EXHIBIT 10.3
DISTRIBUTION AGREEMENT
BY AND BETWEEN
HILTON HOTELS CORPORATION
AND
GAMING CO., INC.
(TO BE RENAMED _____________________)
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DATED AS OF [________ __], 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.01. General. . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.02. Terms Defined Elsewhere in Agreement.. . . . . . . . . . 11
ARTICLE II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . . . . 12
Section 2.01. Transfer of Assets to Gaming Co. . . . . . . . . . . . . 12
Section 2.02. Transfers of Assets from Gaming Subsidiaries to Hilton
or Retained Business Subsidiaries. . . . . . . . . . . . 12
Section 2.03. Transfers Not Effected Prior to the Distribution.. . . . 12
Section 2.04. Cooperation Re: Assets. . . . . . . . . . . . . . . . . 13
Section 2.05. No Representations or Warranties; Consents.. . . . . . . 13
Section 2.06. Conveyancing and Assumption Instruments. . . . . . . . . 14
Section 2.07. Cash Allocation; Cash Management.. . . . . . . . . . . . 14
Section 2.08. Allocation of Debt.. . . . . . . . . . . . . . . . . . . 15
Section 2.09. Ancillary Agreements Between Hilton and Gaming Co. . . . 17
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES. . . . . . . . . . 17
Section 3.01. Assumption and Satisfaction of Liabilities . . . . . . . 17
ARTICLE IV. THE DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.01. Cooperation Prior to the Distribution. . . . . . . . . . 17
Section 4.02. Hilton Board Action; Conditions Precedent to the
Distribution . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.03. The Distribution.. . . . . . . . . . . . . . . . . . . . 19
ARTICLE V. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.01. Indemnification by Hilton. . . . . . . . . . . . . . . . 20
Section 5.02. Indemnification by Gaming Co.. . . . . . . . . . . . . . 20
Section 5.03. Insurance Proceeds.. . . . . . . . . . . . . . . . . . . 20
Section 5.04. Procedure for Indemnification. . . . . . . . . . . . . . 21
Section 5.05. Remedies Cumulative. . . . . . . . . . . . . . . . . . . 23
Section 5.06. Survival of Indemnities. . . . . . . . . . . . . . . . . 23
ARTICLE VI. CERTAIN ADDITIONAL MATTERS. . . . . . . . . . . . . . . . . . 23
Section 6.01. Gaming Co. Board . . . . . . . . . . . . . . . . . . . . 23
Section 6.02. Resignations; Hilton Board.. . . . . . . . . . . . . . . 24
Section 6.03. Gaming Co. Certificate and Bylaws. . . . . . . . . . . . 24
Section 6.04. Certain Post-Distribution Transactions.. . . . . . . . . 24
Section 6.05. Gaming Co. Rights Plan.. . . . . . . . . . . . . . . . . 25
Section 6.06. Timeshare and Vacation Ownership Facilities. . . . . . . 25
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ARTICLE VII. ACCESS TO INFORMATION AND SERVICES. . . . . . . . . . . . . . 25
Section 7.01. Provision of Corporate Records . . . . . . . . . . . . . 25
Section 7.02. Access to Information. . . . . . . . . . . . . . . . . . 26
Section 7.03. Production of Witnesses. . . . . . . . . . . . . . . . . 26
Section 7.04. Reimbursement. . . . . . . . . . . . . . . . . . . . . . 27
Section 7.05. Retention of Records.. . . . . . . . . . . . . . . . . . 27
Section 7.06. Confidentiality. . . . . . . . . . . . . . . . . . . . . 27
Section 7.07. Privileged Matters.. . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.01. Policies and Rights Included Within the Gaming Group
Assets . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.02. Policies and Rights Included Within the Retained Business
Group Assets . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.03. Administration and Reserves. . . . . . . . . . . . . . . 30
Section 8.04. Agreement for Waiver of Conflict and Shared Defense. . . 32
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.01. Entire Agreement; No Third Party Beneficiaries . . . . . 32
Section 9.02. Tax Allocation and Indemnity Agreement;
After-Tax Payments.. . . . . . . . . . . . . . . . . . . 32
Section 9.03. Expenses.. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.04. Governing Law. . . . . . . . . . . . . . . . . . . . . . 33
Section 9.05. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.06. Amendments.. . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.07. Assignments. . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.08. Termination. . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.09. Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . 34
Section 9.10. Specific Performance.. . . . . . . . . . . . . . . . . . 34
Section 9.11. Headings; References.. . . . . . . . . . . . . . . . . . 35
Section 9.12. Counterparts.. . . . . . . . . . . . . . . . . . . . . . 35
Section 9.13. Severability; Enforcement. . . . . . . . . . . . . . . . 35
Section 9.14. Arbitration of Disputes. . . . . . . . . . . . . . . . . 35
Section 9.15. Prompt Payment.. . . . . . . . . . . . . . . . . . . . . 36
Section 9.16. Approvals, Consent and Waivers.. . . . . . . . . . . . . 36
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INDEX OF SCHEDULES
Schedule 1 Casino Hotels and Other Gaming Facilities
Schedule 2 Gaming Corporate Functions
Schedule 3 Certain Gaming Group Assets
Schedule 4 Gaming Group Cash Accounts
Schedule 5 Gaming Subsidiaries
Schedule 6 Certain Retained Business Group Assets
Schedule 7 Retained Business Subsidiaries
Schedule 8 Retained Corporate Functions
Schedule 9 Retained Credit Agreement Debt Amount
Schedule 10 Exceptions to Resignations Required under Section 6.02
INDEX OF EXHIBITS
Exhibit A Assignment and License Agreement
Exhibit B Corporate Services Agreements
Exhibit C Employee Benefits and Other Employment Matters Allocation
Agreement
Exhibit D Terms of Gaming Co. Intercompany Debt Allocation Agreement
Exhibit E Tax Allocation and Indemnity Agreement
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "AGREEMENT"), dated as of [________
__], 1998, by and between HILTON HOTELS CORPORATION, a Delaware corporation
("HILTON"), and GAMING CO., INC. a Delaware corporation and wholly-owned
subsidiary of Hilton, to be renamed _______________________ ("GAMING CO.").
WHEREAS, Hilton, directly and through subsidiaries, owns, operates
and develops certain gaming facilities (as more specifically described
herein, the "GAMING BUSINESS"), and owns, operates and develops lodging
properties and vacation ownership resorts and engages in franchising of
lodging properties (as more specifically described herein, the "RETAINED
BUSINESS");
WHEREAS, the Board of Directors of Hilton has determined that it is
in the best interests of Hilton and the stockholders of Hilton to separate
the Gaming Business from the Retained Business through the distribution (the
"DISTRIBUTION") to the holders of Hilton Common Stock (as defined herein) of
all of the outstanding shares of Gaming Co. Common Stock (as defined herein),
and to consummate the Merger (as defined herein) promptly following the
Distribution;
WHEREAS, in order to effect such separation, Hilton and the
Retained Business Subsidiaries (as defined herein) will contribute to Gaming
Co. and the Gaming Subsidiaries (as defined herein), prior to the
Distribution, all of the operations, assets and liabilities of Hilton and the
Retained Subsidiaries comprising the Gaming Business and such other assets,
liabilities and operations as are described below;
WHEREAS, in connection with the Distribution, Hilton and Gaming Co.
have determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth
the agreements that will govern certain matters following the Distribution;
WHEREAS, the consummation of the Distribution is a condition to
each of Hilton's and Company's (as defined herein) respective obligations to
effect the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall qualify as a tax-free distribution within the meaning of
Section 355 of the Internal Revenue Code of 1986, as amended, to Hilton and
its stockholders.
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants and agreements set forth below, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL.
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other regulatory
or administrative agency or commission or any arbitration tribunal.
AFFILIATE: With respect to any specified Person, an affiliate of
such Person within the meaning of Rule 145 promulgated under the Securities
Act. Notwithstanding the foregoing, (i) the Affiliates of Hilton shall not
include Gaming Co., the Gaming Subsidiaries or any other Person which
otherwise would be an Affiliate of Hilton solely by reason of Hilton's
ownership of the capital stock of Gaming Co. or a Gaming Subsidiary prior to
the Distribution or the fact that any officer or director of Hilton or any of
the Retained Business Subsidiaries shall also serve as an officer or director
of Gaming Co. or any of the Gaming Subsidiaries, and (ii) the Affiliates of
Gaming Co. shall not include Hilton, the Retained Business Subsidiaries or
any other Person which otherwise would be an Affiliate of Gaming Co. solely
by reason of Hilton's ownership of the capital stock of Gaming Co. or a
Gaming Subsidiary prior to the Distribution or the fact that any officer or
director of Gaming Co. or any of the Gaming Subsidiaries shall also serve as
an officer or director of Hilton or any of the Retained Business Subsidiaries.
AFFILIATED GROUP: The meaning set forth for such term in the Tax
Allocation and Indemnity Agreement.
AGENT: The distribution agent appointed by Hilton to distribute
the Gaming Co. Common Stock pursuant to the Distribution.
ANCILLARY AGREEMENTS: The Assignment and License Agreement,
Corporate Services Agreements, Employee Benefits Allocation Agreement and Tax
Allocation and Indemnity Agreement.
ASSIGNMENT AND LICENSE AGREEMENT: The Assignment and License
Agreement between Hilton and Gaming Co., which agreement shall be entered
into on or prior to the Distribution Date in substantially the form attached
hereto as Exhibit A.
ASSUMED DEBT: The Debt of Hilton and its Subsidiaries which is to
be assumed by Gaming Co. and/or retained by the Gaming Group Subsidiaries in
connection with the Distribution, as determined pursuant to Section 2.08.
BALLY'S: Bally Entertainment Corporation.
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BALLY'S ACQUISITION: The acquisition of Bally's by Hilton, which
was effected on December 18, 1996.
