares of common stock, par value $.01 per share, of Park Place;
<PAGE>
WHEREAS, in connection with the Distribution, Hilton and Park Place
have entered into a Debt Assumption Agreement of even date herewith (the "Park
Place Debt Assumption Agreement"), pursuant to which Hilton and Park Place have
agreed, among other things, to effect certain amendments to the Indentures that
do not adversely affect the rights of Holders (as defined in the Indentures) of
Notes;
WHEREAS, pursuant to Sections 11.01(2) and (11) of the Indenture,
Hilton and the Trustee may enter into a supplemental indenture without the
consent of any Holder of Notes to add to the covenants of the Company or to make
any change that does not adversely affect the interests of the Holders of Notes
in any material respect;
WHEREAS, pursuant to the Park Place Debt Assumption Agreement, Park
Place has agreed to assume the payment obligations under the Notes (but not
obligations under any other debt securities issued or to be issued pursuant to
the Indentures);
NOW THEREFORE, pursuant to Section 11.01 of the Indentures, the
parties hereby amend the Indentures, but only with respect to the Notes, as
follows:
SECTION 1. CAPITALIZED TERMS.
All capitalized terms used herein, and not defined herein, shall have
the meanings ascribed to them in the Indentures.
SECTION 2. DEFINITIONS.
(a) The following defined terms shall be added to Section 1.01 of the
Indentures:
1.01 of the Indentures:
"PARK PLACE" means Park Place Entertainment Corporation, a Delaware
corporation.
"2002 NOTES" has the meaning set forth in the recitals.
2
<PAGE>
"2004 NOTES" has the meaning set forth in the recitals.
"2002 INDENTURE" has the meaning set forth in the recitals.
"2004 INDENTURE" has the meaning set forth in the recitals.
"INDENTURES" has the meaning set forth in the recitals.
"DISTRIBUTION" has the meaning set forth in the recitals.
"PARK PLACE DEBT ASSUMPTION AGREEMENT" has the meaning set forth in
the recitals.
"PARK PLACE PAYMENT OBLIGATIONS" has the meaning set forth in
Section 3.
SECTION 3. PARK PLACE COVENANTS.
A new Article 12A regarding additional covenants of Park Place and
Hilton shall be added to the Indentures with respect to the Notes immediately
following Article 12 of the Indenture, as follows:
"ARTICLE TWELVE A
ADDITIONAL COVENANTS
Section 12A.01. PARK PLACE PAYMENT OBLIGATIONS.
Park Place assumes responsibility for, and agrees to pay, one
hundred percent (100%) of the amount of each payment required to be made by
Hilton to Holders of Notes pursuant to the terms of the Indentures and the
Notes with respect to the principal of (and premium, if any) and interest
on the Notes (the "Park Place Payment Obligations").
Section 12A.02. HILTON OBLIGATIONS.
Notwithstanding the foregoing assumption by Park Place, Hilton
retains responsibility for all of its obligations under the Indentures and
the Notes including,
3
<PAGE>
without limitation, the obligation to make payment of the Park Place
Payment Obligations in the event Park Place fails to make any such
payments in accordance with Section 12A.01. The assumption by Park
Place of the Park Place Payment Obligations shall not limit or affect
the rights of the Trustee or the Holders of Notes under Article 5 of the
Indentures to take action against Hilton if an Event of Default occurs
under the Indentures.
Section 12A.03. MANNER OF PAYMENT.
Park Place shall satisfy the Park Place Payment Obligations on
the dates and in the manner provided in the Indentures with respect to
Hilton's payment obligations under the Notes.
Section 12A.04. COMPENSATION AND REIMBURSEMENT.
The obligations of Hilton under Section 6.07 of the Indenture
shall apply to Park Place with the same force and effect as such
obligations apply to Hilton with respect to the administration of the
Indentures with respect to the Notes (provided that Park Place's
obligations under this Section 12A.04 shall not include indemnity payments
solely attributable to a breach or alleged breach by Hilton of its
obligations under the Indentures, which payments shall be the sole
responsibility of Hilton)."
SECTION 4. DEFAULTS AND REMEDIES AGAINST PARK PLACE.
A new Article 5A regarding remedies against Park Place shall be added
immediately following Article 5 of the Indenture as follows:
4
<PAGE>
"ARTICLE 5A
REMEDIES AGAINST PARK PLACE
Section 5A.01. LIMITATION ON ACTION. The rights to and
limitations on action against Hilton set forth in Article 5 shall also apply to
any action against Park Place for the enforcement of the Park Place Payment
Obligations; without limiting the generality of the foregoing, the Trustee shall
be permitted to pursue a remedy against Park Place for collection of the Park
Place Payment Obligations only under such circumstances as would enable the
Trustee under Article 5 to pursue such remedy against Hilton."
SECTION 5. MISCELLANEOUS. A new Article 1A shall be added
immediately following Article 1 of the Indenture as follows:
"ARTICLE 1A
MISCELLANEOUS PROVISIONS APPLICABLE
TO PARK PLACE
Section 1A.01 TIA COMPLIANCE. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Supplemental Indenture
by the TIA, the required provision shall control.
Section 1A.02. NOTICES. Copies of any notice that Hilton
delivers to, or receives from, the Paying Agent, the Registrar, the
Trustee, or the Holders of Notes pursuant to the terms of the Indentures
shall, promptly after such notice is delivered or received, be delivered by
Hilton to Park Place. Copies of any notice that the Trustee is required to
deliver to Hilton under the Indentures shall, at the time such notice is
delivered to Hilton, be delivered to Park Place.
5
<PAGE>
Any notice or communication to Park Place shall be delivered to
Park Place in the manner set forth in Section 1.04 of the Indentures. Park
Place's address for any such notice or communication shall be as follows:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, NV 89109
Attn: General Counsel
Telecopy: (702) 699-5179
Section 1A.03. NON-IMPAIRMENT. Nothing in this Supplemental
Indenture shall impair the rights of the Trustee (including, without
limitation, the rights of the Trustee under Section 6.07 of the Indentures)
or Holders of Notes and the obligations of Hilton as such rights and
obligations existed prior to the execution and delivery hereof.
Section 1A.04. SUCCESSORS AND ASSIGNS OF PARK PLACE. All
covenants and agreements in this Supplemental Indenture shall bind Park
Place's successors and assigns and inure to the benefit of its successors
and assigns, whether so expressed or not."
SECTION 6. GOVERNING LAW. This Supplemental Indenture shall be
governed and construed in accordance with the laws of the State of New York
without regard to any applicable conflicts of law, including all matters of
construction, validity and performance.
SECTION 7. COUNTERPARTS. This instrument may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this instrument by
signing such counterpart.
SECTION 8. EFFECTIVENESS. This Supplemental Indenture is effective
as of the date first written above.
[Signature Page Follows]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Supplemental Indenture on behalf of the respective parties hereto
as of the date first written above.
HILTON HOTELS CORPORATION
By: /s/ Matthew J. Hart
------------------------------------
Its: Executive Vice President and Chief
Financial Officer
-----------------------------------
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
------------------------------------
Its: Executive Vice President and Chief
Financial Officer
-----------------------------------
BNY WESTERN TRUST COMPANY, as trustee
By: /s/ Bill Chambers
------------------------------------
Its: ASSISTANT VICE PRESIDENT
-----------------------------------
S-1
<PAGE>
Exhibit 99.1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
----------------------------------------
DATED AS OF DECEMBER 31, 1998
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS..................................................................................2
Section 1.01. General..............................................................................2
Section 1.02. Terms Defined Elsewhere in Agreement................................................11
ARTICLE II. TRANSFER OF ASSETS..........................................................................12
Section 2.01. Transfer of Assets to Park Place....................................................12
Section 2.02. Transfers of Assets from Gaming Subsidiaries to Hilton or Retained Business
Subsidiaries........................................................................12
Section 2.03. Transfers Not Effected Prior to the Distribution....................................12
Section 2.04. Cooperation Re: Assets.............................................................13
Section 2.05. No Representations or Warranties; Consents..........................................13
Section 2.06. Conveyancing and Assumption Instruments.............................................14
Section 2.07. Cash Allocation; Cash Management....................................................14
Section 2.08. Allocation of Debt..................................................................16
Section 2.09. Ancillary Agreements Between Hilton and Park Place..................................19
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES..................................................19
Section 3.01. Assumption and Satisfaction of Liabilities..........................................19
ARTICLE IV. THE DISTRIBUTION............................................................................20
Section 4.01. Cooperation Prior to the Distribution...............................................20
Section 4.02. Hilton Board Action; Conditions Precedent to the Distribution.......................20
Section 4.03. The Distribution....................................................................22
ARTICLE V. INDEMNIFICATION.............................................................................22
Section 5.01. Indemnification by Hilton...........................................................22
Section 5.02. Indemnification by Park Place.......................................................23
Section 5.03. Insurance Proceeds..................................................................23
Section 5.04. Procedure for Indemnification.......................................................23
Section 5.05. Remedies Cumulative.................................................................26
Section 5.06. Survival of Indemnities.............................................................26
ARTICLE VI. CERTAIN ADDITIONAL MATTERS..................................................................26
Section 6.01. Park Place Board....................................................................26
Section 6.02. Resignations; Hilton Board..........................................................26
Section 6.03. Park Place Certificate and Bylaws...................................................26
Section 6.04. Certain Post-Distribution Transactions..............................................27
Section 6.05. Sales and Transfer Taxes............................................................27
Section 6.06. Park Place Rights Plan..............................................................27
Section 6.07. Timeshare and Vacation Ownership Facilities.........................................27
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES..........................................................28
Section 7.01. Provision of Corporate Records......................................................28
Section 7.02. Access to Information...............................................................28
Section 7.03. Production of Witnesses.............................................................29
Section 7.04. Reimbursement.......................................................................29
Section 7.05. Retention of Records................................................................29
Section 7.06. Confidentiality.....................................................................30
Section 7.07. Privileged Matters..................................................................30
ARTICLE VIII. INSURANCE...................................................................................32
Section 8.01. Policies and Rights Included Within the Gaming Group Assets.........................32
Section 8.02. Policies and Rights Included Within the Retained Business Group Assets..............32
Section 8.03. Administration and Reserves.........................................................32
Section 8.04. Agreement for Waiver of Conflict and Shared Defense.................................34
ARTICLE IX. MISCELLANEOUS...............................................................................35
Section 9.01. Entire Agreement; No Third Party Beneficiaries......................................35
Section 9.02. Tax Allocation and Indemnity Agreement; After-Tax Payments..........................35
Section 9.03. Expenses............................................................................35
Section 9.04. Governing Law.......................................................................35
Section 9.05. Notices.............................................................................36
Section 9.06. Amendments..........................................................................37
Section 9.07. Assignments.........................................................................37
Section 9.08. Termination.........................................................................37
Section 9.09. Subsidiaries........................................................................37
Section 9.10. Specific Performance................................................................37
Section 9.11. Headings; References................................................................37
Section 9.12. Counterparts........................................................................38
Section 9.13. Severability; Enforcement...........................................................38
Section 9.14. Arbitration of Disputes.............................................................38
Section 9.15. Prompt Payment......................................................................39
Section 9.16. Approvals, Consent and Waivers......................................................39
</TABLE>
ii
<PAGE>
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "AGREEMENT"), dated as of December 31,
1998, is by and between HILTON HOTELS CORPORATION, a Delaware corporation
("HILTON"), and PARK PLACE ENTERTAINMENT CORPORATION (FORMERLY KNOWN AS GAMING
CO., INC.), a Delaware corporation ("PARK PLACE").
WHEREAS, Hilton, directly and through subsidiaries, owns, operates and
develops certain gaming facilities (as more specifically described herein, the
"GAMING BUSINESS"), and owns, operates and develops lodging properties and
vacation ownership resorts and engages in franchising of lodging properties (as
more specifically described herein, the "RETAINED BUSINESS");
WHEREAS, the Board of Directors of Hilton has determined that it is in the
best interests of Hilton and the stockholders of Hilton to separate the Gaming
Business from the Retained Business through the distribution (the
"DISTRIBUTION") to the holders of Hilton Common Stock (as defined herein) of all
of the outstanding shares of Park Place Common Stock (as defined herein), and to
consummate the Merger (as defined herein) promptly following the Distribution;
WHEREAS, in order to effect such separation, Hilton and the Retained
Business Subsidiaries (as defined herein) will contribute to Park Place and the
Gaming Subsidiaries (as defined herein), prior to the Distribution, all of the
operations, assets and liabilities of Hilton and the Retained Subsidiaries
comprising the Gaming Business and such other assets, liabilities and operations
as are described below;
WHEREAS, in connection with the Distribution, Hilton and Park Place have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution;
WHEREAS, the consummation of the Distribution is a condition to each of
Hilton's and Company's (as defined herein) respective obligations to effect the
Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall qualify as a tax-free distribution within the meaning of
Section 355 of the Internal Revenue Code of 1986, as amended, by Hilton to its
stockholders.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL.
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: With respect to any specified Person, an affiliate of such
Person within the meaning of Rule 145 promulgated under the Securities Act.
Notwithstanding the foregoing, (i) the Affiliates of Hilton shall not include
Park Place, the Gaming Subsidiaries or any other Person which otherwise would be
an Affiliate of Hilton solely by reason of Hilton's ownership of the capital
stock of Park Place or a Gaming Subsidiary prior to the Distribution or the fact
that any officer or director of Hilton or any of the Retained Business
Subsidiaries shall also serve as an officer or director of Park Place or any of
the Gaming Subsidiaries, and (ii) the Affiliates of Park Place shall not include
Hilton, the Retained Business Subsidiaries or any other Person which otherwise
would be an Affiliate of Park Place solely by reason of Hilton's ownership of
the capital stock of Park Place or a Gaming Subsidiary prior to the Distribution
or the fact that any officer or director of Park Place or any of the Gaming
Subsidiaries shall also serve as an officer or director of Hilton or any of the
Retained Business Subsidiaries.
AFFILIATED GROUP: The meaning set forth for such term in the Tax Allocation
and Indemnity Agreement.
AGENT: The distribution agent appointed by Hilton to distribute the Park
Place Common Stock pursuant to the Distribution.
ANCILLARY AGREEMENTS: The Assignment and License Agreement, Corporate
Services Agreements, Employee Benefits Allocation Agreement and Tax Allocation
and Indemnity Agreement.
ASSIGNMENT AND LICENSE AGREEMENT: The Assignment and License Agreement
between Hilton and Park Place, which agreement shall be entered into on or prior
to the Distribution Date in substantially the form attached hereto as Exhibit A.
ASSUMED DEBT: The Debt of Hilton and its Subsidiaries which is to be
assumed by Park Place and/or retained by the Gaming Group Subsidiaries in
connection with the Distribution, as determined pursuant to Section 2.08.
BALLY'S: Bally Entertainment Corporation.
2
<PAGE>
BALLY'S ACQUISITION: The acquisition of Bally's by Hilton, which was
effected on December 18, 1996.
BALLY'S GOLDBERG AGREEMENT: That certain Agreement, dated as of November
25, 1996, by and between Bally's and Bally's Maryland, Inc., a Maryland
corporation, pursuant to which, among other things, Bally granted to Arthur M.
Goldberg, 40% of Bally's right, title and interest in any gaming venture in
Cancun, Mexico.
CASINO HOTELS: Hotels that are part of or adjacent to a casino or other
gaming facility where the principal focus of the combined facilities is gaming
operations; PROVIDED, that Casino Hotels do not include (i) hotels operated by
the Retained Business (E.G., the Conrad hotel being developed in Cairo, Egypt)
with Hotel Ancillary Facilities or (ii) the entity managing the Casino Windsor.
The Casino Hotels operated by Hilton and its Subsidiaries as of the date hereof
are set forth in Schedule 1.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the taxable year in question.
COMPANY: Grand Casinos, Inc., a Minnesota corporation.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
CORPORATE SERVICES AGREEMENTS: The Hilton Corporate Services Agreement and
the Park Place Corporate Services Agreement.
DEBT: All (i) indebtedness for borrowed money and obligations evidenced by
bonds, notes, debentures or similar instruments, and all accrued interest
relating thereto (ii) obligations issued or assumed as the deferred purchase
price of property or services, (iii) obligations under capital leases and (iv)
all guarantees of the obligations of other Persons described in the foregoing
clauses (i)--(iii).
DEBT ASSUMPTION AGREEMENT: The Debt Assumption Agreement between Park Place
and Hilton which agreement shall be entered into on or prior to the Distribution
Date in substantially the form attached hereto as Exhibit D.
DISTRIBUTION: The distribution to the holders of Hilton Common Stock as of
the Distribution Record Date of all of the outstanding shares of Park Place
Common Stock.
DISTRIBUTION DATE: The date on which the Distribution is effected.
DISTRIBUTION RECORD DATE: December 23, 1998.
3
<PAGE>
EMPLOYEE BENEFITS ALLOCATION AGREEMENT: The Employee Benefits and Other
Employment Matters Allocation Agreement between Park Place and Hilton, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit C.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FOREIGN GAMING LAWS: The laws, rules and regulations promulgated by the
applicable Governmental Authorities of Australia or Uruguay or any political
subdivisions thereof relating to casino gaming.
FORM 10: The Registration Statement on Form 10 under the Exchange Act with
respect to the Park Place Common Stock.
GAAP: Generally accepted accounting principles.
GAMING BUSINESS: The business conducted by Hilton and its Subsidiaries
relating to (i) the management, ownership, operation and development of Casino
Hotels and gaming facilities other than Hotel Ancillary Facilities (such Casino
Hotels and gaming facilities in existence as of the date hereof are specified in
Schedule 1), (ii) the Gaming Corporate Functions and (iii) any other operations
conducted by Hilton and its Subsidiaries utilizing the Gaming Group Assets.
GAMING CORPORATE FUNCTIONS: The corporate level and support functions of
Hilton which may be conducted by Park Place in connection with the Distribution,
as set forth in Schedule 2.
GAMING GROUP: Park Place and the Gaming Subsidiaries, collectively.
GAMING GROUP ASSETS: (i) All outstanding capital stock of the Gaming
Subsidiaries; (ii) the Gaming Group Books and Records; (iii) the rights of Park
Place and the Gaming Subsidiaries under the Shared Policies; (iv) all of the
assets expressly to be retained by, or assigned or allocated to, Park Place or
any of the Gaming Subsidiaries under this Agreement and the Related Agreements;
(v) the assets specified in Schedule 3, to the extent in existence on the
Distribution Date; (vi) the assets used in connection with the Gaming Corporate
Functions; (vii) all rights and benefits of Hilton arising out of the Merger
Agreement; and (viii) any other assets of Hilton and its Subsidiaries used
principally in the Gaming Business, including, without limitation, (x) all
assets obtained by Hilton or its Subsidiaries as a result of the Bally's
Acquisition, to the extent still held by Hilton or its Subsidiaries; EXCEPT, in
each case, excluding the assets listed on Schedule 6. Notwithstanding anything
to the contrary contained herein, "Gaming Group Assets" shall include, without
limitation, all of the assets used principally in the Gaming Business owned,
directly or indirectly, by any of (A) Paris Casino Corp., a Nevada corporation,
(B) Bally's Grand, Inc., a Delaware corporation, (C) Conrad International
Investments Corporation, a Nevada corporation, (D) Conrad International Hotels
Corporation, a Nevada corporation and (E) Conrad International Royalty
Corporation, a Nevada corporation.
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GAMING GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Park Place and the Gaming Subsidiaries and any other
books and records of Hilton and its Subsidiaries which relate principally to the
Gaming Group, are necessary to conduct the Gaming Business, or are required by
law to be retained by Park Place or a Gaming Subsidiary, including, without
limitation, (i) all such books and records relating to Transferred Employees,
(ii) all files relating to any Action being assumed by Park Place or retained by
a Gaming Subsidiary as part of the Gaming Group Liabilities, and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Park Place, the Gaming
Subsidiaries or the Gaming Business (but not including the Retained Business
Group Books and Records, provided that Park Place shall have access to, and have
the right to obtain duplicate copies of, any of the Retained Business Group
Books and Records which pertain to the Gaming Business in accordance with the
provisions of Article VII).
GAMING GROUP CASH ACCOUNTS: The bank accounts set forth in Schedule 4
hereto.
GAMING GROUP LIABILITIES: (i) All of the Liabilities of the Gaming Group
under, or to be retained or assumed by Park Place or any of the Gaming
Subsidiaries pursuant to this Agreement or any of the Related Agreements; (ii)
the Assumed Debt; (iii) all Liabilities of Park Place and the Gaming
Subsidiaries, other than Liabilities specifically associated with the Retained
Business (which shall be transferred to Hilton or to a Retained Business
Subsidiary in connection with the Distribution); (iv) all Liabilities of Hilton
arising out of the Merger Agreement and (v) all other Liabilities of Hilton and
its Subsidiaries arising out of, or specifically associated with, any of the
Gaming Group Assets or the Gaming Business, including, but not limited to, all
Liabilities assumed or incurred by Hilton or its Subsidiaries as a result of the
Bally's Acquisition (including, without limitation, all Liabilities assumed or
incurred by Hilton under the Bally's Goldberg Agreement), to the extent still
outstanding; PROVIDED, HOWEVER, that the Gaming Group Liabilities shall not
include (x) any Debt of Hilton or its Subsidiaries other than the Assumed Debt,
(y) any claims, losses, damages, demands, costs, expenses or Liabilities for any
Tax (which shall be governed by Sections 6.05 and 9.02 hereof and by the Tax
Allocation and Indemnity Agreement) and (z) any Liabilities under the Conrad
License Agreements (as defined in the Assignment and License Agreement).
GAMING LAWS: Foreign Gaming Laws, Louisiana Gaming Laws, Mississippi Gaming
Laws, Missouri Gaming Laws, New Jersey Gaming Laws, Nevada Gaming Laws and
Ontario Gaming Laws.
GAMING SUBSIDIARIES: The Subsidiaries of Hilton specified in Schedule 5 and
any other Subsidiaries formed after the date hereof to conduct a portion of the
Gaming Business.
GOVERNMENTAL AUTHORITY: Any court, administrative agency or commission or
other governmental authority or instrumentality.
HILTON BOARD: The Board of Directors of Hilton as it is constituted prior
to the Distribution Date.
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HILTON COMMON STOCK: The common stock, par value $2.50 per share, of
Hilton.
HILTON CORPORATE SERVICES AGREEMENT: The agreement between Hilton and Park
Place governing the provision of services by Hilton to Park Place for a period
following the Distribution Date, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form attached hereto as
Exhibit B.
HOLDERS: The holders of record of Hilton Common Stock as of the
Distribution Record Date.
HOTEL ANCILLARY FACILITIES: Small gaming facilities which are included as
an adjunct to hotel operations.
INSURANCE ADMINISTRATION: With respect to each Policy (including Self
Insurance Programs) shall include, but not be limited to, the accounting for
premiums, retrospectively rated premiums, defense costs, adjuster's fees,
indemnity payments, deductibles and retentions as appropriate under the terms
and conditions of each of the Policies; and the reporting to primary and excess
insurance carriers of any losses, claims and/or audit exposure in accordance
with Policy provisions, and the distribution of Insurance Proceeds as
contemplated by this Agreement.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Policies, whether or
not subject to deductibles, co-insurance, uncollectability or retrospectively
rated premium adjustments, but only to the extent that such Liabilities are
within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service or any successor thereto, including but
not limited to its agents, representatives and attorneys.
IRS RULING: The letter ruling issued by the IRS in response to the Ruling
Request.
LAKES: Lakes Gaming, Inc. (formerly known as GCI Lakes, Inc.), a Minnesota
corporation and wholly-owned subsidiary of Company.
LIABILITIES: Any and all debts, liabilities and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
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LOUISIANA GAMING LAWS: The Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder.
MERGER: The merger of Merger Sub with and into Company with Company as the
surviving corporation.
MERGER AGREEMENT: That certain Agreement and Plan of Merger, dated as of
June 30, 1998 by and among Hilton, Gaming Co., Inc., a Delaware corporation
(n/k/a Park Place Entertainment Corporation), Merger Sub, Company and GCI Lakes,
Inc., a Minnesota corporation (n/k/a Lakes Gaming Inc.).
MERGER SUB: Gaming Acquisition Corporation, a Minnesota corporation and
wholly-owned subsidiary of Park Place.
MISSISSIPPI GAMING LAWS: The Mississippi Gaming Control Act and the rules
and regulations promulgated thereunder.
MISSOURI GAMING LAWS: The Missouri Gaming Law and the rules and regulations
promulgated thereunder.
NET CASH: The sum of (i) net cash provided by (used in) financing
activities, (ii) net cash provided by operating activities and (iii) net cash
used in investing activities.
NEVADA GAMING LAWS: The Nevada Gaming Control Act and the rules and
regulations promulgated thereunder, the Clark County, Nevada Code and the rules
and regulations promulgated thereunder, and the City of Reno, Nevada Code and
other applicable local regulations.
NEW JERSEY GAMING LAWS: shall mean the New Jersey Casino Control Act and
the rules and regulations promulgated thereunder.
ONTARIO GAMING LAWS: The Ontario Gaming Control Act, 1992 and the rules and
regulations promulgated thereunder.
PARK PLACE BOARD: The Board of Directors of Park Place.
PARK PLACE BYLAWS: The Amended and Restated Bylaws of Park Place.
PARK PLACE CORPORATE SERVICES AGREEMENT: The agreement between Hilton and
Park Place governing the provision of services by Park Place to Hilton for a
period following the Distribution Date, which agreement shall be entered into on
or prior to the Distribution Date in substantially the form attached hereto as
Exhibit B.
PARK PLACE CERTIFICATE: The Amended and Restated Certificate of
Incorporation of Park Place.
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PARK PLACE COMMON STOCK: The common stock, $.01 par value per share, of
Park Place.
PARK PLACE MEMBERS: The meaning specified in the Tax Allocation and
Indemnity Agreement.
PERSON: Any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organization,
governmental or regulatory body or other entity.
POLICIES: Insurance policies and insurance contracts of any kind relating
to the Gaming Business or the Retained Business as conducted prior to the
Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile, aircraft, workers'
compensation, property insurance, crime insurance and boiler and machinery
insurance policies and self-insurance and captive insurance company
arrangements, together with the rights and benefits thereunder.
POST-DISTRIBUTION MEMBERS: The meaning specified in the Tax Allocation and
Indemnity Agreement.
PRELIMINARY TRANSFERS: The contribution by Hilton and the Retained Business
Subsidiaries to Park Place and the Gaming Subsidiaries, prior to the
Distribution, of all of the assets and liabilities of Hilton and the Retained
Subsidiaries comprising the Gaming Business and such other assets, liabilities
and operations as are described herein.
PRIVILEGED INFORMATION: All information as to which Hilton, Park Place or
any of their Subsidiaries are entitled to assert the protection of a Privilege.
PRIVILEGES: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
RELATED AGREEMENTS: All of the agreements, instruments, understandings,
assignments or other arrangements set forth in writing, which are entered into
in connection with the transactions contemplated hereby, including, without
limitation, the Conveyancing and Assumption Instruments and the Ancillary
Agreements.
RETAINED BUSINESS: The business conducted by Hilton and its Subsidiaries
relating to (i) the sales, marketing, management, ownership, operation,
development and franchising of lodging, timeshare and vacation ownership
facilities (including those timeshare and vacation ownership facilities located
at or associated with the Casino Hotels, and including the ability to sell,
market and franchise any such facilities whether or not located at or associated
with the Casino Hotels), (ii) the Retained Corporate Functions, (iii) Hilton's
strategic alliance with Ladbroke Group PLC and its affiliates (including all
interests in joint ventures owned
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jointly with Ladbroke Group PLC) and (iv) any other operations conducted by
Hilton and its Subsidiaries utilizing the Retained Business Group Assets.
RETAINED BUSINESS GROUP: Hilton and the Retained Business Subsidiaries,
collectively.
RETAINED BUSINESS GROUP ASSETS: (i) All outstanding capital stock of the
Retained Business Subsidiaries and all assets of the Gaming Subsidiaries other
than the Gaming Group Assets; (ii) the Retained Business Group Books and
Records; (iii) the rights of Hilton and the Retained Business Subsidiaries under
the Shared Policies; (iv) all of the assets expressly to be retained by, or
assigned or allotted to, Hilton or any of the Retained Business Subsidiaries
under this Agreement or the Related Agreements; (v) the assets used in
connection with the Retained Corporate Functions; (vi) the assets specified in
Schedule 6, to the extent in existence on the Distribution Date; and (vii) any
other assets of Hilton and its Subsidiaries used principally in the Retained
Business; EXCEPT, in each case, excluding the assets listed in Schedule 3.
RETAINED BUSINESS GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Hilton and the Retained Business Subsidiaries and any
other books and records of Hilton's Subsidiaries which relate principally to the
Retained Business Group, are necessary to conduct the Retained Business or are
required by law to be retained by Hilton or a Retained Business Subsidiary,
including, without limitation, (i) all such books and records relating to
Retained Business Group Employees, (ii) all files relating to any Action being
retained by Hilton as part of the Retained Business Group Liabilities, and (iii)
original corporate minute books, stock ledgers and certificates and corporate
seals, and all licenses, leases, agreements and filings, relating to Hilton, the
Retained Business Subsidiaries or the Retained Business (but not including the
Gaming Group Books and Records, provided that Hilton shall have access to, and
shall have the right to obtain duplicate copies of, the Gaming Group Books and
Records in accordance with the provisions of Article VII).
RETAINED BUSINESS GROUP EMPLOYEES: The meaning specified in the Employee
Benefits Allocation Agreement.
RETAINED BUSINESS GROUP LIABILITIES: (i) All of the Liabilities of the
Retained Business Group under, or to be retained or assumed by Hilton or any of
the Retained Business Subsidiaries pursuant to, this Agreement or any of the
Related Agreements; (ii) all Liabilities for payment of outstanding drafts of
Hilton and its Subsidiaries existing as of the Distribution Date; (iii) the
Retained Debt; (iv) all Liabilities of Hilton and the Retained Business
Subsidiaries, other than Gaming Group Liabilities and (v) all other Liabilities
of Hilton and its Subsidiaries arising out of, or specifically associated with,
any of the Retained Business Group Assets or the Retained Business; PROVIDED,
HOWEVER, that the Retained Business Group Liabilities shall not include (x) any
Debt of Hilton or its Subsidiaries other than the Retained Debt; (y) any claims,
losses, damages, demands, costs, expenses or Liabilities for any Tax (which
shall be governed by Sections 6.05 and 9.02 hereof and by the Tax Allocation and
Indemnity Agreement) and (z) any Liabilities under the Conrad International
Management Agreements (as defined in the Assignment and License Agreement).
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RETAINED BUSINESS SUBSIDIARIES: The Subsidiaries of Hilton specified in
Schedule 7 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Retained Business.
RETAINED CORPORATE FUNCTIONS: The corporate level and support functions of
Hilton to be retained by Hilton in connection with the Distribution, as set
forth in Schedule 8 hereto.
RETAINED DEBT: The Debt of Hilton and its Subsidiaries which is to be
retained by Hilton and/or the Retained Business Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.08.
RULING REQUEST: The private letter ruling request to be filed by Hilton
with the Internal Revenue Service, as supplemented and amended from time to
time, with respect to certain tax matters relating to the Distribution, the
Merger, and other related matters.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELF INSURANCE PROGRAMS: Those self insured programs maintained by Hilton
and/or any of its Subsidiaries prior to the Distribution for the benefit of
employees, properties and operating businesses, including without limitation
such programs that utilize "fronted policies."
SHARED POLICIES: All Policies (including Self Insurance Programs), current
or past, which are owned or maintained by or on behalf of Hilton and/or any of
its Subsidiaries or their respective predecessors which insure both the Retained
Business and the Gaming Business.
SUBSIDIARY: With respect to any Person, (i) each corporation, partnership,
joint venture, limited liability company or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership or limited liability company in which such Person or another
Subsidiary of such Person is the general partner, managing partner or otherwise
controls.
TAX OR TAXES: Any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
TAX ALLOCATION AND INDEMNITY AGREEMENT: The Tax Allocation and Indemnity
Agreement between Hilton and Park Place pursuant to which such parties will
provide for the
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allocation of, and indemnification against, certain tax liabilities, the
preparation and filing of certain tax returns and the payment of taxes related
thereto and certain related matters, which agreement shall be entered into on or
prior to the Distribution Date substantially in the form attached hereto as
Exhibit E.
TAX RETURN(S): With respect to any corporation or Affiliated Group, all
returns, reports, estimates, statements, declarations and other filings relating
to, or required to be filed by any taxpayer in connection with, the payment or
receipt of any refund of any Tax.
TRANSFERRED EMPLOYEES: The meaning specified in the Employee Benefits
Allocation Agreement.
Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT.
Each of the following terms is defined in the Section set forth opposite
such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
1992 Notes 2.08
1997 Notes 2.08
Agreement Recitals
Committee 9.14
Consents 4.01
Credit Agreement Debt 2.08
Disposition Agreement 2.03
Dispute 9.14
Gaming Field Cash 2.07
Hilton Recitals
Hilton Indemnitees 5.02
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lodging Field Cash 2.07
Park Place Recitals
Park Place Indemnities 5.01
Regulatory Approvals 4.02(g)
Retained Credit Agreement Debt 2.08
Amount
Subordinated Notes 2.08
Third Party Claim 5.04
Transaction Taxes 6.05
</TABLE>
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ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO PARK PLACE.
On or prior to the Distribution Date, Hilton shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Park Place and/or the appropriate Gaming Subsidiaries designated
by Park Place of all of Hilton's and its Subsidiaries' right, title and interest
in any Gaming Group Assets held, on or prior to the Distribution Date, by Hilton
or any Retained Business Subsidiary.
Section 2.02. TRANSFERS OF ASSETS FROM GAMING SUBSIDIARIES TO HILTON OR
RETAINED BUSINESS SUBSIDIARIES.
On or prior to the Distribution Date, Park Place shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Hilton and/or the applicable Retained Business Subsidiaries
designated by Hilton of all of Park Place's and the Gaming Subsidiaries' right,
title and interest in any Retained Business Group Assets held, on or prior to
the Distribution Date, by Park Place or any of the Gaming Subsidiaries.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION.
To the extent that any transfers contemplated by this Article II shall not
have been fully effected as of the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer of
any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed including, without limitation,
pursuant to Gaming Laws; PROVIDED, HOWEVER, that Hilton and Park Place and their
respective Subsidiaries and Affiliates shall cooperate in seeking to obtain any
necessary consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Agreement including, without
limitation, pursuant to Gaming Laws. Notwithstanding the foregoing, any
transfers relating to Flamingo Casino Kansas City, Hilton Kansas City
Corporation, HKC Partners, Inc. and HKC Advertising, Inc. shall be governed by
the terms of that certain Disposition Agreement (the "DISPOSITION AGREEMENT")
dated the date hereof, by and among Hilton, Flamingo Hilton Riverboat Casino,
L.P., a Missouri limited partnership and Park Place, and the ancillary
agreements thereto. To the extent that the terms of this Agreement and the terms
of the Disposition Agreement or any ancillary agreement thereto are in conflict,
the Disposition Agreement and the related ancillary agreements thereto shall
govern. In the event that any such transfer of assets or Liabilities has not
been consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had
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such asset been transferred or such Liability been assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable, such
transfer and assumption shall be effected forthwith. The parties agree that,
except as set forth in this Section 2.03, as of the Distribution Date, each
party hereto shall be deemed to have acquired complete and sole beneficial
ownership over all of the assets, together with all rights, powers and
privileges incidental thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. COOPERATION RE: ASSETS.
In the case that at any time after the Distribution Date, Park Place
reasonably determines that any of the Retained Business Group Assets (other than
the assets set forth in Schedule 6) are essential for the conduct of the Gaming
Business, or Hilton reasonably determines that any of the Gaming Group Assets
(other than the assets set forth in Schedule 3) are essential for the conduct of
the Retained Business, and the nature of such assets makes it impracticable for
Park Place or Hilton, as the case may be, to obtain substitute assets or to make
alternative arrangements on commercially reasonable terms to conduct their
respective businesses, and reasonable provisions for the use thereof are not
already included in the Related Agreements, then Park Place (with respect to the
Gaming Group Assets) and Hilton (with respect to the Retained Business Group
Assets) shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations. However, (i) the usage of such assets by
the other party shall not materially interfere with the use of such assets by
the party holding such assets, and (ii) such assets shall be required to be made
available only until such time as the other party can reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS.
Each of the parties hereto understands and agrees that no party hereto is,
in this Agreement, in any Related Agreement, or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any assets of such party or (ii) as to the legal
sufficiency to convey title to any asset transferred pursuant to this Agreement
or any Related Agreement. IT IS ALSO AGREED AND UNDERSTOOD THAT THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF ANY OF
THE ASSETS EITHER TRANSFERRED TO OR RETAINED BY THE PARTIES, AS THE CASE MAY BE,
AND ALL SUCH ASSETS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS;" PROVIDED,
HOWEVER, that the absence of warranties shall have no effect upon the allocation
of Liabilities under this Agreement. Each party hereto understands and agrees
that no party hereto is, in this Agreement, in any Related Agreement, or
otherwise, representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement,
any Related Agreement,
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or otherwise, will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets, including
without limitation, the Gaming Laws. Notwithstanding the foregoing, the parties
shall use their good faith efforts to obtain all consents and approvals,
including, without limitation, pursuant to the Gaming Laws, to enter into all
reasonable amendatory agreements and to make all filings and applications which
may be reasonably required for the consummation of the transactions contemplated
by this Agreement and the Related Agreements, and shall take all such further
reasonable actions as shall be necessary to preserve for each of the Gaming
Group and the Retained Business Group, to the greatest extent feasible, the
economic and operational benefits of the allocation of assets and liabilities
provided for in this Agreement. In case at any time after the Distribution Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS.
In connection with the Preliminary Transfers described in Article II and
Article III hereof, and the assignment of assets and the assumption of
Liabilities contemplated by any Related Agreements, the parties shall execute,
or cause to be executed by the appropriate entities, the Conveyancing and
Assumption Instruments in such forms as the parties shall reasonably agree. The
transfer of capital stock and other equity interests shall be effected by means
of delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporation or other legal entity involved and, to the
extent required by applicable law, by notation on public registries.
Section 2.07. CASH ALLOCATION; CASH MANAGEMENT.
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. Subject to Section 2.07(e),
the allocation between Hilton and Park Place of all domestic and international
cash bank balances, short-term investments and outstanding checks and drafts of
Hilton and its Subsidiaries recorded per the books of Hilton and its
Subsidiaries shall be in accordance with the following:
(i) all deposits of cash, checks, drafts or short-term investments
made to accounts, other than the Gaming Group Cash Accounts, after the
close of business on the Distribution Date shall be remitted to Hilton
and/or the appropriate Retained Business Subsidiary; PROVIDED, HOWEVER,
that any such deposits that (1) are generated from operations of the Gaming
Business shall be remitted to Park Place and/or the appropriate Gaming
Subsidiary as promptly as possible and (2) are erroneously made to such
accounts shall be redeposited to the correct accounts as promptly as
possible;
(ii) all deposits of cash, checks, drafts or short-term investments
made to the Gaming Group Cash Accounts after the close of business on the
Distribution Date shall be remitted to Park Place and/or
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<PAGE>
the appropriate Gaming Subsidiary; PROVIDED, HOWEVER, that any such
deposits that (1) are generated from operations of the Retained Business
shall be remitted to Hilton and/or the appropriate Retained Business
Subsidiary as promptly as possible and (2) are erroneously made to such
accounts shall be redeposited to the correct accounts as promptly as
possible;
(iii) cash held on the Distribution Date in the ordinary course of
business at Casino Hotels or other gaming facilities comprising part of the
Gaming Business in an aggregate amount up to $100 million ("GAMING FIELD
CASH") shall constitute assets of Park Place and/or the appropriate Gaming
Subsidiaries;
(iv) cash held on the Distribution Date by Park Place representing a
corporate cash reserve in an aggregate amount equal to $25 million funded
through a borrowing under the Park Place Credit Facility (as defined below)
("GAMING CORPORATE CASH") shall constitute assets of Park Place and/or the
appropriate Gaming Subsidiaries;
(v) cash held on the Distribution Date in the ordinary course of
business at lodging or timeshare properties comprising part of the Retained
Business in an aggregate amount up to $5 million ("LODGING FIELD CASH")
shall constitute assets of Hilton and/or the appropriate Retained Business
Subsidiaries;
(vi) cash held on the Distribution Date by Hilton representing a
corporate cash reserve in an aggregate amount equal to $25 million funded
through a borrowing under its credit facility ("LODGING CORPORATE CASH")
shall constitute assets of Hilton and/or the appropriate Retained Business
Subsidiaries; and
(vii) all cash based on book balances existing as of the Distribution
Date, except Gaming Field Cash, Gaming Corporate Cash, Lodging Field Cash,
Lodging Corporate Cash and cash unavailable for general corporate purposes
(e.g., cash pledged to secure assets), shall be equally divided between
Hilton and Park Place.
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. All petty cash, depository
and disbursement accounts of Hilton (other than the Gaming Group Cash Accounts)
shall be retained by Hilton. The Gaming Group Cash Accounts shall be transferred
to Park Place, and Park Place shall establish and maintain a separate cash
management system and separate accounting records with respect to the Gaming
Group Business effective as of 12:01 a.m. New York time on the day following the
Distribution Date.
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(c) ORDINARY COURSE OPERATIONS. The parties contemplate and agree that the
Gaming Business and the Retained Business, including, but not limited to, the
administration, payment and collection of accounts payable and accounts
receivable, will be conducted in the ordinary course of business and consistent
with past practice prior the Distribution Date.
(d) CASH ALLOCATIONS AFTER THE YEAR-END. Notwithstanding anything to the
contrary herein, (i) Net Cash generated after December 31, 1998 from operations
of the Retained Business (regardless of whether the Distribution has occurred)
shall be retained by Hilton, (ii) Net Cash generated after December 31, 1998
from operations of the Gaming Business (regardless of whether the Distribution
has occurred) shall be retained by Gaming Co, and (iii) in the event the
Distribution has not occurred by December 31, 1998, the allocations of cash set
forth in Section 2.07(a) shall be made as of December 31, 1998.
(e) CASH TRUE-UP. In the event that the parties cannot fully and finally
determine the cash allocations set forth in Section 2.07(a) as of the
Distribution Date, the allocation of cash as of such date shall be provisional
(based on the best data available as of such date) and the parties shall make an
appropriate "true up" payment as promptly as practicable (but in no event later
than February 19, 1999) after all the facts necessary for such a payment can be
ascertained.
Section 2.08. ALLOCATION OF DEBT. (1)
Debt will be allocated as follows:
(a) Debt secured by Retained Business Group Assets, or otherwise
specifically associated with the Retained Business, will be assumed or retained
by Hilton and/or the appropriate Retained Business Subsidiaries. As of November
30, 1998, such Debt comprises (v) IRB financings of the Atlanta Airport Hilton
and the New Orleans Airport Hilton (in the amounts of $50 million and $32
million, respectively), (w) two mortgages on the New Orleans Hilton (in the
amounts of $46 million and $52 million, respectively), (x) the unsecured credit
facility relating to the Hilton Hawaiian Village (in the amount of $480
million), (y) one mortgage on the Pointe Tapatio Hilton (in the amount of $48
million) and (z) $3 million of other Debt.
(b) Debt secured by Gaming Group Assets, or otherwise specifically
associated with the Gaming Business, will be assumed or retained by Park Place
and/or the appropriate Gaming Subsidiaries. As of November 30, 1998, such Debt
comprises (i) $11 million of secured Debt relating to the Belle of Orleans
riverboat, and (ii) $3 million of other Debt.
(c) Except as provided by Section 2.08(d), Hilton's public bond Debt will
be Retained Debt. As of November 30, 1998, such Debt consists of (i) $500
million of unsecured 5% convertible subordinated notes due 2006 (the
"SUBORDINATED NOTES"), (ii) $1.4 billion of
- -------------------
(1) All amounts set forth in this Section 2.08 are approximate and represent
gross principal amounts.
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unsecured senior notes issued in 1997, with various interest rates and
maturities ranging from 2002 to 2017 (the "1997 NOTES"), (iii) $267.6 million of
unsecured 7.7% notes issued in 1992 and due in 2002 (the "1992 NOTES") and (iv)
unsecured medium-term notes, Series A and Series B, due 1998 through 2001 ($77.6
million currently outstanding).
(d) Debt allocated to Park Place in the Debt Assumption Agreement will be
assumed by Park Place.
(e) Debt under Hilton's credit agreement and related commercial paper
program ("CREDIT AGREEMENT DEBT") will be refinanced, in part, by a new credit
facility obtained by Park Place. Except as provided by Section 2.08(g), Hilton
will retain an amount of the Credit Agreement Debt (the "RETAINED CREDIT
AGREEMENT DEBT AMOUNT") equal to the amount set forth in Schedule 9 PLUS the
amount of option cash-outs attributable to Retained Business Group employees, if
any (which Debt shall constitute a part of the Retained Debt). Park Place will
refinance the remainder of the Credit Agreement Debt (which Debt shall
constitute a part of the Assumed Debt). The parties acknowledge that this
Section 2.08(e) is intended to equalize the Debt (excluding any Debt -- or
reductions thereof -- associated with the items referred to in Sections
2.08(e)(i) through (e)(viii) below (the "SPECIAL ALLOCATIONS")) between Hilton
and Park Place as of December 31, 1998, giving pro forma effect to the
Distribution and the Merger assuming they had occurred on December 31, 1998.
Once equalized, the Debt of each company will then be adjusted according to the
Special Allocations. Any Debt increases or decreases subsequent to December 31,
1998 will be allocated in accordance with Section 2.08(g). If the Merger does
not occur after the Distribution, the parties hereto shall reallocate the Debt
(excluding any Debt -- or reductions thereof -- associated with the Special
Allocations) between Hilton and Park Place to equalize it as of December 31,
1998, giving pro forma effect solely to the Distribution assuming it had
occurred on December 31, 1998. Once re-equalized, the Debt of each company will
then be adjusted according to the Special Allocations. Any Debt increases or
decreases subsequent to such date will be allocated in accordance with Section
2.08(g). The parties intend that all Special Allocations of cash shall be used
to reduce the total Debt allocated to the subject company.
(i) Debt equal to $83,274,300, representing the purchase price paid by
Hilton and/or the relevant Retained Business Subsidiary in connection with
the purchase of the Sheraton Torrey Pines, Debt equal to $2,000,000,
representing the deposits paid by Hilton and/or the relevant Retained
Business Subsidiary in connection with the contemplated purchase of the
Radisson Plaza Hotel at Mark Center in Alexandria, Virginia ($1,500,000)
and the Back Bay Hilton in Boston, Massachusetts ($500,000) and Debt equal
to $25 million, representing the Lodging Corporate Cash shall be allocated
to Hilton;
(ii) Debt equal to $620,000, representing the purchase price paid by
Park Place and/or the relevant Gaming Subsidiary in connection with the
purchase of 101 Hemsley in Northfield, New Jersey, Debt equal to $206,597,
representing the expenditures incurred by Park Place and/or
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the relevant Gaming Subsidiary in 1998 in connection with the construction
of the pedestrian bridge between Caesars Palace and the Flamingo Hilton-Las
Vegas, Debt equal to $1,000,000, representing the deposit paid by Park
Place and/or the relevant Gaming Subsidiary in connection with the
contemplated purchase of the Gulfstream IV, Debt equal to $9,630,000,
representing the expenses paid by Hilton in connection with the offering
and sale of Park Place's $400 million 77/8% Senior Subordinated Notes due
2005 (the "SENIOR SUBORDINATED NOTE OFFERING") and Debt equal to $25
million, representing the Gaming Corporate Cash shall be allocated to Park
Place;
(iii) cash equal to $22,892,054 representing 100% of the cash value
assigned to the Flamingo Casino - Kansas City shall be allocated to Park
Place;
(iv) subject to the true-up provision set forth in Section 2.08(f)
below, cash equal to (A) 50% of the following total (1) the book balances
of Unrestricted Cash of Company (as defined in the Merger Agreement), less
(2) cash unavailable for general corporate purposes (e.g., cash pledged to
secure assets), (3) cash reserved for the payment of trade payables, less
(4) cash generated from the sale of the assets pursuant to the Asset
Purchase Agreement dated October 15, 1998 by and between BL Development
Corp. and the Robinsonville Commerce Utility District, plus (5) cash in an
amount equal to Trade accounts receivable, and (B) 50% of the excess (if
any) of any insurance proceeds received by Company or its affiliates
relating to all damage claims arising from Hurricane Georges in excess of
any related property damage expenditures, shall be allocated to Hilton;
(v) cash equal to $9,010,954, representing 50% of the Tax benefit
expected to be realized by (1) the consolidated group of which Park Place
is the common parent in 1999 resulting from the payment of tender and
defeasance premiums and related expenses in connection with the tender
offer for the First Mortgage Notes (as defined in the Merger Agreement) and
(2) the consolidated group of which Park Place is the common parent in 1999
resulting from the payment of defeasance premiums and related expenses in
connection with the defeasance of the Senior Notes (as defined in the
Merger Agreement), shall be allocated to Hilton;
(vi) cash equal to $1,094,089, representing a portion of the present
value (assuming a discount rate of 12%) of the Tax benefits expected to be
realized by Park Place in the years 1999 through and including 2003
resulting from the payment of fees and expenses in connection with the Five
Year Credit Agreement dated as of the date
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hereof by and between, among others, Park Place and Bank of America
National Trust and Savings Association, as Administrative Agent ("BOA") and
the Short Term Credit Agreement dated as of December 31, 1998 by and
between, among others, Park Place and BOA (collectively, the "PARK PLACE
CREDIT FACILITY"), shall be allocated to Hilton;
(vii) Debt equal to $3,907,828, representing a portion of the fees and
expenses paid by Park Place in connection with the Park Place Credit
Facility that are included in the calculation of the Total Debt of Company
(as defined in the Merger Agreement) shall be allocated to Hilton; and
(viii) cash equal to $1,250,000, representing 50% of the credit
relating to the Goldman Sachs, shall be allocated to Hilton.
