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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ....................... to ......................
Commission File Number 1-3427
HILTON HOTELS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-2058176
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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Registrant's telephone number, including area code: (310) 278-4321
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, par value $2.50 per share New York, Pacific
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
Based upon the March 17, 2000 New York Stock Exchange closing price of
$7.8125 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.6 billion.
On that date, there were 366,798,511 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1999 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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TABLE OF CONTENTS
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PART I.............................................................................. 1
ITEM 1. BUSINESS.................................................... 1
General Information................................................................. 1
Current Operations................................................................ 1
Recent Developments............................................................... 1
Separation of Gaming Business..................................................... 2
Industry Segments................................................................. 3
Hotel Operations.................................................................... 3
Hotel Properties.................................................................. 3
Hotel Brands...................................................................... 5
Expansion Program................................................................. 6
Strategic Alliances and Joint Ventures............................................ 8
Development Financing............................................................. 8
Territorial Restrictions.......................................................... 9
Potential Acquisitions............................................................ 9
Property Transactions............................................................. 9
Statistical Information........................................................... 10
Additional Information.............................................................. 13
Vacation Ownership................................................................ 13
Casino Windsor.................................................................... 13
Flamingo Casino-Kansas City....................................................... 13
Design and Furnishing Services.................................................... 13
Reservation System................................................................ 13
E-Business........................................................................ 14
Trademarks........................................................................ 14
Marketing......................................................................... 14
Business Risks.................................................................... 14
Competition....................................................................... 15
Forward-Looking Statements........................................................ 15
Environmental Matters............................................................. 15
Year 2000......................................................................... 16
Regulation and Licensing.......................................................... 16
Employees......................................................................... 17
ITEM 2. PROPERTIES.................................................. 17
ITEM 3. LEGAL PROCEEDINGS........................................... 17
Bally Merger Litigation............................................................. 17
Promus Acquisition Litigation....................................................... 17
Rights Agreement Litigation......................................................... 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 18
Executive Officers of the Company................................................... 19
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PART II............................................................................. 20
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 20
Rights Agreement.................................................................... 20
ITEM 6. SELECTED FINANCIAL DATA..................................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 21
AND RESULTS OF OPERATIONS...................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 21
AND FINANCIAL DISCLOSURE....................................
PART III............................................................................ 22
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 22
ITEM 11. EXECUTIVE COMPENSATION...................................... 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 22
PART IV............................................................................. 23
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K......................................................... 23
(a) Index to Financial Statements................................................. 23
(b) Reports on Form 8-K........................................................... 23
(c) Exhibits...................................................................... 23
Signatures.......................................................................... 24
Index to Exhibits................................................................... 25
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation ("Hilton" or the "Company") is primarily engaged,
together with its subsidiaries, in the ownership, management and franchising of
hotels. As of December 31, 1999, the Company owned an interest in and operated
141 hotels, managed 185 hotels owned by others, leased 74 hotels and franchised
1,352 hotels owned and operated by third parties. All of these hotels were
located in the United States, with the exception of 11 hotels in which the
Company owns an interest and/or manages and 30 hotels franchised by the Company.
The Company is also engaged in various other activities incidental or related to
the operation of hotels. See "Additional Information."
On November 30, 1999, the Company acquired Promus Hotel Corporation. See
"Recent Developments--Promus Acquisition." On December 31, 1998, the Company
completed the spin-off of its gaming operations. See "Separation of Gaming
Business."
Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210, and its telephone number is (310) 278-4321.
For additional information, see the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1999 (the "Stockholder Report"). The
Stockholder Report is included as Exhibit 13 to this Form 10-K and, to the
extent specific references are made to the Stockholder Report, these provisions
are incorporated in this Form 10-K by reference.
RECENT DEVELOPMENTS
PROMUS ACQUISITION
On November 30, 1999, the Company consummated its acquisition of Promus
Hotel Corporation ("Promus") through the merger of Promus into a wholly owned
subsidiary of the Company (the "Promus Acquisition"). Pursuant to the Agreement
and Plan of Merger, dated as of September 3, 1999, as amended, among the
Company, its merger subsidiary and Promus, each share of Promus common stock was
converted into the right to receive either $38.50 in cash or 3.2158 shares of
the Company's Common Stock. Fifty-five percent of the Promus shares were
exchanged for approximately $1.7 billion of cash consideration, while the
remaining forty-five percent were converted into approximately 113 million
shares of the Company's Common Stock. See "Acquisitions and
Divestitures--Acquisition of Promus Hotel Corporation" in the Notes to the
Company's Consolidated Financial Statements on page 37 in the Stockholder
Report.
As a result of the Promus Acquisition, the Company added over
1,450 properties representing over 200,000 rooms to its hotel system, along with
a complementary portfolio of hotel brand names including Doubletree, Embassy
Suites, Hampton Inn, Homewood Suites and Red Lion. The Company believes that the
Promus Acquisition has created a more diversified and balanced income stream by
increasing the percentage of revenues the Company derives from management and
franchise fees which require little or no capital investment by the Company. The
Company believes that the Promus Acquisition will result in significant
synergies, economies of scale and revenue enhancements by providing greater
opportunity for expansion with multiple brands and market segments; spreading
overhead over a wider base of properties; and including the Promus brands in
Hilton's HHonors frequent guest program, its Hilton Reservations Worldwide
central reservation system and its sales and marketing organizations.
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HOTEL ACQUISITIONS
In addition to the Promus Acquisition, during 1999, the Company increased
its ownership of full-service hotels by acquiring 100% ownership interests in
the following properties:
- In February 1999, the Company acquired the 495-room Radisson Plaza Hotel
at Mark Center in Alexandria, Virginia (renamed the Hilton Alexandria Mark
Center).
- In April 1999, the Company acquired the 563-room Pointe Hilton Squaw Peak
Resort in Phoenix, Arizona and the 385-room Hilton Boston Back Bay in
Boston, Massachusetts. Prior to these acquisitions, the Pointe Hilton
Squaw Peak Resort had been managed by the Company and the Hilton Boston
Back Bay had been operated as a Hilton franchise hotel.
- In November 1999, the Company acquired the 814-room Hilton Minneapolis &
Towers, which had been managed by the Company.
HOTEL CONSTRUCTION
Since January 1, 1999, the Company has completed construction of the
following hotels, each of which is wholly owned and managed by the Company:
- In September 1999, the Company completed construction of the 600-room
Hilton Boston Logan Airport, located at the center of Boston's Logan
International Airport.
- In February 2000, the Company completed construction of the 162-room
Hilton Garden Inn LAX/ El Segundo, located near the Los Angeles
International Airport, which the Company also plans to use for employee
training and for testing model room designs for its hotel brands.
FRANCHISE HOTELS
During 1999, the Company continued to improve its franchise business
primarily through the expansion of the Hilton Garden Inn product. The Company
opened 45 Hilton Garden Inn properties in 1999, bringing the total number of
such properties to 63 at December 31, 1999. The Promus Acquisition has increased
Hilton's franchise business significantly, adding more than 1,100 franchise
properties to the Company's portfolio.
ADDITIONAL INFORMATION
For a more detailed description of the Company's recent developments, see
"Hotel Operations" and "Additional Information--Vacation Ownership." For a
description of the Company's planned expansion activities, see "Hotel
Operations--Expansion Program." For additional information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 23 through 30 in the Stockholder Report.
SEPARATION OF GAMING BUSINESS
On December 31, 1998, the Company completed the spin-off of its gaming
operations, thereby creating a new publicly-held gaming company called Park
Place Entertainment Corporation ("Park Place"). The spin-off was accomplished
through a tax free distribution to the Company's stockholders, on a one-for-one
basis, of the shares of Park Place common stock (the "Park Place Distribution").
As a result of the Park Place Distribution, effective December 31, 1998, the
Company disposed of all of its gaming operations, and all assets and liabilities
related to the gaming operations, except as follows:
- The Company retained its 50% ownership interest in the consortium that
manages Casino Windsor for the Ontario provincial government. See
"Additional Information--Casino Windsor."
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- On February 1, 1999, the Company opened the 619-room Conrad International
Cairo which features an approximately 6,000 square foot amenity casino.
The Company owns a 10% equity interest in, and manages, the Conrad
International Cairo.
- The Company owns and operates the Flamingo Casino-Kansas City in Kansas
City, Missouri. The Company has entered into an agreement to sell this
riverboat casino to a third party. Upon completion of such sale, the
proceeds of the sale will be allocated between the Company and Park Place
pursuant to an agreement entered into in connection with the Park Place
Distribution. See "Additional Information--Flamingo Casino-Kansas City."
- In the Park Place Distribution, the Company retained its right to use the
"Hilton" name in the United States and granted Park Place a non-exclusive
license to use such name in the operation of its business for specified
periods in exchange for license fees to be paid to the Company commencing
in 2001. For additional information relating to the use of the Hilton
name, see "Hotel Operations--Territorial Restrictions."
INDUSTRY SEGMENTS
Hilton's revenue and income are derived primarily from hotel operations,
which include the operation of Hilton's owned, leased, partially owned and
managed hotels, and franchise fees.
As of December 31, 1999, the Company managed (and in some cases, partially
owned) hotel properties in Belgium, Egypt, England, Hong Kong, Ireland, Puerto
Rico, Singapore, Spain and Turkey. The Company also franchised hotel properties
in Canada, Chile, Colombia, Costa Rica, Mexico and Puerto Rico. To date, the
amounts of revenues, operating profits and identifiable assets attributable to
geographic areas outside the United States have not been material.
HOTEL OPERATIONS
HOTEL PROPERTIES
OWNED HOTELS
As of December 31, 1999, the Company owned and managed 85 hotels,
representing 36,367 rooms. The owned hotels consist of properties in which the
Company owned a majority or controlling interest and include some of the
Company's largest and most profitable hotels, including:
- the 1,380-room Waldorf=Astoria;
- the 2,041-room Hilton New York & Towers;
- the 2,545-room Hilton Hawaiian Village;
- the 1,895-room Hilton San Francisco & Towers;
- the 1,543-room Hilton Chicago & Towers;
- the 1,639-room Palmer House Hilton;
- the 1,123-room Hilton Washington & Towers; and
- the 1,600-room Hilton New Orleans Riverside.
Included in the number of owned hotels are 12 hotels for which Hilton leases
the land upon which the hotels are located. The expiration dates of the leases
range up to 2044, with certain leases containing renewal options for 30 to 40
years. Under these leases, the Company owns the buildings and leasehold
improvements and all furniture and equipment, is responsible for repairs,
maintenance, operating expenses and lease rentals, and retains complete
managerial discretion over operations. Generally, the Company pays a percentage
rental based on the gross revenue of the facility. Upon the expiration of such
leases, the
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buildings and other leasehold improvements presently owned by the Company revert
to the landlords. For additional information, see "Leases" in the Notes to the
Company's Consolidated Financial Statements on page 44 in the Stockholder
Report.
LEASED HOTELS
As of December 31, 1999, the Company leased 74 hotels, representing 12,681
rooms. Under these leases, the Company leases the hotel from its owner, manages
the hotel and is generally responsible for all aspects of the hotel's operations
and recognizes all revenues and substantially all expenses associated with the
hotel's operations. Although, in general, furniture, fixtures and equipment
replacement is the landlord's responsibility, certain leases obligate the
Company to maintain and replace these items. Lease terms typically require the
payment by the Company of a fixed monthly base rent regardless of the
performance of the hotel and a variable rent based on a percentage of revenues.
Included in the number of hotels leased by the Company as of December 31,
1999, were 52 hotels representing 7,821 rooms that the Company leased pursuant
to substantially similar lease agreements with subsidiaries of RFS Hotel
Investors, Inc. ("RFS"). The RFS leases generally have expiration dates ranging
up to 2012, are subject to early termination upon the occurrence of certain
contingencies, and require the payment of base rent and percentage rent. The
Company and RFS have entered into an agreement which gives RFS an option to
terminate all 52 of these leases. See "Strategic Alliances and Joint
Ventures--RFS Hotel Investors" below and "Leases" in the Notes to the Company's
Consolidated Financial Statements on page 44 in the Stockholder Report.
JOINT VENTURES
As of December 31, 1999, the Company had a minority ownership interest in
and managed 56 hotels, representing 16,171 rooms. These hotels are owned by
joint ventures of which the Company owns a minority or non-controlling interest.
The Company has a right of first refusal to purchase additional equity interests
in certain of these joint ventures. Each of the partially owned hotels is
managed by the Company for the entity owning the hotel. For additional
information, See "Strategic Alliances and Joint Ventures" below.
MANAGED HOTELS
As of December 31, 1999, the Company managed 185 hotels, representing 51,979
rooms, which are wholly owned by others. Under its standard management
arrangement, the Company operates a hotel for the benefit of its owner, which
either owns or leases the hotel and the associated personal property. The
Company's management fee is generally based on a percentage of each hotel's
gross revenue plus, in the majority of properties, an incentive fee based on
operating performance. The expiration dates of the Company's management
agreements range up to 2024 and generally contain renewal options ranging from
five to 20 years, subject to certain termination rights.
Under the management agreements, all operating and other expenses are paid
by the owner, and the Company is generally reimbursed for its out-of-pocket
expenses. In turn, the Company's managerial discretion is subject to approval by
the owner in certain major areas, including adoption of capital budgets.
FRANCHISE HOTELS
As of December 31, 1999, the Company franchised 1,352 hotels, representing
183,081 rooms, which are owned and operated by third parties. In general,
franchisees pay the Company an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the hotel's room
revenue. Although the Company does not directly participate in the management or
operation of franchise hotels, it conducts periodic inspections to ensure that
the Company's standards are maintained and renders
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advice with respect to hotel operations. The Company generally approves the
plans for, and the location of, franchise hotels and assists in their design.
HOTEL BRANDS
The Company operates hotels through the following brands, which target a
wide variety of markets and geographic areas.
HILTON
Hilton hotels are upscale, full-service hotels targeted toward group
meetings, business travelers and leisure travelers. These hotels typically
include swimming pools, gift shops and retail facilities, meeting and banquet
facilities, restaurants and lounges, room service, parking facilities and other
services. The Hilton brand also includes Hilton Suites hotels which target the
upscale extended stay market utilizing an all-suites design. As of December 31,
1999, there were 220 Hilton hotels, representing 82,388 rooms, located in 40
states, the District of Columbia, Canada and Mexico. As of December 31, 1999,
there were 10 Hilton hotels either under construction or in the process of
converting from third party brands, all of which will be franchise hotels.
HILTON GARDEN INN
Hilton Garden Inn hotels target the upper mid-market hotel segment utilizing
a modular design constructed around a courtyard containing an indoor or outdoor
swimming pool. As of December 31, 1999, there were 63 Hilton Garden Inn hotels,
representing 8,836 rooms, located in 23 states, Canada and Mexico, of which 60
were franchise hotels. As of December 31, 1999, 31 Hilton Garden Inn hotels were
under construction, 30 of which will be franchise hotels.
DOUBLETREE
Doubletree hotels are positioned as the complementary full-service brand to
the Hilton brand in the mid-market to upscale hotel segment. The Doubletree
brand also includes the Doubletree Guest Suites and the moderately priced
Doubletree Club hotels. As of December 31, 1999, there were 164 Doubletree
hotels, representing 44,414 rooms, located in 38 states, the District of
Columbia, the U.S. Virgin Islands and Mexico. As of December 31, 1999, 20
Doubletree hotels were either under construction or in the process of converting
from third party brands, of which 15 will be franchise hotels.
EMBASSY SUITES
Embassy Suites are upscale all-suite hotels that target business and leisure
travelers. These hotels feature two-room guest suites with a separate living
room and dining/work area and a complimentary cooked-to-order breakfast. Most
Embassy Suites hotels are built around a landscaped atrium. As of December 31,
1999, there were 149 Embassy Suites, representing 35,873 rooms, located in 39
states, the District of Columbia, Canada and Latin America. As of December 31,
1999, 35 Embassy Suites hotels were under construction, all of which will be
franchise hotels.
HOMEWOOD SUITES BY HILTON
Homewood Suites by Hilton target the upscale, extended stay market, as well
as the traditional business and leisure traveler. These properties feature
residential-style accommodations including business centers, swimming pools,
convenience stores and limited meeting facilities. In January 2000, the Company
re-launched the Homewood Suites brand as "Homewood Suites by Hilton," and also
announced a new prototype design with a more efficient, home-like interior and a
product that can be built at a lower cost than previous design plans. As of
December 31, 1999, there were 86 Homewood Suites, representing 9,455
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rooms, located in 29 states. As of December 31, 1999, 14 Homewood Suites were
under construction, nine of which will be franchise hotels.
HAMPTON INN
Hampton Inn hotels are moderately priced hotels with limited food and
beverage facilities that target the mid-market business and leisure traveler.
The Hampton Inn brand also includes Hampton Inn & Suites hotels which offer both
traditional hotel room accommodations and apartment-style suites within one
property. As of December 31, 1999, there were 984 Hampton Inn hotels,
representing 102,403 rooms, located in 48 states, Canada, Chile, Costa Rica,
Mexico and Puerto Rico. As of December 31, 1999, 84 Hampton Inn hotels were
under construction, all of which will be franchise hotels.
OTHER BRANDS
In addition to the hotel brands described above, as of December 31, 1999,
there were 86 hotels, representing 16,910 rooms, operated under other brand
names. These hotels are operated under the Company's brand names described below
or under third party brands pursuant to contractual arrangements.
- RED LION. Red Lion hotels are full-service hotels located primarily in the
Pacific Northwest that serve as a complementary brand to Doubletree hotels
in the mid-market hotel segment. As of December 31, 1999, there were
29 Red Lion hotels in the Company's system, representing 4,506 rooms,
located in nine states. As of December 31, 1999, there were three hotels
operated under third party brands scheduled to convert to the Red Lion
brand in spring 2000.
- CONRAD INTERNATIONAL. Conrad International hotels are the Company's
upscale full-service hotels located outside the United States. As of
December 31, 1999, the Company managed, and in some cases partially owned,
ten Conrad International hotels, representing 3,904 rooms, located in
Belgium, Egypt, England, Hong Kong, Ireland, Singapore, Spain and Turkey.
Future development of Conrad International hotels is subject to agreements
between the Company and Hilton Group plc. See "Territorial Restrictions"
below.
- HARRISON CONFERENCE CENTERS. The Company owns and operates Harrison
Conference Centers which are conference centers and hotels targeting
upscale corporate convention groups, executive education and training
groups, sales meetings and other group meetings. As of December 31, 1999,
the Company operated 11 Harrison Conference Centers, representing 2,014
rooms and approximately 287,000 square feet of meeting space.
EXPANSION PROGRAM
CONSTRUCTION AND RENOVATION
The Company seeks to maintain its competitive advantage by consistently
improving its hotel system through renovation programs and the construction of
new properties or additions to existing hotels. The Company has recently
completed, has commenced or is commencing construction projects or renovation
programs at a number of properties, including the following:
HILTON
- Hilton New York & Towers--substantially completed an extensive renovation
including new restaurants, a state-of-the-art business/conference center,
a world-class fitness facility, a Towers Lounge overlooking Manhattan and
37 additional guest rooms.
- Hilton Hawaiian Village--commenced construction of the new 453-room Kalia
Tower, which will feature a world-class health club and wellness spa,
retail shops and an interactive Hawaiian cultural center.
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- Hilton Seattle Airport--commenced construction of a 222-room addition to
the property, which will include a new conference center and the
renovation of existing rooms.
- Hilton Portland--expect to begin construction of a 319-room Executive
Tower addition to the property in spring 2000.
HOMEWOOD SUITES BY HILTON
- Homewood Suites by Hilton, St. Louis--completed construction of a new
145-suite hotel in March 2000.
- Homewood Suites by Hilton, Orlando--expect to complete construction of a
new 144-suite hotel in summer 2000.
- Homewood Suites by Hilton, Washington, D.C.--expect to complete
construction of a new 175-suite hotel in fall 2000.
- Homewood Suites by Hilton, Albuquerque--expect to complete construction of
a new 151-suite hotel in December 2000.
- Homewood Suites by Hilton, Colorado Springs--expect to complete
construction of a new 127-suite hotel in January 2001.
For additional information regarding the Company's expansion program, see
"Additional Information--Vacation Ownership."
FRANCHISE AND MANAGED HOTELS
During 1999, the Company continued to improve its franchise business
primarily through the expansion of the Hilton Garden Inn product. The Company
opened 45 Hilton Garden Inn properties in 1999, bringing the total number of
such properties to 63 at December 31, 1999. The Company anticipates that
approximately 200 Hilton Garden Inn hotels will be either open or under
construction by December 31, 2000. The Promus Acquisition has increased Hilton's
franchise business significantly, adding more than 1,100 franchise properties to
the Company's portfolio. The Company believes this will result in greater
diversification of revenue and cash flow.
The Company also acquired a strong development pipeline with the Promus
Acquisition, with 300 properties either in the design or construction phase as
of December 31, 1999. The majority of this new development will be franchise
properties in the Hampton Inn and Hampton Inn & Suites brands. The Company's
total development pipeline for 2000 and 2001, including Hilton Garden Inn
franchise expansion, totals more than 430 hotels and 63,000 rooms either under
construction or in design.
Hilton intends to grow its brands primarily through franchising and the
addition of management contracts. The success of the Company's ability to grow
the number of franchise and managed hotels is affected by, among other things,
national and regional economic conditions, capital markets, credit availability,
relationships with franchisees and owners as well as competition from other
hotel franchisors and managers.
INTERNATIONAL HOTELS
The Company has entered into management contracts to operate new
international hotels under the Conrad International name in Bangkok, Thailand
and Jakarta, Indonesia. The Company expects to have a 10% equity interest in the
Conrad International Jakarta.
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Future development of international hotels by the Company under the "Hilton"
and "Conrad" names will be subject to agreements entered into between the
Company and Hilton Group plc, formerly known as Ladbroke Group PLC ("Hilton
Group"). Pursuant to such agreements, Hilton Group has rights to future
international development using the Conrad brand name and the Company and Hilton
Group will have the opportunity to participate in certain of each other's future
hotel development focusing primarily upon management contracts and franchises.
See "Strategic Alliances and Joint Ventures--Hilton Group" and "Territorial
Restrictions."
STRATEGIC ALLIANCES AND JOINT VENTURES
HILTON GROUP
In 1997, the Company entered into agreements with Hilton Group, whose wholly
owned subsidiary, Hilton International Co. ("HI"), owns the rights to the Hilton
name outside the United States. The agreements provide for the reunification of
the Hilton brand worldwide through a strategic alliance between the companies,
including cooperation on sales and marketing, loyalty programs and other
operational matters. Pursuant to these agreements, the Company and HI have
integrated their reservation systems under Hilton Reservations Worldwide, LLC,
launched the Hilton HHonors Worldwide loyalty program, integrated worldwide
sales offices, developed joint marketing initiatives and adopted a new Hilton
brand identity used by both companies. Stephen F. Bollenbach, the Company's
President and Chief Executive Officer, is a non-executive director of Hilton
Group and Peter M. George, Chief Executive of Hilton Group, is a non-executive
director of the Company.
RFS HOTEL INVESTORS
As of December 31, 1999, the Company leased 52 hotel properties from RFS. On
January 26, 2000, the Company entered into an agreement with RFS which gives RFS
an option to terminate all of these leases for a termination payment of
approximately $60 million. Under this agreement, the Company has the option to
require RFS to repurchase convertible preferred stock of RFS owned by the
Company for approximately $13 million. If RFS exercises its termination option,
the Company anticipates that the lease termination and stock repurchase will
occur simultaneously in the first quarter of 2001. See "Hotel Properties--Leased
Hotels" above.
FELCOR
As of December 31, 1999, FelCor Lodging Trust Inc. ("FelCor") owned or had
an interest in 75 Company brand hotels and the Company owned approximately 1.5
million shares of FelCor common stock, representing approximately two percent of
FelCor's outstanding shares. In addition, the Company has guaranteed repayment
of a third party loan to FelCor of up to $25 million.
CANDLEWOOD
As of December 31, 1999, the Company owned approximately 2.6 million shares
of Candlewood Hotel Company ("Candlewood") common stock. The Company also has a
note receivable from Candlewood with a balance of approximately $15 million at
December 31, 1999.
The Company has committed to provide credit support for a loan facility
utilized by Candlewood to provide construction and permanent financing to
Candlewood and its franchisees. The Company's aggregate maximum exposure for
such credit support is capped at $30 million. As of December 31, 1999, the
Company has guaranteed $11 million in such financing.
DEVELOPMENT FINANCING
In order to assist prospective owners in obtaining financing for hotel
projects, the Company has initiated programs to provide alternative capital
sources to owners. Promus Acceptance Corp.
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("ProMAC"), a third party lending entity, provides first mortgage construction
financing to franchisees for select Homewood Suites by Hilton, Hampton Inn and
Embassy Suites hotels. The Company has provided a guarantee of up to $36 million
on loans outstanding under the ProMAC program. The Company has also agreed to
guarantee up to 25 percent of construction financing relating to select Hilton
Garden Inn development projects. Under a pre-existing program, the Company
provided secondary financing to franchisees under a mezzanine financing program.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 23 through 30 in the Stockholder Report.
TERRITORIAL RESTRICTIONS
Certain franchise and management agreements entered into by Hilton and
Promus contain provisions that may have the effect of limiting or restricting
Hilton's or Promus' right to own, manage or franchise additional hotels, or in
some cases brands, in a specified geographic area. Such provisions vary
significantly in their applicability and scope and may be subject to differing
interpretations. As a result of the Promus Acquisition, the Company owns,
manages or franchises hotels in circumstances that may give rise to claims that
such hotels conflict with or violate such provisions. To the extent that such
conflicts arise, the Company seeks to resolve them by negotiation with the
relevant parties. In the event that such resolution cannot be achieved,
litigation may result in damages or other remedies against the Company. Such
remedies could include termination of the right to own, manage or franchise the
relevant property. Although no assurance can be given that the Company will be
able to renegotiate successfully or otherwise resolve the effects of all
conflicts in each instance, these conflicts are not expected to have a material
adverse effect on the Company's financial position or results of operations. See
"Item 3. Legal Proceedings--Promus Acquisition Litigation."
Hilton has entered into agreements which restrict its right to operate
hotels in various areas under the "Hilton" or "Conrad" names. Pursuant to an
agreement entered into in 1964 at the time Hilton distributed to its
stockholders all of the issued and outstanding capital stock of HI, Hilton was
prohibited from operating facilities outside the United States identified as
"Hilton" hotels and HI was prohibited from operating facilities within the
United States identified as "Hilton" hotels. The Company conducts certain of its
international hotel operations under the Conrad International name. See "Hotel
Brands--Other Brands--Conrad International."
The Company and Hilton Group, the parent company of HI, have entered into
agreements to form a strategic alliance which reunites the Hilton name. See
"Strategic Alliances and Joint Ventures--Hilton Group." Pursuant to these
agreements, the Company has granted a license to HI to use the Conrad name for
future development outside the United States for a period of 20 years. HI has
granted a license to the Company to develop franchise properties under the
Hilton and Hilton Garden Inn names in Canada, Mexico and the Island of
St. John, U.S. Virgin Islands for a period of 20 years. Subject to the foregoing
restrictions as to the use of the "Hilton" and "Conrad" names, Hilton and HI can
compete in all, and do compete in certain, markets.
POTENTIAL ACQUISITIONS
The Company continuously evaluates acquisition opportunities and may, from
time to time, negotiate to engage in a business combination transaction or other
acquisition. However, there is no assurance that the Company will engage in any
such transactions.
PROPERTY TRANSACTIONS
The Company continuously evaluates its property portfolio and intends to
dispose of its interests in hotels or properties that, in its opinion, no longer
yield an adequate return on investment or conform to the Company's long range
plans. In light of the Promus Acquisition, the Company will continue to review
its hotel portfolio for potential repositioning or re-branding opportunities,
and may seek to sell certain owned assets.
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<PAGE>
STATISTICAL INFORMATION
The following table sets forth certain information for the Company's hotel
properties with respect to the number of hotels and rooms as of December 31,
1998 and 1999:
<TABLE>
<CAPTION>
1998(1) 1999(1) CHANGE
NUMBER OF NUMBER OF NUMBER OF
BRAND HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HILTON
Owned............................................... 31 23,144 36 26,000 5 2,856
Joint Venture....................................... 2 1,453 2 1,453 -- --
Managed............................................. 17 12,220 15 10,844 (2) (1,376)
Franchised.......................................... 172 44,411 167 44,091 (5) (320)
----- ------- ----- ------- --- ------
Total............................................. 222 81,228 220 82,388 (2) 1,160
HILTON GARDEN INN
Owned............................................... 1 197 1 197 -- --
Joint Venture....................................... 1 152 2 280 1 128
Franchised.......................................... 16 2,151 60 8,359 44 6,208
----- ------- ----- ------- --- ------
Total............................................. 18 2,500 63 8,836 45 6,336
DOUBLETREE
Owned............................................... 18 5,560 14 4,757 (4) (803)
Leased.............................................. 9 3,050 9 3,050 -- --
Joint Venture....................................... 34 8,374 30 7,907 (4) (467)
Managed............................................. 64 17,900 63 17,341 (1) (559)
Franchised.......................................... 51 11,927 48 11,359 (3) (568)
----- ------- ----- ------- --- ------
Total............................................. 176 46,811 164 44,414 (12) (2,397)
EMBASSY SUITES
Owned............................................... 6 1,299 6 1,299 -- --
Joint Venture....................................... 19 4,944 19 5,098 -- 154
Managed............................................. 58 14,425 60 15,049 2 624
Franchised.......................................... 62 13,905 64 14,427 2 522
----- ------- ----- ------- --- ------
Total............................................. 145 34,573 149 35,873 4 1,300
HOMEWOOD SUITES BY HILTON
Owned............................................... 19 2,232 13 1,655 (6) (577)
Leased.............................................. 1 83 1 83 -- --
Managed............................................. 4 471 15 1,689 11 1,218
Franchised.......................................... 50 5,081 57 6,028 7 947
----- ------- ----- ------- --- ------
Total............................................. 74 7,867 86 9,455 12 1,588
HAMPTON INN
Owned............................................... 11 1,504 1 133 (10) (1,371)
Leased.............................................. 18 2,250 18 2,250 -- --
Managed............................................. 10 1,337 10 1,337 -- --
Franchised.......................................... 835 86,581 955 98,683 120 12,102
----- ------- ----- ------- --- ------
Total............................................. 874 91,672 984 102,403 110 10,731
OTHER(2)
Owned............................................... 10 1,620 14 2,326 4 706
Leased.............................................. 41 6,433 46 7,298 5 865
Joint Venture....................................... 2 816 3 1,433 1 617
Managed............................................. 24 5,537 22 5,719 (2) 182
Franchised.......................................... -- -- 1 134 1 134
----- ------- ----- ------- --- ------
Total............................................. 77 14,406 86 16,910 9 2,504
TOTAL
Owned............................................... 96 35,556 85 36,367 (11) 811
Leased.............................................. 69 11,816 74 12,681 5 865
Joint Venture....................................... 58 15,739 56 16,171 (2) 432
Managed............................................. 177 51,890 185 51,979 8 89
Franchised.......................................... 1,186 164,056 1,352 183,081 166 19,025
----- ------- ----- ------- --- ------
TOTAL HOTELS.......................................... 1,586 279,057 1,752 300,279 166 21,222
===== ======= ===== ======= === ======
</TABLE>
10
<PAGE>
- ---------
(1) Statistics are presented on a pro forma basis for both periods, as if the
Promus Acquisition had been completed as of January 1, 1998.
(2) Includes properties operated under the Company's Red Lion, Conrad
International and Harrison Conference Center brands, and properties operated
under third party brands pursuant to contractual arrangements.
For purposes of the table above, "owned" hotels are properties in which the
Company has a majority or controlling ownership interest and "joint venture"
hotels are properties in which the Company has a minority or non-controlling
ownership interest. For additional information, see "Hotel Properties" above.
The following table sets forth certain information for the Company's hotel
properties with respect to occupancy rates, average room rates and revenues per
available room for the fiscal years ended December 31, 1998 and 1999:
<TABLE>
<CAPTION>
%/PT
1998(1) 1999(1) CHANGE
------------ ------------ --------
<S> <C> <C> <C>
HILTON
Occupancy................................... 71.2% 70.7% (0.5)pts
Average rate................................ $ 127.19 $ 130.60 2.7%
RevPAR(2)................................... $ 90.54 $ 92.34 2.0%
HILTON GARDEN INN
Occupancy................................... 64.0% 65.9% 1.9pts
Average rate................................ $ 91.00 $ 92.05 1.2%
RevPAR(2)................................... $ 58.20 $ 60.63 4.2%
DOUBLETREE(3)
Occupancy................................... 70.8% 70.1% (0.7)pts
Average rate................................ $ 106.34 $ 108.01 1.6%
RevPAR(2)................................... $ 75.31 $ 75.70 0.5%
EMBASSY SUITES
Occupancy................................... 72.5% 73.1% 0.6pts
Average rate................................ $ 120.77 $ 121.49 0.6%
RevPAR(2)................................... $ 87.57 $ 88.84 1.5%
HOMEWOOD SUITES BY HILTON
Occupancy................................... 73.9% 73.7% (0.2)pts
Average rate................................ $ 96.01 $ 95.01 (1.0)%
RevPAR(2)................................... $ 70.93 $ 69.98 (1.3)%
HAMPTON INN
Occupancy................................... 70.0% 68.1% (1.9)pts
Average rate................................ $ 68.57 $ 71.29 4.0%
RevPAR(2)................................... $ 47.98 $ 48.57 1.2%
OTHER(4)
Occupancy................................... 68.1% 67.0% (1.1)pts
Average rate................................ $ 98.38 $ 99.50 1.1%
RevPAR(2)................................... $ 67.02 $ 66.70 (0.5)%
</TABLE>
- ---------
(1) Statistics are presented on a pro forma basis for both periods, as if the
Promus Acquisition had been completed as of January 1, 1998. Statistics are
for comparable hotels, and include only those hotels in the Company's system
as of December 31, 1999 which were owned, leased, managed or franchised by
the Company since January 1, 1998.
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<PAGE>
(2) RevPAR is equal to rooms revenue divided by the number of available rooms.
(3) Doubletree franchise hotels are not included in this table.
(4) Includes properties operated under the Company's Red Lion, Conrad
International and Harrison Conference Center brands, and properties operated
under third party brands pursuant to contractual arrangements.
For additional information regarding the Company's hotel brands, see "Hotel
Brands" above.
The following table sets forth certain statistical information for the
Company's properties by geographic region as of and for the year ended
December 31, 1999:
<TABLE>
<CAPTION>
PROPERTIES ROOMS OCCUPANCY ROOM RATE REVPAR
---------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Owned, Leased and Managed Hotels:
Pacific/Mountain........................ 143 42,352 70.6% $120.94 $ 85.34
North Central........................... 60 15,952 71.6 123.01 88.11
South Central........................... 63 15,841 69.5 112.68 78.33
New England/Middle Atlantic............. 42 14,800 75.9 185.31 140.68
South Atlantic.......................... 81 24,257 72.3 143.46 103.65
International........................... 11 3,996 68.2 130.33 88.83
----- ------- ---- ------- -------
Total..................................... 400 117,198 71.3% $131.33 $ 93.67
===== ======= ==== ======= =======
Franchise Hotels:........................... 1,352 183,081 68.3% $ 84.91 $ 58.01
===== ======= ==== ======= =======
</TABLE>
In the table above, statistics are for comparable hotels, and include only
those hotels in the Company's system as of December 31, 1999 which were owned,
leased, managed or franchised by the Company since January 1, 1998. For
additional information regarding the Company's properties, number of available
rooms and occupancy ratios, see the Supplementary Financial Information and Five
Year Summary on pages 48 and 49 in the Stockholder Report.
12
<PAGE>
ADDITIONAL INFORMATION
VACATION OWNERSHIP
Hilton Grand Vacations Company and its related entities ("HGVC"), which are
wholly owned by the Company, currently operate 19 vacation ownership resorts in
Florida, two in Nevada and one in Hawaii. In addition, HGVC operates the
HGVClub, a points based reservation and exchange system. HGVC has recently
opened or is currently developing the following projects:
- In December 1999, HGVC opened a new 232-unit vacation ownership resort
located adjacent to the Las Vegas Hilton.
- In December 1999, HGVC opened the final phase of a new 52-unit vacation
ownership resort in the South Beach area of Miami Beach, Florida,
developed through the renovation of two historic art deco buildings.
- HGVC has completed 260 units of a 420-unit vacation ownership resort
located adjacent to Sea World in Orlando, Florida.
- HGVC is developing a 275-unit vacation ownership resort at the Hilton
Hawaiian Village in Honolulu, Hawaii, developed through the conversion of
the Lagoon Tower to timeshare units. HGVC expects to open this facility in
the first quarter of 2001.
As a result of the Promus Acquisition, the Company also manages three
vacation ownership resorts and franchises seven vacation ownership resorts in
the United States under the Embassy Vacation Resort and Hampton Vacation Resort
names.
HGVC is actively seeking new management, development and acquisition
opportunities in other destination resort locations.
CASINO WINDSOR
The Company owns a 50% equity interest in Windsor Casino Limited ("WCL"),
which operates the 400-room Casino Windsor in Windsor, Ontario, Canada for the
Ontario provincial government under a management contract. This hotel casino
features a 75,000 square foot casino and entertainment and meeting facilities.
See "Additional Information--Regulation and Licensing--Ontario Gaming Laws."
FLAMINGO CASINO-KANSAS CITY
The Company owns and operates the Flamingo Casino-Kansas City, a dockside
casino complex in Kansas City, Missouri. Prior to and in connection with the
Park Place Distribution, Park Place applied to the Missouri Gaming Commission
for approval to own and operate the Flamingo Casino-Kansas City, which approval
was not received prior to the Park Place Distribution. As a result, the Company
retained this property and agreed to cooperate with Park Place to take
appropriate action to put Park Place in the same economic position it would have
been in if the transfer had occurred on December 31, 1998. The Company and Park
Place entered into a disposition agreement providing for the sale or other
disposition of the Flamingo Casino-Kansas City. On February 8, 2000, the Company
entered into an agreement to sell this property to a third party. Upon
completion of such sale, the proceeds of the sale will be allocated between the
Company and Park Place pursuant to the disposition agreement. See "Additional
Information--Regulation and Licensing--Missouri Gaming Laws."
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
provides design and furnishing services to the Company's hotels and to hotels
owned and operated by others. These services include the purchase and
distribution of furniture, furnishings, equipment, food, beverage and operating
supplies. The revenues of this operation depend primarily on the number of new
hotels operated or franchised by the Company and on refurbishing and remodeling
of the Company's existing hotels.
RESERVATION SYSTEM
Hilton Reservations Worldwide, LLC ("HRW") operates a worldwide reservation
system for hotels owned, operated or franchised by the Company, HI, their
affiliates and others. The Company and HI each
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<PAGE>
own a 50% interest in HRW. HRW uses an updated computerized reservation system
called Hilstar, which is managed by REZsolutions Inc. The Company is integrating
the reservation system used by Promus into the Hilstar system. See "Hotel
Operations--Strategic Alliances and Joint Ventures--Hilton Group."
E-BUSINESS
The Company operates the award winning Hilton.com internet web site which
provides cost effective customer service in addition to the Hilstar reservation
system used by HRW. The Company also provides high-speed internet access and
business services in hotel guest rooms and other areas at certain of its hotels.
TRADEMARKS
The following trademarks used herein are owned by the Company and are
registered as service marks in the United States and in certain foreign
countries: Conrad International-Registered Trademark-, Doubletree-Registered
Trademark-, Doubletree Club-Registered Trademark-, Doubletree Guest
Suites-Registered Trademark-, Embassy Suites-Registered Trademark-, Embassy
Vacation Resort-Registered Trademark-, Hampton Inn-Registered Trademark-,
Hampton Inn & Suites-Registered Trademark-, Hampton Vacation Resort-Registered
Trademark-, Harrison Conference Centers-Registered Trademark-,
HGVClub-Registered Trademark-, HHonors-Registered Trademark-, Hilton-Registered
Trademark-, Hilton Garden Inn-Registered Trademark-, Hilton Grand Vacations
Company-Registered Trademark-, Hilton Suites-TM-, Homewood Suites-Registered
Trademark-by Hilton, and Red Lion Hotels and Inns-Registered Trademark-. The
Company considers all of these marks, and the associated name recognition, to be
valuable to its business. See "Summary of Significant Accounting Policies--
Brands" in the Notes to the Company's Consolidated Financial Statements on
page 36 in the Stockholder Report.
MARKETING
The Company's hotel properties offer multiple product lines to a broad range
of customers in many geographic markets. The Company's properties include
full-service and limited-service hotels in urban, airport, resort and suburban
locations, as well as vacation ownership resorts and conference centers. The
Company participates in certain joint marketing programs with business partners
in the airline, car rental and cruise line industries.
The Company's metropolitan and airport properties primarily serve the
convention and meeting market and the business traveler market (businesspersons
traveling as individuals or in small groups). The Company's resort properties
primarily serve the tour and leisure market (tourists traveling either as
individuals or in groups) and the convention and meeting market. The Company's
suburban properties primarily serve the leisure and business traveler markets.
As indicated under "Business Risks" below, these sources of business are
sensitive to general economic and other conditions.
The Company believes that the Promus Acquisition enables it to strengthen
the performance of its hotel brands and maximize revenue per available room by:
- introducing the Hilton HHonors Worldwide frequent guest program to the
Doubletree, Hampton Inn, Embassy Suites and Homewood Suites by Hilton
brands in April 2000;
- utilizing the Company's worldwide sales organization to market all of the
Company's hotel brands;
- cross-selling complementary brands and, where appropriate, converting
hotels to another Company brand to maximize revenues; and
- spreading brand support and system costs over a greater number of
properties.
The Company believes that its alliance with Hilton Group (which currently
owns the rights to the Hilton name outside the U.S.) has improved the
performance of the Company's operations as its properties have benefited from
the worldwide integration of the Hilton brand, reservation systems, marketing
programs and sales organizations. See "Hotel Operations--Strategic Alliances and
Joint Ventures--Hilton Group."
BUSINESS RISKS
The Company's future operating results could be adversely impacted by
industry overcapacity and weak demand, which could restrict the Company's
ability to raise room rates to keep pace with the rate of inflation. The
Company's business could also be adversely affected by increases in
transportation and fuel
14
<PAGE>
costs or sustained recessionary periods in the U.S. (affecting domestic travel)
and internationally (affecting inbound travel from abroad). In 1999, the
Company's hotels in Hawaii were adversely impacted by the softness in Hawaiian
tourism resulting from the Asian economic situation.
General economic conditions, competition, work stoppages and other factors
affecting particular properties impact the Company's occupancy ratios. Occupancy
ratios at the Company's hotels could also be negatively impacted by a decrease
in travel resulting from adverse economic conditions outside the U.S. and by
excess industry capacity.
COMPETITION
The Company seeks to maintain the quality of its lodging business while
expanding both domestically and internationally. The Company intends to improve
and expand its core business by leveraging its strong brand names, maximizing
operating efficiencies, expanding and enhancing properties and acquiring or
developing properties as appropriate.
The Company's position as a multi-branded owner, operator, manager and
franchisor of hotels makes it one of the largest hotel companies in the United
States. Competition in the industry is based primarily on the level of service,
quality of accomodations, convenience of locations and room rates. Competition
from other hotels, motels and inns, including facilities owned by local
interests and facilities owned by national and international chains, is vigorous
in all areas in which the Company operates or franchises its facilities. The
Company's hotels also compete generally with facilities offering similar
services and located in cities and other locations where the Company's hotels
are not present. If hotel capacity is expanded by others in a city where a
Company branded hotel is located, competition will increase.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without limitation,
those set forth under the captions "General Information--Recent Developments,"
"Hotel Operations--Hotel Brands," "--Expansion Program," "--Strategic Alliances
and Joint Ventures," "--Territorial Restrictions," "--Potential Acquisitions"
and "--Property Transactions," and "Additional Information--Vacation Ownership,"
"--Trademarks," "--Marketing," "--Competition," "--Environmental Matters" and
"--Regulation and Licensing," and "Legal Proceedings," and statements relating
to the Company's plans, strategies, objectives, expectations, intentions and
adequacy of resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.
Words such as "believes," "anticipates," "expects," "intends," "plans" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements reflect the Company's current views with respect to
future events and financial performance, and are subject to certain risks and
uncertainties, including those set forth under the captions "Additional
Information--Business Risks" and "--Competition," the effect of economic
conditions, and customer demand, which could cause actual results to differ
materially from historical results or those anticipated. Although the Company
believes the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be attained.
ENVIRONMENTAL MATTERS
The Company, like others in its industry, is subject to various Federal,
state, local and, in some cases, foreign laws, ordinances and regulations that:
(i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for solid and hazardous or toxic wastes, or
(ii) may impose liability for the costs of cleaning up, and certain damages
resulting from, sites of past spills, disposals or other releases of hazardous
or toxic substances or wastes (together, "Environmental Laws").
15
<PAGE>
The Company endeavors to maintain compliance with Environmental Laws but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including:
(i) uncertainty whether a Company facility in fact shipped any wastes to one
such site;
(ii) the number of potentially responsible parties at such sites;
(iii) where available, the volume and type of waste sent to each such site;
and
(iv) efforts among potentially responsible parties to voluntarily resolve
potential legal disputes relating to one such site;
the Company believes that any liability arising from such disposals under
Environmental Laws would not have a material adverse effect on its results of
operations or financial condition.
YEAR 2000
The Company encountered no significant problems from the impact of the Year
2000 on the processing of date-sensitive information by its computerized
information systems. The Company had established a Year 2000 program to ensure
that all significant information technology systems, non-information technology
systems and suppliers were Year 2000 compliant. The cost to assess, test and
remediate potential Year 2000 problems totaled approximately $6 million.
REGULATION AND LICENSING
ONTARIO GAMING LAWS. Ontario, Canada has laws and regulations governing the
conduct of casino gaming. Ontario law requires that the operator of a casino
must be found suitable and be registered. A registration once issued remains in
force until revoked. Ontario law defines the grounds for registration, as well
as revocation or suspension of such registration. The Ontario authorities have
conducted an investigation of, and have found suitable, the Company and the
other shareholder of WCL in connection with the Ontario registration of WCL. See
"Additional Information--Casino Windsor."
MISSOURI GAMING LAWS. Missouri has enacted the Missouri Gaming Law (the
"MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for licensing and regulating riverboat gaming in Missouri. The MGL
grants specific powers and duties to the MGC to supervise riverboat gaming,
implement the MGL and take other action as may be reasonable or appropriate to
enforce the MGL. The MGL extensively regulates owning and operating riverboat
gaming facilities in Missouri. Generally, a licensed company and its officers,
directors, employees, related subsidiaries and significant shareholders are
subject to such extensive regulation. In October 1996, the MGC granted a
riverboat gaming license to the Company to operate the Flamingo Casino-Kansas
City.
Prior to and in connection with the Park Place Distribution, Park Place
applied to the MGC for approval to own and operate the Flamingo Casino-Kansas
City. The approval was not received prior to the Park Place Distribution. On
February 8, 2000, the Company entered into an agreement to sell this property to
a third party. This sale is subject to approval by the MGC. Upon completion of
the sale, the Company expects to cease gaming operations in Missouri and
surrender the gaming license to the MGC. See "Additional Information--Flamingo
Casino-Kansas City."
OTHER LAWS AND REGULATIONS. Each of the hotels and vacation ownership
resorts operated by the Company is subject to extensive state and local
regulations and, on a periodic basis, must obtain various licenses and permits,
including those required to sell alcoholic beverages. Federal and state laws and
regulations also require certain registration, disclosure statements and other
practices with respect to the franchising of hotels. Management believes that
the Company has obtained all required licenses and permits and its businesses
are conducted in substantial compliance with applicable laws.
16
<PAGE>
EMPLOYEES
At December 31, 1999, Hilton employed approximately 78,000 persons, of whom
approximately 17,000 were covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel industry
generally. Hilton believes its employee relations are satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels to be leading establishments with respect to
desirability of location, size, facilities, physical condition, quality and
variety of services offered in most of the areas in which they are located.
Obsolescence arising from age and condition of facilities is a factor in the
hotel industry. Accordingly, Hilton spends, and intends to continue to spend,
substantial funds to maintain its owned facilities in first-class condition in
order to remain competitive.
Hotels owned, leased, managed and franchised by Hilton are briefly described
under "Item 1" and, in particular, under the caption "Hotel Operations." In
addition, contemplated additions to or renovations of existing properties and
new hotels presently under construction that Hilton will operate are briefly
described under the caption "Hotel Operations--Expansion Program" and
"Additional Information--Vacation Ownership" under "Item 1."
ITEM 3. LEGAL PROCEEDINGS
BALLY MERGER LITIGATION
A purported class action against Bally Entertainment Corporation ("Bally"),
its directors and Hilton was commenced in August 1996 under the caption PARNES
V. BALLY ENTERTAINMENT CORPORATION, ET AL. (C.A. No. 15192) in the Court of
Chancery for the State of Delaware. The plaintiff alleges breaches of fiduciary
duty in connection with the merger of Bally with and into Hilton in
December 1996 (the "Bally Merger"), including allegedly illegal payments to
Arthur M. Goldberg that purportedly denied Bally shareholders other than
Mr. Goldberg an opportunity to sell their shares to Hilton or any other bidder
at the best possible price. In the complaint, the plaintiff seeks, among other
things:
(i) an order enjoining the Bally Merger;
(ii) an award of damages in an unspecified amount;
(iii) an order requiring Mr. Goldberg to disgorge his profits; and
(iv) an award of attorneys' fees and expenses.
In orders dated May 13, 1997 and February 3, 1998, the Court dismissed this
litigation. Plaintiff appealed this dismissal and, on January 25, 1999, the
Delaware Supreme Court reversed the dismissal order and remanded the case to the
Court of Chancery. The Company intends to continue to defend this action
vigorously.
PROMUS ACQUISITION LITIGATION
On or around September 7, 1999, two actions were filed in the Court of
Chancery for the State of Delaware by alleged common stockholders of Promus on
behalf of a purported class of similarly situated Promus stockholders. The
actions are captioned STEVEN GOLDSTEIN V. PROMUS HOTEL CORPORATION, ET AL.
(C.A. No. 17410NC) and JOSEPH CARCO V. PROMUS HOTEL CORPORATION, ET AL.
(C.A. No. 17411NC). The complaints in the actions, which are substantially
similar, name as defendants Promus, the members of the Promus board of directors
and Hilton, and allege that the Promus directors breached their fiduciary duties
to Promus stockholders by agreeing to the acquisition and by allegedly failing
to obtain the highest value for Promus stockholders, and that Hilton allegedly
aided and abetted such alleged breaches of fiduciary
17
<PAGE>
duty. The complaints seek injunctive relief and monetary damages in an
unspecified amount. Defendants intend to defend these actions vigorously.
On or about October 11, 1999, an action was filed in the United States
District Court for the Southern District of Florida entitled HOTELRAMA
ASSOCIATES, LTD. V. HILTON HOTELS CORPORATION (Case No. 99-CV02717), alleging
that the acquisition of Promus would cause Hilton to be in violation of
territorial restrictions contained in a management agreement under which Hilton
manages a hotel owned by the plaintiff in Miami, Florida. The complaint sought
to enjoin Hilton from violating the restrictive covenant by its acquisition of
Promus, as well as other remedies. On November 19, 1999, the Court denied
plaintiff's motion to enjoin Hilton from acquiring Promus, and the Promus
Acquisition was consummated on November 30, 1999. On March 16, 2000, the Company
and plaintiff reached an agreement in principle to settle all outstanding issues
between the parties, subject to documentation.
RIGHTS AGREEMENT LITIGATION
A purported class action against the Company was filed in the Court of
Chancery for the State of Delaware on or about February 22, 2000 under the
caption LEONARD LOVENTHAL ACCOUNT V. HILTON HOTELS CORPORATION (C.A.
No. 17803NC). The plaintiff alleges that the Rights Agreement, dated as of
November 29, 1999, between the Company and ChaseMellon Shareholder Services
L.L.C., relating to the Company's preferred share purchase rights plan, is
invalid and unenforceable and violates provisions of the Delaware General
Corporation Law, the Uniform Commercial Code and the Company's Restated
Certificate of Incorporation and By-Laws. In the complaint, plaintiff seeks an
order declaring the Rights Agreement to be invalid and enjoining the Company
from enforcing the Rights Agreement, and monetary damages in an unspecified
amount. The Company intends to defend this action vigorously. For a description
of the Rights Agreement, see "Part II Item 5.--Rights Agreement" below.
In management's opinion, disposition of pending litigation against the
Company, including the litigation described above, is not expected to have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's special meeting of stockholders held on November 30, 1999,
the Company's stockholders approved each of the proposals voted upon. The voting
results for each of the proposals are as follows:
<TABLE>
<C> <S> <C> <C>
i) Approval of the Agreement and Plan of Merger, dated as of September 3, 1999, as amended, between the Company,
Promus and a wholly owned subsidiary of the Company, and the issuance of the Company's Common Stock in the Promus
Acquisition.
FOR: 193,495,168 AGAINST: 8,610,492 ABSTAIN: 885,679
ii) Approval of the amendment to the Company's Restated Certificate of Incorporation to increase the authorized number
of shares of Common Stock from 400 million shares to 500 million shares.
FOR: 194,718,989 AGAINST: 7,228,702 ABSTAIN: 1,043,648
iii) Approval of the amendment to the Company's By-Laws to change the authorized number of directors from 12 to a range
of 10 to 20 directors, with the exact number to be set from time to time by the Company's Board of Directors.
FOR: 221,091,587 AGAINST: 15,225,215 ABSTAIN: 1,129,926
</TABLE>
18
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company:
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH THE COMPANY AGE
- ---- -------------------------------------- ---
<S> <C> <C>
Stephen F. Bollenbach President and Chief Executive Officer since 57
February 1996
Thomas E. Gallagher Executive Vice President and General Counsel since 55
July 1997, Secretary since May 1998 and Chief
Administrative Officer since May 1999
Matthew J. Hart Executive Vice President and Chief Financial 47
Officer since April 1996, and Treasurer from
January 1999 until January 2000
Dieter H. Huckestein Executive Vice President and President--Hotel 56
Division
Thomas L. Keltner Executive Vice President and President--Franchise 53
Hotel Group since December 1999
</TABLE>
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1995. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related.
All of the above named executive officers are directors of the Company,
except for Messrs. Gallagher, Hart and Keltner. Prior to joining Hilton, Mr.
Gallagher served as President and Chief Executive Officer of The Griffin Group,
Inc. since April 1992, and was a partner with the law firm of Gibson, Dunn &
Crutcher prior thereto. During 1995 and 1996, Mr. Gallagher also served as
President and Chief Executive Officer of Griffin Gaming & Entertainment, Inc.
(formerly Resorts International, Inc.). Prior to joining Hilton, Mr. Hart served
as Senior Vice President and Treasurer of The Walt Disney Company since October
1995, and as Executive Vice President and Chief Financial Officer of Host
Marriott Corporation prior thereto. Prior to joining Hilton, Mr. Keltner served
as President, Brand Performance and Development Group of Promus since February
1999, as Executive Vice President and Chief Development Officer of Promus from
July 1997 until February 1999, and as Senior Vice President, Development of
Promus prior thereto.
Additional information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 11, 2000, and this information is incorporated in this Form 10-K. See "Cover
Page--Documents Incorporated by Reference."
19
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." In 1998, the Company made
quarterly dividend payments of $.08 per share. Following the Park Place
Distribution, in 1999 and the first quarter of 2000 the Company made quarterly
dividend payments of $.02 per share. The sales prices for the Company's Common
Stock in 1999 and 2000 reflect the Common Stock trading on a stand-alone basis
after the Park Place Distribution on December 31, 1998. As of December 31, 1999,
the Company had approximately 23,300 stockholders of record. The high and low
reported sales prices per share of the Company's Common Stock are set forth in
the following table for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998
1st Quarter................................................. $35.50 $27.50
2nd Quarter................................................. 34.00 28.13
3rd Quarter................................................. 29.38 16.56
4th Quarter................................................. 22.81 12.50
1999
1st Quarter................................................. 16.69 13.81
2nd Quarter................................................. 17.13 13.38
3rd Quarter................................................. 15.00 9.75
4th Quarter................................................. 11.50 8.38
2000
1st Quarter (through March 28, 2000)........................ 9.94 6.38
</TABLE>
RIGHTS AGREEMENT
On November 29, 1999, the Company adopted a new preferred share purchase
rights plan (the "Rights Plan") and declared a dividend distribution of one
preferred share purchase right (a "Right") on each outstanding share of the
Company's Common Stock. The new Rights Plan replaced the Company's prior rights
plan which had been originally adopted in 1988 and readopted in 1998 prior to
its expiration. The Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, entered into a Rights Agreement, dated as of November 29, 1999
(the "Rights Agreement"). The Rights are transferred only with the Common Stock,
unless and until they become exercisable. The Rights will expire on
November 29, 2009, subject to the Company's right to extend, unless earlier
redeemed or exchanged by the Company or terminated.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as defined below):
(i) acquires beneficial ownership of 20% or more of the Company's Common
Stock (such person or group, an "Acquiring Person") or
(ii) announces a tender offer, the consummation of which would result in
ownership by a person or group of 20% or more of the Common Stock.
When exercisable, each Right entitles a shareholder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock at
an exercise price of $80, subject to adjustment (the "Purchase Price").
After a person becomes an Acquiring Person, each holder of a Right (other
than Rights owned by the Acquiring Person) will have the right to receive, upon
exercise of such Right, a number of shares of Common Stock having a market value
equal to two times the then current Purchase Price of the Right. After a person
becomes an Acquiring Person, if the Company engages in certain mergers or
transfers of assets, each holder of a Right (other than Rights owned by the
Acquiring Person) will have the right to
20
<PAGE>
receive upon exercise, at the Right's exercise price, a number of the acquiring
company's common shares having a market value of twice the Right's Purchase
Price.
Once a person becomes an Acquiring Person, but prior to their acquisition of
50% or more of the outstanding Common Stock, the Company's Board of Directors
may cause the Company to exchange the Rights (other than Rights owned by an
Acquiring Person), in whole or in part, for shares of Common Stock at an
exchange ratio based on the value of the Common Stock at that time, subject to
adjustment.
Prior to a person or group becoming an Acquiring Person, the Rights are
redeemable for $.001 per Right at the option of the Company's Board of
Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The Rights Agreement has been filed as Exhibit 4.18 to this Form 10-K, and
the foregoing summary is qualified in its entirety by reference to
Exhibit 4.18. For a description of litigation relating to the Rights Agreement,
see "Part I Item 3. Legal Proceedings--Rights Agreement Litigation."
ITEM 6. SELECTED FINANCIAL DATA
The ratio of earnings to fixed charges for the five years ended
December 31, 1999 is as follows: 1999 - 2.3 to 1; 1998 - 3.2 to 1; 1997 -
4.0 to 1; 1996 - 4.2 to 1; and 1995 - 2.8 to 1.
The ratio of earnings to combined fixed charges and preferred stock
dividends for the five years ended December 31, 1999 is as follows: 1999 - 2.3
to 1; 1998 - 2.9 to 1; 1997 - 3.3 to 1; 1996 - 4.1 to 1; and 1995 - 2.8 to 1.
The computation of the aforesaid ratios is set forth in Exhibit 12 to this
Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 23 through 30 in the Stockholder Report, which information is
incorporated in this Form 10-K by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the Stockholder Report on the pages indicated,
which information is incorporated in this Form 10-K by reference.
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Consolidated Statements of Income for
the three years ended December 31, 1999................... 31
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... 32
Consolidated Statements of Cash Flow for
the three years ended December 31, 1999................... 33
Consolidated Statements of Stockholders' Equity for
the three years ended December 31, 1999................... 34
Notes to Consolidated Financial Statements.................. 35
Report of Independent Public Accountants.................... 46
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers of the Company" in Part
I. Other information respecting certain executive officers, as well as the
required information for directors, will be contained in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation," "Compensation Committee Report on Executive Compensation--Chief
Executive Officer Compensation" and "--Chairman of the Board Compensation,"
"Retirement Plans" and "Change of Control Agreements" in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Security
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Company's Proxy Statement, and reference is expressly made to
the Proxy Statement for the specific information incorporated in this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 of this Form 10-K.
2. Financial Statement Schedules:
All schedules are inapplicable or the required information is included
elsewhere herein.
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated December 1, 1999,
under the caption "Item 2. Acquisition or Disposition of Assets," to report the
consummation of the Promus Acquisition, and under the caption "Item 5. Other
Events," to report that the stockholders of the Company and Promus voted in
favor of all proposals at the special meetings of stockholders held on November
30, 1999, and that the Company adopted a new Rights Plan, dated as of
November 29, 1999.
(c) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits to this Form 10-K.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of March 28, 2000.
<TABLE>
<S> <C> <C>
HILTON HOTELS CORPORATION
(Registrant)
By: MATTHEW J. HART
-----------------------------------------
Matthew J. Hart
Executive Vice President and
Chief Financial Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of March 28, 2000.
<TABLE>
<S> <C>
STEPHEN F. BOLLENBACH ROBERT M. LA FORGIA
- ---------------------------------------------- ----------------------------------------------
Stephen F. Bollenbach Robert M. La Forgia
President, Chief Executive Officer Senior Vice President and Controller
and Director (Chief Accounting Officer)
A. STEVEN CROWN BENJAMIN V. LAMBERT
- ---------------------------------------------- ----------------------------------------------
A. Steven Crown Benjamin V. Lambert
Director Director
PETER M. GEORGE JOHN H. MYERS
- ---------------------------------------------- ----------------------------------------------
Peter M. George John H. Myers
Director Director
ARTHUR M. GOLDBERG JOHN L. NOTTER
- ---------------------------------------------- ----------------------------------------------
Arthur M. Goldberg John L. Notter
Director Director
MATTHEW J. HART JUDY L. SHELTON
- ---------------------------------------------- ----------------------------------------------
Matthew J. Hart Judy L. Shelton
Executive Vice President and Director
Chief Financial Officer
BARRON HILTON DONNA F. TUTTLE
- ---------------------------------------------- ----------------------------------------------
Barron Hilton Donna F. Tuttle
Chairman of the Board Director
DIETER H. HUCKESTEIN PETER V. UEBERROTH
- ---------------------------------------------- ----------------------------------------------
Dieter H. Huckestein Peter V. Ueberroth
Director Director
ROBERT L. JOHNSON SAM D. YOUNG, JR.
- ---------------------------------------------- ----------------------------------------------
Robert L. Johnson Sam D. Young, Jr.
Director Director
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of June 30, 1998,
among Registrant, Park Place Entertainment Corporation
("Park Place"), Gaming Acquisition Corporation, GCI Lakes,
Inc. and Grand Casinos, Inc. (incorporated herein by
reference from Exhibit 2.1 to Registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 1998)
2.2 Agreement and Plan of Merger, dated as of September 3, 1999,
as amended, among Registrant, Promus Hotel Corporation and
Chicago Hilton, Inc. (incorporated herein by reference from
Appendix A to Registrant's Registration Statement on Form
S-4 (File No. 333-89437))
3.1 Restated Certificate of Incorporation of Registrant, as
amended (incorporated herein by reference from Exhibit 4.1
to Registrant's Registration Statement on Form S-3 (File
No. 333-18523))
3.2 Amendment to Restated Certificate of Incorporation of
Registrant, relating to Exhibit 3.1 hereto (incorporated
herein by reference from Exhibit 3.1 to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30,
1997)
3.3 Amendment to Restated Certificate of Incorporation of
Registrant, relating to Exhibits 3.1 and 3.2 hereto
(incorporated herein by reference from Appendix F to
Registrant's Registration Statement on Form S-4 (File No.
333-89437))
3.4 By-Laws of Registrant, as amended (incorporated herein by
reference from Exhibit 4.2 to Registrant's Registration
Statement on Form S-3 (File No. 333-18523))
3.5 Amendment to By-Laws of Registrant, relating to Exhibit 3.4
hereto (incorporated herein by reference from Exhibit 3.4 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998)
3.6 Amendment to By-Laws of Registrant, relating to Exhibits 3.4
and 3.5 hereto (incorporated herein by reference from
Appendix G to Registrant's Registration Statement on Form
S-4 (File No. 333-89437))
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Morgan Guaranty Trust Company of New York, as Trustee,
regarding Registrant's Senior Debt Securities (incorporated
herein by reference from Exhibit 4.1 to Post-Effective
Amendment No. 1 to Registrant's Registration Statement on
Form S-3 (File No. 2-99967))
4.2 First Supplemental Indenture, dated as of June 30, 1992,
between Registrant and Morgan Guaranty Trust Company of New
York, as Trustee, regarding Registrant's Senior Debt
Securities, relating to Exhibit 4.1 hereto (incorporated
herein by reference from Exhibit 4.3 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992)
4.3 Indenture, dated as of May 14, 1996, between Registrant and
The Bank of New York, as Trustee, regarding Registrant's 5%
Convertible Subordinated Notes due 2006 (incorporated herein
by reference from Exhibit 4.6 to Registrant's Registration
Statement on Form S-4 (File No. 333-10415))
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
4.4.1 Indenture, dated as of April 15, 1997, between Registrant
and BNY Western Trust Company, as Trustee, regarding
Registrant's Debt Securities (incorporated herein by
reference from Exhibit 4.3 to Registrant's Current Report on
Form 8-K, dated April 15, 1997)
4.4.2 First Supplemental Indenture, dated as of December 31, 1998,
among Registrant, Park Place and BNY Western Trust Company,
as Trustee, regarding Registrant's Debt Securities, relating
to Exhibit 4.4.1 hereto (incorporated herein by reference
from Exhibit 4.1 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
4.4.3 Officers' Certificate containing terms of 7.95% Senior Notes
due 2007 (incorporated herein by reference from Exhibit 99
to Registrant's Current Report on Form 8-K, dated April 15,
1997)
4.4.4 Officers' Certificate containing terms of 7.375% Senior
Notes due 2002 (incorporated herein by reference from
Exhibit 99.01 to Registrant's Current Report on Form 8-K,
dated June 4, 1997)
4.4.5 Officers' Certificate containing terms of 7% Senior Notes
due 2004 (incorporated herein by reference from Exhibit
99.01 to Registrant's Current Report on Form 8-K,
dated July 17, 1997)
4.4.6 Officers' Certificate containing terms of 7.20% Senior Notes
due 2009 and 7.5% Senior Notes due 2017 (incorporated herein
by reference from Exhibit 4.1 to Registrant's Current Report
on Form 8-K, dated December 17, 1997)
4.5 Five Year Credit Agreement, dated as of November 30, 1999,
among Registrant, Bank of America, N.A., as Administrative
Agent, and the financial institutions signatory thereto.....
4.6 Short Term Credit Agreement, dated as of November 30, 1999,
among Registrant, Bank of America, N.A., as Administrative
Agent, and the financial institutions signatory thereto.....
4.7 Credit Agreement, dated as of October 18, 1996, among
Registrant, Morgan Guaranty Trust Company of New York, as
Documentation Agent, The Bank of New York, as Administrative
Agent, and the financial institutions signatory thereto
(incorporated herein by reference from Exhibit 4.5 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)
4.8 Amendment No. 1 to Credit Agreement, dated as of December 3,
1998, among Registrant, Morgan Guaranty Trust Company of New
York, as Documentation Agent, The Bank of New York, as
Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibit 4.7 hereto
(incorporated herein by reference from Exhibit 4.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
4.9 Amendment No. 2 to Credit Agreement, dated as of November
30, 1999, among Registrant, Morgan Guaranty Trust Company of
New York, as Documentation Agent, The Bank of New York, as
Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibits 4.7 and 4.8
hereto......................................................
4.10 Credit Agreement, dated as of June 1, 1998, among Hilton
Hawaiian Village LLC, Registrant, NationsBank, N.A., as
Syndication Agent, First Union National Bank, as
Documentation Agent, The Bank of New York, as Administrative
Agent, and the financial institutions signatory thereto.....
4.11 Amendment No. 1 to Credit Agreement, dated as of December
10, 1998, among Hilton Hawaiian Village LLC, Registrant,
NationsBank, N.A., as Syndication Agent, First Union
National Bank, as Documentation Agent, The Bank of New York,
as Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibit 4.10 hereto..........
4.12 Amendment No. 2 to Credit Agreement, dated as of November
30, 1999, among Hilton Hawaiian Village LLC, Registrant,
Bank of America, N.A., as Syndication Agent, First Union
National Bank, as Documentation Agent, The Bank of New York,
as Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibits 4.10 and 4.11
hereto......................................................
4.13 Reimbursement Agreement, dated as of November 15, 1990,
among Registrant, Swiss Bank Corporation and the financial
institutions signatory thereto (incorporated herein by
reference from Exhibit 4.7 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990)
4.14 First Amendment to Reimbursement Agreement, dated as of
December 17, 1996, among Registrant, Deutsche Bank AG and
the financial institutions signatory thereto, relating to
Exhibit 4.13 hereto (incorporated herein by reference from
Exhibit 4.9 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998)
4.15 Second Amendment to Reimbursement Agreement, dated as of May
1, 1998, among Registrant, Deutsche Bank AG and the
financial institutions signatory thereto, relating to
Exhibits 4.13 and 4.14 hereto (incorporated herein by
reference from Exhibit 4.10 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998)
4.16 Third Amendment to Reimbursement Agreement, dated as of June
30, 1999, among Registrant, Deutsche Bank AG and the
financial institutions signatory thereto, relating to
Exhibits 4.13, 4.14 and 4.15 hereto.........................
4.17 Fourth Amendment to Reimbursement Agreement, dated as of
November 30, 1999, among Registrant, Deutsche Bank AG and
the financial institutions signatory thereto, relating to
Exhibits 4.13, 4.14, 4.15 and 4.16 hereto...................
4.18 Rights Agreement, dated as of November 29, 1999, between
Registrant and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (incorporated herein by reference from Exhibit
1 to Registrant's Registration Statement on Form 8-A, dated
December 1, 1999)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
10.1 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement
relating thereto, both as amended (incorporated herein by
reference from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibit 10.1 hereto (incorporated herein by reference
from Exhibit 10.3 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990)*
10.3 Amendment, dated November 14, 1996, to the 1984 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibits 10.1 and 10.2 hereto (incorporated herein by
reference from Exhibit 10.3 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996)*
10.4 Third Amendment, dated as of December 31, 1998, to the 1984
Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.1, 10.2 and 10.3 hereto
(incorporated herein by reference from Exhibit 99.8 to
Registrant's Current Report on Form 8-K, dated January 8,
1999)*
10.5 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement
relating thereto, both as amended (incorporated herein by
reference from Exhibit 10.4 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990)*
10.6 Amendment, dated January 20, 1994, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibit 10.5 hereto (incorporated herein by reference
from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993)*
10.7 Amendment, dated January 19, 1995, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibits 10.5 and 10.6 hereto (incorporated herein by
reference from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994)*
10.8 Amendment, dated November 14, 1996, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibits 10.5, 10.6 and 10.7 hereto (incorporated herein
by reference from Exhibit 10.7 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)*
10.9 Fourth Amendment, dated as of December 31, 1998, to the 1990
Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.5, 10.6, 10.7 and 10.8
hereto (incorporated herein by reference from Exhibit 99.9
to Registrant's Current Report on Form 8-K, dated January 8,
1999)*
10.10 Amended and Restated 1996 Stock Incentive Plan of Registrant
(incorporated herein by reference from Annex F to
Registrant's Joint Proxy Statement/Prospectus, dated October
23, 1998)*
10.11 1996 Chief Executive Stock Incentive Plan of Registrant
(incorporated herein by reference from Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995)*
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
10.12 First Amendment, dated as of December 31, 1998, to the Chief
Executive Stock Incentive Plan of Registrant, relating to
Exhibit 10.11 hereto (incorporated herein by reference from
Exhibit 99.10 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)*
10.13 1997 Independent Director Stock Option Plan of Registrant
(incorporated herein by reference from Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997)*
10.14 First Amendment, dated as of December 31, 1998, to the 1997
Independent Director Stock Option Plan of Registrant,
relating to Exhibit 10.13 hereto (incorporated herein by
reference from Exhibit 99.11 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)*
10.15 Second Amendment, dated as of November 11, 1999, to the 1997
Independent Director Stock Option Plan of Registrant,
relating to Exhibits 10.13 and 10.14 hereto*................
10.16 Incentive Compensation Plan of Registrant (incorporated
herein by reference from Exhibit 10.4 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1980)*
10.17 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.16
hereto (incorporated herein by reference from Exhibit 10.7
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993)*
10.18 Promus Hotel Corporation Key Executive Officer Annual
Incentive Plan (incorporated herein by reference from
Exhibit 10.30 to the Promus Hotel Corporation Annual Report
on Form 10-K for the year ended December 31, 1998)*
10.19 Retirement Plan of Registrant, as amended and restated
(incorporated herein by reference from Exhibit 10.8 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)*
10.20 First Amendment, dated as of November 15, 1995, to the
Retirement Plan of Registrant, relating to Exhibit 10.19
hereto (incorporated herein by reference from Exhibit 10.11
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)*
10.21 Second Amendment, effective December 31, 1996, to the
Retirement Plan of Registrant, relating to Exhibits 10.19
and 10.20 hereto (incorporated herein by reference from
Exhibit 10.15 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996)*
10.22 Third Amendment, effective December 31, 1996, to the
Retirement Plan of Registrant, relating to Exhibits 10.19,
10.20 and 10.21 hereto (incorporated herein by reference
from Exhibit 10.16 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1996)*
10.23 Amendment, effective January 1, 1997, to the Retirement Plan
of Registrant, relating to Exhibits 10.19, 10.20, 10.21 and
10.22 hereto (incorporated herein by reference from
Exhibit 10.17 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)*
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
10.24 Amendment 1999-1 to the Retirement Plan of Registrant,
relating to Exhibits 10.19, 10.20, 10.21, 10.22 and 10.23
hereto (incorporated herein by reference from Exhibit 99.01
to Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1999)*
10.25 Supplemental Executive Retirement Plan of Registrant, as
amended (incorporated herein by reference from Exhibit 10.6
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991)*
10.26 Amendment, effective April 1, 1994, to the Supplemental
Executive Retirement Plan of Registrant, relating to
Exhibit 10.25 hereto (incorporated herein by reference from
Exhibit 10.10 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994)*
10.27 Amendment, effective December 31, 1996, to the Supplemental
Executive Retirement Plan of Registrant, relating to
Exhibits 10.25 and 10.26 hereto (incorporated herein by
reference from Exhibit 10.19 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)*
10.28 Doubletree Hotels Corporation Supplemental Executive
Retirement Plan, dated as of February 15, 1997, as amended
by letter dated December 9, 1997 (incorporated herein by
reference from Exhibit 10.29 to the Promus Hotel Corporation
Annual Report on Form 10-K for the year ended December 31,
1998)*
10.29 Directors' Retirement Benefit Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991)*
10.30 First Amendment, dated July 31, 1997, to the Directors'
Retirement Benefit Plan of Registrant, relating to Exhibit
10.29 hereto (incorporated herein by reference from
Exhibit 10.22 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)*
10.31 Retirement Benefit Replacement Plan of Registrant, as
amended (incorporated herein by reference from Exhibit 10.9
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992)*
10.32 Amendment, dated as of January 1, 1994, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibit 10.31 hereto (incorporated herein by reference from
Exhibit 10.12 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993)*
10.33 Amendment, effective April 1, 1994, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibits 10.31 and 10.32 hereto (incorporated herein by
reference from Exhibit 10.14 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994)*
10.34 Amendment, effective December 31, 1996, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibits 10.31, 10.32 and 10.33 hereto (incorporated herein
by reference from Exhibit 10.24 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996)*
10.35 Thrift Savings Plan of Registrant, as amended and restated
(incorporated herein by reference from Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)*
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
10.36 Amendment, effective January 1, 1996, to the Thrift Savings
Plan of Registrant, relating to Exhibit 10.35 hereto
(incorporated herein by reference from Exhibit 10.26 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)*
10.37 Amendment, effective January 1, 1997, to the Thrift Savings
Plan of Registrant, relating to Exhibits 10.35 and 10.36
hereto (incorporated herein by reference from Exhibit 10.29
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)*
10.38 Amendment 1999-1 to the Thrift Savings Plan of Registrant,
relating to Exhibits 10.35, 10.36 and 10.37 hereto
(incorporated herein by reference from Exhibit 99.02 to
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1999)*
10.39 Executive Deferred Compensation Plan of Registrant, as
amended and restated effective January 1, 2000*.............
10.40 Employee Stock Purchase Plan of Registrant (incorporated
herein by reference from Exhibit 10.29 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1996)*
10.41 Amendment, effective January 1, 1997, to the Employee Stock
Purchase Plan of Registrant, relating to Exhibit 10.40
hereto (incorporated herein by reference from Exhibit 10.34
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)*
10.42 Second Amendment, dated as of December 31, 1998, to the
Employee Stock Purchase Plan of Registrant, relating to
Exhibits 10.40 and 10.41 hereto (incorporated herein by
reference from Exhibit 99.12 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)*
10.43 Form of Change of Control Agreement between Registrant and
each of Thomas E. Gallagher, Matthew J. Hart, Barron
Hilton, Dieter H. Huckestein and Thomas L. Keltner*.........
10.44 Employment Agreement, dated as of March 9, 2000, between
Registrant and Stephen F. Bollenbach*.......................
10.45 Distribution Agreement, dated as of December 31, 1998,
between Registrant and Park Place (incorporated herein by
reference from Exhibit 99.1 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)
10.46 Debt Assumption Agreement, dated as of December 31, 1998,
between Registrant and Park Place (incorporated herein by
reference from Exhibit 99.2 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)
10.47 Assignment and License Agreement, dated as of December 31,
1998, between Registrant, Conrad International Royalty
Corporation and Park Place (incorporated herein by reference
from Exhibit 99.3 to Registrant's Current Report on Form
8-K, dated January 8, 1999)
10.48 Hilton Hotels Corporation Corporate Services Agreement,
dated as of December 31, 1998, between Registrant and Park
Place (incorporated herein by reference from Exhibit 99.4 to
Registrant's Current Report on Form 8-K, dated January 8,
1999)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S> <C>
10.49 Park Place Entertainment Corporation Corporate Services
Agreement, dated as of December 31, 1998, between Registrant
and Park Place (incorporated herein by reference from
Exhibit 99.5 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
10.50 Employee Benefits and Other Employment Matters Allocation
Agreement, dated as of December 31, 1998, between Registrant
and Park Place (incorporated herein by reference from
Exhibit 99.6 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
10.51 Tax Allocation and Indemnity Agreement, dated as of December
31, 1998, between Registrant and Park Place (incorporated
herein by reference from Exhibit 99.7 to Registrant's
Current Report on Form 8-K, dated January 8, 1999)
10.52 Guarantee Agreement, dated as of February 6, 1996, among
Promus Hotel Corporation, Promus Hotels, Inc., Canadian
Imperial Bank of Commerce, as Agent for the lenders, FelCor
Suites Limited Partnership, FelCor/CSS Holdings, L.P. and
FelCor Suite Hotels, Inc. (incorporated herein by reference
from Exhibit 10.3 to the Promus Hotel Corporation Quarterly
Report on Form 10-Q for quarter ended March 31, 1996)
10.53 Guaranty Agreement, dated as of November 13, 1998, among
Doubletree Corporation, GMAC Commercial Mortgage Corporation
and Promus Hotel Corporation (incorporated herein by
reference from Exhibit 10.5 to the Promus Hotel Corporation
Annual Report on Form 10-K for the year ended December 31,
1998)
10.54 Termination Agreement, dated as of January 26, 2000, among
Registrant, Doubletree Corporation, RFS Hotel Investors,
Inc. and related entities signatory thereto.................
11 Computation of Earnings Per Share...........................
12 Computation of Ratios of Earnings to Fixed Charges..........
13 Incorporated portions of Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1999....
21 List of Registrant's Subsidiaries...........................
23 Consent of Independent Public Accountants...................
99 Undertakings................................................
</TABLE>
- ---------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of
Regulation S-K, previously filed where indicated and incorporated herein by
reference.
Pursuant to Regulation Section 229.601, Item 601(b)(4)(iii) of
Regulation S-K, upon request of the Securities and Exchange Commission, the
Registrant hereby undertakes to furnish a copy of any unfiled instrument which
defines the rights of holders of long-term debt of the Registrant and its
consolidated subsidiaries (and for any of its unconsolidated subsidiaries for
which financial statements are required to be filed) wherein the total amount of
securities authorized thereunder does not exceed 10% of the total consolidated
assets of the Registrant.
32
<PAGE>
EXHIBIT 4.5
FIVE YEAR CREDIT AGREEMENT
dated as of
November 30, 1999
among
HILTON HOTELS CORPORATION
The Lenders and Syndication Agents Referred to Herein
and
BANK OF AMERICA, N.A.
as the Administrative Agent
--------------------------------------
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Sole Book Manager
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS..........................................................................................1
1.01 Definitions....................................................................................1
1.02 Accounting Terms and Determinations...........................................................15
1.03 Types of Borrowings...........................................................................16
ARTICLE II
THE CREDITS.........................................................................................17
2.01 Commitments to Lend...........................................................................17
2.02 Notice of Committed Borrowings................................................................17
2.03 Money Market Borrowings.......................................................................17
2.04 Swing Line Loans..............................................................................21
2.05 Conversion and Continuation of Committed Loans................................................23
2.06 Notice to Lenders; Funding of Loans...........................................................23
2.07 Notes.........................................................................................24
2.08 Interest Rates................................................................................25
2.09 Administrative Agency Fees....................................................................26
2.10 Upfront Fees..................................................................................26
2.11 Facility Fees.................................................................................26
2.12 Letter of Credit Fees.........................................................................26
2.13 Optional Termination or Reduction of Commitments
by Borrower................................................................................26
2.14 Optional Termination or Reduction of Commitments
by the Lenders.............................................................................27
2.15 Scheduled Termination of Commitments..........................................................27
2.16 Optional Prepayments..........................................................................27
2.17 General Provisions as to Payments.............................................................27
2.18 Funding Losses................................................................................28
2.19 Computation of Interest and Fees..............................................................28
2.20 Withholding Tax Exemption.....................................................................29
2.21 Letters of Credit.............................................................................29
2.22 Regulation D Compensation.....................................................................32
2.23 Extension of Termination Date..................................................................32
2.24 Increased Commitments; Additional Lenders.....................................................33
ARTICLE III
CONDITIONS..........................................................................................35
3.01 Borrowings and Issuances of Letters of Credit.................................................35
3.02 Effective Date................................................................................35
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES......................................................................38
4.01 Corporate Existence and Power.................................................................38
4.02 Corporate and Governmental Authorization;
Contravention..............................................................................38
4.03 Binding Effect................................................................................38
4.04 Financial Information.........................................................................38
4.05 Litigation....................................................................................38
4.06 Compliance with ERISA.........................................................................39
4.07 Taxes.........................................................................................39
4.08 Significant Subsidiaries......................................................................39
4.09 Not an Investment Company.....................................................................39
4.10 Environmental Matters.........................................................................39
4.11 Full Disclosure...............................................................................39
ARTICLE V
COVENANTS...........................................................................................41
5.01 Information...................................................................................41
5.02 Maintenance of Property; Insurance............................................................43
5.03 Conduct of Business and Maintenance of Existence..............................................43
5.04 Compliance with Laws..........................................................................43
5.05 Inspection of Property, Books and Records.....................................................43
5.06 Negative Pledge...............................................................................44
5.07 Consolidations, Mergers and Sales of Assets...................................................45
5.08 Use of Proceeds...............................................................................45
5.09 Leverage Ratio................................................................................45
5.10 Interest Coverage Ratio.......................................................................45
ARTICLE VI
DEFAULTS............................................................................................47
6.01 Events of Default.............................................................................47
6.02 Notice of Default.............................................................................48
6.03 Cash Cover....................................................................................48
ARTICLE VII
THE ADMINISTRATIVE AGENT............................................................................50
7.01 Appointment and Authorization.................................................................50
7.02 Administrative Agent and Affiliates...........................................................50
7.03 Action by the Administrative Agent............................................................50
7.04 Consultation with Experts.....................................................................50
7.05 Liability of Agent............................................................................50
7.06 Indemnification...............................................................................50
7.07 Credit Decision...............................................................................51
7.08 Successor Agent...............................................................................51
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<PAGE>
7.09 Administrative Agents' Fees...................................................................51
ARTICLE VIII
CHANGE IN CIRCUMSTANCES.............................................................................52
8.01 Basis for Determining Interest Rate Inadequate or
Unfair.....................................................................................52
8.02 Illegality....................................................................................52
8.03 Increased Cost and Reduced Return.............................................................53
8.04 Base Rate Loans Substituted for Affected Fixed
Rate Loans.................................................................................54
ARTICLE IX
MISCELLANEOUS.......................................................................................56
9.01 Notices.......................................................................................56
9.02 No Waivers....................................................................................56
9.03 Expenses; Documentary Taxes; Indemnification..................................................56
9.04 Amendments and Waivers........................................................................57
9.05 Successors and Assigns........................................................................57
9.06 New York Law; Submission to Jurisdiction......................................................60
9.07 Counterparts; Integration.....................................................................60
9.08 Several Obligations...........................................................................60
9.09 Sharing of Set-Offs...........................................................................61
9.10 WAIVER OF JURY TRIAL..........................................................................62
SCHEDULES:
Pricing Schedule
EXHIBITS:
Exhibit A - Compliance Certificate
Exhibit B - Form of Note
Exhibit C - Pricing Certificate
Exhibit D - Form of Notice of Committed Borrowing
Exhibit E - Form of Request for Letter of Credit
Exhibit F - Form of Money Market Quote Request
Exhibit G - Form of Invitation for Money Market Quotes
Exhibit H - Form of Money Market Quote
Exhibit I - Opinion of Gibson, Dunn & Crutcher, LLP
Exhibit J - Assignment and Assumption Agreement
Exhibit K - Extension Agreement
</TABLE>
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<PAGE>
FIVE YEAR CREDIT AGREEMENT
FIVE YEAR CREDIT AGREEMENT dated as of November 30, 1999,
among HILTON HOTELS CORPORATION ("Borrower"), THE BANK OF NOVA SCOTIA, FIRST
UNION NATIONAL BANK AND WACHOVIA BANK, as Syndication Agents, the Lenders who
are parties hereto from time to time, and BANK OF AMERICA, N.A., as
Administrative Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money
Market Quotes setting forth Money Market Absolute Rates pursuant to Section
2.03.