CASINO HOTELS: Hotels that are part of or adjacent to a casino or
other gaming facility where the principal focus of the combined facilities is
gaming operations; PROVIDED, that Casino Hotels do not include (i) hotels
operated by the Retained Business (E.G., the ▇▇▇▇▇▇ hotel being developed in
Cairo, Egypt) with Hotel Ancillary Facilities or (ii) the entity managing the
Casino Windsor. The Casino Hotels operated by Hilton and its Subsidiaries as
of the date hereof are set forth in Schedule 1.
CODE: The Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
COMPANY: Grand Casinos, Inc., a Minnesota corporation.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
CORPORATE SERVICES AGREEMENTS: The Hilton Corporate Services
Agreement and the Gaming Co. Corporate Services Agreement.
DEBT: All (i) indebtedness for borrowed money and obligations
evidenced by bonds, notes, debentures or similar instruments, (ii)
obligations issued or assumed as the deferred purchase price of property or
services, (iii) obligations under capital leases and (iv) all guarantees of
the obligations of other Persons described in the foregoing clauses
(i)--(iii).
DISTRIBUTION: The distribution to the holders of Hilton Common
Stock as of the Distribution Record Date of all of the outstanding shares of
Gaming Co. Common Stock.
DISTRIBUTION DATE: The date on which the Distribution is effected.
DISTRIBUTION RECORD DATE: The date established by the Hilton Board
as the date for taking a record of the Holders of Hilton Common Stock
entitled to participate in the Distribution.
EMPLOYEE BENEFITS ALLOCATION AGREEMENT: The Employee Benefits and
Other Employment Matters Allocation Agreement between Gaming Co. and Hilton,
which agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit C.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
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FOREIGN GAMING LAWS: The laws, rules and regulations promulgated
by the applicable Governmental Authorities of Australia or Uruguay or any
political subdivisions thereof relating to casino gaming.
FORM 10: The Registration Statement on Form 10 under the Exchange
Act with respect to the Gaming Co. Common Stock.
GAAP: Generally accepted accounting principles.
GAMING BUSINESS: The business conducted by Hilton and its
Subsidiaries relating to the (i) management, ownership, operation and
development of Casino Hotels and gaming facilities other than Hotel Ancillary
Facilities (such Casino Hotels and gaming facilities in existence as of the
date hereof are specified in Schedule 1), (ii) the Gaming Corporate Functions
and (iii) any other operations conducted by Hilton and its Subsidiaries
utilizing the Gaming Group Assets.
GAMING CORPORATE FUNCTIONS: The corporate level and support
functions of Hilton to be conducted by Gaming Co. in connection with the
Distribution, as set forth in Schedule 2. (Currently expected to include (i)
aviation services, (ii) food and beverage purchasing and procurement, (iii)
retail management and administration, (iv) compliance and (v) surveillance.)
GAMING GROUP: Gaming Co. and the Gaming Subsidiaries, collectively.
GAMING GROUP ASSETS: (i) All outstanding capital stock of the
Gaming Subsidiaries; (ii) the Gaming Group Books and Records; (iii) the
rights of Gaming Co. and the Gaming Subsidiaries under the Shared Policies;
(iv) all of the assets expressly to be retained by, or assigned or allocated
to, Gaming Co. or any of the Gaming Subsidiaries under this Agreement and the
Related Agreements; (v) the assets specified in Schedule 3, to the extent in
existence on the Distribution Date; (vi) the assets used in connection with
the Gaming Corporate Functions; (vii) all rights and benefits of Hilton
arising out of the Merger Agreement; and (viii) any other assets of Hilton
and its Subsidiaries used principally in the Gaming Business, including
without limitation, all assets obtained by Hilton or its Subsidiaries as a
result of the Bally's Acquisition, to the extent still held by Hilton or its
Subsidiaries; EXCEPT, in each case, excluding the assets listed on Schedule 6.
GAMING GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Gaming Co. and the Gaming Subsidiaries and any other
books and records of Hilton and its Subsidiaries which relate principally to
the Gaming Group, are necessary to conduct the Gaming Business, or are
required by law to be retained by Gaming Co. or a Gaming Subsidiary,
including, without limitation, (i) all such books and records relating to
Transferred Employees, (ii) all files relating to any Action being assumed by
Gaming Co. or retained by a Gaming Subsidiary as part of the Gaming Group
Liabilities, and (iii) original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements and
filings, relating to Gaming Co., the Gaming Subsidiaries or the Gaming
Business (but not including the Retained Business Group Books and Records,
provided that
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Gaming Co. shall have access to, and have the right to obtain duplicate
copies of, any of the Retained Business Group Books and Records which pertain
to the Gaming Business in accordance with the provisions of Article VII).
GAMING GROUP CASH ACCOUNTS: The bank accounts set forth in
Schedule 4 hereto.
GAMING GROUP LIABILITIES: (i) All of the Liabilities of the Gaming
Group under, or to be retained or assumed by Gaming Co. or any of the Gaming
Subsidiaries pursuant to this Agreement or any of the Related Agreements;
(ii) the Assumed Debt; (iii) all Liabilities of Gaming Co. and the Gaming
Subsidiaries, other than Liabilities specifically associated with the
Retained Business (which shall be transferred to Hilton or to a Retained
Business Subsidiary in connection with the Distribution); (iv) all
Liabilities of Hilton arising out of the Merger Agreement and (v) all other
Liabilities of Hilton and its Subsidiaries arising out of, or specifically
associated with, any of the Gaming Group Assets or the Gaming Business,
including, but not limited to, all Liabilities assumed or incurred by Hilton
or its Subsidiaries as a result of the Bally's Acquisition, to the extent
still outstanding; PROVIDED, HOWEVER, that the Gaming Group Liabilities shall
not include (x) any Debt of Hilton or its Subsidiaries other than the Assumed
Debt, (y) any claims, losses, damages, demands, costs, expenses or
Liabilities for any Tax (which shall be governed by Sections 6.05 and 9.02
hereof and by the Tax Allocation and Indemnity Agreement) and (z) any
Liabilities under the ▇▇▇▇▇▇ License Agreements (as defined in the Assignment
and License Agreement).
GAMING LAWS: Foreign Gaming Laws, Louisiana Gaming Laws,
Mississippi Gaming Laws, Missouri Gaming Laws, New Jersey Gaming Laws, Nevada
Gaming Laws and Ontario Gaming Laws.
GAMING SUBSIDIARIES: The Subsidiaries of Hilton specified in
Schedule 5 and any other Subsidiaries formed after the date hereof to conduct
a portion of the Gaming Business.
GAMING CO. BOARD: The Board of Directors of Gaming Co.
GAMING CO. BYLAWS: The Bylaws of Gaming Co., which shall be
substantially similar to the bylaws of Hilton as in effect immediately prior
to the Distribution Date.
GAMING CO. CORPORATE SERVICES AGREEMENT: The agreement between
Hilton and Gaming Co. governing the provision of services by Gaming Co. to
Hilton for a period following the Distribution Date, which agreement shall be
entered into on or prior to the Distribution Date in substantially the form
attached hereto as Exhibit B.
GAMING CO. CERTIFICATE: The Certificate of Incorporation of Gaming
Co., which shall be substantially similar to the certificate of incorporation
of Hilton as in effect immediately prior to the Distribution Date.
GAMING CO. COMMON STOCK: The common stock, $.01 par value per
share, of Gaming Co.
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GAMING CO. INTERCOMPANY DEBT ALLOCATION AGREEMENT: The agreement
to be executed and delivered by Gaming Co. in favor of Hilton on or prior to
the Distribution Date with the terms set forth on Exhibit D attached hereto.
GAMING CO. MEMBERS: The meaning specified in the Tax Allocation
and Indemnity Agreement.
GOVERNMENTAL AUTHORITY: Any court, administrative agency or
commission or other governmental authority or instrumentality.
HILTON BOARD: The Board of Directors of Hilton as it is
constituted prior to the Distribution Date.
HILTON COMMON STOCK: The common stock, par value $2.50 per share,
of Hilton.
HILTON CORPORATE SERVICES AGREEMENT: The agreement between Hilton
and Gaming Co. governing the provision of services by Hilton to Gaming Co.
for a period following the Distribution Date, which agreement shall be
entered into on or prior to the Distribution Date in substantially the form
attached hereto as Exhibit B.
HOLDERS: The holders of record of Hilton Common Stock as of the
Distribution Record Date.
HOTEL ANCILLARY FACILITIES: Small gaming facilities which are
included as an adjunct to hotel operations.
INSURANCE ADMINISTRATION: With respect to each Policy (including
Self Insurance Programs) shall include, but not be limited to, the accounting
for premiums, retrospectively rated premiums, defense costs, adjuster's fees,
indemnity payments, deductibles and retentions as appropriate under the terms
and conditions of each of the Policies; and the reporting to primary and
excess insurance carriers of any losses, claims and/or audit exposure in
accordance with Policy provisions, and the distribution of Insurance Proceeds
as contemplated by this Agreement.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the
Policies, whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively rated premium adjustments, but only to
the extent that such Liabilities are within applicable Policy limits,
including aggregates.
IRS: The Internal Revenue Service or any successor thereto,
including but not limited to its agents, representatives and attorneys.
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IRS RULING: The letter ruling issued by the IRS in response to the
Ruling Request.
LAKES: GCI Lakes, Inc., a Minnesota corporation and wholly-owned
subsidiary of Company.
LIABILITIES: Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including, without limitation, those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity
or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking.
LOUISIANA GAMING LAWS: The Louisiana Riverboat Economic
Development and Gaming Control Act and the rules and regulations promulgated
thereunder.
MERGER: The merger of Merger Sub with and into Company with Company
as the surviving corporation.
MERGER AGREEMENT: That certain Agreement and Plan of Merger, dated
as of June 30, 1998 by and among Hilton, Gaming Co., Merger Sub, Company and
Lakes.
MERGER SUB: Gaming Acquisition Corporation, a Minnesota
corporation and wholly-owned subsidiary of Gaming Co.
MISSISSIPPI GAMING LAWS: The Mississippi Gaming Control Act and
the rules and regulations promulgated thereunder.
MISSOURI GAMING LAWS: The Missouri Gaming Law and the rules and
regulations promulgated thereunder.
NET CASH: The sum of (i) net cash provided by (used in) financing
activities, (ii) net cash provided by operating activities and (iii) net cash
used in investing activities.