(f) In the event that the parties cannot fully and finally determine the
allocation of Debt as set forth in this Section 2.08 as of the Distribution
Date, the allocation of Debt as of such date shall be provisional (based on the
best data available as of such date) and the parties shall make an appropriate
"true up" adjustment as promptly as practicable (but in no event later than
February 19, 1999) after all facts necessary for a final determination of Debt
can be ascertained.
(g) Notwithstanding anything to the contrary herein, (i) any increases
(decreases) in Debt incurred (repaid) after December 31, 1998 arising out of
operations of the Retained Business (regardless of whether the Distribution has
occurred) shall be attributed to Hilton and (ii) any increases (decreases) in
Debt incurred (repaid) after December 31, 1998 arising out of operations of the
Gaming Business (regardless of whether the Distribution has occurred) shall be
attributed to Park Place; and, to the extent such increases (decreases) are not
already given effect in the definition of Net Cash and the allocations thereof
pursuant to Section 2.07(d), such increases (decreases) shall increase or
decrease (as applicable) the Debt allocated to Hilton or Park Place (as
applicable).
Section 2.09. ANCILLARY AGREEMENTS BETWEEN HILTON AND PARK PLACE.
On or prior to the Distribution Date, Hilton and Park Place shall enter
into the Ancillary Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES.
Except as set forth in one or more of the Related Agreements, from and
after the Distribution Date, (a) Park Place shall, and/or shall cause the Gaming
Subsidiaries to, assume, pay, perform and discharge in due course all of the
Gaming Group Liabilities, and (b) Hilton
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shall, and/or shall cause the Retained Business Subsidiaries to, assume, pay,
perform and discharge in due course all of the Retained Business Group
Liabilities.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Park Place and Hilton shall cooperate in preparing, filing with the SEC
and causing to become effective any registration statements or amendments
thereof which are appropriate to reflect the establishment of, or amendments to,
any employee benefit plans and other plans contemplated by the Employee Benefits
Allocation Agreement.
(b) Park Place and Hilton shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) Park Place and Hilton shall use all reasonable efforts to obtain any
governmental or third-party consents or approvals necessary or desirable in
connection with the transactions contemplated hereby, including, without
limitation, pursuant to the Gaming Laws ("CONSENTS").
(d) Park Place and Hilton will use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements, including, but not
limited to, actions related to the satisfaction of the conditions indicated in
Section 4.02 below.
Section 4.02. HILTON BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION.
The Hilton Board shall, in its sole discretion, establish the Record Date
and the Distribution Date and any appropriate procedures in connection with the
Distribution. In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated in Article II and Article III shall have
been consummated in all material respects;
(b) the Park Place Board, comprised as contemplated by Section 6.01, shall
have been elected by Hilton Hotels U.S.A., Inc., a Delaware corporation, as sole
stockholder of Park Place, and the Park Place Certificate and Park Place Bylaws
shall have been adopted and shall be in effect;
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(c) the IRS Ruling shall have been granted in form and substance
satisfactory to the Hilton Board, the IRS Ruling shall not have been withdrawn
by the IRS and the representations made to the IRS therein shall be true in all
material respects;
(d) the Form 10 shall have been declared effective by the SEC;
(e) the Park Place Common Stock shall have been approved for trading on the
New York Stock Exchange (or such other securities exchange comprising the
principal securities exchange or market on which the Park Place Common Stock is
listed), subject to official notice of issuance;
(f) each of Park Place and Hilton shall have executed and delivered the
Related Agreements to which it is a party and each of the transactions
contemplated by the Related Agreements to be consummated on or prior to the
Distribution Date shall have been consummated;
(g) all necessary regulatory approvals, registrations, licenses, finding of
suitability (collectively, the REGULATORY APPROVALS") and consents of third
parties shall have been received, including, without limitation, any required
approvals under the Gaming Laws, except for any such Regulatory Approvals or
consents the failure of which to obtain would not have a material adverse effect
on the business, operations or condition (financial or otherwise) of either
Hilton or Park Place;
(h) the Board of Directors of Hilton shall be satisfied that (i) at the
time of the Distribution and after giving effect to the Distribution and the
transactions contemplated under the Related Agreements, Hilton will not be
insolvent (in that, both before and immediately following the Distribution, (1)
the fair market value of Hilton's assets would exceed Hilton's liabilities, (2)
Hilton would be able to pay its liabilities as they mature and become absolute
and (3) Hilton would not have unreasonably small capital with which to engage in
its business) and (ii) the Distribution would be permitted under Section 170(a)
of the Delaware General Corporation Law; and at the Board of Directors'
discretion, Hilton shall have received the opinion of a financial advisor or
other appraisal or valuation expert selected by Hilton, in form and substance
satisfactory to Hilton, as to the matters set forth above, and such opinion
shall not have been withdrawn;
(i) Park Place shall have obtained, or Hilton shall have obtained for Park
Place, insurance (or binders therefor) providing coverage to Park Place similar
to the coverage provided by insurance in place prior to the Distribution Date;
(j) financing arrangements with respect to Hilton and Park Place
satisfactory to the Hilton Board shall be in place;
(k) Park Place shall have executed and delivered the Debt Assumption
Agreement, which shall be in full force and effect;
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(l) Hilton shall have received stockholder ratification of the Distribution
at a meeting of stockholders;
(m) the Merger Agreement shall be in full force and effect and no material
breach shall exist thereunder; and
(n) Each condition to the consummation of the Merger, other than the
condition set forth in Section 8.1(g) of the Merger Agreement relating to the
consummation of the Distribution, shall have been fulfilled or waived by the
party for whose benefit such condition exists; PROVIDED, HOWEVER, that (x) any
such condition may be waived by the Hilton Board in its sole discretion, and (y)
the satisfaction of such conditions shall not create any obligation on the part
of Hilton or any other party hereto to effect the Distribution or in any way
limit Hilton's power of termination set forth in Section 9.08 or alter the
consequences of any such termination from those specified in such Section.
Section 4.03. THE DISTRIBUTION.
On the Distribution Date, or as soon thereafter as practicable, subject to
the conditions and rights of termination set forth in this Agreement, Hilton
shall deliver to the Agent, for the benefit of the Holders, a share certificate
representing all of the then outstanding shares of Park Place Common Stock owned
by Hilton, endorsed in blank, and shall instruct the Agent to distribute to each
Holder, on or as soon as practicable following the Distribution Date, a
certification, or if requested by such Holder, a certificate, representing one
share of Park Place Common Stock for each share of Hilton Common Stock so held.
Park Place agrees to provide all share certificates that the Agent shall require
in order to effect the Distribution.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY HILTON.
Except as otherwise expressly set forth in a Related Agreement, Hilton
shall indemnify, defend and hold harmless Park Place and each of the Gaming
Subsidiaries, and each of their respective past or present directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "PARK PLACE INDEMNITEES") from and
against any and all losses, Liabilities, damages and expenses (including,
without limitation, the reasonable costs and expenses, including reasonable
attorneys' fees, in connection with any such investigations, Actions or
threatened Actions) (collectively, "INDEMNIFIABLE LOSSES" and, individually, an
"INDEMNIFIABLE LOSS") incurred or suffered by any of the Park Place Indemnitees
and arising out of or due to the failure or alleged failure of Hilton, any
Retained Business Subsidiary, or any of their respective Affiliates to pay,
perform or otherwise discharge in due course any of the Retained Business Group
Liabilities.
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Section 5.02. INDEMNIFICATION BY PARK PLACE.
Except as otherwise expressly set forth in a Related Agreement, Park Place
shall indemnify, defend and hold harmless Hilton and each of the Retained
Business Subsidiaries, and each of their respective past or present directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "HILTON INDEMNITEES") from
and against any and all Indemnifiable Losses incurred or suffered by any of the
Hilton Indemnitees and arising out of or due to the failure or alleged failure
of Park Place, any Gaming Subsidiaries, or any of their respective Affiliates to
pay, perform or otherwise discharge in due course any of the Gaming Group
Liabilities.
Section 5.03. INSURANCE PROCEEDS.
The amount which any party (an "INDEMNIFYING PARTY") is or may be required
to pay to or on behalf of any other Person (an "INDEMNIFIED PERSON") pursuant to
Section 5.01 or Section 5.02 shall be reduced (including, without limitation,
retroactively) by any Insurance Proceeds or other amounts actually recovered by
or on behalf of such Indemnified Person in reduction of the related
Indemnifiable Loss. If an Indemnified Person shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnified Person shall pay to such Indemnifying Party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION.
(a) Except as may be set forth in a Related Agreement, if an Indemnified
Person shall receive written notice of the assertion by a Person (including,
without limitation, any Governmental Authority) who is not a party to this
Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person of any Action with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to this
Agreement (a "THIRD-PARTY CLAIM"), such Indemnified Person shall give the
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; PROVIDED, that the failure of any Indemnified Person to give
notice as required by this Section 5.04 shall not relieve the Indemnifying Party
of its obligations under this Article V, except to the extent that such
Indemnifying Party is materially prejudiced by such failure to give notice. Such
notice shall describe the Third-Party Claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the Indemnifiable Loss that has
been claimed against or may be sustained by such Indemnified Person.
(b) Within 15 days of the receipt of notice from an Indemnified Person in
accordance with Section 5.04(a) (or sooner, if the nature of such Third-Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Person
of its election whether to assume responsibility for such Third-Party Claim
(provided that if the Indemnifying Party does not so notify the Indemnified
Person of its election within 15 days after receipt of such notice from the
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Indemnified Person, the Indemnifying Party shall be deemed to have elected not
to assume responsibility for such Third-Party Claim). An election not to assume
responsibility for such Third-Party Claim may only be made in the event of a
good faith dispute that a Third-Party Claim is not covered as an Indemnifiable
Loss under the grounds specified in Section 5.01 or 5.02, as the case may be.
Subject to Section 5.04(e) hereof, an Indemnifying Party may elect to defend or
to seek to settle or compromise, at such Indemnifying Party's own expense and by
counsel reasonably satisfactory to the Indemnified Person, any Third-Party
Claim, PROVIDED that (i) the Indemnifying Party must confirm in writing that it
agrees that the Indemnified Person is entitled to indemnification hereunder in
respect of such Third-Party Claim and (ii) no compromise or settlement shall be
made without the prior written consent of the Indemnified Person, which consent
shall not be unreasonably withheld.
(c) In the event that the Indemnifying Party elects to assume
responsibility for the Third-Party Claim, pursuant to Section 5.04(b) above, (i)
the Indemnified Person shall cooperate in the defense or settlement or
compromise of such Third-Party Claim, including making available to the
Indemnifying Party any personnel and any books, records or other documents
within the Indemnified Person's control or which it otherwise has the ability to
make available that are necessary or appropriate for the defense of the
Third-Party Claim, (ii) the Indemnifying Party shall keep the Indemnified Person
reasonably informed regarding the strategy, status and progress of the defense
of the Third-Party Claim, and (iii) the Indemnifying Party shall consider, in
good faith, the opinions and suggestions of the Indemnified Person with respect
the Third-Party Claim. After notice from an Indemnifying Party to an Indemnified
Person of its election to assume responsibility for a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnified Person under this
Article V for any legal or other costs or expenses (except costs or expenses
approved in advance by the Indemnifying Party) subsequently incurred by such
Indemnified Person in connection with the defense thereof; PROVIDED, that if the
defendants in any such claim include both the Indemnifying Party and one or more
Indemnified Persons and in such Indemnified Persons' reasonable judgment a
conflict of interest between such Indemnified Persons and such Indemnifying
Party exists in respect of such claim, such Indemnified Persons shall have the
right to employ separate counsel and in that event the reasonable fees, costs
and expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(d) If an Indemnifying Party elects not to assume responsibility for a
Third-Party Claim, the Indemnified Person may defend or (subject to the
following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnified Person may not settle or
compromise any claim without prior written notice to the Indemnifying Party,
which shall have the option within ten days following the receipt of such notice
(i) to disapprove the settlement and to then assume all past and future
responsibility for the claim, including immediately reimbursing the Indemnified
Person for prior expenditures in connection with the claim, (ii) to disapprove
the settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnified Person may, in its sole discretion,
proceed with the settlement and the Indemnifying Party shall have no further
right to contest the amount
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or reasonableness of the settlement, (iii) to approve and pay the amount of the
settlement, reserving the Indemnifying Party's right to contest the Indemnified
Person's right to indemnity, or (iv) to approve and pay the settlement. In the
event the Indemnifying Party makes no response to such written notice, the
Indemnifying Party shall be deemed to have elected option (ii). When the
Indemnifying Party chooses, or is deemed to have chosen, option (ii) or (iii),
the issue of whether the Indemnified Person has a right to indemnity under this
Article V shall be resolved by arbitration pursuant to the provisions of Section
9.14 hereof. If the Indemnifying Party does not prevail at such arbitration, the
Indemnifying Party shall promptly reimburse the Indemnified Person for all
Indemnifiable Losses, plus interest on such amounts at the lower of (i) 10 % or
(ii) the highest legal interest rate, accruing from the date of payment by the
Indemnified Person.
(e) Notwithstanding the foregoing, if an Indemnified Person reasonably and
in good faith determines that (i) the Indemnifying Party is not financially
capable to defend a Third-Party Claim and to provide full indemnification with
respect to any settlement thereof or (ii) the Indemnifying Party or such
Indemnifying Party's attorney is not adequately representing the Indemnified
Person's interests with respect to such Third-Party Claim, the Indemnified
Person may, by notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle such Third-Party Claim and the Indemnifying Party
shall remain responsible for, and be bound by the resolution of, such
Third-Party Claim.
(f) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnified Person to the applicable Indemnifying Party. Such Indemnifying Party
shall have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnified Person shall be free to pursue such remedies as may be available to
such party under applicable law or under this Agreement.
(g) In addition to any adjustments required pursuant to Section 5.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Person to the
Indemnifying Party.
(h) In the event of payment by an Indemnifying Party to any Indemnified
Person in connection with any Third-Party Claim, such Indemnifying Party shall
be subrogated to and shall stand in the place of such Indemnified Person as to
any events or circumstances in respect of which such Indemnified Person may have
any right or claim relating to such Third-Party Claim against any claimant or
plaintiff asserting such Third-Party Claim or against any other party that may
be liable. Such Indemnified Person shall cooperate with such Indemnifying Party
in a reasonable manner, and at the cost and expense of such Indemnifying Party,
in prosecuting any subrogated right or claim.
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Section 5.05. REMEDIES CUMULATIVE.
The remedies provided in this Article V shall be cumulative and shall not
preclude assertion by any Indemnified Person of any other rights or the seeking
of any and all other remedies against any Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES.
The obligations of each of Park Place and Hilton under this Article V shall
survive the sale or other transfer by it of any assets or businesses or the
assignment by it of any Liabilities, with respect to any Indemnifiable Loss of
the other related to such assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. PARK PLACE BOARD.
Park Place and Hilton shall take all actions which may be required to
appoint as officers and directors of Park Place those persons named in the Form
10 (as may be altered or supplemented prior to the date hereof by the Hilton
Board and the Park Place Board) to constitute, effective as of the Distribution
Date, the officers and the directors of Park Place.
Section 6.02. RESIGNATIONS; HILTON BOARD.
(a) Park Place shall cause all of its directors and the Transferred
Employees to resign, effective as of the Distribution Date, from all boards of
directors or similar governing bodies of Hilton or any of the Retained Business
Subsidiaries on which they serve, and from all positions as officers or
employees of Hilton or any of the Retained Business Subsidiaries in which they
serve, except that (i) Steven Bollenbach will be President, Chief Executive
Officer and a Director of Hilton and will be Chairman of the Board of Directors
of Park Place and (ii) Arthur Goldberg will be a Director of both Hilton and
Park Place and Chief Executive Officer of Park Place. Hilton shall cause all of
its directors and the Retained Business Group Employees to resign from all
boards of directors or similar governing bodies of Park Place or any of the
Gaming Subsidiaries on which they serve, and from all positions as officers or
employees of Park Place or any of the Gaming Subsidiaries in which they serve,
except as set forth in Schedule 10.
Section 6.03. PARK PLACE CERTIFICATE AND BYLAWS.
On or prior to the Distribution Date, Park Place shall adopt the Park Place
Certificate and the Park Place Bylaws, and shall file the Park Place Certificate
with the Secretary of State of the State of Delaware. Hilton shall provide all
necessary shareholder approvals for
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the Park Place Certificate prior to the filing of the Park Place Certificate
with the Secretary of State of the State of Delaware.
Section 6.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
Each of Hilton and Park Place shall, and shall cause each of their
respective Subsidiaries to, comply in all material respects with each
representation, covenant and statement made, or to be made, to any taxing
authority in connection with the IRS Ruling or any other ruling obtained, or to
be obtained, by Hilton and Park Place acting together, from any such taxing
authority with respect to any transaction contemplated by this Agreement.
Section 6.05. SALES AND TRANSFER TAXES.
Hilton and Park Place agree to cooperate to determine the amount of sales,
transfer or other Taxes, including, without limitation, all real estate, patent,
trademark and transfer taxes and recording fees, but excluding any Income Taxes,
as defined in the Tax Allocation and Indemnity Agreement) incurred in connection
with the Distribution and other transactions contemplated by the Agreement (the
"TRANSACTION TAXES"). Hilton agrees to file promptly and timely the Tax Returns
for such Transaction Taxes and Park Place will join in the execution of any such
Tax Returns or other documentation. Financial responsibility for payment of all
such Transaction Taxes shall be shared equally between Hilton and Park Place.
Section 6.06. PARK PLACE RIGHTS PLAN.
Effective as of the Distribution Date, Park Place shall adopt a shareholder
rights plan which shall be substantially similar to the shareholder rights plan
of Hilton in effect as of the Distribution Date.
Section 6.07. TIMESHARE AND VACATION OWNERSHIP FACILITIES.
Subject to the terms set forth on Schedule 11 hereto, Hilton shall have the
exclusive right for 15 years to sell and market timeshare and vacation ownership
interests from sites located within any now or future existing Casino Hotel
operated by any member of the Gaming Group; PROVIDED, HOWEVER, that Hilton shall
not be entitled to exercise such right with respect to any particular Casino
Hotel if and only if (i) Hilton is not selling or marketing timeshare and
vacation ownership interests at such Casino Hotel, (ii) Park Place receives a
bona fide offer from an unaffiliated third party to (1) commence timeshare and
vacation ownership sales at such Casino Hotel and (2) pay a fee to Park Place
for such marketing and sales on a basis comparable to the fees being paid by
Hilton to Park Place at the other Casino Hotels where Hilton is selling and
marketing timeshare and vacation ownership interests, and (iii) Hilton elects,
for a period of 90 days, not to commence timeshare and vacation ownership sales
at such Casino Hotel. In addition, Park Place shall, prior to developing any
timeshare or vacation ownership facilities at any Casino Hotel or at any other
location during such 15 year term, offer to Hilton the right to proceed with any
such development (the "FIRST OFFER"). If Hilton (a) does
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not accept the First Offer and commence development of such timeshare or
vacation ownership facility within a period of 120 days or (b) notifies Park
Place in writing that it does not accept such First Refusal Option, then, (i)
Park Place shall be entitled to develop the subject timeshare and vacation
ownership facility (the "NEW FACILITY") and (ii) Hilton shall not be entitled to
sell and market timeshare and vacation ownership interests in the New Facility;
PROVIDED, that Hilton shall be entitled to sell and market timeshare and
vacation ownership interests in other facilities from the Casino Hotel located
next to the New Facility.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement, Hilton
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Park Place's cost) to Park Place of
the Gaming Group Books and Records in its possession, except to the extent such
items are already in the possession of Park Place or a Gaming Subsidiary. The
Gaming Group Books and Records shall be the property of Park Place, but the
Gaming Group Books and Records that reasonably relate to Hilton or the Retained
Business shall be available to Hilton for review and duplication until Hilton
shall notify Park Place in writing that such records are no longer of use to
Hilton.
(b) Except as may otherwise be provided in a Related Agreement, Park Place
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Hilton's cost) to Hilton of the
Retained Business Group Books and Records in its possession, except to the
extent such items are already in the possession of Hilton or a Retained Business
Subsidiary. The Retained Business Group Books and Records shall be the property
of Hilton, but the Retained Business Group Books and Records that reasonably
relate to Park Place or the Gaming Business shall be available to Park Place for
review and duplication until Park Place shall notify Hilton in writing that such
records are no longer of use to Park Place.
Section 7.02. ACCESS TO INFORMATION.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, Hilton shall afford to Park Place and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"INFORMATION") within Hilton's possession or control, insofar as such access is
reasonably required by Park Place for the conduct of its business, subject to
appropriate restrictions for classified or Privileged Information. Similarly,
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except as otherwise provided in a Related Agreement, Park Place shall afford to
Hilton and its authorized accountants, counsel, and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within Park Place's possession or control,
insofar as such access is reasonably required by Hilton for the conduct of its
business, subject to appropriate restrictions for classified or Privileged
Information. Information may be requested under this Article VII for the
legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. PRODUCTION OF WITNESSES.
At all times from and after the Distribution Date, each of Park Place and
Hilton shall use reasonable efforts to make available to the other, upon written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that such persons may reasonably be required in
connection with any Action.
Section 7.04. REIMBURSEMENT.
Except to the extent otherwise contemplated in any Related Agreement, a
party providing Information or witnesses to the other party under this Article
VII shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments of such amounts, relating to supplies, disbursements
and other out-of-pocket expenses (at cost) of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witnesses. Notwithstanding the foregoing, the
parties acknowledge that a party providing Information or witnesses shall not be
entitled to receive reimbursement of salary or other compensation expenses
relating to any employees providing such Information or acting as such
witnesses.
Section 7.05. RETENTION OF RECORDS.
Except as otherwise required by law or agreed to in a Related Agreement or
otherwise in writing, each of Park Place and Hilton may destroy or otherwise
dispose of any of the Information which is material Information and is not
contained in other Information retained by the other, only after the later to
occur of (i) all applicable statutes of limitations (including any waivers or
extensions thereof) with respect to Tax Returns which Hilton or Park Place, as
the case may be, may be obligated to file on behalf of Park Place Members or
Post-Distribution Members, as the case may be, and (ii) any retention period
required by law or pursuant to any record retention agreement, provided that,
prior to such destruction or disposal, (a) it shall provide no less than 90 or
more than 120 days advance written notice to the other, specifying in reasonable
detail the Information proposed to be destroyed or disposed of and (b) if a
recipient of such notice shall request in writing prior to the scheduled date
for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the
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delivery of such of the Information as was requested at the expense of the party
requesting such Information.
Section 7.06. CONFIDENTIALITY.
Each of Hilton and its Subsidiaries on the one hand, and Park Place and its
Subsidiaries on the other hand, shall hold, and shall cause its consultants and
advisors to hold, in strict confidence, all Information concerning the other in
its possession or furnished by the other or the other's representatives pursuant
to this Agreement (except to the extent that such Information has been (i) in
the public domain through no fault of such party or (ii) later lawfully acquired
from other sources by such party), and each party shall not release or disclose
such Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors, unless
compelled to disclose by judicial or administrative process or, as reasonably
advised by its counsel, by other requirements of law, or unless such Information
is reasonably required to be disclosed in connection with (x) any litigation
with any third-parties or litigation between the Retained Business Group and the
Gaming Group, (y) any contractual agreement to which members of the Retained
Business Group or the Gaming Group are currently parties, or (z) in exercise of
either party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS.
Park Place and Hilton recognize that certain legal and other professional
services that have been and will be provided prior to the Distribution Date have
been and will be rendered for the benefit of both the Retained Business Group
and the Gaming Group and that both the Retained Business Group and the Gaming
Group should be deemed to be the client for the purposes of asserting all
Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) Hilton shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Retained Business Group, whether or not the Privileged Information
is in the possession of or under the control of Hilton or Park Place. Hilton
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting Retained Business Group Liabilities,
now pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Hilton or a Retained Business Subsidiary,
whether or not the Privileged Information is in the possession of or under the
control of Hilton or Park Place.
(b) Park Place shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Gaming Group, whether or not the Privileged Information is
in the possession of or under the control of Hilton or Park Place. Park Place
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information which relates solely to the
subject matter of any claims constituting Gaming Group Liabilities, now pending
or
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which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Park Place or a Gaming Subsidiary, whether or not the
Privileged Information is in the possession of or under the control of Hilton or
Park Place.
(c) Park Place and Hilton agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Park Place and Hilton,
or in respect of which both Park Place and Hilton retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member of the
Retained Business Group and a member of the Gaming Group, either party may waive
a Privilege in which the other party has a shared Privilege, without obtaining
the consent of the other party, provided that such waiver of a shared Privilege
shall be effective only as to the use of Information with respect to the
litigation or dispute between the Retained Business Group and the Gaming Group,
and shall not operate as a waiver of the shared Privilege with respect to
third-parties.
(f) If a dispute arises between the parties regarding whether a Privilege
should be waived to protect or advance the interest of either party, each party
agrees that it shall negotiate in good faith, shall endeavor to minimize any
prejudice to the rights of the other party, and shall not unreasonably withhold
consent to any request for waiver by the other party. Each party specifically
agrees that it will not withhold consent to waiver for any purpose except to
protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other request
which arguably calls for the production or disclosure of Information subject to
a shared Privilege or as to which the other party has the sole right hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Gaming Group Books and Records and the Retained
Business Group Books and Records and other Information between Hilton and its
Subsidiaries
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and Park Place and its Subsidiaries is made in reliance on the agreement of Park
Place and Hilton, as set forth in Sections 7.06 and 7.07, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to Information being granted pursuant to
Sections 7.01 and 7.02 hereof, the agreement to provide witnesses and
individuals pursuant to Section 7.03 hereof and the transfer of Privileged
Information between Hilton and its Subsidiaries and Park Place and its
Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE GAMING GROUP ASSETS.
Without limiting the generality of the definition of the Gaming Group
Assets or the effect of Section 2.01, the Gaming Group Assets shall include any
and all rights of an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, where applicable, with respect to all injuries,
losses, liabilities, damages and expenses incurred or claimed to have been
incurred on or prior to the Distribution Date by any party in or in connection
with the conduct of the Gaming Business or, to the extent any claim is made
against Park Place or any of its Subsidiaries, the Retained Businesses, and
which injuries, losses, liabilities, damages and expenses may arise out of
insured or insurable occurrences or events under one or more of the Shared
Policies.
Section 8.02. POLICIES AND RIGHTS INCLUDED WITHIN THE RETAINED BUSINESS
GROUP ASSETS.
Without limiting the generality of the definition of the Retained Business
Group Assets or the effect of Section 2.01, the Retained Business Group Assets
shall include any and all rights of an insured party under each of the Shared
Policies, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, where applicable, with respect to
all injuries, losses, liabilities, damages and expenses incurred or claimed to
have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Retained Business or, to the extent any claim
is made against Hilton or any of the Retained Business Subsidiaries, the Gaming
Business, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.03. ADMINISTRATION AND RESERVES.
(a) GENERAL. Notwithstanding the provisions of Article III, but subject to
any contrary provisions of any Related Agreement, from and after the
Distribution Date:
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(i) Hilton shall be responsible for the Insurance Administration of
the Shared Policies; PROVIDED, that the administration of the Shared
Policies by Hilton is in no way intended to limit, inhibit, or preclude any
right to insurance coverage for any Insured Claim of a named insured under
the Shared Policies including, but not limited to, Park Place or any of its
Subsidiaries or Affiliates;
(ii) Park Place shall be entitled to any reserves established by
Hilton or any of its Subsidiaries (other than reserves established by
Hilton Insurance Company, which reserves shall remain with such entity), or
the benefit of reserves held by any insurance carrier, with respect to the
Gaming Group Liabilities; and
(iii) Hilton shall be entitled to any reserves established by Hilton
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Retained Business Group Liabilities.
(b) INSURANCE PREMIUMS.
(i) Park Place shall have the right but not the obligation to pay the
premiums, to the extent that Hilton does not pay premiums with respect to
Retained Business Group Liabilities (retrospectively-rated or otherwise),
with respect to Shared Policies as required under the terms and conditions
of the respective Policies, whereupon Hilton shall forthwith reimburse Park
Place for that portion of such premiums paid by Park Place as are
attributable to the Retained Business Group Liabilities.
(ii) Hilton shall have the right but not the obligation to pay the
premiums, to the extent that Park Place does not pay premiums with respect
to Gaming Group Liabilities (retrospectively-rated or otherwise), with
respect to Shared Policies as required under the terms and conditions of
the respective Policies, whereupon Park Place shall forthwith reimburse
Hilton for that portion of such premiums paid by Hilton as are attributable
to the Gaming Group Liabilities.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received with
respect to claims, costs and expenses under the Policies shall be paid to Park
Place with respect to the Gaming Group Liabilities and to Hilton with respect to
the Retained Business Group Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from the liability policies will
be made to the appropriate party upon receipt from the insurance carrier. In the
event that the aggregate limits on any Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims taking into
account their relative contributions towards premiums and the Insurance Proceeds
used by each party to satisfy Insured Claims. The parties agree to use their
reasonable best efforts to cooperate with respect to insurance matters.
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(d) INSURANCE CHARGES.
(i) Notwithstanding anything to the contrary contained herein, Park
Place or an appropriate Gaming Subsidiary assumes responsibility for and
shall pay to the appropriate insurance carriers or otherwise any premiums,
retrospectively rated premiums, defense costs, indemnity payments,
deductibles, retentions or other charges as appropriate (collectively
"INSURANCE CHARGES"), whenever arising, which become due and payable upon
the terms and conditions of any applicable Policy in respect of any Insured
Claims against Park Place or a Gaming Subsidiary for charges which relate
to the period before the Distribution Date. In the event that Park Place or
a Gaming Subsidiary fails to pay any insurance charges when due and
payable, whether at the request of the party entitled to payment or upon
demand by Hilton or a Retained Business Subsidiary, Hilton or a Retained
Business Subsidiary may (but shall not be required to) pay such Insurance
Charges for and on behalf of Park Place or a Gaming Subsidiary and
thereafter Park Place shall forthwith reimburse Hilton or such Retained
Business Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary contained herein, Hilton
or an appropriate Retained Business Subsidiary assumes responsibility for
and shall pay to the appropriate insurance carriers or otherwise any
Insurance Charges, whenever arising, which become due and payable upon the
terms and conditions of any applicable Policy in respect of any Insured
Claims against Hilton or a Retained Business Subsidiary for charges which
relate to the period before the Distribution Date. In the event that Hilton
or a Retained Business Subsidiary fails to pay any Insurance Charges when
due and payable, whether at the request of the party entitled to payment or
upon demand by Park Place or a Gaming Subsidiary, Park Place or a Gaming
Subsidiary may (but shall not be required to) pay such Insurance Charges
for and on behalf of Hilton or a Retained Business Subsidiary and
thereafter Hilton shall forthwith reimburse Park Place or such Gaming
Subsidiary for such payment.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE.
In the event that Insured Claims of both Park Place and Hilton exist
relating to the same occurrence, Park Place and Hilton agree to jointly defend
and to waive any conflict of interest necessary to the conduct of that joint
defense. Nothing in this paragraph shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.
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ARTICLE IX.
MISCELLANEOUS
Section 9.01. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement and all documents and instruments referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and are not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
Section 9.02. TAX ALLOCATION AND INDEMNITY AGREEMENT; AFTER-TAX PAYMENTS.
(a) Other than as provided in this Section 9.02 and Section 6.05, this
Agreement shall not govern any Tax matter, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax
Allocation and Indemnity Agreement or the Hilton Corporate Services Agreement.
(b) If, at the time Park Place is required to make any payment to Hilton
under this Agreement, Hilton owes Park Place any amount under the Tax Allocation
and Indemnity Agreement, then such amounts shall be offset and the excess shall
be paid by the party liable for such excess. Similarly, if, at the time Hilton
is required to make any payment to Park Place under this Agreement, Park Place
owes Hilton any amount under the Tax Allocation and Indemnity Agreement, then
such amounts shall be offset and the excess shall be paid by the party liable
for such excess.
Section 9.03. EXPENSES.
Except as specifically provided in this Agreement or in a Related
Agreement, for the sake of administrative ease, all fees and expenses incurred
in connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, however, with respect to any such fees and expenses incurred by or
allocated to such party that constitute Transaction Costs (as defined in the
Merger Agreement), the parties hereto agree to share such fees and expenses
equally; provided further however, that Park Place shall pay all of the fees and
expenses associated with the Senior Subordinated Note Offering; and provided
further however, that Park Place shall pay all of the fees and expenses
associated with the Park Place Credit Facility to the extent such fees and
expenses are not included in the calculation of the Total Debt of Company.
Section 9.04. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without regard to any applicable conflicts of laws,
except to the extent that the Gaming Laws shall be mandatorily applicable.
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Section 9.05. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: General Counsel
Telecopy: (310) 205-7677
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004-2505
Attn: Bruce Rosenblum, Esq.
Telecopy: (202) 637-2201
(b) if to Park Place, to
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President and Chief Financial Officer and
Executive Vice President - Law and Corporate Affairs
Telecopy: (702) 699-5190
(702) 699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: (973) 643-6500
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Section 9.06. AMENDMENTS.
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 9.07. ASSIGNMENTS.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 9.08. TERMINATION.
This Agreement may be terminated and the Distribution abandoned at any time
prior to the Distribution Date by and in the sole discretion of the Hilton Board
without the approval of Park Place's or of Hilton's stockholders. In the event
of such termination, no party shall have any liability to any other party
pursuant to this Agreement.
Section 9.09. SUBSIDIARIES.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.10. SPECIFIC PERFORMANCE.
The parties hereto agree that the remedy at law for any breach of this
Agreement will be inadequate and that any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable laws, each party waives any objection to the imposition of such
relief.
Section 9.11. HEADINGS; REFERENCES.
The article, section and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to "Article", "Sections"
or "Exhibits" shall be deemed to be references to Articles or Sections hereof or
Exhibits hereto unless otherwise indicated.
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Section 9.12. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 9.13. SEVERABILITY; ENFORCEMENT.
The invalidity of any portion hereof shall not affect the validity, force
or effect of the remaining portions hereof. If it is ever held that any covenant
hereunder is too broad to permit enforcement of such covenant to its fullest
extent, each party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such covenant.
Section 9.14. ARBITRATION OF DISPUTES.
(a) Any dispute, controversy or disagreement ("DISPUTE") between the
Parties related to the obligations of the parties under this Agreement in
respect of which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("COMMITTEE"). If the parties are unable to
reach an amicable resolution of a Dispute within thirty days after submission to
the Committee, then, to the maximum extent allowed by law, the Dispute shall be
submitted and resolved by final and binding arbitration in Los Angeles,
California administered by JAMS-Endispute in accordance with JAMS-Endispute's
rules of practice then in effect or such other procedures as the parties may
agree upon; PROVIDED, HOWEVER, that any party may seek injunctive relief and
enforcement of any award rendered pursuant to the arbitration provisions of this
Section 9.14 by bringing a suit in any court of competent jurisdiction. Any
award issued as a result of such arbitration shall be final and binding between
the parties thereto and shall be enforceable by any court having jurisdiction
over the party against whom enforcement was sought and application may be made
to such court for judicial acceptance of the award and order of enforcement. The
fees, costs and expenses of arbitration (including reasonable attorneys' fees)
shall be paid by the party that does not prevail in such arbitration.
(b) ATTORNEYS' FEES. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(c) SPECIFIC PERFORMANCE. Nothing contained in this Section 9.14 shall
limit or restrict in any way the right or power of a party at any time to seek
injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other party
from breaching this Agreement or (ii) for specific enforcement of this Section
9.14 or any other provision of this Agreement or any Ancillary Agreement. The
parties
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agree that any legal remedy available to a party with respect to a
breach of this Section 9.14 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.14.
(d) CONSENT TO JURISDICTION. The Parties hereby consent to the jurisdiction
of the federal and state courts located in the State of California for all
purposes under this Agreement.
(e) CONFIDENTIALITY. Neither party nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of both parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
Section 9.15. PROMPT PAYMENT.
Where the terms of this Agreement require payment of an amount "as promptly
as possible," "as soon as practicable," or "as soon as possible," following a
specified event, occurrences or date, such payment shall be made no later than
five (5) business days after such event, occurrence or date.
Section 9.16. APPROVALS, CONSENT AND WAIVERS.
Any approval, consent or waiver required or authorized by any provision of
this Agreement to be given or made by any of the parties hereto shall only be
valid to the extent such approval, consent or waiver is in writing and signed by
the Executive Vice President & Chief Financial Officer, the Executive Vice
President & General Counsel, the Senior Vice President & Treasurer and the
Senior Vice President & Controller of the party to be bound by such approval,
consent or waiver.
[Signature Page to Follow]
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IN WITNESS WHEREOF, Hilton and Park Place have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
-------------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT
CORPORATION,
A DELAWARE CORPORATION
By: /s/ Scott A. LaPorta
-------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
S-1
<PAGE>
SCHEDULE 1
CASINO HOTELS AND OTHER GAMING FACILITIES
1. Flamingo Hilton - Las Vegas
2. Flamingo Hilton - Reno
3. Flamingo Hilton - Laughlin
4. Las Vegas Hilton
5. Reno Hilton
6. Bally's Las Vegas
7. Bally's Park Place
8. Atlantic City Hilton
9. Bally's Mississippi
10. Bally's Belle of Orleans
11. Conrad International Jupiters (Gold Coast, Australia)
12. Conrad International Treasury (Brisbane, Australia)
13. Conrad International Punta del Este
14. The Ocean Downs (Maryland) racetrack
15. Paris - Las Vegas
<PAGE>
SCHEDULE 2
GAMING CORPORATE FUNCTIONS
- - Aviation services
- - Food and beverage purchasing and procurement
- - Retail management and administration
- - Compliance
- - Surveillance
<PAGE>
SCHEDULE 3
CERTAIN GAMING GROUP ASSETS
1. G-2 and Hawker aircraft
2. Interest in the Howard Hughes Parkway office (Las Vegas)
3. Stock in Players International, Inc.
4. Loan to Chehalis Native American casino
5. Options on land in Philadelphia for potential gaming uses
6. Rosecroft loan and related option
7. The riverboat docked in Ontario, Canada
8. Rights to receive the license fees under the Conrad License Agreements (as
defined in the Assignment and License Agreement)
9. Undeveloped Reno land parcels
10. New Orleans Riverboat (docked in Mississippi)
11. The letters of credit issued by tour and travel companies to Hilton as
security for outstanding accounts receivable balances existing as of the
date hereof will cover such balances due Hilton with respect to the
Retained Business and Park Place with respect to the Gaming Business as of
the date hereof. Any amounts collected under any of these letters of credit
will be paid to each company prorata based on the relative balances due
Hilton with respect to the Retained Business and Park Place with respect to
the Gaming Business as of the date the subject letter of credit is
submitted for collection. The letters of credit will not cover any accounts
receivable balances due Park Place with respect to the Gaming Business for
any periods after the date hereof.
<PAGE>
SCHEDULE 4
GAMING GROUP CASH ACCOUNTS
See attached Schedule. The parties acknowledge that some of the attached
accounts are being consolidated into one another and that therefore the total
number of accounts may be reduced after the date hereof but before the
Distribution occurs.
<PAGE>
SCHEDULE 5
GAMING SUBSIDIARIES/GAMING INVESTMENTS
1. 3930 Building Partnership*
2. Atlantic City Country Club, Inc.
3. B.W. Realty Corp.
4. Bally's Casino Holdings, Inc.
5. Bally's Casino Management, Inc.
6. Bally's Grand Laundry Corporation
7. Bally's Grand Management Co., Inc.
8. Bally's Grand Property Sub I, Inc.
9. Bally's Grand Property Sub II, Inc.
10. Bally's Intermediate Casino Holdings, Inc.
11. Bally's Intermediate Sub, Inc.
12. Bally's Louisiana II, Inc.
13. Bally's Louisiana, Inc.
14. Bally's Manager, Inc.
15. Bally's Maryland Inc.
16. Bally's Mexico, Inc.
17. Bally's Midwest Casino, Inc.
18. Bally's Olympia Limited Partnership*
19. Bally's Operator, Inc.
20. Bally's Park Place Funding, Inc.
21. Bally's Park Place Realty Co.
22. Bally's Park Place, Inc. (Delaware)
23. Bally's Park Place, Inc. (New Jersey)
24. Bally's Philadelphia, Inc.
25. Bally's Sub, Inc.
26. Bally's Tunica, Inc.
27. Bally Biloxi, Inc.
28. Bally Data Systems, Inc.
29. Bally Warwick, Inc.
30. Baluma Holdings, S.A.(*)
31. Belle of Orleans, L.L.C.*
32. Benco, Inc.
33. B I Gaming Corporation
34. Conrad International Hotels Corporation - SA (Proprietary) Limited
35. FHR Corporation
36. Flamingo Hilton-Laughlin, Inc.
- --------------------------
* Gaming investments, not Subsidiaries.
<PAGE>
37. Flamingo Hilton-Reno, Inc.
38. Florida Locally Approved Gaming, Inc.
39. Gaming Acquisition Corporation
40. GNF, Corp.
41. GNOC, Corp.
42. Grand Reservation Services, Inc.
43. Grand Resorts, Inc.
44. Hilton Gaming (Switzerland County) Corporation
45. Hilton/Holyoke L.L.C.*
46. Hilton Hotels Management, Inc.
47. Hilton New Orleans Corporation
48. Hilton Supersports, Inc.
49. HGSC (Delaware) Corporation
50. Jupiters Limited*
51. Las Vegas Hilton Corporation
52. LVH Corporation
53. MGM Grand-Bally's Monorail Limited Liability Co.*
54. Parball Corporation
55. Park Place Entertainment Corporation
56. Park Place Finance Corp.
57. Park Place Gaming (Switzerland County), L.L.C.
58. Park Place New Orleans, L.L.C.
59. Reno Hilton Resort Corporation
60. SKA Investments, L.L.C.
61. The BAC 1-11 Corporation
<PAGE>
SCHEDULE 6
CERTAIN RETAINED BUSINESS GROUP ASSETS
1. Challenger Airplane
2. New Jersey laundry facility
3. Hilton Insurance Company
4. Beverly Hills headquarters
5. Compass Computer Services
6. 50% interest in the entity managing the Casino Windsor
7. Interest in Strategic Alliances with Ladbroke Group PLC and its affiliates
(including joint ventures)
8. Rights to receive the portion of the Operator Fees allocable to advertising
and promotion under the international management agreements relating to the
Conrad Properties
9. The letters of credit issued by tour and travel companies to Hilton as
security for outstanding accounts receivable balances existing as of the
date hereof will cover such balances due Hilton with respect to the
Retained Business and Park Place with respect to the Gaming Business as of
the date hereof. Any amounts collected under any of these letters of credit
will be paid to each company prorata based on the relative balances due
Hilton with respect to the Retained Business and Park Place with respect to
the Gaming Business as of the date the subject letter of credit is
submitted for collection. The letters of credit will not cover any accounts
receivable balances due Park Place with respect to the Gaming Business for
any periods after the date hereof.
<PAGE>
SCHEDULE 7
RETAINED BUSINESS SUBSIDIARIES/RETAINED BUSINESS INVESTMENTS
1. 349 West 53rd Street Realty Corp.
2. Avenue Louise Hotel Partners S.N.C.
3. Bally's Grand, Inc.
4. Capital Hilton, LLC
5. Chicago Hilton Joint Venture
6. Compass Computer Services, Inc.
7. Conrad International (Belgium) Corporation
8. Conrad International (Cairo) Corporation
9. Conrad International (Egypt) Corporation
10. Conrad International (Indonesia) Corporation
11. Conrad International (Spain) Corporation
12. Conrad International (Thailand) Corporation
13. Conrad International (Thailand) Limited
14. Conrad International Hotels (HK) Ltd.
15. Conrad International Hotels Corporation
16. Conrad International Hotels Limited
17. Conrad International Investment Corporation
18. Conrad International Investment (Jakarta) Corporation
19. Conrad International Management Services (Singapore) PTE Ltd.
20. Conrad International Royalty Corporation
21. Conrad International Services
22. Destination Resort Affiliates*
23. Destination Resorts, Inc.
24. DFW Bevco, Inc.
25. DFW Hilton Hotel Limited Partnership
26. DFW Hilton, Inc.
27. Earlsfort Centre Hotel Proprietors Limited (*)
28. Flamingo Hilton Riverboat Casino, L.P.
29. Global Resort Partners*
30. Grand Vacations Realty, Inc.
31. Grand Vacations Realty, Limited
32. Grand Vacations Title, Limited
33. Hapeville Hotel Limited Partnership
34. Hapeville Investors, Inc.
35. HHC/PTC L.L.C.
36. Hilton Charlotte, Inc.
37. Hilton Chicago Corporation
- ---------------------
* Retained Business investments, not Subsidiaries.
<PAGE>
38. Hilton D.C. Corporation
39. Hilton Dallas, Inc.
40. Hilton Employee Relief Fund
41. Hilton Equipment Corporation
42. Hilton Finance Corporation
43. Hilton Fort Worth, Inc.
44. Hilton Grand Vacations Club, LLC
45. Hilton Grand Vacations Company, LLC
46. Hilton Grand Vacations Development Company-Las Vegas, LLC
47. Hilton Grand Vacations Development Company-Orlando, LLC
48. Hilton Grand Vacations Development Company-Las Vegas, JV
49. Hilton Grand Vacations Development Company-Orlando, JV
50. Hilton Grand Vacations Exchange Company
51. Hilton Hawaii Corporation
52. Hilton Hawaiian Village, LLC*
53. Hilton HHonors Worldwide, L.L.C.*
54. Hilton Holdings, Inc.
55. Hilton Hotels Partners I, Inc.
56. Hilton Hotels Partners II, Inc.
57. Hilton Hotels U.S.A., Inc.
58. Hilton Inns, Inc.
59. Hilton Insurance Corporation
60. Hilton Kansas City Corporation (1)
61. Hilton Marketing Worldwide, L.L.C.*
62. Hilton New Jersey Corporation
63. Hilton New York Corporation
64. Hilton Pennsylvania Hotel Corporation
65. Hilton Recreation, Inc.
66. Hilton Reservations Worldwide, L.L.C.*
67. Hilton Resorts Corporation
68. Hilton San Diego Corporation
69. Hilton San Francisco Corporation
70. Hilton Suites, Inc.
71. Hilton Systems, Inc.
72. Hilton Texas, Inc.
73. Hilton Washington Corporation
74. HKC Advertising, Inc.(1)
75. HKC Partners, Inc.(1)
- ----------------------
(1) Park Place has applied for approval from the state gaming authorities to
own and operate the riverboat casino relating to this entity, but does not
expect to receive this approval prior to the Distribution. In this case,
Hilton will retain the property and cooperate with Park Place to transfer
the property to Park Place or take other appropriate action to put Park
Place in the same position it would have been in if the transfer had
occurred.