"Additional Lender" has the meaning set forth in Section
2.24(b).
"Administrative Agent" means Bank of America, N.A. in its
capacity as administrative agent for the Lenders hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each
Lender, an administrative questionnaire in the form prepared by the
Administrative Agent and submitted to the Administrative Agent (with a copy
to the Borrower) duly completed by such Lender.
"Affiliate" means, as to any Lender, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Lender. As used in this definition, "control" (and the
correlative terms, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise);
PROVIDED that, in any event, any Person that owns, directly or indirectly,
25% or more of the securities having ordinary voting power for the election
of directors or other governing body of a corporation, or 25% or more of the
partnership or other ownership interests of any other Person, will be deemed
to control such corporation or other Person.
"Agreement" means this Five Year Credit Agreement, either
as originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
"Allocation Notice" means a written communication submitted
to each Lender by the Lead Arranger prior to the date hereof, setting forth
the allocated Commitment of each Lender as of the Effective Date.
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<PAGE>
"Applicable Lending Office" means, with respect to any
Lender, (i) in the case of its Base Rate Loans, its Domestic Lending Office,
(ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and
(iii) in the case of its Money Market Loans, its Money Market Lending Office.
"Authorized Officer" means any of the controller, the
treasurer or the chief financial officer of the Borrower.
"Bank of America" means Bank of America, N.A., its
successors and assigns.
"Base Rate" means, as of any date of determination, the
rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal
to the HIGHER OF (a) the Reference Rate in effect on such date (calculated on
the basis of a year of 365 or 366 days and the actual number of days elapsed)
and (b) the Federal Funds Rate in effect on such date (calculated on the
basis of a year of 360 days and the actual number of days elapsed) PLUS 1/2
of 1% (50 basis points).
"Base Rate Loan" means a Committed Loan made or to be made
by a Lender as a Base Rate Loan in accordance with the applicable Notice of
Committed Borrowing or Notice of Conversion/Continuation or pursuant to
Article VIII.
"Base Rate Margin" has the meaning set forth on the Pricing
Schedule.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Hilton Hotels Corporation, a Delaware
corporation, and its successors.
"Borrowing" means the aggregation of Loans of one or more
Lenders to be made to the Borrower pursuant to Article II on a single date
and, in the case of Fixed Rate Borrowings, for a single Interest Period.
"Change of Control" means the occurrence of a Rating
Decline in connection with any of the following events: (i) upon any merger
or consolidation of the Borrower with or into any person or any sale,
transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Borrower, on a consolidated basis, in
one transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) is or becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
securities representing a majority of the total voting power of the aggregate
outstanding securities of the transferee or surviving entity normally
entitled to vote in the election of directors, managers, or trustees, as
applicable, of the transferee or surviving entity, (ii) when any person or
group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) is or becomes the beneficial owner (within
the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of securities representing a majority of total
voting power of the aggregate outstanding securities of the Borrower
-2-
<PAGE>
normally entitled to vote in the election of directors of the Borrower, (iii)
when, during any period of 12 consecutive calendar months, individuals who
were directors of the Borrower on the first day of such period (together with
any new directors whose election by the board of directors of the Borrower or
whose nomination for election by the stockholders of the Borrower was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of the Borrower, or (iv) the
sale or disposition, whether directly or indirectly, by the Borrower of all
or substantially all of its assets.
"Commitment" means, as to each Lender, the commitment of
that Lender to make Loans and to participate in Letters of Credit and Swing
Line Loans, in each case as such amount may be reduced from time to time
pursuant to Section 2.13, 2.14, 2.15, or 2.16 or increased from time to time
pursuant to Section 2.24. The aggregate amount of the Commitments under this
Agreement as of the Effective Date is $1,400,000,000. As of the Effective
Date, each Lender shall hold a Commitment in the amount set forth in its
Allocation Notice.
"Committed Loan" means a loan made or to be made by a
Lender pursuant to Section 2.01.
"Compliance Certificate" means a certificate, substantially
in the form of Exhibit A, properly completed and signed by an Authorized
Officer.
"Consolidated Debt" means at any date the Debt of the
Borrower and its Subsidiaries, determined on a consolidated basis as of such
date PROVIDED that Consolidated Debt shall exclude (A) the PPE Assumed Notes,
and (B) Debt of the Borrower or a Subsidiary as to which a sum of cash and
cash equivalents sufficient to provide for payment in full of such Debt at
its scheduled maturity or at an earlier date at which it shall have been
called for redemption shall have been irrevocably deposited in trust for the
benefit of the holders of such Debt or a representative of such holders so as
to result in legal or in substance defeasance thereof; PROVIDED, FURTHER,
that, notwithstanding clause (A) in the foregoing proviso, if Park Place
fails to pay when due any principal of or interest on or any other amount
with respect to the PPE Assumed Notes or reimburse the Borrower for payment
thereof, and such failure is continuing, on and after the 90th day after such
payment default first occurs, any of the PPE Assumed Notes then outstanding
shall be included in Consolidated Debt, unless such Debt then would be
excluded therefrom pursuant to clause (B) in the foregoing proviso.
"Consolidated EBITDA" means, for any period, Consolidated
Net Income for such period before (i) income taxes, (ii) interest expense,
(iii) depreciation and amortization, (iv) minority interest, (v)
extraordinary losses or gains, (vi) Pre-Opening Expenses, (vii) transactional
expenses associated with the Park Place Spin-Off and the Promus Acquisition,
(viii) discontinued operations and (ix) nonrecurring non-cash charges;
PROVIDED that:
(a) Consolidated EBITDA for any period shall be adjusted on a
pro forma basis (i) to include (or exclude) amounts attributable to
hotel operations acquired (or sold or otherwise discontinued) during
such period as if such acquisition (or disposition) had occurred on the
first day of such period and (ii) to include amounts (annualized on a
simple arithmetic basis) attributable to hotel projects which commenced
operations during such period and were in operation for at least one
full fiscal quarter during such period;
-3-
<PAGE>
(b) for purposes of determining Consolidated EBITDA for any
period, Consolidated Net Income shall exclude any interest income
attributable to the assumption or payment by Park Place of the PPE
Assumed Notes;
(c) in calculating "Consolidated EBITDA" for that portion of
any period occurring prior to the Effective Date, "Consolidated EBITDA"
shall be computed on the basis of the combined operating results of the
Borrower, Promus and their respective Subsidiaries for such periods
reflected in the Pro Forma Combined Financial Statements; and
(d) the operating results of each New Project which commences
operations and records not less than one full fiscal quarter's
operations during the relevant period shall be annualized on a simple
arithmetic basis.
"Consolidated Interest Expense" means, for any period, net
interest expense of the Borrower and its Subsidiaries for such period,
determined in accordance with generally accepted accounting principles,
PROVIDED that for that portion of any period occurring prior to the Effective
Date, "Consolidated Interest Expense" shall be computed on the basis of the
net interest expense allocated to the Borrower and its Subsidiaries and shown
on the Pro Forma Combined Financial Statements.
"Consolidated Net Income" means, for any period, the
consolidated net income of the Borrower and its Subsidiaries for such period
determined in accordance with generally accepted accounting principles,
PROVIDED that for that portion of any period occurring prior to the Effective
Date, such consolidated net income shall be the pro forma combined net income
of the Borrower, Promus and their respective Subsidiaries for such periods
reflected in the Pro Forma Combined Financial Statements PLUS the Pro Forma
Adjustments applicable to that portion of such period.
"Consolidated Net Tangible Assets" means the total assets
of the Borrower and its Subsidiaries, after deducting therefrom (a) all
current liabilities of the Borrower and its Subsidiaries (excluding (i) the
current portion of long term indebtedness, (ii) inter-company liabilities,
and (iii) any liabilities which are by their terms renewable or extendable at
the option of the obligor thereon to a time more than twelve months from the
time as of which the amount thereof is being computed), and (b) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the latest consolidated balance
sheet of the Borrower prepared in accordance with generally accepted
accounting principles.
"Covered Subsidiary" means at any time any Subsidiary of
the Borrower that has consolidated assets in an amount greater than
$5,000,000.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business and obligations in the nature of deferred
employee compensation to the extent that such deferred employee compensation
obligations do not exceed $150,000,000, in the aggregate, (iv) all
obligations of such Person as lessee under leases which are capitalized in
accordance with generally accepted accounting principles, (v) all other
obligations secured by a Lien on any asset of such Person, whether
-4-
<PAGE>
or not such obligations are otherwise an obligation of such Person, in an
amount equal to the lesser of the amount of the obligation so secured or the
fair value of the assets subject to such Lien, and (vi) all obligations of
others constituting "Debt" under the foregoing clauses of this paragraph
which are Guaranteed by such Person; it being understood that "Debt" does not
include contingent obligations of such Person to reimburse any other Person
in respect of surety bonds or letters of credit.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City or Los Angeles
are authorized or required by law to close.
"Domestic Lending Office" means, as to each Lender, its
office located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Lender may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Administrative
Agent.
"Effective Date" means the first date upon which each of
the conditions precedent set forth in Section 3.02 of this Agreement are
satisfied or waived in writing by the Administrative Agent with the consent
of all of the Lenders.
"Eligible Assignee" means (a) another Lender, (b) with
respect to any Lender, any Affiliate of that Lender, (c) any commercial bank
having a combined capital and surplus of $500,000,000 or more, (d) any (i)
savings bank, savings and loan association or similar financial institution
or (ii) insurance company which, in either case (A) has a net worth of
$500,000,000 or more, (B) is regularly engaged in the business of lending
money and extending credit under credit facilities substantially similar to
those extended under this Agreement and (C) is operationally and procedurally
able to meet the obligations of a Lender hereunder to the same degree as a
commercial bank and (e) any other financial institution (INCLUDING a mutual
fund or other fund) having total assets of $250,000,000 or more which meets
the requirements set forth in subclauses (B) and (C) of clause (d) above;
PROVIDED that each Eligible Assignee must either (a) be organized under the
laws of the United States of America, any State thereof or the District of
Columbia or (b) be organized under the laws of the Cayman Islands or any
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of such a country, and (i) act
hereunder through a branch, agency or funding office located in the United
States of America and (ii) is otherwise exempt from withholding of tax on
interest and delivers appropriate Tax Withholding Forms pursuant to Section
2.20 at the time of any assignment pursuant to Section 9.05.
"Environmental Laws" means any and all statutes,
regulations, permits, licenses or other governmental restrictions relating to
the environment or to releases of petroleum or petroleum products, chemicals
or toxic or hazardous substances or wastes into the environment.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, or any successor statute.
-5-
<PAGE>
"ERISA Group" means the Borrower, any Subsidiary of the
Borrower and all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control which,
together with the Borrower or any Subsidiary of the Borrower, are treated as
a single employer under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day
on which commercial banks are open for international business (including
dealings in Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Lender as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan made or to be
made by a Lender as a Euro-Dollar Loan in accordance with the applicable
Notice of Committed Borrowing or Notice of Conversion/Continuation and
bearing interest with reference to the London Interbank Offered Rate.
"Euro-Dollar Margin" has the meaning set forth on the
Pricing Schedule.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank
of the Federal Reserve System with deposits exceeding five billion Dollars in
respect of "eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate
on Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any bank
to United States residents).
"Event of Default" has the meaning set forth in Section
6.01.
"Excluded Taxes" means (a) taxes or assessments on or
measured by or upon the overall net income, gross income or gross receipts of
lenders generally, and (b) franchise taxes levied upon lenders generally.
"Existing Hilton Facility" means the $1,750,000,000 Credit
Agreement dated as of October 18, 1996 among the Borrower, the lenders
referred to therein, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and The Bank of New York, as Administrative Agent, as
amended.
"Existing Hawaiian Village Facility" means the $500,000,000
Credit Agreement dated as of June 1, 1998 among Hilton Hawaiian Village LLC,
as borrower, the Borrower, as guarantor, the Banks, Syndication Agent and
Documentation Agent referred to therein, and The Bank of New York, as
Administrative Agent, as amended.
"Existing Promus Facility" means, collectively, (a) the
Tranche A Credit Agreement dated as of December 19, 1997 among Doubletree
Corporation, a Delaware corporation and a wholly-
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<PAGE>
owned subsidiary of Promus, and Promus Hotels, Inc., as borrowers, Promus and
Promus Operating Company, Inc., a Delaware corporation and a wholly-owned
Subsidiary of Promus, as guarantors, the lenders and agents party thereto
and, NationsBank, N.A., as Agent , as amended to the Effective Date, and (b)
the Tranche B Credit Agreement dated as of December 19, 1997 among the same
parties, as amended as of the Effective Date.
"Existing Promus Letters of Credit" means Letters of Credit
heretofore issued under the Existing Promus Facility by Bank of America's
predecessor, NationsBank, N.A., by The Bank of Nova Scotia, and by First
Tennessee Bank, National Association,, having an aggregate effective face
amount of $18,006,810, which shall be deemed outstanding as Letters of Credit
hereunder as of the Effective Date pursuant to Section 2.21(a).
"Facility Fee Rate" has the meaning set forth on the
Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of l%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if such day
is not a Domestic Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Domestic Business Day as
so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.
"Fixed Rate Loans" means Euro-Dollar Loans or Money Market
Loans (excluding Money Market Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
"Gaming Segment" means the former gaming segment (as
"segment" is used in Regulation S-K and Regulation S-X of the Securities and
Exchange Commission) of the Borrower which, prior to December 31, 1998, was
comprised of assets and operations now principally owned and conducted by
Park Place.
"Granting Lender" has the meaning set forth in Section
9.05(f).
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person(i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder
of such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include (x) endorsements for collection or deposit in the ordinary course
of business or (y) performance or completion guarantees. The term "Guarantee"
used as a verb has a corresponding meaning.
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<PAGE>
"Increased Commitment" has the meaning set forth in Section
2.24.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Initial Year" means the period from the Effective Date
through November 30, 2000.
"Interest Coverage Ratio" means, as of the last day of each
fiscal quarter, the ratio of (a) Consolidated EBITDA for the four fiscal
quarters ending on that date, to (b) Consolidated Interest Expense for the
same period.
"Interest Period" means:
(a) with respect to each Euro-Dollar Borrowing or Money Market
LIBOR Borrowing, the period commencing on the date of such
Borrowing and ending one week or 1, 2, 3 or 6 months thereafter (or in
the case of a Money Market LIBOR Borrowing, such other period as the
Borrower may specify in the related Money Market Quote Request pursuant
to Section 2.03), as the Borrower may elect in the applicable Notice of
Committed Borrowing, Money Market Quote Request or Notice of
Conversion/Continuation; provided that:
(i) any Interest Period which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last
Euro-Dollar Business Day in a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (a)(iii) below, end on the last Euro-Dollar
Business Day in the calendar month which is the last calendar
month which commences in such Interest Period; and
(iii) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date,
or, if such date is not a Euro-Dollar Business Day, then on
the next preceding Euro-Dollar Business Day.
(b) with respect to each Money Market Absolute Rate Borrowing,
the period commencing on the date of such Borrowing and ending not less
than 5 days nor more than the earlier to occur of 364 days thereafter
or the Termination Date, as the Borrower may elect in accordance with
Section 2.03; provided that:
(i) any Interest Period which would otherwise end on
a day which is not a Domestic Business Day shall be extended
to the next succeeding Domestic Business Day; and
(ii) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date.
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<PAGE>
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment Grade" means (i) with respect to S&P, a rating
of BBB-or higher, and (ii) with respect to Moody's, a rating of Baa3 or
higher.
"Invitation for Money Market Quotes" has the meaning set
forth in Section 2.03(c).
"Issuing Lender" means (a) with respect to the Existing
Promus Letters of Credit, Bank of America, The Bank of Nova Scotia and First
Tennessee Bank, National Association (b) with respect to each other Letter of
Credit, Bank of America or any other Lender which may hereafter agree to
issue Letters of Credit hereunder, in each case in that Lender's capacity as
issuer of a Letter of Credit hereunder.
"LC Fee Rate" has the meaning set forth on the Pricing
Schedule.
"Lead Arranger" means Banc of America Securities LLC.
Following the date of this Agreement, the Lead Arranger shall have no
obligations or liabilities under the Loan Documents.
"Lender" means each lender listed on the signature pages
hereof and each Lender which accepts an assignment pursuant to Section 9.05,
and their respective successors and shall include, as the context may
require, the Issuing Lender in its capacity as Issuing Lender.
"Letter of Credit" means a letter of credit to be issued
hereunder by the Issuing Lender in accordance with Section 2.21.
"Letter of Credit Commitment" means the lesser of (x)
$250,000,000 and (y) the aggregate Commitments.
"Letter of Credit Liabilities" means, for any Lender and at
any time, such Lender's ratable participation in the sum of (x) the amounts
then owing by the Borrower in respect of amounts drawn under Letters of
Credit and (y) the aggregate amount then available for drawing under all
Letters of Credit.
"Leverage Ratio" means, as of each date of determination,
the ratio of (a) Consolidated Debt on such date to (b) Consolidated EBITDA
for the four fiscal quarters ending on that date.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary of the Borrower shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
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<PAGE>
"Loan" means a Base Rate Loan or a Euro-Dollar Loan or a
Money Market Loan and "Loans" means Base Rate Loans or Euro-Dollar Loans or
Money Market Loans or any combination of the foregoing.
"Loan Documents" means this Agreement and the Notes.
"London Interbank Offered Rate" means, for the Interest
Period applicable to each Euro-Dollar Loan, the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum
at which deposits in Dollars are offered to the Administrative Agent in the
London interbank market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Euro-Dollar Loan of
the Administrative Agent to which such Interest Period is to apply and for a
period of time equal to such Interest Period.
"Margin Adjustment" has the meaning set forth in the
Pricing Schedule.
"Material Adverse Effect" means, as of each date of
determination, a material adverse effect on or change in the condition
(financial or otherwise), business, assets or results of operations or
prospects of the Borrower and its Subsidiaries, taken as a whole (or, for
purposes of Section 3.02(h), of the Borrower and Promus and their respective
subsidiaries, taken as a whole and on a pro forma combined consolidated
basis) EXCEPT any such effect or change resulting from (i) changes in
circumstances or conditions affecting the hotel, motel or travel industries
in general or affecting any segment or region thereof in which they operate,
(ii) changes in general economic or business conditions in the United States,
or (iii) the transactions contemplated by the Promus Merger Agreement or the
announcement thereof, including but not limited to any stockholder litigation
brought or threatened in respect of the Promus Merger Agreement or the Promus
Acquisition.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.
"Maximum Money Market Loan Amount" has the meaning set
forth in Section 2.03(a).
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made
by a Lender pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Lender, its
Domestic Lending Office or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Money Market Lending Office by
notice to the Borrower and the Administrative Agent; PROVIDED that any Lender
may from time to time by notice to the Borrower and the Administrative Agent
designate separate Money Market Lending Offices for its Money Market LIBOR
Loans, on the one hand, and its Money Market Absolute Rate Loans, on the
other hand, in which case all references herein to the Money Market Lending
Office of such Lender shall be deemed to refer to either or both of such
offices, as the context may require.
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<PAGE>
"Money Market LIBOR Loan" means a loan to be made by a
Lender pursuant to a LIBOR Auction (including such a loan bearing interest at
the Base Rate pursuant to Section 8.02).
"Money Market Loan" means a Money Market LIBOR Loan or a
Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d).
"Money Market Quote" means an offer by a Lender to make a
Money Market Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"New Project" means each new hotel or resort project (as
opposed to any project which consists of an extension or redevelopment of an
operating hotel or resort) having a development and construction budget in
excess of $50,000,000 which hereafter receives a certificate of completion or
occupancy and all relevant operational licenses, and in fact commences
operations.
"Non-Recourse Debt" means Debt in respect of which the
recourse of the holder of such Debt is limited to the assets securing such
Debt and such Debt does not constitute the general obligation of the Borrower
or any Subsidiary of the Borrower.
"Notes" means promissory notes of the Borrower, (a)
substantially in the form of Exhibit B hereto, evidencing the obligation of
the Borrower to repay the Committed Loans, (b) any Note issued to a Lender in
connection with its Money Market Loans under Section 2.07(b), and (c) the
Swing Line Note, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing
(as defined in Section 2.02) or a Notice of Money Market Borrowing (as
defined in Section 2.03(f)).
"Notice of Committed Borrowing" has the meaning set forth
in Section 2.02.
"Notice of Conversion/Continuation" has the meaning set
forth in Section 2.05.
"Notice of Issuance" has the meaning set forth in Section
2.21(b).
"Notice of Money Market Borrowing" has the meaning set
forth in Section 2.03(f).
"Other New Facilities" means the lending commitments of the
Lenders under the Short Term Credit Agreement of even date herewith among
Borrower, the Lenders party thereto and Bank of America, as Administrative
Agent.
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<PAGE>
"Parent" means, with respect to any Lender, any Person
controlling such Lender.
"Park Place" means Park Place Entertainment Corporation, a
Delaware corporation.
"Park Place Spin-Off" means (a) the transfer to Park Place
of the assets comprising the former Gaming Segment of Borrower, and (b) the
distribution by the Borrower to its stockholders of all capital stock of Park
Place by the Borrower, each of which occurred on December 31, 1998.
"PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member
of the ERISA Group for employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PPE Assumed Notes" means the 7.35% senior notes of the
Borrower due 2002 in the aggregate principal amount of $300,000,000 and the
7.00% senior notes of the Borrower due 2004 in the aggregate principal amount
of $325,000,000 issued pursuant to the Indenture, dated as of April 15, 1997
executed by the Borrower in favor of BNY Western Trust Company, as Trustee.
"Pre-Opening Expenses" means, with respect to any fiscal
period, the amount of expenses (other than Consolidated Interest Expense)
incurred with respect to capital projects which are classified as
"pre-opening expenses" on the applicable financial statements of Borrower and
its Subsidiaries for such period (or, with respect to that portion of any
period occurring prior to September 30, 1999, the Pro Forma Combined
Financial Statements), prepared in accordance with generally accepted
accounting principles.
"Pricing Certificate" means a Pricing Certificate
substantially in the form of Exhibit C hereto, properly completed and signed
by an Authorized Officer.
"Pro Forma Adjustment" means an adjustment to the amount of
Consolidated Net Income set forth in the Pro Forma Combined Financial
Statements for the period prior to the Effective Date reflecting anticipated
synergies from the Merger (on a pro forma combined basis) equal in each
fiscal period set forth below to the amount set forth opposite that fiscal
period:
<TABLE>
<CAPTION>
FISCAL PERIOD PRO FORMA ADJUSTMENT
------------- --------------------
<S> <C>
January 1 through March 31, 1999 $10,000,000
April 1 through June 30, 1999 $10,000,000
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July 1 through September 30, 1999 $10,000,000
October 1 through December 31, 1999 $9,500,000.
</TABLE>
"Pro Forma Combined Financial Statements" means (a) from
the Effective Date until the Borrower delivers the pro forma combined
financial statements described in Section 5.01(a), the pro forma combined
financial statements of the Borrower and its Subsidiaries (exclusive of its
former Gaming Segment) and Promus and its Subsidiaries for the twelve month
period ended September 30, 1999 heretofore delivered by the Borrower to the
Administrative Agent and each Lender, and (b) thereafter, the pro forma
combined financial statements for the twelve month period ended December 31,
1999, so delivered.
"Promus" means Promus Hotel Corporation, Inc., a Delaware
corporation.
"Promus Acquisition" means the merger of Promus with a
Subsidiary of the Borrower on the Effective Date pursuant to the Promus
Merger Agreement, as a result of which the Borrower will own, directly or
indirectly, of all of the issued and outstanding capital stock of the
corporation surviving such merger.
"Promus Merger Agreement" means the Agreement and Plan of
Merger dated as of September 3, 1999 among the Borrower, Promus, and PRH
Acquisition Corporation, (formerly known as Chicago Hilton, Inc.), a Delaware
corporation and a wholly-owned subsidiary of the Borrower.
"Public Notice" means, without limitation, any filing or
report made in accordance with the requirements of the Securities and
Exchange Commission (or any successor), any press release or public
announcement made by the Borrower or any written notice the Borrower gives to
the Administrative-Agent or the Lenders.
"Rating Agencies" means S&P and Moody's.
"Rating Decline" means the occurrence on any date on or
within 90 days after the date of the first public notice of (i) the
occurrence of an event described in clauses (i)-(iv) of the definition of
"Change of Control" or (ii) the intention by the Borrower to effect such an
event (which 90-day period shall be extended so long as the rating of the
senior debt of the Borrower is under publicly announced consideration for
possible downgrade by either of the Rating Agencies) of a decrease in the
rating of the senior debt of the Borrower by both of the Rating Agencies to
below Investment Grade.
"Reference Rate" means the rate of interest publicly
announced from time to time by Bank of America as its "prime rate" or
"reference rate" or the similar prime rate or reference rate announced by any
successor Administrative Agent. Bank of America's reference rate is a rate
set by Bank of America based upon various factors including Bank of America's
costs and desired return, general economic conditions and other factors, and
is used as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate. Any change in the Reference Rate
announced by Bank of America or any successor Administrative Agent shall take
effect at the opening of business on the day specified in the public
announcement of such change.
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"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Request for Letter of Credit" means a written request for
the issuance of a Letter of Credit, substantially in the form of Exhibit E.
"Required Lenders" means at any time Lenders having more
than 50% of the aggregate amount of the Commitments or, if the Commitments
shall have been terminated, holding more than 50% of the sum of the aggregate
unpaid principal amount of the Loans and the aggregate amount of Letter of
Credit Liabilities.
"Revolving Credit Period" means the period from and
including the Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., and its successors.
"Significant Subsidiary" means at any time a Subsidiary of
the Borrower having (i) at least 10% of the consolidated total assets of the
Borrower and its Subsidiaries (determined as of the last day of the most
recent fiscal quarter of the Borrower) or (ii) at least 10% of the
consolidated revenues of the Borrower and its Subsidiaries for the fiscal
year of the Borrower then most recently ended.
"Solvent" as to any Person shall mean that (a) the sum of
the assets of such Person, both at a fair valuation and at present fair
saleable value, exceeds its liabilities, including its probable liability in
respect of contingent liabilities, (b) such Person will have sufficient
capital with which to conduct its business as presently conducted and as
proposed to be conducted and (c) such Person has not incurred debts, and does
not intend to incur debts, beyond its ability to pay such debts as they
mature. For purposes of this definition, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or
(y) a right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured. With respect to any such contingent
liabilities, such liabilities shall be computed at the amount which, in light
of all the facts and circumstances existing at the time, represents the
present value of the amount which can reasonably be expected to become an
actual or matured liability.
"SPC" has the meaning set forth in Section 9.05(f).
"Subsidiary" means at any date any Subsidiary of the
Borrower or other entity the accounts of which would be consolidated with
those of the Borrower in its consolidated financial statements as of such
date.
"Swing Line" means the revolving line of credit established
by the Swing Line Lender in favor of Borrower pursuant to Section 2.04.
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"Swing Line Loans" means Loans made by the Swing Line
Lender to Borrower pursuant to Section 2.04.
"Swing Line Lender" means, when acting in such capacity,
Bank of America, its successors and assigns.
"Swing Line Note" means the promissory note executed by
Borrower in favor of the Swing Line Lender in connection with the Swing Line.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal Debt of Borrower on all Swing Line
Loans then outstanding.
"Syndication Agents" means, collectively, The Bank of Nova
Scotia, First Union National Bank and Wachovia Bank. The Syndication Agents
shall have no rights, duties or obligations under this Agreement which are in
addition to the other Lenders.
"Tax Withholding Forms" has the meaning set forth in
Section 2.20.
"Termination Date" means November 30, 2004, or such later
date to which the Termination Date has been extended pursuant to Section
2.23, or, if such day is not a Domestic Business Day, the next preceding
Domestic Business Day.
"Unfunded Liabilities" means, with respect to any Plan at
any time, the amount (if any) by which (i) the value of all benefit
liabilities under such Plan, determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person
under Title IV of ERISA.
"Year 2000 Issue" means any inability of computer software,
hardware and firmware systems, and equipment containing embedded computer
chips, to properly receive, transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilize data and information due to the
occurrence of the year 2000 or the inclusion of dates on or after January 1,
2000.
1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants and disclosed in such
financial statements) with the most recent audited consolidated financial
statements of the Borrower and its Subsidiaries delivered to the Lenders;
provided that, if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any covenant in Article V to eliminate the effect of
any change in generally accepted accounting principles on the operation of
such covenant (or if the Administrative Agent notifies the Borrower that the
Required Lenders wish to amend Article V for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant
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change in generally accepted accounting principles became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
1.03 TYPES OF BORROWINGS. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article
II under which participation therein is determined (I.E., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which all Lenders participate
in proportion to their commitments, while a "Money Market Borrowing" is a
Borrowing under Section 2.03 in which the Lender participants are determined
in accordance therewith).
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ARTICLE II
THE CREDITS
2.01 COMMITMENTS TO LEND. During the Revolving Credit
Period each Lender severally agrees, on the terms and conditions set forth in
this Agreement, to lend to the Borrower pursuant to this Section from time to
time amounts such that (a) the aggregate principal amount of Committed Loans
made by such Lender at any one time outstanding shall not exceed the amount
of its Commitment, and (b) the aggregate outstanding principal amount of all
Committed Loans, Money Market Loans and Swing Line Loans plus the Letter of
Credit Liabilities shall not exceed the aggregate Commitments. Each Borrowing
under this Section shall be in an aggregate principal amount of $10,000,000
or any larger multiple of $1,000,000; and each Committed Borrowing shall be
made from the several Lenders ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, repay, or to the extent permitted by Section 2.16, prepay Loans and
reborrow at any time on or prior to the Termination Date under this Section.
The Committed Loans shall mature, and the principal amount thereof shall be
due and payable, on the Termination Date.
2.02 NOTICE OF COMMITTED BORROWINGS. The Borrower shall
give the Administrative Agent notice (a "Notice of Committed Borrowing"),
substantially in the form of Exhibit D hereto, not later than 8:30 A.M.
(California local time) on (y) the date of each Base Rate Borrowing (or, if
the Borrower shall have requested Money Market Quotes in an Absolute Rate
Auction to be submitted on such date but shall not have accepted such Money
Market Quotes in the full amount requested, then the Borrower may give a
Notice of Committed Borrowing not later than 10:00 A.M. (California local
time) on such date for the smallest amount permitted under Section 2.01 which
is sufficient to fund the shortfall), and (z) the third Euro-Dollar Business
Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to be Base
Rate Loans or Euro-Dollar Loans; and
(d) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
Not more than twelve Interest Periods with respect to Euro-Dollar Loans shall be
in effect at any time.
2.03 MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. In addition to Committed
Borrowings pursuant to Section 2.01, the Borrower may, as set forth in
this Section, request the Lenders prior to the Termination Date to make
offers to make Money Market Loans to the Borrower in Dollars in a
maximum aggregate principal amount not to exceed $500,000,000 at any
time
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outstanding (the "Maximum Money Market Loan Amount"), provided that,
giving effect to the making of each Money Market Loan, the aggregate
outstanding principal amount of all Committed Loans, Money Market Loans
and Swing Line Loans plus the Letter of Credit Liabilities shall not
exceed the aggregate Commitments. The Lenders may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this
Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower
wishes to request offers to make Money Market Loans under this Section,
it shall transmit to the Administrative Agent by telex or facsimile
transmission a Money Market Quote Request substantially in the form of
Exhibit F hereto so as to be received no later than (x) 11:30 A.M.
(California local time) on the fifth Euro-Dollar Business Day prior to
the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) 10:30 A.M. (California local time) on the Domestic Business Day
prior to the date of Borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as
the Borrower and the Administrative Agent shall have mutually agreed
and shall have notified to the Lenders not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which
shall be a Euro-Dollar Business Day in the case of a LIBOR
Auction or a Domestic Business Day in the case
of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing,
which (A) when added to the aggregate amount of all Money
Market Loans then outstanding shall not exceed the Maximum
Money Market Loan Amount and (B) shall be $5,000,000 or a
larger multiple of $1,000,000,
(iii) the duration of the Interest Period
applicable thereto, subject to the provisions of the
definition of Interest Period, and
(iv) whether the Money Market Quotes
requested are to set forth a Money Market Margin or a Money
Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for no more
than three Interest Periods in a single Money Market Quote Request, and
no more than twelve Money Market Borrowings shall be outstanding at any
time. No Money Market Quote Request shall be given within five
Euro-Dollar Business Days (or such other number of days as the Borrower
and the Administrative Agent may agree) of any other Money Market Quote
Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon
receipt of a Money Market Quote Request, the Administrative Agent shall
send to the Lenders by telex or facsimile transmission an invitation
for Money Market Quotes ("Invitation for Money Market Quotes")
substantially in the form of Exhibit G hereto, which shall constitute
an invitation by the Borrower to each Lender to submit Money Market
Quotes offering to make the Money
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Market Loans to which such Money Market Quote Request relates in
accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES.
(i) Each Lender may submit a Money Market
Quote containing an offer or offers to make Money Market Loans
in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this
subsection (d) and must be submitted to the Administrative
Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x)
8:00 A.M. (California local time) on the fourth Euro-Dollar
Business Day prior to the proposed date of Borrowing, in the
case of a LIBOR Auction or (y) 8:00 A.M. (California local
time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Lenders not
later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes
submitted by the Administrative Agent (or any affiliate of the
Administrative Agent) in the capacity of a Lender may be
submitted, and may only be submitted, if the Administrative
Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) one
hour prior to the deadline for other Lenders, in the case of a
LIBOR Auction or (y) 15 minutes prior to the deadline for
other Lenders, in the case of an Absolute Rate Auction.
Subject to Articles III and VI, any Money Market Quote so made
shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit H hereto and shall in any
case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the
Money Market Loan for which each such offer is being made,
which principal amount (w) may be greater than or less than
the Commitment of the quoting Lender, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as
to the principal amount of Money Market Loans for which offers
being made by such quoting Lender may be accepted,
(C) in the case of a LIBOR Auction,
the margin above or below the applicable London Interbank
Offered Rate (the "Money Market Margin") offered for each such
Money Market Loan, expressed as a percentage (specified to the
nearest 1/10,000th of 1%) to be added to or subtracted from
such base rate,
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(D) in the case of an Absolute Rate
Auction, the rate of interest per annum (specified to the
nearest 1/10,000th of 1%) (the "Money Market Absolute Rate")
offered for each such Money Market Loan, and
(E) the identity of the quoting
Lender.
A Money Market Quote may set forth up to five separate offers by the
quoting Lender with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be
disregarded if it:
(A) is not substantially in
conformity with Exhibit H hereto or does not specify
all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional
or similar language, except as provided in subsection
(d)(ii)(B)(z);
(C) proposes terms other than or in
addition to those set forth in the applicable
Invitation for Money Market Quotes, except as
provided in subsection (d)(ii)(B)(z); or
(D) arrives after the time set forth
in subsection (d)(i) .
(e) NOTICE TO BORROWER. The Administrative Agent
shall promptly notify the Borrower of the terms (i) of any Money Market
Quote submitted by a Lender that is in accordance with subsection (d)
and (ii) of any Money Market Quote that amends, modifies or is
otherwise inconsistent with a previous Money Market Quote submitted by
such Lender with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall
specify (A) the aggregate principal amount of Money Market Loans for
which offers have been received for each Interest Period specified in
the related Money Market Quote Request, (B) the respective principal
amounts and Money Market Margins or Money Market Absolute Rates, as the
case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in
any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than
(x) 8:30 A.M. (California local time) on the third Euro-Dollar Business
Day prior to the proposed date of Borrowing, in the case of a LIBOR
Auction or (y) 8:30 A.M. (California local time) on the proposed date
of Borrowing, in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Lenders
not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective), the Borrower shall notify the Administrative Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant
to subsection (e). In the case of acceptance, such notice (a "Notice of
Money Market Borrowing") shall specify the aggregate principal
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amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part;
PROVIDED that:
(i) the aggregate principal amount of each
Money Market Borrowing may not exceed the applicable amount
set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money
Market Borrowing must be $5,000,000 or a larger multiple of
$1,000,000,
(iii) acceptance of offers may only be made
on the basis of ascending Money Market Margins or Money Market
Absolute Rates, as the case may be, and
(iv) the Borrower may not accept any offer
that is described in subsection (d)(iii) or that otherwise
fails to comply with the requirements of this Agreement.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are
made by two or more Lenders with the same Money Market Margins or Money
Market Absolute Rates, as the case may be, for a greater aggregate
principal amount than the Borrower determines to accept pursuant to
Section 2.03(f), the principal amount of Money Market Loans in respect
of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in
multiples of $1,000,000, as the Administrative Agent may deem
appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest
error.
(h) EFFECT ON COMMITMENTS. Any Money Market Loans
made by a Lender pursuant to this Section shall not reduce such
Lender's pro rata share of the remaining undrawn Commitments.
(i) MATURITY OF MONEY MARKET LOANS. Each Money Market
Loan shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to that
Money Market Loan.
2.04 SWING LINE LOANS.
(a) The Swing Line Lender shall from time to time
from the Effective Date through the day prior to the Termination Date
make Swing Line Loans in Dollars to Borrower in such amounts as
Borrower may request, PROVIDED that (i) after giving effect to each
such Swing Line Loan, (A) the aggregate Swing Line Outstandings shall
not exceed $25,000,000 and (B) the aggregate outstanding principal
amount of all Committed Loans, Money Market Loans and Swing Line Loans
plus the Letter of Credit Liabilities shall not exceed the aggregate
Commitments, (ii) without the consent of all of the Lenders, no Swing
Line Loan may be made during the continuation of any Default or Event
of Default and (iii) the Swing Line Lender has not given at least
twenty-four hours prior notice to Borrower
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that availability under the Swing Line is suspended or terminated.
Borrower may borrow, repay and reborrow under this Section. Unless
notified to the contrary by the Swing Line Lender, borrowings under
the Swing Line may be made in amounts which are integral multiples of
$1,000,000 upon telephonic request by an Authorized Officer made to the
Administrative Agent not later than 1:00 P.M. (California local time),
on the Domestic Business Day of the requested Swing Line Loan (which
telephonic request shall be promptly confirmed in writing by
telecopier). Promptly after receipt of such a request for a Swing Line
Loan, the Administrative Agent shall provide telephonic verification
to the Swing Line Lender that the requested Swing Line Loan is in
conformity with this Section. Unless the Swing Line Lender otherwise
agrees, each repayment of a Swing Line Loan shall be in an amount
which is an integral multiple of $1,000,000. If Borrower instructs the
Swing Line Lender to debit its demand deposit account at the Swing
Line Lender in the amount of any payment with respect to a Swing Line
Loan, or the Swing Line Lender otherwise receives repayment, after
3:00 p.m. (California local time), on a Domestic Business Day, such
payment shall be deemed received on the next Domestic Business Day.
The Swing Line Lender shall promptly notify the Administrative Agent
of the Swing Line Outstandings each time there is a change therein.
(b) The Swing Line Lender shall be responsible for
submitting invoices to Borrower for such interest. The interest payable
on Swing Line Loans shall be solely for the account of the Swing Line
Lender unless and until the Lenders fund their participations therein
pursuant to clause (d) of this Section.
(c) The Swing Line Loans shall be payable on demand
made by the Swing Line Lender and in any event on the Termination Date.
(d) Upon the making of a Swing Line Loan, each Lender
shall be deemed to have purchased from the Swing Line Lender a
participation therein in an amount equal to that Lender's percentage of
the aggregate Commitments TIMES the amount of the Swing Line Loan. Upon
demand made by the Swing Line Lender, each Lender shall, according to
such percentage, promptly provide to the Swing Line Lender its purchase
price therefor in an amount equal to its participation therein. The
obligation of each Lender to so provide its purchase price to the Swing
Line Lender shall be absolute and unconditional and shall not be
affected by the occurrence of a Default or Event of Default. Each
Lender that has provided to the Swing Line Lender the purchase price
due for its participation in Swing Line Loans shall thereupon acquire a
pro rata participation, to the extent of such payment, in the claim of
the Swing Line Lender against Borrower for principal and interest and
shall share, in accordance with that pro rata participation, in any
principal payment made by Borrower with respect to such claim and in
any interest payment made by Borrower (but only with respect to periods
subsequent to the date such Lender paid the Swing Line Lender its
purchase price) with respect to such claim.
(e) In the event that the Swing Line Outstandings are
in excess of $10,000,000 on three consecutive Domestic Business Days
then, on the next Domestic Business Day (unless Borrower has made other
arrangements acceptable to the Swing Line Lender to reduce the Swing
Line Outstandings below $10,000,000), Borrower shall request a
Borrowing in an amount sufficient to reduce the Swing Line Outstandings
below $10,000,000. In addition, upon any demand for payment of the
Swing Line Outstandings by the Swing Line
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Lender (unless Borrower has made other arrangements acceptable to the
Swing Line Lender to reduce the Swing Line Outstandings to $0),
Borrower shall request a Borrowing in an amount sufficient to repay
all Swing Line Outstandings (and, for this purpose, the limitations
as to the minimum amounts of Base Rate Borrowings set forth in Section
2.01 shall not apply). In each case, the Administrative Agent shall
automatically provide the responsive Loans made by each Lender to the
Swing Line Lender (which the Swing Line Lender shall then apply to the
Swing Line Outstandings). In the event that Borrower fails to request
a Borrowing within the time specified by Section 2.02 on any such
date, the Administrative Agent may, but shall not be required to,
without notice to or the consent of Borrower, cause Loans to be made
by the Lenders under their Commitments in amounts which are sufficient
to reduce the Swing Line Outstandings as required above. The
conditions precedent set forth in Section 3.01 shall not apply to
Loans to be made by the Lenders pursuant to the three preceding
sentences. The proceeds of such Loans shall be paid directly to the
Swing Line Lender for application to the Swing Line Outstandings.
2.05 CONVERSION AND CONTINUATION OF COMMITTED Loans. So
long as no Default or Event of Default has occurred and is continuing,
Borrower shall have the option at any time (i) to convert all or any part of
its outstanding Base Rate Loans which are integral multiples of $1,000,000
and which are not less than $10,000,000 into Euro-Dollar Loans or (ii) upon
the expiration of any Interest Period applicable to Euro-Dollar Loans, to
continue all or any portion of such Loans equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount as Euro-Dollar Loans or to
convert such Loans into Base Rate Loans.
Borrower shall deliver to the Administrative Agent notice
of any such conversion or continuation, substantially in the form of Exhibit
D (each a "Notice of Conversion/Continuation"), no later than 8:30 A.M.
(California local time) at least one Domestic Business Day in advance of the
proposed conversion date (in the case of a conversion to a Base Rate Loan)
and at least three Euro-Dollar Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a
continuation of, a Euro-Dollar Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Domestic Business Day in the case of Base Rate Loans and a Euro-Dollar
Business Day in the case of conversion to or continuation of Euro-Dollar
Loans), (ii) the amount and type of the Loan to be converted/continued, (iii)
the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Euro-Dollar Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation
of, a Euro-Dollar Loan, that no Default or Event of Default has occurred and
is continuing.
2.06 NOTICE TO LENDERS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing or a Notice
of Conversion\Continuation, the Administrative Agent shall promptly
notify each Lender of the contents thereof and of such Lender's share
(if any) of such Borrowing and such Notice of Borrowing or Notice of
Conversion\Continuation shall not thereafter be revocable by the
Borrower.
(b) Not later than 11:00 A.M. (California local time)
on the date of each Borrowing, each Lender participating therein shall
(except as provided in subsection (c) of
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this Section) make available its share of such Borrowing in Dollars,
in federal or other funds immediately available to the Administrative
Agent at its address referred to in Section 9.01. Unless the
Administrative Agent determines that any applicable condition specified
in Article III has not been satisfied, the Administrative Agent will
make the funds so received from the Lenders available to the Borrower
at the Administrative Agent's aforesaid address or place.
(c) Unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing that
such Lender will not make available to the Administrative Agent such
Lender's share of such Borrowing, the Administrative Agent may assume
that such Lender has made such share available to the Administrative
Agent on the date of such Borrowing in accordance with Section 2.06(b)
and the Administrative Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If
and to the extent that such Lender shall not have so made such share
available to the Administrative Agent, such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for
each day from the date (and including the date) such amount is made
available to the Borrower to (but excluding) the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower,
a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.08 and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such
amount so repaid shall constitute such Lender's Loan included in such
Borrowing for purposes of this Agreement. If the Borrower pays interest
under this subsection (c) at the Federal Funds Rate and the Federal
Funds Rate is higher than the interest rate applicable thereto pursuant
to Section 2.08, the applicable Lender shall pay the Borrower the
difference between such rates.
2.07 NOTES.
(a) The Committed Loans of each Lender shall be
evidenced by a single Note payable to the order of such Lender for the
account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Lender's Commitment.
(b) Each Lender may, by notice to the Borrower and
the Administrative Agent, request that its Money Market Loans be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Money Market Loans. Each such Note shall be in
substantially the form of Exhibit B hereto with appropriate
modifications to reflect the fact that it evidences solely Money Market
Loans. Each reference in this Agreement to the "Note" of such Lender
shall be deemed to refer to and include any or all of such Notes, as
the context may require.
(c) Upon receipt of each Lender's Note pursuant to
Section 3.02(b), the Administrative Agent shall forward such Note to
such Lender. Each Lender shall record the date, amount, type and
maturity of each Loan made by it and the date and amount of each
payment of principal made by the Borrower with respect thereto, and
may, if such Lender so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with
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respect to each such Loan then outstanding; provided that the failure
of any Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Notes.
Each Lender is hereby irrevocably authorized by the Borrower so to
endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
2.08 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from (and
including) the date such Loan is made to (but excluding) the date it becomes
due, at a rate per annum equal to the Base Rate for such day PLUS any applicable
Base Rate Margin. Any overdue principal of or interest on any Base Rate Loan
shall, at the option of the Required Lenders, bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Base Rate PLUS the Base
Rate Margin PLUS 2%. Such interest shall be payable on the last Domestic
Business Day of each calendar quarter in arrears and on the Termination Date.
(b) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during the Interest Period
applicable thereto (from and including the first day of such Interest Period to
but excluding the last day of such Interest Period), at a rate per annum equal
to the sum of (a) the Euro-Dollar Margin for such day PLUS (b) the applicable
London Interbank Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
(c) Any overdue principal of or interest on any Euro-Dollar
Loan shall, at the option of the Required Lenders, bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day deposits in Dollars in an amount
approximately equal to such overdue payment due to the Administrative Agent
are offered to the Administrative Agent in the London interbank market for
the applicable period determined as provided above by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause
(a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum
of 2% plus the rate applicable to Base Rate Loans for such day).
(d) Subject to Section 8.01(a), each Money Market LIBOR
Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of
the London Interbank Offered Rate for such Interest Period (determined as if
the related Money Market LIBOR Borrowing were a Euro-Dollar Borrowing) plus
(or minus) the Money Market Margin quoted by the Lender making such Loan in
accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the Money Market Absolute
Rate quoted by the Lender making such Loan in accordance with Section 2.03.
Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue principal
of or interest on any Money Market Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of the
Base Rate PLUS any applicable Base Rate Margin PLUS 2% per annum for such
day.
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(e) Swing Line Loans shall bear interest at a fluctuating
rate per annum equal to the Base Rate PLUS any applicable Base Rate Margin.
Interest on the Swing Line Loans shall be payable on such dates, not more
frequent than monthly, as may be specified by the Swing Line Lender and in
any event on the Termination Date. Any overdue principal of or interest on
any Swing Line Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of the Base Rate PLUS any
applicable Base Rate Margin PLUS 2% per annum for such day.
(f) The Administrative Agent shall determine in accordance
with the provisions of this Agreement each interest rate applicable to the
Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Lenders of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence
of manifest error.
2.09 ADMINISTRATIVE AGENCY FEES. On the date hereof and on
the Effective Date, the Borrower shall pay to the Administrative Agent and
the Lead Arranger certain agency fees in the amounts set forth in a letter
agreement with the Administrative Agent and the Lead Arranger.
2.10 UPFRONT FEES. On the Effective Date, the Borrower
shall pay to the Administrative Agent for the account of each Lender
non-refundable upfront fees in the amounts set forth in letter agreements
between each Lender and the Lead Arranger, and in an aggregate amount not to
exceed the amount set forth in a letter agreement among the Borrower, the
Administrative Agent and the Lead Arranger.
2.11 FACILITY FEES. The Borrower shall pay to the
Administrative Agent for the account of the Lenders ratably facility fees at
the Facility Fee Rate determined daily in accordance with the Pricing
Schedule. Such facility fee shall accrue from and including the date hereof
to but excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety), on the daily aggregate amount of the
Commitments (whether used or unused). Facility fees shall be payable
quarterly in arrears on the first day of each March, June, September and
December and upon the date of termination of the Commitments in their
entirety and, when paid, are non-refundable.
2.12 LETTER OF CREDIT FEES. The Borrower shall pay to the
Administrative Agent (i) for the account of the Lenders ratably a Letter of
Credit fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit at the LC Fee Rate, determined in accordance with
the Pricing Schedule, and (ii) for the account of the Issuing Lender a Letter
of Credit fronting fee accruing daily on the aggregate amount then available
for drawing under all Letters of Credit issued by the Issuing Lender at a
rate per annum set forth in a letter agreement between the Borrower and the
Issuing Lender. Letter of Credit fees shall payable quarterly in arrears on
the first day of each March, June, September and December and upon the date
of termination of the Commitments in their entirety and, when paid, are
non-refundable.
2.13 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY
BORROWER. During the Revolving Credit Period, the Borrower may, upon at least
three Domestic Business Days' notice to theAdministrative Agent, (i)
terminate the Commitments at any time, if no Loans or Letter of Credit
Liabilities are outstanding at such time or (ii) ratably and permanently
reduce from time to time by an aggregate amount of $25,000,000 or any larger
amount in multiples of $1,000,000, the aggregate amount of the Commitments in
excess of the sum of the aggregate outstanding principal balance of the Loans
and the aggregate amount of Letter of Credit Liabilities.
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2.14 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY
THE LENDERS. Following the occurrence of a Change of Control, the Required
Lenders may in their sole and absolute discretion elect, during the sixty day
period immediately subsequent to the LATER OF (a) such occurrence and (b) the
EARLIER of (i) receipt of the Borrower's written notice to the Administrative
Agent of such occurrence and (ii) if no such notice has been received by the
Administrative Agent, the date upon which the Administrative Agent and the
Lenders have actual knowledge thereof, to terminate all of the Commitments.
In any such case the Commitments shall be terminated effective on the date
which is sixty days subsequent to the date of written notice from the
Administrative Agent to the Borrower thereof, and (a) to the extent that
there is then any Debt evidenced by the Notes, the same shall be immediately
due and payable, and (b) the Borrower shall either cause the return or
termination of all Letters of Credit or provide cash collateral for all
outstanding Letters of Credit.
2.15 SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
2.16 OPTIONAL PREPAYMENTS.
(a) Subject in the case of any Euro-Dollar Borrowing
to Section 2.18, the Borrower may, upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest with
reference to the Base Rate pursuant to Section 8.01(a)) or upon at
least three Euro-Dollar Business Days' notice to the Administrative
Agent, with respect to any Euro-Dollar Borrowing, prepay any
Euro-Dollar Borrowing, in each case in whole at any time, or from time
to time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the Loans
of the several Lenders included in such Borrowing.
(b) Except as provided in Section 2.16(a), the
Borrower may not prepay all or any portion of the principal amount of
any Money Market Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant
to this Section, the Administrative Agent shall promptly notify each
Lender of the contents thereof and of such Lender's ratable share (if
any) of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
2.17 GENERAL PROVISIONS AS TO PAYMENTS.
(a) The Borrower shall make each payment of principal
of, and interest on, Loans and Letters of Credit Liabilities and of
fees hereunder, in Dollars not later than 11:00 A.M. (California local
time) on the date when due, in federal or other immediately available
funds, to the Administrative Agent at its address referred to in
Section 9.01, without offset or counterclaim. The Administrative Agent
will promptly distribute to each Lender its ratable share of each such
payment received by the Administrative Agent for the account of
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the Lenders, in Dollars and in the type of funds received by the
Administrative Agent. Whenever any payment of principal of, or interest
on, the Base Rate Loans or Letters of Credit Liabilities or of fees
shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans or Money Market LIBOR Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Absolute Rate Loans shall be due on a day
which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. If the
date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any
payment is due to the Lenders hereunder that the Borrower will not make
such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on
such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent
that the Borrower shall not have so made such payment, each Lender
shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date
such Lender repays such amount to the Administrative Agent, at the
Federal Funds Rate.
2.18 FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII
or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or if the Borrower fails to borrow any Fixed Rate Loans
after notice has been given to any Lender in accordance with Section 2.06(a),
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it, including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment
or failure to borrow, provided that such Lender shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
2.19 COMPUTATION OF INTEREST AND FEES. Interest based on
the Reference Rate and all fees hereunder shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and paid for the actual number
of days elapsed (including the first day but excluding the last day). All
other interest shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
2.20 WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Lender, each Lender that is not incorporated
under the laws of the United States of America or a state thereof agrees that
it will deliver to each of the Borrower and the Administrative Agent two duly
completed copies of
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United States Internal Revenue Service Forms 1001, 4224 or W-8 ECI, or their
successor forms ("Tax Withholding Forms"), in each case as required to
demonstrate and certify that such Lender is entitled to receive payments
under the Loan Documents without deduction or withholding of any United
States federal income taxes.
Each Lender which so delivers Tax Withholding Forms further
undertakes to deliver to each of the Borrower and the Administrative Agent
two additional copies of such forms on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by
the Borrower or the Administrative Agent, in each case certifying that such
Lender is entitled to receive payments under the Loan Documents deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Lender from duly completing and delivering any such form with respect to
it and such Lender advises the Borrower and the Administrative Agent that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
2.21 LETTERS OF CREDIT.
(a) Subject to the terms and conditions hereof, the
Issuing Lender agrees to issue Letters of Credit hereunder from time to
time before the tenth day before the Termination Date upon the request
of the Borrower; PROVIDED that, immediately after each Letter of Credit
is issued, (i) the aggregate amount of the Letter of Credit Liabilities
shall not exceed the Letter of Credit Commitment and (ii) the aggregate
amount of the Letter of Credit Liabilities plus the aggregate
outstanding principal amount of all Committed Loans, Money Market Loans
and Swing Line Loans shall not exceed the aggregate Commitments. Upon
the date of issuance of a Letter of Credit, the Issuing Lender shall be
deemed, without further action by any party hereto, to have sold to
each Lender, and each Lender shall be deemed, without further action by
any party hereto, to have purchased from the Issuing Lender, a
participation in such Letter of Credit and the related Letter of Credit
Liabilities in the proportion their respective Commitments bear to the
aggregate Commitments. As of the date hereof, the Borrower has
requested that the Existing Promus Letters of Credit be deemed issued
hereunder effective as of the Effective Date. On the Effective Date,
the Existing Promus Letters of Credit shall be deemed issued hereunder
as Letters of Credit hereunder, Bank of America shall be deemed to have
released each lender under the Existing Promus Facility from their
participations therein, and each Lender here under shall be deemed to
have thereby purchased a ratable participation in each Existing Promus
Letters of Credit in the manner set forth above in this Section.
(b) The Borrower shall give the Issuing Lender notice
at least five days prior to the requested issuance of a Letter of
Credit specifying the date such Letter of Credit is to be issued, and
describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such
notice given in connection with the extension of a Letter of Credit, a
"Notice of Issuance") and shall concurrently submit to the Issuing
Lender a Request for Letter of Credit and, if required by the Issuing
Lender, a letter of credit application on the Issuing Lender's then
standard form for
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the issuance of letters of credit. Upon receipt of a Notice of
Issuance, the Issuing Lender shall promptly notify the Administrative
Agent, and the Administrative Agent shall promptly notify each Lender
of the contents thereof and of the amount of such Lender's
participation in such Letter of Credit. The issuance by the Issuing
Lender of each Letter of Credit shall, in addition to the conditions
precedent set forth in Article III, be subject to the conditions
precedent that such Letter of Credit shall be in such form and
contain such terms as shall be satisfactory to the Issuing Lender
and that the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the
Issuing Lender shall have reasonably requested. The Borrower shall also
pay to the Issuing Lender for its own account issuance, drawing,
amendment and extension charges in the amounts and at the times as
agreed between the Borrower and the Issuing Lender. The extension or
renewal of any Letter of Credit shall be deemed to be an issuance of
such Letter of Credit, provided that even if the Issuing Lender does
not receive a Notice of Issuance, unless the Issuing Lender has notice
of any Default or Event of Default, the Issuing Lender may (but shall
not be required to) permit the automatic extension of such Letter of
Credit without the requirement of such notice. No Letter of Credit
shall have a term extending or be so extendible beyond the fifth
Domestic Business Day preceding the Termination Date.
(c) Upon receipt from the beneficiary of any Letter
of Credit of any notice of a drawing under such Letter of Credit, the
Issuing Lender shall notify the Administrative Agent and the
Administrative Agent shall promptly notify the Borrower and each other
Lender as to the amount to be paid as a result of such demand or
drawing and the payment date. The Borrower shall be irrevocably and
unconditionally obligated forthwith to reimburse the Issuing Lender for
any amounts paid by the Issuing Lender upon any drawing under any
Letter of Credit, without presentment, demand, protest or other
formalities of any kind. All such amounts paid by the Issuing Lender
and remaining unpaid by the Borrower shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of
2% plus the rate applicable to Base Rate Loans for such day. In
addition, each Lender will pay to the Administrative Agent, for the
account of the Issuing Lender, immediately upon the Issuing Lender's
demand at any time during the period commencing after such drawing
until reimbursement therefor in full by the Borrower, an amount equal
to such Lender's ratable share of such drawing (in proportion to its
participation therein), together with interest on such amount for each
day from the date of the Issuing Lender's demand for such payment (or,
if such demand is made after 9:00 A.M. (California local time) on such
date, from the next succeeding Domestic Business Day) to the date of
payment by such Lender of such amount at a rate of interest per annum
equal to the Federal Funds Rate. The Issuing Lender will promptly pay
to each Lender ratably all amounts received from the Borrower for
application in payment of its reimbursement obligations in respect of
any Letter of Credit, but only to the extent such Lender has made
payment to the Issuing Lender in respect of such Letter of Credit
pursuant hereto.
(d) The obligations of the Borrower and each Lender
under subsection (c) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including
without limitation the following circumstances:
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(i) any lack of validity or enforceability
of this Agreement or any Letter of Credit or any document
related hereto or thereto;
(ii) any amendment, waiver of or any consent
to departure from all or any of the provisions of this
Agreement, any Letter of Credit or any document related hereto
or thereto;
(iii) the use which may be made of the
Letter of Credit by, or any acts or omission of, a beneficiary
of a Letter of Credit (or any Person for whom the beneficiary
may be acting);
(iv) the existence of any claim, set-off,
defense or other rights that the Borrower may have at any time
against a beneficiary of a Letter of Credit (or any Person for
whom the beneficiary may be acting), the Lenders (including
the Issuing Lender) or any other Person, whether in connection
with this Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
(v) any statement or any other document
presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(vi) payment under a Letter of Credit to the
beneficiary of such Letter of Credit against presentation to
the Issuing Lender of a draft or certificate that does not
comply with the terms of the Letter of Credit; or
(vii) any other act or omission to act or
delay of any kind by any Lender (including the Issuing
Lender), the Administrative Agent or any other Person or any
other event or circumstance whatsoever that
might, but for the provisions of this subsection (vii),
constitute a legal or equitable discharge of the Borrower's or
the Lenders' obligations hereunder.
(e) The Borrower hereby indemnifies and holds
harmless each Lender (including the Issuing Lender) and the
Administrative Agent from and against any and all claims, damages,
losses, liabilities, costs or expenses which such Lender or the
Administrative Agent may incur (including, without limitation, any
claims, damages, losses, liabilities, costs or expenses which the
Issuing Lender may incur by reason of or in connection with the failure
of any other Lender to fulfill or comply with its obligations to the
Issuing Lender hereunder (but nothing herein contained shall affect any
rights the Borrower may have against such defaulting Lender)), and none
of the Lenders (including the Issuing Lender) nor the Administrative
Agent nor any of their officers or directors or employees or agents
shall be liable or responsible, by reason of or in connection with the
execution and delivery or transfer of or payment or failure to pay
under any Letter of Credit, including without limitation any of the
circumstances enumerated in subsection (d) above, as well as (i) any
error, omission, interruption or delay in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, (ii) any
error in interpretation of technical terms, (iii) any loss or delay in
the transmission of any document required in order to make a drawing
under a Letter of Credit, (iv) any consequences arising from causes
beyond the control of the Issuing Lender,
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including without limitation any government acts, or any other
circumstances whatsoever in making or failing to make payment under
such Letter of Credit; PROVIDED that the Borrower shall not be
required to indemnify the Issuing Lender for any claims, damages,
losses, liabilities, costs or expenses, and the Borrower shall
retain any claim for damages suffered by it, to the extent found by
a court of competent jurisdiction to have been caused by (x) the
willful misconduct or gross negligence of the Issuing Lender in
determining whether a request presented under any Letter of Credit
complied with the terms of such Letter of Credit or (y) the Issuing
Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and
conditions of the Letter of Credit. Nothing in this subsection (e) is
intended to limit the obligations of the Borrower under any other
provision of this Agreement. To the extent the Borrower does not
indemnify the Issuing Lender as required by this subsection, the
Lenders agree to do so ratably in accordance with their Commitments.
2.22 REGULATION D COMPENSATION. Each Lender may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Lender at a rate per annum determined by such Lender up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Lender wishing to require
payment of such additional interest (x) shall so notify the Borrower and the
Administrative Agent, in which case such additional interest on the
Euro-Dollar Loans of such Lender shall be payable to such Lender at the place
indicated in such notice with respect to each Interest Period commencing at
least three Euro-Dollar Business Days after the giving of such notice and (y)
shall notify the Borrower at least five Euro-Dollar Business Days prior to
each date on which interest is payable on the Euro-Dollar Loans of the amount
then due it under this Section.
2.23 EXTENSION OF TERMINATION DATE. The Termination Date
may be extended once in each year, in the manner set forth in this Section,
on November 30, 2000 and on each anniversary of such date which falls not
less than one year prior to the Termination Date (as theretofore extended)
for a period of one year after the date on which the Termination Date would
otherwise have occurred. If the Borrower wishes to extend the Termination
Date, it shall give written notice to that effect to the Administrative Agent
not less than 90 days nor more than 150 days following the delivery to the
Administrative Agent of the audited annual financial statements of Borrower
in accordance with Section 5.01(b), whereupon the Administrative Agent shall
notify each of the Lenders of such notice. Each Lender will respond to such
request, whether affirmatively or negatively, within 30 days (the "Response
Date"). If a Lender or Lenders respond negatively or fail to timely respond
to such request, but such non-extending Lender(s) have Commitment(s)
aggregating less than 33 1/3% of the aggregate amount of the Commitments, the
Borrower shall, for a period of up to 60 days following the Response Date
(but in any event not later than 15 days prior to the then effective
Termination Date), have the right, with the assistance of the Administrative
Agent, to seek a mutually satisfactory substitute financial institution or
financial institutions (which may be one or more of the Lenders) to assume
the Commitment(s) of such non-extending Lender(s). No Lender which fails to
consent shall be deemed to have consented to a request by the Borrower under
this Section. Not later than the third Domestic Business Day prior to the end
of such period (whether of 60 days or shorter), the Borrower shall, by notice
to the Lenders through the Administrative Agent, either (i) terminate,
effective on the third Domestic Business Day after the giving of such notice,
the Commitment(s) of such non-extending Lender(s), whereupon the Lenders who
have consented to the extension shall continue with
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their commitments unaffected to lend subject to the terms of this Agreement
to the new Termination Date, or (ii) designate one or more new financial
institutions reasonably acceptable to the Administrative Agent to assume the
Commitments of such non-extending Lenders, whereupon the aggregate amount of
such Commitment(s) shall be assumed by such substitute financial institution
or financial institutions within such 60-day period or (iii) withdraw its
request for an extension of the Termination Date, in which the Commitments
shall continue unaffected. The failure of the Borrower to timely take the
actions contemplated by clause (i) or (ii) of the preceding sentence shall be
deemed a withdrawal of its request for an extension as contemplated by clause
(ii) whether or not notice to such effect is given. So long as Lenders having
Commitment(s) totaling not less than 66 2/3% of the aggregate amount of the
Commitment(s) shall have responded affirmatively to such a request, and such
request is not withdrawn in accordance with the preceding sentence, then,
subject to receipt by the Administrative Agent of counterparts of an
Extension Agreement in substantially the form of Exhibit K duly completed and
signed by all of the parties hereto (other than non-consenting Lenders), the
Termination Date shall be extended for the period set forth in this Section
2.23 and in the Extension Agreement.
2.24 INCREASED COMMITMENTS; ADDITIONAL Lenders.
(a) Following the Effective Date, the Borrower may from
time to time, propose to increase the aggregate amount of the Commitments in
accordance with this Section. The aggregate principal amount of the increases
to the Commitments made pursuant to this Section (the amount of any such
increase, the "Increased Commitments"), when aggregated with the principal
amount of any increases to the Other New Facilities made pursuant to Section
2.24 thereof, shall not exceed $500,000,000. Borrower shall provide at least
30 days' notice to the Administrative Agent (which shall promptly provide a
copy of such notice to the Lenders) of any requested Increased Commitments.
Each Lender party to this Agreement at such time shall have the right (but
not the obligation), for a period of 15 days following receipt of such
notice, to elect by notice to the Borrower and the Administrative Agent to
increase its Commitment by a principal amount which bears the same ratio to
the Increased Commitments as its then Commitment bears to the aggregate
Commitments then existing. No Lender which fails to respond shall be deemed
to have elected to increase its Commitment in response to a notice by the
Borrower under this Section.
(b) If any Lender party to this Agreement elects not to
increase its Commitment pursuant to subsection (a) of this Section, the
Borrower may designate another lender which qualifies as an Eligible Assignee
(which may be, but need not be, one or more of the existing Lenders) which at
the time agrees to (i) in the case of any such designated Lender that is an
existing Lender, increase its Commitment and (ii) in the case of any other
such lender (an "Additional Lender"), become a party to this Agreement. The
sum of the increases in the Commitments of the existing Lenders pursuant to
this subsection (b) plus the Commitments of the Additional Lenders shall not
in the aggregate exceed the unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments
pursuant to this Section 2.24 shall become effective upon the receipt by the
Administrative Agent of an agreement in form and substance satisfactory to
the Administrative Agent signed by the Borrower, by each Additional Lender
and by each other Lender whose Commitment is to be increased, setting forth
the new Commitments of such Lenders and setting forth the agreement of each
Additional Lender to become a party to this Agreement and to be bound by all
the terms and provisions hereof, together
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with such evidence of appropriate corporate authorization on the part of the
Borrower with respect to the Increased Commitments and such opinions of
counsel for the Borrower with respect to the Increased Commitments as the
Administrative Agent may reasonably request.
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ARTICLE III
CONDITIONS
3.01 BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT. The
obligation of any Lender to make a Loan on the occasion of any Borrowing, the
obligation of the Issuing Lender to issue (or renew or extend the term of) any
Letter of Credit and the obligation of the Swing Line Lender to make any Swing
Line Loan are each subject to the satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a Notice
of Borrowing as required by Section 2.02 or 2.03, or receipt by the
Issuing Lender of a Notice of Issuance as required by Section 2.21(b),
as the case may be;
(b) immediately after such Borrowing or issuance of a
Letter of Credit, the sum of the aggregate outstanding principal amount
of the Loans and Swing Line Loans and the aggregate amount of Letter of
Credit Liabilities will not exceed the aggregate amount of the
Commitments;
(c) immediately before and after such Borrowing or
issuance of a Letter of Credit, no Default or Event of Default shall
have occurred and be continuing;
(d) the representations and warranties of the
Borrower contained in this Agreement (except the representations and
warranties set forth in Section 4.04(b) and Section 4.05, in each case
as to any matter which has theretofore been disclosed in writing by the
Borrower to the Lenders) shall be true on and as of the date of such
Borrowing or issuance of such Letter of Credit; and
(e) in the case of an issuance of a Letter of Credit,
immediately after such issuance of a Letter of Credit, the aggregate
amount of the Letter of Credit Liabilities shall not exceed the Letter
of Credit Commitment.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date of such Borrowing
or issuance as to the facts specified in clauses (b), (c) and (d) of this
Section.
3.02 EFFECTIVE DATE. As conditions precedent to the Effective
Date and the making of the initial Loans, Swing Line Loans and Letters of Credit
hereunder, each of the following conditions shall have been satisfied (or waived
in accordance with Section 9.04):
(a) receipt by the Administrative Agent of
counterparts hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart shall not have
been received, receipt by the Administrative Agent in form satisfactory
to it of telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party); and
(b) receipt by the Administrative Agent for the
account of each Lender of a duly executed Note dated as of the
Effective Date and the Swing Line Note;
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(c) receipt by the Administrative Agent of an opinion
of Gibson, Dunn & Crutcher, LLP substantially in the form of Exhibit I
hereto;
(d) All conditions precedent to the Borrower's
obligations to consummate the Promus Acquisition shall have been
satisfied or waived with the consent of the Required Lenders.
(e) receipt by the Administrative Agent of evidence
acceptable to the Administrative Agent that the Promus Acquisition and
the other transactions contemplated hereby to occur on the Effective
Date have been or shall concurrently be consummated in material
compliance with all applicable laws and all regulatory requirements
(including without limitation the Hart-Scott Rodino Act but excluding
any regulatory requirements consisting of consents to the transfer of
liquor licenses); that all governmental and shareholder consents and
approvals necessary in connection therewith have been obtained; that
all third party consents required in connection therewith have been
obtained (in the case of such third party consents, except to the
extent that the failure to obtain the same would not, individually or
in the aggregate, have a Material Adverse Effect) and all such consents
and approvals shall be in force and effect and all applicable waiting
periods shall have expired without any action being taken by any
authority that restrains, prevents or imposes any material adverse
conditions upon the Promus Acquisition;
(f) arrangements satisfactory to the Administrative
Agent for the repayment of all loans (if any) outstanding under the
Existing Promus Facility, the termination of that facility and of any
related liens and the termination of all capital lease facilities for
which Promus and its Subsidiaries have any liability (except as to
customary surviving indemnities and other contingent obligations) and
the payment of all interest and fees accrued thereunder shall have been
made;
(g) receipt by the Administrative Agent of all
documents it may reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of the Loan
Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent;
(h) there shall not have occurred a Material Adverse
Effect since December 31, 1998;
(i) the Other New Facilities shall be in a position
to concurrently close and be funded, as applicable;
(j) the Borrower and the requisite lenders under the
Existing Hilton Facility shall have entered into, or shall concurrently
enter into, an amendment thereto substantially in the form thereof
heretofore distributed to the Lenders;
(k) receipt by the Administrative Agent and the Lead
Arranger of the fees required to be paid on the Effective Date by the
letter agreement referred to in Sections 2.09, 2.10 and 7.09; and
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(l) the Effective Date shall have occurred prior to
December 2, 1999.
The Administrative Agent shall promptly notify the Borrower and each Lender of
the effectiveness of this Agreement, and such notice shall be conclusive and
binding on all parties hereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
4.01 CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Borrower of the Loan Documents
are within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower (in the case of any such default under the provisions of any agreement
or instrument binding upon the Borrower, except to the extent that the same
could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect), or result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
4.03 BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower, in each case enforceable in accordance with their respective
terms.
4.04 FINANCIAL INFORMATION.
(a) The Pro Forma Combined Financial Statements
delivered as of the date hereof (i) are derived from (y) the audited
financial statements of the Borrower set forth in the Borrower's 1998
Form 10-K, and the unaudited financial statements of the Borrower set
forth in the Borrower's Form 10-Q for the period ended September 30,
1999, and (z) the audited financial statements of Promus set forth in
Promus's 1998 Form 10-K and the unaudited financial statements of
Promus set forth in Promus's Form 10-Q for the period ended September
30, 1999, and (ii) fairly present in all material respects, in
conformity with generally accepted accounting principles, the pro forma
combined financial position of the Borrower, Promus and their
respective Subsidiaries as of such date and their consolidated results
of operations and cash flows for such fiscal year; and
(b) Since December 31, 1998, there has been no
Material Adverse Effect.
4.05 LITIGATION. Except as disclosed in the Form 10-Q reports
dated as of September 30, 1999 for the Borrower and Promus, there is no action,
suit or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could reasonably
be expected to have a Material
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Adverse Effect or which in any manner draws into question the validity or
enforceability of any of the Loan Documents. Without limiting the generality
of the foregoing, with respect to the litigation reported in the Form 10-Q
reports as of September 30, 1999, for the Borrower and Promus, (a) the
disclosure contained therein was accurate as of the date thereof, and (b)
since such date there has been no adverse development which would reasonably
be expected to have a Material Adverse Effect.
4.06 COMPLIANCE WITH ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance
in all material respects with the presently applicable provisions of ERISA
and the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA.
4.07 TAXES. The United States federal income tax returns of
the Borrower and its Subsidiaries and of Promus and its Subsidiaries have
been filed through the fiscal year ended December 31, 1998. The Borrower and
its Significant Subsidiaries have filed all United States federal income tax
returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary of the Borrower. The
charges, accruals and reserves on the books of the Borrower and its
Significant Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
4.08 SIGNIFICANT SUBSIDIARIES. Each of the Significant
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
4.09 NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
4.10 ENVIRONMENTAL MATTERS. The Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial position, results of operations or
prospects of the Borrower and its Subsidiaries, considered as a whole.
4.11 FULL DISCLOSURE. All information heretofore furnished
by Promus and the Borrower to the Administrative Agent or to any Lender for
purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Administrative Agent or any Lender, taken as a whole, will be
true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the Lenders
in writing any and all facts which materially and adversely affect or may
affect (to the extent the Borrower can now reasonably foresee), the business,
operations or financial positionof the Borrower and its Subsidiaries, taken
as a whole, or the ability of the Borrower to
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perform its obligations under this Agreement. With respect to any projections
or forecasts provided, such projections or forecasts represent, as of the
date thereof, management's best estimates based on reasonable assumptions and
all available information, but are subject to the uncertainty inherent in all
projections and forecasts.
4.12 THE PROMUS ACQUISITION. As of the Effective Date, the
Promus Acquisition has been consummated in material compliance with all
applicable laws and all regulatory requirements (including without limitation
the Hart-Scott Rodino Act but excluding any regulatory requirements
consisting of consents to the transfer of liquor licenses); all governmental
and shareholder consents and approvals necessary in connection therewith have
been obtained; all third party consents required in connection therewith have
been obtained (in the case of such third party consents, except to the extent
that the failure to obtain the same would not, individually or in the
aggregate, have a Material Adverse Effect) and all such consents and
approvals are in force and effect and all applicable waiting periods have
expired without any action being taken by any authority that restrains,
prevents or imposes any material adverse conditions upon the Promus
Acquisition. Giving effect to the Promus Acquisition, as of the Effective
Date, Borrower and its Significant Subsidiaries are, on a consolidated basis,
Solvent.
4.13 YEAR 2000. Borrower and its Subsidiaries have reviewed
the effect of the Year 2000 Issue on the computer software, hardware and
firmware systems and equipment containing embedded microchips owned or
operated by or for Borrower and its Subsidiaries. The costs to Borrower and
its Subsidiaries which are anticipated as of the date hereof of any
reprogramming required as a result of the Year 2000 Issue to permit the
proper functioning of such systems and equipment and the proper processing of
data, and the testing of such reprogramming, and of required systems changes
are not reasonably expected to result in a Default or to have a Material
Adverse Effect.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any
Commitment hereunder or any amount payable under any Note or any Letter of
Credit Liability remains unpaid:
5.01 INFORMATION. The Borrower will deliver to the
Administrative Agent:
(a) as soon as available and in any event no later
than March 31, 2000, a pro forma combined statement of income of the
Borrower, Promus and their respective Subsidiaries for the period
commencing January 1, 1999 and ending on December 31, 1999, and a pro
forma combined balance sheet of the Borrower, Promus and their
respective Subsidiaries as at December 31, 1999, in each case prepared
in a manner consistent with the Pro Forma Combined Financial Statements
delivered to the Administrative Agent and the Lenders prior to the date
hereof;
(b) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each case
in comparative form the figures as of the end of and for the previous
fiscal year, all reported on in a manner acceptable to the Securities
and Exchange Commission by Arthur Andersen LLP or other independent
public accountants of nationally recognized standing;
(c) as soon as available and in any event within 60
days after the end of each of the first three quarters of each fiscal
year of the Borrower, the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements of income and
cash flows in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's previous fiscal
year, all certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by an Authorized Officer;
(d) simultaneously with the delivery of each set of
financial statements referred to in clauses (b) and (c) above, a
Compliance Certificate (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in
compliance with the requirements of Section 5.06, Section 5.09 and
Section 5.10 on the date of such financial statements, and (ii) stating
whether any Default exists on the date of such Compliance Certificate
and, if any Default then exists, setting forth the details thereof and
the action which the Borrower is taking or proposes to take with
respect thereto;
(e) simultaneously with the delivery of each set of
financial statements referred to in clause (b) above, a statement of
the firm of independent public accountants which reported on such
statements (i) whether anything has come to their attention to cause
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them to believe that any Default existed on the date of such statements
and (ii) confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith;
(f) as soon as available and in any event not later
than the last day of February of each year, a completed Pricing
Certificate as of December 31 of the prior year;
(g) within five Domestic Business Days of any officer
of the Borrower obtaining knowledge of any Default, if such Default is
then continuing, a certificate of an Authorized Officer setting forth
the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(h) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all financial
statements, reports and proxy statements so mailed;
(i) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission;
(j) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412
of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA,
a copy of such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of the Borrower
setting forth details as to such occurrence and action, if any, which
the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(k) forthwith, notice of any change of which the
Borrower becomes aware in the rating by S&P or Moody's, of the
Borrower's outstanding senior unsecured long-term debt securities; and
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(l) from time to time such additional information
regarding the financial position or business of the Borrower as the
Administrative Agent, at the request of any Lender, may reasonably
request.
5.02 MAINTENANCE OF PROPERTY; INSURANCE.
(a) The Borrower will keep, and will cause each
Significant Subsidiary to keep, all property useful and necessary in
its business in good working order and condition, ordinary wear and
tear excepted, except where failure to do so would not have a material
adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries,
considered as a whole.
(b) The Borrower will, and will cause each of its
Significant Subsidiaries to, maintain (either in the name of the
Borrower or in such Subsidiary's own name) with financially sound and
responsible insurance companies, insurance on all their respective
properties in at least such amounts and against at least such risks
(and with such risk retention) as are usually insured against in the
same general area by companies of established repute engaged in the
same or a similar business and will furnish to the Lenders, upon
request from the Administrative Agent, information presented in
reasonable detail as to the insurance so carried. Notwithstanding the
foregoing, the Borrower may self-insure with respect to such risks with
respect to which companies of established repute engaged in the same or
similar business in the same general area usually self-insure.
5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue, and will cause each Significant Subsidiary to
continue, to engage in business of the same general type as now conducted by
the Borrower and its Significant Subsidiaries, and will preserve, renew and
keep in full force and effect, and will cause each Subsidiary of the Borrower
to preserve, renew and keep in full force and effect their respective
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business; provided that
nothing in this Section 5.03 shall prohibit (i) the merger of a Subsidiary of
the Borrower into the Borrower or the merger or the consolidation of a
Subsidiary of the Borrower with or into another Person if the corporation
surviving such consolidation or merger is a Subsidiary of the Borrower and
if, in each case, after giving effect thereto, no Default shall have occurred
and be continuing or (ii) the termination of the corporate existence of any
Subsidiary of the Borrower if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not materially
disadvantageous to the Lenders.
5.04 COMPLIANCE WITH LAWS. The Borrower will comply, and
cause each Significant Subsidiary to comply, in all material respects with
all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder), and shall timely file
all material tax returns and pay all material taxes required to be filed by
them and so paid, except in each case where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Borrower will keep, and will cause each Significant Subsidiary to keep,
proper books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business
and activities;
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and will permit, and will cause each Significant Subsidiary to permit,
representatives of any Lender at such Lender's expense to visit and inspect
any of their respective properties, to examine and make abstracts from any of
their respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often as
may reasonably be desired.
5.06 NEGATIVE PLEDGE. None of the Borrower, any Covered
Subsidiary or any Significant Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing as of the Effective Date;
(b) any Lien existing on any asset of any Person at
the time such Person becomes a Subsidiary of the Borrower or at the
time such Person is merged or consolidated with or into the Borrower or
a Subsidiary of the Borrower, in each case where the Lien is not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring or constructing such asset (it being understood that, for
this purpose, the acquisition of a Person is also an acquisition of the
assets of such Person); provided that the Lien attaches to such asset
concurrently with or within 180 days after the acquisition thereof, or
such longer period, not to exceed 12 months, due to the Borrower's
inability to retain the requisite governmental approvals with respect
to such acquisition; provided further that, in the case of real estate,
(i) the Lien attaches within 12 months after the latest of the
acquisition thereof, the completion of construction thereon or the
commencement of full operation thereof and (ii) the Debt so secured
does not exceed the sum of (x) the purchase price of such real estate
plus (y) the costs of such construction;
(d) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary of the Borrower and
not created in contemplation of such acquisition;
(e) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses of this Section, provided
that such Debt is not increased (other than to cover any transaction
costs of such refinancing, extension, renewal or refunding) and is not
secured by any additional assets;
(f) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not secure any single
obligation in an amount exceeding $50,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(g) Liens securing Debt of a Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower; and
(h) Liens not otherwise permitted by the foregoing
clauses of this Section encumbering assets of the Borrower and its
Subsidiaries having an aggregate fair
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market value which is not in excess of 10% of Consolidated Net Tangible
Assets (determined, in each case, by reference to the Pro Forma
Combined Financial Statements or, if then delivered, as of the most
recent date for which Borrower has delivered its financial statements
under Section 5.01(b) or Section 5.01(c), as applicable).
5.07 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer all or any substantial part of the
assets of the Borrower and its Subsidiaries, taken as a whole, to any other
Person; PROVIDED that, the Borrower may merge with another Person if (A) the
Borrower is the corporation surviving such merger and (B) immediately after
giving effect to such merger, no Default shall have occurred and be
continuing.
5.08 USE OF PROCEEDS. The proceeds of the Loans made under
this Agreement will be used by the Borrower and its Subsidiaries for general
corporate purposes, including but not limited to (a) on the Effective Date,
to (i) finance a portion of the cash consideration payable in connection with
the Promus Acquisition, and (ii) to refinance all of the outstanding
obligations under the Existing Promus Facility, and (iii) to pay
transactional and other expenses associated herewith, with the Promus
Acquisition, the refinancing of the Existing Promus Facility and the
amendment of the Existing Hilton Facility and Existing Hawaiian Village
Facility, and (b), thereafter, for working capital, capital expenditures, the
back stop of commercial paper and the acquisition of full-service hotel and
resort properties. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the meaning of Regulation U in
any manner that would violate Regulation X or result in a violation of
Regulation U.
5.09 LEVERAGE RATIO. The Leverage Ratio will not, as of the
last day of any fiscal quarter of Borrower described in the matrix below,
exceed the ratio set forth opposite that fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDING MAXIMUM RATIO
---------------------- --------------
<S> <C>
September 30, 1999 through and
including December 31, 2000 5.00:1.00
March 31, 2001 through and including
March 31, 2002 4.75:1.00
Thereafter 4.50:1.00.
</TABLE>
5.10 INTEREST COVERAGE RATIO. The Interest Coverage Ratio
shall not, as of the last day of any fiscal quarter of Borrower, be less than
2.50:1.00.
5.11 YEAR 2000. Borrower shall promptly and in any event
prior to December 15, 1999 make, and shall cause each of its Subsidiaries so
to make, all required systems changes, in computer software, hardware and
firmware systems and equipment containing embedded microchips owned or
operated by or for Borrower and its Subsidiaries required as a result of the
Year 2000 Issue to permit the proper functioning of such computer systems and
other equipment, except to the extent that the failure to take any such
action would not reasonably be expected to result in a Default or to
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have a Material Adverse Effect. At the request of any Lender, Borrower shall
provide, and shall cause each of its Subsidiaries to provide, to such Lender
reasonable assurance of its compliance with the preceding sentence.