NEVADA GAMING LAWS: The Nevada Gaming Control Act and the rules
and regulations promulgated thereunder, the ▇▇▇▇▇ County, Nevada Code and the
rules and regulations promulgated thereunder, and the City of Reno, Nevada
Code and other applicable local regulations.
NEW JERSEY GAMING LAWS: shall mean the New Jersey Casino Control
Act and the rules and regulations promulgated thereunder.
ONTARIO GAMING LAWS: The Ontario Gaming Control Act, 1992 and the
rules and regulations promulgated thereunder.
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PERSON: Any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, estate, unincorporated
organization, governmental or regulatory body or other entity.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Gaming Business or the Retained Business as conducted prior
to the Distribution Date, including without limitation primary and excess
policies, comprehensive general liability policies, automobile, aircraft,
workers' compensation, property insurance, crime insurance and boiler and
machinery insurance policies and self-insurance and captive insurance company
arrangements, together with the rights and benefits thereunder.
POST-DISTRIBUTION MEMBERS: The meaning specified in the Tax
Allocation and Indemnity Agreement.
PRELIMINARY TRANSFERS: The contribution by Hilton and the Retained
Business Subsidiaries to Gaming Co. and the Gaming Subsidiaries, prior to the
Distribution, of all of the assets and liabilities of Hilton and the Retained
Subsidiaries comprising the Gaming Business and such other assets,
liabilities and operations as are described herein.
PRIVILEGED INFORMATION: All information as to which Hilton, Gaming
Co. or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
PRIVILEGES: All privileges that may be asserted under applicable
law including, without limitation, privileges arising under or relating to
the attorney-client relationship (including but not limited to the
attorney-client and work product privileges), the accountant-client
privilege, and privileges relating to internal evaluative processes.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements set forth in writing, which
are entered into in connection with the transactions contemplated hereby,
including, without limitation, the Conveyancing and Assumption Instruments
and the Ancillary Agreements.
RETAINED BUSINESS: The business conducted by Hilton and its
Subsidiaries relating to (i) the sales, marketing, management, ownership,
operation, development and franchising of lodging, timeshare and vacation
ownership facilities (including those timeshare and vacation ownership
facilities located at or associated with the Casino Hotels, and including the
ability to sell, market and franchise any such facilities whether or not
located at or associated with the Casino Hotels), (ii) the Retained Corporate
Functions, (iii) Hilton's strategic alliance with Ladbroke Group PLC and its
affiliates (including all interests in joint ventures owned jointly with
Ladbroke Group PLC) and (iv) any other operations conducted by Hilton and its
Subsidiaries utilizing the Retained Business Group Assets.
RETAINED BUSINESS GROUP: Hilton and the Retained Business
Subsidiaries, collectively.
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RETAINED BUSINESS GROUP ASSETS: (i) All outstanding capital stock
of the Retained Business Subsidiaries and all assets of the Gaming
Subsidiaries other than the Gaming Group Assets; (ii) the Retained Business
Group Books and Records; (iii) the rights of Hilton and the Retained Business
Subsidiaries under the Shared Policies; (iv) all of the assets expressly to
be retained by, or assigned or allotted to, Hilton or any of the Retained
Business Subsidiaries under this Agreement or the Related Agreements; (v) the
assets used in connection with the Retained Corporate Functions; (vi) the
assets specified in Schedule 6, to the extent in existence on the
Distribution Date; and (vii) any other assets of Hilton and its Subsidiaries
used principally in the Retained Business; EXCEPT, in each case, excluding
the assets listed in Schedule 3.
RETAINED BUSINESS GROUP BOOKS AND RECORDS: The books and records
(including computerized records) of Hilton and the Retained Business
Subsidiaries and any other books and records of Hilton's Subsidiaries which
relate principally to the Retained Business Group, are necessary to conduct
the Retained Business or are required by law to be retained by Hilton or a
Retained Business Subsidiary, including, without limitation, (i) all such
books and records relating to Retained Business Group Employees, (ii) all
files relating to any Action being retained by Hilton as part of the Retained
Business Group Liabilities, and (iii) original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Hilton, the Retained Business
Subsidiaries or the Retained Business (but not including the Gaming Group
Books and Records, provided that Hilton shall have access to, and shall have
the right to obtain duplicate copies of, the Gaming Group Books and Records
in accordance with the provisions of Article VII).
RETAINED BUSINESS GROUP EMPLOYEES: The meaning specified in the
Employee Benefits Allocation Agreement.
RETAINED BUSINESS GROUP LIABILITIES: (i) All of the Liabilities of
the Retained Business Group under, or to be retained or assumed by Hilton or
any of the Retained Business Subsidiaries pursuant to, this Agreement or any
of the Related Agreements; (ii) all Liabilities for payment of outstanding
drafts of Hilton and its Subsidiaries existing as of the Distribution Date;
(iii) the Retained Debt; (iv) all Liabilities of Hilton and the Retained
Business Subsidiaries, other than Gaming Group Liabilities and (v) all other
Liabilities of Hilton and its Subsidiaries arising out of, or specifically
associated with, any of the Retained Business Group Assets or the Retained
Business; PROVIDED, HOWEVER, that the Retained Business Group Liabilities
shall not include (x) any Debt of Hilton or its Subsidiaries other than the
Retained Debt; (y) any claims, losses, damages, demands, costs, expenses or
Liabilities for any Tax (which shall be governed by Sections 6.05 and 9.02
hereof and by the Tax Allocation and Indemnity Agreement) and (z) any
Liabilities under the ▇▇▇▇▇▇ International Management Agreements (as defined
in the Assignment and License Agreement).
RETAINED BUSINESS SUBSIDIARIES: The Subsidiaries of Hilton
specified in Schedule 7 and any other Subsidiaries formed after the date
hereof to conduct a portion of the Retained Business.
9
RETAINED CORPORATE FUNCTIONS: The corporate level and support
functions of Hilton to be retained by Hilton in connection with the
Distribution, as set forth in Schedule 8 hereto. (Currently expected to include
corporate treasury, corporate accounting support (including payroll), central
accounting, internal audit, tax, corporate affairs, legal, human resources
(including employee benefits administration), accounts payable services, risk
management functions (including claims administration), certain equipment
purchasing and procurement functions, architectural and construction management
and project accounting and corporate information services.)
RETAINED DEBT: The Debt of Hilton and its Subsidiaries which is to be
retained by Hilton and/or the Retained Business Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.08.
RULING REQUEST: The private letter ruling request to be filed by
Hilton with the Internal Revenue Service, as supplemented and amended from time
to time, with respect to certain tax matters relating to the Distribution, the
Merger, and other related matters.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELF INSURANCE PROGRAMS: Those self insured programs maintained by
Hilton and/or any of its Subsidiaries prior to the Distribution for the benefit
of employees, properties and operating businesses, including without limitation
such programs that utilize "fronted policies."
SHARED POLICIES: All Policies (including Self Insurance Programs),
current or past, which are owned or maintained by or on behalf of Hilton and/or
any of its Subsidiaries or their respective predecessors which insure both the
Retained Business and the Gaming Business.
SUBSIDIARY: With respect to any Person, (i) each corporation,
partnership, joint venture, limited liability company or other legal entity of
which such Person owns, either directly or indirectly, 50% or more of the stock
or other equity interests, the holders of which are generally entitled to vote
for the election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership or limited liability company in which such Person or another
Subsidiary of such Person is the general partner, managing partner or otherwise
controls.
TAX OR TAXES: Any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto.
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TAX ALLOCATION AND INDEMNITY AGREEMENT: The Tax Allocation and
Indemnity Agreement between Hilton and Gaming Co. pursuant to which such parties
will provide for the allocation of, and indemnification against, certain tax
liabilities, the preparation and filing of certain tax returns and the payment
of taxes related thereto and certain related matters, which agreement shall be
entered into on or prior to the Distribution Date substantially in the form
attached hereto as Exhibit E.
TAX RETURN(S): with respect to any corporation or Affiliated Group,
all returns, reports, estimates, statements, declarations and other filings
relating to, or required to be filed by any taxpayer in connection with, the
payment or receipt of any refund of any Tax.
TRANSFERRED EMPLOYEES: The meaning specified in the Employee Benefits
Allocation Agreement.
Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT.
Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
1992 Notes 2.08
1997 Notes 2.08
Agreement Recitals
Committee 9.14
Consents 4.01
Credit Agreement Debt 2.08
Dispute 9.14
Gaming Field Cash 2.07
Hilton Recitals
Hilton Indemnitees 5.02
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lodging Field Cash 2.07
Gaming Co. Recitals
Gaming Co. Indemnities 5.01
Regulatory Approvals 4.02(g)
Retained Credit Agreement Debt Amount 2.08
Subordinated Notes 2.08
Third Party Claim 5.04
Transaction Taxes 6.05
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ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO GAMING CO.
Prior to the Distribution Date, Hilton shall take or cause to be taken
all actions necessary to cause the transfer, assignment, delivery and conveyance
to Gaming Co. and/or the appropriate Gaming Subsidiaries designated by Gaming
Co. of all of Hilton's and its Subsidiaries' right, title and interest in any
Gaming Group Assets held, on or prior to the Distribution Date, by Hilton or any
Retained Business Subsidiary.
Section 2.02. TRANSFERS OF ASSETS FROM GAMING SUBSIDIARIES TO HILTON
OR RETAINED BUSINESS SUBSIDIARIES.
Prior to the Distribution Date, Gaming Co. shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Hilton and/or the applicable Retained Business Subsidiaries
designated by Hilton of all of Gaming Co.'s and the Gaming Subsidiaries' right,
title and interest in any Retained Business Group Assets held, on or prior to
the Distribution Date, by Gaming Co. or any of the Gaming Subsidiaries.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION.