<PAGE>
76. HLT Corporation
77. Hotels Statler Company, Inc.
78. International Company for Touristic Investments, S.A.E.*
79. International Rivercenter Partnership*
80. Kenner Hotel Limited Partnership
81. Kenner Investors, Inc.
82. Logan Hilton Joint Venture
83. McLean Hotel Associates, Limited Partnership
84. MeriTex, L.L.C.*
85. New Orleans International Hotel*
86. New Orleans Rivercenter*
87. New York Hilton Joint Venture
88. Oakbrook Hilton Suites and Garden Inn LLC*
89. On Command Corporation*
90. Paris Casino Corp.
91. P.T. Jakarta International Artha*
92. Rye Hilton, LLC
93. San Francisco Hilton, L.P.
94. Tarrytown Hilton Joint Venture
95. The Beverly Hilton Corporation
96. The Hotel Waldorf-Astoria Corporation
97. The New Yorker Hotel Corporation
98. The Palmer House Hilton Hotel Company
99. Valencia Hotel Joint Venture*
100. Washington Hilton, L.L.C.
101. Windsor Casino Financial Limited*
102. Windsor Casino Limited*
103. Windsor Casino Supplies Limited*
104. Yeditepe Beynelmilel Otelcilik Turizm Ve Ticaret, A.S.*
<PAGE>
SCHEDULE 8
RETAINED CORPORATE FUNCTIONS
- - Corporate treasury
- - Corporate accounting (including payroll) and central accounting
- - Internal audit
- - Tax
- - Corporate affairs
- - Legal
- - Human resources (including employee benefits administration)
- - Risk management functions (including claims administration)
- - Certain equipment purchasing and procurement functions
- - Subject to the terms of the Architecture and Construction Services
Agreement between Hilton and Park Place, architectural and
construction management services
- - Corporate Information Services
<PAGE>
SCHEDULE 9
RETAINED CREDIT AGREEMENT DEBT AMOUNT
$0.00 (subject to adjustment as set forth in the Agreement).
<PAGE>
SCHEDULE 10
EXCEPTIONS TO RESIGNATIONS REQUIRED UNDER SECTION 6.02
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
NAME OF OFFICER, DIRECTOR POSITION(S) PRIOR TO THE POSITION(S) FOLLOWING
OR EMPLOYEE DISTRIBUTION DATE THE DISTRIBUTION DATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
1. A. Steven Crown Director of Hilton Director of Hilton;
Director of Park Place
- ------------------------------------------------------------------------------------------------
2. Barron Hilton Director of Hilton Director of Hilton;
Director of Park Place
- ------------------------------------------------------------------------------------------------
3. Eric Hilton Director of Hilton Director of Park Place
- ------------------------------------------------------------------------------------------------
4. Duncan McKenzie President and Treasurer President and Treasurer
of Hilton Kansas City of Hilton Kansas City
Corporation; President Corporation; President
and Treasurer of HKC and Treasurer of HKC
Partners, Inc. Partners, Inc.
- ------------------------------------------------------------------------------------------------
5. Wallace R. Barr Executive Vice President, Executive Vice
Secretary and Director of President, Secretary and
Hilton Kansas City Director of Hilton
Corporation; Executive Kansas City Corporation;
Vice President, Secretary Executive Vice
and Director of HKC President, Secretary and
Partners, Inc. Director of HKC
Partners, Inc.
- ------------------------------------------------------------------------------------------------
6. Arthur M. Goldberg Director of Hilton Kansas Director of Hilton
City Corporation Kansas City Corporation
- ------------------------------------------------------------------------------------------------
7. Matthew J. Hart Director of HKC Partners, Director of HKC
Inc. Partners, Inc.
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 11
OFF PREMISE CONTACT ("OPC") TERM SHEET
Number of OPC's: There will be one OPC for the first 1,499 rooms and an
additional OPC for each incremental 1,000 rooms.
Rent: Rent will be the greater of the Base Rent or the Percentage
Rent. The Base Rent is $100 per available room per year (in
1998 dollars), regardless of how many OPC's are at the
hotel. The Base Rent will be adjusted into current year
dollars at the beginning of each term using the growth of
the CPI Index with 1998 as the base year. The Percentage
Rent will be 4% of Net Timeshare Unit Sales (net of first
day incentives, closing costs and documentary stamps). The
Rent will be paid monthly but will be calculated on an
annual basis.
Term: The Initial Term will be five years. At HGVC's option the
lease may be extended for up to three Additional Terms of
three years each.
Termination: HGVC will have the option to terminate the lease after two
years if for two consecutive years the Base Rent is greater
than 6% of Net Timeshare Unit Sales. If HGVC elects to
terminate the lease and if Park Place desires to lease space
to a competitive timeshare operator, HGVC will waive its
right of first refusal for a period equal to the remaining
term of either the Initial Term or the Additional Term.
OPC Locations: Park Place must approve all OPC locations. Park Place will
use reasonable efforts to locate the OPC's in heavily
trafficked areas, which do not interfere with hotel and/or
casino operations. Park Place will have the right to move
the OPC to a similar location if necessitated by
construction or a change in hotel and/or casino operations.
Park Place will pay for all reasonable relocation costs.
Form of Lease: The lease will have similar terms and conditions as the
recently executed leases for the OPC's at Bally's, the
Flamingo Hilton and the Las Vegas Hilton.
<PAGE>
INDEX OF SCHEDULES
Schedule 1 Casino Hotels and Other Gaming Facilities
Schedule 2 Gaming Corporate Functions
Schedule 3 Certain Gaming Group Assets
Schedule 4 Gaming Group Cash Accounts
Schedule 5 Gaming Subsidiaries
Schedule 6 Certain Retained Business Group Assets
Schedule 7 Retained Business Subsidiaries
Schedule 8 Retained Corporate Functions
Schedule 9 Retained Credit Agreement Debt Amount
Schedule 10 Exceptions to Resignations Required under Section 6.02
Schedule 11 OPC Term Sheet
INDEX OF EXHIBITS
Exhibit A Assignment and License Agreement
Exhibit B Corporate Services Agreements
Exhibit C Employee Benefits and Other Employment Matters Allocation
Agreement
Exhibit D Debt Assumption Agreement
Exhibit E Tax Allocation and Indemnity Agreement
<PAGE>
DEBT ASSUMPTION AGREEMENT
This Debt Assumption Agreement (the "Agreement") is entered into this
31st day of December, 1998 between Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), and Park Place Entertainment Corporation, a Delaware
corporation and indirect wholly-owned subsidiary of Hilton ("Park Place").
RECITALS
WHEREAS, Hilton and Park Place have entered into a Distribution
Agreement dated as of December 31, 1998, which provides for among other things,
(i) the distribution (the "Distribution") to the holders of Hilton's outstanding
shares of common stock, par value $2.50 per share (the "Common Stock"), on a
one-for-one basis, of all the outstanding shares of common stock, par value $.01
per share, of Park Place (the "Park Place Common Stock"), (ii) the division
between Hilton and Park Place of certain assets and liabilities and (iii)
certain other agreements governing the relationship between Hilton and Park
Place following the Distribution;
WHEREAS, Hilton has entered into an indenture dated as of April 15,
1997 (the "Indenture") with BNY Western Trust Company, as trustee (the
"Trustee"), pursuant to which Hilton may issue debt securities in series from
time to time;
WHEREAS, Hilton has outstanding $300 million aggregate principal
amount of 7.375% Senior Notes due 2002 (the "2002 Notes"), issued pursuant to
the Indenture, as supplemented by terms established pursuant to a Board
Resolution (as defined in the Indenture) adopted on May 28, 1997 and set forth
in an Officer's Certificate (the "2002 Officer's Certificate" and, together with
the Indenture, the "2002 Indenture");
WHEREAS, Hilton has outstanding $325 million aggregate principal
amount of 7% Senior Notes due 2004 (the "2004 Notes" and, together with the 2002
Notes, the "Notes") issued pursuant to the Indenture, as supplemented by terms
established pursuant to a Board
<PAGE>
Resolution adopted on July 17, 1997 and set forth in an Officer's Certificate
(the "2004 Officer's Certificate" and, together with the Indenture, the "2004
Indenture") (the 2002 Indenture and the 2004 Indenture being referred to
collectively herein as the "Indentures"); and
WHEREAS, the Distribution Agreement provides that Park Place shall
enter into this Agreement on or prior to the date on which the Distribution is
effected (the "Distribution Date"), in order to provide for the assumption of
obligations set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants set forth herein, the parties hereby agree as follows:
SECTION 1. CAPITALIZED TERMS.
Capitalized terms used herein, and not defined herein, shall have the
meanings ascribed to such terms in the Indentures.
SECTION 2. EXECUTION OF THE SUPPLEMENTAL INDENTURE.
Park Place and Hilton agree to amend the terms of the Indentures by
executing the First Supplemental Indenture in the form attached hereto as
Exhibit A (the "Supplemental Indenture") on the Distribution Date, which
Supplemental Indenture will serve to amend the 2002 Indenture with respect to
the 2002 Notes and the 2004 Indenture with respect to the 2004 Notes. The
Supplemental Indenture will not amend the Indenture with respect to any other
series of Debt Securities that Hilton has issued or may issue pursuant to the
Indenture. Hilton agrees to deliver to the Trustee an Officer's Certificate and
an Opinion of Counsel, in form and substance satisfactory to the Trustee,
stating that the execution of the Supplemental Indenture is permitted pursuant
to section 11.01 of the Indenture. Park Place and Hilton agree to take all such
other action as may be reasonably necessary to cause the Trustee to execute the
Supplemental Indenture.
2
<PAGE>
SECTION 3. PARK PLACE PAYMENT OBLIGATION.
Pursuant to the Supplemental Indenture, Park Place will assume
responsibility for, and agree to pay, one hundred percent (100%) of the amount
of each payment required to be made by Hilton to Holders of Notes pursuant to
the terms of the Indentures and the Notes with respect to the principal of (and
premium, if any) and interest on the Notes (the "Park Place Payment
Obligations"). Under the circumstances set forth below, Park Place shall be
entitled to certain payments from Hilton.
SECTION 4. HILTON OBLIGATIONS.
Any payments by Park Place in satisfaction of the Park Place Payment
Obligations shall be deemed to relieve Hilton of its obligations under the
Indentures to the extent of such payments by Park Place. Subject to the Park
Place Payment Obligations, Hilton shall retain all of its obligations with
respect to payments under the Indentures with respect to the Notes, including,
without limitation, the obligation to make payment of the Park Place Payment
Obligations in the event Park Place fails to make any such payments as provided
in Section 3.
SECTION 5. DIRECT PAYMENT BY HILTON.
Upon a default by Park Place in the Park Place Payment Obligations,
Hilton shall have the right to pay all or any portion of the Park Place Payment
Obligations directly to the Paying Agent or the Trustee. In such event, Park
Place shall be required to pay to Hilton upon demand any amounts paid by Hilton
in satisfaction of the Park Place Payment Obligations, together with interest on
any such amounts at the rate per annum borne by the applicable Notes plus 2% per
annum, calculated from the date such payment was due from Park Place under the
applicable Indenture to the date such payment is made by Park Place to Hilton.
3
<PAGE>
SECTION 6. HILTON REIMBURSEMENT OBLIGATION.
In the event of an Acquisition Related Rating Change, Hilton shall be
required to pay to Park Place, as such amounts become due under the applicable
Notes, the increase in the interest rate on the Notes attributable to such
Acquisition Related Rating Change.
SECTION 7. EVENT OF DEFAULT BY HILTON.
If Hilton creates an Event of Default under the Indentures and the
Notes are accelerated in accordance with the terms of the applicable Indenture
as a result thereof, Park Place will have the option to require Hilton to loan
it an amount sufficient to make such payments. In such event, Park Place will
repay such loan to Hilton on the schedule it would have adhered to for payments
on the Notes if no acceleration had occurred.
SECTION 8. OBLIGATION TO REPURCHASE OR DEFEASE NOTES.
If Park Place fails to pay any of the Park Place Payment Obligations
as and when payment of any principal of (or premium, if any) or interest on the
Notes is due, and any grace period with respect to such payment provided in the
Indenture has expired (or if Hilton pays any of such principal, premium or
interest and Park Place does not repay such amount to Hilton pursuant to Section
5 hereof within ten (10) days after demand therefor is made by Hilton), then, in
either case, upon the written request of Hilton, Park Place shall, within 90
days after it receives such written request, either (i) repurchase all of the
outstanding Notes and pay all accrued and unpaid interest thereon and other
amounts payable with respect thereto to the Persons entitled to such payment, or
(ii) defease the obligations of Hilton and Park Place under all of the
outstanding Notes pursuant to Article Fifteen of the Indenture, it being
understood that Park Place may elect either the "legal defeasance option" or the
"covenant defeasance option" (both as defined in Section 15.02 of the
Indenture), so long as Park Place satisfies all of the conditions precedent to a
defeasance pursuant to the option so elected that are set forth in the
Indentures.
4
<PAGE>
SECTION 9. COVENANTS.
Park Place agrees with Hilton to comply with the following covenants
for the sole benefit of Hilton and for so long as it is obligated to make the
Park Place Payment Obligations. Hilton's remedies upon a breach of the
following covenants by Park Place are set forth in Section 9(e) below. Certain
defined terms used below are set forth on Exhibit B hereto.
(a) LIMITATIONS ON LIENS. Other than as set forth in Section 9(c)
below, neither Park Place nor any Restricted Subsidiary will create, assume or
suffer to exist any Lien (i) upon any Principal Property, (ii) upon any shares
of capital stock of any Restricted Subsidiary owned by Park Place or any
Restricted Subsidiary or (iii) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the Notes with (or prior to) the Debt
secured by such Lien, for so long as such Debt shall be so secured, PROVIDED,
HOWEVER, that this limitation will not apply to (a) Liens existing on the date
of issuance of the Notes or on the date of the assumption by Park Place of the
payment obligations under the Indentures governing the Notes; (b) Liens existing
(i) on property at the time of acquisition thereof by Park Place or a Restricted
Subsidiary (whether such property is acquired through a merger, a consolidation
or otherwise), or (ii) on property or securing Debt of, or an equity interest
in, any corporation, partnership or other entity at the time such corporation,
partnership or other entity becomes a Restricted Subsidiary; (c) Liens to secure
Debt with respect to all or any part of the acquisition cost or the cost of
construction or improvement of property, PROVIDED, such Debt is incurred and
related Liens are created within 24 months of the acquisition, completion of
construction or improvement or commencement of full operation, whichever is
later, and such Debt does not exceed the aggregate amount of the acquisition
cost and/or the construction cost thereof; (d) Liens on shares of capital stock
or property of a Restricted Subsidiary to secure Debt with respect to all or
part of
5
<PAGE>
the acquisition cost of such Restricted Subsidiary, PROVIDED that such
Debt is incurred and related Liens are created within 24 months of the
acquisition of such Restricted Subsidiary and such Debt does not exceed the
acquisition cost of such Restricted Subsidiary; (e) Liens to secure Debt
incurred to construct additions to, or to make Capital Improvements to,
properties of Park Place or any Restricted Subsidiary, PROVIDED such Debt is
incurred and related Liens are created within 24 months of completion of
construction or Capital Improvements and such indebtedness does not exceed the
cost of such construction or Capital Improvements; (f) Liens in favor of Park
Place or another Restricted Subsidiary; (g) Liens to secure Debt on which
interest payments are exempt from Federal income tax under Section 103 of the
Internal Revenue Code of 1986, as amended; (h) Liens on the capital stock,
partnership or other equity interests of Park Place or any Restricted Subsidiary
in any Joint Venture or any Restricted Subsidiary which owns an equity interest
in such Joint Venture to secure Debt, PROVIDED the amount of such Debt is
contributed and/or advanced solely to such Joint Venture; (i) any extension,
renewal or replacement, in whole or in part, of any Liens referred to in the
foregoing clauses (a) through (h) or of any Debt secured thereby, including
premium, if any, PROVIDED that the aggregate principal amount secured does not
exceed (x) the greater of (i) the principal amount secured thereby at the time
of such extension, renewal or replacement, or, as the case may be, repayment or
extinguishment and (ii) 80% of the fair market value (in the opinion of Park
Place's board of directors) of the properties subject to such extension, renewal
or replacement plus (y) any reasonable fees and expenses associated with such
extension, renewal or replacement, and PROVIDED, FURTHER, that in the case of a
replacement thereof, such Debt is incurred and related Liens are created within
24 months of the repayment or extinguishment of the Debt or Liens referred to in
the foregoing clauses (a) through (h); (j) purchase money liens on personal
property; (k) Liens to secure payment of
6
<PAGE>
workers' compensation or insurance premiums, or relating to tenders, bids or
contracts (except contracts for the payment of money); (l) Liens in
connection with tax assessments or other governmental charges, or as security
required by law or governmental regulation as a condition to the transaction
of any business or the exercise of any privilege or right; (m) mechanic's,
materialman's, carrier's or other like Liens, arising in the ordinary course
of business; and (n) Liens in favor of any domestic or foreign government or
governmental body in connection with contractual or statutory obligations.
(b) LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as
provided in Section 9(c) below, neither Park Place nor any Restricted Subsidiary
will enter into any arrangement with any lessor (other than Park Place or a
Restricted Subsidiary), providing for the lease to Park Place or a Restricted
Subsidiary for a period of more than three years (including renewals at the
option of the lessee) of any Principal Property that has been or is to be sold
or transferred by Park Place or such Restricted Subsidiary to such lessor or to
any other Person, and for which funds have been or are to be advanced by such
lessor or other Person on the security of the leased property ("Sale and
Lease-Back Transaction"), unless either (a) Park Place or such Restricted
Subsidiary would be entitled, pursuant to the provisions described in clauses
(a) through (n) of the proviso of Section 9(a), to create, assume or suffer to
exist a Lien on the property to be leased without equally and ratably securing
the Notes, or (b) an amount equal to (i) the greater of the net cash proceeds of
such sale or the fair market value of such property (in the opinion of Park
Place's board of directors) less (ii) the fair market value (in the opinion of
Park Place's board of directors) of any noncash proceeds of the sale of such
property (PROVIDED such noncash proceeds constitute "Principal Property,"
acquired on the date the property sold in the Sale and Lease-Back Transaction
was acquired by Park Place or any of its Restricted
7
<PAGE>
Subsidiaries), is applied within 180 days to the retirement or other
discharge of the Notes or Debt ranking on a parity with the Notes.
(c) EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS.
Notwithstanding the restrictions set forth in Sections 9(a) and 9(b) above, Park
Place or any Restricted Subsidiary may create, assume or suffer to exist Liens
or enter into Sale and Lease-Back Transactions not otherwise permitted as
described in Sections 9(a) and 9(b) above, PROVIDED that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted in Section 9(a)) plus all Attributable
Debt in respect of such Sale and Lease-Back Transactions entered into (not
including Sale and Lease-Back Transactions permitted in Section 9(b)), measured,
in each case, at the time any such Lien is incurred or any such Sale and
Lease-Back Transaction is entered into, by Park Place and Restricted
Subsidiaries does not exceed 15% of Consolidated Net Tangible Assets.
(d) LIMITATION ON MERGER, CONSOLIDATION AND TRANSFER OF ASSETS. Park
Place shall not consolidate with, merge with or into, or sell, assign, convey,
transfer or lease its properties and assets substantially in their entirety
(computed on a consolidated basis) to any Person unless:
(1) either (A) Park Place is the surviving entity or (B) the
successor or transferee (the "Successor Corporation") is a corporation organized
and existing under the laws of the United States, any State thereof or the
District of Columbia and shall expressly assume all of the obligations of Park
Place in this Agreement and the Supplemental Indenture; and
(2) immediately after giving effect to such transaction, Park
Place or the Successor Corporation, as the case may be, is not in default on its
obligations under the Agreement or the Supplemental Indenture.
8
<PAGE>
Upon any consolidation with or merger with or into any other
corporation, or any sale, assignment, conveyance, transfer or lease of the
properties and assets of Park Place substantially in their entirety in
accordance with this Section 9(d), the Successor Corporation formed by such
consolidation or into which Park Place is merged or to which such sale,
assignment, conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, Park Place under
this Agreement with the same effect as if such Successor Corporation had been
named as Park Place herein.
(e) BREACH OF COVENANTS BY PARK PLACE. If Park Place either (i)
breaches any of the covenants set forth in this Section 9 after written
notice by Hilton and the continuance of such default for 60 days, or (ii)
fails to pay any Park Place Payment Obligations as and when such payment is
due, then Hilton shall have the right to require that Park Place or the
Successor Corporation, as the case may be, set aside the remaining payments
due on the Notes in an escrow account for the benefit of Hilton. Park Place
will make scheduled payments to Holders of Notes from such escrow account.
If Park Place fails to make such payments from the escrow account, Hilton
shall be entitled to direct the Trustee to make scheduled payments due from
Park Place to Holders of Notes from such escrow account. If Park Place cures
such default and is otherwise in compliance with the Park Place Payment
Obligations, Park Place shall be entitled to the repayment of the amount
remaining in such escrow account.
SECTION 10. DEFEASANCE AND TENDER OFFERS.
(a) In the event Hilton wishes to repurchase or defease any or all
of the Notes at its option (other than pursuant to Section 10(b) hereof),
Hilton will loan Park Place the funds sufficient to permit Park Place to
effect such repurchase or defeasance. In such event, Park Place will repay
such loan, but the amount of such repayment shall not exceed, and will be
made on the
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same schedule as, the payments Park Place would have made on the Notes if no
repurchase or defeasance had occurred.
(b) In the event that Park Place fails to perform its obligation
to repurchase or defease the outstanding Notes pursuant to Section 8 hereof,
Hilton may effect such repurchase or defeasance. In such event, Park Place
will repay to Hilton, upon demand, the aggregate amount of cash and cash
equivalents applied by Hilton to effect such repurchase or defeasance,
together with interest on such amount at the rate per annum borne by the
applicable notes plus 2% per annum, calculated from the date of such
repurchase or defeasance to the date such payment is made by Park Place to
Hilton.
(c) In the event Park Place wishes to repurchase or defease any or
all of the Notes at its option it may do so and shall be responsible for any
payments required thereunder. Hilton agrees to provide the necessary
cooperation required from it as the original obligor on the Notes to effect
such repurchase or defeasance.
SECTION 11. NOTICE TO HOLDERS OF NOTES.
Hilton shall deliver a notice to Holders of Notes, reasonably
satisfactory in form and substance to Park Place, within 30 days following
the Distribution Date that describes the matters set forth in the
Supplemental Indenture.
SECTION 12. CERTAIN REPRESENTATIONS.
Each party hereto represents to the other party hereto that this
Agreement is enforceable against such party in accordance with its terms.
SECTION 13. COMPLIANCE WITH INDENTURES.
(a) Hilton agrees to comply with all of its obligations under the
Indentures and the Supplemental Indentures, and not to take any action that
would cause an Event of Default under the Indentures.
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(b) Park Place agrees to comply with all of its obligations under
the Indentures and the Supplemental Indenture, and not to take any action
that would cause an Event of Default under the Indentures.
SECTION 14. AMENDMENT OF INDENTURES AND SUPPLEMENTAL INDENTURE.
Hilton agrees that it will not amend the Supplemental Indenture or
either of the Indentures with respect to the Notes without the prior written
consent of Park Place (which consent shall not be unreasonably withheld)
except to (i) evidence the succession of another entity in place of Hilton as
permitted by the Indentures or (ii) in the event Hilton is required to secure
the Notes under applicable provisions of the Indentures. Hilton may amend
the Indenture without the consent of Park Place with respect to any Debt
Securities other than the Notes.
SECTION 15. REMEDIES.
Hilton and Park Place acknowledge and agree that money damages
would be inadequate relief for any breach or threatened breach of their
obligations hereunder, and that either party shall be entitled to injunctive
or other equitable relief for any breach or threatened breach.
SECTION 16. SEVERABILITY.
The invalidity or partial invalidity or unenforcability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provisions.
SECTION 17. CHOICE OF LAW.
THIS AGREEMENT SHALL BE CONSTRUED UNDER AND ENFORCED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
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SECTION 18. ATTORNEY'S FEES.
If either party commences an action against the other with respect
to this Agreement, the prevailing party in such action shall be entitled to
an award of reasonable costs and expenses of litigation, including reasonable
attorneys' fees, to be paid by the non-prevailing party.
SECTION 19. ENTIRE AGREEMENT.
This Agreement and the Supplemental Indenture constitute the entire
agreement and understanding between the parties with respect to its subject
matter, are intended as a complete and exclusive statement of the terms of
their agreement with respect to the Notes and supersede any prior or
contemporaneous agreement or understanding related to the subject matter
hereof. To the extent that there is any conflict between the terms of the
Indentures and the Supplemental Indenture and the terms of this Agreement,
the terms of the Indentures and the Supplemental Indenture shall control.
SECTION 20. AMENDMENTS.
This Agreement may not be amended, supplemented or modified in any
respect except by written agreement between the parties, duly signed by their
respective authorized representatives, PROVIDED, that a Successor Corporation
may assume the obligations of Park Place hereunder in accordance with the
terms set forth in Section 9(d) and a successor corporation (as defined in
the Indenture) may assume the obligations of Hilton hereunder so long as in
connection therewith Hilton has complied with the provisions of Section 10.01
of the Indenture.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all such counterparts together shall
constitute but one and the same instrument.
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SECTION 22. WAIVER.
Either party may specifically waive any breach of this Agreement by
the other party, but no such waiver shall be deemed effective unless in
writing, signed by the waiving party, and specifically designating the breach
waived. No waiver shall constitute a continuing waiver of similar or other
breaches.
SECTION 23. NOTICES.
Any notice required or permitted hereunder shall be delivered in
the manner set forth in Section 1.05 of the Indentures.
SECTION 24. HEADINGS.
The descriptive headings of the several Sections of this Agreement
are for convenience only and do not constitute a part of the Agreement or
affect its meaning or interpretation.
SECTION 25. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement by the parties
hereto shall bind their respective successors and assigns and inure to the
benefit of their permitted successors and assigns.
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IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this Agreement as of the date first written above.
HILTON HOTELS CORPORATION
By: /s/ Mathew J. Hart
------------------------------
Its: Executive Vice President and Chief Financial Officer
-----------------------------
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
------------------------------
Its: Executive Vice President and Chief Financial Officer
-----------------------------
S-1
<PAGE>
Exhibit A
[First Supplemental Indenture]
A-1
<PAGE>
Exhibit B
DEFINED TERMS
"Acquisition Event" means a transaction or series of transactions that
constitute related steps that are part of a single transaction, with respect
to which a Public Notice has been given at any time on or before July 22,
2000,(1) the aggregate consideration of which exceeds $1,000,000,000, and
which involves a merger or consolidation, whether direct or indirect, of any
Person, with or into Hilton or of Hilton with or into any Person, or any
sale, transfer or other conveyance, whether direct or indirect, of any assets
of any Person to Hilton or of substantially all of the assets of Hilton to
any Person.
"Acquisition Related Rating Change" means the occurrence on or within 90
days after the date of a Public Notice (which period shall be extended so
long as the rating of Hilton's senior unsecured debt is (i) under review by
Moody's Investors Service, Inc., other than for possible upgrade or (ii) on
CreditWatch by Standard & Poor's Ratings Group, other than with positive
implications) of a decrease in the rating of Hilton's senior unsecured debt
by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group
attributable in whole or in part, directly or indirectly, to an Acquisition
Event.
"Attributable Debt" with respect to any Sale and Lease-Back Transaction
that is subject to the restrictions described in Exhibit C means the present
value of the minimum rental payments called for during the term of the lease
(including any period for which such lease has been extended), determined in
accordance with generally accepted accounting principles, discounted at a
rate that, at the inception of the lease, the lessee would have incurred to
borrow over a similar term the funds necessary to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of Park Place and its subsidiaries
(less applicable depreciation, amortization and other valuation reserves)
after deducting therefrom (a) all current liabilities of Park Place and its
subsidiaries (excluding (i) the current portion of long-term indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their
terms renewable or extendible at the option of the obligor thereon to a time
more than 12 months from the time as of which the amount thereof is being
computed) and (b) all goodwill, trade names, trademarks, patents, unamortized
debt discount and any other like intangibles, all as set forth on the most
recent consolidated balance sheet of Park Place and computed in accordance
with generally accepted accounting principles.
________________
(1) This date applies to the 7% Senior Notes due 2004. In the case of the
7.375% Senior Notes due 2002, such date is June 2, 2000.
B-1
<PAGE>
"Debt" means notes, bonds, debentures or other similar evidences of Debt
for borrowed money or any guarantee of any of the foregoing.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interest, outstanding voting
stock or other equity interest is owned, directly or indirectly, by Park
Place and/or one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets
of Park Place.
"Public Notice" means a written press release, governmental filing or
statement of a representative of Hilton reported in the media announcing that
Hilton has engaged, will engage, intends or seeks to engage in an Acquisition
Event.
"Restricted Subsidiary" means any Subsidiary of Park Place organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property
or (y) in which the investment of Park Place and all its Subsidiaries exceeds
5% of Consolidated Net Tangible Assets as of the date of such determination
other than, in the case of either clause (x) or (y), (i) each Subsidiary
whose business primarily consists of finance, banking, credit, leasing,
insurance, financial services or other similar operations, or any combination
thereof, (ii) each Subsidiary formed or acquired after the date hereof for
the purpose of developing new assets or acquiring the business or assets of
another Person and which does not acquire any part of the business or assets
of Park Place or any Restricted Subsidiary and (iii) Subsidiaries whose
principal business is conducting any Park Place timeshare business.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect
a majority of the directors of such corporation is, at the time, directly or
indirectly, owned by Park Place or by one or more Subsidiaries thereof, or by
Park Place and one or more Subsidiaries.
B-2
<PAGE>
ASSIGNMENT AND LICENSE AGREEMENT
THIS ASSIGNMENT AND LICENSE AGREEMENT (this "AGREEMENT") is made
and entered into as of this 31st day of December, 1998 by and among HILTON
HOTELS CORPORATION, a Delaware corporation ("HILTON"), CONRAD INTERNATIONAL
ROYALTY CORPORATION, a Nevada corporation ("CRC") and PARK PLACE
ENTERTAINMENT CORPORATION (f/n/a Gaming Co., Inc.), a Delaware corporation
("PARK PLACE"). Hilton and CRC shall sometimes be collectively referred to
herein as "LICENSORS."
RECITALS
WHEREAS, Hilton, directly and through its subsidiaries, owns,
operates and develops certain gaming facilities (the "GAMING BUSINESS"), and
owns, operates and develops lodging properties and engages in franchising of
lodging properties (the "RETAINED BUSINESS");
WHEREAS, the Board of Directors of Hilton has determined that it is
in the best interests of Hilton and the stockholders of Hilton to separate
the Gaming Business from the Retained Business through the distribution (the
"DISTRIBUTION") to the holders of Hilton's common stock of all of the
outstanding shares of Park Place's common stock;
WHEREAS, in order to effect such separation, Hilton and Park Place
have entered into that certain Distribution Agreement, dated December 31,
1998 (the "DISTRIBUTION AGREEMENT"), pursuant to which Hilton will contribute
to Park Place and/or its subsidiaries, prior to the Distribution, all of the
operations, assets and liabilities of Hilton and the Retained Business
Subsidiaries (as defined below) comprising the Gaming Business;
WHEREAS, Schedule A hereto lists certain federal and state
registered trademarks and service marks, and certain trademarks and service
marks for which registration is pending, that are owned by Hilton and certain
Retained Business Subsidiaries and that are used primarily in the Gaming
Business (the "ASSIGNED MARKS"), including without limitation the marks
"Flamingo" and "Bally's," and any other marks obtained by Hilton or its
Subsidiaries as a result of the Bally's Acquisition (as defined below), to
the extent still held by Hilton or its Subsidiaries;
WHEREAS, the name and mark "Hilton" and certain variations thereof,
including certain related service marks, marks of origin, insignia, slogans,
emblems, symbols and other identifying characteristics, whether or not
registered in any jurisdiction (the "HILTON MARK"), is owned by Hilton in the
United States and is used primarily in the Retained Business but is also used
in the Gaming Business. The primary Hilton Mark is set forth in Schedule B
hereto, as such schedule may be modified from time to time;
WHEREAS, the name and mark "Conrad," and certain variations thereof
including certain related service marks, marks of origin, insignia, slogans,
emblems, symbols and other identifying characteristics, whether or not
registered in any jurisdiction, and as may be modified from time to time (the
"CONRAD MARK"), is owned by CRC, and is used primarily in the Retained
Business but is also used in the Gaming Business. The primary Conrad Mark is
set forth in Schedule C hereto, as such schedule may be modified from time to
time;
<PAGE>
WHEREAS, Hilton and the Hilton Parties (as defined below) desire to
assign and transfer to Park Place and the Gaming Subsidiaries (as defined
below), and Park Place and the Gaming Subsidiaries desire to acquire, (i) all
of the right, title and interest of Hilton and the Retained Business
Subsidiaries in and to the Assigned Marks and (ii) the rights to receive
license fees from third parties pursuant to certain license agreements with
respect to the usage of the Conrad Mark at certain properties;
WHEREAS, Hilton desires to license to the Park Place Parties (as
defined below) the right to use the Hilton Mark in connection with the
operation of certain casino hotels in the United States and the Park Place
Parties desire to license the Hilton Mark from Hilton, in accordance with the
terms of this Agreement; and
WHEREAS, CRC desires to license to the Park Place Parties the right
to use the Conrad Mark in connection with the operation of three casino
hotels and the Park Place Parties desire to license the Conrad Mark from CRC,
in accordance with the terms of this Agreement. The Hilton Mark and the
Conrad Mark are sometimes collectively referred to herein as the "LICENSED
MARKS."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Licensors and Park
Place agree as follows:
1. DEFINITIONS. As used herein, the following terms have the
meanings set forth below:
"ASSIGNED MARKS" has the meaning set forth in the Recitals.
"ASSIGNED RIGHTS" has the meaning set forth in Section 2.
"BALLY'S ACQUISITION" shall mean the acquisition of Bally Entertainment
Corporation by Hilton, which was effected on December 19, 1996.
"CRC" has the meaning set forth in the Recitals.
"CONRAD INTERNATIONAL MANAGEMENT AGREEMENTS" shall mean the agreements
under which an affiliate of CRC manages the Conrad Properties.
"CONRAD LICENSE AGREEMENTS" has the meaning set forth in Section 2(a).
"CONRAD MARK" has the meaning set forth in the Recitals.
"CONRAD PROPERTIES" means Conrad Jupiters, Gold Coast (Australia),
Conrad International Treasury Casino, Brisbane (Australia) and Conrad
International Punta del Este.
"DISTRIBUTION AGREEMENT" has the meaning set forth in the Recitals.
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<PAGE>
"DISTRIBUTION DATE" has the meaning set forth in the Distribution
Agreement.
"EXPENSES" has the meaning set forth in Section 8.
"GAMING BUSINESS" has the meaning set forth in the Recitals.
"GAMING SUBSIDIARIES" has the meaning set forth in the Distribution
Agreement.
"HRW TERMS" shall mean the terms and conditions applicable to all hotels
participating in Hilton Reservations Worldwide as set forth in Annex A, as
such terms and conditions may be modified from time to time by Hilton
Reservations Worldwide, L.L.C.
"HILTON" has the meaning set forth in the Preamble.
"HILTON CASINO HOTELS" shall mean Reno Hilton, Las Vegas Hilton,
Atlantic City Hilton, Flamingo Hilton - Reno, Flamingo Hilton - Laughlin, and
Flamingo Hilton - Las Vegas.
"HILTON INDEMNITEES" has the meaning set forth in Section 8.
"HILTON MARK" has the meaning set forth in the Recitals.
"HILTON PARTIES" means Hilton and the Retained Business Subsidiaries.
"HILTON RESERVATIONS WORLDWIDE" shall mean the central reservation
system operated by Hilton Reservations Worldwide, L.L.C. which provides
reservation services to participating hotels.
"HHONORS PROGRAM" shall mean the frequent guest program operated by
Hilton HHonors Worldwide, L.L.C. which allows members to earn point credits
redeemable for various travel related rewards.
"HHONORS TERMS" shall mean the terms and conditions applicable to all
hotels participating in the HHonors Program, as such terms and conditions may
be modified from time to time by Hilton HHonors Worldwide, L.L.C.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.
"INDEMNITOR" has the meaning set forth in Section 8.
"INITIAL TERM" has the meaning set forth in Section 4.
"INJUNCTION" shall mean the Final Judgment of Permanent Injunction
entered on November 1, 1995 by the United States District Court for the
Southern District of New York in the action HILTON INTERNATIONAL CO. V.
HILTON, ET AL. (Civil Action No. 91 Civ. 751 (JFK)) in the form attached
hereto as Exhibit A.
"LICENSE" has the meaning set forth in Section 3.
"LICENSED MARKS" has the meaning set forth in the Recitals.
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"LICENSORS" has the meaning set forth in the Preamble.
"NET ROOM REVENUES" shall mean total room revenues excluding revenue
attributable to complimentary rooms.
"OTHER HOTELS" shall mean Bally's Las Vegas, Bally's Park Place,
Paris-Las Vegas, and any other hotels now or hereafter owned, operated,
managed or acquired by any Park Place Party.
"PARK PLACE" has the meaning set forth in the Preamble.
"PARK PLACE PARTIES" means Park Place and the Gaming Subsidiaries, while
such Persons remain Subsidiaries of Park Place.
"PARK PLACE PARTY INDEMNITEE" has the meaning set forth in Section 8.
"PERSON" means any individual, corporation, partnership, association,
trust company or other entity or organization, including any government
entity or authority.
"PROCEEDING" has the meaning set forth in Section 8.
"RETAINED BUSINESS" has the meaning set forth in the Recitals.
"RETAINED BUSINESS SUBSIDIARIES" has the meaning set forth in the
Distribution Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, (a) each
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person owns, either directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or
similar governing body of such corporation, partnership, joint venture or
other legal entity and (b) each partnership or limited liability company in
which such Person or another Subsidiary of such Person is the general
partner, managing partner or other otherwise controls.
2. ASSIGNMENT OF MARKS AND LICENSES.
(a) Without representation or warranty of any kind, express
or implied, and subject to all existing licenses, the Hilton Parties hereby
grant and assign to Park Place all of their right, title and interest in and
to (i) the Assigned Marks, (ii) all federal, state and foreign registrations
related to the Assigned Marks and all pending applications therefor, (iii)
all statutory, common law, equitable and civil law rights (whether arising
under federal, state or foreign law) related to the Assigned Marks, (iv) all
of the goodwill associated with the Assigned Marks, (v) all rights to income,
royalties, license and franchise fees and any other payments now or hereafter
due or payable with respect to the Assigned Marks, including without
limitation all damages and payments for past, present and future
infringements thereof, (vi) the right to sue for, and all rights of recovery
with respect to, all past, present and future infringements of the Assigned
Marks, (vii) all rights of the Hilton Parties under all license agreements
with respect to the Assigned Marks, (viii) all other rights and privileges
pertaining to or associated with the Assigned Marks throughout the world, the
same to be held and enjoyed by Park Place as fully as
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<PAGE>
the same would have been held and enjoyed by the Hilton Parties had this
assignment not have been made and (ix) all rights of CRC to receive license
fees under the license agreements (the "CONRAD LICENSE AGREEMENTS") which
license the Conrad Mark for use with respect to the Conrad Properties (the
rights described in clauses (i) through (ix) above are collectively referred
to herein as the "ASSIGNED RIGHTS").
(b) Park Place hereby assumes all obligations and liabilities
of the Hilton Parties pertaining to the Assigned Rights, including without
limitation, any obligations and liabilities arising under any license
agreements to which Hilton or any of the Retained Business Subsidiaries is a
party and that are being assigned to Park Place under Section 2(a)(vii).
(c) Notwithstanding the grant to Park Place of the CRC's
rights to receive license fees under the Conrad License Agreements, pursuant
to Section 2(a)(ix), CRC shall retain its ownership of the Conrad Mark and
title to the Conrad Mark shall not be assigned to Park Place by virtue of
this Agreement.
3. LICENSE. Hilton hereby grants to the Park Place Parties a
non-exclusive right and license (the "HILTON LICENSE"), subject to the terms
and conditions set forth herein, to use the Hilton Mark for five years
following the Distribution Date, except that the Hilton License shall be for
10 years with respect to the Las Vegas Hilton, Reno Hilton and Atlantic City
Hilton (the "EXTENDED TERM"). CRC hereby grants to the Park Place Parties a
non-exclusive right and license (the "CONRAD LICENSE"), subject to the terms
and conditions set forth herein, to use the Conrad Mark for the duration of
the Conrad License Agreement applicable to such Conrad Property. The Hilton
License and the Conrad License shall sometimes be referred to herein,
collectively, as the "LICENSE."
The Licensed Marks shall be used only in accordance with the
following provisions:
(a) the Park Place Parties shall use the Hilton Mark solely
in connection with (i) the operation of the Hilton Casino Hotels in the
United States and in connection with the advertising and promotion of such
hotels worldwide; and (ii) the participation of Other Hotels in Hilton
Reservations Worldwide and/or the HHonors Program;
(b) the Park Place Parties shall use the Conrad Marks solely
in connection with the operation of Conrad Properties and in connection with
the advertising and promotion of the Conrad Properties worldwide; and
(c) the Licensed Marks may be used only in a manner
consistent with the use of such Licensed Mark during the year preceding this
Agreement and, without the prior written consent of the Licensor of such
Licensed Mark, which consent may be withheld at such Licensor's sole
discretion, Park Place shall not expand its business or operations to include
use of any of the Licensed Marks on products or services beyond those
products or services in use by Hilton or CRC on the Distribution Date.
4. PAYMENT OF FEES AND PARTICIPATION IN HILTON RESERVATIONS
WORLDWIDE AND THE HHONORS PROGRAM. The Park Place Parties shall pay no
royalty fees for the right to use the Hilton Mark for the first two years of
the term (the "INITIAL TERM") of the Hilton License.
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Thereafter, the Park Place Parties shall pay the Hilton Parties a royalty fee
of 3% of the Net Room Revenues of each hotel that is branded with the Hilton
Mark; PROVIDED, THAT, with respect to the Las Vegas Hilton, Reno Hilton and
Atlantic City Hilton, the royalty fee shall be a fixed fee of, in the
aggregate, $5 million per year (the "YEARLY FEE"). The Park Place Parties
shall pay no royalty fees for the right to use the Conrad Mark for the term
of the Conrad License.
(a) Notwithstanding the foregoing, so long as any Park Place
Party shall license the Hilton Mark, such Park Place Party shall cause each
of the Hilton Casino Hotels to do all of the following: (i) participate in
Hilton Reservations Worldwide in accordance with the HRW Terms; (ii)
purchase, install and thereafter maintain, at their sole cost, computer
equipment and other hardware and software and related systems for the
utilization of Hilton Reservations Worldwide; (iii) participate in the
HHonors Program in accordance with the HHonors Terms; (iv) pay the fees
established annually by Hilton Reservations Worldwide, L.L.C. for
participation in Hilton Reservations Worldwide; (v) pay the fees and be
entitled to receive the reimbursements as such fees and reimbursements are
established annually by Hilton HHonors Worldwide, L.L.C., for participation
in the HHonors Program; and (vi) pay a national and regional group
advertising and sales and business promotions services fee to Hilton equal to
1% of Net Room Revenues for such hotel.
(b) As long as any Park Place Party shall license the Conrad
Mark, such Park Place Party shall cause each of the Conrad Properties to do
all of the following: (i) participate in Hilton Reservations Worldwide in
accordance with the HRW Terms; (ii) participate in the HHonors Program in
accordance with the HHonors Terms; (iii) pay the fees established annually by
Hilton Reservations Worldwide, L.L.C. for participation in Hilton
Reservations Worldwide; (iv) purchase, install and thereafter maintain, at
their sole cost, computer equipment and other hardware and software and
related systems for the utilization of Hilton Reservations Worldwide; (v) pay
the fees and be entitled to receive the reimbursements as such fees and
reimbursements are established annually by Hilton HHonors Worldwide, L.L.C.,
for participation in the HHonors Program and (vi) remit to Hilton the
advertising and promotion fees as set forth in the Conrad International
Management Agreements.
(c) Subject to Section 27 hereof, during the term of this
Agreement and at Park Place's request and subject to the approval of Hilton
and its subsidiaries, the Park Place Parties shall cause each of the Other
Hotels to do all of the following: (i) participate in Hilton Reservations
Worldwide in accordance with the HRW Terms; (ii) participate in the HHonors
Program in accordance with the HHonors Terms; (iii) pay the fees established
annually by Hilton Reservations Worldwide, L.L.C. for participation in Hilton
Reservations Worldwide; (iv) purchase, install and thereafter maintain, at
their sole cost, computer equipment and other hardware and software and
related systems for the utilization of Hilton Reservations Worldwide; (v) pay
the fees and be entitled to receive the reimbursements as such fees and
reimbursements are established annually by Hilton HHonors Worldwide, L.L.C.,
for participation in the HHonors Program and (vi) pay a national and regional
group advertising and sales and business promotions services fee to Hilton
equal to 1% of Net Room Revenues for such hotel; PROVIDED, HOWEVER, that
Bally's Park Place shall not be required to pay the fee described in the
preceding clause (vi).
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(d) Notwithstanding anything to the contrary in this
Agreement or in the HRW Terms or HHonors Terms, Hilton HHonors Worldwide,
L.L.C. and Hilton Reservations Worldwide, L.L.C. shall not provide
reservation services or any other services to any hotel or permit the
participation of any hotel in Hilton Reservations Worldwide or the HHonors
Program if the provision of such services or participation would violate
applicable law. As long as such hotels participate in the HHonors Program,
the Hilton Casino Hotels, Conrad Properties, and Other Hotels will have the
same rights to use the HHonors Program trademarks as any other hotels
participating in the HHonors Program.
5. OWNERSHIP OF MARKS.
(a) Hilton acknowledges, without representation, warranty or
inquiry, that, by virtue of the assignment made in Section 2, Park Place is
the exclusive owner of the Assigned Rights. Hilton agrees that no Hilton
Party has any right, title or interest in or to any of the Assigned Rights
from and after the date hereof.
(b) Hilton agrees to cooperate fully with Park Place, at Park
Place's expense, in recording appropriate assignment and other documents
evidencing Park Place's acquisition and ownership of the Assigned Rights.
Hilton agrees to take no action inconsistent with Park Place's ownership of
and interest in the Assigned Rights. Park Place agrees to cooperate fully
with the Hilton Parties at Park Place's expense in recording appropriate
documents evidencing the License to the Park Place Parties.
(c) No Hilton Party shall attack the validity of any of the
Assigned Rights, Park Place's ownership thereof, or any of the terms of this
Agreement, or assist any third party in doing any of the same, and each
Hilton Party hereby waives any right to contest the validity of the Assigned
Rights.
(d) Park Place acknowledges that Hilton is the exclusive
owner of the Hilton Mark and CRC is the exclusive owner of the Conrad Mark.
Park Place agrees that no Park Place Party has any right, title or interest
in or to any Licensed Mark, except as expressly set forth in Sections
2(a)(ix) and 3. Park Place agrees that all uses of any Licensed Mark by the
Park Place Parties and third parties and the goodwill associated with such
uses shall inure solely to the benefit of the Licensor of such Licensed Mark.
Upon termination of its rights to use a Licensed Mark as provided in this
Agreement, all right and interest of such Park Place Party in and to such
Licensed Mark shall revert fully to the Licensor of such Licensed Mark.
(e) Park Place agrees, if requested by either Licensor, to
cooperate fully with such party in recording appropriate documents evidencing
such Licensor's ownership of a Licensed Mark. Park Place agrees to take no
action inconsistent with either Licensor's ownership of and interest in its
Licensed Mark.
