SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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 No. 1-11463
PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware I.R.S. No. 62-1596939
(State of Incorporation) (I.R.S. Employer Identification No.)
850 Ridge Lake Blvd., Suite 400
Memphis, Tennessee 38120
(Address of principal executive offices)
(901) 680-7200
(Registrant's telephone number, including area code)
6800 Poplar Avenue, Suite 200
Memphis, Tennessee 38138
(Former address of Registrant)
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
------- -------
At June 30, 1995, there were outstanding 51,360,013 shares of the Company's
Common Stock.
Page 1 of 296
Exhibit Index Page 31
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
----------------------------
As discussed in Note 1, on June 30, 1995, The Promus Companies Incorporated
(Parent) completed the planned spin-off (Spin-Off) that split Parent into two
independent public corporations, one for conducting its casino entertainment
business and one for conducting its hotel business. Parent's interests in the
Embassy Suites, Hampton Inn and Homewood Suites hotel divisions and certain
other hotel-related assets and liabilities were transferred to Promus Hotel
Corporation (PHC or the Company). The historical financial statements of Parent
have been disaggregated through June 30, 1995. The accompanying consolidated
condensed financial statements of PHC include the assets and liabilities,
revenues, expenses and cash flows of PHC as a stand-alone business. The
Company's financial position as of June 30, 1995, reflects the actual assets and
liabilities received from Parent pursuant to the Spin-Off.
The accompanying unaudited consolidated condensed financial statements of PHC, a
Delaware corporation, have been prepared in accordance with the instructions to
Form 10-Q, and therefore do not include all information and notes necessary for
complete financial statements in conformity with generally accepted accounting
principles. The results for the periods indicated are unaudited, but reflect
all adjustments (consisting only of normal recurring adjustments) which
management considers necessary for a fair presentation of operating results.
Results of operations for interim periods are not necessarily indicative of a
full year of operations. These consolidated condensed financial statements
should be read in conjunction with the PHC combined financial statements and
notes thereto included in the PHC Registration Statement on Form 10/A as
declared effective on May 3, 1995.
2
<PAGE>
PROMUS HOTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
June 30, Dec. 31,
(in thousands, except share amounts) 1995 1994
--------- --------
ASSETS
Current assets
Cash and cash equivalents $ 2,595 $ 2,222
Receivables, including notes receivable of
$482 and $66, less allowance for doubtful
accounts of $1,703 and $1,270 24,735 18,148
Deferred income taxes 1,535 2,844
Supplies 4,813 1,095
Prepayments and other 2,667 1,256
--------- --------
Total current assets 36,345 25,565
--------- --------
Land, buildings and equipment 455,303 410,751
Less: accumulated depreciation (105,188) (88,611)
--------- --------
350,115 322,140
Investments in and advances to nonconsolidated
affiliates (Note 7) 37,372 35,856
Deferred costs and other 47,079 37,004
--------- --------
$ 470,911 $420,565
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,673 $ 14,437
Accrued expenses 26,127 18,769
Current portion of long-term debt 969 1,255
--------- --------
Total current liabilities 43,769 34,461
Long-term debt (Note 2) 219,760 189,943
Deferred credits and other 35,441 28,649
Deferred income taxes 29,670 24,504
--------- --------
328,640 277,557
--------- --------
Commitments and contingencies (Notes 5 and 8)
Stockholders' equity
Common stock, $0.10 par value, 360,000,000
shares authorized, 51,360,013 shares
outstanding 5,136 -
Capital surplus 138,664 -
Deferred compensation related to
restricted stock (1,529) -
Parent company investment - 143,008
--------- --------
142,271 143,008
--------- --------
$ 470,911 $420,565
========= ========
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
PROMUS HOTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 1995 1994 1995 1994
------- ------- -------- --------
Revenues
Rooms $30,165 $28,566 $ 59,634 $ 55,897
Food and beverage 1,896 2,127 3,788 4,117
Franchise and management
fees 20,697 19,594 38,193 35,156
Other (Note 7) 16,809 13,253 31,170 23,924
------- ------- -------- --------
Total revenues 69,567 63,540 132,785 119,094
------- ------- -------- --------
Operating expenses
Direct
Rooms 14,381 14,393 27,981 28,122
Food and beverage 1,852 2,173 3,554 4,034
Depreciation 6,954 6,174 13,714 11,694
Other 17,359 15,539 32,406 29,282
------- ------- -------- --------
Total direct operating
expenses 40,546 38,279 77,655 73,132
------- ------- -------- --------
29,021 25,261 55,130 45,962
General and administrative (798) (757) (1,666) (1,520)
Property transactions ( 33) (199) (331) (397)
------- ------- -------- --------
Operating income 28,190 24,305 53,133 44,045
Interest expense, net of
interest capitalized
(Notes 2 and 7) (8,335) (7,321) (16,742) (15,021)
Interest and other income 222 24 273 51
------- ------- -------- --------
Income before income taxes 20,077 17,008 36,664 29,075
Provision for income taxes (8,451) (6,801) (15,434) (12,737)
------- ------- -------- --------
Net income $11,626 $10,207 $ 21,230 $ 16,338
======= ======= ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
<TABLE><CAPTION>
PROMUS HOTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS'
EQUITY (NOTES 1 and 4)
(UNAUDITED)
Deferred
Compensation
Related to Parent
Common Stock Capital Restricted Company
(in thousands) Shares Amount Surplus Stock (Note 6) Investment Total
------ ------ -------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1994 - $ - $ - $ - $ 143,008 $143,008
Net Income -
January 1, 1995
through
June 30, 1995 - - - - 21,230 21,230
Intercompany
activity with
Parent - January 1,
1995 through
June 30, 1995 - - - - (21,967) (21,967)
Spin-Off of the
Company (Note 1) 51,352 5,135 138,490 (1,354) (142,271) -
Shares issued or
returned under
incentive
compensation plan 8 1 174 (175) - -
------ ------ -------- ------- --------- --------
Balance -
June 30, 1995 51,360 $5,136 $138,664 $(1,529) $ - $142,271
====== ====== ======== ======= ========= ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
PROMUS HOTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
(in thousands) 1995 1994
-------- --------
Cash flows from operating activities
Net income $ 21,230 $ 16,338
Adjustments to reconcile net income to cash
flows from operating activities
Depreciation and amortization 14,614 12,259
Other noncash items (151) 88
Equity in earnings and distributions from
nonconsolidated affiliates (952) (98)
Net loss from property transactions 175 320
Net change in long-term accounts 4,091 2,596
Net change in working capital accounts (10,743) (13,401)
-------- --------
Cash flows provided by operating
activities 28,264 18,102
-------- --------
Cash flows from investing activities
Land, buildings and equipment additions (38,962) (5,928)
Other (6,116) (736)
-------- --------
Cash flows used in investing activities (45,078) (6,664)
-------- --------
Cash flows from financing activities
Debt retirements (493) (840)
Advances from (to) Parent 17,680 (12,068)
-------- --------
Cash flows provided by (used in)
financing activities 17,187 (12,908)
-------- --------
Net increase (decrease) in cash and cash
equivalents 373 (1,470)
Cash and cash equivalents, beginning of period 2,222 3,652
-------- --------
Cash and cash equivalents, end of period $ 2,595 $ 2,182
======== ========
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
Note 1 - Basis of Presentation and Organization
- -----------------------------------------------
On June 30, 1995, The Promus Companies Incorporated (Parent) completed the
transfer of the operations, assets and liabilities of its hotel business (the
Hotel Business), composed of three hotel brands targeted at specific market
segments: Embassy Suites, Hampton Inn and Homewood Suites, to a new publicly
traded entity, Promus Hotel Corporation (PHC or the Company). As approved by
Parent's Board of Directors and stockholders on May 26, 1995, this entity was
spun-off (the Spin-Off) from the Parent and its stock distributed to Parent's
stockholders on a one-for-two basis effective June 30, 1995 (the Distribution).
Concurrent with the Distribution, Parent changed its name to Harrah's
Entertainment, Inc.
The historical financial statements of Parent have been disaggregated
through June 30, 1995. The accompanying consolidated condensed financial
statements include the assets, liabilities, revenues, expenses and cash flows of
PHC as a stand-alone business. The Company's financial position as of June 30,
1995, reflects the actual assets and liabilities received from Parent pursuant
to the Spin-Off.
All significant intercompany accounts and transactions among PHC entities
have been eliminated. Investments in 50% or less owned companies and joint
ventures over which PHC has the ability to exercise significant influence, but
does not control, are accounted for using the equity method. PHC reflects its
share of income before interest expense and extraordinary gain of these
nonconsolidated affiliates in revenues - other. PHC's proportionate share of
interest expense of such nonconsolidated affiliates is included in interest
expense in the Consolidated Condensed Statements of Income (see Note 7 for
combined summarized financial information regarding these nonconsolidated
affiliates). Management believes that PHC's income statement treatment of
equity investments is the preferable presentation due to the nature of PHC's
equity investments.
Note 2 - Long-term Debt
- -----------------------
Parent Debt Allocation
----------------------
The Company's financial position at December 31, 1994, and its results of
operations for the three and six months ended June 30, 1995 and 1994, reflect
all indebtedness, together with related interest expense, specifically
identified with PHC entities, as well as a pro-rata portion of Parent's
historical corporate debt balance, unamortized deferred finance charges and
interest expense. Allocations of those amounts to PHC from Parent were based on
the percentage of Parent's historical corporate debt that was expected to be
retired using proceeds from PHC's new $350 million bank credit facility (the PHC
Facility). The accompanying Consolidated Condensed Balance Sheet, as of
December 31, 1994, reflects corporate debt allocated to PHC from Parent of
7
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 2 - Long-term Debt (Continued)
- ----------------------------------
$187.8 million, together with debt specifically associated with PHC entities
of $3.3 million, as well as the unamortized deferred finance charges allocated
to PHC of $3.2 million.
PHC interest expense includes interest related to indebtedness specifically
identified with PHC entities, PHC's proportionate share of interest expense of
its nonconsolidated affiliates (see Note 7), and Parent's allocation of interest
and deferred finance costs related to the allocated debt. The amounts of
Parent's corporate interest expense, including deferred finance costs, allocated
to PHC for second quarter 1995 and 1994 were $5.5 million and $3.9 million,
respectively, and $10.5 million and $8.5 million for the six months ended
June 30, 1995 and 1994, respectively.
New Bank Facility
-----------------
Immediately prior to the Distribution, Parent drew, through its then wholly-
owned subsidiary Embassy Suites, Inc., $218 million under the PHC Facility to
retire a portion of existing Parent debt which had been previously allocated to
PHC and to pay related bank fees and expenses. The actual borrowings of $218
million, together with deferred finance charges of $2.4 million that were
transferred to PHC in connection with the Spin-Off are reflected in long-term
debt and deferred costs and other, respectively, in the accompanying
Consolidated Condensed Balance Sheet as of June 30, 1995. The PHC Facility is
secured by the stock of PHC's material subsidiaries. The liability associated
with all current and future borrowings under the PHC Facility was assumed by PHC
upon consummation of the Spin-Off, at which time Parent was released from
liability.
The PHC Facility consists of a $300 million revolving credit arrangement
with a maturity of five years (the Five-Year Revolver) and a $50 million
annually extendible revolving credit facility with an initial maturity of 364
days (the Extendible Revolver). The Extendible Revolver is convertible into a
two-year term loan with equal amortizing payments over such two-year period.
Interest on the drawn portion of the PHC Facility will be, at the option of the
Company, equal to either (i) the Base Rate, as defined, or (ii) LIBOR plus the
applicable spread. Both agreements incorporate a tiered scale that defines the
applicable LIBOR spread and commitment fee based upon the more favorable of the
Company's current debt rating or leverage ratio, as defined. Currently, the
LIBOR spread under both facilities is 55 basis points, and the commitment fee
required on the undrawn portion of the Five-Year Revolver and the Extendible
Revolver is 0.20% and 0.15%, respectively. The PHC Facility also contains
provisions that restrict certain investments, limit the Company's ability to
incur additional indebtedness and pay dividends, and require that certain
performance ratios be maintained. As of June 30, 1995, PHC was in compliance
with all such covenants.
8
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 2 - Long-term Debt (Continued)
- ----------------------------------
The Five-Year Revolver also provides for a sublimit for letters of credit of
$20 million. At June 30, 1995, approximately $10.5 million in letters of credit
related to PHC were outstanding under Parent's debt facilities. Concurrent with
the Distribution, PHC assumed responsibility for that contingent liability, and
is to replace those letters of credit (primarily related to the Company's self-
insurance reserves) within 90 days.
Interest Rate Agreements
------------------------
In connection with the Spin-Off, PHC assumed two of Parent's existing
interest rate swaps, each with a notional amount of $50 million, in order to
effectively convert to a fixed rate a portion of the amount of variable rate
debt outstanding under the PHC Facility. The floating rate resets every three
months under both agreements. One swap arrangement specifies a 6.99%
contractual fixed rate (effective rate of 7.54%) with a March 20, 2000
expiration, while the other bears a 7.8625% contractual fixed rate (effective
rate of 8.4125%) expiring July 28, 1997.
Note 3 - Supplemental Disclosure of Cash Paid for Interest and Taxes
- --------------------------------------------------------------------
The following table reconciles PHC's interest expense, net of interest
capitalized, to cash paid for interest:
<TABLE><CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense, net of amount
capitalized (Note 2) $ 8,335 $ 7,321 $16,742 $15,021
Adjustments to reconcile to cash
paid for interest
PHC's share of interest
expense of nonconsolidated
affiliates (Note 7) (3,354) (3,207) (6,615) (6,152)
Amortization of deferred
finance charges (208) (195) (402) (362)
Net amortization of discounts
and premiums (2) (11) (8) (22)
Other (39) (34) (77) (69)
------- ------- ------- -------
Cash paid for interest, net of
amount capitalized $ 4,732 $ 3,874 $ 9,640 $ 8,416
======= ======= ======= =======
</TABLE>
For purposes of this presentation, interest expense allocated to PHC by
Parent is assumed to have been paid in the quarter allocated. No income taxes
were paid by PHC as these payments have historically been the responsibility of
Parent.
9
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 3 - Supplemental Disclosure of Cash Paid for Interest and Taxes (Cont'd)
- ------------------------------------------------------------------------------
Concurrent with the Spin-Off, the historical net assets and liabilities of
the Hotel Business were transferred to PHC by Parent, and the issuance of PHC
common stock was completed in connection with the Distribution.
Note 4 - Stockholders' Equity
- -----------------------------
In addition to its common stock, the Company has the following classes of
stock authorized but unissued:
Preferred stock, $100 par value, 150,000 shares authorized
Special stock, 5,000,000 shares authorized -
Series A, $1.125 par value
Note 5 - Commitments and Contingencies
- --------------------------------------
Contractual Commitments
-----------------------
PHC manages certain hotels for others under agreements that provide for
payments/loans to the hotel owners if stipulated levels of financial performance
are not maintained. In addition, PHC is liable under certain lease agreements
where it has assigned the direct obligation to third party interests. PHC
believes the likelihood is remote that material payments will be required under
these agreements. PHC's estimated maximum exposure under such agreements is
currently less than $40 million over the next 30 years.
Investment in Real Estate Investment Trust
------------------------------------------
On May 3, 1995, Parent entered into a Subscription Agreement whereby Parent
agreed to purchase up to $25 million in limited partnership interests of an
entity for which a real estate investment trust (REIT) is the general partner
and holds a 73.6% interest. PHC assumed this obligation upon completion of the
Distribution. PHC's commitment is subject to various conditions which include,
but are not limited to, the limited partnership's acquisition of additional
hotels that may be converted to the Embassy Suites hotel brand (Embassy) and PHC
being granted the management contract for the property. PHC has the option to
convert their limited partnership interests into the REIT's common stock,
subject to some limitations, in the future.
Pursuant to the terms of the Subscription Agreement, an all-suites hotel was
purchased by the limited partnership and converted to an Embassy on July 1,
1995. Two other properties, already in the Embassy system, were purchased by
the limited partnership on July 19, 1995, and management contracts for all three
properties were awarded to PHC. PHC has agreed to purchase $10 million of
limited partnership interests for all three hotels, although the timing of such
funding has not yet been determined.
10
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 5 - Commitments and Contingencies (Continued)
- --------------------------------------------------
Litigation
----------
Upon completion of the Distribution, PHC assumed responsibility for various
inquiries, administrative proceedings and litigation relating to contracts,
sales of property and other matters arising in the normal course of the Hotel
Business. While any proceeding or litigation has an element of uncertainty,
management believes that the final outcome of these matters will not have a
materially adverse effect upon PHC's consolidated financial position or its
results of operations.
Employment and Severance Agreements
-----------------------------------
PHC has entered into individual severance agreements with 13 senior officers
of the Company that provide for a compensation payment of 2.99 times the average
annual cash compensation (salary and bonus) paid to each such executive for the
five preceding calendar years, including such compensation paid during service
with Parent, as well as accelerated payment of any compensation or awards
payable to such executive under any PHC incentive compensation or stock option
plan if the executive is terminated subsequent to a change in control of PHC, as
defined. The maximum amount of compensation that would be payable under all
agreements if a change in control occurred and if such executives were
terminated as of June 30, 1995, would be approximately $14.5 million.
Self-Insurance Reserves
-----------------------
Both PHC and Parent are self-insured for various levels of general
liability, workers' compensation and employee medical coverage. For five years
following the Spin-Off, PHC will guarantee, but Parent will retain, the
insurance reserves related to the Company's general liability and workers'
compensation claims for all periods prior to the Spin-Off date. PHC claims
prior to the Spin-Off will be administered by the Company, but will be funded by
Parent. PHC will maintain and administer its own self-insurance reserves for
general liability, workers' compensation and employee medical claims occurring
subsequent to the Spin-Off date. Medical insurance claims and reserves related
to PHC that existed at June 30, 1995, were transferred from Parent in connection
with the Spin-Off. All self-insurance reserves include accruals of estimated
settlements for known claims, as well as accruals of actuarial estimates of
incurred but not reported claims.
11
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 6 - Employee Benefit Plans
- -------------------------------
Savings and Retirement Plan
---------------------------
In connection with the Spin-Off, PHC established a defined contribution
savings and retirement plan (PHC S&RP) to replace Parent's S&RP. Employees
participating in the PHC S&RP may elect to make pre-tax and after-tax
contributions of up to 16 percent of their eligible earnings, the first six
percent of which PHC will match fully. Amounts contributed to the plan are
invested, at the participant's option, in a PHC common stock fund, an aggressive
stock fund, a diversified stock fund, a long-term bond fund, an income fund and
a treasury fund. On June 30, 1995, all PHC employee participant accounts were
transferred from Parent's S&RP to the PHC S&RP while retaining participants'
current investment elections. Previous investments in Parent's common stock
fund were converted to PHC common stock on a dollar value basis. Participants
become vested in PHC's matching contributions over seven years of credited
service, including any previous credited service under Parent's plan.
Restricted Stock
----------------
The Company established a restricted stock plan (RSP) in connection with the
Spin-Off. At the Distribution date, PHC employees with unvested restricted
stock in Parent's RSP received a dividend of one share of PHC common stock for
each two shares of Parent RSP common stock held as of the Spin-Off date.
Concurrent with the Spin-Off, the unamortized Parent RSP shares held by PHC
employees were cancelled and replaced by an adjusted number of PHC RSP shares
that will vest under the same terms and conditions as the Parent RSP shares they
replaced. Under the new PHC RSP, executives and key employees may be awarded
shares of PHC's common stock. Shares granted under the PHC RSP are restricted
as to transfer, are subject to forfeiture prior to vesting and will generally
vest evenly over periods from two to four years. The deferred compensation
expense will be amortized over the vesting period.
Stock Option Plan
-----------------
Parent maintains a stock option plan (SOP) under which options had been
granted to PHC key management personnel to purchase Parent's common stock at a
price equal to its market value at the date of grant. Pursuant to the Spin-Off,
the Company established a similar plan and outstanding options for Parent's
common stock held by PHC employees were cancelled and new options for PHC common
stock were issued under PHC's SOP. The number of shares subject to option and
the exercise price were calculated so as to preserve the intrinsic value of
Parent options cancelled while maintaining the ratio of the exercise price per
option to market value per share as of the Spin-Off date. The accompanying
Consolidated Condensed Financial Statements (as well as those of Parent) do not
reflect any actual or allocated expenses associated with these plans. As of
June 30, 1995, there were approximately 1.2 million unexercised PHC options
outstanding at option prices ranging from $2.42 to $30.71.
12
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 6 - Employee Benefit Plans (Continued)
- -------------------------------------------
Deferred Compensation Plans
---------------------------
Concurrent with the Spin-Off, PHC established deferred compensation plans
similar to Parent's under which certain employees may defer a portion of their
compensation. Amounts deposited into these plans are unsecured and earn
interest at rates approved by the Human Resources Committee of the Board of
Directors. In connection with the administration of the executive deferred
compensation plan, company-owned life insurance policies insuring the lives of
certain directors, officers and key employees have been purchased. As of the
Spin-Off date, the total liability under Parent's plans associated with PHC
directors and employees of $7.6 million and the related cash surrender value of
life insurance policies of $10.4 million was transferred to PHC.
Stock Incentive Plan
--------------------
The Company has established a PHC 1996 Non-Management Directors Stock
Incentive Plan under which (i) directors will automatically receive each May 1,
August 1, November 1, and February 1, in lieu of cash payments, shares of PHC
common stock based upon one-half of the meeting and retainer fees earned and the
fair market value of PHC common stock and (ii) may elect to receive the
remaining one-half of compensation due in the form of a cash payment or as PHC
common stock. Shares issued under the plan are restricted as to transfer for at
least six months after the date of grant, and the compensation expense will be
amortized ratably over such restricted period. The plan becomes effective as of
the date of the 1996 PHC annual stockholders' meeting.
13
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 7 - Nonconsolidated Affiliates
- -----------------------------------
Combined summarized income statements of nonconsolidated affiliates, which
PHC accounted for using the equity method, were as follows:
Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 1995 1994 1995 1994
------- ------- ------- -------
Combined Summarized Income
Statements
Revenues $42,797 $40,906 $80,770 $78,781
======= ======= ======= =======
Operating income $11,201 $ 9,855 $19,172 $16,815
======= ======= ======= =======
Net income $ 4,024 $ 3,067 $ 5,005 $ 3,814
======= ======= ======= =======
PHC's share of nonconsolidated affiliates' combined net income is reflected
in the accompanying Consolidated Condensed Statements of Income as follows:
Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 1995 1994 1995 1994
------- ------- ------- -------
Pre-interest operating income
(included in revenues-other) $ 5,986 $ 5,154 $10,466 $ 9,040
======= ======= ======= =======
Interest expense (included in
interest expense) $(3,354) $(3,207) $(6,615) $(6,152)
======= ======= ======= =======
June 30, Dec. 31,
1995 1994
------- -------
PHC's investments in and
advances to nonconsolidated
affiliates
At equity $27,249 $25,551
At cost 10,123 10,305
------- -------
$37,372 $35,856
======= =======
14
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 8 - Relationship Between PHC and Parent after the Distribution
- -------------------------------------------------------------------
General
-------
For the purpose of governing certain of the ongoing relationships between
PHC and Parent after the Distribution and to provide mechanisms for an orderly
transition, Parent and PHC have entered into various agreements and have adopted
policies governing their future relationship. PHC believes that the agreements
are fair to both parties and contain terms which generally are comparable to
those which would have been reached in arm's-length negotiations with
unaffiliated parties (although comparisons are difficult with respect to certain
agreements that relate to the specific circumstances of this transaction). In
some cases the agreements are comparable to those used by other companies in
similar transactions.
Tax Sharing Agreement
---------------------
In connection with the Spin-Off, PHC and Parent entered into a tax sharing
agreement that defines each company's rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to PHC's business for tax years prior to the Distribution and with
respect to certain tax attributes of PHC after the Distribution. In general,
with respect to periods ending on or before December 31, 1995, Parent is
responsible for (i) filing federal tax returns for the Parent and PHC for the
periods such companies were members of the same consolidated group, and (ii)
paying taxes relating to such returns (to include any subsequent adjustments
resulting from the redetermination of such tax liabilities by the applicable
taxing authorities; PHC will reimburse Parent for the portion of such
adjustments relating to the Hotel Business). PHC is responsible for filing
returns and paying taxes for periods beginning after the Spin-Off. PHC and
Parent have agreed to cooperate with each other and to share information in
preparing such tax returns and in dealing with other tax matters.
15
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 9 - Summarized Financial Information
- -----------------------------------------
Promus Hotels, Inc. (PHI) is a wholly-owned subsidiary of PHC and the
primary entity through which the operations of PHC are conducted. PHI is also
PHC's principal asset. Summarized financial information for PHI, prepared on
the same basis as PHC, is as follows:
June 30, Dec. 31,
(in thousands) 1995 1994
-------- --------
ASSETS
Current assets $ 36,345 $ 25,565
Land, buildings and equipment, net 350,115 322,140
Other assets 83,590 72,860
-------- --------
470,050 420,565
-------- --------
LIABILITIES
Current liabilities 43,769 34,461
Long-term debt 219,760 189,943
Other liabilities 65,111 53,153
-------- --------
328,640 277,557
-------- --------
Net assets $141,410 $143,008
======== ========
Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 1995 1994 1995 1994
------- ------- -------- --------
Revenues $69,567 $63,540 $132,785 $119,094
======= ======= ======== ========
Operating income $28,190 $24,305 $ 53,133 $ 44,045
======= ======= ======== ========
Net income $11,626 $10,207 $ 21,230 $ 16,338
======= ======= ======== ========
16
<PAGE>
PROMUS HOTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995
(UNAUDITED)
Note 10 - Pro Forma Earnings Per Share
- --------------------------------------
For purposes of presenting earnings per share on a comparable basis,
calculated below is PHC's pro forma earnings per share, which is based on the
actual common and common equivalent shares outstanding on June 30, 1995, and
historical net income for all periods presented.
Second Quarter Ended Six Months Ended
(in thousands, except June 30, June 30, June 30, June 30,
per share amounts) 1995 1994 1995 1994
------- ------- ------- -------
Net income $11,626 $10,207 $21,230 $16,338
======= ======= ======= =======
Pro forma average
common shares
outstanding 51,573 51,573 51,573 51,573
======= ======= ======= =======
Pro forma earnings
per share $ 0.23 $ 0.20 $ 0.41 $ 0.32
======= ======= ======= =======
17
<PAGE>
PERFORMANCE STATISTICS
- ----------------------
<TABLE><CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30, Inc/ June 30, June 30, Inc/
1995 1994 (Dec) 1995 1994 (Dec)
-------- -------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
COMPARABLE SYSTEM
HOTELS*
Embassy Suites
Occupancy 77.8% 78.2% (0.4)pts 76.0% 76.1% (0.1)pts
ADR $102.49 $96.65 6.0% $102.78 $96.92 6.0%
Rev/PAS $ 79.71 $75.56 5.5% $ 78.11 $73.75 5.9%
Hampton Inn
Occupancy 80.0% 79.2% 0.8 pts 75.0% 73.7% 1.3 pts
ADR $56.50 $53.31 6.0% $55.71 $52.59 5.9%
Rev/PAR $45.17 $42.22 7.0% $41.80 $38.77 7.8%
Homewood Suites
Occupancy 80.9% 80.4% 0.5 pts 78.5% 77.7% 0.8 pts
ADR $82.34 $76.51 7.6% $80.18 $74.96 7.0%
Rev/PAS $66.60 $61.54 8.2% $62.91 $58.23 8.0%
TOTAL SYSTEM HOTELS
Embassy Suites
Occupancy 77.4% 77.9% (0.5)pts 75.7% 75.9% (0.2)pts
ADR $101.73 $97.58 4.3% $102.14 $97.72 4.5%
Rev/PAS $ 78.78 $76.04 3.6% $ 77.34 $74.16 4.3%
Hampton Inn
Occupancy 78.8% 79.0% (0.2)pts 74.0% 73.5% 0.5 pts
ADR $56.67 $53.34 6.2% $55.92 $52.64 6.2%
Rev/PAR $44.67 $42.13 6.0% $41.41 $38.71 7.0%
Homewood Suites
Occupancy 80.6% 80.4% 0.2 pts 77.7% 77.5% 0.2 pts
ADR $82.25 $76.51 7.5% $80.85 $75.45 7.2%
Rev/PAS $66.26 $61.54 7.7% $62.83 $58.47 7.5%
TOTAL SYSTEM REVENUES
(in thousands)
Embassy Suites $186,883 $179,705 4.0% $363,487 $348,640 4.3%
Hampton Inn 213,623 175,060 22.0% 385,915 315,251 22.4%
Homewood Suites 17,873 15,965 12.0% 33,572 29,797 12.7%
-------- -------- -------- --------
$418,379 $370,730 12.9% $782,974 $693,688 12.9%
======== ======== ======== ========
</TABLE>
*Includes results for only those hotels open for the entire applicable period
for both years.
18
<PAGE>
PERFORMANCE STATISTICS (CONTINUED)
- ----------------------------------
TOTAL HOTELS AND ROOMS/SUITES
Number of Hotels Rooms/Suites
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
------- ------- ------- -------
Embassy Suites
Company-owned 9 9 2,025 2,026
Joint venture 23 23 5,901 5,912
Management contract 26 23 6,224 5,835
Franchised 52 52 11,867 12,231
------- ------- ------- -------
110 107 26,017 26,004
======= ======= ======= =======
Hampton Inn
Company-owned 15 15 2,047 2,048
Joint venture 19 19 2,376 2,376
Management contract 4 5 464 585
*Franchised 445 363 49,020 41,768
------- ------- ------- -------
483 402 53,907 46,777
======= ======= ======= =======
Homewood Suites
Company-owned 8 8 932 932
Joint venture - - - -
Management contract - - - -
Franchised 19 18 2,033 1,957
------- ------- ------- -------
27 26 2,965 2,889
======= ======= ======= =======
Total System
Company-owned 32 32 5,004 5,006
Joint venture 42 42 8,277 8,288
Management contract 30 28 6,688 6,420
Franchised 516 433 62,920 55,956
------- ------- ------- -------
620 535 82,889 75,670
======= ======= ======= =======
*Includes one Hampton Inn & Suites with 90 rooms and 30 suites that opened
June 6, 1995.
19
<PAGE>
Item 2. Management's Discussion and Analysis
--------------------------------------------
of Financial Condition and Results of Operations
------------------------------------------------
On June 30, 1995, The Promus Companies Incorporated (Parent) completed the
previously announced and approved spin-off that split the company into two
independent public corporations, one for conducting its casino entertainment
business and one for conducting its hotel business (the Spin-Off). Parent's
hotel operations were transferred to a new entity, Promus Hotel Corporation (PHC
or the Company), the stock of which was distributed to Parent's stockholders on
a one-for-two basis (the Distribution). The following is a discussion and
analysis of the financial condition and results of operations of PHC as a stand-
alone business.
RESULTS OF OPERATIONS
- ---------------------
The principal factors affecting PHC results are: the continued growth in
the number of hotels; the occupancies and room rates achieved by the three hotel
brands; the number and relative mix of owned, managed and franchised hotels; and
PHC's ability to manage costs. The number of rooms/suites at franchised
properties and revenue per available room/suite (RevPAR/S) significantly affect
PHC results since franchise royalty fees are based upon a percentage of
rooms/suites revenues of all franchised hotels, which includes management
contracts and joint ventures. Increases in franchise and management fee
revenues have a disproportionate impact on PHC's operating margin due to lower
incremental costs associated with these revenues. Although occupancy was
relatively flat compared to 1994, increases in the average daily rate (ADR),
which contributed to higher RevPAR/S, and the addition of new (primarily
franchised) hotels resulted in improved financial results over the prior year
for both the three and six months ended June 30, 1995.
As of June 30, 1995, PHC's combined hotel systems had grown to include 620
properties, a net increase of 85 properties compared to June 30, 1994. Embassy
Suites', Hampton Inn's and Homewood Suites' RevPAR/S for comparable hotels
improved by 5.5%, 7.0% and 8.2%, respectively, for the second quarter and 5.9%,
7.8%, and 8.0%, respectively, for the six months ended June 30, 1995. Total
system revenues for both the second quarter and the first six months of the year
increased 12.9% over the comparable periods last year to $418 million and $783
million, respectively. The continued unit growth of the franchise systems,
coupled with a continued focus on rate growth and cost management, contributed
to the Company's higher revenues, operating income and operating margins.
20
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
- ---------------------------------
<TABLE><CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30, Inc/ June 30, June 30, Inc/
(in millions) 1995 1994 (Dec) 1995 1994 (Dec)
------- ------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $69.6 $63.5 9.6% $132.8 $119.1 11.5%
Operating profit
before general and
administrative
expense and
property transactions 29.0 25.3 14.6% 55.1 46.0 19.8%
Operating income 28.2 24.3 16.0% 53.1 44.0 20.7%
Net income 11.6 10.2 13.7% 21.2 16.3 30.1%
Operating margin 40.5% 38.3% 2.2 pts 40.0% 36.9% 3.1 pts
</TABLE>
The increase in revenues was due primarily to the addition of new franchised
hotels and improved ADR and RevPAR/S.
Profit before general and administrative expense and property transactions
increased in both the second quarter and first six months of 1995 primarily due
to increased franchise and management fees, as well as the impact of higher
revenues and improved operating margins at company-owned hotels. Additionally,
second quarter 1994 results included approximately $0.8 million of termination
fees and other one-time fee income, while second quarter 1995 included
additional expenses of approximately $0.7 million due to timing differences
between first and second quarter. Excluding these amounts, operating profit
before property transactions and general and administrative expense for the
second quarter ended June 30, 1995, increased 21.4%.
<TABLE><CAPTION>
Second Quarter Ended Six Months Ended
June 30, June 30, Inc/ June 30, June 30, Inc/
(in millions) 1995 1994 (Dec) 1995 1994 (Dec)
------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
General and
administrative $ 0.8 $ 0.8 - $ 1.7 $ 1.5 13.3 %
Property transactions - 0.2 N/M 0.3 0.4 (25.0)%
Interest expense 8.3 7.3 13.7% 16.7 15.0 11.3 %
Effective tax rate 42.1% 40.0% 2.1 pts 42.1% 43.8% (1.7)pts
</TABLE>
General and administrative expense reflects the cost of specific PHC staff
functions which support all three hotel brands. The Distribution resulted in
the division of certain of Parent's existing corporate support functions between
the two resulting entities. Historically, Parent allocated to its operating
units corporate overhead expenses specifically identified with those
operations. The amounts of such costs allocated to the entities comprising
PHC and included in other operating expenses in the accompanying Consolidated
Condensed Statements of Income were $2.5 million and $3.1 million in second
quarter 1995 and 1994, respectively, and $5.7 million and $6.1 million for
the six months ended June 30, 1995 and 1994, respectively. Responsibility
for these support functions has been assumed by PHC, so the staff costs
included in other operating expense in the historical financial statements
may not be indicative of such costs in the future. In addition, PHC's
21
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------
historical operating results do not reflect any estimated incremental costs that
may be incurred by PHC to support its operations as a stand-alone entity after
the Distribution.
Interest expense for all periods presented includes the pro-rata allocation
of corporate interest by Parent related to the debt that was expected to be
retired in connection with the Distribution using funds drawn on the PHC
Facility. (See "Liquidity and Capital Resources" for additional discussion).
Interest expense also includes PHC's share of interest expense of its
nonconsolidated affiliates. Interest expense increased due to higher debt
levels, primarily due to the purchase of a corporate office complex and higher
interest rates on Parent's variable rate debt. Management expects PHC's
weighted average borrowing rate to be less than the rates historically obtained
by Parent.
The effective tax rate for all periods is higher than the federal statutory
rate primarily due to state income taxes.
CAPITAL SPENDING AND DEVELOPMENT
- --------------------------------
PHC had net additions of 48 franchised properties during the first six
months of 1995, compared to 32 in the comparable 1994 period. The growth
occurred primarily in the Hampton Inn brand. As of June 30, 1995, 78 properties
were under construction, 75 of which will operate under franchise agreements as
PHC brands: 63 Hampton Inns (including six Hampton Inn & Suites); eight Homewood
Suites; and seven Embassy Suites. These 78 properties will add 8,696
rooms/suites to the PHC hotel system. The Company had 50 properties under
construction at the same time last year. PHC had 163 hotels in the design phase
at June 30, 1995, compared with 125 at the same time last year.
On May 3, 1995, Parent entered into a Subscription Agreement whereby Parent
agreed to purchase up to $25 million in limited partnership interests of an
entity for which a real estate investment trust (REIT) is the general partner
and holds a 73.6% interest. Parent's commitment, which was assumed by PHC at
the Distribution date, is subject to various conditions which include, but are
not limited to, the limited partnership's acquisition of additional hotels to be
converted to the Embassy Suites hotel brand (Embassy) and PHC being granted the
management contract for the property. Subject to some limitations, the limited
partnership interests are convertible into the REIT's common stock.
Pursuant to the terms of the Subscription Agreement, an all-suites hotel was
purchased by the limited partnership and converted to an Embassy on July 1,
1995. Two other properties, already in the Embassy system, were purchased by
the limited partnership on July 19, 1995, and management contracts for all
three properties were awarded to PHC. PHC has agreed to purchase $10 million
of limited partnership interests for all three hotels, although the timing of
such funding has not yet been determined.
22
<PAGE>
CAPITAL SPENDING AND DEVELOPMENT (CONTINUED)
- --------------------------------------------
PHC's first Hampton Inn & Suites hotel opened on June 6, 1995. This
franchise-built hotel is the newest PHC hotel product which combines, as a
single hotel, Hampton-style rooms with two-room suites and a common lodge in the
center. Of the 163 hotels in the design phase at June 30, 1995, 18 were Hampton
Inn & Suites. To further encourage system growth, PHC currently plans to spend
up to $112 million to expand the Homewood Suites hotel brand by developing as
many as 15 additional company-owned properties over the next three to five
years. PHC, however, plans to continue to follow its general strategy of
growing its systems primarily through franchising and management contracts. As
in the past, company-owned hotels may be sold to franchisees and the proceeds
used to fuel additional system growth or to develop new concepts.
To encourage growth (primarily in the Hampton Inn & Suites and Homewood
Suites franchise segments of the business), in light of the lack of available
financing for new hotel construction, PHC has developed a mezzanine financing
program whereby the Company provides secondary financing to franchisees. PHC
provided $5.4 million in mezzanine loans during the first half of 1995, and
anticipates providing an additional $12.9 million during the remainder of the
year. Outstanding loans bear interest at rates ranging from 10.0% to 11.5%.
Ongoing refurbishment of PHC's existing company-owned hotel properties to
maintain the quality standards set for those properties will continue in 1995 at
an estimated annual cost of $11.8 million. In early 1995, PHC acquired for
approximately $22.0 million an office complex in Memphis, Tennessee, which will
serve as its future corporate headquarters.
Cash needed to finance the projects currently under development, as well as
additional projects to be developed by PHC, will be made available from
operating cash flows, the PHC Facility (see "Liquidity and Capital Resources"),
joint venture partners, specific project financing, sales of existing hotel
assets and, if necessary, PHC debt and equity offerings. PHC capital
expenditures totaled $45.1 million during the six months ended
June 30, 1995. Approximately $49.7 million is expected to be spent during the
remainder of 1995 to fund project development, including those projects
discussed above, to refurbish existing facilities and for other corporate-
related projects.
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The accompanying financial statements represent the portion of Parent's
historical revenues, expenses, assets, liabilities and cash flows associated
with its hotel operations. The results of operations and cash flows are not
necessarily indicative of PHC's future results as a separate corporation. The
most significant items that will affect such future results are incremental
general and administrative costs, an anticipated decrease in the Company's
average borrowing rate, and the fact that PHC will assume responsibility for
payment of state and federal income taxes subsequent to the Distribution (Parent
historically paid PHC taxes).
Parent, through its wholly-owned subsidiary Embassy Suites, Inc., entered
into a $350 million bank credit facility to be secured by the stock of certain
material subsidiaries of PHC (the PHC Facility). Concurrent with the
Distribution, $218 million was drawn on the PHC Facility by Parent to retire
existing Parent debt which had been previously allocated to PHC and to pay PHC
Facility fees and expenses. Subsequent to the Distribution, the liability
associated with the actual outstanding borrowings was assumed by PHC, and Parent
was released from liability related to any current or future borrowings under
the PHC Facility. The PHC Facility consists of two agreements, the significant
terms of which are as follows:
<TABLE><CAPTION>
Total
Facility Maturity Date Interest Rate Commitment Fees
------------ ------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Base Rate, as 0.20% of the
Five-Year defined, or LIBOR unused portion of
Revolver $300,000,000 June 30, 2000 +55 basis points the total facility
Base Rate, as 0.15% of the
Extendible defined, or LIBOR unused portion of
Revolver $ 50,000,000 June 6, 1996 +55 basis points the total facility
</TABLE>
The Extendible Revolver is a 364-day facility with annual renewals and may be
converted into a two-year term loan with equal amortizing payments over such
two-year period. Commitment fees and interest on Base Rate loans are paid
quarterly. The agreements contain a tiered scale for commitment fees and the
applicable LIBOR spread (current rates for both reflected above) that is based
on the more favorable of PHC's current credit rating or leverage ratio, as
defined. They also contain provisions that restrict certain investments, limit
the Company's ability to incur additional indebtedness and pay dividends, and
requires that certain performance ratios be maintained. As of June 30,
1995, PHC was in compliance with all such covenants.
PHC's initial credit rating by Standard & Poor's was Investment Grade. The
Investment Grade rating allows PHC to receive a more favorable interest rate
spread on borrowings and commitment fees on the unused portion under the PHC
Facility. The current spread is reflected in the table above.
The Five-Year Revolver includes a sublimit for letters of credit of
$20 million. At June 30, 1995, approximately $10.5 million in letters of credit
related to PHC were outstanding under Parent's debt facilities. At the
Distribution date, PHC assumed responsibility for that contingent liability,
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- -------------------------------------------
and new letters of credit (related primarily to the Company's self-insurance
reserves) will be issued within 90 days. There was $132 million of availability
under the PHC Facility as of June 30, 1995. PHC will use the remaining
borrowing capacity available under the PHC Facility for working capital, hotel
development and other general corporate purposes.
A pro-rata portion of Parent's historical outstanding debt balance and
unamortized deferred finance charges was allocated to PHC and reflected in the
accompanying Consolidated Condensed Balance Sheet as of December 31, 1994. A
pro-rata portion of Parent's interest expense was also allocated to PHC through
June 30, 1995, and is reflected in the accompanying Consolidated Condensed
Statements of Income for all periods presented. In addition to amounts
allocated by Parent, all indebtedness, together with related interest expense
specifically identified with a PHC entity, is included in the accompanying
Consolidated Condensed Financial Statements. The amounts allocated by Parent
are based on the percentage of Parent's existing debt that was expected to be
retired using proceeds from the PHC Facility. The amount of Parent's
corporate interest expense allocated to PHC was $5.5 million and $3.9 million
for second quarter 1995 and 1994, respectively, and $10.5 million and $8.5
million for the six months ended June 30, 1995 and 1994, respectively. The
amount of Parent's corporate interest allocated to PHC is in addition to the
interest expense included in PHC's financial statements on indebtedness
specifically identified with a PHC entity and PHC's proportionate share of
interest expense of its nonconsolidated affiliates (see Note 7 to financial
statements).
PHC assumed two of Parent's existing interest rate swaps, each with a
notional amount of $50 million. The effect of the swap agreements was to
convert to a fixed rate a portion of the amount of variable rate debt
outstanding under the PHC Facility. The floating rate resets every three months
under both agreements. One swap specifies a 6.99% contractual fixed rate
(effective rate of 7.54%) and expires on March 20, 2000, while the other has a
7.8625% contractual fixed rate (effective rate of 8.4125%) with a
July 28, 1997 expiration.
RELATIONSHIP BETWEEN PHC AND PARENT AFTER THE DISTRIBUTION
- ----------------------------------------------------------
For the purpose of governing certain of the ongoing relationships between
PHC and Parent after the Distribution and to provide mechanisms for an orderly
transition, Parent and PHC have entered into various agreements and adopted
policies to govern their future relationship. PHC believes that the agreements
are fair to both parties and contain terms which generally are comparable to
those which would have been reached in arm's-length negotiations with
unaffiliated parties (although comparisons are difficult with respect to certain
agreements that relate to the specific circumstances of this transaction). In
some cases the agreements are comparable to those used by other companies in
similar transactions.
25
<PAGE>
TAX SHARING AGREEMENT
- ---------------------
In connection with the Spin-Off, PHC and Parent entered into a tax sharing
agreement that defines each company's rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to PHC's business for tax years prior to the Distribution and with
respect to certain tax attributes of PHC after the Distribution. In general,
with respect to periods ending on or before December 31, 1995, Parent is
responsible for (i) filing federal tax returns for the Parent and PHC for the
periods such companies were members of the same consolidated group, and (ii)
paying the taxes relating to such returns (to include any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities; PHC will reimburse Parent for the portion of such
adjustments relating to the Hotel Business). PHC is responsible for filing
returns and paying taxes for periods beginning after the Spin-Off. PHC and
Parent have agreed to cooperate with each other and to share information in
preparing such tax returns and in dealing with other tax matters.
26
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 2. Changes in Securities
------------------------------
The PHC Facility requires the Company to maintain certain specified financial
covenants. Although the payment of dividends is not prohibited by the
agreement, the covenants are structured such that the Company's ability to pay
dividends is limited.
Item 4. Submission of Matters to a Vote of Stockholders
--------------------------------------------------------
At its Annual Meeting of Stockholders held on May 26, 1995, Parent, as the
sole shareholder of PHC, approved a variety of matters in connection with the
Spin-Off which have been disclosed in previous filings.
Item 6. Exhibit and Reports on Form 8-K
----------------------------------------
(a) Exhibits
EX-10.1 Promus Hotel Corporation Savings and Retirement Plan. (1)
EX-10.2 Promus Hotel Corporation 1995 Stock Option Plan. (2)
EX-10.3 Promus Hotel Corporation Restricted Stock Plan. (2)
EX-10.4 Promus Hotel Corporation Non-Management Directors Stock
Incentive Plan. (2)
EX-10.5 Plan of Reorganization and Distribution Agreement, dated as
of June 30, 1995, between The Promus Companies Incorporated
and Promus Hotel Corporation. (4)
EX-10.6 Tranche A Credit Agreement, dated as of June 7, 1995, among
Embassy Suites, Inc., as Initial Borrower, Promus Hotels,
Inc., as the Subsequent Borrower, certain subsidiaries and
related parties from time to time party thereto, as
Guarantors, the several lenders from time to time party
thereto, and NationsBank, N.A. (Carolinas), as Agent. (3)
EX-10.7 First Amendment to Tranche A Credit Agreement dated as of
June 30, 1995, by and among Embassy Suites, Inc., Promus
Hotels, Inc., The Promus Companies Incorporated, Promus
Hotel Corporation and NationsBank, N.A. (Carolinas). (4)
EX-10.8 Tranche A Assignment and Assumption Agreement dated as of
June 30, 1995, among Embassy Suites, Inc., Promus Hotels, Inc.,
The Promus Companies Incorporated and NationsBank, N.A.
(Carolinas). (4)
EX-10.9 Tranche B Credit Agreement, dated as of June 7, 1995, among
Embassy Suites, Inc., as Initial Borrower, Promus Hotels,
Inc., as the Subsequent Borrower, certain subsidiaries and
related parties from time to time party thereto, as
Guarantors, the several lenders from time to time party
thereto, and NationsBank, N.A. (Carolinas), as Agent. (3)
EX-10.10 First Amendment to Tranche B Credit Agreement dated as of
June 30, 1995, by and among Embassy Suites, Inc., Promus
Hotels, Inc., The Promus Companies Incorporated, Promus
Hotel Corporation and NationsBank, N.A. (Carolinas).(4)
EX-10.11 Tranche B Assignment and Assumption Agreement dated as of
June 30, 1995, by and among Embassy Suites, Inc., Promus
Hotels Inc., The Promus Companies Incorporated and
NationsBank, N.A. (Carolinas). (4)
EX-10.12 Pledge Agreement dated as of June __, 1995, by and among
Promus Hotel Corporation, Promus Hotels, Inc., certain
subsidiaries which may now be owners of Credit Parties
and NationsBank, N.A. (Carolinas).(4)
EX-10.13 Escrow Agreement, dated as of June 30, 1995, among Promus
Hotel Corporation, Promus Hotels, Inc. and NationsBank. (3)
27
<PAGE>
EX-10.14 Employee Benefits and Other Employment Matters Allocation
Agreement, dated as of June 30, 1995, between The Promus
Companies Incorporated and Promus Hotel Corporation. (4)
EX-10.15 Risk Management Allocation Agreement, dated as of June 30,
1995, between The Promus Companies Incorporated and Promus
Hotel Corporation. (4)
EX-10.16 Tax Sharing Agreement, dated as of June 30, 1995, between The
Promus Companies Incorporated and Promus Hotel
Corporation. (4)
EX-10.17 Promus Hotel Corporation Executive Deferred Compensation
Plan. (3)
EX-10.18 Promus Hotel Corporation Deferred Compensation Plan. (3)
EX-10.19 Promus Hotel Corporation Savings and Retirement Plan Trust
Agreement, dated as of May 26, 1995, among Promus Hotel
Corporation, and Robert S. Davis, Donald H. Dempsey,
Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins,
Frederick G. Schultz and Mark C. Wells. (3)
EX-10.20 Form of Severance Agreement, dated as of June 30, 1995,
entered into with Donald H. Dempsey, Thomas L. Keltner,
Ralph B. Lake, David C. Sullivan, and Mark C. Wells. (4)
EX-10.21 Form of Severance Agreement, dated June 30, 1995, entered
into with Michael D. Rose and Raymond E. Schultz. (4)
EX-10.22 Employment Agreement, dated as of June 30, 1995, between
Michael D. Rose and Promus Hotel Corporation. (4)
EX-10.23 Promus Hotel Corporation Key Executive Officer Annual
Incentive Plan. (2)
EX-10.24 International Swap Dealers Association, Inc. Master
Agreement, dated as of June 30, 1995, among Promus Hotels,
Inc. and NationsBank, N.A. (Carolinas). (4)
EX-10.25 Transfer Agreement, dated as of June 30, 1995, among Embassy
Suites, Inc., Promus Hotels, Inc., and NationsBank, N.A.
(Carolinas). (4)
EX-27 Financial Data Schedule. (4)
28
<PAGE>
(b) The following report on Form 8-K was filed during the quarter ended
June 30, 1995.
Form 8-K filed June 14, 1995, that announced, under Item 5 of Form 8-K
"Other Events," the intended distribution to all holders of The Promus
Companies Incorporated outstanding shares of common stock of a special
dividend of shares of Promus Hotel Corporation common stock on a
one-for-two basis and associated rights (the "Distribution"), the Board
of Director's approval of the Distribution, the removal of conditions
to the Distribution, the Distribution Date of June 30, 1995, and the
treatment of fractional shares in connection with the Distribution.
Footnotes
- ---------
(1) Incorporated by reference from Promus Hotel Corporation Registration
Statement No. 33-59977 on Form S-8 for the Promus Hotel Corporation
1995 Stock Option Plan, filed June 6, 1995.
(2) Incorporated by reference from Promus Hotel Corporation Form 10/A, filed
May 3, 1995, File No. 1-11463.
(3) Incorporated by reference from Promus Hotel Corporation Form 8-K, filed
June 14, 1995, File No. 1-11463.
(4) Filed herewith.
29
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROMUS HOTEL CORPORATION
August 11, 1995 By: JEFFERY M. JARVIS
-----------------------------
Jeffery M. Jarvis
Vice President and Controller
(Chief Accounting Officer)
30
<PAGE>
Exhibit Index
- -------------
Exhibit No. Description Sequential Page No.
- ------------- ------------------------------------- -------------------
(a) EX-10.1 Promus Hotel Corporation Savings and
Retirement Plan. (1)
EX-10.2 Promus Hotel Corporation 1995 Stock
Option Plan. (2)
EX-10.3 Promus Hotel Corporation Restricted
Stock Plan. (2)
EX-10.4 Promus Hotel Corporation Non-Management
Directors Stock Incentive Plan. (2)
EX-10.5 Plan of Reorganization and Distribution
Agreement, dated as of June 30, 1995,
between The Promus Companies Incorporated
and Promus Hotel Corporation. (4) 35
EX-10.6 Tranche A Credit Agreement, dated as of
June 7, 1995, among Embassy Suites, Inc.,
as Initial Borrower, Promus Hotels, Inc.,
as the Subsequent Borrower, certain
subsidiaries and related parties from time
to time party thereto, as Guarantors, the
several lenders from time to time party
thereto, and NationsBank, N.A. (Carolinas),
as Agent. (3)
EX-10.7 First Amendment to Tranche A Credit Agreement
dated as of June 30, 1995, by and among Embassy
Suites, Inc., Promus Hotels, Inc., The Promus
Companies Incorporated, Promus Hotel Corporation
and NationsBank, N.A. (Carolinas). (4) 98
EX-10.8 Tranche A Assignment and Assumption Agreement
dated as of June 30, 1995, among Embassy
Suites, Inc., Promus Hotels, Inc., The Promus
Companies Incorporated and NationsBank, N.A.