To the extent that any transfers contemplated by this Article II shall
not have been fully effected as of the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed including, without limitation,
pursuant to Gaming Laws; PROVIDED, HOWEVER, that Hilton and Gaming Co. and their
respective Subsidiaries and Affiliates shall cooperate in seeking to obtain any
necessary consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Agreement including, without
limitation, pursuant to Gaming Laws. In the event that any such transfer of
assets or Liabilities has not been consummated effective as of the Distribution
Date, the party retaining such asset or Liability shall thereafter hold such
asset in trust for the use and benefit of the party entitled thereto (at the
expense of the party entitled thereto) and retain such Liability for the account
of the party by whom such Liability is to be assumed pursuant hereto, and take
such other actions as may be reasonably required in order to place the parties,
insofar as reasonably possible, in the same position as would have existed had
such asset been transferred or such Liability been assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable, such
transfer and assumption shall be effected forthwith. The parties agree that,
except as set forth in this Section 2.03, as of the Distribution Date, each
party hereto shall be deemed to have acquired complete and sole beneficial
ownership over all of the assets, together with all rights, powers and
privileges incidental thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and all duties,
obligations and
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responsibilities incidental thereto, which such party is entitled to acquire
or required to assume pursuant to the terms of this Agreement.
Section 2.04. COOPERATION RE: ASSETS.
In the case that at any time after the Distribution Date, Gaming Co.
reasonably determines that any of the Retained Business Group Assets (other than
the assets set forth in Schedule 6) are essential for the conduct of the Gaming
Business, or Hilton reasonably determines that any of the Gaming Group Assets
(other than the assets set forth in Schedule 3) are essential for the conduct of
the Retained Business, and the nature of such assets makes it impracticable for
Gaming Co. or Hilton, as the case may be, to obtain substitute assets or to make
alternative arrangements on commercially reasonable terms to conduct their
respective businesses, and reasonable provisions for the use thereof are not
already included in the Related Agreements, then Gaming Co. (with respect to the
Gaming Group Assets) and Hilton (with respect to the Retained Business Group
Assets) shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations. However, (i) the usage of such assets by
the other party shall not materially interfere with the use of such assets by
the party holding such assets, and (ii) such assets shall be required to be made
available only until such time as the other party can reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS.
Each of the parties hereto understands and agrees that no party hereto
is, in this Agreement, in any Related Agreement, or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any assets of such party or (ii) as to the legal
sufficiency to convey title to any asset transferred pursuant to this Agreement
or any Related Agreement. IT IS ALSO AGREED AND UNDERSTOOD THAT THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF ANY OF
THE ASSETS EITHER TRANSFERRED TO OR RETAINED BY THE PARTIES, AS THE CASE MAY BE,
AND ALL SUCH ASSETS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS;" PROVIDED,
HOWEVER, that the absence of warranties shall have no effect upon the allocation
of Liabilities under this Agreement. Each party hereto understands and agrees
that no party hereto is, in this Agreement, in any Related Agreement or
otherwise, representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement,
any Related Agreement or otherwise will satisfy the provisions of any or all
applicable laws or judgments or other instruments or agreements relating to such
assets, including without limitation, the Gaming Laws. Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, including, without limitation, pursuant to the Gaming Laws, to
enter into all reasonable amendatory agreements and to make all filings and
applications which may be reasonably required for the consummation of the
transactions contemplated by this Agreement and the Related Agreements, and
shall take all such further reasonable actions as shall be
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necessary to preserve for each of the Gaming Group and the Retained Business
Group, to the greatest extent feasible, the economic and operational benefits
of the allocation of assets and liabilities provided for in this Agreement.
In case at any time after the Distribution Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all
such necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS.
In connection with the Preliminary Transfers described in Article II
and Article III hereof, and the assignment of assets and the assumption of
Liabilities contemplated by any Related Agreements, the parties shall execute,
or cause to be executed by the appropriate entities, the Conveyancing and
Assumption Instruments in such forms as the parties shall reasonably agree. The
transfer of capital stock and other equity interests shall be effected by means
of delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporation or other legal entity involved and, to the
extent required by applicable law, by notation on public registries.
Section 2.07. CASH ALLOCATION; CASH MANAGEMENT.
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. The allocation between
Hilton and Gaming Co. of all domestic and international cash bank balances,
short-term investments and outstanding checks and drafts of Hilton and its
Subsidiaries recorded per the books of Hilton and its Subsidiaries shall be in
accordance with the following:
(i) all deposits of cash, checks, drafts or short-term
investments made to accounts, other than the Gaming Group Cash
Accounts, after the close of business on the Distribution Date shall
be remitted to Hilton; PROVIDED, HOWEVER, that any such deposits that
are erroneously made to such accounts shall be redeposited to the
correct accounts as promptly as possible;
(ii) all deposits of cash, checks, drafts or short-term
investments made to the Gaming Group Cash Accounts after the close of
business on the Distribution Date shall be remitted to Gaming Co.
and/or the appropriate Gaming Subsidiary; PROVIDED, HOWEVER, that any
such deposits that are erroneously made to such accounts shall be
redeposited to the correct accounts as promptly as possible;
(iii) cash held on the Distribution Date in the ordinary
course of business at Casino Hotels or other gaming facilities
comprising part of the Gaming Business in an aggregate amount up to
$100 million ("GAMING FIELD CASH") shall constitute assets of Gaming
Co. and/or the appropriate Gaming Subsidiaries;
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(iv) cash held on the Distribution Date in the ordinary
course of business at lodging or timeshare properties comprising part
of the Retained Business in an aggregate amount up to $5 million
("LODGING FIELD CASH") shall constitute assets of Hilton and/or the
appropriate Retained Business Subsidiaries; and
(v) all cash existing as of the Distribution Date, except
Gaming Field Cash and Lodging Field Cash and except for the cash
necessary to satisfy the outstanding drafts of Hilton and its
Subsidiaries existing as of the Distribution Date, shall be evenly
divided between Hilton and Gaming Co.
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. All ▇▇▇▇▇ cash,
depository and disbursement accounts of Hilton (other than the Gaming Group Cash
Accounts) shall be retained by Hilton. The Gaming Group Cash Accounts shall be
transferred to Gaming Co., and Gaming Co. shall establish and maintain a
separate cash management system and separate accounting records with respect to
the Gaming Group Business effective as of 12:01 a.m. New York time on the day
following the Distribution Date.
(c) ORDINARY COURSE OPERATIONS. The parties contemplate and agree
that the Gaming Business and the Retained Business, including, but not limited
to, the administration, payment and collection of accounts payable and accounts
receivable, will be conducted in the ordinary course of business and consistent
with past practice prior the Distribution Date.
(d) CASH ALLOCATIONS AFTER THE YEAR-END. Notwithstanding anything to
the contrary herein, (i) Net Cash generated after December 31, 1998 from
operations of the Retained Business (regardless of whether the Distribution has
occurred) shall be retained by Hilton, (ii) Net Cash generated after December
31, 1998 from operations of the Gaming Business (regardless of whether the
Distribution has occurred) shall be retained by Gaming Co, and (iii) in the
event the Distribution has not occurred by December 31, 1998, the allocations of
cash set forth in Section 2.07(a) shall be made as of December 31, 1998.
Section 2.08. ALLOCATION OF DEBT.(1)
Debt will be allocated as follows:
(a) Debt secured by Retained Business Group Assets, or otherwise
specifically associated with the Retained Business, will be assumed or retained
by Hilton and/or the appropriate Retained Business Subsidiaries. As of May 31,
1998, such Debt comprises (x) IRB financings of the Atlanta Airport Hilton and
the New Orleans Airport Hilton (in the amounts of $50 million and $32 million,
respectively), (y) two mortgages on the New Orleans Hilton (in
--------------------------
(1) All amounts set forth in this Section 2.08 are approximate and represent
gross principal amounts.
15
the amounts of $46 million and $53 million, respectively) and (z) the unsecured
credit facility relating to the Hilton Hawaiian Village (in the amount of $480
million).
(b) Debt secured by Gaming Group Assets, or otherwise specifically
associated with the Gaming Business, will be assumed or retained by Gaming Co.
and/or the appropriate Gaming Subsidiaries. As of May 31, 1998, such Debt
comprises (i) $13.6 million of secured Debt relating to the Belle of Orleans
riverboat, and (ii) $2.9 million of other Debt.
(c) Except as provided by Section 2.08(f), Hilton's public bond Debt
will be Retained Debt. As of May 31, 1998, such Debt consists of (i) $500
million of unsecured 5% convertible subordinated notes due 2006 (the
"SUBORDINATED NOTES"), (ii) $1.4 billion of unsecured senior notes issued in
1997, with various interest rates and maturities ranging from 2002 to 2017 (the
"1997 NOTES"), (iii) $267.6 million of unsecured 7.7% notes issued in 1992 and
due in 2002 (the "1992 NOTES") and (iv) unsecured medium-term notes, Series A
and Series B, due 1998 through 2001 ($135.1 million currently outstanding).
(d) Debt under Hilton's credit agreement and related commercial paper
program ("CREDIT AGREEMENT DEBT") will be refinanced by new credit facilities
obtained by Hilton and Gaming Co., respectively. Except as provided by Section
2.08(g), Hilton will be responsible for refinancing an amount of the Credit
Agreement Debt (the "RETAINED CREDIT AGREEMENT DEBT AMOUNT") equal to the amount
set forth in Schedule 9 PLUS the amount of option cash-outs attributable to
Retained Business Group employees, if any (which Debt shall constitute a part of
the Retained Debt). Gaming Co. will be responsible for refinancing the remainder
of the Credit Agreement Debt (which Debt shall constitute a part of the Assumed
Debt).
(e) In the event that the parties cannot fully and finally determine
the Retained Credit Agreement Debt Amount as of the Distribution Date, the
allocation of Debt as of such date shall be provisional (based on the best data
available as of such date) and the parties shall make an appropriate "true up"
adjustment as promptly as practicable after all facts necessary for a final
determination of the Retained Credit Agreement Debt Amount can be ascertained.