(f) No Park Place Party shall attack the validity of either
Licensor's ownership of its Licensed Mark or any of the terms of this
Agreement, or assist any third party in doing any of the same.
6. LIMITATIONS ON USE OF THE LICENSED MARKS. The License is
expressly subject to the following conditions:
7
<PAGE>
(a) in its use of any Licensed Mark, each Park Place Party
shall faithfully reproduce such mark's design, coloration and appearance, as
such design, coloration and appearance may be modified from time to time by
the Licensor of such Licensed Mark. No Park Place Party shall modify the
design, coloration or appearance of a Licensed Mark unless requested to do so
in writing by the Licensor of such Licensed Mark;
(b) all uses of a Licensed Mark by any Park Place Party,
other than any previously authorized use in effect as of the Distribution
Date in connection with the Gaming Business, shall be subject to the
applicable Licensor's prior written approval, which approval shall not be
unreasonably withheld or delayed, on the basis of samples submitted by such
Park Place Party and shall be made in strict conformance with such reasonable
specifications as the Licensor of the Licensed Mark shall establish, as such
specifications may be modified by the applicable Licensor from time to time;
(c) all displays of a Licensed Mark by each Park Place Party
shall bear such copyright, trademark, service mark and other notices as the
Licensor of such Licensed Mark shall reasonably require, and each Park Place
Party shall adhere to any other reasonable and customary posting requirements
developed by the applicable Licensor with respect to such Licensed Mark;
(d) no Park Place Party shall use a Licensed Mark as part of,
or display such Licensed Mark in conjunction with, any other names or marks
except with the Licensor of such Licensed Mark's prior written approval;
(e) no Park Place Party shall use a Licensed Mark or any
confusingly similar or diluting mark, term or design, except as expressly
authorized in this Agreement, and no Park Place Party shall attempt to
register or aid any third party in using or attempting to register any such
mark, term or design;
(f) no Park Place Party shall use a Licensed Mark in any
manner that will indicate that it is using such Licensed Mark other than as a
licensee; and
(g) no Park Place Party shall, and shall cause each of its
Subsidiaries and affiliates not to, at any time use the trademark, name or
sign "Hilton" or any variation thereof outside the United States to
represent, directly or indirectly, that any hotel, bar, restaurant, gaming
interest or related facility is owned, operated or licensed by Hilton in such
area or is a member of its group.
7. QUALITY CONTROL.
(a) The Licensors are familiar with the quality of the goods
and services to be provided by Park Place and the Gaming Subsidiaries in the
Gaming Business and find, at the present time, the quality of such goods and
services to be acceptable. All goods and services to be provided by the Park
Place Parties under a Licensed Mark shall be provided substantially in
accordance with the quality standards of Park Place and the Gaming
Subsidiaries now in place or with such other quality standards as the
applicable Licensor(s) may reasonably establish from time to time.
8
<PAGE>
(b) Each of Hilton and CRC shall have the right, at
reasonable times and with prior notice, to inspect any facility operated by
any Park Place Party under a Licensed Mark, and any goods (including, without
limitation, any advertising and promotional materials used in connection with
the Gaming Business and Conrad Properties) provided by any Park Place Party
that bear a Licensed Mark, at any time for the purpose of determining whether
they have met or are meeting the quality standards required under this
Agreement. Each Park Place Party shall promptly produce and deliver (at its
own expense) to the applicable Licensor such examples of its use of the
Licensor's Licensed Mark as such Licensor shall reasonably request.
8. LIMITATION OF LIABILITY; INDEMNITY.
(a) THE ASSIGNED RIGHTS AND THE LICENSED MARKS ARE PROVIDED
TO THE PARK PLACE PARTIES "AS IS." THE HILTON PARTIES DISCLAIM ANY EXPRESS
OR IMPLIED WARRANTY, INCLUDING NON-INFRINGEMENT, WITH RESPECT TO THE ASSIGNED
RIGHTS AND THE LICENSED MARKS. IN NO EVENT SHALL THE HILTON PARTIES BE
LIABLE FOR ANY MATTER WHATSOEVER RELATING TO THE USE BY ANY PARK PLACE PARTY
OF THE LICENSED MARKS, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 8
AND SECTION 9 OF THIS AGREEMENT.
(b) Park Place shall indemnify, defend and hold harmless the
Hilton Parties, their past and present affiliates, subsidiaries, other
related companies, licensees and properties, and each of the foregoing
entities' respective past and present employees, representatives, directors,
officers, partners and agents (each, a "HILTON PARTY INDEMNITEE"), from and
against any and all costs, liabilities and expenses, including, without
limitation, interest, penalties, attorney and third party fees, and all
amounts paid in the investigation, defense and/or settlement of any claim,
action or proceeding (collectively, "EXPENSES"), that relate to (i) the
provision or promotion of goods or services by any Park Place Party under a
Licensed Mark, notwithstanding any approval which may have been given by any
Hilton Party Indemnitee with respect to the provision or promotion of such
goods or services and/or (ii) any liabilities or obligations arising under
any license agreement assigned to the Park Place Parties pursuant to Section
2 of this Agreement; PROVIDED, HOWEVER, that the Park Place Parties shall
have no obligation to indemnify, defend and hold harmless any Hilton Party
Indemnitee under clause (i) above from any Expenses resulting from any claim
of any third party that a Licensed Mark is invalid, unless such claim of
invalidity arises from a Park Place Party's failure to comply with the terms
of this Agreement.
(c) Hilton or CRC, as applicable, shall indemnify, defend and
hold harmless the Park Place Parties and their respective past and present
employees, representatives, directors, officers and agents (each, a "PARK
PLACE PARTY INDEMNITEE"), from and against any and all Expenses resulting
from any claim asserted against any Park Place Party Indemnitee by any third
party alleging that a Park Place Party's use of a Licensed Mark infringes
upon the proprietary rights of such third party, PROVIDED that such claim
arises from such Park Place Party's use of such Licensed Mark in accordance
with the terms of this Agreement.
(d) If any claim or action is asserted against any party that
would entitle such party to indemnification pursuant to Section 8(b) or (c)
(a "PROCEEDING"), any party
9
<PAGE>
who seeks indemnification (the "INDEMNIFIED PARTY") shall give written notice
thereof to the party or parties from whom indemnification is sought (the
"INDEMNITOR") promptly, but in no event later than thirty (30) days after
such Indemnified Party learns of the existence of such Proceeding; PROVIDED,
HOWEVER, that the Indemnified Party's failure to give the Indemnitor prompt
notice shall not bar the Indemnified Party's right to indemnification unless
such failure has materially prejudiced the Indemnitor's ability to defend
such Proceeding. The Indemnitor shall have the right to employ counsel
reasonably acceptable to the Indemnified Party to defend any such Proceeding,
or to compromise, settle or otherwise dispose of the same, if the Indemnitor
deems it advisable to do so, all at the expense of the Indemnitor, PROVIDED
that the Indemnitor shall not have the right to control the defense of any
such Proceeding unless it has acknowledged in writing its obligation to
indemnify the Indemnified Party fully from all Expenses incurred as a result
of such Proceeding. The Indemnitor shall not settle, or consent to the entry
of any judgment in, any Proceeding without obtaining either (i) an
unconditional release of the Indemnified Party from all liability with
respect to all claims underlying such Proceeding or (ii) the prior written
consent of the Indemnified Party. Each Indemnitor and each Indemnified Party
will fully cooperate with each other in any such Proceeding and shall make
available to each other any books or records useful for the defense of any
such Proceeding. If the Indemnitor fails to acknowledge in writing its
obligation to defend against such Proceeding within fifteen (15) days after
receiving written notice thereof as provided above, the Indemnified Party
shall be free to dispose of the matter, at the expense of the Indemnitor, in
any way in which the Indemnified Party reasonably deems to be in its best
interest.
(e) The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification provisions set
forth herein are intended to supplement, but not to replace, the
indemnification provisions in the Distribution Agreement. To the extent the
indemnification provisions set forth herein conflict with those set forth in
the Distribution Agreement, those provisions that provide the greatest
benefits to the Indemnified Party shall control.
9. INFRINGEMENT PROCEEDINGS. Each Park Place Party shall provide
Hilton or CRC, as applicable, with prompt written notice of (i) any
unauthorized uses by third parties of a Licensed Mark, or of confusingly
similar or diluting trademarks, service marks, trade names, terms or designs,
which come to the attention of such Park Place Party and (ii) any action
commenced or threatened against such Park Place Party in connection with its
use of a Licensed Mark. Each Licensor shall have the right, in its sole
discretion, to commence infringement or unfair competition actions regarding
any unauthorized use by third parties of such Licensor's Licensed Mark or any
confusingly similar or diluting devices. The Park Place Parties shall
cooperate with and assist the Licensors in their investigation and
prosecution of any of the foregoing.
10. INJUNCTION. Each Park Place Party agrees that if application is
made by Hilton or Hilton International CO to reinstate the Injunction, such Park
Place Party shall not oppose or contest such application or take any other
action to interfere with the reinstatement of the Injunction. Each Park Place
Party shall cooperate, if requested by Hilton and/or Hilton International CO, in
obtaining court approval of any such application and shall execute any documents
required by the court in connection therewith. If the Injunction is reinstated,
each
10
<PAGE>
Park Place Party shall take all actions necessary to comply with the terms
and provisions set forth in the Injunction.
11. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
construed to create any relationship among the parties of agency,
partnership, franchise or joint venturer or render any party liable for any
debts or obligations incurred by any other party hereto. No party is
authorized to enter into agreements for or on behalf of any other party
hereto, to collect any obligation due or owed to any such party, or to bind
any other party in any manner whatsoever.
12. ASSIGNMENT AND SUBLICENSE. No Park Place Party may assign its
rights under this Agreement or sublicense its rights to use either Licensed
Mark to a third party without the prior written consent of the Licensor of
such Licensed Mark (which consent may be withheld in the sole discretion of
such Licensor). Upon any assignment or sublicense entered into in accordance
with this Section 12, such assignee or sublicensee shall enter into an
assignment or sublicense agreement with such Park Place Party, in a form
reasonably satisfactory to the applicable Licensor, pursuant to which such
assignee or sublicensee agrees to comply with, and be bound by, the terms of
this Agreement and acknowledges the status of Hilton and CRC as intended
third party beneficiaries of such assignment or sublicense agreement. If
requested by the applicable Licensor, such assignee or sublicensee shall also
execute an instrument or instruments pursuant to which such assignee or
sublicensee shall be bound by, and become a party to, this Agreement. Any
purported assignment or sublicense by any Park Place Party not in compliance
with the terms of this Agreement shall be null and void. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns.
13. TERM; TERMINATION OF LICENSE.
(a) This Agreement, unless earlier terminated pursuant to
this Section 13, shall expire upon the later to occur of the expiration (or
earlier termination) of the Hilton License and the Conrad License. By mutual
agreement of the parties, the term of this Agreement may be renewed with
respect to any License for an extended period to be determined by the parties.
(b) During the Initial Term, the Park Place Parties shall be
required to use the Hilton Mark at each of the Hilton Casino Hotels.
Thereafter, the Park Place Parties may terminate use of the Hilton Mark at
any Hilton Casino Hotel by giving the Hilton Parties at least six months'
written notice of the Park Place Parties' decision to terminate use of the
Hilton Mark; PROVIDED, HOWEVER, that with respect to the Las Vegas Hilton,
Reno Hilton and Atlantic City Hilton, the Park Place Parties shall be
required to use the Hilton Mark for the Extended Term, except the Park Place
Parties may terminate use of the Hilton Mark if: (i) the Las Vegas Hilton,
Reno Hilton and Atlantic City Hilton are sold by the Park Place Parties and
the Park Place Parties pay the Hilton Parties the present value of the Yearly
Fee due under the remainder of the Extended Term, discounted back at a six
percent annual rate or (ii) after the fifth anniversary of the date hereof,
the Park Place Parties provide the Hilton Parties with at least six months'
written notice of the Park Place Parties' decision to terminate use of the
Hilton Mark with respect to the Las Vegas Hilton, Reno Hilton and Atlantic
City Hilton, and the Park Place
11
<PAGE>
Parties pay the Hilton Parties the present value of the Yearly Fee due under
the remainder of the Extended Term, discounted back at a six percent annual
rate.
(c) Notwithstanding any of the foregoing, any party may at
any time terminate this Agreement in the event of a material breach by any
other party of any provision herein that has not been cured within ten days
following the receipt by the breaching party of notice of such breach,
PROVIDED, HOWEVER, that the availability of such right of termination shall
not prejudice the terminating party's right to pursue any additional remedies
at law or in equity with respect to such breach.
14. EFFECT OF TERMINATION.
(a) Upon the termination of this Agreement, the Park Place
Parties shall:
(i) immediately discontinue use of the Licensed Marks,
refrain from using any confusingly similar marks, terms or designs, and no
longer possess any right or interest in the Licensed Marks; and
(ii) if Hilton requires, cooperate with Hilton to apply
to the appropriate authorities to cancel from all governmental records the
recording of this Agreement or to record the termination of this Agreement.
(b) Notwithstanding any termination of this Agreement, (i)
the provisions of Section 2 (Assignment of Marks and Licenses), Section 5
(Ownership of Marks), Section 6(e) (Limitations on Use of the Licensed
Marks), Section 8 (Limitation on Liability; Indemnity), Section 15
(Severability), Section 17 (Specific Performance), Section 18 (Arbitration),
Section 19 (Choice of Law), Section 20 (Attorneys' Fees) and Section 25
(Waiver) of this Agreement shall remain in full force and effect in
perpetuity and (ii) the provisions of Section 14(a) of this Agreement shall
remain in effect until satisfied in full.
15. SEVERABILITY. The invalidity or partial invalidity or
unenforceability of any portion of this Agreement shall not affect the
validity or enforceability of any other portion. If it is ever held that any
covenant hereunder is too extensive to permit enforcement of such restriction
to its fullest extent, each party agrees that a court of competent
jurisdiction may enforce such covenant to the maximum extent permitted by
law, and each party hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding brought to enforce such
covenant.
16. REMEDIES. Each of the parties acknowledge and agree that
money damages would be inadequate relief for any breach or threatened breach
by the other party of its obligations hereunder, and that upon such breach,
the non-breaching party or parties, as the case may be, shall be entitled to
injunctive or other equitable relief for any breach or threatened breach
thereof.
17. SPECIFIC PERFORMANCE. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that
any party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or
12
<PAGE>
remedy. Such party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable laws, each party waives any objection to the imposition of such
relief.
18. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance
or injunctive relief thereof.
19. CHOICE OF LAW. This Agreement shall be construed under and
entered in accordance with the laws of the State of New York.
20. ATTORNEYS' FEES. If any party commences an action against the
other with respect to this Agreement, the prevailing party in such action
shall be entitled to an award of reasonable costs and expenses of mediation,
arbitration and/or litigation, including reasonable attorneys' fees, to be
paid by the non-prevailing party.
21. EXPENSES. Except as specifically provided otherwise in this
Agreement, all fees and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby shall be paid by
Park Place. In addition, it is understood and agreed that Park Place shall
pay the legal, recording, filing and out-of-pocket expenditures in connection
with (a) the filing and recordation of the assignment of the Assigned Marks
and the License and (b) any accrued and unpaid fees and expenses with respect
to legal, recording, filing and other expenses related to the Assigned Marks.
22. ENTIRE AGREEMENT. This Agreement (and the exhibit, annexes
and schedules hereto which are incorporated by reference herein and made part
hereof) and the Distribution Agreement (including any Ancillary Agreements,
as such term is defined in the Distribution Agreement) constitute the entire
agreement and understanding among the parties hereto with respect to the
subject matter covered by such agreements, and supersedes any prior or
contemporaneous agreement or understanding related to the subject matter
hereof and thereof. To the extent that the terms of this Agreement and
similar terms of the Distribution Agreement or any Ancillary Agreement are in
conflict, the interpretation given to the conflicting terms of the
Distribution Agreement shall govern the interpretation and performance of
this Agreement.
23. AMENDMENTS. This Agreement may not be amended, supplemented
or modified in any respect except by written agreement among the parties,
duly signed by their respective authorized representatives.
24. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
25. WAIVER. Park Place may specifically waive any breach of this
Agreement by the Hilton Parties and Hilton may waive any breach of this
Agreement by a Park Place Party;
13
<PAGE>
PROVIDED, HOWEVER, that no such waiver shall be deemed effective unless in
writing, signed by the waiving party, and specifically designating the breach
waived. No waiver shall constitute a continuing waiver of similar or other
breaches.
26. NOTICES. Any notice required or permitted hereunder shall be
in writing and shall be deemed received (a) upon personal delivery, if so
delivered, (b) upon three (3) business days after having been deposited in
the United States mail, first class, postage prepaid, return receipt
requested, or (c) on the next business day if sent by nationally recognized
overnight delivery service. In each such case, notices shall be addressed as
follows:
If to Hilton:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn.: General Counsel
Telecopy: (310) 205-7677
If to CRC:
c/o Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn.: General Counsel
Telecopy: (310) 205-4613
If to one or more of the Park Place Parties:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway, 4th Floor
Las Vegas, Nevada 89109
Attn.: General Counsel
Fax: (702) 699-5179
or to such other address as one party may designate to the other by written
notice given in accordance with this Section 26.
27. NOTICE OF ENTRY INTO PARK PLACE MARKETS. Hilton shall give
Park Place six months' written notice (the "NOTICE OF ENTRY") prior to the
development or acquisition by any Hilton Party of any casino hotels branded
with the Hilton Mark or the Conrad Mark within any Park Place market. If the
Park Place Party operating in such Park Place market provides Hilton, within
30 days of receipt of such Notice of Entry, of its agreement to cease using
the Hilton Mark or Conrad Mark, as the case may be, in such market within six
months and of its decision to withdraw from Hilton Reservations Worldwide and
the HHonors Program (the "NOTICE OF WITHDRAWAL"), Hilton shall use its
reasonable best efforts to remove such Park Place Party from Hilton
Reservations Worldwide and the HHonors Program within six months of Hilton's
receipt of such Notice of Withdrawal.
14
<PAGE>
28. FURTHER ASSURANCES. The parties hereto hereby covenant and
agree to execute and deliver all such documents, make such government
filings, and to do or cause to be done all such acts or things as may be
necessary to complete and effect the transactions contemplated hereby.
29. COMPLIANCE BY SUBSIDIARIES. Hilton shall take all such
actions as are necessary to ensure compliance with the terms of this
Agreement by the Hilton Parties other than Hilton; and Park Place shall take
all such actions as are necessary to ensure compliance with the terms of this
Agreement by the Park Place Parties other than Park Place.
30. HEADINGS. The descriptive headings of the several sections of
this Agreement are for convenience only and do not constitute a part of the
Agreement or affect its meaning or interpretation.
[Signature page to follow]
15
<PAGE>
IN WITNESS WHEREOF, a duly authorized representative of each party
has executed this Agreement as of the date first written above.
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
---------------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
---------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
CONRAD INTERNATIONAL ROYALTY CORPORATION,
a Nevada corporation
By: /s/ Robert M. La Forgia
---------------------------------------
Name: Robert M. La Forgia
Title: Senior Vice President and Controller
S-1
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on
this day personally appeared Thomas E. Gallagher, the Executive Vice
President and General Counsel of Hilton Hotels Corporation, known to me as
the person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 23rd day of December, 1998.
/s/ David Marote
[SEAL] ---------------------------------------
Notary Public
My Commission Expires: 8/8/2002
---------------------------------------
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on
this day personally appeared Scott A. LaPorta, the Executive Vice President
and Chief Financial Officer of Park Place Entertainment Corporation, known to
me as the person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 31st day of December, 1998.
/s/ SUSAN BIRD
[SEAL] ---------------------------------------
Notary Public
My Commission Expires: September 5, 2002
---------------------------------------
<PAGE>
STATE OF CALIFORNIA )
---------------
) ss:
COUNTY OF LOS ANGELES )
---------------
Before me, a Notary Public, in and for said County and State, on this
day personally appeared Robert M. La Forgia, the Senior Vice President and
Controller of Conrad International Royalty Corporation, known to me as the
person whose name is subscribed to the foregoing instrument.
Given under my hand and seal this 31st day of December, 1998.
/s/ Yvonne Tang
---------------------------------------
Notary Public
My Commission Expires: April 12, 2002
---------------------------------------
[SEAL]
<PAGE>
SCHEDULE A
ASSIGNED MARKS
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK CLASS/GOODS FILING DATE AND DATE
<S> <C> <C> <C>
7 HEAVEN Casino services 1,440,235
5-14-87
7 HEAVEN DOLLARS Casino services 1,439,550
5-12-87
777 HEAVEN Casino services 1,439,557
5-12-87
ANIMATIONS 1,677,163
2-25-92
ATLANTIC CITY'S WINNING 1,386,348
ADDRESS 3-11-86
B Class 41 090,602
4-28-96
B (STYLIZED) nutritional 75/169,129
supplements 9-20-96
B (STYLIZED) credit cards 75/162,874
B (STYLIZED) health clubs 74/640,369
2-24-95
BFIT nutritional 75/166,310
supplements 9-16-96
B WEAR (stylized) sportswear 75/452,111
3-18-98
BALLY ball rolling 505,218
games 12-28-48
BALLY business 1,909,427
management 8-01-95
BALLY electrical 1,646,697
apparatus 6-04-91
BALLY relay mechanisms, 1,012,199
etc. 6-03-75
BALLY (SCRIPT) 155,687
4-09-91
BALLY classes 1,552,562
9,28,41,42 8-22-89
BALLY BFIT nutritional 75/166,200
supplements 9-16-96
BALLY BOB casino services 1,955,688
2-13-96
BALLY BOB DESIGN (I) casino services 1,975,755
5-28-96
BALLY CAJUN electronic video 1,792,139
lottery terminals 9-07-93
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK CLASS/GOODS FILING DATE AND DATE
<S> <C> <C> <C>
BALLY GAMING casino services 1,820,490
2-08-94
BALLY MARDIGRAS casino services 1,806,687
11-23-93
BALLY MAVERICK Class 9 1,816,368
1-11-94
BALLY MIDWAY Classes 9 and 28 1,066,701
8-06-84
BALLY SYSTEM 5000 1,547,119
7-11-89
BALLY TOTAL FITNESS credit card 75/165,335
services 9-13-96
BALLY TOTAL FITNESS Class 41 1,992,150
8-6-96
B BALLY TOTAL FITNESS Class 41 1,973,721
(square design) 5-14-96
B BALLY TOTAL FITNESS Class 41 2,020,035
(design) 12-3-96
B BALLY TOTAL FITNESS credit card 75/162,713
(design) services 9-9-96
BALLY'S credit card 1,904,615
services 7-11-95
BALLY'S casino services 1,515,843
12-06-88
BALLY'S video and pinball 1,581,959
arcade services 2-06-90
BALLY'S hotel services 1,523,910
2-07-89
BALLY'S 1,533,712
4-04-89
BALLY'S 1,543,909
6-13-89
BALLY'S (script) credit card 1,915,383
services 8-29-95
BALLY'S health club 1,870,035
12-27-94
BALLY'S (script) health club 1,854,914
9-20-94
BALLY'S BELLE OF ORLEANS classes 41 and 42 2,012,257
10-29-96
BALLY'S BIG BUCKS casino services 1,767,697
4-27-93
BALLY'S CASINO LAKESHORE classes 41 and 42 1,982,255
RESORT (design) 6-25-96
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK CLASS/GOODS FILING DATE AND DATE
------------------------ ----------------- ----------- -----------
<S> <C> <C> <C>
BALLY'S CASINO LAKESHORE classes 41 and 42 1,973,722
RESORT 5-14-96
BALLY'S COMMODORE CLUB classes 16 & 41 - 2,032,928
printed id cards 1-21-97
and bonus
programs
BALLY'S COMMODORE CLUB AND classes 16 & 41 - 2,034,472
DESIGN printed id cards 1-28-97
and bonus
programs
BALLY'S GAMING U. Class 41 2,112,386
11-11-97
BALLY'S GAMING U. AND Class 41 2,105,286
DESIGN 10-14-97
BALLY'S GAMING U. AND Class 41 2,108,952
DESIGN 2 10-28-97
BALLY'S GAMING UNIVERSITY Class 41 2,103,312
10-07-97
BALLY'S GRAND Class 41 1,543,909
6-13-89
BALLY'S GRAND Class 42 1,533,712
4-4-89
BALLY'S LAKEHOUSE Class 41 74/723,086
8-31-95
BALLY'S PARIS Classes 41 and 42 75/103,801
5-14-96
BALLY'S SALOON & GAMBLING Class 41 1,955,699
HALL (stylized) 2-13-96
BALLY'S SALOON, GAMBLING Classes 41 and 42 2,048,291
HALL HOTEL 3-25-97
BALLY'S TOTAL FITNESS Class 41 1,673,918
1-28-92
BANNER Class 42 1,134,830
5-06-80
BARRONSHIRE PRIME RIB restaurant 1,382,797
services 2-11-86
BEEF BARRON restaurant 1,345,187
services 6-25-85
BG LOGO Class 41 1,498,142
7-26-88
BIG BUCKS Class 41 1,847,026
7-26-94
BROADWAY VARIETIES and Class 41 1,690,577
design 6-2-92
CANDYMANIA retail store 2,007,114
10-8-96
CITY LITES Class 41 1.243,194
6-21-83
CLUB MAGIC Class 41 74/696,443
12-13-95
FLAGSHIP BUFFET hotel, restaurant 1,692,123
6-9-92
FLAMINGO "BIRD" DESIGN Class 41 1,724,334
10-13-92
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK CLASS/GOODS FILING DATE AND DATE
------------------------ ----------------- ----------- -----------
<S> <C> <C> <C>
FLAMINGO CASINO 1,948,375
12-19-95
FLAMINGO PLAYERS CLUB Classes 41 and 42 2,015,176
11-12-96
FRUIT BASKET BUFFET restaurant 1,820,290
2-8-94
GARDEN OF THE DRAGON restaurant 1,702,280
7-31-92
LAUGHLIN AIR VACATIONS 75/022,555
11-20-95
LIGHTNING QUARTERS Class 41 1,801,151
10-26-93
LOS TRES HOMBRES CANTINA filed 11-11-96
MARGARITA GRILL restaurant 74/712,265
8-7-95
MR. MING'S restaurant 1,835,833
services 5-10-94
MVP filed 12-19-89
O'SHEAS CASINO casino services 1,692,034
6-9-92
PARIS Classes 41 and 42 74/653,425
3-29-95
PARIS CASINO - RESORT Classes 41 and 42 74/703,331
(stylized) 7-18-95
PARIS CASINO RESORT Classes 41 and 42 74/703,332
7-18-95
PARK PLACE (and design) filed 10-31-81
PARK PLACE filed 10-31-81
PIN PAN ALLEY Class 41 1,215,311
11-02-82
RENO'S NEW GOLD STANDARD 74/733,745
9-25-95
RIGHT ON THE RIVER, RIGHT Class 41 1,738,711
ON THE MONEY 12-8-92
SEAPOINT INN filed 12-4-90
SLOT MAGIC (and design) Class 41 1,699,523
7-7-92
SUPERBOOK legal sports, 1,519,150
race wagering 1-3-89
THE BUFFET OF CHAMPIONS hotel, restaurant 1,755,852
(and design) services 3-2-93
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK CLASS/GOODS FILING DATE AND DATE
------------------------ ----------------- ----------- -----------
<S> <C> <C> <C>
THE END OF THE RAINBOW hotel, restaurant 1,090,516
services 5-2-78
THE GRAND VIP CARD Classes 41 and 42 1,867,269
12-13-94
THE NATION'S ODDS MAKER Class 41 1,784,997
7-27-93
THE OAKS restaurant 1,821,905
services 2-15-94
THE SKY'S THE LIMIT Class 41 1,379,481
1-21-86
THE VERTICAL CLUB Classes 41 and 42 1,724,335
10-13-92
THIS SOUNDS LIKE THE PLACE Class 41 1,707,354
TO BE 8-11-92
TREE DESIGN filed 1-18-83
VERTICAL CLUB health club 1,666,141
11-26-91
VERTICAL CLUB sportswear 1,734,972
1-24-92
VERTICAL CLUB (triangle sportswear 1,733,050
design) 5-25-93
VERTICAL CLUB AND DESIGN health club 1,151,961
4-21-81
VERTICAL CLUB (circle sportswear 1,715,953
design) 9-15-92
WE DO IT BIGGER Class 41 1,858,926
10-18-94
YOU WON'T BELIEVE YOUR Class 41 1,757,279
EARS 3-9-93
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
$10,000 PYRAMID BALLY ENTERTAINMENT CORPORATION OR 02/26/92
BALLY MANUFACTURING ("BEC OR BM")
1st IN SERVICE BEC OR BM 02/27/91
FAST FIFTIES BEC OR BM 02/26/92
LIGHTING QUARTERS BEC OR BM 02/26/92
QUICK BUCKS BEC OR BM 02/26/92
THE MVP CARD BEC OR BM 09/18/90
BALLY'S CASINO*LAKESHORE BALLY'S LOUISIANA, INC. ("BLI") 02/20/95
RESORT WITH DESIGN
BALLY'S CASINO*LAKESHORE BLI 02/20/95
RESORT
LET FREEDOM ROLL BLI 04/24/95
BALLY'S BELLE OF ORLEANS BLI 08/29/96
BALLY'S SALOON-GAMBLING BALLY'S OLYMPIA LIMITED 07/17/95
HALL-HOTEL PARTNERSHIP ("BOLP")
"M" BOLP 04/02/96
MAVERICK'S BOLP 04/02/96
MAVERICK'S HIGH STAKES BOLP 04/02/96
PARLOR
DELTA STEAKHOUSE BOLP 08/08/96
THE MVP CARD BALLY'S PARK PLACE, INC. ("BPPI") 09/18/90
QUICK BUCKS BPPI 02/26/92
$10,000 PYRAMID BPPI 02/26/92
LIGHTNING QUARTERS BPPI 02/26/92
FAST FIFTIES BPPI 02/26/92
CHAMPAGNE SLOTS BPPI 07/25/94
ARTURO'S BPPI 01/14/94
BALLY BOB BPPI 07/27/95
BILLY'S BPPI 01/11/96
POKER, PONIES & KENO BPPI 01/11/96
HIDDEN TREASURES BPPI 04/09/96
'B' encircled by 'PARK BPPI 04/11/96
PLACE CASINO HOTEL TOWER'
WILD PARTY BPPI 04/11/96
BALLY'S PARK PLACE * BPPI 05/06/96
CASINO RESORT
LONE STAR SNACK BAR BPPI 07/17/97
TAKE FIVE BPPI 07/29/97
SWEET ROCKS & GUMDROPS BPPI 08/11/97
BOARDWALK MERCANTILE BPPI 08/11/97
BEYOND THE MISSISSIPPI BPPI 08/11/97
LOS TRES HOMBRES CANTINA BPPI 08/11/97
VIRGINIA CITY BUFFET BPPI 08/11/97
MOUNTAIN BAR BPPI 08/11/97
BALLY'S WILD WILD WEST BPPI 08/11/97
CASINO
THE WILD * WILD WEST AT BPPI 08/11/97
BALLY'S PARK PLACE
THE WILD * WILD WEST BPPI 08/11/97
CASINO AT BALLY'S PARK
PLACE
THE WILD WILD WEST CASINO BPPI 08/11/97
THE WILD WILD WEST BPPI 08/11/97
RUNAWAY JACKPOTS BPPI 09/23/97
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
BRONCO BUSTER BPPI 09/23/97
CRAZY JOKER BPPI 09/23/97
BALLY'S MOST WANTED BPPI 09/23/97
JACKPOT ROUNDUP BPPI 09/23/97
LUCKY HORSESHOES BPPI 09/23/97
JACKPOT FIESTA BPPI 09/23/97
THE GRAND VIP CARD GNOC CORP. ("GNOCC") 09/15/93
BLAST OF CASH GNOCC 05/31/94
HOT HOT HOT GNOCC 05/31/9
TORNADOS OF CASH GNOCC 05/31/94
JACK POTTS GNOCC 09/25/96
RANDOM REWARDS GNOCC 11/22/96
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
DRIVE IN FOR DOLLARS GNOCC 01/07/97
HALF YOUR PLAY FREE A GNOCC 06/03/07
DAY
CAPPUCINO'S GNOCC 10/31/97
GATSBY'S GNOCC 03/05/98
MR. MING'S GNOCC 03/05/98
EMPRESS GARDEN GNOCC 03/05/98
CORNUCOPIA BUFFET GNOCC 03/05/98
CORNUCOPIA CAFE GNOCC 03/05/98
PEREGRINES' GNOCC 03/05/98
HORIZONS GNOCC 03/05/98
CHAIRMAN'S CLUB GNOCC 03/05/98
8TH HOLE BAR HILTON 11/02/89
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
ALTA VILLA HILTON 12/06/89
ANDIAMO HILTON 07/79/92
BUGSY'S CELEBRITY THEATER HILTON 01/08/93
CARAVAN CORNER HILTON 12/06/89
CLUB FLAMINGO HILTON 06/27/91
CROWN ROOM BUFFET HILTON 12/06/89
DESIGN - ELONGATED OVAL HILTON 09/18/90
W/IN AN OVAL (LINDY'S)
DESIGN - RUNNING CHIP HILTON 01/10/90
DESIGN - RUNNING LAUGHLIN HILTON 01/10/90
CHERRIES
DESIGN - RUNNING PLUM HILTON 01/10/90
DESIGN - RUNNING HILTON 01/10/90
WATERMELON
DONNYBROOK BUFFET HILTON 11/02/89
DOUBLE OPPORTUNITY SLOTS HILTON 10/17/91
FLAMINGO DINER HILTON 08/24/92
FLAMINGO DOWNS HILTON 06/27/91
FLAMINGO MAGIC HILTON 09/14/92
FLAMINGO MAGIC CLUB AND HILTON 02/10/93
LOGOI
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
FOOD COURT HILTON 12/06/98
FOOD FANTASY HILTON 09/19/88
GALLERY OF GOLD HILTON 04/13/92
JUST FOR LAUGHS HILTON 10/06/92
LAUGHLIN PREVIEW HILTON 04/01/92
LE MONTRACHET HILTON 11/02/89
LE MONTRACHET BAR HILTON 11/02/89
LINDY'S HILTON 03/28/89
NEVADA'S #1 PLAYLAND HILTON 11/02/89
ODESSY(sp?) BUFFET HILTON 12/06/89
PADDOCK SNACK BAR HILTON 11/02/89
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK OWNER FILING DATE
---------------------- ---------------------------------- -----------
<S> <C> <C>
PEKING MARKET HILTON 03/28/89
PROMENADE BAR HILTON 03/28/89
PUB BAR HILTON 11/02/89
RAINBOW BAR HILTON 12/06/89
SHAMROCK CAFE HILTON 11/02/89
SHOW SPOT LOUNGE HILTON 02/06/89
SIERRA CROSSING HILTON 12/06/89
SNACKS 'N STUFF HILTON 11/02/89
SOCORRO SPRINGS CAFE HILTON 11/02/89
SPIRITS OF DR. WU HILTON 3/28/89
SUPERBOOK HILTON 02/21/90
UTA MARO BAR AND LOUNGE HILTON 11/02/89
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY Australia A-157829
5-8-61
BALLY Australia A-252393
9-29-71
BALLY Benelux 107,788
12-31-71
BALLY Benelux 364,110
7-15-80
BALLY Botswana 87/00721
10-23-97
BALLY Canada 125,612
3-02-62
BALLY Denmark 1983
7-15-83
BALLY Denmark 1330-1959
8-01-59
BALLY Fed. Republic of 733,554
Germany 4-13-79
BALLY Fed. Republic of 1,036,512
Germany 8-08-79
BALLY France 1,380,644
11-20-86
BALLY France 1,734,110
10-26-90
BALLY Italy 411485
1-18-82
BALLY Italy 413186
3-10-86
BALLY Kenya SMA/1219
11/97
BALLY Malawi 566/97
10/29/97
BALLY Namibia 97/1500
10/24/97
BALLY South Africa 95/09580
class 9 7/25/95
BALLY South Africa 95/09581
class 28 7/25/95
BALLY South Africa 95/09582
class 41 7/25/95
BALLY South Africa 97/11631
class 42 8/4/97
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY Swaziland 653/97
10/23/97
BALLY Sweden 198,465
11-01-85
BALLY Switzerland 176,194
4-02-59
BALLY Switzerland 302,217
4-02-79
BALLY United Kingdom 790214
4-28-59
BALLY United Kingdom B1,149,994
3-05-81
BALLY United Kingdom B1,149,993
3-05-81
BALLY Zambia 713/97
10/29/97
BALLY Zimbabwe 1692/97
10/28/97
BALLY (SCRIPT) Australia A-290497
2-09-77
BALLY (SCRIPT) Fed. Republic of 1,184,362
Germany 3-24-92
BALLY (SCRIPT) United Kingdom 1,441,062
5-29-87
BALLY (SCRIPT) United Kingdom 1,441,061
5-29-87
BALLY FITNESS France 1,389,056
1-13-87
BALLYGAMING Canada TMA453,296
2-02-96
BALLY MIDWAY Austria 119591
5-11-88
BALLY MIDWAY Benelux 437085
11-06-87
BALLY MIDWAY France 1434003
11-05-87
BALLY MIDWAY Italy 534597
9-20--90
BALLY MIDWAY Norway 141,665
6-14-90
BALLY MIDWAY Republic of 125142
Ireland 10-27-94
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY MIDWAY Sweden 235,729
6-05-92
BALLY MIDWAY Switzerland 358,506
3-22-88
FAST FIFTIES Fed. Republic of 2,030,906
Germany 2-22-93
FAST FIFTIES France 92/417008
4-28--92
FAST FIFTIES United Kingdom 1,499,188
5-07-93
GALAXIAN Canada 267,301
3-12-82
LIGHTING QUARTERS Fed. Republic of 2,030,907
Germany 2-22-93
LIGHTING QUARTERS France 92/417007
4-28-92
LIGHTING United Kingdom 1,499,225
11-07-91
MIDWAY Canada 973,900
PAC-MAN Argentina 1,064,719
10-07-93
PAC-MAN Argentina 1,112,823
2-08-85
PAC-MAN Canada 267,300
3-12-82
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY Australia A-157829
5-8-61
BALLY Australia A-252393
9-29-71
BALLY Benelux 107,788
12-31-71
BALLY Benelux 364,110
7-15-80
BALLY Botswana 87/00721
10-23-97
BALLY Canada 125,612
3-02-62
BALLY Denmark 1983
7-15-83
BALLY Denmark 1330-1959
8-01-59
BALLY Fed. Republic of 733,554
Germany 4-13-79
BALLY Fed. Republic of 1,036,512
Germany 8-08-79
BALLY France 1,380,644
11-20-86
BALLY France 1,734,110
10-26-90
BALLY Italy 411485
1-18-82
BALLY Italy 413186
3-10-86
BALLY Kenya SMA/1219
11/97
BALLY Malawi 566/97
10/29/97
BALLY Namibia 97/1500
10/24/97
BALLY South Africa 95/09580
class 9 7/25/95
BALLY South Africa 95/09581
class 28 7/25/95
BALLY South Africa 95/09582
class 41 7/25/95
BALLY South Africa 97/11631
class 42 8/4/97
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY Swaziland 653/97
10/23/97
BALLY Sweden 198,465
11-01-85
BALLY Switzerland 176,194
4-02-59
BALLY Switzerland 302,217
4-02-79
BALLY United Kingdom 790214
4-28-59
BALLY United Kingdom B1,149,994
3-05-81
BALLY United Kingdom B1,149,993
3-05-81
BALLY Zambia 713/97
10/29/97
BALLY Zimbabwe 1692/97
10/28/97
BALLY (SCRIPT) Australia A-290497
2-09-77
BALLY (SCRIPT) Fed. Republic of 1,184,362
Germany 3-24-92
BALLY (SCRIPT) United Kingdom 1,441,062
5-29-87
BALLY (SCRIPT) United Kingdom 1,441,061
5-29-87
BALLY FITNESS France 1,389,056
1-13-87
BALLYGAMING Canada TMA453,296
2-02-96
BALLY MIDWAY Austria 119591
5-11-88
BALLY MIDWAY Benelux 437085
11-06-87
BALLY MIDWAY France 1434003
11-05-87
BALLY MIDWAY Italy 534597
9-20--90
BALLY MIDWAY Norway 141,665
6-14-90
BALLY MIDWAY Republic of 125142
Ireland 10-27-94
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
APPLIC. NO. REG. NUMBER
TRADEMARK COUNTRY FILING DATE AND DATE
- ----------------- ------------- ----------- -----------
<S> <C> <C> <C>
BALLY MIDWAY Sweden 235,729
6-05-92
BALLY MIDWAY Switzerland 358,506
3-22-88
FAST FIFTIES Fed. Republic of 2,030,906
Germany 2-22-93
FAST FIFTIES France 92/417008
4-28--92
FAST FIFTIES United Kingdom 1,499,188
5-07-93
GALAXIAN Canada 267,301
3-12-82
LIGHTING QUARTERS Fed. Republic of 2,030,907
Germany 2-22-93
LIGHTING QUARTERS France 92/417007
4-28-92
LIGHTING United Kingdom 1,499,225
11-07-91
MIDWAY Canada 973,900
PAC-MAN Argentina 1,064,719
10-07-93
PAC-MAN Argentina 1,112,823
2-08-85
PAC-MAN Canada 267,300
3-12-82
</TABLE>
39
<PAGE>
SCHEDULE B
HILTON MARK
<PAGE>
SCHEDULE C
CONRAD MARK
<PAGE>
ANNEX A
HILTON RESERVATION SERVICE TERMS AND CONDITIONS
A. The Park Place Parties agree that they will use Hilton
Reservations Worldwide as their principal reservation service with respect to
any hotel using the Hilton Mark or the Conrad Mark and any of the Other Hotels
and that they shall take no action detrimental to Hilton Reservations Worldwide,
L.L.C.; PROVIDED, HOWEVER, that (i) the foregoing commitment shall not apply
with respect to any hotels as to which Hilton Reservations Worldwide, L.L.C. is
prohibited from providing reservation services and (ii) no Park Place Party
shall be precluded from using other reservation services to the extent
reasonably necessary to supplement Hilton Reservations Worldwide, PROVIDED that
no Park Place Party shall take any action to diminish the business opportunities
of Hilton Reservations Worldwide, L.L.C.
B. The Park Place Parties will use their reasonable best
efforts, and shall cooperate with Hilton Reservations Worldwide, L.L.C. in all
reasonable respects, to enhance and improve Hilton Reservations Worldwide,
L.L.C. and any other related services provided by Hilton Reservations Worldwide,
L.L.C., for the mutual benefit of all participants in such services.
C. The Park Place Parties will pay the fees established
annually by Hilton Reservations Worldwide, L.L.C. for participation by Hilton
Casino Hotels, the Conrad Properties, and Other Hotels in Hilton Reservations
Worldwide.
D. The Park Place Parties will purchase, install and thereafter
maintain, at their sole cost, computer equipment and other hardware and software
and related systems for the utilization of Hilton Reservations Worldwide, L.L.C.
E. The Park Place Parties will comply with all other terms and
conditions that may be established from time to time by Hilton Reservations
Worldwide, L.L.C., for participation of hotels in Hilton Reservations Worldwide,
L.L.C.
<PAGE>
ANNEX B
HHONORS PROGRAM TERMS AND CONDITIONS
A. The Park Place Parties will pay the fees and be entitled to
receive the reimbursements as such fees and reimbursements may be established
annually by Hilton HHonors Worldwide, L.L.C., for participation by Hilton Casino
Hotels, the Conrad Properties, and Other Hotels in the HHonors Program.
B. The Park Place Parties will comply with all other terms and
conditions that may be established from time to time by Hilton HHonors
Worldwide, L.L.C. for participation of hotels in the HHonors Program.
<PAGE>
EXHIBIT A
INJUNCTION
<PAGE>
HILTON HOTELS CORPORATION CORPORATE SERVICES AGREEMENT
THIS HILTON HOTELS CORPORATION CORPORATE SERVICES AGREEMENT (this
"AGREEMENT"), dated December 31, 1998, is by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION, a Delaware corporation and wholly owned subsidiary of Hilton ("PARK
PLACE").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated December 31, 1998
(the "DISTRIBUTION AGREEMENT") between Hilton and Park Place, Hilton and certain
of its subsidiaries (the "RETAINED BUSINESS SUBSIDIARIES") will (i) contribute
to Park Place and certain of its subsidiaries that conduct gaming business all
of the operations, assets and liabilities of Hilton and the Retained Business
Subsidiaries comprising the gaming business and (ii) distribute all of the
outstanding shares of Park Place's common stock to the holders of Hilton's
common stock;
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that Hilton and Park Place enter into, among
other things, a corporate services agreement with substantially the same terms
and conditions set forth herein;
WHEREAS, Park Place desires to retain Hilton as described herein, and
Hilton desires to render services as described herein for a fee; and
WHEREAS, the Board of Directors of each of Hilton and Park Place have
determined that it is to the benefit and in the best interests of the respective
parties and their stockholders to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
warranties, covenants and agreements set forth below, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"ACCOUNTING PERIOD" shall be a one month period.
"ACTION" shall mean any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"CORPORATE SERVICES" shall mean the services described in Exhibit A.
1
<PAGE>
"DISTRIBUTION" means the distribution to the holders of Hilton's
common stock of all the outstanding shares of Park Place's common stock.
"DISTRIBUTION DATE" means the date on which the Distribution is
effected.
"INITIAL TERM" shall have the meaning set forth in Section 2.
"LIABILITIES" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"PRIME RATE" shall be the rate identified from time to time in the New
York edition of the Wall Street Journal as being the prime rate of interest;
should such rate be shown as a spread of rates, then the highest such rate shall
be utilized.
"RELATED AGREEMENTS" shall have the meaning described in the
Distribution Agreement.
Any capitalized terms defined in the Distribution Agreement and used
herein shall have the meanings ascribed to them in the Distribution Agreement
unless otherwise defined herein.
2. TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence on the Distribution Date and, unless earlier terminated pursuant
to this Section 2, shall expire on the date that is 12 months immediately
following the Distribution Date. After the Initial Term, unless earlier
terminated pursuant to this Section 2, the parties may agree to renew the term
of this Agreement for an extended period to be determined by the parties;
PROVIDED, HOWEVER, that the term of this Agreement shall not extend past the
date that is 18 months immediately following the Distribution Date.
Notwithstanding the foregoing, (a) Park Place may terminate this Agreement or
any of the services provided by Hilton hereunder at any time for any reason or
no reason upon 30 days prior written notice to Hilton and (b) either party may
at any time terminate this Agreement in the event of a material default (past
the expiration of any applicable cure period provided herein) in accordance with
the provisions of this Agreement; PROVIDED, HOWEVER, that the availability of
such right of termination shall not prejudice such party's right under Section 9
hereof.
3. SERVICES. Upon 30 days written request from Park Place, Hilton
shall provide to Park Place, to the extent requested in such notice, the types
of Corporate Services set forth in Exhibit A. As of the date of this Agreement,
Park Place has requested Hilton to provide those services described on Exhibit
B. The scope of the services to be provided by Hilton hereunder shall be
consistent with the scope of the services being provided by the Retained
Business Group to the Gaming Group on the date the Merger Agreement is signed
and shall not be expanded unless otherwise agreed to in writing by the parties
hereto. Exhibit A and Exhibit B may be amended from time to time as the parties
may mutually agree in writing.
2
<PAGE>
In the event that Hilton is required to retain, outside of the
ordinary course of business, outside consultant/contractor assistance to perform
any of the services hereunder, Hilton shall first obtain the written consent of
Park Place to such retention (which consent may not be unreasonably withheld).
Hilton shall not be held responsible for the performance of such
consultant/contractor services and Park Place assumes the risk thereof.
4. COOPERATION. Park Place will provide access to information and
its employees necessary for Hilton to provide such Corporate Services. Park
Place shall, in a timely manner, take all such actions as may be reasonably
necessary or desirable in order to enable or assist Hilton to provide the
Corporate Services, including, but not limited to, providing necessary
information and specific written authorizations and consents, and Hilton shall
be relieved of its obligations hereunder to the extent that Park Place's failure
to take any such action renders performance by Hilton unlawful or impracticable.