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ARTICLE VI
DEFAULTS
6.01 EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to (i) reimburse any
drawing under any Letter of Credit when required hereunder or (ii) pay
when due any principal of any Loan or Swing Line Loan under this
Agreement, or (iii) pay within five days of the due date thereof any
interest, fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.06 to 5.10, inclusive;
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for 7 days after written notice
thereof has been given to the Borrower by the Administrative Agent at
the request of any Lender;
(d) any representation, warranty, certification or
statement made or deemed made by the Borrower in this Agreement or in
any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in any
material respect when made (or deemed made);
(e) the Borrower or any Covered Subsidiary or any
Significant Subsidiary shall fail to make any payment in respect of any
Debt (other than the Notes and Non-Recourse Debt) when due or within
any applicable grace period and the aggregate principal amount of such
Debt is in excess of $100,000,000;
(f) any event or condition shall occur which results
in the acceleration of the maturity of any Debt (other than
Non-Recourse Debt) in excess of $100,000,000 of the Borrower or any
Covered Subsidiary or any Significant Subsidiary or enables the holder
of such Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Significant Subsidiary seeking
liquidation, reorganization or other relief
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with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall
be entered against the Borrower or any Significant Subsidiary under
the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of $5,000,000 which
it shall have become liable to pay under Title IV of ERISA; or notice
of intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer, any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation
in excess of $25,000,000; or
(j) a judgment or order for the payment of money in
excess of $25,000,000 shall be rendered against the Borrower or any
Subsidiary of the Borrower and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days;
then, and in every such event, the Administrative Agent shall (i) if
requested by the Required Lenders, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by the
Required Lenders, by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans (together with accrued
interest thereon) shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; PROVIDED that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to the Borrower,
without any notice to the Borrower or any other act by the Administrative
Agent or the Lenders, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
6.02 NOTICE OF DEFAULT. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested to
do so by any Lender and shall thereupon notify all the Lenders thereof.
6.03 CASH COVER. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent upon the instruction of the Required Lenders, pay to the
Administrative Agent an amount in immediately available funds (which funds
shall be held as collateral pursuant to arrangements satisfactory to the
Administrative Agent) equal to the aggregate amount available for drawing
under all Letters of Credit then outstanding at such time, provided that,
upon the occurrence of any Event of Default specified in Section 6.01(g) or
6.01(h) with respect to the
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Borrower, the Borrower shall pay such amount forthwith without any notice or
demand or any other act by the Administrative Agent or the Lenders.
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ARTICLE VII
THE ADMINISTRATIVE AGENT
7.01 APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Administrative Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
7.02 ADMINISTRATIVE AGENT AND AFFILIATES. Bank of America
shall have the same rights and powers under this Agreement as any other
Lender and may exercise or refrain from exercising the same as though it were
not the Administrative Agent, and Bank of America and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with, the Borrower or any Subsidiary or affiliate of the Borrower as
if it were not the Administrative Agent hereunder.
7.03 ACTION BY THE ADMINISTRATIVE AGENT. The obligations of
the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent
shall not be required to take any action with respect to any Default, except
as expressly provided in Article VI.
7.04 CONSULTATION WITH EXPERTS. The Administrative Agent
may consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
7.05 LIABILITY OF AGENT. Neither the Administrative Agent
nor any of its respective affiliates nor any of the respective directors,
officers, agents or employees of any of the foregoing shall be liable for any
action taken or not taken by it in connection herewith (i) with the consent
or at the request of the Required Lenders or (ii) in the absence of its own
gross negligence or willful misconduct. Neither the Administrative Agent nor
any of its respective affiliates nor any of the respective directors,
officers, agents or employees of any of the foregoing shall be responsible
for or have any duty to ascertain, inquire into or verify (a) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (b) the performance or observance of any of the
covenants or agreements of the Borrower; (c) the satisfaction of any
condition specified in Article III, except in the case of the Administrative
Agent receipt of items required to be delivered to it; or (d) the validity,
effectiveness or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The Administrative
Agent shall incur no liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
7.06 INDEMNIFICATION. Each Lender shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent, the
Issuing Lender, their affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrower) against
any cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that
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such indemnitees may suffer or incur in connection with the Administrative
Agent's and Issuing Lender's roles under this Agreement or any related action
taken or omitted by such indemnitees hereunder.
7.07 CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, the Lead
Arranger or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent, the Lead
Arranger or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement.
7.08 SUCCESSOR AGENT. The Administrative Agent may resign
at any time subject to the appointment of a successor Administrative Agent by
giving notice to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent with the consent of the Borrower, which consent shall not be
unreasonably withheld or delayed; provided that no such consent shall be
required if the successor Administrative Agent is a Lender. If no successor
Administrative Agent shall have been so appointed, and shall have accepted
such appointment, within 30 days after the retiring Administrative Agent's
giving of notice of resignation, then the retiring Administrative Agent may,
on behalf of the Lenders, and without the Borrower's consent, appoint a
successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $1,000,000,000.
Upon the acceptance of its appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent.
7.09 ADMINISTRATIVE AGENTS' FEES. The Borrower shall pay to
the Administrative Agent for its own account fees in the amounts and at the
times previously agreed upon between the Borrower and the Administrative
Agent pursuant to a letter agreement.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
8.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Administrative Agent is advised by the
Required Lenders that deposits in Dollars and in the required amounts
are not being offered to the Lenders in the relevant market for such
Interest Period, or
(b) in the case of a Committed Borrowing, the
Required Lenders advise the Administrative Agent that the London
Interbank Offered Rate, as determined by the Administrative Agent, will
not adequately and fairly reflect the cost to such Lenders of funding
their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Lenders to make Euro-Dollar Loans shall be suspended. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money
Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing
shall bear interest for each day from and including the first day to but
excluding the last day of the Interest Period applicable thereto at the rate
applicable to Base Rate Loans for such day. The Administrative Agent shall
promptly notify the Lenders of any election by the Borrower pursuant to the
preceding sentence.
8.02 ILLEGALITY. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Lender (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Lender (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Lender shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Lenders and the Borrower, whereupon until such Lender
notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Lender
to make Euro-Dollar Loans shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Lender shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the sole judgment of such Lender, be
otherwise disadvantageous to such Lender. If such Lender shall determine that
it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, the
Borrower shall immediately prepay in full the then outstanding principal
amount of each such Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base
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Rate Loan in an equal principal amount from such Lender (on which interest
and principal shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Lenders), and such Lender shall make such a Base Rate Loan.
8.03 INCREASED COST AND REDUCED RETURN.
(a) If after (x) the Effective Date, in the case of
any Committed Loan or Letter of Credit or any obligation to make
Committed Loans or issue or participate in any Letter of Credit or (y)
the date of the related Money Market Quote, in the case of any Money
Market Loan, the adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender
(or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central
bank or comparable agency:
(i) shall subject any Lender (or its
Applicable Lending Office) to any tax, duty or other charge
with respect to its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans or its obligations
hereunder in respect of Letters of Credit (other than Excluded
Taxes), or shall change the basis of taxation of payments to
any Lender (or its Applicable Lending Office) of the principal
of or interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate Loans or
its obligation to make Fixed Rate Loans (except for changes in
the rate of tax on the overall net income of such Lender or
its Applicable Lending Office imposed by the jurisdiction in
which such Lender's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable
any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding, with respect to any Euro-Dollar
Loan any such requirement included in the Euro-Dollar Reserve
Percentage), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (or its
Applicable Lending Office) or shall impose on any Lender (or
its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any
other condition affecting its Fixed Rate Loans, its Note or
its obligation to make Fixed Rate Loans or its obligations
hereunder in respect to Letters of Credit;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making or maintaining any
Fixed Rate Loan or of issuing or participating in any Letter of Credit,
or to reduce the amount of any sum received or receivable by such
Lender (or its Applicable Lending Office) under this Agreement or under
its Note with respect thereto, by an amount deemed by such Lender to be
material, then, subject to clause (d) of this Section, within 15 days
after demand by such Lender (with a copy to the Administrative Agent),
the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such increased cost or reduction.
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(b) If, after the Effective Date, any Lender shall
have determined that any applicable law, rule or regulation regarding
capital adequacy (irrespective of the actual timing of the adoption or
implementation thereof and including, without limitation, any law or
regulation adopted pursuant to the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices) or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on
capital of such Lender (or its Parent) as a consequence of such
Lender's obligations hereunder to a level below that which such Lender
(or its Parent) could have achieved but for such law, regulation,
change or compliance (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Lender to be
material, then, subject to clause (d) of this Section, from time to
time, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender (or its
Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and
the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to
compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender.
(d) Borrower shall not be required to reimburse any
Lender for any increased costs, reductions or payments under this
Section arising prior to 90 days preceding the date of any claim or
demand by a Lender for compensation under this Section except to the
extent the applicable law or regulation is imposed retroactively and
the demand or claim is made within 90 days of the effect (in which case
such claim or demand shall be submitted within 90 days of the date upon
which such Lender becomes aware or should reasonably be aware of such
law or regulation). A certificate of any Lender claiming compensation
under this Section and setting forth the additional amount or amounts
to be paid to it hereunder (with detail sufficient to allow the
verification by Borrower of its calculations) shall be conclusive in
the absence of manifest error. In determining such amount, such Lender
may use any reasonable averaging and attribution methods.
8.04 BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Lender to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Lender has demanded
compensation under Section 8.03(a) and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Lender through the
Administrative Agent, have elected that the provisions of this Section shall
apply to such Lender, then, unless and until such Lender notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
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(a) all Loans which would otherwise be made by such
Lender as Euro-Dollar Loans shall be made instead as Base Rate Loans
(on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Lenders), and
(b) after each of its Euro-Dollar Loans has been
repaid, all payments of principal which would otherwise be applied to
repay such Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.
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ARTICLE IX
MISCELLANEOUS
9.01 NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex, telecopy
or similar writing) and shall be given to such party: (x) in the case of the
Borrower or the Administrative Agent, at its address or telex or telecopier
number set forth on the signature pages hereof, (y) in the case of any Lender,
at its address or telex or telecopier number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex or
telecopier number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered or received at
the address specified in this Section; provided that notices to the
Administrative Agent or the Issuing Lender under Article II or Article VIII
shall not be effective until received.
9.02 NO WAIVERS. No failure or delay by the Administrative
Agent or any Lender in exercising any right, power or privilege hereunder or
under any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
9.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION.
(a) The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Administrative Agent and the Lead
Arranger, including reasonable fees and disbursements of counsel for
the Administrative Agent (including the allocated fees and expenses of
any internal counsel), in connection with the preparation of this
Agreement and all related documents, the negotiation, closing and
syndication of this Agreement and the Loans (including due diligence
with respect thereto), the administration of this Agreement and the
Loans, and in connection with any waiver, amendment or consent
hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Lender, the Swing Line Lender or any Lender, including fees and
disbursements of counsel (including the allocated fees and expenses of
any internal counsel), in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom. The Borrower shall indemnify each Lender and the
Swing Line Lender against any transfer taxes, documentary taxes,
mortgage recording taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery or
enforcement of any of the Loan Documents.
(b) The Borrower agrees to indemnify the
Administrative Agent, the Lead Arranger, the Issuing Lender, the Swing
Line Lender and each Lender, their respective affiliates and the
respective directors, officers, agents and employees of the foregoing
(each an "Indemnitee") and hold each Indemnitee harmless from and
against any and all liabilities,
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losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel
(including the allocated fees and expenses of any internal counsel),
which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of the Promus Acquisition, the
Promus Merger Agreement or the transactions contemplated thereby, this
Agreement or any actual or proposed use of proceeds of Loans
hereunder; provided that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
9.04 AMENDMENTS AND WAIVERS. No amendment or waiver of the
terms of this Agreement or the other Loan Documents shall be made or be
effective unless such amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (and, if the rights or duties of the
Administrative Agent, the Swing Line Lender or the Issuing Lender are
affected thereby, by the Administrative Agent, the Swing Line Lender or the
Issuing Lender, as relevant); provided that no such amendment or waiver
shall, unless signed by all the Lenders, (i) except as provided in Section
2.24, increase or decrease the amount of the Commitment of any Lender (except
for a ratable decrease in the Commitments of all Lenders) or subject any
Lender to any additional obligation, (ii) reduce the principal of or rate of
interest on any Loan or reduce the amount to be reimbursed in respect of any
Letter of Credit or interest thereon or any fees hereunder, (iii) postpone
the date fixed for any payment of principal of or interest on any Loan or the
amount to be reimbursed in respect of any Letter of Credit or interest
thereon or any fees hereunder, or the Termination Date, (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes and Letter of Credit Liabilities, or the percentage of Lenders,
which shall be required for the Lenders or any of them to take any action
under this Section or any other provision of this Agreement or (v) render
more restrictive the ability of any Lender to assign or grant participations
in its Commitment under Section 9.05.
9.05 SUCCESSORS AND ASSIGNS.
(a) This Agreement and the other Loan Documents to
which Borrower is a party will be binding upon and inure to the benefit
of Borrower, the Administrative Agent, each of the Lenders, and their
respective successors and permitted assigns, EXCEPT that the Borrower
may not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all the Lenders.
Each Lender represents that it is not acquiring its Note with a view to
the distribution thereof within the meaning of the Securities Act of
1933, as amended (subject to any requirement that disposition of such
Note must be within the control of such Lender). Any Lender may at any
time pledge its Note or any other instrument evidencing its rights as a
Lender under this Agreement to a Federal Reserve Bank, but no such
pledge shall release that Lender from its obligations hereunder or
grant to such Federal Reserve Bank the rights of a Lender hereunder
absent foreclosure of such pledge.
(b) From time to time following the Effective Date,
each Lender may assign to one or more Eligible Assignees all or any
portion of its Commitment; PROVIDED that (i) such Eligible Assignee, if
not then a Lender or an Affiliate of the assigning Lender, shall be
approved by each of the Administrative Agent and (if no Default or
Event of Default then exists) the Borrower (neither of which approvals
shall be unreasonably withheld or delayed),
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(ii) such assignment shall be evidenced by an Assignment and
Assumption Agreement substantially in the form of Exhibit J, a copy
of which shall be furnished to the Administrative Agent as hereinbelow
provided, (iii) EXCEPT in the case of an assignment to an Affiliate
of the assigning Lender, to another Lender or of the entire remaining
Commitment of the assigning Lender, the assignment shall not assign a
portion of the Commitments that is equivalent to less than $5,000,000,
and (iv) the effective date of any such assignment shall be as
specified in the Assignment and Assumption Agreement, but not earlier
than the date which is five Domestic Business Days after the date the
Administrative Agent has received the Assignment and Assumption
Agreement. Upon the effective date of the Assignment and Assumption
Agreement, the Eligible Assignee named therein shall be a Lender for
all purposes of this Agreement, with the Commitment therein set forth
and, to the extent of such Commitment, the assigning Lender shall be
released from its further obligations under this Agreement. Borrower
agrees that it shall execute and deliver (against delivery by the
assigning Lender to Borrower of its Note) to such assignee Lender, a
Note evidencing that assignee Lender's Commitment, and to the
assigning Lender, a Note evidencing the remaining Commitment retained
by the assigning Lender.
(c) By executing and delivering an Assignment and
Assumption Agreement, the Eligible Assignee thereunder acknowledges and
agrees that: (i) other than the representation and warranty that it is
the legal and beneficial owner of the Commitment being assigned thereby
free and clear of any adverse claim, the assigning Lender has made no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has made no
representation or warranty and assumes no responsibility with respect
to the financial condition of Borrower or the performance by Borrower
of its obligations under this Agreement; (iii) it has received a copy
of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.01 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Assumption
Agreement; (iv) it will, independently and without reliance upon the
Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement; (v) it appoints and authorizes the Administrative Agent to
take such action and to exercise such powers under this Agreement as
are delegated to the Administrative Agent by this Agreement; and (vi)
it will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by it
as a Lender.
(d) The Administrative Agent shall maintain a copy of
each Assignment and Assumption Agreement delivered to it and a register
(the "Register") of the names and address of each of the Lenders and
the Commitment held by each Lender, giving effect to each Assignment
and Assumption Agreement. The Register shall be available during normal
business hours for inspection by Borrower or any Lender upon reasonable
prior notice to the Administrative Agent. After receipt of a completed
Assignment and Assumption Agreement executed by any Lender and an
Eligible Assignee (including without limitation any existing Lender),
and receipt of an assignment fee of $3,500 from such Lender or Eligible
Assignee,
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the Administrative Agent shall, promptly following the effective date
thereof, provide to Borrower and the affected Lenders notice of such
effectiveness. Borrower, the Administrative Agent and the Lenders
shall deem and treat the Persons listed as Lenders in the Register
as the holders and owners of the Commitments listed therein for all
purposes hereof, and no assignment or transfer of any Commitment
shall be effective, in each case unless and until an Assignment and
Assumption Agreement effecting the assignment or transfer thereof
shall have been accepted by the Administrative Agent and recorded in
the Register as provided above. Prior to such recordation, all
amounts owed with respect to the applicable Commitment shall be owed
to the Lender listed in the Register as the owner thereof, and any
request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is listed
in the Register as a Lender shall be conclusive and binding on
any subsequent holder, assignee or transferee of the corresponding
Commitment.
(e) Each Lender may from time to time grant
participations to one or more Lenders or other financial institutions
(INCLUDING another Lender) in its Commitment; PROVIDED, HOWEVER, that
(i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participating Lenders or other financial institutions shall not be a
Lender hereunder for any purpose (provided that the participation
agreement may provide for a Lender to allow the participant the
derivative benefit of Sections 2.23, 8.03 and 9.03, but such derivative
benefits shall not increase the overall cost to Borrower under such
Sections), (iv) Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement, (v) the participation interest shall be expressed as a
percentage of the granting Lender's Commitment as it then exists and
shall not restrict an increase in the Commitments, or in the granting
Lender's Commitment, so long as the amount of the participation
interest is not affected thereby and (vi) the consent of the holder of
such participation interest shall not be required for amendments or
waivers of provisions of the Loan Documents OTHER THAN those which (A)
result in a decrease in fees, interest rate spreads or principal
payable to the holder of such participation, (B) increase the
Commitment of the granting Lenders and thereby increase the funding
requirements of the holder of such a participation, or (C) extend the
Termination Date.
(f) Notwithstanding anything to the contrary
contained herein, any Lender (a "Granting Lender") may grant to special
purpose funding vehicles (each, an "SPC") of such Granting Lender,
identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower the option to provide all
or any part of any Committed Loan or Money Market Loan that such
Granting Lender would otherwise be obligated to make pursuant to this
Agreement, provided that (i) nothing herein shall constitute a
commitment to make any Loan by any SPC, (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of
such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof, and (iii) except as expressly set forth
herein, the rights of any such SPC shall be derivative of the rights of
the Granting Lender, and each SPC shall be subject to all of the
restrictions upon the Granting Lender herein contained. Each SPC shall
be conclusively presumed to have made arrangements with its Granting
Lender for the exercise of voting and other rights hereunder in a
manner which is
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acceptable to the SPC, and the Administrative Agent, the Lenders and
Borrower and each other party shall be entitled to rely upon and deal
solely with the Granting Lender with respect to Loans made by or
through its SPC. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender (and, if such Loan is
a Money Market Loan, shall be deemed to utilize the Commitments of
all the Lenders) to the same extent, and as if, such Loan were made by
the Granting Lender. Each party hereto hereby agrees that no SPC shall
be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the related
Granting Lender). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after
the payment in full of all outstanding senior indebtedness of any SPC,
it will not institute against, or join any other person in instituting
against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the
laws of the United States of America or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section
9.05, each SPC may, at any time, without regard to the period required
by Section 9.05(b)(iv), (i) with notice to, but without the prior
written consent of, the Borrower or the Administrative Agent, and
without paying any processing fee therefor, assign all or a portion of
its interests in any Loans to its Granting Lender (or to any other SPC
of such Granting Lender) or to any financial institutions providing
liquidity and/or credit facilities to or for the account of such SPC to
fund the Loans made by such SPC or to support the securities (if any)
issued by such SPC to fund such Loans (but nothing contained herein
shall be construed in derogation of the obligation of the Granting
Lender to make Loans hereunder), and (ii) disclose on a confidential
basis any non-public information relating to its Loans to any rating
agency, commercial paper dealer or provider of a surety, guarantee or
credit or liquidity enhancement to such SPC. This Section 9.05(f) may
not be amended without the consent of all SPC's then designated to the
Administrative Agent in accordance with the foregoing provisions of
this Section.
9.06 NEW YORK LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Note shall be construed in accordance with and governed by the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Central District of
California and of any California State court sitting in Los Angeles, California
(in each case, applying such law) for purposes of all legal proceedings arising
out of or relating to this Agreement or the transactions contemplated hereby.
The Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
9.07 COUNTERPARTS; INTEGRATION. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
9.08 SEVERAL OBLIGATIONS. The obligations of the Lenders
hereunder are several. Neither the failure of any Lender to carry out its
obligations hereunder nor the failure of this Agreement to be duly authorized,
executed and delivered by any Lender shall relieve any other Lender
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<PAGE>
of its obligations hereunder (or affect the rights hereunder of such other
Lender). No Lender shall be responsible for the obligations of, or any action
taken or omitted by, any other Lender hereunder.
9.09 SHARING OF SET-OFFS. Each Lender agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it and any Letter of Credit
Liabilities which is greater than the proportion received by any other Lender
in respect of the aggregate amount of principal and interest due with respect
to any Note and any Letter of Credit Liabilities held by such other Lender,
the Lender receiving such proportionately greater payment shall purchase such
participations in the Notes and Letter of Credit Liabilities held by the
other Lenders, and such other adjustments shall be made, as may be required
so that all such payments of principal and interest with respect to the Notes
and Letter of Credit Liabilities held by the Lenders shall be shared by the
Lenders pro rata; PROVIDED that nothing in this Section shall impair the
right of any Lender to exercise any right of set-off or counterclaim it may
have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes. The
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note or Letter of
Credit Liability, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
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<PAGE>
9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE SWING LINE LENDER AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
HILTON HOTELS CORPORATION
By:
-------------------------------------
Name: Mariel C. Albrecht
Title: Vice President and Assistant Treasurer
Address for Notices:
Mariel C. Albrecht
Vice President and Assistant Treasurer
Hilton Hotels Corporation
World Headquarters
9336 Civic Center Drive
Beverly Hills, California 90210
Telecopier: 310/205-7867
Telephone: 310/205-7687
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<PAGE>
BANK OF AMERICA, N.A., as Administrative Agent
By:
-------------------------------------------
Janice Hammond, Vice President
Bank of America, N.A.
555 South Flower Street
11th Floor
Los Angeles, California 90071
Attn: Janice Hammond
Telecopier: 213/228-2299
Telephone: 213/228-9861
E-mail: [email protected]
BANK OF AMERICA, N.A., as a Lender
By:
-------------------------------------------
Scott L. Faber, Principal
Address for Notices:
Bank of America, N.A.
Credit Products - LA 3283
Entertainment & Media Group
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Scott L. Faber, Principal
Telecopier: 213/228-2641
Telephone: 213/228-2768
E-Mail: [email protected]
with a copy to:
Bank of America, N.A.
Entertainment, Media & Gaming Industries Group
5777
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: William S. Newby, Managing Director
Telecopier: 213/228-3145
Telephone: 213/228-2438
E-Mail: [email protected]
S-1
<PAGE>
THE BANK OF NOVA SCOTIA, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-2
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-3
<PAGE>
WACHOVIA BANK, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-4
<PAGE>
BANK ONE, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-5
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-6
<PAGE>
SOCIETE GENERALE, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-7
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-8
<PAGE>
WELLS FARGO BANK, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-9
<PAGE>
THE NORTHERN TRUST COMPANY, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-10
<PAGE>
BANK OF CHINA, LOS ANGELES BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-11
<PAGE>
BANK OF HAWAII, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-12
<PAGE>
BANK OF TAIWAN, LOS ANGELES BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-13
<PAGE>
BANQUE NATIONALE DE PARIS, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-14
<PAGE>
THE DAI-ICHI KANGYO BANK. LTD. NEW YORK
BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-15
<PAGE>
FIRST HAWAIIAN BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-16
<PAGE>
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-17
<PAGE>
LASALLE BANK N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-18
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-19
<PAGE>
THE SANWA BANK, LIMITED; LOS ANGELES
BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-20
<PAGE>
U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-21
<PAGE>
HUA NAN COMMERCIAL BANK, LTD.
LOS ANGELES BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-22
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION,
as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-23
<PAGE>
CITY NATIONAL BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-24
<PAGE>
EXHIBIT 4.6
SHORT TERM CREDIT AGREEMENT
dated as of
November 30, 1999
among
HILTON HOTELS CORPORATION
The Lenders and Syndication Agents Referred to Herein
and
BANK OF AMERICA, N.A.
as the Administrative Agent
--------------------------------------
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Sole Book Manager
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS..........................................................................................1
1.01 Definitions....................................................................................1
1.02 Accounting Terms and Determinations...........................................................13
1.03 Types of Borrowings...........................................................................13
ARTICLE II
THE CREDITS.........................................................................................14
2.01 Commitments to Lend...........................................................................14
2.02 Notice of Borrowings..........................................................................14
2.03 [Reserved]....................................................................................14
2.04 [Reserved]....................................................................................14
2.05 Conversion and Continuation of Loans..........................................................14
2.06 Notice to Lenders; Funding of Loans...........................................................15
2.07 Notes.........................................................................................16
2.08 Interest Rates................................................................................16
2.09 Administrative Agency Fees....................................................................17
2.10 Upfront Fees..................................................................................17
2.11 Facility Fees.................................................................................17
2.12 [Reserved]....................................................................................17
2.13 Optional Termination or Reduction of Commitments by Borrower..................................17
2.14 Optional Termination or Reduction of Commitments by the Lenders...............................17
2.15 Scheduled Termination of Commitments..........................................................18
2.16 Optional Prepayments..........................................................................18
2.17 General Provisions as to Payments.............................................................18
2.18 Funding Losses................................................................................19
2.19 Computation of Interest and Fees..............................................................19
2.20 Withholding Tax Exemption.....................................................................19
2.21 [Reserved]....................................................................................20
2.22 Regulation D Compensation.....................................................................20
2.23 Extension of Termination Date.................................................................20
2.24 Increased Commitments; Additional Lenders.....................................................21
ARTICLE III
CONDITIONS..........................................................................................22
3.01 Borrowings....................................................................................22
3.02 Effective Date................................................................................22
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES......................................................................24
4.01 Corporate Existence and Power.................................................................24
4.02 Corporate and Governmental Authorization; Contravention.......................................24
4.03 Binding Effect................................................................................24
4.04 Financial Information.........................................................................24
4.05 Litigation....................................................................................24
4.06 Compliance with ERISA.........................................................................25
4.07 Taxes.........................................................................................25
4.08 Significant Subsidiaries......................................................................25
4.09 Not an Investment Company.....................................................................25
4.10 Environmental Matters.........................................................................25
4.11 Full Disclosure...............................................................................25
4.12 The Promus Acquisition........................................................................26
4.13 Year 2000.....................................................................................26
ARTICLE V
COVENANTS...........................................................................................27
5.01 Information...................................................................................27
5.02 Maintenance of Property; Insurance............................................................29
5.03 Conduct of Business and Maintenance of Existence..............................................29
5.04 Compliance with Laws..........................................................................29
5.05 Inspection of Property, Books and Records.....................................................29
5.06 Negative Pledge...............................................................................30
5.07 Consolidations, Mergers and Sales of Assets...................................................31
5.08 Use of Proceeds...............................................................................31
5.09 Leverage Ratio................................................................................31
5.10 Interest Coverage Ratio.......................................................................31
5.11 Year 2000.....................................................................................31
ARTICLE VI
DEFAULTS............................................................................................33
6.01 Events of Default.............................................................................33
6.02 Notice of Default.............................................................................34
ARTICLE VII
THE ADMINISTRATIVE AGENT............................................................................35
7.01 Appointment and Authorization.................................................................35
7.02 Administrative Agent and Affiliates...........................................................35
7.03 Action by the Administrative Agent............................................................35
7.04 Consultation with Experts.....................................................................35
7.05 Liability of Agent............................................................................35
7.06 Indemnification...............................................................................35
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<PAGE>
7.07 Credit Decision...............................................................................36
7.08 Successor Agent...............................................................................36
7.09 Administrative Agents' Fees...................................................................36
ARTICLE VIII
CHANGE IN CIRCUMSTANCES.............................................................................37
8.01 Basis for Determining Interest Rate Inadequate or Unfair......................................37
8.02 Illegality....................................................................................37
8.03 Increased Cost and Reduced Return.............................................................38
8.04 Base Rate Loans Substituted for Affected Euro-Dollar Loans....................................39
ARTICLE IX
MISCELLANEOUS.......................................................................................41
9.01 Notices.......................................................................................41
9.02 No Waivers....................................................................................41
9.03 Expenses; Documentary Taxes; Indemnification..................................................41
9.04 Amendments and Waivers........................................................................42
9.05 Successors and Assigns........................................................................42
9.06 New York Law; Submission to Jurisdiction......................................................45
9.07 Counterparts; Integration.....................................................................45
9.08 Several Obligations...........................................................................45
9.09 Sharing of Set-Offs...........................................................................45
9.10 WAIVER OF JURY TRIAL..........................................................................47
</TABLE>
SCHEDULES:
Pricing Schedule
EXHIBITS:
Exhibit A - Compliance Certificate
Exhibit B - Form of Note
Exhibit C - Pricing Certificate
Exhibit D - Form of Notice of Borrowing
Exhibit E - Reserved
Exhibit F - Reserved
Exhibit G - Reserved
Exhibit H - Reserved
Exhibit I - Opinion of Gibson, Dunn & Crutcher, LLP
Exhibit J - Assignment and Assumption Agreement
Exhibit K - Extension Agreement
-iii-
<PAGE>
SHORT TERM CREDIT AGREEMENT
SHORT TERM CREDIT AGREEMENT dated as of November 30, 1999,
among HILTON HOTELS CORPORATION ("Borrower"), THE BANK OF NOVA SCOTIA, FIRST
UNION NATIONAL BANK AND WACHOVIA BANK, as Syndication Agents, the Lenders who
are parties hereto from time to time, and BANK OF AMERICA, N.A., as
Administrative Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Additional Lender" has the meaning set forth in Section
2.24(b).
"Administrative Agent" means Bank of America, N.A. in its
capacity as administrative agent for the Lenders hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each
Lender, an administrative questionnaire in the form prepared by the
Administrative Agent and submitted to the Administrative Agent (with a copy
to the Borrower) duly completed by such Lender.
"Affiliate" means, as to any Lender, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Lender. As used in this definition, "control" (and the
correlative terms, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise);
PROVIDED that, in any event, any Person that owns, directly or indirectly,
25% or more of the securities having ordinary voting power for the election
of directors or other governing body of a corporation, or 25% or more of the
partnership or other ownership interests of any other Person, will be deemed
to control such corporation or other Person.
"Agreement" means this Short Term Credit Agreement, either
as originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
"Allocation Notice" means a written communication submitted
to each Lender by the Lead Arranger prior to the date hereof, setting forth
the allocated Commitment of each Lender as of the Effective Date.
"Applicable Lending Office" means, with respect to any
Lender, (i) in the case of its Base Rate Loans, its Domestic Lending Office
and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office.
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<PAGE>
"Authorized Officer" means any of the controller, the
treasurer or the chief financial officer of the Borrower.
"Bank of America" means Bank of America, N.A., its
successors and assigns.
"Base Rate" means, as of any date of determination, the
rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal
to the HIGHER OF (a) the Reference Rate in effect on such date (calculated on
the basis of a year of 365 or 366 days and the actual number of days elapsed)
and (b) the Federal Funds Rate in effect on such date (calculated on the
basis of a year of 360 days and the actual number of days elapsed) PLUS 1/2
of 1% (50 basis points).
"Base Rate Loan" means a Loan made or to be made by a
Lender as a Base Rate Loan in accordance with the applicable Notice of
Borrowing or Notice of Conversion/Continuation or pursuant to Article VIII.
"Base Rate Margin" has the meaning set forth on the Pricing
Schedule.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Hilton Hotels Corporation, a Delaware
corporation, and its successors.
"Borrowing" means the aggregation of Loans of one or more
Lenders to be made to the Borrower pursuant to Article II on a single date
and, in the case of Eurodollar Rate Loans, for a single Interest Period.
"Change of Control" means the occurrence of a Rating
Decline in connection with any of the following events: (i) upon any merger
or consolidation of the Borrower with or into any person or any sale,
transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Borrower, on a consolidated basis, in
one transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) is or becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
securities representing a majority of the total voting power of the aggregate
outstanding securities of the transferee or surviving entity normally
entitled to vote in the election of directors, managers, or trustees, as
applicable, of the transferee or surviving entity, (ii) when any person or
group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) is or becomes the beneficial owner (within
the meaning of Rule 13d-3 promulgated by the Securities and-Exchange
Commission under said Act) of securities representing a majority of total
voting power of the aggregate outstanding securities of the Borrower normally
entitled to vote in the election of directors of the Borrower, (iii) when,
during any period of 12 consecutive calendar months, individuals who were
directors of the Borrower on the first day of such period (together with any
new directors whose election by the board of directors of the Borrower or
whose nomination for election by the stockholders of the Borrower was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period
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<PAGE>
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the board of directors of
the Borrower, or (iv) the sale or disposition, whether directly or
indirectly, by the Borrower of all or substantially all of its assets.
"Commitment" means, as to each Lender, the commitment of
that Lender to make Loans as such amount may be reduced from time to time
pursuant to Section 2.13, 2.14, 2.15, or 2.16 or increased from time to time
pursuant to Section 2.24. The aggregate amount of the Commitments under this
Agreement as of the Effective Date is $450,000,000. As of the Effective Date,
each Lender shall hold a Commitment in the amount set forth in its Allocation
Notice.
"Compliance Certificate" means a certificate, substantially
in the form of Exhibit A, properly completed and signed by an Authorized
Officer.
"Consolidated Debt" means at any date the Debt of the
Borrower and its Subsidiaries, determined on a consolidated basis as of such
date PROVIDED that Consolidated Debt shall exclude (A) the PPE Assumed Notes,
and (B) Debt of the Borrower or a Subsidiary as to which a sum of cash and
cash equivalents sufficient to provide for payment in full of such Debt at
its scheduled maturity or at an earlier date at which it shall have been
called for redemption shall have been irrevocably deposited in trust for the
benefit of the holders of such Debt or a representative of such holders so as
to result in legal or in substance defeasance thereof; PROVIDED, FURTHER,
that, notwithstanding clause (A) in the foregoing proviso, if Park Place
fails to pay when due any principal of or interest on or any other amount
with respect to the PPE Assumed Notes or reimburse the Borrower for payment
thereof, and such failure is continuing, on and after the 90th day after such
payment default first occurs, any of the PPE Assumed Notes then outstanding
shall be included in Consolidated Debt, unless such Debt then would be
excluded therefrom pursuant to clause (B) in the foregoing proviso.
"Consolidated EBITDA" means, for any period, Consolidated
Net Income for such period before (i) income taxes, (ii) interest expense,
(iii) depreciation and amortization, (iv) minority interest, (v)
extraordinary losses or gains, (vi) Pre-Opening Expenses, (vii) transactional
expenses associated with the Park Place Spin-Off and the Promus Acquisition,
(viii) discontinued operations and (ix) nonrecurring non-cash charges,
PROVIDED that:
(a) Consolidated EBITDA for any period shall be
adjusted on a pro forma basis (i) to include (or exclude) amounts
attributable to hotel operations acquired (or sold or otherwise
discontinued) during such period as if such acquisition (or
disposition) had occurred on the first day of such period and (ii) to
include amounts (annualized on a simple arithmetic basis) attributable
to hotel projects which commenced operations during such period and
were in operation for at least one full fiscal quarter during such
period;
(b) for purposes of determining Consolidated EBITDA
for any period, Consolidated Net Income shall exclude any interest
income attributable to the assumption or payment by Park Place of the
PPE Assumed Notes;
(c) in calculating "Consolidated EBITDA" for that
portion of any period occurring prior to the Effective Date,
"Consolidated EBITDA" shall be computed on the basis of the combined
operating results of the Borrower, Promus and their respective
Subsidiaries for such periods reflected in the Pro Forma Combined
Financial Statements; and
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(d) the operating results of each New Project which
commences operations and records not less than one full fiscal
quarter's operations during the relevant period shall be annualized on
a simple arithmetic basis.
"Consolidated Interest Expense" means, for any period, net
interest expense of the Borrower and its Subsidiaries for such period,
determined in accordance with generally accepted accounting principles, PROVIDED
that for that portion of any period occurring prior to the Effective Date,
"Consolidated Interest Expense" shall be computed on the basis of the net
interest expense allocated to the Borrower and its Subsidiaries and shown on the
Pro Forma Combined Financial Statements.
"Consolidated Net Income" means, for any period, the
consolidated net income of the Borrower and its Subsidiaries for such period
determined in accordance with generally accepted accounting principles, PROVIDED
that for that portion of any period occurring prior to the Effective Date, such
consolidated net income shall be the pro forma combined net income of the
Borrower, Promus and their respective Subsidiaries for such periods reflected in
the Pro Forma Combined Financial Statements plus the Pro Forma Adjustments
applicable to that portion of such period.
"Consolidated Net Tangible Assets" means the total assets of
the Borrower and its Subsidiaries, after deducting therefrom (a) all current
liabilities of the Borrower and its Subsidiaries (excluding (i) the current
portion of long term indebtedness, (ii) inter-company liabilities, and (iii) any
liabilities which are by their terms renewable or extendable at the option of
the obligor thereon to a time more than twelve months from the time as of which
the amount thereof is being computed), and (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the latest consolidated balance sheet of the
Borrower prepared in accordance with generally accepted accounting principles.
"Covered Subsidiary" means at any time any Subsidiary of the
Borrower that has consolidated assets in an amount greater than $5,000,000.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business and obligations in the nature of deferred employee
compensation to the extent that such deferred employee compensation obligations
do not exceed $150,000,000, in the aggregate, (iv) all obligations of such
Person as lessee under leases which are capitalized in accordance with generally
accepted accounting principles, (v) all other obligations secured by a Lien on
any asset of such Person, whether or not such obligations are otherwise an
obligation of such Person, in an amount equal to the lesser of the amount of
the obligation so secured or the fair value of the assets subject to such
Lien, and (vi) all obligations of others constituling "Debt" under the
foregoing clauses of this paragraph which are Guaranteed by such Person; it
being understood that "Debt" does not include contingent obligations of such
Person to reimburse any other Person in respect of surety bonds or letters of
credit.
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"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City or Los Angeles
are authorized or required by law to close.
"Domestic Lending Office" means, as to each Lender, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Lender may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Administrative Agent.
"Effective Date" means the first date upon which each of the
conditions precedent set forth in Section 3.02 of this Agreement are satisfied
or waived in writing by the Administrative Agent with the consent of all of the
Lenders.
"Eligible Assignee" means (a) another Lender, (b) with respect
to any Lender, any Affiliate of that Lender, (c) any commercial bank having a
combined capital and surplus of $500,000,000 or more, (d) any (i) savings bank,
savings and loan association or similar financial institution or (ii) insurance
company which, in either case (A) has a net worth of $500,000,000 or more, (B)
is regularly engaged in the business of lending money and extending credit under
credit facilities substantially similar to those extended under this Agreement
and (C) is operationally and procedurally able to meet the obligations of a
Lender hereunder to the same degree as a commercial bank and (e) any other
financial institution (INCLUDING a mutual fund or other fund) having total
assets of $250,000,000 or more which meets the requirements set forth in
subclauses (B) and (C) of clause (d) above; PROVIDED that each Eligible Assignee
must either (a) be organized under the laws of the United States of America, any
State thereof or the District of Columbia or (b) be organized under the laws of
the Cayman Islands or any country which is a member of the Organization for
Economic Cooperation and Development, or a political subdivision of such a
country, and (i) act hereunder through a branch, agency or funding office
located in the United States of America and (ii) is otherwise exempt from
withholding of tax on interest and delivers appropriate Tax Withholding Forms
pursuant to Section 2.20 at the time of any assignment pursuant to Section 9.05.
"Environmental Laws" means any and all statutes, regulations,
permits, licenses or other governmental restrictions relating to the environment
or to releases of petroleum or petroleum products, chemicals or toxic or
hazardous substances or wastes into the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary of the
Borrower and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with the Borrower or any Subsidiary of the Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.
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<PAGE>
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative Questionnaire
as its Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Lender as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Loan made or to be made by a Lender
designated as such in accordance with the applicable Notice of Borrowing or
Notice of Conversion/Continuation and bearing interest with reference to the
London Interbank Offered Rate.
"Euro-Dollar Margin" has the meaning set forth on the Pricing
Schedule.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System with deposits exceeding five billion Dollars in
respect of "eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any bank to United
States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Excluded Taxes" means (a) taxes or assessments on or measured
by or upon the overall net income, gross income or gross receipts of lenders
generally, and (b) franchise taxes levied upon lenders generally.
"Existing Hilton Facility" means the $1,750,000,000 Credit
Agreement dated as of October 18, 1996 among the Borrower, the lenders referred
to therein, Morgan Guaranty Trust Company of New York, as Documentation Agent,
and The Bank of New York, as Administrative Agent, as amended.
"Existing Hawaiian Village Facility" means the $500,000,000
Credit Agreement dated as of June 1, 1998 among Hilton Hawaiian Village LLC, as
borrower, the Borrower, as guarantor, the Banks, Syndication Agent and
Documentation Agent referred to therein, and The Bank of New York, as
Administrative Agent, as amended.
"Existing Promus Facility" means, collectively, (a) the
Tranche A Credit Agreement dated as of December 19, 1997 among Doubletree
Corporation, a Delaware corporation and a wholly-owned subsidiary of Promus, and
Promus Hotels, Inc., as borrowers, Promus and Promus Operating Company, Inc., a
Delaware corporation and a wholly-owned Subsidiary of Promus, as guarantors, the
lenders and agents party thereto and, NationsBank, N.A., as Agent , as amended
to the Effective Date, and (b) the Tranche B Credit Agreement dated as of
December 19, 1997 among the same parties, as amended as of the Effective Date.
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<PAGE>
"Facility Fee Rate" has the meaning set forth on the Pricing
Schedule.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of l%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if such day
is not a Domestic Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Domestic Business Day as
so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.
"Gaming Segment" means the former gaming segment (as
"segment" is used in Regulation S-K and Regulation S-X of the Securities and
Exchange Commission) of the Borrower which, prior to December 31, 1998, was
comprised of assets and operations now principally owned and conducted by
Park Place.
"Granting Lender" has the meaning set forth in Section
9.05(f).
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder
of such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include (x) endorsements for collection or deposit in the ordinary course
of business or (y) performance or completion guarantees. The term "Guarantee"
used as a verb has a corresponding meaning.
"Increased Commitment" has the meaning set forth in Section
2.24.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Initial Year" means the period from the Effective Date
through November 30, 2000.
"Interest Coverage Ratio" means, as of the last day of each
fiscal quarter, the ratio of (a) Consolidated EBITDA for the four fiscal
quarters ending on that date, to (b) Consolidated Interest Expense for the same
period.
"Interest Period" means, with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one
week or 1, 2, 3 or 6 months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing or Notice of Conversion/Continuation; provided
that:
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(a) any Interest Period which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day in a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (a)(iii) below, end on the last Euro-Dollar
Business Day in the calendar month which is the last calendar
month which commences in such Interest Period; and
(c) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date,
or, if such date is not a Euro-Dollar Business Day, then on
the next preceding Euro-Dollar Business Day.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment Grade" means (i) with respect to S&P, a rating of
BBB- or higher, and (ii) with respect to Moody's, a rating of Baa3 or higher.
"Lead Arranger" means Banc of America Securities LLC.
Following the date of this Agreement, the Lead Arranger shall have no
obligations or liabilities under the Loan Documents.
"Lender" means each lender listed on the signature pages
hereof and each Lender which accepts an assignment pursuant to Section 9.05, and
their respective successors.
"Leverage Ratio" means, as of each date of determination, the
ratio of (a) Consolidated Debt on such date to (b) Consolidated EBITDA for the
four fiscal quarters ending on that date.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary of the
Borrower shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and
"Loans" means Base Rate Loans or Euro-Dollar Loans or any combination of the
foregoing.
"Loan Documents" means this Agreement and the Notes.
"London Interbank Offered Rate" means, for the Interest Period
applicable to each Euro-Dollar Loan, the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which
deposits in Dollars are offered to the Administrative Agent in the London
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days
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before the first day of such Interest Period in an amount approximately equal
to the principal amount of the Euro-Dollar Loan of the Administrative Agent
to which such Interest Period is to apply and for a period of time equal to
such Interest Period.
"Margin Adjustment" has the meaning set forth in the Pricing
Schedule.
"Material Adverse Effect" means, as of each date of
determination, a material adverse effect on or change in the condition
(financial or otherwise), business, assets or results of operations or prospects
of the Borrower and its Subsidiaries, taken as a whole (or, for purposes of
Section 3.02(h), of the Borrower and Promus and their respective subsidiaries,
taken as a whole and on a pro forma combined consolidated basis) EXCEPT any such
effect or change resulting from (i) changes in circumstances or conditions
affecting the hotel, motel or travel industries in general or affecting any
segment or region thereof in which they operate, (ii) changes in general
economic or business conditions in the United States, or (iii) the transactions
contemplated by the Promus Merger Agreement or the announcement thereof,
including but not limited to any stockholder litigation brought or threatened in
respect of the Promus Merger Agreement or the Promus Acquisition.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"New Project" means each new hotel or resort project (as
opposed to any project which consists of an extension or redevelopment of an
operating hotel or resort) having a development and construction budget in
excess of $50,000,000 which hereafter receives a certificate of completion or
occupancy and all relevant operational licenses, and in fact commences
operations.
"Non-Recourse Debt" means Debt in respect of which the
recourse of the holder of such Debt is limited to the assets securing such Debt
and such Debt does not constitute the general obligation of the Borrower or any
Subsidiary of the Borrower.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit B hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Notice of Conversion/Continuation" has the meaning set forth
in Section 2.05.
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<PAGE>
"Other New Facilities" means the lending commitments of the
Lenders under the Five Year Credit Agreement of even date herewith among
Borrower, the Lenders party thereto and Bank of America, as Administrative
Agent.
"Parent" means, with respect to any Lender, any Person
controlling such Lender.
"Park Place" means Park Place Entertainment Corporation, a
Delaware corporation.
"Park Place Spin-Off" means (a) the transfer to Park Place of
the assets comprising the former Gaming Segment of Borrower, and (b) the
distribution by the Borrower to its stockholders of all capital stock of Park
Place by the Borrower, each of which occurred on December 31, 1998.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"PPE Assumed Notes" means the 7.35% senior notes of the
Borrower due 2002 in the aggregate principal amount of $300,000,000 and the
7.00% senior notes of the Borrower due 2004 in the aggregate principal amount of
$325,000,000 issued pursuant to the Indenture, dated as of April 15, 1997
executed by the Borrower in favor of BNY Western Trust Company, as Trustee.
"Pre-Opening Expenses" means, with respect to any fiscal
period, the amount of expenses (other than Consolidated Interest Expense)
incurred with respect to capital projects which are classified as "pre-opening
expenses" on the applicable financial statements of Borrower and its
Subsidiaries for such period (or, with respect to that portion of any period
occurring prior to September 30, 1999, the Pro Forma Combined Financial
Statements), prepared in accordance with generally accepted accounting
principles.
"Pricing Certificate" means a Pricing Certificate
substantially in the form of Exhibit C hereto, properly completed and signed by
an Authorized Officer.
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<PAGE>
"Pro Forma Adjustment" means an adjustment to the amount of
Consolidated Net Income set forth in the Pro Forma Combined Financial Statements
for the period prior to the Effective Date reflecting anticipated synergies from
the Merger (on a pro forma combined basis) equal in each fiscal period set forth
below to the amount set forth opposite that fiscal period:
<TABLE>
<CAPTION>
Fiscal Period Pro Forma Adjustment
------------- --------------------
<S> <C>
January 1 through March 31, 1999 $10,000,000
April 1 through June 30, 1999 $10,000,000
July 1 through September 30, 1999 $10,000,000
October 1 through December 31, 1999 $9,500,000.
</TABLE>
Pro Forma Combined Financial Statements" means (a) from the
Effective Date until the Borrower delivers the pro forma combined financial
statements described in Section 5.01(a), the pro forma combined financial
statements of the Borrower and its Subsidiaries (exclusive of its former
Gaming Segment) and Promus and its Subsidiaries for the twelve month period
ended September 30, 1999 heretofore delivered by the Borrower to the
Administrative Agent and each Lender, and (b) thereafter, the pro forma
combined financial statements for the twelve month period ended December 31,
1999, so delivered.
"Promus" means Promus Hotel Corporation, Inc., a Delaware
corporation.
"Promus Acquisition" means the merger of Promus with a
Subsidiary of the Borrower on the Effective Date pursuant to the Promus Merger
Agreement, as a result of which the Borrower will own, directly or indirectly,
all of the issued and outstanding capital stock of the corporation surviving
such merger.
"Promus Merger Agreement" means the Agreement and Plan of
Merger dated as of September 3, 1999 among the Borrower, Promus, and PRH
Acquisition Corporation, (formerly known as Chicago Hilton, Inc.), a Delaware
corporation and a wholly-owned subsidiary of the Borrower.
"Public Notice" means, without limitation, any filing or
report made in accordance with the requirements of the Securities and Exchange
Commission (or any successor), any press release or public announcement made by
the Borrower or any written notice the Borrower gives to the
Administrative-Agent or the Lenders.
"Rating Agencies" means S&P and Moody's.
"Rating Decline" means the occurrence on any date on or
within 90 days after the date of the first public notice of (i) the
occurrence of an event described in clauses (i)-(iv) of the definition of
"Change of Control" or (ii) the intention by the Borrower to effect such an
event (which 90-day period shall be extended so long as the rating of the
senior debt of the Borrower is under publicly announced consideration for
possible downgrade by either of the Rating Agencies) of a decrease in the
rating of the senior debt of the Borrower by both of the Rating Agencies to
below Investment Grade.
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<PAGE>
"Reference Rate" means the rate of interest publicly announced
from time to time by Bank of America as its "prime rate" or "reference rate" or
the similar prime rate or reference rate announced by any successor
Administrative Agent. Bank of America's reference rate is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the Reference Rate announced by Bank of
America or any successor Administrative Agent shall take effect at the opening
of business on the day specified in the public announcement of such change.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having more than
50% of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding more than 50% of the sum of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including
the Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., and its successors.
"Significant Subsidiary" means at any time a Subsidiary of the
Borrower having (i) at least 10% of the consolidated total assets of the
Borrower and its Subsidiaries (determined as of the last day of the most recent
fiscal quarter of the Borrower) or (ii) at least 10% of the consolidated
revenues of the Borrower and its Subsidiaries for the fiscal year of the
Borrower then most recently ended.
"Solvent" as to any Person shall mean that (a) the sum of the
assets of such Person, both at a fair valuation and at present fair saleable
value, exceeds its liabilities, including its probable liability in respect of
contingent liabilities, (b) such Person will have sufficient capital with which
to conduct its business as presently conducted and as proposed to be conducted
and (c) such Person has not incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature. For purposes of this
definition, "debt" means any liability on a claim, and "claim" means (x) a right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (y) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured. With respect to
any such contingent liabilities, such liabilities shall be computed at the
amount which, in light of all the facts and circumstances existing at the time,
represents the present value of the amount which can reasonably be expected to
become an actual or matured liability.
"SPC" has the meaning set forth in Section 9.05(f).
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"Subsidiary" means at any date any Subsidiary of the Borrower
or other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements as of such date.
"Syndication Agents" means, collectively, The Bank of Nova
Scotia, First Union National Bank and Wachovia Bank. The Syndication Agents
shall have no rights, duties or obligations under this Agreement which are in
addition to the other Lenders.
"Tax Withholding Forms" has the meaning set forth in Section
2.20.
"Termination Date" means November 28, 2000 or such later date
to which the Termination Date shall be extended pursuant to Section 2.23, or, if
such day is not a Domestic Business Day, the next preceding Domestic Business
Day.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"Year 2000 Issue" means any inability of computer software,
hardware and firmware systems, and equipment containing embedded computer chips,
to properly receive, transmit, process, manipulate, store, retrieve, re-transmit
or in any other way utilize data and information due to the occurrence of the
year 2000 or the inclusion of dates on or after January 1, 2000.
1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants and disclosed in such financial statements) with
the most recent audited consolidated financial statements of the Borrower and
its Subsidiaries delivered to the Lenders; provided that, if the Borrower
notifies the Administrative Agent that the Borrower wishes to amend any covenant
in Article V to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Lenders wish to
amend Article V for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Lenders.
1.03 TYPES OF BORROWINGS. Borrowings are classified for
purposes of this Agreement by reference to the pricing of Loans comprising such
Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans).
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ARTICLE II
THE CREDITS
2.01 COMMITMENTS TO LEND. During the Revolving Credit Period
each Lender severally agrees, on the terms and conditions set forth in this
Agreement, to lend to the Borrower pursuant to this Section from time to time
amounts such that (a) the aggregate principal amount of Loans made by such
Lender at any one time outstanding shall not exceed the amount of its
Commitment, and (b) the aggregate outstanding principal amount of all Loans
shall not exceed the aggregate Commitments. Each Borrowing under this Section
shall be in an aggregate principal amount of $10,000,000 or any larger multiple
of $1,000,000; and each Borrowing shall be made from the several Lenders ratably
in proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.16, prepay Loans and reborrow at any time on or prior to the
Termination Date under this Section. The Loans shall mature, and the principal
amount thereof shall be due and payable, on the Termination Date.
2.02 NOTICE OF BORROWINGS. The Borrower shall give the
Administrative Agent notice (a "Notice of Borrowing"), substantially in the form
of Exhibit D hereto, not later than 8:30 A.M. (California local time) on (x) the
date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day
before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing or a
Euro-Dollar Business Day in the case of a Euro- Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are
to be Base Rate Loans or Euro-Dollar Loans; and
(d) in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
Not more than twelve Interest Periods with respect to Euro-Dollar Loans shall be
in effect at any time.
2.03 [RESERVED].
2.04 [RESERVED].
2.05 CONVERSION AND CONTINUATION OF LOANS. So long as no
Default or Event of Default has occurred and is continuing, Borrower shall
have the option at any time (i) to convert all or any part of its outstanding
Base Rate Loans which are integral multiples of $1,000,000 and which are not
less than $10,000,000 into Euro-Dollar Loans or (ii) upon the expiration of
any Interest Period applicable to Euro-Dollar Loans, to continue all or any
portion of such Loans equal to $1,000,000 and integral multiples of $100,000
in excess of that amount as Euro-Dollar Loans or to convert such Loans into
Base Rate Loans.
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Borrower shall deliver to the Administrative Agent notice of
any such conversion or continuation, substantially in the form of Exhibit D
(each a "Notice of Conversion/Continuation"), no later than 8:30 A.M.
(California local time) at least one Domestic Business Day in advance of the
proposed conversion date (in the case of a conversion to a Base Rate Loan) and
at least three Euro-Dollar Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Euro-Dollar Loan). A Notice of Conversion/Continuation shall specify (i)
the proposed conversion/continuation date (which shall be a Domestic Business
Day in the case of Base Rate Loans and a Euro-Dollar Business Day in the case of
conversion to or continuation of Euro-Dollar Loans), (ii) the amount and type of
the Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Euro- Dollar Loan, the requested Interest Period, and (v) in the case of a
conversion to, or a continuation of, a Euro-Dollar Loan, that no Default or
Event of Default has occurred and is continuing.
2.06 NOTICE TO LENDERS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing or a Notice
of Conversion\Continuation, the Administrative Agent shall promptly
notify each Lender of the contents thereof and of such Lender's share
(if any) of such Borrowing and such Notice of Borrowing or Notice of
Conversion\Continuation shall not thereafter be revocable by the
Borrower.
(b) Not later than 11:00 A.M. (California local time)
on the date of each Borrowing, each Lender participating therein shall
(except as provided in subsection (c) of this Section) make available
its share of such Borrowing in Dollars, in federal or other funds
immediately available to the Administrative Agent at its address
referred to in Section 9.01. Unless the Administrative Agent determines
that any applicable condition specified in Article III has not been
satisfied, the Administrative Agent will make the funds so received
from the Lenders available to the Borrower at the Administrative
Agent's aforesaid address or place.
(c) Unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing that
such Lender will not make available to the Administrative Agent such
Lender's share of such Borrowing, the Administrative Agent may assume
that such Lender has made such share available to the Administrative
Agent on the date of such Borrowing in accordance with Section 2.06(b)
and the Administrative Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If
and to the extent that such Lender shall not have so made such share
available to the Administrative Agent, such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for
each day from the date (and including the date) such amount is made
available to the Borrower to (but excluding) the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower,
a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.08 and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such
amount so repaid shall constitute such
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Lender's Loan included in such Borrowing for purposes of this
Agreement. If the Borrower pays interest under this subsection (c) at
the Federal Funds Rate and the Federal Funds Rate is higher than the
interest rate applicable thereto pursuant to Section 2.08, the
applicable Lender shall pay the Borrower the difference between such
rates.
2.07 NOTES.
(a) The Loans of each Lender shall be evidenced by a
single Note payable to the order of such Lender for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Lender's Commitment.
(b) [Reserved].
(c) Upon receipt of each Lender's Note pursuant to
Section 3.02(b), the Administrative Agent shall forward such Note to
such Lender. Each Lender shall record the date, amount, type and
maturity of each Loan made by it and the date and amount of each
payment of principal made by the Borrower with respect thereto, and
may, if such Lender so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure
of any Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Notes.
Each Lender is hereby irrevocably authorized by the Borrower so to
endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
2.08 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from (and
including) the date such Loan is made to (but excluding) the date it becomes
due, at a rate per annum equal to the Base Rate for such day PLUS any applicable
Base Rate Margin. Any overdue principal of or interest on any Base Rate Loan
shall, at the option of the Required Lenders, bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Base Rate PLUS the Base
Rate Margin PLUS 2%. Such interest shall be payable on the last Domestic
Business Day of each calendar quarter in arrears and on the Termination Date.
(b) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during the Interest Period
applicable thereto (from and including the first day of such Interest Period to
but excluding the last day of such Interest Period), at a rate per annum equal
to the sum of (a) the Euro-Dollar Margin for such day PLUS (b) the applicable
London Interbank Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
(c) Any overdue principal of or interest on any Euro-Dollar
Loan shall, at the option of the Required Lenders, bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at
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which one day deposits in Dollars in an amount approximately equal to such
overdue payment due to the Administrative Agent are offered to the
Administrative Agent in the London interbank market for the applicable period
determined as provided above by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the
rate applicable to Base Rate Loans for such day).
(d) [Reserved].
(e) [Reserved].
(f) The Administrative Agent shall determine in accordance
with the provisions of this Agreement each interest rate applicable to the Loans
hereunder. The Administrative Agent shall give prompt notice to the Borrower and
the participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
2.09 ADMINISTRATIVE AGENCY FEES. On the date hereof and on the
Effective Date, the Borrower shall pay to the Administrative Agent and the Lead
Arranger certain fees in the amounts set forth in a letter agreement with the
Administrative Agent and the Lead Arranger.
2.10 UPFRONT FEES. On the Effective Date, the Borrower shall
pay to the Administrative Agent for the account of each Lender non-refundable
upfront fees in the amounts set forth in letter agreements between each Lender
and the Lead Arranger, and in an aggregate amount not to exceed the amount set
forth in a letter agreement among the Borrower, the Administrative Agent and the
Lead Arranger.
2.11 FACILITY FEES. The Borrower shall pay to the
Administrative Agent for the account of the Lenders ratably facility fees at the
Facility Fee Rate determined daily in accordance with the Pricing Schedule. Such
facility fee shall accrue from and including the date hereof to but excluding
the Termination Date (or earlier date of termination of the Commitments in their
entirety), on the daily aggregate amount of the Commitments (whether used or
unused). Facility fees shall be payable quarterly in arrears on the first day of
each March, June, September and December and upon the date of termination of the
Commitments in their entirety and, when paid, are non-refundable.
2.12 [RESERVED].
2.13 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY
BORROWER. During the Revolving Credit Period, the Borrower may, upon at least
three Domestic Business Days' notice to the Administrative Agent, (i) terminate
the Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably and permanently reduce from time to time by an aggregate amount of
$25,000,000 or any larger amount in multiples of $1,000,000, the aggregate
amount of the Commitments in excess of the sum of the aggregate outstanding
principal balance of the Loans.
2.14 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS BY THE
LENDERS. Following the occurrence of a Change of Control, the Required Lenders
may in their sole and absolute discretion elect, during the sixty day period
immediately subsequent to the LATER OF (a) such occurrence and
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(b) the EARLIER of (i) receipt of the Borrower's written notice to the
Administrative Agent of such occurrence and (ii) if no such notice has been
received by the Administrative Agent, the date upon which the Administrative
Agent and the Lenders have actual knowledge thereof, to terminate all of the
Commitments. In any such case the Commitments shall be terminated effective
on the date which is sixty days subsequent to the date of written notice from
the Administrative Agent to the Borrower thereof, and to the extent that
there is then any Debt evidenced by the Notes, the same shall be immediately
due and payable.
2.15 SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
2.16 OPTIONAL PREPAYMENTS.
(a) Subject in the case of any Euro-Dollar Borrowing
to Section 2.18, the Borrower may, upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Base Rate
Borrowing or upon at least three Euro-Dollar Business Days' notice to
the Administrative Agent, with respect to any Euro-Dollar Borrowing,
prepay any Euro-Dollar Borrowing, in each case in whole at any time, or
from time to time in part in amounts aggregating $10,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Lenders included in such Borrowing.
(b) [Reserved].
(c) Upon receipt of a notice of prepayment pursuant
to this Section, the Administrative Agent shall promptly notify each
Lender of the contents thereof and of such Lender's ratable share (if
any) of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
2.17 GENERAL PROVISIONS AS TO PAYMENTS.
(a) The Borrower shall make each payment of principal
of, and interest on, Loans and of fees hereunder, in Dollars not later
than 11:00 A.M. (California local time) on the date when due, in
federal or other immediately available funds, to the Administrative
Agent at its address referred to in Section 9.01, without offset or
counterclaim. The Administrative Agent will promptly distribute to each
Lender its ratable share of each such payment received by the
Administrative Agent for the account of the Lenders, in Dollars and in
the type of funds received by the Administrative Agent. Whenever any
payment of principal of, or interest on, the Base Rate Loans or of fees
shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans or shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business
Day. If the
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date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any
payment is due to the Lenders hereunder that the Borrower will not make
such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on
such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent
that the Borrower shall not have so made such payment, each Lender
shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date
such Lender repays such amount to the Administrative Agent, at the
Federal Funds Rate.
2.18 FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article VI or VIII
or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or if the Borrower fails to borrow any Euro-Dollar Loans
after notice has been given to any Lender in accordance with Section 2.06(a),
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it, including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
failure to borrow, provided that such Lender shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
2.19 COMPUTATION OF INTEREST AND FEES. Interest based on the
Reference Rate and all fees hereunder shall be computed on the basis of a year
of 365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other interest
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
2.20 WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Lender, each Lender that is not incorporated
under the laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrower and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Forms 1001, 4224 or
W-8 ECI, or their successor forms ("Tax Withholding Forms"), in each case as
required to demonstrate and certify that such Lender is entitled to receive
payments under the Loan Documents without deduction or withholding of any United
States federal income taxes.
Each Lender which so delivers Tax Withholding Forms further
undertakes to deliver to each of the Borrower and the Administrative Agent two
additional copies of such forms on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or
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extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, in each case certifying that such Lender is
entitled to receive payments under the Loan Documents deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Lender from duly completing and delivering any such form with respect to
it and such Lender advises the Borrower and the Administrative Agent that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
2.21 [RESERVED].
2.22 REGULATION D COMPENSATION. Each Lender may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Lender at a rate per annum determined by such Lender up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Lender wishing to require
payment of such additional interest (x) shall so notify the Borrower and the
Administrative Agent, in which case such additional interest on the
Euro-Dollar Loans of such Lender shall be payable to such Lender at the place
indicated in such notice with respect to each Interest Period commencing at
least three Euro-Dollar Business Days after the giving of such notice and (y)
shall notify the Borrower at least five Euro-Dollar Business Days prior to
each date on which interest is payable on the Euro-Dollar Loans of the amount
then due it under this Section.
2.23 EXTENSION OF TERMINATION DATE. The Termination Date
may be extended, in the manner set forth in this Section, for a period of 364
days after the date on which the Termination Date would otherwise have
occurred. If the Borrower wishes to extend the Termination Date, it shall
give written notice to that effect to the Administrative Agent not less than
90 days nor more than 150 days following the delivery to the Administrative
Agent of the audited annual financial statements of Borrower in accordance
with Section 5.01(b), whereupon the Administrative Agent shall notify each of
the Lenders of such notice. Each Lender will respond to such request, whether
affirmatively or negatively, within the period ending on the later of 30 days
following the submission of the Borrower's request to the Lenders or 40 days
prior to the then scheduled Termination Date (the "Response Date"). If a
Lender or Lenders respond negatively or fail to timely respond to such
request, but such non- extending Lender(s) have Commitment(s) aggregating
less than 33 1/3% of the aggregate amount of the Commitments, the Borrower
shall, for a period of up to 60 days following the Response Date (but in any
event not later than 15 days prior to the then effective Termination Date),
have the right, with the assistance of the Administrative Agent, to seek a
mutually satisfactory substitute financial institution or financial
institutions (which may be one or more of the Lenders) to assume the
Commitment(s) of such non-extending Lender(s). No Lender which fails to
consent shall be deemed to have consented to a request by the Borrower under
this Section. Not later than the third Domestic Business Day prior to the end
of such period (whether of 60 days or shorter), the Borrower shall, by notice
to the Lenders through the Administrative Agent, either (i) terminate,
effective on the third Domestic Business Day after the giving of such notice,
the Commitment(s) of such non-extending Lender(s), whereupon the Lenders who
have consented to the extension shall continue with their commitments
unaffected to lend subject to the terms of this Agreement to the new
Termination Date, or (ii) designate one or more new financial institutions
reasonably acceptable to the Administrative Agent to assume the Commitments
of such non-extending Lenders, whereupon the
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aggregate amount of such Commitment(s) shall be assumed by such substitute
financial institution or financial institutions within such 60-day period or
(iii) withdraw its request for an extension of the Termination Date, in which
the Commitments shall continue unaffected. The failure of the Borrower to
timely take the actions contemplated by clause (i) or (ii) of the preceding
sentence shall be deemed a withdrawal of its request for an extension as
contemplated by clause (ii) whether or not notice to such effect is given. So
long as Lenders having Commitment(s) totaling not less than 66 2/3% of the
aggregate amount of the Commitment(s) shall have responded affirmatively to
such a request, and such request is not withdrawn in accordance with the
preceding sentence, then, subject to receipt by the Administrative Agent of
counterparts of an Extension Agreement in substantially the form of Exhibit K
duly completed and signed by all of the parties hereto (other than
non-consenting Lenders), the Termination Date shall be extended for the
period set forth in this Section 2.23 and in the Extension Agreement.
2.24 INCREASED COMMITMENTS; ADDITIONAL LENDERS.
(a) Following the Effective Date, the Borrower may from time
to time, propose to increase the aggregate amount of the Commitments in
accordance with this Section. The aggregate principal amount of the increases to
the Commitments made pursuant to this Section (the amount of any such increase,
the "Increased Commitments"), when aggregated with the principal amount of any
increases to the Other New Facilities made pursuant to Section 2.24 thereof,
shall not exceed $500,000,000. Borrower shall provide at least 30 days' notice
to the Administrative Agent (which shall promptly provide a copy of such notice
to the Lenders) of any requested Increased Commitments. Each Lender party to
this Agreement at such time shall have the right (but not the obligation), for a
period of 15 days following receipt of such notice, to elect by notice to the
Borrower and the Administrative Agent to increase its Commitment by a principal
amount which bears the same ratio to the Increased Commitments as its then
Commitment bears to the aggregate Commitments then existing. No Lender which
fails to respond shall be deemed to have elected to increase its Commitment in
response to a notice by the Borrower under this Section.
(b) If any Lender party to this Agreement elects not to
increase its Commitment pursuant to subsection (a) of this Section, the Borrower
may designate another lender which qualifies as an Eligible Assignee (which may
be, but need not be, one or more of the existing Lenders) which at the time
agrees to (i) in the case of any such designated Lender that is an existing
Lender, increase its Commitment and (ii) in the case of any other such lender
(an "Additional Lender"), become a party to this Agreement. The sum of the
increases in the Commitments of the existing Lenders pursuant to this subsection
(b) plus the Commitments of the Additional Lenders shall not in the aggregate
exceed the unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments
pursuant to this Section 2.24 shall become effective upon the receipt by the
Administrative Agent of an agreement in form and substance satisfactory to
the Administrative Agent signed by the Borrower, by each Additional Lender
and by each other Lender whose Commitment is to be increased, setting forth
the new Commitments of such Lenders and setting forth the agreement of each
Additional Lender to become a party to this Agreement and to be bound by all
the terms and provisions hereof, together with such evidence of appropriate
corporate authorization on the part of the Borrower with respect to the
Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Administrative Agent may
reasonably request.
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ARTICLE III
CONDITIONS
3.01 BORROWINGS. The obligation of any Lender to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of a Notice
of Borrowing as required by Section 2.02;
(b) immediately after such Borrowing the sum of the
aggregate outstanding principal amount of the Loans and will not exceed
the aggregate amount of the Commitments;
(c) immediately before and after such Borrowing no
Default or Event of Default shall have occurred and be continuing; and
(d) the representations and warranties of the
Borrower contained in this Agreement (except the representations and
warranties set forth in Section 4.04(b) and Section 4.05, in each case
as to any matter which has theretofore been disclosed in writing by the
Borrower to the Lenders) shall be true on and as of the date of such
Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
3.02 EFFECTIVE DATE. As conditions precedent to the Effective
Date and the making of the initial Loans hereunder, each of the following
conditions shall have been satisfied (or waived in accordance with Section
9.04):
(a) receipt by the Administrative Agent of
counterparts hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart shall not have
been received, receipt by the Administrative Agent in form satisfactory
to it of telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party); and
(b) receipt by the Administrative Agent for the
account of each Lender of a duly executed Note dated as of the
Effective Date;
(c) receipt by the Administrative Agent of an opinion
of Gibson, Dunn & Crutcher, LLP substantially in the form of Exhibit I
hereto;
(d) All conditions precedent to the Borrower's
obligations to consummate the Promus Acquisition shall have been
satisfied or waived with the consent of the Required Lenders.
(e) receipt by the Administrative Agent of evidence
acceptable to the Administrative Agent that the Promus Acquisition and
the other transactions contemplated
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hereby to occur on the Effective Date have been or shall concurrently
be consummated in material compliance with all applicable laws and all
regulatory requirements (including without limitation the Hart-Scott-
Rodino Act but excluding any regulatory requirements consisting of
consents to the transfer of liquor licenses); that all governmental
and shareholder consents and approvals necessary in connection
therewith have been obtained; that all third party consents required
in connection therewith have been obtained (in the case of such third
party consents, except to the extent that the failure to obtain the
same would not, individually or in the aggregate, have a Material
Adverse Effect) and all such consents and approvals shall be in force
and effect and all applicable waiting periods shall have expired
without any action being taken by any authority that restrains,
prevents or imposes any material adverse conditions upon the Promus
Acquisition;
(f) arrangements satisfactory to the Administrative
Agent for the repayment of all loans (if any) outstanding under the
Existing Promus Facility, the termination of that facility and of any
related liens and the termination of all capital lease facilities for
which Promus and its Subsidiaries have any liability (except as to
customary surviving indemnities and other contingent obligations) and
the payment of all interest and fees accrued thereunder shall have been
made;
(g) receipt by the Administrative Agent of all
documents it may reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of the Loan
Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent;
(h) there shall not have occurred a Material Adverse
Effect since December 31, 1998;
(i) the Other New Facilities shall be in a position
to concurrently close and be funded, as applicable;
(j) the Borrower and the requisite lenders under the
Existing Hilton Facility shall have entered into, or shall concurrently
enter into, an amendment thereto substantially in the form thereof
heretofore distributed to the Lenders;
(k) receipt by the Administrative Agent and the Lead
Arranger of the fees required to be paid on the Effective Date by the
letter agreement referred to in Sections 2.09, 2.10 and 7.09; and
(l) the Effective Date shall have occurred prior to
December 2, 1999.
The Administrative Agent shall promptly notify the Borrower and each Lender of
the effectiveness of this Agreement, and such notice shall be conclusive and
binding on all parties hereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
4.01 CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Borrower of the Loan Documents
are within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower (in the case of any such default under the provisions of any agreement
or instrument binding upon the Borrower, except to the extent that the same
could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect), or result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
4.03 BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower, in each case enforceable in accordance with their respective
terms.
4.04 FINANCIAL INFORMATION.
(a) The Pro Forma Combined Financial Statements
delivered as of the date hereof (i) are derived from (y) the audited
financial statements of the Borrower set forth in the Borrower's 1998
Form 10-K, and the unaudited financial statements of the Borrower set
forth in the Borrower's Form 10-Q for the period ended September 30,
1999, and (z) the audited financial statements of Promus set forth in
Promus's 1998 Form 10-K and the unaudited financial statements of
Promus set forth in Promus's Form 10-Q for the period ended September
30, 1999, and (ii) fairly present in all material respects, in
conformity with generally accepted accounting principles, the pro forma
combined financial position of the Borrower, Promus and their
respective Subsidiaries as of such date and their consolidated results
of operations and cash flows for such fiscal year; and
(b) Since December 31, 1998, there has been no
Material Adverse Effect.
4.05 LITIGATION. Except as disclosed in the Form 10-Q
reports dated as of September 30, 1999 for the Borrower and Promus, there is
no action, suit or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an adverse decision
which could reasonably be expected to have a Material
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Adverse Effect or which in any manner draws into question the validity or
enforceability of any of the Loan Documents. Without limiting the generality
of the foregoing, with respect to the litigation reported in the Form 10-Q
reports as of September 30, 1999, for the Borrower and Promus, (a) the
disclosure contained therein was accurate as of the date thereof, and (b)
since such date there has been no adverse development which would reasonably
be expected to have a Material Adverse Effect.
4.06 COMPLIANCE WITH ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance
in all material respects with the presently applicable provisions of ERISA
and the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA.
4.07 TAXES. The United States federal income tax returns of
the Borrower and its Subsidiaries and of Promus and its Subsidiaries have
been filed through the fiscal year ended December 31, 1998. The Borrower and
its Significant Subsidiaries have filed all United States federal income tax
returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary of the Borrower. The
charges, accruals and reserves on the books of the Borrower and its
Significant Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
4.08 SIGNIFICANT SUBSIDIARIES. Each of the Significant
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
4.09 NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
4.10 ENVIRONMENTAL MATTERS. The Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial position, results of operations or
prospects of the Borrower and its Subsidiaries, considered as a whole.
4.11 FULL DISCLOSURE. All information heretofore furnished
by Promus and the Borrower to the Administrative Agent or to any Lender for
purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Administrative Agent or any Lender, taken as a whole, will be
true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the Lenders
in writing any and all facts which materially and adversely affect or may
affect (to the extent the Borrower can now reasonably foresee), the business,
operations or financial position of the Borrower and its Subsidiaries, taken
as a whole, or the ability of the Borrower to
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perform its obligations under this Agreement. With respect to any projections
or forecasts provided, such projections or forecasts represent, as of the
date thereof, management's best estimates based on reasonable assumptions and
all available information, but are subject to the uncertainty inherent in all
projections and forecasts.
4.12 THE PROMUS ACQUISITION. As of the Effective Date, the
Promus Acquisition has been consummated in material compliance with all
applicable laws and all regulatory requirements (including without limitation
the Hart-Scott-Rodino Act but excluding any regulatory requirements
consisting of consents to the transfer of liquor licenses); all governmental
and shareholder consents and approvals necessary in connection therewith have
been obtained; all third party consents required in connection therewith have
been obtained (in the case of such third party consents, except to the extent
that the failure to obtain the same would not, individually or in the
aggregate, have a Material Adverse Effect) and all such consents and
approvals are in force and effect and all applicable waiting periods have
expired without any action being taken by any authority that restrains,
prevents or imposes any material adverse conditions upon the Promus
Acquisition. Giving effect to the Promus Acquisition, as of the Effective
Date, Borrower and its Significant Subsidiaries are, on a consolidated basis,
Solvent.
4.13 YEAR 2000. Borrower and its Subsidiaries have reviewed
the effect of the Year 2000 Issue on the computer software, hardware and
firmware systems and equipment containing embedded microchips owned or
operated by or for Borrower and its Subsidiaries. The costs to Borrower and
its Subsidiaries which are anticipated as of the date hereof of any
reprogramming required as a result of the Year 2000 Issue to permit the
proper functioning of such systems and equipment and the proper processing of
data, and the testing of such reprogramming, and of required systems changes
are not reasonably expected to result in a Default or to have a Material
Adverse Effect.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any
Commitment hereunder or any amount payable under any Note remains unpaid:
5.01 INFORMATION. The Borrower will deliver to the
Administrative Agent:
(a) as soon as available and in any event no later
than March 31, 2000, a pro forma combined statement of income of the
Borrower, Promus and their respective Subsidiaries for the period
commencing January 1, 1999 and ending on December 1, 1999, and a pro
forma combined balance sheet of the Borrower, Promus and their
respective Subsidiaries as at December 31, 1999, in each case prepared
in a manner consistent with the Pro Forma Combined Financial Statements
delivered to the Administrative Agent and the Lenders prior to the date
hereof;
(b) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each case
in comparative form the figures as of the end of and for the previous
fiscal year, all reported on in a manner acceptable to the Securities
and Exchange Commission by Arthur Andersen LLP or other independent
public accountants of nationally recognized standing;
(c) as soon as available and in any event within 60
days after the end of each of the first three quarters of each fiscal
year of the Borrower, the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements of income and
cash flows in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's previous fiscal
year, all certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by an Authorized Officer;
(d) simultaneously with the delivery of each set of
financial statements referred to in clauses (b) and (c) above, a
Compliance Certificate (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in
compliance with the requirements of Section 5.06, Section 5.09 and
Section 5.10 on the date of such financial statements, and (ii) stating
whether any Default exists on the date of such Compliance Certificate
and, if any Default then exists, setting forth the details thereof and
the action which the Borrower is taking or proposes to take with
respect thereto;
(e) simultaneously with the delivery of each set of
financial statements referred to in clause (b) above, a statement of
the firm of independent public accountants which reported on such
statements (i) whether anything has come to their attention to cause
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them to believe that any Default existed on the date of such statements
and (ii) confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith;
(f) as soon as available and in any event not later
than the last day of February of each year, a completed Pricing
Certificate as of December 31 of the prior year;
(g) within five Domestic Business Days of any officer
of the Borrower obtaining knowledge of any Default, if such Default is
then continuing, a certificate of an Authorized Officer setting forth
the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(h) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all financial
statements, reports and proxy statements so mailed;
(i) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission;
(j) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412
of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA,
a copy of such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of the Borrower
setting forth details as to such occurrence and action, if any, which
the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(k) forthwith, notice of any change of which the
Borrower becomes aware in the rating by S&P or Moody's, of the
Borrower's outstanding senior unsecured long-term debt securities; and
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(l) from time to time such additional information
regarding the financial position or business of the Borrower as the
Administrative Agent, at the request of any Lender, may reasonably
request.
5.02 MAINTENANCE OF PROPERTY; INSURANCE.
(a) The Borrower will keep, and will cause each
Significant Subsidiary to keep, all property useful and necessary in
its business in good working order and condition, ordinary wear and
tear excepted, except where failure to do so would not have a material
adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries,
considered as a whole.
(b) The Borrower will, and will cause each of its
Significant Subsidiaries to, maintain (either in the name of the
Borrower or in such Subsidiary's own name) with financially sound and
responsible insurance companies, insurance on all their respective
properties in at least such amounts and against at least such risks
(and with such risk retention) as are usually insured against in the
same general area by companies of established repute engaged in the
same or a similar business and will furnish to the Lenders, upon
request from the Administrative Agent, information presented in
reasonable detail as to the insurance so carried. Notwithstanding the
foregoing, the Borrower may self-insure with respect to such risks with
respect to which companies of established repute engaged in the same or
similar business in the same general area usually self-insure.
5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue, and will cause each Significant Subsidiary to continue,
to engage in business of the same general type as now conducted by the Borrower
and its Significant Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Subsidiary of the Borrower to preserve,
renew and keep in full force and effect their respective corporate existence and
their respective rights, privileges and franchises necessary or desirable in the
normal conduct of business; provided that nothing in this Section 5.03 shall
prohibit (i) the merger of a Subsidiary of the Borrower into the Borrower or the
merger or the consolidation of a Subsidiary of the Borrower with or into another
Person if the corporation surviving such consolidation or merger is a Subsidiary
of the Borrower and if, in each case, after giving effect thereto, no Default
shall have occurred and be continuing or (ii) the termination of the corporate
existence of any Subsidiary of the Borrower if the Borrower in good faith
determines that such termination is in the best interest of the Borrower and is
not materially disadvantageous to the Lenders.
5.04 COMPLIANCE WITH LAWS. The Borrower will comply, and cause
each Significant Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder), and shall timely file all
material tax returns and pay all material taxes required to be filed by them and
so paid, except in each case where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower
will keep, and will cause each Significant Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities;
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and will permit, and will cause each Significant Subsidiary to permit,
representatives of any Lender at such Lender's expense to visit and inspect any
of their respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired.
5.06 NEGATIVE PLEDGE. None of the Borrower, any Covered
Subsidiary or any Significant Subsidiary will create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing as of the Effective Date;
(b) any Lien existing on any asset of any Person at
the time such Person becomes a Subsidiary of the Borrower or at the
time such Person is merged or consolidated with or into the Borrower or
a Subsidiary of the Borrower, in each case where the Lien is not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring or constructing such asset (it being understood that, for
this purpose, the acquisition of a Person is also an acquisition of the
assets of such Person); provided that the Lien attaches to such asset
concurrently with or within 180 days after the acquisition thereof, or
such longer period, not to exceed 12 months, due to the Borrower's
inability to retain the requisite governmental approvals with respect
to such acquisition; provided further that, in the case of real estate,
(i) the Lien attaches within 12 months after the latest of the
acquisition thereof, the completion of construction thereon or the
commencement of full operation thereof and (ii) the Debt so secured
does not exceed the sum of (x) the purchase price of such real estate
plus (y) the costs of such construction;
(d) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary of the Borrower and
not created in contemplation of such acquisition;
(e) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses of this Section, provided
that such Debt is not increased (other than to cover any transaction
costs of such refinancing, extension, renewal or refunding) and is not
secured by any additional assets;
(f) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not secure any single
obligation in an amount exceeding $50,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(g) Liens securing Debt of a Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower; and
(h) Liens not otherwise permitted by the foregoing
clauses of this Section encumbering assets of the Borrower and its
Subsidiaries having an aggregate fair
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market value which is not in excess of 10% of Consolidated Net Tangible
Assets (determined, in each case, by reference to the Pro Forma
Combined Financial Statements or, if then delivered, as of the most
recent date for which Borrower has delivered its financial statements
under Section 5.01(b) or Section 5.01(c), as applicable).
5.07 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower
will not (i) consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer all or any substantial part of the assets of the
Borrower and its Subsidiaries, taken as a whole, to any other Person; PROVIDED
that, the Borrower may merge with another Person if (A) the Borrower is the
corporation surviving such merger and (B) immediately after giving effect to
such merger, no Default shall have occurred and be continuing.
5.08 USE OF PROCEEDS. The proceeds of the Loans made under
this Agreement will be used by the Borrower and its Subsidiaries for general
corporate purposes, including but not limited to (a) on the Effective Date, to
(i) finance a portion of the cash consideration payable in connection with the
Promus Acquisition, and (ii) to refinance all of the outstanding obligations
under the Existing Promus Facility, and (iii) to pay transactional and other
expenses associated herewith, with the Promus Acquisition, the refinancing of
the Existing Promus Facility and the amendment of the Existing Hilton Facility
and Existing Hawaiian Village Facility, and (b), thereafter, for working
capital, capital expenditures, the back stop of commercial paper and the
acquisition of full-service hotel and resort properties. None of such proceeds
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock" within the
meaning of Regulation U in any manner that would violate Regulation X or result
in a violation of Regulation U.
5.09 LEVERAGE RATIO. The Leverage Ratio will not, as of the
last day of any fiscal quarter of Borrower described in the matrix below, exceed
the ratio set forth opposite that fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDING MAXIMUM RATIO
---------------------- -------------
<S> <C>
September 30, 1999 through and
including December 31, 2000 5.00:1.00
March 31, 2001 through and including
March 31, 2002 4.75:1.00
Thereafter 4.50:1.00.