(f) Debt allocated to Gaming Co. in the Gaming Co. Intercompany Debt
Allocation Agreement will be assumed by Gaming Co. and/or the appropriate Gaming
Subsidiaries. The parties acknowledge that this agreement will approximately
equalize the Debt between Hilton and Gaming Co. as of December 31, 1998, giving
pro forma effect to the Distribution and the Merger assuming they had occurred
on December 31, 1998, and will allocate any Debt increases or decreases
subsequent to such date in accordance with Section 2.08(g); PROVIDED, HOWEVER,
that if the Merger does not occur after the Distribution, the parties hereto
shall reallocate the Debt between Hilton and Gaming Co. to approximately
equalize it as of December 31, 1998, giving pro forma effect solely to the
Distribution assuming it had occurred on December 31, 1998, and allocating any
Debt increases or decreases subsequent to such date in accordance with Section
2.08(g).
(g) Notwithstanding anything to the contrary herein, (i) any
increases (decreases) in Debt incurred (repaid) after December 31, 1998 arising
out of operations of the
16
Retained Business (regardless of whether the Distribution has occurred) shall
be attributed to Hilton and (ii) any increases (decreases) in Debt incurred
(repaid) after December 31, 1998 arising out of operations of the Gaming
Business (regardless of whether the Distribution has occurred) shall be
attributed to Gaming Co.; and, to the extent such increases (decreases) are
not already given effect in the definition of Net Cash and the allocations
thereof pursuant to Section 2.07(d), such increases (decreases) shall
increase or decrease (as applicable) the Debt allocated to Hilton or
GamingCo. (as applicable).
Section 2.09. ANCILLARY AGREEMENTS BETWEEN HILTON AND GAMING CO.
On or prior to the Distribution Date, Hilton and Gaming Co. shall
enter into the Ancillary Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES.
Except as set forth in one or more of the Related Agreements, from and
after the Distribution Date, (a) Gaming Co. shall, and/or shall cause the Gaming
Subsidiaries to, assume, pay, perform and discharge in due course all of the
Gaming Group Liabilities, and (b) Hilton shall, and/or shall cause the Retained
Business Subsidiaries to, assume, pay, perform and discharge in due course all
of the Retained Business Group Liabilities.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Gaming Co. and Hilton shall cooperate in preparing, filing with
the SEC and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Employee Benefits Allocation Agreement.
(b) Gaming Co. and Hilton shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Related Agreements.
(c) Gaming Co. and Hilton shall use all reasonable efforts to obtain
any governmental or third-party consents or approvals necessary or desirable in
connection with the
17
transactions contemplated hereby, including, without limitation, pursuant to
the Gaming Laws ("CONSENTS").
(d) Gaming Co. and Hilton will use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary or desirable under applicable law, to consummate the
transactions contemplated under this Agreement and the Related Agreements,
including, but not limited to, actions related to the satisfaction of the
conditions indicated in Section 4.02 below.
Section 4.02. HILTON BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION.
The Hilton Board shall, in its sole discretion, establish the
Record Date and the Distribution Date and any appropriate procedures in
connection with the Distribution. In no event shall the Distribution occur
unless the following conditions shall have been satisfied:
(a) the transactions contemplated in Article II and Article III
shall have been consummated in all material respects;
(b) the Gaming Co. Board, comprised as contemplated by Section
6.01, shall have been elected by Hilton, as sole stockholder of Gaming Co.,
and the Gaming Co. Certificate and Gaming Co. Bylaws shall have been adopted
and shall be in effect;
(c) the IRS Ruling shall have been granted in form and substance
satisfactory to the Hilton Board, the IRS Ruling shall not have been
withdrawn by the IRS and the representations made to the IRS therein shall be
true in all material respects;
(d) the Form 10 shall have been declared effective by the SEC;
(e) the Gaming Co. Common Stock shall have been approved for
trading on the New York Stock Exchange (or such other securities exchange
comprising the principal securities exchange or market on which the Gaming
Co. Common Stock is listed), subject to official notice of issuance;
(f) each of Gaming Co. and Hilton shall have executed and
delivered the Related Agreements to which it is a party and each of the
transactions contemplated by the Related Agreements to be consummated on or
prior to the Distribution Date shall have been consummated;
(g) all necessary regulatory approvals, registrations, licenses,
finding of suitability (collectively, the REGULATORY APPROVALS") and consents
of third parties shall have been received, including, without limitation, any
required approvals under the Gaming Laws, except for any such Regulatory
Approvals or consents the failure of which to obtain would not have a
material adverse effect on the business, operations or condition (financial
or otherwise) of either Hilton or Gaming Co.;
18
(h) the Board of Directors of Hilton shall be satisfied that (i)
at the time of the Distribution and after giving effect to the Distribution
and the transactions contemplated under the Related Agreements, Hilton will
not be insolvent (in that, both before and immediately following the
Distribution, (1) the fair market value of Hilton's assets would exceed
Hilton's liabilities, (2) Hilton would be able to pay its liabilities as they
mature and become absolute and (3) Hilton would not have unreasonably small
capital with which to engage in its business) and (ii) the Distribution would
be permitted under Section 170(a) of the Delaware General Corporation Law;
and at the Board of Directors' discretion, Hilton shall have received the
opinion of a financial advisor or other appraisal or valuation expert
selected by Hilton, in form and substance satisfactory to Hilton, as to the
matters set forth above, and such opinion shall not have been withdrawn;
(i) Gaming Co. shall have obtained, or Hilton shall have obtained
for Gaming Co., insurance (or binders therefor) providing coverage to Gaming
Co. similar to the coverage provided by insurance in place prior to the
Distribution Date;
(j) financing arrangements with respect to Hilton and Gaming Co.
satisfactory to the Hilton Board shall be in place;
(k) Gaming Co. shall have executed and delivered the Gaming Co.
Intercompany Debt Allocation Agreement, which shall be in full force and
effect;
(l) Hilton shall have received stockholder ratification of the
Distribution at a meeting of stockholders;
(m) the Merger Agreement shall be in full force and effect and no
material breach shall exist thereunder; and
(n) Each condition to the consummation of the Merger, other than
the condition set forth in Section 8.1(g) of the Merger Agreement relating to
the consummation of the Distribution, shall have been fulfilled or waived by
the party for whose benefit such condition exists;
PROVIDED, HOWEVER, that (x) any such condition may be waived by the Hilton
Board in its sole discretion, and (y) the satisfaction of such conditions
shall not create any obligation on the part of Hilton or any other party
hereto to effect the Distribution or in any way limit Hilton's power of
termination set forth in Section 9.08 or alter the consequences of any such
termination from those specified in such Section.
Section 4.03. THE DISTRIBUTION.
On the Distribution Date, or as soon thereafter as practicable,
subject to the conditions and rights of termination set forth in this
Agreement, Hilton shall deliver to the Agent, for the benefit of the Holders,
a share certificate representing all of the then outstanding shares of Gaming
Co. Common Stock owned by Hilton, endorsed in blank, and shall instruct the
Agent to distribute to each Holder, on or as soon as practicable following
the Distribution Date, a
19
certification, or if requested by such Holder, a certificate, representing
one share of Gaming Co. Common Stock for each share of Hilton Common Stock so
held. Gaming Co. agrees to provide all share certificates that the Agent
shall require in order to effect the Distribution.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY HILTON.
Except as otherwise expressly set forth in a Related Agreement,
Hilton shall indemnify, defend and hold harmless Gaming Co. and each of the
Gaming Subsidiaries, and each of their respective past or present directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "GAMING CO. INDEMNITEES")
from and against any and all losses, Liabilities, damages and expenses
(including, without limitation, the reasonable costs and expenses, including
reasonable attorneys' fees, in connection with any such investigations,
Actions or threatened Actions) (collectively, "INDEMNIFIABLE LOSSES" and,
individually, an "INDEMNIFIABLE LOSS") incurred or suffered by any of the
Gaming Co. Indemnitees and arising out of or due to the failure or alleged
failure of Hilton, any Retained Business Subsidiary, or any of their
respective Affiliates to pay, perform or otherwise discharge in due course
any of the Retained Business Group Liabilities.
Section 5.02. INDEMNIFICATION BY GAMING CO.
Except as otherwise expressly set forth in a Related Agreement,
Gaming Co. shall indemnify, defend and hold harmless Hilton and each of the
Retained Business Subsidiaries, and each of their respective past or present
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "HILTON
INDEMNITEES") from and against any and all Indemnifiable Losses incurred or
suffered by any of the Hilton Indemnitees and arising out of or due to the
failure or alleged failure of Gaming Co., any Gaming Subsidiaries, or any of
their respective Affiliates to pay, perform or otherwise discharge in due
course any of the Gaming Group Liabilities.
Section 5.03. INSURANCE PROCEEDS.
The amount which any party (an "INDEMNIFYING PARTY") is or may be
required to pay to or on behalf of any other Person (an "INDEMNIFIED PERSON")
pursuant to Section 5.01 or Section 5.02 shall be reduced (including, without
limitation, retroactively) by any Insurance Proceeds or other amounts actually
recovered by or on behalf of such Indemnified Person in reduction of the related
Indemnifiable Loss. If an Indemnified Person shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnified Person shall pay to such
20
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or
other amounts actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION.
(a) Except as may be set forth in a Related Agreement, if an
Indemnified Person shall receive written notice of the assertion by a Person
(including, without limitation, any Governmental Authority) who is not a
party to this Agreement or to any of the Related Agreements of any claim or
of the commencement by any such Person of any Action with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to
this Agreement (a "THIRD-PARTY CLAIM"), such Indemnified Person shall give
the Indemnifying Party written notice thereof promptly after becoming aware
of such Third-Party Claim; PROVIDED, that the failure of any Indemnified
Person to give notice as required by this Section 5.04 shall not relieve the
Indemnifying Party of its obligations under this Article V, except to the
extent that such Indemnifying Party is materially prejudiced by such failure
to give notice. Such notice shall describe the Third-Party Claim in
reasonable detail, and shall indicate the amount (estimated if necessary) of
the Indemnifiable Loss that has been claimed against or may be sustained by
such Indemnified Person.