5. FEES AND PAYMENT. Park Place shall pay Hilton for services
requested by and rendered to Park Place hereunder as follows:
a. Fees for the Corporate Services for the Initial Term
shall be based on the fair value of such services based on an arm's
length negotiation between Hilton and Park Place. Fees for work
performed by outside consultants/contractors retained by Hilton outside
of the ordinary course of business shall be paid directly by Park Place
and shall not include any mark-up or margins by Hilton.
b. Hilton shall invoice Park Place once each month for the
services performed during the prior month, other than services provided
by consultants/contractors outside of the ordinary course of business,
which services will be invoiced directly to Park Place by such
consultants/contractors. Payment for all services hereunder, other than
services provided by consultants/contractors outside of the ordinary
course of business, shall be made by Park Place to Hilton within 30 days
of receipt of invoice for payment (with appropriate supporting
documentation for any out-of-pocket expenses). Payment for services
performed by consultants/contractors outside of the ordinary course of
business shall be made promptly by Park Place following Park Place's
receipt of invoices for such services. Any payments not made by Park
Place to Hilton when due shall bear interest, computed daily, from the
date due to the date of payment based on the annual percentage rate
equal to the Prime Rate, as the same may vary from time to time, plus
two percentage points.
c. If at any time during the term of the Agreement, Park
Place moves its office location from 3930 Howard Hughes Parkway, 4th
Floor, Las Vegas, Nevada, both the availability of certain services and
their associated rates may be subject to change. If any additional
services are provided by Hilton, other than as set forth in the Exhibit
attached hereto, or if the scope or nature of the Corporate Services
provided at any time under this Agreement change materially, the parties
hereto will negotiate in good faith to set new fees based on the fair
value of providing such additional or revised services.
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d. Fees for Corporate Services provided after the Initial Term,
if any, shall be mutually agreed upon by the parties.
e. The parties agree that in the event that any tax or
assessment is required to be paid as a result of the provision of
services hereunder, other than any income tax (for which the party
incurring such expense shall be responsible), Park Place shall be solely
responsible for the payment of such tax or assessment.
6. DUTY OF CARE.
a. HILTON'S OBLIGATIONS. All services provided and all
obligations hereunder shall be administered in accordance with Hilton's
standard policies, procedures and practices in effect as of the date
hereof and as may be changed from time to time, or as otherwise
specified in accordance with the terms hereof. In so doing, Hilton
shall exercise the same care and skill as it exercises in performing
like services for itself. In the event Hilton changes its policies,
procedures or practices, the Corporate Services performed hereunder may
be modified by Hilton to meet such revised policies, procedures and
practices provided that Hilton gives Park Place prior written notice of
such change and a reasonable opportunity for Park Place to adapt its
operations to accommodate such changes or to reject such change. Park
Place's decision whether or not to accept the proposed change must be
made on or before the date Hilton implements such change, which date
shall be specified in the notice given to Park Place. Park Place agrees
to pay any charges (i) resulting from Hilton's need to maintain
different versions of the same systems, procedures, technologies, or
services and (ii) resulting from requirements of third party vendors.
Notwithstanding anything to the contrary in this Section 6.a., Hilton's
liability for the provision of services hereunder shall be strictly
limited, as set forth in Section 9.
b. PARK PLACE'S OBLIGATIONS. Park Place shall adopt
reasonable measures to limit its and Hilton's exposure with respect to
any potential losses and damages, including, but not limited to,
periodic examination and confirmation of results, provision for
identification and correction of errors and omissions, preparation and
storage of backup data, virus prevention, security, replacement of lost
or mutilated documents, and reconstruction of data.
7. LIAISON. Hilton shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President & General Counsel, Senior Vice
President & Treasurer and Senior Vice President & Controller (the "HILTON
REPRESENTATIVES") and Park Place shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President,Law & Corporate Affairs, &
Secretary and Vice President & Controller (the "PARK PLACE REPRESENTATIVES" and,
together with the Hilton Representatives, the "REPRESENTATIVES") to facilitate
communications and performance under this Agreement. Each party may treat an
act of a Representative of the other party as being authorized by such other
party without inquiring or ascertaining whether such Representative had
authority to so act. Each party shall have the right at any time and from time
to time to replace any of its Representatives by giving prior notice in writing
to the other party setting forth the name of (i) each Representative to be
replaced and (ii) the replacement, and certifying that
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the replacement Representative is authorized to act for the party giving the
notice in all matters relating to this Agreement.
8. CONFIDENTIALITY.
a. Hilton and Park Place agree that all information
regarding the Corporate Services provided hereunder (the "CONFIDENTIAL
INFORMATION"), including, but not limited to, price, methods of
operation and software, shall be maintained in confidence and not be
released to any third party for any reason whatsoever, excluding such
parties' counsel, agents, auditors or lenders. However, a party may
release the Confidential Information to a third party upon the prior
approval of the other party (such approval not to be unreasonably
withheld, conditioned or delayed), upon court order or as such party in
good faith believes, based on the advice of counsel, is required by any
rules, regulations or laws. Notwithstanding the previous sentence, in
the event that a party becomes legally compelled (by deposition,
interrogatory, request for documents, subpoena, civil investigative
demand or otherwise) to disclose any information, such party shall
provide the other with prompt prior written notice of such requirement
so that the other party may seek a protective order or other appropriate
remedy to minimize disclosure of the Confidential Information. In the
event that such protective order or other remedy is not obtained, or the
other party approves the disclosure, the disclosing party agrees to
furnish only that portion of the Confidential Information which the
disclosing party in good faith believes, based on the advice of counsel,
is legally required and to exercise reasonable efforts to obtain
assurance that confidential treatment will be accorded to such
information. Each party shall cease use of all Confidential Information
which any party has obtained from the other upon the expiration or
earlier termination of this Agreement. The provisions of this Section 8
shall survive the expiration or earlier termination of this Agreement.
b. Any Park Place information or other information provided
by Park Place to Hilton for use with the Corporate Services provided
hereunder and identified in writing as confidential shall remain the
exclusive and confidential property of Park Place. Specifically, Park
Place's employee database and payroll information shall be deemed
confidential. Hilton shall treat such information as confidential and
will not disclose or otherwise make available any Park Place information
to any person other than employees, consultants, or auditors of Hilton
with a need-to-know or except as required by court order or as such
party in good faith believes, based on the advice of counsel, is
required by any rules, regulations or laws. Hilton will instruct its
employees who have access to the Park Place information to keep the same
confidential by using the same care and discretion that Hilton uses with
respect to its own confidential property and trade secrets.
c. Hilton will continue current security provisions
regarding third parties' access to Park Place information. Hilton
reserves the right to issue and change regulations and procedures from
time to time to improve file security.
d. Hilton will continue current precautions regarding the
loss or alteration of Park Place information. Park Place will, to the
extent it deems necessary, keep
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copies of all source documents delivered to Hilton and will maintain a
procedure external to Hilton's systems for the reconstruction of lost or
altered Park Place data.
e. Hilton will, to the extent applicable, retain Park
Place's information in accordance with and to the extent provided by
Hilton's then prevailing records retention policies and practices for
similar activities. Hilton will, in conformity with its then prevailing
records retention policies and practices, dispose of all Park Place
information in any manner it deems appropriate unless Park Place, prior
to such disposal, furnishes to Hilton written instructions for the
disposition of such Park Place information, at Park Place's expense. At
Park Place's request, Hilton will provide Park Place, in a standard
Hilton format and at Hilton's then standard rates for such format, any
and all Park Place information requested.
f. Hilton's systems used to perform the Corporate Services
provided hereunder, including but not limited to the payroll system, are
confidential and proprietary to Hilton or third parties. Park Place
shall treat these systems and all related procedures as confidential and
proprietary to Hilton or its third party vendors and shall be directly
bound by and responsible for applicable license and other obligations.
Park Place agrees that all software systems, procedures, and related
materials provided to Park Place by Hilton for the purposes of this
Agreement are for Park Place's interim, revocable internal use
exclusively and only as related to the Corporate Services or any of the
underlying systems used to provide Corporate Services hereunder. Park
Place may not sell, transfer, assign, or otherwise use the Corporate
Services provided hereunder, in whole or in part, for the benefit of any
other party. Park Place shall not copy, modify, reverse engineer, or in
any way alter these systems without Hilton's express written consent.
Title to all software systems used in performing the Corporate Services
provided hereunder shall remain in Hilton or its third party vendors.
9. WARRANTIES AND LIMITATIONS OF LIABILITY.
a. HILTON DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE CORPORATE
SERVICES PROVIDED HEREUNDER. Hilton will use reasonable efforts to
perform the Corporate Services provided hereunder in a professional and
workmanlike manner, but the results of the Corporate Services are
furnished "as is."
b. Hilton shall have no liability to any third party in
connection with the provision of the Corporate Services in any event,
and no liability to Park Place except to the extent (i) the performance
of such Corporate Services is in material breach of the standard of care
specified in this Agreement or (ii) the performance of such Corporate
Services is interrupted, delayed or otherwise not available, PROVIDED,
HOWEVER, that in each case such liability shall be subject to Sections
9.e. and 13 hereof.
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c. Hilton's sole liability to Park Place for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(i). above, shall be, at Park
Place's discretion, to (i) promptly perform again the particular
Corporate Service that was previously performed in breach of the
standard of care specified in this Agreement, at no additional cost to
Park Place or (ii) refund the portion of the fees attributable to the
performance of the Corporate Service that was previously performed in
breach of the standard of care specified in this Agreement.
d. Hilton's sole liability to Park Place for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(ii). above, shall be to use all
reasonable efforts to make the Corporate Services available as promptly
as reasonably practicable. Hilton will maintain the same back-up
procedures for Park Place's information that Hilton has for its own
similar information.
e. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, (i)
HILTON SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS, DELAYS, OR LOSSES
UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH OR GROSS
NEGLIGENCE AND (ii) HILTON SHALL NOT BE LIABLE FOR INCIDENTAL, INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR OTHER
ECONOMIC DAMAGES. PARK PLACE AGREES THAT IN NO EVENT SHALL THE TOTAL
AGGREGATE LIABILITY OF HILTON FOR ANY AND ALL CLAIMS, LOSSES, OR DAMAGES
ARISING UNDER THIS AGREEMENT AND FOR THE CORPORATE SERVICES PERFORMED
HEREUNDER EXCEED THE VALUE OF PARK PLACE'S PAYMENT FOR SAID SPECIFIC
CORPORATE SERVICE IN DISPUTE OVER ONE ACCOUNTING PERIOD'S TIME.
f. The foregoing provisions of this Section 9 set forth the
full extent of Hilton's liability hereunder (monetary or otherwise) for
any claim or action, regardless of the form in which any such claim or
action may be asserted against Hilton (e.g. contract, negligence or
otherwise).
g. "Hilton" as used in this Section 9 includes all of
Hilton's affiliates, subsidiaries, vendors, service providers,
licensors, licensees and properties, and each of such entities' agents,
officers, directors, agents, employees, guests, residents, invitees,
permitees, heirs, executors, successors and assigns, related persons or
entities (the "HILTON INDEMNITEES").
10. DEFAULT. If either party materially defaults hereunder, the non-
defaulting party may terminate this Agreement effective immediately (subject to
the cure periods set forth below) upon written notice to the defaulting party.
The non-defaulting party shall be entitled to all remedies provided by law or
equity (including reasonable attorneys' fees and costs). The following events
shall be deemed to be material defaults hereunder:
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a. Failure by any party to make any payment required to be
made to the other hereunder or under an agreement related to the
provision of Corporate Services, which failure is not remedied within 5
days after receipt of written notice thereof; or
b. Except as otherwise provided herein, failure by any party
substantially to perform in accordance with the terms and conditions of
this Agreement or under an agreement related to the provision of
Corporate Services, which failure is not remedied within 30 days after
receipt of written notice from the other party specifying the nature of
such default; or
c. (i) Filing of a voluntary bankruptcy petition by any
party; (ii) filing of an involuntary bankruptcy petition against any
party which is not withdrawn within 60 days after filing; (iii)
assignment for the benefit of creditors made by any party; or (iv)
appointment of a receiver for any party.
11. LAWS AND GOVERNMENTAL REGULATIONS. Park Place shall be
responsible for (a) compliance with all laws and governmental regulations
affecting its business and (b) any use it may make of the Corporate Services to
assist it in complying with such laws and governmental regulations. While
Hilton shall not have any responsibility for Park Place's compliance with the
laws and regulations referred to above, Hilton agrees to use reasonable efforts
to cause the Corporate Services to be designed in such manner that they will be
able to assist Park Place in complying with its applicable legal and regulatory
responsibilities as related to the Corporate Services. In no event, however,
will Park Place rely solely on its use of the Corporate Services in complying
with any laws and governmental regulations.
12. INDEMNIFICATION.
a. Park Place shall indemnify, defend and hold harmless each
Hilton Indemnitee from and against any and all losses, Liabilities,
damages and expenses (including, without limitation, the reasonable
costs and expenses of investigation and reasonable attorneys' fees and
expenses in connection with any or all such investigations or any and
all Actions, or threatened Actions) (collectively, "LOSSES") incurred or
suffered by such Hilton Indemnitee either (i) as the result of any claim
made against such Hilton Indemnitee by any third party arising out of
such Hilton Indemnitee's provision of the Corporate Services or (ii)
arising out of Park Place's negligence or malfeasance in connection with
its use of the Corporate Services.
b. The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification
provisions set forth herein are intended to supplement, but not to
replace, the indemnification provisions in the Distribution Agreement.
To the extent the indemnification provisions set forth herein conflict
with those set forth in the Distribution Agreement, those provisions
that provide the greatest benefits to the indemnified party shall
control.
13. FORCE MAJEURE. Park Place and Hilton shall incur no liability to
each other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire,
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flood, war, strike, lock-out work stoppage or slow-down, labor disturbances,
power failure, major equipment breakdowns, construction delays, accident,
riots, acts of God, acts of United States' enemies, laws, orders or at the
insistence or result of any governmental authority or any other event beyond
each other's reasonable control. In addition, Hilton shall not be liable or
deemed to be in default for any delay or failure to perform hereunder
resulting, directly or indirectly, from any cause beyond Hilton's reasonable
control, including limitations upon the availability of communications
facilities or failures of Park Place or other communications equipment or
failure of Park Place to prepare data properly for use in the Corporate
Services.
14. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller.
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
16. SPECIFIC PERFORMANCE. The parties hereto agree that the remedy
at law for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable laws, each party waives any objection to the
imposition of such relief.
17. HEADINGS; REFERENCES. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to "Sections" or
"Exhibits" shall be deemed to be references to Sections hereof or Exhibits
hereto unless otherwise indicated.
18. SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any covenant hereunder is too extensive in any respect
to permit enforcement of such covenant to its fullest extent, each party agrees
that a court of competent jurisdiction may enforce such covenant to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such covenant.
19. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) if to Park Place, to
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President & Chief Financial
Officer and Executive Vice President--Law &
Corporate Affairs, & Secretary
Telecopy: 702-699-5190 and
702-699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: 973-643-6500
(b) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: Executive Vice President & General Counsel and
Executive Vice President & Chief Financial Officer
Telecopy: 310-205-7677 and
310-205-4327
with a copy to:
Latham & Watkins
1001 Pennsylvania Ave., N.W.
Suite 1300
Washington, D.C. 20004-2505
Attn: Bruce Rosenblum, Esq.
Telecopy: 202-637-2201
20. FURTHER ACTION. Park Place and Hilton each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
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21. WAIVER. Park Place and Hilton each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute any
waiver of any subsequent default or rights herein or nullify the effectiveness
of that term or condition. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
22. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law.
23. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement, including the Exhibits hereto, and the Distribution Agreement
(including any Ancillary Agreements, as such term is defined in the
Distribution Agreement) and including the Schedules and Exhibits thereto,
constitute the entire understanding between the parties, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter covered by said agreements. To the extent
that the terms of this Agreement and similar terms of the Distribution
Agreement or any Ancillary Agreement are in conflict, the interpretation
given to the conflicting terms of the Distribution Agreement shall govern the
interpretation and performance of this Agreement. This Agreement is not
intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
24. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
25. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance
or injunctive relief thereof, and including the attorneys' fees provisions
referred to therein.
26. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
27. HILTON EQUIPMENT CORPORATION. With respect to any purchase
orders placed with Hilton Equipment Corporation, the agreed fair value of
services shall reflect the following: there shall be (i) no mark up of any
invoices relating to purchase orders in connection with the construction and
development of the Paris Hotel & Casino ("Paris Casino") and (ii) a mark up
to be agreed to by the parties hereto on all invoices relating to purchase
orders placed on or after the date hereof for all matters other than those
relating to the construction and development of the Paris Casino. Purchase
orders relating to the Paris Casino after the official opening date of the
property will be subject to a markup to be agreed to by the parties hereto.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Hilton and Park Place have caused this
Agreement to be signed by their duly authorized officers as of the date first
above written.
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
---------------------------
Name: Thomas E. Gallagher
Its: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT
CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
---------------------------
Name: Scott A. LaPorta
Its: Executive Vice President and
Chief Financial Officer
S-1
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PARK PLACE ENTERTAINMENT CORPORATION
CORPORATE SERVICES AGREEMENT
THIS PARK PLACE ENTERTAINMENT CORPORATION CORPORATE SERVICES AGREEMENT
(this "AGREEMENT"), dated December 31, 1998, is by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION, a Delaware corporation and wholly owned subsidiary of Hilton ("PARK
PLACE").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated December 31, 1998
(the "DISTRIBUTION AGREEMENT") between Hilton and Park Place, Hilton and certain
of its subsidiaries (the "RETAINED BUSINESS SUBSIDIARIES") will (i) contribute
to Park Place and certain subsidiaries of Park Place that conduct gaming
business all of the operations, assets and liabilities of Hilton and the
Retained Business Subsidiaries comprising the gaming business and (ii)
distribute all of the outstanding shares of Park Place's common stock to the
holders of Hilton's common stock;
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that Park Place and Hilton enter into, among
other things, a corporate services agreement with substantially the same terms
and conditions set forth herein;
WHEREAS, Hilton desires to retain Park Place as described herein, and
Park Place desires to render services as described herein for a fee; and
WHEREAS, the Board of Directors of each of Park Place and Hilton have
determined that it is to the benefit and in the best interests of the respective
parties and their stockholders to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
warranties, covenants and agreements set forth below, the parties agree as
follows:
AGREEMENT
1. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall
have the meanings set forth below:
"ACCOUNTING PERIOD" shall be a one month period.
"ACTION" shall mean any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"CORPORATE SERVICES" shall mean the services described in Exhibit A.
<PAGE>
"DISTRIBUTION" means the distribution to the holders of Hilton's
common stock of all the outstanding shares of Park Place's common stock.
"DISTRIBUTION DATE" means the date on which the Distribution is
effected.
"INITIAL TERM" shall have the meaning set forth in Section 2.
"LIABILITIES" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"PRIME RATE" shall be the rate identified from time to time in the New
York edition of the Wall Street Journal as being the prime rate of interest;
should such rate be shown as a spread of rates, then the highest such rate shall
be utilized.
"RELATED AGREEMENTS" shall have the meaning described in the
Distribution Agreement.
Any capitalized terms defined in the Distribution Agreement and used
herein shall have the meanings ascribed to them in the Distribution Agreement
unless otherwise defined herein.
2. TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence on the Distribution Date and, unless earlier terminated pursuant
to this Section 2, shall expire on the date that is 12 months immediately
following the Distribution Date. After the Initial Term, unless earlier
terminated pursuant to this Section 2, the parties may agree to renew the term
of this Agreement for an extended period to be determined by the parties;
PROVIDED, HOWEVER, that the term of this Agreement shall not extend past the
date that is 18 months immediately following the Distribution Date.
Notwithstanding the foregoing, (a) Hilton may terminate this Agreement or any of
the services provided by Park Place hereunder at any time for any reason or no
reason upon 30 days prior written notice to Park Place and (b) either party may
at any time terminate this Agreement in the event of a material default (past
the expiration of any applicable cure period provided herein) in accordance with
the provisions of this Agreement; PROVIDED, HOWEVER, that the availability of
such right of termination shall not prejudice such party's right under Section 9
hereof.
3. SERVICES. Upon 30 days written request from Hilton, Park Place
shall provide to Hilton, to the extent requested in such notice, the types of
Corporate Services set forth in Exhibit A. As of the date of this Agreement,
Hilton has requested Park Place to provide those services described on Exhibit
B. The scope of the services to be provided by Park Place hereunder shall be
consistent with the scope of the services being provided by the Gaming Group to
the Retained Business Group on the date the Merger Agreement is signed and shall
not be expanded unless otherwise agreed to in writing by the parties hereto.
Exhibit A and Exhibit B may be amended from time to time as the parties may
mutually agree in writing.
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In the event that Park Place is required to retain, outside of the
ordinary course of business, outside consultant/contractor assistance to perform
any of the services hereunder, Park Place shall first obtain the written consent
of Hilton to such retention (which consent may not be unreasonably withheld).
Park Place shall not be held responsible for the performance of such
consultant/contractor services and Hilton assumes the risk thereof.
4. COOPERATION. Hilton will provide access to information and its
employees necessary for Park Place to provide such Corporate Services. Hilton
shall, in a timely manner, take all such actions as may be reasonably necessary
or desirable in order to enable or assist Park Place to provide the Corporate
Services, including, but not limited to, providing necessary information and
specific written authorizations and consents, and Park Place shall be relieved
of its obligations hereunder to the extent that Hilton's failure to take any
such action renders performance by Park Place unlawful or impracticable.
5. FEES AND PAYMENT. Hilton shall pay Park Place for services
requested by and rendered to Hilton hereunder as follows:
a. Fees for the Corporate Services for the Initial Term shall
be based on the fair value of such services based on an arm's length
negotiation between Hilton and Park Place. Fees for work performed by
outside consultants/contractors retained by Park Place outside of the
ordinary course of business shall be paid directly by Hilton and shall not
include any mark-up or margins by Park Place.
b. Park Place shall invoice Hilton once each month for the
services performed during the prior month, other than services provided by
consultants/contractors outside of the ordinary course of business, which
services will be invoiced directly to Hilton by such
consultants/contractors. Payment for all services hereunder, other than
services provided by consultants/contractors outside of the ordinary course
of business, shall be made by Hilton to Park Place within 30 days of
receipt of invoice for payment (with appropriate supporting documentation
for any out-of-pocket expenses). Payment for services performed by
consultants/contractors outside of the ordinary course of business shall be
made promptly by Hilton following Hilton's receipt of invoices for such
services. Any payments not made by Hilton to Park Place when due shall
bear interest, computed daily, from the date due to the date of payment
based on the annual percentage rate equal to the Prime Rate, as the same
may vary from time to time, plus two percentage points.
c. If at any time during the term of the Agreement, Hilton
moves its office location from 9336 Civic Center Drive, Beverly Hills,
California, both the availability of certain services and their associated
rates may be subject to change. If any additional services are provided by
Park Place, other than as set forth in the Exhibits attached hereto, or if
the scope or nature of the Corporate Services provided at any time under
this Agreement change materially, the parties hereto will negotiate in good
faith to set new fees based on the fair value of providing such additional
or revised services.
d. Fees for Corporate Services provided after the Initial Term,
if any, shall be mutually agreed upon by the parties.
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e. The parties agree that in the event that any tax or
assessment is required to be paid as a result of the provision of services
hereunder, other than any income tax (for which the party incurring such
expense shall be responsible), Hilton shall be solely responsible for the
payment of such tax or assessment.
6. DUTY OF CARE.
a. PARK PLACE'S OBLIGATIONS. All services provided and all
obligations hereunder shall be administered in accordance with Park Place's
standard policies, procedures and practices in effect as of the date hereof
and as may be changed from time to time, or as otherwise specified in
accordance with the terms hereof. In so doing, Park Place shall exercise
the same care and skill as it exercises in performing like services for
itself. In the event Park Place changes its policies, procedures or
practices, the Corporate Services performed hereunder may be modified by
Park Place to meet such revised policies, procedures and practices provided
that Park Place gives Hilton prior written notice of such change and a
reasonable opportunity for Hilton to adapt its operations to accommodate
such changes or to reject such change. Hilton's decision whether or not to
accept the proposed change must be made on or before the date Park Place
implements such change, which date shall be specified in the notice given
to Hilton. Hilton agrees to pay any charges (i) resulting from Park
Place's need to maintain different versions of the same systems,
procedures, technologies, or services and (ii) resulting from requirements
of third party vendors. Notwithstanding anything to the contrary in this
Section 6.a., Park Place's liability for the provision of services
hereunder shall be strictly limited, as set forth in Section 9.
b. HILTON'S OBLIGATIONS. Hilton shall adopt reasonable
measures to limit its and Park Place's exposure with respect to any
potential losses and damages, including, but not limited to, periodic
examination and confirmation of results, provision for identification and
correction of errors and omissions, preparation and storage of backup data,
virus prevention, security, replacement of lost or mutilated documents, and
reconstruction of data.
7. LIAISON. Hilton shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President & General Counsel, Senior Vice
President & Treasurer and Senior Vice President & Controller (the "HILTON
REPRESENTATIVES") and Park Place shall appoint its Executive Vice President &
Chief Financial Officer, Executive Vice President,Law & Corporate Affairs, &
Secretary and Vice President & Controller (the "PARK PLACE REPRESENTATIVES," and
together with the Hilton Representatives, the "REPRESENTATIVES") to facilitate
communications and performance under this Agreement. Each party may treat an
act of a Representative of the other party as being authorized by such other
party without inquiring or ascertaining whether such Representative had
authority to so act. Each party shall have the right at any time and from time
to time to replace any of its Representatives by giving prior notice in writing
to the other party setting forth the name of (i) each Representative to be
replaced and (ii) the replacement, and certifying that the replacement
Representative is authorized to act for the party giving the notice in all
matters relating to this Agreement.
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8. CONFIDENTIALITY.
a. Park Place and Hilton agree that all information regarding
the Corporate Services provided hereunder (the "CONFIDENTIAL INFORMATION"),
including, but not limited to, price, methods of operation and software,
shall be maintained in confidence and not be released to any third party
for any reason whatsoever, excluding such parties' counsel, agents,
auditors or lenders. However, a party may release the Confidential
Information to a third party upon the prior approval of the other party
(such approval not to be unreasonably withheld, conditioned or delayed),
upon court order or as such party in good faith believes, based on the
advice of counsel, is required by any rules, regulations or laws.
Notwithstanding the previous sentence, in the event that a party becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or otherwise) to disclose any
information, such party shall provide the other with prompt prior written
notice of such requirement so that the other party may seek a protective
order or other appropriate remedy to minimize disclosure of the
Confidential Information. In the event that such protective order or other
remedy is not obtained, or the other party approves the disclosure, the
disclosing party agrees to furnish only that portion of the Confidential
Information which the disclosing party in good faith believes, based on the
advice of counsel, is legally required and to exercise reasonable efforts
to obtain assurance that confidential treatment will be accorded to such
information. Each party shall cease use of all Confidential Information
which any party has obtained from the other upon the expiration or earlier
termination of this Agreement. The provisions of this Section 8 shall
survive the expiration or earlier termination of this Agreement
b. Any Hilton information or other information provided by
Hilton to Park Place for use with the Corporate Services provided hereunder
and identified in writing as confidential shall remain the exclusive and
confidential property of Hilton. Park Place shall treat such information
as confidential and will not disclose or otherwise make available any
Hilton information to any person other than employees, consultants, or
auditors of Park Place with a need-to-know or except as required by court
order or as such party in good faith believes, based on the advice of
counsel, is required by any rules, regulations or laws. Park Place will
instruct its employees who have access to the Hilton information to keep
the same confidential by using the same care and discretion that Park Place
uses with respect to its own confidential property and trade secrets.
c. Park Place will continue current security provisions
regarding third parties' access to Hilton information. Park Place reserves
the right to issue and change regulations and procedures from time to time
to improve file security.
d. Park Place will continue current precautions regarding the
loss or alteration of Hilton information. Hilton will, to the extent it
deems necessary, keep copies of all source documents delivered to Park
Place and will maintain a procedure external to Park Place's systems for
the reconstruction of lost or altered Hilton data.
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e. Park Place will, to the extent applicable, retain Hilton's
information in accordance with and to the extent provided by Park Place's
then prevailing records retention policies and practices for similar
activities. Park Place will, in conformity with its then prevailing
records retention policies and practices, dispose of all Hilton information
in any manner it deems appropriate unless Hilton, prior to such disposal,
furnishes to Park Place written instructions for the disposition of such
Hilton information, at Hilton's expense. At Hilton's request, Park Place
will provide Hilton, in a standard Park Place format and at Park Place's
then standard rates for such format, any and all Hilton information
requested.
f. Park Place's systems used to perform the Corporate Services
provided hereunder are confidential and proprietary to Park Place or third
parties. Hilton shall treat these systems and all related procedures as
confidential and proprietary to Park Place or its third party vendors and
shall be directly bound by and responsible for applicable license and other
obligations. Hilton agrees that all software systems, procedures, and
related materials provided to Hilton by Park Place for the purposes of this
Agreement are for Hilton's interim, revocable internal use exclusively and
only as related to the Corporate Services or any of the underlying systems
used to provide Corporate Services hereunder. Hilton may not sell,
transfer, assign, or otherwise use the Corporate Services provided
hereunder, in whole or in part, for the benefit of any other party. Hilton
shall not copy, modify, reverse engineer, or in any way alter these systems
without Park Place's express written consent. Title to all software
systems used in performing the Corporate Services provided hereunder shall
remain in Park Place or its third party vendors.
9. WARRANTIES AND LIMITATIONS OF LIABILITY.
a. PARK PLACE DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE CORPORATE
SERVICES PROVIDED HEREUNDER. Park Place will use reasonable efforts to
perform the Corporate Services provided hereunder in a professional and
workmanlike manner, but the results of the Corporate Services are furnished
"as is."
b. Park Place shall have no liability to any third party in
connection with the provision of the Corporate Services in any event, and
no liability to Hilton except to the extent (i) the performance of such
Corporate Services is in material breach of the standard of care specified
in this Agreement or (ii) the performance of such Corporate Services is
interrupted, delayed or otherwise not available, PROVIDED, HOWEVER, that in
each case such liability shall be subject to Sections 9.e. and 13 hereof.
c. Park Place's sole liability to Hilton for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(i). above, shall be, at Hilton's
discretion, to (i) promptly perform again the particular Corporate Service
that was previously performed in breach of the standard of care specified
in this
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Agreement, at no additional cost to Hilton or (ii) refund the portion of
the fees attributable to the performance of the Corporate Service that was
previously performed in breach of the standard of care specified in this
Agreement.
d. Park Place's sole liability to Hilton for claims,
notwithstanding the form of such claims (e.g. contract, negligence or
otherwise), arising out of Section 9.b(ii). above, shall be to use all
reasonable efforts to make the Corporate Services available as promptly as
reasonably practicable. Park Place will maintain the same back-up
procedures for Hilton's information that Park Place has for its own similar
information.
e. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, (i) PARK
PLACE SHALL NOT BE LIABLE FOR ANY ERRORS, OMISSIONS, DELAYS, OR LOSSES
UNLESS CAUSED SOLELY BY ITS CRIMINAL CONDUCT, FRAUD, BAD FAITH OR GROSS
NEGLIGENCE AND (ii) PARK PLACE SHALL NOT BE LIABLE FOR INCIDENTAL,
INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR
OTHER ECONOMIC DAMAGES. HILTON AGREES THAT IN NO EVENT SHALL THE TOTAL
AGGREGATE LIABILITY OF PARK PLACE FOR ANY AND ALL CLAIMS, LOSSES, OR
DAMAGES ARISING UNDER THIS AGREEMENT AND FOR THE CORPORATE SERVICES
PERFORMED HEREUNDER EXCEED THE VALUE OF HILTON'S PAYMENT FOR SAID SPECIFIC
CORPORATE SERVICE IN DISPUTE OVER ONE ACCOUNTING PERIOD'S TIME.
f. The foregoing provisions of this Section 9 set forth the
full extent of Park Place's liability hereunder (monetary or otherwise) for
any claim or action, regardless of the form in which any such claim or
action may be asserted against Park Place (e.g. contract, negligence or
otherwise).
g. "Park Place" as used in this Section 9 includes all of Park
Place's affiliates, subsidiaries, vendors, service providers, licensors,
licensees and properties, and each of such entities' agents, officers,
directors, agents, employees, guests, residents, invitees, permitees,
heirs, executors, successors and assigns, related persons or entities (the
"PARK PLACE INDEMNITEES").
10. DEFAULT. If either party materially defaults hereunder, the
non-defaulting party may terminate this Agreement effective immediately (subject
to the cure periods set forth below) upon written notice to the defaulting
party. The non-defaulting party shall be entitled to all remedies provided by
law or equity (including reasonable attorneys' fees and costs). The following
events shall be deemed to be material defaults hereunder:
a. Failure by any party to make any payment required to be made
to the other hereunder or under an agreement related to the provision of
Corporate Services, which failure is not remedied within 5 days after
receipt of written notice thereof; or
b. Except as otherwise provided herein, failure by any party
substantially to perform in accordance with the terms and conditions of
this Agreement or
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under an agreement related to the provision of Corporate Services, which
failure is not remedied within 30 days after receipt of written notice from
the other party specifying the nature of such default; or
c. (i) Filing of a voluntary bankruptcy petition by any party;
(ii) filing of an involuntary bankruptcy petition against any party which
is not withdrawn within 60 days after filing; (iii) assignment for the
benefit of creditors made by any party; or (iv) appointment of a receiver
for any party.
11. LAWS AND GOVERNMENTAL REGULATIONS. Hilton shall be responsible
for (a) compliance with all laws and governmental regulations affecting its
business and (b) any use it may make of the Corporate Services to assist it in
complying with such laws and governmental regulations. While Park Place shall
not have any responsibility for Hilton's compliance with the laws and
regulations referred to above, Park Place agrees to use reasonable efforts to
cause the Corporate Services to be designed in such manner that they will be
able to assist Hilton in complying with its applicable legal and regulatory
responsibilities as related to the Corporate Services. In no event, however,
will Hilton rely solely on its use of the Corporate Services in complying with
any laws and governmental regulations.
12. INDEMNIFICATION.
a. Hilton shall indemnify, defend and hold harmless each Park
Place Indemnitee from and against any and all losses, Liabilities, damages
and expenses (including, without limitation, the reasonable costs and
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any or all such investigations or any and all Actions, or
threatened Actions) (collectively, "LOSSES") incurred or suffered by such
Park Place Indemnitee either (i) as the result of any claim made against
such Park Place Indemnitee by any third party arising out of such Park
Place Indemnitee's provision of the Corporate Services or (ii) arising out
of Hilton's negligence or malfeasance in connection with its use of the
Corporate Services.
b. The parties hereto are also subject to indemnification
provisions in the Distribution Agreement. The indemnification provisions
set forth herein are intended to supplement, but not to replace, the
indemnification provisions in the Distribution Agreement. To the extent
the indemnification provisions set forth herein conflict with those set
forth in the Distribution Agreement, those provisions that provide the
greatest benefits to the indemnified party shall control.
13. FORCE MAJEURE. Hilton and Park Place shall incur no liability to
each other due to a failure to perform under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other event beyond each other's reasonable control. In
addition, Park Place shall not be liable or deemed to be in default for any
delay or failure to perform hereunder resulting, directly or indirectly, from
any cause beyond Park Place's reasonable control, including limitations upon the
availability of
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communications facilities or failures of Hilton or other communications
equipment or failure of Hilton to prepare data properly for use in the Corporate
Services.
14. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller.
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
16. SPECIFIC PERFORMANCE. The parties hereto agree that the remedy
at law for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable laws, each party waives any objection to the
imposition of such relief.
17 HEADINGS; REFERENCES. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to "Sections" or
"Exhibits" shall be deemed to be references to Sections hereof or Exhibits
hereto unless otherwise indicated.
18 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any covenant hereunder is too extensive in any respect
to permit enforcement of such covenant to its fullest extent, each party agrees
that a court of competent jurisdiction may enforce such covenant to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such covenant.
19 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) if to Hilton, to
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: Executive Vice President & General Counsel and
Executive Vice President & Chief Financial Officer
Telecopy: 310-205-7677 and
310-205-4327
with a copy to:
Latham & Watkins
1001 Pennsylvania Ave., N.W.
Suite 1300
Washington, D.C. 20004-2505
Attn: Bruce Rosenblum, Esq.
Telecopy: 202-637-2201
(b) if to Park Place, to
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
4th Floor
Las Vegas, Nevada 89109
Attn: Executive Vice President & Chief Financial
Officer and Executive Vice President,Law &
Corporate Affairs, & Secretary
Telecopy: 702-699-5190 and
702-699-5179
with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Attn: Michael Tischman, Esq.
Telecopy: 973-643-6500
20. FURTHER ACTION. Hilton and Park Place each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
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21. WAIVER. Hilton and Park Place each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute any
waiver of any subsequent default or rights herein or nullify the effectiveness
of that term or condition. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
22. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law.
23. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
including the Exhibits hereto, and the Distribution Agreement (including any
Ancillary Agreements, as such term is defined in the Distribution Agreement) and
including the Schedules and Exhibits thereto, constitute the entire
understanding between the parties, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter covered by said agreements. To the extent that the terms of this
Agreement and similar terms of the Distribution Agreement or any Ancillary
Agreement are in conflict, the interpretation given to the conflicting terms of
the Distribution Agreement shall govern the interpretation and performance of
this Agreement. This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
24. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
25. ARBITRATION. The parties hereto agree that any dispute,
controversy or disagreement between the parties related to the obligations of
the parties under this Agreement in respect of which resolution cannot be
reached shall be submitted for mediation and final and binding arbitration in
accordance with Section 9.14 of the Distribution Agreement, including Section
9.14(c) thereof regarding the parties' ability to seek specific performance or
injunctive relief thereof, and including the attorneys' fees provisions referred
to therein.
26. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Park Place and Hilton have caused this Agreement
to be signed by their duly authorized officers as of the date first above
written.
PARK PLACE ENTERTAINMENT
CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
-------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
-------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
S-1
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----------------------------------------------------
EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
PARK PLACE ENTERTAINMENT CORPORATION
DATED AS OF DECEMBER 31, 1998
----------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS. . . . . . . . . . . . . . . . . . . . 7
Section 2.1. Transfer of Employees.. . . . . . . . . . . . . . . . . . . 7
Section 2.2. Allocations between Hilton and Park Place.. . . . . . . . . 8
Section 2.3. Change of Control Benefits; Termination Benefits. . . . . . 9
ARTICLE III. INCENTIVE PLANS . . . . . . . . . . . . . . . . . . . . . .10
Section 3.1. Stock Option and Incentive Plans. . . . . . . . . . . . . .10
Section 3.2. Stock Purchase Plans. . . . . . . . . . . . . . . . . . . .11
Section 3.3. Compensation Plans. . . . . . . . . . . . . . . . . . . . .11
ARTICLE IV. PENSION AND SAVINGS PLAN. . . . . . . . . . . . . . . . . .12
Section 4.1. 401(k) Plans. . . . . . . . . . . . . . . . . . . . . . . .12
Section 4.2. Retirement Plan.. . . . . . . . . . . . . . . . . . . . . .14
ARTICLE V. WELFARE AND OTHER BENEFITS. . . . . . . . . . . . . . . . .15
Section 5.1. Hilton Medical/Dental Plans.. . . . . . . . . . . . . . . .15
Section 5.2. Park Place Medical/Dental Plans.. . . . . . . . . . . . . .16
Section 5.3. Vacation and Sick Pay Liabilities.. . . . . . . . . . . . .17
Section 5.4. Payroll Reporting and Withholding.. . . . . . . . . . . . .18
Section 5.5. Post-Retirement Welfare Benefits. . . . . . . . . . . . . .19
ARTICLE VI. LABOR AND EMPLOYMENT MATTERS. . . . . . . . . . . . . . . .19
Section 6.1. Separate Employers. . . . . . . . . . . . . . . . . . . . .19
Section 6.2. Employment Policies and Practices.. . . . . . . . . . . . .20
Section 6.3. Collective Bargaining Agreements. . . . . . . . . . . . . .20
Section 6.4. Notice of Claims. . . . . . . . . . . . . . . . . . . . . .20
Section 6.5. Assumption of Unemployment Tax Rates. . . . . . . . . . . .20
Section 6.6. Employees on Leave of Absence.. . . . . . . . . . . . . . .20
Section 6.7. Release and Separation Agreements.. . . . . . . . . . . . .20
ARTICLE VII. NON-U.S. PLANS. . . . . . . . . . . . . . . . . . . . . . .21
Section 7.1. Non-U.S. Plans Generally. . . . . . . . . . . . . . . . . .21
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ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .21
Section 8.1. Relationship of Parties.. . . . . . . . . . . . . . . . . .21
Section 8.2. Access to Information; Cooperation. . . . . . . . . . . . .21
Section 8.3. Assignment. . . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.5. Severability. . . . . . . . . . . . . . . . . . . . . . . .22
Section 8.6. Parties in Interest; No Third Party Beneficiary Rights. . .22
Section 8.7. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 8.8. Further Assurances. . . . . . . . . . . . . . . . . . . . .24
Section 8.9. Waiver of Conditions. . . . . . . . . . . . . . . . . . . .24
Section 8.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . . .24
Section 8.11. Preservation of Right To Amend or Terminate Plans.. . . . .24
Section 8.12. Entire Agreement. . . . . . . . . . . . . . . . . . . . . .24
Section 8.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.14. Survival. . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.15. Dispute Resolution. . . . . . . . . . . . . . . . . . . . .25
Section 8.16. Reimbursement.. . . . . . . . . . . . . . . . . . . . . . .25
Section 8.17. Default.. . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 8.18. Force Majeure.. . . . . . . . . . . . . . . . . . . . . . .25
Section 8.19. Attorney/Client Privilege.. . . . . . . . . . . . . . . . .26
Section 8.20. Specific Performance. . . . . . . . . . . . . . . . . . . .26
</TABLE>
SCHEDULES
Schedule A Release and Separation Agreements
EXHIBITS
Exhibit A Park Place Entertainment Corporation 1998 Stock Incentive
Plan
Exhibit B Park Place Entertainment Corporation 1998 Independent
Director Stock Option Plan
Exhibit C Park Place Entertainment Corporation Employee Stock Purchase
Plan
ii
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EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT
(this "AGREEMENT") is made and entered into as of December 31, 1998, by and
between HILTON HOTELS CORPORATION, a Delaware corporation ("HILTON"), and PARK
PLACE ENTERTAINMENT CORPORATION (f/k/a Gaming Co., Inc.), a Delaware corporation
("PARK PLACE"), effective as of the Distribution Date (as hereinafter defined).
RECITALS
WHEREAS, subject to certain conditions, Hilton intends to spin-off its
operations, assets and liabilities relating to its gaming business by
distributing all of the issued and outstanding shares of common stock, par value
$.01 per share, of Park Place (together with the Park Place Rights, as
hereinafter defined, the "PARK PLACE COMMON STOCK") to the holders as of the
Record Date (as hereinafter defined) of the common stock, par value $2.50 per
share, of Hilton (the "HILTON COMMON STOCK"), on a pro rata basis (the
"DISTRIBUTION");
WHEREAS, in connection with such spin-off, Hilton and Park Place have
entered into a Distribution Agreement of even date herewith (the "DISTRIBUTION
AGREEMENT"), pursuant to which, among other things, Hilton is divested of the
gaming business to be conducted by Park Place; and
WHEREAS, pursuant to, and as contemplated by, the Distribution
Agreement, Hilton and Park Place have agreed to enter into an agreement
allocating responsibilities with respect to certain matters relating to
employees and employee compensation, benefits, labor and certain other
employment matters pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants,
agreements, undertakings and obligations set forth herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below. Capitalized
terms used and not otherwise defined in this Agreement shall have the meaning
ascribed to them in the Distribution Agreement. All references herein to
"Article," "Sections" or "Schedules" shall be deemed to be references to
Articles or Sections hereof or Schedules hereto unless otherwise indicated.
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"ANCILLARY AGREEMENT" shall mean any agreement contemplated by the
Distribution Agreement, and such other documents as the parties thereto shall
mutually agree are required to effect the Distribution.
"AMG COMPENSATION AGREEMENT" shall mean the Deferred Compensation
Agreement, dated as of January 16, 1997, by and between Hilton and Arthur M.
Goldberg.
"CHANGE OF CONTROL AGREEMENTS" shall mean any and all employment or
severance agreements of Hilton which provide severance or termination benefits
to any Employee subsequent to a change of control of Hilton.
"CIRP" shall mean the Conrad International Retirement Plan, with any
amendments thereto.
"COBRA" shall mean Code Section 4980B and ERISA Sections 601 through
608, and any applicable state law establishing employer requirements for
continuation of health care, life insurance or other Welfare Plan benefits for
the benefit of certain current and former employees or dependents thereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"COLLECTIVE BARGAINING AGREEMENT" shall mean any collective bargaining
agreement or other labor agreement to which Hilton or any of its subsidiaries or
affiliates was a party on or before the Distribution Date.
"DISTRIBUTION" shall have the meaning set forth in the Recitals.
"DISTRIBUTION AGREEMENT" shall have the meaning set forth in the
Recitals.
"DISTRIBUTION DATE" shall mean the date on which the Distribution
occurs.
"EMPLOYEE" shall mean with respect to any entity, an individual who is
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, layoff with rights of recall, and any other leave of absence or
similar interruption of active employment that is not considered, according to
the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave. An employee
includes, without limitation, any individual who is in one of the following
categories: a Retained Employee, a Hilton Terminee, a Park Place Employee or a
Transferred Employee.
"EMPLOYER" shall mean Hilton or Park Place, as the context so indicates.
"EMPLOYER COMMON STOCK" shall mean Hilton Common Stock with respect to
Hilton Individuals, and Park Place Common Stock with respect to Park Place
Individuals.
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"EMPLOYER STOCK OPTION PLAN" shall mean a plan which provides for awards
of additional compensation to eligible Employees in the form of nonqualified or
incentive options to purchase Employer Common Stock, including without
limitation, the Hilton Stock Option Plans and the Park Place Stock Option Plans.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor legislation.
"FOREIGN PLANS" shall have the meaning set forth in Section 7.1.
"FOREIGN PLANS AGREEMENT" shall have the meaning set forth in Section
7.1.
"HILTON" shall have the meaning set forth in the Preamble.
"HILTON COMMON STOCK" shall have the meaning set forth in the Recitals.
"HILTON COMPENSATION PLANS" shall mean collectively, the Hilton
Incentive Compensation Plan, the Hilton Executive Deferred Compensation Plan and
any and all other incentive or bonus compensation plans of Hilton.
"HILTON DIRECTOR OPTION PLAN" shall mean the 1997 Independent Director
Stock Option Plan of Hilton.
"HILTON EXECUTIVE DEFERRED COMPENSATION PLAN" shall mean the Executive
Deferred Compensation Plan, with amendments thereto, of Hilton.
"HILTON EXECUTIVE INCENTIVE PLAN" shall mean the 1996 Chief Executive
Stock Incentive Plan of Hilton.
"HILTON 401(k) PLAN" shall mean the Thrift Savings Plan of Hilton, as
amended and restated.
"HILTON INCENTIVE COMPENSATION PLAN" shall mean the Incentive
Compensation Plan of Hilton, as amended.
"HILTON INDIVIDUAL" shall mean any individual who (a) is a Retained
Employee, (b) is, as of the Distribution Date, a Hilton Terminee whose last
employment with Hilton or any of its subsidiaries was with a Hilton Retained
Business or (c) is a dependent or beneficiary of any individual specified in
clause (a) or (b).
"HILTON MEDICAL/DENTAL PLANS" shall mean any Medical/Dental Plans
maintained for or providing benefits to Hilton Individuals.
"HILTON 1984 STOCK OPTION PLAN" shall mean the 1984 Stock Option and
Stock Appreciation Rights Plan, and amendments thereto, of Hilton.
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"HILTON 1990 STOCK OPTION PLAN" shall mean the 1990 Stock Option and
Stock Appreciation Rights Plan, and amendments thereto, of Hilton.
"HILTON QUALIFIED BENEFICIARY" shall mean a Qualified Beneficiary who,
immediately following the Distribution, is not a Park Place Qualified
Beneficiary and who, immediately prior to the Distribution, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"HILTON RETAINED BUSINESS" shall mean any business or operation of
Hilton or its subsidiaries which is, pursuant to the Distribution Agreement, to
be conducted by Hilton following the Distribution.
"HILTON RIGHTS AGREEMENT" shall mean the Rights Agreement dated as of
July 14, 1988 between Hilton and the First National Bank of Chicago, as rights
agent, as amended from time to time.
"HILTON STOCK INCENTIVE PLAN" shall mean the 1996 Stock Incentive Plan
of Hilton, as amended.
"HILTON STOCK OPTION" shall mean an option to purchase Hilton Common
Stock pursuant to any of the Hilton Stock Option Plans.
"HILTON STOCK OPTION PLANS" shall mean collectively, the Hilton 1984
Stock Option Plan, the Hilton 1990 Stock Option Plan, the Hilton Director Option
Plan, the Hilton Stock Incentive Plan and the Hilton Executive Incentive Plan.
"HILTON STOCK PURCHASE PLAN" shall mean the Employee Stock Purchase Plan
of Hilton, as amended.
"HILTON TERMINEE" shall mean any individual who was formerly employed by
Hilton who terminated such employment prior to the Distribution Date.
"HMO" shall mean any health maintenance organization organized under 42
U.S.C. Section 300e-9, or a state health maintenance organization statute that
provides medical services for Hilton Individuals or Park Place Individuals under
any Plan.
"IRS" shall mean the Internal Revenue Service.
"LOCAL ACTUARY" shall have the meaning set forth in Section 7.1.
"MEDICAL/DENTAL PLAN" shall mean a Welfare Plan providing health
benefits to Employees and their dependents.
"PARK PLACE" shall have the meaning set forth in the Preamble.
"PARK PLACE BUSINESS" shall mean any business or operation of Hilton or
its subsidiaries which, pursuant to the Distribution Agreement, is to be
conducted by Park Place immediately following the Distribution.
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"PARK PLACE COMMON STOCK" shall have the meaning set forth in the
Recitals.
"PARK PLACE COMPENSATION PLANS" shall have the meaning set forth in
Section 3.3(b).
"PARK PLACE EMPLOYEE" shall mean any individual who is (a) a Transferred
Employee or (b) not a Transferred Employee but becomes an employee of Park Place
on or after the Distribution Date.
"PARK PLACE EMPLOYMENT AGREEMENTS" shall have the meaning set forth in
Section 2.1(d).
"PARK PLACE 401(k) PLAN" shall have the meaning set forth in
Section 4.1(b).
"PARK PLACE INDIVIDUAL" shall mean any individual who (a) is a
Transferred Employee, (b) is otherwise a Park Place Employee, (c) is, as of the
Distribution Date, a Hilton Terminee whose last employment with Hilton or a
subsidiary of Hilton was with a Park Place Business or (d) is a dependent or
beneficiary of any individual described in clause (a), (b) or (c).
"PARK PLACE MEDICAL/DENTAL PLANS" shall mean the Medical/Dental Plans to
be established by Park Place in accordance with Section 5.2(a).
"PARK PLACE OPTION" shall have the meaning set forth in Section 3.1(a).
"PARK PLACE QUALIFIED BENEFICIARY" shall mean any Park Place Individual
(or dependent thereof) who, on or before the Distribution Date, was a Qualified
Beneficiary under any Hilton Medical/Dental Plan.
"PARK PLACE RIGHTS" shall mean the rights issued under the Park Place
Rights Agreement to purchase shares of Park Place Common Stock.
"PARK PLACE RIGHTS AGREEMENT" shall mean the Rights Agreement by and
between Park Place and ChaseMellon Shareholder Services, L.L.C., dated as of
December 23, 1998.
"PARK PLACE STOCK OPTION PLANS" shall mean the Stock Option Plans of
Park Place, as established by Park Place pursuant to Section 3.1(b) hereof.
"PLAN" shall mean any plan, policy, arrangement, contract or agreement
providing compensation benefits for any group of Employees or individual
Employees (including former Employees,) or the dependents or beneficiaries of
any such Employee, whether formal or informal or written or unwritten, and
including, without limitation, any means, whether or not legally required,
pursuant to which any benefit is provided by an Employer to any such Employee or
the beneficiaries of any such Employee, existing as of the Distribution Date or
prior thereto.
"QUALIFIED BENEFICIARY" shall mean an individual (or dependent thereof)
who either (a) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan or (b) becomes a "qualified
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beneficiary" (as that term is defined in Code Section 4980B(g)(1) and ERISA
607(3)) under any Medical/Dental Plan.
"RECORD DATE" shall mean December 23, 1998.
"RELEASE AND SEPARATION AGREEMENTS" shall mean those Release and/or
Separation Agreements identified on SCHEDULE A hereto, and any other similar
agreements entered into by Hilton or any of its subsidiaries and a Hilton
Terminee whose last employment with Hilton or such subsidiary was with either a
Park Place Business or a Hilton Retained Business.
"REPLACEMENT PLAN" shall mean the Retirement Benefit Replacement Plan of
Hilton, as amended.
"RETAINED EMPLOYEE" shall mean any individual who immediately prior to
the Distribution was an Employee of Hilton and who is an employee of Hilton
immediately following the Distribution.
"REV. PROC. 84-77" shall have the meaning set forth in Section 5.4(a).
"RETIREMENT PLAN" shall mean the Retirement Plan, and amendments
thereto, of Hilton.
"SEC" shall mean the Securities and Exchange Commission.
"SERP" shall mean the Supplemental Executive Retirement Plan effective
as of June 14, 1989, as amended and restated, of Hilton.
"SERVICE CREDIT" shall mean the period taken into account under any Plan
for purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
"TERMINATION BENEFITS" shall have the meaning set forth in Section
2.3(a).
"TRANSFERRED EMPLOYEE" shall mean any individual who was an Employee of
Hilton immediately prior to the Distribution and who becomes, immediately after
the Distribution, an Employee of Park Place.
"WELFARE PLAN" shall mean any Plan which provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment benefit, but
excluding vacation benefits covered under Section 5.3.
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ARTICLE II.
TRANSFER OF EMPLOYEES; EMPLOYMENT ALLOCATION;
TERMINATION BENEFITS
Section 2.1. TRANSFER OF EMPLOYEES.
(a) Hilton and Park Place shall take all steps necessary or
appropriate so that all of the Employees of Hilton and its subsidiaries are
allocated between the Hilton Retained Business and the Park Place Business in
accordance with the principles set forth in Section 2.1(b) below, and so that
each individual who is so allocated to the Park Place Business is, as of the
Distribution Date and immediately following the Distribution, an Employee of a
member of the Park Place Business, and each individual who is so allocated to
the Hilton Retained Business is, as of the Distribution Date and immediately
following the Distribution, an Employee of a member of the Hilton Retained
Business.
(b) In making the allocation provided for in this
Section 2.1, Hilton and Park Place shall allocate each Employee who is primarily
engaged in the Hilton Retained Business to Hilton and/or its subsidiaries and
each Employee who is primarily engaged in the Park Place Business to Park Place
and/or its subsidiaries. All other Employees shall be allocated in a mutually
agreeable manner that, to the extent possible, takes into account (i) the
Employees' expertise, experience and existing positions and duties, (ii) the
likelihood of unreasonably disrupting either the Hilton Retained Business or the
Park Place Business and (iii) maximizing the ability of each of Hilton and Park
Place and their respective subsidiaries to manage and operate their respective
businesses after the Distribution Date, taking into account the respective needs
of such businesses as established by past practice, and with a view towards
maximizing the value and effectiveness of both the Hilton Retained Business and
the Park Place Business.
(c) Hilton and Park Place each agree that, between the date
hereof and the Distribution Date, Employees will not be transferred between the
Hilton Retained Business or Park Place Business except as (i) necessary to
effect the transfer pursuant to this Section 2.1 or (ii) in the ordinary course
of business consistent with past practice. Notwithstanding the foregoing
allocation, Hilton and Park Place acknowledge that (x) Hilton may need the
services of certain Transferred Employees for a transitional period following
the Distribution and (y) Park Place may need the services of certain Retained
Employees for a transitional period following the Distribution. Hilton and Park
Place agree to enter into an Ancillary Agreement to this effect and to cooperate
to make such services available on a transitional basis.
(d) Effective as of the Distribution Date, Hilton shall
assume all obligations and liabilities for, and arising under all written
employment agreements and oral employment agreements, if any, in each case with
respect to Retained Employees, and Park Place shall have no liability or
obligation with respect thereto. Effective as of the Distribution Date, Park
Place shall assume all obligations and liabilities for and arising under all
written employment agreements and oral employment agreements, if any, in each
case with respect to Transferred Employees (the "PARK PLACE EMPLOYMENT
AGREEMENTS"), and Hilton shall have no liability or obligation with respect
thereto. Park Place shall take, or cause to be taken, all action necessary
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and appropriate to assume, effective as of the Distribution Date, all Park Place
Employment Agreements, with such changes as may be necessary to reflect the
change in the employer thereunder and such other changes as Park Place shall
determine. Such Park Place Employment Agreements shall otherwise have the same
terms and conditions as in effect immediately prior to the Distribution Date,
except that references to employment by or termination of employment with Hilton
and its affiliates shall be changed to references to employment by or
termination of employment with Park Place and its affiliates.
Section 2.2. ALLOCATIONS BETWEEN HILTON AND PARK PLACE.
(a) ALLOCATION OF RESPONSIBILITIES AS EMPLOYER ON
DISTRIBUTION DATE. On the Distribution Date, except to the extent assumed by
Hilton under this Agreement or any Ancillary Agreement, Park Place shall retain
or assume, as the case may be, responsibility as employer for Transferred
Employees. On the Distribution Date, except to the extent assumed by Park Place
under this Agreement or any Ancillary Agreement, Hilton shall retain
responsibility as employer for Retained Employees.
(b) ASSUMPTION OF LIABILITIES ON DISTRIBUTION DATE. Except
as specifically provided in this Agreement, or as otherwise agreed by the
parties hereto:
(i) Except as provided in Section 2.2(c) and with
respect to the Retirement Plan, immediately following the Distribution, Park
Place shall assume all benefit obligations and all related rights in connection
with any Plan with respect to the Transferred Employees and Hilton Terminees
engaged in a Park Place Business and Hilton shall have no further liability with
respect thereto.
(ii) Hilton shall retain all benefit obligations and
all related rights which accrue after the Distribution Date in connection with
any Plan and with respect to Retained Employees, and Park Place shall have no
further liability with respect thereto; PROVIDED, HOWEVER, that with respect to
such Retained Employees who become employed by Park Place after the
Distribution, any benefit obligations and all related rights in connection with
any Plan with respect to such employment with Park Place shall be assumed by
Park Place.
(c) SERVICE CREDITS.
(i) DISTRIBUTION DATE TRANSFERS. In connection with
the Distribution and for purposes of determining Service Credits under any Plan,
Hilton shall credit each Retained Employee and Park Place shall credit each
Transferred Employee with such Employee's Service Credits and original hire date
as reflected in the Hilton records as of the Distribution Date. Such Service
Credits and hire date shall continue to be maintained as described herein for as
long as the Employee does not terminate employment or as otherwise may be
required by applicable law or any applicable Plan.
(ii) SERVICE CREDITS FOLLOWING THE DISTRIBUTION DATE.
Subject to the provisions of applicable law, (x) Park Place may, in the case of
Transferred Employees, in its sole discretion, make such decisions as it deems
appropriate with respect to determining Service
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Credits accrued after the Distribution Date and (y) Hilton may, in the case of
Retained Employees, in its sole discretion, make such decisions as it deems
appropriate with respect to determining Service Credits accrued after the
Distribution Date.
Section 2.3. CHANGE OF CONTROL BENEFITS; TERMINATION BENEFITS.
(a) No Retained Employee and no Transferred Employee shall be
deemed, as a result of any actions taken pursuant to this Article II or
otherwise as a result of the consummation of the transactions contemplated by
the Distribution Agreement, to have become entitled to any benefits under any
Plan, contract, agreement, statute, regulation or other arrangement that
provides for the payment of severance pay, salary continuation, pay in lieu of
notice, unused vacation pay, or similar benefits in connection with actual or
constructive termination or alleged actual or constructive termination of
employment (collectively, "TERMINATION BENEFITS"). Without limiting the
generality of the foregoing, none of the transactions contemplated by the
Distribution Agreement constitutes a "change of control" or a "change in
control" for purposes of any Plan.
(b) Notwithstanding Section 2.3(a), effective as of the
Distribution Date, Hilton shall retain all liabilities relating to or arising
out of claims made by or on behalf of Retained Employees (including the
beneficiary, dependent or alternate payee of such individual) for, or with
respect to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of employment of any
Retained Employee with any member of the Park Place Business or the Hilton
Retained Business, whether before, on or after the Distribution Date. In
addition, Hilton shall retain all liabilities and obligations pursuant to any
Change of Control Agreements with respect to Retained Employees.
(c) Notwithstanding Section 2.3(a), and except as provided
otherwise in Section 2.3(b) above, effective as of the Distribution Date, Park
Place shall assume all liabilities relating to or arising out of claims made by
or on behalf of Transferred Employees (including the beneficiary, dependent or
alternative payee of such individual) for, or with respect to, Termination
Benefits relating to the actual or constructive termination or alleged actual or
constructive termination of employment of any Transferred Employee with any
member of the Park Place Business or the Hilton Retained Business, whether
before, on or after the Distribution Date. In addition, Park Place shall assume
all liabilities and obligations pursuant to any Change of Control Agreements
with respect to Transferred Employees.
ARTICLE III.
INCENTIVE PLANS
Section 3.1. STOCK OPTION AND INCENTIVE PLANS.
(a) HILTON STOCK OPTION PLANS. Hilton shall continue the
Hilton Stock Option Plans. Effective as of the Distribution Date, all
outstanding Hilton Stock Options, other than Hilton Stock Options held by Arthur
M. Goldberg, shall be adjusted to represent options to purchase an equivalent
number of shares of Hilton Common Stock and shares of Park Place Common Stock
(each such option to purchase Park Place Common Stock, a "PARK PLACE
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OPTION"). Pursuant to such adjustment, the intrinsic value of the Hilton Stock
Options prior to the Distribution shall be preserved after the Distribution, and
the exercise price of the Hilton Stock Options shall be allocated between the
Hilton Stock Options, as adjusted, and the Park Place Options based upon the
relative values of the Hilton Common Stock and the Park Place Common Stock on
December 21, 1998 (the first date on which the Park Place Common Stock traded on
a "when issued" basis), all as determined by Hilton. Effective as of the
Distribution Date, all outstanding Hilton Stock Options held by Arthur M.
Goldberg shall be adjusted to represent Park Place Options. Pursuant to such
adjustment, the intrinsic value of Mr. Goldberg's Hilton Stock Options prior to
the Distribution shall be preserved after the Distribution, and the number of
shares subject to and the exercise price of such Hilton Stock Options shall be
adjusted based on the relative values of the Hilton Common Stock and the Park
Place Common Stock on December 21, 1998 (the first date on which the Park Place
Common Stock traded on a "when issued" basis), all as determined by Hilton. To
the extent necessary, Hilton shall amend the Hilton Stock Option Plans to
provide that with respect to Park Place Individuals, references to employment or
termination of employment with Hilton and its affiliates shall be changed to
references to employment by or termination of employment with Park Place and its
affiliates.
(b) PARK PLACE STOCK OPTION PLANS. Park Place shall take, or
cause to be taken, all action necessary and appropriate to adopt, effective no
later than the Distribution Date, the Park Place Entertainment Corporation 1998
Stock Incentive Plan in substantially the form attached hereto as EXHIBIT A and
the Park Place Entertainment Corporation 1998 Independent Director Stock Option
Plan in substantially the form attached hereto as EXHIBIT B (such plans as
adopted, the "PARK PLACE STOCK OPTION PLANS"). All awards under the Park Place
Stock Option Plans will be options with respect to Park Place Common Stock.
Park Place Options which are issued pursuant to the adjustment of the Hilton
Stock Options under subsection (a) above shall otherwise have substantially
similar terms and conditions as the Hilton Stock Options with respect to which
they are issued, except that with respect to Hilton Individuals, references to
employment by or termination of employment with Park Place and its affiliates
shall be changed to references to employment by or termination of employment
with Hilton and its affiliates. From and after the Distribution Date, Park
Place shall assume all obligations with respect to the Park Place Options, and
shall administer the Park Place Stock Option Plans under terms governing such
awards.
Section 3.2. STOCK PURCHASE PLANS.
(a) HILTON STOCK PURCHASE PLAN. The Hilton Stock Purchase
Plan shall be administered and amended, if necessary, to provide that the
options held by each participant under such Plan shall be exercised on the
Distribution Date under the terms and conditions set forth in such Plan;
PROVIDED that, the exercise price per share shall be the lesser of (i) 95% of
the Fair Market Value (as defined therein) of Hilton Common Stock on the
applicable Grant Date (as defined therein) or (ii) 95% of the Fair Market Value
on the Distribution Date of Hilton Common Stock with a "due bill" to receive
Park Place Common Stock. From and after the Distribution Date, Hilton shall
continue the Hilton Stock Purchase Plan with respect to Retained Employees.
Hilton shall assume all obligations, and shall administer the Hilton Stock
Purchase Plan under
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terms governing such awards, with respect to Retained Employees, except as
adjusted or amended herein.
(b) PARK PLACE STOCK PURCHASE PLAN. Park Place shall take,
or cause to be taken, all action necessary and appropriate to adopt,
effective as of the Distribution Date, the Park Place Entertainment
Corporation Employee Stock Purchase Plan in substantially the form attached
hereto as EXHIBIT C.
Section 3.3. COMPENSATION PLANS.
(a) HILTON COMPENSATION PLANS. Hilton shall pay, or cause to
be paid, all compensation and bonuses earned by each Hilton Individual who, on
the Distribution Date, is a participant under any of the Hilton Compensation
Plans, for the period prior to the Distribution Date, in accordance with the
terms of the applicable Hilton Compensation Plan. From and after the
Distribution Date, Hilton shall retain all liabilities relating to or arising
under the Hilton Compensation Plans with respect to any Hilton Individuals.
(b) PARK PLACE COMPENSATION PLANS.
Park Place shall assume and shall be solely responsible for, all
obligations to pay all compensation and bonuses earned by each Park Place
Individual who, on the Distribution Date, is a participant under the Hilton
Compensation Plans. Park Place shall take, or cause to be taken, all action
necessary and appropriate to adopt, effective as of the Distribution Date,
compensation plans in substantially the same form as the Hilton Compensation
Plans which cover Park Place Individuals, with such changes as may be necessary
to reflect the change in the issuer of awards thereunder and such other changes
as Park Place shall determine (such plans as adopted, the "PARK PLACE
COMPENSATION PLANS"). From and after the Distribution Date, the Park Place
Compensation Plans shall provide future compensation benefits thereunder to Park
Place Individuals pursuant to the terms therein. The terms and conditions of
the Park Place Compensation Plans shall be substantially similar to the terms
and conditions of the Hilton Compensation Plans, until such time as Park Place
may determine that any amendment or termination of any Park Place Compensation
Plan is necessary or desirable.
(c) AMG COMPENSATION AGREEMENT. Park Place shall pay, or
caused to be paid, all compensation and bonuses earned by Arthur M. Goldberg
under the AMG Compensation Agreement according to the terms thereof. As of the
Distribution Date, Park Place shall retain and shall be solely responsible for,
all liabilities and obligations in connection with or arising under the AMG
Compensation Agreement, and Hilton shall have no liability or obligation with
respect thereto.
ARTICLE IV.
PENSION AND SAVINGS PLAN
Section 4.1. 401(k) PLANS.
(a) CONTINUATION OF HILTON 401(k) PLAN. Hilton shall take,
or cause to be taken, all action necessary and appropriate to maintain the
Hilton 401(k) Plan. From and after
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the Distribution Date, such Plan shall provide benefits for all eligible Hilton
Individuals, subject to the terms and provisions of such Plan.
(b) ESTABLISHMENT OF PARK PLACE 401(k) PLAN. Effective as of
the Distribution Date, Park Place shall take, or cause to be taken, all action
necessary and appropriate to establish and administer a 401(k) Plan separate
from the Hilton 401(k) Plan (the "PARK PLACE 401(k) PLAN"). The Park Place
401(k) Plan shall contain substantially the same terms and conditions as the
Hilton 401(k) Plan. The Park Place 401(k) Plan shall be a split up of that
portion of the Hilton 401(k) Plan which is attributable to Park Place
Individuals. Park Place shall provide benefits under the Park Place 401(k) Plan
after the Distribution Date for all Park Place Individuals subject to the terms
and provisions of such Plan. The Park Place 401(k) Plan shall be intended to
qualify for tax-favored treatment under Sections 401(a) and 401(k) of the Code
and to comply with the requirements of ERISA.
(c) MATCHING AND PROFIT SHARING CONTRIBUTIONS. Matching and
discretionary contributions under the Hilton 401(k) Plan with respect to Hilton
Individuals will be made solely by Hilton pursuant to the terms of the Hilton
401(k) Plan. Matching and discretionary contributions under the Park Place
401(k) Plan with respect to Park Place Individuals will be made solely by Park
Place pursuant to the terms of the Park Place 401(k) Plan.
(d) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES. As soon as
practicable after the Distribution Date, Hilton and Park Place shall cause
the trustees of the Hilton 401(k) Plan to transfer to the trustees or other
funding agent of the Park Place 401(k) Plan, the amounts (in cash,
securities, other property or a combination thereof) representing the account
balances of all Park Place Individuals, said amounts to be established as
account balances or accrued benefits of such individuals under the Park Place
401(k) Plan. Each such transfer shall comply with Section 414(1) of the Code
and the requirements of ERISA and the regulations promulgated thereunder.
Park Place shall cause the trustees or other funding agent of the Park Place
401(k) Plan to accept the plan-to-plan transfer from the Hilton 401(k) Plan
trustees, and to credit the accounts of such Transferred Employees under the
Park Place 401(k) Plan with amounts transferred on their behalf.
(e) INFORMATION. Hilton shall provide Park Place, as soon as
practicable after the Distribution Date (with the cooperation of Park Place to
the extent that relevant information is in the possession of Park Place), with a
list of Park Place Individuals who, to the best knowledge of Hilton, were
participants in or otherwise entitled to benefits under the Hilton 401(k) Plan
on the Distribution Date, together with a listing of each participant's Service
Credits under such Plan and a listing of each such Park Place Individual's
account balance thereunder, and each Park Place Individual's investment
election. Hilton shall, as soon as practicable after the Distribution Date,
provide Park Place with such additional information in the possession of Hilton
(and not already in the possession of Park Place) as may be reasonably requested
by Park Place and necessary for Park Place to administer effectively the Park
Place 401(k) Plan.
(f) REGULATORY FILINGS. Hilton and Park Place shall, in
connection with the plan-to-plan transfer described in this Section 4.1,
cooperate in making any and all appropriate
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filings required by the SEC or the IRS, or required under the Code or ERISA or
any applicable securities laws and the regulations thereunder, and take all such
action as may be necessary and appropriate to cause such plan-to-plan transfer
to take place as soon as practicable after the Distribution Date or otherwise
when required by law. Further, Park Place shall seek a favorable IRS
determination letter that the Park Place 401(k) Plan as organized, satisfies all
qualification requirements under Section 401(a) of the Code. Notwithstanding
the foregoing, such plan-to-plan transfers shall take place pending issuance of
such favorable determination letter. Park Place shall make any necessary
amendments on a retroactive basis to the Park Place 401(k) Plan as required by
the IRS to issue the favorable determination letter described above.
(g) ACCOUNT BALANCES OF PARTICIPANTS. Except as otherwise
provided herein, on the Distribution Date, Park Place shall assume sole
responsibility for all liabilities and obligations existing as of the
Distribution Date under the Park Place 401(k) Plan, and Hilton shall have no
liability or obligation with respect thereto. Hilton shall retain sole
responsibility for all liabilities and obligations arising before and after the
Distribution Date under the Hilton 401(k) Plan with respect to Retained
Employees, and Park Place shall have no liability or obligation with respect
thereto.
Section 4.2. RETIREMENT PLAN.
(a) RETIREMENT PLAN. Effective as of January 1, 1997,
Employees who were participants in the Retirement Plan ceased accruing
additional benefits thereunder. From and after the Distribution Date, Hilton
shall retain and shall be responsible for the administration of the Retirement
Plan, and each of Hilton and Park Place shall retain or assume, as applicable,
all liabilities and excess assets, if any, relating to or arising under the
Retirement Plan, including, without limitation, all liabilities for benefits
accrued and payable thereunder to each participant thereunder, and for all costs
of administering the Retirement Plan after the Distribution Date, in a
proportion based upon the ratios of the accrued benefits of Hilton Individuals
and of Park Place Individuals, respectively, as of December 31, 1997.
(b) SERP AND THE REPLACEMENT PLAN. Effective as of January
1, 1997, Employees who were participants in the SERP and/or the Replacement Plan
ceased accruing additional benefits thereunder. From and after the Distribution
Date, Hilton shall retain and shall be responsible for the administration of the
SERP and the Replacement Plan, and each of Hilton and Park Place shall retain or
assume, as applicable, all liabilities relating to or arising under the SERP
and/or the Replacement Plan, as the case may be, and for all costs of
administering the SERP and/or the Replacement Plan, as the case may be, after
the Distribution Date, in a proportion based upon the ratios of the accrued
benefits of Hilton Individuals and of Park Place Individuals, respectively,
under each such respective Plan, as of December 31, 1997.
(c) QUALIFICATION OF PLANS AND OTHER LIABILITIES. Hilton
shall be responsible for all liabilities incurred by Hilton or Park Place as a
result of any failure of the Hilton 401(k) Plan or the Retirement Plan to be
qualified under Section 401(a) of the Code, or any other liability which might
be incurred with respect to such Plans (including, without limitation, all
liabilities relating to or arising out of claims made by or on behalf of
participants therein for, or
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with respect to, benefits under such Plan), with respect to Hilton Individuals,
and Park Place shall be responsible for all liabilities incurred by Hilton or
Park Place as a result of any such failure or other liability (including,
without limitation, all liabilities relating to or arising out of claims made by
or on behalf of participants therein for, or with respect to, benefits under
such Plan) with respect to Park Place Individuals. Notwithstanding the
foregoing, to the extent that any liabilities incurred by Hilton or Park Place
as a result of any failure of the Hilton 401(k) Plan or the Retirement Plan to
be qualified under Section 401(a) of the Code, or any other liability which
might be incurred with respect to such Plans (including, without limitation, all
liabilities relating to or arising out of claims made by or on behalf of
participants therein for, or with respect to, benefits under such Plan) are not
directly or indirectly attributable to either Hilton Individuals or Park Place
Individuals, then each of Hilton and Park Place shall be responsible for such
liabilities in a proportion based upon the ratios of the accrued benefits of
Hilton Individuals and of Park Place Individuals, respectively, under each such
respective Plan, as of December 31, 1997. The parties hereto agree that to the
extent any of them becomes aware that any such Plan fails or may fail to be so
qualified, it shall notify the other party and the parties shall cooperate and
use best efforts to avoid such disqualification, including using the Internal
Revenue Service's Employee Plans Compliance Resolution System or similar
programs, and taking any steps available pursuant to such program to avoid
disqualification, as determined by the party who is made responsible under this
Section 4.2(c) for the liabilities that would result from such disqualification
(and the liabilities for which such party is responsible shall include all costs
and expenses resulting from such steps, including fines, penalties,
contributions, attorneys' fees and expenses and administrative expenses).
ARTICLE V.
WELFARE AND OTHER BENEFITS
Section 5.1. HILTON MEDICAL/DENTAL PLANS.
(a) LIABILITY FOR CLAIMS.
(i) Except as otherwise provided herein, as of the
Distribution Date, Hilton shall assume or retain and shall be responsible for,
or cause its insurance carriers or HMOs to be responsible for, all liabilities
and obligations related to claims asserted or incurred or premiums owed as of
and after the Distribution Date in respect of any Hilton Individual under any
Hilton Medical/Dental Plan and claims asserted or incurred or premiums due after
the Distribution Date in respect of any Hilton Individual under any Hilton
Medical/Dental Plan, and Park Place shall have no liability or obligation with
respect thereto.
(ii) Except as otherwise provided herein, as of the
Distribution Date, Park Place shall assume or retain and shall be responsible
for, or cause its insurance carriers or HMOs to be responsible for, all
liabilities and obligations related to claims asserted or incurred or premiums
owed as of and after the Distribution Date in respect of any Park Place
Individual under any Hilton Medical/Dental
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Plan and claims asserted or incurred or premiums due after the Distribution Date
in respect of any such Park Place Individual under any Hilton Medical/Dental
Plan or any Park Place Medical/Dental Plan, and Hilton shall have no liability
or obligation with respect thereto.
(b) CONTINUATION COVERAGE ADMINISTRATION. As of the
Distribution Date, Hilton shall retain and shall be solely responsible for, or
cause its insurance carriers or HMOs to be responsible for, providing and
administering the continuation coverage required by COBRA as it relates to any
Hilton Qualified Beneficiary, and Park Place shall have no liability or
obligation with respect thereto. As of the Distribution Date, Park Place shall
retain and shall be solely responsible for, or cause its insurance carriers or
HMOs to be responsible for, providing and administering the continuation
coverage required by COBRA as it relates to any Park Place Qualified
Beneficiary, and Hilton shall have no liability or obligation with respect
thereto.
(c) CONTINUATION COVERAGE CLAIMS. As of the Distribution
Date, Hilton shall assume or retain and shall be responsible for, or cause its
insurance carriers or HMOs to be responsible for, all liabilities and
obligations in connection with claims asserted or incurred or premiums owed
through the Distribution Date under any Hilton Medical/Dental Plan in respect of
any Hilton Qualified Beneficiary and claims asserted or incurred or premiums
owed after the Distribution Date under any Hilton Medical/Dental Plan in respect
of any Hilton Qualified Beneficiary, and Park Place shall have no liability or
obligation with respect thereto. As of the Distribution Date, Park Place shall
assume or retain and shall be responsible for, or cause its insurance carriers
or HMOs to be responsible for, all liabilities and obligations in connection
with claims asserted or incurred or premiums owed through the Distribution Date
under any Hilton Medical/Dental Plan in respect of any Park Place Qualified
Beneficiary and claims asserted or incurred or premiums owed after the
Distribution Date under any Hilton Medical/Dental Plan or any Park Place
Medical/Dental Plan in respect of any Park Place Qualified Beneficiary, and
Hilton shall have no liability or obligation with respect thereto.
Section 5.2. PARK PLACE MEDICAL/DENTAL PLANS.
(a) ESTABLISHMENT OF PARK PLACE MEDICAL/DENTAL PLANS. On or
prior to the Distribution Date, Park Place shall take, or cause to be taken, all
action necessary and appropriate to establish and administer the Park Place
Medical/Dental Plans and to provide benefits thereunder for all Park Place
Individuals and Park Place Qualified Beneficiaries (with respect to continuation
coverage under COBRA only) who, immediately prior to the Distribution Date, were
participants in or otherwise entitled to benefits under the Hilton
Medical/Dental Plans. Each such individual shall, to the extent applicable, for
all purposes under the new Park Place Medical/Dental Plans (i) have coverage
which is substantially comparable to that provided immediately prior to the
Distribution Date, (ii) have no preexisting condition limitation imposed other
than that which is or was already imposed under the applicable existing Plan and
(iii) be credited with or otherwise have taken into account, to the extent
applicable, Service Credits, any expenses incurred towards deductibles,
out-of-pocket limits, maximum benefit payments, and any benefit usage towards
plan limits credited to such individual as of the Distribution Date under the
terms of the applicable existing Plan as if such service had been rendered to
Park Place and as if such expenses and usage had originally been credited to
such individual under the Park Place Medical/Dental Plans.
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(b) HILTON TO PROVIDE INFORMATION. As soon as practicable
after the Distribution Date, Hilton shall provide Park Place (with the
cooperation of Park Place to the extent that relevant information is in the
possession of Park Place, and in accordance with Section 8.2), with a list of
Park Place Individuals who were, to the best knowledge of Hilton, participants
in or otherwise entitled to benefits under the Hilton Medical/Dental Plans
immediately prior to the Distribution Date, together with a listing of each such
individual's Service Credit under such Plans and a listing of each such
individual's expenses incurred towards deductibles, out-of-pocket limits,
maximum benefit payments, and any benefit usage towards plan limits thereunder.
Hilton shall, as soon as practicable after the Distribution Date, in accordance
with Section 8.2, provide Park Place with such additional information in the
possession of Hilton (and not already in the possession of Park Place) as may be
reasonably requested by Park Place and necessary for Park Place to establish and
administer effectively any Park Place Medical/Dental Plan.
Section 5.3. VACATION AND SICK PAY LIABILITIES.
(a) DIVISION OF LIABILITIES. Effective on the Distribution
Date, (i) Hilton shall retain and shall be responsible for all accrued
liabilities (whether vested or unvested, and whether funded or unfunded) for
vacation and sick leave in respect of all Hilton Individuals as of the
Distribution Date and (ii) Park Place shall assume and shall be responsible for
all accrued liabilities (whether vested or unvested, and whether funded or
unfunded) for vacation and sick leave in respect of all Park Place Individuals
as of the Distribution Date. From and after the Distribution Date, (x) Hilton
shall be solely responsible for the payment to Hilton Individuals of vacation or
sick leave accrued after the Distribution Date and (y) Park Place shall be
solely responsible for the payment to Park Place Individuals of vacation or sick
leave accrued after the Distribution Date.
(b) POST-DISTRIBUTION TRANSFERS. For a period of 90 days
after the Distribution Date, an Employee who leaves the service of one party to
immediately begin employment with the other party (i.e., leaving Hilton
employment to work for Park Place, or leaving Park Place employment to work for
Hilton) shall be provided by the successor employer with the same balance of
vested and unvested vacation and sick leave hours as had been accrued by the
former Employer through such termination date. The former Employer shall
promptly notify the successor Employer in writing of the occurrence of any
termination subject to the provisions of this Section 5.3(b), and the former
Employer shall make a payment to the successor Employer within thirty (30) days
of the aforesaid termination date in an amount equal to the value of the
terminating Employee's vested balance of vacation leave and sick leave accrued
by the former Employer through such termination date, based on the Employee's
final rate of pay with the former Employer. No payment shall be made by the
former Employer to the successor Employer for any unvested sick leave or
vacation leave balance relating to any post-Distribution transfer which occurs
within or after the 90-day period referred to above.
Section 5.4. PAYROLL REPORTING AND WITHHOLDING. (a) FORM W-2
REPORTING. Hilton and Park Place may adopt the "alternative procedure" for
preparing and filing IRS Forms W-2 (Wage and Tax Statements), as described in
Section 5 of Revenue Procedure 84-77, 1984-2 IRS
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Cumulative Bulletin 753 ("REV. PROC. 84-77"). Under this procedure Park
Place as the successor employer shall provide all required Forms W-2 to all
Park Place Individuals reflecting all wages paid and taxes withheld by both
Hilton as the predecessor and Park Place as the successor employer for the
entire year during which the Distribution takes place. Hilton shall provide
all required Forms W-2 to all Hilton Individuals reflecting all wages and
taxes paid and withheld by Hilton before and after the Distribution Date.
In connection with the aforesaid agreement under Rev. Proc. 84-77, each
business unit or business operation of Hilton shall be assigned to either Hilton
or Park Place, depending upon whether it is a Hilton Retained Business or a Park
Place Business, and each Hilton Individual or Park Place Individual associated
with such business unit or business operation shall be assigned for payroll
reporting purposes to Hilton or Park Place, as the case may be. Hilton and Park
Place shall be responsible for filing IRS Forms 941 for their respective
Employees.
(b) FORMS W-4 AND W-5. Hilton and Park Place may adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4
(Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate). Under this procedure Hilton shall provide to Park
Place all IRS Forms W-4 and W-5 on file with respect to each Park Place
Individual, and Park Place will honor these forms until such time, if any, that
such Park Place Individual submits a revised form.
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, AND WAGE
ASSIGNMENTS. With respect to garnishments, tax levies, child support orders,
and wage assignments in effect with Hilton on the Distribution Date, Park Place
shall honor such payroll deduction authorizations with respect to Park Place
Individuals and will continue to make payroll deductions and payments to the
authorized payee, as specified by the court or governmental order which was
filed with Hilton on or before the Distribution Date, and Hilton will continue
to make such payroll deductions and payments to authorized payees with respect
to Hilton Individuals. Hilton shall, as soon as practicable after the
Distribution Date, in accordance with Section 8.2, provide Park Place with such
information in the possession of Hilton (and not already in the possession of
Park Place) as may be reasonably requested by Park Place and necessary for Park
Place to make the payroll deductions and payments to the authorized payee as
required by this subsection (c).
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS. Unless otherwise
prohibited by this or another agreement entered into in connection with the
Distribution, or by a Plan document, with respect to Park Place Individuals with
authorizations for payroll deductions in effect with Hilton on the Distribution
Date, Park Place will honor such payroll deduction authorizations relating to
each Park Place Individual, and shall not require that such Park Place
Individual submit a new authorization to the extent that the type of deduction
by Park Place does not differ from that made by Hilton. Such deduction types
include, without limitation: contributions to any Plan; scheduled loan
repayments to any Plan or to an employee credit union; and direct deposit of
payroll, bonus advances, union dues, employee relocation loans, and other types
of authorized company receivables usually collectible through payroll
deductions. Hilton shall, as soon as practicable after the Distribution Date,
in accordance with Section 8.2, provide
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Park Place with such information in the possession of Hilton (and not already in
the possession of Park Place) as may be reasonably requested by Park Place and
necessary for Park Place to honor the payroll deduction authorizations
contemplated by this subsection (d).
Section 5.5. POST-RETIREMENT WELFARE BENEFITS. As of the
Distribution Date, Hilton shall assume or retain and shall be responsible
for, or cause its insurance carriers or HMOs to be responsible for, all
liabilities and obligations related to claims asserted or incurred or
premiums owed as of and after the Distribution Date for post-retirement
medical or life benefits in respect of any Hilton Individual under any Plan
and claims asserted or incurred or premiums due after the Distribution Date
in respect of any Hilton Individual under any such Plan, and Park Place shall
have no liability or obligation with respect thereto. As of the Distribution
Date, Park Place shall assume or retain and shall be responsible for, or
cause its insurance carriers or HMOs to be responsible for, all liabilities
and obligations related to claims asserted or incurred or premiums owed as of
and after the Distribution Date for post-retirement medical or life benefits
in respect of any Park Place Individual under any Plan and claims asserted or
incurred or premiums due after the Distribution Date in respect of any Park
Place Individual under any such Plan, and Hilton shall have no liability or
obligation with respect thereto.
ARTICLE VI.
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
agreement between Hilton and Park Place to the contrary, Hilton and Park Place
understand and agree that:
Section 6.1. SEPARATE EMPLOYERS. On and after the Distribution Date
and the separation of Employees into their respective companies, Hilton and Park
Place will be separate and independent employers.
Section 6.2. EMPLOYMENT POLICIES AND PRACTICES. Subject to the
provisions of ERISA and the provisions herein governing post-Distribution
transfers, and except as limited by applicable law or agreement, Hilton and Park
Place may adopt, continue, modify or terminate such employment policies,
compensation practices, retirement plans, welfare benefit plans, and other
employee benefit plans of any kind or description, as each may determine, in its
sole discretion, are necessary or appropriate.
Section 6.3. COLLECTIVE BARGAINING AGREEMENTS. With regard to
Employees covered by a Collective Bargaining Agreement on the Distribution Date
who are Retained Employees or become Park Place Employees, Hilton and Park Place
promise and covenant to each other not to take any action which disrupts or
otherwise negatively impacts the labor relations of the other. Hilton and Park
Place will diligently work to substitute the appropriate employer for Hilton in
Collective Bargaining Agreements with respect to Transferred Employees.
Section 6.4. NOTICE OF CLAIMS. Without limitation to the scope and
application to each party in the performance of its duties herein, each party
hereto will notify in writing and consult with the other party prior to making
any settlement of an employee claim, for the purpose of avoiding any prejudice
to such other party arising from the settlement.
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Section 6.5. ASSUMPTION OF UNEMPLOYMENT TAX RATES. Changes in state
unemployment tax experience from that of Hilton as of the Distribution Date
shall be handled as follows. In the event an option exists to allocate state
unemployment tax experience of Hilton, the Hilton experience shall be
transferred to Park Place if this results in the lowest aggregate unemployment
tax costs for both Hilton and Park Place combined, and the Hilton experience
shall be retained by Hilton if this results in the lowest aggregate unemployment
tax costs for Hilton and Park Place combined.
Section 6.6. EMPLOYEES ON LEAVE OF ABSENCE. After the Distribution
Date, Park Place shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Park Place Business. After the
Distribution Date, Hilton shall assume responsibility, if any, as employer for
all Employees returning from an approved leave of absence who prior to the
Distribution Date were not employed in a Park Place Business.
Section 6.7. RELEASE AND SEPARATION AGREEMENTS. Effective as of the
Distribution Date, Hilton shall assume all obligations and liabilities for, and
arising under those Release and Separation Agreements with respect to Hilton
Individuals, and Park Place shall have no liability or obligation with respect
thereto. Effective as of the Distribution Date, Park Place shall assume all
obligations and liabilities for and arising under those Release and Separation
Agreements with respect to Park Place Individuals, and Hilton shall have no
liability or obligation with respect thereto.
ARTICLE VII.
NON-U.S. PLANS
Section 7.1. NON-U.S. PLANS GENERALLY. As soon as practicable after
the date of this Agreement, the parties hereto shall enter into one or more
agreements or memoranda of understanding (collectively, the "FOREIGN PLANS
AGREEMENT") regarding the treatment and allocation of liabilities relating to or
arising under the CIRP and all other Plans (the "FOREIGN PLANS") for Employees
located outside the United States, including without limitation expatriates, and
to expatriate Employees located in the United States. The Foreign Plans
Agreement shall provide for the treatment of each Foreign Plan, which treatment
may include, without limitation, (a) the retention or assumption of such Foreign
Plan by Hilton, (b) the retention or assumption of such Foreign Plan by Park
Place or (c) an allocation of the liabilities and assets of the Foreign Plan
between a Plan (which may include the Foreign Plan) that is intended to be
maintained by Hilton and a Plan (which may include the Foreign Plan) that is
intended to be maintained by Park Place, after the Distribution Date. Any
transfers of assets or liabilities from a Foreign Plan shall be made on the
basis of reasonable methods and assumptions determined by the local actuarial
firm that is, as of the date of this Agreement, serving as the actuary for such
Foreign Plan (or another actuarial firm if the parties hereto so agree) (the
"LOCAL ACTUARY"), in accordance with applicable legal and regulatory
requirements, local practice and the past practice of Hilton; PROVIDED that,
each of Hilton and Park Place shall be entitled to review such methods and
assumptions and object to them if they are unreasonable, and to review all
calculations and determinations of the Local Actuary for accuracy.
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ARTICLE VIII.
MISCELLANEOUS
Section 8.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall
be deemed or construed by the parties hereto or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties hereto, it being understood and agreed that no provision contained
herein, and no act of the parties hereto, shall be deemed to create any
relationship between such parties other than the relationship set forth herein.
Section 8.2. ACCESS TO INFORMATION; COOPERATION. Hilton and Park
Place and their authorized agents shall be given reasonable access to and may
take copies of all information relating to the subjects of this Agreement (to
the extent permitted by federal and state confidentiality laws) in the custody
of the other party, including any agent, contractor, subcontractor, agent or any
other person or entity under the contract of such party. The parties hereto
shall provide one another with such information within the scope of this
Agreement as is reasonably necessary to administer each party's Plans. The
parties hereto shall cooperate with each other to minimize the disruption caused
by any such access and providing of information.
Section 8.3. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party hereto and any purported transfer without
such consent shall be void.
Section 8.4. HEADINGS. The section and paragraph headings and table
of contents contained herein are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
Section 8.5. SEVERABILITY. If any provision set forth in this
Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of its being too extensive in any respect, such
provision shall be interpreted to have the broadest application as shall be
enforceable. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the validity of the other provisions hereof,
which shall continue in full force and effect.
Section 8.6. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARY RIGHTS.
(a) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as specifically provided herein, this Agreement is for the sole
and exclusive benefit of the parties hereto and nothing herein is intended to
give or shall be construed to give to any person or entity other than the
parties hereto any rights or remedies hereunder.
(b) No provision of this Agreement shall create any third
party beneficiary rights in any Employee, any beneficiary or dependent thereof,
or any collective bargaining representative thereof, with respect to the
compensation, terms and conditions of employment
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and benefits that may be provided to any Employee by either party hereto or
under any Plan which a party may maintain.
(c) Nothing contained in this Agreement shall confer upon any
Employee any right with respect to continuance of employment by either party
hereto, nor shall anything herein interfere with the right of either party
hereto to terminate the employment of any Employee at any time, with or without
cause, or restrict a party in the exercise of its independent business judgment
in modifying any of the terms and conditions of the employment of an Employee,
except as provided by applicable law.
Section 8.7. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party (or
other person referred to herein) shall be in writing and shall be deemed to be
given and effective (a) upon delivery if delivered in person or by courier,
(b) when sent by electronic transmission (telegraph, telex, telecopy or
facsimile transmission), receipt confirmed, (c) five days after being sent by
airmail, postage prepaid or (d) when receipt is acknowledged if mailed by
certified mail, postage prepaid, return receipt requested. The notice shall be
delivered to the addresses of each party hereto as follows, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice:
(a) if to Hilton:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attn: General Counsel
Fax: (310) 205-7677
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1000
Washington, D.C. 20004-2505
Attn: Bruce E. Rosenblum, Esq.
Fax: (202) 637-2201
(b) if to Park Place:
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
4th Floor
Las Vegas, Nevada 89109
Attn: General Counsel
Fax: 702-699-5179
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with a copy to:
Sills Cummis Zuckerman
Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Michael Tischman, Esq.
Fax: 973-643-6500
Section 8.8. FURTHER ASSURANCES. Each of the parties hereto promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions hereof
and to consummate the transactions contemplated hereby.
Section 8.9. WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to effect the transactions contemplated herein are for the
sole benefit of such party. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
Section 8.10. GOVERNING LAW. This Agreement shall be deemed to be made
in and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws thereof.
Section 8.11. PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS.
Except as otherwise expressly provided herein, no provisions of this Agreement,
including, without limitation, the agreement of Hilton or Park Place to make a
contribution or payment to or under any Plan referred to herein for any period,
shall be construed as a limitation on the right of Hilton or Park Place to amend
such Plan or terminate its participation therein which Hilton or Park Place
would otherwise have under the terms of such Plan or otherwise, and no provision
of this Agreement shall be construed to create a right in any employee or former
employee, or dependent or beneficiary of such employee or former employee under
a Plan which such person would not otherwise have under the terms of the Plan
itself; PROVIDED, HOWEVER, that neither party shall amend any Plan to the extent
that such amendment would have the effect of increasing the liabilities of the
other party under any Plan of the other party, without such other party's
consent.
Section 8.12. ENTIRE AGREEMENT. This Agreement, the Distribution
Agreement and all other Ancillary Agreements constitute the entire understanding
between the parties hereto, and supersede all prior written or oral
communications, relating to the subject matter covered by said agreements. To
the extent that the terms of this Agreement and similar terms of the
Distribution Agreement are in conflict, the interpretation given to the
conflicting terms of the Distribution Agreement shall govern the interpretation
and performance of this Agreement. No amendment, modification, extension or
failure to enforce any condition of this Agreement by either party shall be
deemed a waiver of any of its rights herein.
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Section 8.13. COUNTERPARTS. This Agreement and any amendments hereto
may be executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.
Section 8.14. SURVIVAL. Obligations described in this Agreement shall
remain in full force and effect and shall survive the Distribution Date.
Section 8.15. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.14 of the Distribution Agreement, including Section 9.14(c) thereof
regarding the parties' ability to seek specific performance or injunctive
relief, and including the attorneys' fees provisions referred to therein.