</TABLE>
5.10 INTEREST COVERAGE RATIO. The Interest Coverage Ratio
shall not, as of the last day of any fiscal quarter of Borrower, be less than
2.50:1.00.
5.11 YEAR 2000. Borrower shall promptly and in any event prior
to December 15, 1999 make, and shall cause each of its Subsidiaries so to make,
all required systems changes, in computer software, hardware and firmware
systems and equipment containing embedded microchips owned or operated by or for
Borrower and its Subsidiaries required as a result of the Year 2000 Issue to
permit the proper functioning of such computer systems and other equipment,
except to the extent that the failure to take any such action would not
reasonably be expected to result in a Default or to
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have a Material Adverse Effect. At the request of any Lender, Borrower shall
provide, and shall cause each of its Subsidiaries to provide, to such Lender
reasonable assurance of its compliance with the preceding sentence.
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ARTICLE VI
DEFAULTS
6.01 EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to (i) pay when due any
principal of any Loan under this Agreement or (ii) pay within five days
of the due date thereof any interest, fees or other amount payable
hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.06 to 5.10, inclusive;
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for 7 days after written notice
thereof has been given to the Borrower by the Administrative Agent at
the request of any Lender;
(d) any representation, warranty, certification or
statement made or deemed made by the Borrower in this Agreement or in
any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in any
material respect when made (or deemed made);
(e) the Borrower or any Covered Subsidiary or any
Significant Subsidiary shall fail to make any payment in respect of any
Debt (other than the Notes and Non-Recourse Debt) when due or within
any applicable grace period and the aggregate principal amount of such
Debt is in excess of $100,000,000;
(f) any event or condition shall occur which results
in the acceleration of the maturity of any Debt (other than
Non-Recourse Debt) in excess of $100,000,000 of the Borrower or any
Covered Subsidiary or any Significant Subsidiary or enables the holder
of such Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
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hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Borrower or
any Significant Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of $5,000,000 which
it shall have become liable to pay under Title IV of ERISA; or notice
of intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer, any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation
in excess of $25,000,000; or
(j) a judgment or order for the payment of money in
excess of $25,000,000 shall be rendered against the Borrower or any
Subsidiary of the Borrower and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days;
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Lenders, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by the Required Lenders,
by notice to the Borrower declare the Loans (together with accrued interest
thereon) to be, and the Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; PROVIDED that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Administrative Agent or the Lenders, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
6.02 NOTICE OF DEFAULT. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested to do
so by any Lender and shall thereupon notify all the Lenders thereof.
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ARTICLE VII
THE ADMINISTRATIVE AGENT
7.01 APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to the Administrative Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
7.02 ADMINISTRATIVE AGENT AND AFFILIATES. Bank of America
shall have the same rights and powers under this Agreement as any other Lender
and may exercise or refrain from exercising the same as though it were not the
Administrative Agent, and Bank of America and its affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with, the
Borrower or any Subsidiary or affiliate of the Borrower as if it were not the
Administrative Agent hereunder.
7.03 ACTION BY THE ADMINISTRATIVE AGENT. The obligations of
the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article VI.
7.04 CONSULTATION WITH EXPERTS. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
7.05 LIABILITY OF AGENT. Neither the Administrative Agent nor
any of its respective affiliates nor any of the respective directors, officers,
agents or employees of any of the foregoing shall be liable for any action taken
or not taken by it in connection herewith (i) with the consent or at the request
of the Required Lenders or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Administrative Agent nor any of its respective
affiliates nor any of the respective directors, officers, agents or employees of
any of the foregoing shall be responsible for or have any duty to ascertain,
inquire into or verify (a) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (b) the performance
or observance of any of the covenants or agreements of the Borrower; (c) the
satisfaction of any condition specified in Article III, except in the case of
the Administrative Agent receipt of items required to be delivered to it; or (d)
the validity, effectiveness or genuineness of this Agreement, the Notes or any
other instrument or writing furnished in connection herewith. The Administrative
Agent shall incur no liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
7.06 INDEMNIFICATION. Each Lender shall, ratably in accordance
with its Commitment, indemnify the Administrative Agent, its affiliates and its
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in
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connection with the Administrative Agent's role under this Agreement or any
related action taken or omitted by such indemnitees hereunder.
7.07 CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, the Lead
Arranger or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent, the Lead Arranger or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement.
7.08 SUCCESSOR AGENT. The Administrative Agent may resign at
any time subject to the appointment of a successor Administrative Agent by
giving notice to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent with the consent of the Borrower, which consent shall not be unreasonably
withheld or delayed; provided that no such consent shall be required if the
successor Administrative Agent is a Lender. If no successor Administrative Agent
shall have been so appointed, and shall have accepted such appointment, within
30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, and without the Borrower's consent, appoint a successor Administrative
Agent, which shall be a commercial bank organized or licensed under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $1,000,000,000. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.
7.09 ADMINISTRATIVE AGENTS' FEES. The Borrower shall pay to
the Administrative Agent for its own account fees in the amounts and at the
times previously agreed upon between the Borrower and the Administrative Agent
pursuant to a letter agreement.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
8.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or prior to the first day of any Interest Period for any Borrowing
consisting of Euro-Dollar Loans:
(a) the Administrative Agent is advised by the
Required Lenders that deposits in Dollars and in the required amounts
are not being offered to the Lenders in the relevant market for such
Interest Period, or
(b) the Required Lenders advise the Administrative
Agent that the London Interbank Offered Rate, as determined by the
Administrative Agent, will not adequately and fairly reflect the cost
to such Lenders of funding their Euro-Dollar Loans for such Interest
Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Lenders to make Euro-Dollar Loans shall be suspended. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any Borrowing consisting of Euro-Dollar Loans for which
a Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing. The
Administrative Agent shall promptly notify the Lenders of any election by the
Borrower pursuant to the preceding sentence.
8.02 ILLEGALITY. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Lender (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Lender shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Lenders and the Borrower,
whereupon until such Lender notifies the Borrower and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Lender to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section, such
Lender shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender. If such
Lender shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Lender (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Lenders), and such Lender shall make such a Base
Rate Loan.
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8.03 INCREASED COST AND REDUCED RETURN.
(a) If after the Effective Date, the adoption of any
applicable law, rule or regulation, or any change in any applicable
law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office)
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Lender (or its
Applicable Lending Office) to any tax, duty or other charge
with respect to its Euro-Dollar Loans, its Note or its
obligation to make Euro-Dollar Loans or shall change the basis
of taxation of payments to any Lender (or its Applicable
Lending Office) of the principal of or interest on its
Euro-Dollar Loans or any other amounts due under this
Agreement in respect of its Euro-Dollar Loans or its
obligation to make Euro-Dollar Loans (except for changes in
the rate of tax on the overall net income of such Lender or
its Applicable Lending Office imposed by the jurisdiction in
which such Lender's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable
any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding, with respect to any Euro-
Dollar Loan any such requirement included in the Euro-Dollar
Reserve Percentage), special deposit, insurance assessment or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (or its
Applicable Lending Office) or shall impose on any Lender (or
its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any
other condition affecting its Euro-Dollar Loans, its Note or
its obligation to make Euro- Dollar Loans;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or
receivable by such Lender (or its Applicable Lending Office) under this
Agreement or under its Note with respect thereto, by an amount deemed
by such Lender to be material, then, subject to clause (d) of this
Section, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such
increased cost or reduction.
(b) If, after the Effective Date, any Lender shall
have determined that any applicable law, rule or regulation regarding
capital adequacy (irrespective of the actual timing of the adoption or
implementation thereof and including, without limitation, any law or
regulation adopted pursuant to the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices) or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance
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<PAGE>
by any Lender (or its Applicable Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on capital of
such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its
Parent) could have achieved but for such law, regulation, change or
compliance (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Lender to be material,
then, subject to clause (d) of this Section, from time to time, within
15 days after demand by such Lender (with a copy to the Administrative
Agent), the Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender (or its Parent) for such
reduction.
(c) Each Lender will promptly notify the Borrower and
the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to
compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender.
(d) Borrower shall not be required to reimburse any
Lender for any increased costs, reductions or payments under this
Section arising prior to 90 days preceding the date of any claim or
demand by a Lender for compensation under this Section except to the
extent the applicable law or regulation is imposed retroactively and
the demand or claim is made within 90 days of the effect (in which case
such claim or demand shall be submitted within 90 days of the date upon
which such Lender becomes aware or should reasonably be aware of such
law or regulation). A certificate of any Lender claiming compensation
under this Section and setting forth the additional amount or amounts
to be paid to it hereunder (with detail sufficient to allow the
verification by Borrower of its calculations) shall be conclusive in
the absence of manifest error. In determining such amount, such Lender
may use any reasonable averaging and attribution methods.
8.04 BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR
LOANS. If (i) the obligation of any Lender to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation
under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Lender through the Administrative Agent,
have elected that the provisions of this Section shall apply to such Lender,
then, unless and until such Lender notifies the Borrower that the circumstances
giving rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such
Lender as Euro-Dollar Loans shall be made instead as Base Rate Loans
(on which interest and principal shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Lenders), and
(b) after each of its Euro-Dollar Loans has been
repaid, all payments of principal which would otherwise be applied to
repay such Euro-Dollar Loans shall be applied to repay its Base Rate
Loans instead.
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<PAGE>
ARTICLE IX
MISCELLANEOUS
9.01 NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex, telecopy
or similar writing) and shall be given to such party: (x) in the case of the
Borrower or the Administrative Agent, at its address or telex or telecopier
number set forth on the signature pages hereof, (y) in the case of any Lender,
at its address or telex or telecopier number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex or
telecopier number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered or received at
the address specified in this Section; provided that notices to the
Administrative Agent under Article II or Article VIII shall not be effective
until received.
9.02 NO WAIVERS. No failure or delay by the Administrative
Agent or any Lender in exercising any right, power or privilege hereunder or
under any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
9.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION.
(a) The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Administrative Agent and the Lead
Arranger, including reasonable fees and disbursements of counsel for
the Administrative Agent (including the allocated fees and expenses of
any internal counsel), in connection with the preparation of this
Agreement and all related documents, the negotiation, closing and
syndication of this Agreement and the Loans (including due diligence
with respect thereto), the administration of this Agreement and the
Loans, and in connection with any waiver, amendment or consent
hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Administrative Agent or any
Lender, including fees and disbursements of counsel (including the
allocated fees and expenses of any internal counsel), in connection
with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom. The Borrower shall
indemnify each Lender against any transfer taxes, documentary taxes,
mortgage recording taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery or
enforcement of any of the Loan Documents.
(b) The Borrower agrees to indemnify the
Administrative Agent, the Lead Arranger and each Lender, their
respective affiliates and the respective directors, officers, agents
and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation,
the reasonable fees and disbursements of
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counsel (including the allocated fees and expenses of any internal
counsel), which may be incurred by such Indemnitee in connection with
any investigative, administrative or judicial proceeding (whether or
not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of the Promus Acquisition, the
Promus Merger Agreement or the transactions contemplated thereby, this
Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
9.04 AMENDMENTS AND WAIVERS. No amendment or waiver of the
terms of this Agreement or the other Loan Documents shall be made or be
effective unless such amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (and, if the rights or duties of the
Administrative Agent are affected thereby, by the Administrative Agent);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) except as set forth in Section 2.24 increase or decrease the amount
of the Commitment of any Lender (except for a ratable decrease in the
Commitments of all Lenders) or subject any Lender to any additional obligation,
(ii) reduce the principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or interest thereon or any fees hereunder, or the
Termination Date, (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the percentage of Lenders,
which shall be required for the Lenders or any of them to take any action under
this Section or any other provision of this Agreement or (v) render more
restrictive the ability of any Lender to assign or grant participations in its
Commitment under Section 9.05.
9.05 SUCCESSORS AND ASSIGNS.
(a) This Agreement and the other Loan Documents to
which Borrower is a party will be binding upon and inure to the benefit
of Borrower, the Administrative Agent, each of the Lenders, and their
respective successors and permitted assigns, EXCEPT that the Borrower
may not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all the Lenders.
Each Lender represents that it is not acquiring its Note with a view to
the distribution thereof within the meaning of the Securities Act of
1933, as amended (subject to any requirement that disposition of such
Note must be within the control of such Lender). Any Lender may at any
time pledge its Note or any other instrument evidencing its rights as a
Lender under this Agreement to a Federal Reserve Bank, but no such
pledge shall release that Lender from its obligations hereunder or
grant to such Federal Reserve Bank the rights of a Lender hereunder
absent foreclosure of such pledge.
(b) From time to time following the Effective Date,
each Lender may assign to one or more Eligible Assignees all or any
portion of its Commitment; PROVIDED that (i) such Eligible Assignee, if
not then a Lender or an Affiliate of the assigning Lender, shall be
approved by each of the Administrative Agent and (if no Default or
Event of Default then exists) the Borrower (neither of which approvals
shall be unreasonably withheld or delayed), (ii) such assignment shall
be evidenced by an Assignment and Assumption Agreement substantially in
the form of Exhibit J, a copy of which shall be furnished to the
Administrative Agent as hereinbelow provided, (iii) EXCEPT in the case
of an assignment to an Affiliate of the assigning Lender, to another
Lender or of the entire remaining Commitment of the assigning
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Lender, the assignment shall not assign a portion of the Commitments
that is equivalent to less than $5,000,000, and (iv) the effective date
of any such assignment shall be as specified in the Assignment and
Assumption Agreement, but not earlier than the date which is five
Domestic Business Days after the date the Administrative Agent has
received the Assignment and Assumption Agreement. Upon the effective
date of the Assignment and Assumption Agreement, the Eligible Assignee
named therein shall be a Lender for all purposes of this Agreement,
with the Commitment therein set forth and, to the extent of such
Commitment, the assigning Lender shall be released from its further
obligations under this Agreement. Borrower agrees that it shall
execute and deliver (against delivery by the assigning Lender to
Borrower of its Note) to such assignee Lender, a Note evidencing that
assignee Lender's Commitment, and to the assigning Lender, a Note
evidencing the remaining Commitment retained by the assigning Lender.
(c) By executing and delivering an Assignment and
Assumption Agreement, the Eligible Assignee thereunder acknowledges and
agrees that: (i) other than the representation and warranty that it is
the legal and beneficial owner of the Commitment being assigned thereby
free and clear of any adverse claim, the assigning Lender has made no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has made no
representation or warranty and assumes no responsibility with respect
to the financial condition of Borrower or the performance by Borrower
of its obligations under this Agreement; (iii) it has received a copy
of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.01 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Assumption
Agreement; (iv) it will, independently and without reliance upon the
Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement; (v) it appoints and authorizes the Administrative Agent to
take such action and to exercise such powers under this Agreement as
are delegated to the Administrative Agent by this Agreement; and (vi)
it will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by it
as a Lender.
(d) The Administrative Agent shall maintain a copy of
each Assignment and Assumption Agreement delivered to it and a register
(the "Register") of the names and address of each of the Lenders and
the Commitment held by each Lender, giving effect to each Assignment
and Assumption Agreement. The Register shall be available during normal
business hours for inspection by Borrower or any Lender upon reasonable
prior notice to the Administrative Agent. After receipt of a completed
Assignment and Assumption Agreement executed by any Lender and an
Eligible Assignee (including without limitation any existing Lender),
and receipt of an assignment fee of $3,500 from such Lender or Eligible
Assignee, the Administrative Agent shall, promptly following the
effective date thereof, provide to Borrower and the affected Lenders
notice of such effectiveness. Borrower, the Administrative Agent and
the Lenders shall deem and treat the Persons listed as Lenders in the
Register as the holders and owners of the Commitments listed therein
for all purposes hereof, and no
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assignment or transfer of any Commitment shall be effective, in each
case unless and until an Assignment and Assumption Agreement effecting
the assignment or transfer thereof shall have been accepted by the
Administrative Agent and recorded in the Register as provided above.
Prior to such recordation, all amounts owed with respect to the
applicable Commitment shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of
any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee
of the corresponding Commitment.
(e) Each Lender may from time to time grant
participations to one or more Lenders or other financial institutions
(INCLUDING another Lender) in its Commitment; PROVIDED, HOWEVER, that
(i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participating Lenders or other financial institutions shall not be a
Lender hereunder for any purpose (provided that the participation
agreement may provide for a Lender to allow the participant the
derivative benefit of Sections 2.23, 8.03 and 9.03, but such derivative
benefits shall not increase the overall cost to Borrower under such
Sections), (iv) Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement, (v) the participation interest shall be expressed as a
percentage of the granting Lender's Commitment as it then exists and
shall not restrict an increase in the Commitments, or in the granting
Lender's Commitment, so long as the amount of the participation
interest is not affected thereby and (vi) the consent of the holder of
such participation interest shall not be required for amendments or
waivers of provisions of the Loan Documents OTHER THAN those which (A)
result in a decrease in fees, interest rate spreads or principal
payable to the holder of such participation, (B) increase the
Commitment of the granting Lenders and thereby increase the funding
requirements of the holder of such a participation, or (C) extend the
Termination Date.
(f) Notwithstanding anything to the contrary
contained herein, any Lender (a "Granting Lender") may grant to special
purpose funding vehicles (each, an "SPC") of such Granting Lender,
identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower the option to provide all
or any part of any Loan that such Granting Lender would otherwise be
obligated to make pursuant to this Agreement, provided that (i) nothing
herein shall constitute a commitment to make any Loan by any SPC, (ii)
if an SPC elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof, and (iii)
except as expressly set forth herein, the rights of any such SPC shall
be derivative of the rights of the Granting Lender, and each SPC shall
be subject to all of the restrictions upon the Granting Lender herein
contained. Each SPC shall be conclusively presumed to have made
arrangements with its Granting Lender for the exercise of voting and
other rights hereunder in a manner which is acceptable to the SPC, and
the Administrative Agent, the Lenders and Borrower and each other party
shall be entitled to rely upon and deal solely with the Granting Lender
with respect to Loans made by or through its SPC. The making of a Loan
by an SPC hereunder shall utilize the Commitment of the Granting Lender
to the same extent, and as if, such Loan were made by the Granting
Lender. Each party hereto hereby agrees that no SPC shall be liable
for any indemnity or similar payment obligation
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under this Agreement (all liability for which shall remain with the
related Granting Lender). In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of
this Agreement) that, prior to the date that is one year and one day
after the payment in full of all outstanding senior indebtedness of
any SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar
proceedings under the laws of the United States of America or any
State thereof. In addition, notwithstanding anything to the
contrary contained in this Section 9.05, each SPC may, at any
time, without regard to the period required by Section 9.05(b)(iv), (i)
with notice to, but without the prior written consent of, the Borrower
or the Administrative Agent, and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to its
Granting Lender (or to any other SPC of such Granting Lender) or to any
financial institutions providing liquidity and/or credit facilities to
or for the account of such SPC to fund the Loans made by such SPC or to
support the securities (if any) issued by such SPC to fund such Loans
(but nothing contained herein shall be construed in derogation of the
obligation of the Granting Lender to make Loans hereunder), and (ii)
disclose on a confidential basis any non-public information relating to
its Loans to any rating agency, commercial paper dealer or provider of
a surety, guarantee or credit or liquidity enhancement to such SPC.
This Section 9.05(f) may not be amended without the consent of all
SPC's then designated to the Administrative Agent in accordance with
the foregoing provisions of this Section.
9.06 NEW YORK LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Note shall be construed in accordance with and governed by the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Central District of
California and of any California State court sitting in Los Angeles, California
(in each case, applying such law) for purposes of all legal proceedings arising
out of or relating to this Agreement or the transactions contemplated hereby.
The Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
9.07 COUNTERPARTS; INTEGRATION. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
9.08 SEVERAL OBLIGATIONS. The obligations of the Lenders
hereunder are several. Neither the failure of any Lender to carry out its
obligations hereunder nor the failure of this Agreement to be duly authorized,
executed and delivered by any Lender shall relieve any other Lender of its
obligations hereunder (or affect the rights hereunder of such other Lender). No
Lender shall be responsible for the obligations of, or any action taken or
omitted by, any other Lender hereunder.
9.09 SHARING OF SET-OFFS. Each Lender agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Note held by it which is greater than the proportion received by
any other Lender in respect of the aggregate amount of principal and interest
due with
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respect to any Note held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the
Notes held by the other Lenders, and such other adjustments shall be made, as
may be required so that all such payments of principal and interest with
respect to the Notes held by the Lenders shall be shared by the Lenders pro
rata; PROVIDED that nothing in this Section shall impair the right of any
Lender to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Borrower in
the amount of such participation.
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9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
HILTON HOTELS CORPORATION
By:
-------------------------------------
Name: Mariel C. Albrecht
Title: Vice President and Assistant
Treasurer
Address for Notices:
Mariel C. Albrecht,
Vice President and Assistant Treasurer
Hilton Hotels Corporation
World Headquarters
9336 Civic Center Drive
Beverly Hills, California 90210
Telecopier: 310/205-7867
Telephone: 310/205-7687
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BANK OF AMERICA, N.A., as Administrative Agent
By:
-------------------------------------------
Janice Hammond, Vice President
Bank of America, N.A.
555 South Flower Street
11th Floor
Los Angeles, California 90071
Attn: Janice Hammond
Telecopier: 213/228-2299
Telephone: 213/228-9861
E-mail: [email protected]
BANK OF AMERICA, N.A., as a Lender
By:
-------------------------------------------
Scott L. Faber, Principal
Address for Notices:
Bank of America, N.A.
Credit Products - LA 3283
Entertainment & Media Group
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Scott L. Faber, Principal
Telecopier: 213/228-2641
Telephone: 213/228-2768
E-Mail: [email protected]
with a copy to:
Bank of America, N.A.
Entertainment, Media & Gaming Industries
Group 5777
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: William S. Newby, Managing Director
Telecopier: 213/228-3145
Telephone: 213/228-2438
E-Mail: [email protected]
S-1
<PAGE>
THE BANK OF NOVA SCOTIA, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-2
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-3
<PAGE>
WACHOVIA BANK, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-4
<PAGE>
BANK ONE, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-5
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-6
<PAGE>
SOCIETE GENERALE, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-7
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-8
<PAGE>
WELLS FARGO BANK, N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-9
<PAGE>
THE NORTHERN TRUST COMPANY, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-10
<PAGE>
BANK OF CHINA, LOS ANGELES BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-11
<PAGE>
BANK OF HAWAII, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-12
<PAGE>
BANK OF TAIWAN, LOS ANGELES BRANCH, as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-13
<PAGE>
BANQUE NATIONALE DE PARIS, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-14
<PAGE>
THE DAI-ICHI KANGYO BANK. LTD. NEW YORK
BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-15
<PAGE>
FIRST HAWAIIAN BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-16
<PAGE>
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-17
<PAGE>
LASALLE BANK N.A., as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-18
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-19
<PAGE>
THE SANWA BANK, LIMITED; LOS ANGELES
BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-20
<PAGE>
U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-21
<PAGE>
HUA NAN COMMERCIAL BANK, LTD.
LOS ANGELES BRANCH, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-22
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION,
as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-23
<PAGE>
CITY NATIONAL BANK, as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-24
<PAGE>
EXHIBIT 4.9
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT No. 2 dated as of November 30, 1999 to the Credit
Agreement dated as of October 18, 1996 (as heretofore amended, the "CREDIT
AGREEMENT") among HILTON HOTELS CORPORATION (the "BORROWER"), the BANKS party
thereto (the "BANKS"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent (the "DOCUMENTATION AGENT") and THE BANK OF NEW YORK, as
Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower proposes to enter into a Five Year Credit
Agreement and a Short Term Credit Agreement of even date herewith with two
syndicates of lenders for which Bank of America, N.A. will act as
Administrative Agent providing for an aggregate $1,850,000,000 in new
revolving credit facilities (the "New Senior Credit Facilities"); and
WHEREAS, substantially concurrently herewith, the Borrower proposes
to consummate an acquisition of Promus Hotels Corporation; and
WHEREAS, the Borrower intends to use certain funds available under
the Credit Agreement and the New Senior Credit Facilities to finance a
portion of the exchange consideration payable to the former shareholders of
Promus Hotels Corporation; and
WHEREAS, in connection therewith, the parties hereto desire to make
certain modifications to the Credit Agreement;
NOW, THEREFORE, the Borrower and the Required Banks under Section
9.04 of the Credit Agreement hereby amend the Credit Agreement as follows:
1. DEFINED TERMS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder," "herein" and "hereby" and
each similar reference and each reference to this "agreement" and each other
similar reference contained in the Credit Agreement shall, after this
Amendment becomes effective, refer to the Credit Agreement as amended hereby.
2. DESIGNATION OF BANC OF AMERICA SECURITIES LLC AND J.P.
MORGAN. Banc of America Securities LLC and J.P. Morgan are hereby designated
as co-lead arrangers and co-book managers of the Credit Agreement.
-1-
<PAGE>
3. AMENDMENTS TO CERTAIN EXISTING DEFINED TERMS. The
following terms defined in the Credit Agreement are hereby amended to read in
full as follows:
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period before (i) income taxes, (ii) interest expense, (iii)
depreciation and amortization, (iv) minority interest, (v)
extraordinary losses or gains, (vi) Pre-Opening Expenses, (vii)
transactional expenses associated with the Spin-Off and the Promus
Acquisition, (viii) discontinued operations and (ix) nonrecurring
non-cash charges; PROVIDED that:
(a) Consolidated EBITDA for any period shall be
adjusted on a pro forma basis (i) to include (or exclude)
amounts attributable to hotel operations acquired (or sold or
otherwise discontinued) during such period as if such
acquisition (or disposition) had occurred on the first day of
such period and (ii) to include amounts (annualized on a
simple arithmetic basis) attributable to hotel projects which
commenced operations during such period and were in operation
for at least one full fiscal quarter during such period;
(b) for purposes of determining Consolidated EBITDA
for any period, Consolidated Net Income shall exclude any
interest income attributable to the assumption or payment by
Park Place of the PPE Assumed Notes;
(c) in calculating "Consolidated EBITDA" for that
portion of any period occurring prior to the Effective Date,
"Consolidated EBITDA" shall be computed on the basis of the
combined operating results of the Borrower, Promus and their
respective Subsidiaries for such periods reflected in the Pro
Forma Combined Financial Statements; and
(d) the operating results of each New Project which
commences operations and records not less than one full fiscal
quarter's operations during the relevant period shall be
annualized on a simple arithmetic basis.
"Consolidated Net Income" means, for any period, the consolidated net
income of the Borrower and its Subsidiaries for such period determined
in accordance with generally accepted accounting principles, PROVIDED
that for that portion of any period occurring prior to the Effective
Date, such consolidated net income shall be the pro forma combined net
income of the Borrower, Promus and their respective Subsidiaries for
such periods reflected in the Pro Forma Combined Financial Statements
PLUS the Pro Forma Adjustments applicable to that portion of such
period.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business and obligations in the
nature of deferred employee compensation to the extent that such
deferred employee compensation obligations do not exceed $250,000,000,
in the aggregate, (iv) all obligations of such Person as lessee under
leases which are capitalized in accordance with generally accepted
accounting principles, (v) all other obligations secured by a Lien on
any
-2-
<PAGE>
asset of such Person, whether or not such obligations are otherwise
an obligation of such Person, in an amount equal to the lesser of the
amount of the obligation so secured or the fair value of the assets
subject to such Lien, and (vi) all obligations of others constituting
"Debt" under the foregoing clauses of this paragraph which are
Guaranteed by such Person; it being understood that "Debt" does not
include contingent obligations of such Person to reimburse any other
Person in respect of surety bonds or letters of credit.
"Investment Grade" means (i) with respect to S&P, a rating of BBB- or
higher and (ii) with respect to Moody's, a rating of Baa3 or higher.
"Rating Agencies" means S&P or Moody's.
4. ADDITIONAL DEFINED TERMS. Section 1.01 of the
Credit Agreement is hereby amended to add thereto the following terms:
"Consolidated Interest Expense" means, for any period, net interest
expense of the Borrower and its Subsidiaries for such period,
determined in accordance with generally accepted accounting principles,
PROVIDED that for that portion of any period occurring prior to the
Effective Date, "Consolidated Interest Expense" shall be computed on
the basis of the net interest expense allocated to the Borrower and its
Subsidiaries and shown on the Pro Forma Combined Financial Statements.
"New Project" means each new hotel or resort project (as opposed to any
project which consists of an extension or redevelopment of an operating
hotel or resort) having a development and construction budget in excess
of $50,000,000 which receives a certificate of completion or occupancy
and all relevant operational licenses, and in fact commences operations
after November 30, 1999.
"Pre-Opening Expenses" means, with respect to any fiscal period, the
amount of expenses (other than Consolidated Interest Expense) incurred
with respect to capital projects which are classified as "pre-opening
expenses" on the applicable financial statements of Borrower and its
Subsidiaries for such period (or, with respect to that portion of any
period occurring prior to September 30, 1999, the Pro Forma Combined
Financial Statements), prepared in accordance with generally accepted
accounting principles.
"Pricing Certificate" means a Pricing Certificate, substantially in the
form of Exhibit B to Amendment No. 2 to this Agreement, properly
completed and signed by an Authorized Officer.
"Pro Forma Adjustment" means an adjustment to the amount of
Consolidated Net Income set forth in the Pro Forma Combined Financial
Statements for the period prior to the Effective Date reflecting
anticipated synergies from the Merger (on a pro forma combined basis)
equal in each fiscal period set forth below to the amount set forth
opposite that fiscal period:
-3-
<PAGE>
<TABLE>
<CAPTION>
FISCAL PERIOD PRO FORMA ADJUSTMENT
------------- --------------------
<S> <C>
January 1 through March 31, 1999 $10,000,000
April 1 through June 30, 1999 $10,000,000
July 1 through September 30, 1999 $10,000,000
October 1 through December 31, 1999 $9,500,000.
</TABLE>
"Pro Forma Combined Financial Statements" means (a) from November 30,
1999 until the Borrower delivers the pro forma combined financial
statements described in Section 5.01(l), the pro forma combined
financial statements of the Borrower and its Subsidiaries (exclusive of
its former Gaming Segment) and Promus and its Subsidiaries for the
twelve month period ended September 30, 1999 heretofore delivered by
the Borrower to the Administrative Agent and each Bank, and (b)
thereafter, the pro forma combined financial statements for the twelve
month period ended December 31, 1999, so delivered.
"Promus" means Promus Hotel Corporation, Inc., a Delaware corporation.
"Promus Acquisition" means the merger of Promus Hotels Corporation with
a Subsidiary of the Borrower on the effective date hereof, as a result
of which the Borrower will own, directly or indirectly, all of the
issued and outstanding capital stock of the corporation surviving such
merger.
5. "STATUS" ELECTION. Section 5.01(c) of the Credit Agreement
is hereby amended to delete clause (iii) thereof, it being understood that the
Borrower shall not be required to notify the Administrative Agent or the Banks
of whether interest rates and fees shall be determined on the basis of its
Ratings or the Leverage Ratio (with the Borrower to automatically receive the
benefits of the more favorable basis of computation).
6. PRICING CERTIFICATE AND COMBINED PRO FORMAS. Section 5.01
of the Credit Agreement is further amended to add thereto new clause (k) and
(l), to read in full as follows:
"(k) as soon as available and in any event not later than the
last day of February of each year, a completed Pricing Certificate as
of December 31 of the prior year; and
"(l) as soon as available and in any event no later than March
31, 2000, a pro forma combined statement of income of the Borrower,
Promus and their respective Subsidiaries for the period commencing
January 1, 1999 and ending on December 31, 1999, and a pro forma
combined balance sheet of the Borrower, Promus and their respective
Subsidiaries as at December 31, 1999, in each case prepared in a manner
consistent with the Pro Forma Combined Financial Statements delivered
to the Administrative Agent and the Banks prior to the date hereof."
7. MAXIMUM LEVERAGE RATIO. Section 5.09 of the Credit
Agreement is hereby amended to read in full as follows:
-4-
<PAGE>
"5.09 LEVERAGE RATIO. The Leverage Ratio will not, as of the last day
of any fiscal quarter of Borrower described in the matrix below, exceed
the ratio set forth opposite that fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDING MAXIMUM RATIO
---------------------- --------------
<S> <C>
September 30, 1999 through and
including December 31, 2000 5.00:1.00
March 31, 2001 through and including
March 31, 2002 4.75:1.00
Thereafter 4.50:1.00."
</TABLE>
8. PRICING REVISIONS. The Pricing Schedule attached to the
Credit Agreement is hereby amended and restated in its entirety as set forth
on Exhibit A hereto.
9. AMENDMENT FEE. Concurrently with the effectiveness of
this Amendment, the Borrower shall pay to the Administrative Agent, for the
ratable account of each of the Banks, an amendment fee equal to 0.10% of the
aggregate Commitments of the Banks.
10. REPRESENTATIONS OF BORROWER. The Borrower represents
and warrants that (i) the representations and warranties of the Borrower set
forth in Article 4 of the Credit Agreement will be true on and as of the
Amendment Effective Date and (ii) no Default will have occurred and be
continuing on such date.
11. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
12. COUNTERPARTS. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
13. EFFECTIVENESS. This Amendment shall become effective as
of the date hereof on the date (the "AMENDMENT EFFECTIVE DATE") when the
Administrative Agent shall have received the signatures hereto from the
Required Banks and an executed counterpart hereof signed by Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
HILTON HOTELS CORPORATION
By:
--------------------------------------
Mariel C. Albrecht, Vice President
and Assistant Treasurer
-5-
<PAGE>
THE BANK OF NEW YORK, as Administrative Agent and
as a Bank
By:
----------------------------------------------
-------------------------------------------------
[Printed or Typed Name and Title]
-6-
<PAGE>
EXHIBIT 4.10
$500,000,000
CREDIT AGREEMENT
dated as of
June 1, 1998
among
HILTON HAWAIIAN VILLAGE LLC,
as Borrower,
HILTON HOTELS CORPORATION,
as Guarantor,
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF,
NATIONSBANK, N.A.,
as Syndication Agent,
FIRST UNION NATIONAL BANK,
as Documentation Agent,
and
THE BANK OF NEW YORK,
as Administrative Agent
---------------------------
Arranged by
BNY CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS1
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C>
DEFINITIONS.......................................................................................................1
Section 1.01 DEFINITIONS.....................................................................................1
Section 1.02 ACCOUNTING TERMS AND DETERMINATIONS............................................................10
Section 1.03 TYPES OF BORROWINGS............................................................................11
ARTICLE II
THE CREDITS......................................................................................................11
Section 2.01 COMMITMENTS TO LEND............................................................................11
Section 2.02 NOTICE OF COMMITTED BORROWINGS.................................................................11
Section 2.03 MONEY MARKET BORROWINGS........................................................................12
Section 2.04 NOTICE TO BANKS; FUNDING OF LOANS..............................................................15
Section 2.05 NOTES..........................................................................................16
Section 2.06 MATURITY OF LOANS..............................................................................17
Section 2.07 INTEREST RATES.................................................................................17
Section 2.08 FACILITY FEES..................................................................................18
Section 2.09 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS...............................................18
Section 2.10 SCHEDULED TERMINATION OF COMMITMENTS...........................................................18
Section 2.11 OPTIONAL PREPAYMENTS...........................................................................18
Section 2.12 GENERAL PROVISIONS AS TO PAYMENTS..............................................................19
Section 2.13 FUNDING LOSSES.................................................................................20
Section 2.14 COMPUTATION OF INTEREST AND FEES...............................................................20
Section 2.15 WITHHOLDING TAX EXEMPTION......................................................................20
Section 2.16 REGULATION D COMPENSATION......................................................................20
ARTICLE III
CONDITIONS.......................................................................................................21
</TABLE>
- -------------------
(1) The Table of Contents is not a part of this Agreement.
<PAGE>
<TABLE>
<S> <C>
Section 3.01 BORROWINGS.....................................................................................21
Section 3.02 EFFECTIVENESS..................................................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...................................................................................23
Section 4.01 CORPORATE EXISTENCE AND POWER..................................................................23
Section 4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION........................................23
Section 4.03 BINDING EFFECT.................................................................................23
Section 4.04 FINANCIAL INFORMATION..........................................................................24
Section 4.05 LITIGATION.....................................................................................24
Section 4.06 COMPLIANCE WITH ERISA..........................................................................24
Section 4.07 TAXES..........................................................................................24
Section 4.08 SIGNIFICANT SUBSIDIARIES.......................................................................25
Section 4.09 NOT AN INVESTMENT COMPANY......................................................................25
Section 4.10 ENVIRONMENTAL MATTERS..........................................................................25
Section 4.11 YEAR 2000 ISSUE................................................................................25
Section 4.12 FULL DISCLOSURE................................................................................25
ARTICLE V
COVENANTS........................................................................................................26
Section 5.01 INFORMATION....................................................................................26
Section 5.02 MAINTENANCE OF PROPERTY; INSURANCE.............................................................28
Section 5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE...............................................28
Section 5.04 COMPLIANCE WITH LAWS...........................................................................28
Section 5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS......................................................29
Section 5.06 YEAR 2000 ISSUE................................................................................29
Section 5.07 NEGATIVE PLEDGE................................................................................29
Section 5.08 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS....................................................30
Section 5.09 USE OF PROCEEDS................................................................................30
Section 5.10 LEVERAGE RATIO.................................................................................30
Section 5.11 DEBT OF THE BORROWER...........................................................................31
Section 5.12 LIMITATION ON RESTRICTIVE COVENANTS............................................................31
ARTICLE VI
DEFAULTS.........................................................................................................31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 6.01 EVENTS OF DEFAULT..............................................................................31
Section 6.02 NOTICE OF DEFAULT..............................................................................33
ARTICLE VII
THE AGENTS.......................................................................................................33
Section 7.01 APPOINTMENT AND AUTHORIZATION..................................................................33
Section 7.02 AGENTS AND AFFILIATES..........................................................................34
Section 7.03 ACTION BY ADMINISTRATIVE AGENT.................................................................34
Section 7.04 CONSULTATION WITH EXPERTS......................................................................34
Section 7.05 LIABILITY OF ADMINISTRATIVE AGENT..............................................................34
Section 7.06 INDEMNIFICATION................................................................................34
Section 7.07 CREDIT DECISION................................................................................34
Section 7.08 SUCCESSOR AGENT................................................................................35
ARTICLE VIII
GUARANTY.........................................................................................................35
Section 8.01 GUARANTY OF PAYMENT AND PERFORMANCE............................................................35
Section 8.02 CONTINUANCE AND ACCELERATION OF GUARANTEED OBLIGATIONS UPON CERTAIN EVENTS.....................35
Section 8.03 RECOVERED PAYMENTS.............................................................................36
Section 8.04 NATURE OF GUARANTOR'S OBLIGATIONS..............................................................36
Section 8.05 NO RELEASE OF GUARANTOR........................................................................36
Section 8.06 CERTAIN WAIVERS................................................................................37
Section 8.07 SUBORDINATION OF RIGHTS AGAINST THE BORROWER AND COLLATERAL....................................37
ARTICLE IX
CHANGE IN CIRCUMSTANCES..........................................................................................38
Section 9.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.......................................38
Section 9.02 ILLEGALITY.....................................................................................38
Section 9.03 INCREASED COST AND REDUCED RETURN..............................................................39
Section 9.04 BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS......................................40
ARTICLE X
MISCELLANEOUS....................................................................................................41
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 10.01 NOTICES.......................................................................................41
Section 10.02 NO WAIVERS....................................................................................41
Section 10.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION..................................................41
Section 10.04 AMENDMENTS AND WAIVERS........................................................................42
Section 10.05 SUCCESSORS AND ASSIGNS........................................................................42
Section 10.06 COLLATERAL....................................................................................43
Section 10.07 NEW YORK LAW; SUBMISSION TO JURISDICTION......................................................43
Section 10.08 COUNTERPARTS; INTEGRATION.....................................................................44
Section 10.09 SEVERAL OBLIGATIONS...........................................................................44
Section 10.10 SHARING OF SET-OFFS...........................................................................44
Section 10.11 WAIVER OF JURY TRIAL..........................................................................44
Section 10.12 LIMITED RECOURSE..............................................................................44
</TABLE>
Pricing Schedule
Exhibit A - Form of Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Form of Opinion of Ashford & Wriston, Special Hawaii
Counsel for the Borrower
Exhibit F - Form of Opinion of Gibson, Dunn & Crutcher LLP,
Special Counsel for the Guarantor and the Borrower
Exhibit G - Form of Opinion of General Counsel for the Guarantor
Exhibit H - Form of Opinion of Winthrop, Stimson, Putnam &
Roberts, Special Counsel for the Agents
Exhibit I - Form of Assignment and Assumption Agreement
iv
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of June 1, 1998 among HILTON HAWAIIAN VILLAGE LLC,
as Borrower, HILTON HOTELS CORPORATION, as Guarantor, the BANKS listed on the
signature pages hereof, NATIONSBANK, N.A., as Syndication Agent, FIRST UNION
NATIONAL BANK, as Documentation Agent, and THE BANK OF NEW YORK, as
Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Administrative Agent" means The Bank of New York in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"Applicable Law" means, anything in Section 10.07 to the contrary
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules, regulations
and orders of governmental bodies, (ii) Governmental Approvals and Governmental
Registrations and (iii) orders, decisions, judgements and decrees.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Assignee" has the meaning set forth in Section 10.05(c).
"Authorized Officer" means any of the controller, the treasurer or the
chief financial officer of the Guarantor or the Borrower, as the case may be.
<PAGE>
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.05(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Committed Loan made or to be made by a Bank as
a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article IX.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means Hilton Hawaiian Village LLC, a Hawaii limited
liability company, and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Change of Control" means the occurrence of a Ratings Decline in
connection with any of the following events: (i) upon any merger or
consolidation of the Guarantor with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or substantially all of the
assets of the Guarantor, on a consolidated basis, in one transaction or a series
of related transactions, if, immediately after giving effect to such
transaction, any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended), is or becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated by the Securities
and Exchange Commission under said Act) of securities representing a majority of
the total voting power of the aggregate outstanding securities of the transferee
or surviving entity normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, as amended) is or becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of securities representing a majority of
total voting power of the aggregate outstanding securities of the Guarantor
normally entitled to vote in the election of directors of the Guarantor, (iii)
when, during any period of 12 consecutive calendar months, individuals who were
directors of the Guarantor on the first day of such period (together with any
new directors whose election by the board of directors of the Guarantor or whose
nomination for election by the stockholders of the Guarantor was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of the Guarantor, (iv) the sale or
disposition, whether directly or indirectly, by the Guarantor of all or
substantially all of its assets relating to the Hotel Segment or the Gaming
Segment (as segment is used in Regulation S-K and Regulation S-X of the
Securities and Exchange Commission) or (v) the pro-rata distribution by the
Guarantor to its stockholders of the Hotel Segment or the Gaming Segment.
2
<PAGE>
"Commitment" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite the name of such Bank on
the signature pages hereof and (ii) with respect to any Assignee which becomes a
Bank pursuant to Section 10.05(c), the amount of the Commitment thereby assumed
by it, in each case as such amount may be reduced from time to time pursuant to
Section 2.09 or 2.10.
"Committed Loan" means a loan made or to be made by a Bank pursuant to
Section 2.01.
"Consolidated Debt" has the meaning set forth in Section 5.10.
"Consolidated EBITDA" has the meaning set forth in Section 5.10.
"Consolidated Net Income" means, for any period, the consolidated net
income of the Guarantor and its Consolidated Subsidiaries for such period.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated Subsidiaries
determined as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Guarantor
in its consolidated financial statements as of such date.
"Contract" means (a) any agreement, including an indenture, lease or
license, (b) any deed or instrument of conveyance, (c) any certificate of
incorporation or charter, and (d) any by-law.
"Conversion and Operating Agreement" means the Conversion and Operating
Agreement dated as of June 1, 1998 among the Guarantor, Hilton Recreation, Inc.,
a Delaware corporation and a wholly-owned Subsidiary of the Guarantor, and The
Prudential Life Insurance Company of America, a New Jersey corporation.
"Covered Subsidiary" means (a) the Borrower and (b) at any time any
Subsidiary of the Guarantor that has consolidated assets in an amount greater
than $5,000,000.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person; it being understood that Debt does not include contingent obligations of
such Person to reimburse any other Person in respect of surety bonds or letters
of credit.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
3
<PAGE>
"Dollars" and the sign "$" mean lawful money of the United States.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Los Angeles are
authorized or required by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.02.
"Environmental Laws" means any and all statutes, regulations, permits,
licenses or other governmental restrictions relating to the environment or to
releases of petroleum or petroleum products, chemicals or toxic or hazardous
substances or wastes into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Guarantor, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Guarantor or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan made or to be made by a Bank
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in the Pricing Schedule.
"Euro-Dollar Reference Banks" means the principal London offices of The
Bank of New York, First Union National Bank and NationsBank, N.A.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.16.
"Event of Default" has the meaning set forth in Section 6.01.
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"Existing Credit Agreement" means the $1,750,000,000 Credit Agreement
dated as of October 18, 1996 among the Guarantor, the banks listed on the
signature pages thereof, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and The Bank of New York, as Administrative Agent, as
amended to the Effective Date.
"Existing First Mortgage Indebtedness" means the Debt of the Borrower
in the original principal amount of $185,500,000 existing on the Effective Date
and secured by a Lien on certain assets of the Borrower, including its real
property.
"Facility Fee Rate" has the meaning set forth in Section 2.08.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to The Bank of New York on such day on such
transactions as determined by the Administrative Agent.
"Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans
(excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant
to Section 9.01(a)) or any combination of the foregoing.
"Governmental Approval" means any authority, consent, approval, license
(or the like) or exemption (or the like) issued or granted by any governmental
unit.
"Governmental Registration" means any registration or filing (or the
like) with, or report or notice (or the like) to, any governmental unit.
"Guaranteed Obligations" means all Liabilities of the Borrower
(including in its capacity as a "debtor in possession" under the Bankruptcy
Code) due or owing to, or in favor or for the benefit of, the Guaranteed Parties
under the Loan Documents, of every kind, nature and description, direct or
indirect, absolute or contingent, due or not due, now existing or hereafter
arising, and whether or not (a) due or owing to, or in favor or for the benefit
of, Persons that are Guaranteed Parties as of the Effective Date or that become
Guaranteed Parties by reason of any succession or assignment at any time
thereafter, (b) ARISING OR ACCRUING BEFORE OR AFTER THE FILING BY OR AGAINST THE
BORROWER OF A PETITION UNDER THE BANKRUPTCY CODE OR (c) ALLOWABLE UNDER SECTION
502(b)(2) OF THE BANKRUPTCY CODE.
"Guaranteed Parties" means all Persons that are, or at any time were,
the Administrative Agent, the Documentation Agent, the Syndication Agent or a
Bank.
"Guarantor" means Hilton Hotels Corporation, a Delaware corporation,
and its successors.
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"Guarantor's 1997 Form 10-K" means the Guarantor's annual report on
Form 10-K for 1997, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Debt of the payment
thereof or to protect such holder against loss in respect thereof (in whole or
in part), provided that the term Guaranty shall not include (y) endorsements for
collection or deposit in the ordinary course of business or (z) performance or
completion guarantees. The term "Guaranty" used as a verb has a corresponding
meaning.
"Indemnitee" has the meaning set forth in Section 10.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending 1, 2,
3 or 6 months thereafter, as the Borrower may elect in the applicable Notice of
Committed Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day in
a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date, or, if such date is not a
Euro-Dollar Business Day, then on the next preceding Euro-Dollar Business Day.
(2) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending 1, 2, 3 or 6 months
thereafter, as the Borrower may elect in accordance with Section 2.03; provided
that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar
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month at the end of such Interest Period) shall, subject to clause (c) below,
end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market Absolute Rate Borrowing, the
period commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than seven days and not more than 180 days) as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment Grade" means (i) with respect to S&P, a rating of BBB- or
higher, (ii) with respect to Moody's, a rating of Baa3 or higher and (iii) with
respect to Duff & Phelps, a rating of BBB- or higher.
"Leverage Ratio" has the meaning set forth in Section 5.10.
"Liabilities" of any Person means (in each case whether with full or
limited recourse) any indebtedness, liability, obligation, covenant or duty of
or binding upon, or any term or condition to be observed by or binding upon,
such Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, whether arising under Contract, Applicable Law, or
otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Guarantor or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan or a Money Market
Loan, and "Loans" means Base Rate Loans or Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"Loan Documents" means this Agreement and the Notes.
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"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(b).
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Administrative Agent; provided that any Bank may from time to time by
notice to the Borrower and the Administrative Agent designate separate Money
Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 9.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Moody's" has the meaning set forth in the Pricing Schedule.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Non-Recourse Debt" means Debt in respect of which the recourse of the
holder of such Debt is limited to the assets securing such Debt and such Debt
does not constitute the general obligation of the Guarantor or any Subsidiary.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined
in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
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"Notice of Committed Borrowing" has the meaning set forth in Section
2.02.
"Notice of Money Market Borrowing" has the meaning set forth in Section
2.03(f).
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 10.05(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time to time in New York City by The Bank of
New York as its prime commercial lending rate, such rate to be adjusted
automatically (without notice) on the effective date of any change in such
publicly announced rate.
"PRS, Inc." means Prudential Realty Securities, Inc.
"Public Notice" means, without limitation, any filing or report made in
accordance with the requirements of the Securities and Exchange Commission (or
any successor), any press release or public announcement made by the Guarantor
or any written notice the Guarantor gives to the Administrative Agent or the
Banks.
"Quarterly Payment Date" means each of March 31, June 30, September 30,
and December 31 in each year.
"Rating Agencies" means S&P, Moody's or Duff & Phelps.
"Rating Decline" means the occurrence on any date on or within 90 days
after the date of the first Public Notice of (i) the occurrence of an event
described in clauses (i)-(v) of the definition of "Change of Control" or (ii)
the intention by the Guarantor to effect such an event (which 90-day period
shall be extended so long as the rating of the senior debt of the Guarantor is
under publicly announced consideration for possible downgrade by any of the
Rating
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Agencies) of a decrease in the rating of the senior debt of the Guarantor by any
of the Rating Agencies to below Investment Grade.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding at least 51% of the sum of the aggregate unpaid principal
amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" has the meaning set forth in the Pricing Schedule.
"Significant Subsidiary" means at any time a Subsidiary of the
Guarantor having (i) at least 10% of the total consolidated assets of the
Guarantor and its Subsidiaries (determined as of the last day of the most recent
fiscal quarter of the Guarantor) or (ii) at least 10% of the consolidated
revenues of the Guarantor and its Subsidiaries for the fiscal year of the
Guarantor then most recently ended.
"Subsidiary" means (a) the Borrower and (b) any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Guarantor.
"Tax" means any Federal, State or foreign tax, assessment or other
governmental charge (including any withholding tax) upon a Person or upon its
assets, revenues, income or profits.
"Termination Date" means June 1, 2003 or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Year 2000 Issue" means failure of computer software, hardware and
firmware systems and equipment containing embedded computer chips to properly
receive, transmit, process, manipulate, store, retrieve, re-transmit or in any
other way utilize data and information due to the occurrence of the year 2000 or
the inclusion of dates on or after January 1, 2000.
Section 1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations
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hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared, in accordance with generally accepted accounting
principles as in effect from time to time, applied on a basis consistent (except
for changes concurred in by the Guarantor's independent public accountants and
disclosed in such financial statements) with the most recent audited financial
statements of the Guarantor and its Consolidated Subsidiaries delivered to the
Banks; provided that, if the Guarantor notifies the Administrative Agent that
the Guarantor wishes to amend any covenant in Article V to eliminate the effect
of any change in generally accepted accounting principles on the operation of
such covenant (or if the Administrative Agent notifies the Guarantor that the
Required Banks wish to amend Article V for such purpose), then the Guarantor's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Guarantor and the Required Banks.
Section 1.03 TYPES OF BORROWINGS. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on a single date and for a single Interest Period or are converted
to, or continued as, Loans of the same type at the same time for the same
successive Interest Period. Borrowings are classified for purposes of this
Agreement either by reference to the pricing of Loans comprising such Borrowing
(e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans)
or by reference to the provisions of Article II under which participation
therein is determined (i.e., a "Committed Borrowing" is a Borrowing under
Section 2.01 in which all Banks participate in proportion to their Commitments,
while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the
Bank participants are determined in accordance therewith).
ARTICLE II
THE CREDITS
Section 2.01 COMMITMENTS TO LEND. During the Revolving Credit Period
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to lend to the Borrower pursuant to this Section from time to time
amounts such that (i) the aggregate amount of Committed Loans by such Bank at
any one time outstanding shall not exceed the amount of its Commitment and (ii)
the aggregate amount of all Loans by all Banks at any one time outstanding shall
not exceed the aggregate amount of the Commitments. Each Borrowing under this
Section shall be in an aggregate principal amount of $10,000,000 or any larger
multiple of $1,000,000 and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.11, prepay Loans and reborrow at any time on or prior to the
Termination Date under this Section.
Section 2.02 NOTICE OF COMMITTED BORROWINGS. The Borrower shall give
the Administrative Agent notice (a "Notice of Committed Borrowing") not later
than 11:30 A.M. (New York City time) on (y) the date of each Base Rate Borrowing
(or, if the Borrower shall have requested Money Market Quotes in an Absolute
Rate Auction to be submitted on such date but shall not have accepted such Money
Market Quotes in the full amount requested, then the Borrower may give a Notice
of Committed Borrowing not later than 1:00 P.M. (New York City
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<PAGE>
time) on such date for the smallest amount permitted under Section 2.01 which is
sufficient to fund the shortfall) and (z) the third Euro-Dollar Business Day
before each Euro-Dollar Borrowing, specifying;
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to be Base
Rate Loans or Euro-Dollar Loans; and
(d) in the case of a Committed Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
Section 2.03 MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as
set forth in this Section, request the Banks prior to the Termination Date to
make offers to make Money Market Loans to the Borrower in Dollars, provided that
the aggregate amount of all Loans by all Banks at any one time outstanding shall
not exceed the aggregate amount of the Commitments. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Administrative Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit B hereto so as to be received
no later than (x) 11:30 A.M. (New York City time) on the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in the case of a
LIBOR Auction or (y) 10:30 A.M. (New York City time) on the Domestic Business
Day next preceding the date of Borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall
be $10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
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The Borrower may request offers to make Money Market Loans for
more than one Interest Period in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days (or
such other number of days as the Borrower and the Administrative Agent may
agree) of any other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt
of a Money Market Quote Request, the Administrative Agent shall send to the
Banks by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request relates
in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection (d) and must
be submitted to the Administrative Agent by telex or facsimile transmission at
its offices specified in or pursuant to Section 9.01 not later than (x) 2:00
P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 12:00 Noon
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for other Banks, in
the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for other
Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI,
any Money Market Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially
the form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market
Loan for which each such offer is being made, which principal
amount (w) may be greater than or less than the Commitment of
the quoting Bank, (x) must be $5,000,000 or a larger multiple
of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may
be subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the
margin above or below the applicable London Interbank Offered
Rate (the "Money Market Margin")
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offered for each such Money Market Loan, expressed as a
percentage (specified to the nearest 1/10,000th of 1%) to be
added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction,
the rate of interest per annum (specified to the nearest
1/10,000th of 1%) (the "Money Market Absolute Rate") offered
for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity
with Exhibit D hereto or does not specify all of the
information required by subsection (d)(ii);
(B) contains qualifying, conditional or
similar language, except as provided in subsection (d)(ii)(B)
(z); or
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for Money
Market Quotes, except as provided in subsection (d)(ii)(B)(z);
or
(D) arrives after the time set forth in
subsection (d)(i).
(e) NOTICE TO BORROWER. The Administrative Agent shall
promptly notify the Borrower of the terms (x) of any Money Market Quote
submitted by a Bank that is in accordance with subsection (d), and (y) of any
Money Market Quote that amends, modifies or is otherwise inconsistent with a
previous Money Market Quote submitted by such Bank with respect to the same
Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall specify
(A) the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins or
Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money Market Loans
for which offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (x)
11:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to
the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 12:45 P.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective), the Borrower shall
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notify the Administrative Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of acceptance,
such notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing
must be $10,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis
of ascending Money Market Margins or Money Market Absolute Rates, as
the case may be, and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply
with the requirements of this Agreement.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by
two or more Banks with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are permitted to be accepted for the
related Interest Period, the principal amount of Money Market Loans in respect
of which such offers are accepted shall be allocated by the Administrative Agent
among such Banks as nearly as possible (in multiples of $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Administrative Agent of
the amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
(h) EFFECT ON COMMITMENTS. Any Money Market Loans made by
a Bank pursuant to this Section shall not reduce such Bank's pro rata share of
the remaining undrawn Commitments.
Section 2.04 NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 2:00 P.M. (New York City time) on the date
of each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing in
Dollars, in Federal or other funds immediately available in New York City, to
the Administrative Agent at its address referred to in Section 10.01. Unless the
Administrative Agent determines that any applicable condition specified in
Article III has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address or place.
(c) If any Bank makes a new Loan hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the
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proceeds of its new Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by such Bank to the Administrative Agent as
provided in subsection (b), or remitted by the Borrower to the Administrative
Agent as provided in Section 2.12, as the case may be.
(d) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsections (b) and (c) of this Section 2.04 and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Administrative Agent, such Bank and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement. If the Borrower
pays interest under this subsection (d) at the Federal Funds Rate and the
Federal Funds Rate is higher than the interest rate applicable thereto pursuant
to Section 2.07, the applicable Bank shall pay the Borrower the difference
between such rates.
Section 2.05 NOTES. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the
Administrative Agent, request that its Loans of a particular type be evidenced
by a separate Note in an amount equal to the aggregate unpaid principal amount
of such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section
3.02(b), the Administrative Agent shall forward such Note to such Bank. Each
Bank shall record the date, amount, type and maturity of each Loan made by it
and the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Bank so elects in connection with any transfer
or enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding; provided that the failure of any Bank to make any
such recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
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Section 2.06 MATURITY OF LOANS. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
Section 2.07 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable on the last day of each
calendar quarter (or if such day is not a Domestic Business Day, the next
Domestic Business Day). Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the otherwise applicable rate for such
day.
(b) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the applicable London Interbank Offered Rate for such
Interest Period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in Dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Euro-Dollar Margin for such day plus
the quotient obtained (rounded upwards, if necessary, to the next higher 1/100
of 1%) by dividing (i) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such period of time not longer than six months as the Administrative Agent
may elect) deposits in Dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
9.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(d) Subject to Section 9.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in accordance
with Section 2.07(b) as if the related Money Market LIBOR Borrowing were a
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute
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Rate Loan shall bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance with
Section 2.03. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue principal of
or interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
(e) The Administrative Agent shall determine each interest
rate applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the participating Banks of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(f) Each Euro-Dollar Reference Bank agrees to use its best
efforts to furnish quotations to the Administrative Agent as contemplated by
this Section. If any Euro-Dollar Reference Bank does not furnish a timely
quotation, the Administrative Agent shall determine the relevant interest rate
on the basis of the quotation or quotations furnished by the remaining
Euro-Dollar Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 9.01 shall apply.
Section 2.08 FACILITY FEES. (a) The Borrower shall pay to the
Administrative Agent for the account of the Banks ratably a facility fee at the
Facility Fee Rate (as defined in, and determined daily in accordance with the
Pricing Schedule). Such facility fee shall accrue from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the daily aggregate amount
of the Commitments (whether used or unused).
(b) PAYMENTS. Accrued fees under this Section shall be payable
quarterly in arrears on the first day of each March, June, September and
December and upon the date of termination or reduction of the Commitments (in
the case of any such reduction, on the amount thereof).
Section 2.09 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Administrative Agent, (i) terminate the Commitments
at any time, if no Loans are outstanding at such time or (ii) ratably and
permanently reduce from time to time, by an aggregate amount of $5,000,000 or
any larger amount in multiples of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate amount of the Loans at such time.
Section 2.10 SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
Section 2.11 OPTIONAL PREPAYMENTS. (a) Subject in the case of any
Euro-Dollar Borrowing to Section 2.13, the Borrower may, upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 9.01(a)) or upon at least three Euro-Dollar
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Business Days' notice to the Administrative Agent, with respect to any
Euro-Dollar Borrowing, prepay any Euro-Dollar Borrowing, in each case in whole
at any time, or from time to time in part in amounts aggregating $5,000,000 or
any larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Borrowing.
(b) Except as provided in Section 2.11(a), the Borrower may
not prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
Section 2.12 GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, Loans and of fees hereunder,
in Dollars not later than 2:00 P.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 10.01, without offset
or counterclaim. The Administrative Agent will promptly distribute to each Bank
its ratable share of each such payment received by the Administrative Agent for
the account of the Banks, in the type of funds received by the Administrative
Agent. Whenever any payment of principal of, or interest on, the Base Rate Loans
or of fees shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic Business
Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
or Money Market LIBOR Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. Whenever any payment of principal
of, or interest on, the Money Market Absolute Rate Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
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Section 2.13 FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or IX or
otherwise) on any day other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.07(c), or if the Borrower fails to borrow any Fixed Rate Loans after notice
has been given to any Bank in accordance with Section 2.04(a), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or failure to borrow, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
Section 2.14 COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in
a leap year) and paid for the actual number of days elapsed (including the first
day but excluding the last day). All other interest and all fees hereunder shall
be computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
Section 2.15 WITHHOLDING TAX EXEMPTION. At least five Domestic Business
Days prior to the first date on which interest or fees are payable hereunder for
the account of any Bank (including, without limitation, any Bank that becomes a
Bank by assignment pursuant to Section 10.05(c)), each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Administrative Agent
two duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Bank is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes.
Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, in each case certifying that such Bank is entitled
to receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Borrower and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.
Section 2.16 REGULATION D COMPENSATION. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest
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(x) shall so notify the Borrower and the Administrative Agent, in which case
such additional interest on the Euro-Dollar Loans of such Bank shall be payable
to such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the giving of
such notice and (y) shall notify the Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans of
the amount then due it under this Section.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars in
respect of "Eurocurrency Liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
ARTICLE III
CONDITIONS
Section 3.01 BORROWINGS. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02 or 2.03;
(b) the fact that, immediately after such Borrowing, the sum
of the aggregate outstanding amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Guarantor and the Borrower contained in this Agreement (except the
representation and warranty set forth in Section 4.04(c) and Section 4.05, in
each case as to any matter which has theretofore been disclosed in writing by
the Guarantor or the Borrower to the Banks) shall be true on and as of the date
of such Borrowing (except to the extent that any such representation or warranty
expressly relates only to a specific date, in which case such representation or
warranty shall have been true on and as of such date).
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in clauses (b), (c) and (d) of this Section.
Section 3.02 EFFECTIVENESS. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 10.04):
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(a) receipt by the Administrative Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party);
(b) receipt by the Administrative Agent for the account of
each Bank of a duly executed Note dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Administrative Agent of an opinion of
Ashford & Wriston, special Hawaii counsel for the Borrower, substantially in the
form of Exhibit E hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Administrative Agent of an opinion of
Gibson, Dunn & Crutcher LLP, special counsel for the Guarantor and the Borrower,
substantially in the form of Exhibit F hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required Banks
may reasonably request;
(e) receipt by the Administrative Agent of an opinion of
General Counsel for the Guarantor, substantially in the form of Exhibit G hereto
and covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(f) receipt by the Administrative Agent of an opinion of
Winthrop, Stimson, Putnam & Roberts, special counsel for the Agents,
substantially in the form of Exhibit H hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required Banks
may reasonably request;
(g) receipt by the Administrative Agent of a certificate
signed by the chief financial officer, controller or the treasurer of the
Guarantor, to the effect set forth in clauses (b), (c) and (d) of Section 3.01;
(h) receipt by the Administrative Agent of a certificate
signed by the chief financial officer, controller or the treasurer of the
Guarantor, to the effect that no "Default" (as defined therein) has occurred and
is continuing under the Existing Credit Agreement;
(i) receipt by the Administrative Agent of all documents it
may reasonably request relating to the existence of the Borrower and the
Guarantor, the corporate authority for and the validity of this Agreement and
the Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agent;
(j) receipt by the Administrative Agent of a copy of the
Conversion and Operating Agreement, certified by the Secretary or an Assistant
Secretary of the Guarantor to be a true, correct and complete copy thereof; and
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(k) the Administrative Agent shall be satisfied that a portion
of the proceeds of the initial Loans shall be used to repay in full the Existing
First Mortgage Indebtedness and all other amounts payable in connection
therewith.
The Administrative Agent shall promptly notify the Borrower, the Guarantor, and
each Bank of the effectiveness of this Agreement, and such notice shall be
conclusive and binding on all parties hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Guarantor and, to the extent relating to itself, the Borrower each
hereby represents and warrants that:
Section 4.01 CORPORATE EXISTENCE AND POWER. (a) The Borrower is a
limited liability company, duly organized, validly existing and in good standing
under the laws of Hawaii, and has all company powers and all material government
licenses, authorizations, consents and approvals required to carry on its
business as now conducted; and
(b) the Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
Section 4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
(a) The execution, delivery and performance by the Borrower of this Agreement
and the Notes are within the Borrower's company powers, have been duly
authorized by all necessary company action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the Conversion and Operating Agreement of the Borrower or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or result in the creation or imposition of any Lien on any
asset of the Borrower.
(b) The execution, delivery and performance by the Guarantor
of this Agreement are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency, or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Guarantor or
of any agreement, judgement, injunction, order, decree or any other instrument
binding upon the Guarantor or result in the creation or imposition of any Lien
on any asset of the Guarantor or any of its Subsidiaries.
Section 4.03 BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and the Guarantor, and the Notes, when
executed and delivered in accordance with this Agreement, will constitute valid
and binding obligations of the Borrower, in each case enforceable in accordance
with their respective terms.
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Section 4.04 FINANCIAL INFORMATION. (a) The consolidated balance sheet
of the Guarantor and its Consolidated Subsidiaries as of December 31, 1997 and
the related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by Arthur Andersen LLP and set forth in the Guarantor's
1997 Form 10-K, a copy of which has been delivered to each of the Banks, fairly
present in all material respects, in conformity with generally accepted
accounting principles, the consolidated financial position of the Guarantor and
its Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The balance sheet of the Borrower as of December 31, 1997
and the related statements of income and cash flows for the fiscal year then
ended, reported on by Arthur Andersen LLP, copies of which has been delivered to
each of the Banks, fairly present in all material respects, in conformity with
generally accepted accounting principles, the financial position of the Borrower
as of such date and its results of operations and cash flows for such fiscal
year.
(c) Since December 31, 1997, there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Guarantor and its Consolidated Subsidiaries, considered as a
whole.
Section 4.05 LITIGATION. Except as disclosed in the Guarantor's 1997
Form 10-K or in its Form 10-Q for the fiscal quarter ended March 31, 1998, there
is no action, suit or proceeding pending against, or to the knowledge of the
Guarantor threatened against or affecting, the Guarantor or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, consolidated financial position
or consolidated results of operations of the Guarantor and its Consolidated
Subsidiaries or which in any manner draws into question the validity or
enforceability of this Agreement or the Notes. Without limiting the generality
of the foregoing, with respect to those litigation matters described in the
Guarantor's 1997 Form 10-K, (i) the disclosure contained in the Guarantor's 1997
Form 10K was accurate as of the date of the Guarantor's 1997 Form 10-K and (ii)
since such date there has been no material adverse development.
Section 4.06 COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV or ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
Section 4.07 TAXES. United States Federal income tax returns of the
Guarantor and its Subsidiaries have been examined and closed through the fiscal
year ended December 31, 1997.
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The Guarantor and its Significant Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Guarantor or any Subsidiary. The
charges, accruals and reserves on the books of the Guarantor and its Significant
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Guarantor, adequate.
Section 4.08 SIGNIFICANT SUBSIDIARIES. Each of the Significant
Subsidiaries is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Section 4.09 NOT AN INVESTMENT COMPANY. Neither the Guarantor nor
Borrower is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
Section 4.10 ENVIRONMENTAL MATTERS. The Guarantor has reasonably
concluded that Environmental Laws are unlikely to have a material adverse effect
on the business, financial position, results of operations or prospects of the
Guarantor and its Consolidated Subsidiaries, considered as a whole.
Section 4.11 YEAR 2000 ISSUE. The Guarantor and its Subsidiaries have
reviewed the effect of the Year 2000 Issue on the computer software, hardware
and firmware systems and equipment containing embedded microchips owned or
operated by or for the Guarantor and its Subsidiaries. The costs to the
Guarantor and its Subsidiaries of any reprogramming required as a result of the
Year 2000 Issue to permit the proper functioning of such systems and equipment
and the proper processing of data, and the testing of such reprogramming, and of
required systems changes are not reasonably expected to result in a Default or
to have a material adverse effect on the business, financial position, results
of operations or prospects of the Guarantor and its Consolidated Subsidiaries,
considered as a whole.
Section 4.12 FULL DISCLOSURE. All information heretofore furnished by
the Borrower or the Guarantor, as the case may be, to the Administrative Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by the Borrower or the Guarantor, as the case may be, to the Administrative
Agent or any Bank will be, taken as a whole, true and accurate in all material
respects on the date as of which such information is stated or certified. The
Guarantor has disclosed to the Banks in writing any and all facts which
materially and adversely affect or may affect (to the extent the Guarantor can
now reasonably foresee), the business, operations or financial position of the
Guarantor and its Consolidated Subsidiaries, taken as a whole, or the ability of
the Guarantor to perform its obligations under this Agreement. The Borrower has
disclosed to the Banks in writing any and all facts which materially and
adversely affect or may affect (to the extent the Borrower can now reasonably
foresee), the business, operations or financial position of the Borrower, or the
ability of the Borrower to perform its obligations under this Agreement. With
respect to any projections or forecasts provided, such projections or forecasts
represent, as of the date thereof, management's best estimates based on
reasonable
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assumptions and all available information, but are subject to the uncertainty
inherent in all projections and forecasts.
ARTICLE V
COVENANTS
The Guarantor and, to the extent relating to itself, the Borrower each
hereby agrees that, so long as any Bank has any Commitment hereunder or any
amount payable under any Note remains unpaid:
Section 5.01 INFORMATION. The Guarantor or the Borrower, as the
case may be, will deliver to the Administrative Agent:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Guarantor, the consolidated balance sheet of
the Guarantor and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures as of
the end of and for the previous fiscal year, all reported on in a manner
acceptable to the Securities and Exchange Commission by Arthur Andersen LLP or
other independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, the balance sheet of the Borrower
as of the end of such fiscal year and the related statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures as of the end of and for the previous fiscal year, all reported on by
Arthur Andersen LLP or other independent public accountants of nationally
recognized standing;
(c) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Guarantor, the consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of income and cash flows for such quarter and for the portion of the
Guarantor's fiscal year ended at the end of such quarter, setting forth in the
case of such statements of income and cash flows in comparative form the figures
for the corresponding quarter and the corresponding portion of the Guarantor's
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, generally accepted accounting principles and
consistency by an Authorized Officer;
(d) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the Borrower,
the balance sheet of the Borrower as of the end of such quarter and the related
statements of income and cash flows for such quarter and for the portion of the
Borrower's fiscal year ended at the end of such quarter, setting forth in the
case of such statements of income and cash flows in comparative form the figures
for the corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, generally accepted accounting principles and
consistency by an Authorized Officer;
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(e) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (c) above, a certificate of an
Authorized Officer (i) setting forth in reasonable detail the calculations
required to establish whether the Guarantor was in compliance with the
requirements of clauses (g), (h) and (i) of Section 5.07 and Section 5.10 on the
date of such financial statements, (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Guarantor is taking or proposes to take
with respect thereto and (iii) if the Guarantor elects that Status (as defined
in the Pricing Schedule) shall be determined for purposes of the Pricing
Schedule on the basis of the Leverage Ratio reflected in such certificate, a
statement to such effect;
(f) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a statement of the firm of
independent public accountants which reported on such statements (i) as to
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith;
(g) within five Domestic Business Days of any officer of the
Guarantor obtaining knowledge of any Default, if such Default is then
continuing, a certificate of an Authorized Officer setting forth the details
thereof and the action which the Guarantor is taking or proposes to take with
respect thereto;
(h) promptly upon the mailing thereof to the shareholders of
the Guarantor generally, copies of all financial statements, reports and proxy
statements so mailed;
(i) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Guarantor shall have filed with the
Securities and Exchange Commission;
(j) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security,
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a certificate of the chief financial officer or the chief accounting officer of
the Guarantor setting forth details as to such occurrence and action, if any,
which the Guarantor or applicable member of the ERISA Group is required or
proposes to take;
(k) forthwith, notice of any change of which the Guarantor
becomes aware in the rating by S&P or Moody's, of the Guarantor's outstanding
senior unsecured long-term debt securities; and
(l) from time to time such additional information regarding
the financial position or business of the Guarantor or the Borrower as the
Administrative Agent, at the request of any Bank, may reasonably request.
Section 5.02 MAINTENANCE OF PROPERTY; INSURANCE. (a) The Guarantor will
keep, and will cause each Significant Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary wear
and tear excepted, except where failure to do so would not have a material
adverse effect on the business, financial position, results of operations or
prospects of the Guarantor and its Consolidated Subsidiaries, considered as a
whole.
(b) The Guarantor will, and will cause each of its Significant
Subsidiaries to, maintain (either in the name of the Guarantor or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such amounts
and against at least such risks (and with such risk retention) as are usually
insured against in the same general area by companies of established repute
engaged in the same or a similar business and will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried. Notwithstanding the foregoing, the
Guarantor may self-insure with respect to such risks with respect to which
companies of established repute engaged in the same or similar business in the
same general area usually self-insure.
Section 5.03 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Guarantor will continue, and will cause the Borrower and each Significant
Subsidiary to continue, to engage in business of the same general type as now
conducted by the Borrower, the Guarantor and its Significant Subsidiaries, and
will preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their respective
corporate or limited liability company existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business; provided that nothing in this Section 5.03 shall prohibit (i) the
merger of a Subsidiary into the Guarantor or the merger or the consolidation of
a Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the corporate existence of any Subsidiary if the Guarantor in
good faith determines that such termination is in the best interest of the
Guarantor and is not materially disadvantageous to the Banks.
Section 5.04 COMPLIANCE WITH LAWS. The Guarantor will comply, and cause
the Borrower and each Significant Subsidiary to comply, in all material respects
with all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including,
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without limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
Section 5.05 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Guarantor
will keep, and will cause the Borrower and each Significant Subsidiary to keep,
proper books of record and account in which full, true and correct entries shall
be made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause the Borrower and each Significant
Subsidiary to permit, representatives of any Bank at such Bank's expense to
visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
Section 5.06 YEAR 2000 ISSUE. The Guarantor shall make, and shall cause
each of its Subsidiaries to make, all required systems changes by December 31,
1999, in computer software, hardware and firmware systems and equipment
containing embedded microchips owned or operated by or for the Guarantor and its
Subsidiaries required as a result of the Year 2000 Issue to permit the proper
functioning of such computer systems and other equipment, except to the extent
that the failure to take any such action could not reasonably be expected to
result in a Default or to have a material adverse effect on the business,
financial position, results of operations or prospects of the Guarantor and its
Consolidated Subsidiaries, considered as a whole. At the request of any Bank,
the Guarantor shall provide, and shall cause each of its Subsidiaries to
provide, to such Bank reasonable assurance of its compliance with the preceding
sentence.
Section 5.07 NEGATIVE PLEDGE. None of the Guarantor, any Covered
Subsidiary or any Significant Subsidiary will create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing as of the Effective Date (as such term is
defined in the Existing Credit Agreement);
(b) any Lien existing on any asset of any corporation at the
time such corporation becomes a Subsidiary and not created in contemplation of
such event;
(c) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring or
constructing such asset (it being understood that, for this purpose, the
acquisition of a Person is also an acquisition of the assets of such Person);
provided that the Lien attaches to such asset concurrently with or within 180
days after the acquisition thereof, or such longer period, not to exceed 12
months, due to the Guarantor's inability to retain the requisite governmental
approvals with respect to such acquisition; provided further that, in the case
of real estate, (i) the Lien attaches within 12 months after the latest of the
acquisition thereof, the completion of construction thereon or the commencement
of full operation thereof and (ii) the Debt so secured does not exceed the sum
of (x) the purchase price of such real estate plus (y) the costs of such
construction;
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(d) any Lien on any asset of any corporation existing at the
time such corporation is merged or consolidated with or into the Guarantor
or a Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Guarantor or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased (other
than to cover any transaction costs of such refinancing, extension, renewal
or refunding) and is not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt, (ii) do not secure any single obligation in an amount
exceeding $50,000,000 and (iii) do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business;
(h) Liens securing Debt of a Subsidiary to the Guarantor or another
Subsidiary; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 15% of Consolidated Net Worth.
Section 5.08 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Neither the
Guarantor nor the Borrower will (i) consolidate or merge with or into any other
Person or (ii) sell, lease or otherwise transfer (A) all or any substantial part
of the assets of the Guarantor and its Subsidiaries, taken as a whole, or (B)
all or substantially all of the assets of the Borrower to any other Person;
provided that the Guarantor or the Borrower may merge with another Person if (A)
the Guarantor or the Borrower, as the case may be, is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no Default
shall have occurred and be continuing.
Section 5.09 USE OF PROCEEDS. The proceeds of the Loans made under this
Agreement will be used by the Borrower for general business purposes, including
but not limited to, the backstop of commercial paper, to purchase unsecured
notes issued by PRS, Inc. in an aggregate principal amount of $294,000,000, and
to repay or prepay Existing First Mortgage Indebtedness. None of such proceeds
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock" within the
meaning of Regulation U in any manner that violates or causes the violation of
Regulation U or Regulation X.
Section 5.10 LEVERAGE RATIO. The Leverage Ratio will at no time exceed the
greater of (a) 4:1 or (b) the maximum amount thereof permitted at such time
under the Existing Credit Agreement. For purposes of this Section 5.10, the
following terms shall have the following meanings:
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"Consolidated Debt" means at any date the Debt of the Guarantor and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated EBITDA" means for any period, Consolidated Net Income for
such period before (i) income taxes, (ii) interest expense, (iii) depreciation
and amortization, (iv) minority interest, (v) extraordinary losses or gains,
(vi) discontinued operations and (vii) the cumulative effect of changes in
accounting principles; provided, however, that if the definition of
"Consolidated EBITDA" contained in the Existing Credit Agreement shall at any
time be amended or otherwise modified, the definition of "Consolidated EBITDA"
hereunder shall be deemed amended or modified in the same manner.
"Leverage Ratio" means at any date the ratio of Consolidated Debt at such
date to Consolidated EBITDA for the period of four consecutive fiscal quarters
most recently ended on or prior to such date.
Section 5.11 DEBT OF THE BORROWER. The Borrower shall not have any Debt at
any time other than (a) the Loans, (b) Debt owed to the Guarantor or any
Consolidated Subsidiary, (c) Debt incurred pursuant to a commercial paper
program in an aggregate amount outstanding at such time not in excess of the
unused portion of the Commitments at such time and (d) other Debt in an
aggregate amount outstanding at such time not in excess of $25,000,000.
Section 5.12 LIMITATION ON RESTRICTIVE COVENANTS. Neither the Borrower nor
the Guarantor shall permit to exist, at any time, any consensual restriction
limiting the ability (whether by covenant, event of default, subordination or
otherwise) of the Borrower to create any Lien upon its property or assets
whether now owned or hereafter acquired or upon any income or profits therefrom,
other than any such restriction contained herein or in the Existing Credit
Agreement.
ARTICLE VI
DEFAULTS
Section 6.01 EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
under this Agreement, or shall fail to pay within five days of the due date
thereof any interest, fees or other amount payable hereunder;
(b) the Borrower or the Guarantor shall fail to observe or perform
any covenant contained in Sections 5.07 to 5.12, inclusive;
(c) the Borrower or the Guarantor shall fail to observe or perform
any covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for seven days after written notice
thereof has been given to the Borrower by the Administrative Agent at the
request of any Bank;
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(d) any representation, warranty, certification or statement made or
deemed made by the Borrower or the Guarantor in this Agreement or in any
certificate, financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any material respect
when made (or deemed made);
(e) the Guarantor or any Covered Subsidiary or any Significant
Subsidiary shall fail to make any payment in respect of any Debt (other
than the Notes and Non-Recourse Debt) when due or within any applicable
grace period and the aggregate principal amount of such Debt is in excess
of $100,000,000;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt (other than Non-Recourse Debt) in
excess of $100,000,000 of the Guarantor or any Covered Subsidiary or any
Significant Subsidiary or enables the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower, the Guarantor or any Significant Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower, the Guarantor or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief
shall be entered against the Borrower, the Guarantor or any Significant
Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer, any Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could
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cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Guarantor or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a period
of 30 days;
(k) a Change of Control; or
(l) (i) the Guarantor shall at any time cease to (A) be the Manager
(as defined in the Conversion and Operating Agreement) of the Borrower or
(B) own, directly or indirectly, and control capital stock (or other
ownership interest) issued by the Borrower representing not less than 49%
of the equity ownership interest in the Borrower or (ii) the Borrower shall
at any time cease to be a part of the Guarantor's Hotel Segment (as segment
is used in Regulation S-K and Regulation S-X of the Securities and Exchange
Commission);
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and they shall thereupon terminate,
and (ii) if requested by Banks holding more than 50% of the sum of the aggregate
principal amount of the Loans, by notice to the Borrower declare the Loans
(together with accrued interest thereon) to be, and the Loans (together with
accrued interest thereon) shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above, without any notice to
the Borrower or any other act by the Administrative Agent or the Banks, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and the Guarantor.
Section 6.02 NOTICE OF DEFAULT. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENTS
Section 7.01 APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the Notes as are
delegated to such Administrative Agent by the terms hereof or thereof, together
with all such powers as are reasonably incidental thereto. First Union National
Bank, as Documentation Agent, and NationsBank, N.A., as Syndication Agent, shall
have no duties or responsibilities hereunder.
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Section 7.02 AGENTS AND AFFILIATES. NationsBank, N.A., First Union National
Bank and The Bank of New York shall each have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not an agent hereunder, and NationsBank, N.A., First
Union National Bank and The Bank of New York and their respective affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with, the Borrower, the Guarantor or any Subsidiary or affiliate of the
Guarantor as if it were not an agent hereunder.
Section 7.03 ACTION BY ADMINISTRATIVE AGENT. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article VI.
Section 7.04 CONSULTATION WITH EXPERTS. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
Section 7.05 LIABILITY OF ADMINISTRATIVE AGENT. Neither the Administrative
Agent nor any of its respective affiliates nor any of the respective directors,
officers, agents or employees of any of the foregoing shall be liable for any
action taken or not taken by it in connection herewith (i) with the consent or
at the request of the Required Banks or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Administrative Agent nor any of
its respective affiliates nor any of the respective directors, officers, agents
or employees of any of the foregoing shall be responsible for or have any duty
to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower or the Guarantor, as the case may be; (iii) the
satisfaction of any condition specified in Article III, except in the case of
the receipt of items required to be delivered to it; or (iv) the validity,
effectiveness or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The Administrative Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
Section 7.06 INDEMNIFICATION. Each Bank shall, ratably in accordance with
its Commitment, indemnify the Administrative Agent, its affiliates and its
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with such Administrative Agent's
role under this Agreement or any related action taken or omitted by such
indemnitees hereunder.
Section 7.07 CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without
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reliance upon the Administrative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
Section 7.08 SUCCESSOR AGENT. Any agent hereunder (an "Agent") may resign
at any time subject to the appointment of a successor Agent by giving notice to
the Banks and the Borrower. Upon any such resignation, the Required Banks shall
have the right to appoint a successor Agent with the consent of the Borrower,
which consent shall not be unreasonably withheld or delayed; provided that no
such consent shall be required if the successor Agent is a Bank. If no successor
Agent shall have been so appointed, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation, then
the retiring Agent may, on behalf of the Banks, and without the Borrower's
consent, appoint a successor Agent, which shall be a commercial bank organized
or licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $1,000,000,000.
Upon the acceptance of its appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
ARTICLE VIII
GUARANTY
Section 8.01 GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
(a) absolutely, unconditionally and irrevocably guarantees to the Guaranteed
Parties the due and punctual payment and performance of all of the Guaranteed
Obligations in accordance with their respective terms and when and as due
(whether at maturity, by reason of acceleration or otherwise, but giving effect
to any applicable grace period set forth in Section 6.01(a)), or deemed to be
due pursuant to Section 8.02, and (b) agrees so to pay and perform the same when
so due, or deemed to be due, upon demand.
Section 8.02 CONTINUANCE AND ACCELERATION OF GUARANTEED OBLIGATIONS UPON
CERTAIN EVENTS. If:
(a) any Event of Default resulting in the automatic acceleration of
any Guaranteed Obligations shall occur;
(b) any injunction, stay or the like that enjoins any acceleration,
or demand for the payment of any Guaranteed Obligations that would
otherwise be required or permitted under the Loan Documents shall become
effective; or
(c) any Guaranteed Obligations shall be or be determined to be or
become discharged (other than by payment or performance in full),
disallowed, invalid, illegal,
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void or otherwise unenforceable (whether by operation of any present or
future law or by order of any court or governmental agency) against the
Borrower;
then (i) such Guaranteed Obligations shall, for all purposes hereunder, be
deemed (A) in the case of clause (c), to continue to be outstanding and in full
force and effect notwithstanding the unenforceability thereof against the
Borrower and (B) if such is not already the case, to have thereupon become
immediately due and payable and to have commenced bearing interest at the rate
provided in the last sentence of Section 2.07(a) or in Section 2.07(c), as the
case may be, and (ii) the Guaranteed Parties may exercise all of the rights and
remedies hereunder that would be available to them during an Event of Default.