(b) Within 15 days of the receipt of notice from an Indemnified
Person in accordance with Section 5.04(a) (or sooner, if the nature of such
Third-Party Claim so requires), the Indemnifying Party shall notify the
Indemnified Person of its election whether to assume responsibility for such
Third-Party Claim (provided that if the Indemnifying Party does not so notify
the Indemnified Person of its election within 15 days after receipt of such
notice from the Indemnified Person, the Indemnifying Party shall be deemed to
have elected not to assume responsibility for such Third-Party Claim). An
election not to assume responsibility for such Third-Party Claim may only be
made in the event of a good faith dispute that a Third-Party Claim is not
covered as an Indemnifiable Loss under the grounds specified in Section 5.01
or 5.02, as the case may be. Subject to Section 5.04(e) hereof, an
Indemnifying Party may elect to defend or to seek to settle or compromise, at
such Indemnifying Party's own expense and by counsel reasonably satisfactory
to the Indemnified Person, any Third-Party Claim, PROVIDED that (i) the
Indemnifying Party must confirm in writing that it agrees that the
Indemnified Person is entitled to indemnification hereunder in respect of
such Third-Party Claim and (ii) no compromise or settlement shall be made
without the prior written consent of the Indemnified Person, which consent
shall not be unreasonably withheld.
(c) In the event that the Indemnifying Party elects to assume
responsibility for the Third-Party Claim, pursuant to Section 5.04(b) above,
(i) the Indemnified Person shall cooperate in the defense or settlement or
compromise of such Third-Party Claim, including making available to the
Indemnifying Party any personnel and any books, records or other documents
within the Indemnified Person's control or which it otherwise has the ability
to make available that are necessary or appropriate for the defense of the
Third-Party Claim, (ii) the Indemnifying Party shall keep the Indemnified
Person reasonably informed regarding the strategy, status and progress of the
defense of the Third-Party Claim, and (iii) the Indemnifying Party shall
consider, in good faith, the opinions and suggestions of the Indemnified
Person with
21
respect the Third-Party Claim. After notice from an Indemnifying Party to an
Indemnified Person of its election to assume responsibility for a Third-Party
Claim, such Indemnifying Party shall not be liable to such Indemnified Person
under this Article V for any legal or other costs or expenses (except costs
or expenses approved in advance by the Indemnifying Party) subsequently
incurred by such Indemnified Person in connection with the defense thereof;
PROVIDED, that if the defendants in any such claim include both the
Indemnifying Party and one or more Indemnified Persons and in such
Indemnified Persons' reasonable judgment a conflict of interest between such
Indemnified Persons and such Indemnifying Party exists in respect of such
claim, such Indemnified Persons shall have the right to employ separate
counsel and in that event the reasonable fees, costs and expenses of such
separate counsel (but not more than one separate counsel reasonably
satisfactory to the Indemnifying Party) shall be paid by such Indemnifying
Party.
(d) If an Indemnifying Party elects not to assume responsibility
for a Third-Party Claim, the Indemnified Person may defend or (subject to the
following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnified Person may not settle or
compromise any claim without prior written notice to the Indemnifying Party,
which shall have the option within ten days following the receipt of such
notice (i) to disapprove the settlement and to then assume all past and
future responsibility for the claim, including immediately reimbursing the
Indemnified Person for prior expenditures in connection with the claim, (ii)
to disapprove the settlement and continue to refrain from participation in
the defense of the claim, in which event the Indemnified Person may, in its
sole discretion, proceed with the settlement and the Indemnifying Party shall
have no further right to contest the amount or reasonableness of the
settlement, (iii) to approve and pay the amount of the settlement, reserving
the Indemnifying Party's right to contest the Indemnified Person's right to
indemnity, or (iv) to approve and pay the settlement. In the event the
Indemnifying Party makes no response to such written notice, the Indemnifying
Party shall be deemed to have elected option (ii). When the Indemnifying
Party chooses, or is deemed to have chosen, option (ii) or (iii), the issue
of whether the Indemnified Person has a right to indemnity under this Article
V shall be resolved by arbitration pursuant to the provisions of Section 9.14
hereof. If the Indemnifying Party does not prevail at such arbitration, the
Indemnifying Party shall promptly reimburse the Indemnified Person for all
Indemnifiable Losses, plus interest on such amounts at the lower of (i) 10 %
or (ii) the highest legal interest rate, accruing from the date of payment by
the Indemnified Person.
(e) Notwithstanding the foregoing, if an Indemnified Person
reasonably and in good faith determines that (i) the Indemnifying Party is
not financially capable to defend a Third-Party Claim and to provide full
indemnification with respect to any settlement thereof or (ii) the
Indemnifying Party or such Indemnifying Party's attorney is not adequately
representing the Indemnified Person's interests with respect to such
Third-Party Claim, the Indemnified Person may, by notice to the Indemnifying
Party, assume the exclusive right to defend, compromise or settle such
Third-Party Claim and the Indemnifying Party shall remain responsible for,
and be bound by the resolution of, such Third-Party Claim.
(f) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by
the Indemnified Person to
22
the applicable Indemnifying Party. Such Indemnifying Party shall have a
period of 15 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnified Person shall be free to pursue such remedies as may be available
to such party under applicable law or under this Agreement.
(g) In addition to any adjustments required pursuant to Section
5.03, if the amount of any Indemnifiable Loss shall, at any time subsequent
to the payment required by this Agreement, be reduced by recovery, settlement
or otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Person to
the Indemnifying Party.
(h) In the event of payment by an Indemnifying Party to any
Indemnified Person in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of
such Indemnified Person as to any events or circumstances in respect of which
such Indemnified Person may have any right or claim relating to such
Third-Party Claim against any claimant or plaintiff asserting such
Third-Party Claim or against any other party that may be liable. Such
Indemnified Person shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 5.05. REMEDIES CUMULATIVE.
The remedies provided in this Article V shall be cumulative and
shall not preclude assertion by any Indemnified Person of any other rights or
the seeking of any and all other remedies against any Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES.
The obligations of each of Gaming Co. and Hilton under this Article
V shall survive the sale or other transfer by it of any assets or businesses
or the assignment by it of any Liabilities, with respect to any Indemnifiable
Loss of the other related to such assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. GAMING CO. BOARD.
Gaming Co. and Hilton shall take all actions which may be required
to appoint as officers and directors of Gaming Co. those persons named in the
Form 10 (as may be altered or
23
supplemented prior to the date hereof by the Hilton Board and the Gaming Co.
Board) to constitute, effective as of the Distribution Date, the officers and
the directors of Gaming Co.
Section 6.02. RESIGNATIONS; HILTON BOARD.
(a) Gaming Co. shall cause all of its directors and the
Transferred Employees to resign, effective as of the Distribution Date, from
all boards of directors or similar governing bodies of Hilton or any of the
Retained Business Subsidiaries on which they serve, and from all positions as
officers or employees of Hilton or any of the Retained Business Subsidiaries
in which they serve, except that (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ will be President,
Chief Executive Officer and a Director of Hilton and will be Chairman of the
Board of Directors of Gaming Co. and (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will be a Director
of both Hilton and Gaming Co. and Chief Executive Officer of Gaming Co.
Hilton shall cause all of its directors and the Retained Business Group
Employees to resign from all boards of directors or similar governing bodies
of Gaming Co. or any of the Gaming Subsidiaries on which they serve, and from
all positions as officers or employees of Gaming Co. or any of the Gaming
Subsidiaries in which they serve, except as set forth in Schedule 10.
Section 6.03. GAMING CO. CERTIFICATE AND BYLAWS.
On or prior to the Distribution Date, Gaming Co. shall adopt the
Gaming Co. Certificate and the Gaming Co. Bylaws, and shall file the Gaming
Co. Certificate with the Secretary of State of the State of Delaware. Hilton
shall provide all necessary shareholder approvals for the Gaming Co.
Certificate prior to the filing of the Gaming Co. Certificate with the
Secretary of State of the State of Delaware.
Section 6.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
Each of Hilton and Gaming Co. shall, and shall cause each of their
respective Subsidiaries to, comply in all material respects with each
representation, covenant and statement made, or to be made, to any taxing
authority in connection with the IRS Ruling or any other ruling obtained, or
to be obtained, by Hilton and Gaming Co. acting together, from any such
taxing authority with respect to any transaction contemplated by this
Agreement.
Section 6.05. SALES AND TRANSFER TAXES.
Hilton and Gaming Co. agree to cooperate to determine the amount of
sales, transfer or other Taxes, including, without limitation, all real
estate, patent, trademark and transfer taxes and recording fees, but
excluding any Income Taxes, as defined in the Tax Allocation and Indemnity
Agreement) incurred in connection with the Distribution and other
transactions contemplated by the Agreement (the "TRANSACTION TAXES"). Hilton
agrees to file promptly and timely the Tax Returns for such Transaction Taxes
and Gaming Co. will join in the execution of any such Tax Returns or other
documentation. Financial responsibility for payment of all such Transaction
Taxes shall be shared equally between Hilton and Gaming Co.
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Section 6.06. GAMING CO. RIGHTS PLAN.
Effective as of the Distribution Date, Gaming Co. shall adopt a
shareholder rights plan which shall be substantially similar to the
shareholder rights plan of Hilton in effect as of the Distribution Date.
Section 6.07. TIMESHARE AND VACATION OWNERSHIP FACILITIES.