Section 8.16. REIMBURSEMENT. Hilton and Park Place acknowledge that
Hilton, on the one hand, and Park Place, on the other hand, may incur costs and
expenses, including, but not limited to, contributions to Plans and the payment
of insurance premiums arising from or related to any of the Plans which are, as
set forth in this Agreement, the responsibility of the other party hereto.
Accordingly, Hilton and Park Place shall reimburse each other, as soon as
practicable, but in any event within thirty (30) days of receipt from the other
party hereto of appropriate verification, for all such costs and expenses.
Section 8.17. DEFAULT. In the event of a material default by either
party hereunder, the non-defaulting party shall be entitled to all remedies
provided by law or equity (including reasonable attorneys' fees and costs of
suit incurred).
Section 8.18. FORCE MAJEURE. Hilton and Park Place shall incur no
liability to each other due to a default under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out, work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other delay beyond each other's reasonable control.
Section 8.19. ATTORNEY/CLIENT PRIVILEGE. The provisions herein
requiring either party hereto to cooperate shall not be deemed to be a waiver of
the attorney/client privilege for either party hereto nor shall it require
either party to waive its attorney/client privilege.
Section 8.20. SPECIFIC PERFORMANCE. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable laws, each party waives any
objection to the imposition of such relief.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
HILTON HOTELS CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Gallagher
-----------------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
-----------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and Chief
Financial Officer
S-1
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TAX ALLOCATION AND INDEMNITY AGREEMENT
THIS TAX ALLOCATION AND INDEMNITY AGREEMENT (this "AGREEMENT"), is
made and entered into as of December 31, 1998, by and between HILTON HOTELS
CORPORATION, a Delaware corporation ("HILTON"), and PARK PLACE ENTERTAINMENT
CORPORATION (f/n/a Gaming Co., Inc.), a Delaware corporation and wholly owned
subsidiary of Hilton ("PARK PLACE").
WHEREAS, Hilton, Park Place and Hilton's other subsidiaries have
joined in filing consolidated federal Income Tax Returns and certain
consolidated, combined, unitary or similar state, foreign and local Tax Returns;
WHEREAS, pursuant to a Distribution Agreement dated as of December 31,
1998 by and among Hilton and Park Place (the "Distribution Agreement"), Hilton
will distribute to the holders of its common stock all of the shares of common
stock of Park Place (the "Distribution");
WHEREAS, pursuant to the Distribution Agreement, Park Place will leave
the Hilton Group (as defined herein); and
WHEREAS, the parties hereto wish to provide for (i) the allocation of,
and indemnification against, certain liabilities for Taxes, (ii) the preparation
and filing of Tax Returns and the payment of Taxes with respect thereto and
(iii) certain related matters.
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
ARTICLE I.
DEFINITIONS
When used herein the following terms shall have the following
meanings:
AFFILIATE: with respect to any corporation (the "given corporation"),
each entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the given
corporation. For purposes of this definition, "control" means the possession,
directly or indirectly, of 50% or more of the voting power or value of
outstanding equity interests.
AFFILIATED GROUP: an affiliated group of corporations within the
meaning of Code Section 1504(a) (and without regard to the exclusions contained
in Code Section 1504(b)) for the
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Taxable Period or, for purposes of any state, foreign or local Tax matters that
are filed on a consolidated, combined, unitary or similar basis, any
consolidated, combined, unitary or similar group of corporations within the
meaning of the corresponding provisions of tax law for the jurisdiction in
question.
AFTER-TAX BASIS: any indemnity payment made hereunder shall give
effect to, and be adjusted by the value of, any and all Tax Benefit(s) for
federal, state or other Income Tax purposes attributable to the payment of the
indemnified liability, which value shall be determined on an assumed basis by
(a) multiplying the amount of any applicable deductions, losses, offsets or
other Tax items (such amount determined as if such deductions, losses, offsets
or other Tax items will generate an immediate deduction for the full amount
ultimately available) by (i) 39% or (ii) if no state Tax Benefit shall result
therefrom (determined on a hypothetical basis by using the highest marginal
corporate Tax rate), 35% (such percentages to increase or decrease on a
percentage-for-percentage basis with any subsequent increases or decreases in
the current 35% maximum marginal federal Income Tax rate for corporations, and
100% minus the maximum marginal federal Income Tax rate for corporations (E.G.,
65%) of any increases or decreases in the maximum marginal state or local Income
Tax rate for corporations) and (b) valuing any credits or other direct
reductions of Tax on a dollar-for-dollar basis. For example, if a deductible
payment of $100 is indemnified hereunder, the indemnification payment with
respect thereto (applying the characterization set forth in Section 4.2) shall
be reduced by $39 to $61.
AUDIT: any audit, assessment of Taxes, other examination by any
Taxing Authority, proceeding or appeal of such a proceeding relating to Taxes,
whether judicial or administrative.
CARRYFORWARDS: as defined in Section 2.12 of this Agreement.
CLOSING DATE: the date on which the Distribution is effected by
Hilton.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the Taxable Year in question.
COMBINED JURISDICTION: for any Taxable Period, any state, foreign or
local jurisdiction in which Hilton and a Hilton Affiliate (or two or more Hilton
Affiliates) for that period join in the filing of a consolidated, combined,
unitary or similar return for state, foreign or local Tax purposes.
CORPORATE SERVICES AGREEMENT: the Hilton Hotels Corporation Corporate
Services Agreement entered into by and between Hilton and Park Place dated as of
December 31, 1998 which provides, among other things, that Hilton shall, during
the transition period specified therein, prepare or cause to be prepared, on
Park Place's behalf, certain Tax and Information Returns of Park Place and Park
Place Members.
DISPUTE RESOLUTION PROCEDURE: a procedure whereby (i) Hilton shall
select a representative of a nationally recognized accounting firm; (ii) Park
Place shall select a representative of a second nationally recognized accounting
firm; (iii) the two representatives so
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selected shall together select a representative of a third nationally recognized
accounting firm, provided however, that the representative so selected shall not
be from any of the following firms: (a) Arthur Andersen, LLP, (b) Ernst & Young,
LLP, or (c) any other firm which shall have received more than $500,000 in fees
from Hilton, Park Place, or any successor or predecessor entity in any of the
preceding five years; and (iv) the three representatives together (or, if they
are unable to agree, a majority of them) shall, within a reasonable period of
time, decide the issue(s) submitted to them. Hilton and Park Place shall each
be responsible for the fees of their respective representative, and the fees of
the third representative shall be shared equally by Hilton and Park Place. Any
decision rendered pursuant to a Dispute Resolution Procedure shall be final and
binding on all Post-Distribution Members and Park Place Members.
DISTRIBUTION: as defined in the Preamble.
EFFECTIVE TIME: the time at which the Distribution becomes effective.
FINAL DETERMINATION: (i) a decision, judgment, decree, or other order
by a court of competent jurisdiction, which has become final and unappealable;
(ii) a closing agreement or accepted offer in compromise under Code Sections
7121 or 7122, or comparable agreements under the laws of other jurisdictions;
(iii) any other final settlement with the IRS or other Taxing Authority
(including the execution of IRS Form 870AD, or a comparable form under the laws
of other jurisdictions, but excluding any such form that reserves (whether by
its terms or by operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the Taxing Authority to assert a further deficiency);
(iv) the expiration of an applicable statute of limitations; or (v) the
allowance of a refund or credit, but only after the expiration of all periods
during which such refund or credit may be recovered (including by way of
offset).
FINAL HILTON GROUP COMBINED TAX RETURN: as defined in Section 2.7(c)
of this Agreement.
HILTON: as defined in the preamble to this Agreement.
HILTON GROUP: Hilton and each corporation that is a member of an
Affiliated Group with respect to which Hilton is the common parent.
INCOME TAX(ES): with respect to any corporation or Affiliated Group,
any and all Taxes based upon or measured by net income (regardless of whether
denominated as an "income tax," a "franchise tax" or otherwise).
INCOME TAX RETURN: a Tax Return relating to the payment or receipt of
any refund of any Income Tax.
INFORMATION RETURN(S): with respect to any corporation or Affiliated
Group, any and all returns, reports, estimates, statements, declarations and
other filings (other than Tax Returns) required to be filed or supplied to any
Taxing Authority.
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IRS: the Internal Revenue Service or any successor thereto, including
but not limited to its Representatives.
IRS RULING: The letter ruling issued by the IRS in response to the
Ruling Request.
MERGER AGREEMENT: That certain Agreement and Plan of Merger, dated as
of June 30, 1998 by and among Hilton; Park Place; Gaming Acquisition
Corporation, a Minnesota corporation; Grand Casinos, Inc., a Minnesota
corporation; and Lakes Gaming, Inc., a Minnesota corporation.
OVERDUE RATE: a variable rate of interest per annum equal to the
Federal short-term rate as established from time to time pursuant to Code
Section 1274(d).
PARK PLACE: as defined in the preamble to this Agreement.
PARK PLACE GROUP: Park Place and each corporation that was a
Pre-Distribution Member and which would be a member of an Affiliated Group with
respect to which Park Place would be the common parent during any Post-Closing
Taxable Period. For purposes of this Agreement, the Park Place Group shall
exist from and after the day after the close of business on the Closing Date.
To the extent applicable to any state, foreign or local Tax matters that are
filed on a consolidated, combined, unitary or similar basis, the "Park Place
Group" shall consist of all corporations joining with Park Place in the filing
of a consolidated, combined, unitary or similar Tax Return for the jurisdiction
in question.
PARK PLACE MEMBER: a corporation that would be a member of the Park
Place Group.
POST-CLOSING STRADDLE PERIOD: with respect to any Straddle Period, the
portion beginning after the close of business on the Closing Date and ending on
the last day of such Taxable Year.
POST-CLOSING TAXABLE PERIOD: a Taxable Year that begins after the
close of business on the Closing Date.
POST-DISTRIBUTION HILTON GROUP: Hilton and each corporation that was a
Pre-Distribution Member and which would be a member of an Affiliated Group with
respect to which Hilton would be the common parent during any Post-Closing
Taxable Period. For purposes of this Agreement, the Post-Distribution Hilton
Group shall exist from and after the close of business on the Closing Date. To
the extent applicable to any state, foreign or local Tax matters that are filed
on a consolidated, combined, unitary or similar basis, the "Post-Distribution
Hilton Group" shall consist of all corporations joining with Hilton in the
filing of a consolidated, combined, unitary or similar Tax Return for the
jurisdiction in question.
POST-DISTRIBUTION MEMBER: a corporation that was a Pre-Distribution
Member and is a member of the Post-Distribution Hilton Group after the close of
business on the Closing Date.
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PRE-CLOSING STRADDLE PERIOD: with respect to any Straddle Period, the
portion beginning on the first day of such Taxable Year and ending on the close
of business on the Closing Date.
PRE-CLOSING TAXABLE PERIOD: a Taxable Year that ends on or before the
Closing Date.
PRE-DISTRIBUTION HILTON GROUP: Hilton and each corporation that would
be a member of an Affiliated Group with respect to which Hilton would be the
common parent during any Pre-Closing Taxable Period. For purposes of this
Agreement, the Pre-Distribution Hilton Group shall terminate at the close of
business on the Closing Date. To the extent applicable to any state, foreign or
local Tax matters that are filed on a consolidated, combined, unitary or similar
basis, the "Pre-Distribution Hilton Group" shall consist of all corporations
joining with Hilton in the filing of a consolidated, combined, unitary or
similar Tax Return for the jurisdiction in question.
PRE-DISTRIBUTION MEMBER: a corporation that was a member of the
Pre-Distribution Hilton Group at the close of business on the Closing Date.
REPRESENTATIVE(S): with respect to any person or entity, any of such
person's or entity's directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.
RULING REQUEST: The private letter ruling request filed by Hilton
with the IRS, as supplemented and amended from time to time, with respect to
certain federal Income Tax matters relating to the Distribution and other
related matters.
STRADDLE PERIOD: any Taxable Year beginning before and ending after
the close of business on the Closing Date.
TAX BENEFIT(S): (i) in the case of a Tax for which a consolidated
federal, or a consolidated, combined, unitary or similar state, foreign or local
Tax Return is filed, the amount by which the Tax liability of the Affiliated
Group is reduced (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
taxable income in any other Taxable Year or as a carryforward or carryback, and
including the effect on other Taxes of such reduction), plus any interest
received with respect to any related Tax refund, and (ii) in the case of any
other Tax, the amount by which the Tax liability of a corporation is reduced (by
deduction, entitlement to refund, credit, offset or otherwise, whether available
in the current Taxable Year, as an adjustment to taxable income in any other
Taxable Year or as a carryforward or carryback, and including the effect on
other Taxes of such reduction), plus any interest received with respect to any
related Tax refund, determined in the case of both (i) and (ii) on a basis
consistent with the computation of After-Tax Basis.
TAX PRACTICES: the most recently applied policies, procedures and
practices employed by the Hilton Group in the preparation and filing of, and
positions taken on, any Tax
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Returns of Hilton or any Pre-Distribution Member or Hilton Affiliate for any
Pre-Closing Taxable Period.
TAX RETURN(S): with respect to any corporation or Affiliated Group,
all returns, reports, estimates, statements, declarations and other filings
relating to, or required to be filed by any taxpayer in connection with, the
payment or receipt of any refund of any Tax.
TAX TREATMENT: as defined in Section 3.3 hereto.
TAXABLE PERIOD: a Pre-Closing Taxable Period, a Post-Closing Taxable
Period or a Straddle Period.
TAXABLE YEAR: a taxable year (which may be shorter than a full
calendar or fiscal year) or similar period with respect to which any Tax may be
imposed.
TAX(ES): any federal, state, foreign or local income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto; EXCLUDING, HOWEVER, any "Transaction
Taxes" as defined in Section 6.05 of the Distribution Agreement.
TAXING AUTHORITY: the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Tax.
ARTICLE II.
FILING OF TAX RETURNS AND PAYMENT OF TAXES
Section 2.1. PREPARATION AND FILING OF TAX RETURNS.
(a) BY HILTON. Hilton shall prepare and timely file (or cause to be
prepared and timely filed):
(i) all Tax and Information Returns of the Hilton
Group or any Pre-Distribution Member or group of
Pre-Distribution Members for all Pre-Closing Taxable Periods
that are required to be filed on or before the Closing Date;
(ii) all Tax and Information Returns of the Hilton
Group or any Pre-Distribution Member or group of
Pre-Distribution Members for all Pre-Closing Taxable Periods
(other than such Returns that relate solely to any Park
Place Member or group of Park Place Members) that are not
required to be filed on or before the Closing Date; and
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(iii) all Tax and Information Returns of the Hilton
Group or any Post-Distribution Member or group of
Post-Distribution Members for all Straddle Periods and
Post-Closing Taxable Periods.
(b) BY PARK PLACE. Park Place shall prepare and timely file (or
cause to be prepared and timely filed):
(i) all Tax and Information Returns that relate
solely to any Park Place Member or group of Park Place
Members for all Pre-Closing Taxable Periods that are not
required to be filed on or before the Closing Date; and
(ii) all Tax and Information Returns of the Park
Place Group or any Park Place Member or group of Park Place
Members for all Straddle Periods and Post-Closing Taxable
Periods.
Pursuant to the Corporate Services Agreement, during a transition period
specified therein, certain Tax and Information Returns described in
Section 2.1(b) will be prepared (or caused to be prepared) by Hilton on Park
Place's behalf.
Section 2.2. PROVISION OF FILING INFORMATION. Park Place (or
Hilton, as the case may be) shall cooperate and assist Hilton (or Park Place) in
the preparation and filing of all Tax and Information Returns subject to
Section 2.1 and any tax planning related thereto, and shall submit to Hilton (or
Park Place) (i) all necessary filing information in a manner consistent with
past Tax Practices and (ii) all other information reasonably requested by Hilton
(or Park Place) in connection with the preparation of such Tax Returns and any
such tax planning promptly after such request, including permission to copy any
applicable documents. It is expressly understood and agreed that Hilton's (or
Park Place's) ability to discharge its Tax and Information Return preparation
and filing responsibilities is contingent upon Park Place (or Hilton) providing
Hilton (or Park Place) with all cooperation, assistance and information
reasonably necessary or requested for the filing of such Tax and Information
Returns and that Park Place (or Hilton) shall indemnify Hilton (or Park Place),
if, and to the extent that, Taxes are increased as a result of material
inaccuracies in such information or failures to provide such information and
assistance on a timely basis.
Section 2.3. TAXABLE YEAR. Park Place and Hilton agree that, to the
extent permitted by applicable law, (i) the Taxable Year of the Park Place
Members included in the consolidated federal Income Tax Return of the Hilton
Group for the Taxable Period that includes the Closing Date (and all
corresponding consolidated, combined, unitary or similar state, foreign or local
Income Tax Returns of the Hilton Group) shall end at the close of business on
the Closing Date, and (ii) the Park Place Group and each Park Place Member shall
begin a new Taxable Year for purposes of such federal, state, foreign or local
Income Taxes on the day after the Closing Date. The parties further agree that,
to the extent permitted by applicable law, all federal, state, foreign or local
Tax and Information Returns shall be filed consistently with this position.
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Section 2.4. ADVANCE REVIEW OF TAX RETURNS. At least thirty (30)
days prior to the filing of any federal Income Tax Return (including amendments
thereto) that includes a Park Place Member, and at least fifteen (15) days prior
to the filing of any other Tax Return (including amendments thereto) that
includes a Park Place Member, Hilton shall provide Park Place with the portion
of such Tax Return related to the Park Place Member. In the case of each Tax
Return (including amendments thereto) subject to the conformity requirements of
Section 2.5 and filed pursuant to Section 2.1(b), Park Place shall provide
Hilton with copies of any such Tax Return at least thirty (30) days prior to the
filing thereof. Park Place and its Representatives (or Hilton and its
Representatives, as the case may be) shall have the right to review all related
work papers prior to the filing of any such Tax Return. Hilton (or Park Place,
as the case may be) shall consult with Park Place (or Hilton) regarding its
comments with respect to such Tax Returns and shall in good faith (A) consult
with Park Place (or Hilton) in an effort to resolve any differences with respect
to the preparation and accuracy of such Tax Returns and their consistency with
past Tax Practices and (B) consider Park Place's (or Hilton's) recommendations
for alternative positions with respect to items reflected on such Tax Returns;
PROVIDED, HOWEVER, that Hilton (or Park Place) shall not be required to consider
any such recommendation if the result thereof would adversely affect the Taxes
of the Hilton Group or any Post-Distribution Member (or the Park Place Group or
any Park Place Member) for any Straddle Period or Post-Closing Taxable Period,
and Hilton (or Park Place) may condition the acceptance of any such
recommendation upon the receipt of appropriate indemnification from Park Place
(or Hilton) for any increases in Taxes that may result from the adoption of the
relevant alternative position.
Section 2.5. CONSISTENT POSITIONS ON TAX RETURNS. Hilton (or Park
Place, as the case may be) shall (i) prepare all Tax Returns filed pursuant to
this Agreement for all Taxable Years ended on or before December 31, 1999 in a
manner consistent with past Tax Practices, and (ii) prepare all Tax Returns
filed pursuant to this Agreement in a manner consistent with the IRS Ruling and
the Ruling Request, except in either (i) or (ii) as otherwise required by
changes in applicable law or material underlying facts or as the parties hereto
shall otherwise consent in writing, which consent shall not be unreasonably
withheld.
Section 2.6. STRADDLE PERIOD TAXES. For purposes of this Agreement,
Taxes attributable to Straddle Periods shall be allocated between the Pre- and
Post-Closing Straddle Periods, in Hilton's reasonable judgment with the consent
of Park Place, in the following manner:
(a) To the extent not impractical, on the basis of the actual
operations and taxable income for each such period, determined by closing the
books of the entity at the close of business on the Closing Date; or
(b) To the extent that an allocation based on a closing of the books
is impractical, on the basis of allocations of taxable income, loss, gain,
deduction and credits made for the entity for federal Income Tax purposes.
Section 2.7. PAYMENT OF TAXES
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(a) Hilton shall pay (i) (A) all Taxes shown to be due and payable on
all Tax Returns as filed pursuant to Sections 2.1(a) and 2.1(b)(i) hereof and
(B) all Taxes shown to be due and payable on all Tax Returns as filed pursuant
to Section 2.1(b)(ii) for Straddle Periods, to the extent allocable to
Pre-Closing Straddle Periods, and (ii) subject to Article III below, all
additional Taxes that shall thereafter become due and payable as a result of a
Final Determination with respect to all Tax Returns filed by Hilton pursuant to
Section 2.1(a) hereof; PROVIDED, HOWEVER, that Park Place shall reimburse Hilton
for the amount of any such additional Taxes required to be paid as a result of
the operation of the foregoing Subsection 2.7(a)(ii) within 15 days of receipt
of notification from Hilton, if and to the extent that such Tax Returns include
one or more Park Place Members and such additional Taxes are allocable to one or
more Park Place Members as set forth in Section 2.8 herein.
(b) Park Place shall pay (i) all Taxes shown to be due and payable on
all Tax Returns filed by Park Place pursuant to Section 2.1(b)(ii), (A) for
Straddle Periods, to the extent allocable to Post-Closing Straddle Periods, and
(B) for Post-Closing Taxable Periods and (ii) subject to Article III, all
additional Taxes that shall thereafter become due and payable as a result of a
Final Determination with respect to all Tax Returns filed by Park Place pursuant
to Section 2.1(b) hereof.
(c) With respect to the 1998 Hilton Group consolidated federal Income
Tax Return and any Hilton Group Income Tax Return for any Combined Jurisdiction
for the Taxable Period that includes the Closing Date (together, a "Final Hilton
Group Combined Tax Return"), within 15 days of receipt of notice from Hilton,
Park Place shall reimburse Hilton in an amount equal to fifty percent (50%) of
(i) any additional payment of Income Taxes required to be made by Hilton with
any request for extension of any Final Hilton Group Combined Tax Return and
(ii) any additional payment of Income Taxes required to be made by Hilton with
the filing of any Final Hilton Group Combined Tax Return. To the extent that
the amount of Income Taxes previously paid by Hilton with respect to the Taxable
Year reported on any Final Hilton Group Combined Tax Return exceeds the Income
Tax liability shown on such Income Tax Return, Hilton shall reimburse Park
Place, within 15 days of the filing of such Tax Return an amount equal to fifty
percent (50%) of such excess.
(d) With respect to all Tax Returns described in Section 2.7(a)(i)
above that relate solely to any Park Place Member or group of Park Place
Members, within 15 days of receipt of notice from Hilton, Park Place shall
reimburse Hilton in an amount equal to one hundred percent (100%) of (i) any
additional payment of Taxes required to be made by Hilton with any request for
extension of the due date of such Tax Returns and (ii) any additional payment of
Taxes required to be made by Hilton with the filing of such Tax Returns. To the
extent that the amount of Taxes previously paid by Hilton with respect to the
Taxable Year reported on any Tax Return described in Section 2.7(a)(i) above
which relates solely to any Park Place Member or group of Park Place Members
exceeds the Tax liability shown on such Tax Return, Hilton shall reimburse Park
Place, within 15 days of the filing of such Tax Return, in an amount equal to
one hundred percent (100%) of such excess.
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Section 2.8. ALLOCATION OF ADDITIONAL TAXES.
(a) For purposes of determining the reimbursement obligations of Park
Place pursuant to Section 2.7(a) with respect to additional Taxes required to be
paid by Hilton pursuant to Section 2.7(a)(ii), such additional Taxes shall be
allocated in the following manner:
(i) Any additional Taxes that relate to Tax Returns
consisting solely of one or more Park Place Members shall be
allocated in full to such Park Place Members.
(ii) Any additional Taxes that relate to Tax Returns
consisting solely of Pre-Distribution Members, none of which
are Park Place Members, shall be allocated in full to such
Pre-Distribution Members.
(iii) With respect to additional Taxes that relate to
Tax Returns that are filed on a consolidated, combined,
unitary or similar basis and that include at least one Park
Place Member but do not consist solely of Park Place
Members, such additional Taxes shall be allocated to the
Park Place Members to the extent that such additional Taxes
result in an increase in the separate return tax liabilities
of the Park Place Members as computed under Treasury
Regulation Section 1.1552-1(a)(2)(ii) in the case of a
consolidated federal Income Tax Return. In the case of
federal Taxes other than the regular Income Tax, similar
principles will apply with the application determined
separately for each separate type of Tax. Similarly, in the
case of consolidated, combined, unitary or similar state,
foreign or local Tax Returns, similar principles will apply
with the application determined separately for each separate
type of such Tax.
(b) Notwithstanding any other provision of this Agreement, for
purposes of this Section 2.8, the parties hereto intend that the following
entities shall be treated as if they were Park Place Members, but only with
respect to Pre-Closing Taxable Periods and Pre-Closing Straddle Periods:
Bally's Grand Inc., a Nevada corporation; Bally's Grand Property Sub I, Inc., a
Nevada corporation; Bally's Casino Management, Inc., a Delaware corporation;
Hilton Gaming Corporation, a Nevada corporation; Paris Casino Corp., a Nevada
corporation; Conrad International Hotels Corporation, a Nevada corporation;
Conrad International Investment Corporation, a Nevada corporation; Conrad
International Royalty Corporation, a Nevada corporation.
(c) With respect to any of the entities described in the preceding
Section 2.8(b), (i) Hilton shall not take any actions subsequent to the Closing
which could reasonably be expected to have a material and adverse effect on any
indemnification obligation of Park Place hereunder, and (ii) Hilton shall, for
all Pre-Closing Taxable Periods and Pre-Closing Straddle Periods, under the
principles set forth in Section 2.4 above, in good faith afford Park Place a
reasonable
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opportunity to review in advance any Tax Returns pertaining to such entities,
and such Tax Returns shall not be filed without the written consent of Park
Place, which consent shall not be unreasonably withheld.
Section 2.9. AMENDMENTS TO TAX AND INFORMATION RETURNS. Hilton (or
Park Place, as the case may be) shall be entitled to amend Tax and Information
Returns filed by Hilton (or Park Place) pursuant to Section 2.1; PROVIDED,
HOWEVER, that Park Place (or Hilton) shall not amend for any reason whatsoever
any Tax or Information Return of Hilton, the Hilton Group, any Pre-Distribution
Member or group thereof or any Post-Distribution Member or group thereof (or of
Park Place, the Park Place Group or any Park Place Member or group thereof) for
any Taxable Period ending on or before December 31, 1999, except (A) pursuant to
the settlement or other resolution of an Audit subject to Article VI or (B) with
Hilton's (or Park Place's) written consent (which consent shall not be
unreasonably withheld, PROVIDED, HOWEVER, that such consent may be conditioned
upon the receipt of appropriate indemnification for any increases in Taxes that
may result from the amendment; PROVIDED, HOWEVER, that such prohibition shall
not extend to the correction of mathematical or material factual errors or other
adjustments necessary to conform such Tax and Information Returns to applicable
law or to comply with Section 2.5.
Section 2.10. REFUNDS OF TAXES. Hilton shall be entitled to any
refund of Taxes for which Hilton would be ultimately liable pursuant to a Final
Determination of such Taxes under Section 2.7(a), and Park Place shall be
entitled to any refund of Taxes for which Park Place would be ultimately liable
pursuant to a Final Determination of such Taxes under Section 2.7(a) or (b), in
each case taking into account Park Place's reimbursement obligations which
obligations are described therein and allocated pursuant to Section 2.8. If
Hilton or any Post-Distribution Member (or Park Place or any Park Place Member,
as the case may be) receives a Tax refund to which Park Place or any Park Place
Member (or Hilton or any Post-Distribution Member) is entitled pursuant to this
Agreement, Hilton (or Park Place) shall pay (in accordance with Article IV) the
amount of such refund (including any interest received thereon) to Park Place
(or Hilton) promptly after receipt thereof.
Section 2.11. CARRYBACKS. Park Place shall notify Hilton promptly of
the existence of any items of deduction, loss or credit arising in a
Post-Closing Taxable Year that are required to be carried back to a Taxable
Period of the Hilton Group or any Pre-Distribution Member (other than to a
separate Tax Return of a member of the Park Place Group). Park Place hereby
expressly agrees (on its behalf and on behalf of all Park Place Members and
successors thereto) that Hilton or any Post-Distribution Member may retain any
cash refund or reduction of a Tax liability or any other Tax Benefit obtained by
Hilton or any Post-Distribution Member (other than a member of the Park Place
Group) as a result of any carryback without compensation to Park Place or any
Park Place Member. Notwithstanding Section 2.5, Park Place and Hilton agree
that Park Place shall elect to carry forward all such items that affect Park
Place or any member of the Park Place Group, or otherwise take such steps to the
extent permitted under applicable law to preserve the benefit to it of all items
generated by Park Place or any member of the Park Place Group.
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Section 2.12. NOL, ITC, AMT AND FTC CREDIT BENEFITS. If any Park
Place Members have attributable to them, under applicable federal and state
Income Tax law (including, without limitation, Code Section 1502 and the
Treasury Regulations promulgated thereunder), any net operating loss
carryforwards, investment tax credit carryforwards, alternative minimum tax
credit carryforwards or foreign tax credit carryforwards (the "CARRYFORWARDS"),
the parties hereto agree that the Park Place Group and the Park Place Members
shall be exclusively entitled to use and benefit from the Carryforwards without
compensation to the Hilton Group or any Pre-Distribution Member. Hilton hereby
agrees to take any action or make any election reasonably required to permit
Park Place and the Park Place Members to utilize the Carryforwards; PROVIDED,
HOWEVER, that no such action or election shall be required if it would adversely
affect in any way the Income Tax liabilities of the Hilton Group or any
Post-Distribution Member for any Taxable Year. The parties also hereby agree
that the provisions of this Section 2.12 shall apply with respect to any similar
carryforwards available under applicable state, foreign or local Tax law.
Section 2.13. DISPUTES. If Hilton and Park Place are unable to agree
on any calculation, numerical value, procedure or payment set forth in or
required by this Article II, such item shall be determined pursuant to the
Dispute Resolution Procedure.
ARTICLE III.
INDEMNIFICATION.
Section 3.1. BY HILTON.
(a) TAXES. Subject to Section 3.3, Hilton shall indemnify and hold
Park Place and each Park Place Member harmless (on an After-Tax Basis) against
any and all Taxes for which Hilton is ultimately liable pursuant to a Final
Determination of such Taxes under Section 2.7(a), taking into account Park
Place's reimbursement obligations described therein.
(b) MEMBER LIABILITY. Subject to Sections 3.2 and 3.3, Hilton shall
indemnify and hold Park Place and each Park Place Member harmless (on an
After-Tax Basis) against each and every liability for Taxes of the Hilton Group
asserted by any Taxing Authority under Treasury Regulation Section 1.1502-6 or
any similar law, rule or regulation.
Section 3.2. BY PARK PLACE. Subject to Section 3.3, Park Place
shall indemnify and hold the Hilton Group and each Post-Distribution Member
harmless (on an After-Tax Basis) against the Taxes for which Park Place is
ultimately liable pursuant to a Final Determination of such Taxes under Section
2.7(a) or (b), taking into account Park Place's reimbursement obligations
described therein.
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<PAGE>
Section 3.3. ASSUMED TAX TREATMENTS
(a) The parties expressly agree for all purposes to treat the
Distribution as a tax-free distribution under Code Section 355 in accordance
with (i) the IRS Ruling and Ruling Request or (ii) an opinion of tax counsel as
described in Section 7.11 of the Merger Agreement (the "TAX TREATMENT"). Each
party hereto also expressly agrees not to take (and to cause each of its
Affiliates not to take) any action (except where such action is required by law)
that is inconsistent with the treatment of the Distribution and all related
transactions in accordance with the Tax Treatment and to take (and to cause each
of its Affiliates to take) any and all actions reasonably available to such
party (or Affiliate) to support and defend the Tax Treatment.
(b) Notwithstanding anything to the contrary in Sections 2.7, 3.1 or
3.2:
(i) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and either (A) there has been no material breach
of Section 3.3(a) and no Post-Distribution Member or Park
Place Member has taken actions after the Distribution which
result in such disallowance, or (B) if one or more
Post-Distribution Members and one or more Park Place Members
have materially breached Section 3.3(a) or taken actions
after the Distribution which result in such disallowance,
then any liability of Hilton for Taxes as a result of such
disallowance shall be divided equally between Hilton and
Park Place.
(ii) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and any Park Place Member (and no
Post-Distribution Member) has materially breached Section
3.3(a) or has taken any action after the Distribution which
results in such disallowance, then Park Place shall
indemnify and hold each Post-Distribution Member harmless
for any Taxes which would not have occurred but for such
disallowance.
(iii) If there is a Final Determination that results
in the disallowance, in whole or in part, of the Tax
Treatment, and any Post-Distribution Member (and no Park
Place Member) has materially breached Section 3.3(a) or has
taken any action after the Distribution which results in
such disallowance, then Hilton shall indemnify and hold each
Park Place Member harmless for any Taxes which would not
have occurred but for such disallowance.
Any such claim for indemnification shall otherwise be handled in the
manner specified under this Article III, but shall not affect in any manner the
provisions of Articles V and VI with respect to cooperation and control of
Audits.
13
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Section 3.4. CERTAIN REIMBURSEMENTS. Park Place (or Hilton, as the
case may be) shall notify Hilton (or Park Place) of any Taxes paid by the Park
Place Group or any Park Place Member (or the Hilton Group or any
Post-Distribution Member) which are subject to indemnification under this
Article III; PROVIDED, HOWEVER, that no Tax liability of $10,000 or less in the
aggregate shall in any event be indemnified hereunder. Any notification
contemplated by this Section 3.4 shall include a detailed calculation
(including, if applicable, separate allocations of such Taxes between Pre- and
Post-Closing Taxable Periods and supporting work papers) and a brief explanation
of the basis for indemnification hereunder. Whenever a notification described
in this Section 3.4 is given, the notified party shall pay the amount requested
in such notice to the notifying party in accordance with Article IV, but only to
the extent that the notified party agrees with such request. To the extent the
notified party disagrees with such request, it shall, within 15 days of receipt
of such notice, so notify the notifying party, whereupon the parties shall use
their best efforts to resolve any such disagreement. To the extent not
otherwise provided for in this Article III or in Article IV, any payment made
after such 15-day period shall include interest at the Overdue Rate from the
date of receipt of original notice of such payment.
Section 3.5. LOSS OF TAX BENEFITS. Appropriate payments shall be
made between the parties to take account of subsequent losses of, or changes in,
any Tax Benefit that has been taken into account for purposes of determining the
After-Tax Basis of any indemnification payment.
ARTICLE IV.
METHOD, TIMING AND CHARACTER OF PAYMENTS REQUIRED BY THIS
AGREEMENT.
Section 4.1. PAYMENT IN IMMEDIATELY AVAILABLE FUNDS; INTEREST. All
payments made pursuant to this Agreement shall be made in immediately available
funds. Except as otherwise provided herein, any payment not made within 15 days
of receipt of notice of such payment shall thereafter bear interest at the
Overdue Rate from the date of receipt of notice of such payment.
Section 4.2. CHARACTERIZATION OF PAYMENTS. Any payment (other than
interest thereon) made hereunder by Hilton to Park Place or by Park Place to
Hilton shall be treated by all parties for all purposes to the extent permitted
by law as a non-taxable dividend distribution or capital contribution made prior
to the close of business on the Closing Date. If, pursuant to a Final
Determination, it is determined that the receipt or accrual of any payment under
this Agreement (other than interest thereon) is, itself, subject to any Tax, the
party making such payment shall be required to pay an additional amount to cover
the additional Tax (on an After-Tax Basis), together with interest at the
Overdue Rate from the date the Tax accrues through the date of payment of the
additional amount.
ARTICLE V.
COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
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<PAGE>
Section 5.1. PROVISION OF COOPERATION, DOCUMENTS AND OTHER
INFORMATION. Upon reasonable request by a requesting party, Hilton and Park
Place shall promptly provide (and shall cause their respective Affiliates to
provide) such requesting party with such cooperation and assistance, documents,
and other information, without charge, as may be necessary or reasonably helpful
in connection with (i) the preparation and filing of any original or amended Tax
or Information Return, (ii) the conduct of any Audit involving to any extent
Taxes or Tax or Information Returns within the scope of this Agreement, or (iii)
the verification by a party of an amount payable hereunder to, or receivable
hereunder from, another party. Such cooperation and assistance shall include,
without limitation: (w) the provision on demand of books, records, Tax or
Information Returns, documentation or other information relating to any relevant
Tax Return; (x) the execution of any document that may be necessary or
reasonably helpful in connection with the filing of any Tax or Information
Return by the Hilton Group, a Pre-Distribution Member, a Post-Distribution
Member, the Park Place Group or a Park Place Member, or in connection with any
Audit of the type generally referred to in the preceding sentence, including,
without limitation, the execution of powers of attorney and extensions of
applicable statutes of limitations with respect to Tax or Information Returns
which Hilton may be obligated to file on behalf of Park Place Members pursuant
to Section 2.1; (y) the prompt and timely filing of appropriate claims for
refund; and (z) the use of reasonable best efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
Section 5.2. PARTICIPATION IN THE RULING REQUEST. With respect to
the ruling Request, Hilton shall (i) afford park place full opportunity to
review any submissions related to the Ruling Request and correspondence from the
IRS, and to participate in any proceedings related to the Ruling Request, (ii)
in good faith consult with Park Place regarding its comments with respect to
such submissions and proceedings in an effort to resolve any differences with
respect to Hilton's positions with regard to such issues, (iii) in good faith
consider Park Place's recommendations for alternative positions with respect to
such issues, and (iv) provide Park Place with final copies of such submissions
and correspondence. Hilton shall not make any representations in connection
with the Ruling Request that could reasonably be expected to have a material and
adverse effect on (A) any indemnification obligation of park place hereunder or
(B) any tax liability of the Park Place group or any Park Place member for any
taxable period, without the prior written consent of Park Place, which consent
shall not be unreasonably withheld. Moreover, Hilton agrees that, at the
reasonable request of Park Place, Hilton shall cooperate with Park Place and use
its reasonable best efforts to expeditiously obtain, at Park Place's expense,
supplemental rulings from the IRS confirming (x) the continuing validity of the
IRS Ruling, and (y) compliance on the part of Park Place or any Park Place
member with its obligation under Section 3.3(a) to conform to the Tax Treatment.
SECTION 5.3. RETENTION OF BOOKS AND RECORDS. Hilton, each Post
Distribution Member, Park Place and each Park Place Member shall retain or cause
to be retained all Tax and Information Returns, and all books, records,
schedules, workpapers, and other documents relating thereto, until the
expiration of the later of (i) seven (7) years from the close of the Taxable
Year, (ii)
15
<PAGE>
all applicable statutes of limitations (including any waivers or extensions
thereof) and (iii) any retention period required by law (E.G., depreciation or
inventory records) or pursuant to any record retention agreement. The parties
hereto shall notify each other in writing of any waivers, extensions or
expirations of applicable statutes of limitations. The parties hereto shall
provide at least thirty (30) days prior written notice of any intended
destruction of the documents referred to in this Section 5.2. A party giving
such a notification shall not dispose of any of the foregoing materials without
first obtaining the written approval (which may not be unreasonably withheld) of
the notified party and, in lieu of destruction or disposition, the notified
party shall be permitted to take possession, at its sole cost, of the foregoing
materials which affect (or potentially affect) its liability for Tax.
Section 5.4. CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Except
as required by law or with the prior written consent of the other party, all Tax
and Information Returns, documents, schedules, work papers and similar items and
all information contained therein which are within the scope of this Agreement
shall be kept confidential by the parties hereto and their Representatives,
shall not be disclosed to any other person or entity and shall be used only for
the purposes provided herein.
ARTICLE VI.
AUDITS.
Section 6.1. STATUS AND OTHER INFORMATION REGARDING AUDITS AND
DISPUTES. Upon the receipt by Hilton or any Post-Distribution Member (or Park
Place or any Park Place Member, as the case may be) of notice of, or relating
to, an Audit which asserts, proposes or recommends a deficiency, claim or
adjustment (including the receipt of a IRS Form 5701 or comparable form from any
other Taxing Authority) that, if sustained, would affect the liability for Taxes
which are subject to indemnification under this Agreement, Hilton (or Park
Place) shall promptly notify Park Place (or Hilton) in writing of the receipt of
such notice. Hilton (or Park Place) shall use reasonable best efforts to keep
Park Place (or Hilton) advised as to the status of Audits pertaining to Taxes
subject to indemnification under this Agreement. To the extent relating to any
such issue, Hilton (or Park Place) shall promptly furnish Park Place (or Hilton)
with copies of any inquiries or requests for information from any Taxing
Authority or any other administrative, judicial or other governmental authority,
as well as copies of any revenue agent's report or similar report, notice of
proposed adjustment or notice of deficiency.
Section 6.2. CONTROL AND SETTLEMENT.
(a) Hilton shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating, in whole or in part,
to any Pre-Closing Taxable Period or any other Taxable Period for which Hilton
is responsible, in whole or in part, for Taxes under Section 2.7(a) and Article
III, and to employ counsel of its choice at its expense; PROVIDED, HOWEVER,
that, with respect to such issues that may impact Park Place or any Park Place
Member for any Post-Closing Taxable Period or for which Park Place may be
responsible in part under Section 2.7(a) and Article III, Hilton shall in good
faith (i) afford Park Place full opportunity to
16
<PAGE>
observe at any such proceedings and to review any submissions related to such
issues, (ii) consult with Park Place regarding its comments with respect to such
proceedings and submissions in an effort to resolve any differences with respect
to Hilton's positions with regard to such issues, (iii) in good faith consider
Park Place's recommendations for alternative positions with respect to such
issues, (iv) advise Park Place of the reasons for rejecting any such alternative
position, and (v) provide Park Place with final copies of such submissions. In
the event of any disagreement regarding the proceedings, Hilton shall have the
ultimate control of the Audit and any settlement or other resolution thereof,
PROVIDED, HOWEVER, that Hilton shall not agree to settle any such proceeding in
a manner that could reasonably be expected to have a material and adverse effect
on (A) any indemnification obligation of Park Place hereunder or (B) any Tax
liability of the Park Place Group or any Park Place Member for any Taxable
Period, without the prior written consent of Park Place, which consent shall not
be unreasonably withheld.
(b) Park Place shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating solely to any
Post-Closing Taxable Period of the Park Place Group or any Park Place Member, or
relating to any other Taxable Period for which Park Place is solely responsible
for Taxes under Section 2.7(b) and Article III, and to employ counsel of its
choice at its expense; PROVIDED, HOWEVER, that Park Place shall in good faith
(i) afford Hilton full opportunity to observe at any such proceedings and to
review any submissions related thereto and (ii) not agree to settle any such
proceeding in a manner that could reasonably be expected to have a material and
adverse effect on (A) any indemnification obligation of Hilton hereunder or (B)
any Tax liability of the Hilton Group or any Post-Distribution Member for any
Taxable Period, without the prior written consent of Hilton, which consent shall
not be unreasonably withheld.
ARTICLE VII.
MISCELLANEOUS.
Section 7.1. EFFECTIVENESS. This Agreement shall be effective from
and after the Closing Date and shall survive until the expiration of any
applicable statute of limitations.
Section 7.2. ENTIRE AGREEMENT. This Agreement and the Distribution
Agreement, together with all documents and instruments referred to herein and
therein constitute the entire agreement and supersede and terminate all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
Section 7.3. GUARANTEES OF PERFORMANCE. Hilton and Park Place
hereby guarantee the complete and prompt performance by the members of their
respective Affiliated Groups of all of their obligations and undertakings
pursuant to this Agreement. If, subsequent to the Effective Time, either Hilton
or Park Place shall be acquired by another entity such that 50% or more of its
common stock is in common control, such acquirer shall, by making such
acquisition, simultaneously agree to jointly and severally guarantee the
complete and prompt performance by the acquired corporation and any Affiliate of
the acquired corporation of all of their obligations and undertakings pursuant
to this Agreement.
17
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Section 7.4. SEVERABILITY. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
Section 7.5. INDULGENCES, ETC.. Neither the failure nor any delay
on the part of any party hereto to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise of the same or any other right, nor
shall any waiver of any right with respect to any occurrence be construed as a
waiver of such right with respect to any other occurrence.
Section 7.6. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without regard
to any applicable conflicts of laws.
Section 7.7. NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be made in the
manner provided in Section 9.05 of the Distribution Agreement.
Section 7.8. AMENDMENTS. This Agreement may be amended at any time
only by written agreement executed and delivered by duly authorized officers of
Park Place and Hilton.
Section 7.9. ASSIGNMENTS. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 7.10. HEADINGS; REFERENCES. The article, section and
paragraph headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. All references herein to "Article", "Sections" or "Exhibits" shall
be deemed to be references to Articles or Sections hereof or Exhibits hereto
unless otherwise indicated.
Section 7.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 7.12. PREDECESSORS AND SUCCESSORS. To the extent necessary
to give effect to the purposes of this Agreement, any reference to any
corporation, Affiliated Group or member of an Affiliated Group shall also
include any predecessors or successors thereto, by operation of law or
otherwise.
18
<PAGE>
Section 7.13. TAX ELECTIONS. Nothing in this Agreement is intended
to change or otherwise affect any previous tax election made by or on behalf of
the Hilton Group (including the election with respect to the calculation of
earnings and profits under Code Section 1552 and the regulations thereunder).
Hilton, as common parent of the Hilton Group, shall continue to have sole
discretion to make any and all elections with respect to all members of the
Hilton Group for all Taxable Periods for which it is obligated to file Tax or
Information Returns under Section 2.1(a). Park Place, as common parent of the
Park Place Group, shall have sole discretion to make any and all elections with
respect to all members of the Park Place Group for all Taxable Periods for which
it is obligated to file Tax or Information Returns under Section 2.1(b);
PROVIDED, HOWEVER, that any such election for a Pre-Closing Taxable Period or
Pre-Closing Straddle Period shall be made only with the written consent of
Hilton, which consent shall not be unreasonably withheld.
Section 7.14. SPECIFIC PERFORMANCE. The parties hereto agree that
the remedy at law for any breach of this Agreement will be inadequate and that
any party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable laws, each party waives any
objection to the imposition of such relief.
Section 7.15. FURTHER ASSURANCES. Subject to the provisions hereof,
the parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as it
may reasonably request in order to be able to comply with the provisions of this
sentence.
Section 7.16. SETOFF. All payments to be made by any party under
this Agreement shall be made without setoff, counterclaim or withholding, all of
which are expressly waived.
Section 7.17. EXPENSES. Except as specifically provided in this
Agreement or in a Related Agreement, all fees and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
19
<PAGE>
Section 7.18. RULES OF CONSTRUCTION. Any ambiguities shall be resolved without
regard to which party drafted the Agreement.
[Signature Page To Follow]
20
<PAGE>
IN WITNESS WHEREOF, Hilton and Park Place have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
HILTON HOTELS CORPORATION,
a Delaware Corporation
BY: /s/ Thomas E. Gallagher
-----------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
PARK PLACE ENTERTAINMENT CORPORATION,
a Delaware corporation
By: /s/ Scott A. LaPorta
-------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
S-1
<PAGE>
THIRD AMENDMENT TO
HILTON HOTELS CORPORATION
1984 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
THIS THIRD AMENDMENT TO HILTON HOTELS CORPORATION 1984 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN, dated as of December 31, 1998, is made and
adopted by HILTON HOTELS CORPORATION, a Delaware corporation (the
"Corporation"). Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to such terms in the Plan (as defined
below).
WHEREAS, effective as of March 22, 1984, the Corporation adopted the Hilton
Hotels Corporation 1984 Stock Option and Stock Appreciation Rights Plan (as
amended from time to time, the "Plan") for the benefit of its key employees;
WHEREAS, subject to certain conditions, the Corporation intends to spin-off
its operations, assets and liabilities relating to its gaming business by
distributing, on a pro rata basis, all of the issued and outstanding shares of
common stock of Park Place Entertainment Corporation ("Park Place") to the
holders of the Corporation's common stock (the "Distribution");
WHEREAS, concurrently with the Distribution, the outstanding options under
the Plan will be adjusted to represent options to purchase an equivalent number
of shares of the Corporation's common stock and shares of Park Place common
stock;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
Section 12 thereof;
WHEREAS, the Corporation desires to amend the Plan so as to reflect the
Distribution; and
WHEREAS, this Third Amendment was duly adopted by a resolution of the Board
of Directors of the Corporation dated as of November 12, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. The Plan is hereby amended by adding the following new Section 14 after
Section 13 of the Plan:
"14. PROVISIONS REGARDING THE DISTRIBUTION.
(a) Concurrently with the distribution (the "Distribution") to the
holders of the outstanding shares of the Corporation's Common Stock, on a
one-for-one basis, of all of the outstanding shares of the common stock (the
"Park Place Common Stock"), par value $.01 per
<PAGE>
share, of Park Place Entertainment Corporation ("Park Place"), the Corporation
and Park Place are entering into that certain Employee Benefits and Other
Employment Matters Allocation Agreement, dated as of the date of the
Distribution (the "Benefits Allocation Agreement"), which provides for the
Corporation and Park Place to allocate the responsibilities with respect to
certain matters relating to employees and employee compensation, benefits, labor
and other employment matters. Concurrently with the Distribution and pursuant
to the terms of the Benefits Allocation Agreement, all outstanding options to
purchase the Corporation's Common Stock granted under this Plan (each, a "Hilton
Option") shall be adjusted (the "Option Adjustment") to represent options to
purchase an equivalent number of shares of the Corporation's Common Stock (each
adjusted option to purchase the Corporation's Common Stock, an "Adjusted Hilton
Option") and shares of Park Place Common Stock (each adjusted option to purchase
Park Place Common Stock, an "Adjusted Park Place Option"). Pursuant to the
Option Adjustment, the intrinsic value of the Hilton Options prior to the
Distribution shall be preserved after the Distribution, and the exercise price
of the Hilton Options shall be allocated between the Adjusted Hilton Options and
the Adjusted Park Place Options based upon the relative values of the
Corporation's Common Stock and the Park Place Common Stock on December 21, 1998
(the first date on which the Park Place Common Stock traded on a "when issued"
basis), all as determined by the Corporation.
(b) Following the date of the Option Adjustment, all Adjusted Hilton
Options which are issued as a result of Hilton Options granted under this Plan
shall remain subject to the terms of this Plan and any applicable option
agreement, and all Adjusted Park Place Options which are issued as a result of
Hilton Options granted under this Plan shall be subject to the terms of the Park
Place Entertainment Corporation 1998 Stock Incentive Plan and the applicable
option agreement.
(c) For purposes of this Plan, with respect to Adjusted Hilton Options
held by Park Place Individuals (as defined in the Benefits Allocation Agreement)
as a result of the Option Adjustment, references to employment or termination of
employment in this Plan and in the applicable option agreement shall be deemed
to refer to employment by or termination of employment with Park Place and its
subsidiaries or affiliates."
2. This Third Amendment shall be and is hereby incorporated in and
forms a part of the Plan.
3. This Third Amendment shall be effective as of the effective date of
the Distribution.
4. Except as set forth herein, the Plan shall remain in full force and
effect.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this amendment to the
Plan to be executed by its duly authorized officer as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
-----------------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
<PAGE>
FOURTH AMENDMENT TO
HILTON HOTELS CORPORATION
1990 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
THIS FOURTH AMENDMENT TO HILTON HOTELS CORPORATION 1990 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN, dated as of December 31, 1998, is made and
adopted by HILTON HOTELS CORPORATION, a Delaware corporation (the
"Corporation"). Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to such terms in the Plan (as defined
below).
WHEREAS, effective as of July 12, 1990, the Corporation adopted the Hilton
Hotels Corporation 1990 Stock Option and Stock Appreciation Rights Plan (as
amended from time to time, the "Plan") for the benefit of its key employees;
WHEREAS, subject to certain conditions, the Corporation intends to spin-off
its operations, assets and liabilities relating to its gaming business by
distributing, on a pro rata basis, all of the issued and outstanding shares of
common stock of Park Place Entertainment Corporation ("Park Place") to the
holders of the Corporation's common stock (the "Distribution");
WHEREAS, concurrently with the Distribution, the outstanding options under
the Plan will be adjusted to represent options to purchase an equivalent number
of shares of the Corporation's common stock and shares of Park Place common
stock;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
Section 16 thereof;
WHEREAS, the Corporation desires to amend the Plan so as to reflect the
Distribution; and
WHEREAS, this Fourth Amendment was duly adopted by a resolution of the
Board of Directors of the Corporation dated as of November 12, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. The Plan is hereby amended by adding the following new Section 19 after
Section 18 of the Plan:
"19. PROVISIONS REGARDING THE DISTRIBUTION.
(a) Concurrently with the distribution (the "Distribution") to the
holders of the outstanding shares of the Corporation's Common Stock, on a
one-for-one basis, of all of the outstanding shares of the common stock (the
"Park Place Common Stock"), par value $.01 per
<PAGE>
share, of Park Place Entertainment Corporation ("Park Place"), the Corporation
and Park Place are entering into that certain Employee Benefits and Other
Employment Matters Allocation Agreement, dated as of the date of the
Distribution (the "Benefits Allocation Agreement"), which provides for the
Corporation and Park Place to allocate the responsibilities with respect to
certain matters relating to employees and employee compensation, benefits, labor
and other employment matters. Concurrently with the Distribution and pursuant
to the terms of the Benefits Allocation Agreement, all outstanding options to
purchase the Corporation's Common Stock granted under this Plan (each, a "Hilton
Option") shall be adjusted (the "Option Adjustment") to represent options to
purchase an equivalent number of shares of the Corporation's Common Stock (each
adjusted option to purchase the Corporation's Common Stock, an "Adjusted Hilton
Option") and shares of Park Place Common Stock (each adjusted option to purchase
Park Place Common Stock, an "Adjusted Park Place Option"). Pursuant to the
Option Adjustment, the intrinsic value of the Hilton Options prior to the
Distribution shall be preserved after the Distribution, and the exercise price
of the Hilton Options shall be allocated between the Adjusted Hilton Options and
the Adjusted Park Place Options based upon the relative values of the
Corporation's Common Stock and the Park Place Common Stock on December 21, 1998
(the first date on which the Park Place Common Stock traded on a "when issued"
basis), all as determined by the Corporation.
(b) Following the date of the Option Adjustment, all Adjusted Hilton
Options which are issued as a result of Hilton Options granted under this Plan
shall remain subject to the terms of this Plan and any applicable option
agreement, and all Adjusted Park Place Options which are issued as a result of
Hilton Options granted under this Plan shall be subject to the terms of the Park
Place Entertainment Corporation 1998 Stock Incentive Plan and the applicable
option agreement.
(c) For purposes of this Plan, with respect to Adjusted Hilton Options
held by Park Place Individuals (as defined in the Benefits Allocation Agreement)
as a result of the Option Adjustment, references to employment or termination of
employment in this Plan and in the applicable option agreement shall be deemed
to refer to employment by or termination of employment with Park Place and its
subsidiaries or affiliates."
2. This Fourth Amendment shall be and is hereby incorporated in and
forms a part of the Plan.
3. This Fourth Amendment shall be effective as of the effective date of
the Distribution.
4. Except as set forth herein, the Plan shall remain in full force and
effect.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this amendment to the
Plan to be executed by its duly authorized officer as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
-----------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
S-1
<PAGE>
FIRST AMENDMENT TO
HILTON HOTELS CORPORATION
1996 CHIEF EXECUTIVE STOCK INCENTIVE PLAN
THIS FIRST AMENDMENT TO HILTON HOTELS CORPORATION 1996 CHIEF EXECUTIVE
STOCK INCENTIVE PLAN, dated as of December 31, 1998, is made and adopted by
HILTON HOTELS CORPORATION, a Delaware corporation (the "Corporation").
Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Plan (as defined below).
WHEREAS, effective as of February 1, 1996, the Corporation adopted the
Hilton Hotels Corporation 1996 Chief Executive Stock Incentive Plan (as amended
from time to time, the "Plan") for the benefit of its Chief Executive Officer;
WHEREAS, subject to certain conditions, the Corporation intends to spin-off
its operations, assets and liabilities relating to its gaming business by
distributing, on a pro rata basis, all of the issued and outstanding shares of
common stock of Park Place Entertainment Corporation ("Park Place") to the
holders of the Corporation's common stock (the "Distribution");
WHEREAS, concurrently with the Distribution, the outstanding options under
the Plan will be adjusted to represent options to purchase an equivalent number
of shares of the Corporation's common stock and shares of Park Place common
stock;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
Section 7 thereof;
WHEREAS, the Corporation desires to amend the Plan so as to reflect the
Distribution; and
WHEREAS, this First Amendment was duly adopted by a resolution of the Board
of Directors of the Corporation dated as of November 12, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. The Plan is hereby amended by adding the following new Section 11 after
Section 10 of the Plan:
"SECTION 11. PROVISIONS REGARDING THE DISTRIBUTION.
(a) Concurrently with the distribution (the "Distribution") to the holders
of the outstanding shares of the Corporation's Common Stock, on a one-for-one
basis, of all of the outstanding shares of the common stock (the "Park Place
Common Stock"), par value $.01 per
<PAGE>
share, of Park Place Entertainment Corporation ("Park Place"), the Corporation
and Park Place are entering into that certain Employee Benefits and Other
Employment Matters Allocation Agreement, dated as of the date of the
Distribution (the "Benefits Allocation Agreement"), which provides for the
Corporation and Park Place to allocate the responsibilities with respect to
certain matters relating to employees and employee compensation, benefits, labor
and other employment matters. Concurrently with the Distribution and pursuant
to the terms of the Benefits Allocation Agreement, all outstanding options to
purchase the Corporation's Common Stock granted under this Plan (each, a "Hilton
Option") shall be adjusted (the "Option Adjustment") to represent options to
purchase an equivalent number of shares of the Corporation's Common Stock (each
adjusted option to purchase the Corporation's Common Stock, an "Adjusted Hilton
Option") and shares of Park Place Common Stock (each adjusted option to purchase
Park Place Common Stock, an "Adjusted Park Place Option"). Pursuant to the
Option Adjustment, the intrinsic value of the Hilton Options prior to the
Distribution shall be preserved after the Distribution, and the exercise price
of the Hilton Options shall be allocated between the Adjusted Hilton Options and
the Adjusted Park Place Options based upon the relative values of the
Corporation's Common Stock and the Park Place Common Stock on December 21, 1998
(the first date on which the Park Place Common Stock traded on a "when issued"
basis), all as determined by the Corporation.
(b) Following the date of the Option Adjustment, all Adjusted Hilton
Options which are issued as a result of Hilton Options granted under this
Plan shall remain subject to the terms of this Plan and any applicable option
agreement, and all Adjusted Park Place Options which are issued as a result
of Hilton Options granted under this Plan shall be subject to the terms of
the Park Place Entertainment Corporation 1998 Stock Incentive Plan and the
applicable option agreement.
(c) For purposes of this Plan, with respect to Adjusted Hilton
Options held by the CEO as a result of the Option Adjustment, references to
employment or termination of employment in this Plan and in the applicable
option agreement shall be deemed to refer to employment by or termination of
employment with the Corporation and Park Place and their subsidiaries or
affiliates. For purposes of this Plan, no termination of the CEO's
employment shall be deemed to have occurred until such time as the CEO's
employment with both the Corporation and Park Place (and their subsidiaries
or affiliates) has been terminated."
2. This First Amendment shall be and is hereby incorporated in and
forms a part of the Plan.
3. This First Amendment shall be effective as of the effective date
of the Distribution.
4. Except as set forth herein, the Plan shall remain in full force
and effect.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this amendment to the
Plan to be executed by its duly authorized officer as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
-------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
S-1
<PAGE>
FIRST AMENDMENT TO
HILTON HOTELS CORPORATION
1997 INDEPENDENT DIRECTOR STOCK OPTION PLAN
THIS FIRST AMENDMENT TO HILTON HOTELS CORPORATION 1997 INDEPENDENT
DIRECTOR STOCK OPTION PLAN, dated as of December 31, 1998, is made and
adopted by HILTON HOTELS CORPORATION, a Delaware corporation (the
"Corporation"). Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Plan (as
defined below).
WHEREAS, effective as of July 16, 1997, the Corporation adopted the
Hilton Hotels Corporation 1997 Independent Director Stock Option Plan (the
"Plan") for the benefit of its non-employee directors;
WHEREAS, subject to certain conditions, the Corporation intends to
spin-off its operations, assets and liabilities relating to its gaming
business by distributing, on a pro rata basis, all of the issued and
outstanding shares of common stock of Park Place Entertainment Corporation
("Park Place") to the holders of the Corporation's common stock (the
"Distribution");
WHEREAS, concurrently with the Distribution, the outstanding
options under the Plan will be adjusted to represent options to purchase an
equivalent number of shares of the Corporation's common stock and shares of
Park Place common stock;
WHEREAS, the Corporation reserved the right to amend the Plan
pursuant to Section 8 thereof;
WHEREAS, the Corporation desires to amend the Plan so as to reflect
the Distribution; and
WHEREAS, this First Amendment was duly adopted by a resolution of
the Board of Directors of the Corporation dated as of November 12, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation
hereby amends the Plan as follows:
1. The Plan is hereby amended by adding the following new Section
10 after Section 9 of the Plan:
"SECTION 10. PROVISIONS REGARDING THE DISTRIBUTION
(a) Concurrently with the distribution (the "Distribution") to the
holders of the outstanding shares of the Corporation's Common Stock, on a
one-for-one basis, of all of the outstanding shares of the common stock (the
"Park Place Common Stock"), par value $.01 per
<PAGE>
share, of Park Place Entertainment Corporation ("Park Place"), the
Corporation and Park Place are entering into that certain Employee Benefits
and Other Employment Matters Allocation Agreement, dated as of the date of
the Distribution (the "Benefits Allocation Agreement"), which provides for
the Corporation and Park Place to allocate the responsibilities with respect
to certain matters relating to employees and employee compensation, benefits,
labor and other employment matters. Concurrently with the Distribution and
pursuant to the terms of the Benefits Allocation Agreement, all outstanding
options to purchase the Corporation's Common Stock granted under this Plan
(each, a "Hilton Director Option") shall be adjusted (the "Option
Adjustment") to represent options to purchase an equivalent number of shares
of the Corporation's Common Stock (each adjusted option to purchase the
Corporation's Common Stock, an "Adjusted Hilton Option") and shares of Park
Place Common Stock (each adjusted option to purchase Park Place Common Stock,
an "Adjusted Park Place Option"). Pursuant to the Option Adjustment, the
intrinsic value of the Hilton Director Options prior to the Distribution
shall be preserved after the Distribution, and the exercise price of the
Hilton Director Options shall be allocated between the Adjusted Hilton
Options and the Adjusted Park Place Options based upon the relative values of
the Corporation's Common Stock and the Park Place Common Stock on December
21, 1998 (the first date on which the Park Place Common Stock traded on a
"when issued" basis), all as determined by the Corporation.
(b) Following the date of the Option Adjustment, all Adjusted
Hilton Options which are issued as a result of Hilton Director Options shall
remain subject to the terms of this Plan and any applicable option agreement,
and all Adjusted Park Place Options which are issued as a result of Hilton
Director Options shall be subject to the terms of the Park Place
Entertainment Corporation 1998 Independent Director Stock Option Plan and the
applicable option agreement.
(c) For purposes of this Plan, with respect to Adjusted Hilton
Options held by members of the Board of Directors of Park Place (the "Park
Place Board") as a result of the Option Adjustment, references to
directorship or termination of directorship in this Plan and in the
applicable option agreement shall be deemed to refer to directorship or
termination of directorship on the Park Place Board."
2. This First Amendment shall be and is hereby incorporated in
and forms a part of the Plan.
3. This First Amendment shall be effective as of the effective
date of the Distribution.
4. Except as set forth herein, the Plan shall remain in full
force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this amendment to the
Plan to be executed by its duly authorized officer as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
----------------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
S-1
<PAGE>
SECOND AMENDMENT TO
HILTON HOTELS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
THIS SECOND AMENDMENT TO HILTON HOTELS CORPORATION EMPLOYEE STOCK PURCHASE
PLAN, dated as of December 31, 1998, is made and adopted by HILTON HOTELS
CORPORATION, a Delaware corporation (the "Company"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to such
terms in the Plan (as defined below).
WHEREAS, effective as of January 1, 1997, the Company adopted the Hilton
Hotels Corporation Employee Stock Purchase Plan (as amended from time to time,
the "Plan") for the benefit of its eligible employees;
WHEREAS, subject to certain conditions, the Company intends to spin-off its
operations, assets and liabilities relating to its gaming business by
distributing, on a pro rata basis, all of the issued and outstanding shares of
common stock of Park Place Entertainment Corporation to the holders of the
Company's common stock (the "Distribution");
WHEREAS, in connection with the Distribution, the Company intends that all
outstanding options under the Plan will be exercised on the date of the
Distribution;
WHEREAS, the Company reserved the right to amend the Plan pursuant to
Section 18 thereof;
WHEREAS, the Company desires to amend the Plan so as to provide for the
exercise of options under the Plan in connection with the Distribution; and
WHEREAS, this Second Amendment was duly adopted by a resolution of the
Board of Directors of the Company dated as of December 11, 1998.
NOW THEREFORE, in consideration of the foregoing, the Company hereby amends
the Plan as follows:
1. The Plan is hereby amended by adding the following new Section 23
immediately after Section 22 of the Plan:
"23. PROVISIONS REGARDING THE DISTRIBUTION
In connection with the distribution (the "Distribution") to the
holders of the outstanding shares of the Company's Common Stock, on
a one-for-one basis, of all of the outstanding shares of the common
stock, par value $.01 per share, of Park Place Entertainment
Corporation ("Park Place"), the
<PAGE>
Company and Park Place intend to enter into that certain Employee
Benefits and Other Employment Matters Allocation Agreement (the
"Benefits Allocation Agreement"), to be dated as of the date of the
Distribution (the "Distribution Date"), which provides for the
Company and Park Place to allocate the responsibilities with respect
to certain matters relating to employees and employee compensation,
benefits, labor and other employment matters. Notwithstanding
anything contained herein, in connection with the Distribution and
pursuant to the terms of the Benefits Allocation Agreement, the
following provisions shall apply:
(a) Options outstanding under the Plan on the Distribution Date
shall be exercised automatically as of the Distribution Date
in the manner set forth in Section 9 hereof; PROVIDED,
HOWEVER, that such Options shall be exercised to purchase
Shares of the Company's Common Stock with a "due bill" to
receive the distribution of Park Place common stock, and
PROVIDED, FURTHER, that the Option Price per Share of the
Shares subject to each Option so exercised 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
on the Distribution Date of a Share of the Company's Common
Stock with a "due bill" to receive the distribution of Park
Place common stock;
(b) The Grant Date with respect to the Offering Period
immediately following the Distribution Date (the
"Post-Distribution Offering Period") shall be the first
business day immediately following the Distribution Date.
(c) The Post-Distribution Offering Period, which may be more or
less than six months, shall begin on the first business day
immediately following the Distribution Date and shall end on
June 30, 1999. All Offering Periods, Grant Dates and
Exercise Dates following the Post-Distribution Offering
Period shall be determined in accordance with the Plan.
(d) Effective as of the Distribution Date, Park Place and its
subsidiaries shall cease to be Subsidiaries of the Company
for purposes of this Plan and all employees of Park Place
and its subsidiaries shall cease to be Participants and
Eligible Employees under this Plan."
2. This Second Amendment shall be and is hereby incorporated in and
forms a part of the Plan.
2
<PAGE>
3. This Second Amendment shall be effective as of the effective date of
the Distribution.
4. Except as set forth herein, the Plan shall remain in full force and
effect.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this amendment to the
Plan to be executed by its duly authorized officer as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
----------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
S-1
<PAGE>
AGREEMENT IN CONNECTION WITH SECOND AMENDMENT TO
HILTON HOTELS CORPORATION EMPLOYEE STOCK PURCHASE PLAN
In connection with that certain Second Amendment to Hilton Hotels
Corporation Employee Stock Purchase Plan, dated as of December 31, 1998 (the
"Amendment"), Hilton Hotels Corporation ("Hilton") and Park Place Entertainment
Corporation ("Park Place") hereby agree as follows:
1. Hilton and Park Place hereby agree that each share (a "Hilton
Share") of common stock, par value $2.50 per share, of Hilton purchased under
the Hilton Employee Stock Purchase Plan (the "Plan") pursuant to the Amendment
shall be subject to the distribution to the holders of Hilton common stock, on a
pro rata basis, of all of the issued and outstanding shares (each, a "Park Place
Share") of common stock, par value $.01 per share, of Park Place in accordance
with that certain Distribution Agreement, dated as of December 31, 1998, between
Hilton and Park Place.
2. Concurrently with (or as soon as administratively practicable
following) the delivery by Hilton to participants in the Plan (or a
recordkeeping service, as the case may be) of certificates representing the
Hilton Shares purchased pursuant to the Amendment, Park Place shall deliver to
such participants (or recordkeeping service, as the case may be) certificates
representing the Park Place Shares in the manner set forth in the Plan. Not
less than five business days prior to such delivery by Hilton of certificates
representing the Hilton Shares, Hilton shall provide Park Place with such
information as is reasonably necessary for Park Place to deliver such
certificates representing the Park Place Shares to participants (or
recordkeeping service, as the case may be).
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of December 31, 1998.
HILTON HOTELS CORPORATION
By: /s/ James M. Anderson
--------------------------------------
Name: James M. Anderson
Title: Senior Vice President - Labor
Relations and Personnel
Administration
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
--------------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT by and between Hilton Hotels Corporation, a Delaware
corporation (the "Company"), and Stephen F. Bollenbach (the "Executive"), dated
as of the Commencement Date, as defined below.
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to continue to employ the Executive as President and Chief Executive Officer,
and the Executive desires to continue to serve in that capacity;
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of February 1, 1996 (the "Prior Employment Agreement") and a
Change of Control Agreement dated as of January 30, 1996 (collectively with the
Prior Employment Agreement, the "Prior Agreements"), which shall be terminated
and of no further force and effect as of the Commencement Date, except as
provided in Section 14 below;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, for the period beginning on the earlier to occur of (i) the
effective date (the "Split Date") of a transaction whereby the Company separates
its gaming operations from its lodging operations (the "Split") and (ii) January
1, 1999 (the "Commencement Date") and ending on July 1, 2005, which shall
automatically renew for periods of one year unless one party gives written
notice to the other, at least 60 days prior to July 1, 2005 or at least 60 days
prior to the end of any one-year renewal period, that the Agreement shall not be
further extended, except as otherwise specifically provided below, (the
<PAGE>
"Employment Period"). Notwithstanding the foregoing, if the Split does not
occur on or before June 30, 1999, the Executive shall have the right, upon
written notice to the Company delivered not later than July 31, 1999, to
terminate this Agreement and thereafter neither party shall have any continuing
obligation to the other hereunder (except with respect to the Company's
obligations to compensate the Executive with respect to services performed prior
thereto).
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall continue to be employed as the President and Chief Executive
Officer of the Company and, when applicable, the Company shall cause the
Executive to be reelected as a member of the Board. In his executive
capacities, the Executive shall report to the Board through the Chairman of the
Board. During the Employment Period, no executive of the Company other than the
Executive shall have a direct reporting relationship with the Chairman of the
Board. During the Employment Period, the Executive shall have authority to make
all operating decisions, plan the strategic direction of the Company, and hire,
promote and terminate the employment of all personnel, subject to the direction
of the Board. During the Employment Period, the Executive shall have such
reasonable and customary powers as are generally associated with the positions
of President and Chief Executive Officer, including, without limitation,
authority to expend capital resources of the Company and shall have, subject to
the direction of the Board, authority to fill all management positions.
(b) If, during the Employment Period, Barron Hilton shall cease
to serve as Chairman of the Board for any reason, the Company shall cause the
Executive thereupon to be elected as Chairman of the Board in addition to the
positions of President and Chief Executive Officer and shall, as Chairman,
report directly to the Board.
2
<PAGE>
(c) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote principal attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. Notwithstanding the foregoing, nothing in this
Agreement shall be construed to limit the ability of the Executive, from and
after the Split Date, to provide services to the entity which holds the
Company's gaming operations following the Split. It shall not be considered a
violation of the foregoing for the Executive to (A) serve on corporate, civic or
charitable boards or committees (excluding those which would create a conflict
of interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(d) The Executive's services shall be performed primarily at the
Company's Headquarters in Beverly Hills, California.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") of
$620,000, payable in accordance with the regular payroll practices of the
Company. During the Employment Period, the Annual Base Salary shall be reviewed
for possible increase at least annually, with any increase being at the sole
discretion of the Board or the P&C Committee. Any increase in the Annual Base
Salary shall not limit or reduce any other obligation of the Company under this
Agreement except as described in subparagraph (b) below . The Annual Base
Salary shall not be reduced after any such
3
<PAGE>
increase, and the term "Annual Base Salary" shall thereafter refer to the Annual
Base Salary as so increased.
(b) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be eligible to receive, for each fiscal year or portion of a
fiscal year ending during the Employment Period, an annual bonus (the "Annual
Bonus") (either pursuant to the Company's annual incentive plan or otherwise)
provided that the Executive shall not receive an Annual Bonus for any fiscal
year the amount of which, together with the Executive's then rate of Annual
Base Salary, would be in excess of $1,000,000. Each Annual Bonus shall be paid
in a single cash lump sum no later than 90 days after the end of the fiscal year
or portion thereof for which the Annual Bonus is awarded, unless the Executive
elects in writing, before the beginning of the fiscal year for which the Annual
Bonus is to be awarded (or at such later date as may be permitted under the
Company's generally applicable policies or procedures), to defer receipt of the
Annual Bonus pursuant to the Company's deferred compensation plan for senior
executives.
(c) OTHER BENEFITS. During the Employment Period: (i) the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company to at least
the same extent as other senior executives of the Company, provided that in
determining the Executive's participation in any incentive plans the Incentive
Options, as defined below, shall be taken into account; and (ii) the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation, and shall receive all benefits under, all welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life insurance,
4
<PAGE>
group life insurance, accidental death and travel accident insurance plans and
programs) to at least the same extent as other senior executives of the Company.
(d) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in carrying out the Executive's duties under this Agreement,
provided that the Executive complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports,
receipts, or similar documentation of such expenses.
(e) FRINGE BENEFITS AND AIR TRAVEL. During the Employment
Period, the Executive shall be entitled to fringe benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company as in effect at the time with respect to other senior executives of
the Company, including, without limitation, the use of an automobile and payment
of related expenses; and first-class travel accommodations on all commercial
carriers for travel related to the business of the Company. The Executive shall
also be entitled to unrestricted, but not exclusive, use of the Company's
aircraft (leased or owned); provided, however, that if the Executive uses the
Company's aircraft for his personal purposes, he shall pay to the Company the
cost of such usage, as determined in accordance with the Company's cost
determination methodology applied to the Company's senior executives with
respect to their personal use of the Company's aircraft.
(f) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to his current office at the Company's Beverly Hills
Headquarters, and to secretarial and other assistance, at least equal to the
most favorable of such as provided with
5
<PAGE>
respect to other senior executives of the Company. Without limiting the
generality of the foregoing, the Executive shall at all times have a personal
secretary and a personal assistant.
(g) VACATION. During the Employment Period, the Executive shall
be entitled to four weeks of paid vacation annually.
(h) STOCK OPTIONS: (i) If the Split occurs, on the Split Date,
the Executive shall be granted non-statutory stock options (the "Incentive
Options") under the Company's 1996 Stock Incentive Plan, as amended (the "Stock
Plan) covering 6,000,000 shares of the Company's (but not the gaming company's)
post-Split common stock in tranches of 4,000,000 shares (the "Regular Option")
and 2,000,000 shares (the "Special Option"), respectively. The exercise price
of the shares subject to the Regular Option shall be equal to the closing price
of the Company's common shares on the New York Stock Exchange on the Split Date.
The exercise price of the shares subject to the Special Option shall be equal to
the greater of (i) the closing price of the Company's common shares on the New
York Stock Exchange on the Split Date or (ii) 150% of the closing price of
Hilton Hotel Corporation's common shares on the New York Stock Exchange on July
9, 1998 ratably reduced (in the manner described on Exhibit A hereto) following
the Split so as to reflect that revised July 9, 1998 closing price as if only
the Company's post-Split common shares existed on that date. The grant of the
Incentive Options is subject to obtaining the approval of the amended Stock Plan
by a majority of the shares of common stock of the Company voting at the
shareholders meeting immediately following the date of this Agreement.
Notwithstanding the foregoing, if the Company's shareholders do not approve the
amendment of the Stock Plan, the Executive shall have the right, upon written
notice to the Company delivered not later than July 31, 1999, to terminate this
Agreement and thereafter neither party shall have any continuing obligation to
the other hereunder
6
<PAGE>
(except with respect to the Company's obligations to compensate the Executive
with respect to services performed prior thereto). As soon as practicable
thereafter, the Company shall register with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, the shares issuable
upon the exercise of the Incentive Options. The Incentive Options shall be
exercisable for 10 years after the Split Date except as otherwise specifically
provided in this Agreement.
The Regular Option shall vest and become exercisable according to the following
schedule if the Executive continues in the employment of the Company through the
applicable vesting date(s), except as otherwise specifically provided herein:
1. 25%: on the first anniversary of the Split Date.
2. 50%: on the second anniversary of the Split Date.
3. 75%: on the third anniversary of the Split Date.
4. 100%:on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9 years
and 9 months following the Split Date; provided, however, that, if, at any time
prior to the fifth anniversary of the Split Date, the closing price of the
Company's common shares on the New York Stock Exchange equals or exceeds 200% of
the closing price of the Company's common shares on the New York Stock Exchange
on July 9, 1998 ratably reduced (in the manner described on Exhibit A hereto)
following the Split so as to reflect that revised July 9, 1998 closing price as
if only the Company's post-Split common shares existed on that date, on each of
any 7 consecutive trading days, all shares under the Special Option shall be
immediately vested and exercisable; and provided further that, in any either,
the Executive continues in the employment of the Company through the applicable
vesting date, except as otherwise specifically provided herein. Notwithstanding
the foregoing, all shares subject to the Regular Option and the Special Option
shall vest and become exercisable upon the occurrence of any of the following
events (each of (A), (B) and (C) below a "Triggering Event"):
7
<PAGE>
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below or
(ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because of
death or Disability; or
(C) termination of employment by the Executive for Good
Reason, as defined below;
provided that the Special Option shall vest and become (and remain) exercisable
upon a Triggering Event only if Executive does not breach the terms of the
covenants contained in Section 8 below and such vesting and exercisability shall
be part of the consideration for the Executive's undertakings under Section 8.
(ii) If a Triggering Event occurs, any portion of the Incentive
Options that have become vested on or before the date of such Event (including
without limitation, any portion that becomes exercisable due to such Triggering
Event) shall remain exercisable until the earlier to occur of (x) the fifth
anniversary of such date of termination or (y) the tenth anniversary of the
Split Date. All non-vested Incentive Options shall immediately terminate.
(iii) The Executive may assign the right to exercise the Incentive
Options to his spouse, children, grandchildren, or parents of a recipient, to
trusts for the benefit of the Executive's immediately family, to a family
partnership or limited liability company designated by the Executive in which
the Executive's family members are the only partners or shareholders or to an
entity exempt from federal income tax under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
8
<PAGE>
(iv) The Incentive Options shall be subject to the terms of
the Stock Plan in all respects not described herein.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment and the Employment Period shall terminate automatically
upon the Executive's death during the Employment Period. The Company shall be
entitled to terminate the Executive's employment because of the Executive's
Disability during the Employment Period. "Disability" means that (i) the
Executive has been unable, for a period of 180 consecutive business days, to
perform the Executive's duties under this Agreement, as a result of physical or
mental illness or injury, and (ii) a physician selected by the Company or its
insurers, and acceptable to the Executive or the Executive's legal
representative, has determined that the Executive's incapacity is total and
permanent. The Executive agrees to reasonably cooperate with the Company in
order to obtain its physician's evaluation of the Executive. A termination of
the Executive's employment by the Company for Disability shall be communicated
to the Executive by written notice, and shall be effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
unless the Executive returns to full-time performance of the Executive's duties,
as determined by the Board, before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties;
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(B) illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company;
or
(C) a breach of the covenants or representations contained
in Section 8.
(ii) A termination of the Executive's employment for Cause shall
be effected in accordance with the following procedures. The Company shall give
the Executive written notice ("Notice of Termination for Cause") of its
intention to terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it considers to
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Board Meeting. The
"Special Board Meeting" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than five and not more than fifteen business
days after the Executive receives the Notice of Termination for Cause. The
Executive shall be given an opportunity, together with counsel, to be heard at
the Special Board Meeting. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board Meeting,
stating that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in the Notice of Termination for Cause, and such conduct
constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment for
Good Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, following a
Change of Control) with paragraph (a) or, if applicable, (b) of
Section 2 of this Agreement, or any other action by the Company
(other than the Split) that results in a material
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diminution in the Executive's position or authority, duty,
titles, responsibilities, or reporting requirements other than an
action that is not taken in bad faith and is remedied by the
Company within 30 days after receipt of written notice thereof
from the Executive;
(B) any material failure (any failure, following a Change
of Control, as defined below) by the Company to comply with any
provision of Section 3 of this Agreement, other than a failure
that is not taken in bad faith and is remedied by the Company
within 30 days after receipt of written notice thereof from the
Executive;
(C) any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than that provided for in paragraph (d) of Section 2 of this
Agreement, other than normal business travel;
(D) any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly
permitted by this Agreement; or
(E) any failure by the Company to comply with paragraph (c)
of Section 9 of this Agreement.
In addition, following a Change of Control, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Change of Control shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective
on the fifth business day following the date when the Notice of Termination
for Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given).
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(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at least
10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason or without Good Reason, as the case may be, is
effective.
(5) OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE
COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR
GOOD REASON. If, during the Employment Period, the Company terminates the
Executive's employment, other than for Cause or Disability or by reason of
the Executive's death, or the Executive terminates employment for Good
Reason, the Company shall fulfill its obligations as to Base Salary under
Section 3(a) hereof for the balance of the Employment Period. Fifty percent
of such amounts shall be consideration for the Executive's undertaking not to
breach the terms of the covenants contained in Section 8 below. The Company
shall also provide the Executive with all benefits due in accordance with the
terms of any applicable plans and programs of the Company and shall also pay
to the Executive, in a lump sum in cash within 30 days after the Date of
Termination, the Executive's accrued but unpaid cash compensation (the
"Accrued Obligations"), which shall equal the sum of (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not
yet been paid, (2) an amount representing the Annual Bonus for the year of
termination based on target, and multiplying that amount by a fraction, the
numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 (the "Annual
Bonus
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Amount"); (3) any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) that has not yet been paid; and
(4) any accrued but unpaid Annual Bonuses and vacation pay; provided, however,
that the Company's obligation to make any payments under this Section to the
extent any such payment shall not have accrued as of the day before the Date of
Termination shall also be conditioned upon the Executive's execution, and
non-revocation, of a written release, substantially in the form attached hereto
as Annex 1, (the "Release"), of any and all claims against the Company and all
related parties with respect to all matters arising out of the Executive's
employment by the Company (other than any entitlements under the terms of this
Agreement or under any other plans or programs of the Company in which the
Executive participated and under which the Executive has accrued a benefit), or
the termination thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Section 8 below,
the Executive, in lieu of the amounts specified in the first sentence above,
shall receive in a lump sum in cash within 30 days after the Date of Termination
equal to 2.99 multiplied by the sum of the Executive's Base Salary and the
Annual bonus paid to the Employee for the last full fiscal year (if any) ending
during the Employment Period or, if higher, the Annual Bonus paid to the
Employee for the last full fiscal year prior to the Change of Control. Fifty
percent of such amount shall be consideration for the Executive's undertaking
not to breach the terms of the covenants contained in Section 8 below. In
addition, the Executive shall also be entitled in the case of compensation
previously deferred by the Executive, to a lump sum equal to all amounts
previously deferred (together with any accrued interest thereon) and not yet
paid by the Company,
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and any accrued vacation pay not yet paid by the Company and to receive a
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 Executive would receive if he remained employed by the Company at the
compensation level provided for in Sections 3(a) and (b) 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. For the remainder of the Employment
Period, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in
Section 3 of this Agreement if the Employee's employment had not been
terminated, including health insurance and life insurance, in accordance with
the most favorable plans, practices, programs or policies of the Company and its
subsidiaries during the 90-day period immediately preceding the date on which
the Change of Control occurs or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees and their families
and for purposes of eligibility for retiree benefits pursuant to such plans,
practices, programs and policies, the Employee shall be considered to have
remained employed until the end of the Employment Period and to have retired on
the last day of such period.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company, in addition to fulfilling its obligations
under Section 3(a) hereof, shall pay the Accrued Obligations to
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the Executive or the Executive's estate or legal representative, as applicable,
in a lump sum in cash within 30 days after the Date of Termination, and the
Company shall have no further obligations under this Agreement other than for
any entitlements under the terms any other plans or programs of the Company in
which the Executive participated and under which the Executive has accrued a
benefit.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment
Period, the Company shall pay the Executive the Annual Base Salary through
the Date of Termination, the amount of any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon), in
each case to the extent not yet paid, and the amount of any earned but unpaid
Annual Bonuses and vacation pay, and the Company shall have no further
obligations under this Agreement other than for any entitlements under the
terms any other plans or programs of the Company in which the Executive
participated and under which the Executive has accrued a benefit. If the
Executive voluntarily terminates employment during the Employment Period,
other than for Good Reason, the Company shall pay the Accrued Obligations to
the Executive in a lump sum in cash within 30 days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement other than for any entitlements under the terms any other plans or
programs of the Company in which the Executive participated and under which
the Executive has accrued a benefit.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to Section 13, shall
anything in this Agreement limit or otherwise affect such rights as the
Executive
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may have under any contract or agreement with the Company or any of its
affiliated companies. Vested benefits and other amounts that the Executive is
otherwise entitled to receive under any plan, policy, practice or program of, or
any contract or agreement with, the Company or any of its affiliated companies
on or after the Date of Termination shall be payable in accordance with such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
8. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period or fifty
percent of the lump sum payment in lieu of Base Salary provided under Section 5
in the event of Executive's termination of employment following a Change of
Control, the Executive agrees as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing
information, marketing and sales techniques, strategies and programs,
computer programs and software and financial information relating to the
Company or any of its affiliated companies and their respective businesses
that the Executive obtains during the
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Executive's employment by the Company or any of its affiliated companies and
that is not public knowledge (other than as a result of the Executive's
violation of this paragraph (a) of Section 8) ("Confidential Information"). The
Executive shall not communicate, divulge or disseminate Confidential Information
at any time during or after the Executive's employment with the Company, except
in the good faith performance of his duties hereunder, with the prior written
consent of the Company or as otherwise required by law or legal process. In no
event shall an asserted violation of the provisions of this paragraph (a) of
Section 8 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive will
not, except with the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Executive
agrees that he will not, for a period of two years after the expiration or
termination of the Executive's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent contractor,
or solicit the employment of, any managerial or higher level person who is or at
any time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
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(c) The Executive represents that he is licensed by the
gaming authorities in Nevada and New Jersey and knows of no reason why a
license necessary for him to perform his duties hereunder would not be
granted to or maintained by him by those or similar authorities in the future.
(d) Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any rights of any third party.
(e) The Executive acknowledges and agrees that the
restrictions contained in this Section are reasonable and necessary to
protect and preserve the legitimate interests, properties, goodwill and
business of the Company, that the Company would not have entered into this
Agreement in the absence of such restrictions and that irreparable injury
will be suffered by the Company should the Executive breach any of those
provisions. Executive represents and acknowledges that (i) the Executive has
been advised by the Company to consult Executive's own legal counsel in
respect of this Agreement, and (ii) that the Executive has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with the Executive's counsel. The Executive further acknowledges
and agrees that a breach of any of the restrictions in this Section cannot be
adequately compensated by monetary damages. The Executive agrees that the
Executive's right to the payments specified above in consideration for his
undertakings under this Section shall be forfeited, the Executive's right to
exercise the Special Option shall cease and Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits
and other benefits in the event of any violation of this Section, which
rights shall be cumulative and in addition to any other rights
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<PAGE>
or remedies to which the Company may be entitled; provided, however, that the
foregoing remedies shall be conditioned upon the Company providing the Executive
with at least 30 days written notice of its good faith belief that a violation
of the Executive's undertakings hereunder has occurred and Executive failing to
cease any such prohibited activity within 30 days after such written notice is
given. In the event that any of the provisions of this Section should ever be
adjudicated to exceed the time, geographic, service, or other limitations
permitted by applicable law in any jurisdiction, it is the intention of the
parties that the provision shall be amended to the extent of the maximum time,
geographic, service, or other limitations permitted by applicable law, that such
amendment shall apply only within the jurisdiction of the court that made such
adjudication and that the provision otherwise be enforced to the maximum extent
permitted by law. The Executive irrevocably and unconditionally (i) agrees that
any suit, action or other legal proceeding arising out of this Section,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief and other equitable relief, may be
brought in the United States District Court for the Southern District of
California, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Los Angeles, California,
(ii) consents to the non-exclusive jurisdiction of any such court in any such
suit, action or proceeding, and (iii) waives any objection which the Executive
may have to the laying of venue of any such suit, action or proceeding in any
such court. The Executive also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 13 hereof.
9. SUCCESSORS. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by
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will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
10. CHANGE OF CONTROL.
(a) For the purpose of this Agreement, a "Change of Control" shall
mean:
(i) The acquisition by any person, entity or "group",
within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange
Act of 1934 (the "Exchange Act"). (excluding, for this purpose, (A) the Company
or its subsidiaries, (B) any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company or (C) Barron Hilton, the Charitable Remainder Unitrust created by
Barron Hilton to receive shares from the Estate of Conrad N. Hilton, or the
Conrad N. Hilton Foundation, collectively the "Hilton Interests"), of beneficial
ownership, (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either the then outstanding shares of common stock or
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the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14 a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (B) a liquidation or dissolution of
the Company or (C) the sale of all or substantially all of the assets of the
Company; provided, however, that the Split shall not be deemed a "Change of
Control" for any purpose under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that
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with respect to the Special Option, such immediate vesting and exercisability
shall be conditioned upon the Executive not breaching the terms of the covenants
contained in Section 8.
(c) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the Executive shall be paid an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive after deduction of any excise tax imposed under Section 4999 of
the Code, and any federal, state and local income and employment tax and excise
tax imposed upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income tax and employment taxes at the highest marginal
rate of federal income and employment taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Termination Date, net of the maximum reduction in federal income taxes
that may be obtained from the deduction of such state and local taxes.
(d) All determinations to be made under this Section 10 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. Within five days after the
Accounting Firm's determination, the Company shall pay (or cause to be
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paid) or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement.
(e) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax 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 10, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearing and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a termination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, however, that if the Company directs the Executive
to pay such claim and sue for a refund the Company shall advance the amount of
such payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax 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 Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
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(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to this Section, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of subsection (d)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to this Section, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(g) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or wilful misconduct of the Accounting Firm.
(h) Following a Change of Control and for a period of not less than
three years after the Date of Termination, the Executive be entitled to
indemnification and, to the extent available on commercially reasonable terms,
insurance coverage therefor, with respect to the various liabilities as to which
the Executive has been customarily indemnified prior to the Change of Control.
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11. ARBITRATION. The Company and the Executive mutually consent to
the resolution by arbitration, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association, of
all claims or controversies arising out of the Executive's employment (or its
termination) that the Company may have against the Executive or that the
Executive may have against the Company or against its officers, directors,
shareholders, employees or agents in their capacity as such other than a claim
which is primarily for an injunction or other equitable relief. The Company and
the Executive shall equally share the fees and costs of the arbitrator, and each
party shall bear its own costs in connection with any arbitration, unless the
Executive shall prevail in an arbitration proceeding as to any material issue,
in which case the Company shall reimburse the Executive for all reasonable
costs, expenses and fees incurred in connection with such arbitration.
12. LEGAL FEES. The Company agrees to pay all legal fees incurred by
the Executive in connection with the negotiation and preparation of this
Agreement, up to a maximum of $15,000.
13. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
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IF TO THE EXECUTIVE:
c/o Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence Cagney
IF TO THE COMPANY:
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: General Counsel
WITH A REQUIRED COPY TO:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Robert J. Lichtenstein
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 13. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
27
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(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 5 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
14. PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements, including the provisions of the Prior Agreements, except for the
provisions of Sections 3(h), (i) and (j) of the Prior Employment Agreement
which shall continue in full force and effect in accordance with their terms,
and sets forth the entire understanding among the parties hereto with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HILTON HOTELS CORPORATION
By /s/ Baron Hilton /s/ Stephen F. Bollenbach
-------------------------------- ---------------------------------
Baron Hilton Stephen F. Bollenbach
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[LOGO]
Hilton Contact: Marc Grossman Park Place Contact: Geoffrey Davis
310-205-4030 702-699-5037
310-205-4541
Kathy Shepard
310-205-7676 Scott LaPorta
702-699-5000
310-205-4331
HILTON COMPLETES SPIN-OFF OF GAMING OPERATIONS
PARK PLACE ENTERTAINMENT ACQUIRES MISSISSIPPI OPERATIONS OF GRAND CASINOS, INC.
BEVERLY HILLS, Calif., December 31, 1998 -- Hilton Hotels Corporation
(NYSE:HLT) today completed the separation of its gaming and lodging
businesses -- via a tax-free distribution of its casino gaming operations to
shareholders, creating a newly formed gaming company named Park Place
Entertainment Corporation (NYSE:PPE). Concurrently, Park Place Entertainment
acquired the three Mississippi gaming operations of Grand Casinos, Inc.
(NYSE:GND), making it the world's largest casino gaming company. In the
Grand merger, Park Place has assumed approximately $565 million of debt and
issued shares of Park Place to Grand shareholders in a ratio of one share of
Park Place for each share of Grand.
Hilton shareholders of record at the close of business on December 23,
1998 will receive one share of Park Place common stock for each share of
Hilton common stock they own. An estimated 260.8 million shares of Park
Place will be distributed to Hilton shareholders to effectuate the spin-off
and an additional 42.3 million shares of Park Place will be issued to Grand
shareholders to effectuate the merger. ChaseMellon Shareholders Services, LLC
is the transfer agent.
The transactions were approved in November by shareholders of both
Hilton and Grand Casinos, Inc. Approvals have also been received from casino
gaming regulators in Nevada, New Jersey, Mississippi, Louisiana, Australia
and Uruguay.
Concurrent with the closing of the transactions, Stephen F. Bollenbach
becomes chairman of the board of Park Place Entertainment, while remaining
president and chief executive officer of Beverly Hills-based Hilton Hotels
Corporation. Arthur Goldberg, currently president - gaming operations for
Hilton Hotels, becomes president and chief executive officer and a director
of Park Place Entertainment. He remains on Hilton's board of directors.
Additionally, Lyle Berman current chairman of the board of Grand Casinos,
Inc. has joined the board of Park Place Entertainment.
-more-
<PAGE>
Hilton Business Separation
2-2-2-2
Hilton Hotels Corporation is one of the world's foremost lodging
companies. The company owns, manages or franchises approximately 250 hotels
in the United States, Canada and Mexico, including ownership of some of the
world's most renowned properties, such as the Waldorf=Astoria, Hilton San
Francisco and Towers, Hilton Hawaiian Village and Chicago's Palmer House
Hilton. Hilton will continue to pursue a growth strategy centered on
acquiring full-service hotels in markets seeing little new supply. In 1998,
Hilton purchased approximately $950 million of hotels at attractive prices.
The company also will continue aggressively building its franchise program in
the U.S., Canada and Mexico, which will include the company's successful
Hilton Garden Inn program, which is expected to have 200 hotels open or under
contract by 2000.
Park Place Entertainment is the world's largest gaming company, as
measured by casino square footage and revenues, and is the only casino gaming
company with a leading presence in Nevada, New Jersey and Mississippi--the
three largest gaming markets in the U.S. In 1999, the company will own or
have an interest in 18 gaming properties located throughout the United States
and in Australia and Uruguay, with a total of 1.4 million square feet of
casino space and more than 23,000 hotel rooms.
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