Section 8.03 RECOVERED PAYMENTS. The Guaranteed Obligations shall be
deemed not to have been paid, observed or performed, and the Guarantor's
obligations hereunder in respect thereof shall continue and not be discharged,
to the extent that any payment thereof by the Borrower or the Guarantor, or out
of the proceeds of any collateral, is recovered from or paid over by or for the
account of the Guaranteed Parties for any reason, including as a preference or
fraudulent transfer or by virtue of any subordination (whether present or future
or contractual or otherwise; provided that, if such subordination is
contractual, the Guarantor shall have consented thereto in writing) of the
Guaranteed Obligations, whether such recovery or payment over is effected by any
judgment, decree or order of any court or governmental agency, by any plan of
reorganization or by settlement or compromise by the Guaranteed Parties (whether
or not consented to by the Borrower, the Guarantor or any other guarantor) of
any claim for any such recovery or payment over. The Guarantor hereby expressly
waives the benefit of any applicable statute of limitations and agrees that it
shall be liable hereunder whenever such a recovery or payment over occurs.
Section 8.04 NATURE OF GUARANTOR'S OBLIGATIONS. The Guarantor's obligations
under the Loan Documents (a) are absolute and unconditional, (b) constitute a
guaranty of payment and not a guaranty of collection, (c) are as primary obligor
and not as a surety only, (d) shall be a continuing guaranty of all present and
future Guaranteed Obligations and (e) shall be irrevocable.
Section 8.05 NO RELEASE OF GUARANTOR. THE OBLIGATIONS OF THE GUARANTOR
HEREUNDER SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL THE GUARANTOR
BE DISCHARGED FROM ANY THEREOF, FOR ANY REASON WHATSOEVER (other than, subject
to Section 8.03, the payment, observance and performance of the Guaranteed
Obligations), INCLUDING ANY ACT OR FAILURE TO ACT OR ANY EVENT OR CIRCUMSTANCE
THAT (i) VARIES THE RISK OF THE GUARANTOR HEREUNDER OR (ii) BUT FOR THE
PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR EQUITY,
OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF THE GUARANTOR HEREUNDER
OR DISCHARGE THE GUARANTOR FROM ANY THEREOF.
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Section 8.06 CERTAIN WAIVERS. The Guarantor waives:
(a) any requirement, and any right to require, that any right
or power be exercised or any action be taken against the Borrower or any
collateral for the Guaranteed Obligations;
(b) all defenses to the Guaranteed Obligations that may at any time
be available to the Guarantor as a surety that would not be available if the
Guarantor was the primary obligor hereunder (and agrees that payments due from
the Guarantor hereunder shall be made without any reduction or deduction
whatsoever, including any reduction or deduction for any setoff, counterclaim or
claim of recoupment otherwise available to the Guarantor or to the Borrower);
(c) (i) notice of acceptance of and intention to rely hereunder,
(ii) notice of the making or renewal of any Loans or other extensions of credit
hereunder and of the incurrence or renewal of any other Guaranteed Obligations,
(iii) notice of any of the matters referred to in Section 8.05 and (iv) all
other notices that may be required by Applicable Law or otherwise to preserve
any rights against the Guarantor hereunder, including any notice of default,
demand, dishonor, presentment and protest;
(d) diligence; and
(e) any defense based upon, arising out of or in any way related to
(i) any claim that any sale or other disposition of any collateral for the
Guaranteed Obligations was not conducted in a commercially reasonable fashion or
that a public sale, should the Guaranteed Parties have elected so to proceed,
was, in and of itself, not a commercially reasonable method of sale, (ii) any
claim that any election of remedies by the Guaranteed Parties, including the
exercise by the Guaranteed Parties of any rights against any collateral,
impaired, reduced, released or otherwise extinguished any right that the
Guarantor might otherwise have had against the Borrower or against any
collateral, including any right of subrogation, exoneration, reimbursement or
contribution or right to obtain a deficiency judgment, (iii) any claim based
upon, arising out of or in any way related to any of the matters referred to in
Section 8.06 and (iv) any claim that the Loan Documents should be strictly
construed against the Guaranteed Parties.
Section 8.07 SUBORDINATION OF RIGHTS AGAINST THE BORROWER AND
COLLATERAL. All rights that the Guarantor may at any time have against the
Borrower or any collateral for the Guaranteed Obligations (including rights of
subrogation, exoneration, reimbursement and contribution and whether arising
under Applicable Law or otherwise), and all obligations that the Borrower may at
any time have to the Guarantor, arising by virtue of the Guarantor's obligations
to pay principal, interest or other amounts payable to Guaranteed Parties
hereunder, any payment made pursuant thereto or the exercise by the Guaranteed
Parties of their rights with respect to any collateral are hereby expressly
subordinated to the prior payment, observance and performance in full of the
Guaranteed Obligations. The Guarantor shall not enforce any of the rights, or
attempt to obtain payment or performance of any of the obligations, subordinated
pursuant to this Section 8.07 until the Guaranteed Obligations have been paid,
observed and performed in full, except that such prohibition shall not apply to
routine acts, such as the giving of notices and the filing of continuation
statements, necessary to preserve any such rights. If any
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amount shall be paid to or recovered by the Guarantor (whether directly or by
way of setoff, recoupment or counterclaim) on account of any right or obligation
subordinated pursuant to this Section 8.07, such amount shall be held by the
Guarantor for the benefit of the Guaranteed Parties.
ARTICLE IX
CHANGE IN CIRCUMSTANCES
Section 9.01 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Administrative Agent is advised by the Euro-Dollar Reference
Banks that deposits in the applicable amounts are not being offered to the
Euro-Dollar Reference Banks in the relevant market for such Interest
Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Administrative Agent
that the London Interbank Offered Rate, as the case may be, as determined
by the Administrative Agent will not adequately and fairly reflect the cost
to such Banks of funding their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Euro-Dollar Loans (in the affected currency),
as the case may be, shall be suspended. Unless the Borrower notifies the
Administrative Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date (which the Borrower shall be entitled
to do under the circumstances contemplated by this Section 9.01, without
penalty, notwithstanding any contrary provision contained in Section 2.13), (i)
if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing
is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such
Borrowing shall bear interest for each day from and including the first day to
but excluding the last day of the Interest Period applicable thereto at the Base
Rate for such day. The Administrative Agent shall promptly notify the Banks of
any election by the Borrower pursuant to the preceding sentence.
Section 9.02 ILLEGALITY. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the
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Borrower, whereupon until such Bank notifies the Borrower and the Administrative
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section, such
Bank shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the sole judgment of
such Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such notice,
the Borrower shall immediately prepay in full the then outstanding principal
amount of each such Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
Section 9.03 INCREASED COST AND REDUCED RETURN. (a) If on or after (x) the
date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office)
to any tax, duty or other charge with respect to its Fixed Rate Loans,
its Note or its obligation to make Fixed Rate Loans, or shall change
the basis of taxation of payments to any Bank (or its Applicable
Lending Office) of the principal of or interest on its Fixed Rate Loans
or any other amounts due under this Agreement in respect of its Fixed
Rate Loans or its obligation to make Fixed Rate Loans (except for
changes in the rate of tax on the overall net income of such Bank or
its Applicable Lending Office imposed by the jurisdiction in which
such Bank's principal executive office or Applicable Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding with
respect to any Euro-Dollar Loan any such requirement included in the
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable Lending
Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the
London interbank market any other condition affecting its Fixed Rate
Loans, its Note or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be
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material, then, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If, after the date hereof, any Bank shall have determined that
any applicable law, rule or regulation regarding capital adequacy (irrespective
of the actual timing of the adoption or implementation thereof and including,
without limitation, any law or regulation adopted pursuant to the July 1988
report of the Basle Committee on Banking Regulations and Supervisory Practices)
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Applicable Lending Office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such law, regulation, change or compliance (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
Section 9.04 BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS.
If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended
pursuant to Section 9.02 or (ii) any Bank has demanded compensation under
Section 9.03(a) and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate Loans
instead.
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ARTICLE X
MISCELLANEOUS
Section 10.01 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, telecopy or
similar writing) and shall be given to such party: (x) in the case of the
Borrower or the Administrative Agent, at its address or telex or telecopier
number set forth on the signature pages hereof, (y) in the case of any Bank, at
its address or telex or telecopier number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex or
telecopier number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered or received at
the address specified in this Section; provided that notices to the
Administrative Agent under Article II or Article IX shall not be effective until
received.
Section 10.02 NO WAIVERS. No failure or delay by the Administrative Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
Section 10.03 EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses of the
Administrative Agent, including reasonable fees and disbursements of special
counsel for the Administrative Agent, in connection with the preparation of this
Agreement, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Administrative Agent or any
Bank, including fees and disbursements of either in-house counsel or outside
counsel (but not both for any one Bank either in its capacity as Administrative
Agent or Bank), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
The Borrower shall indemnify each Bank against any transfer taxes, documentary
taxes, mortgage recording taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery or enforcement of this
Agreement or the Notes.
(b) The Borrower agrees to indemnify the Administrative Agent and
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no
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Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
Section 10.04 AMENDMENTS AND WAIVERS. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Administrative Agent are affected thereby, by the
Administrative Agent); provided that no such amendment or waiver shall, unless
signed by all the Banks, (i) increase or decrease the Commitment of any Bank
(except for a ratable decrease in the Commitments of all Banks) or subject any
Bank to any additional obligation, (ii) reduce the principal of or rate or
amount of interest on any Loan or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder, or the Termination Date, (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
percentage of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement, (v)
change Section 10.05(a), 10.09 or 10.10 or (vi) release the Guarantor from any
of its obligations under Article VIII hereof.
Section 10.05 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither the Borrower nor the
Guarantor may assign or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all of its
Loans or, upon 10 days' notice and with the consent of the Borrower (which
consent shall not be unreasonably withheld or delayed), its Commitment; provided
that no such notice or consent shall be required if the Participant is a Bank or
an affiliate of a Bank; and provided further that such Participant shall agree
to be bound by Section 10.10 of this Agreement. In the event of any such grant
by a Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower and the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 10.04 without the consent of the Participant. The Borrower agrees that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article IX with respect to its participating
interest; provided that all amounts payable to a Bank for the account of a
Participant under Article IX shall be determined as if such Bank had not granted
such participation to such Participant. An assignment or other transfer which is
not permitted by subsection (c) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
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(c) Any Bank may, upon ten days' notice and with the consent of the
Borrower and the Administrative Agent (which consents shall not be unreasonably
withheld), assign to one or more banks or other institutions (each an
"Assignee") all, or a proportionate part of all (in a minimum amount of
$10,000,000), of its rights and obligations under this Agreement and the Notes,
and such Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit I
hereto executed by such Assignee and such transferor Bank, with (and subject to)
the subscribed consent of the Borrower, which shall not be unreasonably
withheld, and the Administrative Agent, which shall not be unreasonably
withheld; provided that the foregoing shall not be applicable in the case of,
and this subsection (c) shall not restrict, an assignment or other transfer by
any Bank to an affiliate of such Bank or to a Federal Reserve Bank; and provided
further that such assignment may, but need not, include rights of the transferor
Bank in respect of outstanding Money Market Loans. Upon execution and delivery
of such an instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay or cause to be paid to the Administrative Agent an
administrative fee for processing such assignment in the amount of $3,500. If
the Assignee is not incorporated under the laws of the United States of America
or a state thereof, it shall, prior to the first date on which interest or fees
are payable hereunder for its account, deliver to the Borrower and the
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 2.15.
(d) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 9.03 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless (subject to the provisions of subsection (b) above) such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 9.02 or 9.03 requiring such Bank to designate a different Applicable
Lending Office under certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.
Section 10.06 COLLATERAL. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
Section 10.07 NEW YORK LAW; SUBMISSION TO JURISDICTION. This Agreement and
each Note shall be construed in accordance with and governed by the laws of the
State of New York. The Borrower and the Guarantor hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower and the
Guarantor
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irrevocably waive, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 10.08 COUNTERPARTS; INTEGRATION. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
Section 10.09 SEVERAL OBLIGATIONS. The obligations of the Banks hereunder
are several. Neither the failure of any Bank to carry out its obligations
hereunder nor of this Agreement to be duly authorized, executed and delivered by
any Bank shall relieve any other Bank of its obligations hereunder (or affect
the rights hereunder of such other Bank). No Bank shall be responsible for the
obligations of, or any action taken or omitted by, any other Bank hereunder.
Section 10.10 SHARING OF SET-OFFS. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or other similar right, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes. The Borrower agrees, to
the fullest extent it may effectively do so under Applicable Law, that any
holder of a participation in a Note, whether or not acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
Section 10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
GUARANTOR, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.12 LIMITED RECOURSE. The Banks hereby agree that no member of
the Borrower (other than Hilton Hotels Corporation, solely in its capacity as
Guarantor and not in its capacity as a member of the Borrower) shall be liable
for any of the obligations of the Borrower hereunder by virtue of its status as
a member of the Borrower.
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
HILTON HAWAIIAN VILLAGE LLC
By: HILTON HOTELS CORPORATION
As Manager of the Borrower
By: /s/ Scott A. LaPorta
----------------------------
Name: SCOTT A. LAPORTA
Title: SENIOR VICE PRESIDENT & TREASURER
By: HILTON HOTELS CORPORATION
As Guarantor
By: /s/ Scott A. LaPorta
-----------------------------
Name: SCOTT A. LAPORTA
Title: SENIOR VICE PRESIDENT & TREASURER
<PAGE>
THE BANK OF NEW YORK
as Administrative Agent and as a Bank
By: /s/ Lisa Y. Brown
-----------------------------
Name: LISA Y. BROWN
Title: VICE PRESIDENT
FIRST UNION NATIONAL BANK
as Documentation Agent and as a Bank
By: /s/ John Reid
------------------------------
Name: JOHN REID
Title: VICE PRESIDENT
NATIONSBANK, N.A.,
as Syndication Agent and as a Bank
By: /s/ Michelle L. Hilse
------------------------------
Name: MICHELLE L. HILSE
Title: VICE PRESIDENT
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Scott L. Faber
---------------------------------
Name: SCOTT L. FABER
Title: VICE PRESIDENT
THE BANK OF NOVA SCOTIA
By: /s/ M. Van Otterloo
--------------------------------
Name: M. VAN OTTERLOO
Title: SENIOR RELATIONSHIP MANAGER
BANKERS TRUST COMPANY
By: /s/ Mary Jo Jolly
--------------------------------
Name: MARY JO JOLLY
Title: ASSISTANT VICE PRESIDENT
FLEET BANK N.A.
By: /s/ John F. Cullinan
--------------------------------
Name: JOHN F. CULLINAN
Title: SENIOR VICE PRESIDENT
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Gary W. Wessels
--------------------------------
Name: GARY W. WESSELS
Title: VICE PRESIDENT
<PAGE>
SOCIETE GENERALE
By: /s/ J. Blaine Shaum
--------------------------------
Name: J. BLAINE SHAUM
Title: MANAGING DIRECTOR
WACHOVIA BANK, N.A.
By: /s/ Charles S. Zimmerman
--------------------------------
Name: CHARLES S. ZIMMERMAN
Title: VICE PRESIDENT
THE NORTHERN TRUST COMPANY
By: /s/ John E. Burda
--------------------------------
Name: JOHN E. BURDA
Title: SECOND VICE PRESIDENT
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Stephan A. Wiedemann /s/ Susan L. Pearson
-------------------------------- --------------------------------
Name: STEPHAN A. WIEDEMANN SUSAN L. PEARSON
Title: DIRECTOR DIRECTOR
WELLS FARGO BANK, N.A.
By: /s/ Judy A. Vodhanel /s/ Eugene Fuentes
-------------------------------- --------------------------------
Name: JUDY A. VODHANEL EUGENE FUENTES
Title: VICE PRESIDENT VICE PRESIDENT
<PAGE>
FIRST HAWAIIAN BANK
By: /s/ Travis Ruetenik
--------------------------------
Name: TRAVIS RUETENIK
Title: CORPORATE BANKING OFFICER
UNION BANK OF CALIFORNIA, N.A.
By: /s/ J. Scott Jessup
--------------------------------
Name: J. SCOTT JESSUP
Title: VICE PRESIDENT
BANK OF HAWAII
By: /s/ Robert M. Wheeler III
--------------------------------
Name: ROBERT M. WHEELER III
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 4.11
AMENDMENT NO. 1
dated as of December 10, 1998
to
CREDIT AGREEMENT
dated as of June 1, 1998
HILTON HAWAIIAN VILLAGE LLC, as Borrower, HILTON HOTELS
CORPORATION, as Guarantor, the BANKS party to the Credit Agreement referred to
below, NATIONSBANK, N.A., as Syndication Agent, FIRST UNION NATIONAL BANK, as
Documentation Agent, and THE BANK OF NEW YORK, as Administrative Agent, hereby
agree as follows:
1. CREDIT AGREEMENT. Reference is hereby made to the Credit
Agreement dated as of June 1, 1998 (the "Credit Agreement") among the Borrower,
the Guarantor, the Banks, NationsBank, N.A., as Syndication Agent, First Union
National Bank, as Documentation Agent, and The Bank of New York, as
Administrative Agent. Capitalized terms used and not otherwise defined herein
shall have the meaning ascribed thereto in the Credit Agreement.
2. AMENDMENT. Upon and after the Amendment No. 1 Effective
Date (as defined in Section 5 below) the definition of "Consolidated Debt" in
Section 5.10 of the Credit Agreement shall be amended by inserting the following
at the end thereof:
"; provided, however, that if the definition of "Consolidated
Debt" contained in the Existing Credit Agreement shall at any time be
amended or otherwise modified, the definition of "Consolidated Debt"
hereunder shall be deemed amended or modified in the same manner".
3. AGREEMENT. The parties to this Amendment No. 1 agree that
the Spin-Off does not give rise to a Default pursuant to Section 5.03 or Section
5.08 of the Credit Agreement. For purposes of this Section 3, the following
terms shall have the following meanings:
"Park Place" means Park Place Entertainment Corporation, a
Delaware corporation, and, immediately prior to the Spin-Off, a
Subsidiary holding the assets of the Guarantor's Gaming Segment (as
segment is used in Regulation S-K and Regulation S-X of the Securities
and Exchange Commission).
"Spin-Off" means (A) the transfer to Park Place of all or
substantially all of the assets of the Guarantor and its Subsidiaries
comprising the Guarantor's Gaming Segment and (B)
<PAGE>
the distribution by the Guarantor to its stockholders of all capital
stock of Park Place held by the Guarantor.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Banks to agree to amend the Credit Agreement, the Guarantor and the Borrower, as
applicable, represents and warrants that each of the representations and
warranties set forth in Article 4 of the Credit Agreement is true and correct,
in all material respects, as though such representations and warranties were
made at and as of the Amendment No. 1 Effective Date, except to the extent that
any such representations or warranties are made as of a specified date or with
respect to a specified period of time, in which case such representations and
warranties shall be made as of such specified date or with respect to such
specified period. Each of the representations and warranties made under the
Credit Agreement (including those made herein) shall survive to the extent
provided therein and not be waived by the execution and delivery of this
Amendment.
5. AMENDMENT NO. 1 EFFECTIVE DATE. This Amendment No. 1
shall become effective as of the date first referenced above on the date (the
"Amendment No. 1 Effective Date") on which the Administrative Agent shall have
received this Amendment, executed by the Borrower, the Guarantor, the
Administrative Agent and the Required Banks.
6. GOVERNING LAW. The rights and duties of the parties hereto
under this Amendment No. 1 shall, pursuant to New York General Obligations Law,
Section 5-1401, be governed by the law of the State of New York.
7. RATIFICATION. The Credit Agreement, as amended by
this Amendment No. 1, and the other Loan Documents are and shall continue to be
in full force and effect and are hereby in all respects confirmed, approved and
ratified.
8. COUNTERPARTS. This Amendment No. 1 may be executed
in any number of counterparts, each of which shall be an original and all of
which, when taken together, shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be executed by their duly authorized officers all as of the date hereof.
THE BANK OF NEW YORK
as Administrative Agent and as a Bank
By:_______________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Documentation Agent and as a Bank
By:_______________________________________
Name:
Title:
NATIONSBANK, N.A.,
as Syndication Agent and as a Bank
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.12
AMENDMENT NO. 2 TO CREDIT AGREEMENT
(Hawaiian Village)
AMENDMENT No. 2 dated as of November 30, 1999 to the Credit
Agreement dated as of June 1, 1998 (as heretofore amended, the "CREDIT
AGREEMENT") among HILTON HAWAIIAN VILLAGE, LLC, (the "BORROWER"), HILTON
HOTELS CORPORATION (the "GUARANTOR"), the BANKS party thereto (the "BANKS"),
NATIONSBANK, N.A. (now BANK OF AMERICA, N.A.) as Syndication Agent, FIRST
UNION NATIONAL BANK, as Documentation Agent (the "DOCUMENTATION AGENT") and
THE BANK OF NEW YORK, as Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the Guarantor proposes to enter into a Five Year Credit
Agreement and a Short Term Credit Agreement of even date herewith with two
syndicates of lenders for which Bank of America, N.A. will act as
Administrative Agent providing for an aggregate $1,850,000,000 in new
revolving credit facilities (the "New Senior Credit Facilities"); and
WHEREAS, substantially concurrently herewith, the Guarantor proposes
to consummate an acquisition of Promus Hotels Corporation; and
WHEREAS, in connection with the aforementioned transactions, the
Guarantor shall enter into an amendment to the $1,750,000,000 Credit
Agreement (as amended, the "Existing Credit Agreement") dated as of December
3, 1998 among the Guarantor, the lenders named therein, Morgan Guaranty Trust
Company of New York as Documentation Agent and The Bank of New York, as
Administrative Agent, pursuant to which, INTER ALIA, certain adjustments to
the Leverage Ratio covenant set forth in the Existing Credit Agreement and
the interest rates and fees payable thereunder will be made so as to make
them consistent with the New Senior Credit Facilities; and
WHEREAS, pursuant to Section 5.10 of the Credit Agreement, the
maximum Leverage Ratio permitted under the Credit Agreement may equal that
permitted under the Existing Credit Agreement and amendments to the
definition of "Consolidated EBITDA" are automatically deemed to concurrently
amend the manner in which that term is defined in the Credit Agreement; and
WHEREAS, in connection therewith, the parties hereto desire to make
certain modifications to the Credit Agreement;
NOW, THEREFORE, the Borrower, the Guarantor and Required Banks under
Section 9.04 of the Credit Agreement hereby amend the Credit Agreement as
follows:
-1-
<PAGE>
1. DEFINED TERMS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder," "herein" and "hereby" and
each similar reference and each reference to this "agreement" and each other
similar reference contained in the Credit Agreement shall, after this
Amendment becomes effective, refer to the Credit Agreement as amended hereby.
2. AMENDMENTS TO CERTAIN EXISTING DEFINED TERMS. The
following terms defined in the Credit Agreement are hereby amended to read in
full as follows:
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business and obligations in the
nature of deferred employee compensation to the extent that such
deferred employee compensation obligations do not exceed $150,000,000,
in the aggregate, (iv) all obligations of such Person as lessee under
leases which are capitalized in accordance with generally accepted
accounting principles, (v) all other obligations secured by a Lien on
any asset of such Person, whether or not such obligations are otherwise
an obligation of such Person, in an amount equal to the lesser of the
amount of the obligation so secured or the fair value of the assets
subject to such Lien, and (vi) all obligations of others constituting
"Debt" under the foregoing clauses of this paragraph which are
Guaranteed by such Person; it being understood that "Debt" does not
include contingent obligations of such Person to reimburse any other
Person in respect of surety bonds or letters of credit.
"Investment Grade" means (i) with respect to S&P, a rating of BBB- or
higher and (ii) with respect to Moody's, a rating of Baa3 or higher.
"Promus Acquisition" means the merger of Promus Hotels Corporation with
a Subsidiary of the Guarantor on the effective date hereof, as a result
of which the Guarantor will own, directly or indirectly, of all of the
issued and outstanding capital stock of the corporation surviving such
merger.
"Rating Agencies" means S&P or Moody's.
3. ADDITIONAL DEFINED TERMS. Section 1.01 of the Credit
Agreement is hereby amended to add thereto the following terms:
"New Senior Credit Facilities" means the Five Year Credit Agreement and
the Short Term Credit Agreement, in each case of even date herewith and
among the Guarantor, the Lenders and Syndication Agents named therein,
and Bank of America, N.A., as Administrative Agent, as at any time
amended, replaced, renewed or supplanted.
"Pricing Certificate" means a Pricing Certificate, substantially in the
form of Exhibit B to Amendment No. 2 to this Agreement, properly
completed and signed by an Authorized Officer.
-2-
<PAGE>
4. "STATUS" ELECTION. Section 5.01(e) is hereby amended to
delete clause (iii) thereof, it being understood that the Guarantor shall not
be required to notify the Administrative Agent or the Banks of whether
interest rates and fees shall be determined on the basis of its Ratings or
the Leverage Ratio (with the Borrower to automatically receive the benefits
of the more favorable basis of computation).
5. PRICING CERTIFICATE. Section 5.01 of the Credit
Agreement is further amended to add thereto a new clause (m), to read in full
as follows:
"(m) as soon as available and in any event not later than the
last day of February of each year, a completed Pricing Certificate as
of December 31 of the prior year;"
6. MAXIMUM LEVERAGE RATIO. The first sentence of Section 5.10
of the Credit Agreement is hereby amended to read in full as follows:
"5.10 LEVERAGE RATIO. The Leverage Ratio will at no time exceed the
greater of (a) 4.5:1 or (b) the maximum amount thereof permitted at
such time under any of the Existing Credit Agreement or the New Senior
Credit Facilities."
7. PRICING REVISIONS. The Pricing Schedule attached to the
Credit Agreement is hereby amended and restated in its entirety as set forth on
Exhibit A hereto.
8. REPRESENTATIONS OF THE GUARANTOR AND THE BORROWER. The
Guarantor and, to the extent relating to itself, the Borrower each represents
and warrants that (i) the representations and warranties of the Guarantor and
the Borrower set forth in Article 4 of the Credit Agreement will be true on
and as of the Amendment Effective Date and (ii) no Default will have ocurred
and be continuing on such date.
9. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
10. COUNTERPARTS. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
-3-
<PAGE>
11. EFFECTIVENESS. This Amendment shall become effective as
of the date hereof on the date (the "AMENDMENT EFFECTIVE DATE") when the
Administrative Agent shall have received signatures hereto from the Required
Banks and an executed counterpart hereof signed by the Guarantor and the
Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
HILTON HAWAIIAN VILLAGE LLC
By: Hilton Hotels Corporation, Manager
By:
--------------------------------------
Mariel C. Albrecht,
Vice President and Assistant Treasurer
HILTON HOTELS CORPORATION, as Guarantor
By:
-------------------------------------------
Mariel C. Albrecht, Vice President
and Assistant Treasurer
THE BANK OF NEW YORK, as Administrative Agent and
as a Bank
By:
-------------------------------------------
----------------------------------------------
[Printed or Typed Name and Title]
-4-
<PAGE>
EXHIBIT 4.16
THIRD AMENDMENT TO REIMBURSEMENT AGREEMENT
This THIRD AMENDMENT TO REIMBURSEMENT AGREEMENT (this
"Amendment"), dated as of June 30, 1999, by and among HILTON HOTELS
CORPORATION, a Delaware corporation (the "Company"), DEUTSCHE BANK AG, NEW
YORK BRANCH, as issuer of the Letter of Credit (in such capacity, the
"Issuer"); DEUTSCHE BANK AG, NEW YORK BRANCH AS SUCCESSOR TO DEUTSCHE BANK
AG, LOS ANGELES BRANCH, THE BANK OF NEW YORK, SOCIETE GENERALE, CIBC INC.,
AND BANCA NATIONALE DEL LAVORO (herein collectively, the "Existing Banks" and
individually an "Existing Bank"); and DEUTSCHE BANK AG, NEW YORK BRANCH, as
agent (in such capacity, the "Agent") and each of the Banks listed on
Schedule A hereto (each, a "New Bank" and, collectively, the "New Banks").
Unless otherwise expressly defined herein, any capitalized term used herein
and defined in the Reimbursement Agreement (as defined below) shall have the
meaning assigned to it in the Reimbursement Agreement.
WITNESSETH:
WHEREAS, the Issuer has issued that certain letter of credit
No. 839-53762, dated May 16, 1996 (the "Letter of Credit"), pursuant to that
certain reimbursement agreement, dated as of May 16, 1996, as amended by a
First Amendment to Reimbursement Agreement, dated as of December 17, 1996, as
further amended by a Second Amendment to Reimbursement Agreement, dated as of
May 1, 1998, and as further amended by that certain Letter Agreement, dated
May 10, 1999 (collectively, the "Original Reimbursement Agreement"; as
amended from time to time, including by this Agreement, the "Reimbursement
Agreement"), by and between the Company, the Agent, the Issuer and the Banks;
WHEREAS, the Company, the Issuer, the Agent and the Banks each
desire to amend the Original Reimbursement Agreement in the manner and
pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises made hereunder
by the Company, this Issuer, the Agent and the Banks, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. ASSIGNMENT AND ASSUMPTION.
1.1. ASSIGNMENT AND ASSUMPTION. Each Existing Bank hereby
sells and assigns to each New Bank without recourse and without
representation or warranty (other than as expressly provided herein), and
each New Bank hereby purchases and assumes from each Existing Bank,
<PAGE>
that interest in and to each Existing Bank's rights and obligations in
respect of the Letter of Credit Commitment, the Risk Participation and the
Loans set forth on Schedule A hereto under the Reimbursement Agreement as of
the date hereof which for each such New Bank represents such New Bank's
Letter of Credit Commitment as set forth on such Schedule A (calculated after
giving effect to this Amendment), and represents all of the outstanding
rights and obligations under the Reimbursement Agreement that are being sold
and assigned to each such New Bank pursuant to this Amendment.
1.2. EFFECTIVENESS. In accordance with the requirements of
Section 11.04(c) of the Reimbursement Agreement, on the Third Amendment
Effective Date (as defined below), each New Bank shall be a "Bank" party to
the Reimbursement Agreement and shall have all of the rights and obligations
of a Bank with a Letter of Credit Commitment as set forth in such Schedule A
and each Existing Bank shall be released from its obligations thereunder to a
corresponding extent and no further consent or action by any party shall be
required. The provisions of Section 11.04(d) shall not be applicable to the
New Banks.
1.3. REPRESENTATION AND WARRANTIES. Each Existing Bank (i)
represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Reimbursement Agreement or
the Related Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Reimbursement Agreement or the
Related Documents or any other instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or the
performance or observance by the Company of any of their respective obligations
under the Reimbursement Agreement or the Related Documents to which they are
a party or any other instrument or document furnished pursuant thereto.
1.4. CONFIRMATION. Each New Bank (i) confirms that it has
received a copy of the Reimbursement Agreement, together with such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Amendment; (ii) agrees that it will,
independently and without reliance upon the Agent, or any other New Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under the Reimbursement Agreement; (iii) appoints and authorizes the
Agent and the Collateral Agent to take such action as agent on its behalf and
to exercise such powers under the Reimbursement Agreement and Related
Documents as are delegated to the Agent and the Collateral Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; and
(iv) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Reimbursement Agreement are required to
be performed by it as a Bank.
2. AMENDMENTS TO REIMBURSEMENT AGREEMENT.
-2-
<PAGE>
2.1 CONSENTS. The Company, the Issuer, the Agent and each of
the New Banks executing this Agreement hereby consent to the following
amendments to the Reimbursement Agreement on the terms and subject to the
conditions set forth herein.
2.2 DEFINITIONS.
2.2.1 The following definitions are hereby added to the
Reimbursement Agreement:
"PARK PLACE" means Park Place Entertainment Corporation, a
Delaware corporation, and immediately prior to the Spin-Off, a Subsidiary
holding the assets of the Borrower's Gaming Segment.
"PPE ASSUMED NOTES" means the Borrower's $300,000,000 7.375%
Notes Due 2002 and $325,000,000 7.00% Notes Due 2004.
"SPIN-OFF" means (A) the transfer to Park Place of all or
substantially all of the assets of the Borrower and its Subsidiaries
comprising the Borrower's Gaming Segment and (B) the distribution by
the Borrower to its stockholders of all capital stock of Park Place held
by the Borrower.
"YEAR 2000 ISSUE" means failure of computer software, hardware and
firmware systems, and equipment containing embedded computer chips, to
properly receive, transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilize data and information due to the
occurrence of the year 2000 or the inclusion of dates on or after
January 1, 2000.
2.2.2 The definition of Consolidated Debt is amended by the
addition of the following proviso:
;PROVIDED that Consolidated Debt shall exclude: (A) the PPE
Assumed Notes on the conditions that (i) such Debt shall have been
assumed by Park Place on terms such that as between the Borrower and
Park Place, Park Place is obligated to make payments of principal and
interest on such Debt, and to reimburse the Borrower for any such
payment made by the Borrower and (ii) the Spin-Off shall have occurred,
and (B) Debt of the Borrower or a Subsidiary as to which a sum of cash
and cash equivalents sufficient to provide for payment in full of such
Debt at its scheduled maturity or at an earlier date at which it shall
have been called for redemption shall have been irrevocably deposited in
trust for the benefit of the holders of such Debt or a representative of
such holders so as to result in legal or in-substance defeasance
thereof; PROVIDED, FURTHER, that, notwithstanding clause (A) in the
foregoing proviso, if Park Place fails to pay when due any principal of
or interest on or any other amount with respect to the PPE Assumed Notes
or reimburse the Borrower for payment thereof, and such failure is
continuing, on and after the 90th day after such payment default first
occurs any of the PPE Assumed Notes then outstanding shall be included in
Consolidated Debt, unless such Debt then would be excluded therefrom
pursuant to clause (B) in the foregoing proviso.
-3-
<PAGE>
2.2.3 The definition of Consolidated EBITDA is amended by the
addition of the following proviso:
;PROVIDED that Consolidated EBITDA for any period shall be
adjusted on a pro forma bases (i) to include (or exclude) amounts
attributable to hotel operations acquired (or sold or otherwise
discontinued) during such period as if such acquisition (or
disposition) had occurred on the first day of such period and (ii) to
include amounts (annualized on a simply arithmetic basis) attributable
to hotel projects which commenced operations during such period and were
in operation for at least one full fiscal quarter during such period;
PROVIDED, FURTHER, that for purposes of determining Consolidated EBITDA
for any period, Consolidated Net Income shall exclude any interest
income attributable to the assumption or payment by Park Place of the PPE
Assumed Notes.
2.3 OTHER AMENDMENTS.
2.3.1 SECTION 7.10. Section 7.10 is hereby deleted in its
entirety and amended in full to read as follows:
"Section 7.10. LEVERAGE RATIO. The Leverage Ratio will at no
time exceed 4.5:1."
2.3.2 SECTION 7.14. The following section is hereby added to the
Reimbursement Agreement:
Section 7.14. YEAR 2000. The Company shall make, and shall cause
each of its Subsidiaries to make, all required systems changes by
December 31, 1999, in computer software, hardware and firmware systems
and equipment containing embedded microchips owned or operated by or
for the Company and its Subsidiaries required as a result of the Year
2000 Issue to permit the proper functioning of such computer systems
and other equipment, except to the extent that the failure to take any
such action could not reasonably be expected to result in a Default or
to have a material adverse effect on the business, financial position,
results of operations or prospects of the Company and its Consolidated
Subsidiaries, considered as a whole. At the request of any Bank, the
Company shall provide, and shall cause each of its Subsidiaries to
provide, to such Bank reasonable assurance of its compliance with the
preceding sentence.
2.3.3 PRICING SCHEDULE. The Pricing Schedule attached as
Exhibit A to the first Amendment to Reimbursement Agreement, dated as of
December 17, 1996 is hereby deleted in its entirety and the Pricing Schedule
attached to the Agreement as Exhibit A is hereby incorporated into the
Reimbursement Agreement by this reference as if originally set forth in full
therein.
3. EXTENSION OF SCHEDULED EXPIRATION DATE.
3.1 EXTENSION. In accordance with Section 2.01 of the
Reimbursement Agreement, on and as of the Third Amendment Effective Date the
Scheduled Expiration Date, which was extended to July 15, 1999 by that certain
letter agreement dated May 10, 1999, shall be further extended to October 18,
2001. The notice requirement of Section 2.01 is hereby waived in respect of
this extension.
-4-
<PAGE>
3.2. NOTIFICATION. The second sentence of Section 2.01 is
hereby deleted in its entirety and amended in full to read as follows:
Upon the receipt of a written request of the Company given
to the Agent not more than sixty (60) days nor less than
forty-five (45) days prior to any Scheduled Expiration Date
and upon the receipt of the written approval of all of the
Banks, the Issuer may elect, at its sole option, to extend the
Scheduled Expiration Date for one additional year or for such
longer or shorter period as all the Banks may agree.
4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Issuer, the Agent and the Banks as follows:
4.1 AUTHORITY. The Company has all necessary power and has
taken all corporate action necessary to make this Agreement and all other
agreements and instruments executed in connection herewith the legal, valid
and binding obligations they purport to be.
4.2 NO LEGAL OBSTACLE TO AGREEMENT. The execution of this
Agreement has not constituted or resulted in and will not constitute or
result in a breach of any provision of any contract to which the Company is
a party, or the violation of any law, judgment, decree or governmental order,
rule or regulation applicable to, or result in the creation under any
agreement or instrument of any security interest, lien, charge or
encumbrance upon any of the assets of, the Company, except in favor of the
Agent and the Banks or as permitted by the Reimbursement Agreement. No
approval or authorization of any governmental authority is required to permit
the execution, delivery or performance of this Agreement, or the transactions
contemplated hereby or thereby.
4.3 INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES.
The representations and warranties set forth in Article VI of the
Reimbursement Agreement are true and correct in all respects on and as of the
date hereof, as through made on and as of the date hereof, except to the extent
that such representations and warranties expressly relate to an earlier
date.
4.4 DEFAULT. Upon this Agreement becoming effective pursuant
to Section 5.1 hereof, no Default or Event of Default has occurred and is
continuing. The parties agree that the Spin-Off does not give rise to a
Default under Section 7.04 or Section 7.08.
4.5 LOANS. Upon this Agreement becoming effective pursuant
to Section 5.1 hereof there are no Loans outstanding under the Reimbursement
Agreement.
4.6 FINANCIAL INFORMATION. (a) The consolidated balance
sheet of the Company and its Consolidated Subsidiaries as of December 31,
1998 and the related consolidated statements of income and cash flows for the
fiscal year then ended, reported on by __________________ and set forth in
the Company's 1998 Form 10-K, a copy of which has been delivered to the Agent,
the Issuer and each of the Banks, fairly present in all material respects, in
-5-
<PAGE>
conformity with GAAP, the consolidated financial position of the Company and
is Consolidated Subsidiaries as of such date and their consolidated results
of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of March 31, 1999 and the related
unaudited consolidated statements of income and cash flows for the three
months then ended, set forth in the Company's quarterly report for the fiscal
quarter ended March 31, 1999 as filed with the Securities and Exchange
Commission on Form 10-Q, a copy of which has been delivered to the Agent, the
Issuer and each of the Banks, fairly present, in conformity with GAAP applied
on a basis consistent with the Company's quarterly report for the fiscal
quarter ended March 31, 1999, the consolidated financial position of the
Company and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such three-month period
(subject to normal year-end adjustments).
4.7 YEAR 2000. The Company and its Subsidiaries have
reviewed the effect of the Year 2000 issue on the computer software, hardware
and firmware systems and equipment contained embedded microchips owned or
operated by or for the Company and its Subsidiaries. The costs to the Company
and its Subsidiaries of any reprogramming required as a result of the Year 2000
Issue to permit the proper functioning of such systems and equipment and the
proper processing of data, and the testing of such reprogramming, and of
required systems changes are not reasonably expected to result in a Default
or to have a material adverse effect on the business, financial position,
results of operations or prospects of the Company and its Consolidated
Subsidiaries, considered as a whole.
5. MISCELLANEOUS.
5.1 EFFECTIVE DATE. This Amendment shall become effective
on the date (the "Third Amendment Effective Date") when the Company, the
Agent, the Issuer, each Existing Bank and each New Bank shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the Agent.
5.2 EFFECT OF AGREEMENT ON REIMBURSEMENT. Except as affected
hereby, the Reimbursement Agreement, the other Related Documents and any and
all other agreements, documents, certificates and other instruments executed
in connection therewith, shall remain in full force and effect in accordance
with their respective terms. Except as otherwise provided herein, the
Reimbursement Agreement, the other Related Documents and any and all other
agreements, documents, certificates and other instruments executed in
connection therewith, are in all respects ratified and confirmed, and nothing
contained in this Agreement shall, or shall be construed to, modify,
invalidate or otherwise affect any provision of such agreements, documents,
certificates and instruments or any right of the parties thereto.
5.3 COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered shall be
an original, but all of which shall together
-6-
<PAGE>
constitute one and they same instrument. A complete set of counterparts shall be
lodged with the Company and the Agent.
5.4 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
5.5 REFERENCE. From and after the Second Amendment Effective
Date, all references in the Reimbursement Agreement and each of the Related
Documents to the Reimbursement Agreement shall be deemed to be references to
the Reimbursement Agreement as amended hereby.
* * *
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
THE COMPANY
HILTON HOTELS CORPORATION
By /s/ Mariel Albrecht
------------------------------------------------
Title:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Mariel Albrecht
Vice President and Assistant Treasurer
Tel: (310) 205-4331
Fax: (310) 205-7849
THE AGENT
DEUTSCHE BANK AG, NEW YORK BRANCH, as
Agent
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attention: Inken Finnamore
Tel: (212) 469-8348
Fax: (212) 469-8501
-8-
<PAGE>
THE ISSUER
DEUTSCHE BANK AG, NEW YORK BRANCH, as
Issuer of the Letter of Credit
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attention: Volker Fischer
Trade Finance
Tel: (212) 469-8636
Fax: (212) 469-7880
-9-
<PAGE>
THE EXISTING BANKS
DEUTSCHE BANK AG, NEW YORK BRANCH, AS
SUCCESSOR TO DEUTSCHE BANK AG, LOS
ANGELES BRANCH
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch, as Successor to
Deutsche Bank AG, Los Angeles Branch
31 West 52nd Street
New York, New York 10019
Attention: Thomas Foley
Vice President
Tel: (212) 469-8636
Fax: (212) 469-7880
THE BANK OF NEW YORK
By
----------------------------------------------
Title:
The Bank of New York
10990 Wilshire Boulevard
Suite 1125
Los Angeles, California 90024
Attention: Lisa Brown
Tel: (310) 996-8656
Fax: (310) 996-8667
-10-
<PAGE>
SOCIETE GENERALE
By
----------------------------------------------
Title:
Societe Generale
2029 Century Park East
Suite 2900
Los Angeles, California 90067
Attention: Alex Kim
Tel: (310) 788-7104
Fax: (310) 551-1537
CIBC, INC.
By
----------------------------------------------
Title:
CIBC Inc.
350 South Grand Avenue
Suite 2600
Los Angeles, California 90071
Attention: Dean Decker
Tel: (213) 617-6245
Fax: (213) 346-0157
BANCA NAZIONALE DEL LAVORO
By
----------------------------------------------
Title:
BANCA NAZIONALE DEL LAVORO
25 West 51st Street
New York, NY 10019
Attention: Adolph Mascari
Tel: (212) 314-0207
Fax: (212) 765-2978
-11-
<PAGE>
THE NEW BANKS
DEUTSCHE BANK AG, NEW YORK BRANCH, AS
SUCCESSOR TO DEUTSCHE BANK AG, LOS
ANGELES BRANCH
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch, as Successor to
Deutsche Bank AG, Los Angeles Branch
31 West 52nd Street
New York, New York 10019
Attention: Thomas Foley
Vice President
Tel: (212) 469-8636
Fax: (212) 469-7880
CITICORP USA, INC.
By
----------------------------------------------
Title:
Citicorp USA, Inc.
787 West 5th Street
29th Floor
Los Angeles, California 90071
Attention: Walter L. Larsen
Managing Director
Tel: (213) 239-1501
Fax: (213) 624-9765
-12-
<PAGE>
THE BANK OF NEW YORK
By
----------------------------------------------
Title:
The Bank of New York
10990 Wilshire Boulevard
Suite 1125
Los Angeles, California 90024
Attention: Lisa Brown
Tel: (310) 996-8656
Fax: (310) 996-8667
SOCIETE GENERALE
By
----------------------------------------------
Title:
Societe Generale
2029 Century Park East
Suite 2900
Los Angeles, California 90067
Attention: Alex Kim
Tel: (310) 788-7104
Fax: (310) 551-1537
-13-
<PAGE>
EXHIBIT 4.17
FOURTH AMENDMENT TO REIMBURSEMENT AGREEMENT
This FOURTH AMENDMENT TO REIMBURSEMENT AGREEMENT (this
"Amendment"), dated as of November 30, 1999, by and among HILTON HOTELS
CORPORATION, a Delaware corporation (the "Company"), DEUTSCHE BANK AG, NEW
YORK BRANCH, as issuer of the Letter of Credit (in such capacity, the
"Issuer"); DEUTSCHE BANK AG, NEW YORK BRANCH AS SUCCESSOR TO DEUTSCHE BANK AG,
LOS ANGELES BRANCH, THE BANK OF NEW YORK, SOCIETE GENERALE, CITICORP USA,
INC. (herein collectively, the "Banks" and individually a "Bank"); and
DEUTSCHE BANK AG, NEW YORK BRANCH, as agent (in such capacity, the "Agent").
Unless otherwise expressly defined herein, any capitalized term used herein
and defined in the Reimbursement Agreement (as defined below) shall have the
meaning assigned to it in the Reimbursement Agreement.
WITNESSETH:
WHEREAS, the Issuer has issued that certain letter of credit
No. 839-53762, dated May 16, 1996 (the "Letter of Credit"), pursuant to that
certain reimbursement agreement, dated as of May 16, 1996, as amended by a
First Amendment to Reimbursement Agreement, dated as of December 17, 1996, as
further amended by a Second Amendment to Reimbursement Agreement, dated as of
May 1, 1998, as further amended by that certain Letter Agreement, dated May
10, 1999, and as further amended by a Third Amendment to Reimbursement
Agreement, dated as of June 30, 1999 (collectively, the "Original
Reimbursement Agreement"; as amended from time to time, including by this
Agreement, the "Reimbursement Agreement"), by and between the Company, the
Agent, the Issuer and the Banks;
WHEREAS, the Company, the Issuer, the Agent and the Banks each
desire to amend the Original Reimbursement Agreement in the manner and
pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises made
hereunder by the Company, the Issuer, the Agent and the Banks, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. AMENDMENTS TO REIMBURSEMENT AGREEMENT.
1.1. CONSENTS. The Company, the Issuer, the Agent and each
of the Banks executing this Agreement hereby consent to the following
amendments to the Reimbursement Agreement on the terms and subject to the
conditions set forth herein.
<PAGE>
1.2 DEFINITIONS.
1.2.1 AMENDMENT TO CERTAIN EXISTING DEFINED TERMS. The
following terms defined in the Reimbursement Agreement are hereby amended in
full to read as follows:
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period before (i) income taxes, (ii) interest expense, (iii)
depreciation and amortization, (iv) minority interest, (v) extraordinary
loses or gains, (vi) Pre-Opening Expenses, (vii) transactional expenses
associated with the Spin-Off and the Promus Acquisition, (viii) discontinued
operations and (ix) nonrecurring non-cash charges; PROVIDED that:
(a) Consolidated EBITDA for my period shall be adjusted
on a pro forma basis (i) to include (or exclude) amounts
attributable to hotel operations acquired (or sold or otherwise
discontinued) during such period as if such acquisition (or
disposition) had occurred on the first day of such period and (ii)
to include amounts (annualized on a simple arithmetic basis)
attributable to hotel projects which commenced operations during
such period and were in operation for at least one full fiscal
quarter during such period;
(b) for purposes of determining Consolidated EBITDA for
any period, Consolidated Net Income shall exclude any interest
income attributable to the assumption or payment by Park Place
of the PPE Assumed Notes;
(c) in calculating "Consolidated EBITDA" for that portion
of any period occurring prior to the Fourth Amendment Effective
Date, "Consolidated EBITDA" shall be computed on the basis of the
combined operating results of the Company, Promus and their
respective Consolidated Subsidiaries for such periods reflected
in the Pro Forma Combined Financial Statements; and
(d) the operating results of each New Project which
commences operations and records not less than one full fiscal
quarter's operations during the relevant period shall be
annualized on a simple arithmetic basis.
"Consolidated Net Income" means, for any period, the
consolidated net income of the Company and its Consolidated Subsidiaries for
such period, PROVIDED that for that portion of any period occurring prior to
the Fourth Amendment Effective Date, such consolidated net income shall be
the pro forma combined net income of the Company, Promus and their respective
Consolidated Subsidiaries for such periods reflected in the Pro Forma
Combined Financial Statements PLUS the Pro Forma Adjustments applicable to
that portion of such period.
1.2.2 ADDITIONAL DEFINED TERMS. The following definitions
are hereby added to the Reimbursement Agreement:
"Consolidated Interest Expense" means, for any period net
interest expense of the Company and its Consolidated Subsidiaries for such
period, determined in accordance with generally accepted accounting
principles, PROVIDED that for that portion of any period occurring prior to
the Fourth Amendment Effective Date, "Consolidated Interest Expense" shall be
-2-
<PAGE>
computed on the basis of the net interest expense allocated to the Company
and its Consolidated Subsidiaries and shown on the Pro Forma Combined
Financial Statements.
"Gaming Segment" means the former gaming segment (as "segment"
is used in Regulation S-K and Regulation S-X of the Securities and Exchange
Commission) of the Company which, prior to December 31, 1998, was comprised
of assets and operations now principally owned and conducted by Park Place.
"Investment Grade" means (i) with respect to S&P, a rating of
BBB- or higher and (ii) with respect to Moody's, a rating of Baa3 or higher.
"New Project" means each now hotel or resort project (as
opposed to any project which consists of an extension or redevelopment of an
operating hotel or resort) having a development and construction budget in
excess of $50,000,000 which receives a certificate of completion or
occupancy and all relevant operational licenses, and in fact commences
operations after November 30, 1999.
"Pre-Opening Expenses" means, with respect to any fiscal
period, the amount of expenses (other than Consolidated Interest Expense)
incurred with respect to capital projects which are classified as
"pre-opening expenses" on the applicable financial statements of the Company
and its Consolidated Subsidiaries for such period (or, with respect to that
portion of any period occurring prior to September 30, 1999, the Pro Forma
Combined Financial Statements), prepared in accordance with generally
accepted accounting principles.
"Pricing Certificate" means a Pricing Certificate,
substantially in the form of Exhibit B hereto, properly completed and signed
by an Authorized Officer.
"Pro Forma Adjustment" means an adjustment to the amount of
Consolidated Net Income set forth in the Pro Forma Combined Financial
Statements for the period prior to the Fourth Amendment Effective Date
reflecting anticipated synergies from the Promus Acquisition (on a pro forma
combined basis) equal in each fiscal period set forth below to the amount set
forth opposite that fiscal period:
<TABLE>
<CAPTION>
Fiscal Period Pro Forma Adjustment
------------- --------------------
<S> <C>
January 1 through March 31, 1999 $10,000,000
April 1 through June 30, 1999 $10,000,000
July 1 through September 30, 1999 $10,000,000
October 1 through December 31, 1999 $ 9,500,000
</TABLE>
"Pro Forma Combined Financial Statements" means (a) from
November 30, 1999 until the Company delivers the pro forma combined financial
statements described in Section 7.02(j), the pro forma combined financial
statements of the Company and its Consolidated Subsidiaries (exclusive of its
former Gaming Segment) and Promus and its Consolidated Subsidiaries for the
twelve month period ended September 30, 1999 heretofore delivered by the
Company to the Agent and each Bank, and (b) thereafter, the pro forma
combined financial statements for the twelve month period ended December 31,
1999, so delivered.
-3-
<PAGE>
"Promus" means Promus Hotel Corporation, Inc., a Delaware
corporation.
"Promus Acquisition" means the merger of Promus Hotels
Corporation with a Subsidiary of the Company on the effective date hereof, as
a result of which the Company will own, directly or indirectly, all of the
issued and outstanding capital stock of the corporation surviving such merger.
"Rating Agencies" means S&P or Moody's.
1.3 OTHER AMENDMENTS
1.3.1 INFORMATION. Section 7.02 of the Reimbursement Agreement
is amended to add thereto new clause (j), to read in full as follows:
"(j) as soon as available and in any event no later than
March 31, 2000, a pro forma combined statement of income of the Company,
Promus and their respective Consolidated Subsidiaries for the period
commencing January 1, 1999 and ending on December 31, 1999, and a pro
forma combined balance sheet of the Company, Promus and their respective
Consolidated Subsidiaries as at December 31, 1999, in each case prepared
in a manner consistent with the Pro Forma Combined Financial Statements
delivered to the Agent and the Banks prior to the date hereof."
1.3.2 STATUS ELECTION. Section 7.02(c) of the Reimbursement
Agreement is hereby amended to delete clause (iii) thereof, it being
understood that the Company shall not be required to notify the Agent or the
Banks of whether interest rates and fees shall be determined on the basis of
its Ratings or the Leverage Ratio (with the Company to automatically receive
the benefits of the more favorable basis of computation).
1.3.3 PRICING CERTIFICATE AND COMBINED PRO FORMAS. Section
7.02 of the Reimbursement Agreement is further amended to add thereto new
clause (k), to read in full as follows:
"(k) as soon as available and in any event not later than the
last day of February of each year, a completed Pricing Certificate as of
December 31 of the prior year."
1.3.4 SECTION 7.10. Section 7.10 is hereby deleted in its
entirety and amended in full to read as follows:
"Section 7.10. LEVERAGE RATIO. The Leverage Ratio will not, as
of the last day of any fiscal quarter of the Company described
in the matrix below, exceed the ratio set forth opposite that
fiscal quarter:
Fiscal Quarters Ending Maximum Ratio
---------------------- -------------
September 30, 1999 through and 5.00:1.00
including December 31, 2000
-4-
<PAGE>
March 31, 2001 through and including
March 31, 2002 4.75:1.00
Thereafter 4.50:100."
1.3.5 PRICING SCHEDULE. The Pricing Schedule attached as
Exhibit A to the Third Amendment to Reimbursement Agreement, dated as of
June 30, 1996 is hereby deleted in its entirety and the Pricing Schedule
attached to this Agreement as Exhibit A is hereby incorporated into the
Reimbursement Agreement by this reference as if originally set forth in full
therein.
2. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Issuer, the Agent and the Banks as follows:
2.1 AUTHORITY. The Company has all necessary power and has
taken all corporate action necessary to make this Agreement and all other
agreements and instruments executed in connection herewith the legal, valid
and binding obligations they purport to be.
2.2 NO LEGAL OBSTACLE TO AGREEMENT. The execution of this
Agreement has not constituted or resulted in and will not constitute or
result in a breach of any provision of any contract to which the Company is a
party, or the violation of any law, judgment, decree or governmental order,
rule or regulation applicable to, or result in the creation under any
agreement or instrument of any security interest, lien, charge or encumbrance
upon any of the assets of, the Company, except in favor of the Agent and the
Banks or as permitted by the Reimbursement Agreement. No approval or
authorization of any governmental authority is required to permit the
execution, delivery or performance of this Agreement, or the transactions
contemplated hereby or thereby.
2.3 INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES.
The representations and warranties set forth in Article VI of the
Reimbursement Agreement are true and correct in all respects on and as of the
date hereof, as through made on and as of the date hereof, except to the
extent that such representations and warranties expressly relate to an
earlier date.
2.4 DEFAULT. Upon this Agreement becoming effective pursuant
to Section 3.1 hereof, no Default or Event of Default has occurred and is
continuing.
3. MISCELLANEOUS.
3.1 EFFECTIVE DATE. This Amendment shall become effective on
the date (the "Fourth Amendment Effective Date") when the Company, the Agent,
the Issuer, each Existing Bank and each New Bank shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the Agent.
3.2 EFFECT OF AGREEMENT ON REIMBURSEMENT. Except as affected
hereby, the Reimbursement Agreement, the other Related Documents and any and
all other agreements, documents, certificates and other instruments executed
in connection therewith, shall remain in
-5-
<PAGE>
full force and effect in accordance with their respective terms. Except as
otherwise provided herein, the Reimbursement Agreement, the other Related
Documents and any and all other agreements, documents, certificates and other
instruments executed in connection therewith, are in all respects ratified
and confirmed, and nothing contained in this Agreement shall, or shall be
construed to, modify, invalidate or otherwise affect any provision of such
agreements, documents, certificates and instruments or any right of the
parties thereto.
3.3 EFFECT OF BREACH OF AGREEMENT. The Company hereby
acknowledges and agrees that a breach of or noncompliance with any of the
representations, warranties, covenants or terms contained herein shall
constitute an Event of Default.
3.4 NO WAIVER OF EVENT OF DEFAULT. The execution of this
Agreement by the Issuer, the Agent and the Banks does not constitute a waiver
of any Event of Default which not exists or which may occur hereafter.
3.5 COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Company
and the Agent.
3.6 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
3.7 REFERENCE. From and after the Fourth Amendment Effective
Date, all references in the Reimbursement Agreement and each of the Related
Documents to the Reimbursement Agreement shall be deemed to be references to
the Reimbursement Agreement as amended hereby.
* * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly
authorized officers as of the date first above written.
THE COMPANY
HILTON HOTELS CORPORATION
By /s/ Mariel Albrecht
------------------------------------------------
Title:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Mariel Albrecht
Vice President and Assistant Treasurer
Tel: (310) 205-4331
Fax: (310) 205-7849
THE AGENT
DEUTSCHE BANK AG, NEW YORK BRANCH, as
Agent
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attention: Inken Finnamore
Tel: (212) 469-8348
Fax: (212) 469-8501
-7-
<PAGE>
THE ISSUER
DEUTSCHE BANK AG, NEW YORK BRANCH, as
Issuer of the Letter of Credit
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attention: Volker Fischer
Trade Finance
Tel: (212) 469-8636
Fax: (212) 469-7880
-8-
<PAGE>
THE BANKS
DEUTSCHE BANK AG, NEW YORK BRANCH, AS
SUCCESSOR TO DEUTSCHE BANK AG, LOS
ANGELES BRANCH
By
----------------------------------------------
Title:
By
----------------------------------------------
Title:
Deutsche Bank AG, New York Branch, as Successor to
Deutsche Bank AG, Los Angeles Branch
31 West 52nd Street
New York, New York 10019
Attention: Thomas Foley
Vice President
Tel: (212) 469-8636
Fax: (212) 469-7880
CITICORP USA, INC.
By
----------------------------------------------
Title:
Citicorp USA, Inc.
787 West 5th Street
29th Floor
Los Angeles, California 90071
Attention: Walter L. Larsen
Managing Director
Tel: (213) 239-1501
Fax: (213) 624-9765
-9-
<PAGE>
THE BANK OF NEW YORK
By
----------------------------------------------
Title:
The Bank of New York
10990 Wilshire Boulevard
Suite 1125
Los Angeles, California 90024
Attention: Lisa Brown
Tel: (310) 996-8656
Fax: (310) 996-8667
SOCIETE GENERALE
By
----------------------------------------------
Title:
Societe Generale
2029 Century Park East
Suite 2900
Los Angeles, California 90067
Attention: Alex Kim
Tel: (310) 788-7104
Fax: (310) 551-1537
-10-
<PAGE>
EXHIBIT 10.15
SECOND AMENDMENT TO
HILTON HOTELS CORPORATION
1997 INDEPENDENT DIRECTOR STOCK OPTION PLAN
This Second Amendment to the Hilton Hotels Corporation 1997 Independent
Director Stock Option Plan, dated as of November 11, 1999, 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, which was
approved by the stockholders of the Corporation on May 7, 1998 and amended by
the First Amendment thereto dated as of December 31, 1998 (as amended, the
"Plan"), for the benefit of its non-employee directors;
WHEREAS, effective December 31, 1998, the Corporation spun-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
Corporation's common stock (the "Distribution");
WHEREAS, the Plan provides that the Board of Directors is authorized, in
its sole discretion, to make equitable adjustments to the Plan in the event of a
corporate transaction, including a spin-off;
WHEREAS, the Corporation desires to amend the Plan to increase the number
of stock options granted under the Plan so as to reflect the Distribution; and
WHEREAS, this Second Amendment was duly adopted by resolution of the Board
of Directors of the Corporation dated as of November 11, 1999.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. The Plan is hereby amended by deleting the second paragraph of Section 5 of
the Plan and adding the following in substitution thereof:
"During the term of the Plan, each person who is an Independent
Director automatically shall be granted a Stock Option to
purchase four thousand (4,000) shares of Common Stock (subject to
adjustment as provided herein) on the date of each annual meeting
of stockholders beginning in 2000, for so long as such person
remains an Independent Director. During the term of the Plan,
each person who is initially elected to the Board after the
adoption of the Second Amendment to the Plan by the Board on
November 11, 1999, and who
1
<PAGE>
is an Independent Director at the time of such initial election,
automatically shall be granted: (i) a Stock Option to purchase
four thousand (4,000) shares of Common Stock (subject to adjustment
as provided herein) on the date of such initial election, and
(ii) a Stock Option to purchase four thousand (4,000) shares of
Common Stock (subject to adjustment as provided herein) on the date
of each annual meeting of stockholders after such initial election
for so long as such person remains an Independent Director."
2. This Second Amendment is hereby incorporated in and forms part of the Plan.
3. This Second Amendment shall be effective as of November 11, 1999.
4. Except as set forth herein, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has caused this amendment to the Plan
to be executed by its duly authorized officer as of November 11, 1999.
HILTON HOTELS CORPORATION
BY: /s/ Molly McKenzie-Swarts
-------------------------------------
Name: Molly McKenzie-Swarts
Title: Senior Vice President --
Human Resources
2
<PAGE>
EXHIBIT 10.39
HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE AS OF JANUARY 1, 1997
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
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HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
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ARTICLE I
TITLE AND DEFINITIONS
1.1 - Title....................................................................1
1.2 - Definitions..............................................................1
ARTICLE II
PARTICIPATION
2.1 - Participation............................................................8
ARTICLE III
DEFERRAL ELECTIONS
3.1 - Elections to Defer Compensation..........................................8
3.2 - Investment Elections.....................................................9
ARTICLE IV
DISTRIBUTION OPTION ACCOUNTS
4.1 - Compensation Deferrals..................................................10
4.2 - Company Contribution....................................................11
4.3 - Investment Return.......................................................12
ARTICLE V
VESTING
5.1 - Compensation Deferrals..................................................12
5.2 - Company Contributions...................................................12
ARTICLE VI
DISTRIBUTIONS
6.1 - Distribution Option Accounts............................................13
6.2 - Election of Distribution Option.........................................13
6.3 - Retirement Distribution Option..........................................14
6.4 - In-Service Distribution Option..........................................14
6.5 - Benefits Under the Retirement Distribution Option.......................14
6.6 - Benefits under the In-Service Distribution Option.......................16
6.7- Inability to Locate Participant.........................................17
6.8 - Payment by Trust........................................................18
6.9 - Withdrawals; Change in Control..........................................18
6.10- Distributions on Disability.............................................19
ARTICLE VII
DEATH BENEFITS
7.1 - In General..............................................................19
7.2 - Payment of Death Benefits...............................................19
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ARTICLE VIII
ARBITRATION
8.1 - Arbitration.............................................................19
ARTICLE IX
ADMINISTRATION
9.1 - Committee...............................................................22
9.2 - Committee Action........................................................22
9.3 - Powers and Duties of the Committee......................................22
9.4 - Construction and Interpretation.........................................24
9.5 - Information.............................................................24
9.6 - Compensation, Expenses and Indemnity....................................24
9.7 - Quarterly Statements....................................................25
ARTICLE X
MISCELLANEOUS
10.1 - Unsecured General Creditor.............................................25
10.2 - Restriction Against Assignment.........................................26
10.3 - Withholding............................................................26
10.4 - Amendment, Modification, Suspension or Termination.....................26
10.5 - Governing Law..........................................................27
10.6 - Receipt or Release.....................................................27
10.7 - Payments on Behalf of Persons Under Incapacity.........................27
10.8 - Headings, etc. Not Part of Agreement...................................27
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HILTON HOTELS
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") established a deferred
compensation plan, effective as of January 1, 1997, (the "Plan") to provide
supplemental retirement income benefits for a select group of management and
highly compensated employees through deferrals of salary and through the
Company's contributions; and
WHEREAS, the Company amended and restated the Plan, effective as of January
1, 2000, and now wishes to amend and restate the Plan further in order to
provide more attractive and flexible features for the participants and it
believes that the adoption of this amended and restated plan will be in the best
interests of the Company;
NOW, THEREFORE, the Plan is hereby amended and restated, effective January
1, 2000, to read as follows:
ARTICLE I
TITLE AND DEFINITIONS
1.1 - TITLE.
This Plan shall be known as the Hilton Hotels Executive Deferred
Compensation Plan.
1.2 - DEFINITIONS.
Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.
"Base Salary Deferral" shall mean that portion of Base Salary as to which
an Eligible Employee has made an annual irrevocable election to defer receipt of
until the date specified under the In-Service Distribution Option and/or the
Retirement Distribution Option.
"Beneficiary" or "Beneficiaries" shall mean the person or persons,
including a trustee, personal representative or other fiduciary, last designated
in writing by a Participant in
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accordance with procedures established by the Committee to receive all of the
benefits specified hereunder in the event of the Participant's death. No
Beneficiary designation shall become effective until it is filed with the
Committee. If there is no Beneficiary designation in effect, or if there is no
surviving designated Beneficiary, then the Participant's surviving spouse shall
be the Beneficiary. If there is no surviving spouse to receive any benefits
payable in accordance with the preceding sentence, the duly appointed and
currently acting personal representative of the Participant's estate (which
shall include either the Participant's probate estate or living trust) shall be
the Beneficiary. In any case where there is no such personal representative of
the Participant's estate duly appointed and acting in that capacity within 90
days after the Participant's death (or such extended period as the Committee
determines is reasonably necessary to allow such personal representative to be
appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary shall mean the person or persons who can verify by affidavit or
court order to the satisfaction of the Committee that they are legally entitled
to receive the benefits specified hereunder. In the event any amount is payable
under the Plan to a minor, payment shall not be made to the minor, but instead
be paid (1) to that person's living parent(s) to act as custodian, (2) if that
person's parents are then divorced, and one parent is the sole custodial parent,
to such custodial parent, or (3) if no parent of that person is then living, to
a custodian selected by the Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which
the minor resides. If no parent is living and the Committee decides not to
select another custodian to hold the funds for the minor, then payment shall be
made to the duly appointed and currently acting guardian of the estate for the
minor or, if no guardian of the estate for the minor is duly appointed and
currently acting within 60 days after the date the amount becomes payable,
payment shall be deposited with the court having jurisdiction over the estate of
the minor.
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"Board of Directors" or "Board" shall mean the Board of Directors of Hilton
Hotels Corporation.
"Bonus Compensation Deferral" shall mean that portion of Bonus Compensation
as to which an Eligible Employee has made an annual irrevocable election to
defer receipt of until the date specified under the In-Service Distribution
Option and/or the Retirement Distribution Option.
"Change in Control" shall mean the first to occur of any of the following
events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company, or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c); or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though
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such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 70% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
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execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee appointed by the Board to administer
the Plan in accordance with Article IX, or its delegate.
"Company" shall mean Hilton Hotels Corporation, any successor corporation
and each corporation which is a member of a controlled group of corporations
(within the meaning of Section 414(b) of the Code) of which Hilton Hotels
Corporation is a component member.
"Company Contribution" shall equal the amount described in Section 4.2.
"Compensation" shall mean the total salary paid to the Eligible Employee,
including bonuses, in a Plan Year. An Eligible Employee's "Compensation" shall
consist of the Eligible Employee's "Base Salary" as in effect from time to time
during a Plan Year and the Eligible Employee's "Bonus Compensation" which shall
equal the amount of the incentive to be paid to an Eligible Employee under any
incentive plan of the Company.
"Compensation Deferral" means that portion of Compensation as to which a
Participant has made an annual irrevocable election to defer receipt until the
date specified under the In-Service Distribution Option and/or the Retirement
Distribution Option.
"Disabled" or "Disability" shall mean that a Participant is disabled due to
sickness or injury which qualifies the Participant for disability payments under
the Company's long term disability plan. A Participant shall be considered
totally and permanently disabled on the date he qualifies for such long term
disability payments.
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"Distribution Option" shall mean the two distribution options which are
available under the Plan, consisting of the Retirement Distribution Option and
the In-Service Distribution Option.
"Distribution Option Account" or "Accounts" shall mean, with respect to a
Participant, the Retirement Distribution Account and/or the In-Service
Distribution Account(s) established on the books of account of the Company,
pursuant to Article IV, for each Participant.
"Effective Date" shall mean January 1, 1997. "Amendment Effective Date"
shall mean January 1, 2000.
"Eligible Employee" shall mean (i) officers of Hilton Hotels Corporation at
the Vice President level or higher, (ii) hotel general managers who are employed
by the Company, or (iii) Highly Compensated Employees who are selected by the
Committee to participate in the Plan pursuant to Section 2.1.
"Enrollment Agreement" shall mean the authorization form which an Eligible
Employee files with the Committee to participate in the Plan.
"Fund" or "Funds" shall mean one or more of the investments selected by the
Committee pursuant to Section 3.2(a).
"Highly Compensated Employee" shall mean an employee of the Company who the
Committee, in its discretion, anticipates will receive Compensation in excess of
the salary limitation contained in Section 401(a)(17) of the Code for the
applicable Plan Year.
"In-Service Distribution Account or Accounts" shall mean the Account(s)
maintained for a Participant to which Compensation Deferrals and Company
Contributions are credited pursuant to the In-Service Distribution Option.
"In-Service Distribution Option" shall mean the Distribution Option
pursuant to which benefits are payable in accordance with Section 6.6.
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"Investment Return" shall mean, for each Fund, an amount equal to the net
investment performance of such Fund on a given day, as determined by the
Committee.
"Participant" shall mean any Eligible Employee who elects to defer
Compensation in accordance with Section 3.1.
"Plan" shall mean the Hilton Hotels Executive Deferred Compensation Plan
set forth herein, in effect as of the Effective Date, or as amended from time to
time.
"Plan Year" shall mean the 12 consecutive month period beginning on a
January 1.
"Retirement" shall mean the termination of the Participant's employment
with the Company (for reasons other than death) on or after age 65, or, on or
after the combination of the Participant's age and Years of Service equals at
least 55.
"Retirement Distribution Account" shall mean the Account maintained for a
Participant to which Compensation Deferrals and Company Contributions are
credited pursuant to the Retirement Distribution Option or as otherwise provided
by Section 6.5(b).
"Retirement Distribution Option" shall mean the Distribution Option
pursuant to which benefits are payable in accordance with Section 6.5.
"Termination Date" shall mean the date of termination of a Participant's
employment with the Company.
"Year of Vesting Service" shall mean a "Year of Service" as defined in the
Hilton Hotels Thrift Savings Plan.
ARTICLE II
PARTICIPATION
2.1 - PARTICIPATION.
Prior to December 31 of each Plan Year, the Committee shall designate which
Highly Compensated Employees shall become Eligible Employees for the following
Plan Year. An Eligible Employee designated as a Participant shall thereafter,
unless otherwise determined by the
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Committee, be eligible to make a Compensation Deferral for each Plan Year by
electing to defer a portion of his or her Compensation in accordance with
Section 3.1.
ARTICLE III
DEFERRAL ELECTIONS
3.1 - ELECTIONS TO DEFER COMPENSATION.
(a) Each Eligible Employee may elect to make a Compensation Deferral by
filing with the Committee an election that conforms to the requirements of this
Section 3.1, on an Enrollment Agreement provided by the Committee, no later than
December 31 of the Plan Year preceding the Plan Year for which the election is
to become effective and specifying whether the Participant elects a Base Salary
Deferral or a Bonus Compensation Deferral or a combination, the Distribution
Option Accounts to which such amounts will be credited and providing such other
information as the Committee shall require. The Committee may establish minimum
or maximum amounts that may be deferred under this Section and may change such
standards from time to time. Any such limits shall be communicated by the
Committee to the Plan Administrator and by the Plan Administrator to the
Participants prior to the commencement of a Plan Year. No Participant may have
more than one Retirement Distribution Account.
(b) Notwithstanding anything herein to the contrary, no Eligible Employee
shall be permitted to defer Compensation which the Committee reasonably
determines is required to pay the Eligible Employee's portion of payroll taxes
and contributions towards benefits (including, but not limited to, medical,
life, dental and disability) provided to the Eligible Employee and his or her
dependents.
(c) Any Compensation Deferral made under paragraph (a) of this Section 3.1
shall remain in effect and be irrevocable, notwithstanding any change in the
Participant's Compensation, for the entire Plan Year for which it is effective.
Subject to the provisions of this
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Section 3.1, a Participant shall file a new election for each Plan Year. Such
election shall be made on an Enrollment Agreement filed with the Committee by
December 31 of a Plan Year to make a Compensation Deferral for Compensation to
be paid beginning on January 1 of the immediately following Plan Year.
(d) The Committee may, in its discretion, permit Employees who first become
Eligible Employees after the beginning of a Plan Year, including Employees who
become Eligible Employees because they are promoted or hired by the Company to a
position of Vice President or hotel general manager on or after January 1 of a
Plan Year, to enroll in the Plan for that Plan Year by filing a completed and
fully executed Enrollment Agreement as soon as practicable following the date
the Employee becomes an Eligible Employee but, in any event, within 30 days
after such date. Notwithstanding the foregoing, however, any Enrollment
Agreement executed by an Eligible Employee, pursuant to this Section, to make a
Compensation Deferral shall apply only to such amounts as are paid to the
Eligible Employee after the date on which such Enrollment Agreement is filed.
3.2 - INVESTMENT ELECTIONS.
(a) At the time of making the deferral elections described in Section 3.1,
the Participant shall designate, in a manner prescribed by the Committee, which
Funds the Participant's Accounts will be deemed to be invested in for purposes
of determining the Investment Return to be credited to those Accounts. The Funds
shall be as selected by the Committee from time to time and the Committee may
add, change, or delete Funds at any time. In making the designation pursuant to
this Section 3.2, the Participant may specify that all or any whole percentage
of his Accounts be deemed to be invested in one or more of the Funds. A
Participant may change the designation made under this Section 3.2, in a manner
prescribed by the Committee, on any business day. Such change shall be effective
as soon as administratively feasible after it is received.
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(b) If a Participant fails to elect a type of Fund under this Section 3.2,
he or she shall be deemed to have elected an S & P 500 Index Fund (or, if no
such Fund exists, the Fund designated by the Committee).
(c) Although the Participant may designate the Funds according to paragraph
(a) above, the Committee shall select from time to time, in its sole discretion,
for each of the Funds described in paragraph (a), a commercially available
mutual fund or contract or an investment fund established with and administered
by an investment manager selected by the Committee. The Investment Return of
each such commercially available mutual fund, contract or investment fund shall
be used to determine the amount of earnings to be credited to Participants'
Accounts under Article IV although nothing set forth in this Plan shall require
an actual investment of monies in any such mutual fund or in any other Fund
designated as a deemed investment vehicle for Compensation Deferrals.
ARTICLE IV
DISTRIBUTION OPTION ACCOUNTS
4.1 - COMPENSATION DEFERRALS.
The Committee shall establish and maintain a Distribution Option Account or
Accounts for each Participant under the Plan. Each Participant's Distribution
Option Account shall be further divided into separate subaccounts
("subaccounts"), each of which corresponds to a Fund elected by the Participant
pursuant to Section 3.2(a). A Participant's Distribution Option Account shall be
credited as follows:
As soon as practicable after the end of each calendar month, the Committee
shall credit the subaccounts of the Participant's Distribution Option Account
with an amount equal to the Compensation Deferral by the Participant during such
payroll period in accordance with the Participant's election under Section
3.2(a); that is, the portion of the Participant's Compensation
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Deferral that the Participant has elected to be deemed to be invested in a
certain Fund shall be credited to the subaccount corresponding to that Fund.
4.2 - COMPANY CONTRIBUTION.
A Participant's Distribution Option Account shall be further credited with
the Company Contribution for that Participant as follows:
(a) As soon as practicable after the end of each calendar month, the
Committee shall credit the subaccounts of the Participant's Distribution Option
Account with an amount equal to the portion of the Company Contribution, if any,
which the Participant elected to be deemed to be invested in a certain type of
Fund. A Participant's Company Contribution for any payroll period shall be equal
to 50% of the Compensation Deferral by the Participant during such payroll
period in accordance with the Participant's election under Section 3.1(a),
disregarding any such deferral in excess of 10% of the Participant's
Compensation for such payroll period;
(b) As of the last day of each month, forfeitures that occurred under
Section 5.2 during such month shall be returned to the Company for its
unrestricted use; and
(c) Notwithstanding the above paragraphs of this Section 4.2, from
time-to-time and in its sole discretion, the Board may provide that additional
Company Contribution be credited to some or all Participants, according to the
terms and conditions determined by the Board.
4.3 - INVESTMENT RETURN.
Each subaccount of a Participant's Distribution Option Account shall, as of
each business day, be credited with earnings and debited with losses in an
amount equal to that determined by multiplying the balance credited to such
subaccount as of the previous day by the Investment Return for the corresponding
Fund pursuant to Section 3.2(a).
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ARTICLE V
VESTING
5.1 - COMPENSATION DEFERRAL.
A Participant's Compensation Deferral credited to his or her Distribution
Option Account shall be 100% vested at all times.
5.2 - COMPANY CONTRIBUTION.
(a) All Company Contributions credited to a Participant's Distribution
Option Account shall become nonforfeitable in the following increments: (1) 25%
upon the Participant's completion of two Years of Vesting Service, (2) an
additional 25% (50% total) upon completion of three Years of Vesting Service,
(3) an additional 25% (75% total) upon completion of four Years of Vesting
Service, and (4) the Distribution Option Account balance shall be fully
nonforfeitable in its entirety on and after the Participant's completion of five
Years of Vesting Service.
(b) Notwithstanding paragraph (a) of this Section 5.2, a Participant's
Distribution Option Account balance shall be fully nonforfeitable in its
entirety should: (1) the Participant die while employed by the Company, (2) the
Participant become Disabled while employed by the Company, or (3) there occur a
Change in Control.
(c) When a Participant incurs a Termination Date, the portion of the
Company Contribution credited to his or her Distribution Option Account which is
not vested shall immediately be forever forfeited to the Company, and the
Company shall have no obligation to the Participant (or Beneficiary) with
respect to such forfeited amount.
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ARTICLE VI
DISTRIBUTIONS
6.1 - DISTRIBUTION OPTION ACCOUNTS. The Committee shall establish and maintain
separate Distribution Option Accounts with respect to a Participant. A
Participant's Distribution Option Accounts may consist of the Retirement
Distribution Account and/or the In-Service Distribution Account as elected by
the Participant. The amount of Base Salary Deferrals and/or Bonus Compensation
Deferrals made pursuant to Section 3.1 shall be credited by the Company to the
Participant's Distribution Option Accounts as soon as practicable after the end
of each calendar month in which such Base Salary and/or Bonus Compensation would
otherwise have been paid, in accordance with the Distribution Option irrevocably
elected by the Participant in the Enrollment Agreement. Any amount once taken
into account as Base Salary and/or Bonus Compensation for purposes of this Plan
shall not be taken into account thereafter. Company Contributions, when
credited, are credited to the Distribution Option Accounts in the same
proportion as the Base Salary and/or Bonus Compensation they match. The
Participant's Distribution Option Accounts shall be reduced by the amount of
payments made by the Company to the Participant or the Participant's Beneficiary
pursuant to this Plan.
6.2 - ELECTION OF DISTRIBUTION OPTION. In the Enrollment Agreement filed with
the Committee for each Plan Year, an Eligible Employee shall elect the
Distribution Account pursuant to which the Eligible Employee's Compensation
Deferrals for that Plan Year will be allocated. The Eligible Employee shall
allocate his Compensation Deferrals and Company Contributions between the
Distribution Options in increments of ten percent; provided, however that 100
percent of such Deferrals and Company Contributions may be allocated to one or
the other of the Distribution Options.
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6.3 - RETIREMENT DISTRIBUTION OPTION. Distribution of the Participant's
Retirement Distribution Account shall commence upon (a) the Participant's
Retirement, or (b) if later, the Participant's attainment of age 65 as elected
by the Participant pursuant to Section 6.5.
6.4 - IN-SERVICE DISTRIBUTION OPTION. Subject to Section 6.6, the Participant's
In-Service Distribution Account shall be distributed commencing in the Plan Year
elected by the Participant in the Enrollment Agreement pursuant to which such
In-Service Distribution Account was established. Notwithstanding the foregoing,
no Participant may elect to receive a distribution of any amount credited to the
Participant's In-Service Distribution Account, including any attributable
Investment Return, prior to the beginning of the third Plan Year following the
Plan Year in which the Compensation Deferral giving rise to that distribution
was made.
6.5 - BENEFITS UNDER THE RETIREMENT DISTRIBUTION OPTION. Benefits under the
Retirement Distribution Option shall be paid to a Participant as follows:
(a) BENEFITS UPON RETIREMENT. In the case of a Participant whose
Termination Date occurs on or after eligibility for Retirement, the
Participant's Retirement Distribution Account shall be distributed in one of the
following methods, as elected by the Participant in writing in a separate
election made on or prior to the Participant's Termination Date: (i) in a lump
sum; or (ii) if the amount to be distributed exceeds $100,000, in quarterly,
semi-annual or annual installments payable over 5, 10, 15, or 20 years. Any
benefit payable in accordance with this paragraph shall be paid, or commence to
be paid, no sooner than the first day of the thirteenth month following the
Participant's Termination Date or, if later, the date specified by the
Participant but no later than the first day of the month following the day the
Participant attains age 65. A lump sum benefit shall be payable in an amount
equal to the value of the Participant's Retirement Distribution Account as of
the business day the Funds are deemed to
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be liquidated to make the payment. Installment payments, if any, shall commence
at the time elected by the Participant in accordance with this Section, in an
amount equal to (i) the value of such Retirement Distribution Account as of the
business day the Funds are deemed to be liquidated to make the payment, divided
by (ii) the number of installment payments elected by the Participant. The
remaining installments shall be paid in an amount equal to (i) the value of such
Retirement Distribution Account as of the business day the Funds are deemed to
be liquidated to make the payment divided by (ii) the number of installments
remaining. A Participant may change the election regarding the manner of payment
of the Participant's Account, as described above, at any time on or prior to the
Participant's Termination Date that occurs on or after eligibility for
Retirement.
(b) BENEFITS UPON TERMINATION OF EMPLOYMENT. In the case of a Participant
whose Termination Date occurs prior to the earliest date on which the
Participant is eligible for Retirement, other than on account of becoming
Disabled or by reason of death, or if the amount to be distributed does not
exceed $100,000 the vested portion of a Participant's Retirement Distribution
Account shall be distributed in a lump sum as soon as practicable following the
Participant's Termination Date. If the amount to be distributed exceeds
$100,000, but the Participant is not eligible for Retirement, the Participant's
Retirement Distribution Account shall be distributed in one of the following
methods, as elected by the Participant in writing in a separate election made on
or prior to the Participant's Termination Date: (i) in a lump sum; or (ii) in
annual installments payable over 5 years. Any lump-sum benefit payable in
accordance with this paragraph shall be paid on the first day of the thirteenth
month following the Participant's Termination Date, in an amount equal to the
value of such Retirement Distribution Account as of the business day the Funds
are deemed to be liquidated to make the payment. Installment payments, if any,
shall commence to be paid at the time
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provided in the preceding sentence, in an amount equal to (i) the value of such
Retirement Distribution Account as of the business day the Funds are deemed to
be liquidated to make the payment, divided by (ii) the number of installment
payments elected by the Participant. The remaining installments shall be paid in
an amount equal to (i) the value of such Retirement Distribution Account as of
the business day the Funds are deemed to be liquidated to make the payment
divided by (ii) the number of installments remaining.
6.6 - BENEFITS UNDER THE IN-SERVICE DISTRIBUTION OPTION. Benefits under the
In-Service Distribution Option shall be paid to a Participant as follows:
(a) IN-SERVICE DISTRIBUTIONS. In the case of a Participant who continues in
employment with the Company, the vested portion of a Participant's In-Service
Distribution Account shall be paid to the Participant commencing no later than
January 31 of the Plan Year(s) elected by the Participant in the Enrollment
Agreement pursuant to which such In-Service Distribution Account was
established, which may be no earlier than the third Plan Year following the end
of the Plan Year in the Compensation Deferral giving rise to that distribution
was made, (i) in a lump sum or (ii) if the amount to be distributed exceeds
$25,000, in quarterly, semi-annual or annual installments payable over 2, 3, 4,
or 5 years; provided, however, that no later than the first day of the
thirteenth month preceding the date on which payment is scheduled to be made or
commence, the Participant may elect to defer the payment to a later date but may
not make more than two such elections to delay any distribution. Any lump-sum
benefit payable in accordance with this paragraph shall be paid not later than
January 31 of the Plan Year elected by the Participant in accordance with
Section 6.4, in an amount equal to the vested value of the portion of such
In-Service Distribution Account being distributed as of the business day the
Funds are deemed to be liquidated to make the payment. Installment payments, if
any, shall commence not later than January 31 of the Plan Year as
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elected by the Participant in accordance with Section 6.4, in an amount equal to
(i) the vested value of such portion of such In-Service Distribution Account as
of the business day the Funds are deemed to be liquidated to make the payment,
divided by (ii) the number of installment payments elected by the Participant in
the Enrollment Agreement pursuant to which such In-Service Distribution Account
was established. The remaining installments shall be paid in an amount equal to
(i) the vested value of such portion of the In-Service Distribution Account as
of the business day the Funds are deemed to be liquidated to make the payment
divided by (ii) the number of installments remaining. If a Participant is not
fully vested when the In-Service Distribution Account is to be paid, the
non-vested portion at the date of first payment will automatically be
transferred to the Retirement Distribution Account.
(b) BENEFITS UPON TERMINATION OF EMPLOYMENT. In the case of a Participant
whose employment with the Company terminates prior to the date on which the
Participant's then In-Service Distribution Account would otherwise be
distributed or during an installment period elected under paragraph (a) above,
other than on account of becoming Disabled or by reason of death, the vested
portion of such In-Service Distribution Account shall be distributed in a lump
sum as soon as is practicable following the Participant's Termination Date;
provided, however, that if the amount remaining to be distributed exceeds
$100,000 (taking into account all sums then credited to the Participant's
Retirement Distribution Account), the elections provided by Sections 6.5(a) and
(b) shall then be available to be made if elected by the Participant on or prior
to the Participant's Termination Date.
6.7 - INABILITY TO LOCATE PARTICIPANT.
In the event that the Committee is unable to locate a Participant or
Beneficiary within two years following the date the Participant was to commence
receiving payment, the entire amount allocated to the Participant's Deferral
Account and Company Contribution Account shall be forfeited. If, after such
forfeiture, the Participant or Beneficiary later claims such benefit, such
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benefit shall be reinstated without interest or earnings from the date payment
was to commence under Section 6.1.
6.8 - PAYMENT BY TRUST.
The Company may cause the payment of benefits under this Plan to be made in
whole or in part by the trustee of a trust designated by the Committee (the
"Trust"). The Committee may direct the Trustee to pay the Participant's or
Beneficiary's benefit at the time and in the amount described herein. In the
event the amounts allocated to the Participant under the Trust are not
sufficient to provide the full amount of benefit payable to the Participant, the
Company shall pay the remainder of such benefit.
6.9 - WITHDRAWALS; CHANGE IN CONTROL.
(a) WITHDRAWALS. Any Participant may receive a distribution as set forth in
this Section 6.9 prior to termination of employment of up to 100% (minus the
forfeiture provided below) of the value of the Participant's Distribution Option
Accounts at the time of the distribution. Such distribution shall be paid in the
manner provided by the Committee. The Participant shall forever forfeit 10% of
the amount of the distribution to the Company, and the Company shall have no
obligation to the Participant (or Beneficiary) with respect to such forfeited
amount. The Committee may provide that the forfeiture shall reduce the
distribution, or shall reduce the Participant's Distribution Option Accounts
remaining in the Plan, if any.
(b) CHANGE IN CONTROL. In the event of a Change in Control, any Participant
may elect to receive a distribution, as set forth in this Section 6.9, of up to
100% of the value of the Participant's Distribution Option Accounts at the time
of the distribution. Such election shall be made within 30 days following the
Change in Control in the manner provided by the Committee. Any distribution
shall be made in a lump sum on January 31 of the Plan Year immediately following
the Plan Year in which occurs the Change in Control, in an amount equal to the
value
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of such Distribution Accounts as of the business day the Funds are deemed to be
liquidated to make the payment.
6.10 - DISTRIBUTIONS ON DISABILITY.
If a Participant becomes Disabled, such Participant's Account shall be
distributed pursuant to the Participant's elections under this Article VI
without regard to such Disability.
ARTICLE VII
DEATH BENEFITS
7.1 - IN GENERAL.
Upon the death of a Participant before his or her Distribution Option
Account(s) has been paid in full (either in a lump sum or installment payments),
his or her Beneficiary shall receive the balance of the Participant's vested
Account as of the date of death, as adjusted by subsequent gains or losses prior
to distribution, in accordance with Section 7.2.
7.2 - PAYMENT OF DEATH BENEFITS.
The death benefit payable pursuant to Section 7.1 shall be paid to the
Participant's Beneficiary. All Distribution Accounts shall be distributed in the
manner elected and at the time elected by the Participant prior to death;
provided, however, that if no such timely election was made, the payment shall
be made in the form of a cash lump sum payment not later than January 31 of the
Plan Year following the Plan Year in which occurs the Participant's death.
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ARTICLE VIII
ARBITRATION
8.1 - ARBITRATION.
(a) A Participant or, following the Participant's death, a Beneficiary
(collectively referred to in this section as "Claimant") may, if he desires,
submit any claim for payment under the Plan or any dispute regarding the
interpretation of the Plan to arbitration. This right to select arbitration
shall be solely that of the Claimant, and the Claimant may decide whether or not
to arbitrate in his discretion. The "right to select arbitration" does not
impose on the Claimant a requirement to submit a dispute for arbitration. The
Claimant may, in lieu of arbitration, bring an action in appropriate civil
court. The Claimant retains the right to select arbitration, even if a civil
action (including, without limitation, an action for declaratory relief) is
brought by the Company or any other fiduciary of the Plan prior to the
commencement of arbitration. If arbitration is selected by the Claimant after a
civil action concerning the Claimant's dispute has been brought by a person
other than the Claimant, the Company, the trustee of any grantor trust that
holds assets for the purpose of making benefit payments under the Plan
("Trustee"), and the Claimant shall take such actions as are necessary or
appropriate, including dismissal of the civil action, so that the arbitration
can be timely heard. Once arbitration is commenced, it may not be discontinued
without the unanimous consent of all parties to the arbitration. During the
lifetime of the Participant only he can use the arbitration procedure set forth
in this Section.
(b) Any claim for arbitration may be submitted as follows: if the Claimant
disagrees with an interpretation of the Plan by the Company or any fiduciary of
the Plan, or disagrees with the calculation of his benefit under the Plan, such
claim may be filed in writing with an arbitrator of the Claimant's choice who is
selected by the method described in the next four sentences. The first step of
the selection shall consist of the Claimant submitting in writing a list of five
potential
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arbitrators to the Company and to the Trustee. Each of the five arbitrators must
be either (1) a member of the National Academy of Arbitrators located in the
state of the Claimant's principal residence or (2) a retired California Superior
Court or Appellate Court judge. Within one week after receipt of the list, the
Trustee and the Company shall jointly select one of the five arbitrators as the
arbitrator of the dispute in question. If the Trustee and Company fail to select
an arbitrator in a timely manner (including failure to select an arbitrator by
reason of disagreement between the Trustee and the Company as to the arbitrator
to be selected), the Claimant then shall designate one of the five arbitrators
as the arbitrator of the dispute in question.
(c) The arbitration hearing shall be held within seven days (or as soon
thereafter as possible) after the selection of the arbitrator. No continuance of
said hearing shall be allowed without the mutual consent of the Claimant, the
Trustee, and the Company. Absence from or nonparticipation at the hearing by any
party shall not prevent the issuance of an award. Hearing procedures that will
expedite the hearing may be ordered at the arbitrator's discretion, and the
arbitrator may close the hearing in his sole discretion when he decides he has
heard sufficient evidence to justify issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as possible
and in no event later than one week after the close of the hearing. In the event
the arbitrator finds that the Claimant is entitled to the benefits he claimed,
the arbitrator shall order the Company and/or the Trustee to pay such benefits,
in the amounts and at such time as the arbitrator determines. The obligation of
the Trustee to pay such benefits shall not, however, exceed the assets of the
trust, and the Company shall be jointly and severally liable for any amount that
the Trustee is ordered to pay. The award of the arbitrator shall be final and
binding on the parties. The Company shall thereupon pay the Claimant immediately
the amount that the arbitrator orders to be paid in the manner described in the
award. The award may be enforced in any appropriate court as soon as
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possible after its rendition. If any action is brought to confirm the award, no
appeal shall be taken by any party from any decision rendered in such action.
(e) If the arbitrator determines either that the Claimant is entitled to
the claimed benefits or that the claim by the Claimant was made in good faith,
the arbitrator shall direct the Company to pay to the Claimant, and Company
agrees to pay to the Claimant in accordance with such order, an amount equal to
the Claimant's expenses in pursuing the claim, including attorneys' fees.
ARTICLE IX
ADMINISTRATION
9.1 - COMMITTEE.
A committee shall be appointed by, and serve at the pleasure of, the Board
of Directors. The number of members comprising the Committee shall be determined
by the Board which may from time to time vary the number of members. A member of
the Committee may resign by delivering a written notice of resignation to the
Board. The Board may remove any member by delivering a certified copy of its
resolution of removal to such member. Vacancies in the membership of the
Committee shall be filled promptly by the Board.
9.2 - COMMITTEE ACTION.
The Committee shall act at meetings by affirmative vote of a majority of
the members of the Committee. Any action permitted to be taken at a meeting may
be taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of the
Committee
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designated by the Chairman may execute any certificate or other written
direction on behalf of the Committee.
9.3 - POWERS AND DUTIES OF THE COMMITTEE.
(a) The Committee, on behalf of the Participants and their Beneficiaries,
shall enforce the Plan in accordance with its terms, shall be charged with the
general administration of the Plan, and shall have all powers necessary to
accomplish its purposes, including, but not by way of limitation, the following:
(1) To select the mutual funds, contracts or investment funds to be
the Funds in accordance with Section 3.2(b) hereof;
(2) To construe and interpret the terms and provisions of this Plan
and to make factual determinations;
(3) To compute and certify to the amount and kinds of benefits
payable to Participants and their Beneficiaries;
(4) To maintain all records that may be necessary for the
administration of the Plan;
(5) To provide for the disclosure of all information and the filing
or provision of all reports and statements to Participants,
Beneficiaries or governmental agencies as shall be required by
law;
(6) To make and publish such rules for the regulation of the Plan and
procedures for the administration of the Plan as are not
inconsistent with the terms hereof; and
(7) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time
prescribe.
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(8) On behalf of the Company, to select those Highly Compensated
Employees who shall be Eligible Employees.
9.4 - CONSTRUCTION AND INTERPRETATION.
(a) The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to, the Company and
any Participant or Beneficiary. The Committee shall administer such terms and
provisions in a uniform and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.
(b) Nothing contained in the Plan shall be construed to prevent the Company
from taking any action which is deemed by it to be appropriate or in its best
interest. No Participant, Beneficiary, or other person shall have any claim
against the Company as a result of such action. Any decisions, actions or
interpretations to be made under the Plan by the Company or the Board, or the
Committee acting on behalf of the Company, shall be made in its respective sole
discretion, not as a fiduciary, need not be uniformly applied to similarly
situated individuals and shall be final, binding and conclusive on all persons
interested in the Plan.
9.5 - INFORMATION.
To enable the Committee to perform its functions, the Company shall supply
full and timely information to the Committee on all matters relating to the
Compensation of all Participants, their death, Disability, or other cause of
termination, and such other pertinent facts as the Committee may require.
9.6 - COMPENSATION, EXPENSES AND INDEMNITY.
(a) The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the administration of the
Plan shall be paid by the Company.
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(b) To the extent permitted by applicable state law, the Company shall
indemnify and save harmless the Committee and each member thereof, the Board of
Directors and any delegate of the Committee who is an employee of the Company
against any and all expenses, liabilities and claims, including legal fees to
defend against such liabilities and claims arising out of their discharge in
good faith of responsibilities under or incident to the Plan, other than
expenses and liabilities arising out of willful misconduct. This indemnity shall
not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.
9.7 - QUARTERLY STATEMENTS.
Under procedures established by the Committee, a Participant shall receive
a statement with respect to such Participant's Accounts on a quarterly basis as
of each March 31, June 30, September 30 and December 31.
ARTICLE X
MISCELLANEOUS
10.1 - UNSECURED GENERAL CREDITOR.
Participants and their Beneficiaries, heirs, successors, and assigns shall
have no legal or equitable rights, claims, or interest in any specific property
or assets of the Company. No assets of the Company shall be held under any
trust, or held in any way as collateral security for the fulfilling of the
obligations of the Company under this Plan. Any and all of the Company's assets
shall be, and remain, the general unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the rights of
the Participants and Beneficiaries shall be no greater than those of unsecured
general creditors.
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10.2 - RESTRICTION AGAINST ASSIGNMENT.
The Company shall pay all amounts payable hereunder only to the person or
persons designated by the Plan and not to any other person or corporation. No
part of a Participant's Accounts shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant's Accounts be subject to execution by levy,
attachment, or garnishment or by any other legal or equitable proceeding, nor
shall any such person have any right to alienate, anticipate, commute, pledge,
encumber, or assign any benefits or payments hereunder in any manner whatsoever.
If any Participant, Beneficiary or successor in interest is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge any distribution or payment from the Plan, voluntarily or involuntarily,
the Committee, in its discretion, may cancel such distribution or payment (or
any part thereof) to or for the benefit of such Participant, Beneficiary or
successor in interest in such manner as the Committee shall direct.
10.3 - WITHHOLDING.
There shall be deducted from each payment made under the Plan or any other
compensation payable to the Participant (or Beneficiary) all taxes which are
required to be withheld by the Company in respect to such payment or this Plan.
The Company shall have the right to reduce any payment (or compensation) by the
amount of cash sufficient to provide the amount of said taxes.
10.4 - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION.
The Company may amend, modify, suspend or terminate the Plan in whole or in
part, except that (a) no amendment, modification, suspension or termination
shall have any retroactive effect to reduce any amounts allocated to a
Participant's Accounts, and (b) Section 8.1 may not be amended with respect to
any Participant or Beneficiary following the date the Participant or
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Beneficiary makes a claim for benefits under the Plan. In the event that this
Plan is terminated, the amounts credited to a Participant's Accounts (including
any previously unvested amounts) shall be distributed to the Participant or, in
the event of his or her death, his or her Beneficiary in a lump sum within
thirty (30) days following the date of termination.
10.5 - GOVERNING LAW.
This Plan shall be construed, governed and administered in accordance with
the laws of the State of California.
10.6 - RECEIPT OR RELEASE.
Any payment to a Participant or the Participant's Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Committee, the Company and the Trustee.
The Committee may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute a receipt and release to such effect.
10.7 - PAYMENTS ON BEHALF OF PERSONS UNDER INCAPACITY.
In the event that any amount becomes payable under the Plan to a person
who, in the sole judgement of the Committee, is considered by reason of physical
or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee, in its sole judgement, to have assumed the care of such person. Any
payment made pursuant to such determination shall constitute a full release and
discharge of the Committee and the Company.
10.8 - HEADINGS, ETC. NOT PART OF AGREEMENT.
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
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IN WITNESS WHEREOF, the Company has caused this document to be executed by
its duly authorized officer on this __ day of ______________, 1999.
HILTON HOTELS CORPORATION
By:
------------------------------
Its:
-----------------------------
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EXHIBIT 10.43
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Hilton Hotels Corporation, a Delaware corporation
(the "Company"), and __________________ (the "Employee"), dated as of the ____
day of ________, ____.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations and, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall be the first date during the "Change of
Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated prior to the date on which
a Change of Control occurs, and it is reasonably demonstrated by Employee that
such termination (1) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (2) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
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(b) The "Change of Control Period" is the period commencing on the date
hereof and ending on the earlier to occur of (i) the third anniversary of such
date or (ii) the first day of the month next following the Employee's attainment
of age 65; PROVIDED, HOWEVER, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof is hereinafter referred to as the "Renewal Date"),
the Change of Control Period shall be automatically extended so as to terminate
on the earlier of (x) three years from such Renewal Date or (y) the first day of
the month coinciding with or next following the Employee's attainment of age 65,
unless at least 60 days prior to the Renewal Date the Company shall give the
Employee written notice that the Change of Control Period shall not be so
extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) 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 or the Conrad N. Hilton Fund, collectively the "Hilton
Interests"), of beneficial ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(b) 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 14a-
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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
(c) Approval by the stockholders of the Company of (A) a reorganization,
merger or consolidation, in each case, with respect to which persons who were
the stockholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, or (B) a liquidation or dissolution of the Company or (C) the sale
of all or substantially all of the assets of the Company.
3. EMPLOYMENT PERIOD. If there is a Change of Control, the Company hereby
agrees to continue the Employee in its employ, and the Employee hereby agrees to
remain in the employ of the Company, for the period commencing on the Effective
Date and ending on the earlier to occur of (a) the third anniversary of such
date or (b) the first day of the month coinciding with or next following the
Employee's attainment of age 65 (the Employment Period).
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Employee's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Employee's services shall be performed at the location where the Employee
was employed immediately preceding the Effective Date or any office or location
less than thirty-five (35) miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the
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Employee's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, (C) manage personal investments and (D)
participate as a member or consultant to professional associations and to
otherwise participate in the activities of associations in such manner as has
been historically conducted by the Employee, so long as such activities do not
significantly interfere with the performance of the Employee's responsibilities
as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Employee prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Employee's responsibilities to the
Company.
(b) COMPENSATION.
(i) BASE SALARY. During the Employment Period, the Employee shall
receive an annual base salary ("Base Salary") at a monthly rate at least equal
to the highest monthly base salary paid or payable to the Employee by the
Company during the twelve-month period immediately preceding the month in which
the Effective Date occurs. During the Employment Period, the Base Salary shall
be reviewed at least annually and shall be increased at any time and from time
to time as shall be substantially consistent with increases in base salary
awarded in the ordinary course of business to other key employees of the Company
and its subsidiaries. Any increase in Base Salary shall not serve to limit or
reduce any other obligation to the Employee under this Agreement. Base Salary
shall not be reduced after any such increase.
(ii) ANNUAL BONUS. In addition to Base Salary, the Employee shall be
awarded, for each fiscal year during the Employment Period, an annual bonus (an
"Annual Bonus") (either pursuant to the incentive compensation plan of the
Company or otherwise) in cash at least equal to the average bonus payable to the
Employee from the Company and its subsidiaries in respect of the three fiscal
years immediately preceding the fiscal year in which the Effective Date
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occurs.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Base
Salary and Annual Bonus payable as hereinabove provided, the Employee shall be
entitled to participate during the Employment Period in all incentive, savings
and retirement plans, practices, policies and programs applicable to other key
employees of the Company and its subsidiaries (including the Company's employee
benefit plans, in each case providing benefits which are the economic equivalent
to those in effect or as subsequently amended). Such plans, practices, policies
and programs, in the aggregate, shall provide the Employee with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by the Company for
the Employee under such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Employee, as provided at any time thereafter with
respect to other key employees of the Company and its subsidiaries.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the Employee
and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(v) EXPENSES. During the Employment Period, the Employee shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
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employees of the Company and its subsidiaries.
(vi) FRINGE BENEFITS. During the Employment Period, the Employee shall
be entitled to fringe benefits, including use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its subsidiaries in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key employees of the Company and its subsidiaries.
(c) OFFICE AND SUPPORT STAFF. During the Employment Period, the Employee
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee by the Company and
its subsidiaries at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Employee, as provided at any time
thereafter with respect to other key employees of the Company and its
subsidiaries.
(d) VACATION. During the Employment Period, the Employee shall be entitled
to paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its subsidiaries as in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key employees of the Company and its subsidiaries.
(e) INDEMNIFICATION. During the term of the Employee's employment with the
Company and for a period of not less than three years (or, if applicable, such
longer period as the Company then provides coverage for its executives
generally) after the Date of Termination (as defined below) the Employee shall
be entitled to indemnification and, to the extent available on commercially
reasonable terms, insurance coverage therefor, with respect to the various
liabilities as to which the Employee has been customarily indemnified during the
Change of Control Period.
5. TERMINATION.
(a) DEATH OR DISABILITY. This Agreement shall terminate automatically upon
the Employee's death. If the Company determines in good faith that the
Disability of the Employee has
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occurred (pursuant to the definition of "Disability" set forth below), it may
give to the Employee written notice of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the Employee
(the "Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" means disability
which, at least 26 weeks after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Employee or the Employee's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) CAUSE. During the Employment Period, the Company may terminate the
Employee's employment for "Cause." For purposes of this Agreement, "Cause" means
(i) an act or acts of personal dishonesty taken by the Employee and intended to
result in substantial personal enrichment of the Employee at the expense of the
Company, (ii) repeated violations by the Employee of the Employee's obligations
under Section 4(a) of this Agreement which are demonstrably willful and
deliberate on the Employee's part and which are not remedied in a reasonable
period of time after receipt of written notice from the Company, (iii) the
conviction of the Employee of a felony, (iv) any refusal by the Employee to
provide appropriate information or to otherwise participate and cooperate in
connection with the obtaining by the Company or any of its subsidiaries of all
licenses, permits and approvals necessary to the conduct of their business, or
(v) the inability of the Employee to obtain any license, permit or other
authorization required to be obtained by the Employee as a condition to the
conduct of business by the Company or its subsidiaries.
(c) GOOD REASON. During the Employment Period, the Employee's employment
may be terminated by the Employee for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any
respect with the Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other
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action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office
or location other than that described in Section 4(a)(i)(B) hereof, except
for travel reasonably required in the performance of the Employee's
responsibilities;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Employee shall be conclusive.
Anything in this Agreement to the contrary notwithstanding, a termination
of employment by the Executive for any reason during the 30-day period
immediately following the first anniversary of the Effective Date shall be
deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) NOTICE OF TERMINATION. During the Employment Period, any termination
by the Company for Cause or by the Employee for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's
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<PAGE>
employment under the provision so indicated and (iii) if the Date of Termination
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen (15) days after the giving of such
notice). The failure by the Employee to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good Reason shall not
waive any right of the Employee hereunder or preclude the Employee from
asserting such fact or circumstance in enforcing his rights hereunder.
(e) DATE OF TERMINATION. During the Employment Period, "Date of
Termination" means the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be; PROVIDED, HOWEVER, that (i) if the
Employee's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Employee of such termination and (ii) if the Employee's employment
is terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Employee or the Disability Effective Date, as the case
may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Employee's employment is terminated during the
Employment Period by reason of the Employee's death, this Agreement shall
terminate without further obligations to the Employee's legal representatives
under this Agreement, other than those obligations specifically provided for in
this Agreement (which shall be paid in accordance with their terms) and
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, which shall include for this purpose (i) the Employee's
full Base Salary through the Date of Termination at the rate in effect on the
Date of Termination or, if higher, at the highest rate in effect at any time
from the start of the 90-day period preceding the Effective Date through the
Date of Termination (the "Highest Base Salary"), (ii) the product of the Annual
Bonus paid to the Employee for the last full fiscal year and a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (iii) any
compensation previously deferred by the Employee (together with any accrued
interest thereon) and not yet paid by the Company and any accrued vacation pay
not yet paid by the
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<PAGE>
Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter
referred to as "Accrued Obligations"). All such Accrued Obligations shall be
paid to the Employee's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the Company
and any of its subsidiaries to surviving families of employees of the Company
and such subsidiaries under such plans, programs, practices and policies
relating to family death benefits, if any, in accordance with the most favorable
plans, programs, practices and policies of the Company and its subsidiaries in
effect at any time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee and/or the Employee's family, as in
effect on the date of the Employee's death with respect to other key employees
of the Company and its subsidiaries and their families.
(b) DISABILITY. If the Employee's employment is terminated by
reason of the Employee's Disability, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of Termination,
including for this purpose, all Accrued Obligations. All such Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability Effective
Date to receive disability and other benefits at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Employee's employment shall
be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee
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<PAGE>
other than the obligation to pay to the Employee the Highest Base Salary through
the Date of Termination plus the amount of any compensation previously deferred
by the Employee (together with accrued interest thereon). If the Employee
terminates employment other than for Good Reason, this Agreement shall terminate
without further obligations to the Employee, other than those obligations
accrued or earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash within
30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Employment Period, the Company shall terminate the Employee's employment other
than for Cause, Disability, or death or if the Employee shall terminate his
employment for Good Reason and the Employee executes, and does not revoke, a
written release, substantially in the form then used by the Company for its
executives generally, of any and all claims against the Company and all related
parties with respect to all matters arising out of the Employee'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 Employee
participated and under which the Employee has accrued a benefit), or the
termination thereof,
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) to the extent not theretofore paid, the Employee's Highest
Base Salary through the Date of Termination; and
(B) the product of (x) the Annual Bonus paid to the Employee for
the last full fiscal year (if any) ending during the Employment Period or, if
higher, the Annual Bonus paid to the Employee for the last full fiscal year
prior to the Effective Date (as applicable, the "Recent Bonus") and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which is 365; and
(C) the product of (x) 1.49 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
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<PAGE>
(D) in exchange for the Employee's obligations under Section 10
of this Agreement, the product of (x) 1.5 and (y) the sum of (i) the Highest
Base Salary and (ii) the Recent Bonus; and
(E) in the case of compensation previously deferred by the
Employee, all amounts previously deferred (together with any accrued interest
thereon) and not yet paid by the Company, and any accrued vacation pay not yet
paid by the Company; and
(F) the Employee shall be entitled to receive a lump-sum cash
payment equal to the amount which the Company would have credited to the
Employees Company Contribution Account under the Company's Executive Deferred
Compensation Plan (the "Deferred Compensation Plan") during the remainder of the
Employment Period if during the remainder of the Employment Period the Employee
had deferred under the Deferred Compensation Plan the average amount of deferral
the Employee had elected with respect to the Employee's Compensation for the 12
months immediately preceding the Date of Termination and if the Employee's
annual Compensation during the Employment Period were equal to the sum of the
Employee's Highest Base Salary and Recent Bonus. For the purposes of determining
the amount of this cash payment, no adjustment shall be made for any amounts
which the Company would have contributed to the Employee's account in the Hilton
Hotels Corporation Thrift Savings Plan during the Employment Period.
(ii) for the remainder of the Employment Period, or such longer period
as any plan, program, practice or policy may provide, the Company shall continue
benefits to the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Sections 4(b)(iv) and (vi) of this Agreement
if the Employee's employment had not been terminated, including health insurance
and life insurance, in accordance with the most favorable plans, practices,
programs or policies of the Company and its subsidiaries during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families and for purposes of eligibility for retiree
benefits pursuant
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<PAGE>
to such plans, practices, programs and policies, the Employee shall be
considered to have remained employed until the end of the Employment Period and
to have retired on the last day of such period.
7. NON-EXCLUSIVITY OF RIGHTS. During and after the Employment
Period, nothing in this Agreement shall prevent or limit the Employee's
continuing or future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices provided by the Company or any of its
subsidiaries and for which the Employee may qualify, nor shall anything herein
limit or otherwise affect such rights as the Employee may have under any stock
option or other agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or for which the Employee is otherwise entitled to
receive under any plan, policy, practice or program of the Company or any of its
subsidiaries at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Employee or others except as specifically provided herein. In no event shall the
Employee be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Employee under any of the provisions
of this Agreement. The Company agrees to pay, to the full extent permitted by
law, all legal fees and expenses which the Employee may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Employee, the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Employee about the amount of any payment
pursuant to Section 9 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the Code).
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) 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
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Employee, 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
Employee shall be paid an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Employee 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 Employee 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 Employee's residence (or, if greater, the state and locality in
which the Employee is required to file a nonresident income tax return with
respect to the Payment) on the Termination Date, net of the maximum reduction in
federal income taxes that may be obtained from the deduction of such state and
local taxes.
(b) All determinations to be made under this Section 9 shall be made by
the Company's independent public accountant immediately prior to the Change of
Control (the "Accounting Firm"), which firm shall provide its determinations and
any supporting calculations both to the Company and the Employee within 10 days
of the Termination Date. Any such determination by the Accounting Firm shall be
binding upon the Company and the Employee. Within five days after the Accounting
Firm's determination, the Company shall pay (or cause to be paid) or distribute
(or cause to be distributed) to or for the benefit of the Employee such amounts
as are then due to the Employee under this Agreement.
(c) The Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment (taking into account any amounts theretofore
already paid by the Company). Such notification shall be given as soon as
practicable but no later than ten business days after the Employee knows of such
claim and shall apprise the Company of the nature of such claim and the
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<PAGE>
date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to effectively
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax, including
interest and penalties, with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Employee
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<PAGE>
to pay such claim and sue for a refund the Company shall advance the amount of
such payment to the Employee, on an interest-free basis and shall indemnify and
hold the Employee harmless, on an after-tax basis, from any Excise Tax, income
tax or employment tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to this Section, the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of subsection (b)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to this Section, a determination is made
that the Employee shall not be entitled to any refund with respect to such claim
and the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to 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.
(e) 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.
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10. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION. In
exchange for the Company agreeing to the payment to the Employee provided under
subsection (d)(i)(D) of Section 6, the Employee agrees as follows:
(a) The Employee 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 Employee obtains during the Employee's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Employee's violation of this
subsection (a) of Section 10) ("Confidential Information"). The Employee shall
not communicate, divulge or disseminate Confidential Information at any time
during or after the Employee'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 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Employee under this Agreement.
(b) For a period of one year after the expiration or termination of the
Employee's employment with the Company, the Employee 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 Employee'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 Employee
agrees that he will not, for a period of two years after the expiration or
termination of the Employee'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
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contractor, or solicit the employment of, any managerial or higher level person
who is or at any time during the previous twelve months was an employee,
representative, officer or director of the Company or any of its subsidiaries.
(c) The Employee 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 Employee breach any of those provisions. Employee represents and
acknowledges that (i) the Employee has been advised by the Company to consult
Employee's own legal counsel in respect of this Agreement, and (ii) that the
Employee has had full opportunity, prior to execution of this Agreement, to
review thoroughly this Agreement with the Employee's counsel. The Employee
further acknowledges and agrees that a breach of any of the restrictions in this
Section cannot be adequately compensated by monetary damages. The Employee
agrees that the Employee's right to the payments specified above in
consideration for his undertakings under this Section shall be forfeited and
Company shall be entitled to preliminary and permanent injunctive relief,
without the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits in the event of any
violation of this Section, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled; provided,
however, that the foregoing remedies shall be conditioned upon the Company
providing the Employee with at least 30 days written notice of its good faith
belief that a violation of the Employee's undertakings hereunder has occurred
and Employee 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
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extent permitted by law. The Employee 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 Employee
may have to the laying of venue of any such suit, action or proceeding in any
such court. The Employee 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 12 hereof.
11. SUCCESSORS.
(a) This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without reference to principles of conflict
of laws. The captions of
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this Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EMPLOYEE:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
IF TO THE COMPANY:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: General Counsel
WITH A REQUIRED COPY TO:
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, PA 19103-6993
Attention: Robert J. Lichtenstein
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
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(e) The Employee's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) The Employee and the Company acknowledge that the employment of the
Employee by the Company is "at will", and, prior to the Effective Date, may be
terminated by either the Employee or the Company at any time. Upon a termination
of the Employee's employment or upon the Employee's ceasing to be an officer of
the Company, in each case, prior to the Effective Date, there shall be no
further rights under this Agreement.
(g) The Company represents and warrants that: (i) it is fully authorized
and empowered to enter into this Agreement, (ii) its Board of Directors has
approved this Agreement and (iii) the performance of its obligations under this
Agreement will not violate any agreement between it and any other person, firm
or organization.
(h) This Agreement may be executed in two or more counterparts and by
facsimile, all of which when taken together shall constitute a signed agreement.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
EMPLOYEE
-----------------------------
HILTON HOTELS CORPORATION
By
--------------------------
Attest:
-----------------------------
-----------------------------
Secretary
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EXHIBIT 10.44
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT by and between Hilton Hotels
Corporation, a Delaware corporation (the "Company"), and Stephen F. Bollenbach
(the "Executive"), dated as of March 9, 2000.
WHEREAS, the Board of Directors of the Company (the "Board")
determined that it was in the best interests of the Company and its shareholders
to continue to employ the Executive as President and Chief Executive Officer,
and the Executive desired to continue to serve in that capacity;
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of the effective date (the "Split Date") of a transaction
whereby the Company separated its gaming operations from its lodging operations
which occurred in December, 1998;
WHEREAS, in light of the significant increase in the size of the
Company and the complexity of its business as a result of the acquisition of
Promus Hotel Corporation and the critical role of the Executive in assuring that
the Company and its shareholders realize the expectations for that acquisition,
the Company wishes to assure that the Executive's compensation is comparable to
the competitive market for talented chief executives;
WHEREAS, the Board desires to amend the Employment Agreement to
increase the Executive's cash compensation and provide the Executive with
retirement and survivor benefits as a further inducement to retain the
Executive;
NOW, THEREFORE, IT IS HEREBY AGREED THAT THE EMPLOYMENT AGREEMENT
SHALL BE AMENDED AND RESTATED, EFFECTIVE AS OF MARCH 9, 2000, TO READ AS
FOLLOWS:
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1. EMPLOYMENT PERIOD. The Company shall continue to employ the
Executive, and the Executive shall serve the Company, on the terms and
conditions set forth in this Agreement, for the period beginning on the Split
Date (the "Commencement Date") and ending on July 1, 2005, which shall
automatically renew for periods of one year unless one party gives written
notice to the other, at least 60 days prior to July 1, 2005 or at least 60 days
prior to the end of any one-year renewal period, that the Agreement shall not be
further extended, except as otherwise specifically provided below (the
"Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall continue to be employed as the President and Chief Executive
Officer of the Company and, when applicable, the Company shall cause the
Executive to be reelected as a member of the Board. In his executive
capacities, the Executive shall report to the Board. During the Employment
Period, the Executive shall have authority to make all executive decisions, plan
the strategic direction of the Company, and hire, promote and terminate the
employment of all personnel, subject to the direction of the Board. During the
Employment Period, the Executive shall have such reasonable and customary powers
as are generally associated with the positions of President and Chief Executive
Officer, including, without limitation, authority to expend capital resources of
the Company and shall have, subject to the direction of the Board, authority to
fill all management positions.
(b) If, during the Employment Period, 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.
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(c) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
shall devote principal attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. Notwithstanding the foregoing, nothing in this
Agreement shall be construed to limit the ability of the Executive from
providing services to the entity which holds the Company's gaming operations
following the Split Date. It shall not be considered a violation of the
foregoing for the Executive to (A) serve on corporate, civic or charitable
boards or committees (excluding those which would create a conflict of
interest), (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(d) The Executive's services shall be performed primarily at
the Company's Headquarters in Beverly Hills, California.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") of
$1,000,000, payable in accordance with the regular payroll practices of the
Company.
(b) ANNUAL BONUS.
(1) In addition to the Annual Base Salary, the
Executive shall be eligible to receive, for each fiscal year or portion of a
fiscal year ending during the Employment
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Period, an annual bonus (the "Annual Bonus"), pursuant to the Company's annual
incentive plan, with a target equal to 100% of Annual Base Salary and a maximum
of 200% of Annual Base Salary.
(2) That portion of such Annual Bonus during any
taxable year of the Company which, when added to any otherwise deductible
compensation and benefits paid or provided to the Executive by the Company
during such taxable year, would not be deductible by the Company in the taxable
year such Annual Bonus is paid or accrued because of the applicable limitations
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be deferred annually and paid to the Executive, in a lump sum, on
that date (the "Deferral Date") which is 30 days after the earlier of (i) the
last day of the Company's taxable year in which the Executive ceases to be a
"covered employee" within the meaning of Section 162(m)(3) of the Code or (ii)
the date upon which the Company's deduction with respect to all deferred Annual
Base Salary shall no longer be subject to limitation under Section 162(m) of the
Code or any successor section thereto.
(3) Except as otherwise provided below, any amounts of
Annual Bonus deferred as provided above shall be credited, from the date it
would otherwise have been paid to the date the deferred amounts are paid, with
interest at a floating rate equal to the rate which Morgan Guaranty announces
from time to time as its prime lending rate, as in effect from time to time,
compounded quarterly, and such accrued interest shall be paid to the Executive
on the Deferral Date (said deferred Annual Bonus plus interest collectively
referred to as the "Deferred Compensation"). Notwithstanding the foregoing, the
Executive may elect, prior to the end of each calendar year for which an Annual
Bonus is payable, to have all or any portion of the Deferred Compensation for
that year treated as though invested in shares of the Company's common stock,
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<PAGE>
on a book entry account basis. Such Deferred Compensation shall be deemed to be
used to purchase such shares on the date the Annual Bonus would have been paid,
based on the average of the high and low trading prices of the stock on such
day. The number of shares credited to the Executive's account under this
subparagraph (3) shall be adjusted to reflect any changes to the Company's
capital structure in the same manner as if shares were actually issued to the
Executive on the day the Annual Bonus would otherwise have been paid. The
Company shall also credit the Executive's account with additional amounts
equivalent to any and all dividends or distributions paid on its shares of
common stock (on the same basis as though such shares had been outstanding on
the record date for such dividend or distribution), with any such dividends or
distributions deemed invested in additional shares of the Company's common stock
based on the average of the high and low trading prices of the stock on the day
the dividend or distribution is payable to shareholders of the Company.
(4) The Deferred Compensation shall be paid on the
Deferral Date by wire transfer to an account designated by the Executive prior
to the Deferral Date, (or by transfer of shares of common stock to the extent of
the account referred to in subparagraph (3)).
(c) OTHER BENEFITS. During the Employment Period: (i) the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs of the Company to at least
the same extent as other senior executives of the Company, provided that in
determining the Executive's participation in any incentive plans the Incentive
Options, as defined below, shall be taken into account; and (ii) the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation, and shall receive all benefits under, all welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life insurance,
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<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 incur the Federal, state
and local income tax consequences for the value of such usage, as determined in
accordance with the Company's cost determination methodology applied to the
Company's senior executives with respect to their personal use of the Company's
aircraft.
(f) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to his current office at the Company's Beverly
Hills Headquarters, and to secretarial and other assistance, at least equal to
the most favorable of such as provided with
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<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) On the Split Date, the Executive was
granted non-statutory stock options (the "Incentive Options") under the
Company's 1996 Stock Incentive Plan, as amended (the "Stock Plan) covering
6,000,000 shares of the Company's (but not the gaming company's) post-Split
common stock in tranches of 4,000,000 shares (the "Regular Option") and
2,000,000 shares (the "Special Option"), respectively. The exercise price of
the shares subject to the Regular Option is $13.625. The exercise price of the
shares subject to the Special Option is $27.52676. The Incentive Options shall
be exercisable for 10 years after the Split Date except as otherwise
specifically provided in this Agreement.
The Regular Option shall vest and become exercisable according to the following
schedule if the Executive continues in the employment of the Company through the
applicable vesting date(s), except as otherwise specifically provided herein:
(1) 25%: on the first anniversary of the Split Date.
(2) 50%: on the second anniversary of the Split Date.
(3) 75%: on the third anniversary of the Split Date.
(4) 100%: on the fourth anniversary of the Split Date.
The Special Option shall vest and become exercisable on the date that is 9 years
and 9 months following the Split Date if the Executive continues in the
employment of the Company through such date; provided, however, that, if, at any
time prior to the fifth anniversary of the Split Date, the
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<PAGE>
closing price of the Company's common shares on the New York Stock Exchange
equals or exceeds $36.70234, on each of any 7 consecutive trading days, all
shares under the Special Option shall be immediately vested and exercisable if
the Executive continues in the employment of the Company through the applicable
vesting date, except as otherwise specifically provided herein. Notwithstanding
the foregoing, all shares subject to the Regular Option and the Special Option
shall vest and become exercisable upon the occurrence of any of the following
events (each of (A), (B) and (C) below a "Triggering Event"):
(A) termination of the Executive's employment by the
Company other than for (i) Cause, as defined below
or (ii) non-renewal of the Agreement;
(B) termination of the Executive's employment because
of death or Disability; or
(C) termination of employment by the Executive for
Good Reason, as defined below;
provided that one-half of the unvested portion of the Regular Option and the
unvested portion of the Special Option shall vest and become (and remain)
exercisable upon a Triggering Event only if Executive does not breach the terms
of the covenants contained in Section 8 below; such vesting and exercisability
shall be part of the consideration for the Executive's undertakings under
Section 8.
(ii) If a Triggering Event occurs, any portion of the
Incentive Options that have become vested on or before the date of such Event
(including without limitation, any portion that becomes exercisable due to such
Triggering Event) shall remain exercisable until the
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<PAGE>
earlier to occur of (x) the fifth anniversary of such date of termination or (y)
the tenth anniversary of the Split Date. All non-vested Incentive Options shall
immediately terminate.
(iii) The Executive may assign the right to exercise the
Incentive Options to his spouse, children, grandchildren, or parents of a
recipient, to trusts for the benefit of the Executive's immediately family, to a
family partnership or limited liability company designated by the Executive in
which the Executive's family members are the only partners or shareholders or to
an entity exempt from federal income tax under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
(iv) The Incentive Options shall be subject to the terms of
the Stock Plan in all respects not described herein.
(i) SUPPLEMENTAL RETIREMENT BENEFIT.
(i) JOINT AND SURVIVOR ANNUITY BENEFIT. Subject to the terms
and conditions set forth herein, the Executive shall be entitled to a
supplemental retirement benefit (the "Supplemental Benefit"), in the form of a
100% joint and survivor annuity, which shall provide the Executive and his
spouse with a lifetime annual benefit, commencing on the later of (x) July 1,
2005, and (y) the date of the Executive's termination from the employment of the
Company, (the "Distribution Date") equal to 25% of the Executive's total cash
compensation (Annual Base Salary and Annual Bonus, without regard to the effect
of any deferrals as provided above) for the Executive's service to the Company
through the July 1, 2005. The Executive shall vest in such Supplemental Benefit
in 20% increments on June 30 of each year, beginning June 30, 2001 and be fully
vested on June 30, 2005, provided that the Executive is employed by the Company
on each such June 30 and the Executive shall have a 100% nonforfeitable right in
the Supplemental Benefit
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<PAGE>
on and after June 30, 2005; and, provided, further, that, after the occurrence
of a Change of Control, as defined below, and as further consideration for the
Executive's undertaking not to breach the terms of the covenants contained in
Section 8 below, in the event of the involuntary, or Good Reason, termination of
the Executive's employment from the Company, other than on account of death,
disability or Cause, three additional years shall be added to the Executive's
service for the purposes of determining his vesting rights only.
(ii) OPTIONAL CONVERSION. To provide the Executive both with an
additional incentive to enhance the value of the Company's common stock for its
shareholders and the opportunity to increase his retirement income if the value
of the stock is enhanced, and to enable the Company to fix its exposure for the
Supplemental Benefit for financial accounting purposes, the Company has offered
the Executive the opportunity to elect, and the Executive hereby elects, to
convert his right to receive the joint and survivor annuity described in
subparagraph (i) above into a phantom interest in the equivalent value of the
Company's common stock. The parties agree that this conversion results in a
credit to a book entry account for the Executive of 700,000 of its common
shares, which has been derived based on the estimated present value of such
joint and survivor benefits (without regard to whether such benefits are
currently vested), as calculated using as his covered compensation the
Executive's total annual cash compensation to be provided under this Agreement
(whether or not deferred) with the Annual Bonus component calculated solely at
the target level of performance, and the current trading value of the common
stock. By reason of such election, in lieu of the joint and survivor benefits
described in subparagraph (i) above, the Executive shall be entitled to receive
a distribution, on the Distribution Date, of 700,000 shares of common stock
multiplied by his vested percentage in respect of the Supplemental Benefit.
Such distribution
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shall be made as soon as practicable after the Distribution Date (or such later
date(s) as the Executive shall elect at least 13 months prior to the
Distribution Date but in no more than 10 annual installments). The number of
shares credited to the Executive's account under this subparagraph shall be
adjusted to reflect any changes to the Company's capital structure in the same
manner as if shares were actually issued to the Executive on March 9, 2000. The
Company shall also credit the Executive's account with additinal amounts
equivalent to any and all dividends or distributions paid on its shares of
common stock (on the same basis as though such shares had been outstanding on
the record date for such dividend or distribution), with any such dividends or
distributions deemed invested in additional shares of the Company's common stock
based on the average of the high and low trading prices of the stock on the day
the dividend or distribution is payable to shareholders of the Company.
(j) DEATH BENEFIT AND LIFE INSURANCE. During the Employment
Period, the Executive shall be entitled to a Company-provided death benefit in
the following amounts:
<TABLE>
<CAPTION>
Date of Death Amount of Benefit
------------- -----------------
<S> <C>
On or before June 30, 2001 $5.0 million
After June 30, 2001 and before
July 1, 2002 $4.0 million
After June 30, 2002 and before
July 1, 2003 $3.0 million
After June 30, 2003 and before
July 1, 2004 $2.0 million
After June 30, 2004 and before
July 1, 2005 $1.0 million
</TABLE>
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<PAGE>
In addition, the Company shall purchase for the Executive a $10.0 million face
amount, last to die, variable life insurance policy on the lives of the
Executive and the Executive's spouse (the "Supplemental Policy"). The Company
shall pay the full annual premium, determined at standard underwriting rates, on
the Supplemental Policy, up to a maximum annual payment by the Company of
$226,000 for each year from 2000 to 2005. Such maximum payment is intended to
be in an amount sufficient to carry the Supplemental Policy until the Executive
attains age 100, assuming a 10% crediting rate. The Executive may hold his
interest in the Supplemental Policy directly or may cause the Supplemental
Policy to be held by a trust, but shall assign an interest in such Policy to the
Company to assure its recovery of premium, as provided herein. The Executive
shall take all actions necessary so as to permit the Company to withdraw from
the Supplemental Policy, at the earlier of (i) the death of the last to die of
the Executive and his spouse, or (ii) July 1, 2015, the full amount of premiums
paid by the Company to carry the Supplemental Policy (or, if the withdrawal
occurs prior to the death of the last insured, the Supplemental Policy's cash
surrender value, if less than the premiums paid). To the extent, if any, that
the actual interest credited under the Supplemental Policy is less than 10% or
the Executive terminates employment for any reason other than death prior to
July 1, 2005, the Company shall have no obligation to make any further premium
payments, and the Executive shall have all options under the Supplemental
Policy, not in derogation of the Company's right to withdraw the premiums paid,
to decrease the death benefit or to continue the Supplemental Policy (by
additional personal contributions or otherwise) with the full death benefit of
$10.0 million. Other than as specifically provided herein, with respect to the
payment, and the recovery, of premiums paid by the Company, all economic
consequences (including taxes of the purchase of
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the Supplemental Policy shall be borne or inure to the benefit of the Executive,
or any trust or other vehicle that owns or acquires the Supplemental Policy.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment and the
Employment Period shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means that (i) the Executive has been unable,
for a period of 180 consecutive business days, to perform the Executive's duties
under this Agreement, as a result of physical or mental illness or injury, and
(ii) a physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. The Executive agrees to
reasonably cooperate with the Company in order to obtain its physician's
evaluation of the Executive. A termination of the Executive's employment by the
Company for Disability shall be communicated to the Executive by written notice,
and shall be effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), unless the Executive returns to
full-time performance of the Executive's duties, as determined by the Board,
before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
(A) the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board delivers to the Executive a written
demand for substantial performance that specifically
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identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties;
(B) illegal conduct or gross misconduct by the
Executive, in either case that is willful and results in material
and demonstrable damage to the business or reputation of the
Company; or
(C) a breach of the covenants or representations
contained in Section 8.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause") of
its intention to terminate the Executive's employment for Cause, setting forth
in reasonable detail the specific conduct of the Executive that it considers to
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Board Meeting. The
"Special Board Meeting" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than five and not more than fifteen business
days after the Executive receives the Notice of Termination for Cause. The
Executive shall be given an opportunity, together with counsel, to be heard at
the Special Board Meeting. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special Board Meeting,
stating that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in the Notice of Termination for Cause, and such conduct
constitutes Cause under this Agreement.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
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A. the assignment to the Executive of any duties
inconsistent in any material respect (in any respect, following a
Change of Control) with paragraph (a) or, if applicable, (b) of
Section 2 of this Agreement, or any other action by the Company
(other than the Split) that results in a material diminution in
the Executive's position or authority, duty, titles,
responsibilities, or reporting requirements other than an action
that is not taken in bad faith and is remedied by the Company
within 30 days after receipt of written notice thereof from the
Executive;
B. any material failure (any failure, following a
Change of Control) by the Company to comply with any provision of
Section 3 of this Agreement, other than a failure that is not
taken in bad faith and is remedied by the Company within 30 days
after receipt of written notice thereof from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a location or
locations other than that provided for in paragraph (d) of
Section 2 of this Agreement, other than normal business travel;
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement; or
E. any failure by the Company to comply with
paragraph (c) of Section 9 of this Agreement.
In addition, following a Change of Control, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Change of Control shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given,
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unless the notice sets forth a later date (which date shall in no event be later
than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at least
10 business days' advance written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date the
termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason or without Good Reason, as the case may be, is
effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE COMPANY
OTHER THAN FOR CAUSE, DEATH OR DISABILITY OR BY THE EXECUTIVE FOR GOOD REASON.
If, during the Employment Period, the Company terminates the Executive's
employment, other than for Cause or Disability or by reason of the Executive's
death, or the Executive terminates employment for Good Reason, the Company shall
fulfill its obligations as to Base Salary under Section 3(a) hereof for the
balance of the Employment Period. Fifty percent of such amounts shall be
consideration for the Executive's undertaking not to breach the terms of the
covenants contained in Section 8 below. The Company shall also provide the
Executive with all benefits due in accordance with the terms of any applicable
plans and programs of the Company and shall also pay to the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the Executive's
accrued but unpaid cash compensation (the "Accrued Obligations"), which shall
equal the sum of (1) any portion of the Executive's Annual Base Salary through
the Date of Termination that has not yet been paid, (2) an amount representing
the Annual Bonus for the year of termination based on target, and multiplying
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<PAGE>
that amount by a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of
which is 365 (the "Annual Bonus Amount"); (3) the Deferred Compensation and any
other compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid; and (4) any
accrued but unpaid Annual Bonuses and vacation pay; provided, however, that the
Company's obligation to make any payments under this Section to the extent any
such payment shall not have accrued as of the day before the Date of Termination
shall also be conditioned upon the Executive's execution, and non-revocation, of
a written release, substantially in the form attached hereto as Annex 1, (the
"Release"), of any and all claims against the Company and all related parties
with respect to all matters arising out of the Executive's employment by the
Company (other than any entitlements under the terms of this Agreement or under
any other plans or programs of the Company in which the Executive participated
and under which the Executive has accrued a benefit), or the termination
thereof.
Notwithstanding the foregoing, in the event payment is due to the
Executive under this Section following a Change of Control, then conditioned
upon the Executive's execution, and non-revocation, of the Release and the
Executive not breaching the terms of the covenants contained in Section 8 below,
the Executive, in lieu of the amounts specified in the first sentence above,
shall receive in a lump sum in cash within 30 days after the Date of Termination
equal to 3 multiplied by the sum of the Executive's Base Salary and the Annual
bonus paid to the Employee for the last full fiscal year (if any) ending during
the Employment Period or, if higher, the Annual Bonus paid to the Employee for
the last full fiscal year prior to the Change of Control. Fifty percent of such
amount shall be consideration for the Executive's undertaking not to breach the
terms of the
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<PAGE>
covenants contained in Section 8 below. In addition, the Executive shall also
be entitled in the case of the Deferred Compensation and any other compensation
previously deferred by the Executive, to a lump sum equal to all amounts
previously deferred (together with any accrued interest thereon) and not yet
paid by the Company, and any accrued vacation pay not yet paid by the Company.
For the remainder of the Employment Period, or such longer period as any plan,
program, practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices and
policies described in Section 3 of this Agreement if the Employee's employment
had not been terminated, including health insurance and life insurance, in
accordance with the most favorable plans, practices, programs or policies of the
Company and its subsidiaries during the 90-day period immediately preceding the
date on which the Change of Control occurs or, if more favorable to the
Employee, as in effect at any time thereafter with respect to other key
employees and their families and for purposes of eligibility for retiree
benefits pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company, in addition to fulfilling its obligations under
Section 3(a) hereof, shall pay the Accrued Obligations to the Executive or the
Executive's estate or legal representative, as applicable, in a lump sum in cash
within 30 days after the Date of Termination, and the Company shall have no
further obligations under this Agreement other than for any entitlements under
the terms any other plans or programs
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<PAGE>
of the Company in which the Executive participated and under which the Executive
has accrued a benefit.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause during the Employment Period,
the Company shall pay the Executive the Annual Base Salary through the Date of
Termination, the amount of the Deferred compensation and any other compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon), in each case to the extent not yet paid, and the amount of
any earned but unpaid Annual Bonuses and vacation pay, and the Company shall
have no further obligations under this Agreement other than for any entitlements
under the terms any other plans or programs of the Company in which the
Executive participated and under which the Executive has accrued a benefit. If
the Executive voluntarily terminates employment during the Employment Period,
other than for Good Reason, the Company shall pay the Accrued Obligations to the
Executive in a lump sum in cash within 30 days of the Date of Termination, and
the Company shall have no further obligations under this Agreement other than
for any entitlements under the terms any other plans or programs of the Company
in which the Executive participated and under which the Executive has accrued a
benefit.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to Section 13, shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Vested benefits and other amounts that the Executive
is otherwise entitled to receive under any plan,
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policy, practice or program of, or any contract or agreement with, the Company
or any of its affiliated companies on or after the Date of Termination shall be
payable in accordance with such plan, policy, practice, program, contract or
agreement, as the case may be, except as explicitly modified by this Agreement.
7. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive
obtains other employment.
8. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
LICENSING; NO CONFLICT. In exchange for the Company agreeing to accelerated
vesting and exercisability of the Special Option upon any of the Triggering
Events and the payment to the Executive of fifty percent of his Base Salary
under Section 3(a) hereof for the balance of the Employment Period or fifty
percent of the lump sum payment in lieu of Base Salary provided under Section 5
in the event of Executive's termination of employment following a Change of
Control, the Executive agrees as follows:
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data, customer information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer programs and
software and financial information relating to the Company or any of its
affiliated companies and their respective businesses that the Executive obtains
during the Executive's employment by the Company or any of its affiliated
companies and that is not public knowledge (other than as a result of the
Executive's violation of this paragraph (a) of Section 8)
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("Confidential Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Executive's
employment with the Company, except in the good faith performance of his duties
hereunder, with the prior written consent of the Company or as otherwise
required by law or legal process. In no event shall an asserted violation of
the provisions of this paragraph (a) of Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
(b) For a period of two years after the expiration or
termination of the Executive's employment with the Company, the Executive will
not, except with the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company is engaged at the Date of
Termination or expiration of the Employment Period. In addition, the Executive
agrees that he will not, for a period of two years after the expiration or
termination of the Executive's employment with the Company, without the prior
written consent of the Company, whether directly or indirectly, employ, whether
as an employee, officer, director, agent, consultant or independent contractor,
or solicit the employment of, any managerial or higher level person who is or at
any time during the previous twelve months was an employee, representative,
officer or director of the Company or any of its subsidiaries.
(c) The Executive represents that he is licensed by the
gaming authorities in Nevada and New Jersey and knows of no reason why a license
necessary for him to perform his
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duties hereunder would not be granted to or maintained by him by those or
similar authorities in the future.
(d) Executive represents to the Company that neither his
continuation of employment hereunder nor the performance of his duties hereunder
conflicts with any contractual commitment on his part to any third party or
violates or interferes with any rights of any third party.
(e) The Executive acknowledges and agrees that the
restrictions contained in this Section are reasonable and necessary to protect
and preserve the legitimate interests, properties, goodwill and business of the
Company, that the Company would not have entered into this Agreement in the
absence of such restrictions and that irreparable injury will be suffered by the
Company should the Executive breach any of those provisions. Executive
represents and acknowledges that (i) the Executive has been advised by the
Company to consult Executive's own legal counsel in respect of this Agreement,
and (ii) that the Executive has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with the Executive's counsel.
The Executive further acknowledges and agrees that a breach of any of the
restrictions in this Section cannot be adequately compensated by monetary
damages. The Executive agrees that the Executive's right to the payments
specified above in consideration for his undertakings under this Section shall
be forfeited, the Executive's right to exercise the Special Option and a portion
of the Regular Option shall cease and Company shall be entitled to preliminary
and permanent injunctive relief, without the necessity of proving actual
damages, as well as an equitable accounting of all earnings, profits and other
benefits in the event of any violation of this Section, which rights shall be
cumulative and in addition to any other rights or remedies to which the Company
may be entitled; provided, however, that the foregoing remedies
22
<PAGE>
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
the higher threshold percentage contained in any shareholder rights plan of the
Company) or more of either the then outstanding shares of common stock or the
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combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14 a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or (B) a liquidation or dissolution of the
Company or (C) the sale of all or substantially all of the assets of the
Company;
provided, however, that the Split was not a "Change of Control" for any purpose
under this Agreement.
(b) Upon a Change of Control, the right to purchase all shares
subject to the Regular Option and the Special Option shall vest and become
exercisable; provided, however, that
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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.
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<PAGE>
Within five days after the Accounting Firm's determination, the Company shall
pay (or cause to be paid) or distribute (or cause to be distributed) to or for
the benefit of the Executive such amounts as are then due to the Executive under
this Agreement.
(e) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
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<PAGE>
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or employment tax, including
interest and penalties, with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 10, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a termination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, however, that if the Company directs
the Executive to pay such claim and sue for a refund the Company shall advance
the amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for 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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<PAGE>
(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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<PAGE>
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 LLP
1701 Market Street
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.
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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, except for the provisions of Section 14 of this Agreement prior to
amendment and restatement until the rights under that Section have expired, and
otherwise sets forth the entire understanding among the parties hereto with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HILTON HOTELS CORPORATION
By
-------------------------------- ---------------------------------
Stephen F. Bollenbach
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EXHIBIT 10.54
TERMINATION AGREEMENT
among
RFS, INC., a Tennessee corporation
RFS LEASING, INC., a Tennessee corporation
DTR RFS LESSEE, INC., an Arizona corporation
RFS PARTNERSHIP, L.P., a Tennessee limited partnership
RFS FINANCING PARTNERSHIP, L.P., a Tennessee limited partnership
PLANO INN, L.P., a Texas limited partnership
RFS SPE 1 1998 LLC, a Virginia limited liability company
RFS SPE 2 1998 LLC, a Virginia limited liability company
RIDGE LAKE GENERAL PARTNER, INC., a Tennessee corporation
RFS HOTEL INVESTORS, INC., a Tennessee corporation
DOUBLETREE CORPORATION, a Delaware corporation
and
HILTON HOTELS CORPORATION, a Delaware corporation
dated as of January 26, 2000
<PAGE>
TERMINATION AGREEMENT
TERMINATION AGREEMENT dated as of January 26, 2000, among RFS, Inc., a
Tennessee corporation ("RFS"); RFS Leasing, Inc., a Tennessee corporation
("RFSL"); DTR RFS Lessee, Inc., an Arizona corporation ("DTR"); RFS
Partnership, L.P., a Tennessee limited partnership ("RFSOP"); RFS Financing
Partnership, L.P., a Tennessee limited partnership ("RFSFP"); Plano Inn,
L.P. (formerly known as Plano Hampton Inn, L.P.), a Texas limited
partnership ("Plano"); RFS SPE 1 1998 LLC, a Virginia limited liability
company ("RFS SPE 1"); RFS SPE 2 1998 LLC, a Virginia limited liability
company ("RFS SPE 2"); Ridge Lake General Partner, Inc., a Tennessee
corporation ("Ridge Lake"); RFS Hotel Investors, Inc., a Tennessee
corporation (the "REIT"); Doubletree Corporation, a Delaware corporation;
and Hilton Hotels Corporation, a Delaware corporation ("Hilton").
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessors (each as defined below) have
entered into lease agreements with respect to the hotel properties
described in EXHIBIT 1(a) hereto (as such agreements may have been amended
or modified, each a "Lease Agreement" and collectively, the "Lease
Agreements"); and
WHEREAS, the Owners and the Manager (each as defined below) have
entered into management agreements with respect to the hotel properties
described in EXHIBIT 1(b) hereto (as such agreements may have been amended
or modified, each an "Owner Management Agreement" and collectively, the
"Owner Management Agreements"); and
WHEREAS, certain parties hereto have entered into the agreements
described in EXHIBIT 1(c) hereto (as such agreements may have been amended
or modified, the "Ancillary Agreements"); and
WHEREAS, the parties desire to provide for the termination of the
Lease Agreements, the Ancillary Agreements and the Owner Management
Agreements effective as of the Termination Date (as defined below) subject
to the terms and conditions described herein; and
WHEREAS, the parties desire to set forth other agreements and
covenants as set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the parties do hereby agree as follows:
SECTION 1. DEFINITIONS.
(a) CERTAIN DEFINITIONS. For purposes of this Termination Agreement the
following words and phrases shall have the meanings set forth below:
"AFFILIATE MANAGEMENT AGREEMENTS" shall mean (i) the Consolidated
Management Agreement dated November 21, 1996, between RFS and RFSL, (ii)
the Management Agreement dated November 21, 1996, between RFSL and DT
Management, Inc. (Doubletree Hotel, Del
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Mar, CA), and (iii) any and all other management agreements among the
Lessee Parties with respect to Leased Hotels owned by the REIT Parties.
"AGGREGATE LEASE TERMINATION PAYMENT" shall mean Fifty-Nine Million
Five Hundred Thirty-Three Thousand Five Hundred Fifty Dollars
($59,533,550.00).
"AGGREGATE MANAGEMENT TERMINATION PAYMENT" shall mean the amount
determined pursuant to Section 3(d) hereof.
"AGREEMENTS" shall mean this Termination Agreement, the Escrow
Agreement and the Registration Rights Agreement.
"COMMON STOCK" shall mean the REIT's common stock, par value $.01 per
share.
"CONTRACTS" shall mean, with respect to any Leased Hotel, all
contracts to which a Lessee is a party or is otherwise obligated relating
to the operation of such Leased Hotel other than (i) any Lease Agreement,
Franchise Agreement, Third Party Management Agreement or License and (ii)
any such contracts with or between a Lessee and an affiliate of any of the
Lessee Parties, including, without limitation, the Affiliate Management
Agreements.
"CURRENT MARKET VALUE" shall mean, with respect to a share of Common
Stock, an amount determined by (A) multiplying the closing price per share
of Common Stock for each of the twenty (20) consecutive trading days ending
on the fifth (5th) business day prior to the Purchase Date, as reported on
the NYSE or the principal securities exchange on which the Common Stock is
then traded by the number of shares of Common Stock traded on such date,
(B) adding the products so obtained and (C) dividing the sum thereof by the
total number of shares of Common Stock traded during the 20-day period.
"DOUBLETREE/RFS MERGER" shall mean the merger consummated pursuant to
the Agreement and Plan of Merger described on EXHIBIT 1(c) hereto.
"EXCLUDED ASSETS" shall mean, except as otherwise provided in
EXHIBIT 3(b)(i) hereto, with respect to any Leased Hotel, (a) all cash and
cash equivalents on hand at such Leased Hotel as of the Termination Date,
(b) all accounts receivable of such Leased Hotel as of the Termination
Date, (c) all insurance policies under which the Lessee is insured and
rights of the Lessee thereunder, and (d) all warranties, claims and causes
of action of the Lessee relating to the period prior to the Termination
Date.
"EXCLUDED MATERIAL CONTRACT" shall mean (i) any Material Contract in
existence as of the date of this Termination Agreement which is not
disclosed on EXHIBIT 22 hereto, and (ii) any Material Contract executed
after the date of this Termination Agreement without the prior written
consent of the REIT Parties.
"FRANCHISE AGREEMENT" shall mean, with respect to any Leased Hotel,
the hotel franchise agreement under which such Leased Hotel is operated.
"HILTON FRANCHISE AGREEMENT" shall mean a hotel franchise agreement
with a subsidiary of Hilton, as franchisor, for the Leased Hotels or
Managed Hotels which currently operate as a Hampton Inn, Homewood Suites,
or Doubletree hotel.
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<PAGE>
"LEASED HOTEL" shall mean each hotel described in EXHIBIT 1(a)
hereto other than (i) those hotels whose leases have been previously
terminated as described on EXHIBIT 1(a) hereto, or (ii) if the context
requires, a hotel with respect to which an Interim Lease Termination has
occurred prior to the Termination Date pursuant to Section 6 hereof.
"LESSEES" shall mean RFS, RFSL, DTR and any affiliate of Hilton that
becomes a lessee for a hotel owned by a Lessor prior to the Termination
Date (each a "Lessee").
"LESSEE PARTIES" shall mean Hilton, Doubletree, the Lessees and the
Manager, collectively.
"LESSORS" shall mean RFSOP, RFSFP, Plano, RFS SPE 1, RFS SPE 2
and any affiliate of the REIT that becomes an owner of a hotel leased to a
Lessee prior to the Termination Date (each a "Lessor").
"LICENSES" shall mean, with respect to any Leased Hotel or any Managed
Hotel, all licenses, operating permits and other governmental
authorizations that may be necessary for the operation of such Leased Hotel
or Managed Hotel.
"MANAGED HOTEL" shall mean each hotel described in EXHIBIT 1(b)
hereto, other than a hotel with respect to which an Interim Management
Termination has occurred prior to the Termination Date.
"MANAGER" shall mean RFS, Inc., in its capacity as manager of the
Managed Hotels pursuant to the Owner Management Agreements.
"MATERIAL CONTRACT" shall mean any Contract applicable to one or more
Leased Hotels which (i) requires annual payments by any Lessee or an
affiliate of a Lessee of $25,000 or more or (ii) requires the delivery of
more than 20 room nights per month in exchange for services.
"NYSE" shall mean the New York Stock Exchange.
"OWNERS" shall mean the owners of the Managed Hotels described in
EXHIBIT 1(b) hereto.
"PREFERRED STOCK" shall mean the 973,684 outstanding shares of the
REIT's Series A preferred stock, par value $.01 per share currently owned
by RFS.
"REIT PARTIES" shall mean the REIT, the Owners and the Lessors
collectively.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement of even date herewith by and between the REIT and RFS.
"STANDSTILL AGREEMENT" shall mean the agreement to be executed by
Marriott, Hilton, RFS and RFSL in the form attached hereto as EXHIBIT 1(e)
with such modifications as shall be approved by the REIT.
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<PAGE>
"SUBORDINATION AGREEMENT" shall mean that certain Consolidated Lease
Estoppel, Subordination, Attornment and Non-Disturbance Agreement dated as
of November 21, 1996 by and among LaSalle National Bank, RFSL and RFSFP,
and any amendments thereto.
"SUCCESSOR LESSEE" shall mean any entity designated by the REIT as the
successor to a Lessee as the lessee or operator of a Leased Hotel or as a
successor to the Manager as a lessee or operator of a Managed Hotel and/or
any management company engaged by the REIT Parties or a Successor Lessee to
operate a Leased Hotel.
"THIRD PARTY FRANCHISE AGREEMENT" shall mean a hotel franchise
agreement which is not a Hilton Franchise Agreement.
"THIRD PARTY MANAGEMENT AGREEMENTS" shall mean the management
agreements described in EXHIBIT 1(d) hereto.
"TIER II RFS EMPLOYEE" shall mean an RFS Employee who is in Tier II of
RFS' organizational structure as shown in EXHIBIT 22 hereto.
"UNITS" shall mean units of limited partnership interests in RFSOP.
(b) OTHER DEFINITIONS. For purposes of this Termination Agreement, the
following words and phrases shall have the meanings set forth in the
respective sections hereof or exhibits hereto set forth below:
<TABLE>
<S> <C>
Ancillary Agreements Recitals
Bill of Sale 4(c)(iii)
Consolidated Lease Amendment Exhibit 1(a)
DTR Preamble
ERISA 8(d)
Escrow 5
Escrow Agent 5
Escrow Agreement 5
Exchange Act 9(b)
Existing Shelf Registration Statement 9(b)
FF&E 11(a)
Hilton Preamble
Hilton Indemnitees 21(c)
Individual Lease Termination Payment 3(a)
Individual Management Termination Payment 3(a)
Interim Lease Termination 6
Interim Management Termination 3(d)
Interim Lease Termination Payment 6
Landlord 10
Lease Agreements Recitals
Liabilities 21(b)
Marriott 2(c)
New Shelf Registration Statement 9(b)
Office Lease 10
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Owner Management Agreements Recitals
Partnership Interests 12
Plano Preamble
Purchase Date 9(a)
Purchase Price 9(a)
Required PIPs 13
REIT Preamble
REIT Indemnitees 21(b)
RFS Preamble
RFS Employees 7(a)
RFS SPE 1 Preamble
RFS SPE 2 Preamble
RFSFP Preamble
RFSL Preamble
RFSL Hotels 2(a)
RFSOP Preamble
RFSOP Partnership Agreement 9(c)
Ridge Lake Preamble
Second Consolidated Lease Amendment Exhibit 1(a)
Securities Act 9(b)
SEC 9(b)
Severance Payments 7(b)
St. Louis Agreement 8(d)
St. Louis Hotel 8(d)
St. Louis Plan 8(d)
Submanaged Hotels 2(a)
Termination Date 4(a)
Third Consolidated Lease Amendment Exhibit 1(a)
</TABLE>
Section 2. TERMINATION OF LEASE AGREEMENTS AND RELATED MATTERS.
(a) TERMINATION OF LEASE AGREEMENTS AND ANCILLARY AGREEMENTS. Subject to the
terms and conditions set forth herein, the Lessors and the Lessees hereby
agree that the Lease Agreements and Ancillary Agreements shall terminate as
of the Termination Date. Notwithstanding anything herein to the contrary,
(i) the REIT may elect, in the notice delivered to Hilton in accordance
with Section 4(a) hereof, or at least ten (10) days prior to the
Termination Date upon written notice to Hilton, (A) to purchase from Hilton
or one of its subsidiaries all of the outstanding capital stock of RFSL
and, in the event the REIT so elects, on the Termination Date, Hilton or
such subsidiary shall sell, assign and convey to the REIT or its designee,
all of the capital stock of RFSL, free and clear of any liens, claims,
encumbrances and charges of any kind in exchange for an aggregate payment
of Thirteen Million Four Hundred Sixty-Eight Thousand Dollars ($13,468,000)
and/or (B) to have one or more of the Lease Agreements (as they relate to
the Leased Hotels which are subject to Third Party Management Agreements
(the "Submanaged Hotels")) assigned to the applicable Lessor or Successor
Lessee and the applicable Lessees shall assign and convey to the applicable
Lessors or Successor Lessees all of such Lessees' right, title and interest
in and to the applicable Lease Agreements (as they relate to such
Submanaged Hotel) and the Leased Property (as defined in the applicable
Lease Agreement but exclusive of Excluded Assets) related to such
Submanaged Hotels in exchange for an aggregate payment
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equal to the sum of the Interim Lease Termination Payments applicable
thereto, and (ii) the Aggregate Lease Termination Payment otherwise payable
on the Termination Date shall be reduced by the amounts paid pursuant to
clauses (A) and/or (B) above; PROVIDED, HOWEVER, that if Hilton has
notified the REIT within thirty (30) days after the date hereof that a
purchase of the capital stock of RFSL will cause Hilton to incur income tax
liabilities it would not otherwise incur as a result of the termination of
the Lease Agreements for the RFSL Hotels, the REIT shall not be entitled to
the election described in clause (i)(A) above unless the REIT delivers to
Hilton on the Termination Date an indemnity agreement in form satisfactory
to Hilton covering such increased income tax liabilities. Hilton's
notification to the REIT shall set forth a description of the computation
of the income tax liability and the amount of the income tax liability. In
the event the REIT or its designee purchases the capital stock of RFSL
pursuant to clause (i)(A) above, the Lease Agreements for the Leased Hotels
described in Section II of EXHIBIT 1(a) hereto (the "RFSL Hotels") shall
not be terminated pursuant hereto and the provisions of Sections 2(b),
2(d)(ii), 4(c)(ii), 4(d)(iv), 4(e)(i), 8(a) and 8(b) hereof shall not apply
to the RFSL Hotels. In the event the REIT or its designee takes an
assignment of the Lease Agreements as they relate to one or more Submanaged
Hotels pursuant to clause (i)(B) above, such Lease Agreements shall not be
terminated as to such Submanaged Hotels pursuant hereto and the provisions
of Sections 4(c)(ii), 4(d)(iv) and 4(e)(i) hereof shall not apply to such
Submanaged Hotels.
(b) SURRENDER OF LEASED PROPERTY. Subject to the terms and conditions set forth
herein, upon the Termination Date, each Lessee shall remise, release,
surrender and quitclaim unto the Lessor for the respective Leased Hotels,
and such Lessor shall accept and assume, all right, title and interest of
such Lessee in and to the Leased Property (as defined in the applicable
Lease Agreement) relating to such Leased Hotel; PROVIDED, HOWEVER, that the
Leased Property relating to any Leased Hotel shall not include Excluded
Assets relating to such Leased Hotel.
(c) FRANCHISE AGREEMENTS. Subject to the terms and conditions set forth herein,
and to the extent necessary with respect to the RFSL Hotels if the REIT or
its designee purchases the capital stock of RFSL, (i) the Lessee for each
Leased Hotel currently operating under a Hilton Franchise Agreement shall
cause the applicable franchisor to grant a replacement Hilton Franchise
Agreement of the same brand for the balance of the existing term in favor
of the applicable Lessor or Successor Lessee, as specified by such Lessor
(by written notice delivered to such Lessee on or prior to the Termination
Date), in the same form and on the same economic terms as the existing
Hilton Franchise Agreements and effective as of the Termination Date, and
(ii) the Lessee for each Leased Hotel operating under a Third Party
Franchise Agreement shall exercise its good faith reasonable commercial
efforts to assist the applicable Lessor or Successor Lessee in obtaining a
replacement Third Party Franchise Agreement (or commitment therefor) of the
same brand for the balance of the existing term in favor of such Lessor or
such Successor Lessee on terms then applicable for the issuance of such
replacement Third Party Franchise Agreements (or commitments therefor) and
effective as of the Termination Date. None of the Lessor Parties or any
Successor Lessee shall be required to pay any change in ownership fee or
other fee in connection with the issuance of a replacement Hilton Franchise
Agreement. The Lessee Parties shall exercise their good faith reasonable
commercial efforts to obtain an agreement from Marriott International, Inc.
("Marriott") to the effect that Marriott will not require payment of any
re-licensing fee or any similar fee or increase the franchise, marketing or
reservation fees over the amounts contemplated by the Standstill Agreement
for the Leased Hotels operating under a franchise license from Marriott as
a result of the transactions contemplated by this
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<PAGE>
Termination Agreement. The REIT Parties acknowledge that Marriott's
execution of the Standstill Agreement will satisfy the obligation of the
Lessee Parties in the preceding sentence.
(d) MANAGEMENT AGREEMENTS RELATED TO LEASED HOTELS. Subject to the terms and
conditions set forth herein, (i) the Affiliate Management Agreements shall
terminate as of the Termination Date, and (ii) the applicable Lessor or
Successor Lessee for each Leased Hotel operating under a Third Party
Management Agreement shall accept and assume all liabilities under such
Third Party Management Agreement effective as of the Termination Date and
the Lessee Parties (exclusive of RFSL if the stock of RFSL is transferred
to the REIT or its designee on the Termination Date pursuant to Section
2(a) hereof) shall be released of all liabilities under such Third Party
Management Agreement from and after the Termination Date.
(e) CONTRACTS. Subject to the terms and conditions set forth herein, and to the
extent necessary with respect to the RFSL Hotels if the REIT or its
designee purchases the capital stock of RFSL, the Lessees shall use their
good faith reasonable commercial efforts to assign and transfer to the
Lessor for such Leased Hotel, or the applicable Successor Lessee, all
Contracts with respect to such Leased Hotel effective as of the Termination
Date, and such Lessor or Successor Lessee shall assume such assigned and
transferred Contracts; PROVIDED, HOWEVER, that if (i) any such Contract is
not permitted to be assigned or (ii) such Lessor or Successor Lessee elects
(by written notice delivered to the Lessees no less than thirty (30) days
prior to the Termination Date) not to accept and assume any such Contract,
the Lessees shall use their good faith reasonable commercial efforts to
terminate such Contract as of (or as soon as practicable after) the
Termination Date.
(f) OWNER MANAGEMENT AGREEMENTS. Subject to the terms and conditions set forth
herein, unless earlier terminated in accordance with its terms, each Owner
Management Agreement shall terminate as of the Termination Date, and
Manager shall assign and deliver to the applicable Owner or its designee,
and the assignee shall assume, all leases, concession agreements and
commercial or other agreements in effect with respect to the Managed Hotels
previously entered into by Manager pursuant to its authority under the
Owner Management Agreements and which are then in Manager's, rather than
the applicable Owner's, name.
Section 3. PAYMENTS.
(a) TERMINATION PAYMENTS. As consideration for the termination of the Lease
Agreements, the Owner Management Agreements and the Ancillary Agreements,
on the Termination Date, the REIT Parties shall deliver to the Lessee
Parties (i) the Aggregate Lease Termination Payment as adjusted if required
pursuant to Sections 2(a) and 6 hereof, if applicable, and (ii) the
Aggregate Management Termination Payment, both as further adjusted as
provided in subsection (b) below and net of the principal amount of the
Escrow which shall be disbursed by the Escrow Agent to the Lessee Parties
in accordance with the terms of the Escrow Agreement. The Aggregate Lease
Termination Payment and Aggregate Management Termination Payment (as so
adjusted) shall be paid by wire transfer in immediately available funds to
such bank account(s) as the Lessee Parties shall specify (by written notice
delivered to the REIT Parties not less than three (3) business days prior
to the Termination Date). The Aggregate Lease Termination Payment shall be
allocated to the Lease Agreements for the applicable Leased Hotels as
described in EXHIBIT 1(a) hereto and the Aggregate Management Termination
Payment shall be allocated to the applicable Owner Management Agreements as
described in EXHIBIT 1(b) hereto (as so allocated
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<PAGE>
to a Leased Hotel, an "Individual Lease Termination Payment", and as so
allocated to an Owner Management Agreement an "Individual Management
Termination Payment").
(b) OPERATIONAL SETTLEMENT.
(i) All of the items described on EXHIBIT 3(b)(i) hereto shall be
allocated and prorated as of the Termination Date with respect to the
Leased Hotels in the manner described in said EXHIBIT 3(b)(i), and
appropriate credits shall be given to the Lessors and Lessees as
adjustments to the Aggregate Lease Termination Payment and the
appropriate Individual Lease Termination Payment. In the event that an
amount for any such item cannot be accurately determined as of the
Termination Date, the Lessors and the Lessees shall provide a good
faith estimate of such amount, which shall be adjusted as promptly as
practicable after the Termination Date; and
(ii) Funds or any other assets from each Managed Hotel remaining in
Manager's possession or control as of the Termination Date which are
the property of the applicable Owner shall be remitted to or on behalf
of such Owner in the manner set forth in the applicable Owner
Management Agreement.
(c) ADDITIONAL PAYMENTS.
(i) On the Termination Date, the REIT Parties shall pay or cause to be
paid to the appropriate Lessee Parties (A) the payments specified in
Section 11 hereof, and (B) such costs and expenses as shall have been
incurred by the Lessee Parties on or before the Termination Date and
for which the REIT Parties are responsible or liable under the terms
of Sections 7(b) or 21(a) hereof. Such payments shall be made by wire
transfer in immediately available funds to such bank account(s) as
such Lessee Parties shall specify (by written notice delivered to the
REIT Parties not less than three (3) business days prior to the
Termination Date).
(ii) On the Termination Date, the Lessee Parties shall pay or cause to be
paid all such costs and expenses as shall have been incurred on or
before the Termination Date and for which the Lessee Parties are
responsible or liable under the terms of Section 21(a) hereof.
(d) DETERMINATION OF AGGREGATE MANAGEMENT TERMINATION. The Aggregate Management
Termination Payment shall be One Hundred Fifteen Thousand Dollars
($115,000); PROVIDED, HOWEVER, that if one or more of the Owner Management
Agreements is terminated in accordance with its terms prior to the
Termination Date (an "Interim Management Termination") and the applicable
Individual Management Termination Payment has been made to Manager, the
Aggregate Management Termination Payment shall be reduced by the amount of
the Individual Management Termination Payments so paid.
Section 4. THE CLOSING.
(a) NOTICE. On or before November 30, 2000, the REIT will notify Hilton, in
writing, that either (i) the REIT Parties do not intend to terminate the
Lease Agreements, the Owner Management Agreements, and the Ancillary
Agreements pursuant to the terms of this Termination Agreement, or (ii) the
REIT Parties intend to terminate the Lease Agreements, the Owner Management
Agreements and the Ancillary Agreements pursuant to the terms of this
Termination Agreement
8
<PAGE>
effective as of a date, designated by the REIT in the notice, not more than
sixty (60) days and not less than thirty (30) days following the date of
the notice (such designated date being herein referred to as the
"Termination Date").
(b) CLOSING. The closing of the transactions contemplated by this Agreement
shall take place on the Termination Date at the offices of the REIT or at
such other place or such other date as the parties shall mutually agree.
(c) CLOSING DELIVERIES BY THE LESSEE PARTIES. On the Termination Date (or, with
respect to subparagraph (xiv) below, on the Purchase Date if different from
the Termination Date), the Lessee Parties shall execute and deliver or
cause to be executed and delivered the following to the REIT Parties or the
applicable Successor Lessees:
(i) counterpart to a closing statement;
(ii) counterpart to a Memorandum of Lease Termination for each Leased Hotel
containing provisions substantially equivalent to those set forth in
EXHIBIT 4(c)(ii) hereto;
(iii) to the extent necessary with respect to the RFSL Hotels if the REIT
or its designee purchases the capital stock of RFSL, a Bill of Sale
with respect to the food and beverage inventory at each Leased Hotel
and the FF&E and other assets described in Section 11 hereof
substantially in the form of EXHIBIT 4(c)(iii) hereto (the "Bill of
Sale"), together with a list of all FF&E as of the Termination Date
and the book values thereof as of the last day of the month
immediately preceding the Termination Date;
(iv) counterpart to a replacement Hilton Franchise Agreement for each
Leased Hotel currently operating under a Hilton Franchise Agreement in
favor of the applicable Lessor or the applicable Successor Lessee and
otherwise in accordance with Section 2(c)(i) hereof;
(v) counterpart to an Assignment of Contracts and Assumption Agreement for
each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
covering all Contracts to be assigned and assumed as of the
Termination Date in accordance with Section 2(e) hereof;
(vi) counterpart to an Assignment of Office Lease and Assumption Agreement
substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
Office Lease if it is to be assigned and assumed as of the Termination
Date in accordance with Section 10 hereof;
(vii) the documentation necessary to effect the agreement with respect to
Leased Hotels operating under a Third Party Management Agreement set
forth in Section 2(d) hereof;
(viii) legal opinion of counsel to the Lessee Parties reasonably acceptable
to the REIT Parties with respect to the matters set forth on
EXHIBIT 4(c)(viii) hereto;
(ix) a certificate of the Lessee Parties that the representations and
warranties contained in Sections 22 and 24(b) hereof (after giving
effect to any permitted updating of EXHIBIT 22 hereto pursuant to
Section 22(b) hereof) are true and correct in all material respects as
of the Termination Date;
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<PAGE>
(x) a certificate of the Lessee Parties as to non-foreign status pursuant
to Section 1445 of the Internal Revenue Code;
(xi) evidence reasonably acceptable to the REIT Parties that the Affiliate
Management Agreements have been terminated;
(xii) counterpart to a Non-Compete Termination Agreement substantially in
the form of EXHIBIT 4(c)(xii) hereto;
(xiii) a release by Hilton, Doubletree and RFS of all non-competition,
confidentiality and similar restrictive covenant obligations of each
RFS Employee hired by the REIT Parties or a Successor Lessee pursuant
to Section 7(d) hereof;
(xiv) the certificate representing the Preferred Stock duly endorsed for
transfer; and
(xv) the documentation with respect to the Managed Hotels described in
Section 2(f) hereof.
(xvi) certificates representing the capital stock of RFSL if such capital
stock is to be transferred pursuant to Section 2(a) hereof; and
(xvii) counterpart to an Assignment of Lease Agreement and Assumption
Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
each Submanaged Hotel with respect to which the REIT has elected to
take a lease assignment pursuant to Section 2(a) hereof.