Hilton shall have the exclusive right for 15 years, subject to the
payment of a reasonable fee to be agreed to by the parties, to sell and
market timeshare and vacation ownership interests from sites located within
any now or future existing Casino Hotel operated by any member of the Gaming
Group; PROVIDED, HOWEVER, that Hilton shall not be entitled to exercise such
right with respect to any particular Casino Hotel if and only if (i) Hilton
is not selling or marketing timeshare and vacation ownership interests at
such Casino Hotel, (ii) Gaming Co. receives a bona fide offer from an
unaffiliated third party to (1) commence timeshare and vacation ownership
sales at such Casino Hotel and (2) pay a fee to Gaming Co. for such marketing
and sales on a basis comparable to the fees being paid by Hilton to Gaming
Co. at the other Casino Hotels where Hilton is selling and marketing
timeshare and vacation ownership interests, and (iii) Hilton elects, within a
reasonable time period to be agreed upon by the parties hereto, not to
commence timeshare and vacation ownership sales at such Casino Hotel. In
addition, Gaming Co. shall, prior to developing any timeshare or vacation
ownership facilities at any Casino Hotel or at any other location during such
15 year term, offer to Hilton the right to proceed with any such development
(the "FIRST OFFER"). If Hilton (a) does not accept the First Offer and
commence development of such timeshare or vacation ownership facility within
a reasonable time period to be agreed to by the parties or (b) notifies
Gaming Co. in writing that it does not accept such First Refusal Option,
then, (i) Gaming Co. shall be entitled to develop the subject timeshare and
vacation ownership facility (the "NEW FACILITY") and (ii) Hilton shall not be
entitled to sell and market timeshare and vacation ownership interests in the
New Facility; PROVIDED, THAT Hilton shall be entitled to sell and market
timeshare and vacation ownership interests in other facilities from the New
Facility.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement,
Hilton shall arrange as soon as practicable following the Distribution Date,
to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at Gaming Co.'s cost) to
Gaming Co. of the Gaming Group Books and Records in its possession, except to
the extent such items are already in the possession of Gaming Co. or a Gaming
Subsidiary. The Gaming Group Books and Records shall be the property of
Gaming Co., but the Gaming Group Books and Records that reasonably relate to
Hilton or the Retained Business shall
25
be available to Hilton for review and duplication until Hilton shall notify
Gaming Co. in writing that such records are no longer of use to Hilton.
(b) Except as may otherwise be provided in a Related Agreement,
Gaming Co. shall arrange as soon as practicable following the Distribution Date,
to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at Hilton's cost) to Hilton
of the Retained Business Group Books and Records in its possession, except to
the extent such items are already in the possession of Hilton or a Retained
Business Subsidiary. The Retained Business Group Books and Records shall be the
property of Hilton, but the Retained Business Group Books and Records that
reasonably relate to Gaming Co. or the Gaming Business shall be available to
Gaming Co. for review and duplication until Gaming Co. shall notify Hilton in
writing that such records are no longer of use to Gaming Co.
Section 7.02. ACCESS TO INFORMATION.
Except as otherwise provided in a Related Agreement, from and after
the Distribution Date, Hilton shall afford to Gaming Co. and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"INFORMATION") within Hilton's possession or control, insofar as such access is
reasonably required by Gaming Co. for the conduct of its business, subject to
appropriate restrictions for classified or Privileged Information. Similarly,
except as otherwise provided in a Related Agreement, Gaming Co. shall afford to
Hilton and its authorized accountants, counsel, and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within Gaming Co.'s possession or control,
insofar as such access is reasonably required by Hilton for the conduct of its
business, subject to appropriate restrictions for classified or Privileged
Information. Information may be requested under this Article VII for the
legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. PRODUCTION OF WITNESSES.
At all times from and after the Distribution Date, each of Gaming Co.
and Hilton shall use reasonable efforts to make available to the other, upon
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that such persons may reasonably be required
in connection with any Action.
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Section 7.04. REIMBURSEMENT.
Except to the extent otherwise contemplated in any Related Agreement,
a party providing Information or witnesses to the other party under this Article
VII shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments of such amounts, relating to supplies, disbursements
and other out-of-pocket expenses (at cost) of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witnesses. Notwithstanding the foregoing, the
parties acknowledge that a party providing Information or witnesses shall not be
entitled to receive reimbursement of salary or other compensation expenses
relating to any employees providing such Information or acting as such
witnesses.
Section 7.05. RETENTION OF RECORDS.
Except as otherwise required by law or agreed to in a Related
Agreement or otherwise in writing, each of Gaming Co. and Hilton may destroy or
otherwise dispose of any of the Information which is material Information and is
not contained in other Information retained by the other, only after the later
to occur of (i) all applicable statutes of limitations (including any waivers or
extensions thereof) with respect to Tax Returns which Hilton or Gaming Co., as
the case may be, may be obligated to file on behalf of Gaming Co. Members or
Post-Distribution Members, as the case may be, and (ii) any retention period
required by law or pursuant to any record retention agreement, provided that,
prior to such destruction or disposal, (a) it shall provide no less than 90 or
more than 120 days advance written notice to the other, specifying in reasonable
detail the Information proposed to be destroyed or disposed of and (b) if a
recipient of such notice shall request in writing prior to the scheduled date
for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the Information as was requested at the expense of the party requesting
such Information.
Section 7.06. CONFIDENTIALITY.
Each of Hilton and its Subsidiaries on the one hand, and Gaming Co.
and its Subsidiaries on the other hand, shall hold, and shall cause its
consultants and advisors to hold, in strict confidence, all Information
concerning the other in its possession or furnished by the other or the other's
representatives pursuant to this Agreement (except to the extent that such
Information has been (i) in the public domain through no fault of such party or
(ii) later lawfully acquired from other sources by such party), and each party
shall not release or disclose such Information to any other person, except its
auditors, attorneys, financial advisors, rating agencies, bankers and other
consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as reasonably advised by its counsel, by other
requirements of law, or unless such Information is reasonably required to be
disclosed in connection with (x) any litigation with any third-parties or
litigation between the Retained Business Group and the Gaming Group, (y) any
contractual agreement to which members of the Retained Business
27
Group or the Gaming Group are currently parties, or (z) in exercise of either
party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS.
Gaming Co. and Hilton recognize that certain legal and other
professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of both the
Retained Business Group and the Gaming Group and that both the Retained Business
Group and the Gaming Group should be deemed to be the client for the purposes of
asserting all Privileges. To allocate the interests of each party in the
Privileged Information, the parties agree as follows:
(a) Hilton shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Retained Business Group, whether or not the Privileged
Information is in the possession of or under the control of Hilton or Gaming Co.
Hilton shall also be entitled, in perpetuity, to control the assertion or waiver
of all Privileges in connection with Privileged Information that relates solely
to the subject matter of any claims constituting Retained Business Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Hilton or a Retained Business
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Hilton or Gaming Co.
(b) Gaming Co. shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Gaming Group, whether or not the Privileged
Information is in the possession of or under the control of Hilton or Gaming Co.
Gaming Co. shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the subject matter of any claims constituting Gaming Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Gaming Co. or a Gaming Subsidiary,
whether or not the Privileged Information is in the possession of or under the
control of Hilton or Gaming Co.
(c) Gaming Co. and Hilton agree that they shall have a shared
Privilege, with equal right to assert or waive, subject to the restrictions in
this Section 7.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 7.07(a) and (b). All Privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Gaming
Co. and Hilton, or in respect of which both Gaming Co. and Hilton retain any
responsibility or liability under this Agreement, shall be subject to a shared
Privilege.
(d) No party may waive any Privilege which could be asserted under
any applicable law, and in which the other party has a shared Privilege, without
the consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
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(e) In the event of any litigation or dispute between a member of
the Retained Business Group and a member of the Gaming Group, either party
may waive a Privilege in which the other party has a shared Privilege,
without obtaining the consent of the other party, provided that such waiver
of a shared Privilege shall be effective only as to the use of Information
with respect to the litigation or dispute between the Retained Business Group
and the Gaming Group, and shall not operate as a waiver of the shared
Privilege with respect to third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either
party, each party agrees that it shall negotiate in good faith, shall
endeavor to minimize any prejudice to the rights of the other party, and
shall not unreasonably withhold consent to any request for waiver by the
other party. Each party specifically agrees that it will not withhold consent
to waiver for any purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which the other party has the sole
right hereunder to assert a Privilege, or if any party obtains knowledge that
any of its current or former directors, officers, agents or employees have
received any subpoena, discovery or other requests which arguably calls for
the production or disclosure of such Privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information
and to assert any rights it may have under this Section 7.07 or otherwise to
prevent the production or disclosure of such Privileged Information.
(h) The transfer of the Gaming Group Books and Records and the
Retained Business Group Books and Records and other Information between
Hilton and its Subsidiaries and Gaming Co. and its Subsidiaries is made in
reliance on the agreement of Gaming Co. and Hilton, as set forth in Sections
7.06 and 7.07, to maintain the confidentiality of Privileged Information and
to assert and maintain all applicable Privileges. The access to Information
being granted pursuant to Sections 7.01 and 7.02 hereof, the agreement to
provide witnesses and individuals pursuant to Section 7.03 hereof and the
transfer of Privileged Information between Hilton and its Subsidiaries and
Gaming Co. and its Subsidiaries pursuant to this Agreement shall not be
deemed a waiver of any Privilege that has been or may be asserted under this
Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE GAMING GROUP
ASSETS.
Without limiting the generality of the definition of the Gaming
Group Assets or the effect of Section 2.01, the Gaming Group Assets shall
include any and all rights of an insured
29
party under each of the Shared Policies, specifically including rights of
indemnity and the right to be defended by or at the expense of the insurer,
where applicable, with respect to all injuries, losses, liabilities, damages
and expenses incurred or claimed to have been incurred on or prior to the
Distribution Date by any party in or in connection with the conduct of the
Gaming Business or, to the extent any claim is made against Gaming Co. or any
of its Subsidiaries, the Retained Businesses, and which injuries, losses,
liabilities, damages and expenses may arise out of insured or insurable
occurrences or events under one or more of the Shared Policies.
Section 8.02. POLICIES AND RIGHTS INCLUDED WITHIN THE RETAINED
BUSINESS GROUP ASSETS.
Without limiting the generality of the definition of the Retained
Business Group Assets or the effect of Section 2.01, the Retained Business Group
Assets shall include any and all rights of an insured party under each of the
Shared Policies, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, where applicable, with respect to
all injuries, losses, liabilities, damages and expenses incurred or claimed to
have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Retained Business or, to the extent any claim
is made against Hilton or any of the Retained Business Subsidiaries, the Gaming
Business, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.03. ADMINISTRATION AND RESERVES.