(Carolinas). (4) 114
EX-10.9 Tranche B Credit Agreement, dated as of
June 7, 1995, among Embassy Suites, Inc.,
as Initial Borrower, Promus Hotels, Inc.,
as the Subsequent Borrower, certain
subsidiaries and related parties from time
to time party thereto, as Guarantors, the
several lenders from time to time party
thereto, and NationsBank, N.A. (Carolinas),
as Agent. (3)
EX-10.10 First Amendment to Tranche B Credit Agreement
dated as of June 30, 1995, by and among Embassy
Suites, Inc., Promus Hotels, Inc., The Promus
Companies Incorporated, Promus Hotels Corporation
and NationsBank, N.A. (Carolinas).(4) 116
EX-10.11 Tranche B Assignment and Assumption Agreement dated
as of June 30, 1995, by and among Embassy Suites,
Inc., Promus Hotels Inc., The Promus Companies
Incorporated and NationsBank, N.A. (Carolinas). (4) 132
EX-10.12 Pledge Agreement dated as of June __, 1995, by and
among Promus Hotel Corporation, Promus Hotels, Inc.,
certain subsidiaries which may now be owners of
Credit Parties and NationsBank, N.A. (Carolinas).(4) 134
EX-10.13 Escrow Agreement, dated as of June 30, 1995,
among Promus Hotel Corporation, Promus
Hotels, Inc. and NationsBank. (3)
31
<PAGE>
Exhibit Index (continued)
- -------------------------
Exhibit No. Description Sequential Page No.
- ------------- ------------------------------------- -------------------
EX-10.14 Employee Benefits and Other Employment
Matters Allocation Agreement, dated as of
June 30, 1995, between The Promus Companies
Incorporated and Promus Hotel Corporation. (4) 151
EX-10.15 Risk Management Allocation Agreement,
dated as of June 30, 1995, between The
Promus Companies Incorporated and
Promus Hotel Corporation. (4) 179
EX-10.16 Tax Sharing Agreement, dated as of
June 30, 1995, between The Promus
Companies Incorporated and Promus
Hotel Corporation. (4) 193
EX-10.17 Promus Hotel Corporation Executive
Deferred Compensation Plan. (3)
EX-10.18 Promus Hotel Corporation Deferred
Compensation Plan. (3)
EX-10.19 Promus Hotel Corporation Savings and
Retirement Plan Trust Agreement, dated
as of May 26, 1995, among Promus Hotel
Corporation, and Robert S. Davis,
Donald H. Dempsey, Patricia R. Ferguson,
Jeffery M. Jarvis, Kelly R. Jenkins,
Frederick G. Schultz and Mark C. Wells. (3)
EX-10.20 Form of Severance Agreement, dated as
of June 30, 1995, entered into with
Donald H. Dempsey, Thomas L. Keltner,
Ralph B. Lake, David C. Sullivan, and
Mark C. Wells. (4) 211
EX-10.21 Form of Severance Agreement, dated
June 30, 1995, entered into with
Michael D. Rose and Raymond E. Schultz. (4) 228
EX-10.22 Employment Agreement, dated as of June 30, 1995
between Michael D. Rose and Promus Hotel
Corporation. (4) 244
EX-10.23 Promus Hotel Corporation Key Executive
Officer Annual Incentive Plan. (2)
EX-10.24 International Swap Dealers Association,
Inc. Master Agreement, dated as of
June 30, 1995, among Promus Hotels,
Inc. and NationsBank, N.A. (Carolinas). (4) 265
32
<PAGE>
Exhibit Index (continued)
- -------------------------
EX-10.25 Transfer Agreement, dated as of June 30,
1995, among Embassy Suites, Inc.,
Promus Hotels, Inc., and NationsBank, N.A.
(Carolinas). (4) 287
EX-27 Financial Data Schedule. (4) 295
Footnotes
- ---------
(1) Incorporated by reference from Promus Hotel Corporation Registration
Statement No. 33-59977 on Form S-8 for the Promus Hotel Corporation
1995 Stock Option Plan, filed June 6, 1995.
(2) Incorporated by reference from Promus Hotel Corporation Form 10/A, filed
May 3, 1995, File No. 1-11463.
(3) Incorporated by reference from Promus Hotel Corporation Form 8-K, filed
on June 14, 1995, File No. 1-11463.
(4) Filed herewith.
34
EX-10(5)
PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT
This PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT (this
"Agreement") is made as of this 30th day of June, 1995 between The Promus
Companies Incorporated, a Delaware corporation ("Promus") and Promus Hotel
Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of
Promus ("PRH").
RECITALS
WHEREAS, Promus, through subsidiaries, develops, manages and owns
a hotel business consisting of the Embassy Suites, Hampton Inn, Hampton Inn and
Suites and Homewood Suites hotel brands (the "PRH Business") and the Harrah's
casino entertainment business (the "Casino Business");
WHEREAS, the Board of Directors of Promus has determined that it
is in the best interests of Promus and the stockholders of Promus to separate
the Casino Business, on the one hand, and the PRH Business, on the other hand,
and, in order to effect such separation, to transfer (or to cause its
subsidiaries to transfer) to PRH or its Subsidiaries the stock of certain Promus
subsidiaries principally engaged in the PRH Business and certain other assets
relating principally to the PRH Business (the "Asset Transfers"), and thereafter
to cause Embassy Suites, Inc., a wholly-owned subsidiary of Promus ("Embassy"),
to distribute all of the outstanding shares of common stock, par value $0.10 per
share, of PRH to Promus (the "Embassy Distribution") and thereafter to cause
Promus to distribute such PRH common stock to the holders of Promus common stock
(the "Distribution");
WHEREAS, Promus has already effected certain preliminary
transfers and corporate restructurings, which transactions are not contingent
upon consummation of the Distribution and will not be undone if the Distribution
does not occur; and
- -
<PAGE>
WHEREAS, in connection with the Distribution, Promus and PRH have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Asset Transfers and the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General. As used in this Agreement, the following
terms shall have the following meanings:
Action: Any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
Affiliate: Means with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative to
the foregoing. Notwithstanding the foregoing, (i) the Affiliates of Promus
shall not include PRH, the PRH Subsidiaries or any other Person which would be
an Affiliate of Promus by reason of Promus's ownership of the capital stock of
PRH prior to the Distribution or the fact that any officer or director of PRH or
any of the PRH Subsidiaries shall also serve as an officer or director of
- -
<PAGE>
Promus or any of the Retained Subsidiaries, and (ii) the Affiliates of PRH shall
not include Promus, the Retained Subsidiaries or any other Person which would be
an Affiliate of PRH by reason of Promus's ownership of the capital stock of PRH
prior to the Distribution or the fact that any officer or director of PRH or any
of the PRH Subsidiaries shall also serve as an officer or director of Promus or
any of the Retained Subsidiaries.
Agent: The distribution agent appointed by Promus to distribute
the PRH Common Stock and cash in lieu of fractional shares pursuant to the
Distribution.
Annual Meeting: The 1995 Annual Meeting of Stockholders of
Promus held on May 26, 1995, at which the Distribution and certain other matters
relating to the Distribution were ratified and approved by the holders of a
majority of the outstanding shares of Promus Common Stock.
Code: The Internal Revenue Code of 1986, as amended.
Commission: The Securities and Exchange Commission.
Conveyancing and Assumption Instruments: Collectively, the
various agreements, instruments and other documents to be entered into to effect
the Asset Transfers and the assumption of Liabilities in the manner contemplated
by this Agreement and the Related Agreements.
Distribution Date: The date determined by the Promus Board as
the date on which the Distribution shall be effected, which Distribution Date is
contemplated by the Promus Board to occur on or about June 30, 1995.
Distribution Record Date: The date established by the Promus
Board as the date for taking a record of the Holders of Promus Common Stock
entitled to participate in the Distribution, which Distribution Record Date has
been established as June 21, 1995, subject to the fulfillment on or before June
18, 1995 of certain conditions to the Distribution as provided in Section 4.02.
- -
<PAGE>
Employee Benefits Allocation Agreement: The Benefits and Other
Employment Matters Allocation Agreement between Promus and PRH, which agreement
shall be entered into on or prior to the Distribution Date in substantially the
form of Exhibit A attached hereto.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Existing Management and Lease Agreements: The existing
management or lease agreements with hotel property owners (including those
entities in which Promus or its Subsidiaries are a partner or hold an equity
interest) to which Promus and its Subsidiaries are parties, pursuant to which
Promus or its Subsidiaries lease, manage or operate lodging properties.
Existing Promus Credit Facilities: The credit facilities of
Promus set forth on Schedule 1.01(a).
Financing Obligations: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
Franchise Agreements: All license, franchise or other agreements
or commitments to which Promus or any of its Subsidiaries is a party pursuant to
which Promus (either directly or through any such Subsidiary) has granted
franchise rights with respect to the operation of hotel properties, and all
other franchise rights either granted or received by Promus or any of its
Subsidiaries relating to the PRH Business.
Harrah's: Harrah's, a Nevada corporation.
Harrah's Club: Harrah's Club, a Nevada corporation.
- -
<PAGE>
Harrah's Entertainment Pro Forma Balance Sheet: The Pro Forma
Consolidated Balance Sheet for Harrah's Entertainment, Inc. as of March 31, 1995
attached hereto as Exhibit B-1.
Harrah's Entertainment Pro Forma Statement of Income: The Pro
Forma Consolidated Statement of Income for Harrah's Entertainment, Inc. as of
March 31, 1995 attached hereto as Exhibit B-2.
Holders: The holders of record of Promus Common Stock as of the
Distribution Record Date.
Information Technology Agreements: The agreements to be entered
into between Promus and PRH on or prior to the Distribution Date, providing for
certain matters related to information technology after the Distribution Date,
in substantially the forms of the following: Data Center Lease attached as
Exhibit C-1, Marketing Services Agreement attached as Exhibit C-2, Satellite
Services Agreement attached as Exhibit C-3, Software Agreement attached as
Exhibit C-4, Transitional Service Agreement attached as Exhibit
C-5, Administrative Systems Services Agreement attached as Exhibit C-6, and
Disaster Recovery Agreement attached as Exhibit C-7.
Insurance Proceeds: Those moneys (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
IRS: The Internal Revenue Service.
Liabilities: Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including, without limitation, those debts,
- -
<PAGE>
liabilities and obligations arising under any law, rule, regulation, Action,
threatened Action, order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under any contract,
agreement, commitment or undertaking.
Meeting Record Date: The record date established by the Promus
Board for determining stockholders of Promus entitled to vote at the Annual
Meeting.
NYSE: The New York Stock Exchange.
Person: Any individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization,
including any governmental entity or authority.
PHI: Promus Hotels, Inc., a Delaware corporation and a wholly-
owned subsidiary of PRH.
Pre-Paid Transaction Expenses: Amounts paid by Promus prior to
the allocation of cash pursuant to Section 2.06 for legal, investment banking,
accounting, filing, printing and related expenses incurred by Promus in
connection with the Distribution.
PRH Board: The Board of Directors of PRH.
PRH Books and Records: The books and records (including
computerized records) of PRH and the PRH Subsidiaries and all books and records
owned by Promus and its Subsidiaries which relate to the PRH Business or are
necessary to operate the PRH Business including, without limitation, all such
books and records relating to PRH Employees, all files relating to any Action
being assumed by PRH as part of the PRH Liabilities, original corporate minute
books, stock ledgers and certificates and corporate seals, and all licenses,
leases, agreements and filings, relating to PRH, the PRH Subsidiaries or the PRH
Business (but not including the Promus Books and
- -
<PAGE>
Records, provided that PRH shall have access to, and have the right to obtain
duplicate copies of, the Promus Books and Records in accordance with the
provisions of Article VII).
PRH Business: The businesses conducted by PRH and the PRH
Subsidiaries and the businesses conducted pursuant to or utilizing the PRH
Assets, including without limitation the management, operation and franchising
of hotels, including all hotels in the "Embassy Suites," "Hampton Inn,"
"Homewood Suites," and "Hampton Inn and Suites" hotel chains.
PRH Bylaws: The Bylaws of PRH, substantially in the form of
Exhibit D, to be in effect at the Distribution Date.
PRH Certificate: The Restated Certificate of Incorporation of
PRH, substantially in the form of Exhibit E, to be in effect at the Distribution
Date.
PRH Common Stock: The common stock, par value $0.10 per share,
of PRH (together with any PRH Rights issued pursuant to the PRH Rights Plan).
PRH Credit Agreement: The Credit Agreement between NationsBank,
N.A., Embassy, PHI, the Guarantors and the Several Lenders referred to therein,
dated as of June 7, 1995, and all documents evidencing or securing such Credit
Agreement or executed and delivered by the parties to such Credit Agreement in
connection therewith.
PRH Employees: The meaning specified in the Employee Benefits
Allocation Agreement.
PRH Group: PRH and the PRH Subsidiaries, collectively.
PRH Liabilities: (i) All of the Liabilities of the PRH Group
under, or to be retained or assumed by PRH or any of the PRH Subsidiaries
pursuant to, this Agreement or any of the Related Agreements, including those
set forth on Schedule 1.01(b), (ii) all of the Liabilities under the PRH
- -
<PAGE>
Credit Agreement, (iii) all Liabilities for payment of outstanding drafts of
Promus attributable to the PRH Business existing as of the Distribution Date,
and (iv) all other Liabilities (excluding Embassy liabilities with respect to
the Excluded Assets) arising out of or in connection with any of the PRH Assets
or the PRH Business, determined on a basis consistent with the determination of
the Liabilities of PRH included on the PRH Pro Forma Balance Sheet (as reflected
in the "Distribution Pro Forma column") (including, without limitation, any
liabilities arising out of or related to the transfer to PRH or its Affiliates
of the PRH Assets or the PRH Business).
PRH Pro Forma Balance Sheet: The Pro Forma Consolidated Balance
Sheet for PRH as of March 31, 1995 attached hereto as Exhibit F-1.
PRH Pro Forma Statement of Income: The Pro Forma Combined
Statement of Income for PRH as of March 31, 1995 attached hereto as Exhibit
F-2.
PRH Subsidiaries: The Transferred Subsidiaries and all
Subsidiaries of PRH or the Transferred Subsidiaries at the time of the
Distribution.
Privileges: All privileges regarding Information or use of
lawyers, accountants or other service providers that may be asserted under
applicable law including, without limitation, privileges or rights arising under
or relating to the attorney-client relationship (including but not limited to
the attorney-client and work product privileges and waivers of conflicts of
interest), the accountant-client privilege, and privileges relating to internal
valuative processes.
Privileged Information: All Information as to which Promus, PRH
or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
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<PAGE>
Promus Board: The Board of Directors of Promus.
Promus Books and Records: The books and records (including
computerized records) of Promus and the Retained Subsidiaries and all books and
records owned by Promus and its Subsidiaries which relate to the Retained
Business, are necessary to operate the Retained Business, or are required by law
to be retained by Promus, including, without limitation, all such books and
records relating to Retained Employees, all files relating to any Action
pertaining to the Retained Liabilities, all records required to be maintained by
Promus under the Settlement Agreement, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Promus, the Retained Subsidiaries or the
Retained Business (but not including the PRH Books and Records, provided that
Promus shall have access to, and shall have the right to obtain duplicate copies
of, the PRH Books and Records in accordance with the provisions of Article VII).
Promus Common Stock: The common stock, par value $0.10 per
share, of Promus.
Promus Group: Promus and the Retained Subsidiaries,
collectively.
Property Tax Services Agreement: The Property Tax Services
Agreement between PRI and Embassy, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form of Exhibit J attached
hereto.
Proxy Statement: The proxy statement dated April 25, 1995
provided to the holders of Promus Common Stock as of the Meeting Record Date in
connection with the Annual Meeting.
Related Agreements: All of the agreements, contracts,
instruments, understandings, assignments or other arrangements which are
- -
<PAGE>
entered into in connection with the transactions contemplated hereby and which
are set forth in a writing, including, without limitation: the Conveyancing and
Assumption Instruments, the Employee Benefits Allocation Agreement, the Tax
Sharing Agreement, the Trademark Assignment Agreement, the Information
Technology Agreements, the Risk Management Allocation Agreement, and the
Property Tax Services Agreement.
Retained Assets: The assets of Promus other than the PRH Assets,
including without limitation (i) the capital stock of the Retained Subsidiaries,
(ii) the Retained Real Property, (iii) assets relating to the Retained Business,
determined on a basis consistent with the determination of assets included on
the Harrah's Entertainment Pro Forma Balance Sheet (as reflected in the
"Distribution Pro Forma" column), (iv) all of the assets expressly allocated to
Promus or any of the Retained Subsidiaries under this Agreement or the Related
Agreements, including those set forth on Schedule 1.01(c), (v) any other assets
of Promus and its Affiliates relating to the Retained Business, and (vi) the
Excluded Assets set forth on Schedule 2.01(a).
Retained Business: The businesses conducted by Promus and its
Affiliates other than the PRH Business, including without limitation, the Casino
Business.
Retained Employees: The meaning specified in the Employee
Benefits Allocation Agreement.
Retained Liabilities: (i) All of the Liabilities arising out of
or in connection with the Retained Assets or the Retained Business determined on
a basis consistent with the determination of the Liabilities of Promus included
on the Harrah's Entertainment Pro Forma Consolidated Balance Sheet (as reflected
in the "Distribution Pro Forma" column), (ii) all of the
- -
<PAGE>
Liabilities of Promus under, or to be retained or assumed by Promus or any of
the Retained Subsidiaries pursuant to, this Agreement or any of the Related
Agreements, including those set forth on Schedule 1.01(d), (iii) any Financing
Obligations not constituting PRH Liabilities (including, without limitation, the
Existing Promus Credit Facilities identified on Schedule 1.01(a)), (iv) all
Liabilities for the payment of outstanding drafts of Promus attributable to the
Retained Business existing as of the Distribution Date, (v) all debts,
liabilities or other obligations, including any related claims that may be
asserted, whether prior to or after the Distribution Date, arising from the
Settlement Agreement and (vi) all other Liabilities of Promus not constituting
PRH Liabilities.
Retained Real Property: The ownership interests of Promus and
its Affiliates in real property that is not Transferred Real Property, including
the real property identified on Schedule 1.01(e).
Retained Subsidiaries: All Subsidiaries of Promus, except PRH
and the PRH Subsidiaries.
Risk Management Allocation Agreement: The Risk Management
Allocation Agreement between Promus and PRH, which agreement shall be entered
into on or prior to the Distribution Date in substantially the form of Exhibit G
hereto.
Securities Act: the Securities Act of 1933, as amended.
Senior Subordinated Notes: The 10-7/8% Senior Subordinated Notes
due 2002 and the 8-3/4% Senior Subordinated Notes due 2000 of Embassy.
Settlement Agreement: The Settlement Agreement dated March 17,
1995, whereby Plaintiff and defendant settled the litigation styled Bass Public
Limited Company, Bass International Holdings N.V., (U.S.A.) Incorporated,
Holiday Corporation and Holiday Inns, Inc. v. The Promus
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<PAGE>
Companies Incorporated formerly pending in the United States District Court for
the Southern District of New York (92 Civ. 0969).
Subsidiary: With respect to any Person, (a) any corporation of
which at least a majority in interest of the outstanding voting stock (having by
the terms thereof voting power under ordinary circumstances to elect a majority
of the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest.
Tax Sharing Agreement: The Tax Sharing Agreement between PRH and
Promus, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of Exhibit H attached hereto.
Trademark Assignment Agreement: The Trademark Assignment
Agreement between Promus and PRH, pursuant to which Promus will convey certain
intellectual property rights to PRH, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form of Exhibit I attached
hereto.
Transferred Joint Venture Interests: The partnership and joint
venture interests and minority equity interests identified on Schedule 1.01(f).
Transferred Real Property: The real property identified on
Schedule 1.01(g).
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<PAGE>
Transferred Subsidiaries: The Subsidiaries identified on
Schedule 1.01(h).
Transferred Subsidiary Stock: All of the issued and outstanding
capital stock of the Transferred Subsidiaries.
Section 1.02. Terms Defined Elsewhere in Agreement.
Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Asset Transfers Recitals
Consents 4.01
Distribution Recitals
Embassy Distribution Recitals
Form 10 Registration Statement 4.02
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnitee 5.03
Information 7.02
Promus Recitals
Promus Indemnitees 5.02
PRH Recitals
PRH Assets 2.01
PRH Indemnitees 5.01
PRH Rights 6.06
PRH Rights Plan 6.06
Third-Party Claim 5.04
ARTICLE II
TRANSFER OF ASSETS
Section 2.01. Transfer of Assets to PRH; Harrah's Mergers.
(a) Prior to the Distribution Date, Promus shall take or cause
to be taken all actions necessary to cause the transfer, assignment, delivery
and conveyance to PRH or its Subsidiaries (as directed by PRH) of all of
Promus's and its Subsidiaries' right, title and interest in the PRH Assets. The
"PRH Assets" shall consist of the following assets:
(i) the Transferred Subsidiary Stock;
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<PAGE>
(ii) the trademarks, service marks, goodwill and other
intangible properties and rights to be conveyed to PRH
pursuant to the Trademark Assignment Agreement;
(iii) the Existing Management and Lease Agreements;
(iv) the Franchise Agreements;
(v) the Transferred Real Property;
(vi) the Transferred Joint Venture Interests;
(vii) the PRH Books and Records;
(viii) all licenses and permits relating to the PRH
Business;
(ix) the two U.S. Dollar Swap Transactions between Embassy
and NationsBank, N.A., each with the notional amount of
$50 million, effective on March 20, 1995 and January
26, 1995, respectively;
(x) all of the other assets to be assigned to PRH under
this Agreement or the Related Agreements; and
(xi) all other assets relating to the PRH Business,
determined on a basis consistent with the determination
of the assets included on the PRH Pro Forma Combined
Balance Sheet (as reflected in the "Distribution Pro
Forma" column);
provided, that the PRH Assets shall exclude any rights of Embassy pursuant to
the agreements set forth on Schedule 2.01(a).
(b) Following the consummation of the Asset Transfers described
in Section 2.01(a) and prior to the Distribution Date, Promus shall take or
cause to be taken all actions necessary to cause Casino Holding Company to be
merged with and into Harrah's Club (with Harrah's Club as the surviving
corporation) and to cause Embassy to contribute to the capital of Harrah's
(which shall in turn contribute to the capital of Harrah's Club) all of
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<PAGE>
Embassy's right, title and interest in its Northern Nevada and Las Vegas casino
properties.
Section 2.02. Transfers Not Effected Prior to the Distribution.
To the extent that any transfers contemplated by this Article II
shall not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; provided, however, that
Promus and PRH and their respective Subsidiaries and Affiliates shall cooperate
in seeking to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities contemplated to be transferred pursuant to this Article
II. In the event that any such transfer of assets or Liabilities has not been
consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in
this subsection (a), as of the Distribution Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all rights, powers and privileges incidental thereto, and
shall be deemed to have assumed in accordance with the terms of this Agreement
all of the Liabilities, - -
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and all duties, obligations and responsibilities incidental thereto, which such
party is entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.03. Cooperation Re: Assets.
In the case that at any time after the Distribution Date, PRH
reasonably determines that any of the Retained Assets (other than the assets set
forth on Schedule 2.01(a)) are essential for the conduct of the PRH Business, or
Promus reasonably determines that any of the PRH Assets are essential for the
conduct of the Retained Business, and the nature of such assets makes it
impracticable for PRH or Promus, as the case may be, to obtain substitute assets
or to make alternative arrangements on commercially reasonable terms to conduct
their respective businesses, and reasonable provisions for the use thereof are
not already included in the Related Agreements, then PRH (with respect to the
PRH Assets) and Promus (with respect to the Retained Assets) shall cooperate to
make such assets available to the other party on commercially reasonable terms,
as may be reasonably required for such party to maintain normal business
operations (provided that such assets shall be required to be made available
only until such time as the other party may reasonably obtain substitute assets
or make alternative arrangements on commercially reasonable terms to permit it
to maintain normal business operations).
Section 2.04. No Representations or Warranties; Consents. Each
of the parties hereto understands and agrees that no party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, representing or warranting in any way (i) as to the value or
freedom from encumbrance of, or any other matter concerning, any assets of such
party or (ii) as to the legal sufficiency to convey title to any asset
transferred pursuant to this Agreement or any Related Agreement, including,
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without limitation, any Conveyancing or Assumption Instruments. It is also
agreed and understood that there are no warranties whatsoever, express or
implied, given by either party to the Agreement, as to the condition, quality,
merchantability or fitness of any of the assets, businesses or other rights
either transferred to or retained by the parties, as the case may be, and all
such assets, businesses or other rights shall be "as is, where is" and "with all
faults" (provided, however, that the absence of warranties given by the parties
shall not negate the allocation of Liabilities under this Agreement and shall
have no effect on any manufacturers', sellers', or other third parties'
warranties which are intended to be transferred with such assets). Similarly,
each party hereto understands and agrees that no party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets. Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement, and shall take
all such further actions as shall be deemed reasonably necessary to preserve for
each of the PRH Group and the Promus Group, to the greatest extent reasonably
feasible, consistent with this Agreement, the economic and operational benefits
of the allocation of assets and Liabilities provided for in this Agreement. In
case at any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
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each party to this Agreement shall take all such necessary or desirable action,
provided, that any financial cost shall be borne by the party receiving the
benefit of the action.
Section 2.05. Conveyancing and Assumption Instruments. In
connection with the Asset Transfers and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or cause to be
executed by the appropriate entities the Conveyancing and Assumption Instruments
in such forms as the parties shall reasonably agree, including the transfer of
the Transferred Real Property with deeds as may be appropriate, the assignment
of trademarks and franchise rights and the assignment and assumption of the
Existing Management and Lease Agreements, Transferred Joint Venture Interests,
and the Franchise Agreements. The transfer of capital stock shall be effected
by means of delivery of stock certificates and executed stock powers and
notation on the stock record books of the corporation or other legal entities
involved and, to the extent required by applicable law, by notation on public
registries.
Section 2.06. Cash Allocation.
(a) Cash Allocation on the Distribution Date.
The allocation between Promus and PRH of all domestic and
international cash bank balances and short-term investments ("cash") of Promus
and its Subsidiaries recorded per the books of Promus and its Subsidiaries as of
the close of business on the Distribution Date (the "Pre-Distribution Cash
Balance") shall be in accordance with the following:
(i) all petty cash accounts of hotel properties on the
Distribution Date shall be transferred to PRH;
(ii) all cash received in and deposits made to the
local deposit accounts for business activities
relating to the PRH Business to and including the
Distribution
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Date which has not previously been transferred to
Promus shall be remitted to Promus no later than five
business days following the Distribution Date; and
(iii) all Liabilities for payment of outstanding drafts
drawn on accounts allocated to PRH shall be paid
by PRH (except that, with respect to outstanding
drafts relating to Existing Management and Lease
Agreements, including Transferred Joint Venture
Interests, Promus shall reimburse PRH for such
outstanding drafts net of any corresponding
receivable transferred to PRH).
(b) Cash Management After the Distribution Date. PRH shall
establish and maintain a separate cash management system and accounting records
with respect to the PRH Business effective as of 12:01 a.m. on the day following
the Distribution Date; thereafter, (i) any payments by Promus or its Retained
Subsidiaries on behalf of PRH or the PRH Subsidiaries in connection with the PRH
Business (including, without limitation, any such payments in respect of
Liabilities or other obligations of PRH or the PRH Subsidiaries under the
Employee Benefits Allocation Agreement) shall be recorded in the accounts of the
PRH Group as a payable from the PRH Group to the Promus Group; (ii) any payments
by PRH or the PRH Subsidiaries on behalf of Promus or its Retained Subsidiaries
in connection with the Retained Business (including, without limitation, any
such payments in respect to Liabilities or other obligations of Promus or its
Retained Subsidiaries under the Employee Benefits Allocation Agreement) shall be
recorded in the accounts of the Promus Group as a payable from the Promus Group
to the PRH Group; (iii) any cash payments received by Promus and the Retained
Subsidiaries relating to the PRH Business or the PRH Assets shall be recorded in
the accounts of the Promus Group as a payable from the Promus Group to the PRH
Group; (iv) any cash payments
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received by PRH or the PRH Subsidiaries relating to the Retained Business or the
Retained Assets shall be recorded in the accounts of the PRH Group as a payable
from the PRH Group to the Promus Group; (v) PRH and Promus shall make
adjustments for late deposits, checks returned for not sufficient funds and
other post-Distribution Date transactions as shall be reasonable under the
circumstances consistent with the purpose and intent of this Agreement; and (vi)
the net balance due to the Promus Group or the PRH Group, as the case may be, in
respect of the aggregate amounts of clauses (i), (ii), (iii), (iv) and (v) shall
be paid by PRH or Promus, as appropriate, as promptly as practicable. For
purposes of this Section 2.06(b), the parties contemplate that the Retained
Business and the PRH Business, including but not limited to the administration
of accounts payable and accounts receivable, will be conducted in the normal
course.
(c) All transactions contemplated in this Section 2.06 shall be
subject to audit by the parties, and any dispute thereunder shall be resolved by
Arthur Andersen LLP ("Arthur Andersen") (or, if Arthur Andersen is not
available, by such other independent firm of certified public accounts mutually
acceptable to Promus and PRH), whose decision shall be final and unappealable.
Section 2.07. Financing.
Prior to the Asset Transfers and other transactions described in
this Article II, Embassy shall enter into the PRH Credit Agreement and shall
borrow $215 million in cash under the PRH Credit Agreement. Embassy shall use
the net proceeds of the borrowings under the PRH Credit Agreement to retire a
portion of its indebtedness outstanding under the Existing Promus Credit
Facilities.
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ARTICLE III
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Assumption and Satisfaction of Liabilities.
(a) Except as set forth in the Employee Benefits Allocation
Agreement, the Tax Sharing Agreement or other Related Agreements, effective as
of and after the Distribution Date, (i) PRH shall, and/or shall cause the PRH
Subsidiaries to, assume, pay, perform, and discharge in due course all of the
PRH Liabilities and (ii) Promus shall, and/or shall cause the Retained
Subsidiaries to, pay, perform and discharge in due course all of the Retained
Liabilities.
(b) Effective as of and after the Distribution Date, PRH shall
cause Embassy to be released and discharged from any and all Liabilities under
the PRH Credit Agreement.
ARTICLE IV
THE DISTRIBUTION
Section 4.01. Cooperation Prior to the Distribution.
(a) Promus and PRH shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Employee Benefits Allocation Agreement.
(b) Promus and PRH shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Related Agreements.
(c) Promus and PRH shall use all reasonable efforts to obtain
any third-party consents or approvals necessary or desirable in connection with
the transactions contemplated hereby ("Consents").
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(d) Promus and PRH will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement.
Section 4.02. Promus Board Action; Conditions Precedent to the
Distribution. The Promus Board shall, in its discretion, establish any
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions shall have been
satisfied:
(i) each of the Distribution Proposals (as defined in the
Proxy Statement) having been approved by Promus's
stockholders;
(ii) the Promus Board having received an opinion from Latham
& Watkins to the effect that the Embassy Distribution
and the Distribution will qualify as a tax-free
transaction under Section 355 of the Code;
(iii) the transfers of assets and Liabilities contemplated by
this Agreement having been consummated in all material
respects;
(iv) the PRH Common Stock and associated PRH Rights having
been approved for listing on the New York Stock
Exchange subject to official notice of issuance;
(v) the PRH Board, comprised as contemplated by
Section 6.01, having been elected by Embassy, as sole
stockholder of PRH, and the PRH Certificate and the PRH
Bylaws, as each will be in effect after the
Distribution, having been adopted and being in effect;
(vi) PRH having entered into the PRH Credit Agreement;
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(vii) the Registration Statement on Form 10 with respect to
the PRH Common Stock (the "Form 10 Registration
Statement") having become effective under the Exchange
Act;
(viii) all third party consents to the transactions
contemplated by the Distribution Proposals having
been obtained (including, without limitation,
consents having been obtained from holders of the
Senior Subordinated Notes to certain amendments to
the covenants contained in such Notes), except for
those the failure of which to obtain would not
have a material adverse effect on PRH or Harrah's
Entertainment;
(ix) Embassy having obtained from its lenders under the
Existing Promus Credit Facilities consents to the
transactions contemplated by the Distribution
Proposals; and
(x) James D. Wolfensohn Incorporated having delivered an
updated opinion to the Promus Board, dated as of the
Distribution Date, in substantially the same form as
the opinion set forth in Exhibit K;
provided, however, that (i) any such condition may be waived by the Promus Board
in its sole discretion, and (ii) the satisfaction of such conditions shall not
create any obligation on the part of Promus or any other party hereto to effect
the Distribution or in any way limit Promus's power of termination set forth in
Section 9.07 or alter the consequences of any such termination from those
specified in such Section.
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Section 4.03. The Distribution. On the Distribution Date,
subject to the conditions and rights of termination set forth in this Agreement,
PRH shall issue and deliver to Embassy, and Embassy shall assign
and deliver to Promus, and Promus shall endorse in blank and deliver to the
Agent, a share certificate for PRH Common Stock representing a number of such
shares which, when taken together with the shares of PRH Common Stock already
owned by Embassy, will result in Embassy owning one share of PRH Common Stock
for each two shares of Promus Common Stock issued and outstanding on the
Distribution Record Date. Promus shall instruct the Agent to distribute, on or
as soon as practicable following the Distribution Date, to the Holders one share
of the PRH Common Stock for each two shares of Promus Common Stock held by such
Holders and cash in lieu of fractional shares of PRH Common Stock as provided in
Section 4.04. PRH agrees to provide all share certificates that the Agent shall
require in order to effect the Distribution.
Section 4.04. Cash in Lieu of Fractional Shares.
No certificate or scrip representing fractional shares of PRH
Common Stock shall be issued as part of the Distribution and in lieu thereof,
each holder of PRH Common Stock who would otherwise be entitled to receive a
fractional share of the PRH Common Stock will receive cash for such fractional
share. Promus shall instruct the Agent to determine the number of whole shares
and fractional shares of PRH Common Stock allocable to each holder of record of
the Promus Common Stock as of the Distribution Record Date. Promus shall
instruct the Agent to aggregate all such fractional shares into whole shares and
sell the whole shares obtained thereby in the open market as soon as practicable
following the Distribution Date at then prevailing prices on behalf of Holders
who otherwise would be entitled to receive fractional share interests and to
distribute to each such Holder such Holder's ratable share of
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the proceeds of such sale as soon as practicable after the Distribution Date.
Promus shall bear the costs of commissions incurred in connection with such
sales.
ARTICLE V
INDEMNIFICATION
Section 5.01. Indemnification by Promus. Except as otherwise
expressly set forth in a Related Agreement, Promus shall indemnify, defend and
hold harmless PRH and each of the PRH Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "PRH
Indemnitees") from and against the Retained Liabilities and any and all losses,
Liabilities and damages, including, without limitation, the costs and expenses
of any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions (collectively, "PRH Indemnifiable
Losses" and, individually, a "PRH Indemnifiable Loss") of the PRH Indemnitees
arising out of or due to the failure or alleged failure of Promus or any of its
Affiliates (i) to pay, perform or otherwise discharge in due course any of the
Retained Liabilities, or (ii) comply with the provisions of Section 6.04.
Section 5.02. Indemnification by PRH. Except as otherwise
expressly set forth in a Related Agreement (other than a deed giving effect to a
transfer of the Transferred Real Property), PRH shall indemnify, defend and hold
harmless Promus and each of the Retained Subsidiaries, and each of their
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Promus
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Indemnitees") from and against the PRH Liabilities and any and all losses,
Liabilities, damages, including, without limitation, the costs and expenses of
any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions (collectively, "Promus
Indemnifiable Losses" and, individually, a "Promus Indemnifiable Loss") of the
Promus Indemnitees arising out of or due to the failure or alleged failure of
PRH or any of its Affiliates to (i) pay, perform or otherwise discharge in due
course any of the PRH Liabilities or (ii) comply with the provisions of Section
6.04. The "PRH Indemnifiable Losses" and the "Promus Indemnifiable Losses" are
collectively referred to as the "Indemnifiable Losses."
Section 5.03. Insurance Proceeds. The amount which any party
(an "Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 5.01 or Section 5.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received.
Section 5.04. Procedure for Indemnification.
(a) Except as may be set forth in a Related Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a
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Person (including, without limitation, any governmental entity) who is not a
party to this Agreement or to any of the Related Agreements of any claim or of
the commencement by any such Person of any Action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided, that the failure of any Indemnitee to give notice
as required by this Section 5.04 shall not relieve the Indemnifying Party of its
obligations under this Article V, except to the extent that such Indemnifying
Party is prejudiced by such failure to give notice. Such notice shall describe
the Third-Party Claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third-Party Claim, provided that the
Indemnifying Party must confirm in writing that it agrees that the Indemnitee is
entitled to indemnification hereunder in respect of such Third-Party Claim.
Within 30 days of the receipt of notice from an Indemnitee in accordance with
Section 5.04(a) (or sooner, if the nature of such Third-Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its election
whether to assume responsibility for such Third-Party Claim (provided that if
the Indemnifying Party does not so notify the Indemnitee of its election within
30 days after receipt of such notice from the Indemnitee, the Indemnifying Party
shall be deemed to have elected not to assume responsibility for such Third-
Party Claim), and such Indemnitee shall cooperate in the defense or settlement
or compromise of such Third-Party Claim. After notice from an Indemnifying
Party to an Indemnitee of its
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election to assume responsibility for a Third-Party Claim, such Indemnifying
Party shall not be liable to such Indemnitee under this Article V for any legal
or other expenses (except expenses approved in advance by the Indemnifying
Party) subsequently incurred by such Indemnitee in connection with the defense
thereof; provided, that if the defendants or parties against which relief is
sought in any such claim include both the Indemnifying Party and one or more
Indemnitees and in such Indemnitees' reasonable judgment a conflict of interest
between such Indemnitees and such Indemnifying Party exists in respect of such
claim, such Indemnitees shall have the right to employ separate counsel and in
that event the reasonable fees and expenses of such separate counsel (but not
more than one separate counsel reasonably satisfactory to the Indemnifying
Party) shall be paid by such Indemnifying Party. If an Indemnifying Party
elects not to assume responsibility for a Third-Party Claim (which election may
be made only in the event of a good faith dispute that a claim was
inappropriately tendered under Section 5.01 or 5.02, as the case may be) such
Indemnitee may defend or (subject to the following sentence) seek to compromise
or settle such Third-Party Claim. Notwithstanding the foregoing, an Indemnitee
may not settle or compromise any claim without prior written notice to the
Indemnifying Party, which shall have the option within ten days following the
receipt of such notice (i) to disapprove the settlement and assume all past and
future responsibility for the claim, including reimbursing the Indemnitee for
prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnitee elects
to proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnitee's right to
indemnity, or
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(iv) to approve and agree to pay the settlement. In the event the Indemnifying
Party makes no response to such written notice from the Indemnitee, the
Indemnifying Party shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense or compromise.
(d) Notwithstanding anything else in this Section 5.04 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee) and unless such settlement
or compromise does not involve any new or additional contractual or other
burdens on the Indemnitee. In the event the Indemnitee shall notify the
Indemnifying Party in writing that such Indemnitee declines to accept any such
settlement or compromise, such Indemnitee may continue to contest such Third-
Party Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such Third-Party Claim shall be equal
to (i) the costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of the offer to settle or compromise
(to the extent such costs and expenses are otherwise indemnifiable hereunder)
plus (ii) the lesser of (A) the amount of any offer of settlement or compromise
which such Indemnitee declined to accept and (B)
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the actual out-of-pocket amount such Indemnitee is obligated to pay subsequent
to such date as a result of such Indemnitee's continuing to pursue such Third-
Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(f) In addition to any adjustments required pursuant to Section
5.03, if the amount of any Indemnifiable Loss shall, at any time subsequent to
the payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
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Section 5.05. Remedies Cumulative. The remedies provided in
this Article V shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 5.06. Survival of Indemnities. The obligations of each
of PRH and Promus under this Article V shall survive the sale or other transfer
by it of any assets or businesses or the assignment by it of any Liabilities,
with respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
Section 5.07. After-Tax Indemnification Payments. Except as
otherwise expressly provided herein or in a Related Agreement, any
indemnification payment made by either party under this Article V shall give
effect to, and be reduced by the value of, any and all applicable deductions,
losses, credits, offsets or other items for Federal, state or other tax purposes
attributable to the payment of the indemnified liability by the Indemnitee in a
manner consistent with the treatment of tax indemnity payments under the Tax
Sharing Agreement.
Section 5.08. Characterization of Payments. Any payment (other
than interest thereon) made by either party under this Article V shall be
treated by all parties for tax purposes to the extent permitted by law, and for
accounting purposes to the extent permitted by generally accepted accounting
principles, as non-taxable dividend distributions or capital contributions made
prior to the close of business on the Closing Date.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.01. PRH Board. PRH and Promus shall take all actions
which may be required to constitute, effective as of the Distribution Date, the
following persons as the directors of PRH: Michael D. Rose, Ronald Terry,
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Ben C. Peternell, Raymond E. Schultz, David Sullivan, U. Bertram Ellis, Jr.,
Debra J. Fields, Christopher W. Hart, C. Warren Neel, Michael I. Roth, and Jay
Stein.
Section 6.02. Resignations; Promus Board. PRH shall cause all
of its directors and PRH Employees to resign, effective as of the Distribution
Date, from all boards of directors or similar governing bodies of Promus or any
of its Retained Subsidiaries on which they serve, and from all positions as
officers or employees of Promus or any of its Retained Subsidiaries in which
they serve, except that (i) Michael D. Rose shall serve as a director and
Chairman of Promus and as a director and Chairman of PRH, and (ii) Ben C.
Peternell shall serve as an executive officer of Promus (as well an officer of
Embassy) and as a director of PRH. Promus shall cause all of its directors and
the Retained Employees to resign from all boards of directors or similar
governing bodies of PRH or any of its subsidiaries on which they serve, and from
all positions as officers or employees of PRH or any of its subsidiaries in
which they serve, except to the extent specified in the preceding sentence.
Section 6.03. Certificate and Bylaws. On or prior to the
Distribution Date, PRH shall adopt the PRH Certificate and the PRH Bylaws, and
shall file the PRH Certificate with the Secretary of State of the State of
Delaware.
Section 6.04. Certain Post-Distribution Transactions.
(a) PRH. (i) PRH shall, and shall cause each of the PRH
Subsidiaries to, comply with each representation and statement made, or to be
made, to Latham & Watkins in connection with its tax opinion or any other
opinion obtained, or to be obtained, by Promus and PRH acting together, from any
tax counsel with respect to any transaction contemplated by this Agreement and
(ii) until the second anniversary of the Distribution Date, neither PRH nor any
of its subsidiaries shall (A) liquidate, merge with any other
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corporation or sell or otherwise dispose of a material portion of its assets,
except in the ordinary course of business and except for contributions of hotel
real estate to ventures or entities in which PHC will continue to own an equity
interest and with respect to which hotel real estate PHC retains a contractual
right to serve as manager or franchisor, (B) repurchase or issue any PRH capital
stock (other than stock issued pursuant to employee plans), or (C) cease the
active conduct of a material portion of its business independently, with its own
employees and without material change, unless, in each of cases (A), (B) and
(C), in the opinion of counsel to PRH, which opinion shall be reasonably
satisfactory to Promus, or pursuant to a favorable IRS ruling letter reasonably
satisfactory to Promus, such act or omission would not adversely affect the tax
consequences of the Distribution to Promus or the stockholders of Promus, as set
forth in any tax opinion issued by Latham & Watkins; and PRH has no present
intention to take any such actions.
(b) Promus. (i) Promus shall, and shall cause each of its
subsidiaries to, comply with each representation and statement made, or to be
made, to Latham & Watkins in connection with its tax opinion or any other
opinion obtained, by Promus and PRH acting together, from any tax counsel with
respect to any transaction contemplated by this Agreement; and (ii) until the
second anniversary of the Distribution Date, neither Promus nor any of its
subsidiaries shall (A) liquidate, merge with any other corporation or sell or
otherwise dispose of a material portion of its assets (other than the PRH
Assets), except in the ordinary course of business, (B) repurchase or issue any
capital stock of Promus (other than stock issued pursuant to employee plans), or
(C) cease the active conduct of a material portion of its business
independently, with its own employees and without material change, unless, in
each of cases (A), (B) and (C), in the opinion of counsel to Promus, which
opinion shall be reasonably satisfactory to PRH, or pursuant to a favorable
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IRS ruling letter reasonably satisfactory to PRH, such act or omission would not
adversely affect the tax consequences of the Distribution to PRH or the
stockholders of PRH, as set forth in any opinion issued by Latham & Watkins; and
Promus has no present intention to take any such actions.
Section 6.05. Corporate Name. Effective as of the Distribution
Date, Promus shall change its corporate name to "Harrah's Entertainment, Inc."
and Embassy shall change its corporate name to "Harrah's Operating Company,
Inc." All references to Promus and Embassy herein shall be references to each
such corporation both before and after such corporate name change.
Section 6.06. PRH Rights Plan. Prior to the Distribution Date,
the PRH Board may elect, in its sole discretion, to recommend that PRH adopt a
stockholder rights plan (the "PRH Rights Plan"). The PRH Rights Plan will
provide for the distribution of preferred share purchase rights ("PRH Rights")
with respect to each share of PRH Common Stock. The PRH Rights will be attached
to the PRH Common Stock and will not be exercisable, or transferable apart from
the PRH Common Stock, unless and until certain events occur. If certain events
occur relating to the acquisition by an acquiring person of PRH Common Stock, or
a merger or other combination of PRH with an acquiring person, the PRH Rights
will entitle holders (other than the acquiring person) to purchase either PRH
Common Stock or common stock of the acquiring person at a discount. The
specific terms of the PRH Rights will be determined by the Board of Directors of
PRH consistent with the description thereof in the Proxy Statement.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.01. Provision of Corporate Records.
(a) Except as may otherwise be provided in a Related Agreement,
Promus shall arrange as soon as practicable following the Distribution Date,
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to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at PRH's cost) to PRH of the
PRH Books and Records in its possession, except to the extent such items are
already in the possession of PRH or a PRH Subsidiary. Such PRH Books and
Records shall be the property of PRH, but shall be available to Promus for
review and duplication until Promus shall notify PRH in writing that such
records are no longer of use to Promus or until the 10th anniversary of this
Agreement.
(b) Except as otherwise provided in a Related Agreement, PRH
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Promus's cost) to Promus of the Promus
Books and Records in its possession, except to the extent such items are already
in the possession of Promus. The Promus Books and Records shall be the property
of Promus, but shall be available to PRH for review and duplication until PRH
shall notify Promus in writing that such records are no longer of use to PRH or
until the 10th anniversary of this Agreement.
Section 7.02. Access to Information. Except as otherwise
provided in a Related Agreement, from and after the Distribution Date, Promus
shall afford to PRH and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to pre-Distribution operations
(collectively, "Information") within Promus's possession insofar as such access
is reasonably required by PRH for the conduct of its business, subject to
appropriate restrictions for confidential
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or Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, PRH shall afford to Promus and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within PRH's
possession, insofar as such access is reasonably required by Promus for the
conduct of its business, subject to appropriate restrictions for confidential or
Privileged Information. Information may be requested under this Article VII for
the legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. Production of Witnesses. At all times from and
after the Distribution Date, each of PRH and Promus shall use reasonable efforts
to make available to the other, upon written request, its and its subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any Action.
Section 7.04. Reimbursement. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or witness
services to the other party under this Article VII shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) and direct and indirect expenses of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witness services.
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Section 7.05. Retention of Records. Except as otherwise
required by law or agreed to in a Related Agreement or otherwise in writing,
each of Promus and PRH may destroy or otherwise dispose of any of the
Information, which is material Information and is not contained in other
Information retained by Promus or PRH, as the case may be, at any time after the
10th anniversary of this Agreement, provided that, prior to such destruction or
disposal, (a) it shall provide no less than 90 or more than 120 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (b) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
Section 7.06. Confidentiality. Each of Promus and its
Subsidiaries on the one hand, and PRH and its Subsidiaries on the other hand,
shall hold, and shall cause its consultants and advisors to hold, in strict
confidence, all Information concerning the other in its possession or furnished
by the other or the other's representatives pursuant to this Agreement (except
to the extent that such Information has been (i) in the public domain through no
fault of such party or (ii) later lawfully acquired from other sources by such
party), and each party shall not release or disclose such Information to any
other person, except its auditors, attorneys, financial advisors, rating
agencies, bankers and other consultants and advisors, unless compelled to
disclose by judicial or administrative process or by other requirements of law
or regulation, or unless such Information is reasonably required to be disclosed
in connection with (x) any litigation with any third parties or litigation
between the Promus Group and the PRH Group,
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(y) any contractual agreement to which the Promus Group or the PRH Group are
currently parties, or (z) in exercise of either party's rights hereunder.
Section 7.07. Privileged Matters. Promus and PRH recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of both
the Promus Group and the PRH Group and that both the Promus Group and the PRH
Group should be deemed to be the client for the purposes of asserting all
Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) Promus shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Retained Business, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH.
Promus shall also be entitled, in perpetuity, to control the assertion or waiver
of all Privileges in connection with Privileged Information that relates solely
to the subject matter of any claims constituting Retained Liabilities, now
pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Promus, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH.
(b) PRH shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the PRH Business, whether or not the Privileged
Information is in the possession of or under the control of Promus or PRH. PRH
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information which relates solely to the
subject matter of any claims constituting PRH Liabilities, now pending or which
may be asserted in the future, in any
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lawsuits or other proceedings initiated against or by PRH, whether or not the
Privileged Information is in the possession of PRH or under the control of
Promus or PRH.
(c) Promus and PRH agree that they shall have a shared
Privilege, with equal right to assert or waive, subject to the restrictions in
this Section 7.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 7.07(a) and (b). All Privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Promus
and PRH in respect of which Promus and PRH retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted
under any applicable law, and in which the other party has a shared Privilege,
without the consent of the other party, except to the extent reasonably required
in connection with any litigation with third parties or as provided in
subsection (e) below. Consent shall be in writing, or shall be deemed to be
granted unless written objection is made within 20 days after notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member
of the Promus Group and a member of the PRH Group, either party may waive a
Privilege in which the other party has a shared Privilege, without obtaining the
consent of the other party, provided that such waiver of a shared Privilege
shall be effective only as to the use of Information or counsel with respect to
the litigation or dispute between the Promus Group and the PRH Group, and shall
not operate as a waiver of the shared Privilege with respect to third parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
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minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party.
Each party specifically agrees that it will not withhold consent to waiver for
any purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or
other request which arguably calls for the production or disclosure of
Information subject to a shared Privilege or as to which the other party has the
sole right hereunder to assert a Privilege, or if any party obtains knowledge
that any of its current or former directors, officers, agents or employees have
received any subpoena, discovery or other requests which arguably calls for the
production or disclosure of such Privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information and
to assert any rights it may have under this Section 7.07 or otherwise to prevent
the production or disclosure of such Privileged Information.
(h) The transfer of the PRH Books and Records and the Promus
Books and Records and other Information between Promus and its Subsidiaries and
PRH and its Subsidiaries, is made in reliance on the agreement of Promus and
PRH, as set forth in Sections 7.06 and 7.07, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable Privileges with
respect to third parties. The access to information being granted pursuant to
Sections 7.01 and 7.02 hereof, the agreement to provide witnesses and
individuals pursuant to Section 7.03 hereof and the transfer of Privileged
Information between Promus and its Subsidiaries and PRH and its Subsidiaries
pursuant to this Agreement shall not be deemed a waiver of any Privilege that
has been or may be asserted under this Agreement or otherwise.
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ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01. Non-Competition Agreement.
(a) PRH. Until 5 years after the Distribution Date, PRH and its
Affiliates shall not, without the express written consent of Harrah's
Entertainment, compete with the Casino Business of Harrah's Entertainment,
provided (i) that two years after the Distribution Date and for the remaining
term of this covenant, such restrictions shall not prevent PRH or any of its
Affiliates from competing with the Casino Business in geographic areas where
Harrah's Entertainment is prohibited, by law or by contract, from operating
casino facilities (or any additional casino facilities) and (ii) that such
restrictions shall not prevent PRH or any of its Affiliates from operating the
Hotel Business in competition with Harrah's Entertainment's casino facilities or
from operating a limited scale casino (no more than 10,000 square feet or 300
gaming positions) in a predominantly hotel facility. In the event that PRH or
any of its Affiliates determines to operate a limited scale casino as described
above, PRH shall offer to Harrah's Entertainment the right to provide management
or consulting services to PRH in connection therewith. In the event that PRH
determines not to accept such services on the terms specified by Harrah's
Entertainment, then PRH and its Affiliates shall not enter into any management
or consulting agreement with any other person on terms and conditions that are
less favorable to PRH than the terms offered by Harrah's Entertainment, without
first offering such terms to Harrah's Entertainment.
(b) Harrah's Entertainment. Until 5 years after the
Distribution Date, Harrah's Entertainment and its Affiliates shall not, without
the express written consent of PRH, compete with the Hotel Business of PRH,
provided that such restrictions shall not prevent or impair the operation
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or ownership by Harrah's Entertainment or any of its Affiliates of any hotel
facility related to or supporting a casino facility as such hotel facility may
be operated presently or in the future.
(c) As used in this Section 8.01, the term "Affiliates" includes
any entity in which PRH or Harrah's Entertainment owns a 20% or greater
interest, but excludes any entity owning a controlling or other interest in
either company (now or in the future). PRH and Harrah's Entertainment will not
be permitted to unreasonably withhold their consent to transactions involving
Affiliates that are not controlled by the other Company.
Section 8.02. Hiring of Employees. Neither PRH nor Promus nor
their respective Affiliates shall, for a period of two years after the
Distribution Date, hire any employee of the other company or its subsidiaries
(it being understood that PRH or its Affiliates may employ any PRH Employee and
Promus or its Affiliates may employ any Retained Employee), except that, in
order to provide opportunities for increased line-level responsibility and
career growth to field operations employees of Promus and PRH at the manager,
director and vice president officer levels, Promus and PRH and their respective
Affiliates may employ any employee of the other company in the following
categories:
(1) General manager or assistant general manager of any Embassy
Suites, Hampton Inn, Hampton Inn and Suites or Homewood Suites
hotel.
(2) Manager, director or vice president of any Harrah's casino
operation.
Section 8.03. Settlement Agreement. PRH and Promus shall
cooperate with each other in respect of the Settlement Agreement by making
available to each other such documents or other information and facilities
which, in the reasonable opinion of the party requesting such documents or
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other information and facilities, may be necessary. PRH shall promptly advise
Promus upon receipt of any notices or other communications related to the
Settlement Agreement. Promus agrees to pay all of the out-of-pocket expenses
(including any reasonable fees of legal counsel) of PRH related to such
cooperation. PRH agrees that the defense or prosecution of the claims pursuant
to the Settlement Agreement shall be solely under the direction and control of
Promus; provided that, without PRH's consent, Promus may not settle any claims
or enter into any agreements in connection therewith if doing so would prejudice
PRH in a manner not adequately compensated by the indemnification provided in
Section 5.01.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Complete Agreement; Construction. This Agreement,
including the Schedules and Exhibits and the Related Agreements and other
agreements and documents referred to herein or delivered pursuant hereto, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, then the Related Agreements shall
control; provided, however, that this Agreement shall control in the event of
any conflict between the provisions of this Agreement and the deeds which effect
the transfer of the Transferred Real Property.
Section 9.02. Expenses. Except as otherwise set forth in this
Agreement or any Related Agreement, all costs and expenses incurred through the
Distribution Date in connection with the preparation, execution, delivery and
implementation of this Agreement, the Distribution and with the
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consummation of the transactions contemplated by this Agreement shall be charged
to Promus (other than the costs and expenses of the PRH Credit Agreement, which
shall be charged to PRH). Except as otherwise set forth in this Agreement or
any Related Agreement, all costs and expenses incurred following the
Distribution Date in connection with implementation of the transactions
contemplated in this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.
Section 9.03. Accounting Adjustments. Except as otherwise set
forth in this Agreement or any Related Agreement, Promus and PRH agree (i) after
the Distribution Date, to cooperate in finalizing any adjustments required to
finalize accounting allocations and entries made to account for the transactions
contemplated by this Agreement and the Related Agreements, and (ii) that any
such adjustments shall be finalized by December 31, 1995. Subsequent to
December 31, 1995, any accounting required to adjust either PRH's or Promus's
books and records shall be the responsibility of the respective companies and no
adjustments will be made to account for the transactions contemplated by this
Agreement and the Related Agreements. This Section 9.03 is not intended to
impact any other sections of this Agreement or any of the Related Agreements.
Section 9.04. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Tennessee, without
regard to the principles of conflicts of laws thereof.
Section 9.05. Notices. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
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specified by like notice) and shall be deemed given on the date on which such
notice is received:
To PRH:
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, TN 38138
Attention: Ralph B. Lake
General Counsel
To Promus:
The Promus Companies Incorporated
1023 Cherry Road
Memphis, Tennessee 38117
Attention: Corporate Secretary
Section 9.06. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 9.07. Successors and Assigns. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
Section 9.08. Termination. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Distribution Date by and in
the sole discretion of the Promus Board without the approval of PRH or of
Promus's stockholders. In the event of such termination, no party shall have
any liability to any other party pursuant to this Agreement.
Section 9.09. Subsidiaries. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party which is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
Section 9.10. No Third-Party Beneficiaries. This Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and Affiliates and should not be deemed to confer upon third parties any
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remedy, claim, Liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
Section 9.11. Titles and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 9.12. Exhibits and Schedules. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 9.13. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 9.14. Arbitration of Disputes. (a) Any controversy or
claim arising out of this Agreement, or any breach of this Agreement, including
any controversy relating to a determination of whether specific assets
constitute PRH Assets or Retained Assets or whether specific Liabilities
constitute PRH Liabilities or Retained Liabilities, but excluding any
controversy relating to the matters set forth in Section 2.06, shall be settled
by arbitration in accordance with the Rules of the American Arbitration
Association then in effect, as modified by this Section 9.13 or by the further
agreement of the parties.
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(b) Such arbitration shall be conducted in Memphis, Tennessee.
(c) Any judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.13 shall limit or
restrict in any way the right or power of a party at any time to seek injunctive
relief in any court and to litigate the issues relevant to such request for
injunctive relief before such court (i) to restrain the other party from
breaching this Agreement or (ii) for specific enforcement of this Section 9.13.
The parties agree that any legal remedy available to a party with respect to a
breach of this Section 9.13 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.13.
(e) The Parties hereby consent to the jurisdiction of the
federal courts located in Memphis, Tennessee for all purposes.
(f) Neither party nor the arbitrators may disclose the existence
or results of any arbitration under this Agreement or any evidence presented
during the course of the arbitration without the prior written consent of both
parties, except as required to fulfill applicable disclosure and reporting
obligations, or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the
arbitration. If either party refuses to submit to arbitration any dispute
required to be submitted to arbitration pursuant to this Section 9.13, and
instead commences any other proceeding, including, without limitation,
litigation, then the party who seeks enforcement of the obligation to
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arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
THE PROMUS COMPANIES INCORPORATED,
a Delaware corporation
By: CHARLES A. LEDSINGER, JR.
------------------------------
Name: Charles A. Ledsinger, Jr.
Title: Senior Vice President
PROMUS HOTEL CORPORATION,
a Delaware corporation
By: DONALD H. DEMPSEY
------------------------------
Name: Donald H. Dempsey
Title: SVP-CFO
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EXHIBITS
Exhibit A: Employee Benefits Allocation Agreement
Exhibit B-1: Harrah's Entertainment Pro Forma Balance Sheet
Exhibit B-2: Harrah's Entertainment Pro Forma Statement of Income
Exhibit C: Information Technology Agreements
Exhibit C-1: Data Center Lease
Exhibit C-2: Marketing Services Agreement
Exhibit C-3: Satellite Services Agreement
Exhibit C-4: Software Agreement
Exhibit C-5: Transitional Service Agreement
Exhibit C-6: Administrative Systems Services Agreement
Exhibit C-7: Disaster Recovery Agreement
Exhibit D: PRH Bylaws
Exhibit E: PRH Certificate
Exhibit F-1: PRH Pro Forma Balance Sheet
Exhibit F-2: PRH Pro Forma Statement of Income
Exhibit G: Risk Management Allocation Agreement
Exhibit H: Tax Sharing Agreement
Exhibit I: Trademark Assignment Agreement
Exhibit J: Property Tax Services Agreement
Exhibit K: Opinion of James D. Wolfensohn Incorporated
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SCHEDULES
1.01(a) Existing Promus Credit Facilities
1.01(b) PRH Liabilities
1.01(c) Retained Assets
1.01(d) Retained Liabilities
1.01(e) Retained Real Property
1.01(f) Transferred Joint Venture Interest
1.01(g) Transferred Real Property
1.01(h) Transferred Subsidiaries
2.01(a) Excluded Assets
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TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. General . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Terms Defined Elsewhere in Agreement . . . . . . . . . 13
ARTICLE II - TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.01. Transfer of Assets to PRH; Harrah's Mergers . . . . . . 14
Section 2.02. Transfers Not Effected Prior to the Distribution . . . 16
Section 2.03. Cooperation Re: Assets . . . . . . . . . . . . . . . . 17
Section 2.04. No Representations or Warranties; Consents . . . . . . 17
Section 2.05. Conveyancing and Assumption Instruments . . . . . . . . 19
Section 2.06. Cash Allocation . . . . . . . . . . . . . . . . . . . . 20
Section 2.07. Financing . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III - ASSUMPTION AND SATISFACTION OF LIABILITIES . . . . . . . . . 22
Section 3.01. Assumption and Satisfaction of Liabilities . . . . . . 22
ARTICLE IV - THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.01. Cooperation Prior to the Distribution . . . . . . . . . 23
Section 4.02. Promus Board Action; Conditions Precedent to the
Distribution . . . . . . . . . . . . . . . . . . . . 24
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . . 26
Section 4.04. Cash in Lieu of Fractional Shares . . . . . . . . . . . 26
ARTICLE V - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.01. Indemnification by Promus . . . . . . . . . . . . . . . 27
Section 5.02. Indemnification by PRH . . . . . . . . . . . . . . . . 27
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . . 28
Section 5.04. Procedure for Indemnification . . . . . . . . . . . . . 29
Section 5.05. Remedies Cumulative . . . . . . . . . . . . . . . . . . 33
Section 5.06. Survival of Indemnities . . . . . . . . . . . . . . . . 33
ARTICLE VI - CERTAIN ADDITIONAL MATTERS . . . . . . . . . . . . . . . . . . 33
Section 6.01. PRH Board . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.02. Resignations; Promus Board . . . . . . . . . . . . . . 34
Section 6.03. Certificate and Bylaws . . . . . . . . . . . . . . . . 34
Section 6.04. Certain Post-Distribution Transactions . . . . . . . . 34
Section 6.05. Corporate Name . . . . . . . . . . . . . . . . . . . . 36
Section 6.06. PRH Rights Plan . . . . . . . . . . . . . . . . . . . . 36
<PAGE>
ARTICLE VII - ACCESS TO INFORMATION AND SERVICES . . . . . . . . . . . . . 37
Section 7.01. Provision of Corporate Records . . . . . . . . . . . . 37
Section 7.02. Access to Information . . . . . . . . . . . . . . . . . 37
Section 7.03. Production of Witnesses . . . . . . . . . . . . . . . . 38
Section 7.04. Reimbursement . . . . . . . . . . . . . . . . . . . . . 39
Section 7.05. Retention of Records . . . . . . . . . . . . . . . . . 39
Section 7.06. Confidentiality . . . . . . . . . . . . . . . . . . . . 39
Section 7.07. Privileged Matters . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII - ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . 43
Section 8.01. Non-Competition Agreement . . . . . . . . . . . . . . 43
Section 8.02. Hiring of Employees . . . . . . . . . . . . . . . . . 45
Section 8.03. Settlement Agreement . . . . . . . . . . . . . . . . 45
ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.01. Complete Agreement; Construction . . . . . . . . . . . 45
Section 9.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.03. Accounting Adjustments . . . . . . . . . . . . . . . . 46
Section 9.04. Governing Law . . . . . . . . . . . . . . . . . . . . . 47
Section 9.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.06. Amendments . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.07. Successors and Assigns . . . . . . . . . . . . . . . . 48
Section 9.08. Termination . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 48
Section 9.10. No Third-Party Beneficiaries . . . . . . . . . . . . . 48
Section 9.11. Titles and Headings . . . . . . . . . . . . . . . . . . 49
Section 9.12. Exhibits and Schedules . . . . . . . . . . . . . . . . 49
Section 9.13. Legal Enforceability . . . . . . . . . . . . . . . . . 49
Section 9.14. Arbitration of Disputes . . . . . . . . . . . . . . . . 49
EXHIBITS
SCHEDULES
<PAGE>
Schedule 1.01(a)
Existing Promus Credit Facilities
---------------------------------
1. Credit Agreement dated as of July 22, 1993 among The Promus Companies
Incorporated, Embassy Suites, Inc., Certain Subsidiaries of Embassy Suites,
Inc., Various Banks, Bankers Trust Company, The Bank of New York, Credit
Lyonnais, Atlanta Agency and The Sumitomo Bank, Limited, New York Branch,
as Agents, and Bankers Trust Company, as Administrative Agent.
As amended and restated pursuant to: Amended and Restated Credit Agreement
dated as of June 9, 1995 among The Promus Companies Incorporated, Embassy
Suites, Inc., Certain Subsidiaries of Embassy Suites, Inc., Various Banks,
Bankers Trust Company. The Bank of New York, CIBC, Inc., Credit Lyonnais,
Atlanta Agency, First Interstate Bank of California, The Long-Term Credit
Bank of Japan, New York Branch, NationsBank of Georgia, N.A., Societe
Generale and The Sumitomo Bank, Limited, New York Branch, as Agents, and
Bankers Trust Company, as Administrative Agent (to be effective upon the
satisfaction of certain conditions set forth therein on or before the
Distribution Date).
2. Credit Agreement dated as of June 9, 1995 among The Promus Companies
Incorporated, Embassy Suites, Inc., Certain Subsidiaries of Embassy Suites,
Inc., Various Banks, Bankers Trust Company, The Bank of New York, CIBC,
Inc., Credit Lyonnais, Atlanta Agency, First Interstate Bank of California,
The Long-Term Credit Bank of Japan, New York Branch, NationsBank of
Georgia, N.A., Societe Generale and The Sumitomo Bank, Limited, New York
Branch, as Agents, and Bankers Trust Company, as Administrative Agent (to
be effective upon the satisfaction of certain conditions set forth therein
on or before the Distribution Date).
3. Credit Agreement dated as of June 1, 1994 among The Promus Companies
Incorporated, Embassy Suites, Inc., Various Banks and Bankers Trust
Company, as Administrative Agent.
- -
<PAGE>
Schedule 1.01(b)
PRH Liabilities
---------------
1. Capital Leases
Embassy - Tucson $ 44,350
Embassy - Orlando $ 31,362
Embassy - Thomas Road $ 35,072
Embassy - Philadelphia Airport $ 41,031
Information Technology $ 1,773,302
Marketing Services Center $ 68,061
2. Notes
Embassy - DeBanks Henwood $ 917,641
Hampton - San Francisco land $ 296,724
3. Guarantees
Meadowlands Land Lease $29,356,749
Chicago Lombard $ 500,000
Embassy Pacific Partner LP,
Embassy Atlanta Buckhead Partners LP
and Embassy LaJolla Partners LP $ 4,000,000
Executive Life Guarantee [Not to exceed $8,100,000]
4. Executive Deferred Compensation Plans and Deferred Compensation Plan
5. Commitment to purchase $25,000,000 of shares in Felcor Suites Hotels, Inc.
or units in Felcor Suites Hotels Limited Partnership
6. Indemnity for hotel-related letters of credit issued under Bankers Trust
facility
- -
<PAGE>
Schedule 1.01
Retained Assets
---------------
- Aircraft
- Hangar and related facilities at Memphis airport
- Cherry Road office (including all furniture, fixtures and
equipment located thereat or associated therewith) [Art?]
- Racquet Club Membership and suite
- Memphis State Basketball tickets
- Pyramid Arena Suite
- Equitable portion of other purchased tickets, memberships,
subscriptions and the like
- Vehicles related principally to the Cherry road offices
- Antique automobiles
- Proceeds of Joe Francis life insurance in escrow
- -
<PAGE>
Schedule 1.01(d)
Retained Liabilities
--------------------
1. Hotel-related letters of credit issued under the Bankers Trust facility and
covered by an indemnity agreement from PRH
2. Other hotel-related liabilities covered by an indemnity agreement from PRH
- -
<PAGE>
Schedule 1.01(e)
Retained Real Property
----------------------
1. Casino in Reno, Nevada
2. Casino in Las Vegas, Nevada
3. Casino in Lake Tahoe, Nevada
4. Bill's Casino in Lake Tahoe, Nevada
5. Cherry Road campus in Memphis, Tennessee
6. Chalfonte property in Atlantic City, New Jersey
7. Camelot property in Atlantic City, New Jersey
- -
<PAGE>
Schedule 1.01(f)
Transferred Joint Venture Interests
-----------------------------------
1. Barshop-HII Joint Venture, a Texas general partnership formed pursuant to
that certain Joint Venture Agreement dated January 17, 1984 and amended by
that certain Amendment to Joint Venture Agreement dated February 1, 1995
between Embassy Suites, Inc. and PMB Associates, Ltd.
2. Embassy AKERS Venture, a Georgia general partnership formed pursuant to
that certain Joint Venture Agreement dated March 2, 1984 among Embassy
Suites, Inc., George H. Johnson, and Charles C. Barton.
3. SES/D.C. Venture, a District of Columbia general partnership formed
pursuant to that certain Amended and Restated Joint Venture Agreement dated
April 8, 1988 between Embassy Suites, Inc., CHS/D.C. One Associates and
Shuwa Hotel Joint Venture.
4. Embassy/GACL Lombard Venture, an Illinois general partnership formed
pursuant to that certain Joint Venture Agreement dated July 28, 1987 as
amended by that certain First Amendment to Joint Venture Agreement of
Embassy/GACL Lombard Venture dated June 30, 1992 between Embassy Suites,
Inc., Embassy Development Corporation and GACL Lombard, Inc.
5. Embassy Shaw/Parsippany Venture, a New Jersey general partnership formed
pursuant to that certain Joint Venture Agreement dated January 4, 1986
between Embassy Suites, Inc. and CHS Parsippany Associates, L.P.
6. Embassy Shaw/Rochester Venture, a New York general partnership formed
pursuant to that certain Joint Venture Agreement dated April 7, 1989
between Embassy Suites, Inc. and CHS Investment Company, Inc.
7. EPT Atlanta-Perimeter Center Limited Partnership, a Delaware limited
partnership, formed pursuant to that certain Limited Partnership Agreement
dated December 3, 1987 among Suite Life, Inc. and APCGEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
8. EPT Austin Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and ATEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
9. EPT Bloomington Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and BMEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
- -
<PAGE>
10. EPT Covina Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and CCEPT Realty Corporation
as general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
11. EPT Crystal City Land Limited Partnership, a Delaware limited
partnership formed pursuant to that certain Limited Partnership
Agreement dated June 27, 1989 among Suite Life, Inc. and CCVEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
12. EPT Kansas City Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986 among Suite Life, Inc. and KCMEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
13. EPT Meadowlands Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated December 3,
1987 among Suite Life, Inc. and MNJEPT Realty Corporation as general
partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as limited
partners.
14. EPT Omaha Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
as amended by that certain First Amendment to Limited Partnership Agreement
dated December 12, 1986, among Suite Life, Inc. and ONEPT Realty
Corporation as general partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
15. EPT Overland Park Limited Partnership, a Delaware limited partnership
formed pursuant to that certain Limited Partnership Agreement dated
December 3, 1987 among Suite Life, Inc. and OPKEPT Realty Corporation as
general partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as
limited partners.
16. EPT Raleigh Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated December 3,
1987 among Suite Life, Inc. and RNCEPT Realty Corporation as general
partners and Embassy Suites, Inc. and EPT Hotel Equities Ltd. as limited
partners.
17. EPT San Antonio Limited Partnership, a Delaware limited partnership formed
pursuant to that certain Limited Partnership Agreement dated July 11, 1986
and amended by that certain First Amendment to Limited Partnership
Agreement December 12, 1986 among Suite Life, Inc. and SATEPT Realty
Corporation as genera; partners and Embassy Suites, Inc. and EPT Hotel
Equities Ltd. as limited partners.
- -
<PAGE>
18. E.S. Philadelphia Airport Joint Venture, a Pennsylvania general partnership
formed pursuant to that certain Joint Venture Agreement dated February 2,
1989 between Embassy Suites, Inc. and ES/PA, L.P.
19. Granada Royale Hometel-Tucson, an Arizona limited partnership formed
pursuant to that certain Certificate and Agreement of Limited Partnership
dated March 3, 1975, amended by that certain Amendment to Certificate and
Agreement of Limited Partnership dated August 18, 1975, and amended by that
certain Second Amendment to Certificate and Agreement of Limited
Partnership on December 10, 1975, among Embassy Suites, Inc. as general
partner and certain limited partners.
20. Granada Royale Hometel-West, an Arizona limited partnership, formed
pursuant to that certain Certificate and Agreement of Limited Partnership
dated January 1, 1976, amended by that certain Amended, Restated and
Refiled Certificate and Agreement of Limited Partnership dated March 30,
1984, and amended by that certain Amendment to Certificate and Agreement of
Limited Partnership dated March 28, 1985, among Embassy Suites, Inc. as
general partner and certain limited partners.
21. King Street Station Hotel Associates, L.P., a Virginia limited partnership
formed pursuant to that certain Limited Partnership Agreement dated April
28, 1989 among The Oliver Carr Company and Duke Street Partnership L.P. as
general partners and Embassy Suites, Inc. as limited partner.
22. MHV Joint Venture, a Texas general partnership formed pursuant to that
certain Joint Venture Agreement dated January 6, 1989 between Embassy
Suites, Inc. and Submarin, L.P.
23. Pacific Market Investment Company, a California general partnership formed
pursuant to that certain Joint Venture Agreement dated December 19, 1986
between Harbor Drive Company and Embassy Suites, Inc.
24. Riverview/Embassy Joint Venture, an inactive joint venture in which Embassy
Suites has a 50% interest.
25. Embassy Suites Club No. Two, Inc., a Texas corporation in which Embassy
Suites, Inc. has a 49% ownership interest.
- -
<PAGE>
Schedule 1.01(g)
Transferred Real Property
-------------------------
1. Orlando - Lake Buena Vista (fee interest)
2. Phoenix - 24th & Thomas Road (ground lease interest)
3. Dallas - Market Center (leasehold interest)
4. Data Center Building (fee interest)
5. Ridgeway Center Offices - 850 Ridge Lake Boulevard, Memphis, Tennessee
(multiple leasehold interests)
6. Ridgeway Center Offices - 860 Ridge Lake Boulevard, Memphis, Tennessee
(multiple leasehold interests)
7. Ridgeway Center Offices - 959 Ridgeway Loop, Memphis, Tennessee (multiple
leasehold interests)
8. Southwind - 8245 Tournament Drive, Memphis, Tennessee (multiple leasehold
interests)
9. Southwind - 3239 Players Club Parkway, Memphis, Tennessee (leasehold
interest)
10. 6800 Poplar, Memphis, Tennessee (leasehold interest)
- -
<PAGE>
Schedule 1.01(h)
Transferred Subsidiaries
------------------------
1. Buckleigh, Inc. (100% owned by ESI)
2. ATM Hotels (50% owned by ESI; 50% owned by Pacific Hotels, Inc.)
3. Compass, Inc. (100% owned by ESI)
4. EJP Corporation (100% owned by ESI)
5. Embassy Development Corporation (100% owned by ESI)
6. Embassy Equity Development Corporation (100% owned by ESI)
7. Embassy Memphis Corporation (100% owned by ESI)
8. Embassy Pacific Equity Corporation (100% owned by ESI)
9. Embassy Suites Club No. 1, Inc. (100% owned by ESI)
10. Embassy Suites Club No. Three, Inc. (100% owned by ESI)
11. Embassy Suites De Mexico, S.A., De C.V. (96% owned by ESI)
12. Embassy Suites (Isla Verde), Inc. (100% owned by ESI)
13. Embassy Suites (Puerto Rico), Inc. (100% owned by ESI)
14. Embassy Vacation Resorts, Inc. (100% owned by ESI)
15. EPAM Corporation (100% owned by ESI)
16. ESI Development, Inc. (100% owned by ESI)
17. ESI Mortgage Development Corporation (100% owned by ESI)
18. ESI Mortgage Development Corporation II (100% owned by ESI)
19. E.S. Philadelphia Airport Venture (ESI owns a 90% interest)
20. GOL (Heathrow), Inc. (100% owned by ESI)
21. Granada Royale Hometel-West, a limited partnership (ESI owns a 50.003%
interest)
22. Granada Royale Hometel-Tucson, a limited partnership (ESI owns a 65%
interest)
- -
<PAGE>
23. Hampton Inns, Inc. (100% owned by ESI)
24. Old Town Hotel Corporation (100% owned by ESI)
25. Pacific Hotels, Inc. (100% owned by ESI)
- -
<PAGE>
Schedule 2.01(a)
Excluded Assets
---------------
Interests in those partnerships necessary to avoid Internal Revenue Code Section
708 tax terminations and, after the Distribution has been consummated, those
certain hotel-related assets of Promus and its Subsidiaries that will be
retained by Promus and its Subsidiaries but which shall be managed by Promus
Hotels, Inc. pursuant to that certain Asset Management Agreement by and between
Embassy Suites, Inc. and Promus Hotels, Inc. to be executed as of June 30, 1995.
- -
EXHIBIT 10(7)
FIRST AMENDMENT TO TRANCHE A CREDIT AGREEMENT
THIS FIRST AMENDMENT dated as of June 30, 1995 (the "First Amendment") is
---------------
to that Tranche A Credit Agreement dated as of June 7, 1995 (the "Credit
------
Agreement"; capitalized terms used but not otherwise defined herein shall have
- ---------
the meanings provided in the Credit Agreement) by and among EMBASSY SUITES,
INC., a Delaware corporation as the initial Borrower, and PROMUS HOTELS, INC., a
Delaware corporation, as assignee and subsequent Borrower (the applicable
Borrower hereunder being referred to as the "Borrower"), THE PROMUS COMPANIES
--------
INCORPORATED, a Delaware corporation as an initial guarantor, and PROMUS HOTEL
CORPORATION, a Delaware corporation as a guarantor and those certain
Subsidiaries and related parties identified as "Guarantors" on the signature
pages thereto as listed on the signature pages hereto, the several lenders
identified on the signature pages thereto as listed on the signature pages
hereto (each a "Lender" and collectively, the "Lenders") and NATIONSBANK, N.A.
------ -------
(CAROLINAS), as agent for the Lenders (in such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Banks have extended a $300,000,000 five year revolving credit
facility pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower has requested the amendment of certain Schedules to
the Credit Agreement;
WHEREAS, the Required Lenders have agreed on the terms and conditions set
forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Required Lenders hereby agree as follows:
1. Schedules 6.8, 6.15, 8.1, 8.2, 8.5, and 11.3(b) are hereby amended and
restated to read as attached hereto.
2. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and schedules) remain in full force and effect.
3. This First Amendment may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original and
it shall not be necessary in making proof of this First Amendment to produce or
account for more than one such counterpart.
4. This First Amendment and the Credit Agreement, as amended hereby,
shall be deemed to be contracts made under, and
<PAGE>
for all purposes be construed in accordance with the laws of the State of North
Carolina.
[Remainder of Page Intentionally Left Blank]
- 2 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to be duly executed and delivered as of the date first above written.
BORROWER:
- --------
EMBASSY SUITES, INC.,
a Delaware corporation
By____________________________
Title:________________________
GUARANTORS: THE PROMUS COMPANIES INCORPORATED,
- ----------
a Delaware corporation
By____________________________
Title:________________________
PROMUS HOTEL CORPORATION,
a Delaware corporation
By____________________________
Title:________________________
PROMUS HOTELS, INC.,
a Delaware corporation
By____________________________
Title:________________________
HAMPTON INNS, INC.,
a Delaware corporation
By____________________________
Title:________________________
EMBASSY EQUITY DEVELOPMENT CORPORATION,
a Delaware corporation
By____________________________
Title:________________________
- 3 -
<PAGE>
LENDERS:
- -------
NATIONSBANK, N.A. (CAROLINAS),
individually in its capacity as a
Lender and in its capacity as Agent
By_____________________________
Title__________________________
THE BANK OF NEW YORK
By_____________________________
Title__________________________
THE BANK OF NOVA SCOTIA
By_____________________________
Title__________________________
CIBC INC.
By_____________________________
Title__________________________
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
By_____________________________
Title__________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By_____________________________
Title__________________________
LTCB TRUST COMPANY
By_____________________________
Title__________________________
- 4 -
<PAGE>
THE NIPPON CREDIT BANK, LTD. -
LOS ANGELES AGENCY
By_____________________________
Title__________________________
SOCIETE GENERALE, SOUTHWEST AGENCY
By_____________________________
Title__________________________
CREDIT LYONNAIS, CAYMAN ISLAND BRANCH
By_____________________________
Title__________________________
FIRST AMERICAN NATIONAL BANK
By_____________________________
Title__________________________
FIRST NATIONAL BANK OF COMMERCE
By_____________________________
Title__________________________
FIRST TENNESSEE BANK, NATIONAL ASSOCIATION
By_____________________________
Title__________________________
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By_____________________________
Title__________________________
- 5 -
<PAGE>
THIRD NATIONAL BANK
By_____________________________
Title__________________________
U.S. NATIONAL BANK OF OREGON
By_____________________________
Title__________________________
- 6 -
<PAGE>
Schedule 6.8
Excluded Assets
---------------
After giving effect to the Reorganization, Distribution and the Hotel Inc.
Assignment and Assumption Agreement, (i) those certain hotel-related assets of
Promus Co. and its Subsidiaries that will be retained by Promus Co. and its
Subsidiaries but which shall be managed by Hotel Inc. pursuant to that certain
Asset Management Agreement by and between Embassy Suites and Hotel Inc. to be
executed as of June 30, 1995, and (ii) portions of joint venture interests
retained by Embassy Suites for transfer to Hotel Inc. on July 15, 1996, in order
to avoid adverse tax consequences.
- 7 -
<PAGE>
Schedule 6.15
<TABLE><CAPTION>
Subsidiaries
------------
# of Outstanding
Options, Warrants,
Rights of
# of Shares of Each Conversion or
Class of Capital Stock Purchase and
Jurisdiction of Percentage or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Ziwa Insurance Inc. (to be formed) Vermont None
Promus Hotels, Inc. Delaware 100% None
Buckleigh, Inc. Delaware 100% 100 (100) None
ATM Hotels Pty Limited Australia 50% 2 (1) None
Compass, Inc. Tennessee 100% 1000 (1000) None
EIP Corporation Delaware 100% 1000 (1000) None
Suite Life, Inc. Delaware 100% 1000 (1000) None
Embassy Development Corporation Delaware 100% 100 (100) None
Embassy Suites De Mexico, S.A., Mexico 1% 10,000 (100) None
de C.V.
ES/PA, L.P. Pennsylvania 98% [Not Applicable] None
E.S. Philadelphia Airport Pennsylvania 10% [Not Applicable] None
Joint Venture
Embassy Equity Development Delaware 100% 100 (100) None
Corporation
Embassy Suites De Mexico S.A., Mexico 1% 10,000 (100) None
de C.V.
Embassy Syracuse Development Delaware 100% 100 (100) None
Corporation
</TABLE>
- 8 -
<PAGE>
<TABLE><CAPTION>
# of Outstanding
Options, Warrants,
Rights of
# of Shares of Each Conversion or
Class of Capital Stock Purchase and
Jurisdiction of Percentage or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Embassy Suites De Mexico Mexico 1% 10,000 (100) None
S.A., de C.V.
Southfield Hotel Management, Florida 100% 1000 (1000) None
Inc.
Embassy Memphis Corporation Tennessee 100% 100 (100) None
Embassy Pacific Equity Corporation Delaware 100% 100 (100) None
Embassy Suites Club No. 1, Inc. Kansas 100% 1000 (1000) None
Embassy Suites Club No. Three, Inc. Louisiana 100% 1000 (1000) None
Embassy Suites De Mexico, S.A., De Mexico 97% 10,000 (9,700) None
C.V.
Embassy Suites (Isla Verde), Inc. Delaware 100% 1000 (1000) None
Embassy Suites (Puerto Rico), Inc. Delaware 100% 1000 (1000) None
Embassy Vacation Resorts, Inc. Delaware 100% 1000 (1000) None
EPAM Corporation Delaware 100% 100 (100) None
ESI Development, Inc. Tennessee 100% 1000 (1000) None
ESI Mortgage Development Corporation Delaware 100% 1000 (1000) None
ESI Mortgage Development Corporation Delaware 100% 100 (100) None
II
E.S. Philadelphia Airport Joint Pennsylvania 90% [Not Applicable] None
Venture
GOL Columbia Limited Partnership Maryland 1% [Not Applicable] None
GOL (Heathrow), Inc. Tennessee 100% 1000 (1000) None
Grandma Royale Hometel-West, a Arizona 50.003% [Not Applicable] None
limited partnership
</TABLE>
- 9 -
<PAGE>
<TABLE><CAPTION>
# of Outstanding
Options, Warrants,
Rights of
# of Shares of Each Conversion or
Class of Capital Stock Purchase and
Jurisdiction of Percentage or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Grandma Royale Hometel-Tucson, a Arizona 65% [Not Applicable] None
limited partnership
Hampton Inns, Inc. Delaware 100% 1000 (1000) None
GOL Columbia Limited Maryland 99% [Not Applicable] None
Partnership
Old Town Hotel Corporation Delaware 100% 1000 (1000) None
Pacific Hotels, Inc. Tennessee 100% 1000 (1000) None
ATM Hotels Pty Limited Australia 50% 2 (1) None
Promus Hotel Services, Inc. Delaware 100% 1000 (1000) None
Promus Hotels Florida, Inc. Delaware 100% 1000 (1000) None
</TABLE>
- 10 -
<PAGE>
Schedule 8.1
Existing Indebtedness
---------------------
Capital Leases
--------------
Embassy - Tucson $ 41,970
Embassy - Orlando 27,515
Embassy - Thomas Road 33,641
Embassy - Philadelphia Airport 39,928
Information Technology 1,773,302
Marketing Services Center 58,276
Notes
-----
Embassy- DeBanks Henwood $ 887,299
Hampton- San Francisco Land 284,708
Guarantees
----------
Meadowlands Land lease $ 29,356,749
Chicago Lombard 500,000
Embassy Pacific Partner LP,
Embassy Atlanta Buckhead Partners LP
and Embassy LaJolla Partners LP $ 5,000,000
Executive Life Guarantee $ 493,165
- 11 -
<PAGE>
Schedule 8.2
Existing Liens
--------------
Capital Leases
--------------
Embassy - Tucson 41,970
Embassy - Orlando 27,515
Embassy - Thomas Road 33,641
Embassy - Philadelphia Airport 39,928
Information Technology 1,773,302
Marketing Services Center 58,276
- 12 -
<PAGE>
Schedule 8.5
Existing Investments
--------------------
Name (percent ownership interest)
- ----------------------------------
ATM Hotels Pty Limited (75%)
Barshop-HII Joint Venture (50%)
Embassy Akers Venture (50%)
Embassy Atlanta Buckhead Partners Limited Partnership (5%)
Embassy/GACL Lombard Joint Venture (50%)
Embassy LaJolla Partners Limited Partnership (10%)
Embassy Pacific Partners Limited Partnership (10%)
Embassy /Shaw Parsippany Venture (50%)
Embassy/ Shaw Rochester Venture (50%)
Embassy Suites Club No. Two, Inc. (49%)
EPT Atlanta-Perimeter Center Limited Partnership (50%)
EPT Austin Joint Venture (50%)
EPT Bloomington Joint Venture (50%)
EPT Covina joint Venture (50%)
EPT Crystal City Land Limited Partnership (50%)
EPT Kansas City Joint Venture (50%)
EPT Meadowlands Limited Partnership (50%)
EPT Omaha Joint Venture (50%)
EPT Overland Park Limited Partnership (50%)
EPT Raleigh Limited Partnership (50%)
EPT San Antonio Joint Venture (50%)
ES/PA, L.P. (98%)
E.S. Philadelphia Airport Joint Venture (99.8%)
GOL (Texas) Inc. (49%)
Granada Royale Hometel - Tucson, a limited partnership (50.003%)
Granada Royale Hometel-West, a limited partnership (65%)
Hampton/GHI Associates #1 (20%)
Hampton/GHI Associates #2 (20%)
Hospitality Capital Group (33.3%)
Hospitality Capital Group II (33.3%)
King Street Station Hotel Associates, L.P. (50%)
MHV Joint Venture (50%)
Pacific Market Investment Company Joint Venture (50%)
Riverview /Embassy Joint Venture (50%)
SES/D.C. Venture (25%)
Existing Investments (Notes Receivable)
---------------------------------------
Embassy Suites
--------------
El Paso 148,832
Richmond 1,000,000
LaJolla 706,554
Santa Clara 626,970
Crystal City 657,875
Charleston 786,169
- 13 -
<PAGE>
Hampton Inn
-----------
Secaucus 50,398
San Antonio - Downtown 1,000,000
San Diego 48,650
Hampton Inn & Suites
--------------------
Newport News 1,000,000
El Paso 80,800
Homewood Suites
---------------
Madison 500,000
Santa Fe 1,500,000
San Antonio - Downtown 1,000,000
Harrisburg 939,105
Alexandria 1,646,764
Pigeon Forge, Tn 750,000
Information Technology 750,000
Marketing Services Center 125,725
13,317,842
----------
- 14 -
<PAGE>
Schedule 11.3 (b)
-----------------
Tranche A Assignment and Assumption Agreement
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June 30,
1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation
---------
("Embassy Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel
-------------- -----
Inc."), THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.")
- ---- ----------
and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit
Agreement hereinafter described.
Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain
hotel related assets and liabilities in contemplation of the Reorganization and
the Distribution. In consideration therefor, the parties hereto agree as
follows:
SECTION A. Definitions. Terms capitalized but not defined herein shall
-----------
have the meanings assigned thereto in that certain Tranche A Credit Agreement
dated as of June 7, 1995 (the "Credit Agreement") among Embassy Suites, as
----------------
initial borrower, certain subsidiaries and related parties as guarantors, the
Lenders party thereto and the Agent.
SECTION B. Assignment and Assumption. Effective as of the date hereof,
-------------------------
Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all
of its rights as "Borrower" under the Credit Agreement. Effective as of the
date hereof, Hotel Inc. hereby irrevocably and unconditionally (i) assumes from
Embassy Suites all of Embassy Suites' obligations and liabilities under the
Credit Agreement and any other Credit Document to which Embassy Suites is a
party, (ii) agrees with the Agent and the Lenders to be bound by all of the
terms and conditions of the Credit Agreement and to perform all of the
obligations and discharge all of the liabilities of the Borrower existing at or
accrued prior to the date hereof or hereafter arising under the Credit Agreement
and (iii) ratifies, and agrees to be bound by, (A) the representations and
warranties set forth in Section 6 of the Credit Agreement and (B) all of the
affirmative and negative covenants set forth in Sections 7 and 8 of the Credit
Agreement. Without limiting the generality of the foregoing terms of this
Section 2, Hotel Inc. hereby promises to pay to each Lender the principal
balance of, and accrued interest on, each Loan outstanding (and to pay all other
Obligations, including LOC Obligations and Swingline Loans) at, or advanced on
or after, the date hereof.
SECTION C. Release. The Agent, acting on behalf of the Lenders, hereby
-------
fully and unconditionally releases and forever discharges (i) Embassy Suites as
of the date hereof from any and all liabilities, claims, charges, choses in
actions, causes of action, damages, and other obligations, in each case whether
known or unknown, absolute or contingent, at law or in equity, now existing or
hereafter arising and whether arising under contract, by operation of law or
otherwise (collectively, "Claims") arising under and relating to the Credit
------
Agreement or any other Credit Document to which it is a party and (ii) Promus
Co. from any Claims arising under or relating to its guaranty obligations
relating thereto under or relating to the Credit Agreement or any other Credit
Document to which it is a party.
SECTION D. References in the Credit Documents. From and after the
----------------------------------
Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites
as the "Borrower" under the Credit Agreement, and all references to the
"Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy
Suites and (b) all references to the "Credit Agreement" in any Credit Documents
shall refer to the Credit Agreement, as amended and modified by this Agreement.
Except as expressly amended and modified by this Agreement, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect.
SECTION E. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SECTION F. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY
--------------------
SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
- 15 -
<PAGE>
SECTION G. Successors and Assignees. Subject to the terms of Section 11.4
------------------------
of the Credit Agreement, this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Embassy Suites, Hotel Inc.,
the Agent and each of the Lenders.
SECTION H. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
EMBASSY SUITES, INC.
By:___________________________
William S. McCalmont
Vice President and Treasurer
PROMUS HOTELS, INC.
By:___________________________
Carol G. Champion
Vice President and Treasurer
THE PROMUS COMPANIES INCORPORATED
By:___________________________
Carol G. Champion
Vice President and Treasurer
NATIONSBANK, N.A. (CAROLINAS),
as Agent as aforesaid for
the Lenders
By____________________________
J.E. Ball
Senior Vice President
- 16 -
EXHIBIT 10(8)
Tranche A Assignment and Assumption Agreement
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June 30,
1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation
---------
("Embassy Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel
-------------- -----
Inc."), THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.")
- ---- ----------
and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit
Agreement hereinafter described.
Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain
hotel related assets and liabilities in contemplation of the Reorganization and
the Distribution. In consideration therefor, the parties hereto agree as
follows:
SECTION A. Definitions. Terms capitalized but not defined herein shall
-----------
have the meanings assigned thereto in that certain Tranche A Credit Agreement
dated as of June 7, 1995 (the "Credit Agreement") among Embassy Suites, as
----------------
initial borrower, certain subsidiaries and related parties as guarantors, the
Lenders party thereto and the Agent.
SECTION B. Assignment and Assumption. Effective as of the date hereof,
-------------------------
Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all
of its rights as "Borrower" under the Credit Agreement. Effective as of the
date hereof, Hotel Inc. hereby irrevocably and unconditionally (i) assumes from
Embassy Suites all of Embassy Suites' obligations and liabilities under the
Credit Agreement and any other Credit Document to which Embassy Suites is a
party, (ii) agrees with the Agent and the Lenders to be bound by all of the
terms and conditions of the Credit Agreement and to perform all of the
obligations and discharge all of the liabilities of the Borrower existing at or
accrued prior to the date hereof or hereafter arising under the Credit Agreement
and (iii) ratifies, and agrees to be bound by, (A) the representations and
warranties set forth in Section 6 of the Credit Agreement and (B) all of the
affirmative and negative covenants set forth in Sections 7 and 8 of the Credit
Agreement. Without limiting the generality of the foregoing terms of this
Section 2, Hotel Inc. hereby promises to pay to each Lender the principal
balance of, and accrued interest on, each Loan outstanding (and to pay all other
Obligations, including LOC Obligations and Swingline Loans) at, or advanced on
or after, the date hereof.
SECTION C. Release. The Agent, acting on behalf of the Lenders, hereby
-------
fully and unconditionally releases and forever discharges (i) Embassy Suites as
of the date hereof from any and all liabilities, claims, charges, choses in
actions, causes of action, damages, and other obligations, in each case whether
known or unknown, absolute or contingent, at law or in equity, now existing or
hereafter arising and whether arising under contract, by operation of law or
otherwise (collectively, "Claims") arising under and relating to the Credit
------
Agreement or any other Credit Document to which it is a party and (ii) Promus
Co. from any Claims arising under or relating to its guaranty obligations
relating thereto under or relating to the Credit Agreement or any other Credit
Document to which it is a party.
SECTION D. References in the Credit Documents. From and after the
----------------------------------
Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites
as the "Borrower" under the Credit Agreement, and all references to the
"Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy
Suites and (b) all references to the "Credit Agreement" in any Credit Documents
shall refer to the Credit Agreement, as amended and modified by this Agreement.
Except as expressly amended and modified by this Agreement, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect.
SECTION E. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE>
SECTION F. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY
--------------------
SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION G. Successors and Assignees. Subject to the terms of Section 11.4
------------------------
of the Credit Agreement, this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Embassy Suites, Hotel Inc.,
the Agent and each of the Lenders.
SECTION H. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
EMBASSY SUITES, INC.
By:___________________________
William S. McCalmont
Vice President and Treasurer
PROMUS HOTELS, INC.
By:___________________________
Carol G. Champion
Vice President and Treasurer
THE PROMUS COMPANIES INCORPORATED
By:___________________________
Carol G. Champion
Vice President and Treasurer
NATIONSBANK, N.A. (CAROLINAS),
as Agent as aforesaid for
the Lenders
By____________________________
J.E. Ball
Senior Vice President
- 2 -
EXHIBIT 10(10)
FIRST AMENDMENT TO TRANCHE B CREDIT AGREEMENT
THIS FIRST AMENDMENT dated as of June 30, 1995 (the "First Amendment") is
---------------
to that Tranche B Credit Agreement dated as of June 7, 1995 (the "Credit
------
Agreement"; capitalized terms used but not otherwise defined herein shall have
- ---------
the meanings provided in the Credit Agreement) by and among EMBASSY SUITES,
INC., a Delaware corporation as the initial Borrower, and PROMUS HOTELS, INC., a
Delaware corporation, as assignee and subsequent Borrower (the applicable
Borrower hereunder being referred to as the "Borrower"), THE PROMUS COMPANIES
--------
INCORPORATED, a Delaware corporation as an initial guarantor, and PROMUS HOTEL
CORPORATION, a Delaware corporation as a guarantor and those certain
Subsidiaries and related parties identified as "Guarantors" on the signature
pages thereto as listed on the signature pages hereto, the several lenders
identified on the signature pages thereto as listed on the signature pages
hereto (each a "Lender" and collectively, the "Lenders") and NATIONSBANK, N.A.
------ -------
(CAROLINAS), as agent for the Lenders (in such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Banks have extended a $50,000,000 364-day revolving credit
facility pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower has requested the amendment of certain Schedules to
the Credit Agreement;
WHEREAS, the Required Lenders have agreed on the terms and conditions set
forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Required Lenders hereby agree as follows:
1. Schedules 6.8, 6.15, 8.1, 8.2, 8.5, and 11.3(b) are hereby amended and
restated to read as attached hereto.
2. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and schedules) remain in full force and effect.
3. This First Amendment may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original and
it shall not be necessary in making proof of this First Amendment to produce or
account for more than one such counterpart.
4. This First Amendment and the Credit Agreement, as amended hereby,
shall be deemed to be contracts made under, and
<PAGE>
for all purposes be construed in accordance with the laws of the State of North
Carolina.
[Remainder of Page Intentionally Left Blank]
- 2 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to be duly executed and delivered as of the date first above written.
BORROWER:
- --------
EMBASSY SUITES, INC.,
a Delaware corporation
By____________________________
Title:________________________
GUARANTORS: THE PROMUS COMPANIES INCORPORATED,
- ----------
a Delaware corporation
By____________________________
Title:________________________
PROMUS HOTEL CORPORATION,
a Delaware corporation
By____________________________
Title:________________________
PROMUS HOTELS, INC.,
a Delaware corporation
By____________________________
Title:________________________
HAMPTON INNS, INC.,
a Delaware corporation
By____________________________
Title:________________________
EMBASSY EQUITY DEVELOPMENT CORPORATION,
a Delaware corporation
By____________________________
Title:________________________
- 3 -
<PAGE>
LENDERS:
- -------
NATIONSBANK, N.A. (CAROLINAS),
individually in its capacity as a
Lender and in its capacity as Agent
By_____________________________
Title__________________________
THE BANK OF NEW YORK
By_____________________________
Title__________________________
THE BANK OF NOVA SCOTIA
By_____________________________
Title__________________________
CIBC INC.
By_____________________________
Title__________________________
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
By_____________________________
Title__________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By_____________________________
Title__________________________
LTCB TRUST COMPANY
By_____________________________
Title__________________________
- 4 -
<PAGE>
THE NIPPON CREDIT BANK, LTD. -
LOS ANGELES AGENCY
By_____________________________
Title__________________________
SOCIETE GENERALE, SOUTHWEST AGENCY
By_____________________________
Title__________________________
CREDIT LYONNAIS, CAYMAN ISLAND BRANCH
By_____________________________
Title__________________________
FIRST AMERICAN NATIONAL BANK
By_____________________________
Title__________________________
FIRST NATIONAL BANK OF COMMERCE
By_____________________________
Title__________________________
FIRST TENNESSEE BANK, NATIONAL ASSOCIATION
By_____________________________
Title__________________________
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By_____________________________
Title__________________________
- 5 -
<PAGE>
THIRD NATIONAL BANK
By_____________________________
Title__________________________
U.S. NATIONAL BANK OF OREGON
By_____________________________
Title__________________________
- 6 -
<PAGE>
Schedule 6.8
Excluded Assets
---------------
After giving effect to the Reorganization, Distribution and the Hotel Inc.
Assignment and Assumption Agreement, (i) those certain hotel-related assets of
Promus Co. and its Subsidiaries that will be retained by Promus Co. and its
Subsidiaries but which shall be managed by Hotel Inc. pursuant to that certain
Asset Management Agreement by and between Embassy Suites and Hotel Inc. to be
executed as of June 30, 1995, and (ii) portions of joint venture interests
retained by Embassy Suites for transfer to Hotel Inc. on July 15, 1996, in order
to avoid adverse tax consequences.
- 7 -
<PAGE>
Schedule 6.15
<TABLE><CAPTION>
Subsidiaries
------------
# of Outstanding
Options,
Warrants, Rights
# of Shares of Each of Conversion or
Class of Capital Purchase and
Jurisdiction of Percentage Stock or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Ziwa Insurance Inc. (to be formed) Vermont None
Promus Hotels, Inc. Delaware 100% None
Buckleigh, Inc. Delaware 100% 100 (100) None
ATM Hotels Pty Limited Australia 50% 2 (1) None
Compass, Inc. Tennessee 100% 1000 (1000) None
EIP Corporation Delaware 100% 1000 (1000) None
Suite Life, Inc. Delaware 100% 1000 (1000) None
Embassy Development Corporation Delaware 100% 100 (100) None
Embassy Suites De Mexico, S.A., Mexico 1% 10,000 (100) None
de C.V.
ES/PA, L.P. Pennsylvania 98% [Not Applicable] None
E.S. Philadelphia Airport Pennsylvania 10% [Not Applicable] None
Joint Venture
Embassy Equity Development Delaware 100% 100 (100) None
Corporation
Embassy Suites De Mexico S.A., Mexico 1% 10,000 (100) None
de C.V.
Embassy Syracuse Development Delaware 100% 100 (100) None
Corporation
</TABLE>
- 8 -
<PAGE>
<TABLE><CAPTION>
# of Outstanding
Options,
Warrants, Rights
# of Shares of Each of Conversion or
Class of Capital Purchase and
Jurisdiction of Percentage Stock or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Embassy Suites De Mexico Mexico 1% 10,000 (100) None
S.A., de C.V.
Southfield Hotel Management, Florida 100% 1000 (1000) None
Inc.
Embassy Memphis Corporation Tennessee 100% 100 (100) None
Embassy Pacific Equity Corporation Delaware 100% 100 (100) None
Embassy Suites Club No. 1, Inc. Kansas 100% 1000 (1000) None
Embassy Suites Club No. Three, Inc. Louisiana 100% 1000 (1000) None
Embassy Suites De Mexico, S.A., De Mexico 97% 10,000 (9,700) None
C.V.
Embassy Suites (Isla Verde), Inc. Delaware 100% 1000 (1000) None
Embassy Suites (Puerto Rico), Inc. Delaware 100% 1000 (1000) None
Embassy Vacation Resorts, Inc. Delaware 100% 1000 (1000) None
EPAM Corporation Delaware 100% 100 (100) None
ESI Development, Inc. Tennessee 100% 1000 (1000) None
ESI Mortgage Development Corporation Delaware 100% 1000 (1000) None
ESI Mortgage Development Corporation Delaware 100% 100 (100) None
II
E.S. Philadelphia Airport Joint Pennsylvania 90% [Not Applicable] None
Venture
GOL Columbia Limited Partnership Maryland 1% [Not Applicable] None
GOL (Heathrow), Inc. Tennessee 100% 1000 (1000) None
Grandma Royale Hometel-West, a Arizona 50.003% [Not Applicable] None
limited partnership
</TABLE>
<PAGE>
<TABLE><CAPTION>
# of Outstanding
Options,
Warrants, Rights
# of Shares of Each of Conversion or
Class of Capital Purchase and
Jurisdiction of Percentage Stock or Other Equity Similar Rights
Incorporation of Interest Outstanding (Effect if
Name or Organization Ownership (# Owned) Exercised)
<S> <C> <C> <C> <C>
Grandma Royale Hometel-Tucson, a Arizona 65% [Not Applicable] None
limited partnership
Hampton Inns, Inc. Delaware 100% 1000 (1000) None
GOL Columbia Limited Maryland 99% [Not Applicable] None
Partnership
Old Town Hotel Corporation Delaware 100% 1000 (1000) None
Pacific Hotels, Inc. Tennessee 100% 1000 (1000) None
ATM Hotels Pty Limited Australia 50% 2 (1) None
Promus Hotel Services, Inc. Delaware 100% 1000 (1000) None
Promus Hotels Florida, Inc. Delaware 100% 1000 (1000) None
</TABLE>
- 10 -
<PAGE>
Schedule 8.1
Existing Indebtedness
---------------------
Capital Leases
--------------
Embassy - Tucson $ 41,970
Embassy - Orlando 27,515
Embassy - Thomas Road 33,641
Embassy - Philadelphia Airport 39,928
Information Technology 1,773,302
Marketing Services Center 58,276
Notes
-----
Embassy- DeBanks Henwood $ 887,299
Hampton- San Francisco Land 284,708
Guarantees
----------
Meadowlands Land lease $ 29,356,749
Chicago Lombard 500,000
Embassy Pacific Partner LP,
Embassy Atlanta Buckhead Partners LP
and Embassy LaJolla Partners LP $ 5,000,000
Executive Life Guarantee $ 493,165
- 11 -
<PAGE>
Schedule 8.2
Existing Liens
--------------
Capital Leases
--------------
Embassy - Tucson 41,970
Embassy - Orlando 27,515
Embassy - Thomas Road 33,641
Embassy - Philadelphia Airport 39,928
Information Technology 1,773,302
Marketing Services Center 58,276
- 12 -
<PAGE>
Schedule 8.5
Existing Investments
--------------------
Name (percent ownership interest)
- ----------------------------------
ATM Hotels Pty Limited (75%)
Barshop-HII Joint Venture (50%)
Embassy Akers Venture (50%)
Embassy Atlanta Buckhead Partners Limited Partnership (5%)
Embassy/GACL Lombard Joint Venture (50%)
Embassy LaJolla Partners Limited Partnership (10%)
Embassy Pacific Partners Limited Partnership (10%)
Embassy /Shaw Parsippany Venture (50%)
Embassy/ Shaw Rochester Venture (50%)
Embassy Suites Club No. Two, Inc. (49%)
EPT Atlanta-Perimeter Center Limited Partnership (50%)
EPT Austin Joint Venture (50%)
EPT Bloomington Joint Venture (50%)
EPT Covina joint Venture (50%)
EPT Crystal City Land Limited Partnership (50%)
EPT Kansas City Joint Venture (50%)
EPT Meadowlands Limited Partnership (50%)
EPT Omaha Joint Venture (50%)
EPT Overland Park Limited Partnership (50%)
EPT Raleigh Limited Partnership (50%)
EPT San Antonio Joint Venture (50%)
ES/PA, L.P. (98%)
E.S. Philadelphia Airport Joint Venture (99.8%)
GOL (Texas) Inc. (49%)
Granada Royale Hometel - Tucson, a limited partnership (50.003%)
Granada Royale Hometel-West, a limited partnership (65%)
Hampton/GHI Associates #1 (20%)
Hampton/GHI Associates #2 (20%)
Hospitality Capital Group (33.3%)
Hospitality Capital Group II (33.3%)
King Street Station Hotel Associates, L.P. (50%)
MHV Joint Venture (50%)
Pacific Market Investment Company Joint Venture (50%)
Riverview /Embassy Joint Venture (50%)
SES/D.C. Venture (25%)
Existing Investments (Notes Receivable)
---------------------------------------
Embassy Suites
--------------
El Paso 148,832
Richmond 1,000,000
LaJolla 706,554
Santa Clara 626,970
Crystal City 657,875
Charleston 786,169
- 13 -
<PAGE>
Hampton Inn
-----------
Secaucus 50,398
San Antonio - Downtown 1,000,000
San Diego 48,650
Hampton Inn & Suites
--------------------
Newport News 1,000,000
El Paso 80,800
Homewood Suites
---------------
Madison 500,000
Santa Fe 1,500,000
San Antonio - Downtown 1,000,000
Harrisburg 939,105
Alexandria 1,646,764
Pigeon Forge, Tn 750,000
Information Technology 750,000
Marketing Services Center 125,725
13,317,842
----------
- 14 -
<PAGE>
Schedule 11.3 (b)
-----------------
Tranche B Assignment and Assumption Agreement
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June 30,
1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation
---------
("Embassy Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel
-------------- -----
Inc."), THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.")
- ---- ----------
and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit
Agreement hereinafter described.
Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain
hotel related assets and liabilities in contemplation of the Reorganization and
the Distribution. In consideration therefor, the parties hereto agree as
follows:
SECTION A. Definitions. Terms capitalized but not defined herein shall
-----------
have the meanings assigned thereto in that certain Tranche B Credit Agreement
dated as of June 7, 1995 (the "Credit Agreement") among Embassy Suites, as
----------------
initial borrower, certain subsidiaries and related parties as guarantors, the
Lenders party thereto and the Agent.
SECTION B. Assignment and Assumption. Effective as of the date hereof,
-------------------------
Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all
of its rights as "Borrower" under the Credit Agreement. Effective as of the
date hereof, Hotel Inc. hereby irrevocably and unconditionally (i) assumes from
Embassy Suites all of Embassy Suites' obligations and liabilities under the
Credit Agreement and any other Credit Document to which Embassy Suites is a
party, (ii) agrees with the Agent and the Lenders to be bound by all of the
terms and conditions of the Credit Agreement and to perform all of the
obligations and discharge all of the liabilities of the Borrower existing at or
accrued prior to the date hereof or hereafter arising under the Credit Agreement
and (iii) ratifies, and agrees to be bound by, (A) the representations and
warranties set forth in Section 6 of the Credit Agreement and (B) all of the
affirmative and negative covenants set forth in Sections 7 and 8 of the Credit
Agreement. Without limiting the generality of the foregoing terms of this
Section 2, Hotel Inc. hereby promises to pay to each Lender the principal
balance of, and accrued interest on, each Loan outstanding (and to pay all other
Obligations) at, or advanced on or after, the date hereof.
SECTION C. Release. The Agent, acting on behalf of the Lenders, hereby
-------
fully and unconditionally releases and forever discharges (i) Embassy Suites as
of the date hereof from any and all liabilities, claims, charges, choses in
actions, causes of action, damages, and other obligations, in each case whether
known or unknown, absolute or contingent, at law or in equity, now existing or
hereafter arising and whether arising under contract, by operation of law or
otherwise (collectively, "Claims") arising under and relating to the Credit
------
Agreement or any other Credit Document to which it is a party and (ii) Promus
Co. from any Claims arising under or relating to its guaranty obligations
relating thereto under or relating to the Credit Agreement or any other Credit
Document to which it is a party.
SECTION D. References in the Credit Documents. From and after the
----------------------------------
Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites
as the "Borrower" under the Credit Agreement, and all references to the
"Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy
Suites and (b) all references to the "Credit Agreement" in any Credit Documents
shall refer to the Credit Agreement, as amended and modified by this Agreement.
Except as expressly amended and modified by this Agreement, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect.
SECTION E. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SECTION F. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY
--------------------
SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
- 15 -
<PAGE>
SECTION G. Successors and Assignees. Subject to the terms of Section 11.4
------------------------
of the Credit Agreement, this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Embassy Suites, Hotel Inc.,
the Agent and each of the Lenders.
SECTION H. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
EMBASSY SUITES, INC.
By:___________________________
William S. McCalmont
Vice President and Treasurer
PROMUS HOTELS, INC.
By:___________________________
Carol G. Champion
Vice President and Treasurer
THE PROMUS COMPANIES INCORPORATED
By:___________________________
Carol G. Champion
Vice President and Treasurer
NATIONSBANK, N.A. (CAROLINAS),
as Agent as aforesaid for
the Lenders
By____________________________
J.E. Ball
Senior Vice President
- 16 -
EXHIBIT 10(11)
Tranche B Assignment and Assumption Agreement
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June 30,
1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation
---------
("Embassy Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel
-------------- -----
Inc."), THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.")
- ---- ----------
and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit
Agreement hereinafter described.
Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain
hotel related assets and liabilities in contemplation of the Reorganization and
the Distribution. In consideration therefor, the parties hereto agree as
follows:
SECTION A. Definitions. Terms capitalized but not defined herein shall
-----------
have the meanings assigned thereto in that certain Tranche B Credit Agreement
dated as of June 7, 1995 (the "Credit Agreement") among Embassy Suites, as
----------------
initial borrower, certain subsidiaries and related parties as guarantors, the
Lenders party thereto and the Agent.
SECTION B. Assignment and Assumption. Effective as of the date hereof,
-------------------------
Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all
of its rights as "Borrower" under the Credit Agreement. Effective as of the
date hereof, Hotel Inc. hereby irrevocably and unconditionally (i) assumes from
Embassy Suites all of Embassy Suites' obligations and liabilities under the
Credit Agreement and any other Credit Document to which Embassy Suites is a
party, (ii) agrees with the Agent and the Lenders to be bound by all of the
terms and conditions of the Credit Agreement and to perform all of the
obligations and discharge all of the liabilities of the Borrower existing at or
accrued prior to the date hereof or hereafter arising under the Credit Agreement
and (iii) ratifies, and agrees to be bound by, (A) the representations and
warranties set forth in Section 6 of the Credit Agreement and (B) all of the
affirmative and negative covenants set forth in Sections 7 and 8 of the Credit
Agreement. Without limiting the generality of the foregoing terms of this
Section 2, Hotel Inc. hereby promises to pay to each Lender the principal
balance of, and accrued interest on, each Loan outstanding (and to pay all other
Obligations) at, or advanced on or after, the date hereof.
SECTION C. Release. The Agent, acting on behalf of the Lenders, hereby
-------
fully and unconditionally releases and forever discharges (i) Embassy Suites as
of the date hereof from any and all liabilities, claims, charges, choses in
actions, causes of action, damages, and other obligations, in each case whether
known or unknown, absolute or contingent, at law or in equity, now existing or
hereafter arising and whether arising under contract, by operation of law or
otherwise (collectively, "Claims") arising under and relating to the Credit
------
Agreement or any other Credit Document to which it is a party and (ii) Promus
Co. from any Claims arising under or relating to its guaranty obligations
relating thereto under or relating to the Credit Agreement or any other Credit
Document to which it is a party.
SECTION D. References in the Credit Documents. From and after the
----------------------------------
Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites
as the "Borrower" under the Credit Agreement, and all references to the
"Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy
Suites and (b) all references to the "Credit Agreement" in any Credit Documents
shall refer to the Credit Agreement, as amended and modified by this Agreement.
Except as expressly amended and modified by this Agreement, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect.
SECTION E. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE>
SECTION F. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY
--------------------
SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION G. Successors and Assignees. Subject to the terms of Section 11.4
------------------------
of the Credit Agreement, this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Embassy Suites, Hotel Inc.,
the Agent and each of the Lenders.
SECTION H. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
EMBASSY SUITES, INC.
By:___________________________
William S. McCalmont
Vice President and Treasurer
PROMUS HOTELS, INC.
By:___________________________
Carol G. Champion
Vice President and Treasurer
THE PROMUS COMPANIES INCORPORATED
By:___________________________
Carol G. Champion
Vice President and Treasurer
NATIONSBANK, N.A. (CAROLINAS),
as Agent as aforesaid for
the Lenders
By____________________________
J.E. Ball
Senior Vice President
- 2 -
EXHIBIT 10(12)
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of June __, 1995 (as amended, modified,
restated, renewed, extended or replaced from time to time, this "Agreement" or
---------
"Pledge Agreement") is by and among PROMUS HOTEL CORPORATION, a Delaware
----------------
corporation (the "Parent Company"), PROMUS HOTELS, INC., a Delaware corporation
--------------
(the "Borrower"), and THOSE CERTAIN SUBSIDIARIES AS MAY NOW OR HEREAFTER BE
--------
OWNERS OF CREDIT PARTIES OR ADDITIONAL CREDIT PARTIES UNDER THE CREDIT
AGREEMENTS REFERRED TO BELOW (the "Subsidiaries"; hereafter the Parent Company,
------------
the Borrower and the Subsidiaries may be referred to collectively as the
"Pledgors") and NATIONSBANK, N.A. (CAROLINAS), as Collateral Agent hereunder for
--------
the Lenders under the Credit Agreements (in its capacity as Collateral Agent
hereunder, together with any successor in such capacity being hereinafter
referred to as the "Collateral Agent").
----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, NationsBank, N.A. (Carolinas) and various other banks and
financial institutions as may now or hereafter become a party thereto (such
banks and financial institutions, together with their successors and assigns,
may hereinafter be referred to collectively as the "Lenders" and individually as
-------
a "Lender") have agreed to establish a $350,000,000 credit facility consisting
------
of (i) a $300,000,000 5-year credit facility established pursuant to that
Tranche A Credit Agreement and (ii) a $50,000,000 364-day credit facility
established pursuant to the terms of that Tranche B Credit Agreement, in each
case dated as of June 7, 1995 (in each case as amended, modified, extended,
renewed or replaced from time to time, the "Tranche A Credit Agreement" and the
--------------------------
"Tranche B Credit Agreement", respectively, and sometimes hereinafter referred
--------------------------
to collectively as the "Credit Agreements") among the Embassy Suites, Inc., a
-----------------
Delaware corporation as the initial borrower, the Borrower, as assignee and
subsequent borrower, The Promus Companies Incorporated, a Delaware corporation
as an initial guarantor subject to release, the Parent Company, as a guarantor,
and those certain subsidiaries and related parties identified as "Guarantors"
therein;
WHEREAS, the Lenders have required as a condition to the extension of the
credit facility pursuant to the Credit Agreements that the Pledgors secure their
respective obligations under the Credit Agreements and the other Credit
Documents pursuant to the terms of this Pledge Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
1. Definitions. Terms used but not otherwise defined herein shall have
-----------
the meanings provided in the Tranche A Credit Agreement; provided, however, that
terms which are defined in the Code shall have the meaning provided in the Code
unless specifically provided otherwise herein or in the Credit Agreements. As
used herein:
"Borrower" means Promus Hotels, Inc., a Delaware corporation, as
--------
identified and defined in the opening paragraph.
"Code" means such term as defined in Section 3(b) hereof.
----
"Collateral Agent" means NationsBank, N.A. (Carolinas), in its
----------------
capacity as collateral agent for the Lenders under this Agreement, as
identified and defined in the opening paragraph hereto, together with its
successors and assigns in such capacity.
"Collateral" means the Pledged Collateral.
----------
"Credit Documents" means such terms as defined in the respective
----------------
Credit Agreements.
"Default" means an event or condition which upon notice or lapse of
-------
time, or both, would constitute an Event of Default.
"Default Rate" means such term as defined in Section 3(d) hereof.
------------
"Lender" or "Lenders" means such terms as identified and defined in
------ -------
the recitals hereto.
"Notes" means, collectively, those promissory notes of the Borrower
-----
under the Tranche A Credit Agreement in the aggregate principal amount of
$300,000,000 and those promissory notes of the Borrower under the Tranche B
Credit Agreement in the aggregate principal amount of $50,000,000, in each
case as amended, modified, supplemented, extended, renewed or replaced from
time to time.
"Pledged Collateral" means such term as defined in Section 2 hereof.
------------------
"Pledged Securities" means such term as defined in Section 2 hereof.
------------------
"Pledgor" means the Parent Company, the Borrower and the other Credit
-------
Parties which may now or hereafter become Credit Parties under the Credit
Agreements, as identified and defined in the opening paragraph.
- 2 -
<PAGE>
"Secured Obligations" means (i) all indebtedness, obligations and
-------------------
liabilities of the Borrower under or in connection with (A) the Credit
Agreements and the Notes, (B) any Interest Rate Protection Agreements or
Currency Protection Agreements entered into by the Borrower with a Lender
or an Affiliate of a Lender ("Additional Credit Parties"), (C) this
-------------------------
Agreement or (D) any other of the Credit Documents, whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired, (ii) all
obligations, including guaranty obligations, of the Guarantors under or in
connection with the Credit Agreements (whether as an original party thereto
or by way of Joinder Agreement), this Pledge Agreement or any other of the
Credit Documents, whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired, and (iii) all expenses and charges, legal and
otherwise, reasonably incurred by the Collateral Agent or the Lenders, or
any of them, in collecting or enforcing any of such indebtedness,
obligations and liabilities or in realizing on or protecting any security
therefor, including without limitation the security afforded hereunder,
together with any and all modifications, extensions, renewals and/or
substitutions thereof.
"Subsidiary" or "Subsidiaries" means such terms as identified and
---------- ------------
defined in the opening paragraph hereto, including any newly formed or
acquired subsidiaries which are made a party hereto subsequent to the date
hereof.
2. Grant of Security Interest in the Collateral. To secure the prompt
--------------------------------------------
payment and performance when due of the Secured Obligations, each of the
Pledgors hereby pledges to the Collateral Agent, and grants to the Collateral
Agent for the ratable benefit of the Lenders and the Additional Credit Parties,
a security interest in the shares of stock and securities more particularly
identified and described in Schedule A hereto, together with any other shares or
----------
instruments distributed to or acquired by such Pledgor in respect thereof,
whether in exchange therefor or otherwise (collectively, the "Pledged
-------
Securities") and any and all dividends and proceeds thereof in whatever form
- ----------
(the Pledged Securities together with such dividends and proceeds hereinafter
being referred to collectively as the "Pledged Collateral").
------------------
3. General Covenants and Agreements. So long as any Secured Obligations
--------------------------------
or any commitment to extend any such Secured Obligations remain outstanding, the
Pledgors hereby covenant and agree with the Collateral Agent for the benefit of
the Lenders that:
(a) Priority. The Collateral and every part thereof is and will be
--------
free and clear of all security interests, liens, attachments, levies,
encumbrances of every kind,
- 3 -
<PAGE>
nature and description, and whether voluntary or involuntary, except for
Permitted Liens. Each such Pledgor will warrant and defend the Collateral
against any claims and demands (other than the Permitted Liens) of all
Persons at any time claiming the same or any interest in the Collateral
adverse to the Collateral Agent. The security interest in the Pledged
Securities granted to the Collateral Agent hereunder when properly
perfected by possession of the Pledged Securities, shall constitute a valid
and perfected first priority security interest in the Pledged Securities.
(b) Perfection of Security Interest. Each Pledgor agrees to execute
-------------------------------
and deliver to the Collateral Agent such further agreements and assignments
or other instruments (including affidavits, notices, reaffirmations and
amendments and restatements of existing documents) as the Collateral Agent
may reasonably request, and to do all such other things as the Collateral
Agent may reasonably deem necessary or appropriate to assure to the
Collateral Agent its security interest hereunder, including such financing
statements (including renewal statements), amendments thereof or
supplements thereto or other instruments as the Collateral Agent may from
time to time reasonably request in order to perfect and maintain the
security interest granted hereunder in accordance with the Uniform
Commercial Code as enacted in the State of North Carolina and any successor
statute(s) thereto (the "Code"), to consummate the transactions
----
contemplated hereby and to otherwise protect and assure the Collateral
Agent and the Lenders of their rights and interests hereunder. In the
event for any reason the law of any jurisdiction other than North Carolina
becomes or is applicable to the Collateral or any part thereof, or to any
of the Secured Obligations, each such Pledgor agrees to execute and deliver
all such instruments and to do all such other things as the Collateral
Agent in its sole discretion reasonably deems necessary or appropriate to
preserve, protect and enforce the security interest of the Collateral Agent
under the law of such other jurisdiction.
(c) Advances by Secured Parties. On failure of any such Pledgor to
---------------------------
perform any of the covenants and agreements herein contained following
notice from the Collateral Agent, the Collateral Agent may, at its option,
perform the same and in so doing may expend such sums as the Collateral
Agent may reasonably deem advisable in the performance thereof, including
without limitation the payment of any liens and encumbrances, expenditures
made in defending against any adverse claim and all other expenditures
which the Collateral Agent may be compelled to make by operation of law or
which the Collateral Agent may make by agreement or otherwise for the
protection of the security hereof. All such sums and amounts so expended
shall be repayable by the Pledgors immediately upon demand, shall
constitute additional Secured Obligations and shall bear interest from
- 4 -
<PAGE>
the date said amounts are expended at the rate per annum equal to the
default rate provided in Section 3.1 of the Tranche A Credit Agreement for
Base Rate Loans (such rate per annum as so determined being hereinafter
referred to as the "Default Rate"). No such performance of any covenant or
------------
agreement by the Collateral Agent on behalf of any Pledgor, and no such
advance or expenditure therefor, shall relieve any Pledgor of any Default
under the terms of this Agreement. The Collateral Agent, in making any
payment hereby authorized may do so according to any bill, statement or
estimate procured from the appropriate public office or holder of the claim
to be discharged without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax assessment, sale, forfeiture,
tax lien or title or claim.
(d) Disposition. None of the Pledgors will sell or otherwise dispose
-----------
of any portion of, or rights or interests in, the Collateral, except (i)
with the prior written consent of the Collateral Agent and such Lenders as
may be required under Section 11.6 of the respective Credit Agreements or
(ii) as may otherwise be permitted under the respective Credit Agreements.
4. Special Provisions Regarding Pledged Collateral.
-----------------------------------------------
(a) Representations and Warranties. Each Pledgor represents and
------------------------------
warrants to the Collateral Agent for the benefit of the Lenders that (i)
except as identified on Schedule A and except as otherwise permitted by the
----------
Credit Agreements or this Agreement, it is the owner of the Pledged
Securities identified on Schedule A as being owned by such Pledgor free and
----------
clear of all claims, pledges, liens, encumbrances or security interests of
every kind or nature, (ii) such Pledged Securities represent each such
Pledgor's entire interest in the issuer of such Pledged Securities, (iii)
such Pledged Securities have been duly and validly issued, (iv) except as
otherwise permitted by the Credit Agreements or this Agreement, the Pledged
Securities represent 100% of the equity interests in the Borrower and the
Subsidiaries of the Parent Company and the Borrower which are the subject
of this Agreement, and (v) no consent or approval of any body,
governmental, regulatory or otherwise (including that of the subject
entity, co-owners or other shareholders), is required for the pledge
contemplated hereby which has not been obtained. Each Pledgor covenants
and agrees that its entire interest in the issuers of the Pledged
Securities identified on Schedule A or in any Joinder Agreement as being
----------
owned by such Pledgor will at all times be subject to the grant and pledge
contained herein in accordance with the provisions hereof, except to the
extent released herefrom in accordance with Section 7(b) hereof.
- 5 -
<PAGE>
(b) Delivery of Stock Certificates in Transferable Form. All Pledged
---------------------------------------------------
Securities (including specifically without limitation share certificates
acquired subsequent to the date of this Agreement) will be delivered to the
Collateral Agent in form transferable for delivery together with undated
stock powers duly executed in blank in the form provided in Schedule A-1
------------
hereto.
(c) Dividends, etc. Additional Pledged Securities acquired by or
--------------
otherwise coming into the possession of any Pledgor, whether by stock
dividend, stock split, recapitalization, reorganization or otherwise, will
be promptly delivered to the Collateral Agent, together with appropriate
undated stock powers executed in blank, to be held as additional Pledged
Securities hereunder and will constitute Pledged Securities for all
purposes hereunder. Subject to the terms of the Credit Documents, so long
as no Event of Default has occurred and is continuing, dividends and other
distributions on account of any Pledged Securities (other than stock
dividends and other dividends constituting Pledged Securities which are
addressed hereinabove) may be paid to and accepted by any such Pledgor free
and clear of the lien of this Agreement. Upon the occurrence and during
the continuance of an Event of Default, dividends and other distributions
on account of any Pledged Securities (other than stock dividends and other
dividends constituting Pledged Collateral which are addressed hereinabove)
will be immediately paid over to the Collateral Agent and held as
additional Collateral hereunder. Any such other dividends or distributions
received by any of the Pledgors after the occurrence and during the
continuance of an Event of Default will be accepted in trust for the
benefit of, and will be promptly paid over to, the Collateral Agent.
(d) Voting Rights. So long as no Event of Default shall have
-------------
occurred and not been waived or cured to the satisfaction of the Required
Lenders, each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreements. The Collateral Agent shall promptly execute and
deliver (or cause to be executed and delivered) to each Pledgor all such
proxies, dividend payment orders and other instruments as such Pledgor may
from time to time reasonably request for the purpose of enabling such
Pledgor to exercise the voting and other consensual rights which it is
entitled to exercise pursuant to this subclause (d) and to receive the
dividends and other distributions which it is authorized to receive and
retain pursuant to subclause (c) above.
(e) Endorsement. Upon the occurrence and during the continuance of
-----------
an Event of Default, the Collateral Agent shall have the right, for and in
the name, place and stead of any such Pledgor, to execute endorsements,
assignments or
- 6 -
<PAGE>
other instruments of conveyance or transfer with respect to all or any of
the Pledged Collateral.
(f) Collateral Agent's Obligation. The Collateral Agent shall have
-----------------------------
no duty as to the collection or protection of the Pledged Collateral or any
income thereon or as to the preservation of any rights pertaining thereto,
beyond the safe custody of any thereof actually in its possession. To the
extent permitted by law, each Pledgor releases the Collateral Agent from
any claims, causes of action and demands at any time arising out of or with
respect to this Agreement, the Pledged Collateral and/or any actions, taken
or omitted to be taken by the Collateral Agent with respect thereto, and
each such Pledgor hereby agrees to hold the Collateral Agent harmless from
and with respect to any and all such claims, causes of action and demands
in each case other than those resulting from the gross negligence, willful
misconduct or unlawful conduct of the Collateral Agent.
(g) Waivers. The Collateral Agent shall not be obligated to make any
-------
sale of Pledged Collateral if it shall determine not to do so, regardless
of the fact that notice of sale may have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. Upon
each private sale of Pledged Collateral of a type customarily sold in a
recognized market or subject to widely distributed standard price
quotations and upon each public sale, the Collateral Agent may purchase all
or any of the Pledged Collateral being sold, free from any equity or right
of redemption, which is hereby waived and released by each such Pledgor,
and may make payment therefor by endorsement without recourse of the
Secured Obligations in lieu of cash to the amount then due thereon which
such Pledgor hereby agrees to accept. In the case of all sales of Pledged
Collateral, public or private, the Pledgors shall pay all reasonable costs
and expenses of every kind for sale or delivery, including brokers' and
attorneys' fees, and after deducting such costs and expenses from the
proceeds of sale, the Collateral Agent shall apply any residue to the
payment of the Secured Obligations, and the Pledgors shall continue to be
liable for any deficiency. The balance, if any, remaining after payment in
full of all of the Secured Obligations, shall be paid to the Pledgors.
- 7 -
<PAGE>
5. Remedies.
--------
(a) General Remedies. Upon the occurrence of an Event of Default and
----------------
until such time as the Event of Default is waived or cured to the
satisfaction of the Required Lenders, the Collateral Agent shall have in
addition to the rights and remedies provided herein, in the Credit
Documents or by law, the rights and remedies of a secured party under the
Code (regardless of whether the Code is the law of the jurisdiction where
the rights and remedies are asserted and regardless of whether the Code
applies to the affected Collateral), and further the Collateral Agent may
with or without judicial process or the aid and assistance of others (i)
enter on any premises on which any of the Collateral may be located and,
without resistance or interference by any such Pledgor, take possession of
the Collateral, (ii) dispose of any Collateral on any such premises, (iii)
require any such Pledgor to assemble and make available to the Collateral
Agent at its own expense any Collateral at any place and time designated by
the Collateral Agent which is reasonably convenient to both parties, (iv)
remove any Collateral from any such premises for the purpose of effecting
sale or other disposition thereof, and/or (v) without demand and without
advertisement, notice, hearing or process of law except to the extent
required by law, all of which each such Pledgor hereby waives to the extent
permitted by law, at any place and time or times, sell and deliver any or
all Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise, at
such prices and upon such terms as the Collateral Agent deems advisable, in
its sole discretion, provided that said disposition complies with any and
all mandatory legal requirements. In addition to all other sums due the
Collateral Agent or any Lender hereunder, the Pledgors shall pay the
Collateral Agent all reasonable costs and expenses incurred by the
Collateral Agent, including reasonable attorneys' fees (including the
allocated costs of in-house counsel) and court costs, in obtaining or
liquidating the Collateral, in enforcing payment of Secured Obligations, or
in the prosecution or defense of any action or proceeding by or against the
Collateral Agent or any Lender concerning any matter arising out of or
connected with this Agreement or the Collateral or Secured Obligations,
including without limitation any of the foregoing arising in, arising under
or related to a case under the Bankruptcy Code. Each Pledgor agrees that
any requirement of reasonable notice shall be met if such notice is
personally served on or otherwise sent to the Pledgor in accordance with
Section 9 hereof at least 10 days before the time of sale or other event
giving rise to the requirement of such notice. The Collateral Agent shall
not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given unless required by law. To the
extent permitted by law, the Collateral Agent or any Lender may be the
purchaser at any
- 8 -
<PAGE>
such sale. To the extent permitted by applicable law, each such Pledgor
hereby waives all of its rights of redemption from any such sale. Subject
to the provisions of applicable law, the Collateral Agent may postpone or
cause the postponement of the sale of all or any portion of the Collateral
by announcement at the time and place of such sale, and such sale may,
without further notice, to the extent permitted by law, be made at the time
and place to which the sale was postponed or the Collateral Agent may
further postpone such sale by announcement made at such time and place.
(b) Remedies relating to Pledged Collateral. Upon the occurrence of
---------------------------------------
an Event of Default and to the extent permitted by law, with regard to the
Pledged Collateral, the Collateral Agent may immediately (i) have the right
to vote Pledged Securities and (ii) cause all or any of the Pledged
Securities to be transferred to it or registered in the name of its
nominee(s).
(c) Access. In addition to the rights and remedies hereunder, upon
------
the occurrence of an Event of Default and during the continuance thereof,
the Collateral Agent shall have the right to enter and remain upon the
various premises of each Pledgor without cost or charge to the Collateral
Agent, and use the same, together with materials, supplies, books and
records of such Pledgor for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition, the
Collateral Agent may remove the Collateral, or any part thereof, from such
premises and/or any records with respect thereto, in order to effectively
collect or liquidate the Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Collateral Agent
-------------------------------
to exercise any right, remedy or option under this Agreement or any other
agreement between any Pledgor and the Collateral Agent or any of the
Lenders, or provided by law, or delay by the Collateral Agent in exercising
the same, shall not operate as a waiver; no waiver hereunder shall be
effective unless it is in writing, signed by the party against whom such
waiver is sought to be enforced and then only to the extent specifically
stated. To the extent permitted by law, neither the Collateral Agent nor
any Lender, nor any party acting as attorney for the Collateral Agent or
any Lender, shall be liable hereunder for any acts or omissions or for any
error of judgment or mistake of fact or law other than for its gross
negligence, willful misconduct or unlawful conduct hereunder. The rights
and remedies of the Collateral Agent under this Agreement shall be
cumulative and not exclusive of any other right or remedy which the
Collateral Agent or the Lenders may have.
- 9 -
<PAGE>
(e) Unregistered Securities. Each Pledgor recognizes that the
-----------------------
Collateral Agent may be unable to effect a public sale of all or a part of
the Pledged Securities by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, as now or hereafter in effect, or in
applicable state securities laws, as now or hereafter in effect, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire
such Pledged Securities for their own account, for investment and not with
a view to the distribution or resale thereof. Each Pledgor acknowledges,
understands and agrees that private sales so made may be at prices and
other terms less favorable to the seller than if such Pledged Securities
were sold at public sales, and that neither the Collateral Agent nor the
Lenders shall have any obligation to delay sale of any such Pledged Securi-
ties for the period of time necessary to permit the issuer of such Pledged
Securities even if such issuer would agree, to register such Pledged
Securities for public sale under such applicable securities laws. Each
Pledgor agrees that (i) if the Collateral Agent shall, pursuant to the
terms of this Agreement, sell or cause the Pledged Securities or any
portion thereof to be sold at private sale, the Collateral Agent shall have
the right to rely upon the advice and opinion of any national brokerage or
investment firm having a seat on the New York Stock Exchange as to the best
manner in which to expose the Pledged Securities for sale and as to the
best price reasonably obtainable at the private sale thereof, and (ii) that
private sales made under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner.
6. Application of Proceeds. Upon the occurrence, and during the
-----------------------
continuance, of an Event of Default any proceeds of the Collateral, when
received by the Collateral Agent in cash or its equivalent, will be applied
first to costs and expenses of collection and sale and then in ratable reduction
of the Secured Obligations, and each such Pledgor irrevocably waives the right
to direct the application of such payments and proceeds and acknowledges and
agrees that the Collateral Agent shall have the continuing and exclusive right
to apply and reapply any and all such payments and proceeds in the Collateral
Agent's sole discretion, notwithstanding any entry to the contrary upon any of
its books and records. Each of the Pledgors shall remain liable to the
Collateral Agent for any deficiency. Any surplus remaining after the full
payment and satisfaction of the Secured Obligations shall be returned to the
Pledgors or to whomsoever a court of competent jurisdiction shall determine to
be entitled thereto.
7. Continuing Agreement.
--------------------
(a) This Agreement shall be a continuing agreement in every respect
and shall remain in full force and effect
- 10 -
<PAGE>
until all of the Secured Obligations have been fully paid and satisfied and
any commitments thereunder or with regard thereto shall have terminated.
Upon such termination of this Agreement, the Collateral Agent shall, upon
the request and at the expense of the Pledgors, forthwith return any
certificated securities which are the subject of this Agreement together
with any stock powers relating thereto, release all of its liens and
security interests hereunder and shall execute and deliver to the Pledgors,
or to such person or persons as the Pledgors shall reasonably designate,
all Uniform Commercial Code termination statements and similar documents
prepared by the Pledgors which the Pledgors shall reasonably request to
evidence such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this Agreement.
(b) Without limiting the foregoing, all Collateral sold, transferred
or otherwise disposed of in accordance with the terms of the Credit
Agreements shall be sold, transferred or otherwise disposed of free and
clear of the lien and security interest created hereunder. In addition,
the Pledged Securities of any issuer required to be discharged as a
Guarantor under Section 4.7 of the Credit Agreements shall be released from
the lien and security interest created hereunder immediately upon such
discharge. In connection with each of the foregoing, the Collateral Agent
shall return any Pledged Securities which are the subject of such sale,
transfer or other disposal or which are required to be released, together
with any stock powers relating thereto, release all of its liens and
security interests hereunder with respect to such Collateral, and execute
and deliver to the Pledgors, or to such other person or persons as the
Pledgors shall reasonably designate, all Uniform Commercial Code
termination statements and similar documents prepared by the Pledgors which
the Pledgors shall reasonably request to evidence the release of the lien
and security interest created hereunder with respect to any such
Collateral.
(c) This Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in
part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Lender as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or
similar law, all as though such payment had not been made; provided that in
the event payment of all or any part of the Secured Obligations is
rescinded or must be restored or returned, all reasonable costs and
expenses (including without limitation any reasonable legal fees and
disbursements) incurred by the Collateral Agent or any Lender in defending
and enforcing such reinstatement shall be deemed to be included as a part
of the Secured Obligations.
- 11 -
<PAGE>
8. Notices. Except as otherwise expressly provided herein, all notices
-------
and other communications shall have been duly given and shall be effective (i)
when delivered, (ii) when transmitted via telecopy (or other facsimile device)
to the number set out below, (iii) the day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (iv) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in the case of the
Pledgors to the address set out in Section 11.1 of the Credit Agreements, and in
the case of the Collateral Agent at the address set out below, or at such other
address as such party may specify by written notice to the other parties:
If to the
Collateral Agent: NationsBank, N.A. (Carolinas)
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Tracy Crotts, Agency Services
Telephone: (704) 386-9368
Telecopy: (704) 386-9923
with a copy to:
NationsBank, N.A. (Carolinas)
Corporate Bank
1 NationsBank Plaza
Nashville, Tennessee 37329-1697
Attn: J. E. Ball
Telephone: (615) 749-3469
Telecopy: (615) 749-4640
The Pledgors hereby acknowledge and agree that notices and other communications
to the Borrower at its address referred to above shall be deemed adequate notice
to each of the other Pledgors.
9. Amendments; Waivers; Modifications. This Agreement and the provisions
----------------------------------
hereof may not be amended, waived, modified, changed, discharged or terminated
except with the prior written consent of the Pledgors and the Collateral Agent
and such Lenders as may be required under Section 11.6 of the respective Credit
Agreements.
10. Successors in Interest. This Agreement shall create a continuing
----------------------
security interest in the Collateral and shall be binding upon the Pledgors,
their respective successors and assigns and shall inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and its successors and assigns; provided, however, that the
Pledgors may not assign their respective rights or delegate their respective
duties hereunder without prior written consent of the Collateral Agent and the
Lenders as required under Section 11.6 of the respective Credit Agreements,
except as permitted by the
- 12 -
<PAGE>
Credit Agreements. To the extent permitted by law, each such Pledgor hereby
releases the Collateral Agent and the Lenders, and their respective successors
and assigns, from any liability for any act or omission relating to this
Agreement or the Collateral, except for any liability arising from the
Collateral Agent's gross negligence, willful misconduct or unlawful conduct.
11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
12. Headings. The headings of the sections and subsections hereof are
--------
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
13. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal
action or proceeding with respect to this Agreement may be brought in the
courts of the State of North Carolina in Mecklenburg County, or of the
federal courts of the United States for the Western District of North
Carolina, and, by execution and delivery of this Agreement, each party
hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each party
further irrevocably consents to the service or process out of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such
party at its address for notices pursuant to Section 8. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.
(b) Each party hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
or any other Credit Document brought in the courts referred to in
subsection (a) hereof and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(c) EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
- 13 -
<PAGE>
14. Severability. If any provision of any of this Agreement is determined
------------
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
15. The Collateral Agent. In acting under or by virtue of this Agreement,
--------------------
the Collateral Agent shall be entitled to all the rights, authority, privileges
and immunities provided in the Credit Agreements, all of which provisions are
incorporated by reference herein with the same force and effect as if set forth
herein.
16. Entirety. This Agreement together with the other Credit Documents
--------
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
17. Survival. All representations and warranties of the Pledgors
--------
hereunder shall survive the execution and delivery of this Agreement and the
other Credit Documents.
18. Other Security. To the extent that any of the Secured Obligations are
--------------
now or hereafter secured by property other than the Collateral, or by a
guarantee, endorsement or property of any other person, then the Collateral
Agent or Lenders shall have the right to proceed against such other property,
guarantee or endorsement upon the occurrence of any Event of Default, and the
Collateral Agent shall have the right, in its sole discretion, to determine
which rights, security, liens, security interests or remedies the Collateral
Agent shall at any time pursue, relinquish, subordinate, modify or take any
other action with respect thereto, without in any way modifying or affecting any
of them or any of the Collateral Agent's rights or the Secured Obligations under
this Agreement or under any other of the Credit Documents.
20. Reasonable Attorneys' Fees. For the purposes of this Agreement,
--------------------------
"reasonable attorneys' fees" shall be limited by the actual attorneys' fees
incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and
without any presumption that such reasonable attorneys' fees shall be a fixed
percentage of the Commitments.
[Remainder of Page Intentionally Left Blank]
- 14 -
<PAGE>
IN WITNESS WHEREOF, the Pledgors have caused this Pledge Agreement to be
duly executed under seal as of the date first above written.
PROMUS HOTELS, INC.,
a Delaware corporation
By_________________________________
Title:
PROMUS HOTEL CORPORATION,
a Delaware corporation
By_________________________________
Title:
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A. (CAROLINAS),
as Collateral Agent for the
Lenders
By_________________________________
Title:
- 15 -
<PAGE>
SCHEDULE A
----------
to
Promus Hotels, Inc.
Pledge Agreement
Pledged Securities
------------------
<TABLE><CAPTION>
Percen-
Certi- tage of
Nominal ficate No. of Total
Issuer Owner No. Shares Ownership
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C>
100%
Promus Hotels, Inc., Promus Hotel Corporation,
a Delaware corporation a Delaware corporation
Hampton Inns, Inc., Promus Hotels, Inc., 100%
a Delaware corporation a Delaware corporation
Embassy Equity Promus Hotels, Inc., 100%
Development Corporation, a Delaware corporation
a Delaware corporation
</TABLE>
- 16 -
<PAGE>
SCHEDULE A-1
------------
to
Promus Hotels, Inc.
Pledge Agreement
Irrevocable Stock Power
-----------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following shares of capital stock of [ISSUING CORPORATION], a _____________
corporation:
Certificate No. No. of Shares
--------------- -------------
and irrevocably appoints
its agent and attorney-in-fact to transfer all or any part of such capital stock
and to take all necessary and appropriate action to effect any such transfer.
The agent and attorney-in-fact may substitute and appoint one or more persons to
act for him. The effectiveness of a transfer pursuant to this stock power shall
be subject to any and all transfer restrictions referenced on the face of the
certificates evidencing such interest or in the certificate of incorporation or
bylaws of the subject corporation, to the extent they may from time to time
exist.
Dated ________________________________
[Pledgor]
By______________________________
Name____________________________
Title___________________________
[Address]
Witnessed by:
________________________
________________________
- 17 -
EX-10(14)
EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS ALLOCATION
AGREEMENT ("Agreement") is made and entered into as of June 30, 1995, by and
between THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus"), to
be known as HARRAH'S ENTERTAINMENT, INC. after the spin off of Promus' hotel
business, and PROMUS HOTEL CORPORATION, a Delaware corporation ("PHC", and
collectively with Promus, the "Parties"), effective as of the Distribution Date
(as herein after defined).
R E C I T A L S
WHEREAS, subject to shareholder approval and certain other
conditions, Promus intends to spin-off its hotel business by distributing a
special dividend of one share of PHC Common Stock per two shares of Promus
Common Stock to the holders of shares of Promus Common Stock (the
"Distribution") ; and
WHEREAS, in connection with said spin-off, PROMUS and PHC have
entered into a Distribution Agreement (the "Distribution Agreement"); and
WHEREAS, pursuant to the aforesaid Distribution Agreement, Promus
and PHC have agreed to enter into an agreement allocating responsibilities with
respect to employee compensation, benefits, labor and certain other employment
matters pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Promus and PHC agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, the
following terms shall have the meanings indicated below:
Aggregate Spread: the difference between the exercise price of a
Promus Stock Option and the Pre-Distribution Stock Price, multiplied by the
number of shares covered by such Promus Stock Option remaining unexercised on
the Cut-off Date.
Asset Transfer Agreement: the Asset Transfer Agreement, dated as
of June 30, 1995 between the Trustees of the Promus Savings and Retirement Plan
and the Trustees of the PHC Savings and Retirement Plan, which provides for the
spin-off of that portion of the Promus Savings and Retirement Plan attributable
to Transferred Employees and Hotel Terminees to the PHC Savings and Retirement
Plan.
- -
<PAGE>
Assumed Deferred Compensation Liabilities: all liabilities and
obligations of Promus to Transferred Employees accrued through the Cut-off Date
with respect to the Promus Executive Deferred Compensation Plan and the Promus
Deferred Compensation Plan, along with earnings required to be credited to
account balances included therein through the Cut-off Date, to be assumed by PHC
in accordance with Section 2.03.
Base Matching Contribution: the base matching contribution of
Promus under the Promus Savings and Retirement Plan (as provided in the Promus
Savings and Retirement Plan document).
COBRA: Code Section 4980B and ERISA Sections 601 through 608,
establishing employer requirements for continuation of health care benefits for
the benefit of certain current and former employees or dependents thereof.
Code: the Internal Revenue Code of 1986, as amended, or any
successor legislation.
Collective Bargaining Agreement: any collective bargaining
agreement or other labor agreement to which Promus or any of its subsidiaries or
affiliates was a party on or before the Cut-off Date.
Commission: the Securities and Exchange Commission.
Common Stock: the common stock of Promus, Harrah's Entertainment
or PHC, as more specifically described below:
(i) Employer Common Stock: Harrah's Entertainment
Common Stock in the case of Retained Employees and Promus Terminees and PHC
Common Stock in the case of PHC Employees; or
(ii) Harrah's Entertainment Common Stock: the common
stock, par value $0.10 per share, of Harrah's Entertainment after the
Distribution Date; or
(iii) PHC Common Stock: the common stock, par value
$0.10 per share, of PHC; or
(iv) Promus Common Stock: the common stock, par value
$0.10 per share, of Promus prior to the Distribution Date.
Conversion Award: an award of an option to acquire Common Stock
made to a Transferred Employee or a Retained Employee to reflect the effect of
the Distribution on awards of Promus Stock Options held on the Cut-off Date, in
accordance with Section 2.04.
Current Plan Year: the plan year or fiscal year, to the extent
applicable with respect to any Plan, during which the Distribution occurs.
Cut-off Date: the Distribution Date.
Deferred Compensation Plan: a plan of deferred compensation that
is not intended to be tax-qualified under Section 401(a) of the Code and that is
maintained for Employees of Promus and their beneficiaries, or for Employees of
Harrah's Entertainment or PHC and their beneficiaries, as described below:
- -
<PAGE>
(i) Harrah's Entertainment Deferred Compensation Plan:
the Promus Deferred Compensation Plan, as continued by Harrah's Entertainment
pursuant to Section 2.03(b) after the Distribution Date; or
(ii) Harrah's Entertainment Executive Deferred
Compensation Plan: the Promus Executive Deferred Compensation Plan, as
continued by Harrah's Entertainment pursuant to Section 2.03(b) after the
Distribution Date; or
(iii) PHC Deferred Compensation Plan: the Promus Hotel
Corporation 1995 Deferred Compensation Plan as adopted on April 5, 1995, as
amended; or
(iv) PHC Executive Deferred Compensation Plan: the
Promus Hotel Corporation Executive Deferred Compensation Plan as adopted on
April 5, 1995, as amended; or
(v) Promus Deferred Compensation Plan: The Promus
Companies Incorporated Deferred Compensation Plan in existence immediately prior
to the Distribution; or
(vi) Promus Executive Deferred Compensation Plan: The
Promus Companies Incorporated Executive Deferred Compensation Plan in existence
immediately prior to the Distribution.
Director: a member of the Board of Directors of Harrah's
Entertainment, Promus or PHC, as the context indicates.
Discretionary Matching Contribution: the employer discretionary
matching contribution under the Employer's Savings and Retirement Plan, as may
be determined by the Chief Executive Officer in his sole and absolute
discretion.
Distribution Agreement: the agreement described in the second
recital of this Agreement.
Distribution Date: the date on which the Distribution occurs.
Distribution Record Date: June 21, 1995.
Employee: an individual who is identified as being in any of the
following categories:
(i) Harrah's Employee: any individual who is (a) a
Retained Employee, or (b) not a Retained Employee but becomes an employee of
Harrah's Entertainment on or after the Distribution Date; or
(ii) Hotel Terminee: any Promus Terminee who, as of
January 1, 1995 had terminated his employment with Promus within the five
consecutive years preceding that date or who had terminated his employment with
Promus between January 1, 1995 and the Distribution Date and whose remaining
account balances as of the Distribution Date under the Promus Savings and
Retirement Plan are entirely unvested and whose last employment with Promus was
primarily related to a Transferred Business; or
- -
<PAGE>
(iii) PHC Employee: any individual who is (a) a
Transferred Employee, or (b) not a Transferred Employee but becomes an employee
of PHC on or after the Distribution Date; or
(iv) Promus Employee: any individual who is an
employee of Promus prior to the Distribution Date; or
(v) Promus Terminee: any individual formerly employed
by Promus who terminated such employment prior to the Distribution Date,
including but not limited to any Promus employee or director who has retired
prior to the Distribution Date; or
(vi) Retained Employee: any individual who immediately
prior to the Distribution was a Promus Employee and who is an Employee of
Harrah's Entertainment immediately following the Distribution; or
(vii) Transferred Employee: any individual who
immediately prior to the Distribution was a Promus Employee and whose
employment, immediately after the Distribution, is to be transferred to PHC
pursuant to the Spin-off. It also includes any director of Promus who resigns
from the Promus Board before the Distribution and concurrently or within 90 days
thereafter is elected to the PHC Board.
Employee Bonus Plan: a plan providing incentive compensation to
eligible Employees based upon achievement of performance criteria by the
Employer or the operating unit of the Employer to which the Employee is
assigned, as more particularly described below:
(i) Harrah's Entertainment Bonus Plan: the Promus
Bonus Plan as renamed and continued by Harrah's Entertainment after the
Distribution; or
(ii) PHC Bonus Plan: the Promus Hotel Corporation
Annual Management Bonus Plan, as established by PHC pursuant to Section 2.06,
effective as of the Distribution Date; or
(iii) Promus Bonus Plan: The Promus Companies
Incorporated Annual Management Bonus Plan as in effect on the Distribution Date.
Employer: Harrah's Entertainment, PHC or Promus, as the context
indicates.
Employer Restricted Stock Plan: a plan which provides for awards
of additional compensation to key Employees and non-employee Directors in the
form of shares of Employer Restricted Stock, as described below:
(i) Harrah's Entertainment Restricted Stock Plan: the
Harrah's Entertainment, Inc. 1990 Restricted Stock Plan, as the Promus
Restricted Stock Plan shall be renamed and continued immediately after the
Distribution pursuant to Section 2.04(b).
(ii) PHC Restricted Stock Plan: the Promus Hotel
Corporation 1995 Restricted Stock Plan as established by PHC effective as of the
Distribution pursuant to Section 2.04(a).
- -
<PAGE>
Employer Stock Option Plan: a plan which provides for awards of
additional compensation to eligible Employees in the form of nonqualified or
incentive options to purchase Employer Common Stock, as more particularly
described below:
(i) Harrah's Entertainment Stock Option Plan: the
Harrah's Entertainment, Inc. 1990 Stock Option Plan, as the Promus Stock Option
Plan shall be renamed and continued by Harrah's Entertainment immediately after
the Distribution pursuant to Section 2.04(b); or
(ii) PHC Stock Option Plan: the Promus Hotel
Corporation 1995 Stock Option Plan, as established by PHC pursuant to Section
2.04(a).
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
Existing Stock Plans: certain stock-based compensation plans
maintained by Promus prior to the Distribution Date for eligible Promus
Employees and eligible Promus Directors, as described below:
(i) Promus Restricted Stock Plan: the Promus
Companies Incorporated 1990 Restricted Stock Plan, a plan which provides for
awards of additional compensation to key Employees and non-Employee Directors in
the form of shares of Promus Restricted Stock; and
(ii) Promus Stock Option Plan: the Promus Companies
Incorporated 1990 Stock Option Plan, which provides for awards of non-qualified
and incentive Promus Stock Options to eligible Promus Employees.
Harrah's Entertainment: Harrah's Entertainment, Inc., a Delaware
corporation (to which Promus shall change its name after the spin-off of Promus'
hotel business), or any of its direct or indirect subsidiaries.
Harrah's Entertainment Stock Option: an option to purchase
Harrah's Entertainment Common Stock pursuant to the Harrah's Entertainment Stock
Option Plan.
HMO: any health maintenance organization organized under 42
U.S.C. Sec.300e-9, or a state health maintenance organization statute that
provides medical services for Retained Individuals or PHC Individuals under
any Plan.
Human Resources Committee: the Human Resources Committee of the
Board of Directors of Promus, Harrah's Entertainment or PHC, as the context
indicates.
IRS: the Internal Revenue Service.
Medical/Dental Plan: a Welfare Plan providing health benefits to
Employees and their dependents as described below:
(i) Harrah's Entertainment Medical/Dental Plans: the
Promus Medical/Dental Plans as renamed and continued by Harrah's Entertainment
after the Distribution pursuant to Section 2.07; or
- -
<PAGE>
(ii) PHC Medical/Dental Plans: the Medical/Dental
Plans to be established by PHC in accordance with Section 2.08(a); or
(iii) Promus Medical/Dental Plans: any Medical/Dental
Plans maintained prior to the Distribution Date for Promus Individuals.
Medical Retirees: any Promus Terminee (or dependent or
beneficiary thereof) who was retired or disabled on or before the Cut-off Date,
and who was receiving or otherwise entitled to receive Retiree Medical/Dental
Benefits, other than, or in addition to, coverage mandated by COBRA, as a
retiree (or dependent or beneficiary thereof) under any Promus Medical/Dental
Plan immediately prior to the Distribution.
PHC: Promus Hotel Corporation, a Delaware Corporation, or any of
its direct or indirect subsidiaries.
PHC Individual: any individual who (i) is a Transferred
Employee, or (ii) a PHC Employee, or (iii) is a dependent or beneficiary of any
individual described in clause (i) or (ii).
PHC Participant: as defined in Section 2.02(a).
PHC Stock Option: an option to purchase PHC Common Stock
pursuant to the PHC Stock Option Plan.
Plan: any plan, policy, arrangement, contract or agreement
providing compensation benefits for any group of Employees or former Employees
or individual Employee or former Employee, or the dependents or beneficiaries of
any such Employee or former Employee, whether formal or informal or written or
unwritten, and including, without limitation, any means, whether or not legally
required, pursuant to which any benefit is provided by an Employer to any
Employee or former Employee or the beneficiaries of any such Employee or former
Employee, adopted or entered into by a Party prior to, or upon the Distribution.
The term "Plan" as used in this Agreement does not include any contract,
agreement or understanding entered into by Promus prior to the Distribution or
Harrah's Entertainment or PHC after the Distribution relating to settlement of
actual or potential Employee related litigation claims.
Post-Conversion Stock Price: the average of the per share New
York Stock Exchange closing prices of PHC Common Stock or Harrah's Entertainment
Common Stock, as the context indicates, during the ten-trading day period
immediately following the Distribution Date.
Pre-Distribution Stock Price: the New York Stock Exchange
closing price per share for Promus Common Stock on the Distribution Date (before
giving effect to the Distribution).
Prior Plan Year: a plan year or fiscal year or portion thereof,
to the extent applicable with respect to any Plan, ending on or prior to the
Cut-off Date.
Promus: The Promus Companies Incorporated, a Delaware
corporation (which will be renamed Harrah's Entertainment, Inc. effective as of
the Distribution Date), or any of its direct or indirect subsidiaries.
- -
<PAGE>
Promus Employee Stock Purchase Plan: that certain arrangement
between Promus and Merrill Lynch which provides Promus Employees with the
opportunity to purchase Promus Common Stock in market transactions at reduced
commissions, the cost of such commissions being borne by Promus.
PHC: Promus Hotel Corporation, a Delaware Corporation, or any of
its direct or indirect subsidiaries.
Promus Individual: any individual who is (i) a Promus Employee,
(ii) a Promus Terminee, or (iii) a dependent or beneficiary of any individual
specified in clauses (i) or (ii).
Promus Stock Option: an option to purchase Promus Common Stock
pursuant to the Promus Stock Option Plan.
Qualified Beneficiary: an individual (or dependent thereof) who
either (1) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan, or (2) becomes a "qualified beneficiary" (as that term is
defined in Code Section 4980B(g)(1) and ERISA 607(3)) under any Medical/Dental
Plan, and who is included in any one of the following categories:
(i) Harrah's Entertainment Qualified Beneficiary: any
Retained Individual (or dependent thereof) who, on or before the Cut-off Date,
was a Qualified Beneficiary under any Promus Medical/Dental Plan; or
(ii) PHC Qualified Beneficiary: any Transferred
Individual (or dependent thereof) who, on or before the Cut-off Date, was a
Qualified Beneficiary under any Promus Medical/Dental Plan; or
(iii) Promus Qualified Beneficiary: any Promus
Individual who, immediately following the Distribution, is not a Harrah's
Entertainment Qualified Beneficiary or a PHC Qualified Beneficiary and who,
immediately prior to the Distribution, was a Qualified Beneficiary under any
Promus Medical/Dental Plan.
Rabbi Trust: a trust maintained by an Employer which holds
assets to satisfy certain contingent or deferred payment obligations of an
Employer to an Employee under a Deferred Compensation Plan or severance
agreement with such Employee, as more particularly described below:
(i) Harrah's Entertainment Rabbi Trust: the Promus
Rabbi Trust as renamed, amended and continued by Harrah's Entertainment
immediately after the Distribution; or
(ii) PHC Rabbi Trust: the Escrow Agreement to be
entered into between PHC and NationsBank effective immediately after the
Distribution; or
(iii) Promus Rabbi Trust: the Escrow Agreement dated
February 6, 1990, between Promus and NationsBank (formerly Sovran Bank), as
amended.
Restricted Stock: any of the following shares of Employer Common
Stock issued pursuant to an Employer Restricted Stock Plan:
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(i) Harrah's Restricted Stock: shares of common stock
of Harrah's Entertainment issued pursuant to the Harrah's Entertainment
Restricted Stock Plan and subject to certain restrictions set forth therein or
in a related agreement or certificate; or
(ii) PHC Restricted Stock: shares of common stock of
PHC issued pursuant to the PHC Restricted Stock Plan and subject to certain
restrictions set forth therein or in a related agreement or certificate; or
(iii) Promus Restricted Stock: shares of common stock
of Promus issued pursuant to the Promus Restricted Stock Plan and subject to
certain restrictions set forth therein or in a related agreement or certificate.
Retained Business: any business or operation of Promus or its
subsidiaries which is, pursuant to the Distribution Agreement, to be conducted,
following the Distribution, by Harrah's Entertainment.
Retained Individual: any individual who (i) is a Retained
Employee, or (ii) is, as of the Cut-off Date, a Promus Terminee whose last
employment with Promus or subsidiary of Promus was with a Retained Business, or
(iii) is a dependent or beneficiary of any individual described in clause (i) or
(ii).
Retiree Medical/Dental Benefits: health, medical and dental
benefits provided to a Promus Terminee (or a dependent or beneficiary thereof)
who is a retiree under any Promus Medical/Dental Plan, not including any
coverage mandated by COBRA.
Savings and Retirement Plan: any of the following Plans, as the
context indicates, maintained pursuant to Section 401(a) of the Code:
(i) Harrah's Entertainment Savings and Retirement
Plan: the Promus Savings and Retirement Plan, as renamed, amended and continued
after the Distribution Date pursuant to Section 2.02(g); or
(ii) Promus Savings and Retirement Plan: The Promus
Companies Incorporated Savings and Retirement Plan, as maintained by Promus
immediately prior to the Distribution Date; or
(iii) PHC Savings and Retirement Plan: the Savings and
Retirement Plan established by PHC pursuant to Section 2.02(a) as of the
Distribution Date primarily for the benefit of PHC Employees.
Service Credit: the period taken into account under any Plan for
purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
Stock Option: a nonqualified or incentive option to purchase
Employer Common Stock under an Employer Stock Option Plan.
Transferred Business: any business or operation of Promus or its
subsidiaries which is, pursuant to the Distribution Agreement, to be conducted
by PHC immediately following the Distribution.
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Transferred Individual: any individual who (i) is a Transferred
Employee or (ii) is, as of the Cut-off Date, a Promus Terminee (x) whose last
employment with Promus or a subsidiary of Promus was with a Transferred Business
or (y) whose employment with Promus was primarily related to the hotel business
to be conducted by PHC after the Distribution, or (iii) is a dependent or
beneficiary of any individual described in clause (i) or (ii).
Welfare Plan: any Plan which provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment benefit, but
excluding vacation benefits covered under Section 2.09.
Section 1.02 Other Terms. Any capitalized terms used herein
but not defined herein shall have the meaning set forth in the Distribution
Agreement.
Section 1.03 Certain Constructions. References to the singular
in this Agreement shall refer to the plural and vice-versa and references to the
masculine shall refer to the feminine and vice-versa.
Section 1.04 Sections. References to a "Section" are, unless
otherwise specified, to one of the Sections of this Agreement.
Section 1.05 Survival. Obligations described in this Agreement
shall remain in full force and effect and shall survive the Distribution Date.
ARTICLE II
EMPLOYEE BENEFITS
Section 2.01 Employment.
(a) Allocation of Responsibilities on Distribution Date.
On the Distribution Date, except to the extent retained or assumed by Harrah's
Entertainment under this Agreement or any other agreement relating to the
Distribution, PHC shall retain or assume, as the case may be, responsibility as
employer for the Transferred Employees. On the Distribution Date, except to the
extent retained or assumed by PHC under this Agreement or any other agreement
relating to the Distribution, Harrah's Entertainment shall retain or assume, as
the case may be, responsibility as employer for the Retained Employees. The
assumption or retention of responsibility as employer by Harrah's Entertainment
or PHC described in this Section 2.01 shall not, of itself, constitute a
severance or a termination of employment under any Plan of severance maintained
by Promus nor shall it constitute a change of control of Promus for purposes of
any Plan.
(b) Assumption of Liabilities on Distribution Date:
Except as specifically provided in this Agreement, or as otherwise agreed by the
Parties:
(i) Immediately following the Distribution, Harrah's
Entertainment shall assume or retain, as the case may be, all benefit
obligations and all related rights in connection with any Plan with respect to
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the Retained Employees and Promus Terminees provided, however, that with respect
to such Retained Employees or Promus Terminees who become employed by PHC after
the Distribution, any benefit obligations and all related rights in connection
with any Plan with respect to such employment with PHC shall be assumed by PHC;
and
(ii) Immediately following the Distribution, PHC shall
assume or retain, as the case may be, all benefit obligations and all related
rights in connection with any Plan with respect to the Transferred Employees,
and Harrah's Entertainment shall have no further liability with respect thereto;
provided, however, that with respect to such Transferred Employees or Promus
Terminees who return to employment with Harrah's Entertainment after the
Distribution, any benefit obligations and all related rights in connection with
any Plan with respect to such employment with Harrah's Entertainment shall be
assumed by Harrah's Entertainment.
(c) Service Credits.
(i) Distribution Date Transfers. In connection
with the Distribution and for purposes of determining Service Credits under any
Plans, Harrah's Entertainment shall credit each Retained Employee and PHC shall
credit each PHC Employee with such Employee's Service Credits and original hire
date as reflected in the Promus payroll system records as of the Cut-off Date.
Such Service Credits and hire date shall continue to be maintained as described
herein for as long as the Employee does not terminate employment or as otherwise
may be required by applicable law or any applicable Plan.
(ii) Post-Distribution Date Terminations. Subject
to the provisions of applicable law and to Sections 2.01(d), 2.02(g), 2.03(c)
and 2.09(c) herein (governing post-Distribution transfers through December 31,
1995), (x) PHC may, in the case of Transferred Employees, in its sole
discretion, make such decisions as it deems appropriate with respect to
determining Service Credits accrued after the Distribution Date for such
Employees, and (y) Harrah's Entertainment may, in the case of Retained
Employees, in its sole discretion, make such decisions as it deems appropriate
with respect to determining Service Credits accrued after the Distribution Date
for such Employees.
(d) Post-Distribution Date Transfers Through December 31,
1995: Notwithstanding any provision of this Agreement to the contrary, except
to the extent prohibited by applicable law or any applicable agreement, where an
Employee leaves the service of one Party to immediately begin employment with
the other Party at any time on or before December 31, 1995, such Employee's
accrued benefits, account balances, or other rights or interests, to the extent
transferable, under any Plan maintained by the former Employer may be
transferred to the applicable Plan of the new Employer. The Parties hereby
agree to amend any Plan to the extent necessary to comply with the preceding
sentence of this Section 2.01(d). This Section 2.01(d) shall not apply to any
benefits, balances, rights or interests of such Employees in any Employer Stock
Option Plan or Employer Restricted Stock Plan.
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Section 2.02 Savings and Retirement Plans.
(a) Establishment of PHC Savings and Retirement Plan.
Effective as of the Distribution Date, PHC shall take, or cause to be taken, all
action necessary and appropriate to establish and administer a new Plan named
the PHC Savings and Retirement Plan and Trust in substantially the form approved
by the Promus Board of Directors at its April 5, 1995 meeting. The PHC Savings
and Retirement Plan shall be a spin off of that portion of the Promus Savings
and Retirement Plan which is attributable to (i) Transferred Employees who,
immediately prior to the Distribution Date, were participants in or otherwise
entitled to benefits under the Promus Savings and Retirement Plan ("PHC
Participants"), and (ii) Hotel Terminees. PHC shall provide benefits under such
PHC Savings and Retirement Plan after the Distribution for all such Transferred
Employees and Hotel Terminees (and PHC Employees admitted to participation in
such Plan after the Distribution) subject to the terms and provisions of such
Plan. The PHC Savings and Retirement Plan shall be intended to qualify for
tax-favored treatment under Sections 401(a) and 401(k) of the Code and to comply
with the requirements of ERISA.
(b) Obligation to Make Base Matching Contribution.
Effective as of the Cut-off Date, PHC shall assume, and shall be solely
responsible for, Promus's obligation to make payment of the Base Matching
Contributions to the account of any Transferred Employee who is a participant
under the Promus Savings and Retirement Plan for the portion of the Current Plan
Year ending on the Cut-off Date. For the remainder of the 1995 Plan Year (the
Distribution Date through December 31, 1995) the rate of Base Matching
Contributions made to the PHC Savings and Retirement Plan will continue at the
same rate that Base Matching Contributions are made prior to the Distribution
under the Promus Savings and Retirement Plan. Commencing with the 1996 Plan
Year, Base Matching Contributions under the PHC Savings and Retirement Plan will
be as set forth in such Plan as it may be amended or, with respect to
discretionary contributions (including Discretionary Matching Contributions) at
the sole determination of the PHC Chief Executive Officer or the PHC Human
Resources Committee, or as otherwise provided in such Plan.
(c) Transfer and Acceptance of Account Balances. As soon
as practicable after the Distribution Date, Harrah's Entertainment shall cause
the trustees of the Harrah's Entertainment Savings and Retirement Plan to
transfer to the trustees or other funding agent of the PHC Savings and
Retirement Plan the amounts (in cash, securities, other property or a
combination thereof) representing the account balances of all PHC Participants
and Hotel Terminees, said amounts to be established as account balances or
accrued benefits of such individuals under the PHC Savings and Retirement Plan.
Each such transfer shall comply with Section 414(1) of the Code and the
requirements of ERISA and the regulations promulgated thereunder. PHC shall
cause the trustees or other funding agent of the PHC Savings and Retirement to
accept the plan-to-plan transfer from the Harrah's Entertainment Savings and
Retirement Plan trustees, and to credit the accounts of such Transferred
Employees and Hotel Terminees under the PHC Savings and Retirement Plan with
amounts transferred on their behalf, as provided in an Asset Transfer Agreement
between the plans. On and after the Distribution Date, PHC shall be responsible
for guaranteeing the recovery of the April 11, 1991 balances of the Executive
Life investment of Transferred Employees and Hotel Terminees to the extent
required by Addendum A to the PHC Savings and Retirement Plan and pursuant to
the applicable closing agreement with the IRS related thereto.
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(d) Harrah's Entertainment to Provide Information.
Harrah's Entertainment shall provide PHC, as soon as practicable after the
Distribution Date (with the cooperation of PHC to the extent that relevant
information is in the possession of PHC, and in accordance with Section 5.02),
with a list of Transferred Employees and Hotel Terminees who, to the best
knowledge of Harrah's Entertainment, were participants in or otherwise entitled
to benefits under the Promus Savings and Retirement Plan on the Cut-off Date,
together with a listing of each participant's Service Credits under such Plan
and a listing of each such Transferred Employee's or Hotel Terminee's account
balance thereunder, and each Transferred Employee's investment election and
beneficiary designation. Harrah's Entertainment shall, as soon as practicable
after the Distribution Date and in accordance with Section 5.02, provide PHC
with such additional information in the possession of Harrah's Entertainment
(and not already in the possession of PHC) as may be reasonably requested by PHC
and necessary for PHC to administer effectively the PHC Savings and Retirement
Plan.
(e) Regulatory Filings. PHC and Harrah's Entertainment
shall, in connection with the plan-to-plan transfer described in Section
2.02(c), cooperate in making any and all appropriate filings required by the
Commission or the IRS, or required under the Code or ERISA or any applicable
securities laws and the regulations thereunder, and take all such action as may
be necessary and appropriate to cause such plan-to-plan transfer to take place
as soon as practicable after the Distribution Date or otherwise when required by
law. Further, PHC shall seek a favorable IRS determination letter that the PHC
Savings and Retirement Plan, as organized, satisfies all qualification
requirements under Section 401(a) of the Code. Notwithstanding the foregoing,
such plan-to-plan transfers shall take place pending issuance of such favorable
determination letter. PHC and Harrah's Entertainment shall each make any
necessary amendments on a retroactive basis to the PHC Savings and Retirement
Plan or the Harrah's Entertainment Savings and Retirement Plan, respectively, as
required by the IRS to issue the favorable determination letter described above.
(f) Account Balances of Retained Employees: Except as
provided in Section 2.02(a), on the Distribution Date, Harrah's Entertainment
shall retain sole responsibility for all liabilities and obligations under the
Promus Savings and Retirement Plan (including but not limited to, liabilities
and obligations to Promus Terminees except as to accounts of Hotel Terminees
that are transferred to the PHC Savings and Retirement Plan pursuant to Section
2.02(c)), and PHC shall have no liability or obligation with respect thereto.
As soon as practicable after the Distribution Date, Harrah's Entertainment shall
take, or cause to be taken, all action necessary and appropriate to amend and
rename the Promus Savings and Retirement Plan as the "Harrah's Entertainment
Savings and Retirement Plan". Harrah's Entertainment shall provide future
benefits thereunder accruing after the Cut-off Date for all Retained Employees
who, on the Cut-off Date, were participants in or otherwise entitled to benefits
under the Promus Savings and Retirement Plan and for Harrah's Employees who are
admitted to participate in the Harrah's Entertainment Savings and Retirement
Plan on or after the Distribution Date.
(g) Post-Distribution Employment Transfers: To the extent
permitted by applicable law, the accounts in the Harrah's Entertainment Savings
and Retirement Plan of any Retained Employee or Harrah's Employee who transfers
employment to PHC on or prior to December 31, 1995 (or, only with
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respect to certain Retained Employees or Harrah's Employees, designated by
agreement of the Parties, who work in the Harrah's Entertainment Information
Technology Department and who transfer to a similar position with PHC, within a
specified period following the Distribution, as such period is determined by
agreement of the Parties), or through such extended period as may be agreed by
Promus (or Harrah's Entertainment) and PHC with respect to any Employee or group
of Employees, may be transferred to the PHC Savings and Retirement Plan. The
business operation or business unit from which such employee terminates
employment shall promptly notify the administrator of the Savings and Retirement
Plan in which any such employee participates of the occurrence of any transfers
subject to the provision of this Section 2.02(g). To the extent necessary, the
Harrah's Entertainment Savings and Retirement Plan and the PHC Savings and
Retirement Plan will be amended to permit such transfers.
Section 2.03 Deferred Compensation Plans.
(a) PHC Deferred Compensation Plans. Effective as of the
Distribution Date, PHC shall assume or retain sponsorship of and shall be solely
responsible for all Assumed Deferred Compensation Liabilities, and Harrah's
Entertainment shall transfer to the PHC Rabbi Trust an amount of assets held in
the Promus Rabbi Trust sufficient to fund the Assumed Deferred Compensation
Liability with approximately the same relative funding coverage as existed
immediately prior to the Distribution. Upon completion of such transfer,
Harrah's Entertainment shall have no additional liability or obligation with
respect to the Assumed Deferred Compensation Liabilities. Except as otherwise
provided herein, PHC shall not be responsible for any liabilities or obligations
of Promus or Harrah's Entertainment under any Deferred Compensation Plan.
Effective as of the Distribution Date, the PHC Board of Directors shall adopt
the PHC Executive Deferred Compensation Plan and the PHC Deferred Compensation
Plan and shall provide future deferred compensation benefits thereunder accruing
after the Cut-off Date for all Transferred Employees (or any beneficiaries of
such Transferred Employee) who, on the Cut-off Date, were participants in or
otherwise entitled to current or deferred benefits under the Promus Executive
Deferred Compensation Plan or the Promus Deferred Compensation Plan, as the case
may be, and for PHC Employees and PHC Directors who are admitted to participate
therein on or after the Distribution Date. PHC shall be responsible for all
reporting and withholding obligations relating to the Assumed Deferred
Compensation Liabilities with respect to pay-outs made after the Cut-off Date to
PHC Employees who, on the Cut-off Date, were participants in or otherwise
entitled to benefits under the Promus Executive Deferred Compensation Plan. All
accrued benefits, rights and service credit shall carry over from the Promus
Deferred Compensation Plans to the PHC Deferred Compensation Plans. Any such
Director who retires from the Promus Board prior to the Distribution and
commences service on the PHC Board within 90 days of such retirement shall be
credited with and vested in the Retirement Rate (as described in the PHC
Executive Deferred Compensation Plan) under the PHC Executive Deferred
Compensation Plan, which Retirement Rate for the Current Plan Year and all prior
plan years shall be the same as the Retirement Rate under the Promus Executive
Deferred Compensation Plan for each corresponding plan year.
(b) Harrah's Entertainment Deferred Compensation Plans.
Except as provided in Section 2.03(a), on the Distribution Date, Harrah's
Entertainment shall retain sole responsibility for all liabilities and
obligations under the Promus Deferred Compensation Plans (including but not
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limited to, liabilities and obligations to Promus Terminees or their
beneficiaries), and PHC shall have no liability or obligation with respect
thereto. As soon as practicable after the Distribution Date, Harrah's
Entertainment shall take, or cause to be taken, all action necessary and
appropriate to amend and rename the Promus Executive Deferred Compensation Plan
and the Promus Deferred Compensation Plans as the "Harrah's Entertainment, Inc.
Executive Deferred Compensation Plan" and the "Harrah's Entertainment, Inc.
Deferred Compensation Plan" (collectively, the "Retained Deferred Compensation
Plans"). Harrah's Entertainment shall provide future benefits thereunder
accruing after the Cut-off Date for all Retained Employees, Promus Directors,
Promus Terminees and Harrah's Entertainment Directors who, on the Cut-off Date,
were participants in or otherwise entitled to benefits under the Retained
Deferred Compensation Plans and for Harrah's Employees and eligible Harrah's
Entertainment Directors who are admitted to participate therein on or after the
Distribution Date. All accrued benefits, rights and Service Credit shall
continue under the Retained Deferred Compensation Plans.
(c) Post-Distribution Employment Transfers Through
December 31, 1995. For purposes of determining whether a termination of
employment has occurred under the Promus Executive Deferred Compensation Plan or
the Promus Deferred Compensation Plan, termination of employment shall not be
deemed to occur where an Employee leaves the service of PHC or Harrah's
Entertainment to immediately begin employment with Harrah's Entertainment or
PHC, respectively, at any time on or before December 31, 1995 (i.e., leaving
Harrah's Entertainment employment to work for PHC, or leaving PHC employment to
work for Harrah's Entertainment); in any such case, the business operation or
business unit from which such Employee terminates employment shall promptly
notify the administrator of the Deferred Compensation Plan in which such
Employee participates of the occurrence of any termination subject to the
provisions of this Section 2.03(c). Whichever Party is the former Employer
shall inform the successor Employer of any termination of employment of such
transferred Employee, and the former Employer shall inform the Plan
administrator of the applicable Deferred Compensation Plan in which such
transferred Employee was a participant. Upon such transfer of employment by
such transferred Employee, the account balances of such Employee in the
applicable Deferred Compensation Plan may be transferred to the applicable
Deferred Compensation Plan of the successor Employer in a manner complying with
Section 2.03(a) and the successor Employer shall be solely responsible for the
payment of such account balances. This special rule shall apply both to the
Assumed Deferred Compensation Liabilities and Retained Deferred Compensation
Liabilities.
(d) Special Provisions With Respect To Allocation of
Deferred Compensation Liabilities of Michael D. Rose ("Mr. Rose").
Notwithstanding anything in this Section 2.03 to the contrary, Mr. Rose's Promus
Executive Deferred Compensation Plan account balances as of the Distribution
Date shall be prorated as follows:
(1) Proration to Harrah's Entertainment Executive
Deferred Compensation Plan. Harrah's Entertainment shall retain and be solely
responsible for 58.33 percent of Mr. Rose's Promus Executive Deferred
Compensation Plan account balance (the "Rose Retained Account Balance") and
shall administer it under the Harrah's Entertainment Executive Deferred
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Compensation Plan, unless otherwise agreed by the Parties. PHC shall have no
liability or obligation with respect to the Rose Retained Account Balance,
unless otherwise agreed by the Parties.
(2) Proration to PHC Executive Deferred Compensation
Plan. Promus shall transfer to PHC 41.67 percent of Mr. Rose's Executive
Deferred Compensation Plan account balance (the "Rose Transferred Account
Balance"), and PHC shall administer such balance under the PHC Executive
Deferred Compensation Plan, unless otherwise agreed by the Parties. Harrah's
Entertainment shall have no further liability or obligation with respect to the
Rose Transferred Account Balance, unless otherwise agreed by the Parties.
(3) Proration Applicable to Each Year of Deferral.
The percentage allocations under this Section 2.03(d) shall be applied to each
year of deferral under the Promus Executive Deferred Compensation Plan and its
accrued interest as of the Distribution Date. It is agreed Mr. Rose is vested
at the Retirement Rate under the Executive Deferred Compensation Plans of both
Parties.
Section 2.04 Stock Plans.
(a) PHC Stock Plans. Effective as of the Distribution
Date, PHC shall take, or cause to be taken, all action necessary and appropriate
to establish and administer new stock-based compensation plans named the "Promus
Hotel Corporation 1995 Stock Option Plan" and the "Promus Hotel Corporation 1995
Restricted Stock Plan" (together, the "PHC Stock Plans") in substantially the
form approved by the Promus Board of Directors at its April 5, 1995 meeting.
PHC shall provide future benefits thereunder accruing after the Cut-off Date for
all Transferred Employees and PHC Directors who, on the Cut-off Date, were
participants in or otherwise entitled to benefits under the Existing Stock Plans
and for PHC Employees and PHC Directors who are admitted to participate in the
PHC Stock Plans on or after the Distribution Date.
(b) Harrah's Entertainment Stock Plans. On the
Distribution Date, except with respect to shares surrendered for Replacement
Shares (as defined below) and options replaced with PHC Stock Options, Harrah's
Entertainment shall retain sole responsibility for all liabilities and
obligations under the Existing Stock Plans, and PHC shall have no liability or
obligation with respect thereto. As soon as practicable after the Distribution
Date, Harrah's Entertainment shall take, or cause to be taken, all action
necessary and appropriate to amend and rename the Promus Restricted Stock Plan
and the Promus Stock Option Plan Plans as the "Harrah's Entertainment, Inc. 1990
Restricted Stock Plan" and the "Harrah's Entertainment, Inc. 1990 Stock Option
Plan". Harrah's Entertainment shall provide future benefits thereunder accruing
after the Cut-off Date for all Retained Employees and Harrah's Entertainment
directors who, on the Cut-off Date, were participants in or otherwise entitled
to benefits under the Existing Stock Plans and for Harrah's Employees and
Harrah's Entertainment Directors who are admitted to participate therein on or
after the Distribution Date.
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(c) Effect of the Distribution on Awards Made Prior to the
Cut-off Date.
(i) Restricted Stock.
(A) Dividend: All Employees who hold Restricted
Stock as of the Distribution Record Date shall receive as part of the
Distribution one unrestricted share of PHC Common Stock for every two shares of
Promus Restricted Stock they hold. Fractional interests will be paid in cash.
Shares of PHC Common Stock so received shall be unrestricted.
(B) Harrah's Restricted Stock: As soon as
possible after the Distribution, Retained Employees who have been granted shares
of Promus Restricted Stock as of the Cut-off Date shall retain such shares,
which shall become Harrah's Restricted Stock. Shares so retained shall be
subject to the same terms and conditions as the shares of Promus Restricted
Stock surrendered in exchange therefor.
(C) PHC Restricted Stock: As soon as possible
following the Distribution, Transferred Employees who have been granted shares
of Promus Restricted Stock as of the Cut-off Date shall surrender such shares,
and shall receive shares of PHC Restricted Stock in replacement thereof (the
"Replacement Shares"). The number of Replacement Shares so received by a
Transferred Employee shall be determined by multiplying the number of shares of
Promus Restricted Stock held by such Employee by a fraction, the numerator of
which is equal to the sum of the Pre-Distribution Stock Price minus one half of
the PHC Post-Conversion Stock Price, and the denominator of which is the PHC
Post-Conversion Stock Price. Fractional shares will not be awarded, rather,
they will be rounded to the next highest share. The Replacement Shares shall be
subject to the same terms and conditions as the shares of Promus Restricted
Stock surrendered and replaced by such Replacement Shares.
(ii) Adjustment of Stock Options. As soon as
possible following the Distribution, each Employee who is a grantee of a
nonqualified or incentive award of a Promus Stock Option shall receive for each
such award a Conversion Award intended to maintain the Aggregate Spread of such
Employee. Retained Employees shall receive Conversion Awards for options to
purchase Harrah's Entertainment Common Stock, and Transferred Employees shall
receive Conversion Awards for Options to purchase PHC Common Stock, pursuant to
one of the following sets of formulas, as applicable:
(A) Harrah's Entertainment Stock Options:
(1) Number of Shares Subject to Options: The
number of shares of Harrah's Entertainment Common Stock subject to a Harrah's
Entertainment Stock Option held by a Retained Employee shall be determined by
multiplying the number of shares of Promus Common Stock subject to Promus Stock
Options held by such Employee by a fraction, the numerator of which is the Pre-
Distribution Stock Price, and the denominator of which is the Post-Distribution
Harrah's Entertainment Stock Price. Fractional shares shall be rounded to the
next highest whole share.
(2) Adjustment of Option Price: The exercise
price of a Conversion Award of a Harrah's Entertainment Stock Option held by a
Retained Employee shall be determined by multiplying the exercise price of the
Promus Stock Option from which it is being converted by a
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fraction, the numerator of which is the Harrah's Entertainment Post-Conversion
Stock Price and the denominator of which is the Pre-Distribution Stock Price.
The exercise price shall be rounded down to the next lowest whole cent.
(B) PHC Stock Options:
(1) Number of Shares Subject to Options: The
number of shares of PHC Common Stock subject to a PHC Stock Option held by a
Transferred Employee shall be determined by multiplying the number of shares of
Promus Common Stock subject to the Promus Stock Option held by such Employee by
a fraction, the numerator of which is the Pre-Distribution Stock Price, and the
denominator of which is the Post-Distribution PHC Stock Price. Fractional
shares shall be rounded to the next highest whole share.
(2) Adjustment of Option Price: The exercise
price of a Conversion Award of a PHC Stock Option held by a Transferred Employee
shall be determined by multiplying the exercise price of the Promus Stock Option
from which it is being converted by a fraction, the numerator of which is the
PHC Post-Conversion Stock Price and the denominator of which is the Pre-
Distribution Stock Price. The exercise price shall be rounded down to the next
lowest whole cent.
Section 2.05 Promus Employee Stock Purchase Plan. The Promus
Employee Stock Purchase Plan shall continue in effect after the Distribution and
shall be renamed the "Harrah's Entertainment Employee Stock Purchase Plan".
Transferred Employees who were participants in the Promus Employee Stock
Purchase Plan shall no longer be eligible to participate in such plan. Harrah's
Entertainment shall provide Transferred Employees the opportunity to withdraw
their investments from the Harrah's Entertainment Employee Stock Purchase Plan
after the Distribution Date. PHC may, in its sole discretion and on terms it
may determine, establish a similar Employee Stock Purchase Plan.
Section 2.06 Employee Bonus Plans.
(a) Calculation of Bonuses for Transferred Employees for
the Current Plan Year.
(i) Calculation of Bonuses for Transferred
Employees Not Employed in a Transferred Business. With respect to the Current
Plan Year, Harrah's Entertainment shall credit to each Transferred Employee (and
to each Harrah's Employee who terminates employment with Harrah's Entertainment
to immediately begin employment with PHC after the Distribution Date but not
later than December 31, 1995) currently employed by a division or operating unit
of Promus which is not a Transferred Business a prorated portion of the bonus to
which such Employee would be entitled under the Promus Bonus Plan determined as
if such Employee had remained employed by Harrah's Entertainment for the entire
Current Plan Year. Such bonus shall be prorated based upon the length of such
Employee's employment with Promus and/or Harrah's Entertainment, as the case may
be, during the Current Plan Year, pursuant to procedures adopted in that certain
memorandum of understanding dated March 9, 1995 by and between Promus and PHC.
PHC shall calculate such Transferred Employee's bonus under the PHC Bonus Plan
in accordance with the terms of the PHC Bonus Plan for the remainder of the
Current Plan Year, prorated based upon the length of such Transferred Employee's
employment with PHC for the Current Plan Year.
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(ii) Calculation of Bonuses for Transferred
Employees Covered By Operating Unit Matrix. Bonuses of Transferred Employees
who are employed by a division or operating unit that is a Transferred Business
shall be calculated for the entire Current Plan Year, without proration, under
the PHC Bonus Plan pursuant to the operating unit matrix established for such
division or operating unit under the Promus Bonus Plan.
(b) Payment of Bonuses for Current Plan Year. PHC shall
pay to Transferred Employees the entire amount of the bonus as calculated by
Harrah's Entertainment and PHC pursuant to Section 2.06(a). Harrah's
Entertainment shall pay to PHC the portion of such bonus attributable to such
Transferred Employee's employment with Promus and/or Harrah's Entertainment, as
the case may be, during the Current Plan Year.
(c) Harrah's Entertainment Bonus Plan. Harrah's
Entertainment shall assume and retain the Promus Annual Bonus Plan, which shall
be renamed the "Harrah's Entertainment Annual Management Bonus Plan" and shall
continue to provide benefits thereunder to eligible Harrah's Employees. Bonuses
of Retained Employees shall be calculated and paid pursuant to the terms of the
Harrah's Entertainment Bonus Plan, as such may be amended from time to time,
during the Current Plan Year and any subsequent Plan Year.
(d) No Right to Bonus Created. Bonuses may be awarded in
the absolute discretion of the Parties, subject to the terms of the applicable
Employee Bonus Plan, and this section 2.06 shall not be construed as creating
any right or entitlement in favor of any third party to receive any bonus under
any Employee Bonus Plan.
Section 2.07 Harrah's Entertainment Medical/Dental Plans.
(a) Liability for Claims. Except as otherwise provided
herein, as of the Distribution Date, Harrah's Entertainment shall assume or
retain and shall be responsible for, or cause its insurance carriers or HMOs to
be responsible for, all liabilities and obligations related to claims asserted
or incurred or premiums owed through the Cut-off Date in respect of any Retained
Employee (or any dependent or beneficiary thereof) or Promus Terminee (or any
dependent or beneficiary thereof) under any Promus Medical/Dental Plan and
claims asserted or incurred or premiums due after the Cut-off Date in respect of
any Retained Employee (or any dependent or beneficiary thereof) or Promus
Terminee (or any dependent or beneficiary thereof) under any Harrah's
Entertainment Medical/Dental Plan, and PHC shall have no liability or obligation
with respect thereto.
(b) Continuation Coverage Administration. As of the
Distribution Date, Harrah's Entertainment shall assume or retain and shall be
solely responsible for, or cause its insurance carriers or HMOs to be
responsible for, providing and administering the continuation coverage required
by COBRA as it relates to any Promus Qualified Beneficiary or Harrah's
Entertainment Qualified Beneficiary, except as provided in Section 2.08(d), and
PHC shall have no liability or obligation with respect thereto.
(c) Continuation Coverage Claims. As of the Distribution
Date, and except as provided in Sections 2.08(a) and (e), Harrah's Entertainment
shall assume or retain and shall be responsible for, or cause its insurance
carriers or HMOs to be responsible for, all liabilities and obligations in
connection with claims asserted or incurred or premiums owed
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through the Cut-off Date under any Promus Medical/Dental Plan in respect of any
Promus Qualified Beneficiary and claims asserted or incurred or premiums owed
after the Cut-off Date under any Harrah's Entertainment Medical/Dental Plan in
respect of any Promus Qualified Beneficiary or Harrah's Entertainment Qualified
Beneficiary and PHC shall have no liability or obligation with respect thereto.
Through December 31, 1995, or through such other period to the extent required
by COBRA, each Promus Qualified Beneficiary and each Harrah's Entertainment
Qualified Beneficiary shall, to the extent applicable, for all purposes under
any new Harrah's Entertainment Medical/Dental Plan (i) have coverage which is
substantially comparable to that provided immediately prior to the Distribution
Date, (ii) have no preexisting condition limitation imposed other than that
which is or was already imposed under the applicable existing Plan, and (iii) be
credited with or otherwise have taken into account, to the extent applicable,
the expenses incurred towards deductibles, out-of-pocket limits, maximum benefit
payments, and any benefit usage towards plan limits credited to such individual
as of the Cut-off Date under the terms of the applicable existing Plan as if
such expenses and usage had originally been credited to such individual under a
Harrah's Entertainment Medical/Dental Plan.
(d) Liability for Medical Retirees. As of the
Distribution Date, Harrah's Entertainment shall assume or retain, as the case
may be, and shall be solely responsible for, or cause its insurance carriers or
HMOs to be responsible for, all liabilities and obligations whatsoever in
connection with claims asserted or incurred or premiums owed through or after
the Cut-off Date under the retiree coverage provisions of any Promus
Medical/Dental Plan (or successor thereto) or any Harrah's Entertainment
Medical/Dental Plan in respect of any Medical Retiree, and PHC shall have no
liability or obligation with respect thereto.
Section 2.08 PHC Medical/Dental Plans
(a) Establishment of New PHC Medical/Dental Plans. As
soon as practicable after the date hereof and effective as of the Distribution
Date, PHC shall take, or cause to be taken, all action necessary and appropriate
to establish and administer (or continue to administer) the PHC Medical/Dental
Plans and to provide benefits thereunder for all Transferred Employees (and any
dependents or beneficiaries thereof), and PHC Qualified Beneficiaries (with
respect to continuation coverage under COBRA only) who, immediately prior to the
Distribution Date, were participants in or otherwise entitled to benefits under
the Promus Medical/Dental Plans. Each such individual shall, to the extent
applicable, for all purposes under the new PHC Medical/Dental Plans (i) have
coverage which is substantially comparable to that provided immediately prior to
the Distribution Date, (ii) have no preexisting condition limitation imposed
other than that which is or was already imposed under the applicable existing
Plan, and (iii) be credited with or otherwise have taken into account, to the
extent applicable, Service Credits, any expenses incurred towards deductibles,
out-of-pocket limits, maximum benefit payments, and any benefit usage towards
plan limits credited to such individual as of the Cut-off Date under the terms
of the applicable existing Plan as if such service had been rendered to PHC and
as if such expenses and usage had originally been credited to such individual
under the new PHC Medical/Dental Plans.
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(b) Harrah's Entertainment to Provide Information. As
soon as practicable after the Distribution Date, Harrah's Entertainment shall
provide PHC (with the cooperation of PHC to the extent that relevant information
is in the possession of PHC, and in accordance with Section 5.02), with a list
of individuals (and dependents thereof) employed by PHC who were, to the best
knowledge of Harrah's Entertainment, participants in or otherwise entitled to
benefits under the Promus Medical/Dental Plans immediately prior to the
Distribution Date, together with a listing of each such individual's Service
Credit under such Plans and a listing of each such individual's expenses
incurred towards deductibles, out-of-pocket limits, maximum benefit payments,
and any benefit usage towards plan limits thereunder. Harrah's Entertainment
shall, as soon as practicable after the Distribution Date, in accordance with
Section 5.02 provide PHC with such additional information in the possession of
Harrah's Entertainment (and not already in the possession of PHC) as may be
reasonably requested by PHC and necessary for PHC to establish and administer
effectively any new PHC Medical/Dental Plan.
(c) Liability for Claims. As of the Distribution Date,
PHC shall assume and shall be responsible for, or cause its insurance carriers
or HMOs to be responsible for, all liabilities and obligations in connection
with claims asserted or incurred or premiums due on and after the Cut-off Date
in respect of any Transferred Employee (or any dependent or beneficiary thereof)
and, with respect to COBRA only, any PHC Qualified Beneficiary (whether such
claims are asserted or incurred before, on or after the Cut-off Date) under any
Promus Medical/Dental Plan and Harrah's Entertainment shall have no liability or
obligation with respect thereto.
(d) Continuation Coverage Administration. As of the
Distribution Date, PHC shall assume or retain, as the case may be, and shall be
solely responsible for, or cause its insurance carriers or HMOs to be
responsible for, providing and administering the continuation coverage mandated
by COBRA as it relates to any PHC Qualified Beneficiary, and Harrah's
Entertainment shall have no liability or obligation with respect thereto.
(e) Continuation Coverage Claims. As of the Distribution
Date, PHC shall be solely responsible for, or cause its insurance carriers or
HMOs to be responsible for, all liabilities and obligations whatsoever in
connection with claims asserted or incurred or premiums due through and after
the Cut-off Date under any Promus Medical/Dental Plan (or successor thereto) in
respect of any PHC Qualified Beneficiary, and Harrah's Entertainment shall have
no liability or obligation with respect thereto. Through December 31, 1995, or
through such other period to the extent required by COBRA, each PHC Qualified
Beneficiary, shall, to the extent applicable, for all purposes under the Plans
established by PHC (i) have coverage which is substantially comparable to that
provided to him or her immediately prior to the Distribution Date, (ii) have no
preexisting condition limitation imposed other than that which is or was already
imposed under the applicable existing Plan, and (iii) be credited with or
otherwise have taken into account, to the extent applicable, the expenses
incurred towards deductibles, out-of-pocket limits, maximum benefit payments,
and any benefit usage towards plan limits credited to such individual as of the
Cut-off Date under the terms of the applicable existing Plan as if such expenses
and usage had originally been credited to such individual under a PHC
Medical/Dental Plan.
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Section 2.09 Vacation and Sick Pay Liabilities.
(a) Division of Liabilities. Effective on the
Distribution Date, PHC shall assume, as to the Transferred Employees, and
Harrah's Entertainment shall retain, as to the Retained Employees, all accrued
liabilities (whether vested or unvested, and whether funded or unfunded) for
vacation and sick leave in respect of such employees as of the Cut-off Date.
PHC shall be solely responsible for the payment of such vacation or sick leave
to PHC Employees after the Cut-off Date, and Harrah's Entertainment shall be
solely responsible for the payment of such vacation or sick leave to Retained
Employees after the Cut-off Date. Each Party shall provide to its own Employees
on the Distribution Date the same vested and unvested balances of vacation and
sick leave as credited to such Employee on the Promus payroll system on the
Cut-off Date.
(b) Funded Reserves. Assets attributable to funded
reserves for the vacation leave liabilities being divided in accordance with
Section 2.09(a) (whether held in a trust, a voluntary employees beneficiary
association, or any other funding vehicle) shall be divided in accordance with
the division of liabilities described above, i.e., assets attributable to
obligations to Transferred Employees shall be transferred to PHC, and all
remaining assets shall be retained by or within the control of Harrah's
Entertainment; provided however, that assets of any Promus trust which is exempt
from tax under Section 501(c)(9) of the Code established to provide vacation
leave benefits to Employees of Promus shall be transferred only into another
tax-exempt trust with comparable terms established to provide vacation leave
benefits to PHC Employees.
(c) Post-Distribution Transfers. Through December 31,
1995, an Employee who leaves the service of one Party to immediately begin
employment with the other Party (i.e., leaving Harrah's Entertainment employment
to work for PHC, or leaving PHC employment to work for Harrah's Entertainment)
shall be provided by the successor employer with the same balance of vested and
unvested vacation and sick leave hours as had been accrued by the former
Employer through such termination date. The former Employer shall promptly
notify the successor Employer in writing of the occurrence of any termination
subject to the provisions of this Section 2.09(c), and shall make a payment to
such successor Employer within thirty (30) days of the aforesaid termination
date in an amount equal to the value of the terminating Employee's vested
balance of vacation leave accrued by the former Employer through such
termination date, based on the Employee's final rate of pay with the former
Employer. No payment shall be made by the former Employer to the successor
Employer for any sick leave or unvested vacation leave balance relating to any
post-Distribution transfer.
Section 2.10 Adjustments for Welfare Plans. Except as
otherwise expressly provided herein, Harrah's Entertainment shall retain all
liabilities accrued though the Cut-off Date under all Welfare Plans of Promus to
the extent relating to Retained Individuals, Promus Qualified Beneficiaries,
Promus Terminees and Medical Retirees, and PHC shall be responsible for all
liabilities accrued under such Welfare Plans, to the extent relating to PHC
Individuals or PHC Qualified Beneficiaries as of the Cut-off Date.
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Section 2.11 Preservation of Right To Amend or Terminate Plans.
Except as otherwise expressly provided in this Article II, no provisions of this
Agreement, including, without limitation, the agreement of Harrah's
Entertainment or PHC to make a contribution or payment to or under any Plan
herein referred to for any period, shall be construed as a limitation on the
right of Harrah's Entertainment or PHC to amend such Plan or terminate its
participation therein which Harrah's Entertainment or PHC would otherwise have
under the terms of such Plan or otherwise, and no provision of this Agreement
shall be construed to create a right in any employee or former employee, or
dependent or beneficiary of such employee or former employee under a Plan which
such person would not otherwise have under the terms of the Plan itself;
provided, however, that neither Party shall amend any Plan to the extent that
such amendment would have the effect of increasing the liabilities of the other
Party under any Plan of the other Party, without such other Party's consent.
Section 2.12 Reimbursement. Promus and PHC acknowledge that
Harrah's Entertainment, on the one hand, and PHC, on the other hand, may incur
costs and expenses, including, but not limited to, contributions to Plans and
the payment of insurance premiums arising from or related to any of the Plans
which are, as set forth in this Agreement, the responsibility of the other Party
hereto. Accordingly, Harrah's Entertainment and PHC shall reimburse each other,
as soon as practicable, but in any event within thirty (30) days of receipt from
the other Party of appropriate verification, for all such costs and expenses.
Section 2.13 Payroll Reporting and Withholding.
(a) Form W-2 Reporting. PHC and Harrah's Entertainment
hereby adopt the "alternative procedure" for preparing and filing IRS Forms W-2
(Wage and Tax Statements), as described in Section 5 of Revenue Procedure 84-77,
1984-2 IRS Cumulative Bulletin 753 ("Rev. Proc. 84-77"). Under this procedure
PHC as the successor employer shall provide all required Forms W-2 to all
Transferred Employees reflecting all wages paid and taxes withheld by both
Promus as the predecessor and PHC as the successor employer for the entire year
during which the Distribution takes place. Harrah's Entertainment shall provide
all required Forms W-2 to all Retained Employees reflecting all wages and taxes
paid and withheld by Promus before the Distribution Date and by Harrah's
Entertainment on and after the Distribution Date.
In connection with the aforesaid agreement under Rev. Proc.
84-77, each business unit or business operation of Promus shall be assigned to
either Harrah's Entertainment or PHC, depending upon whether it is a Retained
Business or a Transferred Business, and each Retained Employee or Transferred
Employee associated with such business unit or business operation shall be
assigned for payroll reporting purposes to Harrah's Entertainment or PHC, as the
case may be. Harrah's Entertainment and PHC shall be responsible for filing IRS
Forms 941 for their respective Employees.
(b) Forms W-4 and W-5. PHC and Harrah's Entertainment
agree to adopt the alternative procedure of Rev. Proc. 84-77 for purposes of
filing IRS Forms W-4 (Employee's Withholding Allowance Certificate) and W-5
(Earned Income Credit Advance Payment Certificate). Under this procedure
Harrah's Entertainment shall provide to PHC as the successor employer all IRS
Forms W-4 and W-5 on file with respect to each Transferred Employee, and PHC
will honor these forms until such time, if any, that such Transferred Employee
submits a revised form.
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(c) Garnishments, Tax Levies, Child Support Orders, and
Wage Assignments. With respect to Employees with garnishments, tax levies,
child support orders, and wage assignments in effect with Promus on the Cut-off
Date, PHC as the successor employer with respect to each Transferred Employee
shall honor such payroll deduction authorizations and will continue to make
payroll deductions and payments to the authorized payee, as specified by the
court or governmental order which was filed with Promus.
(d) Authorizations for Payroll Deductions. Unless
otherwise prohibited by this or another agreement entered into in connection
with the Distribution, or by a Plan document, with respect to Transferred
Employees with authorizations for payroll deductions in effect with Promus on
the Cut-off Date, PHC as the successor employer will honor such payroll
deduction authorizations relating to each Transferred Employee, and shall not
require that such Transferred Employee submit a new authorization to the extent
that the type of deduction by PHC does not differ from that made by Promus.
Such deduction types include, without limitation, contributions to any Plan,
U.S. Savings Bonds, and United Giver's Fund; scheduled loan repayments to the
Profit Sharing Plan or to an employee credit union; and Direct Deposit of
Payroll, bonus advances, union dues, employee relocation loans, and other types
of authorized company receivables usually collectible through payroll
deductions.
(e) Withholding Taxes on Account of The Distribution to
Promus Restricted Stockholders Who Are Transferred Employees. PHC shall
cooperate with Harrah's Entertainment in the collection of withholding tax
liability of Transferred Employees who received the Distribution on account of
Promus Restricted Stock held by such Transferred Employee on the Distribution
Date. PHC shall collect such amounts, by payroll deduction or otherwise,
commencing on October 2, 1995, from those Transferred Employees who have not as
of that date satisfied the full amount of their liability for such withholding
taxes to Harrah's Entertainment. Such payroll deductions shall be made ratably
over 6 to 10 pay periods as determined by Harrah's Entertainment. Any amount
collected on account of such liability shall be remitted to Harrah's
Entertainment as soon as practicable after collection.
ARTICLE III
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any
other Agreement between PHC and Harrah's Entertainment to the contrary, PHC and
Harrah's Entertainment understand and agree that:
Section 3.01 Separate Employers. On and after the Distribution
Date and the separation of Employees into their respective companies, PHC and
Harrah's Entertainment will be separate and independent employers.
Section 3.02 Employment Policies and Practices. Subject to the
provisions of ERISA and Sections 2.01(b) on Service Credits and 2.02(g), 2.03(c)
and 2.09(c) governing post-Distribution transfers through December 31, 1995, and
except as limited by applicable law or agreement, PHC and Harrah's Entertainment
may adopt, continue, modify or terminate such employment
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policies, compensation practices, retirement plans, welfare benefit plans, and
other employee benefit plans of any kind or description, as each may determine,
in its sole discretion, are necessary or appropriate.
Section 3.03 Collective Bargaining Agreements. With regard to
Employees covered by a Collective Bargaining Agreement on the Cut-off Date who
become PHC Employees or Retained Employees, PHC and Harrah's Entertainment
promise and covenant to each other not to take any action which disrupts or
otherwise negatively impacts the labor relations of the other. PHC and Harrah's
Entertainment will diligently work to substitute the appropriate employer for
Promus in Collective Bargaining Agreements.
Section 3.04 Special Matters.
(a) Administrative Services In Connection With The PHC
Savings And Retirement Plan. It is agreed that Promus will provide
administrative services to the PHC Savings and Retirement Plan from the
Distribution Date through December 31, 1995 at a reasonable fee to be agreed
upon by Promus and the Trustees of the PHC Savings and Retirement Plan, which
fee shall comply with ERISA and other applicable law. Such services will be
substantially similar to the services provided by Promus employees to the Promus
Savings and Retirement Plan. These administrative services may be extended
beyond December 31, 1995, if agreed to by Promus and the Trustees of the PHC
Savings and Retirement Plan.
(b) Allocation of Group Insurance Reserves. The Parties
hereby agree to divide and allocate any surplus balances and any reserves
relating to any group insurance Plan maintained by Promus prior to the
Distribution, in accordance with a formula and procedures to be adopted by the
Parties prior to the Distribution Date.
Section 3.05 Funding of Union Plans. Without limitation to the
scope and application of Section 3.04, any claims by or on behalf of employees
or their collective bargaining agent or any federal, state or local governmental
agency for alleged underfunding of, or failure to make payments to, union or
collectively bargained health, welfare and pension plans and funds based on acts
or omissions with respect to such plans and funds occurring on or before the
Distribution Date or arising from or in connection with the Distribution, or
resulting from actuarial recalculation by auditors of such plans and funds, will
be the sole responsibility of each Party as to its own employees (i.e., PHC with
respect to Transferred Employees, and Harrah's Entertainment with respect to
Retained Employees), and the responsible Party will indemnify, defend, and hold
harmless the other from any such claims.
Section 3.06 Notice of Claims. Without limitation to the scope
and application to each Party in the performance of its duties under Sections
3.04 and 3.05 herein, each Party will notify in writing and consult with the
other Party prior to making any settlement of an employee claim, for the purpose
of avoiding any prejudice to such other Party arising from the settlement.
Section 3.07 Assumption of Unemployment Tax Rates. Changes in
state unemployment tax experience from that of Promus as of the Cut-off Date
shall be handled as follows. In the event an option exists to allocate state
unemployment tax experience of Promus, the Promus experience shall be
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transferred to PHC if this results in the lowest aggregate unemployment tax
costs for both Harrah's Entertainment and PHC combined, and the Promus
experience shall be retained by Harrah's Entertainment if this results in the
lowest aggregate unemployment tax costs for Harrah's Entertainment and PHC
combined.
Section 3.08 Employees on Leave of Absence. After the
Distribution Date, PHC shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Transferred Business. After the
Distribution Date, Harrah's Entertainment shall assume responsibility, if any,
as employer for all Employees returning from an approved leave of absence who
prior to the Distribution Date were not employed in a Transferred Business.
Section 3.09 No Third Party Beneficiary Rights.
(a) Neither this Agreement nor any other intercompany
agreement between PHC and Harrah's Entertainment is intended to nor does it
create any third party contractual or other common law rights. No person shall
be deemed a third-party beneficiary of the agreements between PHC and Harrah's
Entertainment.
(b) Nothing contained in this Agreement shall confer upon
any Employee any right with respect to continuance of employment by either
Party, nor shall anything herein interfere with the right of either party to
terminate the employment of any Employee at any time, with or without cause, or
restrict a Party in the exercise of its independent business judgment in
modifying any of the terms and conditions of the employment of an Employee,
except as provided by applicable law.
(c) No provision of this Agreement shall create any third
party beneficiary rights in any Employee, any beneficiary or dependent thereof,
or any collective bargaining representative thereof, with respect to the
compensation, terms and conditions of employment and benefits that may be
provided to any Employee by either Party or under any benefit plan which a Party
may maintain.
Section 3.10 Attorney-Client Privilege. The provisions herein
requiring either Party to this Agreement to cooperate shall not be deemed to be
a waiver of the attorney/client privilege for either Party nor shall it require
either Party to waive its attorney/client privilege.
ARTICLE IV
DEFAULT
Section 4.01 Default. If either Party materially defaults
hereunder, the non-defaulting Party shall be entitled to all remedies provided
by law or equity (including reasonable attorneys' fees and costs of suit
incurred).
Section 4.02 Force Majeure. PHC and Harrah's Entertainment
shall incur no liability to each other due to a default under the terms and
conditions of this Agreement resulting from fire, flood, war, strike, lock-out,
work stoppage or slow-down, labor disturbances, power failure, major
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equipment breakdowns, construction delays, accident, riots, acts of God, acts of
United States' enemies, laws, orders or at the insistence or result of any
governmental authority or any other delay beyond each other's reasonable
control.
ARTICLE V
MISCELLANEOUS
Section 5.01 Relationship of Parties. Nothing in this
Agreement shall be deemed or construed by the Parties or any third party as
creating the relationship of principal and agent, partnership or joint venture
between the Parties, it being understood and agreed that no provision contained
herein, and no act of the Parties, shall be deemed to create any relationship
between the Parties other than the relationship set forth herein.
Section 5.02 Access to Information; Cooperation. Harrah's
Entertainment and PHC and their authorized agents shall be given reasonable
access to and may take copies of all information relating to the subjects of
this Agreement (to the extent permitted by federal and state confidentiality
laws) in the custody of the other Party, including any agent, contractor,
subcontractor, agent or any other person or entity under the contract of such
Party. The Parties shall provide one another with such information within the
scope of this Agreement as is reasonably necessary to administer each Party's
Plans. The Parties shall cooperate with each other to minimize the disruption
caused by any such access and providing of information.
Section 5.03 Assignment. Neither Party shall, without the
prior written consent of the other, have the right to assign any rights or
delegate any obligations under this Agreement.
Section 5.04 Headings. The headings used in this Agreement are
inserted only for the purpose of convenience and reference, and in no way define
or limit the scope or intent of any provision or part hereof.
Section 5.05 Severability of Provisions. Neither Harrah's
Entertainment nor PHC intend to violate statutory or common law by executing
this Agreement. If any section, sentence, paragraph, clause or combination of
provisions in this Agreement is in violation of any law, such sections,
sentences, paragraphs, clauses or combinations shall be inoperative and the
remainder of this Agreement shall remain in full force and effect and shall be
binding upon the Parties.
Section 5.06 Parties Bound. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective
successors and permitted assigns. Nothing herein, expressed or implied, shall
be construed to give any other person any legal or equitable rights hereunder.
Section 5.07 Notices. All notices, consents, approvals and
other communications given or made pursuant hereto shall be in writing and shall
be deemed to have been duly given when delivered personally or by overnight
courier or three days after being mailed by registered or certified mail
(postage prepaid, return receipt requested) to the named representatives of the
Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
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(a) if to Harrah's Entertainment:
Harrah's Entertainment, Inc.
1023 Cherry Road
Memphis, Tennessee 38117
Attention: General Counsel
(b) if to PHC:
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, Tennessee 38138
Attention: General Counsel
PHC and Harrah's Entertainment agree that, upon the request of either Party, the
requested Party will give copies of all of its notices, consents, approvals and
other communications hereunder to any lender to the requesting Party or other
person specified by such requesting Party.
Section 5.08 Further Action. PHC and Harrah's Entertainment
each shall cooperate in good faith and take such steps and execute such papers
as may be reasonably requested by the other Party to implement the terms and
provisions of this Agreement.
Section 5.09 Waiver. PHC and Harrah's Entertainment each agree
that the waiver of any default under any term or condition of this Agreement
shall not constitute a waiver of any subsequent default or nullify the
effectiveness of that term or condition.
Section 5.10 Governing Law. All controversies and disputes
arising out of or under this Agreement shall be determined pursuant to the laws
of the State of Tennessee, regardless of the laws that might be applied under
applicable principles of conflicts of laws.
Section 5.11 Consent to Jurisdiction. The Parties irrevocably
submit to the exclusive jurisdiction of (a) the Courts of the State of
Tennessee, Shelby County, or (b) any federal district court where there is
federal jurisdiction for the purpose of any suit, action or other Court
proceeding arising out of this Agreement.
Section 5.12 Entire Agreement. This Agreement and the
Distribution Agreement constitute the entire understanding between the Parties
hereto, and supersede all prior written or oral communications, relating to the
subject matter covered by said agreements. To the extent that the terms of this
Agreement and similar terms of the Distribution Agreement are in conflict, the
interpretation given to the conflicting terms of the Distribution Agreement
shall govern the interpretation and performance of this Agreement. No
amendment, modification, extension or failure to enforce any condition of this
Agreement by either Party shall be deemed a waiver of any of its rights herein.
This Agreement shall not be amended except by a writing executed by the Parties.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the date first above written.
THE PROMUS COMPANIES INCORPORATED, a
Delaware corporation
By: CHARLES A. LEDSINGER, JR.
---------------------------------
Name: Charles A. Ledsinger, Jr.
Title: Senior Vice President
PROMUS HOTEL CORPORATION, a
Delaware corporation
By: DONALD H. DEMPSEY
---------------------------------
Name: Donald H. Dempsey
Title: SVP-CFO
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EX-10(15)
RISK MANAGEMENT ALLOCATION AGREEMENT
AGREEMENT between The Promus Companies Incorporated, a Delaware corporation
("Promus"), to be known as Harrah's Entertainment, Inc. after the Distribution
(as hereinafter defined), and Promus Hotel Corporation, a Delaware corporation
and an indirect wholly-owned subsidiary of Promus ("PRH").
RECITALS
WHEREAS, subject to certain conditions, Promus intends to spin off its
hotel business by distributing all of the outstanding shares of common stock of
PRH to the holders of Promus common stock (the "Distribution");
WHEREAS, in connection with the Distribution, Promus and PRH have entered
into a Distribution Agreement (the "Distribution Agreement") setting forth the
principal corporate transactions required to effect the Distribution and setting
forth the agreements that will govern certain matters following the
Distribution; and
WHEREAS, pursuant to the aforesaid Distribution Agreement, Promus and PRH
have agreed to enter into an agreement allocating responsibilities with respect
to risk management matters pursuant to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General. As used in this Agreement, the following terms
shall have the following meanings:
Claim: Any demand for payment with respect to an injury, loss, liability,
damage or expense arising out of insured or insurable occurrences or events
under one or more of the Policies, the Excess Policies or Self Insurance
Programs, including any IBNR Losses for which a demand for payment is
subsequently made.
Claims Administration: The processing of Claims including the reporting of
Claims to the insurance carrier, management and defense of Claims and providing
for appropriate releases upon settlement of Claims.
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Distribution Date: The date determined by the Promus Board as the date on
which the Distribution shall be effected.
Excess Policies: The insurance policies described in Section 3.03 of this
Agreement.
IBNR Losses: "Incurred but not reported" losses for which reserves are
routinely established.
Insurance Administration: With respect to each Policy (including Self
Insurance Programs) and Excess Policy, the accounting for premiums,
retrospectively rated premiums, defense costs, adjuster's fees, indemnity
payments, deductibles and retentions as appropriate under the terms and
conditions of each of the Policies; and the reporting to excess insurance
carriers of any losses or claims in accordance with Policy provisions, and the
distribution of Insurance Proceeds as contemplated by this Agreement.
Insurance Proceeds: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
Policies: Insurance policies and insurance contracts of any kind relating
to the PRH Business or the Retained Business as conducted prior to the
Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile, aircraft and workers'
compensation insurance policies, state workers' compensation funds in Ohio and
Washington, and self-insurance and captive insurance company arrangements,
including any "fronted policies" with respect to Self Insurance Programs,
together with the rights, benefits and privileges thereunder.
Post-Distribution Claims: Claims asserted against the PRH Group or the
Promus Group with respect to any injury, loss, liability, damage or expense
incurred after the Distribution Date.
PRH Claims: Claims arising in or in connection with the PRH Business.
PRH Policies: All Policies, current or past, which are owned by or on
behalf of Promus or any of its Affiliates or predecessors, which relate to the
PRH Business but do not relate to the Casino Business, and which Policies are
either maintained by PRH or assignable to PRH.
PRH Reserve: The reserve described in Section 3.01 of this Agreement.
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Promus Claims: Claims arising in or in connection with the Retained
Business.
Self Insurance Programs: Those self-insured programs administered by
Promus for the benefit of its employees, properties and operating businesses
covering Claims arising prior to the Distribution Date, including without
limitation prospective funding of (a) workers' compensation claims with the
approval of state self-insurance departments, (b) claims within the deductible
of an insurance policy (including property, workers' compensation, general
liability, automobile liability policies), and (c) reinsurance of an insurance
company insuring Promus for property, workers' compensation, general liability,
or automobile liability.
Shared Policies: All Policies, current or past, which are owned or
maintained by or on behalf of Promus or any of its Subsidiaries or their
respective predecessors which relate to both the Casino Business and the PRH
Business, and all other Policies not constituting PRH Policies or Retained
Policies.
Section 1.02. Other Terms. Any capitalized terms used herein but not
defined herein shall have the meaning set forth in the Distribution Agreement.
ARTICLE II
THE DISTRIBUTION
Section 2.01. Effective Date. This Agreement shall be effective on the
Distribution Date and shall expire five (5) years thereafter, unless sooner
terminated as provided herein.
Section 2.02. Post-Distribution Claims. Effective at 12:01 a.m. on the
day following the Distribution Date, Promus and PRH will have separate risk
management programs for the negotiation and execution of insurance contracts,
risk identification and treatment, risk control, claims management, and risk
retention and financing. With the exception of Claims under the Excess
Policies, which will be handled as described in Section 3.03 of this Agreement,
Promus shall be solely responsible for the administration and payment of Post-
Distribution Claims relating to the Retained Business, and PRH shall be solely
responsible for the administration and payment of Post-Distribution Claims
relating to the PRH Business.
Section 2.03. Pre-Distribution Claims. The PRH Liabilities as defined in
the Distribution Agreement shall include any and all PRH Claims asserted
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against the PRH Group or the Promus Group and which were incurred or claimed to
have been incurred on or prior to the Distribution Date. The Retained
Liabilities as defined in the Distribution Agreement shall include any and all
Promus Claims asserted against the PRH Group or the Promus Group and which were
incurred or claimed to have been incurred on or prior to the Distribution Date.
ARTICLE III
INSURANCE POLICIES AND RESERVES
Section 3.01. Reserves.
(a) PRH shall be entitled to reserves recorded by Promus or its
captive insurance company, Aster Insurance Ltd., with respect to the PRH Claims
(the "PRH Reserve") in accordance with the terms and conditions of this
Agreement. The amount of the PRH Reserve shall be determined by allocating a
portion of Promus's reserve for insured losses (including losses insured under
Self Insurance Programs) in the following manner: As soon as is reasonably
practicable after the Distribution Date, PRH Claims which were incurred or
claimed to be incurred prior to the Distribution Date (including an estimate of
PRH Claims incurred but not reported) shall be valued by Becher + Carlson,
Promus's actuary, as of the Distribution Date. The parties will instruct Becher
Carlson to value the PRH Claims using the same or similar methods used in
previous valuations of the Claims and without regard to the value of the Promus
Claims. PRH Claims shall be paid from the PRH Reserve in the manner provided in
this Agreement. Promus's liability for PRH Claims shall be limited to the
amount of the PRH Reserve.
(b) Promus shall be entitled to any reserves established by Promus or
any of its Subsidiaries with respect to the Retained Liabilities, or the benefit
of reserves held by any insurance carrier with respect to the PRH Liabilities or
the Retained Liabilities, subject to the rights of PRH to the PRH Reserve as
provided herein.
Section 3.02. Insurance Policies and Rights Included Within the PRH
Assets. The PRH Assets as defined in the Distribution Agreement shall include
(a) any and all rights of an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, with respect to all injuries, losses, liabilities,
damages and expenses incurred or claimed to have been incurred on
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or prior to the Distribution Date by any party in or in connection with the
conduct of the PRH Business or, to the extent any claim is made against PRH or
any of its Subsidiaries, the Retained Business, and which injuries, losses,
liabilities, damages and expenses may arise out of insured or insurable
occurrences or events under one or more of the Shared Policies; provided,
however, that nothing in this clause shall be deemed to constitute (or to
reflect) the assignment of the Shared Policies, or any of them, to PRH and
provided, further, that the foregoing shall not limit the generality of the
definition of the PRH Assets set forth in Section 1.01 of the Distribution
Agreement or the effect of Section 2.02 thereof; and (b) the PRH Policies.
Section 3.03. Excess Liability Policies.
(a) After the Distribution, Promus shall provide continued coverage
for PRH Claims under the following excess liability insurance policies (the
"Excess Policies") until the expiration of the Excess Policies on June 1, 1997,
or such later date as may be agreed by the parties:
- The X. L. Insurance Company Ltd. policy number UMB01565, with a
limit of liability of $50 million per occurrence, $100 million
annual aggregate, and attaching at $100 million.
- The ACE Limited policy number PRMU750/4, with a limit of
liability of $150 million and attaching at $150 million.
Forty-seven percent (47%) of the additional premiums, if any, for such coverage
shall be reimbursed by PRH within 10 business days of the Distribution Date or
any policy renewal date.
(b) In the event either party hereto makes a Claim which results in a
reduction of the policy limits of one or both of the Excess Policies, the party
making such Claim shall be required to reinstate the original policy limit of
any affected Excess Policy at its sole cost, unless otherwise agreed by the
other party. Each party agrees to be reasonable if requested to waive the
foregoing requirement, taking into account the remaining term of the affected
Excess Policy, the cost of reinstatement and the availability of alternative
insurance coverage.
Section 3.04. Treatment of Claims Against PRH Reserve.
(a) If any person, corporation, firm or entity shall assert a claim against
PRH or any PRH Subsidiary with respect to any injury, loss, liability, damage or
expense incurred or claimed to have been incurred on or prior to the
Distribution Date in or in connection with the conduct of the PRH Business or,
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to the extent any claim is made against PRH or any of its Subsidiaries, the
Retained Business, and which injury, loss, liability, damage or expense may
arise out of insured or insurable occurrences or events under a Self Insurance
Program or otherwise be chargeable to the PRH Reserve, PRH shall be entitled to
payment of such Claim and related expenses from the PRH Reserve in the manner
described in this Section 3.04. Promus shall make available an imprest bank
account for use by PRH or its agent (including, without limitation, its third
party administrator) in paying PRH Claims. PRH or its agent shall submit
documentation to Promus on a monthly basis detailing payments made from the
imprest bank account during the preceding month for PRH Claims and requesting
replenishment of the account in like amount. The requests for replenishment
shall be accompanied by reasonable supporting documentation. Promus shall
replenish the imprest bank account in accordance with procedures and
requirements contained in existing contractual arrangements among Promus,
Promus's third party administrator (which is also PRH's third party
administrator) and Old Republic Insurance Company, or in such other manner as
the parties may from time to time agree. The amount of the PRH Reserve shall be
reduced by the amount of any payment made by Promus of the PRH Claims, whether
by funding the imprest bank account or otherwise. The obligation of Promus to
fund the imprest bank account or to otherwise pay PRH Claims at any time shall
be limited to the balance remaining in the PRH Reserve after reductions to such
reserve as provided herein.
(b) Upon the expiration or earlier termination of this Agreement, Promus
will pay to PRH the cash equivalent of the balance, if any, then remaining in
the PRH Reserve.
Section 3.05. Treatment of Claims Under the Shared Polices and the Excess
Policies. If any person, corporation, firm or entity shall assert a claim
against PRH or any PRH Subsidiary with respect to any injury, loss, liability,
damage or expense incurred or claimed to have been incurred on or prior to the
Distribution Date in or in connection with the conduct of the PRH Business or,
to the extent any claim is made against PRH or any of its Subsidiaries, the
Retained Business, and which injury, loss, liability, damage or expense may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies or the Excess Policies, Promus shall at the time such claim is
asserted be deemed to assign, without need of further documentation, to PRH any
and all rights of an insured party under the applicable Shared Policy or Excess
Policy with respect to such asserted claim,
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specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer; provided, however, that nothing in this sentence
shall be deemed to constitute (or to reflect) the assignment of the Shared
Policies or the Excess Policies, or any of them, to PRH.
ARTICLE IV
ADMINISTRATION
Section 4.01. Administration. Notwithstanding the provisions of Article
III of the Distribution Agreement, but subject to any contrary provisions of
this Agreement, from and after the Distribution Date: (a) Promus shall be
responsible for (i) the Insurance Administration of the Shared Policies and the
Excess Policies and (ii) Claims Administration with respect to the Promus
Claims; provided, that the administration of the Shared Policies and the Excess
Policies by Promus is in no way intended to limit, inhibit, or preclude any
right to insurance coverage for any Claim of a named insured under the Shared
Policies and the Excess Policies, including but not limited to PRH and any of
its operations, subsidiaries and Affiliates; and (b) PRH shall be responsible
for (i) the Insurance Administration of the PRH Policies, and (ii) Claims
Administration with respect to the PRH Claims.
Section 4.02 Insurance Premiums. Except as otherwise provided in this
Agreement, (a) PRH shall pay that portion of the premiums (retrospectively-rated
or otherwise) with respect to Shared Policies and the Excess Policies as are
attributable to the PRH Liabilities, and (b) Promus shall pay that portion of
the premiums (retrospectively-rated or otherwise) with respect to Shared
Policies and the Excess Policies as are attributable to the PRH Liabilities.
Each party shall have the right but not the obligation to pay the entire premium
required under the terms and conditions of any of the respective Policies to the
extent the other party does not pay its proportionate share thereof and to be
reimbursed by the non-paying party for the portion of the premium attributable
to the Liabilities of such party.
Section 4.03 Allocation of Insurance Proceeds. Insurance Proceeds
received with respect to claims, costs and expenses under the Policies shall be
paid to PRH with respect to the PRH Liabilities and to Promus with respect to
the Retained Liabilities. Payment of the allocable portions of indemnity costs
of Insurance Proceeds resulting from the liability policies will be made to the
appropriate party upon receipt from the insurance carrier. In the event that
the aggregate limits on any Shared Policies or Excess Policies are
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exceeded, the parties agree to provide an equitable allocation of Insurance
Proceeds received after the Distribution Date based upon their respective bona
fide claims. The parties agree to use their best efforts to cooperate with
respect to insurance matters.
Section 4.04. Agreement for Waiver of Conflict and Shared Defense. In the
event that Claims of both PRH and Promus exist relating to the same occurrence,
PRH and Promus agree to jointly defend and to waive any conflict of interest
necessary to the conduct of that joint defense. Nothing in this paragraph shall
be construed to limit or otherwise alter in any way the indemnity obligations of
the parties to this Agreement, including those created by this Agreement, the
Distribution Agreement, by operation of law or otherwise.
Section 4.05. Surety Bonds and Letters of Credit. Promus or its
Subsidiaries have posted surety bonds to secure obligations for self-insured
workers' compensation losses as required by various state insurance departments
(the "Surety Bonds") and the letters of credit to insurance companies that front
Promus's workers' compensation, general and automobile liability insurance
("LOCs"). PRH shall replace all Surety Bonds and LOC's relating to the PRH
Business within three (3) months after the Distribution Date. Promus shall keep
any such Surety Bonds and LOCs in place after the Distribution to secure
obligations relating to periods preceding the Distribution Date until their
replacement by PRH or until three (3) months after the Distribution Date,
whichever first occurs, provided, that PRH shall be responsible for payment of
all obligations secured by the Surety Bonds and LOCs constituting PRH
Liabilities (and shall reimburse Promus for any payment made directly by Promus
with respect to such PRH Liabilities), and Promus shall be responsible for all
such obligations constituting Retained Liabilities (and shall reimburse PRH for
any payments made directly by PRH on behalf of such Retained Liabilities),
consistent with the allocations of PRH Liabilities and Retained Liabilities set
forth in the Distribution Agreement. PRH will be responsible for the cost of
any Surety Bonds and LOCs outstanding after the Distribution Date that relate to
the PRH Business.
Section 4.06. Expenses. Except as otherwise provided herein, each party
will bear the cost of its performance of this Agreement. In the event that
Promus should incur any material cost or expense in connection with the PRH
Claims or any of them or as a result of providing services hereunder relating to
the PRH Claims, which cost or expense was not contemplated at the
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time this Agreement was executed, PRH agrees to reimburse Promus for the
reasonable amount of such cost or expense upon presentation of appropriate
supporting documentation. Promus and PRH each agree to negotiate in good faith
to resolve any disagreement concerning whether a cost or expense is reimbursable
under this Section 4.06 or whether the amount thereof is reasonable.
Section 4.07. Third Party Administrator. PRH has retained Alexsis, Inc.
to serve as its third party administrator with respect to the PRH Claims and the
Post-Distribution Claims relating to the PRH Business. PRH agrees not to change
third party administrators without the prior written consent of Promus, which
consent shall not be unreasonably withheld.
ARTICLE V
INDEMNIFICATION
Section 5.01. Indemnification of Promus. Except as otherwise expressly
set forth herein, Promus shall indemnify, defend and hold harmless PRH and each
of the PRH Subsidiaries, and each of their respective directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "PRH Indemnitees") from and against the
Promus Claims and any and all losses, Liabilities and damages, including,
without limitation, the costs and expenses of any and all Actions, threatened
Actions, demands, assessments, judgments, settlements and compromises relating
thereto and attorneys' fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any such Actions or
threatened Actions ("Indemnifiable Losses") of the PRH Indemnitees arising out
of or due to the failure or alleged failure of Promus or any of its Affiliates
to pay, perform or otherwise discharge in due course any of the Promus Claims.
Section 5.02. Indemnification by PRH. Except as otherwise expressly set
forth herein, PRH shall indemnify, defend and hold harmless Promus and each of
the Retained Subsidiaries, and each of their directors, officers, employees,
agents and Affiliates and each of the heirs, executors, successors and assigns
of any of the foregoing (the "Promus Indemnitees") from and against the PRH
Claims and any and all losses, Liabilities, damages, including, without
limitation, the costs and expenses of any and all Actions, threatened Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
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investigation, preparing or defending against any such Actions or threatened
Actions ("Indemnifiable Losses") of the Promus Indemnitees arising out of or due
to the failure or alleged failure of PRH or any of its Affiliates to pay,
perform or otherwise discharge in due course any of the PRH Claims.
Section 5.03. Insurance Proceeds. The amount which any party (an
"Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 5.01 or Section 5.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received.
Section 5.04. Procedure for Indemnification. The procedure for
indemnification under this Agreement shall be the same as that set forth in the
Distribution Agreement.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. It shall be an Event of Default
hereunder if either party:
(a) fails to perform any covenant, warranty or agreement under this
Agreement, and such breach continues for more than 30 days after receipt of
written notice thereof; or
(b) (i) either party generally fails to pay its debts as they become due;
(ii) either party becomes insolvent or makes an assignment for the benefit of
creditors; (iii) a receiver, trust conservator or liquidator of either party, or
of all or any substantial part of its assets, is appointed with or without the
application or consent of the other party and is not contested or, if contested,
not dismissed with 90 days; or (iv) a petition is filed by or against either
party requesting the entry of an order for relief under the Bankruptcy Code or
any amendment thereto, or under any other state
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or federal insolvency law or laws providing for the relief of debtors and is
acquiesced to or, if contested, is not dismissed within 90 days.
Section 6.02. Remedies.
(a) If any Event of Default shall occur with respect to Promus, PRH shall
have the right, in addition to all other rights and remedies available to it, to
terminate this Agreement with respect to future rights and obligations without
any liability to PRH for such termination, and Promus shall pay to PRH the then-
remaining balance in the PRH Reserve.
(b) If any Event of Default shall occur with respect to PRH, Promus shall
have the right, in addition to all other rights and remedies available to it, to
terminate this Agreement with respect to future rights and obligations without
any liability to Promus for such termination, except for the obligation of
Promus to pay to PRH the then-remaining balance in the PRH Reserve as provided
in Section 3.04(b) of this Agreement.
(c) Neither party shall be liable to the other for consequential
damages.
(d) Except as expressly set forth herein, nothing shall limit the
rights and remedies of the parties hereto at law or in equity.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Relationship of Parties. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
Section 7.02. Access to Information; Cooperation. Promus and PRH and
their authorized agents will be given reasonable access to and may take copies
of all information relating to the subjects of this Agreement (to the extent
permitted by federal and state confidentiality laws) in the custody of the other
party, including any agent, contractor, subcontractor, agent or any other person
or entity under the contract of such party, including the risk management
information system ("RMIS"), claims management system of any third party
administrator. and any other information relating to PRH Claims. The parties
will cooperate with each other to minimize the disruption caused by any such
access and providing of information.
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Section 7.03. Arbitration of Disputes.
(a) Any controversy or claim arising out of this Agreement, or any breach
of this Agreement, shall be settled by arbitration in accordance with the Rules
of the American Arbitration Association then in effect, as modified by this
Section 7.03 or by the further agreement of the parties.
(b) Such arbitration shall be conducted in Memphis, Tennessee.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 7.03 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain the other party from breaching this
Agreement or (ii) for specific enforcement of this Section 7.03. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 7.03 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this Section
7.03.
(e) The parties hereby consent to the jurisdiction of the federal
courts located in Memphis, Tennessee for all purposes.
(f) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any evidence presented during
the course of the arbitration without the prior written consent of both parties,
except as required to fulfill applicable disclosure and reporting obligations,
or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the arbitration.
If either party refuses to submit to arbitration any dispute required to be
submitted to arbitration pursuant to this Section 7.03, and instead commences
any other proceeding, including, without limitation, litigation, then the party
who seeks enforcement of the obligation to arbitrate shall be entitled to its
attorneys' fees and costs incurred in any such proceeding.
Section 7.04. Assignment. Neither party shall, without the prior written
consent of the other, have the right to assign any rights or delegate any
obligations under this Agreement.
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Section 7.05. Parties Bound. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing herein, expressed or implied, shall be construed to
give any other person any legal or equitable rights hereunder.
Section 7.06. Notices. All notices, consents, approvals and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight courier
or three days after being mailed by registered or certified mail (postage
prepaid, return receipt requested) to the named representatives of the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):
(a) if to Promus
Harrah's Entertainment, Inc.
1023 Cherry Road
Memphis, Tennessee 38117
Attention: Corporate Secretary
(b) if to PRH
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, Tennessee 38138
Attention: Corporate Secretary
Section 7.07. Further Action. PRH and Promus each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
Section 7.08. Waiver. PRH and Promus each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute a
waiver of any subsequent default or nullify the effectiveness of that term or
condition.
Section 7.09. Governing Law. All controversies and disputes arising out
of or under this Agreement shall be determined pursuant to the laws of the State
of Tennessee.
Section 7.10. Entire Agreement. This Agreement and the Distribution
Agreement constitute the entire understanding between the parties hereto, and
supersede all prior written or oral communications, relating to the subject
matter covered by said agreements. No amendment, modification, extension or
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failure to enforce any condition of this Agreement by either party shall be
deemed a waiver of any of its rights herein. This Agreement shall not be
amended except by a writing executed by the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
30th day of June, 1995.
THE PROMUS COMPANIES INCORPORATED,
a Delaware corporation
By: CHARLES A. LEDSINGER, JR.
------------------------------
Name: Charles A. Ledsinger, Jr.
Title: Senior Vice President
PROMUS HOTEL CORPORATION, a
Delaware corporation
By: DONALD H. DEMPSEY
------------------------------
Name: Donald H. Dempsey
Title: SVP-CFO
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EX-10(16)
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, dated as of June 30, 1995, among The Promus
Companies, Incorporated, a Delaware corporation ("Promus") to be renamed
Harrah's Entertainment, Inc. ("HEI"), Promus Hotel Corporation, a Delaware
corporation ("PHC"), and their respective direct and indirect subsidiaries.
References herein to a "party" (or "parties") to this Agreement, shall refer to
Promus, PHC, and where appropriate and the context so requires, HEI.
WHEREAS, Promus and its subsidiaries have joined in filing
consolidated Federal Income Tax Returns and certain consolidated, combined or
unitary state Income Tax Returns;
WHEREAS, Promus and PHC have entered into that certain Plan of
Reorganization and Distribution Agreement, dated as of the date hereof (the
"Distribution Agreement"), pursuant to which Promus will distribute all of the
outstanding common stock in PHC (such stock to be received by Promus immediately
before in a Code Section 355 distribution from Embassy Suites, Inc. ("Embassy"),
a wholly-owned subsidiary of Promus) to its stockholders in a transaction
intended to qualify for tax-free treatment under Code Section 355 (the "Spin-
off");
WHEREAS, pursuant to the Spin-off, (i) PHC and its subsidiaries will
leave the Promus Group and (ii) Promus will change its name to Harrah's
Entertainment, Inc.; and
WHEREAS, the parties hereto wish to provide for (i) allocations of,
and indemnifications against, certain liabilities for Taxes, (ii) the
preparation and filing of Tax Returns on a basis consistent with prior practice
and the payment of Taxes with respect thereto, and (iii) certain related
matters;
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. Definitions.
When used herein the following terms shall have the following
meanings:
"Affiliate" -- with respect to any corporation (the "given
corporation"), each person, corporation, partnership or other entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the given corporation. For
purposes of this definition, "control" means the possession, directly or
indirectly, of 50% or more of the voting power or value of outstanding voting
interests.
"Affiliated Group" -- an affiliated group of corporations within the
meaning of Code Section 1504(a) for the Taxable Period or, for purposes of any
state income tax matters, any consolidated, combined or unitary group of
corporations within the meaning of the corresponding provisions of tax law for
the state in question.
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"After-Tax Basis" -- any indemnity payment made hereunder shall give
effect to, and be reduced by the value of, any and all applicable deductions,
losses, credits, offsets or other tax items for Federal, state or other Tax
purposes attributable to the payment of the indemnified liability, which value
shall be determined on an assumed basis by (a) multiplying the amount of such
deductions, losses, offsets or other tax items (such amount determined as if
such deductions, losses, offsets or other tax items will generate an immediate
deduction for the full amount ultimately available) by (i) 39% or (ii) if no
state income tax benefit shall result therefrom, 35% (such percentages to
increase or decrease on a percentage-for-percentage basis with any subsequent
increases or decreases in the current 35% highest marginal income tax rate for
corporations) and (b) valuing any credits or other direct reduction of Tax on a
dollar-for-dollar basis. For example, if a deductible interest payment of $100
is indemnified hereunder, the indemnification payment with respect thereto shall
be reduced by $39 to $61.
"Closing" -- the time when the Spin-off shall become effective on the
Closing Date.
"Closing Date" -- the date on which the Spin-off is effected by HEI.
"Code" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the Taxable Year in question.
"Combined Jurisdiction" -- for any Taxable Period, any state, local or
foreign jurisdiction in which Promus or a Promus Affiliate is included in a
consolidated, combined, unitary or similar return with Promus or any Promus
Affiliate for state, local or foreign Income Tax purposes.
"Distribution Agreement" -- as defined in the preamble to this
Agreement.
"Embassy" -- as defined in the preamble to this Agreement.
"Embassy Location-Specific Tax and Information Returns" -- as defined
in Section 2(a)(i)(D) of this Agreement.
"Final Determination" -- (i) a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable; (ii) a closing agreement or accepted offer in compromise under
Code Sections 7121 or 7122, or comparable agreements under the laws of other
jurisdictions; or (iii) any other final settlement with the IRS or other Taxing
Authority, or (iv) the expiration of an applicable statute of limitations.
"HEI"-- as defined in the preamble to this Agreement.
"HEI Group" -- HEI and each corporation that joins with HEI in filing
a consolidated federal income tax return for any Post-Closing Taxable Period.
For purposes of this Agreement, the HEI Group shall exist from the beginning of
the day immediately after the Closing Date. To the extent applicable, to any
state income tax matters, the "HEI Group" shall include all corporations joining
in the filing of a consolidated, combined or unitary income tax return for the
state and period in question.
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"HEI Member" -- a corporation that was immediately before the Spin-off
a Promus Member and becomes a member of the HEI Group at the beginning of the
day immediately after the Closing Date.
"Income Tax(es)" -- with respect to any corporation or group of
corporations, any and all Taxes based upon or measured by net income (regardless
of whether denominated as an "income tax," a "franchise tax" or otherwise),
imposed by any Taxing Authority, together with any related interest, penalties
or other additions thereto.
"Indemnified Party" -- as defined in Section 3(e) of this Agreement.
"Indemnifying Party" -- as defined in Section 3(e) of this Agreement.
"Information Return(s)" -- with respect to any corporation or
Affiliated Group, any and all reports, returns, declarations or other filings
(other than Tax Returns) required to be supplied to any Tax Authority.
"IRS" -- the United States Internal Revenue Service.
"Other Tax(es)" -- with respect to any corporation or Affiliated
Group, any and all Taxes, other than Income Taxes, together with any related
interest, penalties or other additions thereto.
"Overdue Rate" -- a rate of interest per annum that fluctuates with
the Federal short-term rate established from time to time pursuant to Code
Section 6621.
"PHC"-- as defined in the preamble to this Agreement.
"PHC Group" -- PHC and each corporation that joins with PHC in filing
a consolidated federal income tax return for any Post-Closing Taxable Period.
For purposes of this Agreement, the PHC Group shall exist from the beginning of
the day immediately after the Closing Date. To the extent applicable to any
state income tax matters, the "PHC Group" shall include all corporations joining
in the filing of a consolidated, combined or unitary income tax return for the
state and period in question.
"PHC Member" -- a corporation that was a Promus Member and becomes a
member of the PHC Group at the beginning of the day immediately after the
Closing Date.
"Post-Closing Straddle Period" -- with respect to any Straddle Period,
the period beginning on the day after the Closing Date and ending on the last
day of such Taxable Year.
"Post-Closing Taxable Period" -- a Taxable Year that begins on the day
immediately after the Closing Date, including any Post-Closing Straddle Period.
"Pre-Closing Straddle Period" -- with respect to any Straddle Period,
the period beginning on the first day of such Taxable Year and ending on the
close of business on the Closing Date.
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"Pre-Closing Taxable Period" -- a Taxable Year that ends at or before
the close of business on the Closing Date, including any Pre-Closing Straddle
Period.
"Promus" -- as defined in the Preamble to this Agreement.
"Promus Group" -- HEI and each corporation that joined with HEI in
filing a consolidated federal income tax return for any Pre-Closing Taxable
Period. For purposes of this Agreement, the Promus Group shall terminate at the
close of business on the Closing Date. To the extent applicable to any state
income tax matters, the "Promus Group" shall include all corporations joining in
the filing of a consolidated, combined or unitary income tax return for the
state and period in question.
"Promus Member" -- a corporation that was a member of the Promus
Group at the close of business on the Closing Date.
"Representative" -- with respect to any person or entity, any of such
person's or entity's directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.
"Spin-off" -- as defined in the Preamble to this Agreement.
"Straddle Period" -- any Taxable Year beginning before and ending
after the close of business on the Closing Date.
"Tax(es)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or additional amount imposed
by any Taxing Authority, whether any such tax is imposed directly or through
withholding.
"Taxable Period" -- either a Pre-Closing Taxable Period or a Post-
Closing Taxable Period.
"Taxable Year" -- a taxable year (which may be shorter than a full
calendar or fiscal year), year of assessment or similar period with respect to
which any Tax may be imposed.
"Tax Benefit(s)" -- (i) in the case of an Income Tax for which a
consolidated Federal, or a consolidated, combined or unitary state or other, Tax
Return is filed, the amount by which the Tax liability of the Affiliated Group
or other relevant group of corporations is actually reduced on a "with and
without" basis (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
taxable income in any other Taxable Year or as a carryforward or carryback, and
including the effect on other Income or Other Taxes of such reduction), plus any
interest received with respect to any related Tax refund, and (ii) in the case
of any Other Tax, the amount by which the Tax liability of a corporation is
actually reduced on a "with and without" basis (by deduction, entitlement to
refund, credit, offset or otherwise, whether available in the current Taxable
Year, as an adjustment to taxable income in any other Taxable Year or as a
carryforward or carryback, and including the effect on other Income or Other
Taxes of such reduction), plus any interest received with respect to any related
Tax refund.
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"Taxing Authority" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"Tax Practices" -- the most recently applied policies, procedures and
practices employed by the Promus Group in the preparation and filing of, and
positions taken on, any Tax Returns of Promus or any Promus Member or Promus
Affiliate for any Pre-Closing Taxable Period.
"Tax Return(s)" -- with respect to any corporation or Affiliated
Group, all returns, reports, estimates, information statements, declarations and
other filings relating to, or required to be filed in connection with, the
payments or refund of any Tax.
"Tax Treatment" -- as defined in Section 3(c) hereto.
2. Obligations, Responsibilities and Rights of HEI and PHC.
(a) Preparation and Filing of Tax Returns.
(i) By HEI. HEI shall prepare and timely file (or cause to
be prepared and timely filed):
(A) all Tax and Information Returns for Income Taxes
of the Promus Group and any Promus Member for any Pre-Closing Taxable Period
other than a Pre-Closing Straddle Period;
(B) all Tax and Information Returns for Income Taxes
of the Promus Group, the HEI Group, any Promus Member and any HEI Member (other
than such Returns solely for any PHC Member or any group of PHC Members) for all
Straddle Periods;
(C) all Tax and Information Returns for Income Taxes
of the HEI Group and any HEI Member for all Post-Closing Taxable Periods;
(D) all Tax and Information Returns for Other Taxes
for all Taxable Periods relating to (i) all Promus Members (except for PHC
Members), the HEI Group, and the HEI Members (but not including any hotel
location-specific or hotel activity-specific Tax and Information Returns filed
by Embassy or Harrah's Operating Company, Inc. ("Embassy Location-Specific Tax
and Information Returns")), and (ii) any New York City or State of New York real
property transfer Taxes relating to the transfer or deemed transfer of any real
property owned or leased by any Promus Member during any Pre-Closing Taxable
Period (including, without limitation, any such Taxes resulting from the Spin-
off);
(E) all Information Returns required to be filed by
the Promus Group or any Promus Member at or before the close of business on the
Closing Date and by any HEI Member after the close of business on the Closing
Date, as well as any Information Returns required from the Promus Group or any
Promus Member with respect to the formation of the PHC Group or the Spin-off;
and
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(F) all Tax and Information Returns not otherwise
required to be filed by HEI or PHC pursuant to this Section 2(a)(i) and Section
2(a)(ii).
(ii) By PHC. PHC shall prepare and timely file (or cause to
be prepared and timely filed);
(A) all Information Returns for Income Taxes of any
PHC Member;
(B) all Tax and Information Returns for Income Taxes
of any PHC Member or any group of PHC Members (other than such Returns for the
Promus Group or any Promus Member) for all Straddle Periods;
(C) all Tax and Information Returns for Income Taxes
of the PHC Group and any PHC Member for all Post-Closing Taxable Periods;
(D) to the extent not filed by the close of business
on the Closing Date, all Tax Returns for Other Taxes for all Taxable Periods
relating to (i) all PHC Members, and (ii) Embassy Location-Specific Tax and
Information Returns; and
(E) all Information Returns required to be filed by
the PHC Group or any PHC Member after the close of business on the Closing Date.
(b) Provision of Filing Information. HEI (or PHC, as the case
may be) shall cooperate and assist PHC (or HEI) in the preparation and filing of
all Tax and Information Returns subject to Section 2(a) and submit to PHC (or
HEI) (i) all necessary filing information in a manner consistent with past Tax
Practices and (ii) all other information reasonably requested by PHC (HEI) in
connection with the preparation of such Tax and Information Returns promptly
after such request. It is expressly understood and agreed that PHC's (or HEI's)
ability to discharge its Tax and Information Return preparation and filing
responsibilities is contingent upon HEI (or PHC) providing PHC (or HEI) with all
cooperation, assistance and information reasonably necessary or requested for
the filing of such Tax and Information Returns and that HEI (or PHC) shall
indemnify PHC's (or HEI), and PHC's (or HEI's) indemnification obligations of
Section 3 shall not apply, if, and to the extent that, penalties, interest or
other additions to Taxes are incurred as a result of material inaccuracies in
such information or of failures, material in nature, to provide such information
and assistance.
(c) Taxable Year. PHC and HEI agree that, for Income Tax
purposes, (i) the PHC Members shall be included in the consolidated Federal
Income Tax Return of the Promus Group for the Taxable Year that ends at the
close of business on the Closing Date (and in all corresponding consolidated,
combined or unitary state or other Income Tax Returns of the Promus Group) and
(ii) the PHC Group and each PHC Member shall begin a new Taxable Year for
purposes of such Federal and, to the extent permitted by law, state Income Taxes
on the day after the Closing Date. The parties further agree that, to the
extent permitted by applicable law, all Federal, state or other Income Tax
Returns shall be filed consistently with this position.
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(d) Advance Review of Tax Returns. At least fifteen (15) days
prior to the filing of any Federal Income Tax Return (including amendments
thereto) that includes a PHC Member, and at least ten (10) days prior to the
filing of any Tax Return other than any Federal Income Tax Return (including
amendments thereto) that includes a PHC Member, HEI shall provide PHC with the
portion of such Tax Return related to any PHC Member. In the case of each Tax
Return subject to the conformity requirements of Section 2(e) and filed pursuant
to Section 2(a), PHC shall provide HEI with copies of any such Tax Return at
least fifteen (15) days prior to the filing thereof (including amendments
thereto). PHC and its Representatives (or HEI and its Representatives, as the
case may be) shall have the right to review all workpapers related to such
portions of such Tax Returns prior to the filing of any such Tax Return. HEI
(or PHC, as the case may be) shall consult with PHC (or HEI's) regarding its
comments with respect to such Tax Returns and shall in good faith (A) consult
with PHC (or HEI) in an effort to resolve any differences with respect to the
preparation and accuracy of such Tax Returns and their consistency with past Tax
Practices and (B) consider PHC's (or HEI's) recommendations for alternative
positions with respect to items reflected on such Tax Returns; provided,
however, that HEI (or PHC) shall not be required to consider any such
recommendation if the result thereof would adversely affect the Taxes of the HEI
Group or any HEI Member (or the PHC Group or any PHC Member) for any Post-
Closing Taxable Period and may condition the acceptance of any such
recommendation upon the receipt of appropriate indemnification from PHC (HEI)
for any increases in Taxes that may result from the adoption of the relevant
alternative position.
(e) Consistent Positions on Tax Returns. HEI (or PHC, as the
case may be) shall prepare all Tax Returns filed pursuant to Section 2(a) for
all Taxable Years ended on or before December 31, 1996 in a manner consistent
with past Tax Practices except as otherwise required by changes in applicable
law or material underlying facts. Whether by original or amended Tax Returns or
otherwise, (i) HEI shall not (A) voluntarily accelerate or shift deductions and
other similar items into a Pre-Closing Taxable Period or (B) voluntarily defer
or shift income and other similar items into a Post-Closing Taxable Period, and
(ii) PHC shall not (A) voluntarily defer or shift deductions and other similar
items into a Post-Closing Taxable Period or (B) voluntarily accelerate or shift
income and other similar items into a Pre-Closing Taxable Period; provided,
however, that this Section 2(e) shall not preclude the correction of
mathematical or material factual errors or other adjustments necessary to
conform any such Tax Return to applicable law or past Tax Practices.
(f) Allocation of Straddle Period Taxes. For purposes of this
Agreement, Taxes shall be allocated between the Pre- and Post-Closing Straddle
Periods, in HEI s reasonable judgment after consulting with appropriate PHC
personnel, in the following manner:
(i) To the extent not impractical, Income Taxes shall be
allocated on the basis of the actual taxable income for each such period,
determined by closing the books of the Promus Group at the close of business on
the Closing Date.
(ii) To the extent that such an allocation based on a
closing of the books is impractical, HEI shall be authorized to use any
reasonable method, including allocations based on (x) allocations of taxable
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income, loss, gain, deduction and credits made for Federal Income Tax purposes,
(y) rounding to the next nearest month-end, or (z) the actual number of days in
the Pre- and Post-Closing Straddle Periods in proportion to the number of days
in the entire Straddle Period.
(g) Payment of Taxes. HEI shall pay all Taxes shown to be due
and payable on all Tax Returns filed by HEI pursuant to Section 2(a)(i) hereof
and, subject to Section 3(b), all Taxes that shall thereafter become due and
payable with respect to such Tax Returns as a result of a Final Determination.
PHC shall pay all Taxes shown to be due and payable on all Tax Returns filed by
PHC pursuant to Section 2(a)(ii) hereof and, subject to Section 3(a), all Taxes
that shall thereafter become due and payable with respect to any such Tax
Returns as a result of a Final Determination.
(h) Amendments to Tax Returns. HEI (or PHC, as the case may be)
shall be entitled to amend Tax Returns filed by HEI (or PHC) pursuant to Section
2(a); provided, however, that PHC shall not amend for any reason whatsoever any
Tax Return of HEI or any HEI Member for Pre-Closing Taxable Periods or Pre-
Closing Straddle Periods, except (A) after written notice to HEI, pursuant to a
change in accounting method granted by a Taxing Authority pursuant to a request
made prior to the Closing Date, or (B) with HEI's written consent (which consent
may be withheld at HEI's sole discretion). PHC shall not amend any Tax Return
of the PHC Group or any PHC Member for any Post-Closing Taxable Period ended on
or before December 31, 1996, or any Pre-Closing Straddle Period, except (A)
pursuant to the settlement or other resolution of a contest subject to Section 6
or (B) with HEI's written consent (which consent shall not be unreasonably
withheld); provided, however, that such prohibition shall not extend to the
correction of mathematical or material factual errors or other adjustments
necessary to conform such Tax Returns to applicable law or past Tax Practices.
(i) Refunds of Taxes.
(i) HEI shall be entitled to any refund (including for
purposes of this Section 2(i), any Tax Benefits realized by the PHC Group or any
PHC Member in lieu of any refund) of (x) any and all Taxes of the Promus Group
or any Promus Member (excluding PHC and the PHC Members) for all Pre-Closing
Taxable Periods and all Pre-Closing Straddle Periods, and (y) any and all Taxes
of the HEI Group or any HEI Member for all Post-Closing Taxable Periods (except
for Taxes in connection with Embassy Location-Specific Tax and Information
Returns). PHC shall be entitled to any refund (including for purposes of this
Section 2(i), any Tax Benefits realized by the Promus Group or any Promus Member
(excluding PHC and the PHC Members) or the HEI Group or any HEI Member in lieu
of any refund) of (x) any and all Taxes of the PHC Group or any PHC Member for
all Taxable Periods, and (y) any and all Taxes in connection with Embassy
Location-Specific Tax and Information Returns. Any such refunds attributable to
a Straddle Period shall be allocated between the Pre-Closing Straddle Period and
Post-Closing Straddle Period on a basis consistent with the method used to
allocate the Tax liability for such Straddle Period.
(ii) Except as otherwise provided in this Agreement, if HEI
or any HEI Member (or PHC or any PHC Member, as the case may be) receives a Tax
refund or Tax Benefit to which PHC or any PHC Member (or HEI or any HEI Member)
is entitled pursuant to this Agreement, HEI (or PHC) shall pay
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(in accordance with Section 4) the amount of such Tax refund or Tax Benefit
(including any interest received thereon) to PHC (or HEI) promptly after receipt
thereof.
(iii) The realization of, and procedural requirements
with respect to, any Tax Benefit under this Section 2(i) shall be governed by
Section 3(e).
(j) Carrybacks. PHC shall not file any carryback claim for
federal Income Taxes or state, local or foreign Income Taxes in a Combined
Jurisdiction for the PHC Group or any PHC Member into a Pre-Closing Taxable
Period without the prior written consent of HEI, which consent shall not be
unreasonably withheld.
(k) NOL, ITC and AMT Credit Benefits. The Tax Returns of the
Promus Group for Taxable Years prior to and including the Taxable Year that
includes the Closing Date may reflect that certain PHC Members have attributable
to them, under applicable Federal and state Income Tax law, certain net
operating loss carryforwards, investment tax credit carryforwards and
alternative minimum tax credit carryforwards (the "Carryforwards"). The parties
hereto agree that the PHC Group and the PHC Members shall be exclusively
entitled to use and benefit from the Carryforwards without compensation to the
Promus Group or any Promus Member. PHC hereby acknowledges and agrees (on its
behalf and on behalf of all PHC Members) that the exact amount of the
Carryforwards is not presently known and may not be definitively determined
until a Final Determination has been reached for all Pre-Closing Taxable Periods
of the Promus Group and each Promus Member. PHC further agrees that it shall
have no recourse against the Promus Group, any Promus Member, HEI Group or any
HEI Member regardless of (a) what amount of such Carryforwards will ultimately
be available to the PHC Group and the PHC Members in Post-Closing Taxable Years
and (b) whether the Carryforwards shall be subject to any limitation imposed as
a result of the application of Code Sections 382 and 383, the Treasury
regulations thereunder or other applicable law. HEI hereby agrees to take any
action or make any election reasonably required to permit PHC and the PHC
Members to utilize the Carryforwards; provided, however, that no such action or
election shall be required if it would adversely affect in any way the Income
Tax liabilities of the HEI Group or any HEI Member for any Taxable Year. The
parties also hereby agree that the provisions of this Section 2(k) shall apply
with respect to any similar carryforwards available under applicable state,
local or foreign Income Tax law.
(l) Tax Reserves. The Tax reserves of the Promus Group, as
reported on the financial statements dated as of the Closing Date, shall be
apportioned between the HEI Group and the PHC Group based on the allocation of
the related Tax liabilities as provided in this Section 2.
3. Indemnification.
(a) By HEI.
(i) Taxes. Subject to Sections 2(b) and 3(b), HEI shall
indemnify and hold PHC and PHC Members harmless (on an After-Tax Basis) against
any and all (A) federal, state, local and foreign Income Taxes of (x) the
predecessor group of the Promus Group for all Pre-Closing Taxable Periods
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ending on or prior to February 7, 1990 and (y) the Promus Group for all Pre-
Closing Taxable Periods beginning after February 7, 1990 (but excluding Income
Taxes solely attributable to the operations of any PHC Member), (B) state, local
and foreign Income Taxes of any Promus Members (excluding PHC Members) or HEI
Members for all Taxable Periods and (C) federal, state, local and foreign Other
Taxes (except for Other Taxes paid in connection with Embassy Location-Specific
Tax and Information Returns) of any Promus Members or HEI Members for all
Taxable Periods.
(ii) Member Liability. Subject to Sections 2(b) and 3(b),
HEI shall indemnify and hold PHC and the PHC Members harmless (on an After-Tax
Basis) against each and every liability for Taxes of the Promus Group under
Treasury Regulation Section 1.1502-6 or any similar law, rule or regulation
administered by any Taxing Authority, together with any related interest,
penalties and other additions.
(iii) Pre-existing Indemnification Obligations. HEI
shall indemnify and hold PHC and the PHC Members harmless (on an After-Tax
Basis) against any liability for Taxes of any person other than PHC or a PHC
Member for any Taxable Year; provided, however, that such liability shall only
be indemnified hereunder if it shall arise from, or be imposed under or pursuant
to, a contract, agreement, indemnity or other arrangement that (A) is legally
binding upon PHC or such a PHC Member, and was in full force and effect, both
(x) at the close of business on the Closing Date and (y) at the time such
liability arises and is imposed against PHC or the PHC Member and (B) has not
been amended, modified, changed, altered, restored, reinstated, extended or
otherwise affected by any action, inaction or other event occurring after the
close of business on the Closing Date. With respect to any claim for
indemnification under this Section 3(a)(iii), HEI shall be entitled to enforce
all rights and defenses available to PHC or any PHC Member with respect to any
contest of the underlying Taxes of such other person and any available rights or
defenses with respect to the imposition of such liability against PHC or the PHC
Member in a manner consistent with Section 6 as if such underlying Taxes or such
liability were an indemnified "Tax" for purposes of such Section.
(iv) Bass Litigation. HEI shall indemnify and hold PHC
harmless (on an After-Tax Basis) against any liability for Taxes arising from
the Settlement Agreement, dated March 17, 1995, which effected the settlement of
the litigation styled as Bass Public Limited Company, Bass International
Holdings N.V., (U.S.A.) Incorporated, Holiday Corporation and Holiday Inns, Inc.
v. The Promus Companies Incorporated, formerly pending in the United States
District Court for the Southern District of New York (92 Civ. 0969).
(b) By PHC.
(i) Taxes. Subject to Sections 3(a)(ii), (iii) and (iv),
PHC shall indemnify and hold HEI and HEI Members harmless (on an After-Tax
Basis) against any and all (A) federal, state, local and foreign Income Taxes of
the Promus Group for all Pre-Closing Taxable Periods beginning after February 7,
1990 to the extent solely attributable to the operations of any PHC Member, (B)
federal, state, local and foreign Income Taxes of the PHC Group and any PHC
Members for all Post-Closing Taxable Periods and (C) federal, state, local and
foreign Other Taxes of PHC Members and Other Taxes paid in connection with
Embassy Location-Specific Tax and Information Returns for all Taxable Periods.
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(ii) Post-Closing Transactions. Notwithstanding any
contrary provision in this Agreement or in the Distribution Agreement, PHC shall
indemnify and hold the HEI Group and the HEI Members harmless (on an After-Tax
Basis) against any Taxes imposed on or against the Promus Group (including
Promus Members) or the HEI Group (including the HEI Members) that are
attributable to, or arise from, transactions or events outside the ordinary
course of business of PHC and the PHC Members occurring on the Closing Date
after the Closing.
(c) Assumed Tax Treatments. The parties expressly agree for all
purposes to treat the Spin-off as a tax-free transaction under Code Sections 355
and 368 (the "Tax Treatment"). Each party hereto also expressly agrees not to
take (and to cause each of its Affiliates not to take) any action inconsistent
with the treatment of the Spin-off and all related transactions in accordance
with the Tax Treatment and to take (and to cause each of its affiliates to take)
any and all actions reasonably available to such party (or affiliate) to support
and defend such treatment. Notwithstanding anything to the contrary in Sections
3(a) or 3(b), if, solely as a result of any action by a party hereto (or an
Affiliate thereof other than the other party hereto) or its shareholders (in
their capacities as shareholders of such party) occurring after the Closing Date
(such party being the "acting party" for purposes of this Section 3(c)), a Final
Determination results in the Tax Treatment being incorrect and as a result
thereof additional Taxes are incurred, or any Tax Benefit is eliminated in a
Pre-Closing Taxable Period, the acting party shall indemnify and hold harmless
the other party hereto for all such additional Taxes or lost Tax Benefits. If
both Promus and PHC shall be "acting parties" for purposes of the preceding
sentence, then (a) if it can be clearly determined which such party (or
Affiliate or shareholders thereof) took the first action that irrevocably
created the basis for the Tax Treatment being incorrect, such party shall
indemnify and hold harmless the other party for all such additional Taxes or
lost Tax Benefits, or (b) if it cannot be so determined, the parties shall each
bear (and indemnify the other party against) 50% of such additional Taxes or
lost Tax Benefits. Any such claim for indemnification shall otherwise be
handled in the manner specified under this Section 3, but shall not affect in
any manner the provisions of Sections 5 and 6 with respect to cooperation and
control of contests and audits.
(d) Certain Reimbursements. PHC (or HEI, as the case may be)
shall notify HEI (or PHC) of any Taxes paid by the PHC Group or any PHC Member
(or the HEI Group or any HEI Member) which are subject to indemnification under
this Section 3. To the extent not otherwise provided in this Section 3, any
other notification contemplated by this Section 3(d) shall include a detailed
calculation (including, if applicable, separate allocations of such Taxes
between Pre- and Post-Closing Taxable Periods and Pre- and Post-Closing Straddle
Periods and supporting work papers) and a brief explanation of the basis for
indemnification hereunder. Whenever a notification described in this Section
3(d) is given, the notified party shall pay the amount requested in such notice
to the notifying party in accordance with Section 4, but only to the extent that
the notified party agrees with such request. To the extent the notified party
disagrees with such request, it shall, within 20 days, so notify the notifying
party, whereupon the parties shall use their best efforts to resolve any such
disagreement. To the extent not otherwise provided for in this Section 3 or in
Section 4, any payment made after such 20-day period shall include interest at
the Overdue Rate from the date such payment would have been made under Section 4
based upon the original notice given by the notifying party.
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(e) Tax Benefits Arising from Timing Adjustments. If and to the
extent that any Tax liability is indemnified under this Section 3 as a result of
a deferral, delay, acceleration or other timing adjustment with respect to the
accrual, recognition or utilization of any item of loss, deduction, credit,
income or gain of the party indemnified (the "Indemnified Party") (and not as a
result of the outright elimination or denial of such item), the Indemnified
Party shall (i) make, file or report in a proper and timely manner, at the
earliest time permitted by law, a claim for or with respect to, such item, (ii)
provide an annual notice to the party providing such indemnification (the
"Indemnifying Party") of the Indemnified Party's realization of any Tax Benefit
in other Taxable Periods as a result of any such item, and (iii) pay to the
Indemnifying Party the amount of any Tax Benefit that it may thereafter obtain
as a result of its use of such item; provided, however, that clauses (ii) and
(iii) hereof shall apply only after an indemnification payment under this
Section 3 has been received; and provided, further, that the provisions of this
Section 3(e) shall not apply if, and to the extent that, any such item has been
taken into account for purposes of determining the After-Tax Basis for the
related indemnification payment. The notices contemplated by clauses (iii)
above shall be accompanied by (1) appropriate supporting Tax Returns (for past,
current and, when available, future Taxable Years), documentation, schedules and
workpapers, and (2) such other Tax Returns (for past, current and, when
available, future Taxable Years), documentation and information as the
Indemnifying Party shall reasonably request, to enable the Indemnifying Party to
monitor the effect of such loss, credit, savings or Tax Benefit on the actual
Tax liabilities, payments and refunds of the Indemnified Party. For purposes of
this Agreement: (A) a Tax Benefit related to an overpayment or refund of Taxes
shall be deemed to have been realized at the time (x) an actual cash refund or
payment is received or (y) such overpayment is applied against other Taxes due;
(B) where a party has other losses, deductions, credits or similar items
available to it, any losses, deductions, credits or items for which the other
party would be entitled to a payment under this Agreement shall be treated as
the last items utilized to produce a Tax Benefit; and (C) in determining the
amount of the Tax Benefit realized, the amount by which the tax liability of a
corporation (or an Affiliated Group) for a Taxable Period is reduced because of
such an item shall be equal to the excess of (I) such corporation's Tax
liability for such Taxable Period if such item had not been taken into account,
over (II) the corporation's actual Tax liability for such Taxable Period. Each
of HEI and PHC shall take, and shall cause the members of their respective
Affiliated Groups to take, as promptly as practicable, all reasonable steps to
ensure that all available Tax Benefits are realized at the earliest possible
time.
(f) Loss of Deductions or Tax Benefits. Appropriate payments
shall be made between the parties to take account of subsequent losses of, or
changes in (i) any deductions, losses, credits, offsets or other tax items taken
into account for purposes of determining the After-Tax Basis of any
indemnification payment or (ii) any Tax Benefit that has been claimed and paid
for by the Indemnified Party under Section 3(e)(iii) above.
4. Method, Timing and Character of Payments Required by This
Agreement.
(a) Payment Procedures. HEI and PHC hereby agree to the
following monthly reporting and payment system with respect to all amounts that
shall become due and payable hereunder between the parties: (1) HEI (or
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<PAGE>
PHC, as the case may be) shall prepare and deliver to PHC (or HEI), on or before
the 5th calendar day of the following month (or, if such day is not a business
day, the next business day thereafter), a comprehensive monthly report of all
amounts that have become due hereunder to HEI (or PHC) or HEI's (or PHC's)
subsidiaries; and (2) the net amount due between HEI and its subsidiaries on the
one hand and PHC and its subsidiaries on the other hand as of such month-end
(including any amounts remaining unpaid, plus interest thereon, from prior
months) shall become due and payable on the 10th calendar day of the following
month (or, if such day is not a business day, the next business day thereafter).
The parties hereby agree to consult with each other in good faith to resolve any
differences with respect to such monthly reports and payments. HEI's (or PHC's)
failure to prepare or distribute any such monthly report shall not relieve or
defer its obligation to pay any amounts it may owe to PHC (or HEI) hereunder.
(b) Payment in Immediately Available Funds; Interest. All
payments made pursuant to this Agreement shall be made in immediately available
funds. Except as otherwise provided herein, any payment not made when due and
payable under Section 4(a) shall thereafter bear interest at the Overdue Rate.
(c) Characterization of Payments. Any payment (other than
interest thereon) made hereunder by HEI to PHC or by PHC to HEI shall be treated
by all parties for Tax purposes to the extent permitted by law, and for
accounting purposes to the extent permitted by generally accepted accounting
principles, as non-taxable dividend distributions or capital contributions made
prior to the close of business on the Closing Date.
5. Tax Returns; Cooperation; Document Retention; Confidentiality.
(a) Tax Returns. Promptly upon reasonable request, each party
shall deliver to the other party a copy of all filed Income Tax Returns for all
Post-Closing Taxable Periods ending prior to January 1, 2000 and make available
to the other party for inspection a copy of all filed Income Tax Returns for all
Post-Closing Taxable Periods ending after December 31, 1999 and prior to January
1, 2010.
(b) Provision of Cooperation, Documents and Other Information.
Upon the reasonable request of any party to this Agreement, HEI and PHC shall
provide (and shall cause the members of their respective Affiliated Groups to
provide) the requesting party, promptly upon request, with such cooperation and
assistance, documents, and other information, without charge, as may reasonably
be requested by such party in connection with (i) the preparation and filing of
any original or amended Tax Return, (ii) the conduct of any audit or other
examination or any judicial or administrative proceeding involving to any extent
Taxes or Tax Returns within the scope of this Agreement, or (iii) the
verification by a party of an amount payable hereunder to, or receivable
hereunder from, another party. Such cooperation and assistance shall include,
without limitation: (i) the provision on demand of books, records, Tax Returns,
documentation or other information relating to any relevant Tax Return; (ii) the
execution of any document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return by the Promus Group, a Promus
Member, the HEI Group, a HEI Member, the PHC Group or a PHC Member, or in
connection with any audit,
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<PAGE>
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations, with respect to Tax Returns
which HEI may be obligated to file on behalf of PHC Members pursuant to Section
2(a); (iii) the prompt and timely filing of appropriate claims for refund; and
(iv) the use of reasonable best efforts to obtain any documentation from a
governmental authority or a third party that may be necessary or helpful in
connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
(c) Retention of Books and Records. HEI, each HEI Member, PHC
and each PHC Member shall retain or cause to be retained all Tax Returns, and
all books, records, schedules, workpapers, and other documents relating thereto,
until the expiration of the later of (i) all applicable statutes of limitations
(including any waivers or extensions thereof), and (ii) any retention period
required by law or pursuant to any record retention agreement. The parties
hereto shall notify each other in writing of any waivers, extensions or
expirations of applicable statutes of limitations. The parties shall provide
written notice of any intended destruction of the documents referred to in this
subsection. A party giving such a notification shall not dispose of any of the
foregoing materials without first offering to transfer possession thereof to all
notified parties.
(d) Status and Other Information Regarding Audits and
Litigation. HEI (or PHC, as the case may be) shall use reasonable best efforts
to keep PHC (or HEI) advised, as to the status of Tax audits and litigation
involving any issue relating to any Taxes, Tax Returns or Tax Benefits subject
to indemnification under this Agreement. To the extent relating to any such
issue, HEI (or PHC) shall promptly furnish PHC (or HEI) copies of any inquiries
or requests for information from any Taxing Authority or any other
administrative, judicial or other governmental authority, as well as copies of
any revenue agent's report or similar report, notice of proposed adjustment or
notice of deficiency.
(e) Confidentiality of Documents and Information. Except as
required by law or with the prior written consent of the other party, all Tax
Returns, documents, schedules, work papers and similar items and all information
contained therein, which Tax Returns and other materials are within the scope of
this Agreement, shall be kept confidential by the parties hereto and their
Representatives, shall not be disclosed to any other person or entity and shall
be used only for the purposes provided herein.
6. Contests and Audits.
(a) Notification of Audits or Disputes. Upon the receipt by HEI
or any HEI Member (or PHC or any PHC Member, as the case may be) of notice of
any pending or threatened Tax audit or assessment which may affect the liability
for Taxes that are subject to indemnification hereunder, HEI (or PHC) shall
promptly notify the other in writing of the receipt of such notice.
(b) Control and Settlement. HEI shall have the right to
control, and to represent the interests of all affected taxpayers in, any Tax
audit or administrative, judicial or other proceeding relating, in whole or in
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<PAGE>
part, to any Pre-Closing Taxable Period or any other Taxable Period for which
HEI is responsible, in whole or in part, for Taxes under Sections 2(g) and (3),
and to employ counsel of its choice at its expense; provided, however, that,
with respect to such issues that may impact PHC or any PHC Member for any
Post-Closing Taxable Period, HEI shall (i) afford PHC full opportunity to
participate in any such proceedings in a reasonable manner at PHC's expense and
to review any submissions related to such issues, (ii) in good faith, consult
with PHC regarding its comments with respect to such proceedings and submissions
in an effort to resolve any differences with respect to HEI's positions with
regard to such issues, consider PHC's recommendations for alternative positions
with respect to such issues and advise PHC of the reasons for rejecting any such
alternative position, (iii) in good faith consult with PHC as to strategy and
settlement decisions with respect to such proceedings and submissions and (iv)
use its best efforts to arrive at a settlement of such proceedings that reflects
the ultimate merits of the issues rather than the respective indemnification
obligations of the parties pursuant to Section 3. In the event of any
disagreement regarding the proceedings, HEI shall have the ultimate control of
the contest and any settlement or other resolution thereof. PHC shall have the
right to control, and to represent the interests of all affected taxpayers in,
any Tax audit or administrative, judicial or other proceeding relating, in whole
or in part, to any Post-Closing Taxable Period of the PHC Group, or relating to
any other Taxable Period for which PHC is solely responsible, for Taxes under
Section 2(g) and (3), and to employ counsel of its choice at its expense;
provided, however, that PHC shall (i) afford HEI full opportunity to participate
in any such proceedings in a reasonable manner at HEI's expense and to review
any submissions related thereto and (ii) not agree to settle any such proceeding
in a manner that could reasonably have a material and adverse effect on (A) any
indemnification obligation of HEI hereunder, (B) any Tax liability of the Promus
Group or any Promus Member for any Pre-Closing Taxable Period or (C) any Tax
liability of the HEI Group or any HEI Member for any Post-Closing Taxable
Period, without the prior written consent of HEI, which consent shall not be
unreasonably withheld.
(c) Delivery of Powers of Attorney and Other Documents. PHC (or
HEI, as the case may be) shall execute and deliver to HEI (or PHC), promptly
upon request, powers of attorney authorizing HEI (or PHC) to extend statutes of
limitations, receive refunds, negotiate settlements and take such other actions
that HEI or PHC reasonably considers to be appropriate in exercising its control
rights pursuant to Section 6(b), and any other documents reasonably necessary to
effect the exercising of such control rights.
7. Miscellaneous.
(a) Effectiveness. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of any applicable
statute of limitations; provided, however, that this Agreement shall terminate
immediately upon a termination of the Distribution Agreement in accordance with
the terms of Section 9.07 thereof and thereafter this Agreement shall be of no
further force and effect.
(b) Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof.
This Agreement terminates and supersedes, on a prospective basis only, any and
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<PAGE>
all other sharing or allocation agreements with respect to Taxes in effect at
the time between the Promus Group and the PHC Members, but shall not affect any
such agreement to the extent applicable only among HEI Members.
(c) Guarantees of Performance. HEI and PHC hereby guarantee the
complete and prompt performance by the members of their respective Affiliated
Groups of all of their obligations and undertakings pursuant to this Agreement.
If, subsequent to the close of business on the Closing Date, either HEI or PHC
shall be acquired by another entity such that 50% or more of its common stock is
in common control, such acquirer shall, by making such acquisition,
simultaneously agree to jointly and severally guarantee the complete and prompt
performance by the acquired corporation and any Affiliate of the acquired
corporation of all of their obligations and undertakings pursuant to this
Agreement.
(d) Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any of such
which may hereafter be declared invalid, void or unenforceable. In the event
that any such term, provision, covenant or restriction is hereafter held to be
invalid, void or unenforceable, the parties hereto agree to use their best
efforts to find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
(e) Indulgences, etc. Neither the failure nor any delay on the
part of any party hereto to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise of the same or any other right, nor
shall any waiver of any right with respect to any occurrence be construed as a
waiver of such right with respect to any other occurrence.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
regard to the conflict of law principles thereof, except with respect to matters
of law concerning the internal corporate affairs of any corporate entity which
is a party to or subject of this Agreement, and as to those matters the law of
the jurisdiction under which the respective entity derives its powers shall
govern.
(g) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement that are routine in
nature shall be made in writing and shall be delivered by hand or mailed by
registered or certified mail (return receipt requested) to the designated
representative of the tax department of each party and confirmed by a copy
thereof directed to the general counsel of each party, while all notices,
requests, demands and other communications of material importance shall be made
in the manner provided in Section 9.04 of the Distribution Agreement and
confirmed by a copy thereof directed to the designated representative of the tax
department of each party.
(h) Modification or Amendment. This Agreement may be amended at
any time by written agreement executed and delivered by duly authorized officers
of PHC and HEI.
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<PAGE>
(i) Successors and Assigns. A party's rights and obligations
under this Agreement may not be assigned without the prior written consent of
the other party. All of the provisions of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns, and shall survive any acquisition, disposition or other
corporate restructuring or transaction involving either party.
(j) No Third-Party Beneficiaries. This Agreement is solely for
the benefit of the parties to this Agreement and their respective Affiliates and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without this Agreement.
(k) Other. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all of such counterparts shall together constitute one and the same
instrument. The section numbers and captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
(l) Predecessors and Successors. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation,
Affiliated Group or member of an Affiliated Group shall also include any
predecessors or successors thereto, by operation of law or otherwise.
(m) Tax Elections. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
Promus Group (including the election with respect to the calculation of earnings
and profits under Code Section 1552 and the regulations thereunder). HEI, as
common parent of the HEI Group, shall continue to have sole discretion to make
any and all elections with respect to all members of the Promus Group for all
Pre-Closing Taxable Periods for which it is obligated to file Tax or Information
Returns under Section 2(a)(i).
(n) Injunctions. The parties acknowledge that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. The parties hereto shall be entitled to an injunction of injunctions
to prevent breaches hereto and to enforce specifically the terms and provisions
hereof in any court having jurisdiction; such remedy shall be in addition to any
other remedy available at law or in equity.
(o) Further Assurances. Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as it
may reasonably request in order to be able to comply with the provisions of this
sentence.
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<PAGE>
(p) Setoff. Except as provided in Section 4(a), all payments to
be made by any party under this Agreement shall be made without setoff,
counterclaim or withholding, all of which are expressly waived.
(q) Costs and Expenses. Unless otherwise specifically provided
herein, each party agrees to pay its own costs and expenses resulting from the
fulfillment of its respective obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
above written.
THE PROMUS COMPANIES,
INCORPORATED AND SUBSIDIARIES
By: DEE A. WALLACE
---------------------------
Name: Dee A. Wallace
Title: Vice President, Tax
The Promus Companies, Incorporated
PROMUS HOTEL CORPORATION AND
SUBSIDIARIES
By: DONALD H. DEMPSEY
---------------------------
Name: Donald H. Dempsey
Title: SVP-CFO
Promus Hotel Corporation
Exhibit 10(20)
PROMUS HOTEL CORPORATION
June 30, 1995
[Name of Executive]
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, Tennessee 38138
Re: Severance Agreement
Dear _____________:
Promus Hotel Corporation (the "Company") considers it essential to the best
interest of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreements set forth in Subsection 2(b) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("this Agreement") in the event your employment with the
Company terminates subsequent to a "Change in Control of the Company" (as
defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on June 30, 1995, and
shall continue in effect through December 31, 1995; provided, however, that
commencing on January 1, 1996 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, if a
Change in Control of the Company shall have occurred during the original or
extended term of this Agreement, this Agreement shall automatically continue in
<PAGE>
[Name of Executive]
June 30, 1995
Page 2
effect for a period of twenty-four months beyond the month in which such Change
in Control occurred.
2. Change in Control.
(a) No benefit shall be payable to you hereunder unless there shall have
been a Change in Control of the Company, as set forth below. For purposes of
this Agreement, a "Change in Control of the Company" shall be deemed to have
occurred, subject to subparagraph (iv) hereof, if any of the events in
subparagraphs (i), (ii) or (iii) occur:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than an employee benefit plan of the Company, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 25% or more of the Company's then
outstanding voting securities carrying the right to vote in elections of
persons to the Board, regardless of comparative voting power of such voting
securities, and regardless of whether or not the Board shall have approved
such Change in Control; or
(ii) During any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in clauses (i)
or (iii) of this Subsection) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a majority
thereof; or
(iii) The holders of securities of the Company entitled to vote
thereon approve the following:
(A) A merger or consolidation of the Company with any other
corporation regardless of which entity is the surviving company, other
than a merger or consolidation which would result in the voting
securities of the Company carrying the right to vote in elections of
persons to the Board outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of the
Company's then outstanding voting securities carrying the right to
vote in elections of persons to the Board, or
<PAGE>
[Name of Executive]
June 30, 1995
Page 3
such securities of such surviving entity outstanding immediately after
such merger or consolidation, or
(B) A plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(iv) Notwithstanding the definition of a "Change in Control" of the
Company as set forth in this Section 2(a), the Human Resources Committee of
the Board (the "Committee") shall have full and final authority, which
shall be exercised in its discretion, to determine conclusively whether a
Change in Control of the Company has occurred, and the date of the
occurrence of such Change in Control and any incidental matters relating
thereto, with respect to a transaction or series of transactions which have
resulted or will result in a substantial portion of the assets or business
of the Company (as determined immediately prior to the transaction or
series of transactions by the Committee in its sole discretion which
determination shall be final and conclusive) being held by a corporation at
least 80% of whose voting securities are held, immediately following such
transaction or series of transactions, by holders of the voting securities
of the Company (determined immediately prior to such transaction or series
of transactions). The Committee may exercise such discretionary authority
without regard to whether one or more of the transactions in such series of
transactions would otherwise constitute a Change in Control of the Company
under the definition set forth in this Section 2(a).
(b) For purposes of this Agreement, a "Potential Change in Control of the
Company" shall be deemed to have occurred if the following occur:
(i) The Company enters into an agreement or letter of intent,
the consummation of which would result in the occurrence of
a Change in Control of the Company;
(ii) Any person (including the Company) publicly announces an
intention to take or to consider taking actions which if
consummated would constitute a Change in Control of the
Company;
(iii) Any person, other than an employee benefit plan of the
Company, or a trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing
9.5% or more of the Company's then outstanding voting
securities carrying the right to vote in elections of
persons to the Board increases his beneficial ownership
of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or
<PAGE>
[Name of Executive]
June 30, 1995
Page 4
(iv) The Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control of the Company has occurred.
You agree that, subject to the terms and conditions of this Agreement, in
the event of a Potential Change in Control of the Company, you will remain in
the employ of the Company (or the subsidiary thereof by which you are employed
at the date such Potential Change in Control occurs) until the earliest of (x) a
date which is six months from the occurrence of such Potential Change in Control
of the Company, (y) the termination by you of your employment by reasons of
Disability or Retirement (at your normal retirement age), as defined in
Subsection 3(i), or (z) the occurrence of a Change in Control of the Company.
(c) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of the Company of any of the following circumstances unless, in the case
of paragraphs (i), (v), (vi), (vii) or (viii), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(e) and 3(d), respectively, given in
respect thereof:
(i) The assignment to you of any duties inconsistent with your
status as an executive officer of the Company or a substantial adverse
alteration in the nature or status of your responsibilities from those
in effect immediately prior to the Change in Control of the Company;
(ii) A reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly affecting
all executives of the Company and all executives of any person in
control of the Company;
(iii) The relocation of the Company's principal executive offices
where you are working immediately prior to the Change in Control of the
Company to a location more than 50 miles from the location of such
offices immediately prior to the Change in Control of the Company or the
Company's requiring you to be based anywhere other than the location of
the Company's principal executive offices where you were working
immediately prior to the Change in Control of the Company except for
required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;
(iv) The failure by the Company, without your consent, to pay to
you any portion of your current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all
executives of the Company and all executives of any person in
control of the Company, or to pay to you any portion of
<PAGE>
[Name of Executive]
June 30, 1995
Page 5
an installment of deferred compensation under any deferred compensation
program of the Company, within thirty days of the date such compensation is
due;
(v) The failure by the Company to continue in effect any
compensation plan in which you are participating immediately prior to the
Change in Control of the Company which is material to your total
compensation, including but not limited to, the Company's Bonus Plan,
Executive Deferred Compensation Plan, Restricted Stock Plan, or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms
of the amount of benefits provided and the level of your participation
relative to other participants, as existed immediately prior to the
Change in Control of the Company;
(vi) The failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, savings and retirement plan, life insurance, medical,
health and accident, or disability plans in which you were participating at
the time of the Change in Control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by you
at the time of the Change in Control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time
of the Change in Control of the Company;
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 5 hereof; or
(viii) Any purported termination of your employment by the Company
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 3(d) hereof and the requirements of Subsection
3(b) above; for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this Agreement for Good
Reason shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason hereunder.
<PAGE>
[Name of Executive]
June 30, 1995
Page 6
3. Termination Following Change in Control. If any of the events
described in Subsection 2(a) hereof constituting a Change in Control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(c) hereof upon the subsequent termination of your employment if
such termination is (y) by the Company other than for Cause, Retirement or
Disability, or (z) by you for Good Reason.
(a) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six consecutive months, and
within thirty days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your employment may
be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination at age 65 (or later)
with ten years of service or retirement in accordance with any retirement
contract between the Company and you.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon your engaging in willful and continued misconduct,
or your willful and continued failure to substantially perform your duties with
the Company (other than due to physical or mental illness), if such failure or
misconduct is materially damaging or materially detrimental to the business and
operations of the Company, provided that you shall have received written notice
of such failure or misconduct and shall have continued to engage in such failure
or misconduct after 30 days following receipt of such notice from the Board,
which notice specifically identifies the manner in which the Board believes that
you have engaged in such failure or misconduct. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of failure
to substantially perform your duties or of misconduct in accordance with the
first sentence of this Subsection, and of continuing such failure to
substantially perform your duties or misconduct as aforesaid after notice from
the Board, and specifying the particulars thereof in detail.
(c) Voluntary Resignation. After a Change in Control of the Company and
for purposes of receiving the benefits provided in Subsection 4(c) hereof, you
shall be entitled to terminate your employment by voluntary resignation given at
any time during the two years following the occurrence of a Change in Control of
the Company hereunder, provided such
<PAGE>
[Name of Executive]
June 30, 1995
Page 7
resignation is by you for Good Reason. Such resignation shall not be deemed a
breach of any employment contract between you and the Company.
(d) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination, Etc. "Date of Termination" shall mean:
(i) If your employment is terminated for Disability, thirty days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty day
period), and
(ii) If your employment is terminated pursuant to Subsection (b) or
(c) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (b) above shall not be less than thirty days, and in
the case of a termination pursuant to Subsection (c) above shall not be
less than fifteen nor more than sixty days, respectively, from the date
such Notice of Termination is given);
provided that if within fifteen days after any Notice of Termination is given,
or, if later, prior to the Date of Termination (as determined without regard to
this provision), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
bonus, benefit and insurance plans in which you were participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this Subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
<PAGE>
[Name of Executive]
June 30, 1995
Page 8
4. Compensation Upon Termination or During Disability Following a Change
of Control. Following a Change in Control of the Company, as defined in
Subsection 2(a), upon termination of your employment or during a period of
Disability, you shall be entitled to the following benefits:
(a) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Company's Bonus Plan, Restricted Stock Plan, and other incentive
compensation plans during such period, until this Agreement is terminated
pursuant to Section 3(a) hereof. Thereafter, or in the event your employment
shall be terminated for Retirement, or by reason of your death, your benefits
shall be determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs, subject to Subsection 4(e) hereof.
(b) If your employment shall be terminated by the Company for Cause, the
Company shall pay you your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment by the Company shall be terminated (y) by the
Company other than for Cause, Retirement or Disability or (z) by you for Good
Reason, then you shall be entitled to the benefits provided below:
(i) The Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation or benefit plan of the Company, at the time such payments are
due;
(ii) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (the "Severance Payment") equal to
2.99 times the average of the Annual Compensation (as defined below) which
was payable to you by the Company (including for periods prior to the
commencement date of your employment with the Company, The Promus Companies
Incorporated or its affiliates, and, for periods prior to February 7, 1990,
provided that your employment with The Promus Companies Incorporated or its
affiliates commenced on or about February 7, 1990 and you were employed by
Holiday Corporation or its affiliates immediately prior to your
commencement of employment with The Promus Companies Incorporated or its
affiliates, Holiday Corporation or its affiliates) or any corporation
affiliated with the
<PAGE>
[Name of Executive]
June 30, 1995
Page 9
Company within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), for the five calendar years preceding the
calendar year in which the Change in Control occurred. Such average shall
be determined in accordance with proposed, temporary or final regulations
promulgated under Section 280G(d) of the Code, or, in the absence of such
regulations, if you were not employed by the Company or its affiliates
(including as the "Company" for this purpose The Promus Companies
Incorporated or its affiliates for periods prior to the commencement date
of your employment with the Company, and, provided that your employment
with The Promus Companies Incorporated or its affiliates commenced on or
about February 7, 1990 and you were employed by Holiday Corporation or its
affiliates immediately prior to your commencement of employment with The
Promus Companies Incorporated or its affiliates, Holiday Corporation or its
affiliates for periods prior to February 7, 1990) during the entire five
calendar years preceding the calendar year in which the Change in Control
occurred, then such average shall be an average of your Annual Compensation
for the complete calendar years (if any) and partial calendar year (if any)
during which you were so employed provided that the amount for any such
partial calendar year shall be an annualized amount based on the amount of
Annual Compensation paid to you during the partial calendar year. If you
were not employed by the Company or its affiliates, The Promus Companies
Incorporated or its affiliates or Holiday Corporation or its affiliates
during such preceding calendar year, then such average shall be an
annualized amount based on the amount of Annual Compensation paid to you
during the calendar year in which the Change of Control occurred. Annual
Compensation is your base salary and your annual bonus under the Annual
Management Bonus Plan of the Company that was payable to you by the Company
or any of its affiliates (including for this purpose base salary and bonus
payable to you by The Promus Companies Incorporated or its affiliates for
periods prior to the commencement date of your employment with the Company,
and, provided that your employment with The Promus Companies Incorporated
or its affiliates commenced on or about February 7, 1990 and you were
employed by Holiday Corporation or its affiliates immediately prior to your
commencement of employment with The Promus Companies Incorporated or its
affiliates, Holiday Corporation or its affiliates for periods prior to
February 7, 1990) that was payable to you during a calendar year determined
without any reduction for any deferrals of such salary or such bonus under
any deferred compensation plan (qualified or unqualified) and without any
reduction for any salary reductions used for making contributions to any
group insurance plan of the Company or its affiliates (including as the
"Company" for this purpose The Promus Companies Incorporated or its
affiliates for periods prior to the commencement date of your employment
with the Company, and, provided that your employment with The Promus
Companies Incorporated or its affiliates commenced on or about February 7,
1990 and you were employed by Holiday Corporation or its affiliates
immediately prior to your
<PAGE>
[Name of Executive]
June 30, 1995
Page 10
commencement of employment with The Promus Companies Incorporated or its
affiliates, Holiday Corporation or its affiliates for periods prior to
February 7, 1990).
(iii) The Company shall also pay to you the amounts of any
compensation or awards payable to you or due to you in respect of any
period preceding the Date of Termination under any incentive compensation
plan of the Company (including, without limitation, the Company's
Restricted Stock Plan and Stock Option Plan (the "Option Plan") and under
any agreements with you in connection therewith, and shall make any other
payments and take any other actions provided for in such plans and
agreements.
(iv) In lieu of shares of common stock of the Company ("Company
Shares") issuable upon exercise of outstanding options, if any ("Options")
granted to you under the Option Plan (which Options shall be cancelled upon
the making of the payment referred to below), you shall receive an amount
in cash equal to the product of (y) the excess of, the higher of the
closing price of Company Shares as reported on the New York Stock Exchange
on or nearest the Date of Termination (or, if not listed on such exchange,
on a nationally recognized exchange or quotation system on which trading
volume in Company Shares is highest) or the highest per share price for
Company Shares actually paid in connection with any change in control of
the Company, over the per share exercise price of each Option held by you
(whether or not then fully exercisable), times (z) the number of Company
Shares covered by each such option.
(v) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder).
(vi) In the event that you become entitled to the payments (the
"Severance Payments") provided under paragraphs (ii), (iii), and (iv),
above (and Subsections (d) and (e), below), and if any of the Severance
Payments will be subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, the Company shall pay to you at the time specified in
paragraph (vii), below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of any Excise Tax on
the Severance Payments and any federal (and state and local) income tax and
Excise Tax upon the payment provided for by this paragraph, shall be equal
to the amount of the Severance Payments less any Excise Tax attributable to
Severance Payments in respect of those shares of restricted stock granted
to you in 1990 in connection with the merger of Holiday Corporation with
and into a subsidiary of Bass
<PAGE>
[Name of Executive]
June 30, 1995
Page 11
plc and which were issued in substitution of shares of Holiday Corporation
restricted stock granted to you on or after November 11, 1986 in connection
with the 1987 recapitalization of Holiday Corporation (the "Excluded
Severance Payments"). For purposes of determining whether any of the
Severance Payments will be subject to the Excise Tax and the amount of such
Excise Tax the following will apply:
(A) Any other payments or benefits received or to be received by
you in connection with a Change in Control of the Company or your
termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such person)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or
are otherwise not subject to the Excise Tax;
(B) The amount of the Severance Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (y) the
total amount of the Severance Payments or (z) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (A), above); and
(C) The value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company's independent auditors
in accordance with proposed, temporary or final regulations under
Sections 280G(d)(3) and (4) of the Code or, in the absence of such
regulations, in accordance with the principles of Section 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay Federal income taxes at
the highest marginal rate of federal income 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 your residence on the Date of Termination, net of the
maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the amount
of Excise Tax attributable to Severance Payments other than the
Excluded Severance Payment is subsequently determined to be less than
the amount taken into
<PAGE>
[Name of Executive]
June 30, 1995
Page 12
account hereunder at the time of termination of your employment, you
shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and Federal (and
state and local) income tax imposed on the Gross-Up Payment being
repaid by you if such repayment results in a reduction in Excise Tax
and/or a Federal (and state and local) income tax deduction) plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
attributable to Severance Payments other than the Excluded Severance
Payment is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment (including
by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional gross-up payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(vii) The payments provided for in paragraphs (ii), (iii), (iv)
and (vi) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the Company
shall pay to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to you payable on the fifth day
after demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(d) If your employment shall be terminated (y) by the Company other than
for Cause, Retirement or Disability or (z) by you voluntarily for Good Reason,
then for a twenty-four month period after such termination, the Company shall
arrange to provide you with life, disability, accident and health insurance
benefits substantially similar to those which you are receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable by you
pursuant to this Subsection 4(d) shall be reduced to the extent comparable
benefits are actually received by you during the twenty-four month period
following your termination, and any such benefits actually received by you shall
be reported to the Company.
(e) In the event a Change in Control of the Company occurs after you and
the Company have entered into any retirement agreement including an agreement
providing for early retirement, then the present value, computed using a
discount rate of 8% per annum, of
<PAGE>
[Name of Executive]
June 30, 1995
Page 13
the total amount of all unpaid deferred payments as payable to you in accordance
with the payment schedule that you elected when the deferral was agreed to and
using the plan interest rate applicable to your situation, or other payments
payable or to become payable to you or your estate or beneficiary under such
retirement agreement (other than payments payable pursuant to a plan qualified
under Section 401(a) of the Internal Revenue Code) including, without
limitation, any unpaid deferred payments under the Company's Executive Deferred
Compensation Plan and the Company's other deferred compensation plans shall be
paid to you (or your estate or beneficiary if applicable) in cash within five
business days after the occurrence of the Change in Control of the Company. If
you and the Company or its affiliates have executed a retirement agreement and
if the Change in Control of the Company occurs before the effective date of your
retirement, then you shall receive the Severance Payment payable under
Subsection 4(c)(ii) herein in addition to the present value of your unpaid
deferred retirement payments and other payments under the retirement agreement
as aforesaid. All other benefits to which you or your estate or any beneficiary
are entitled under such retirement agreement shall continue in effect
notwithstanding the Change in Control of the Company. This Subsection 4(e)
shall survive your retirement.
(f) Notwithstanding that a Change in Control shall not have yet occurred,
if you so elect, by written notice to the Company given at any time after the
date hereof and prior to the time such amounts are otherwise payable to you:
(i) The Company shall deposit with an escrow agent, pursuant to an
escrow agreement between the Company and such escrow agent, a sum of money,
or other property permitted by such escrow agreement, sufficient in the
opinion of the Company's management to fund payment of the following
amounts to you, as such amounts become payable:
(A) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate under the Company's Executive Deferred
Compensation Plan and under any agreements related thereto in
existence at the time of your election to make the deposit into
escrow.
(B) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate by reason of your deferral of payments
payable to you prior to the date of your election to make the deposit
into escrow under any other deferred compensation agreements between
you and the Company in existence at the time of your election to make
the deposit into escrow, including but not limited to deferred
compensation agreements relating to the deferral of salary or bonuses.
(C) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate under any agreement relating to your
retirement
<PAGE>
[Name of Executive]
June 30, 1995
Page 14
from the Company (including payments described under Subsection 4(e)
above) which agreement is in existence at the time of your election to
make the deposit into escrow, other than amounts payable by a plan
qualified under Section 401(a) of the Code.
(D) Subject to the approval of the Committee, amounts then due
and payable to you, but not yet paid, under any other benefit plan or
incentive compensation plan of the Company (whether such amounts are
stock or cash) other than amounts payable to you under a plan
qualified under Section 401(a) of the Code.
(ii) Upon the occurrence of a Potential Change of Control, the Company
shall deposit with an escrow agent (which shall be the same escrow agent,
if one exists, acting pursuant to clause (i) of this Subsection 4(f)),
pursuant to an escrow agreement between the Company and such escrow agent,
a sum of money, or other property permitted by such escrow agreement,
sufficient in the opinion of Company management to fund the payment to you
of the amounts specified in Subsection 4(c) of this Agreement.
(iii) It is intended that any amounts deposited in escrow pursuant
to the provisions of clause (i) or (ii) of this Subsection 4(f), be subject
to the claims of the Company's creditors, as set forth in the form of such
escrow agreement.
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise (except as specifically provided in
this Section 4).
(h) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under any benefit
plan of the Company in which you participate to the extent such benefits are not
paid under this Agreement.
5. Successors; Binding Agreement.
(a) 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 expressly assume 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. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this
<PAGE>
[Name of Executive]
June 30, 1995
Page 15
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to hereunder if you
terminate your employment voluntarily for Good Reason following a Change in
Control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. 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.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devises and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under Section 4 shall survive the expiration of
the term of this Agreement.
<PAGE>
[Name of Executive]
June 30, 1995
Page 16
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Memphis, Tennessee in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that you shall be entitled
to seek specific performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
11. Similar Provisions in Other Agreement. The Severance Payment under
this Agreement supersedes and replaces any other severance payment to which you
may be entitled under any previous agreement between you and the Company
(including for this purpose The Promus Companies Incorporated or its affiliates)
or its affiliates.
<PAGE>
[Name of Executive]
June 30, 1995
Page 17
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our binding agreement on this subject.
Very truly yours,
PROMUS HOTEL CORPORATION
BY:_________________________
Agreed:
____________________________
[Name of Executive]
Exhibit 10(21)
PROMUS HOTEL CORPORATION
June 30, 1995
[Name of Executive]
Promus Hotel Corporation
6800 Poplar Avenue, Suite 200
Memphis, TN 38138
Re: Severance Agreement
Dear ___________:
Promus Hotel Corporation (the "Company") considers it essential to the best
interest of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreements set forth in Subsection 2(b) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("this Agreement") in the event your employment with the
Company terminates subsequent to a "Change in Control of the Company" (as
defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on June 30, 1995 and
shall continue in effect through December 31, 1995; provided, however, that
commencing on January 1, 1996 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, if a
Change in Control of the Company shall have occurred during the original or
extended term of this Agreement, this Agreement shall automatically continue in
effect for a period of twenty-four months beyond the month in which such Change
in Control occurred.
<PAGE>
[Name of Executive]
June 30, 1995
Page 2
2. Change in Control.
(a) No benefit shall be payable to you hereunder unless there shall have
been a Change in Control of the Company, as set forth below. For purposes of
this Agreement, a "Change in Control of the Company" shall be deemed to have
occurred, subject to subparagraph (iv) hereof, if any of the events in
subparagraphs (i), (ii) or (iii) occur:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than an employee benefit plan of the Company, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 25% or more of the Company's then
outstanding voting securities carrying the right to vote in elections of
persons to the Board, regardless of comparative voting power of such voting
securities, and regardless of whether or not the Board shall have approved
such Change in Control; or
(ii) During any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in clauses (i)
or (iii) of this Subsection) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a majority
thereof; or
(iii) The holders of securities of the Company entitled to vote
thereon approve the following:
(A) A merger or consolidation of the Company with any other
corporation regardless of which entity is the surviving company, other
than a merger or consolidation which would result in the voting
securities of the Company carrying the right to vote in elections of
persons to the Board outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of the
Company's then outstanding voting securities carrying the right to
vote in elections of persons to the Board, or
<PAGE>
[Name of Executive]
June 30, 1995
Page 3
such securities of such surviving entity outstanding immediately after
such merger or consolidation, or
(B) A plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(iv) Notwithstanding the definition of a "Change in Control" of the
Company as set forth in this Section 2(a), the Human Resources Committee of
the Board (the "Committee") shall have full and final authority, which
shall be exercised in its discretion, to determine conclusively whether a
Change in Control of the Company has occurred, and the date of the
occurrence of such Change in Control and any incidental matters relating
thereto, with respect to a transaction or series of transactions which have
resulted or will result in a substantial portion of the assets or business
of the Company (as determined immediately prior to the transaction or
series of transactions by the Committee in its sole discretion which
determination shall be final and conclusive) being held by a corporation at
least 80% of whose voting securities are held, immediately following such
transaction or series of transactions, by holders of the voting securities
of the Company (determined immediately prior to such transaction or series
of transactions). The Committee may exercise such discretionary authority
without regard to whether one or more of the transactions in such series of
transactions would otherwise constitute a Change in Control of the Company
under the definition set forth in this Section 2(a).
(b) For purposes of this Agreement, a "Potential Change in Control of the
Company" shall be deemed to have occurred if the following occur:
(i) The Company enters into an agreement or letter of intent, the
consummation of which would result in the occurrence of a Change in Control
of the Company;
(ii) Any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control of the Company;
(iii) Any person, other than an employee benefit plan of the Company,
or a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 9.5% or
more of the Company's then outstanding voting
<PAGE>
[Name of Executive]
June 30, 1995
Page 4
securities carrying the right to vote in elections of persons to the Board
increases his beneficial ownership of such securities by 5% or more over
the percentage so owned by such person on the date hereof; or
(iv) The Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control of the Company has
occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a Potential Change in Control of the Company, you will remain in the
employ of the Company (or the subsidiary thereof by which you are employed at
the date such Potential Change in Control occurs) until the earliest of (x) a
date which is six months from the occurrence of such Potential Change in Control
of the Company, (y) the termination by you of your employment by reasons of
Disability or Retirement (at your normal retirement age), as defined in
Subsection 3(i), or (z) the occurrence of a Change in Control of the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(a) hereof constituting a Change in Control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(c) hereof upon the subsequent termination of your employment
(whether or not such termination is voluntary) during the term of this Agreement
unless such termination is (y) because of your death, Disability or Retirement,
or (z) by the Company for Cause.
(a) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six consecutive months, and
within thirty days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your employment may
be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination at age 65 (or later)
with ten years of service or retirement in accordance with any retirement
contract between the Company and you.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon your engaging in willful and continued misconduct,
or your willful and continued failure to substantially perform your duties with
the Company (other than due to physical or mental illness), if such failure or
misconduct is materially damaging or materially detrimental to the business and
operations of the Company, provided that you shall have received written notice
of such failure or misconduct and shall have continued to engage in such failure
or misconduct after 30 days following receipt of such notice from the Board,
which notice specifically identifies the manner in which the Board believes that
you have
<PAGE>
[Name of Executive]
June 30, 1995
Page 5
engaged in such failure or misconduct. For purposes of this Subsection, no act,
or failure to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of failure to substantially
perform your duties or of misconduct in accordance with the first sentence of
this Subsection, and of continuing such failure to substantially perform your
duties or misconduct as aforesaid after notice from the Board, and specifying
the particulars thereof in detail.
(c) Voluntary Resignation. After a Change in Control of the Company and
for purposes of receiving the benefits provided in Subsection 4(c) hereof, you
shall be entitled to terminate your employment by voluntary resignation given at
any time during the two years following the occurrence of a Change in Control of
the Company hereunder. Such resignation shall not be deemed a breach of any
employment contract between you and the Company.
(d) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination, Etc. "Date of Termination" shall mean:
(i) If your employment is terminated for Disability, thirty days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty day
period), and
(ii) If your employment is terminated pursuant to Subsection (b) or
(c) above or for any other reason (other than Disability), the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to Subsection (b) above shall not be less than thirty days, and in
the case of a termination pursuant to
<PAGE>
[Name of Executive]
June 30, 1995
Page 6
Subsection (c) above shall not be less than fifteen nor more than sixty
days, respectively, from the date such Notice of Termination is given);
provided that if within fifteen days after any Notice of Termination is given,
or, if later, prior to the Date of Termination (as determined without regard to
this provision), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Company will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
bonus, benefit and insurance plans in which you were participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this Subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability Following a Change
of Control. Following a Change in Control of the Company, as defined in
Subsection 2(a), upon termination of your employment or during a period of
Disability, you shall be entitled to the following benefits:
(a) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Company's Bonus Plan, Restricted Stock Plan, and other incentive
compensation plans during such period, until this Agreement is terminated
pursuant to Section 3(a) hereof. Thereafter, or in the event your employment
shall be terminated for Retirement, or by reason of your death, your benefits
shall be determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs, subject to Subsection 4(e) hereof.
(b) If your employment shall be terminated by the Company for Cause, the
Company shall pay you your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under
<PAGE>
[Name of Executive]
June 30, 1995
Page 7
any compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(c) If your employment by the Company shall be terminated (y) by the
Company other than for Cause, Retirement or Disability or (z) by you by
voluntary resignation, then you shall be entitled to the benefits provided
below:
(i) The Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation or benefit plan of the Company, at the time such payments are
due;
(ii) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (the "Severance Payment") equal to
2.99 times the average of the Annual Compensation (as defined below) which
was payable to you by the Company (including for periods prior to the
commencement date of your employment with the Company, The Promus Companies
Incorporated or its affiliates, and for periods prior to February 7, 1990,
Holiday Corporation or its affiliates), or any corporation affiliated with
the Company within the meaning of Section 1504 of the Internal Revenue Code
of 1986, as amended (the "Code"), for the five calendar years preceding the
calendar year in which the Change in Control occurred. Such average shall
be determined in accordance with proposed, temporary or final regulations
promulgated under Section 280G(d) of the Code, or, in the absence of such
regulations, if you were not employed by the Company (including for this
purpose The Promus Companies Incorporated or its affiliates for periods
prior to the commencement date of your employment with the Company and
Holiday Corporation or its affiliates for the period prior to February 7,
1990) or its affiliates during the entire five calendar years preceding the
calendar year in which the Change in Control occurred, then such average
shall be the average of your Annual Compensation for the complete calendar
years (if any) and partial calendar year (if any) during which you were so
employed provided that the amount for any such partial calendar year shall
be an annualized amount based on the amount of Annual Compensation paid to
you during the partial calendar year. If you were not employed by the
Company or its affiliates, or, for periods prior to the commencement date
of your employment with the Company, The Promus Companies Incorporated or
its affiliates, or, for periods prior to February 7, 1990, Holiday
Corporation or its affiliates during such preceding calendar year, then
such average shall be an annualized amount based on the amount of Annual
Compensation paid to you during the calendar year in which the Change of
Control
<PAGE>
[Name of Executive]
June 30, 1995
Page 8
occurred. Annual Compensation is your base salary and your annual bonus
under the Annual Management Bonus Plan of the Company that was payable to
you by the Company or any of its affiliates (including for this purpose
base salary and bonus payable to you by The Promus Companies Incorporated
or its affiliates for periods prior to the commencement date of your
employment with the Company and Holiday Corporation or its affiliates for
periods prior to February 7, 1990) that was payable to you during a
calendar year determined without any reduction for any deferrals of such
salary or such bonus under any deferred compensation plan (qualified or
unqualified) and without any reduction for any salary reductions used for
making contributions to any group insurance plan of the Company (including
for this purpose The Promus Companies Incorporated or its affiliates for
periods prior to the commencement date of your employment with the Company
and Holiday Corporation or its affiliates for periods prior to February 7,
1990) or its affiliates.
(iii) The Company shall also pay to you the amounts of any
compensation or awards payable to you or due to you in respect of any
period preceding the Date of Termination under any incentive compensation
plan of the Company (including, without limitation, the Company's
Restricted Stock Plan and Stock Option Plan (the "Option Plan") and under
any agreements with you in connection therewith, and shall make any other
payments and take any other actions provided for in such plans and
agreements.
(iv) In lieu of shares of common stock of the Company ("Company
Shares") issuable upon exercise of outstanding options, if any ("Options")
granted to you under the Option Plan (which Options shall be cancelled upon
the making of the payment referred to below), you shall receive an amount
in cash equal to the product of (y) the excess of, the higher of the
closing price of Company Shares as reported on the New York Stock Exchange
on or nearest the Date of Termination (or, if not listed on such exchange,
on a nationally recognized exchange or quotation system on which trading
volume in Company Shares is highest) or the highest per share price for
Company Shares actually paid in connection with any change in control of
the Company, over the per share exercise price of each Option held by you
(whether or not then fully exercisable), times (z) the number of Company
Shares covered by each such option.
(v) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any
<PAGE>
[Name of Executive]
June 30, 1995
Page 9
tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder).
(vi) In the event that you become entitled to the payments (the
"Severance Payments") provided under paragraphs (ii), (iii), and (iv),
above (and Subsections (d) and (e), below), and if any of the Severance
Payments will be subject to the tax (the "Excise Tax") imposed by section
4999 of the Code, the Company shall pay to you at the time specified in
paragraph (vii), below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of any Excise Tax on
the Severance Payments and any federal (and state and local) income tax and
Excise Tax upon the payment provided for by this paragraph, shall be equal
to the amount of the Severance Payments less any Excise Tax attributable to
Severance Payments in respect of those shares of restricted stock granted
to you in 1990 in connection with the merger of Holiday Corporation with
and into a subsidiary of Bass plc and which were issued in substitution of
shares of Holiday Corporation restricted stock granted to you on or after
November 11, 1986 in connection with the 1987 recapitalization of Holiday
Corporation (the "Excluded Severance Payments"). For purposes of
determining whether any of the Severance Payments will be subject to the
Excise Tax and the amount of such Excise Tax the following will apply:
(A) Any other payments or benefits received or to be received by
you in connection with a Change in Control of the Company or your
termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such person)
shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4) of the Code in excess of the
base amount within the meaning of section 280G(b)(3) of the Code, or
are otherwise not subject to the Excise Tax;
(B) The amount of the Severance Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (y) the
total amount of
<PAGE>
[Name of Executive]
June 30, 1995
Page 10
the Severance Payments or (z) the amount of excess parachute payments
within the meaning of section 280G(b)(1) (after applying clause (A),
above); and
(C) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with proposed, temporary or final regulations under
Sections 280G(d)(3) and (4) of the Code or, in the absence of such
regulations, in accordance with the principles of Section 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay Federal income taxes at
the highest marginal rate of federal income 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 your residence on the Date of Termination, net of the
maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the amount
of Excise Tax attributable to Severance Payments other than the
Excluded Severance Payments is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of
your employment, you shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the Excise Tax and
Federal (and state and local) income tax imposed on the Gross-Up
Payment being repaid by you if such repayment results in a reduction
in Excise Tax and/or a Federal (and state and local) income tax
deduction) plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax attributable to Severance Payments other than the Excluded
Severance Payments is determined to exceed the amount taken into
account hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(vii) The payments provided for in paragraphs (ii), (iii), (iv) and
(vi) above, shall be made not later than the fifth day following the Date
of Termination, provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Company shall pay
to you on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments
<PAGE>
[Name of Executive]
June 30, 1995
Page 11
and shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth day
after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you payable on
the fifth day after demand by the Company (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
(d) If your employment shall be terminated (y) by the Company other than
for Cause, Retirement or Disability or (z) by you voluntarily, then for a
twenty-four month period after such termination, the Company shall arrange to
provide you with life, disability, accident and health insurance benefits
substantially similar to those which you are receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to this
Subsection 4(d) shall be reduced to the extent comparable benefits are actually
received by you during the twenty-four month period following your termination,
and any such benefits actually received by you shall be reported to the Company.
(e) In the event a Change in Control of the Company occurs after you and
the Company have entered into any retirement agreement including an agreement
providing for early retirement, then the present value, computed using a
discount rate of 8% per annum, of the total amount of all unpaid deferred
payments as payable to you in accordance with the payment schedule that you
elected when the deferral was agreed to and using the plan interest rate
applicable to your situation, or other payments payable or to become payable to
you or your estate or beneficiary under such retirement agreement (other than
payments payable pursuant to a plan qualified under section 401(a) of the
Internal Revenue Code) including, without limitation, any unpaid deferred
payments under the Company's Executive Deferred Compensation Plan and the
Company's other deferred compensation plans shall be paid to you (or your estate
or beneficiary if applicable) in cash within five business days after the
occurrence of the Change in Control of the Company. If you and the Company or
its affiliates have executed a retirement agreement and if the Change in Control
of the Company occurs before the effective date of your retirement, then you
shall receive the Severance Payment payable under Subsection 4(c)(ii) herein in
addition to the present value of your unpaid deferred retirement payments and
other payments under the retirement agreement as aforesaid. All other benefits
to which you or your estate or any beneficiary are entitled under such
retirement agreement shall continue in effect notwithstanding the Change in
Control of the Company. This Subsection 4(e) shall survive your retirement.
<PAGE>
[Name of Executive]
June 30, 1995
Page 12
(f) Notwithstanding that a Change in Control shall not have yet occurred,
if you so elect, by written notice to the Company given at any time after the
date hereof and prior to the time such amounts are otherwise payable to you:
(i) The Company shall deposit with an escrow agent, pursuant to an
escrow agreement between the Company and such escrow agent, a sum of money,
or other property permitted by such escrow agreement, sufficient in the
opinion of the Company's management to fund payment of the following
amounts to you, as such amounts become payable:
(A) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate under the Company's Executive Deferred
Compensation Plan and under any agreements related thereto in
existence at the time of your election to make the deposit into
escrow.
(B) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate by reason of your deferral of payments
payable to you prior to the date of your election to make the deposit
into escrow under any other deferred compensation agreements between
you and the Company in existence at the time of your election to make
the deposit into escrow, including but not limited to deferred
compensation agreements relating to the deferral of salary or bonuses.
(C) Amounts payable, or to become payable, to you or to your
beneficiaries or your estate under any agreement relating to your
retirement from the Company (including payments described under
Subsection 4(e) above) which agreement is in existence at the time of
your election to make the deposit into escrow, other than amounts
payable by a plan qualified under Section 401(a) of the Code.
(D) Subject to the approval of the Committee, amounts then due
and payable to you, but not yet paid, under any other benefit plan or
incentive compensation plan of the Company (whether such amounts are
stock or cash) other than amounts payable to you under a plan
qualified under section 401(a) of the Code.
(ii) Upon the occurrence of a Potential Change of Control, the
Company shall deposit with an escrow agent (which shall be the same escrow
agent, if one exists, acting pursuant to clause (i) of this subsection
4(f)), pursuant to an escrow agreement
<PAGE>
[Name of Executive]
June 30, 1995
Page 13
between the Company and such escrow agent, a sum of money, or other
property permitted by such escrow agreement, sufficient in the opinion of
Company management to fund the payment to you of the amounts specified in
Subsection 4(c) of this Agreement.
(iii) It is intended that any amounts deposited in escrow pursuant to
the provisions of clause (i) or (ii) of this Subsection 4(f), be subject to
the claims of the Company's creditors, as set forth in the form of such
escrow agreement.
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise (except as specifically provided in
this Section 4).
(h) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under any benefit
plan of the Company in which you participate to the extent such benefits are not
paid under this Agreement.
5. Successors; Binding Agreement.
(a) 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 expressly assume 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. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminate your employment voluntarily
following a Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. 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.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devises and legatees. If you should die while any amount
would still be payable to you hereunder if you
<PAGE>
[Name of Executive]
June 30, 1995
Page 14
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to your devisee, legatee
or other designee or, if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Memphis, Tennessee in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be
<PAGE>
[Name of Executive]
June 30, 1995
Page 15
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you shall be entitled to seek specific performance of your right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
11. Similar Provisions in Other Agreement. The Severance Payment under
this Agreement supersedes and replaces any other severance payment to which you
may be entitled under any previous agreement between you and the Company
(including for this purpose The Promus Companies Incorporated or its affiliates)
or its affiliates.
<PAGE>
[Name of Executive]
June 30, 1995
Page 16
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our binding agreement on this subject.
Very truly yours,
PROMUS HOTEL CORPORATION
BY:______________________
Agreed:
___________________________________
Raymond E. Schultz
Exhibit 10(22)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of June 30, 1995, between Promus Hotel Corporation,
a Delaware corporation with its executive offices at 6800 Poplar Avenue,
Memphis, Tennessee (the "Company"), and Michael D. Rose (the "Executive").
The Company and the Executive agree as follows:
1. Introductory Statement.
The Company desires to secure the services of the Executive as
Chairman ("Chairman") of the Board of Directors (the "Board") and the Executive
is willing to execute this Agreement with respect to his employment. This
Agreement shall be effective on June 30, 1995, and shall have a five year term
expiring the close of business on June 30, 2000, subject to the terms and
conditions herein.
2. Agreement of Employment.
The Company agrees to, and hereby does, employ the Executive, and the
Executive agrees to, and hereby does accept, employment by the Company, as
Chairman pursuant to the provisions of this Agreement and of the bylaws of the
Company and subject to the control of the Board of Directors. It is understood
that Executive's position of Chairman is subject to his election as a director
by the Company's stockholders and yearly re-election as Chairman by the Board of
Directors in the exercise of its judgment. See paragraph 8 herein for
Executive's rights if Executive fails to be elected a director or is not re-
elected as Chairman during the term of this Agreement.
<PAGE>
3. Executive's Obligations.
During the period of his service under this Agreement, the Executive shall
devote up to 40% of his time during business hours, faithfully and to the best
of his ability, to his duties as Chairman and such other duties as directed by
the Board. The Executive may take up to six weeks vacation each year with pay.
4. Compensation.
The Company shall pay to the Executive for his services under this
Agreement a salary at the rate of $250,000 per year, in equal bi-weekly
installments, provided, however, that the Human Resources Committee of the Board
(the "HRC") shall in good faith review the salary of the Executive, on an annual
basis, with a view to consideration of appropriate merit increases in such
salary. In addition, except as otherwise provided in this Agreement, during the
term of this Agreement the Executive shall be entitled to participate in
incentive compensation programs and to receive employee benefits and perquisites
at least as favorable to the Executive as those provided to Executive by the
Company on the effective date of this
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<PAGE>
Agreement, and as may be enhanced for all senior officers. Such benefits
include, but are not limited to, the rabbi trust (provided pursuant to the
Escrow Agreement dated June 30, 1995 (the "Escrow Agreement") and his Severance
Agreement dated June 30, 1995, attached hereto as Exhibit A (the "Severance
Agreement") both of which will continue in force subject to their terms and
conditions including the termination and amendment provisions thereof. There
will be no diminution of the above compensation, perquisites, or benefits except
as provided in this Agreement.
The Company agrees that, if Executive leaves his position with Harrah's
Entertainment, Inc., the Company will provide Executive with an office and
secretary at the offices of the Company during the remaining term of this
Agreement.
If the Executive dies, retires pursuant to paragraph 7 hereof or resigns
pursuant to this Agreement or pursuant to any other agreement between the
Company and the Executive providing for such resignation during the period of
this Agreement, service for any part of the month in which any such event occurs
shall be considered service for the entire month.
5. Service After June 30, 2000.
5.1 At the option of the Board and with Executive's consent, this
Agreement may be extended on a year to year basis after June 30, 2000, with each
party having the right to terminate at the end of each renewal year.
3
<PAGE>
6. Termination From Employment on June 30, 2000.
6.1 Except as otherwise provided in this Agreement and except if this
Agreement is renewed under paragraph 5.1, the date of Executive's termination
from employment shall be June 30, 2000 and, on that date, all of his stock
options and restricted stock awards not yet vested will become 100% vested
(fully exercisable in case of stock options). Such date will be Executive's
retirement date for purposes of the Company's benefit plans including, without
limitation, the Company's Savings and Retirement Plan ("S&RP"), Executive
Deferred Compensation Plan ("EDCP"), Deferred Compensation Plan ("DCP"), Stock
Option Plan and Restricted Stock Plan and all other benefit plans of the Company
(subject to paragraph 7.2, below).
6.2 Executive's stock options (including options that become vested on the
date of termination) will be exercisable after the date of such termination of
employment in accordance with the terms of the Stock Option Plan then in effect
applicable to retired employees.
6.3 It is understood that Executive is currently vested at the retirement
rate under the EDCP and this rate applies to Executive's EDCP account. After
the date of Executive's termination, retirement or resignation from employment,
his EDCP account and any other deferred compensation
4
<PAGE>
balances will continue to be protected by the Escrow Agreement if it is then in
force subject to the terms and conditions of the Escrow Agreement including its
termination and amendment provisions.
7. Retirement.
7.1 Executive may voluntarily retire, effective at any time on or after
April 30, 1996, by giving the Company three months prior written notice of the
effective date of such retirement. On the effective date of such retirement as
specified in the aforesaid written notice, and notwithstanding the terms of any
Plan to the contrary, all of Executive's unvested stock options will vest and
become fully exercisable and any unvested restricted stock will also vest. The
effective date of such retirement will be Executive's retirement date for
purposes of salary and all benefits including, without limitation, the EDCP,
DCP, S&RP and the Stock Option Plan (subject to paragraph 7.2, below).
Executive's stock options will be exercisable after the effective date of his
retirement in accordance with the provisions of the Stock Option Plan then in
effect applicable to retired employees and for this purpose Executive will be
deemed to have satisfied the requirements of retirement for age under the Plan.
7.2 If a Change in Control (as defined in the Severance Agreement) occurs
during Executive's employment pursuant to this Agreement, and if Executive's
Severance Agreement is in force upon such Change in Control,
5
<PAGE>
Executive's retirement pursuant to the terms of this Agreement within two (2)
years after the Change in Control will be deemed a voluntary resignation, rather
than "Retirement" as defined under 3(a) of the Severance Agreement, for purposes
of Executive's entitlement to the Severance Payments (as defined in the
Severance Agreement), notwithstanding any provisions of the Severance Agreement
to the contrary and the Severance Agreement is hereby amended for this purpose.
In the event of such retirement or voluntary resignation after a Change in
Control, paragraph 7.1 will not apply and Executive will be entitled to the
payments, rights and benefits as provided in paragraph 12 below.
8. Termination Without Cause or Resignation for Good Reason.
8.1 The Board reserves the right to terminate Executive from his then
current position without cause at any time upon at least three months prior
written notice. The failure of the stockholders to elect Executive as a
director during the annual election of directors or the failure of the Board to
elect Executive as Chairman during the annual election of officers shall also be
deemed termination without cause for purposes of this Agreement unless, before
any such annual election, the Board has sent the written notice initiating
termination for Cause as provided in paragraph 13.1 and Executive is thereafter
terminated for Cause. Executive reserves the right to resign his position for
Good Reason (as defined in paragraph 13.2 herein) by giving the
6
<PAGE>
Company 30 days written notice which states the reason for his resignation. For
purposes of this Agreement, Good Reason does not include changes in his duties,
position, salary, perquisites or benefits that are expressly permitted by this
Agreement.
8.2 Upon the effective date of Executive's termination without cause or
resignation from his position with Good Reason as described in paragraph 8.1
above:
(a) All of his unvested stock options will vest (become fully exercisable)
on the effective date of such termination without cause or resignation
with Good Reason, and any unvested restricted stock held by Executive
will also vest at that time.
(b) Executive will continue in employee status as a consultant-employee
beginning on the effective date of such termination without cause or
resignation with Good Reason and continuing (a) until the expiration
of two years, or (b) until June 30, 2000, whichever first occurs (the
"Transition Period"). His stock options will be exercisable after the
expiration of the Transition Period in accordance with the terms of
the Stock Option Plan then in effect applicable to employees who
retire for age, and for this purpose Executive will be deemed to have
satisfied the
7
<PAGE>
requirements of retirement for age under the Plan. The expiration of
employee status at the end of the Transition Period shall be deemed
Executive's retirement date under the Stock Option Plan and all other
benefit plans (subject to paragraph 7.2).
(c) During the Transition Period, Executive will continue to receive his
then-current salary rate and benefits but will no longer be eligible
for bonus, stock option or restricted stock grants or any other long
term incentive awards then in effect and will be responsible for the
cost of his household security.
9. Termination For Cause or Voluntary Resignation Without Good Reason.
9.1 The Board will have the right to terminate Executive at any time from
his then-current position for Cause (as defined in paragraph 13.1 herein).
9.2 If Executive is terminated for Cause or if, prior to April 30, 1996,
he resigns his position without Good Reason, then (a) all of his rights and
benefits under this Agreement shall thereupon terminate and his employment shall
be deemed terminated on the date of such termination or resignation, (b) he
shall be entitled to all accrued rights, payments and benefits vested or paid on
or before such date under the Company's plans and programs,
8
<PAGE>
including his EDCP payments at the retirement rate, but unvested stock options
and unvested shares of restricted stock, if any, will be forfeited, (c) his
right to exercise vested stock options will expire at 12:00 p.m. midnight on the
date of such termination or resignation and all stock options not so exercised
will be forfeited, (d) his indemnification agreement will continue in force, (e)
the Escrow Agreement, if then in force, will continue in force, unless such
Agreement is thereafter amended or terminated pursuant to its terms, and (f) his
Severance Agreement and all rights thereunder will terminate as of such
termination or resignation date unless a Change in Control or Potential Change
in Control (as such terms are defined in the Severance Agreement) has occurred
prior to such termination or resignation date.
If Executive's Severance Agreement is in force upon a Change in Control (as
defined in the Severance Agreement), the provisions of this paragraph 9.2 will
not be applicable if he retires or resigns (with or without Good Reason) within
two (2) years after the Change in Control, and in the event of such retirement
or resignation after a Change in Control he will be entitled to the payments,
rights and benefits as provided in paragraph 12 below.
10. Death.
In the event of Executive's death during his employment under this
Agreement, his salary and all rights and benefits under this Agreement will
terminate, and his estate and beneficiary(ies) will receive the benefits they
are entitled to under the terms of the Company's benefit plans and programs by
reason of a participant's death during active employment including the death
benefits provided by the EDCP and the
9
<PAGE>
applicable rights and benefits of the Company's stock plans. The Escrow
Agreement if then in force will continue in force (subject to its amendment or
termination in accordance with its terms) for the benefit of Executive's
beneficiaries until his deferred compensation accounts are paid in full, and
Executive's indemnification agreement will continue in force for the benefit of
his estate.
11. Disability.
In the event of Executive's disability during his employment hereunder, he
will be entitled to apply at his option for the Company's long term disability
benefits. If he is accepted for such benefits, then the terms and provisions of
the Company's benefit plans and programs (including the EDCP and the Company's
Stock Option and Restricted Stock Plans) that are applicable in the event of
such disability of an employee shall apply in lieu of the salary and benefits
under this Agreement, except that (a) the Escrow Agreement (if then in force)
and his indemnification agreement will continue in force (the Escrow Agreement
will be subject to amendment or termination in accordance with its terms), and
(b) all of his unvested stock options will vest on the date he is determined to
be disabled under the long term
10
<PAGE>
disability plan, and such options together with options previously vested will
be exercisable after the determination of disability in accordance with the
terms of the Stock Option Plan then in effect applicable to disabled employees.
If Executive is disabled so that he cannot perform his duties (as determined by
the HRC) and if he does not apply for long term disability benefits or is not
accepted for such benefits, then the Board may terminate his duties under this
Agreement and, in such event, the Company will be obligated to pay Executive his
then-current salary thereafter through this Agreement's expiration date of June
30, 2000 (or through this Agreement's later expiration date if the June 30,
2000, date has been extended), and to provide the other benefits and rights
described herein including, without limitation, the vesting of all unvested
stock options on June 30, 2000 (or on this Agreement's later expiration date if
the June 30, 2000, date has been extended), except that during the period of
Executive's salary continuation due to disability, Executive will not be
eligible to participate in the Company's annual bonus plan or to receive stock
option or restricted stock grants or any other long term incentive awards except
to the extent approved by the HRC. If the Board terminates Executive's duties
pursuant to the preceding sentence, this Agreement will continue in full force
and effect until June 30, 2000 (or until this Agreement's later expiration date
if the June 30, 2000, date has been extended), which will be the date of
11
<PAGE>
Executive's termination from employment and shall be considered his retirement
date under the provisions of all the Company's benefit plans including the Stock
Option Plan.
12. Change in Control.
12.1 If a Change in Control as defined in Executive's Severance Agreement
occurs prior to Executive's termination of employment, resignation or retirement
and if the Severance Agreement is in force when the Change in Control occurs,
then, upon his termination of employment including voluntary or involuntary
resignation or retirement within two years after the Change in Control
(including termination due to expiration of this Agreement on June 30, 2000),
except if his termination of employment is due to "Disability" or "Cause" as set
forth under the Severance Agreement, he will be entitled to all the rights,
payments and benefits provided under his Severance Agreement including the
Severance Payments thereunder and the benefits that the Severance Agreement
provides with respect to the benefit plans and programs of the Company in lieu
of the rights and benefits that would otherwise apply under this Agreement,
provided that the Escrow Agreement (if then in force) and his indemnification
agreement will continue in force (the Escrow Agreement will be subject to
amendment or termination in accordance with its terms).
12
<PAGE>
12.2 If, at any time after Executive's retirement or resignation or the
termination of Executive's employment, there is a Change in Control (as defined
in the Severance Agreement) and if the Severance Agreement is in force on the
day immediately prior to the effective date of his retirement, resignation or
termination of employment, then this Agreement will be deemed a "retirement
agreement" for purposes of subsection 4(e) of the Severance Agreement, provided
that Executive will have a one time right (to be exercised by written notice
given to the Company at least 60 days before the Change in Control occurs) to
elect to be paid his EDCP account in accordance with the terms and provisions of
his EDCP elections (subject to EDCP plan provisions) at the retirement rate. If
he does not make such election, his EDCP account (based on the retirement rate)
will be accelerated and the then present value thereof will be paid to Executive
in full, as provided by and computed in accordance with paragraph 4(e) of the
Severance Agreement, after the Change in Control occurs.
13. Definitions of Cause and Good Reason.
13.1 Cause. Termination by the Company of this Agreement for "Cause"
shall mean termination upon the Executive's engaging in willful and continued
misconduct, or the Executive's willful and continued failure to substantially
perform his duties with the Company (other than due to physical or mental
illness), if such failure or misconduct is materially
13
<PAGE>
damaging or materially detrimental to the business and operations of the
Company; provided that Executive shall have received written notice of such
failure or misconduct and shall have continued to engage in such failure or
misconduct after 30 days following receipt of such notice from the Board, which
notice specifically identifies the manner in which the Board believes that
Executive has engaged in such failure or misconduct. For purposes of this
paragraph, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purposes (after
reasonable notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of failure to substantially perform his
duties or of misconduct in accordance with the first sentence of this paragraph,
and of continuing such failure to substantially perform his duties or misconduct
as aforesaid after notice from the Board, and specifying the particulars thereof
in detail.
14
<PAGE>
13.2 Good Reason. "Good Reason" shall mean, without Executive's express
written consent, the occurrence of any of the following circumstances unless, in
the case of paragraphs (a), (e), (f) or (g), such circumstances are fully
corrected prior to the date of termination specified in the written notice given
by Executive notifying the Company of his resignation for Good Reason:
(a) The assignment to Executive of any duties inconsistent with his
status as Chairman or an executive officer of the Company or a substantial
adverse alteration in the nature or status of his responsibilities except
as permitted under this Agreement;
(b) Except as permitted under this Agreement, a reduction by the
Company in his annual base salary of $250,000 or as the same may be
increased from time to time pursuant to paragraph 4 hereof;
(c) The relocation of the Company's principal executive offices where
Executive is working to a location more than 50 miles from the location of
such offices on the date of this Agreement, or the Company's requiring
Executive to be based anywhere other than the location of the Company's
principal offices where Executive is working on the date of this Agreement
except for required travel on the Company's business to an extent
substantially consistent with Executive's present business travel
obligations;
15
<PAGE>
(d) The failure by the Company, without Executive's consent, to pay
to him any portion of his current compensation except pursuant to a
compensation deferral elected by the Executive, or to pay to Executive any
portion of an installment of deferred compensation under any deferred
compensation program of the Company within thirty days of the date such
compensation is due;
(e) Except as permitted by this Agreement, the failure by the Company
to continue in effect any compensation plan in which Executive is
participating on the date of this Agreement which is material to
Executive's total compensation, including, but not limited to, the
Company's annual bonus plan, the EDCP (which may be modified or terminated
as to further deferrals after 1995), the Restricted Stock Plan, or the
Stock Option Plan or any substitute plans unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue Executive's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of Executive's participation relative to
other participants at Executive's grade level;
16
<PAGE>
(f) The failure by the Company to continue to provide Executive with
benefits substantially similar to those enjoyed by him under the S&RP and
the life insurance, medical, health and accident, and disability plans in
which Executive is participating on the date of this Agreement, the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive Executive of any material fringe
benefit enjoyed by Executive on the date of this Agreement except as
permitted by this Agreement, or the failure by the Company to provide
Executive with the number of paid vacation days to which Executive is
entitled; or
(g) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 16 hereof.
Executive's right to terminate his employment pursuant to this Agreement
for Good Reason shall not be affected by Executive's incapacity due to physical
or mental illness. Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.
14. Employment with Harrah's Entertainment, Inc.
14.1 Executive's employment with Harrah's Entertainment, Inc. or its
subsidiaries including serving as Chairman of its Board of Directors will not be
deemed a breach of this Agreement.
17
<PAGE>
15. Binding Arbitration
Any and all claims, disputes or controversies arising out of or
related to this Agreement or the breach thereof shall be resolved by arbitration
in accordance with the rules of the American Arbitration Association (the "AAA")
then in existence, subject to this paragraph 15. Such arbitration shall be
conducted by a panel of three arbitrators. The Executive shall appoint one
arbitrator, the Company shall appoint one arbitrator, and the third shall be
appointed by the two arbitrators appointed by the parties. The third arbitrator
shall serve as chairman of the panel. The parties shall appoint their
arbitrators within 30 days after the demand for arbitration is served, failing
which the AAA promptly shall appoint a defaulting party's arbitrator, and the
two arbitrators shall select the third arbitrator within 15 days after their
appointment, or if they cannot agree
or fail to so appoint, then the AAA shall appoint the third arbitrator. The
arbitrators shall render their decision in writing within 60 days after the
close of evidence or other termination of the proceedings by the panel. The
determination or award rendered in such arbitration shall be binding and
conclusive upon the parties and shall not be appealable, and judgment may be
entered thereon in accordance with applicable law in any court of competent
jurisdiction. Any hearings in the arbitration shall be held in Memphis,
Tennessee, and shall be private and not open to the public. Each
18
<PAGE>
party shall bear the fees and expenses of its arbitrator, counsel and witnesses,
and the fees and expenses of the third arbitrator shall be shared equally by the
parties. Other costs of the arbitration, including the fees of AAA, shall be
shared equally by the parties.
16. Assumption of Agreement on Merger, Consolidation or Sale of Assets.
The Company agrees that until the termination of this Agreement as above
provided, it will not enter into any merger or consolidation with another
company in which the Company is not the surviving company, or sell or dispose of
all or substantially all of its assets, unless the company which is to survive
such merger or consolidation or the prospective purchaser of such assets first
makes a written agreement with the Executive either (1) assuming the Company's
financial obligations to the Executive under this Agreement, or (2) making such
other provision for the Executive as is satisfactory to the Executive and
approved by him in writing in lieu of assuming the Company's financial
obligations to him under this Agreement.
17. Assurances on Liquidation.
The Company agrees that until the termination of this Agreement as above
provided, it will not voluntarily liquidate or dissolve without first making a
full settlement or, at the discretion of the Executive, a written agreement with
the Executive satisfactory to and approved by him in writing, in fulfillment of
or in lieu of its obligations to him under this Agreement.
19
<PAGE>
18. Amendments.
This Agreement may not be amended or modified orally, and no provision
hereof may be waived, except in a writing signed by the parties hereto.
19. Assignment.
19.1 Except as otherwise provided in paragraph 19.2, this Agreement cannot
be assigned by either party hereto except with the written consent of the other.
Any assignment of this Agreement by either party hereto shall not relieve such
party of its or his obligations hereunder.
19.2 The Company may elect to perform any or all of its obligations under
this Agreement through any of its wholly-owned subsidiaries, and if the Company
so elects, Executive will be an employee of such subsidiary. Notwithstanding
any such election, the Company's obligations to Executive under this Agreement
will continue in full force and effect as obligations of the Company, and the
Company shall retain primary liability for their performance.
20. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
personal representatives and successors in interest of the Company.
20
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21. Choice of Law.
This Agreement shall be governed by the law of the State of Tennessee as to
all matters, including but not limited to matters of validity, construction,
effect and performance.
22. Severability of Provisions.
In case any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and this Agreement shall be interpreted as if
such invalid, illegal or unenforceable provision was not contained herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company
has caused this Agreement to be executed in its name and on its behalf and its
corporate seal to be hereunto affixed and attested by its corporate officers
thereunto duly authorized.
______________________________
Michael D. Rose
PROMUS HOTEL CORPORATION
By: ________________________
ATTEST:
______________________________
Secretary
21
EXHIBIT 10(24)
(Multicurrency--Cross Border)
ISDA
International Swap Dealers Association. Inc.
MASTER AGREEMENT
dated as of June 30, 1995
Promus Hotels, Inc. and NationsBank, N.A. (Carolinas)
- ------------------------------------ ------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:-
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant Confirmation
or otherwise pursuant to this Agreement, in freely transferable funds and in
the manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by payment), such delivery will be made
for receipt on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright (c) 1992 by International Swap Dealers Association, Inc.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties
make and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such requirement:
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d): or
(B) the failure of a representation made by Y pursuant to Section
3(l) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the
date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a party
to this Agreement) or (II) a Change in Tax Law.
2 ISDA(R) 1992
<PAGE>
(ii) Liability. If:--
(l) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorize such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
3 ISDA(R) 1992
<PAGE>
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(c) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
4 ISDA(R) 1992
<PAGE>
organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support Document
if such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation under
Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
5 ISDA(R) 1992
<PAGE>
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after giving effect
to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger); (2) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as
they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation, and, in the
case of any such proceeding or petition instituted or presented
against it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (5) has a resolution
passed for its winding-up, official management or liquidation (other
than pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets; (7) has a
secured party take possession of all or substantially all its assets
or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or restrained, in
each case within 30 days thereafter; (8) causes or is subject to any
event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
6 ISDA(R) 1992
<PAGE>
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):--
(1) to perform any absolute or contingent obligation to make a payment
or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this
Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the Schedule
or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
7 ISDA(R) 1992
<PAGE>
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution Of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b}(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) Two Affected Parties. If an illegality under Section 5(b)(i)(l) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the patty which is not the Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then
8 ISDA(R) 1992
<PAGE>
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount, if
any, payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event
of Default:-
(1) First Method and Market Quotation. If the First Method and Market
Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect
of the Terminated Transactions and the Termination Currency Equivalent
of the Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the
9 ISDA(R) 1992
<PAGE>
Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the Defaulting Party. If that amount is a
positive number, the Defaulting Party will pay it to the Non-
defaulting Party; if it is a negative number, the Non-defaulting Party
will pay the absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:-
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
10 ISDA(R) 1992
<PAGE>
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. It for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
11 ISDA(R) 1992
<PAGE>
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be, deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpeting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had ended into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12 ISDA(R) 1992
<PAGE>
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement my be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13 ISDA(R) 1992
<PAGE>
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement;--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14 ISDA(R) 1992
<PAGE>
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a)
and, if applicable, in the Schedule. "Illegality" has the meaning specified in
Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having bad a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"Law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks arc open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the patties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal Financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a none contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that parry reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred and as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (of any gain resulting from
any of them). Loss includes losers and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-
of-pocket expenses referred to under Section 11. A party will determine its Loss
as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or pnccs from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
Such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference Market-
maker to enter into a transaction (the "Replacement Transaction") that would
have the effect of preserving for such party the economic equivalent of any
payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15 ISDA(R) 1992
<PAGE>
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been requited (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotions are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(c), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the bighost credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organized, managed and controlled or considered
to have its scat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or tinposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation cannot be determined
or would not (in the reasonable belief of the party making the
determination) produce a commercially reasonable result
"Specified Entity" has the meaning specified in the Schedule.
16 ISDA(R) 1992
<PAGE>
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. ~The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected
in good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17 ISDA(R) 1992
<PAGE>
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
Promus Hotels, Inc. NationsBank, N.A. (Carolinas)
................................... ...................................
(Name of Party) (Name of Party)
By: /s/ Carol G. Champion By: /s/ J.E. Ball
............................. ................................
Name: Carol G. Champion Name: J.E. Ball
Title: Vice President and Treasurer Title: Senior Vice President
Date: June 30, 1995 Date: June 30, 1995
<PAGE>
SCHEDULE to the MASTER AGREEMENT
dated as of June 22, 1995 between
NATIONSBANK, N.A. (CAROLINAS) ("Party A") and
PROMUS HOTELS, INC. ("Party B")
PART 1: Termination Provisions and Certain Other Matters
-------------------------------------------------
(a) "Credit Agreement" means the Tranche A Credit Agreement dated as of June 7,
1995 among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as
the Subsequent Borrower, Certain Subsidiaries and Related Parties From Time to
Time Party Thereto, as Guarantors, The Several Lenders From Time to Time Party
Thereto and NationsBank, N.A. (Carolinas), as Agent; as amended, supplemented or
restated from time to time.
(b) "Specified Entity" means, in relation to Party A, for the purpose of
Sections 5(a)(v), 5(a)(vi), 5(a)(vii) and 5(b)(iv), none;
and, in relation to Party B, for the purpose of Section 5(a)(v), any
Affiliate of Party B; and for the purpose of Sections 5(a)(vi), 5(a)(vii)
and 5(b)(iv), none.
(c) "Specified Transaction" will have the meaning specified in Section 14.
(d) The "Cross-Default" provisions of Section 5(a)(vi) will apply to Party A
and Party B and each Specified Entity of Party B. In connection therewith,
"Specified Indebtedness" will have the meaning specified in Section 14, except
that such term shall not include obligations in respect of deposits received in
the ordinary course of a party's banking business, and "Threshold Amount" means,
in relation to Party A, an amount equal to three percent of a party's
shareholders' equity, determined in accordance with generally accepted
accounting principles in such party's jurisdiction of incorporation or
organization, consistently applied, as at the end of such party's most recently
completed fiscal year; and, in relation to Party B, $10,000,000.
With respect to Party B, an Event of Default (with Party B being the
Defaulting Party) shall also occur under this Agreement upon the occurrence of
any Event of Default specified in the Credit Agreement.
(e) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to
Party A and Party B and each Specified Entity of Party B.
(f) The "Automatic Early Termination" provision of Section 6(a) will not apply
to Party A or Party B.
(g) Payments on Early Termination. For the purpose of Section 6(e):- Loss and
the Second Method will apply.
(h) "Termination Currency" means United States Dollars.
(i) Additional Termination Event. Additional Termination Event will not apply.
PART 2: Tax Representations
-------------------
Not applicable.
<PAGE>
PART 3: Agreement to Deliver Documents
------------------------------
For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees
to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered by Party A and Party B
are: none.
(b) Other documents to be delivered by Party A and Party B are:-
Form/ Date by Covered by
Document/ which to be Section 3(d)
Certificate delivered Representation
- ------------------------------- ---------------------------- -----------------
Certified copies of all Upon execution and delivery Yes
corporate authorizations and of this Agreement
any other documents with
respect to the execution,
delivery and performance of
this Agreement
Certificate of authority and Upon execution and delivery Yes
specimen signatures of of this Agreement and
individuals executing this thereafter upon request of
Agreement and Confirmations. the other party
PART 4: Miscellaneous
-------------
(a) Address for Notices. For the purpose of Section 12(a) of this Agreement:--
Address for notice or NationsBank, N.A. (Carolinas)
communications to Party A: 100 N. Tryon Street, NC1-007-13-01
Charlotte, North Carolina 28255
Attention: Derivatives Documentation Unit
Telecopy No.: 704-386-4113
Address for notice or Promus Hotels, Inc.
communications to Party B: 850 Ridgelake Blvd.
Memphis, TN 38120
Telecopy: 901-762-4060
(b) Process Agent. For the purpose of Section 13(c):- Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:- Not
applicable.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document:-- The
Pledge Agreement (as defined in the Credit Agreement) and any other security
documents executed by Party B granting Party A a perfected security interest
in collateral pledged to secure obligations of Party B under the Credit
Agreement.
(g) Credit Support Provider. Credit Support Provider means in relation to
Party A, not applicable: and Credit Support Provider means in relation to Party
B, the Guarantor as defined in the Credit Agreement.
2
<PAGE>
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to that
jurisdiction's choice of law doctrine);
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) will not apply to
any Transaction unless specified in the relevant Confirmation.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
(k) "Interest Rate Protection Agreement." This Agreement is an Interest Rate
Protection Agreement as defined in the Credit Agreement.
PART 5: Other Provisions
----------------
(a) Set-off. Nothing in this Agreement shall be treated as restricting or
negating any right of set-off, lien, counterclaim or other right or remedy which
might otherwise be available to either party.
(b) Payments. Notwithstanding the provisions of any Swap Transaction, in the
event an Event of Default or an event that with the giving of notice or lapse of
time (or both) would become an Event of Default shall have occurred and be
continuing with respect to a party ("Party X"), or material adverse change in
the business, operations, assets or financial or other condition of Party X
shall have occurred, then, upon written notice being given to Party X by the
other party ("Party Y") (or automatically, without any requirement for the
giving of notice, in the case of an Event of Default or Potential Event of
Default described in Section 5(a)(vii)), the following modifications shall be
made, effective as of the date such notice is given or deemed to be given, to
each Swap Transaction where the originally-scheduled Payment Dates for Party Y
occur more frequently than the Payment Dates for Party X: (i) Compounding shall
apply; (ii) Party Y's Payment Dates shall be changed to coincide with Party X's
Payment Dates; (iii) the Compounding Dates shall be the same dates as Party Y's
originally-scheduled Payment Dates; and (iv) for purposes of calculating the
amount of the payment to be made by Party Y on the Payment Date for Party Y (as
modified hereby) next succeeding the effective date of the modifications
provided for in this paragraph, the Calculation Period in respect of which such
payment is being made will be deemed to have commenced on the date of the most
recent payment made by Party Y.
(c) Exchange of Confirmations. For each Swap Transaction entered into
hereunder, Party A shall promptly send to Party B a Confirmation, via telex or
facsimile transmission. Party B agrees to respond to such Confirmation within
three (3) Business Days, either confirming agreement thereto or requesting a
correction of any error(s) contained therein. Failure by Party B to respond
within such period shall not affect the validity or enforceability of such Swap
Transaction and shall be deemed to be an affirmation of the terms contained in
such Confirmation, absent manifest error. The parties agree that any such
exchange of telexes or facsimile transmissions shall constitute a Confirmation
for all purposes hereunder.
(d) Notice by Facsimile Transmission. Section 12(a) is hereby amended by
inserting the words "or 13(c)" between the number "6" and the word "may" in the
second line thereof.
(e) Waiver of Right to Trial by Jury. Each party hereby irrevocably waives any
and all rights to trial by jury with respect to any legal proceeding arising out
of or relating to this Agreement or any Transaction contemplated hereby.
3
<PAGE>
(f) Recording of Conversations. Each party to this Agreement acknowledges and
agrees to the tape or electronic recording of conversations between the parties
to this Agreement whether by one or other or both of the parties, and that any
such recordings may be submitted in evidence in any action or proceeding
relating to the Agreement or any Transaction.
(g) Eligible Swap Participant. Each party represents to the other that it is an
"eligible swap participant" as defined under the regulations of the Commodity
Futures Trading Commission, currently at 17 C.F.R. Sec.35.1(b)(2).
(h) Transfer. A new subsection (c) shall be added to Section 7 of this
Agreement: "(c) a party may make such a transfer of this Agreement and all
Transactions hereunder to such party's Affiliate upon 10 days' prior written
notice to the other party, provided that such Affiliate has attained a rating of
at least AA (or its equivalent) from a nationally recognized U.S. rating agency
on the date that the intended transfer shall take effect."
(i) Additional Representation. Party B additionally represents and warrants
that (i) it is entering into the Agreement and will enter into all Transactions
thereunder as principal and in connection with its business or the management
of its business, (ii) it is aware of all the material risks associated with its
Transactions, (iii) it is making its own business judgment in entering into
Transactions, and (iv) Party A is not its agent, or fiduciary with respect to
such Transactions.
(j) Prior Transactions. Unless otherwise agreed to by the parties, this
Agreement shall govern all Transactions between the parties entered into prior
to the date of this Agreement.
(k) Incorporation by Reference of Terms of Credit Agreement. The covenants,
terms and provisions of, including all representations and warranties of Party B
contained in, the Credit Agreement, as in effect as of the date of this
Agreement, are hereby incorporated by reference in, and made part of, this
Agreement to the same extent as if such covenants, terms, and provisions were
set forth in full herein. Party B hereby agrees that, during the period
commencing with the date of this Agreement through and including such date on
which all of Party B's obligations under this Agreement are fully performed,
Party B will (a) observe, perform, and fulfill each and every such covenant,
term, and provision applicable to Party B, as such covenants, terms, and
provisions, may be amended from time to time after the date of this Agreement
and (b) deliver to Party A at the address for notices to Party A provided in
Part 4 each notice, document, certificate or other writing as Party B is
obligated to furnish to any other party to the Credit Agreement. In the event
the Credit Agreement terminates or becomes no longer binding on Party B prior to
the termination of this Agreement, such covenants, terms, and provisions (other
than those requiring payments in respect of amounts owed under the Credit
Agreement) will remain in force and effect for purposes of this Agreement as
though set forth in full herein until the date on which all of Party B's
obligations under this Agreement are fully performed, and this Agreement is
terminated.
Accepted and agreed:
NATIONSBANK, N.A. (CAROLINAS) PROMUS HOTELS, INC.
/s/ J.E. Ball /s/ Carol G. Champion
- ---------------------------------- --------------------------------
Title: J.E. Ball Name: Carol G. Champion
Title: Senior Vice President Title: Vice President and Treasurer
4
EXHIBIT 10(25)
TRANSFER AGREEMENT
THIS TRANSFER AGREEMENT, dated as of June 30, 1995, ("Transfer Agreement"),
among Embassy Suites, Inc. ("Transferor"), Promus Hotels, Inc. ("Transferee")
and NationsBank, N.A. (Carolinas) (formerly NationsBank of North Carolina,
N.A.)("NationsBank").
WITNESSETH:
WHEREAS, Transferor and NationsBank have executed and delivered an Interest Rate
and Currency Exchange Agreement dated May 18, 1993 (the "Transferor Swap
Agreement");
WHEREAS, Transferee and NationsBank have executed and delivered a Master
Agreement dated June 30, 1995 (the "Transferee Swap Agreement");
WHEREAS, Transferor desires to transfer and delegate to Transferee all of its
rights, duties and obligations under the Transferor Swap Agreement and
certain Transactions as evidenced by certain Confirmations (the
"Confirmations"), a copy of each of which, subject to the modifications that are
effective as of the Effective Date as hereinafter defined, are attached hereto
as Exhibit I (collectively, the "Obligations");
WHEREAS, Transferee desires to accept such transfer and delegation and to
assume the rights, duties and Obligations of the Transferor under each
Confirmation, by the incorporation thereof pursuant, hereto under the Transferee
Swap Agreement; and
WHEREAS, Transferor desires to obtain the written consent of NationsBank to such
transfer, delegation and assumption, and NationsBank desires to grant such
consent in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein contained, the parties hereto agree as follows:
1. Release. Effective as of and from June 30, 1995 (the "Effective Date"),
---------
NationsBank hereby releases Transferor from all Obligations owed by Transferor
under and in respect of the Transferor Swap Agreement and each Confirmation, and
all of Transferor's rights in and to the same shall be terminated.
2. Transfer and Assumption. Effective as of and from the Effective Date,
-------------------------
Transferee hereby assumes all the Transferor's rights, duties and Obligations
under each Confirmation (including all amounts accrued as of the Effective Date
but not yet payable); provided, however, that as of and from the Effective Date,
--------- -------
each Confirmation will be governed by the terms and conditions of the Transferee
Swap Agreement. For all purposes of the Transferee Swap Agreement, the Trade
Date of each Transaction evidenced by a Confirmation at Exhibit I shall be
deemed to be the Effective Date.
-1-
<PAGE>
3. Consent and Acknowledgment. NationsBank hereby consents to the assignment,
--------------------------
transfer and delegation by Transferor to Transferee of all the rights and
Obligations of Transferor under the Transferor Swap Agreement and each
Confirmation, and as and from the Effective Date, NationsBank shall look solely
to the Transferee for the fulfillment and enforcement of the same.
4. Representations. Each party hereby represents and warrants to the other
-----------------
that (i) it is validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, (ii) the execution, delivery and
performance of this Transfer Agreement by it are within its corporate powers,
and have been duly authorized by all necessary corporate or other action, and
(iii) this Transfer Agreement constitutes its legal, valid and binding
obligation.
5. Governing Law. This Transfer Agreement shall be governed by and construed
-------------
in accordance with the law of the State of New York, without reference to its
conflicts of laws principles.
6. Counterparts. This Transfer Agreement may be executed in any number of
--------------
Counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this Transfer Agreement as
of the date first above written.
Embassy Suites, Inc.
By: /s/
--------------------------------
Name:
Title:
Promus Hotels, Inc.
By: /s/ Carol G. Champion
--------------------------------
Name: Carol G. Champion
Title: Vice President & Treasurer
NationsBank, N.A. (Carolinas)
By: /s/ R. Vaughan Dodd
-------------------------------
Name: R. Vaughan Dodd
Title: Senior Vice President
<PAGE>
EXHIBIT I
---------
NationsBank
CONFIRMATION FOR U.S. DOLLAR RATE SWAP TRANSACTION
UNDER EXISTING IRCEA
TO: EMBASSY SUITES INC.
1023 CHERRY ROAD
MEMPHIS, TN 38117
ATTN: CAROL CHAMPION
TEL: 901-762-8770
FAX: 901-762-4060
FROM: NationsBank, N.A. (Carolinas)
440 S. LaSalle
Chicago, Illinois 60605
JEFF MCNEIL / SEAN DOYLE
Date: 25JAN95
Our Reference #: 291790
The purpose of this letter agreement is to confirm the terms and conditions
of the Swap Transaction entered into between us on the Trade Date specified
below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Interest Rate and Currency Exchange
Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.)
are incorporated into this Confirmation. In the event of any inconsistency
between those definitions and provisions and this Confirmation, this
Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to, the
Interest Rate and Currency Exchange Agreement dated as of 18MAY93, as
amended and supplemented from time to time (the "Agreement"), between you
and us. All provisions contained in the Agreement shall govern this
Confirmation except as expressly modified below.
2. The terms of the Swap Transaction to which this Confirmation
relates are as follows:
Currency/Notional Amount: USD 50,000,000.00
Trade Date: 24JAN95
Effective Date: 26JAN95
Termination Date: 28JUL97, subject to adjustment in
accordance with the Modified Following
Business Day Convention.
Fixed Amounts:
Payer of Fixed: EMBASSY SUITES INC.
<PAGE>
EXHIBIT I
---------
Fixed Payer Payment Dates: EACH MARCH 15, JUNE 15,
SEPTEMBER 15, AND DECEMBER 15,
WITH FINAL PAYMENT JULY 28,
1997, COMMENCING MARCH 15,
1995 AND ENDING JULY 28, 1997,
SUBJECT TO ADJUSTMENT IN
ACCORDANCE WITH THE MODIFIED
FOLLOWING BUSINESS DAY CONVENTION.
Fixed Rate Payer Business
Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Fixed Rate Payer
Business Days: NEW YORK, LONDON
Fixed Rate: 7.8625%
Fixed Rate Payer Day
Count Fraction: ACTUAL/360
Floating Amounts:
Payer of Floating: NATIONSBANK, N.A. (CAROLINAS)
Floating Payer Reset
Dates: First Day of each Calculation Period
Floating Payer Payment
Dates: EACH MARCH 15, JUNE 15,
SEPTEMBER 15, AND DECEMBER 15,
WITH FINAL PAYMENT JULY 28,
1997, COMMENCING MARCH 15,
1995 AND ENDING JULY 28, 1997,
SUBJECT TO ADJUSTMENT IN
ACCORDANCE WITH THE MODIFIED
FOLLOWING BUSINESS DAY CONVENTION.
Floating Rate Payer
Business Days: NEW YORK, LONDON
Floating Rate Payer
Business Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 MONTHS
Initial USD/LIBOR: 6.1875%
Spread: NONE
Floating Rate for Initial
Calculation Period: 6.1875%
Floating Rate Payer
Day Count Fraction: ACTUAL/360
Averaging: INAPPLICABLE
Rounding Factor: One-Hundred-Thousandth of One Percent
Calculation Agent: NationsBank, N.A. (Carolinas)
Assignment: This Swap Transaction may be assigned
only with prior written consent.
Legal and Out-of-Pocket
Expenses: For each party's own account.
Governing Law: The Laws of the State of New York.
2
<PAGE>
EXHIBIT I
---------
Recording of Conversations: Each party to this Agreement
acknowledges and agrees to the tape or
electronic recording of conversations
between the parties to this Agreement
whether by one or other or both of the
parties, and that any such recordings
may be submitted in evidence in any
action or proceeding relating to the
Agreement or any Transaction.
Payment Instructions:
Payments to NationsBank: Payment to EMBASSY SUITES INC.:
NATIONSBANK N.A. (CAROLINAS), FIRST TENNESSEE BANK
CHARLOTTE A/C# 841900
ABA 052000196 ABA# 084000026
ACCT: 10852016511 IN FAVOR OF: EMBASSY SUITES, INC.
ATTN: DERIVATIVE OPERATIONS REPETITIVE 427037
Please confirm that the foregoing correctly sets forth the terms and
conditions of our agreement by responding within three (3) Business Days by
either (i) returning via telecopier an executed copy of this Confirmation
to the attention of Marge Szymczak, Fax No. (312) 431-3160; Telephone No.
(312) 431-2934, or (ii) sending a telex to Marge Szymczak (Telex No.
4330469, answerback: CRT CCO) substantially to the following effect: "We
acknowledge receipt of your fax dated 25JAN95 with respect to a Swap
Transaction between EMBASSY SUITES, INC. and NationsBank, N.A. (Carolinas)
with a Notional Amount of USD 50,000,000.00 and Termination Date of 28JUL97
and confirm that such fax correctly sets forth the term of our agreement
relating to the Swap Transaction described therein. Very truly yours,
-----
, by (specific name and title of authorized officer)." Failure to
---------
respond within such period shall not affect the validity or enforceability
of this Swap Transaction, and shall be deemed to be an affirmation of the
terms and conditions contained herein, absent manifest error.
NationsBank, N.A. (Carolinas) is pleased to have concluded this transaction
with you.
Yours Sincerely,
NationsBank, N.A. (Carolinas)
By: /s/ Nick Kolick
--------------------------
Nick Kolick, Vice President
Authorized Signatory
Confirmed as of the date first written above:
EMBASSY SUITES INC.
By: /s/ Carol G. Champion, Asst. Treasurer
--------------------------
Authorized Signatory
3
<PAGE>
EXHIBIT I
---------
NationsBank
CONFIRMATION FOR U.S. DOLLAR RATE SWAP TRANSACTION
UNDER EXISTING IRCEA
TO: EMBASSY SUITES, INC.
1023 CHERRY ROAD
MEMPHIS, TN 38117
ATTN: CAROL CHAMPION
TEL: 901-762-8770
FAX: 901-762-8637 and 901-762-4060
FROM: NationsBank, N.A. (Carolinas)
440 S. LaSalle
Chicago, Illinois 60605
JEFF MCNEIL / KEVIN SAKODA
Date: 17MAR95
Our Reference #: 324190
The purpose of this letter agreement is to confirm the terms and conditions
of the Swap Transaction entered into between us on the Trade Date specified
below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Interest Rate and Currency Exchange
Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Associations, Inc.)
are incorporated into this Confirmation. In the event of any inconsistency
between those definitions and provisions and this Confirmation, this
Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to, the
Interest Rate and Currency Exchange Agreement dated as of 18MAY93, as
amended and supplemented from time to time (the "Agreement"), between you
and us. All provisions contained in the Agreement shall govern this
Confirmation except as expressly modified below.
2. The terms of the Swap International to which this Confirmation
relates are as follows:
Currency/Notional Amount: USD 50,000,000.00
Trade Date: 16MAR95
Effective Date: 20MAR95
Termination Date: 20MAR00, subject to
adjustment in accordance with
the Modified Following
Business Day Convention.
Fixed Amounts:
Payer of Fixed: EMBASSY SUITES, INC.
<PAGE>
EXHIBIT I
---------
Fixed Payer Payment Dates: EACH MARCH 20, JUNE 20,
SEPTEMBER 20, AND DECEMBER 20,
COMMENCING JUNE 20, 1995 AND
ENDING MARCH 20, 2000, SUBJECT
TO ADJUSTMENT IN ACCORDANCE
WITH THE MODIFIED FOLLOWING
BUSINESS DAY CONVENTION.
Fixed Rate Payer Business
Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Fixed Rate Payer
Business Days: NEW YORK, LONDON
Fixed Rate: 6.99%
Fixed Rate Payer Day
Count Fraction: ACTUAL/360
Floating amounts:
Payer of Floating: NATIONSBANK, N.A. (CAROLINAS)
Floating Payer Reset
Dates: First Day of each Calculation Period
Floating Payer Payment
Dates: EACH MARCH 20, JUNE 20,
SEPTEMBER 20, AND DECEMBER 20,
COMMENCING JUNE 20, 1995 AND
ENDING MARCH 20, 2000, SUBJECT
TO ADJUSTMENT IN ACCORDANCE
WITH THE MODIFIED FOLLOWING
BUSINESS DAY CONVENTION.
Floating Rate Payer
Business Days: NEW YORK, LONDON
Floating Rate Payer
Business Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 MONTHS
Initial USD/LIBOR: 6.25%
Spread: NONE
Floating Rate for Initial
Calculation Period: 6.25%
Floating Rate Payer
Day Count Fraction: ACTUAL/360
Averaging: INAPPLICABLE
Rounding Factor: One-Hundred-Thousandth of One Percent
Calculation Agent: NationsBank, N.A. (Carolinas)
Assignment: This Swap Transaction may be assigned
only with prior written consent.
Legal and Out-of-Pocket
Expenses: For each party's own account.
Governing law: The Laws of the State of New York.
<PAGE>
EXHIBIT I
---------
Recording of Conversations: Each party to this Agreement
acknowledges and agrees to the tape or
electronic recording of conversations
between the parties to this Agreement
whether by one or other or both of the
parties, and that any such recordings
may be submitted in evidence in any
action or proceeding relating to the
Agreement or any Transaction.
Payment Instructions:
Payments to NationsBank: Payment to EMBASSY SUITES, INC.:
NATIONSBANK N.A. (CAROLINAS), FIRST TENNESSEE BANK
CHARLOTTE A/C# 841900
ABA 053000196 ABA# 084000026
ACCT: 10852016511 IN FAVOR OF: EMBASSY SUITES, INC.
ATTN: DERIVATIVE OPERATIONS REPETITIVE 427037
Please confirm that the foregoing correctly sets forth the terms and
conditions of our agreement by responding within three (3) Business Days by
either (i) returning via telecopier an executed copy of this Confirmation
to the attention of Marge Szymczak, Fax No. (312) 431-3160; Telephone No.
(312) 431-2934, or (ii) sending a telex to Marge Szymczak (Telex No.
4330469, answerback: CRT CGO) substantially to the following effect: "We
acknowledge receipt of your fax dated 17MAR95 with respect to a Swap
Transaction between EMBASSY SUITES, INC. and NationsBank, N.A. (Carolinas)
with a Notional Amount of USD 50,000,000.00 and Termination Date of 20MAR00
and confirm that such fax correctly sets forth the term of our agreement
relating to the Swap Transaction described therein. Very truly yours,
-----
, by (specific name and title of authorized officer)." Failure to
---------
respond within such period shall not affect the validity or enforceability
of this Swap Transaction, and shall be deemed to be an affirmation of the
terms and conditions contained herein, absent manifest error.
NationsBank, N.A. (Carolinas) is pleased to have concluded this transaction
with you.
Yours Sincerely,
NationsBank, N.A. (Carolinas)
By: /s/ Nick Kolick
--------------------------
Nick Kolick, Vice President
Authorized Signatory
Confirmed as of the date first written above:
EMBASSY SUITES INC.
By: /s/ Carol G. Champion, Assistant Treasurer
--------------------------
Authorized Signatory
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,595
<SECURITIES> 0
<RECEIVABLES> 26,438
<ALLOWANCES> 1,703
<INVENTORY> 4,813
<CURRENT-ASSETS> 36,345
<PP&E> 455,303
<DEPRECIATION> 105,188
<TOTAL-ASSETS> 470,911
<CURRENT-LIABILITIES> 43,769
<BONDS> 219,760
<COMMON> 5,136
0
0
<OTHER-SE> 137,135
<TOTAL-LIABILITY-AND-EQUITY> 470,911
<SALES> 0
<TOTAL-REVENUES> 132,785
<CGS> 0
<TOTAL-COSTS> 77,655
<OTHER-EXPENSES> 1,997
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 16,742
<INCOME-PRETAX> 36,664
<INCOME-TAX> 15,434
<INCOME-CONTINUING> 21,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,230
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