(d) CLOSING DELIVERIES BY THE REIT PARTIES. On the Termination Date (and/or in
the case of subparagraphs (ix), (xi) and (xiii) below, on the Purchase Date
if different from the Termination Date), the REIT Parties shall execute and
deliver or cause to be executed and delivered the following to the Lessee
Parties:
(i) all payments required to be made by the REIT Parties on the
Termination Date as set forth in Section 3 hereof;
(ii) the full principal amount of the Escrow;
(iii) counterpart to a closing statement;
(iv) counterpart to a Memorandum of Lease Termination for each Leased Hotel
containing provisions substantially equivalent to those set forth in
EXHIBIT 4(c)(ii) hereto;
(v) counterpart to a replacement Hilton Franchise Agreement for each
Leased Hotel currently operating as a Hampton Inn, Homewood Suites or
Doubletree Hotel in favor of the applicable Lessor or the applicable
Successor Lessee and otherwise in accordance with Section 2(c)(i)
hereof;
(vi) counterpart to an Assignment of Contracts and Assumption Agreement for
each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
covering all Contracts to be assigned and assumed as of the
Termination Date in accordance with Section 2(e) hereof;
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<PAGE>
(vii) counterpart to an Assignment of Office Lease and Assumption Agreement
substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
Office Lease if it is to be assigned and assumed as of the Termination
Date in accordance with Section 10 hereof;
(viii) the documentation necessary to effect the agreement with respect to
Leased Hotels operating under a Third Party Management Agreement set
forth in Section 2(d) hereof;
(ix) legal opinion of counsel to the REIT Parties reasonably acceptable to
the Lessee Parties with respect to the matters set forth on EXHIBIT
4(d)(ix) hereto;
(x) a certificate of the REIT Parties that the representations and
warranties contained in Section 24(a) hereof are true and correct in
all material respects as of the Termination Date;
(xi) evidence reasonably acceptable to the Lessee Parties that the REIT has
complied with all of the terms of the Registration Rights Agreement to
be complied with on or before the Termination Date or the Purchase
Date;
(xii) counterparts to a Non-Compete Termination Agreement substantially in
the form of EXHIBIT 4(c)(xii) hereto;
(xiii) the payments required pursuant to Section 9 hereof;
(xiv) the documentation with respect to the Managed Hotels described in
Section 2(f) hereof; and
(xv) counterpart to an Assignment of Lease Agreement and Assumption
Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
each Submanaged Hotel with respect to which the REIT has elected to
take a lease assignment pursuant to Section 2(a) hereof.
(e) EFFECT OF TERMINATION.
(i) Effective on the Termination Date, each Lease Agreement (including,
without limitation, any lease agreement which was amended or restated
thereby, the leasehold interest thereunder, and any rights to review,
options, or rights of first offer or first refusal, if any, created
thereby) and each Ancillary Agreement shall terminate and shall be
null and void and have no further force and effect, except for the
obligation of each Lessee to pay all Rent (as defined in the
respective Lease Agreements) with respect to Leased Hotels accrued and
unpaid through the Termination Date. The Lessees shall pay Rent under
the Lease Agreements accrued through the Termination Date as and when
the same becomes due. This Agreement (including, without limitation,
the provisions of this Section 4(e) and Section 21) shall override and
nullify any provision of any Lease Agreement or Ancillary Agreement
providing for the survival of any provisions set forth therein.
(ii) Effective on the Termination Date, each Affiliate Management Agreement
and each Owner Management Agreement then in effect shall terminate and
shall be null and void and have no further force and effect, except
for (i) the obligation of each Owner to pay all accrued and unpaid
management fees and other amounts owing to Manager under the
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Owner Management Agreements through the Termination Date and (ii) and
obligations and liabilities which, under the terms of each Owner
Management Agreement, survive any termination of the same.
Section 5. ESCROW.
Upon notice from the REIT to Hilton in accordance with Section
4(a)(ii) hereof, the parties hereto will execute and deliver an Escrow
Agreement with Lawyers Title Insurance Corporation, Chicago Office (the
"Escrow Agent") in the form of EXHIBIT 5 hereto (the "Escrow Agreement")
pursuant to which the Lessors will deposit Two Million Dollars
($2,000,000.00) in cash (the "Escrow") with the Escrow Agent, which will be
held and disbursed by the Escrow Agent in accordance with the terms of the
Escrow Agreement. A notice pursuant to said Section 4(a)(ii) hereof shall
have no effect and shall not be deemed given until the Lessors deposit the
Escrow in accordance with this Section 5. If the Lessees become entitled to
the Escrow pursuant to the terms of this Agreement and the Escrow
Agreement, payment of the Escrow to the Lessees in accordance with the
terms of the Escrow Agreement shall constitute the sole remedy of the
Lessee Parties hereunder for failure of the REIT Parties to close the
transactions described in Section 2 hereof, it being the intention and
agreement of the parties that the Escrow constitute liquidated damages for
such failure determined in advance by the parties as a reasonable forecast
of damage likely to occur in light of the fact that actual damage would be
difficult to ascertain. The Escrow shall not constitute liquidated damages
for any breach by the REIT Parties of their obligations under Sections 9 or
12 hereof.
Section 6. INTERIM LEASE TERMINATIONS.
From and after the date hereof, a Lessor may terminate a Lease
Agreement with respect to a Leased Hotel upon sale of the Leased Hotel as
set forth in the Lease Agreement for such Leased Hotel prior to the
Termination Date (an "Interim Lease Termination"). The termination payment
to be paid in connection with any such Interim Lease Termination (the
"Interim Lease Termination Payment") shall be the Individual Lease
Termination Payment for the applicable Leased Hotel as set forth on EXHIBIT
1(a) hereto. If an Interim Lease Termination occurs prior to the
Termination Date, the applicable Interim Lease Termination Payment shall be
paid on the earlier to occur of (i) the Termination Date and (ii) the date
which is one hundred twenty (120) days after the date of such Interim Lease
Termination. All Interim Lease Termination Payments pursuant to this
Section 6 shall be made by wire transfer in immediately available funds to
such bank account(s) as the Lessee Parties shall specify (by written notice
delivered to the REIT Parties not less than three (3) business days prior
to the required payment date).
Section 7. EMPLOYEE MATTERS.
(a) EMPLOYEE TRANSITION. As soon as practicable prior to the Termination Date
and after consultation with Hilton, the REIT shall use its good faith
reasonable commercial efforts to cause the Successor Lessees to fill their
hiring needs, if any, first from the corporate headquarters and regional
office employees of the Lessees described on EXHIBIT 22 hereto (as updated
pursuant to Section 22(b) hereof) (the "RFS Employees") on the terms set
forth herein. Any offer of employment by a Successor Lessee to an RFS
Employee shall be (i) contingent upon the closing of the transactions
contemplated hereby, (ii) for a position with a title substantially
equivalent to
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that described on EXHIBIT 22 hereto (as updated pursuant to Section 22(b)
hereof) and with authorities and responsibilities substantially equivalent
to those existing on the Termination Date with respect to such RFS
Employee, (iii) at the annual base salary described on EXHIBIT 22 hereto
(as updated pursuant to Section 22(b) hereof) with respect to such RFS
Employee, (iv) with employee benefits (including, without limitation,
retirement, insurance and other welfare benefits) substantially similar to
those described on EXHIBIT 7(a) hereto with respect to such RFS Employee,
(v) with credit for all actual and credited service by such RFS Employee
with the Lessees as described on EXHIBIT 22 hereto (as updated pursuant to
Section 22(b) hereof) for purposes of (A) eligibility and vesting under all
employment benefit plans (including, without limitation, retirement,
insurance and other welfare plans) of the applicable Successor Lessee, and
(B) to the extent not duplicative, benefit accruals under any severance or
vacation pay plans of the applicable Successor Lessee, (vi) with credit for
all unused vacation, sick, personal or other similar days earned or accrued
with the Lessees by such RFS Employee as described on EXHIBIT 22 hereto (as
updated pursuant to Section 22(b) hereof) and (vii) in the case of a Tier
II RFS Employee, contingent upon the receipt by the Lessee Parties of a
complete release and discharge of all obligations of the Lessee Parties
under any applicable severance agreement acceptable in form and substance
to the Lessee Parties and the REIT Parties.
(b) SEVERANCE. If (i) the REIT Parties or a Successor Lessee do not offer to
hire an RFS Employee following the Termination Date on the terms specified
in Section 7(a) hereof, and (ii) such RFS Employee is owed and paid
severance and/or accrued vacation by any Lessee Party pursuant to the
severance pay plan described in EXHIBIT 7(b) hereto, the severance
agreements described in EXHIBIT 7(b) hereto (as the same may be modified in
accordance with the terms of Section 7(e)(i) hereof) or the severance
agreement described in Section 7(e)(ii) hereof, including any and all
payments required by applicable state law and made by such Lessee Party in
respect of unused vacation, sick, personal or other similar days which are
earned or accrued by RFS Employees as of the Termination Date
(collectively, the "Severance Payments"), then RFSOP shall reimburse such
Lessee Party for such Severance Payments within two (2) business days after
receiving written notice of such payment from such Lessee Party.
(c) NOTICE. Hilton shall notify the REIT of any claim for Severance Payments
promptly upon receiving notice of such claim and in any event at least ten
(10) days prior to the payment of such claim.
(d) RESTRICTIVE COVENANTS. Effective as of the Termination Date, Hilton shall
execute, or cause the appropriate subsidiary of Hilton to execute, a
release of all non-competition, confidentiality and similar restrictive
covenant obligations of each RFS Employee hired by a Successor Lessee in
form and substance reasonably acceptable to the REIT; PROVIDED, HOWEVER,
that such release shall not be required to effectuate a release of any
obligations with respect to confidential information pertaining to
operations of Hilton or any of its subsidiaries other than the Lessees.
(e) EXTENSION OF CERTAIN SEVERANCE BENEFITS. RFS shall have the right (but not
the obligation) to (i) extend the term of the severance agreements for the
RFS Employees identified on Exhibit 7(b) hereof through January 31, 2001
and (ii) provide to Mr. Mark Kucera the same severance benefits as are
currently provided to Messrs. Kidney, Williams and West as described in
EXHIBIT 7(b) hereto and for a term extending through January 31, 2001.
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Section 8. TRANSITION OF HOTEL MANAGEMENT.
(a) FRANCHISE AGREEMENTS; SUBORDINATION AGREEMENT. The REIT Parties shall
exercise their good faith reasonable commercial efforts to obtain from each
franchisor of a Leased Hotel operating under a Third Party Franchise
Agreement a release of the applicable Lessee from all liabilities arising
under such Third Party Franchise Agreement or any other related agreement
from and after the Termination Date, and the Lessee Parties and the REIT
Parties shall execute and deliver all documents reasonably required by
third party franchisors in connection therewith (other than indemnity
agreements). The REIT Parties shall further exercise their good faith
reasonable commercial efforts to obtain a release of RFSL from all
liabilities arising under the Subordination Agreement from and after the
Termination Date.
(b) LICENSES. The Lessee Parties shall exercise good faith reasonable
commercial efforts (i) to assist the REIT Parties in obtaining replacement
Licenses, and (ii) unless instructed otherwise by the REIT Parties, to
terminate all Licenses as of the Termination Date. If a Successor Lessee or
an Owner, as applicable, is not able to obtain replacement Licenses for one
or more of the Leased Hotels or Managed Hotels effective as of (or as soon
as practicable after) the Termination Date, the REIT Parties shall so
notify the Lessee Parties in writing at least twenty (20) days prior to the
Termination Date, and on the Termination Date, such Successor Lessee or
Owner, as applicable, and the Lessee Parties shall execute a temporary
operating agreement, in form and substance mutually acceptable to the REIT
Parties and the Lessee Parties, to allow the uninterrupted operation of
such Leased Hotels and Managed Hotels for a reasonable period of time after
the Termination Date pending receipt of the replacement Licenses.
(c) BOOKS AND RECORDS. All books and records (including, but not limited to,
accounting and financial records) for the Leased Hotels and the Managed
Hotels kept by the Lessee Parties, and all personnel files regarding RFS
Employees hired by any Successor Lessee, shall be delivered to the REIT
promptly after the Termination Date; PROVIDED, HOWEVER, that such books and
records shall thereafter be available to the Lessee Parties at all
reasonable times for inspection, audit, examination and transcription for a
period of seven (7) years, and the Lessee Parties may retain copies or
computer records thereof.
(d) ST. LOUIS PLAN. It is the intent of the parties to satisfy the provisions
of Section 4204 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), with respect to the obligations of Holiday Inn St.
Louis/Clayton Plaza (the "St. Louis Hotel") under the St. Louis Hotel and
Restaurant Employees Pension Trust Fund (the "St. Louis Plan"). Therefore,
the parties agree as follows:
(i) Notwithstanding the provisions of Section 2(e) hereof, the REIT shall
cause the Successor Lessee with respect to the St. Louis Hotel to
accept an assignment of, and assume all obligations under, that
certain agreement between the Hotel Employees Restaurant Employees
Local 74, AFL-CIO and the St. Louis Hotel effective December 15, 1997
(the "St. Louis Agreement"). Without limitation of the foregoing, from
and after the Termination Date, the REIT shall cause such Successor
Lessee to continue making contributions to the St. Louis Plan in
accordance with the terms of the St. Louis Agreement for substantially
the same number of contribution base units for which the St. Louis
Hotel had an obligation to contribute to the St. Louis Plan on the
Termination Date;
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(ii) Unless exempt under Pension Benefit Guaranty Corporation Regulations
Section 4204.11, or Section 4204.21, the REIT shall cause the
Successor Lessee with respect to the St. Louis Hotel to post a bond or
hold in escrow in favor of the St. Louis Plan for a period of five (5)
plan years commencing with the first plan year beginning after the
Termination Date in an amount and form that satisfies the requirements
of Section 4204(a)(1)(B) of ERISA;
(iii) In the event that the Successor Lessee with respect to the St. Louis
Hotel withdraws in a complete or partial withdrawal under Section 4201
of ERISA from the St. Louis Plan with respect to the St. Louis Hotel
during the first five (5) plan years beginning after the Termination
Date, and such Successor Lessee fails to make any withdrawal liability
payments when due, without limitation of the provisions of Section
21(c)(viii) hereof, RFS and Hilton shall be secondarily liable for any
withdrawal liability that the St. Louis Hotel would have had to the
St. Louis Plan but for the provisions of this Section 8(d) and Section
4204 of ERISA; and
(iv) RFS agrees to use its good faith reasonable commercial efforts to
obtain and deliver to the REIT on or before February 28, 2000, an
actuarial valuation for the St. Louis Plan as of the most recent
practicable date.
Section 9. REIT CAPITAL STOCK.
(a) PREFERRED STOCK PURCHASE. On the earlier to occur of (i) the tenth
(10th) day after receipt by Hilton of a notice from the REIT pursuant
to Section 4(a) hereof evidencing the intention to terminate the Lease
Agreements, the Owner Management Agreements and the Ancillary
Agreements pursuant to the terms hereof or (ii) November 30, 2000, RFS
shall have the one time right to deliver a purchase notice to RFSOP
stating that RFS elects to require RFSOP to purchase all (but not less
than all) of the 973,684 shares of Preferred Stock owned by RFS in
accordance with the terms of this Section 9. In the event RFS delivers
to RFSOP a purchase notice pursuant to the preceding sentence, RFSOP
will purchase the Preferred Stock from RFS in accordance with the
terms of this Section 9; PROVIDED, HOWEVER, that the REIT shall have
the right, but not the obligation, to assume RFSOP's obligation to
purchase the Preferred Stock from RFS on the terms set forth in this
Section 9(a) or to designate a different transferee for the Preferred
Stock; and PROVIDED, FURTHER, that any such assumption by the REIT or
designation by RFSOP shall not otherwise release or waive any
obligation of RFSOP under this Section 9(a). The aggregate purchase
price for the Preferred Stock (the "Purchase Price") shall be the
greater of (A) either (i) Thirteen Million Seven Hundred Fifty
Thousand Dollars ($13,750,000.00), in the event the REIT has not
elected to terminate the Lease Agreements, the Owner Management
Agreements and the Ancillary Agreements in accordance with this
Termination Agreement, or (ii) Thirteen Million Dollars
($13,000,000.00) in the event the REIT has elected to terminate the
Lease Agreements, the Owner Management Agreements and the Ancillary
Agreements in accordance with this Termination Agreement, in either
case plus any accrued and unpaid dividends thereon through the
Purchase Date (defined below) or (B) the amount determined by
multiplying the Current Market Value by the number of shares of Common
Stock into which the Preferred Stock would then be convertible under
the terms of the REIT's Amended and Restated Charter notwithstanding
the fact that pursuant to the terms of the REIT's Amended and Restated
Charter, the Preferred Stock is not then convertible. The purchase and
sale of the Preferred Stock pursuant to this Section 9(a) shall occur
on the earlier of (i) the Termination Date, or (ii) January
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31, 2001 (either such date, the "Purchase Date"). If, as of the Purchase
Date (i) the Common Stock is listed for trading on the NYSE or any other
principal securities exchange and (ii) the New Shelf Registration Statement
(defined below) is effective under the Securities Act (covering the number
of shares of Common Stock to be issued), the REIT or RFSOP may elect, in
its sole discretion, to pay all or part of the Purchase Price in the form
of shares of Common Stock, in which event a share of Common Stock shall be
valued at its Current Market Value. The REIT or RFSOP shall notify RFS on
the business day prior to the Purchase Date whether it will pay any part
of the Purchase Price in the form of Common Stock. In the event RFS does
not elect to require RFSOP to acquire the Preferred Stock at the time and
in the manner described in the first sentence of this Section 9(a) its
right to elect to require such purchase shall be forfeited and null and
void and of no further force and effect.
(b) SHELF REGISTRATION STATEMENT. In accordance with the terms of the
Registration Rights Agreement, the REIT shall prepare and file with the
Securities and Exchange Commission (the "SEC"), as expeditiously as
reasonably possible and at the REIT's sole cost and expense, one or more
shelf Registration Statements on Form S-3 (collectively, the "New Shelf
Registration Statement") pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), covering the resale by RFS of not
less than 973,684 shares of Common Stock issuable to RFS in accordance with
Section 9(a) hereof. In addition, the REIT, at its sole cost and expense,
agrees to maintain the effectiveness of Registration Statement No.
333-28849 (the "Existing Shelf Registration Statement") covering the resale
by RFS of the shares of Common Stock issuable to RFS upon the redemption of
its Units. The REIT agrees to maintain the effectiveness of the New Shelf
Registration Statement and the Existing Shelf Registration Statement,
respectively, or any successor registration statement under the Securities
Act which covers shares of Common Stock issuable to RFS to the same extent
as the New Shelf Registration Statement and the Existing Shelf Registration
Statement, until the earlier to occur of (i) the date on which RFS can sell
all of the shares of Common Stock covered by such Registration Statement
freely without restriction pursuant to Rule 144(k) under the Securities Act
or any successor provision, (ii) the date on which RFS has sold all of the
shares of Common Stock covered by such Registration Statement, or (iii),
with respect to the New Shelf Registration Statement, until the day
following the Purchase Date, if the REIT or RFSOP do not issue any shares
of Common Stock to RFS in connection with the purchase of the Preferred
Stock pursuant to Section 9(a) hereof. The REIT shall file all required
reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on or prior to the due date therefor.
(c) REDEMPTION OF UNITS. The REIT shall cause to be maintained in effect the
provisions of the Fourth Amended and Restated Agreement of Limited
Partnership of RFSOP dated January 3, 1997 (the "RFSOP Partnership
Agreement") allowing RFS to tender its Units to RFSOP for redemption, with
the redemption price being payable in cash or shares of Common Stock at the
option of the REIT.
(d) SURRENDER OF CERTIFICATES. On or prior to the Purchase Date, RFS shall
deliver to the REIT or RFSOP, as applicable, certificates representing the
Preferred Stock, duly endorsed for transfer, free and clear of any liens,
claims, encumbrances or charges of any kind.
(e) LIMITATIONS ON RESALES. Hilton and RFS agree that, in the event RFS
receives shares of Common Stock pursuant to Section 9(a) hereof, RFS will
not sell such shares of Common Stock on any trading day in an amount which
exceeds 20% of the average daily trading volume for the
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Common Stock for the 30-trading-day period preceding the date of the sale.
The REIT Parties agree to work in good faith to assist RFS in the orderly
liquidation of any shares of Common Stock delivered pursuant to Section
9(a) hereof.
Section 10. OFFICE LEASE.
The REIT and RFS shall use their respective good faith reasonable
commercial efforts to effect either (a) the assignment to any REIT Party or
Successor Lessee as of the Termination Date of the Lease Agreement dated
December 1, 1994 by and between the predecessor in interest to Boyle
Investment Company, a Tennessee corporation (the "Landlord") and RFS, as
amended by the First Modification of Lease Agreement by and between
Landlord and RFS dated September ___, 1999 (the "Office Lease"), the
assumption of the Office Lease by such REIT Party or Successor Lessee, and
the release of RFS from all liabilities arising under or from the Office
Lease from and after the Termination Date, or (b) the termination of the
Office Lease as of the Termination Date and execution of a new lease for
the space demised under the Office Lease on substantially the same terms as
the Office Lease and for the remaining term thereof. Any such assignment of
the Office Lease shall be subject to the subleases described on EXHIBIT 22
hereto.
Section 11. FURNITURE AND EQUIPMENT.
(a) FF&E. On the Termination Date, the REIT shall cause a REIT Party or
Successor Lessee to purchase from RFS all corporate office furniture and
equipment then owned by RFS (the "FF&E") at the book value thereof as of
the Termination Date. EXHIBIT 11(a) hereof sets forth all FF&E as of
December 31, 1999, and the book values thereof as of such date. The Lessees
shall cause the FF&E to be transferred to the REIT Party or Successor
Lessee free and clear of all liens, claims, encumbrances and charges of any
kind pursuant to the Bill of Sale. Except as set forth in Section 11(b)
below, the REIT Parties and Successor Lessees shall have no obligation to
purchase from RFS any furniture, fixture or equipment, other than that
described in EXHIBIT 11(a) hereto, unless the REIT agrees in writing prior
to the Termination Date to make such purchase.
(b) CORPORATE OFFICE CAPITAL EXPENDITURES. On the Termination Date, the REIT
shall cause a REIT Party or Successor Lessee to reimburse RFS for the
actual costs of the capital expenditures made or irrevocably committed by
or on behalf of the Lessees with respect to their corporate office and
related systems during the period from and including the date hereof
through and including the Termination Date; PROVIDED, HOWEVER, that the
REIT shall have no obligation to cause any REIT Party or Successor Lessee
to reimburse RFS for (i) any such capital expenditure in excess of $25,000
unless the REIT has given its prior written consent to such capital
expenditure, or (ii) the amount by which the aggregate of any such capital
expenditures of less than $25,000 made without the REIT'S prior written
consent exceeds $100,000. All assets represented by such capital
expenditures for which RFS is reimbursed shall be conveyed to a REIT Party
or Successor Lessee on the Termination Date pursuant to the Bill of Sale.
Section 12. PARTNERSHIP INTERESTS.
The REIT and RFS shall use their respective good faith reasonable
commercial efforts to effect, as soon as practicable after the date hereof,
and pursuant to an Assignment of Partnership Interests and Assumption
Agreement substantially in the form of EXHIBIT 12, hereto
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(a) the assignment to the REIT or its designee of all of the right, title,
and interest of RFS in Highland Plaza Partners, L.P., Devonshire
Associates, L.P., SF Partners, L. P., DDP Partners, L.P., and Shelby
Distribution Partners, L.P., each a Tennessee limited partnership
(collectively, the "Partnership Interests"), (b) the assumption of the
Partnership Interests and all liabilities related thereto by the REIT or
its designee, and (c) the release of RFS from all liabilities related to
the Partnership Interests. Such assignment of Partnership Interests (i)
shall be free and clear of any liens, claims, encumbrances and charges of
any kind on or against the Partnership Interests that have been created by
RFS since the effective date of the Doubletree/RFS Merger, except as
provided in the applicable partnership agreements, and (ii) shall be in
exchange for a cash payment to RFS of $160,000. In the event the
Partnership Interests have not been assigned to the REIT or its designee on
or before the earlier of the Termination Date and January 31, 2001, RFS
shall assign to the REIT or its designee the economic benefits of the
Partnership Interests (to the extent permitted by the applicable
partnership agreements and related agreements) and effective on such date
receive the indemnification of the REIT Parties with respect to Liabilities
suffered or incurred with respect to the Partnership Interests set forth in
Section 21(c)(vi) hereof.
Section 13. PRODUCT IMPROVEMENT PLANS.
As soon as practicable, but in no event later than March 31, 2000,
Hilton will notify the Lessors of any product improvement plans which will
be required at any of the Leased Hotels which will be operated pursuant to
a Hilton Franchise Agreement as a result of the transactions contemplated
by this Termination Agreement (the "Required PIPs") and the capital
improvements comprising such Required PIPs. The Lessee Parties agree that
no Lessor or Successor Lessee shall be required, as a result of the
transactions contemplated by this Agreement, to undertake a product
improvement plan or capital expenditures which are not consistent with
those generally required of licensees pursuant to standard Hilton Franchise
Agreements.
Section 14. FINANCIAL INFORMATION.
(a) FINANCIAL DISCLOSURE. The Lessee Parties agree to (i) provide such
financial information with respect to the Lessees and the Manager and the
Leased Hotels and Managed Hotels as may be reasonably requested by the REIT
Parties and their respective permitted successors and assigns, and (ii)
exercise their good faith reasonable commercial efforts to obtain from
their independent public accountants such consents, "comfort letters" and
similar documents relating to the financial information described in clause
(i) above as may reasonably be requested by the REIT Parties and their
respective permitted successors and assigns for compliance with their
respective SEC disclosure obligations.
(b) COSTS AND EXPENSES. The REIT Parties shall pay all reasonable costs and
expenses arising from the compliance by the Lessee Parties with the
provisions of Section 14(a) hereof, including, without limitation, all
salary and wage expenses attributable to time spent by employees of Hilton
or any of its subsidiaries in complying with such provisions. Hilton shall
provide the REIT Parties with satisfactory evidence of such costs and
expenses.
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Section 15. CONDITIONS TO CLOSING.
(a) CONDITIONS PRECEDENT TO CLOSING BY THE REIT PARTIES. The obligations of any
of the REIT Parties under Sections 2, 3, 4, 7, 10, 11, 18(g) and 18(h) of
this Termination Agreement are subject to the satisfaction or waiver of the
following conditions on or before the Termination Date:
(i) PERFORMANCE OF COVENANTS. The Lessee Parties shall have performed,
satisfied and complied in all material respects with all covenants and
agreements required by this Termination Agreement to be performed,
satisfied or complied with by the Lessee Parties on or before the
Termination Date;
(ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
governmental authority or other third party seeking to prevent or
enjoin the transactions contemplated by this Termination Agreement
shall have been instituted or threatened on or before the Termination
Date; and
(iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Lessee Parties in Sections 22 and 24(b) hereof (after giving
effect to any permitted updating of EXHIBIT 22 hereto pursuant to
Section 22(b) hereof) shall continue to be true and correct in all
material respects as of the Termination Date.
(b) CONDITIONS PRECEDENT TO CLOSING BY THE LESSEE PARTIES. The obligations of
any of the Lessee Parties under Sections 2, 3, 4, and 11 of this
Termination Agreement are subject to the satisfaction or waiver of the
following conditions on or before the Termination Date:
(i) PERFORMANCE OF COVENANTS. The REIT Parties shall have (i) performed,
satisfied and complied in all material respects with all covenants and
agreements required by this Termination Agreement to be performed,
satisfied or complied with by any of the REIT Parties on or before the
Termination Date and (ii) obtained the consents described as Items 3
and 4 on EXHIBIT 24(a)(ii) hereto;
(ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
governmental authority or other third party seeking to prevent or
enjoin the transactions contemplated by this Termination Agreement
shall have been instituted or threatened on or before the Termination
Date; and
(iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the REIT Parties in Section 24(a) hereof shall continue to be true and
correct in all material respects as of the Termination Date.
Section 16. TERMINATION.
(a) TERMINATION DUE TO OTHER CIRCUMSTANCES. This Termination Agreement may be
terminated at any time on or prior to January 31, 2001:
(i) by mutual written agreement of all parties hereto;
(ii) by (A) the REIT pursuant to a notice delivered pursuant to Section
4(a)(i) hereof, or (B) by Hilton if (1) the REIT has not notified
Hilton in writing on or before November
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30, 2000 that the REIT Parties intend to terminate the Lease
Agreements, the Owner Management Agreements and the Ancillary
Agreements pursuant to the terms of this Termination Agreement or (2)
the Lessors have not executed the Escrow Agreement and deposited the
Escrow pursuant to Section 5 hereof on or before November 30, 2000;
PROVIDED HOWEVER, that in either such event the provisions of Sections
9, 12 and 18(g) hereof shall survive such termination.
(iii) by any party hereto if the Termination Date shall not have occurred
on or before January 31, 2001; PROVIDED, HOWEVER, that this provision
shall not be available to the Lessee Parties if the REIT Parties have
the right to terminate this Termination Agreement under clause (iv)
below, and this provision shall not be available to the REIT Parties
if the Lessee Parties have the right to terminate this Termination
Agreement under clause (v) below;
(iv) by the REIT Parties if there is (A) a breach of any material covenant
or material agreement to be complied with or performed by the Lessee
Parties pursuant to the terms of this Termination Agreement and such
breach has not been cured by the Termination Date or (B) a failure of
any condition set forth in Section 15(a) hereof to be satisfied on or
prior to the Termination Date; or
(v) by the Lessee Parties if there is (A) a breach of any material
covenant or material agreement to be complied with or performed by the
REIT Parties pursuant to the terms of this Termination Agreement and
such breach has not been cured by the Termination Date, or (B) a
failure of any condition set forth in Section 15(b) hereof to be
satisfied on or prior to the Termination Date.
(b) EFFECT OF TERMINATION. The termination of this Termination Agreement
pursuant to Section 16(a) above shall not affect the right of any party to
bring any action for breach of this Termination Agreement, and the
obligations of the parties under Sections 9, 12, 18(g) and 21 of this
Termination Agreement shall survive any such termination. Each of the
Lessee Parties (other than RFSL) shall be jointly and severally liable for
any breach of this Termination Agreement by any of the Lessee Parties, and
each of the REIT Parties shall be jointly and severally liable for any
breach of this Termination Agreement by any of the REIT Parties.
Section 17. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY.
(a) PUBLIC ANNOUNCEMENTS. None of the REIT Parties shall issue or make, or
permit any Successor Lessee to issue or make, any reports, statements or
releases to the public or generally to its employees, customers, suppliers
or other persons with respect to this Termination Agreement or the
transactions contemplated hereby without giving Hilton twenty-four (24)
hours (occurring during a business day) to comment on such report,
statement or release. None of the Lessee Parties shall issue or make any
reports, statements or releases to the public or generally to its
employees, customers, suppliers or other persons with respect to this
Termination Agreement or the transactions contemplated hereby without
giving the REIT twenty-four (24) hours (occurring during a business day) to
comment on such report, statement or release. If any Lessee Party is unable
to obtain the comments of the REIT, or any REIT Party or Successor Lessee
is unable to obtain the comments of Hilton, on any such report, statement
or release after such time, then
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such party may make or issue such report, statement or release and promptly
furnish the REIT or Hilton, as applicable, with a copy thereof.
(b) CONFIDENTIALITY. Each party hereto shall keep confidential, and shall cause
its directors, officers, employees, agents, representatives and advisors to
keep confidential, any information from time to time received by it from
any other party regarding such other party or its business affairs;
PROVIDED, HOWEVER, that nothing herein shall restrict the disclosure of any
such information to the extent required by statute, rule, regulation or
judicial process, or the disclosure of any such information which is
generally available to the public.
Section 18. FURTHER COVENANTS AND AGREEMENTS.
(a) EMPLOYEE MATTERS. The REIT shall have no obligation under Section 7(b)
hereof with respect to any increase in Severance Payments resulting from
any of the following actions taken by any Lessee Party prior to the
Termination Date without the prior written consent of the REIT: (i) except
as provided in Section 7(e) hereof, the increase of severance benefits or
the extension of the term of any severance plan or individual severance
agreement with respect to the RFS Employees described in EXHIBIT 7(b)
hereto, (ii) the promotion of any RFS Employee to a level which entitles
such RFS Employee to greater severance benefits, (iii) the increase in the
compensation of any RFS Employee, except in the ordinary course of
business, or (iv) the release of any RFS Employee from any non-compete
provisions or other restrictive covenants applicable to such RFS Employee,
except as required by Section 7(d) hereof.
(b) AFFAIRS OF RFS. RFS hereby agrees to maintain its legal existence and to
use good faith reasonable commercial efforts to (i) maintain its current
management structure at its corporate headquarters and regional offices and
(ii) retain the RFS Employees for the period prior to the Termination Date,
subject to such changes as may occur in the ordinary course of business. It
is the intention of the parties that prior to the Termination Date the
Leased Hotels and the Managed Hotels continue to be managed in a manner
consistent with current operations, and to the extent possible, by the same
individuals who currently manage the Leased Hotels and the Managed Hotels.
After the Termination Date, no Lessee Party shall make, or permit any of
its subsidiaries to make, offers of employment to any RFS Employee or any
manager of a Leased Hotel or Managed Hotel prior to the date which is six
(6) months after the Termination Date.
(c) THE RFS NAME. No later than fifteen (15) business days after the
Termination Date, the Lessee Parties shall take all necessary steps to
change their respective corporate names so as to no longer contain the
designation RFS. The Lessee Parties hereby agree not to utilize the trade
name or mark of RFS (or any logo or other mark containing the designation
RFS) in connection with any of their businesses from and after the
Termination Date except as may be reasonably necessary to wind up the
affairs of the Lessees.
(d) FINAL RENT PAYMENT AND MANAGEMENT FEES. The Lessees shall pay all accrued
and unpaid Percentage Rent and Additional Charges (as such terms are
defined in the applicable Lease Agreements) and the Owners shall pay all
management fees and other amounts due and owing pursuant to the Owner
Management Agreements through the Termination Date on or before the date
which is fifteen (15) days after the Termination Date.
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(e) ST. LOUIS PLAN. The Lessee Parties shall provide any information or give
notice, or use good faith commercially reasonable efforts to cause the
trustee of the St. Louis Plan to provide any information or give notice,
reasonably requested by the REIT Parties or the applicable Successor Lessee
in connection with their application of the Pension Benefit Guaranty
Corporation Regulations exemptions referred to in Section 8(d)(ii) hereof.
(f) RFSL. In the event the REIT or its designee purchases the capital stock of
RFSL pursuant to Section 2(a) hereof, the assets and liabilities of RFSL
shall be prorated and settled as of the Termination Date in the same manner
as if the Lease Agreements applicable to the RFSL Hotels were being
terminated in accordance with the provisions of this Agreement, it being
the intention of the parties that at the Termination Date RFSL will have no
more assets or liabilities than would the applicable Lessor or a Successor
Lessee had the Lease Agreements for the RFSL Hotels been terminated in
accordance with the provisions of this Termination Agreement and
liabilities settled or indemnified in accordance with Sections 3(b), 4(e),
18(d) and 21 hereof. The parties acknowledge and agree that, in the event
the REIT or its designee elects to purchase the capital stock of RFSL
pursuant to Section 2(a) hereof, all assets of RFSL other than the Lease
Agreements and the Leased Property (as such term is defined in the Lease
Agreements but exclusive of Excluded Assets) will be transferred by RFSL to
Hilton or its designee in advance of such purchase.
(g) STANDSTILL AGREEMENT. The REIT Parties hereby (i) consent to the execution
by the Lessees of the "New Amendments" described in the Standstill
Agreement, (ii) agree to execute the owner agreement amendments and new
owner agreements described in the Standstill Agreement and (iii) agree to
evidence their agreement set forth in this Section 18(g) to Marriott, if
requested, in a form satisfactory to the REIT Parties.
(h) NON-INTERFERENCE. The parties hereby acknowledge and agree that, prior to
the Termination Date, except as expressly set forth herein or in the Lease
Agreements or the Ancillary Agreements, the REIT Parties shall have no
rights hereunder with respect to the operations or business of the Lessees.
Section 19. [INTENTIONALLY LEFT BLANK].
Section 20. FURTHER ASSURANCES.
Each party hereby agrees to cooperate in good faith with the other
parties and to execute and deliver such other agreements, documents or
instruments as may be necessary or desirable in connection with the
transactions contemplated by this Termination Agreement (including the
termination of the Lease Agreements, the Owner Management Agreements and
the Ancillary Agreements and execution and delivery of memoranda of lease
termination that comply with applicable local law) or in effecting the
transfer of the operational control of the Leased Hotels and the Managed
Hotels resulting therefrom. Each party hereby further agrees to use its
good faith reasonable commercial efforts to obtain consents and waivers
from third parties, including franchisors, suppliers, vendors, employees,
lessors, lessees, lenders, trustees, rating agencies and other third
parties necessary to effect the transactions contemplated by this
Termination Agreement, including, without limitation, all requisite
consents and waivers
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identified on EXHIBIT 24(a)(ii) hereto and EXHIBIT 24(b)(ii) hereto. If any
affiliate of a REIT Party becomes a lessor for a Leased Hotel prior to the
Termination Date, the REIT shall cause such affiliate to become a party to
and be bound by this Termination Agreement as if it were an original party
hereto. If any affiliate of a Lessee Party becomes a lessee for a Leased
Hotel prior to the Termination Date, Hilton shall cause such affiliate to
become a party to and be bound by this Termination Agreement as if it were
an original party hereto.
Section 21. COSTS AND EXPENSES; INDEMNITIES.
(a) COSTS AND EXPENSES.
(i) COSTS AND EXPENSES PAYABLE BY THE LESSEE PARTIES. The Lessee Parties
shall pay all fees, costs and expenses associated with (A) the
termination of the Affiliate Management Agreements in accordance with
Section 2(d)(i) hereof, including, without limitation, termination
fees, liquidated damages and other payments owing to the managers
thereunder, and (B) obtaining the consents, waivers and other actions
described on EXHIBIT 24(b)(ii) hereto.
(ii) COSTS AND EXPENSES PAYABLE BY THE REIT PARTIES. Except as otherwise
set forth herein and in the Standstill Agreement, the REIT Parties
shall pay all fees, costs and expenses associated with (A) the
replacement of the Third Party Franchise Agreements applicable to the
Leased Hotels in accordance with Section 2(c) hereof, including,
without limitation, new license application fees, change of ownership
fees, liquidated damages and other payments owing to the franchisors
thereunder, whether as a result of the termination of the applicable
Lease Agreement, Third Party Franchise Agreement or any other related
agreement, the change of ownership of the franchise, the execution of
a replacement Third Party Franchise Agreement with the applicable
Lessor or Successor Lessee, or otherwise, (B) the replacement and
termination of the Licenses applicable to the Leased Hotels and the
Managed Hotels in accordance with Section 8(b) hereof, (C) the
assignment or termination of the Contracts applicable to the Leased
Hotels (other than Excluded Material Contracts) in accordance with
Section 2(e) hereof, (D) the termination and replacement or the
assignment of the Office Lease in accordance with Section 10 hereof
and any subleases thereof, (E) the assignment of the Partnership
Interests, (F) the acceptance and assumption of the Third Party
Management Agreements and the release of the Lessee Parties with
respect to the same, all in accordance with Section 2(d) hereof, and
(G) obtaining the consents, waivers and other actions described on
EXHIBIT 24(a)(ii) hereto; PROVIDED, HOWEVER, that the REIT Parties
shall not be responsible for (x) amounts owing by the Lessees or any
of their affiliates under the Franchise Agreements, Third Party
Management Agreements, Contracts, Licenses or the Office Lease for the
period prior to the Termination Date, or (y) any fees, costs or
expenses described in this subsection (ii) (exclusive of clause (E)
above) that are incurred by any Lessee Party prior to the date that is
thirty (30) days in advance of the Termination Date.
(iii) OTHER COSTS AND EXPENSES. Except as otherwise provided herein, each
of the parties shall pay all costs and expenses incurred or to be
incurred by it in negotiating and preparing this Termination Agreement
and the other documents and instruments contemplated herein and in
performing their respective obligations hereunder and thereunder.
23
<PAGE>
(b) INDEMNITY BY THE LESSEE PARTIES. The Lessee Parties (other than RFSL)
agree, jointly and severally, to indemnify, defend and hold harmless the
REIT Parties and their respective affiliates, officers, directors,
shareholders, employees and agents and each Successor Lessee (collectively,
the "REIT Indemnitees") from and against any and all claims, demands,
obligations, losses, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, costs and
expenses, and any and all actions, suits and proceedings in respect thereof
(collectively, "Liabilities"), suffered or incurred by any REIT Indemnitee
as a result of (i) the termination of, or failure to terminate, the
Affiliate Management Agreements for the Leased Hotels, (ii) the breach of
any covenant of the Lessee Parties set forth herein or in any document or
instrument delivered in connection herewith, (iii) the failure of any
representation and warranty made by the Lessee Parties in Sections 22 or
24(b) hereof or pursuant to Section 4(c)(ix) hereof to be true and correct
in all material respects, (iv) the operation of the Leased Hotels by the
Lessee Parties prior to the Termination Date, including, without
limitation, claims or causes of action relating in any way to any employees
of RFS based upon events occurring prior to the Termination Date, including
but not limited to any alleged or actual unfair labor practices, employment
discrimination charges and lawsuits, violations of collective bargaining
contracts or trust agreements, any failure to make contributions to the St.
Louis Plan contrary to the requirements of Section 515 of ERISA, and any
other claims regarding employment, severance, safety, compensation,
benefits or other matters, (v) any untrue statement of a material fact or
omission of any material fact included in written information provided by
any Lessee Party to any of the REIT Parties or their respective permitted
successors and assigns or any Successor Lessee expressly for inclusion in
any Exchange Act report or Securities Act registration statement, or (vi)
in the event the REIT or its designee elects to purchase the capital stock
of RFSL pursuant to Section 2(a) hereof, liabilities of RFSL arising prior
to the Termination Date but not from the operation of the Leased Hotels.
The Lessee Parties shall pay any and all amounts owing under this indemnity
within two (2) business days after demand by the applicable REIT Indemnitee
together with reasonable supporting documentation therefor. This indemnity
shall survive the Termination Date for a period of three (3) years plus,
with respect only to any claim for indemnification made hereunder before
the expiration of such three (3)-year period, any period during which such
claim is pending and unresolved hereunder. Payment of a Liability by a REIT
Indemnitee shall not be a condition precedent to the obligations of the
Lessee Parties under this indemnity. The limitation on the indemnification
obligation set forth in clause (vi) above shall not in any way limit the
indemnification obligation set forth in clause (iv) above.
(c) INDEMNITY BY THE REIT PARTIES. The REIT Parties agree, jointly and
severally, to indemnify, defend and hold harmless the Lessee Parties and
their respective affiliates, officers, directors, shareholders, employees
and agents (collectively, the "Hilton Indemnitees") from and against any
and all Liabilities suffered or incurred by any Hilton Indemnitee as a
result of (i) the breach of any covenant of any REIT Party or Successor
Lessee or any other designee of the REIT Parties set forth herein or in any
document or instrument delivered in connection herewith, including, without
limitation, the breach of any obligation under a Contract, Third Party
Franchise Agreement, Third Party Management Agreement or License assumed by
any REIT Party or Successor Lessee occurring after the Termination Date,
(ii) the failure of any representation and warranty made by the REIT
Parties in Section 24(a) hereof or pursuant to Section 4(d)(x) hereof to be
true and correct in all material respects, (iii) the operation of the
Leased Hotels by the Lessors or any Successor Lessee after the Termination
Date, including, without limitation, (A) costs of complying with all
product improvement plans and satisfying
24
<PAGE>
other requirements for the issuance or continuance of a replacement
Franchise Agreement and (B) claims or causes of action relating in any way
to any employee based upon events occurring after the Termination Date,
including but not limited to any alleged or actual unfair labor practices,
employment discrimination charges and lawsuits, violations of collective
bargaining contracts or trust agreements, any failure to make contributions
to the St. Louis Plan contrary to the requirements of Section 515 of ERISA
or Section 8(d)(i) hereof, and any other claims regarding employment,
severance, safety, compensation, benefits or other matters, (iv) the
continuation beyond the Termination Date of any Contract (other than an
Excluded Material Contract), License or Franchise Agreement which is not
assumed by a REIT Party or Successor Lessee, (v) the continuation beyond
the Termination Date of any obligations of the Lessee Parties under the
Subordination Agreements, (vi) the Partnership Interests (exclusive of
Liabilities arising with respect thereto from the gross negligence or
willful misconduct of RFS after the effective date of the Doubletree/RFS
Merger), (vii) any withdrawal liability incurred as a result of the
transactions contemplated hereby with respect to the St. Louis Plan, (viii)
any information with respect to the Lessee Parties set forth in any reports
of any of the REIT Parties or their respective permitted successors and
assigns or any Successor Lessee under the Exchange Act or any registration
statement under the Securities Act, except, to the extent that any
Liabilities in respect thereof result from any untrue statement of a
material fact or omission of any material fact included in written
information provided by any Lessee Party to such REIT Party, permitted
successor or assign or Successor Lessee expressly for inclusion in any such
Exchange Act report or Securities Act registration statement, and (ix) any
transfer taxes incurred as a result of any lease assignment with respect to
Submanaged Hotels pursuant to Section 2(a) hereof or as a result of the
transfer of the stock of RFSL pursuant to Section 2(a) hereof. The REIT
Parties shall pay any and all amounts owing under this indemnity within two
(2) business days after demand by the applicable Hilton Indemnitee together
with reasonable supporting documentation therefor. This indemnity shall
survive the Termination Date for a period of three (3) years plus, with
respect only to any claim for indemnification made hereunder before the
expiration of such three (3)-year period, any period during which such
claim is pending and unresolved hereunder; PROVIDED, HOWEVER, that (i) the
indemnity obligation described in clause (vii) above shall survive the
Termination Date for a period of six (6)-years plus, with respect only to
any claim for such indemnification made hereunder before the expiration of
such six (6) year period, any period during which such claim is pending and
unresolved hereunder, and (ii) the indemnity obligations described in
clause (vi) above with respect to the Partnership Interests and all
liabilities related thereto shall survive the Termination Date for the
applicable statute of limitations period. Payment of a Liability by a
Hilton Indemnitee shall not be a condition precedent to the obligations of
the REIT Parties under this indemnity.
(d) DEFENSE OF CLAIMS. If a claim for Liabilities is to be made by a party
entitled to indemnification under this Section 21, the party entitled to
such indemnification shall give written notice to the indemnifying party as
soon as practicable after the party entitled to indemnification becomes
aware of any fact, condition or event which may give rise to Liabilities
for which indemnification may be sought under this Section 21. If any
action, suit or proceeding alleging a claim for Liabilities is filed
against any party entitled to the benefit of indemnity hereunder, written
notice thereof shall be given to the indemnifying party as promptly as
practicable. After such notice, the indemnifying party shall be entitled,
if it so elects, (i) to take control of the defense and investigation of
such action, suit or proceeding, (ii) to employ and engage attorneys and
experts of its own choice to handle and defend the same, and (iii) with the
indemnified party's consent, to settle such action, suit or proceeding, all
at the indemnifying party's sole risk and expense,
25
<PAGE>
provided, in each instance, that the indemnifying party and its counsel
shall proceed with diligence and in good faith with respect thereto;
PROVIDED, HOWEVER, that any such settlement shall include, among other
things, an absolute and unconditional release of the indemnified party from
all Liabilities. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such action, suit or proceeding and any
appeal arising therefrom; PROVIDED, HOWEVER, that the indemnified party
may, at its own cost, participate in the investigation, trial and defense
of such action, suit or proceeding and any appeal arising therefrom. This
Section 21(d) shall have no application to the reimbursement obligation of
the RFSOP set forth in Section 7(b) hereof.
(e) APPLICABILITY OF INDEMNITY PROVISIONS. Except with respect to the indemnity
provided by the Lessee Parties (other than RFSL) pursuant to Section
21(b)(v) hereof and the indemnity provided by the REIT Parties pursuant to
Section 21(c)(vi) and Section 21(c)(viii) hereof, the provisions of
subsections (b), (c) and (d) of this Section 21 shall not become applicable
until the consummation of the transactions contemplated by Section 2 hereof
on the Termination Date. The indemnity provided by the REIT Parties
pursuant to Section 21(c)(vi) shall not become applicable until the
earliest of (i) the consummation of the transactions contemplated by
Section 12 hereof, (ii) the consummation of the transactions contemplated
by Section 2 hereof on the Termination Date and (iii) January 31, 2001.
Section 22. DISCLOSURE.
(a) REPRESENTATIONS AND WARRANTIES. The Lessee Parties hereby make the
following representations and warranties:
(i) LITIGATION. To the actual knowledge of Lawrence A. Russell, Jr.,
Section (a) of EXHIBIT 22 hereto (to be completed by RFS within ten
(10) days after the date hereof) will set forth a true and correct
list of all pending and threatened actions, suits and proceedings
against the Lessees as of the date hereof.
(ii) MATERIAL CONTRACTS. To the actual knowledge of Lawrence A. Russell,
Jr., Section (b) of EXHIBIT 22 hereto sets forth a true and correct
list of all Material Contracts as of the date hereof.
(iii) EMPLOYEE MATTERS. Section (c) of EXHIBIT 22 hereto sets forth a true
and correct statement of the current information with respect to the
RFS Employees set forth therein.
(iv) SUBLEASES. Section (d) of EXHIBIT 22 hereto sets forth a true and
correct list of all subleases executed by any of the Lessee Parties
with respect to the space demised under the Office Lease.
(v) MANAGEMENT AGREEMENTS. EXHIBIT 1(d) hereto sets forth all of the Third
Party Management Agreements with respect to the Leased Hotels.
(vi) RFS LEASING, INC. RFSL is duly incorporated, validly existing and in
good standing under the laws of the State of Tennessee and is in good
standing in each state in which it leases a hotel property from RFSFP.
Other than its obligations pursuant to the Lease Agreements, Franchise
Agreements, Licenses, Third Party Management Agreements, Affiliate
Management Agreements, and Contracts relating to the RFSL Hotels, the
26
<PAGE>
Standstill Agreement, this Termination Agreement, the Escrow
Agreement, the Subordination Agreement and the Ancillary Agreements,
RFSL has no material contractual obligations of any kind, and RFSL has
no business operations of any kind which are unrelated to the RFSL
Hotels. Hilton (either directly or indirectly) owns all of the
outstanding capital stock of RFSL free and clear of any liens, claims,
encumbrances and charges of any kind.
(vii) REPLACEMENT HILTON FRANCHISE AGREEMENTS. Hilton, or a wholly owned
subsidiary of Hilton, has full legal right and authority to grant to
the REIT Parties or a Successor Lessee a replacement Hilton Franchise
Agreement for the same franchise brand for each Leased Hotel currently
operating under a Hilton Franchise Agreement.
(b) UPDATING OF DISCLOSURES. The Lessee Parties shall promptly update any of
the information set forth in EXHIBIT 22 hereto to include developments
after the date hereof by delivering written notice of such new developments
to the REIT Parties.
Section 23. COUNTERPARTS.
This Termination Agreement may be executed in multiple counterparts,
each of which shall be deemed an original.
Section 24. AUTHORIZATION; NO CONSENTS.
(a) THE REIT PARTIES. The REIT Parties hereby represent and warrant to the
Lessee Parties as follows:
(i) The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated therein by each of the
REIT Parties have been duly authorized by all necessary corporate or
partnership action, as the case may be. Each Agreement constitutes a
valid and binding agreement of each of the REIT Parties, enforceable
in accordance with its terms.
(ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto,
and except for required consents to the assignment, replacement and/or
termination of the Franchise Agreements (and related agreements), the
Licenses, the Contracts, the Third Party Management Agreements, the
Office Lease and the Partnership Interests, no consents, waivers or
other actions by any third party are required in connection with the
execution, delivery and performance of any Agreement by any of the
REIT Parties.
(b) THE LESSEE PARTIES. The Lessee Parties hereby represent and warrant to the
REIT Parties as follows:
(i) The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated therein by each of the
Lessee Parties (including, without limitation, the execution and
delivery of the agreement described in Section 4(c)(xii) hereof) have
been duly authorized by all necessary corporate or partnership action,
as the case may be. Each Agreement constitutes a valid and binding
agreement of each of the Lessee Parties, enforceable in accordance
with its terms.
27
<PAGE>
(ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto
and except for required consents to the assignment, replacement and/or
termination of the Franchise Agreements (and related agreements), the
Licenses, the Contracts, the Third Party Management Agreements, the
Office Lease and the Partnership Interests, no consents, waivers or
other actions by any third party are required in connection with the
execution, delivery and performance of any Agreement by any of the
Lessee Parties.
Section 25. NOTICES.
Any notice required or permitted to be given under this Termination
Agreement shall be in writing and shall be sent by facsimile transmission
(confirmed by any of the following methods: overnight delivery (with proof
of delivery), courier service (with proof of delivery), hand delivery, or
certified or registered mail (return receipt requested and first class
postage prepaid)) and addressed as follows:
If to any Lessee Party:
c/o Hilton Hotels Corporation
755 Crossover Lane
Memphis, TN 38117-4900
Attention: Rick Schultz and Kevin Kern
Facsimile: (901) 374-5521
with a copy to:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Kevin Luebbers
Facsimile: (310) 205-4611
with a copy (which shall not constitute notice) to:
Latham & Watkins
5800 Sears Tower
Chicago, IL 60606
Attention: Linda S. Schurman
Facsimile: (312) 993-9767
28
<PAGE>
If to any REIT Party:
c/o RFS Hotel Investors, Inc.
850 Ridge Lake Boulevard
Suite 220
Memphis, TN 38120
Attention: Robert M. Solmson, Chairman of the Board
Facsimile: (901) 818-5260
with a copy (which shall not constitute notice) to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219
Attention: David C. Wright
Facsimile: (804) 788-8218
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date the notice
is received or receipt is rejected.
Section 26. SUCCESSORS AND ASSIGNS.
This Termination Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that no party may make any assignment of this Termination
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties. Notwithstanding the foregoing, RFS shall have
the right to assign its rights under Section 9 hereof to Hilton or any
subsidiary of Hilton which is a successive holder of any Preferred Stock,
Common Stock or Units; PROVIDED, HOWEVER, that RFS shall notify the REIT in
writing of any such assignment prior to the filing of the New Shelf
Registration Statement.
Section 27. ENTIRE AGREEMENT; AMENDMENTS.
The Agreements and the exhibits and schedules thereto constitute the
entire agreement among the parties thereto with respect to the subject
matters thereof and supersede all prior agreements and understandings among
the parties with respect to the matters set forth therein, including, without
limitation, any termination or survival provisions in the Lease Agreements.
No addition to or amendment or modification of any provision of this
Termination Agreement shall be binding upon any party hereto unless made in
writing and signed by each party hereto.
Section 28. HEADINGS.
Headings of the sections of this Termination Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
29
<PAGE>
Section 29. INCORPORATION.
The exhibits hereto are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
Section 30. ENFORCEMENT OF AGREEMENT.
The parties agree that irreparable damage will occur in the event that
any of the provisions of this Termination Agreement is not performed in
accordance with the specific terms hereof or are otherwise breached. It is
accordingly agreed that, except as otherwise provided in Section 5 hereof, in
addition to any other remedy to which the parties are entitled at law or in
equity, the parties shall be entitled to injunctive relief to prevent
breaches of this Termination Agreement and to enforce specifically the terms
and provisions hereof in any court in the State of Tennessee.
Section 31. GOVERNING LAW.
This Termination Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to its
rules of conflicts of laws.
Section 32. SEVERABILITY.
Any term or provision of this Termination Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Termination Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Termination Agreement in any other
jurisdiction. If any provision of this Termination Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
Section 33. ATTORNEYS FEES.
If any party brings an action against another party to enforce any
condition or covenant of this Termination Agreement or any other Agreement,
the prevailing party in such action shall be entitled to recover its court
costs, attorneys' fees and expenses in the judgment rendered through such
action.
Section 34. TIME OF THE ESSENCE.
Time is of the essence of this Termination Agreement.
Section 35. RISK OF LOSS.
In the event of a casualty or condemnation affecting any Leased Hotel,
no party shall have the right to terminate any Agreement and the applicable
Lessee shall hold and assign to the applicable Lessor or Successor Lessee any
and all proceeds of insurance or any condemnation award relating to such
casualty or condemnation in such Lessee's possession as of the Termination
Date.
30
<PAGE>
Section 36. SURVIVAL.
Except as limited by Section 21 hereof, all agreements and obligations
of the parties to this Termination Agreement shall survive the Termination
Date.
Section 37. CONSENTS.
Whenever the consent or approval of a party is required under this
Termination Agreement, such consent shall not be unreasonably withheld or
delayed.
Section 38. GOOD FAITH REASONABLE COMMERCIAL EFFORTS.
Whenever a party is obligated under this Termination Agreement to use
its good faith reasonable commercial efforts, such obligation shall not
require such party to expend funds or incur liability not contemplated by
this Termination Agreement.
[SIGNATURE PAGES FOLLOW]
31
<PAGE>
IN WITNESS WHEREOF, each party has caused this Termination Agreement to be
duly executed on its behalf as of the day and year first above written.
RFS, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
RIDGE LAKE GENERAL PARTNER, INC.
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS LEASING, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
DTR RFS LESSEE, INC.
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
RFS PARTNERSHIP, L.P.
By: RFS Hotel Investors, Inc., general partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
S-1
<PAGE>
RFS FINANCING PARTNERSHIP, L.P.
By: RFS Financing, Inc., general partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
PLANO INN, L.P.
By: RFS Partnership, L.P., general partner
By: RFS Hotel Investors, Inc., general
partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS HOTEL INVESTORS, INC.
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS SPE 1 1998 LLC, A VIRGINIA LIMITED LIABILITY
COMPANY
By: RFS MM 1 1998 CORPORATION, a Virginia
corporation, its managing partner
By: /s/ Randall Churchey
--------------------------------
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
RFS SPE 2 1998 LLC
By: RFS MM 2 1998 CORPORATION, a Virginia
corporation, its managing partner
By: /s/ Randall Churchey
--------------------------------
S-2
<PAGE>
Name: Randall Churchey
-------------------------------
Title: President and COO
------------------------------
DOUBLETREE CORPORATION
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
HILTON HOTELS CORPORATION
By: /s/ Kevin M. Luebbers
--------------------------------
Name: Kevin M. Luebbers
-------------------------------
Title: Senior Vice President
------------------------------
S-3
<PAGE>
EXHIBIT 11
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
BASIC
Income (in millions)
Continuing operations $ 183 $ 188 $ 176
Deduct dividends on preferred shares (13) (10) --
----------- ----------- -----------
Income applicable to common stock
from continuing operations 170 178 176
Discontinued gaming operations 67 109 --
Cumulative effect of accounting change -- -- (2)
----------- ----------- -----------
Income applicable to common stock $ 237 $ 287 $ 174
=========== =========== ===========
Shares
Weighted average common shares 249,723,000 250,306,000 266,433,000
=========== =========== ===========
Basic earnings per common share
Continuing operations $ 0.68 $ 0.71 $ 0.66
Discontinued gaming operations 0.27 0.44 --
Cumulative effect of accounting change -- -- (0.01)
----------- ----------- -----------
Net income $ 0.95 $ 1.15 $ 0.65
=========== =========== ===========
DILUTED
Income (in millions) $ 183 $ 188 $ 176
Continuing operations
Add after tax interest applicable to
5% convertible notes 15 15 15
----------- ----------- -----------
Before extraordinary item, as adjusted 198 203 191
Discontinued gaming operations 67 109 --
Cumulative effect of accounting change -- -- (2)
----------- ----------- -----------
Net income $ 265 $ 312 $ 189
=========== =========== ===========
Shares
Weighted average common shares - basic 249,723,000 250,306,000 266,433,000
Assuming conversion of preferred stock 13,645,000 9,845,000 --
Assuming conversion of 5% convertible notes 15,489,000 15,489,000 22,558,000
Dilutive effect of assumed option exercises
(as determined by the application of the
treasury stock method) 2,374,000 1,909,000 1,204,000
----------- ----------- -----------
Common and common equivalent shares
as adjusted 281,231,000 277,549,000 209,195,000
=========== =========== ===========
Diluted earnings per common share
Continuing operations $ 0.70(1) $ 0.73(1) $ 0.66
Discontinued gaming operations 0.24(1) 0.39(1) --
Cumulative effect of accounting change -- -- (0.01)
----------- ----------- -----------
Net income $ 0.94 $ 1.12 $ 0.65
=========== =========== ===========
</TABLE>
- --------------
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 13 of Statement of
Financial Accounting Standards No. 128 because it produces an
anti-dilutive result for continuing operations in the 1997 and 1998
periods.
<PAGE>
EXHIBIT 12
HILTON HOTELS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)(unaudited)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income from continuing operations before income
taxes and minority interest (1) $136 $179 $309 $332 $311
Add:
Interest expense (1) 73 59 99 142 237
Distributions from less than 50% owned companies 7 14 5 3 7
Interest component of rent expense (1)(2) 3 2 4 4 4
------- ------- ------- ------- -------
Earnings available for fixed charges $219 $254 $417 $481 $559
======= ======= ======= ======= =======
Fixed charges:
Interest expense (1) $ 73 $ 59 $ 99 $142 $237
Capitalized interest 1 -- 2 4 7
Interest component of rent expense (1)(2) 3 2 4 4 4
------- ------- ------- ------- -------
Total fixed charges $ 77 $ 61 $105 $150 $248
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.8x 4.2x 4.0x 3.2x 2.3x
======= ======= ======= ======= =======
</TABLE>
- --------------------------
(1) Includes 50% owned companies.
(2) Assumed interest component to be one-third of rent expense.
<PAGE>
HILTON HOTELS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(dollars in millions)(unaudited)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1996 1997 1998 1999
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income from continuing operations before income
taxes and minority interest (1) $ 136 $ 179 $ 309 $ 332 $ 311
Add:
Interest expense (1) 73 59 99 142 237
Distributions from less than 50% owned companies 7 14 5 3 7
Interest component of rent expense (1)(2) 3 2 4 4 4
-------- ------- ------- ------- -------
Earnings available for fixed charges and
preferred stock dividends $ 219 $ 254 $ 417 $ 481 $ 559
======== ======= ======= ======= =======
Fixed charges and preferred stock dividends:
Interest expense (1) $ 73 $ 59 $ 99 $ 142 $ 237
Capitalized interest 1 -- 2 4 7
Interest component of rent expense (1)(2) 3 2 4 4 4
Preferred stock dividends -- 1 22 17 --
-------- ------- ------- ------- -------
Total fixed charges and preferred stock dividends $ 77 $ 62 $ 127 $ 167 $ 248
======== ======= ======= ======= =======
Ratio of earnings to fixed charges and
preferred stock dividends 2.8x 4.1x 3.3x 2.9x 2.3x
======== ======= ======= ======= =======
</TABLE>
- ---------------------------
(1) Includes 50% owned companies.
(2) Assumed interest component to be one-third of rent expense.
<PAGE>
FINANCIAL OVERVIEW
With the completion of the Promus transaction on November 30, 1999,
the financial statements in this annual report include 11 months of
Hilton as a stand-alone company, and one month as a combined company.
Within this financial overview section, we are presenting information
on a pro forma basis, thereby providing a more meaningful comparison
than the historical results required elsewhere in the annual report.
The pro forma results are presented as if the acquisition of Promus
Hotel Corporation had been completed as of January 1, 1998.
Income from continuing operations for 1999 rose 10 percent to
$216 million, from $197 million in 1998. Diluted income from
continuing operations per share increased 14 percent to $.58 per
share, from $.51 in the previous year. Earnings before interest,
taxes, depreciation, amortization, pre-opening expense and non-cash
items (EBITDA) increased 8 percent to $1.094 billion, from $1.016
billion a year ago.
Included in EBITDA are non-recurring charges totaling $51 million
in 1998 and $36 million in 1999. The per-share impact of these charges
was $.11 in 1998 and $.06 in 1999. Non-recurring charges include such
items as business combination expenses related to the Promus
acquisition, business combination and other costs associated with the
Promus-Doubletree merger, and spin-off costs we incurred in 1998.
Despite the increases mentioned above, 1999 was a generally
disappointing year in terms of our ability to deliver bottom line
results. While we posted good revenue per available room (RevPAR)
increases at most of our major owned hotels -- nearly 3 percent across
our owned system -- we were unable to bring these solid RevPAR gains
to the EBITDA line. This "flow-through" to EBITDA was affected at
various points during the year by such factors as reduced attendance
at group meetings, property tax increases, year-long softness in the
Hawaii market and a millennium that failed to meet expectations. With
the confidence that we can continue to achieve RevPAR increases in the
range of 3 percent at our owned hotels, we have as one of our primary
financial goals for 2000 and beyond to improve the RevPAR flow-through
to EBITDA to a ratio of at least 1.5 times. Toward this end we have
instituted a vigorous asset management program to closely monitor the
operating activities of our owned hotels and their capital spending
plans.
In terms of capital expenditures, we have a number of renovation
and construction projects underway, including the guest room tower and
vacation ownership facility at the Hilton Hawaiian Village discussed
previously in this report; expansion and upgrades at our hotels in
Seattle and Portland, and construction of a select number of Homewood
Suites by Hilton properties. Additionally, our continuing reinvestment
in our owned properties through a disciplined maintenance capital
expenditure program ensures that our hotels are kept in first-class
physical condition. As discussed in the Letter to Shareholders, unit
growth, however, will come primarily from the strong existing pipeline
of managed and franchised properties requiring little or no capital
investment.
Importantly, we were able to structure the Promus acquisition to
retain investment grade credit. The cash portion of the transaction
was successfully financed by a syndicate of 25 banks, led by Bank of
America N.A., which arranged senior credit facilities totaling $1.85
billion at the attractive rate of LIBOR + 1.25 %. We amended our
existing 2 year $1.75 billion senior credit facility to match the
terms and pricing of the new facilities.
Our financial position remains strong, though balance sheet
improvement and strengthening of our existing investment grade credit
rating are additional priorities for 2000. Our goal is to reduce our
debt-to-EBITDA ratio through a combination of increased EBITDA and
selective asset dispositions that will ultimately lead to reduced debt
levels.
<PAGE>
Financial Information
Management's Discussion 23
and Analysis
----------------------------------------
Consolidated Statements 31
of Income
----------------------------------------
Consolidated 32
Balance Sheets
----------------------------------------
Consolidated Statements 33
of Cash Flow
----------------------------------------
Consolidated Statements 34
of Stockholders' Equity
----------------------------------------
Notes to Consolidated 35
Financial Statements
----------------------------------------
Report of Independent 46
Public Accountants
----------------------------------------
Supplementary 47
Financial Information
----------------------------------------
Five Year Summary 49
----------------------------------------
<PAGE>
MD&A
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company
On December 31, 1998, Hilton Hotels Corporation ("Hilton" or the
"Company") completed a spin-off that split the Company's operations
into two independent public corporations, one for conducting its hotel
business and one for conducting its gaming business. Hilton retained
ownership of the hotel business. The Company transferred the gaming
business to a new corporation named Park Place Entertainment
Corporation ("Park Place"), and distributed the stock of Park Place
tax-free to Hilton stockholders on a one-for-one basis. As a result of
the spin-off, Hilton's historical financial statements reflect the
gaming business as discontinued operations. The following discussion
and analysis of financial condition and results of operations is that
of Hilton's continuing operations.
On November 30, 1999, Hilton completed the acquisition of Promus
Hotel Corporation ("Promus"). As a result of the Promus acquisition,
the Company expanded its hotel count by over 1,450 properties
representing more than 200,000 rooms. The discussion and analysis of
results of operations include the results of Promus from the date of
acquisition.
Hilton's continuing operations include the consolidated results
of the Company's owned, partially owned and leased hotel assets,
equity income from unconsolidated affiliates, management and franchise
fees and earnings from vacation ownership and conference center
operations. At December 31, 1999, the Company's hotel system contained
1,752 properties totaling approximately 300,000 rooms worldwide. The
Company's brands include Hilton, Hilton Garden Inn, Doubletree,
Embassy Suites, Hampton Inn, Homewood Suites by Hilton, Red Lion,
Conrad, Hilton Grand Vacations and Harrison Conference Centers. The
Company's system also includes certain properties that are not
Company-branded.
Of the 1,752 total hotels at December 31, 1999, 1,352 are owned
and operated by franchisees, and 400 are operated by the Company.
Depending on the brand, the Company charges franchise royalty fees of
up to five percent of rooms revenue in exchange for the use of one of
its brand names and franchise related services. Company operated
properties include 141 owned or partially owned hotels, 74 leased
hotels and 185 hotels managed for third parties. As a manager of
hotels, the Company is typically responsible for supervising or
operating the hotel in exchange for fees based on a percentage of the
hotel's gross revenues, operating profits, cash flow, or a combination
thereof.
DEVELOPMENT
OVERVIEW
Prior to the acquisition of Promus on November 30, 1999, the Company's
system growth was derived primarily through selective acquisition of
large full-service hotels in major market locations and franchise
expansion through the Hilton Garden Inn product.
Acquisitions in the current year include the 495-room Radisson
Plaza Hotel at Mark Center in Alexandria, Virginia (re-named the
Hilton Alexandria Mark Center), which Hilton acquired in February
1999. In April 1999, the Company acquired the 563-room Pointe Hilton
Squaw Peak Resort in Phoenix, Arizona. Also in April 1999, the Company
acquired the 385-room Hilton Boston Back Bay. In November 1999, the
Company acquired the 814-room Hilton Minneapolis & Towers. The Company
also completed construction during 1999 of a new 600-room hotel at the
center of Boston's Logan Airport. This hotel, Hilton's first new-build
hotel in ten years, is conveniently located on the grounds of Logan
International Airport and connected directly to the airport terminals.
During 1999, the Company continued to improve its franchise
business primarily through the expansion of the Hilton Garden Inn
product. The Company opened 45 Garden Inn properties in 1999, bringing
the total number of such properties to 63 at December 31, 1999. The
Promus acquisition has increased Hilton's franchise business
significantly, adding more than 1,100 franchise properties to the
Company's portfolio. The Company believes this will result in greater
diversification of revenue and cash flow.
The Company also acquired a strong development pipeline with the
Promus transaction, with 300 properties either in the design or
construction phase as of December 31, 1999. The
<PAGE>
MD&A (continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
majority of this new development will be franchise properties in the
Hampton Inn and Hampton Inn & Suites brands. The Company's total
development pipeline for 2000 and 2001, including Hilton Garden Inn
franchise expansion, totals more than 430 hotels and 63,000 rooms
either under construction or in design.
Hilton intends to grow its brands primarily through franchising
and the addition of management contracts. The success of our ability
to grow the number of franchised and managed hotels is affected by,
among other things, national and regional economic conditions, capital
markets, credit availability, relationships with franchisees and
owners as well as competition from other hotel franchisors and
managers. In addition, the Company will continue to review its hotel
portfolio in light of the Promus acquisition for potential
repositioning or re-branding opportunities, and may seek to sell
certain owned assets. Acquisition spending is not expected to be
significant in 2000.
STRATEGIC ALLIANCES AND JOINT VENTURES
In 1997, the Company entered into an agreement with Hilton Group plc,
formerly known as Ladbroke Group PLC, whose wholly owned subsidiary,
Hilton International Co. ("HI"), owns the rights to the Hilton name
outside the United States. The agreements provide for the
reunification of the Hilton brand worldwide through a strategic
alliance between the companies, including cooperation on sales and
marketing, loyalty programs and other operational matters. Pursuant to
these agreements, the Company and HI have integrated their reservation
system under Hilton Reservations Worldwide, LLC, launched the Hilton
HHonors Worldwide loyalty program, integrated worldwide sales offices,
developed joint marketing initiatives and adopted a new Hilton brand
identity used by both companies.
As of December 31, 1999, Hilton owned approximately 1.5 million
shares of FelCor Lodging Trust Inc. ("FelCor") common stock,
representing approximately two percent of FelCor's outstanding shares.
FelCor owned or had an interest in 75 Company brand hotels as of
December 31, 1999. In addition, the Company has guaranteed repayment
of a third party loan to FelCor of up to $25 million.
At December 31, 1999, the Company owned approximately 2.6 million
shares of Candlewood Hotel Company ("Candlewood") common stock. The
Company also has a note receivable from Candlewood with a balance at
December 31, 1999 of approximately $15 million.
As of December 31, 1999, the Company leased 52 properties from
RFS Hotel Investors, Inc. ("RFS"). In January 2000, the Company
entered into an agreement which gives RFS the option to terminate
these leases. As consideration for terminating the leases, RFS will
pay the Company approximately $60 million. As part of the agreement,
the Company has the option of requiring RFS to repurchase convertible
preferred stock of RFS currently owned by Hilton for approximately $13
million. It is anticipated that the lease termination and repurchase
of the convertible preferred stock will be accomplished simultaneously
in the first quarter of 2001.
DEVELOPMENT FINANCING
In order to assist prospective owners in obtaining financing for hotel
projects, the Company has initiated programs to provide alternative
capital sources to owners.
Promus Acceptance Corp. ("ProMAC"), a third party lending entity,
provides first mortgage construction financing to franchisees for
select Homewood Suites by Hilton, Hampton Inn and Embassy Suites
hotels. The Company has provided a guarantee of up to $36 million on
loans outstanding under the ProMAC program. The Company has also
agreed to guarantee up to 25 percent of construction financing
relating to select Hilton Garden Inn development projects. Guarantees
under the Hilton Garden Inn development program were not significant
at December 31, 1999.
Under a pre-existing program, the Company provided secondary
financing to franchisees under a mezzanine financing program. Loans
outstanding at December 31, 1999 totaled approximately $48 million.
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company has provided credit support for a loan facility
utilized by Candlewood to provide construction and permanent financing
to Candlewood and its franchisees. The Company's aggregate maximum
exposure for such credit support is capped at $30 million. As of
December 31, 1999, the Company has guaranteed $11 million in such
financing.
ACQUISITIONS AND CAPITAL SPENDING
Aggregate consideration in the November 30, 1999 acquisition of Promus
consisted of approximately 113 million shares of the Company's common
stock and $1.7 billion in cash, for a combined equity value of
approximately $2.8 billion, transaction costs of $175 million, and the
assumption of debt totaling $750 million. In addition, hotel
acquisitions completed during 1999 totaled $330 million, including the
assumption of debt. Each of these hotel acquisitions was completed at
a discount to replacement cost.
Capital expenditures and new investments totaled $356 million
during 1999, including maintenance capital expenditures, costs
associated with the new Hilton Boston Logan Airport and several
significant renovation projects. During 1999, the Company
substantially completed the renovation of the Hilton New York &
Towers, which includes new restaurants, a state-of-the-art
business/conference center, a world-class fitness facility and an
exclusive Towers Lounge overlooking Manhattan. The Company also
completed construction of a new 232-unit vacation ownership resort in
Las Vegas.
Significant ongoing construction projects include the new
453-room Kalia Tower at the Hilton Hawaiian Village. In close
proximity to the new Hawaii Convention Center, the Kalia Tower will
feature a world class health club and wellness spa, exciting retail
shops and an interactive Hawaiian cultural center. Construction on the
project is scheduled to be completed in Spring 2001. Construction has
also begun on a 275-unit vacation ownership resort at the Hilton
Hawaiian Village. Interval sales will commence in the first quarter of
2000 with the project expected to open in the first quarter of 2001.
Renovation and construction projects are also underway at the Hilton
Seattle Airport and the Hilton Portland. The Seattle project includes
renovating existing rooms and constructing a 222-room addition, while
the Portland project involves construction of a 319-room tower
addition. The Company is also currently constructing five new Homewood
Suites by Hilton properties.
In addition to an estimated $300 million in 2000 expenditures
related to renovation and construction projects and development
financing, the Company intends to spend approximately $300 million in
2000 on normal capital replacements, upgrades and technology.
Expenditures required to complete acquisitions and capital
spending programs in 2000 will be financed through available cash
flows and general corporate borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $229 million, $390
million and $279 million for the years ended December 31, 1997, 1998
and 1999, respectively. The decrease in 1999 was primarily
attributable to working capital variances. The increase in 1998 over
1997 operating cash flow was attributable to strong operating results
at many of the Company's owned and partially owned full-service
hotels, the benefit of cash flow from newly acquired hotel properties
and year over year working capital variances. Cash and equivalents
totaled $104 million at December 31, 1999, an increase of $57 million
from December 31, 1998.
Net cash used in investing activities was $1.1 billion in 1998
compared to $2.3 billion in 1999. The net increase of $1.2 billion was
due primarily to the acquisition of Promus partially offset by a lower
level of hotel acquisition spending in the 1999 period compared to the
prior year. The increase in net cash used in investing activities of
$1.0 billion from 1997 to 1998 reflects significant hotel acquisition
activity in the 1998 period and $123 million of cash proceeds from
asset sales in the 1997 period. The proceeds from assets sales in 1997
are primarily the sale of the Company's interest in the Conrad
International Hong Kong.
Net cash provided by financing activities increased approximately
$1.7 billion in 1999, primarily representing additional revolving debt
borrowings to fund the cash portion of the Promus acquisition. The
$377 million increase in cash provided by financing activities in 1998
over 1997 reflects increased borrowings associated with a higher level
of hotel acquisition activity combined with increased share repurchase
activity.
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Hilton believes that its operating cash flow, available
borrowings under its revolving credit facilities, and the Company's
ability to obtain additional financing through various financial
markets are sufficient to meet its liquidity needs.
FINANCING
In 1999, the Company entered into a new $1.85 billion revolving credit
facility, consisting of a $1.4 billion five-year revolver and a $450
million 364-day revolver. As of December 31, 1999, approximately $1.3
billion of borrowings were outstanding under the five-year portion of
the new revolver and the $450 million 364-day portion of the new
revolver was undrawn. The Company's existing $1.75 billion revolving
credit facility, which expires in 2001, was fully drawn as of December
31, 1999, leaving total revolving debt capacity of approximately $550
million available to the Company at such date.
In October 1997, the Company filed a shelf registration statement
("Shelf") with the Securities and Exchange Commission registering up
to $2.5 billion in debt or equity securities. At December 31, 1999,
available financing under the Shelf totaled $2.1 billion. The terms of
any additional securities offered pursuant to the Shelf will be
determined by market conditions at the time of issuance.
The 1998 and 1999 debt balances include $625 million of long-term
debt which, although allocated to Park Place under a debt assumption
agreement, remains the legal obligation of Hilton. At the time of the
spin-off, Park Place assumed and agreed to pay 100% of the amount of
each payment required to be made by Hilton under the terms of the
indentures governing Hilton's $300 million 7.375% Senior Notes due
2002 and its $325 million 7% Senior Notes due 2004. These notes remain
in Hilton's long-term debt balance and a long-term receivable from
Park Place in an equal amount is included in the Company's 1998 and
1999 consolidated balance sheets. In the event of an increase in the
interest rate on these notes as a result of certain actions taken by
Hilton or in certain other limited circumstances, Hilton will be
required to reimburse Park Place for any such increase. Hilton is
obligated to make any payment Park Place fails to make, and in such
event Park Place shall pay to Hilton the amount of such payment
together with interest, at the rate per annum borne by the applicable
notes plus two percent, to the date of reimbursement.
Pursuant to the Company's stock repurchase program, during 1999
the Company repurchased 6.4 million shares of common stock for an
aggregate purchase price of $90 million. The Company may, at any time,
repurchase up to 9.3 million remaining shares authorized for
repurchase pursuant to such program. The timing of stock repurchases
are made at the discretion of the Company's management, subject to
certain business and market conditions.
In accordance with the terms of the indenture governing the
Company's $500 million 5% Convertible Subordinated Notes due 2006,
effective January 4, 1999 the conversion price was adjusted to $22.17,
reflecting the gaming spin-off.
STOCKHOLDERS' EQUITY
Stockholders' equity totaled $1.4 billion at December 31, 1999,
reflecting the issuance of approximately 113 million shares of common
stock in connection with the Promus acquisition. Dividends paid on
common shares were $.32 per share in 1997 and 1998 and $.08 per share
in 1999.
RESULTS OF OPERATIONS
The following discussion presents an analysis of the Company's results
of operations for the three years ended December 31, 1999. EBITDA
(earnings before interest, taxes, depreciation, amortization,
pre-opening expense and non-cash items) is presented supplementally in
the tables below and in the discussion of operating results because
management believes it allows for a more complete analysis of results
of operations. Non-cash items, such as asset write-downs and
impairment losses, are excluded from EBITDA as these items do not
impact operating results on a recurring basis. EBITDA can be computed
by adding depreciation, amortization, pre-opening expense, interest
and
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
dividend income from investments related to operating activities and
non-cash items to operating income. This information should not be
considered as an alternative to any measure of performance as
promulgated under generally accepted accounting principles (such as
operating income or net income), nor should it be considered as an
indicator of the overall financial performance of the Company. The
Company's calculation of EBITDA may be different from the calculation
used by other companies and therefore comparability may be limited.
Fiscal 1999 Compared with Fiscal 1998
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the
years ended December 31, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1999 % CHANGE
<S> <C> <C> <C>
Revenue $ 1,769 2,150 22%
Operating income 464 495 7
Income from continuing operations 188 176 (6)
Income From Continuing Operations Per Share
Basic $ .71 .66 (7)%
Diluted .71 .66 (7)
Other Operating Data
EBITDA
Operations $ 660 768 16%
Corporate expense, net (64) (73) 14
---------- ---------- ---------
Total $ 596 695 17%
========== ========== =========
</TABLE>
Total revenue for 1999 was $2.2 billion, an increase of 22
percent over 1998. EBITDA from operations was $768 million for 1999, a
16 percent increase compared to 1998, while total EBITDA was $695
million for 1999, a 17 percent increase over the prior year. Total
operating income increased seven percent to $495 million.
The Company's consolidated results include the impact of the
Promus acquisition only from November 30, 1999, the date the
transaction was completed. The Promus acquisition resulted in
incremental revenue and EBITDA of $69 million and $19 million,
respectively, representing operations for the month of December 1999.
The impact of the Promus acquisition was not significant to operating
income in 1999. Results in 1999 were also impacted by non-recurring
charges incurred by Hilton related to the Promus acquisition totaling
approximately $26 million.
Consolidated results are significantly influenced by the
operating performance of the Company's owned portfolio of major market
domestic full-service properties. Operating performance is primarily
affected by volume (as measured by occupancy), pricing (as measured by
average room rate), the Company's ability to manage costs and the
growth in the number of available rooms through acquisition and
development. Excluding the one month results from the Promus
acquisition, the Company's domestic owned hotels generated $611
million of EBITDA in 1999. EBITDA margins at these hotels remained
strong at 34 percent. Occupancy in 1999 at comparable owned hotels was
essentially flat at 75.3 percent, with the average rate increasing two
percent to $168.22, resulting in a 2.7 percent improvement in revenue
per available room ("RevPAR").
Strong volume and average rate increases in the group segment
drove a year over year RevPAR increase of nine percent at the Hilton
New Orleans Riverside resulting in a $6 million or 14 percent increase
in EBITDA from 1998. EBITDA at the Hilton San Francisco & Towers
increased $5 million or ten percent compared to the prior year due to
a significant increase in individual business traveler ("IBT") volume
and higher average rates in the group segment. RevPAR at this property
increased seven percent. EBITDA from the Waldorf=Astoria increased $4
million or six percent over 1998. Nearly all of the increase occurred
in the fourth quarter as the property benefited from higher rates,
strong banquet activity and millennium related activities. Combined
EBITDA from the Hilton Washington & Towers and the Capital Hilton
increased $3 million on a combined RevPAR increase of five percent.
Both properties benefited from occupancy growth in the higher rate IBT
segment, and the Hilton Washington & Towers increased average rates
nearly eight percent. Combined EBITDA from the Hilton Chicago &
Towers, the Hilton Chicago O'Hare Airport and the Palmer House Hilton
increased $2 million from the prior year. A strong city-wide
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
convention market in the first quarter of 1999 was offset by a softer
group market and lower convention attendance experienced in subsequent
quarters. EBITDA flow through at these three properties was also
mitigated by higher property tax expense in the 1999 period. EBITDA
from the Hilton New York & Towers decreased $2 million from the prior
year, primarily due to disruptions caused by the property's major
renovation project. This project was substantially complete at the end
of the year.
On a comparable basis, EBITDA from the Hilton Hawaiian Village
declined ten percent from the prior year. This property continued to
be affected for most of the year by softness due primarily to the
impact of the Asian economic situation. However, year over year
comparisons did improve in late 1999, and the Company anticipates
improved market conditions and commensurate improvement at the Hilton
Hawaiian Village in 2000. Factors leading to this outlook include an
increase in advance bookings and enhanced marketing efforts in Asia
and on the U.S. mainland by the State of Hawaii to attract additional
visitors. Excluding this property and the impact of the Promus
acquisition, comparable EBITDA at the Company's domestic owned hotels
increased $15 million or three percent for the year. Occupancy for
comparable domestic owned hotels (excluding the Hilton Hawaiian
Village and Promus) was essentially flat at 75.4 percent. The average
room rate increased 3.2 percent to $168.71 in 1999 and RevPAR improved
3.6 percent.
Hotel acquisition and development activity, excluding the impact
of the Promus acquisition, contributed approximately $66 million of
EBITDA in 1999. The Company opened one new-build hotel and acquired
four full service domestic properties during 1999.
Management and franchise fee revenue increased $16 million in
1999 to $120 million. This increase is attributable primarily to $12
million of incremental fee income as a result of the Promus
acquisition, a $2 million increase in initial and termination fees
from franchise properties, and increased fees as a result of the
Hilton Garden Inn franchise expansion. Fee revenue is based primarily
on operating revenue at managed properties and rooms revenue at
franchised properties.
Depreciation and amortization, including the Company's
proportionate share of depreciation and amortization from its
unconsolidated affiliates, increased $63 million in 1999 to $195
million due primarily to acquisition activity.
Although the supply-demand balance in the Company's major markets
generally remains favorable, future operating results could be
adversely impacted by increased capacity and weak demand. These
conditions could limit the Company's ability to pass through
inflationary increases in operating costs in the form of higher room
rates. Increases in transportation and fuel costs or sustained
recessionary periods in the U.S. (affecting domestic travel) and
internationally (affecting inbound travel from abroad) could also
unfavorably impact future results. However, the Company believes that
its financial strength and diverse market presence will enable it to
remain extremely competitive.
CORPORATE EXPENSE, NET
Corporate expense increased $9 million in 1999 to $73 million. The
1999 expense includes non-recurring charges incurred by Hilton related
to the Promus acquisition. These expenses totaled $26 million in 1999,
$21 million of which are included in corporate expense. The 1998
expense includes the Company's proportionate share of costs associated
with the gaming spin-off totaling $13 million.
FINANCING ACTIVITIES
Interest and dividend income increased $44 million compared with the
prior year, primarily due to interest on the $625 million of Hilton
public debt assumed by Park Place at the time of the spin-off of
Hilton's gaming operations. Interest expense, net of amounts
capitalized, increased $100 million reflecting the $625 million of
debt assumed by Park Place, higher debt levels due to the Promus
acquisition, individual hotel acquisition activity during the year and
significant construction and renovation project expenditures.
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INCOME TAXES
The effective income tax rate in 1999 increased to 41.5% from 40.5% in
1998. The Company's effective income tax rate is determined by the
level and composition of pretax income and the mix of income subject
to varying foreign, state and local taxes.
FISCAL 1998 COMPARED WITH FISCAL 1997
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the
years ended December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1997 1998 % CHANGE
<S> <C> <C> <C>
Revenue $ 1,475 1,769 20%
Operating income 395 464 17
Income from continuing operations 183 188 3
Income From Continuing Operations Per Share
Basic $ .68 .71 4%
Diluted .68 .71 4
Other Operating Data
EBITDA
Operations $ 561 660 18%
Corporate expense, net (64) (64) --
---------- ---------- ---------
Total $ 497 596 20%
========== ========== =========
</TABLE>
Total revenue for 1998 was $1.8 billion, an increase of 20
percent over 1997. EBITDA from operations was $660 million for 1998,
an 18 percent increase compared to 1997, while total EBITDA was $596
million for 1998, a 20 percent increase over the prior year. Total
operating income increased 17 percent to $464 million.
The Company's domestic owned hotels generated $533 million of
EBITDA in 1998, with comparable EBITDA increasing 11 percent over the
prior year. EBITDA margins at these hotels improved two points to 34
percent. The comparable EBITDA increase improved to 17 percent when
excluding the Hilton Hawaiian Village, which was adversely impacted by
the Asian economic crisis. Occupancy in 1998 at comparable owned
hotels declined 2.3 points to 75.0 percent, with the average rate
increasing 8.4 percent to $164.51, resulting in a 5.2 percent
improvement in RevPAR. Without the Hilton Hawaiian Village, RevPAR for
the year at this group of properties increased 7.1 percent.
Combined EBITDA from the Waldorf=Astoria and the Hilton New York
& Towers increased $24 million or 22 percent over the prior year.
RevPAR gains of 10 and 11 percent, respectively, were driven by strong
rate gains in both the leisure and IBT segments. Combined EBITDA from
the Hilton Chicago & Towers, the Hilton Chicago O'Hare Airport and the
Palmer House Hilton increased $20 million or 26 percent over the prior
year. All three properties maintained strong volume and achieved
double-digit rate growth in the IBT segment. Combined EBITDA margins
at these three Chicago properties averaged 35 percent, a five point
increase from 1997. Results also benefited from a combined EBITDA
increase of $11 million from the San Diego and San Francisco Hiltons.
The San Diego property benefited from strong rate increases in all
segments and a seven point improvement in EBITDA margin. The impact of
reduced leisure demand at the Hilton San Francisco & Towers was offset
by an increase in higher rate IBT room nights. EBITDA from the Hilton
New Orleans Riverside & Towers increased $4 million or nine percent
from the prior year. Occupied rooms at this property remained flat
year over year, however decreased leisure volume was replaced with
higher rate convention and IBT business. Growth was negatively
impacted by results at the Hilton Hawaiian Village. On a comparable
basis, EBITDA at this property declined 13 percent.
Acquisition activity, including increased ownership of properties
which were previously partially owned and new property acquisitions,
added $47 million of EBITDA in 1998. The Company acquired or increased
its ownership interest in eight full-service domestic properties
during 1998.
Management and franchise fee revenue decreased $11 million in
1998 to $104 million. This decrease is attributable primarily to the
acquisition of several previously managed properties during 1998,
reduced management fees from the Conrad International Hong Kong, which
was negatively impacted by economic conditions in Asia, and a $1
million decrease in initial and termination fees from franchise
properties.
<PAGE>
MD&A (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Depreciation and amortization, including the Company's
proportionate share of depreciation and amortization from its
unconsolidated affiliates, increased $28 million in 1998 to $132
million due primarily to new acquisitions.
CORPORATE EXPENSE, NET
Corporate expense was flat in 1998 at $64 million. The 1998 expense
includes the Company's proportionate share of costs associated with
the gaming spin-off totaling $13 million. The 1997 expense includes
$25 million in costs related to the Company's efforts to acquire ITT
Corporation ("ITT"). The 1997 costs were partially offset by a $10
million gain recognized on the sale of ITT stock previously purchased
by the Company.
FINANCING ACTIVITIES
Interest and dividend income decreased $4 million compared with the
prior year, primarily due to lower investment balances. Interest
expense, net of amounts capitalized, increased $47 million reflecting
higher debt levels due to acquisition activity during the year and a
higher average cost of debt resulting from the Company issuing
long-term notes to replace floating rate debt in 1997. Net interest
expense from unconsolidated affiliates decreased $4 million,
reflecting the mid-year consolidation of the Hilton Hawaiian Village.
INCOME TAXES
The effective income tax rate in 1998 increased to 40.5% from 39.5% in
1997.
OTHER MATTERS
YEAR 2000
The Company encountered no significant problems from the impact of the
Year 2000 on the processing of date-sensitive information by its
computerized information systems. The Company had established a Year
2000 program to ensure that all significant information technology
systems, non-information technology systems and suppliers were Year
2000 compliant. The cost to assess, test and remediate potential Year
2000 problems totaled approximately $6 million.
OTHER
Various lawsuits are pending against the Company. In management's
opinion, disposition of these lawsuits is not expected to have a
material effect on the Company's financial position or results of
operations.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without
limitation, those set forth under the captions "Development,"
"Liquidity and Capital Resources," "Results of Operations," and "Other
Matters," and statements relating to the Company's plans, strategies,
objectives, expectations, intentions and adequacy of resources, are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.
The words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements reflect the Company's current views with
respect to future events and financial performance, and are subject to
certain risks and uncertainties, including those identified above
under "Results of Operations" and those in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999 under the
captions "Additional Information -- Business Risks," and
"Competition," the effect of economic conditions, and customer demand,
which could cause actual results to differ materially from historical
results or those anticipated. Although the Company believes the
expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its
expectations will be attained.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1997 1998 1999
<S> <C> <C> <C>
REVENUE
Owned hotels $1,203 1,485 1,813
Leased hotels -- -- 26
Management and franchise fees 115 104 120
Other fees and income 157 180 191
------ ----- ------
1,475 1,769 2,150
------ ----- ------
EXPENSES
Owned hotels 820 964 1,196
Leased hotels -- -- 26
Depreciation and amortization 93 125 187
Other operating expenses 103 152 173
Corporate expense, net 64 64 73
------ ----- ------
1,080 1,305 1,655
------ ----- ------
OPERATING INCOME 395 464 495
Interest and dividend income 17 13 57
Interest expense (90) (137) (237)
Interest expense, net, from unconsolidated affiliates (8) (4) (2)
------ ----- ------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 314 336 313
Provision for income taxes (124) (136) (130)
Minority interest, net (7) (12) (7)
------ ----- ------
INCOME FROM CONTINUING OPERATIONS 183 188 176
Income from discontinued gaming operations,
net of tax provision of $63 and $111 in
1997 and 1998, respectively 67 109 --
Cumulative effect of accounting change,
net of tax benefit of $1 in 1999 -- -- (2)
------ ----- ------
NET INCOME $ 250 297 174
====== ===== ======
BASIC EARNINGS PER SHARE
Income from continuing operations $ .68 .71 .66
Discontinued gaming operations .27 .44 --
Cumulative effect of accounting change -- -- (.01)
------ ----- ------
Net income per share $ .95 1.15 .65
====== ===== ======
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .68 .71 .66
Discontinued gaming operations .26 .41 --
Cumulative effect of accounting change -- -- (.01)
------ ----- ------
Net income per share $ .94 1.12 .65
====== ===== ======
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN MILLIONS) DECEMBER 31, 1998 1999
<S> <C> <C>
Assets
CURRENT ASSETS
Cash and equivalents $ 47 104
Accounts receivable, net of allowance of $12 in 1998 and 1999 204 396
Receivable from discontinued gaming operations 73 --
Inventories 54 90
Deferred income taxes 48 15
Current portion of notes receivable -- 78
Other current assets 43 80
-------- -----
Total current assets 469 763
INVESTMENTS, PROPERTY AND OTHER ASSETS
Investments and notes receivable 262 676
Long-term receivable 625 625
Property and equipment, net 2,483 3,892
Management and franchise contracts, net -- 647
Leases, net -- 216
Brands, net -- 1,048
Goodwill, net 36 1,277
Other assets 69 109
-------- -----
Total investments, property and other assets 3,475 8,490
-------- -----
TOTAL ASSETS $ 3,944 9,253
======== =====
Liabilities and Stockholders' Equity
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 410 615
Current maturities of long-term debt 62 9
Income taxes payable 34 5
-------- -----
Total current liabilities 506 629
Long-term debt 3,037 6,085
Deferred income taxes 65 879
Insurance reserves and other 149 245
-------- -----
Total liabilities 3,757 7,838
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, 261 and 368 shares outstanding, respectively 663 946
Additional paid-in capital -- 853
Retained deficit (347) (197)
Accumulated other comprehensive income -- 24
-------- -----
316 1,626
Less treasury stock, at cost 129 211
-------- -----
Total stockholders' equity 187 1,415
-------- -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,944 9,253
======== =====
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(IN MILLIONS) YEAR ENDED DECEMBER 31, 1997 1998 1999
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 250 297 174
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued gaming operations (67) (109) --
Cumulative effect of accounting change -- -- 2
Depreciation and amortization 93 125 187
Amortization of loan costs 1 2 3
Change in working capital components:
Inventories 10 (15) (30)
Accounts receivable 5 (42) (58)
Other current assets (5) (17) 15
Accounts payable and accrued expenses 4 124 16
Income taxes payable 4 25 (29)
Change in deferred income taxes (63) 9 (5)
Change in other liabilities (46) 5 4
Unconsolidated affiliates' distributions
in excess of (less than) earnings 6 (17) (7)
Other 37 3 7
-------- ------- -------
Net cash provided by operating activities 229 390 279
-------- ------- -------
INVESTING ACTIVITIES
Capital expenditures (93) (171) (254)
Additional investments (97) (98) (102)
Change in temporary investments 25 -- --
Proceeds from asset sales 123 -- --
Payments on notes and other 49 49 78
Acquisitions, net of cash acquired (67) (842) (2,036)
-------- ------- -------
Net cash used in investing activities (60) (1,062) (2,314)
-------- ------- -------
FINANCING ACTIVITIES
Change in commercial paper borrowings and
revolving loans (1,218) 355 2,264
Long-term borrowings 1,393 400 --
Reduction of long-term debt (95) (247) (64)
Issuance of common stock 38 25 5
Purchase of common stock (40) (81) (90)
Cash dividends (93) (90) (23)
-------- ------- -------
Net cash (used in) provided by financing activities (15) 362 2,092
-------- ------- -------
Net transfers (to) from discontinued gaming operations (191) 352 --
-------- ------- -------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS (37) 42 57
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 42 5 47
-------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR $ 5 47 104
======== ======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
8% PRIDES ACCUMULATED
CONNVERTIBLE ADDITIONAL RETAINED OTHER
PREFERRED COMMON PAID-IN EARNINGS COMPREHENSIVE TREASURY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) STOCK STOCK CAPITAL (DEFICIT) INCOME (LOSS) STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 15 627 1,745 931 4 (111) 3,211
Net income -- -- -- 250 -- -- 250
Other comprehensive income:
Cumulative translation adjustment,
net of deferred tax -- -- -- -- (4) -- (4)
Change in unrealized gain/loss
on marketable securities,
net of deferred tax -- -- -- -- 11 -- 11
--------- -------- -------- --------- --------- -------- -------
Comprehensive income for 1997 -- -- -- 250 7 -- 257
Issuance of common stock -- 1 4 -- -- 5 10
Exercise of stock options -- -- -- (48) -- 76 28
Treasury stock acquired -- -- -- -- -- (40) (40)
Deferred compensation -- -- 10 -- -- -- 10
Dividends
PRIDES ($.89 per share) -- -- -- (13) -- -- (13)
Common ($.32 per share) -- -- -- (80) -- -- (80)
--------- -------- -------- --------- --------- -------- -------
BALANCE, DECEMBER 31, 1997 15 628 1,759 1,040 11 (70) 3,383
--------- -------- -------- --------- --------- -------- -------
Net income -- -- -- 297 -- -- 297
Other comprehensive income:
Cumulative translation adjustment,
net of deferred tax -- -- -- -- (9) -- (9)
Change in unrealized gain/loss
on marketable securities,
net of deferred tax -- -- -- -- (10) -- (10)
--------- -------- -------- --------- --------- -------- -------
Comprehensive income for 1998 -- -- -- 297 (19) -- 278
Issuance of common stock -- 1 10 -- -- -- 11
Exercise of stock options -- -- -- (8) -- 22 14
Treasury stock acquired -- -- -- -- -- (81) (81)
Conversion of PRIDES (15) 34 (19) -- -- -- --
Deferred compensation -- -- 10 -- -- -- 10
Dividends
PRIDES ($.67 per share) -- -- -- (10) -- -- (10)
Common ($.32 per share) -- -- -- (80) -- -- (80)
Spin-off of Park Place
Entertainment Corporation -- -- (1,760) (1,586) 8 -- (3,338)
--------- -------- -------- --------- --------- -------- -------
BALANCE, DECEMBER 31, 1998 -- 663 -- (347) -- (129) 187
--------- -------- -------- --------- --------- -------- -------
Net income -- -- -- 174 -- -- 174
Other comprehensive income:
Cumulative translation adjustment,
net of deferred tax -- -- -- -- (1) -- (1)
Change in unrealized gain/loss
on marketable securities,
net of deferred tax -- -- -- -- 25 -- 25
--------- -------- -------- --------- --------- -------- -------
Comprehensive income for 1999 -- -- -- 174 24 -- 198
Issuance of common stock -- 283 843 -- -- -- 1,126
Exercise of stock options -- -- -- (5) -- 8 3
Treasury stock acquired -- -- -- -- -- (90) (90)
Deferred compensation -- -- 10 -- -- -- 10
Common dividends ($.08 per share) -- -- -- (23) -- -- (23)
Adjustment to spin-off of Park
Place Entertainment Corporation -- -- -- 4 -- -- 4
--------- -------- -------- --------- --------- -------- -------
BALANCE, DECEMBER 31, 1999 $-- 946 853 (197) 24 (211) 1,415
========= ======== ======== ========= ========= ======== =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
NOTES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
BASIS OF PRESENTATION AND ORGANIZATION
On November 30, 1999, Hilton Hotels Corporation ("Hilton" or the
"Company") acquired Promus Hotel Corporation ("Promus") in a business
combination accounted for as a purchase. Accordingly, the consolidated
financial results of Hilton include the results of Promus and its
subsidiaries from the date of acquisition.
On December 31, 1998, Hilton completed a spin-off that split the
Company's operations into two independent public corporations per an
agreement dated June 30, 1998, one for conducting its hotel business
and one for conducting its gaming business. Hilton retained ownership
of the hotel business. Hilton transferred the gaming business to a new
corporation named Park Place Entertainment Corporation ("Park Place")
and distributed the stock of Park Place tax-free to Hilton
stockholders on a one-for-one basis. As a result of the spin-off,
Hilton's financial statements reflect the gaming business as
discontinued operations.
Hilton is primarily engaged in the ownership, management and
development of hotels, resorts and vacation ownership properties and
the franchising of lodging properties. Hilton operates in select
markets throughout the world, predominately in the United States.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Hilton
Hotels Corporation and its majority owned and controlled subsidiaries.
All material intercompany transactions are eliminated and net earnings
are reduced by the portion of the earnings of affiliates applicable
to other ownership interests. There are no significant restrictions
on the transfer of funds from the Company's wholly owned subsidiaries
to Hilton Hotels Corporation.
CASH AND EQUIVALENTS
Cash and equivalents include investments with initial maturities
of three months or less.
CURRENCY TRANSLATION
Assets and liabilities denominated in most foreign currencies are
translated into U.S. dollars at year-end exchange rates and related
gains and losses, net of applicable deferred income taxes, are
reflected in stockholders' equity. Gains and losses from foreign
currency transactions are included in earnings.
VALUATION OF LONG-LIVED ASSETS
The carrying value of the Company's long-lived assets are reviewed
when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If it is determined that an
impairment loss has occurred based on expected future cash flows, then
a loss is recognized in the income statement using a fair value based
model.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Interest incurred during
construction of facilities is capitalized and amortized over the life
of the asset. Costs of improvements are capitalized. Costs of normal
repairs and maintenance are charged to expense as incurred. Upon the
sale or retirement of property and equipment, the cost and related
accumulated depreciation are removed from the respective accounts, and
the resulting gain or loss, if any, is included in income.
Depreciation is provided on a straight-line basis over the
estimated useful life of the assets. Leasehold improvements are
amortized over the shorter of the asset life or lease term. The
service lives of assets are generally 40 years for buildings and eight
years for building improvements and furniture and equipment.
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
PRE-OPENING COSTS
In April 1998, the AICPA issued Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities." This SOP requires
that all nongovernmental entities expense the costs of start-up
activities (pre-opening, pre-operating and organizational costs) as
those costs are incurred and requires the write-off of any unamortized
balances upon implementation. The Company's adoption of SOP 98-5
resulted in a cumulative effect of accounting change of $2 million,
net of a tax benefit of $1 million, in the first quarter of 1999.
MANAGEMENT AND FRANCHISE CONTRACTS
Management and franchise contracts acquired in acquisitions that were
accounted for as purchases are recorded at the estimated present value
of net cash flows expected to be received over the lives of the
contracts. This value is amortized using the straight-line method over
the remaining contract life. Costs incurred to acquire individual
management and franchise contracts are amortized using the
straight-line method over the life of the respective contract.
LEASES
Leases acquired in acquisitions that were accounted for as purchases
are recorded at the estimated present value of net cash flows expected
to be received over the lives of the lease agreements. This value is
amortized using the straight-line method over the remaining lease
term.
BRANDS
The brand names of hotels acquired in acquisitions are assigned a fair
market value. To arrive at a value for each brand name, an estimation
is made of the amount of royalty income that could be generated from
the brand name if it was licensed to an independent third-party owner.
The resulting cash flow is discounted back using the estimated
weighted average cost of capital for each respective brand name. The
brand value is amortized on a straight line basis over 40 years.
GOODWILL
Goodwill arose in connection with purchase acquisitions and is
amortized using the straight-line method over 40 years.
UNAMORTIZED LOAN COSTS
Debt discount and issuance costs incurred in connection with the
placement of long-term debt are capitalized and amortized to interest
expense over the lives of the related debt.
SELF-INSURANCE
The Company is self-insured for various levels of general liability,
workers' compensation and employee medical and life insurance
coverage. Insurance reserves include the present values of projected
settlements for claims.
EARNINGS PER SHARE ("EPS")
Basic EPS is computed by dividing net income available to common
stockholders (net income less preferred dividends of $13 million in
1997 and $10 million in 1998; no preferred stock was outstanding in
1999) by the weighted average number of common shares outstanding for
the period. The weighted average number of common shares outstanding
for 1997, 1998 and 1999 were 250 million, 250 million and 266 million,
respectively. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted. The dilutive effect of the assumed exercise of
stock options and convertible securities
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
increased the weighted average number of common shares by 31 million,
28 million and 24 million for 1997, 1998 and 1999, respectively. In
addition, the increase to net income resulting from interest on
convertible securities assumed to have not been paid was $15 million
per year for 1997, 1998 and 1999.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS
The consolidated financial statements for prior years reflect certain
reclassifications to conform with classifications adopted in 1999.
These classifications have no effect on net income.
ACQUISITIONS AND DIVESTITURES
ACQUISITION OF PROMUS HOTEL CORPORATION
On November 30, 1999, the Company completed the acquisition of Promus
pursuant to an agreement dated September 3, 1999. Aggregate
consideration consisted of approximately $1.7 billion in cash in
exchange for 55 percent of the outstanding shares of Promus common
stock and approximately 113 million shares of the Company's common
stock in exchange for the remaining 45 percent of Promus stock for a
combined equity value of approximately $2.8 billion, transaction costs
of $175 million, and the assumption of Promus and Promus subsidiary
debt totaling $750 million. Transaction costs include $46 million of
severance costs, $28 million of which had been paid as of December 31,
1999, covering the termination of Promus employees whose positions
were duplicative.
The acquisition has been accounted for using the purchase method
of accounting, and accordingly, the acquisition cost has been
allocated to the assets acquired and liabilities assumed based on
preliminary estimates of their fair value. A total of $1.2 billion,
representing the excess of acquisition cost over the preliminary fair
value of Promus' tangible and identifiable intangible net assets, has
been allocated to goodwill and is being amortized over 40 years.
The Company's consolidated results of operations incorporate
Promus' activity from the date of the acquisition. The following
unaudited pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the respective
periods. This pro forma information does not purport to be indicative
of future results or what would have occurred had the acquisition been
made as of those dates.
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS UNAUDITED) 1998 1999
<S> <C> <C>
Revenues $ 2,876 3,161
Operating income 676 703
Income from continuing operations 197 216
Net income 306 214
Basic earnings per share
Income from continuing operations .51 .58
Net income .81 .58
Diluted earnings per share
Income from continuing operations .51 .58
Net income .81 .58
</TABLE>
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
SPIN-OFF OF GAMING OPERATIONS
On December 31, 1998, the Company completed a spin-off of its gaming
operations. Accordingly, results of operations and cash flows of Park
Place have been reported as discontinued operations in the 1997 and
1998 periods presented in the consolidated financial statements.
Income from discontinued gaming operations for the years ended
December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1997 1998
<S> <C> <C>
Revenue $2,145 2,295
Costs and expenses 1,944 1,993
------- -------
Operating income 201 302
Net interest expense 67 79
------- -------
Income before income taxes and minority interest 134 223
Provision for income taxes 63 111
Minority interest, net 4 3
------- -------
Income from discontiued gaming operations $ 67 109
======= =======
</TABLE>
INVENTORIES
Included in inventories at December 31, 1998 and 1999 are unsold
intervals at the Company's vacation ownership properties of $42
million and $70 million, respectively. Inventories are valued at the
lower of cost or estimated net realizable value.
INVESTMENTS AND NOTES RECEIVABLE
Investments and notes receivable at December 31, 1998 and 1999 are as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1999
<S> <C> <C>
Equity investments
Hotels $ 33 220
Other 58 74
Vacation ownership notes receivable 107 123
Other notes receivable 40 212
Marketable securities 24 125
------ ------
262 754
Less current portion of notes receivable -- 78
------ ------
Total $ 262 676
====== ======
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1999
<S> <C> <C>
Land $ 379 590
Buildings and leasehold improvements 2,296 3,256
Furniture and equipment 540 872
Property held for sale or development 37 22
Construction in progress 71 86
------- -------
3,323 4,826
Less accumulated depreciation 840 934
------- -------
Total $2,483 3,892
======= =======
</TABLE>
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1998 and 1999
are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1999
<S> <C> <C>
Accounts and notes payable $128 106
Accrued compensation and benefits 63 140
Accrued property tax 24 32
Accrued interest 27 34
Other accrued expenses 168 303
------- ------
Total $410 615
======= ======
</TABLE>
LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1999
<S> <C> <C>
Industrial development revenue bonds at adjustable rates, due 2015 $ 82 82
Senior notes, with an average rate of 7.7%, due 2001 to 2017 1,117 1,057
Senior notes, with an average rate of 7.2%, due 2002 to 2004 625 625
Mortgage notes, 6.0% to 8.6%, due 2000 to 2016 145 308
5% Convertible subordinated notes due 2006 492 494
Commercial paper -- 19
Revolving loans 635 3,506
Other 3 3
--------- --------
3,099 6,094
Less current maturities 62 9
--------- --------
Net long-term debt $3,037 6,085
========= ========
</TABLE>
Interest paid, net of amounts capitalized, was $74 million, $130
million and $187 million in 1997, 1998 and 1999, respectively.
Capitalized interest amounted to $2 million, $4 million and $7 million
in 1997, 1998 and 1999, respectively.
Debt maturities during the next five years are as follows:
<TABLE>
(IN MILLIONS)
<S> <C>
2000 $ 9
2001 1,818
2002 634
2003 489
2004 1,631
</TABLE>
During 1996, the Company entered into a long-term revolving
credit facility with an aggregate commitment of $1.75 billion, which
expires in 2001 and may be extended for successive one year periods at
the request of the Company with prior written consent of the lenders.
In 1999, the Company entered into an additional $1.85 billion
unsecured senior credit facility consisting of a $1.4 billion
five-year revolver and a $450 million 364-day revolver. The maturity
dates of the $1.85 billion facility are extendible on substantially
the same terms as the $1.75 billion facility. At December 31, 1999,
the $1.75 billion revolving credit facility was fully drawn and
approximately $1.3 billion was outstanding under the five-year portion
of the $1.85 billion revolving credit facility, leaving approximately
$550 million of the revolving credit facilities available to the
Company at such date. Borrowings will generally bear interest at the
London Interbank Offered Rate ("LIBOR") plus a spread based on the
Company's public debt rating or a leverage ratio. The all-in cost of
borrowings under the facilities was approximately LIBOR plus 125 basis
points as of December 31, 1999.
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
Consolidated long-term debt at December 31, 1999 also includes
$480 million of borrowings outstanding under a $500 million revolving
credit facility at the Hilton Hawaiian Village. The all-in cost of
borrowings under this facility, which expires in 2003, was
approximately LIBOR plus 87.5 basis points as of December 31, 1999.
In October 1997, the Company filed a shelf registration statement
("Shelf") with the Securities and Exchange Commission registering up
to $2.5 billion in debt or equity securities. At December 31, 1999,
available financing under the Shelf totaled $2.1 billion. The terms of
any additional securities offered pursuant to the Shelf will be
determined by market conditions at the time of issuance.
Pursuant to a debt assumption agreement entered into at the time
of the Park Place spin-off, Park Place assumed and agreed to pay 100%
of the amount of each payment required to be made by Hilton under the
terms of the indentures governing Hilton's $300 million 7.375% Senior
Notes due 2002 and its $325 million 7% Senior Notes due 2004. These
notes remain in Hilton's long-term debt balance and a long-term
receivable from Park Place in an equal amount is included in the
Company's 1998 and 1999 consolidated balance sheets. In the event of
an increase in the interest rate on these notes as a result of certain
actions taken by Hilton or in certain other limited circumstances,
Hilton will be required to reimburse Park Place for any such increase.
Hilton is obligated to make any payment Park Place fails to make, and
in such event Park Place shall pay to Hilton the amount of such
payment together with interest, at the rate per annum borne by the
applicable notes plus two percent, to the date of such reimbursement.
A pro rata portion of Hilton's historical outstanding public and
corporate bank debt balances and related interest expense has been
allocated to Park Place for prior periods.
Provisions under various loan agreements require the Company to
comply with certain financial covenants which include limiting the
amount of outstanding indebtedness.
FINANCIAL INSTRUMENTS
CASH EQUIVALENTS AND LONG-TERM MARKETABLE SECURITIES
The fair value of cash equivalents and long-term marketable securities
is estimated based on the quoted market price of the investments.
LONG-TERM DEBT
The estimated fair value of long-term debt is based on the quoted
market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments
at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
------------------------ ------------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) AMOUNT VALUE AMOUNT VALUE
Cash and equivalents and long-term
marketable securities $ 71 71 229 229
Long-term debt (including current maturities) 3,099 3,123 6,094 5,837
</TABLE>
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
INCOME TAXES
The provisions for income taxes for the three years ended
December 31 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1997 1998 1999
<S> <C> <C> <C>
Current
Federal $ 168 98 98
State, foreign and local 34 31 34
------ ------- -------
202 129 132
Deferred (78) 7 (2)
------ ------- -------
Total $ 124 136 130
====== ======= =======
</TABLE>
During 1997, 1998 and 1999 the Company paid income taxes,
including amounts paid on behalf of the discontinued gaming operations
during 1997 and 1998, of $150 million, $165 million and $141 million,
respectively.
The income tax effects of temporary differences between financial
and income tax reporting that gave rise to deferred income tax assets
and liabilities at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1999
<S> <C> <C>
Deferred tax assets
Compensation $ 20 57
Deferred income 3 7
Insurance 17 25
Reserves 21 11
Foreign taxes 21 29
Business combination expense -- 45
NOL carryforwards -- 3
Other -- 9
--------- --------
82 186
Valuation allowance (3) (6)
--------- --------
79 180
--------- --------
Deferred tax liabilities
Basis difference (1) (269)
Investments (80) (207)
Property (2) (119)
Brand value -- (420)
Other (13) (29)
--------- --------
(96) (1,044)
--------- --------
Net deferred tax liability $ (17) (864)
========= ========
</TABLE>
The reconciliation of the Federal income tax rate to the
Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0 35.0
Increase in taxes
State and local income taxes, net of Federal tax benefits 4.0 4.2 4.7
Foreign taxes, net .4 -- --
Spin-off costs -- .8 --
Other .1 .5 1.8
-------- -------- --------
Effective tax rate 39.5% 40.5 41.5
======== ======== ========
</TABLE>
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
STOCKHOLDERS' EQUITY
Five hundred million shares of common stock with a par value of $2.50
per share are authorized, of which 265 million and 378 million were
issued at December 31, 1998 and 1999, respectively, including treasury
shares of four million and ten million in 1998 and 1999, respectively.
Authorized preferred stock includes 25 million shares of preferred
stock with a par value of $1.00 per share. In October 1998, 15 million
shares of 8% PRIDES convertible preferred stock were converted into 14
million shares of common stock. No preferred shares were issued or
outstanding at December 31, 1998 and 1999.
To reflect the spin-off of the gaming business, the $3.3 billion
book value of net assets of discontinued gaming operations as of
December 31, 1998 was charged against the Company's retained earnings
and additional paid-in capital. During 1999, adjustments to the
spin-off totaling $4 million were recorded through retained earnings.
The Company's Board of Directors has approved the repurchase by
the Company of up to 20 million shares of its common stock pursuant to
a stock repurchase program. The timing of the stock purchases are made
at the discretion of the Company's management. At December 31, 1999,
the Company had repurchased 10.7 million shares or 54 percent of the
total authorized to be repurchased. The Company may at any time
repurchase up to 9.3 million of the remaining shares authorized for
repurchase.
The Company has a Share Purchase Rights Plan under which a right
is attached to each share of the Company's common stock. The rights
may only become exercisable under certain circumstances involving
actual or potential acquisitions of the Company's common stock by a
specified person or affiliated group. Depending on the circumstances,
if the rights become exercisable, the holder may be entitled to
purchase units of the Company's junior participating preferred stock,
shares of the Company's common stock or shares of common stock of the
acquiror. The rights remain in existence until November 2009 unless
they are terminated, exercised or redeemed.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock-based compensation plans. Accordingly,
compensation expense recognized was different than what would have
otherwise been recognized under the fair value based method defined in
SFAS No. 123, "Accounting for Stock-Based Compensation." Had
compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards
under those plans consistent with the method of SFAS No. 123, the
Company's net income and net income per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1997 1998 1999
<S> <C> <C> <C>
Income from continuing operations $ 178 183 169
Discontinued gaming operations 61 92 --
Cumulative effect of accounting change -- -- (2)
-------- -------- ---------
Net income $ 239 275 167
======== ======== =========
Basic EPS
Income from continuing operations $ .66 .69 .63
Discontinued gaming operations .25 .37 --
Cumulative effect of accounting change -- -- (.01)
-------- -------- ---------
Net income $ .91 1.06 .62
======== ======== =========
Diluted EPS
Income from continuing operations $ .66 .69 .63
Discontinued gaming operations .24 .35 --
Cumulative effect of accounting change -- -- (.01)
-------- -------- ---------
Net income $ .90 1.04 .62
======== ======== =========
</TABLE>
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
At December 31, 1999, 33 million shares of common stock were
reserved for the exercise of options under the Company's Stock
Incentive Plans. Options may be granted to salaried officers,
directors and other key employees of the Company to purchase common
stock at not less than the fair market value at the date of grant.
Generally, options may be exercised in installments commencing one
year after the date of grant. The Stock Incentive Plans also permit
the granting of Stock Appreciation Rights ("SARs"). No SARs have been
granted as of December 31, 1999.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997, 1998 and 1999,
respectively: dividend yield of one percent for each of the three
years; expected volatility of 32, 34 and 31 percent; risk-free
interest rates of 6.5, 5.5 and 4.8 percent and expected lives of six
years for 1997 and 1998 and seven years for 1999.
A summary of the status of the Company's stock option plans as of
December 31, 1997, 1998 and 1999, and changes during the years ending
on those dates is presented below:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED
PRICE AVERAGE AVAILABLE
RANGE PRICE OPTIONS FOR
(PER SHARE) (PER SHARE) OUTSTANDING GRANT
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 4.68 - 18.70 $ 12.08 13,799,456 3,221,762
Authorized -- 6,200,000
Granted 15.95 - 21.30 16.73 3,046,990 (3,046,990)
Exercised 4.72 - 16.23 9.32 (1,418,185) --
Cancelled 7.46 - 17.15 13.87 (796,642) 795,892
---------------- ----------- -------------- ------------
Balance at December 31, 1997 4.68 - 21.30 13.23 14,631,619 7,170,664
Authorized -- 12,000,000
Granted 12.17 - 27.53 18.23 9,113,850 (9,113,850)
Exercised 4.72 - 18.38 10.04 (692,067) --
Cancelled 10.48 - 21.30 15.71 (2,359,632) 2,359,632
---------------- ----------- -------------- ------------
Balance at December 31, 1998 4.68 - 27.53 15.25 20,693,770 12,416,446
Granted 10.84 - 15.31 14.84 3,157,400 (3,157,400)
Exercised 4.72 - 16.59 9.35 (270,276) --
Cancelled 10.48 - 21.30 16.39 (823,152) 823,152
---------------- ----------- -------------- ------------
Balance at December 31, 1999 $ 4.68 - 27.53 $ 15.22 22,757,742 10,082,198
================ =========== ============== ============
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------------
WEIGHTED
RANGE AVARAGE WEIGHTED WEIGHTED
OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$ 4.68 - 11.88 7,747,892 5.1 $11.40 6,234,892 $11.28
12.51 - 14.84 8,132,250 8.6 14.21 2,025,101 14.14
15.06 - 27.53 6,877,600 7.9 20.74 2,144,181 17.48
---------------- ------------ --------- ---------- ------------- -----------
$ 4.68 - 27.53 22,757,742 7.2 $15.22 10,404,174 $13.11
================ ============ ========= ========== ============= ===========
</TABLE>
Effective January 1, 1997, the Company adopted the 1997 Employee
Stock Purchase Plan by which the Company is authorized to issue up to
two million shares of common stock to its full-time employees. Under
the terms of the Plan, employees can elect to have a percentage of
their earnings withheld to purchase the Company's common stock.
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have various employee investment
plans whereby the Company contributes certain percentages of employee
contributions. The aggregate expense to the Company under these plans
totaled $4 million, $4 million and $6 million in 1997, 1998 and 1999,
respectively.
A significant number of the Company's employees are covered by
union sponsored, collectively bargained multi-employer pension plans.
The Company contributed and charged to expense $9 million, $11 million
and $13 million in 1997, 1998 and 1999, respectively, for such plans.
Information from the plans' administrators is not sufficient to permit
the Company to determine its share, if any, of unfunded vested
benefits.
In addition, a significant number of the Company's employees are
covered by a noncontributory retirement plan ("Basic Plan"). The
Company also has plans covering qualifying employees and non-officer
directors ("Supplemental Plans"). Benefits for all plans are based
upon years of service and compensation, as defined. As of December 31,
1996, employees have not accrued additional benefits under either the
Basic or Supplemental Plans. Plan assets will be used to pay benefits
due employees for service through this date. As of December 31, 1998
and 1999, these plans have assets of $257 million and $258 million and
a projected benefit obligation of $233 million and $224 million,
respectively. Accrued pension cost totaled $17 million at December 31,
1998 and 1999. Pension expense for the years ended December 31, 1997,
1998 and 1999 was not significant.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides life insurance benefits to certain retired
employees. Under terms of the plan covering such life insurance
benefits, the Company reserves the right to change, modify or
discontinue these benefits. The Company does not provide
postretirement health care benefits to its employees. The cost of
the benefits provided is not significant.
LEASES
The Company leases hotel properties and land under operating leases.
As of December 31, 1999, the Company leased 74 hotels, 52 of which are
leased from RFS Hotel Investors, Inc. ("RFS"). The Company's hotel
leases require the payment of rent equal to the greater of fixed base
rent or percentage rent based on a percentage of revenue, and expire
through July 2012, with varying renewal options. Substantially all of
the hotels leased from RFS are cross-defaulted with one another. The
Company's land leases represent ground leases for certain owned hotels
and, in addition to minimum base rental payments, may require the
payment of additional rents based on varying percentages of revenue or
income. Total rent expense incurred under the Company's leases was $19
million, $22 million and $23 million in 1997, 1998 and 1999
respectively. Minimum lease commitments under noncancelable operating
leases, including RFS, approximate $66 million annually through 2004
with an aggregate commitment of $811 million through 2044.
In January 2000, the Company entered into an agreement which
gives RFS the option to terminate the RFS leases. As consideration for
terminating the leases, RFS will pay the Company approximately $60
million. It is anticipated that the lease termination will be
accomplished in the first quarter of 2001.
<PAGE>
NOTES (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
COMMITMENTS AND CONTINGENCIES
The Company is liable under certain lease agreements pursuant to which
it has assigned the direct obligation to third party interests.
Additionally, the Company manages certain hotels for others under
agreements that provide for payments or loans to the hotel owners if
stipulated levels of financial performance are not maintained. The
Company has also provided guarantees for loans and leases related to
certain joint ventures. Management believes the likelihood is remote
that material payments will be required under these agreements. The
Company's estimated maximum exposure under such agreements is
approximately $41 million over the next 30 years.
At December 31, 1999, the Company had contractual commitments for
construction, major expansion and rehabilitation projects of
approximately $175 million.
FELCOR
FelCor Lodging Trust Inc. ("FelCor") owns or has an interest in 75
Company hotels as of December 31, 1999. The Company has guaranteed
repayment of a third party loan to FelCor of up to $25 million.
CANDLEWOOD
A subsidiary of the Company has committed to provide credit support
for a loan facility utilized by Candlewood Hotel Company
("Candlewood") to provide construction and permanent financing to
Candlewood and its franchisees, with the aggregate amount of exposure
for all such credit support capped at $30 million. As of December 31,
1999, the Company has guaranteed $11 million in such financing.
FRANCHISE FINANCING
The Company has established franchise financing programs with third
party lenders to support the growth of its Hampton Inn, Homewood
Suites by Hilton, Hilton Garden Inn and Embassy Suites hotels. As of
December 31, 1999, the Company has provided guarantees of $36 million
on loans outstanding under the programs.
OTHER
Various lawsuits are pending against the Company. In management's
opinion, disposition of these lawsuits is not expected to have a
material effect on the Company's financial position or results of
operations.
SUPPLEMENTAL FINANCIAL INFORMATION
Promus Hotels, Inc. ("PHI") is a wholly-owned subsidiary of the
Company that was acquired as part of the Promus acquisition on
November 30, 1999. The Company's consolidated results reflect the
operations of PHI only for the month of December 1999. Among other
things, PHI holds the franchise license for many of the Company's
franchised hotels, primarily Embassy Suites, Hampton Inn and Homewood
Suites by Hilton brands. The following summarized financial
information for PHI, as of and for the twelve months ended December
31, reflects the push-down of purchase accounting in December 1999.
<TABLE>
<CAPTION>
(IN MILLIONS) 1997 1998 1999
<S> <C> <C> <C>
ASSETS
Current assets $ 37 84
Property and equipment, net 427 323
Other assets 409 1,090
-------- --------
$873 1,497
-------- --------
LIABILITIES
Current liabilities $ 86 84
Notes payable 243 6
Other long-term obligations 119 111
-------- --------
448 201
-------- --------
Net assets $425 1,296
======== ========
Revenues $ 290 316 326
Operating income 104 166 192
Net income 74 93 68
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF HILTON HOTELS CORPORATION:
We have audited the accompanying consolidated balance sheets of Hilton
Hotels Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Hilton Hotels Corporation and subsidiaries as of December 31, 1999 and
1998 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United
States.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Los Angeles, California
February 3, 2000
<PAGE>
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
1998
<S> <C> <C> <C> <C> <C>
Revenue $ 366 457 450 496 1,769
EBITDA(1) 122 173 150 151 596
Operating income 94 142 116 112 464
Income from continuing operations 38 65 41 44 188
Income from discontinued
gaming operations 39 41 38 (9) 109
Net income 77 106 79 35 297
Basic EPS(2)
Continuing operations $ .14 .25 .15 .17 .71
Discontinued gaming operations .16 .16 .16 (.03) .44
--------- ------- -------- -------- --------
Net income $ .30 .41 .31 .14 1.15
--------- ------- -------- -------- --------
Diluted EPS
Continuing operations $ .14 .25 .15 .17 .71
Discontinued gaming operations .15 .14 .15 (.03) .41
--------- ------- -------- -------- --------
Net income $ .29 .39 .30 .14 1.12
--------- ------- -------- -------- --------
1999
Revenue $ 475 539 498 638 2,150
EBITDA(1) 156 198 161 180 695
Operating income 116 154 114 111 495
Income from continuing operations 42 66 42 26 176
Cumulative effect of accounting
change, net of tax benefit (2) -- -- -- (2)
Net income 40 66 42 26 174
Basic EPS(2)
Continuing operations $ .16 .26 .16 .09 .66
Cumulative effect of
accounting change (.01) -- -- -- (.01)
--------- ------- -------- -------- --------
Net income $ .15 .26 .16 .09 .65
--------- ------- -------- -------- --------
Diluted EPS
Continuing operations $ .16 .25 .16 .09 .66
Cumulative effect of
accounting change (.01) -- -- -- (.01)
--------- ------- -------- -------- --------
Net income $ .15 .25 .16 .09 .65
========= ======= ======== ======== ========
</TABLE>
As of December 31, 1999 there were approximately 23,300 stockholders of
record.
(1) EBITDA is earnings before interest, taxes, depreciation, amortization,
pre-opening expense and non-cash items. EBITDA can be computed by adding
depreciation, amortization, pre-opening expense, interest and dividend
income from investments related to operating activities and non-cash
items to operating income. EBITDA is presented supplementally because
management believes it allows for a more complete analysis of results of
operations. Non-cash items, such as asset write-downs and impairment
losses, are excluded from EBITDA as these items do not impact operating
results on a recurring basis. This information should not be considered
as an alternative to any measure of performance as promulgated under
generally accepted accounting principles, such as operating income or
net income, nor should it be considered as an indicator of the overall
financial performance of the Company. The Company's calculation of
EBITDA may be different from the calculation used by other companies,
and therefore comparability may be limited.
(2) The sum of EPS for the four quarters may differ from the annual EPS due
to the required method of computing weighted average number of shares in
the respective periods.
<PAGE>
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
GENERAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1998 1999
<S> <C> <C> <C>
EBITDA (IN MILLIONS)
EBITDA
Operations $561 660 768
Corporate expense, net (64) (64) (73)
------- ------ ------
Total EBITDA $497 596 695
======= ====== ======
Reconciliation of operating income to EBITDA:
Operating income $395 464 495
Pre-opening expense -- -- 2
Non-cash items (2) -- --
Operating interest and dividend income -- -- 3
Depreciation and amortization(1) 104 132 195
------- ------ ------
EBITDA $497 596 695
======= ====== ======
<CAPTION>
1998 1999 CHANGE
<S> <C> <C> <C>
COMPARATIVE STATISTICAL INFORMATION(2)
Hilton
Occupancy 71.2 % 70.7 % (.5)pts
Average rate $127.19 $130.60 2.7 %
RevPAR $ 90.54 $ 92.34 2.0 %
Hilton Garden Inn
Occupancy 64.0 % 65.9 % 1.9 pts
Average rate $ 91.00 $ 92.05 1.2 %
RevPAR $ 58.20 $ 60.63 4.2 %
Doubletree(3)
Occupancy 70.8 % 70.1 % (.7)pts
Average rate $106.34 $108.01 1.6 %
RevPAR $ 75.31 $ 75.70 .5 %
Embassy Suites
Occupancy 72.5 % 73.1 % .6 pts
Average rate $120.77 $121.49 .6 %
RevPAR $ 87.57 $ 88.84 1.5 %
Homewood Suites by Hilton
Occupancy 73.9 % 73.7 % (.2)pts
Average rate $ 96.01 $ 95.01 (1.0)%
RevPAR $ 70.93 $ 69.98 (1.3)%
Hampton Inn
Occupancy 70.0 % 68.1 % (1.9)pts
Average rate $ 68.57 $ 71.29 4.0 %
RevPAR $ 47.98 $ 48.57 1.2 %
Other
Occupancy 68.1 % 67.0 % (1.1)pts
Average rate $ 98.38 $ 99.50 1.1 %
RevPAR $ 67.02 $ 66.70 (.5)%
</TABLE>
(1) Includes proportionate share of unconsolidated affiliates.
(2) Statistics are presented on a pro forma basis for both periods, as if
the acquisition of Promus Hotel Corporation had been completed as of
January 1, 1998. Statistics are for comparable hotels, and include only
those hotels in the system as of December 31, 1999 which were owned,
managed or franchised by Hilton since January 1, 1998.
(3) Doubletree franchised hotels are not included in the statistical
information.
<PAGE>
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
OPERATING DATA
REVENUE $ 715 947 1,475 1,769 2,150
INCOME
Income from continuing operations $ 88 120 183 188 176
Discontinued gaming operations 85 (38) 67 109 --
Cumulative effect of
accounting change -- -- -- -- (2)
--------- -------- -------- -------- --------
Net income $ 173 82 250 297 174
========= ======== ======== ======== ========
BASIC EARNINGS PER SHARE
Income from continuing operations $ .46 .61 .68 .71 .66
Discontinued gaming operations .44 (.20) .27 .44 --
Cumulative effect of
accounting change -- -- -- -- (.01)
--------- -------- -------- -------- --------
Net income $ .90 .41 .95 1.15 .65
========= ======== ======== ======== ========
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .45 .61 .68 .71 .66
Discontinued gaming operations .44 (.20) .26 .41 --
Cumulative effect of
accounting change -- -- -- -- (.01)
--------- -------- -------- -------- --------
Net income $ .89 .41 .94 1.12 .65
========= ======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ .30 .305 .32 .32 .08
Other Information
EBITDA
Operations $ 308 401 561 660 768
Corporate expense, net (18) (40) (64) (64) (73)
--------- -------- -------- -------- --------
Total $ 290 361 497 596 695
========= ======== ======== ======== ========
NUMBER OF PROPERTIES AT YEAR END
Owned(1) 19 24 25 32 85
Joint venture 14 7 7 5 56
Leased -- -- -- -- 74
Managed 24 28 27 24 185
Franchised 162 172 180 188 1,352
--------- -------- -------- -------- --------
Total 219 231 239 249 1,752
========= ======== ======== ======== ========
AVAILABLE ROOMS AT YEAR END
Owned(1) 10,714 17,786 18,377 23,341 36,367
Joint venture 13,384 5,306 5,422 2,421 16,171
Leased -- -- -- -- 12,681
Managed 15,096 16,776 15,779 14,690 51,979
Franchised 41,687 43,694 45,092 46,562 183,081
--------- -------- -------- -------- --------
Total 80,881 83,562 84,670 87,014 300,279
========= ======== ======== ======== ========
</TABLE>
(1) Includes majority owned and controlled hotels.
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
Stephen F. Bollenbach(3,4)
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
A. Steven Crown(1,2,3)
GENERAL PARTNER,
HENRY CROWN & COMPANY,
CHICAGO, ILLINOIS - DIVERSIFIED
MANUFACTURING OPERATIONS,
MARINE OPERATIONS AND REAL
ESTATE VENTURES
Peter M. George(1,2,3)
VICE CHAIRMAN AND GROUP
CHIEF EXECUTIVE - HILTON
GROUP PLC, AND CHAIRMAN -
HILTON INTERNATIONAL CO.,
HERTS, ENGLAND - HOTEL AND
GAMING COMPANY
Arthur M. Goldberg
PRESIDENT AND
CHIEF EXECUTIVE OFFICER,
PARK PLACE ENTERTAINMENT
CORPORATION, LAS VEGAS,
NEVADA - CASINO GAMING COMPANY
Barron Hilton(3)
CHAIRMAN
Dieter H. Huckestein
EXECUTIVE VICE PRESIDENT,
HILTON HOTELS CORPORATION,
AND PRESIDENT - HOTEL
DIVISION
Robert L. Johnson(1,2,3,4)
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER,
BET HOLDINGS, INC.,
WASHINGTON, D.C. -
DIVERSIFIED MEDIA HOLDING
COMPANY, CHAIRMAN AND
PRESIDENT OF DISTRICT
CABLEVISION, INC.
Benjamin V. Lambert(1,3)
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER,
EASTDIL REALTY COMPANY,
L.L.C., NEW YORK -REAL
ESTATE INVESTMENT BANKERS
John H. Myers
PRESIDENT AND
CHIEF EXECUTIVE OFFICER,
GENERAL ELECTRIC ASSET
MANAGEMENT INCORPORATED,
STAMFORD, CONNECTICUT - A
WHOLLY-OWNED SUBSIDIARY OF
GENERAL ELECTRIC COMPANY
John L. Notter(1,2,3)
CHAIRMAN,
SWISS AMERICAN INVESTMENT
CORP. - AN INVESTMENT FIRM,
AND CHAIRMAN, WESTLAKE
PROPERTIES, WESTLAKE VILLAGE,
CALIFORNIA - A HOTEL AND REAL
ESTATE DEVELOPMENT COMPANY
Judy L. Shelton (1,2,3)
ECONOMIST, SPECIALIZING IN
INTERNATIONAL MONEY, FINANCE
AND TRADE ISSUES, MARSHALL,
VIRGINIA, AND PROFESSOR OF
INTERNATIONAL FINANCE AT THE
DUXX ESCUELA DE GRADUADOS
EN LIDERAZGO EMPRESERIAL, IN
MONTERREY, MEXICO
Donna F. Tuttle(1,2,3,4)
PRESIDENT, KORN TUTTLE
CAPITAL GROUP, LOS ANGELES,
CALIFORNIA - FINANCIAL
CONSULTING AND INVESTMENTS FIRM
Peter V. Ueberroth
MANAGING DIRECTOR,
CONTRARIAN GROUP, INC.,
NEWPORT BEACH, CALIFORNIA - A
BUSINESS MANAGEMENT COMPANY,
AND CO-CHAIRMAN,
PEBBLE BEACH COMPANY, PEBBLE
BEACH, CALIFORNIA -
A GOLF MANAGEMENT COMPANY
Sam D. Young, Jr.(1,2,3)
CHAIRMAN, TRANS-WEST
ENTERPRISES, INC.,
EL PASO, TEXAS -
AN INVESTMENT COMPANY
(1) Members of the Audit Committee
(2) Members of the Compensation Committee
(3) Members of the Nominating Committee
(4) Members of the Diversity Committee
CORPORATE EXECUTIVE OFFICERS
Stephen F. Bollenbach
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Thomas E. Gallagher
EXECUTIVE VICE PRESIDENT,
CHIEF ADMINISTRATIVE OFFICER,
GENERAL COUNSEL AND
SECRETARY
Matthew J. Hart
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Dieter H. Huckestein
EXECUTIVE VICE PRESIDENT -
HILTON HOTELS CORPORATION,
AND PRESIDENT -
HOTEL DIVISION
Thomas L. Keltner
EXECUTIVE VICE PRESIDENT -
HILTON HOTELS CORPORATION,
AND PRESIDENT - FRANCHISE
HOTEL GROUP
CORPORATE SENIOR OFFICERS
Mariel C. Albrecht
SENIOR VICE PRESIDENT AND
TREASURER
Marc A. Grossman
SENIOR VICE PRESIDENT -
CORPORATE AFFAIRS
James T. Harvey
SENIOR VICE PRESIDENT AND
CHIEF INFORMATION OFFICER
Dorothy Hayden-Watkins
SENIOR VICE PRESIDENT -
DIVERSITY
Robert M. La Forgia
SENIOR VICE PRESIDENT AND
CONTROLLER
Molly McKenzie-Swarts
SENIOR VICE PRESIDENT -
HUMAN RESOURCES
Stevan D. Porter
SENIOR VICE PRESIDENT -
HILTON HOTELS CORPORATION,
AND EXECUTIVE VICE PRESIDENT
- - HOTEL DIVISION
- - HOTEL OPERATIONS
Hilmar A. Rosenast
SENIOR VICE PRESIDENT -
HILTON HOTELS CORPORATION,
AND EXECUTIVE VICE PRESIDENT
- - HOTEL DIVISION
- - SELECT HOTELS
GENERAL INFORMATION
Hilton Hotels
Corporation
WORLD HEADQUARTERS
9336 CIVIC CENTER DRIVE
BEVERLY HILLS, CA 90210
310.278.4321
Transfer Agent and
Registrar for Common
Stock
CHASEMELLON
SHAREHOLDER SERVICES, L.L.C.
85 CHALLENGER ROAD
OVERPECK CENTRE
RIDGEFIELD PARK, NJ 07660
www.chasemellon.com
1.888.224.2751
FOR THE HEARING IMPAIRED:
1.800.231.5469
Independent Public
Accountants
ARTHUR ANDERSEN LLP
Form 10-K
STOCKHOLDERS WISHING TO
RECEIVE A COPY OF THE
COMPANY'S ANNUAL REPORT
ON FORM 10-K, AS FILED WITH
THE SECURITIES AND EXCHANGE
COMMISSION, EXCLUSIVE OF THE
EXHIBITS THERETO, MAY DO SO
WITHOUT CHARGE BY WRITING TO
INVESTOR RELATIONS,
HILTON HOTELS CORPORATION,
9336 CIVIC CENTER DRIVE,
BEVERLY HILLS, CA 90210.
Annual Meeting
THE ANNUAL MEETING OF STOCKHOLDERS
IS SCHEDULED TO BE HELD
AT THE BEVERLY HILTON,
9876 WILSHIRE BOULEVARD,
BEVERLY HILLS, CALIFORNIA, ON
MAY 11, 2000 AT 10:00 A.M.
Hotel Reservation Information
1.800.HILTONS
Visit our website at:
www.hilton.com
The following service marks used in this annual report are owned by Hilton
Hospitality, Inc.; Hilton,-Registered Trademark- Doubletree,-Registered
Trademark- Embassy Suites,-Registered Trademark- Hampton Inn,-Registered
Trademark- Hampton Inn & Suites,-Registered Trademark- Homewood
Suites-Registered Trademark- by Hilton, Conrad International,-Registered
Trademark- Red Lion,-Registered Trademark- and HHonors.-Registered
Trademark-
<PAGE>
EXHIBIT 21
HILTON HOTELS CORPORATION ("HHC")
SUBSIDIARIES, JOINT VENTURES AND AFFILIATES
A. WHOLLY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
State or Country
Name of Incorporation
---- ----------------
<S> <C>
90210 Corporation Delaware
Aloma, Inc. (29) Delaware
Arizona DTM Florida, Inc. (32) Florida
Arizona DTM Pasadena (32) California
ATM Hotels Pty. Limited (6) Australia
Bally's Grand Property Sub I, Inc. (7) Nevada
Boise-Red Lion/Downtowner, Inc. (30) Idaho
Buckleigh, Inc.(23) Delaware
Capital Hilton, L.L.C. (15) New York
Compass, Inc. (23) Tennessee
Compri Realty Corporation No.1 (35) Arizona
Compris Hotel Corporation (33) Delaware
Conrad International (Belgium) Corporation (4) Nevada
Conrad International (Cairo) Corporation (4) Nevada
Conrad International Corporation (3) Nevada
Conrad International (Egypt) Corporation (2) (4) Nevada
Conrad International (Indonesia) Corporation (2) (4) Nevada
Conrad International (Spain) Corporation (2) (4) Nevada
Conrad International (Thailand) Corporation (2) (4) Nevada
Conrad International (Thailand) Limited (4) Thailand
Conrad International Hotels (HK) Ltd. (4) Hong Kong
Conrad International Hotels Limited (2) (4) Ireland
Conrad International Investment (Jakarta) Corporation (4) Nevada
Conrad International Management Services (Singapore) Pte Ltd (4) Singapore
Conrad International Services (11) Belgium
Destination Resorts, Inc. (13) Arizona
DFW Bevco, Inc. (10) Texas
DFW Hilton, Inc. (13) Nevada
Doubletree Corporation (18) Delaware
Doubletree Hotel Systems, Inc. (21) Arizona
Doubletree Hotel Ventures, Inc. (35) Arizona
Doubletree Hotels Corporation (19) Arizona
Doubletree, Inc. of California (35) Arizona
Doubletree of Phoenix, Inc. (20) Delaware
DT Investments, Inc. (35) Arizona
DT Management, Inc. (21) Arizona
DT Real Estate, Inc. (21) Arizona
DTM Antlers, Inc. (1) (32) Arizona
DTM Atlanta/Legacy, Inc. (36) Arizona
DTM Burlingame, Inc. (32) Arizona
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
State or Country
Name of Incorporation
- ---- ----------------
<S> <C>
DTM Cambridge, Inc. (32) Massachusetts
DTM Coconut Grove, Inc. (32) Arizona
DTM Largo, Inc. (32) Arizona
DTM Maryland, Inc. (32) Arizona
DTM Nashville, Inc. (32) Arizona
DTM Oklahoma, Inc. (32) Arizona
DTM Palm Springs, Inc. (1) (32) Arizona
DTM Salt Lake City, Inc. (32) Utah
DTM Santa Clara, Inc. (32) Arizona
DTM St. Louis, Inc. (32) Arizona
DTM Tampa, Inc. (32) Florida
DTM Tulsa, Inc. (32) Arizona
DTM Ventura, Inc. (32) Arizona
DTM Walnut Creek, Inc. (32) Arizona
DTR Cambridge, Inc. (35) Arizona
DTR FCH Holdings, Inc. (35) Arizona
DTR Independence, Inc. (36) Arizona
DTR North Canton, Inc. (36) Arizona
DTR PAH Holding, Inc. (36) Arizona
DTR RFS Lessee, Inc. (34) California
DTR San Antonio, Inc. (36) Arizona
DTR Sonoran Holding, Inc. (35) Arizona
DTR TM Holdings, Inc. (35) Arizona
DTR West Montrose, Inc. (36) Arizona
EJP Corporation (23) Delaware
Embassy Development Corporation (23) Delaware
Embassy Equity Development Corporation (23) Delaware
Embassy Memphis Corporation (23) Tennessee
Embassy Pacific Equity Corporation (23) Delaware
Embassy Suites Club No. 1, Inc.(23) Kansas
Embassy Suites Club No. Two, Inc.(23) Texas
Embassy Suites Club No. Three, Inc. (23) Louisiana
Embassy Suites (Isla Verde), Inc. (23) Delaware
Embassy Suites (Puerto Rico), Inc. (23) Delaware
Embassy Syracuse Development Corporation (26) Delaware
Embassy Vacation Resorts, Inc. (23) Delaware
EPAM Corporation (23) Delaware
ESI Development, Inc. (23) Delaware
ESI Mortgage Development Corporation (23) Delaware
ESI Mortgage Development Corporation II (23) Delaware
GOL Texas, Inc. (24) Texas
Grand Vacations Realty, LLC (16) Delaware
Grand Vacations Title, LLC (17) Delaware
Guest Quarters Services Corporation (38) Illinois
Hampton Inns, Inc. (23) Delaware
Hapeville Investors, LLC Delaware
Harbor Hotel Corporation (37) Delaware
Harrison Conference Associates, Inc. (20) Delaware
Harrison Conference Center of Glen Cove, Inc. (29) New York
Harrison Conference Center of Lake Bluff, Inc. (29) Illinois
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
State or Country
Name of Incorporation
- ---- ----------------
<S> <C>
Harrison Conference Food Services of New Jersey, Inc. (29) New Jersey
Harrison Conference Services, Inc. (28) New York
Harrison Conference Services of Boston, Inc. (29) Massachusetts
Harrison Conference Services of Connecticut, Inc. (29) Connecticut
Harrison Conference Services of Florida, Inc. (29) Florida
Harrison Conference Services of Illinois, Inc. (29) Illinois
Harrison Conference Services of Massachusetts, Inc. (29) Massachusetts
Harrison Conference Services of North Carolina, Inc. (29) North Carolina
Harrison Conference Services of Princeton, Inc. (29) New Jersey
Harrison Conference Services of Wellesley, Inc. (29) Massachusetts
Harsa, Inc. (28) Delaware
HHV Holdings II LLC (40) Nevada
Hilton Chicago Corporation (13) Nevada
Hilton Dallas, Inc. (13) Nevada
Hilton D.C. Corporation Nevada
Hilton Employee Relief Fund California
Hilton Equipment Corporation (12) Delaware
Hilton Finance Corporation (12) Nevada
Hilton Grand Vacations Club, LLC (16) Delaware
Hilton Grand Vacations Company, LLC (16) Delaware
Hilton Grand Vacations Development Company- Las Vegas, LLC Nevada
Hilton Hawaii Corporation (13) Delaware
Hilton Hawaiian Village LLC (39) Hawaii
Hilton Holdings, Inc. Nevada
Hilton Hospitality, Inc. (12) Nevada
Hilton Hotels Partners I, LLC Delaware
Hilton Hotels Partners II, LLC Delaware
Hilton Hotels U.S.A., Inc. Delaware
Hilton Illinois Corp. (7) Nevada
Hilton Illinois Holdings, Inc. (13) Delaware
Hilton Inns, Inc. (12) Delaware
Hilton Insurance Corporation (12) Vermont
Hilton Kansas City Corporation Missouri
Hilton Michigan Avenue Corporation (14) Delaware
Hilton New York Corporation (13) Nevada
Hilton Real Estate Holdings, Inc. Delaware
Hilton Recreation, Inc. (13) Delaware
Hilton Resorts Corporation Delaware
Hilton Resorts Holding Corp. Delaware
Hilton San Diego Corporation (13) California
Hilton Suites, Inc. (13) Delaware
Hilton Systems, LLC Delaware
Hilton Texas, Inc. (13) Nevada
Hilton Washington Corporation New York
HKC Advertising, Inc. (5) Missouri
HKC Partners, Inc. Missouri
Hosco Corporation (20) Arizona
Houston Airport Doubletree, Inc. (35) Texas
Hotel Clubs of Corporate Woods, Inc. (21) Kansas
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
State or Country
Name of Incorporation
- ---- ----------------
<S> <C>
Hotels Statler Company, Inc. (13) Delaware
Innco Corporation (20) Arizona
InnVision, LLC Delaware
Kenner Investors, LLC Delaware
Kingston Plantation Hotel Management Company (25) Delaware
Old Town Hotel Corp. (23) Delaware
Pacific Hotels, Inc. (23) Tennessee
PHI Alpharetta, L.L.C. (23) Delaware
PHI Austin, L.L.C. (23) Delaware
PHI Dallas, L.L.C. (23) Delaware
PHI Dulles, L.L.C. (23) Delaware
PHI Las Vegas, L.L.C. (23) Delaware
Promus BPC Corporation (23) Delaware
Promus Hotel Corporation Delaware
Promus Hotel Services, Inc. (23) Delaware
Promus Hotels Florida, Inc. (23) Delaware
Promus Hotels Minneapolis, Inc. (23) Delaware
Promus Hotels, Inc. (22) Delaware
Promus/Kingston Development Corporation (23) Delaware
Promus Operating Company, Inc. (18) Delaware
Red Lion Hotel Systems, Inc. (30) Arizona
Red Lion Hotels, Inc. (19) Delaware
Red Lion Properties, Inc. (30) Delaware
RFS Hotel Investors, Inc. (31) Delaware
RFS Leasing, Inc. (31) Tennessee
RFS, Inc. (19) Tennessee
SALC, Inc. (30) Texas
Samantha Hotel Corporation (19) Delaware
Scottsdale Plaza Doubletree, Inc. (35) Arizona
Southfield Hotel Management, Inc. (1) (26) Florida
Suite Life, Inc. (27) Delaware
Tarsa, Inc. (1) (28) New York
The Boise Red Lion Motor Inn, Inc. (30) Delaware
TUK Inns, Inc. (35) Washington
Washington Hilton, L.L.C. (8) New York
Ziwa Insurance, Inc. (22) Connecticut
- ------------------------------------------------------------------------------------
</TABLE>
(1) Inactive.
(2) Nameholding company.
(3) Wholly owned by Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(4) Wholly owned by Conrad International Corporation, which is wholly owned by
Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(5) Wholly owned by Hilton Kansas City Corporation, which is wholly owned by
HHC.
(6) 50%-owned by Promus Hotels, Inc., and 50%-owned by Pacific Hotels, Inc.
(7) Wholly owned by Hilton Illinois Holdings, Inc., which is wholly owned by
Hilton Holdings, Inc., which is wholly-owned by HHC.
(8) 50.05% owned by Hilton Washington Corporation, which is wholly-owned by
HHC, and 49.95% owned by Hilton D.C. Corporation, which is wholly owned by
HHC.
4
<PAGE>
(9) Hilton New York Corporation is the sole member of this limited-liability
company.
(10) Wholly owned by Hilton Dallas, Inc., which is wholly owned by Hilton
Holdings, Inc., which is wholly owned by HHC.
(11) .04% (four-one-hundredths of one percent) owned by HHC, and 99.96% owned by
Conrad International Corporation, which is wholly owned by Hilton Hotels
U.S.A., Inc., which is wholly owned by HHC.
(12) Wholly owned by 90210 Corporation, which is wholly owned by HHC.
(13) Wholly owned by Hilton Holdings, Inc., which is wholly owned by HHC.
(14) 40.24% owned by Hilton Illinois Corp., which is wholly-owned by Hilton
Illinois Holdings, Inc., which is wholly-owned by Hilton Holdings, Inc.,
which is wholly-owned by HHC; and 59.76% owned by Hilton Chicago
Corporation, which is wholly owned by Hilton Holdings, Inc., which is
wholly-owned by HHC.
(15) 50.05% owned by HHC, and 49.95% owned by Hilton D.C. Corporation, which is
wholly owned by HHC.
(16) Wholly-owned by Hilton Resorts Corporation, which is wholly-owned by HHC.
(17) Wholly-owned by Grand Vacations Realty, LLC, which is wholly-owned by
Hilton Resorts Corporation, which is wholly-owned by HHC.
(18) Wholly-owned by Promus Hotel Corporation, which is wholly-owned by HHC.
(19) Wholly-owned by Doubletree Corporation, which is wholly-owned by Promus
Hotel Corporation, which is wholly-owned by HHC.
(20) Wholly-owned by Doubletree Hotels Corporation, which is wholly-owned by
Doubletree Corporation, which is wholly-owned by Promus Hotel Corporation,
which is wholly-owned by HHC.
(21) Wholly-owned by Doubletree of Phoenix, Inc., which is wholly-owned by
Doubletree Hotels Corporation, which is wholly-owned by Doubletree
Corporation, which is wholly-owned by Promus Hotel Corporation, which is
wholly-owned by HHC.
(22) Wholly-owned by Promus Operating Company, Inc., which is wholly-owned by
Promus Hotel Corporation, which is wholly-owned by HHC.
(23) Wholly-owned by Promus Hotels, Inc., which is wholly-owned by Promus
Operating Company, Inc., which is wholly-owned by Promus Hotel Corporation,
which is wholly-owned by HHC.
(24) Wholly-owned by Hampton Inns, Inc., which is wholly-owned by Promus Hotels,
Inc., which is wholly-owned by Promus Operating Company, Inc., which is
wholly-owned by Promus Hotel Corporation, which is wholly-owned by HHC.
(25) Wholly-owned by Buckleigh, Inc., which is wholly-owned by Promus Hotels,
Inc., which is wholly- owned by Promus Operating Company, Inc., which is
wholly-owned by Promus Hotel Corporation, which is wholly-owned by HHC.
(26) Wholly-owned by Embassy Equity Development Corporation, which is
wholly-owned by Promus Hotels, Inc., which is wholly-owned by Promus
Operating Company, Inc., which is wholly-owned by
5
<PAGE>
Promus Hotel Corporation, which is wholly-owned by HHC.
(27) Wholly-owned by EJP Corporation, which is wholly-owned by Promus Hotels,
Inc., which is wholly-owned by Promus Operating Company, Inc., which is
wholly-owned by Promus Hotel Corporation, which is wholly-owned by HHC.
(28) Wholly-owned by Harrison Conference Associates, Inc., which is wholly-owned
by Doubletree Hotels Corporation, which is wholly-owned by Doubletree
Corporation, which is wholly-owned by Promus Hotel Corporation, which is
wholly-owned by HHC.
(29) Wholly-owned by Harrison Conference Services, Inc., which is wholly-owned
by Harrison Conference Associates, Inc., which is wholly-owned by
Doubletree Hotels Corporation, which is wholly-owned by Doubletree
Corporation, which is wholly-owned by Promus Hotel Corporation, which is
wholly-owned by HHC.
(30) Wholly-owned by Red Lion Hotels, Inc., which is wholly-owned by Doubletree
Corporation, which is wholly-owned by Promus Hotel Corporation, which is
wholly-owned by HHC.
(31) Wholly-owned by RFS, Inc., which is wholly-owned by Doubletree Corporation,
which is wholly-owned by Promus Hotel Corporation, which is wholly-owned by
HHC.
(32) Wholly-owned by DT Management, Inc., which is wholly-owned by Doubletree of
Phoenix, Inc., which is wholly-owned by Doubletree Hotels Corporation,
which is wholly-owned by Doubletree Corporation, which is wholly-owned by
Promus Hotel Corporation, which is wholly-owned by HHC.
(33) Wholly-owned by Doubletree Hotel Systems, Inc., which is wholly-owned by
Doubletree of Phoenix, Inc., which is wholly-owned by Doubletree Hotels
Corporation, which is wholly-owned by Doubletree Corporation, which is
wholly-owned by Promus Hotel Corporation, which is wholly-owned by HHC.
(34) Wholly-owned by Compris Hotel Corporation, which is wholly-owned by
Doubletree Hotel Systems, Inc., which is wholly-owned by Doubletree of
Phoenix, Inc., which is wholly-owned by Doubletree Hotels Corporation,
which is wholly-owned by Doubletree Corporation, which is wholly-owned by
Promus Hotel Corporation, which is wholly-owned by HHC.
(35) Wholly-owned by DT Real Estate, Inc., which is wholly-owned by Doubletree
of Phoenix, Inc., which is wholly-owned by Doubletree Hotels Corporation,
which is wholly-owned by Doubletree Corporation, which is wholly-owned by
Promus Hotel Corporation, which is wholly-owned by HHC.
(36) Wholly-owned by DTR Sonoran Holding, Inc., which is wholly-owned by DT Real
Estate, Inc., which is wholly-owned by Doubletree of Phoenix, Inc., which
is wholly-owned by Doubletree Hotels Corporation, which is wholly-owned by
Doubletree Corporation, which is wholly-owned by Promus Hotel Corporation,
which is wholly-owned by HHC.
(37) Wholly-owned by Samantha Hotel Corporation, which is wholly-owned by
Doubletree Corporation, which is wholly-owned by Promus Hotel Corporation,
which is wholly-owned by HHC.
(38) Wholly-owned by Doubletree Partners, which is 60%-owned by Samantha Hotel
Corporation, and 40%-owned by Doubletree Corporation.
(39) 96.08% owned by HHC, and 3.92% owned by Hilton Recreation, Inc.
(40) 100% owned by Hilton Hawaiian Village LLC, which is 96.08% owned by HHC,
and 3.92% owned by Hilton Recreation, Inc.
6
<PAGE>
B. PARTIALLY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
% State or Country
Name Ownership of Incorporation
---- --------- ----------------
<S> <C> <C>
349 West 53rd Street Realty Corp. (1) (4) See (4) below. New York
Arlington Hotel Co. 51 Arizona
Betty MacWilliam & Company (1) 49 Texas
Boise Beverage Corporation 50 Idaho
Candlewood Hotel Company, Inc. 28.7 Delaware
Club Mack Opco, LLC 50 Delaware
Doubletree de Mexico, S.A. de C.V. 50 Mexico
DTR Boston Heights, Inc. 80 Arizona
DTR Houston, Inc. 80 Arizona
Earlsfort Centre Hotel Proprietors Limited (2) 14.7 Ireland
FCH/DT Hotels, L.L.C. 10 Delaware
FCH/DT Leasing, L.L.C. 50 Delaware
HHC/PTC, LLC (3) 75 Delaware
Hilton HHonors Worldwide, L.L.C. (6) 50 Delaware
Hilton Marketing Worldwide, L.L.C. (6) 50 Delaware
Hilton Reservations Worldwide, L.L.C. (6) 50 Delaware
Intermediate MD Property Company (5) See (5) below. Maryland
International Company for
Touristic Investments, S.A.E. (7) 10 Egypt
Louisville Club Opco, L.L.C. 15 Delaware
LSA Club One, Inc. 49 Delaware
MeriTex, LLC (8) See (8) below. Delaware
Norwalk Club Opco, L.L.C. 15 Delaware
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
% State or Country
Name Ownership of Incorporation
---- --------- ----------------
<S> <C> <C>
Oakbrook Hilton Suites and
Garden Inn LLC (9) 50 Illinois
On Command Corporation 8.2 Delaware
Praedium II, Largo Associates, L.L.C. 20 Maryland
Praedium II San Antonio, L.P. 20 Texas
Promus/FCH Condominium Company, LLC 50 Delaware
Promus/FCH Development Company, LLC 50 Delaware
P.T. Jakarta International Artha (10) 10 Indonesia
Red Lion/Riverfront, L.L.C. 10 Delaware
RW Motels, Ltd. 25 Texas
VRLB, Inc. 4.5 Montana
Windsor Casino Financial Limited (11) 50 Ontario, Canada
Windsor Casino Limited (11) 50 Ontario, Canada
Windsor Casino Supplies Limited (11) 50 Ontario, Canada
Yeditepe Beynelmilel Otelcilik 25 Turkey
Turizm Ve Ticaret, A.S.
("Seven Hills International Hotels,
Tourism and Trade, A.S.") (12)
Ziwa Insurance, Inc. 4.5 Vermont
- ------------------------------------------------------------------------------------
</TABLE>
(1) Inactive corporation.
(2) 14.7% owned by Conrad International Corporation, which is wholly owned by
Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(3) 75% owned by Destination Resorts, Inc., which is wholly owned by Hilton
Holdings, Inc., which is wholly-owned by HHC; and 25% owned by Pointe
Tapatio Resort Properties No. 1 Limited Partnership.
(4) Wholly owned by the New York Hilton Joint Venture, which is 50.5% owned by
Hilton Hotels Corporation, and 49.5% owned by Hilton New York Corporation.
(5) HHC owns 100% of the issued and outstanding common (Class A) shares.
(6) The remaining ownership interest is held by Hilton International Co.
8
<PAGE>
(7) 10% owned by Conrad International Corporation, which is wholly owned by
Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(8) HHC owns 100% of the issued and outstanding Class B (equity) shares. P & O,
Inc. owns 100% of the issued and outstanding Class A (managing) shares.
(9) 50% owned by Hilton Suites, Inc., which is wholly owned by Hilton Holdings,
Inc., which is wholly-owned by HHC; and 50% owned by Martinique-Drury Lane
Oakbrook Partnership.
(10) 10% owned by Conrad International Investment (Jakarta) Corporation, which
is wholly owned by Conrad International Corporation, which is wholly owned
by Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(11) 50% owned by Conrad International Corporation, which is wholly owned by
Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
(12) 25% owned by Conrad International Corporation, which is wholly owned by
Hilton Hotels U.S.A., Inc., which is wholly owned by HHC.
9
<PAGE>
C. JOINT VENTURES
<TABLE>
<CAPTION>
% State or Country
Name Ownership of Incorporation
---- --------- ----------------
<S> <C> <C>
Avenue Louise Hotel Partners S.N.C. (1) 100 Belgium
Bakersfield Red Lion Motor Inn 66.7 California
BHH Management Associates (11) 99 Massachusetts
Corporate Associates - Atlanta Limited Partnership 13.78 Arizona
Corporate Associates - Boise Limited Partnership 13.33 Arizona
Corporate Associates - Newport Limited Partnership (11) 13.33 Arizona
Custom House Hotel, L.P. 2.11 Missouri
DDP Partners, L.P. 5.54 Tennessee
Destination Resort Affiliates (3) 50 Arizona
DFW Hilton Hotel Limited Partnership (4) 100 Texas
Doubletree Partners 100 Delaware
DTR Limited Partnership 100 Arizona
Embassy Akers Venture 50 Delaware
Embassy LaJolla Partners Limited Partnership 10 Delaware
Embassy/Shaw Rochester Venture 50 Delaware
EPT Austin L.P. 50 Delaware
EPT Atlanta Perimeter Center L.P. 50 Delaware
EPT Covina L.P. 50 Delaware
EPT Kansas City L.P. 50 Delaware
EPT Meadowlands L.P. 50 Delaware
EPT Overland Park L.P. 50 Delaware
EPT Raleigh L.P. 50 Delaware
EPT San Antonio L.P. 50 Delaware
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
% State or Country
Name Ownership of Incorporation
---- --------- ----------------
<S> <C> <C>
Felcor Suites L.P. 2.53 Delaware
Fess Parker - Red Lion Hotel 49.09 California
Flamingo Hilton Riverboat Casino, L.P. (5) 100 Missouri
FCH/DT BWI Holdings, L.P. 100 Delaware
Glendale Red Lion Hotel 75 California
Global Resort Partners (6) 13.34 Hawaii
GOL Columbia L.P. 100 Delaware
Granada Royale Hometel-West L.P. 50.003 Delaware
Granada Royale Hometel-Tucson L.P. 65 Delaware
Hapeville Hotel Limited Partnership (7) 100 Delaware
Highland Plaza Partners, L.P. 5 Tennessee
Hospitality Capital Group 33.33 Delaware
Hotel Equities Co. 2.1 Arizona
Hotel Properties- Boise 50 Arizona
Hotel Properties- Newport (11) 61 Arizona
Hutton Centre Hotel Associates 30.5 California
International Rivercenter Partnership 67.4 Louisiana
Kenner Hotel Limited Partnership (8) 100 Delaware
King Street Station Hotel Associates, L.P. 50 Delaware
MHV J.V 50 Delaware
New Orleans International Hotel 26.33 Louisiana
New Orleans Rivercenter 38.75 Louisiana
New York Hilton Joint Venture (9) 100 New York
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
% State or Country
Name Ownership of Incorporation
---- --------- ----------------
<S> <C> <C>
Ontario Red Lion Motor Inn 66.7 California
Pacific Market Investment Company 50 Delaware
PAH-DT Allen Partners, LP 15 Delaware
PAH-DT Chicago/O'Hare Partners, LP 10 Delaware
PAH-DT Miami Airport Partners, L.P. 10 Delaware
PAH-DT Minneapolis Suites Partners, L.P. 10 Delaware
PAH-DT Park Place Partners, L.P. 10 Delaware
PAH-DT Tallahassee Partners, L.P. 10 Delaware
Promus/Felcor Lombard L.P. 50 Delaware
Promus/Felcor Parsippany L.P. 50 Delaware
Promus/Felcor San Antonio Joint Venture 50 Delaware
Red Lion La Posada 100 Arizona
Red Lion Orange County Partners, L.P. 51 California
San Francisco Hilton, L.P. (10) 100 California
Santa Barbara Red Lion Hotel 100 California
SES/DC Venture 25 Delaware
SF Partners 2.5 Delaware
Southcenter Motor Hotel, Ltd. 20.2 Washington
Thayer Hotel Investors II, L.P. 4.35 Delaware
THI Metairie, L.P. 4.35 Delaware
THI Oceanfront, L.P. 4.35 Delaware
THI Plantation, L.P. 4.35 Delaware
THI Rockville, L.P. 4.35 Delaware
THI Skokie, L.P. 4.35 Delaware
THI Somerset, L.P. 4.35 Delaware
Tucson Hotel Equity Limited Partnership 49.9 Arizona
Valencia Hotel Joint Venture (2) 25 California
Village Motor Inn 50 Montana
- ------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
(1) 50% of this partnership is owned by Conrad International Corporation, which
is wholly owned by Hilton Hotels U.S.A., Inc., which is wholly owned by
HHC. The remaining 50% is owned by Conrad International (Belgium)
Corporation, which is wholly owned by Conrad International Corporation,
which is wholly owned by Hilton Hotels U.S.A., Inc., which is wholly owned
by HHC.
(2) 25% owned by Hilton Inns, Inc., which is wholly owned by 90210 Corporation,
which is wholly-owned by HHC.
(3) 50% of this joint venture is owned by Destination Resorts, Inc., which is
wholly owned by Hilton Holdings, Inc., which is wholly-owned by HHC.
(4) 99% owned by DFW Hilton Inc., which is wholly owned by Hilton Holdings,
Inc., which is wholly owned by HHC; and 1% owned by Hilton Texas, Inc.,
which is wholly owned by Hilton Holdings, Inc., which is wholly-owned by
HHC.
(5) 90% of this partnership is owned by Hilton Kansas City Corporation, which
is wholly owned by HHC. The remaining 10% is owned by HKC Partners, Inc.,
which is wholly owned by HHC.
(6) 13.34% owned by Hilton Recreation, Inc., which is wholly owned by Hilton
Holdings, Inc., which is wholly-owned by HHC.
(7) 1% owned by Hilton Hotels Partners II, LLC (the general partner), and 99%
owned by Hapeville Investors, LLC (the limited partner.) Both the general
and limited partners are wholly owned by HHC.
(8) 1% owned by Hilton Hotels Partners I, LLC (the general partner), and 99%
owned by Kenner Investors, LLC (the limited partner.) Both the general and
limited partners are wholly owned by HHC.
(9) 50.5%-owned by HHC, and 49.5%-owned by Hilton New York Corporation, which
is wholly-owned by Hilton Holdings, Inc., which is wholly-owned by HHC.
(10) 50.25% owned by HHC, and 49.75% owned by Hilton Hospitality, Inc., which is
wholly owned by 90210 Corporation, which is wholly-owned by HHC.
(11) Inactive.
13
<PAGE>
D. AFFILIATES
1. The following are special purpose corporations formed in connection with the
operation of beverage service at particular hotels. HHC does not directly or
indirectly own any of the shares of these corporations.
<TABLE>
<CAPTION>
State of
Name of Corporation Incorporation
------------------- -------------
<S> <C>
Dallas DBLT Club Texas
Hilton Beverage Corporation Louisiana
New Orleans Hilton Beverage Corporation Louisiana
Tapas Corporation Utah
</TABLE>
2. The following nonprofit corporation serves as the owner of the health club at
the Washington Hilton & Towers. It is owned by the members of that hotel's
health club. HHC does not have any direct or indirect ownership interest in this
corporation.
<TABLE>
<CAPTION>
State of
Name of Corporation Incorporation
------------------- -------------
<S> <C>
Washington Hilton Racquet Club District of Columbia
</TABLE>
14
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 3, 2000, included (or incorporated by reference) in
this Form 10-K for the year ended December 31, 1999, into the Company's
previously filed Registration Statements (File Nos. 2-99967, 33-35951,
333-04273, 333-10415, 333-175155, 333-18523, 333-38047, 333-41447 and
333-89437).
ARTHUR ANDERSEN LLP
Los Angeles, California
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 408
<ALLOWANCES> 12
<INVENTORY> 90
<CURRENT-ASSETS> 763
<PP&E> 4,826
<DEPRECIATION> 934
<TOTAL-ASSETS> 9,253
<CURRENT-LIABILITIES> 629
<BONDS> 6,085
0
0
<COMMON> 946
<OTHER-SE> 469
<TOTAL-LIABILITY-AND-EQUITY> 9,253
<SALES> 2,150
<TOTAL-REVENUES> 2,150
<CGS> 0
<TOTAL-COSTS> 1,579
<OTHER-EXPENSES> 73
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> 313
<INCOME-TAX> 130
<INCOME-CONTINUING> 176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2)
<NET-INCOME> 174
<EPS-BASIC> .65
<EPS-DILUTED> .65
</TABLE>
<PAGE>
EXHIBIT 99
UNDERTAKINGS
For the purposes of complying with the amendments to the rules governing
Form S-8 under the Securities Act of 1933 (the "Securities Act"), the
Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into Registrant's Statement on Form S-8 Nos.
333-04273 (filed May 22, 1996), 333-175155 (filed December 2, 1996),
333-41447 (filed December 4, 1997) and 333-92531 (filed December 10,1999):
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