(a) GENERAL. Notwithstanding the provisions of Article III, but
subject to any contrary provisions of any Related Agreement, from and after the
Distribution Date:
(i) Hilton shall be responsible for the Insurance
Administration of the Shared Policies; PROVIDED, that the
administration of the Shared Policies by Hilton is in no way intended
to limit, inhibit, or preclude any right to insurance coverage for any
Insured Claim of a named insured under the Shared Policies including,
but not limited to, Gaming Co. or any of its Subsidiaries or
Affiliates;
(ii) Gaming Co. shall be entitled to any reserves
established by Hilton or any of its Subsidiaries (other than reserves
established by Hilton Insurance Company, which reserves shall remain
with such entity), or the benefit of reserves held by any insurance
carrier, with respect to the Gaming Group Liabilities; and
(iii) Hilton shall be entitled to any reserves established by
Hilton or any of its Subsidiaries, or the benefit of reserves held by
any insurance carrier, with respect to the Retained Business Group
Liabilities.
30
(b) INSURANCE PREMIUMS.
(i) Gaming Co. shall have the right but not the obligation
to pay the premiums, to the extent that Hilton does not pay premiums
with respect to Retained Business Group Liabilities (retrospectively-
rated or otherwise), with respect to Shared Policies as required under
the terms and conditions of the respective Policies, whereupon Hilton
shall forthwith reimburse Gaming Co. for that portion of such premiums
paid by Gaming Co. as are attributable to the Retained Business Group
Liabilities.
(ii) Hilton shall have the right but not the obligation to
pay the premiums, to the extent that Gaming Co. does not pay premiums
with respect to Gaming Group Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies as required under the
terms and conditions of the respective Policies, whereupon Gaming Co.
shall forthwith reimburse Hilton for that portion of such premiums
paid by Hilton as are attributable to the Gaming Group Liabilities.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Gaming Co. with respect to the Gaming Group Liabilities and to Hilton with
respect to the Retained Business Group Liabilities. Payment of the allocable
portions of indemnity costs of Insurance Proceeds resulting from the liability
policies will be made to the appropriate party upon receipt from the insurance
carrier. In the event that the aggregate limits on any Policies are exceeded,
the parties agree to provide an equitable allocation of Insurance Proceeds
received after the Distribution Date based upon their respective bona fide
claims taking into account their relative contributions towards premiums and the
Insurance Proceeds used by each party to satisfy Insured Claims. The parties
agree to use their reasonable best efforts to cooperate with respect to
insurance matters.
(d) INSURANCE CHARGES.
(i) Notwithstanding anything to the contrary contained
herein, Gaming Co. or an appropriate Gaming Subsidiary assumes
responsibility for and shall pay to the appropriate insurance carriers
or otherwise any premiums, retrospectively rated premiums, defense
costs, indemnity payments, deductibles, retentions or other charges as
appropriate (collectively "INSURANCE CHARGES"), whenever arising,
which become due and payable upon the terms and conditions of any
applicable Policy in respect of any Insured Claims against Gaming Co.
or a Gaming Subsidiary for charges which relate to the period before
the Distribution Date. In the event that Gaming Co. or a Gaming
Subsidiary fails to pay any insurance charges when due and payable,
whether at the request of the party entitled to payment or upon demand
by Hilton or a Retained Business Subsidiary, Hilton or a Retained
Business Subsidiary may (but shall not be required to) pay such
Insurance Charges for and on behalf of Gaming Co. or a Gaming
Subsidiary
31
and thereafter Gaming Co. shall forthwith reimburse Hilton or such
Retained Business Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary contained herein,
Hilton or an appropriate Retained Business Subsidiary assumes
responsibility for and shall pay to the appropriate insurance carriers
or otherwise any Insurance Charges, whenever arising, which become due
and payable upon the terms and conditions of any applicable Policy in
respect of any Insured Claims against Hilton or a Retained Business
Subsidiary for charges which relate to the period before the
Distribution Date. In the event that Hilton or a Retained Business
Subsidiary fails to pay any Insurance Charges when due and payable,
whether at the request of the party entitled to payment or upon demand
by Gaming Co. or a Gaming Subsidiary, Gaming Co. or a Gaming
Subsidiary may (but shall not be required to) pay such Insurance
Charges for and on behalf of Hilton or a Retained Business Subsidiary
and thereafter Hilton shall forthwith reimburse Gaming Co. or such
Gaming Subsidiary for such payment.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE.
In the event that Insured Claims of both Gaming Co. and Hilton exist
relating to the same occurrence, Gaming Co. and Hilton agree to jointly defend
and to waive any conflict of interest necessary to the conduct of that joint
defense. Nothing in this paragraph shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement and all documents and instruments referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and are not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
Section 9.02. TAX ALLOCATION AND INDEMNITY AGREEMENT; AFTER-TAX
PAYMENTS.
(a) Other than as provided in this Section 9.02 and Section 6.05,
this Agreement shall not govern any Tax matter, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax
Allocation and Indemnity Agreement or the Hilton Corporate Services Agreement.
32
(b) If, at the time Gaming Co. is required to make any payment to
Hilton under this Agreement, Hilton owes Gaming Co. any amount under the Tax
Allocation and Indemnity Agreement, then such amounts shall be offset and the
excess shall be paid by the party liable for such excess. Similarly, if, at the
time Hilton is required to make any payment to Gaming Co. under this Agreement,
Gaming Co. owes Hilton any amount under the Tax Allocation and Indemnity
Agreement, then such amounts shall be offset and the excess shall be paid by the
party liable for such excess.
Section 9.03. EXPENSES.
Except as specifically provided in this Agreement or in a Related
Agreement, all fees and expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party incurring such expenses. In addition, it is understood and agreed that
Gaming Co. shall pay the legal, filing, accounting, printing and other
accountable and out-of-pocket expenditures in connection with the preparation,
printing and filing of the Form 10.
Section 9.04. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without regard to any applicable conflicts of
laws, except to the extent that the Gaming Laws shall be mandatorily applicable.
Section 9.05. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Hilton, to
Hilton Hotels Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
(b) if to Gaming Co., to
Gaming Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Section 9.06. AMENDMENTS.
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 9.07. ASSIGNMENTS.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 9.08. TERMINATION.
This Agreement may be terminated and the Distribution abandoned at any
time prior to the Distribution Date by and in the sole discretion of the Hilton
Board without the approval of Gaming Co.'s or of Hilton's stockholders. In the
event of such termination, no party shall have any liability to any other party
pursuant to this Agreement.
Section 9.09. SUBSIDIARIES.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.10. SPECIFIC PERFORMANCE.
The parties hereto agree that the remedy at law for any breach of this
Agreement will be inadequate and that any party by whom this Agreement is
enforceable shall be entitled to
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specific performance in addition to any other appropriate relief or remedy.
Such party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as
such court may deem just and proper in order to enforce this Agreement or
prevent any violation hereof and, to the extent permitted by applicable laws,
each party waives any objection to the imposition of such relief.
Section 9.11. HEADINGS; REFERENCES.
The article, section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All references herein to
"Article", "Sections" or "Exhibits" shall be deemed to be references to Articles
or Sections hereof or Exhibits hereto unless otherwise indicated.
Section 9.12. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when two or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
Section 9.13. SEVERABILITY; ENFORCEMENT.
The invalidity of any portion hereof shall not affect the validity,
force or effect of the remaining portions hereof. If it is ever held that any
covenant hereunder is too broad to permit enforcement of such covenant to its
fullest extent, each party agrees that a court of competent jurisdiction may
enforce such covenant to the maximum extent permitted by law, and each party
hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such covenant.
Section 9.14. ARBITRATION OF DISPUTES.
(a) Any dispute, controversy or disagreement ("DISPUTE") between the
Parties related to the obligations of the parties under this Agreement in
respect of which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("COMMITTEE"). If the parties are unable to
reach an amicable resolution of a Dispute within thirty days after submission to
the Committee, then, to the maximum extent allowed by law, the Dispute shall be
submitted and resolved by final and binding arbitration in Los Angeles,
California administered by JAMS-Endispute in accordance with JAMS-Endispute's
rules of practice then in effect or such other procedures as the parties may
agree upon; PROVIDED, HOWEVER, that any party may seek injunctive relief and
enforcement of any award rendered pursuant to the arbitration provisions of this
Section 9.14 by bringing a suit in any court of competent jurisdiction. Any
award issued as a result of such arbitration shall be final and binding between
the parties thereto and shall be enforceable by any court having jurisdiction
over the party against whom enforcement was sought and application may be made
to such court for judicial acceptance of the award and order
35
of enforcement. The fees, costs and expenses of arbitration (including
reasonable attorneys' fees) shall be paid by the party that does not prevail
in such arbitration.
(b) ATTORNEYS' FEES. If any party to this Agreement brings an action
to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
(c) SPECIFIC PERFORMANCE. Nothing contained in this Section 9.14
shall limit or restrict in any way the right or power of a party at any time to
seek injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other party
from breaching this Agreement or (ii) for specific enforcement of this Section
9.14 or any other provision of this Agreement or any Ancillary Agreement. The
parties agree that any legal remedy available to a party with respect to a
breach of this Section 9.14 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.14.
(d) CONSENT TO JURISDICTION. The Parties hereby consent to the
jurisdiction of the federal and state courts located in the State of California
for all purposes under this Agreement.
(e) CONFIDENTIALITY. Neither party nor the arbitrators may disclose
the existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of both parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
Section 9.15. PROMPT PAYMENT.
Where the terms of this Agreement require payment of an amount "as
promptly as possible," "as soon as practicable," or "as soon as possible,"
following a specified event, occurrences or date, such payment shall be made no
later than five (5) business days after such event, occurrence or date.
Section 9.16. APPROVALS, CONSENT AND WAIVERS.
Any approval, consent or waiver required or authorized by any
provision of this Agreement to be given or made by any of the parties hereto
shall only be valid to the extent such approval, consent or waiver is in writing
and signed by the Executive Vice President & Chief Financial Officer, the
Executive Vice President & General Counsel, the Senior Vice President &
Treasurer and the Senior Vice President & Controller of the party to be bound by
such approval, consent or waiver.
[Signature Page to Follow]
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IN WITNESS WHEREOF, Hilton and Gaming Co. have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
HILTON HOTELS CORPORATION
------------------------------
By:
Its:
GAMING CO., INC.
------------------------------
By:
Its: